<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 7, 1995
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
REGISTRATION STATEMENT
ON
FORM S-4
UNDER
THE SECURITIES ACT OF 1933
----------------
AMERIQUEST TECHNOLOGIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
----------------
DELAWARE 5045 33-0244136
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION INDUSTRIAL CLASSIFICATION IDENTIFICATION NO.)
OFINCORPORATION OR CODE NUMBER)
ORGANIZATION)
2722 MICHELSON DRIVE, IRVINE, CALIFORNIA 92715 (714) 222-6000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
STEPHEN G. HOLMES, SECRETARY
AMERIQUEST TECHNOLOGIES, INC.
2722 MICHELSON DRIVE
IRVINE, CALIFORNIA 92715
(714) 222-6000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, check the following box. [_]
----------------
CALCULATION OF REGISTRATION FEE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
PROPOSED
MAXIMUM
TITLE OF EACH CLASS PROPOSED OF SECURITIES AMOUNT TO BE OFFERING PRICE AGGREGATE AMOUNT OF
TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE REGISTRATION FEE
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $0.01 par value.................. 3,000,000 $2.9375(1) $8,812,500 $3,038.79
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(c) and based upon the average of the high and low
price of the Registrant's Common Stock as reported by the New York Stock
Exchange on February 3, 1995.
----------------
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 COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EXHIBIT INDEX IS ON PAGE 139. PAGE 001 OF 317 PAGES
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
CROSS REFERENCE SHEET PURSUANT TO ITEM 501(B) OF REGULATION S-K AND RULE 404(A)
<TABLE>
<CAPTION>
S-4 HEADING IN PROSPECTUS/JOINT
ITEM NO. TITLE OF FORM S-4 ITEM PROXY STATEMENT
-------- ------------------------------------- ------------------------------
A. INFORMATION ABOUT THE TRANSACTION
<C> <C> <S>
Item 1. Forepart of Registration Statement
and Outside Front Cover Page of
Prospectus.......................... Facing Sheet; Cross Reference
Sheet; Outside Front Cover
Page
Item 2. Inside Front and Outside Back Cover
Pages of Prospectus................. Inside Front Cover Page; Table
of Contents
Item 3. Risk Factors, Ratio of Earnings to
Fixed Charges and Other Information. Summary; Risk Factors;
Business of the Companies;
Information Regarding the
Merger; Selected Historical
Financial Data; Pro Forma
Financial Information;
Comparative Per Share Data;
Comparative Market Prices of
Common Stock; The Special
Meeting; Dissenters Appraisal
Rights
Item 4. Terms of the Transaction............. Information Regarding the
Merger; Description of Capital
Stock of AmeriQuest;
Comparison of Shareholder
Rights
Item 5. Pro Forma Financial Information...... Pro Forma Financial
Information
Item 6. Material Contacts with the Company
Being Acquired...................... *
Item 7. Additional Information Required for
Reoffering by Persons and Parties
Deemed to be Underwriters........... *
Item 8. Interests of Named Experts and
Counsel............................. *
Item 9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities......................... *
<CAPTION>
B. INFORMATION ABOUT THE REGISTRANT
<C> <C> <S>
Item 10. Information With Respect to S-3
Registrants.........................
Item 11. Incorporation of Certain Information
by Reference........................
Item 12. Information With Respect to S-2 or S-
3 Registrants....................... Businesses of the Companies
Item 13. Incorporation of Certain Information
by Reference........................ Inside Front Cover Page;
Businesses of the Companies
Item 14. Information With Respect to
Registrants Other Than S-2 or S-3
Registrants......................... *
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
S-4 HEADING IN PROSPECTUS/JOINT
ITEM NO. TITLE OF FORM S-4 ITEM PROXY STATEMENT
-------- ------------------------------------- ---------------------------
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
<C> <C> <S>
Item 15. Information With Respect to S-3
Companies........................... *
Item 16. Information With Respect to S-2 or S-
3 Companies......................... Inside Front Cover Page;
Businesses of the Companies
Item 17. Information With Respect to Companies
Other Than S-2 or S-3 Companies..... *
Item 18. Information if Proxies, Consents or
Authorizations Are to be Solicited.. The Special Meeting;
Information Regarding the
Merger
Item 19. Information if Proxies, Consents or
Authorizations Are Not to be
Solicited in an Exchange Offer...... *
</TABLE>
- --------
* Omitted because inapplicable or answer is in the negative.
<PAGE>
ROBEC, INC.
425 PRIVET ROAD
HORSHAM, PA 19044
JANUARY , 1995
Dear Shareholder:
You are invited to attend a special meeting of shareholders of Robec, Inc.
("Robec") to be held at 425 Privet Road, Horsham, Pennsylvania 19044, on
February , 1995 at 10:00 a.m., local time (the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon a proposal to
approve and adopt the Plan of Merger (the "Plan of Merger") pursuant to which
RI Acquisition, Inc., a Pennsylvania corporation and a wholly-owned subsidiary
of AmeriQuest Technologies, Inc., a Delaware corporation ("AmeriQuest"), will
be merged with and into Robec (the "Merger"), with Robec surviving the Merger
as a wholly-owned subsidiary of AmeriQuest. Under the terms of the Merger, each
share of common stock, par value $.01 per share, of Robec ("Robec Common
Stock") that is issued and outstanding on the effective date of the Merger,
other than shares held by AmeriQuest or by shareholders who perfect their
statutory dissenters rights, will be converted automatically into the right to
receive .63075 shares of common stock, par value $.01 per share, of AmeriQuest
("AmeriQuest Common Stock"), subject to upward adjustment if the closing price
of AmeriQuest Common Stock is below $3.00 per share on the business day prior
to the day on which the Merger becomes effective, all as more fully described
in the accompanying Prospectus/Proxy Statement and the Plan of Merger attached
as Appendix I thereto.
Pursuant to an Amended and Restated Agreement and Plan of Reorganization (the
"Amended Agreement") dated as of August 11, 1994 among AmeriQuest, Robec and
four principal shareholders of Robec (the "Principal Shareholders"), on
September 22, 1994, the Principal Shareholders exchanged certain of their
shares, representing 50.1% of the outstanding shares of Robec Common Stock, for
shares of AmeriQuest Common Stock at the same conversion ratio as will apply to
shares to be converted in the Merger, subject to the same adjustment mechanism.
The Amended Agreement is attached as Appendix II to the accompanying
Prospectus/Proxy Statement.
Approval and adoption of the Plan of Merger requires the affirmative vote of
a majority of the votes cast by all shareholders entitled to vote thereon at a
meeting at which a quorum is present. Shareholders entitled to notice of and to
vote at the Special Meeting are the holders of outstanding shares of Robec
Common Stock on December 30, 1994 (the "Record Date"). AmeriQuest has
sufficient voting power to approve and adopt the Plan of Merger even if no
other shareholder of Robec votes in favor of such proposal. AmeriQuest has
agreed to vote in favor of the approval and adoption of the Plan of Merger.
THE BOARD OF DIRECTORS OF ROBEC HAS UNANIMOUSLY APPROVED AND ADOPTED THE PLAN
OF MERGER AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE PLAN OF
MERGER. In reaching its determination regarding the Plan of Merger, the Board
considered, among other things, the opinion of Compass Capital Advisors as to
the fairness, from a financial point of view, of the consideration to be
received by holders of shares of Robec Common Stock pursuant to the Plan of
Merger. The opinion of Compass Capital Advisors is attached as Appendix III to
the accompanying Prospectus/Proxy Statement.
In view of the importance of the matter to be acted upon at the Special
Meeting, you are invited to personally attend the Special Meeting. Whether or
not you plan to attend the Special Meeting in person and regardless of the
number of shares of Robec Common Stock you own, please date, sign and return
the enclosed proxy in the accompanying envelope, which requires no postage if
mailed in the United States.
Sincerely,
Robert H. Beckett
Chairman, Chief Executive Officer
and President
SHARE CERTIFICATES SHOULD NOT BE SENT WITH THE ENCLOSED PROXY. IF THE MERGER
IS CONSUMMATED, SHAREHOLDERS WILL BE FURNISHED INSTRUCTIONS FOR EXCHANGING
THEIR ROBEC COMMON STOCK FOR AMERIQUEST COMMON STOCK.
<PAGE>
ROBEC, INC.
425 PRIVET ROAD
HORSHAM, PA 19044
TELEPHONE (215) 675-9300
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON FEBRUARY , 1995
----------------
To the Shareholders of Robec, Inc.:
Notice is hereby given that a special meeting of shareholders (the "Special
Meeting") of Robec, Inc., a Pennsylvania corporation ("Robec"), will be held at
Robec's principal offices, 425 Privet Road, Horsham, Pennsylvania, on February
, 1995 at 10:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the Plan of
Merger (the "Plan of Merger") pursuant to which (a) RI Acquisition, Inc., a
Pennsylvania corporation and a wholly-owned subsidiary of AmeriQuest
Technologies, Inc., a Delaware corporation ("AmeriQuest"), will be merged
with and into Robec (the "Merger"), with Robec surviving the Merger as a
wholly-owned subsidiary of AmeriQuest and (b) each share of common stock,
par value $.01 per share, of Robec ("Robec Common Stock") that is issued
and outstanding on the effective date of the Merger, other than shares held
by AmeriQuest or by shareholders who perfect their statutory dissenters
rights, will be converted automatically into the right to receive .63075
shares of the common stock, par value $.01 per share, of AmeriQuest
("AmeriQuest Common Stock"), subject to adjustment if the closing price of
AmeriQuest Common Stock is below $3.00 per share on the business day prior
to the day on which the Merger becomes effective; and
2. To transact such other business as may properly come before the
Special Meeting or any adjournments thereof.
The Plan of Merger is more fully described in the accompanying
Prospectus/Proxy Statement and is attached as Appendix I thereto.
Robec shareholders have the right to dissent from the Merger and obtain
payment for their shares by following the procedures prescribed in Subchapter
15D of the Pennsylvania Business Corporation Law, which is attached as Appendix
IV to, and summarized under "Dissenters Appraisal Rights" in, the accompanying
Prospectus/Proxy Statement.
Only shareholders of record at the close of business on December 30, 1994 are
entitled to notice of the Special Meeting and to vote at the Special Meeting
and any adjournments thereof. You are cordially invited to attend the Special
Meeting and vote your shares in person.
By Order of the Board of Directors,
Robert S. Beckett
Secretary
January , 1995
YOUR PROXY IS IMPORTANT. ACCORDINGLY, YOU ARE ASKED TO COMPLETE, SIGN AND
RETURN THE ACCOMPANYING PROXY CARD IN THE ENVELOPE PROVIDED WHICH REQUIRES NO
POSTAGE IF MAILED IN THE UNITED STATES. IF YOU DECIDE TO ATTEND THE MEETING,
YOU MAY REVOKE THE PROXY AND VOTE YOUR SHARES IN PERSON.
<PAGE>
ROBEC, INC.
425 PRIVET ROAD
HORSHAM, PENNSYLVANIA 19044
----------------
PROSPECTUS/PROXY STATEMENT
----------------
SPECIAL MEETING OF SHAREHOLDERS
FEBRUARY , 1995
This Prospectus/Proxy Statement is being furnished to the shareholders of
Robec, Inc., a Pennsylvania corporation ("Robec"), in connection with the
solicitation of proxies by the Board of Directors of Robec for use at a special
meeting of shareholders to be held on February , 1995 at 10:00 a.m., local
time, at Robec's principal executive offices, 425 Privet Road, Horsham,
Pennsylvania and at any adjournments thereof (the "Special Meeting").
The purpose of the Special Meeting is to consider and vote upon a proposal to
approve and adopt the Plan of Merger (the "Plan of Merger") pursuant to which
RI Acquisition, Inc., a Pennsylvania corporation ("AmeriQuest Sub") and a
wholly-owned subsidiary of AmeriQuest Technologies, Inc., a Delaware
corporation ("AmeriQuest"), will be merged with and into Robec (the "Merger"),
with Robec surviving the Merger as a wholly-owned subsidiary of AmeriQuest and
renamed AmeriQuest/Robec, Inc. (the "Surviving Corporation"). Under the terms
of the Merger, each share of common stock, par value $.01 per share, of Robec
("Robec Common Stock") that is issued and outstanding on the effective date of
the Merger (the "Effective Date"), other than shares held by AmeriQuest or by
shareholders who perfect their statutory dissenters rights, will be converted
automatically into the right to receive .63075 (the "Applicable Fraction")
shares of the common stock of AmeriQuest ("AmeriQuest Common Stock"), subject
to adjustment if the closing price of AmeriQuest Common Stock is below $3.00 on
the business day prior to the day on which the Merger becomes effective (the
Applicable Fraction including any adjustments thereto, the "Exchange Ratio").
See "Information Regarding the Merger--The Merger." A copy of the Plan of
Merger is attached as Appendix I to this Prospectus/Proxy Statement and is
incorporated herein by this reference. Pursuant to an Amended and Restated
Agreement and Plan of Reorganization (the "Amended Agreement") dated as of
August 11, 1994 among AmeriQuest, Robec and four principal shareholders of
Robec (the "Principal Shareholders"), on September 22, 1994, the Principal
Shareholders exchanged certain of their shares (the "Exchange"), representing
50.1% of the outstanding shares of Robec Common Stock, for shares of AmeriQuest
Common Stock at the Exchange Ratio. A copy of the Amended Agreement is attached
as Appendix II to this Prospectus/Proxy Statement and is incorporated herein by
this reference. The summaries of the portions of the Plan of Merger and Amended
Agreement set forth in this Prospectus/Proxy Statement do not purport to be
complete and are subject to, and are qualified in their entirety by reference
to, the texts of the Plan of Merger and the Amended Agreement.
THE BOARD OF DIRECTORS OF ROBEC HAS UNANIMOUSLY APPROVED AND ADOPTED THE PLAN
OF MERGER AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE PLAN OF
MERGER. In reaching its determination regarding the Plan of Merger, the Board
considered, among other things, the opinion of Compass Capital Advisors
("Compass") as to the fairness, from a financial point of view, of the
consideration to be received by holders of shares of Robec Common Stock
pursuant to the Plan of Merger. A copy of the opinion of Compass is attached as
Appendix III to this Prospectus/Proxy Statement and is incorporated herein by
this reference.
AMERIQUEST HAS FILED A REGISTRATION STATEMENT WITH THE SECURITIES AND
EXCHANGE COMMISSION IN WASHINGTON, D.C. COVERING SHARES OF AMERIQUEST COMMON
STOCK TO BE ISSUED BY AMERIQUEST IN CONNECTION WITH THE MERGER DESCRIBED IN THE
FOLLOWING PROSPECTUS/PROXY STATEMENT. THE PROSPECTUS/PROXY STATEMENT WAS FILED
AS PART OF SUCH REGISTRATION STATEMENT.
----------------
THE SHARES OF AMERIQUEST COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
----------------
THE SHARES OF AMERIQUEST COMMON STOCK TO BE ISSUED PURSUANT TO THE MERGER
INVOLVE CERTAIN IMPORTANT FACTORS TO BE CONSIDERED. SEE "RISK FACTORS."
The date of this Prospectus/Proxy Statement is January , 1995.
<PAGE>
AVAILABLE INFORMATION
Robec and AmeriQuest are each subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith each files reports, proxy statements and other information
with the Securities and Exchange Commission (the "SEC"). Reports, proxy
statements and other information filed by Robec and 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 with
respect to AmeriQuest can also be inspected and copied at the offices of the
New York Stock Exchange, on which AmeriQuest's Common Stock is listed.
AmeriQuest has filed with the SEC a registration statement on Form S-4
(together with any amendments thereto, the "Registration Statement") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to
certain shares of AmeriQuest Common Stock to be issued in connection with the
Merger. This Prospectus/Proxy Statement does not contain all the information
set forth in the Registration Statement, certain portions of which have been
omitted pursuant to the rules and regulations of the SEC. A copy of the
Registration Statement may be inspected without charge at the principal offices
of the SEC in Washington, D.C.
ADDITIONAL INFORMATION
This Prospectus/Proxy Statement is accompanied by AmeriQuest's Annual Report
on Form 10-K/A for the year ended June 30, 1994 and its Quarterly Report on
Form 10-Q for the quarter and three months ended September 30, 1994, as well as
Robec's Annual Report on Form 10-K for the year ended December 31, 1993 and its
Quarterly Report on Form 10-Q/A for the quarter and nine months ended September
30, 1994.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
(1) AmeriQuest's Annual Report on Form 10-K/A for the fiscal year ended
June 30, 1994;
(2) AmeriQuest's Current Report on Form 8-K/A dated September 12, 1994;
(3) AmeriQuest's Quarterly Report on Form 10-Q/A for the quarter ended
September 30, 1994;
(4) AmeriQuest's Current Report on Form 8-K/A dated as of November 14, 1994;
(5) Robec's Annual Report on Form 10-K for the fiscal year ended December
31, 1993;
(6) Robec's Quarterly Report on Form 10-Q/A for the quarter and nine months
ended September 30, 1994;
(7) Robec's Proxy Statement relating to its annual meeting of shareholders
held on June 7, 1994;
(8) Robec's Current Report on Form 8-K dated as of June 30, 1994; and
(9) Robec's Current Report on Form 8-K dated as of September 22, 1994.
In addition, all reports and other documents filed by Robec or AmeriQuest
prior to the date of the Special Meeting pursuant to Sections 13(a), 13(c), 14
and 15(d) of the Exchange Act and after the date of this Prospectus/Proxy
Statement, shall be deemed to be incorporated by reference herein and shall be
deemed to be a part hereof from the date of the filing of each such report or
document.
THIS PROSPECTUS/PROXY STATEMENT INCORPORATES DOCUMENTS BY REFERENCE REGARDING
ROBEC AND AMERIQUEST WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH.
THESE DOCUMENTS ARE AVAILABLE UPON REQUEST AS FOLLOWS: WITH RESPECT TO ROBEC,
FROM ROBERT S. BECKETT, SECRETARY, ROBEC, INC., 425 PRIVET ROAD, HORSHAM,
PENNSYLVANIA 19044, AND WITH RESPECT TO AMERIQUEST, FROM STEPHEN G. HOLMES,
SECRETARY, AMERIQUEST TECHNOLOGIES, INC., 2722 MICHELSON DRIVE, IRVINE,
CALIFORNIA 92715. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY
REQUEST SHOULD BE MADE BY JANUARY , 1995.
ii
<PAGE>
Any statement incorporated herein by reference shall be deemed to be modified
or superseded for purposes of this Prospectus/Proxy Statement to the extent
that a statement contained herein or in any other subsequently filed document
which also is or is deemed to be incorporated herein by reference modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus/Proxy Statement. Subject to the foregoing, all information appearing
in this Prospectus/Proxy Statement is qualified in its entirety by the
information appearing in the documents incorporated herein by this reference.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT IN CONNECTION
WITH THE OFFERING MADE HEREBY, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY ROBEC OR
AMERIQUEST. THIS PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THE REGISTERED SECURITIES TO WHICH IT RELATES, OR AN
OFFER TO ANY PERSON IN ANY JURISDICTION WHERE SUCH OFFER WOULD BE UNLAWFUL. THE
DELIVERY OF THIS PROSPECTUS/PROXY STATEMENT AT ANY TIME DOES NOT IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
iii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
SUMMARY.................................................................... 1
THE MEETING................................................................ 1
TERMS OF THE MERGER........................................................ 2
RISK FACTORS............................................................... 11
Recent Developments...................................................... 11
Recent Losses; Possible Need for Additional Capital...................... 11
Integration of Companies................................................. 12
Changing Methods of Software Distribution................................ 12
Need for Product Development; Manufacturing.............................. 12
Competition; Dominance of Industry Leaders............................... 13
Competition; Products and Gross Margin................................... 13
Dependence upon Key Personnel............................................ 13
Possible Sales by Shareholders........................................... 13
Volatility of Stock Price; Trading Volume................................ 13
THE SPECIAL MEETING........................................................ 13
Purpose of the Special Meeting........................................... 13
Record Date; Solicitation of Proxies..................................... 14
Vote Required............................................................ 14
Stock Ownership of Robec by Management and Certain Beneficial Owners..... 15
Certified Public Accountants............................................. 16
BUSINESSES OF THE COMPANIES................................................ 16
AMERIQUEST............................................................... 16
General................................................................ 16
Incorporation of Certain Information by Reference...................... 17
Recent Developments.................................................... 17
Computer 2000 Investment............................................. 17
Acquisition of NCD................................................... 18
ROBEC.................................................................... 22
General................................................................ 22
Incorporation of Certain Information by Reference...................... 22
Certain Information with Respect to Robert H. Beckett.................. 22
INFORMATION REGARDING THE MERGER........................................... 24
THE MERGER............................................................... 24
BACKGROUND OF THE MERGER................................................. 24
RECOMMENDATION OF THE BOARD OF DIRECTORS OF ROBEC; REASONS FOR THE
MERGER.................................................................. 26
OPINION OF ROBEC'S FINANCIAL ADVISOR..................................... 26
DISSENTERS APPRAISAL RIGHTS.............................................. 31
CERTAIN ANTITRUST MATTERS................................................ 34
INTEREST OF CERTAIN PERSONS IN THE MERGER................................ 34
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.................................. 34
Federal Tax Matters.................................................... 34
Tax Consequences to Robec Shareholders................................. 35
Tax Consequences to Robec and AmeriQuest............................... 35
Information Reporting.................................................. 35
Backup Withholding..................................................... 35
ACCOUNTING TREATMENT..................................................... 35
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
THE PLAN OF MERGER..................................................... 36
The Merger........................................................... 36
Effective Date....................................................... 36
Terms of the Merger.................................................. 36
Payment of Merger Consideration...................................... 36
Surviving Provisions................................................. 37
Dissenting Shares.................................................... 37
THE AMENDED AGREEMENT.................................................. 37
The Exchange......................................................... 37
Robec Stock Options.................................................. 38
Representations and Warranties; Conduct of Business Pending the
Merger.............................................................. 38
Conditions to Consummation of the Merger............................. 38
Indemnification; Insurance........................................... 39
Termination.......................................................... 39
Amendment; Waiver.................................................... 39
Registration Rights.................................................. 40
PRO FORMA FINANCIAL INFORMATION.......................................... 41
CAPITALIZATION........................................................... 46
COMPARATIVE MARKET PRICES OF COMMON STOCK................................ 46
PRO FORMA FINANCIAL INFORMATION.......................................... 47
DIVIDEND POLICY.......................................................... 47
DESCRIPTION OF CAPITAL STOCK OF AMERIQUEST............................... 47
General................................................................ 47
Dividends.............................................................. 47
Voting Rights.......................................................... 47
Liquidation............................................................ 47
Pre-Emptive Rights..................................................... 48
Anti-Takeover Provisions............................................... 48
COMPARISON OF SHAREHOLDER RIGHTS......................................... 48
By-Laws................................................................ 48
Dividend Declarations.................................................. 48
Terms of Directors..................................................... 49
Removal of Directors................................................... 49
Meetings of Shareholders............................................... 49
Action by Shareholders Without Meeting................................. 49
Dissenters Rights...................................................... 49
Supermajority Provisions............................................... 50
Business Combinations with Interested Shareholders..................... 50
Fiduciary Duty......................................................... 50
Derivative Actions..................................................... 51
LEGAL MATTERS............................................................ 51
EXPERTS.................................................................. 51
SHAREHOLDER PROPOSALS.................................................... 51
OTHER MATTERS............................................................ 52
FINANCIAL STATEMENTS OF ROSS WHITE ENTERPRISES, INC. d/b/a "NATIONAL
COMPUTER DISTRIBUTORS................................................... F-1
PLAN OF MERGER........................................................... I-1
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION................ II-1
FAIRNESS OPINION......................................................... III-1
SUBCHAPTER 15D OF THE PENNSYLVANIA BUSINESS CORPORATION LAW--DISSENTERS
RIGHTS.................................................................. IV-1
</TABLE>
v
<PAGE>
SUMMARY
The following brief summary of certain features of the proposal to merge RI
Acquisition, Inc., a Pennsylvania corporation ("AmeriQuest Sub") and wholly-
owned subsidiary of AmeriQuest Technologies, Inc. ("AmeriQuest"), with and into
Robec, Inc. ("Robec") is not a complete statement of all of the proposal's
material features and is qualified in its entirety by reference to the
Prospectus/Proxy Statement which each shareholder of Robec is urged to examine
carefully and consider in its entirety. Cross references in this Summary refer
to appropriate sections of the Prospectus/Proxy Statement where detailed
information is set forth. A copy of the Plan of Merger is attached as Appendix
I hereto and is incorporated herein by this reference.
THE MEETING
Company Soliciting Proxies: Robec, Inc., 425 Privet Road, Horsham, PA
19044, (215) 675-9300. See "Robec Special Meet-
ing."
Company Issuing Securities: AmeriQuest Technologies, Inc., 2722 Michelson
Drive, Irvine, CA 92715, (714) 222-6000.
Businesses of Companies: Robec is engaged primarily in the distribution
of computer hardware to value-added resellers,
dealers and computer retailers. AmeriQuest is
also engaged in the distribution of computer
hardware to value-added resellers through its
CDS Distribution, Inc. subsidiary, and, through
its recently acquired Ross White Enterprises,
Inc. d/b/a National Computer Distributors sub-
sidiary ("NCD"), is engaged in the distribution
of computer hardware to value-added resellers,
systems integrators and computer retailers.
Through its Kenfil, Inc. ("Kenfil") subsidiary,
AmeriQuest is engaged in the distribution of
microcomputer software to the retail market-
place. AmeriQuest and Computer 2000 AG ("Com-
puter 2000") have entered into an agreement
pursuant to which Computer 2000 has agreed to
invest approximately $50 million in AmeriQuest
in exchange for an approximately 51 percent
ownership interest in AmeriQuest, including
shares already owned by Computer 2000 and as-
suming consummation of the Merger. The invest-
ment by Computer 2000 is tiered, with $32 mil-
lion of the investment being contingent upon
the monthly and cumulative performance of
AmeriQuest in the first half of calendar 1995,
approval by AmeriQuest's stockholders and cer-
tain regulatory approvals. See "Businesses of
the Companies."
Date and Time of Meeting: February , 1995 at 10:00 a.m. See "Notice of
Special Meeting."
Place: The principal executive offices of Robec at 425
Privet Road, Horsham, Pennsylvania. See "Notice
of Special Meeting."
Record Date: December 30, 1994. See "Notice of Special Meet-
ing" and "The Special Meeting--Record Date; So-
licitation of Proxies."
Principal Purpose of Robec To consider and vote upon the Plan of Merger,
Meeting: pursuant to which AmeriQuest Sub will be merged
with and into Robec. See "Notice of Special
Meeting" and "The Special Meeting."
Shares Outstanding and 4,439,180 shares of the common stock, par value
Entitled to Vote on Record $.01 per share, of Robec ("Robec Common
Date: Stock"). See "The Special Meeting."
1
<PAGE>
Shares of Robec Common Stock On the Record Date, AmeriQuest owned 2,224,029
Owned on the Record Date by shares of Robec Common Stock and officers and
Officers, Directors and directors of Robec owned an additional 671,671
Principal Shareholders: shares of Robec Common Stock, which cumula-
tively represent approximately 65.23% of the
outstanding shares of Robec Common Stock. This
is greater than the simple majority of votes
cast which is required to adopt the Plan of
Merger. See "The Special Meeting--Vote Re-
quired."
Robec Required Vote: Affirmative vote of the majority of the votes
cast by all of the holders of outstanding
shares of Robec Common Stock entitled to vote
thereon at a meeting at which a quorum is pres-
ent.
Proxies: Revocable at any time before being voted by (1)
giving written notice to the Secretary of
Robec, (2) by substitution of a new Proxy bear-
ing a later date or (3) by request for return
of the Proxy at the special meeting of share-
holders of Robec called to consider and vote
upon the Plan of Merger (the "Special Meet-
ing"). See "The Special Meeting--Vote Re-
quired."
TERMS OF THE MERGER
The Exchange by the Principal AmeriQuest became the owner of 50.1% of the
Shareholders: outstanding Robec Common Stock on September 22,
1994 when four principal shareholders of Robec
(the "Principal Shareholders") exchanged (the
"Exchange") certain of their shares of Robec
Common Stock for shares of common stock, par
value $.01 per share, of AmeriQuest
("AmeriQuest Common Stock") at the Exchange Ra-
tio (as defined below).
Exchange Ratio: On the effective date of the Merger (the "Ef-
fective Date"), each outstanding share of Robec
Common Stock, other than shares owned by
AmeriQuest or by shareholders who perfect their
dissenters rights, will be converted automati-
cally into the right to receive .63075 (the
"Applicable Fraction") shares of newly issued
AmeriQuest Common Stock; provided, however,
that in the event the closing price of
AmeriQuest Common Stock on the New York Stock
Exchange on the business day prior to the Ef-
fective Date as reported in the Wall Street
Journal (the "Closing Date Market Price") is
less than $3.00 per share, then on the Effec-
tive Date each such share of Robec Common Stock
shall instead be converted into the number of
shares of AmeriQuest Common Stock equal to (i)
.63075 multiplied by (ii) a quotient, the nu-
merator of which is $3.00 and the denominator
of which is the Closing Date Market Price (the
Applicable Fraction, including any adjustment
thereto, the "Exchange Ratio"). See "Informa-
tion Regarding the Merger--The Plan of Merger--
Terms of the Merger."
Proposed Effective Date: As soon as possible after the conclusion of the
Special Meeting upon the completion of the nec-
essary formalities required by Pennsylvania law
and certain other conditions precedent, includ-
ing the listing of the shares of AmeriQuest
Common
2
<PAGE>
Stock to be issued pursuant to the Merger with
the New York Stock Exchange. See "Information
Regarding the Merger--The Plan of Merger--Ef-
fective Date."
Risk Factors: Holders of Robec Common Stock should carefully
consider certain risk factors in evaluating the
Merger prior to voting upon the Plan of Merger.
See "Risk Factors."
Principal Reasons for Merger: The combined companies will have an expanded
customer base for operations, greater access to
capital markets and the opportunity for manage-
rial and administrative efficiencies and over-
head expense savings as a result of the consol-
idation of certain operations. See "Information
Regarding the Merger--Recommendation of the
Board of Directors; Reasons for the Merger."
Factors Considered in The Exchange Ratio was negotiated at arm's
Determining Exchange Ratio: length between AmeriQuest and Robec. Factors
considered by Robec included the respective fi-
nancial condition of each company, including
shareholders' equity, their future prospects
and various other factors. See "Information Re-
garding the Merger--Background of the Merger."
Recommendation of Robec's The Board of Directors of Robec has unanimously
Board of Directors: approved and adopted the Plan of Merger and
recommends that the holders of Robec Common
Stock vote FOR approval and adoption of the
Plan of Merger. See "Information Regarding the
Merger--Recommendation of the Board of Direc-
tors of Robec; Reasons for the Merger."
Fairness Opinion: Compass Capital Advisors has delivered its
written opinion to the Board of Directors of
Robec that as of September 20, 1994 the Merger
is fair to Robec's shareholders from a finan-
cial point of view. For information on the as-
sumptions made, matters considered and limits
on the review by Compass Capital Advisors, see
"Information Regarding the Merger--Opinion of
Robec's Financial Advisor."
Dissenters Rights: Under Pennsylvania law, shareholders of Robec
who file a written objection prior to the vote
on the Plan of Merger and do not vote in favor
of approval and adoption of the Plan of Merger
have the right to demand an appraisal of the
"fair value" of their shares of Robec Common
Stock if the required procedures under
Subchapter 15D of the Pennsylvania Business
Corporation Law of 1988, as amended (the
"BCL"), are followed. APPRAISAL RIGHTS WILL BE
FORFEITED IF THE REQUIREMENTS OF SUBCHAPTER 15D
ARE NOT FULLY AND PRECISELY SATISFIED. See "In-
formation Regarding the Merger--Dissenters Ap-
praisal Rights" and a copy of the text of
Subchapter 15D of the BCL attached as Appendix
IV to this Prospectus/Proxy Statement.
Required Approvals: The approval of the shareholders of Robec. The
early termination of the waiting period under
the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act") has
been received. See "Information Regarding the
Merger--Certain Legal Matters."
3
<PAGE>
Appointment of Robert H. AmeriQuest has appointed Robert H. Beckett,
Beckett as a Director of currently the Chairman, Chief Executive Officer
AmeriQuest After the and President of Robec, to the Board of Direc-
Exchange: tors of AmeriQuest and agreed to nominate him
for re-election at each of the next two annual
meetings of AmeriQuest stockholders. See "In-
formation Regarding the Merger--Interest of
Certain Persons in the Merger."
Federal Tax Consequences of The Merger is intended to qualify as a tax-free
the Merger: reorganization under the provisions of Section
368 of the Internal Revenue Code of 1986, as
amended. See "Information Regarding the Merg-
er--Certain Federal Income Tax Consequences."
Accounting: The Merger will be accounted for as a reorgani-
zation of unaffiliated companies and recorded
as a purchase by AmeriQuest for accounting and
financial reporting purposes. See "Information
Regarding the Merger--Accounting Treatment."
Comparison of Shareholders' Holders of Robec Common Stock will become hold-
Rights: ers of AmeriQuest Common Stock as a result of
the Merger. There are certain differences in
the rights of holders of Robec Common Stock and
AmeriQuest Common Stock, including differences
due to the fact that Robec is organized under
the laws of Pennsylvania whereas AmeriQuest is
organized under the laws of Delaware. See "Com-
parison of Shareholders Rights."
Surrender of Certificates: As soon as practicable after the Effective
Date, American Stock Transfer & Trust Company,
or another entity mutually acceptable to both
Robec and AmeriQuest, in its capacity as ex-
change agent for the Merger (the "Exchange
Agent"), will send a transmittal letter to each
Robec shareholder. The transmittal letter will
contain instructions with respect to the sur-
render of certificates representing Robec Com-
mon Stock to be exchanged for AmeriQuest Common
Stock. See "Information Regarding the Merger--
The Plan of Merger--Surrender and Payment."
ROBEC SHAREHOLDERS SHOULD NOT FORWARD CERTIFI-
CATES FOR ROBEC COMMON STOCK TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LET-
TERS. ROBEC SHAREHOLDERS SHOULD NOT RETURN
STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
4
<PAGE>
Comparative Per Share Prices: AmeriQuest Common Stock trades on the New York
Stock Exchange ("NYSE") under the trading sym-
bol ("AQS"). The following table sets forth the
range of high and low closing prices reported
on the NYSE for AmeriQuest Common Stock for the
calendar periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Calendar 1994
First Quarter............................. 5 7/8 4 1/8
Second Quarter............................ 4 1/8 3
Third Quarter............................. 4 1/4 3 1/8
Fourth Quarter............................ 3 3/4 2 7/8
</TABLE>
Robec Common Stock has been traded on the Nasdaq
National Market System since Robec's initial
public offering under the trading symbol "ROBC".
The following table sets forth the range of high
and low last sale prices reported on the Nasdaq
National Market System for Robec Common Stock
for the calendar periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Calendar 1994
First Quarter............................. 2 7/8 1 1/2
Second Quarter............................ 1 7/8 1/2
Third Quarter............................. 2 1/8 1 1/4
Fourth Quarter............................ 1 7/8 1 9/16
</TABLE>
On June 29, 1994, the last trading day prior to
the first public announcement by AmeriQuest and
Robec concerning the proposed Merger, the last
sale price of AmeriQuest Common Stock reported
on the NYSE was $3.25 per share and the last
sale price of Robec Common Stock reported on
the Nasdaq National Market System was $0.88 per
share. Based on the exchange ratio of .63075
shares of AmeriQuest Common Stock for each
share of Robec Common Stock and the quoted
closing sale price of AmeriQuest Common Stock
on that date, AmeriQuest is issuing stock that
had an equivalent value on that date of $2.05
per share of Robec Common Stock. On January
, 1995, the last sale price of AmeriQuest
Common Stock as reported on the NYSE was
$ per share and the last sale price of
Robec Common Stock reported on the Nasdaq
National Market System was $ per share.
For information regarding earlier periods, see
"Comparative Market Prices of Common Stock."
5
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL COMPARATIVE PER SHARE DATA
The following selected historical information of AmeriQuest, Robec, and NCD
has been derived from their respective historical financial statements and
should be read in conjunction with such financial statements and notes thereto.
AmeriQuest's Consolidated Financial Statement for the two years ended June 30,
1994 and 1993 has been audited by Arthur Andersen LLP, independent public
accountants. ROBEC's Consolidated Financial Statements for the two years ended
December 31, 1993 and 1992 has been audited by Coopers & Lybrand LLP,
independent public accountants. NCD's Consolidated Financial Statements for the
two years ended March 31, 1994 and 1993 has been audited by KPMG Peat Marwick
LLP, independent public accountants. Robec's and NCD's statement of income data
for the twelve months ended June 30, 1994, Robec's, NCD's and AmeriQuest's
statements of income data for the three months ended September 30, 1994 and
1993 and the balance sheet data at September 30, 1994 and Robec's statement of
income data for the nine months ended September 30, 1994 and NCD's statement of
income data for the six months ended September 30, 1994 are unaudited but have
been prepared on the same basis as their audited financial statements and, in
the opinion of their respective managements, contain all adjustments consisting
only of normal recurring adjustments, necessary for a fair presentation of the
results of operations for such periods. The selected unaudited pro forma
condensed combined financial data is qualified in their entirety by reference
to, and should be read in conjunction with, the pro forma unaudited combining
financial statements and notes thereto that are included elsewhere in this
Prospectus/Proxy Statement. The unaudited pro forma condensed combined
statement of income combines the results of operations of AmeriQuest, Robec and
NCD for the twelve months ended June 30, 1994 and the three months ended
September 30, 1994 giving effect to the acquisitions as if it had occurred on
July 1, 1993. The unaudited pro forma condensed combined balance sheet data
combines the balance sheets of AmeriQuest and NCD as of September 30, 1994,
giving effect to the NCD acquisition as if it had occurred on that date. The
pro forma information is not necessarily indicative of the operating results or
financial position that would have occurred had the acquisitions been
consummated at the beginning of the periods presented, nor is it necessarily
indicative of future operating results or financial position.
6
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30
------------- -----------------------------------------------
1994 1994 1993 1992 1991 1990
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
AMERIQUEST
Historical Statement of Income Data:
Net sales............. $49,476 $ 87,593 $ 73,082 $115,054 $130,062 $187,724
Income (loss) from
operations........... (453) (7,274) 487 (9,047) (11,730) 1,245
Income (loss) before
income taxes......... (1,113) (7,971) 236 (9,623) (12,027) 652
Net income (loss)..... (1,113) (7,971) 236 (8,894) (8,501) 405
Earnings (loss) per
share................ (0.10) (1.33) 0.08 (3.04) (2.89) 0.13
Weighted average
shares outstanding... 11,623 5,974 3,061 2,922 2,942 3,156
<CAPTION>
SEPTEMBER 30, JUNE 30
------------- -----------------------------------------------
1994 1994 1993 1992 1991 1990
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Historical Balance Sheet
Data:
Working capital....... $14,733 $ 4,872 $ 5,904 $ 5,217 $ 15,081 $ 22,463
Total assets.......... 106,730 65,145 20,274 23,522 40,747 41,084
Long-term obligations. 267 3,442 1,817 274 1,851 1,134
Shareholders' equity.. 28,172 12,875 8,644 7,952 16,806 26,065
<CAPTION>
THREE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED JUNE 30
------------- -----------------------------------------------
1994 1994 1993 1992 1991 1990
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
KENFIL
Historical Statement of Income Data:
Net sales............. (1) $138,759 $184,054 $167,451 $133,219 $139,246
Income (loss) from
operations........... (18,167) 4,799 5,081 1,786 2,225
Income (loss) before
income taxes......... (20,753) 1,636 1,407 (2,501) (36)
Net income (loss)..... (20,770) 1,086 873 (1,663) (25)
Earnings (loss) per
share................ (4.72) 0.17 0.06 (0.70) (0.01)
Weighted average
shares outstanding... 4,399 4,399 2,798 2,869 3,108
<CAPTION>
SEPTEMBER 30, JUNE 30
------------- -----------------------------------------------
1994 1994 1993 1992 1991 1990
------------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Historical Balance Sheet
Data:
Working capital....... (1) (1) $ 17,897 $ 5,212 $ 5,162 $ 2,048
Total assets.......... 56,050 41,484 36,144 33,245
Long-term obligations. 6,480 11,380 11,452 1,525
Shareholders' equity
(deficiency)......... 13,146 (8,628) (8,784) 2,640
</TABLE>
- --------
(1) Includes operations of acquirees from the indicated date and thereafter
which for Kenfil, Inc. was June 1994 and for Robec, Inc. was September
1994.
(2) This table includes pro forma adjustments for income taxes which would have
been recorded in 1989 ($2,023,000) if the Company had not been a Subchapter
S Corporation from January 1, 1989 to October 9, 1989.
7
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEARS ENDED DECEMBER 31
------------- ----------------------------------------------------------------
1994 1993 1992 1991 1990 1989
------------- ---------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
ROBEC
Historical Statement of Income Data:
Net sales............. $105,700 $ 203,233 $ 202,564 $201,131 $ 190,867 $ 168,576
Income (loss) from
operations........... (2,149) (8,141) (5,353) 4,994 7,890 9,112
Income (loss) before
income taxes......... (3,002) (9,994) (6,785) 3,237 6,178 7,521
Net income (loss)..... (3,002) (9,118) (4,589) 2,104 3,956 4,720(2)
Earnings (loss) per
share................ (0.68) (2.04) (1.03) 0.47 0.87 1.32(2)
Weighted average
shares outstanding... 4,439 4,459 4,459 4,457 4,571 3,584(2)
<CAPTION>
SEPTEMBER 30, DECEMBER 31
------------- ----------------------------------------------------------------
1994 1993 1992 1991 1990 1989
------------- ---------- ----------- ------------ ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Historical Balance Sheet
Data:
Working capital....... (1) $ 12,208 $ 42,078 $ 45,167 $ 22,788 $ 20,105
Total assets.......... 57,075 65,685 71,750 62,519 50,735
Long-term obligations. -- 21,336 20,000 -- --
Shareholders' equity
(deficiency)......... 14,261 23,379 27,964 25,860 22,162
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30, YEARS ENDED MARCH 31 MARCH 31, YEARS ENDED DECEMBER 31
------------- ---------------------- ------------ ---------------------------
1994 1994 1993 1992 1991 1990
------------- ---------- ----------- ------------ ----------- --------------
(UNAUDITED) (UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
NCD
Historical Statement of Income Data:
Net sales............. $117,696 $196,513 $ 113,306 $ 15,256 $ 40,505 $ 38,689
Income (loss) from
operations........... 2,551 2,433 (1,481) 119 617 338
Income (loss) before
income taxes......... 994 630 (2,736) 51 309 137
Net income (loss)..... 994 630 (2,461) 51 309 137
Earnings (loss) per
share................ 4,247.86 2,859.00 (13,395.00) 423.00 3,094.00 1,370.00
Weighted average
shares outstanding... 234 220 184 120 100 100
<CAPTION>
SEPTEMBER 30, MARCH 31 DECEMBER 31
------------- ------------------------------------ ---------------------------
1994 1994 1993 1992 1991 1990
------------- ---------- ----------- ------------ ----------- --------------
(UNAUDITED) (UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
Historical Balance Sheet
Data:
Working capital....... $ 2,281 $ 1,289 $ 620 $ 3,713 $ (200) $ 262
Total assets.......... 52,359 51,677 27,984 9,904 9,656 7,153
Long-term obligations. 2,737 2,736 2,663 2,717 136 135
Shareholders' equity
(deficiency)......... 1,260 11 (619) 2,103 697 609
</TABLE>
8
<PAGE>
AMERIQUEST, KENFIL, ROBEC AND NCD
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED THREE MONTHS ENDED
JUNE 30, 1994 SEPTEMBER 30, 1994
------------------- ------------------
<S> <C> <C>
Pro Forma Combined Statement of Income
Data:
Net sales............................. $613,606 $133,191
Amortization of goodwill and purchased
intangibles.......................... (1,095) (274)
Income (loss) from operations......... (33,476) (88)
Income (loss) before taxes............ (39,350) (1,385)
Net income (loss)..................... (38,553)(1) (1,385)
Net income (loss) applicable to common
stockholders......................... (38,553) (1,385)
Net income (loss) per share........... (1.45) (0.05)
Weighted average shares outstanding... 26,652 29,691
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1994
------------------
<S> <C>
Pro Forma Combined Balance Sheet Data:
Working capital............................................ $28,955
Total assets............................................... 171,631
Long-term obligations...................................... 267
Total stockholders' equity................................. 53,044
Book value per share (2)................................... 1.85
Common shares outstanding.................................. 28,650
</TABLE>
- --------
(1) The restructuring charge of $5,000,000 included in AmeriQuest's historical
statement of operations relates principally to the write-off of certain
former personal computer joint venture operations. The restructuring charge
and earthquake loss of $3,305,000 included in Kenfil's historical
financials included charges of $2,821,000 for losses sustained in the
Southern California earthquake and restructuring charges of $484,000
relating to severance costs and lease termination costs. The restructuring
charge of $336,000 included in Robec's historical statement of operations
relates to a reduction in office and warehouse space. Such restructuring
charges, although non-recurring in nature, have been included in the
proforma condensed combined statement of operations in conformity with
Article 11 of Regulation S-X of the Securities and Exchange Commission.
(2) Book value per share is computed by dividing pro forma stockholders' equity
by the pro forma number of shares of common stock outstanding at September
30, 1994.
9
<PAGE>
UNAUDITED COMPARATIVE PER SHARE DATA. The following table sets forth (1) the
historical net income (loss) per share and the historical book value per share
of AmeriQuest Common Stock; (2) the historical net income (loss) per common
share and the historical book value per share of Kenfil, Robec and NCD Common
Stock; (3) the unaudited pro forma combined net income (loss) per common share
and the unaudited pro forma combined book value per share after giving effect
to the proposed Merger on a retroactive basis; and (4) the unaudited pro forma
net income (loss) per equivalent Robec share and the unaudited pro forma book
value per equivalent Robec share assuming the exchange ratio of 0.63075. The
information presented in the table should be read in conjunction with the
unaudited pro forma condensed combined financial statements and the interim
consolidated unaudited condensed financial statements and the notes thereto
appearing elsewhere herein or incorporated herein by reference.
<TABLE>
<CAPTION>
EQUIVALENT
HISTORICAL(3)(4) AMERIQUEST ROBEC
------------------------------------ PRO FORMA PRO FORMA
AMERIQUEST KENFIL ROBEC NCD COMBINED(1)(4) COMBINED(2)
---------- ------ ------ --------- -------------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net Income (Loss) Per
Share(3)
Fiscal year ended
June 30, 1994......... $(1.33) $(3.25) $(2.52) $7,830.77 $(1.45) $(0.91)
Three months ended
September 30, 1994.... (0.10) n/a (0.22) 2,487.18 (0.05) (0.01)
Book Value Per Share at
June 30, 1994......... 1.31 2.65 1.52 0.96
September 30, 1994.... 1.34 2.56 1.53 0.96
</TABLE>
(1) The unaudited pro forma combined net income (loss) per share is based on
the weighted average number of common shares of AmeriQuest Common Stock
outstanding during the period adjusted to give effect to shares assumed to
be issued had the Merger taken place as of the beginning of the period
presented.
(2) The unaudited equivalent Robec pro forma combined per share amounts are
calculated by multiplying the AmeriQuest pro forma combined per share
amounts by the exchange ratio of 0.63075 of a share of AmeriQuest Common
Stock for each share of Robec Common Stock.
(3) AmeriQuest's and Robec's separate net income (loss) per share represents
amounts for the year ended June 30, 1994 and the three months ended
September 30, 1994.
(4) AmeriQuest's, Kenfil's, Robec's and NCD's separate book value per share are
computed by dividing stockholders' equity by the number of shares of common
stock outstanding at the end of each period. Pro forma combined book value
per share is computed by dividing pro forma combined stockholders' equity
by the pro forma combined number of shares of common stock outstanding at
the end of the period.
10
<PAGE>
RISK FACTORS
The following are certain risk factors to be considered by Robec's
shareholders in voting upon the Plan of Merger, in addition to the risks and
other information described elsewhere in this Prospectus/Proxy Statement.
RECENT DEVELOPMENTS. AmeriQuest has a policy of growth, both internal and by
acquisition. On June 6, 1994, the Company acquired 51.9% of Kenfil Inc., a
distributor of computer software products, and on September 12, 1994 acquired
the balance of the outstanding shares of Kenfil Inc. in a merger between
AmeriQuest's wholly-owned subsidiary, AmeriQuest/Kenfil Inc. and Kenfil Inc.
AmeriQuest now owns 100% of the resultant company, AmeriQuest/Kenfil Inc.
("Kenfil"). On September 22, 1994, AmeriQuest acquired 50.1% of Robec from the
Principal Shareholders, and it is contemplated that AmeriQuest will own 100% of
Robec upon consummation of the Merger. On November 15, 1994, AmeriQuest
acquired Ross White Enterprises, Inc., a Florida corporation d/b/a "National
Computer Distributors" ("NCD"). Both Robec and NCD are distributors of computer
hardware. The combination of AmeriQuest (including Kenfil and NCD) and Robec
after consummation of the Merger is referred to in this Prospectus/Proxy
Statement as the "Combined Company." In addition, on November 14, 1994,
AmeriQuest entered into an Investment Agreement and a Loan Agreement with
Computer 2000 AG ("Computer 2000") which contemplate that Computer 2000 will
invest approximately $50 million in AmeriQuest in exchange for a 51% ownership
interest in AmeriQuest, including shares already owned by Computer 2000, and
assuming consummation of the Merger. The investment by Computer 2000 is tiered,
with $32 million being contingent upon the monthly and cumulative performance
of AmeriQuest in the first half of calendar 1995, approval by AmeriQuest
stockholders and certain regulatory approvals.This investment is part and
parcel of a global alliance between AmeriQuest and Computer 2000. Although the
sale of the shares to Computer 2000 would be at a price below the market price
on November 14, 1994, the Board of Directors of AmeriQuest evaluated the
prospects of AmeriQuest in the alliance for improved purchasing margins,
improved vendor lines and cross-selling opportunities, and determined that the
interests of all shareholders of AmeriQuest would be best served by the
arrangement. However, should such alliance synergies not materialize,
AmeriQuest could be viewed as having sold the shares below market without the
receipt of any additional benefit from the arrangement. No assurance can be
given that the anticipated synergies from the alliance will materialize. A
shareholders derivative lawsuit has been filed against AmeriQuest, its
directors and Computer 2000 with respect to the Investment Agreement. For
additional information, see "The Business of the Companies--Ameriquest--Recent
Developments--Investment by Computer 2000 Investment."
RECENT LOSSES; POSSIBLE NEED FOR ADDITIONAL CAPITAL. AmeriQuest experienced
significant net losses for fiscal years 1991 and 1992. Although AmeriQuest had
net earnings of $236,000 for the year ended June 30, 1993, it had a loss of
$7,971,000 for the year ended June 30, 1994, including a write-off of $5.7
million with respect to restructuring and the disposition of assets related to
hardware operations. For the three months ended September 30, 1994, AmeriQuest
experienced a loss of approximately $413,000 compared with a net income of
approximately $62,000 for the same period a year earlier. NCD had a net income
for the fiscal year ended March 31, 1994 of $630,115 on revenues of
$196,512,724 compared with a net loss of $2,460,624 the year earlier on
revenues of $113,306,494. For the six months ended September 30, 1994, NCD had
a net income of $994,000 on sales of $117,696,000. Robec experienced a net loss
of $9,118,000 for the year ended December 31, 1993 and a net loss of $3,002,000
for the nine months ended September 30, 1994. There can be no assurance that
the Combined Company will be able to achieve profitability in subsequent
periods. In fiscal 1994, AmeriQuest raised approximately $5,600,000 from the
sale of 3,400,000 shares of AmeriQuest Common Stock, which shares have been
registered for resale on a Registration Statement on Form S-3. On June 30,
1994, it raised another $2,000,000 in a sale of its securities to foreign
investors. On October 17, 1994, AmeriQuest raised approximately $3,432,000 upon
the placement of unsecured, convertible promissory notes which were
automatically converted to shares of AmeriQuest Common Stock and warrants to
purchase AmeriQuest Common Stock at $2.40 per share upon the acquisition of
NCD. In the event that the Combined Company does not achieve profitability in
the near term, AmeriQuest may be required to seek additional financing, but the
Investment Agreement with Computer 2000 prohibits the issuance of additional
shares of
11
<PAGE>
AmeriQuest Common Stock without its consent. However, if AmeriQuest were to
need additional capital and obtain Computer 2000's consent to issue additional
shares of AmeriQuest Common Stock, AmeriQuest would be obligated to issue an
equal number of additional shares to Computer 2000, thus reducing the price per
share to be paid by Computer 2000. There can be no assurance that any such
financing will be available to AmeriQuest if and when required, or on terms
acceptable to AmeriQuest, or that such additional financing, if available,
would not result in substantial dilution of the equity interests of existing
stockholders.
INTEGRATION OF COMPANIES. In determining the terms of the proposed Merger,
the management of Robec and AmeriQuest evaluated the companies' respective
businesses based in part on expectations concerning the future operations of
the Combined Company. The evaluations reflected to a material extent the
expectation that there would be an increase in the sales of each company's
products, as well as the expectation that the combination of the companies
would produce other beneficial effects. There can be no assurance that these
expectations will be fulfilled. AmeriQuest and Robec believe that a key benefit
to be realized from the Merger will be the integration of their strategies and
product lines. Certain of the anticipated benefits of the Merger may not be
achieved unless the respective operations of each company are successfully
integrated in a timely manner. The difficulties of such integration may
initially be increased by the necessity of maintaining multiple accounting
systems and integrating personnel with disparate business backgrounds and
corporate cultures. Such problems could be further exacerbated in combining
Robec's and NCD's operations with those of AmeriQuest because of the
geographical diversity of the companies. There can be no assurance that the
Combined Company will be able to integrate effectively the products and
services of Robec with the products and services of AmeriQuest, Kenfil and/or
NCD. Nor can there be any assurance that, even if integrated, the Combined
Company's product and service offerings will be successful. If the Combined
Company is not successful in integrating its product strategies and services or
if its integrated products and services fail to achieve market acceptance, the
business of the Combined Company could be adversely affected.
CHANGING METHODS OF SOFTWARE DISTRIBUTION. The manner in which microcomputer
software products are distributed and sold is changing, and new methods of
distribution may emerge or expand. Software publishers have sold, and may
intensify their efforts to sell, their products directly to resellers and end-
users, including certain major reseller customers. From time-to-time certain
publishers have instituted programs for the direct sale of large-order
quantities of software to certain major corporate accounts, and these types of
programs may continue to be used by various publishers. In addition, certain
major publishers have implemented programs for master copy distribution (site
licensing) of software. These programs generally grant an organization the
right to make any number of copies of software for distribution within the
organization provided that the organization pays a fee to the publisher for
each copy made. Also, publishers may attempt to increase the volume of software
products distributed electronically to end-users' microcomputers. If these
programs become more common or if other methods of distribution of software
become more widely accepted, the Combined Company's business and financial
results could be materially adversely affected.
NEED FOR PRODUCT DEVELOPMENT; MANUFACTURING. AmeriQuest (including NCD) and
Robec compete in an industry which is affected by technological change. The
inability of the Combined Company to develop or obtain new products which
respond to industry demands could adversely affect its operational and
financial performance. AmeriQuest and Robec depend on original equipment
manufacturers ("OEMs") to manufacture various portions of their products.
Although Robec and AmeriQuest perform quality control checks on these
components, there can be no assurance that component defects will not occur in
the future. AmeriQuest and Robec have in the past experienced component
reliability problems with respect to new components. AmeriQuest and Robec
believe that this problem is typical in the industry and they perform product
quality inspection and final testing to prevent, detect and remedy such
problems. There can be no assurance that component reliability problems will
not have a material adverse effect on the business of the Combined Company.
Robec and AmeriQuest also purchase components, subassemblies and fabricated
parts from independent suppliers. Robec and AmeriQuest attempt to maintain
adequate inventories of parts to cover their respective short-term requirements
and have never experienced difficulties in obtaining inventories
12
<PAGE>
of parts to cover their respective short-term requirements for components.
However, Robec and AmeriQuest do purchase several key components from a limited
number of sources. There can be no assurance that, with respect to such
components, the loss of key sources would not have a material adverse effect on
business of the Combined Company.
COMPETITION; DOMINANCE OF INDUSTRY LEADERS. Most of the Combined Company's
competitors have financial, marketing or management resources substantially
greater than those of the Combined Company. The personal computer industry is
dominated by companies with annual revenues that exceed a billion dollars. The
Combined Company's principal markets are comprised predominantly of personal
computer resellers with a moderate volume of sales. Robec and AmeriQuest are
facing increasing competition from many competitors. AmeriQuest and Robec
believe that the market will be increasingly dominated by the industry leaders.
There can be no assurance that the Combined Company will develop into one of
the industry leaders.
COMPETITION; PRODUCTS AND GROSS MARGIN. Robec and AmeriQuest compete in an
industry characterized by intense competition. Because the products
traditionally resold by distributors such as Robec and AmeriQuest have shorter
and shorter product life cycles and are offered by many resellers, the gross
margins which can be earned from the sale of such products reduce quickly over
short periods of time. In addition, the products are subject to loss in value
due to technological obsolescence. Accordingly, the Combined Company's primary
marketing strategy will be to sell products with increasing data storage
capacities. There can be no assurance that the Combined Company will be able to
develop or obtain such higher capacity products or maintain adequate gross
margins on the sales of such products.
DEPENDENCE UPON KEY PERSONNEL. The Combined Company will be dependent upon
the marketing and management expertise of certain key personnel. While other
qualified persons may be found to assume the responsibilities of these key
personnel if they were to leave the Combined Company, the search for successors
could take a substantial amount of time, and the disruption to the Combined
Company's operations could have a material adverse effect on its business.
POSSIBLE SALES BY SHAREHOLDERS. AmeriQuest has earlier registered 4,238,639
outstanding shares (24%) of AmeriQuest Common Stock on Form S-3 for resale by
certain selling shareholders, and currently has pending another registration
statement on Form S-3 for the resale by still other selling shareholders of
5,393,177 outstanding shares (29.8%) of AmeriQuest Common Stock. Additionally,
AmeriQuest is obligated to register the resale of shares issued pursuant to the
private placement of October 17, 1994 and the shares issued upon the
acquisition of NCD, totaling approximately 3,404,767 shares of AmeriQuest
Common Stock. AmeriQuest has also agreed to register the shares to be issued to
Computer 2000 upon consummation of the transactions contemplated by the
Investment Agreement with Computer 2000. The sale of the registered shares, or
the perception that such shares may be sold, may have the effect of
substantially depressing the market price of AmeriQuest's Common Stock and
causing substantial fluctuations in the price of AmeriQuest Common Stock.
VOLATILITY OF STOCK PRICE; TRADING VOLUME. The price of AmeriQuest's Common
Stock has been subject to significant price fluctuations. There can be no
assurance that the price of the AmeriQuest's Common Stock will stabilize at any
time or at a price equal to or above the price of such shares at the time of
the Merger. Until recently, the trading volume for AmeriQuest's Common Stock
has generally been low. A large increase in share trading volume in a short
period of time could cause a significant reduction in share trading prices.
THE SPECIAL MEETING
PURPOSE OF THE SPECIAL MEETING
The Special Meeting is being called (i) to consider and vote upon a proposal
to approve and adopt the Plan of Merger pursuant to which (a) AmeriQuest Sub
will be merged with and into Robec, with Robec surviving the Merger as a
wholly-owned subsidiary of AmeriQuest and (b) each share of Robec Common Stock
that is issued and outstanding on the Effective Date, other than shares held by
AmeriQuest or by
13
<PAGE>
shareholders who perfect their statutory dissenters rights, will be converted
automatically into the right to receive shares of AmeriQuest Common Stock at
the Exchange Ratio and (ii) to transact such other business as may properly
come before the Special Meeting or any adjournments thereof.
Approval and adoption of the Plan of Merger by Robec's shareholders is one of
the conditions to the consummation of the Merger. See "Information Regarding
the Merger--The Amended Agreement--Conditions to Consummation of the Merger."
THE BOARD OF DIRECTORS OF ROBEC HAS UNANIMOUSLY APPROVED AND ADOPTED THE PLAN
OF MERGER AND RECOMMENDS THAT HOLDERS OF SHARES OF ROBEC COMMON STOCK VOTE FOR
APPROVAL AND ADOPTION OF THE PLAN OF MERGER.
RECORD DATE; SOLICITATION OF PROXIES
The close of business on December 30, 1994 has been fixed as the record date
(the "Record Date") for the determination of shareholders entitled to notice of
and to vote at the Special Meeting. Accordingly, only holders of Robec Common
Stock of record at the close of business on the Record Date are entitled to
notice of and to vote at the Special Meeting and any adjournments thereof. At
the close of business on the Record Date, there were 4,439,180 shares of Robec
Common Stock outstanding. Robec has 1,000,000 authorized shares of preferred
stock of which no shares are outstanding.
Shares of Robec Common Stock which are represented by properly executed
proxies, unless such proxies shall have previously been properly revoked, will
be voted in accordance with the instructions indicated in such proxies. If no
contrary instructions are indicated, such shares will be voted FOR approval and
adoption of the Plan of Merger and in the discretion of the proxy holder as to
any other matter which may properly come before the Special Meeting. Under the
rules of the National Association of Securities Dealers, brokers may not give a
proxy to vote without complying with the rules of any national exchange to
which the broker is also a member. Brokers that are member firms of the New
York Stock Exchange, Inc. ("NYSE") and who hold shares in street name for
customers have authority under the rules of the NYSE to vote those shares with
respect to the Plan of Merger only if they have received instructions to do so
from the beneficial owners thereof. Under the Pennsylvania Business Corporation
Law of 1988, as amended (the "BCL"), if a shareholder (including a nominee or
other record owner) either records the fact of abstention or otherwise
withholds authority to vote or fails to vote in person or by proxy, such action
would not be considered a "vote cast" and would have no effect in the approval
and adoption of the Plan of Merger, other than to reduce the number of
affirmative votes needed for such approval. A shareholder who has given a proxy
may revoke it at any time prior to its exercise at the Special Meeting by
delivering a written notice of revocation of the proxy being revoked or by
submission of a properly executed proxy bearing a later date than the proxy
being revoked, to Robert S. Beckett, Secretary, Robec, Inc., 425 Privet Road,
Horsham, Pennsylvania 19044, or by voting the shares of Robec Common Stock
covered thereby in person at the Special Meeting.
Robec will bear the cost of the Special Meeting and of soliciting proxies
therefor, including the costs of the printing and mailing of this
Prospectus/Proxy Statement and related materials, and the reasonable expenses
incurred by brokerage houses, custodians, nominees and fiduciaries in
forwarding proxy material to the beneficial owners of shares of Robec Common
Stock.
VOTE REQUIRED
In general, a majority of the outstanding shares of Robec Common Stock
entitled to vote, represented in person or by proxy, is required for a quorum
at the Special Meeting. However, those shareholders entitled to vote who
attend, in person or by proxy, any adjournment or adjournments of the Special
Meeting that have been previously adjourned for one or more periods aggregating
at least 15 days because of an absence of a quorum, although less than a quorum
as fixed by law or in the Articles of Incorporation or By-Laws of Robec, shall
nevertheless constitute a quorum for the purpose of acting upon the Plan of
Merger. Provided that a
14
<PAGE>
quorum is present at the Special Meeting, the affirmative vote of a majority of
the votes cast by all of the holders of the outstanding shares of Robec Common
Stock entitled to vote thereon as of the Record Date is required for approval
and adoption of the Plan of Merger. Any other matter which may properly come
before the Special Meeting at which a quorum is present for such purpose
requires the affirmative vote of a majority of the votes cast on the matter
unless a greater vote is required by law or the Articles of Incorporation or
By-Laws of Robec. Holders of shares of Robec Common Stock are entitled to one
vote at the Special Meeting for each share of Robec Common Stock held of record
by such holders on the Record Date.
Robec shareholders have the right to dissent from the approval and adoption
of the Plan of Merger and, subject to certain requirements of the BCL, to
receive payment for the fair value of their shares of Robec Common Stock. See
"Information Regarding the Merger--Dissenters Appraisal Rights" and a copy of
the text of Subchapter 15D of the BCL attached as Appendix IV hereto.
On the Record Date, AmeriQuest held 2,224,029 shares of Robec Common Stock
and the officers and directors held an additional 671,671 shares of Robec
Common Stock, excluding exercisable "out of the money" options, constituting
approximately 65.23% of the outstanding shares of Robec Common Stock entitled
to vote at the Special Meeting. The affirmative vote of AmeriQuest would be
more than the simple majority of votes cast which is required to approve and
adopt the Plan of Merger even if all shares of Robec Common Stock were voted.
See "Share Ownership of Robec by Management and Certain Beneficial Owners."
AmeriQuest has agreed to vote all of the outstanding shares of Robec Common
Stock beneficially owned by it on the Record Date in favor of the approval and
adoption of the Plan of Merger.
STOCK OWNERSHIP OF ROBEC BY MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of December 30, 1994, information relating
to the beneficial ownership of Robec Common Stock by (i) each person known to
Robec to be the beneficial owner of more than five percent of the outstanding
shares of Robec Common Stock, (ii) each director of Robec, (iii) the chief
executive officer and each of the four other highest paid executive officers of
Robec as of December 31, 1993 and up to two others since such date, and (iv)
all directors and current executive officers as a group. In the case of
directors and executive officers, this information has been provided by them at
the request of Robec.
<TABLE>
<CAPTION>
NAME OF INDIVIDUAL OR NUMBER OF SHARES PERCENT OF COMMON
IDENTITY OF GROUP OF COMMON STOCK(1) STOCK OUTSTANDING(2)
--------------------- ------------------ --------------------
<S> <C> <C>
AmeriQuest (3)................... 2,224,029 50.10
Robert H. Beckett(4)(5).......... 452,812 10.20
Dimensional Fund Advisors
Inc.(6)......................... 324,800 7.32
FMR Corp.(7)..................... 304,020 6.85
G. Wesley McKinney(4)............ 132,420 2.98
Robert S. Beckett(4)(8).......... 49,342 1.11
Alexander C. Kramer, Jr.(4)...... 30,697 *
John P. Puckett.................. 3,500 *
Louis J. Cissone................. 1,700 *
Edward Ray....................... 1,200 *
George R. Hornig................. 0 --
Richard J. Pinola................ 0 --
All directors and current
executive officers
as a group (9 persons)(5)(8).... 671,671 15.13
</TABLE>
- --------
(1) In accordance with SEC regulations, the table lists all shares as to which
such persons have or share the power to vote or direct disposition. Unless
otherwise indicated, each person has the sole power to vote and to direct
disposition of the shares listed as beneficially owned by such person. The
table includes options exercisable on December 30, 1994 or within 60 days
thereafter, regardless of whether such options are "in-the-money" or "out-
of-the-money," but does not include options which are not exercisable
within 60 days of such date.
15
<PAGE>
(2) Percentages calculated with reference to an aggregate 4,439,180 shares of
Robec Common Stock outstanding on December 30, 1994.
(3) On September 22, 1994, Messrs. Robert H. Beckett, G. Wesley McKinney,
Robert S. Beckett and Alexander C. Kramer, Jr. exchanged 1,427,913,
281,733, 96,803 and 417,580 shares, of Robec Common Stock, respectively,
for shares of AmeriQuest Common Stock. Accordingly, AmeriQuest became the
holder of shares of Robec Common Stock representing 50.1% of the
outstanding stock of Robec as of that date. AmeriQuest has agreed that
until the effective date of the Merger, it will vote its shares of Robec
Common Stock against the nomination or election of any directors of Robec
other than Robec's current directors, or any successors nominated by its
current directors, and also to vote such shares in favor of the Plan of
Merger. See "Information Regarding the Merger--The Amended Agreement--The
Exchange."
(4) The address of Messrs. Robert H. Beckett, G. Wesley McKinney and Robert S.
Beckett is: c/o Robec, Inc., 425 Privet Road, Horsham, Pennsylvania 19044.
(5) Excludes 49,342, 108,350 and 108,350 shares of Robec Common Stock held by
Mr. Beckett's children, Robert S. Beckett, Susan K. Childers and Thomas T.
Beckett, respectively.
(6) According to Dimensional Fund Advisors Inc. ("Dimensional"): (i) it is a
Delaware corporation; (ii) it is an investment adviser registered under
Section 203 of the Investment Advisers Act of 1940; (iii) it has sole
voting power as to 206,200 shares of Robec Common Stock and sole
dispositive power as to 324,800 shares of Robec Common Stock, all of which
shares are owned by advisory clients of Dimensional, no one of which, to
the knowledge of Dimensional, owns more than 5% of Robec Common Stock; (iv)
persons who are officers of Dimensional also serve as officers of DFA
Investment Dimensions Group Inc., (the "Fund") and The Investment Trust
Company (the "Trust"), each an open-end management investment company
registered under the Investment Company Act of 1940, and in such capacities
vote 99,200 shares of Robec Common Stock owned by the Fund and 19,400
shares of Robec Common Stock owned by the Trust; and (v) it has its
principal business office at 1299 Ocean Avenue, 11th Floor, Santa Monica,
California 90401.
(7) According to FMR Corp. ("FMR"): (i) all of these shares are owned by
Fidelity Low-Priced Stock Fund (the "Fund"), an investment company
registered under the Investment Company Act of 1940, for which an FMR
subsidiary, Fidelity Management & Research Company, an investment adviser
registered under the Investment Advisers Act of 1940, serves as investment
adviser; (ii) FMR, its controlling shareholder, Edward C. Johnson 3d,
various Johnson family members and trusts for the benefit of the Johnson
family own FMR voting stock and, through such ownership, form a controlling
group with respect to FMR; and (iii) it has its principal business office
at 82 Devonshire Street, Boston, Massachusetts 02109.
(8) Excludes 452,812 108,350 and 108,350 shares of Robec Common Stock held by
Mr. Beckett's father Robert H. Beckett, his sister Susan K. Childers and
his brother Thomas T. Beckett, respectively.
* Less than 1%
CERTIFIED PUBLIC ACCOUNTANTS
Coopers & Lybrand L.L.P. ("Coopers & Lybrand") has served as Robec's
independent accountants since 1987. Robec has requested that a representative
of Coopers & Lybrand attend the Special Meeting. Such representative will have
an opportunity to make a statement, if he or she desires, and will be available
to respond to appropriate shareholders' questions.
BUSINESSES OF THE COMPANIES
AMERIQUEST
GENERAL
AmeriQuest Technologies, Inc. has its principal office at 2722 Michelson
Drive, Irvine, California 92715, and its telephone number is (719) 222-6000.
AmeriQuest is a Delaware corporation that conducts business through its
subsidiaries.
16
<PAGE>
CDS Distribution, Inc., a Delaware corporation and wholly-owned subsidiary of
AmeriQuest ("CDS"), is a national value-added wholesale distributor of
microcomputers and related products to value-added resellers, dealers and
computer retailers. CDS markets, sells and supports a variety of products
ranging from individual components, which are typically sold in volume, to
complete systems that have been fully configured, assembled and tested prior to
delivery to its customers.
Kenfil was formed as a partnership in 1983 and was incorporated in California
in 1984. In April 1992, Kenfil reincorporated in the state of Delaware. Kenfil
was acquired by AmeriQuest in a two-step transaction completed in September,
1994. Kenfil is a distributor primarily of microcomputer software. Kenfil
presently carries over 3,500 software titles from over 200 software publishers
for sale to approximately 1,100 resellers. Kenfil focuses on software products
in high growth categories such as the business application, utilities,
graphics, communications, consumer (education and entertainment) and
productivity segments.
CMS Enhancements, Inc., a California corporation and wholly-owned subsidiary
of AmeriQuest ("CMS"), is a supplier of hard disk drive subsystems for IBM
compatible and other leading personal business computers, including Apple and
Compaq. CMS also offers disk array, magneto optical, CD-ROM, floppy disk drives
and magnetic tape back-up subsystems having a variety of data storage
capacities as well as personal computers, networking, graphics, communications
and connectivity and accessory products.
NCD, a Florida corporation, was acquired by AmeriQuest on November 14, 1994.
NCD is a national value-added wholesale distributor of computer hardware to
value-added resellers, systems integrators and computer retailers. NCD is based
in Hollywood, Florida and serves as AmeriQuest's Southeast distribution
facility.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The business of AmeriQuest is described in greater detail in the periodic
reports filed by AmeriQuest with the Securities and Exchange Commission
pursuant to Section 13(a) of the Securities Exchange Act of 1934 (the "Exchange
Act"), portions of which are incorporated herein by the reference thereto
below:
(a) Part I, Item 1. Business, as contained in AmeriQuest's Annual Report
on Form 10-K/A for the year ended June 30, 1994.
(b) Part II, Item 6. Selected Financial Data, as contained in
AmeriQuest's Annual Report on Form 10-K/A for the year ended June 30, 1994.
(c) Part II, Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition, as contained in AmeriQuest's Annual
Report on Form 10-K/A for the year ended June 30, 1994; and as set forth as
Part I, Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition, in AmeriQuest's Quarterly Report on
Form 10-Q/A for the three months ended September 30, 1994.
RECENT DEVELOPMENTS
COMPUTER 2000 INVESTMENT. Computer 2000 is a company organized under the laws
of the Federal Republic of Germany ("Computer 2000"). Computer 2000 claims to
be the third largest distributor of computer products with approximately $2.6
billion in sales in fiscal 1994. On November 14, 1994, AmeriQuest and Computer
2000 entered into an Investment Agreement and a Loan Agreement pursuant to
which Computer 2000 agreed to invest approximately $50 million in AmeriQuest in
exchange for an approximately 51 percent ownership interest in AmeriQuest,
including shares already owned by Computer 2000. The transaction has been
approved by the boards of both companies, and is subject to approval by the
stockholders of AmeriQuest and to certain regulatory approvals.
Under the terms of the Investment Agreement and the related Loan Agreement,
Computer 2000 has initially loaned to AmeriQuest 2000, Inc., a Delaware
corporation and a wholly-owned subsidiary of AmeriQuest ("Sub"), $18 million
(the "Loan"). Sub's repayment obligations under the Loan are secured by
17
<PAGE>
a pledge by AmeriQuest of a security interest in all of the outstanding shares
of capital stock of NCD and Kenfil and the 2,224,029 shares of Robec Common
Stock owned by AmeriQuest. The Investment Agreement further provides that,
subject to certain conditions, on or before September 1, 1995, Computer 2000
will invest an additional $32 million in AmeriQuest, bringing Computer 2000's
total ownership interest to approximately 22.9 million shares or 51% of the
total outstanding shares of AmeriQuest Common Stock (assuming consummation of
the Merger) at an average price of $2.22 per share. The $32 million investment
is contingent upon a number of conditions, including AmeriQuest's meeting
certain monthly and cumulative after-tax operating profitability conditions
during the first half of calendar 1995. If AmeriQuest does not meet these
profitability conditions, Computer 2000 will have the option to make the $32
million investment. Upon consummation of the $32 million investment, AmeriQuest
will also issue to Computer 2000 an option to purchase additional shares of
AmeriQuest Common Stock in an amount equal to the number of AmeriQuest's shares
issuable upon exercise of currently outstanding options and warrants and
conversion of any other convertible securities. Computer 2000 will also be
issued an option to acquire an additional 4,000,000 shares of AmeriQuest Common
Stock at $10.00 per share exercisable at any time between June 30, 1996 and
June 30, 1998, and at a price of $20 per share exercisable at any time between
July 1, 1998 and November 30, 1999; provided that the exercise of this option
does not cause Computer 2000 to own in excess of 55% of the issued and
outstanding shares of AmeriQuest Common Stock. All newly issued shares of
AmeriQuest Common Stock will be subject to resale restrictions under Rule 144
of the Securities Act of 1933, but registration rights will be granted with
respect to such shares.
If the Investment Agreement is not approved by AmeriQuest's stockholders,
Computer 2000 will have an option to either (i) require the repayment of the
Loan together with a $1.3 million break-up fee or (ii) exchange the notes
evidencing the Loan for shares of AmeriQuest Common Stock equaling 19.9% of the
total number of outstanding shares of AmeriQuest Common Stock. Should Computer
2000 elect to require repayment, AmeriQuest would have to secure financing to
honor that obligation or Computer 2000 could foreclose on AmeriQuest's pledge
of shares of NCD, Kenfil and Robec. The Board of Directors of AmeriQuest has
unanimously recommended that the stockholders of AmeriQuest vote for the
approval of the Investment Agreement and has authorized the mailing as soon as
practicable of a proxy statement to AmeriQuest's stockholders relating to
approval of the Investment Agreement and the increase in number of shares of
AmeriQuest Common Stock necessary to consummate the transactions contemplated
thereby.
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 AmeriQuest, the Board of Directors of AmeriQuest and Computer
2000 pursuant to which the plaintiffs seek to have the court either (i) enjoin
the consummation of the transactions contemplated by the Investment Agreement
or (ii) enter a monetary judgment 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. AmeriQuest and
the other defendants are defending the action. The Board of Directors of
AmeriQuest has received an opinion from L.H. Friend, Weinress & Frankson, Inc.
that the Investment Agreement and the transactions contemplated thereby were
fair to AmeriQuest and its stockholders, from a financial point of view.
ACQUISITION OF NCD. Effective November 15, 1994, AmeriQuest issued 1,864,767
shares of AmeriQuest Common Stock and paid $3,413,312 in exchange for 100% of
the issued and outstanding equity securities of NCD.
GENERAL. NCD was established in 1987 by Greg White and Tom Ross to distribute
computer hardware to value-added resellers ("VARs"), systems integrators and
computer retailers. NCD has grown from a single location in Hollywood, Florida
selling in the southeastern United States, to a company with six distribution
centers, selling products throughout the United States and Latin America. NCD
sells to a broad base of customers, with its largest customer accounting for
only 2.1% of sales. NCD is a leading distributor of microcomputer hardware to
VARs, systems integrators and computer retailers. The Company purchases its
products directly from over fifty different manufacturers and sells to a base
of more than 8,000 customers.
18
<PAGE>
PRODUCTS. NCD sells leading products in network systems, data storage and
computer peripherals. The strategic focus of management has been to add vendors
and to continually expand and change the mix of the product line to ensure that
high demand, fast moving products are available to customers. The expansion of
the product line also protects NCD from relying on any one vendor to too great
a degree. For the fiscal year ending March 31, 1993, NCD generated over 65% of
its sales from its top four vendors. During this last fiscal year, the top
three vendors accounted for only 35% of total sales. Based on the Company's
projected sales by product, the top three vendors are expected to account for
only 29% of sales for the year ending March 31, 1995.
NCD is the largest distributor in the United States for Epson storage
products, Leading Edge computers, AOC monitors and Citizen printers. The
Company is one of the top three national distributors for CTX, Hyundai, Acer
and Samsung. Its recognition as one of the leading national distributors was
reinforced when AST made NCD only its fifth authorized distributor, joining
Ingram Micro D, Merisel, Tech Data and Gates/FA. The Company's leadership
position in the Latin American market was also recognized by Hewlett Packard
and Apple Computer, both of which made NCD an authorized distributor to Latin
America during fiscal 1994.
The following is a description of the major categories of products currently
sold by NCD and the principal current vendors of those products.
Microcomputers--NCD distributes desktop and portable personal computers and
multiuser microcomputers manufactured by Acer, AST, Samsung, Hyundai and
Zenith.
Printers--NCD distributes a broad line of dot matrix, laser and ink-jet
printers manufactured by Citizen, Panasonic, Lexmark and Samsung.
Monitors and Terminals--NCD distributes monitors and terminals manufactured
by CTX, AOC, AST, Samsung, Sony, Goldstar, Wyse, Viewsonic, Hyundai and Leading
Edge.
Local Area Networks--A local area network ("LAN") permits microcomputers to
communicate with one another and to function on an integrated basis. NCD
distributes LAN specialized hardware products manufactured by Allied Telesis,
Alta Research, Boca Research, CNET, SMC, and Xecom.
Accessories and Supplies--NCD distributes hard and floppy disk drives, board
products, diskettes, stand-by power supplies, modems and other communications
products, accessories and supplies manufactured by numerous companies including
Boca Research, Colorado Memory Systems, Diamond Multimedia, Micro Solutions,
Tandberg Data, PNY Memory and Orchid.
VENDOR RELATIONS. To maintain a strong relationship with its principal
vendors, NCD focuses on marketing the products of a limited number of key
vendors. NCD selects its product line to minimize competition among vendors'
products while maintaining some overlap to provide protection against product
shortages or discontinuations. In addition, NCD enhances its relationship with
its vendors by providing feedback on products, assisting in new product
development and working with vendors to develop marketing programs.
NCD, like AmeriQuest and Robec, sells products throughout the United States
for vendors on a non-exclusive basis without geographic restrictions. NCD has
distribution agreements with most of its vendors and believes they are in the
form customarily used by each vendor and generally contain provisions which
allow termination by either party upon as little as 30 days notice. Most of
NCD's major distribution agreements provide price protection by giving NCD a
credit, subject to specified limitations, in the amount of any price reductions
by the vendor between the time of the initial sale to NCD and the subsequent
sale by NCD to its customer. However, numerous situations arise where it is not
possible to return all obsolete inventory. Accordingly, NCD has established
obsolete inventory reserves against the occurrence of such
19
<PAGE>
situations. Most of the major distribution agreements also give NCD qualified
return privileges on slow-moving inventory. NCD's distribution agreements do
not restrict NCD from selling similar products manufactured by competitors. Any
minimum purchase provisions in NCD's distribution agreements are at levels that
NCD believes do not impose significant risk.
From time to time, the demand for certain products sold by NCD exceeds the
supply available from the vendor. NCD believes that its ability to compete has
not been adversely affected to a material extent by these periodic shortages,
although sales may be adversely affected for an interim period. In order to
limit the impact of such shortages, NCD generally attempts to include
comparable products from more than one vendor in its product line and endeavors
to provide direction to its customers in their selection of products.
COMPETITION. Competition in the distribution of microcomputer products is
intense. Principal national distributors are Micro D, Merisel and Tech Data.
NCD also competes with numerous manufacturers, resellers, retailers and
regional distributors. Most of NCD's major competitors have substantially
greater financial resources than NCD has or than the Combined Company will
have.
Competition is primarily based upon availability of product, price, speed of
delivery, convenience, technical support and other support services. NCD
believes that it is generally competitive with respect to each of these factors
and that its principal, competitive advantages are its technical support and
other support services, and speed of delivery.
SALES AND MARKETING. NCD is a marketing and product driven company whose
focus on sales and customer service mentality pervades throughout the entire
organization. NCD is continually broadening its customer base and sells high
quality, high demand products. In order to do this, management knows that NCD
must consistently provide high levels of service and support, and must expand
its product base to appeal to greater segments of the market. NCD's ability to
broaden its customer base is evidenced by the fact that for the fiscal year
1994, the single largest customer accounted for only 2.1% of $196.5 million of
net sales.
NCD offers its customers a broad product selection and gives them customized
service and support by a highly trained staff. Customers are provided with
quick access to sales and technical support personnel ensuring that questions
are answered and problems resolved in a most efficient and timely manner. When
appropriate, NCD provides customers with educational and promotional seminars
to explain new products and relevant features. This is particularly helpful in
Latin America.
NCD's responsiveness is evidenced by the fact that all orders received by
5:00 p.m. will go out the same day and that there is a one day turnaround on
any system configurations. There is also a one day turnaround on any customer
returns. Salespeople can look up on-line, the stocking levels and product
availability at any of the Company's distribution centers and can react to
customers quickly and efficiently.
NCD has 62 salespeople who are primarily telemarketers selling to an
established base of over 8,000 customers. NCD also has one field salesman,
calling in California. Salespeople are paid a base salary and a percentage of
gross profit over and above a prescribed minimum. Salespeople are given
ongoing, in-depth training.
NCD reaches its clients and potential clients through its ongoing
telemarketing efforts, weekly faxed broadcasts of specific product sales
programs, monthly direct mail efforts and through its catalog, which is mailed
to customers twice a year. NCD also advertises regularly in Computer Reseller
News, VARBusiness, CRN MicroMarketplace and Reseller Management. NCD also
participates in certain trade shows. Over the next year, NCD will be an
exhibitor at the following trade shows:
. Comdex - Atlanta (Spring) . Comdex Sucesu - Brazil
. Comdex - Las Vegas (Fall) . Softel - Chile
. NetWorks - Dallas (Summer) . Inforven - Venezuela
. NetWorks - Boston (Winter) . Computel - Columbia
20
<PAGE>
NCD was one of the first large wholesale distributors to open channels of
distribution into Latin America. NCD has been successful in developing this
segment because of its long business history in the Latin American market and
its understanding of the complexities of duties, import and export taxes, and
the governmental regulations peculiar to individual countries in South and
Central America. NCD has a multi-lingual marketing, sales, credit and technical
support staff. The majority of NCD's sales to Latin America are actually to
agents and distributors who have offices in South Florida and pay in U.S.
dollars drawn on local banks. The agents and distributors are responsible for
actually shipping the products into Latin America.
NCD is optimistic about the long term prospects for the Latin American market
and establishing high quality channels of distribution into the market has been
an important part of its corporate growth strategy. However, the business
generated through large resellers in Latin America tends to be lower margin
business than that which is available domestically. In addition, Latin American
markets may be more volatile than domestic markets. NCD plans to expand its
offshore business as profitable opportunities exist and will look to
specifically broaden its business in Latin America, but the highest growth area
for NCD will continue to be the domestic market for the foreseeable future.
EMPLOYEES. As of October 31, 1994, NCD had 179 full time employees, including
87 in sales, support and purchasing/marketing functions. None of NCD's
employees are covered by a collective bargaining agreement. NCD considers its
relations with its employees to be good.
PROPERTIES. NCD's executive, administrative and domestic sales offices are
located in Hollywood, Florida. This facility consists of 31,887 square feet of
office space. This is a leased space with a termination date of August 1997.
NCD maintains an international sales and administrative office in Miami along
with a Miami shipping warehouse. The current configuration is 10,000 square
feet of office with 20,000 square feet of warehouse. In February 1995, NCD has
plans to relocate to a new warehouse/office of which 3,700 square feet will be
office and 26,300 will be warehouse and storage.
NCD maintains a total of six shipping warehouses. Five of these locations are
outside the state of Florida. These warehouses are predominantly shipping
points, having no sales, marketing or administrative support. Customer returns
are accepted at four locations and tech support personnel are located in four
locations.
NCD leases all of it's facilities. The leases generally provide for base
minimum rental rates per square foot. In addition, NCD is generally responsible
for its pro rata share of maintenance expenses for common areas, real estate
taxes and insurance.
The following table sets forth information regarding NCD's locations:
<TABLE>
<CAPTION>
LOCATION SQ. FEET LEASE EXPIRATION YR OPENED
-------- -------- ---------------- ---------
<S> <C> <C> <C>
Hollywood, FL 31,887 08/01/97 10/92
Miami, FL** 30,000 10/31/94 06/89
Miami, FL 30,000 06/28/2000 Est 02/01/95
Visalia, CA 46,800 03/01/99 04/94
Norcross, GA 13,800 01/31/95 02/90
Fairfield, NJ 10,700 07/10/97 07/09/02
Addison, IL 15,582 11/30/97 12/01/92
Carrollton, TX 13,520 03/31/96 03/31/93
</TABLE>
- --------
** Miami, FL is in transition to move to a new location. A hold over period is
in effect until the new location is occupied. Lease payments at the new
location will not begin until occupancy occurs.
21
<PAGE>
ROBEC
GENERAL
Robec, Inc. has its principal office at 425 Privet Road, Horsham,
Pennsylvania 19044, and its telephone number is (215) 675-9300. The predecessor
of Robec was incorporated in Nevada in 1977. On August 16, 1989, this
predecessor company was merged into a new Pennsylvania corporation to form
Robec. Robec is primarily a national value-added wholesale distributor of
microcomputers and related products to value-added resellers, dealers and
computer retailers and primarily operates in this one business segment. Robec
markets, sells and supports a variety of products ranging from individual
components, which are typically sold in volume, to complete systems that have
been fully configured, assembled and tested prior to delivery to its customers.
Upon completion of the Merger, Robec will serve as AmeriQuest's Northeast
distribution facility.
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The business of Robec is described in greater detail in the periodic reports
filed by Robec with the Securities and Exchange Commission pursuant to Section
13(a) of the Securities Exchange Act of 1934 (the "Exchange Act"), portions of
which are incorporated herein by the reference thereto below:
(a) Part I, Item 1. Business, as contained in Robec's Annual Report on
Form 10-K for the year ended December 31, 1993.
(b) Part II, Item 6. Selected Financial Data, as contained in Robec's
Annual Report on Form 10-K for the year ended December 31, 1993.
(c) Part II, Item 7. Management's Discussion and Analysis of Results of
Operations and Financial Condition, as contained in Robec's Annual Report
on Form 10-K for the year ended December 31, 1993; and as set forth as Part
I, Item 2. Management's Discussion and Analysis of Results of Operations
and Financial Condition, in Robec's Quarterly Report on Form 10-Q/A for the
nine months ended September 30, 1994.
CERTAIN INFORMATION WITH RESPECT TO ROBERT H. BECKETT
BUSINESS BACKGROUND. Robert H. Beckett, Chairman of the Board, Chief
Executive Officer and President of Robec, will be the President and Chief
Executive Officer of the Surviving Corporation and a director of AmeriQuest.
See "Interests of Certain Persons in the Merger." Mr. Beckett is a founder of
Robec, has served as its Chairman and Chief Executive Officer and as a director
of Robec since its inception in 1977, and, from 1977 to May 1991 and since
January 1993, Mr. Beckett has also served as President of Robec. Mr. Beckett is
61 years old.
COMPENSATION. The following table provides information regarding the annual
and long-term compensation of Robert H. Beckett during fiscal years 1994, 1993
and 1992.
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION(1) COMPENSATION(2)
--------------- ---------------
NAME AND PRINCIPAL STOCK OPTION ALL OTHER
POSITION YEAR SALARY(1) BONUS AWARDS (SHARES) COMPENSATION(3)
------------------ ---- --------- ----- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Robert H. Beckett......... 1994 $143,569 $0 -0- $38,628
Chairman of the Board,... 1993 $175,000 $0 -0- $38,628
Chief Executive Officer
and President........... 1992 $196,731 $0 -0- $38,628
</TABLE>
- --------
(1) On October 1, 1993, Mr. Beckett took a voluntary reduction of salary from
$190,000 per annum to $125,000 per annum and on September 21, 1994 his
salary was increased to $196,000. In fiscal years 1994, 1993 and 1992, Mr.
Beckett did not receive any perquisites or other personal benefits,
securities or property which exceeded the lesser of $50,000 or 10% of such
executive officer's salary and bonus.
22
<PAGE>
(2) Robec has never made any restricted stock awards or issued any stock
options to Mr. Beckett under Robec's 1989 Stock Option Plan, its only long-
term incentive plan.
(3) The amounts disclosed in this column represent the payment by Robec during
each of fiscal years 1994, 1993 and 1992 of premiums in the amount of
$38,628 for a split-dollar whole-life insurance policy covering Robert H.
Beckett and owned by Robert S. Beckett. All premiums paid by Robec will be
refunded to Robec on termination of the policy.
CERTAIN TRANSACTIONS. Robec leases its main offices and warehouse and two
branch offices from two affiliated partnerships: Bowe Partners and Bowe3
Partners ("Bowe3"). Robert H. Beckett has a 60% interest in Bowe Partners. Bowe
Partners has a 75% interest in Bowe3. Robec leases a branch office from Bowe
Partners and its main offices and warehouse from Bowe3. Aggregate real estate
lease payments by Robec to affiliated partnerships during 1994 were $77,092 to
Bowe Partners, $607,797 to Bowe3 and $40,687 to Bowe2 Partners, another
affiliated partnership, pursuant to a lease terminated in May 1994. The related
leases were entered into between January 1984 and September 1987 and are
generally renegotiable every three years for a maximum increase of 10% of the
previous base rent. AmeriQuest has confirmed that the Surviving Corporation
will continue the existing lease obligations for the main office and warehouse
through the end of lease term.
Robec is a limited partner of EMEX, L.P., a Delaware limited partnership (the
"Software Partnership"), which was formed in July 1988 to engage in the
research, development, manufacturing and marketing of computer software. The
other limited partner is EMEX, Inc., a Pennsylvania corporation ("EMEX").
Robert H. Beckett owns a 51% interest in EMEX. The sole general partner of the
Software Partnership is LEXA, Inc., a Pennsylvania corporation ("LEXA"), whose
President, Treasurer, Secretary and sole shareholder is Alexander C. Kramer,
Jr., an officer of Robec. The participating percentages of the partners in the
Software Partnership are as follows: LEXA -- 2.99%, EMEX -- 67.01%, and Robec
- -- 30%. The participating percentages of the partners were established based
upon the value of the initial capital contribution of each partner. The
Software Partnership can require that additional capital be contributed to the
partnership by the partners. Such contributions would be in accordance with the
participating percentages of the partners. However, if the Software Partnership
requests that additional capital be contributed to the Software Partnership and
LEXA or Robec does not make its share of such additional contribution, EMEX may
make the additional contribution and treat it either as a capital contribution
to the Software Partnership or as a loan to LEXA or the Company, as applicable.
If EMEX does not contribute the requested additional capital, Robec must lend
the additional funds to EMEX. There are no limitations on the amounts of
capital which Robec or the other partners may be required to contribute.
However, the contributions would be in accordance with the participating
percentages of the partners. No requests for additional capital contributions
or advances have been made to date. Any income distributed by the Software
Partnership would be distributed in accordance with the participating
percentages of the partners. The Software Partnership has entered into a
license agreement with Robec whereby Robec has been granted a worldwide, non-
exclusive, non-transferable license to market, sell and support certain of the
Software Partnership's computer programs and products in consideration for
Robec's payment to the Software Partnership of license fees based on software
sales. Robec pays no fees for its own use of the software. All of the products
and related documentation remain the property of the Software Partnership and
the license is not an assignment of any ownership rights in or title to the
Software Partnership's products. The license agreement remains in force so long
as Robec remains a partner in the Software Partnership. During 1994, no license
fees were paid to the Software Partnership.
Robec currently utilizes Action International Marketing, Inc. ("Action"),
which is owned 52%, 24% and 24%, respectively, by Mr. Beckett's three children,
Susan K. Childers, Robert S. Beckett and Thomas T. Beckett, for its public
relations, marketing and promotional services. The total fees for these
services paid to Action during 1994 were approximately $454,000. Robec has
entered into an agreement with Action which provides that, if Action's taxable
income otherwise would exceed $100,000, the amount of such excess will be
remitted to Robec. As a result, approximately $52,000 is payable to Robec on
account of Action's 1994 taxable income. Under the agreement, only expenses
paid to unaffiliated third parties may be taken into account for purposes of
calculating Action's taxable income.
23
<PAGE>
INFORMATION REGARDING THE MERGER
THE MERGER
The Amended Agreement provides that the Merger will be consummated if the
approval of Robec's shareholders required therefor is obtained and all other
conditions to the Merger are satisfied or waived. Upon consummation of the
Merger, AmeriQuest Sub will be merged with and into Robec, with Robec surviving
the Merger as a wholly-owned subsidiary of AmeriQuest. The name of the
surviving entity will be AmeriQuest/Robec, Inc. (previously defined as the
"Surviving Corporation"). Upon consummation of the Merger, each share of Robec
Common Stock that is outstanding on the Effective Date, other than shares held
by AmeriQuest or by holders of Robec Common Stock who perfect their statutory
dissenters rights, will be converted automatically into the right to receive
.63075 shares of AmeriQuest Common Stock (previously defined as the "Applicable
Fraction"); provided, however, that in the event the closing price of
AmeriQuest Common Stock on the New York Stock Exchange on the business day
prior to the Effective Date as reported in the Wall Street Journal (the
"Closing Date Market Price") is less than $3.00 per share, then on the
Effective Date each such share of Robec Common Stock shall be converted into
the number of shares of AmeriQuest Common Stock equal to the product of (i)
.63075 multiplied by (ii) a quotient, the numerator of which is $3.00 and the
denominator of which is the Closing Date Market Price (the Applicable Fraction
including any adjustment thereto having been previously defined as the
"Exchange Ratio"). After the Merger, holders of Robec Common Stock, other than
AmeriQuest, will possess no further interest in, or rights as shareholders of,
Robec.
BACKGROUND OF THE MERGER
Following an extended period of growth and relatively stable profitability,
Robec began to experience difficulty in 1991 and incurred substantial losses in
1992, 1993 and the first three quarters of 1994. Price discounting by its
competitors forced Robec to reduce its prices, resulting in deteriorating gross
margins. The effects of price discounting by competitors were compounded by
customers' increasing focus on price as the basis for purchasing decisions
which reduced Robec's ability to distinguish itself based on service. Finally,
as a result of Robec's failure to comply with certain covenants in its bank
credit agreement, Robec's banks limited its borrowings under its line of
credit.
In March, 1994, Robec hired a consultant to assist it in developing a plan to
return to profitability. The consultant advised Robec's Board of Directors that
the options available to Robec were to (i) restructure operations to reduce
costs, (ii) merge or be acquired or (iii) liquidate Robec. The Board of
Directors directed management to reduce costs, investigate alternate financing
sources and investigate and solicit merger opportunities. Robec designed and
implemented cost reduction activities including, among other items, closing
certain warehouse and sales locations, downsizing its employee base and
refocusing on its core distribution business. While its losses have been
reduced by these activities, Robec is still operating at a loss.
In April, 1994, Robec and its banks reached an oral agreement to limit
Robec's borrowings under its line of credit to $18 million, of which not more
than $6 million could be based on qualifying inventory, with a commitment to
fund under the line of credit until at least May 11, 1994, which date was later
extended until June 30, 1994. At June 30, 1994, Robec and its banks entered
into an agreement whereby the banks agreed to forbear from taking any action
with respect to any known defaults until September 30, 1994. The forbearance
was contingent upon Robec receiving (and providing to the banks) by August 15,
1994 a firm written commitment from a source reasonably satisfactory to the
banks with respect to a sale, merger or refinancing under the express terms of
which sufficient funding would be provided to satisfy in full Robec's
obligations to the banks not later than September 30, 1994.
At June 30, 1994, Robec entered into a letter of intent with AmeriQuest
pursuant to which AmeriQuest would acquire Robec in an exchange by the
Principal Shareholders followed by a merger, pursuant to which each Robec
shareholder would receive .5 shares of AmeriQuest Common Stock for each share
of his or her
24
<PAGE>
Robec Common Stock or a total of approximately 2.22 million shares of
AmeriQuest Common Stock. The letter of intent, the terms of which were publicly
announced by Robec and AmeriQuest, did not restrict Robec from soliciting other
merger or acquisition proposals, and Robec continued to explore other
acquisition alternatives. Robec also continued to seek financing from a new
lender which would loan to Robec a sufficient amount to repay the banks and
provide additional working capital.
On August 4, 1994, Robec's Board of Directors met to discuss the proposed
AmeriQuest transaction and was updated as to the status of negotiations with
potential alternative lenders and acquirors. Robec's Board of Directors was
presented with information relating to AmeriQuest and the synergies expected to
be created by combining AmeriQuest's and Robec's operations. Robec's Board of
Directors expressed concern that Robec was contributing a high proportion of
the revenues of the combined operations relative to the percentage of total
equity to be received by Robec's shareholders in the combined entity. Robec's
Board of Directors also expressed concern that the exchange ratio was subject
to market variances which could result in Robec's shareholders receiving shares
worth less than what was then expected. As a result of these concerns, Robec's
Board of Directors directed its Chairman to go back to AmeriQuest and attempt
to negotiate a higher exchange ratio as well as a floor which would guarantee
holders of Robec Common Stock that they would receive shares of AmeriQuest
Common Stock worth a specific minimum amount regardless of future fluctuations
in AmeriQuest's stock price. Robec's Board of Directors also requested that
additional information be obtained from AmeriQuest regarding AmeriQuest's
publicly announced agreement to acquire Kenfil. Robec's Board of Directors was
informed that Robec had not received any other substantive acquisition
proposals other than the proposal submitted by AmeriQuest. Management also
presented to the Board of Directors projections relating to the ability of
Robec to achieve profitability in 1995 as a stand-alone entity, which assumed
adequate financing would be available.
The Chairman successfully addressed these concerns with AmeriQuest, and on
August 11, 1994, Robec entered into an Agreement and Plan of Reorganization
(the "Agreement") providing for the acquisition of the Company by AmeriQuest
for approximately 2.8 million shares of AmeriQuest Common Stock in a two step
transaction in which the Principal Shareholders would exchange, upon the
satisfaction of certain conditions, at least 50.1% of the outstanding shares of
Robec Common Stock, for AmeriQuest Common Stock at the Exchange Ratio, with
this exchange to be followed by a merger in which each outstanding share of
Robec Common Stock (other than shares held by AmeriQuest or by shareholders who
perfect their statutory dissenters rights) would automatically be converted
into the right to receive AmeriQuest Common Stock at the Exchange Ratio.
Accordingly, the Principal Shareholders would receive the same consideration
per share of Robec Common Stock in the Exchange as would be received by the
holders of Robec Common Stock in the Merger.
On September 8, 1994, Robec's Board of Directors met and received the oral
opinion of Compass that the consideration to be paid upon the terms and
conditions set forth in the Agreement to Robec's shareholders is fair, from a
financial point of view, to the current shareholders of Robec. Robec's Board of
Directors discussed managements 1995 projections relating to the operation of
Robec as a stand-alone entity and certain directors challenged the assumptions
used by the consultant and management in preparing those projections. Robec's
Board of Directors was also informed that at this time no lender had firmly
committed to provide Robec as a stand-alone entity with a sufficient line of
credit to repay its bank line of credit and have sufficient remaining credit
for working capital. Robec's Board of Directors discussed the terms of the
Agreement and the analysis of Compass. As part of this discussion, the Chairman
pointed out that Robec's banks were insisting that they be paid in full and
that a new credit agreement be put in place in accordance with the June 30,
1994 forbearance agreement. Following this discussion, the Chairman suggested
requesting AmeriQuest to clarify in the Agreement that Robec's banks would be
paid in full prior to or simultaneously with the Exchange and amending the
Agreement to insert this condition to replace the existing condition in the
Agreement providing that prior to the Exchange, AmeriQuest would arrange for
Robec's banks to be paid in full on or prior to September 30, 1994. The Board
was also informed that AmeriQuest was engaged in confidential negotiations to
acquire NCD, and that AmeriQuest was engaged in discussions with Computer 2000.
25
<PAGE>
On September 20, 1994, Robec's Board of Directors received the written
opinion of Compass that the consideration to be paid to Robec's shareholders
under the Amended Agreement is fair, from a financial point of view, to the
shareholders of Robec. Also on September 20, 1994, Robec's Board of Directors
unanimously approved entering into the Amended Agreement, including the Plan of
Merger attached thereto, and borrowing up to a maximum of $20 million to be
lent by IBM Credit Corporation pursuant to a collateralized line of credit (the
"IBM Line of Credit"), subject to certain tests and other conditions (including
an AmeriQuest guarantee), to replace Robec's bank credit facility and the
proceeds of a portion of which would repay all of its outstanding borrowings
under such bank credit facility simultaneously with the closing of the
Exchange.
On September 21, 1994, Robec entered into the Amended Agreement with
AmeriQuest and the Principal Shareholders and an Inventory and Working Capital
Financing Agreement dated September 21, 1994 with IBM Credit Corporation
relating to the IBM Line of Credit.
On September 22, 1994, Robec used the proceeds of a portion of the IBM Line
of Credit to repay all of its outstanding borrowings under its existing bank
credit facility. Also on September 22, 1994, as contemplated by the Amended
Agreement, the Principal Shareholders exchanged 2,224,029 shares of Robec
Common Stock, or approximately 50.1% of the outstanding shares of Robec Common
Stock, for 1,402,805 newly issued shares of AmeriQuest Common Stock, subject to
adjustment if the closing price of AmeriQuest Common Stock on the business day
immediately prior to the Merger closing is less than $3.00 per share.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF ROBEC; REASONS FOR THE MERGER
THE BOARD OF DIRECTORS OF ROBEC HAS UNANIMOUSLY APPROVED AND ADOPTED THE PLAN
OF MERGER AND UNANIMOUSLY RECOMMENDS THAT HOLDERS OF SHARES OF ROBEC COMMON
STOCK VOTE FOR APPROVAL AND ADOPTION OF THE PLAN OF MERGER. In reaching its
decision, Robec's Board of Directors considered, among other things, the
following factors: (i) its knowledge of the business, operations, properties,
assets, financial condition and operating results of Robec; (ii) judgments as
to Robec's future prospects; (iii) presentations by Robec's management and by
Compass with respect to Robec and AmeriQuest; (iv) the opinion of Compass as to
the fairness from a financial point of view of the consideration to be received
by the shareholders of Robec in the Merger (See "Opinion of Robec's Financial
Advisor"); (v) the terms of the Amended Agreement and Plan of Merger which were
the product of extensive "arm's length" negotiations; (vi) the fact that no
other bidder came forward with an offer despite nearly three months between the
announced letter of intent and the Amended Agreement; (vii) the historical
trading prices for Robec Common Stock and AmeriQuest Common Stock; and (viii)
the opportunity for Robec shareholders to participate, as holders of AmeriQuest
Common Stock, in a larger, more diversified company of which Robec would become
a significant part. Robec's Board of Directors also believes that the Merger
will allow the Combined Company to enjoy an expanded customer base for
operations, greater access to capital markets and the opportunity for
managerial and administrative efficiencies and overhead expense savings as a
result of the consolidation of certain operations.
The foregoing discussion of the information and factors considered and given
weight by Robec's Board of Directors is not intended to be exhaustive. In view
of the variety of factors considered in connection with its evaluation of the
Merger, Robec's Board of Directors did not find it practicable to and did not
quantify or otherwise assign relative weights to the specific factors
considered in reaching its determination. In addition, individual members of
Robec's Board of Directors may have given different weights to different
factors.
OPINION OF ROBEC'S FINANCIAL ADVISOR
Compass Capital Advisors (previously defined as "Compass") has delivered a
written opinion to Robec's Board of Directors that, as of September 20, 1994,
the Merger was fair, from a financial point of view, to the shareholders of
Robec. No limitations were imposed by Robec's Board of Directors upon Compass
with respect to the investigations made or procedures followed by Compass in
rendering its opinion.
26
<PAGE>
THE FULL TEXT OF COMPASS' OPINION, DATED SEPTEMBER 20, 1994, IS ATTACHED AS
APPENDIX III TO THIS PROSPECTUS/PROXY STATEMENT. SHAREHOLDERS ARE URGED TO READ
THE OPINION IN ITS ENTIRETY FOR THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND
LIMITS OF THE REVIEW UNDERTAKEN BY COMPASS. COMPASS' OPINION IS DIRECTED ONLY
TO THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED BY THE SHAREHOLDERS OF
ROBEC AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY SHAREHOLDER OF ROBEC AS
TO HOW SUCH SHAREHOLDER SHOULD VOTE SUCH SHAREHOLDER'S SHARES OF ROBEC COMMON
STOCK REGARDING APPROVAL AND ADOPTION OF THE PLAN OF MERGER. THE SUMMARY OF THE
OPINION OF COMPASS SET FORTH IN THIS PROSPECTUS/PROXY STATEMENT IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Compass (i) reviewed the Amended Agreement and
Plan of Merger, (ii) reviewed the filings of Robec and AmeriQuest with the SEC
in 1993 and 1994 to the date of its opinion, including AmeriQuest's
registration statement on Form S-4 as filed with the SEC on July 20, 1994,
(iii) reviewed Robec's 1994 budget income statement and 1995 projected
consolidated statement of operations prepared by Robec's management, (iv)
reviewed AmeriQuest's budget model, (v) reviewed AmeriQuest's internally
prepared projected financial statements for Robec and AmeriQuest operations for
1994 through 1998, (vi) reviewed press releases issued by Robec between August
1993 and August 10, 1994 and by AmeriQuest between December 1993 and August 12,
1994, (vii) reviewed price and volume information relating to trading in shares
of Robec Common Stock and AmeriQuest Common Stock from 1992 through September
16, 1994, (viii) reviewed and analyzed market trading and financial information
on comparable companies, (ix) reviewed information on reported acquisitions in
the computer industry and (x) met with the management of Robec to discuss the
business and prospects of Robec.
In connection with its review, Compass did not independently verify any of
the foregoing information and relied on all such information being complete and
accurate in all material respects. In addition, Compass did not make an
independent evaluation or appraisal of the assets of Robec, nor was it
furnished with any such appraisals.
In arriving at its opinion and delivering its opinion to Robec's Board of
Directors, Compass performed a variety of financial analyses, including those
summarized below. The summary set forth below includes summaries of all of the
material financial analyses discussed by Compass with Robec's Board of
Directors, but does not purport to be a complete description of the analyses
performed by Compass in arriving at its opinion. Arriving at a fairness opinion
is a complex process that involves various determinations as to the most
appropriate and relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, such an opinion
is not necessarily susceptible to partial analysis or summary description. In
performing its analyses, Compass made numerous assumptions with respect to
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond the control of Robec.
Any estimates incorporated in the analyses performed by Compass are not
necessarily indicative of actual values or future results, which may be
significantly more or less favorable than suggested by such analyses.
Additionally, estimates of the value of businesses and securities neither
purport to be appraisals nor necessarily reflect the prices at which businesses
or securities actually may be sold. Accordingly, such analyses and estimates
are inherently subject to substantial uncertainty. No public company utilized
as a comparison is identical to Robec, and none of the acquisition transactions
utilized as a comparison is identical to the Merger. Accordingly, an analysis
of publicly traded comparable companies and comparable acquisition transactions
is not mathematical; rather it involves complex considerations and judgments
concerning differences in financial and operating characteristics of the
comparable companies and other factors that could affect the public trading
value of the comparable companies or company to which they are being compared.
The following is a summary of the material financial analyses performed by
Compass in connection with its fairness opinion:
Market Price Analysis.
Compass reviewed pricing and volume information concerning Robec Common
Stock and AmeriQuest Common Stock from 1992 through September 16, 1994.
Compass focused particularly on
27
<PAGE>
the trading ranges of Robec Common Stock and AmeriQuest Common Stock
immediately before and after significant announcements, including
announcements regarding quarterly and annual financial information. Compass
reviewed the reported daily price and volume activities of Robec Common
Stock and AmeriQuest Common Stock for the period January 4 through August
19, 1994, which was the fifth trading day following the announcement of the
signing of the definitive agreement relating to AmeriQuest's acquisition of
Robec. Compass also focused on the periods five trading days before and
five trading days after certain announcements:
<TABLE>
<CAPTION>
ROBEC CLOSING PRICE
-------------------------------------------------------------------------------------
DATE ANNOUNCEMENT FIVE DAYS PRIOR ON DATE FIVE DAYS AFTER
------- ------------ --------------- ------- ---------------
<S> <C> <C> <C> <C>
4/15/94 1993 Year End Results 1 3/8 1 1/2 3/4
5/16/94 First Quarter Results 5/8 3/4 1
6/30/94 Letter of Intent with AmeriQuest 3/4 1 1/16 1 7/8
8/12/94 Definitive Agreement with AmeriQuest 1 1/2 1 13/16 1 15/16
<CAPTION>
AMERIQUEST CLOSING PRICE
-------------------------------------------------------------------------------------
DATE ANNOUNCEMENT FIVE DAYS PRIOR ON DATE FIVE DAYS AFTER
------- ------------ --------------- ------- ---------------
<S> <C> <C> <C> <C>
6/7/94 Acquisition of 51% in Kenfil 3 1/2 3 7/8 3 1/2
6/30/94 Letter of Intent with Robec 3 1/8 3 3/8 3 5/8
8/12/94 Definitive Agreement with Robec 4 3 7/8 3 3/4
</TABLE>
Compass concluded that $7/8 (not shown on the above chart), the closing
price on the day prior to the announcement of the letter of intent, was a
representative price for Robec Common Stock that reflected the market's
valuation of Robec's independent financial results. Compass calculated
various multiples using a stock price of $7/8 per share and concluded that,
at $7/8 per share, the price of Robec Common Stock reasonably reflected the
value of Robec Common Stock before the announcement of the proposed
transaction with AmeriQuest. Compass calculated "Total Capital" (defined as
stock price times primary shares outstanding plus interest-bearing debt) to
latest twelve-month revenue (TC/REV), Total Capital to latest twelve month
"EBIT" (defined as earnings before interest expense and taxes) (TC/EBIT),
Total Capital to latest reported interest-bearing debt plus book equity
(TC/(DEBT+EQUITY)), Total Capital to projected 1994 revenue (TC/94REV) and
Total Capital to projected 1995 EBIT (TC/95EBIT), using the $7/8 price per
share of Robec Common Stock at June 29, 1994 and interest-bearing debt as
reported in Robec's quarterly report on Form 10-Q for the quarter ended
June 30, 1994. The calculated values for Robec were:
TC/REV = 0.1x,
TC/EBIT = NEGATIVE,
TC/(DEBT+EQUITY) = 0.7x,
TC/94REV = 0.1x,
TC/94EBIT = NEGATIVE, and
TC/95EBIT = 9.0x.
Compass also concluded that $3 1/4, the closing price on the day prior to
the announcement of the letter of intent, was a representative price for
AmeriQuest Common Stock that reflected the market's valuation of
AmeriQuest's independent financial results (including pro forma results for
the previously announced Kenfil acquisition). Compass calculated various
multiples using a stock price of $3 1/4 per share and concluded that, at $3
1/4 per share, the price of AmeriQuest's Common Stock reasonably reflected
the value of AmeriQuest Common Stock before the announcement of the
proposed transaction with Robec. Compass calculated Total Capital to latest
twelve month revenue (TC/REV), Total Capital to latest twelve month EBIT
(TC/EBIT), Total Capital to latest reported interest-bearing debt plus book
equity (TC/(DEBT+EQUITY)), Total Capital to projected 1994 revenue
(TC/94REV), Total Capital to projected 1994 EBIT (TC/94EBIT) and Total
Capital to projected 1995 EBIT (TC/95EBIT), using
28
<PAGE>
the $3 1/4 price per share of AmeriQuest Common Stock at June 29, 1994 and
interest-bearing debt as reported in AmeriQuest's quarterly report on Form
10-Q for the quarter ended March 31, 1994. The calculated values for
AmeriQuest were:
TC/REV = 0.3x,
TC/EBIT = NEGATIVE,
TC/(DEBT+EQUITY) = 1.3x,
TC/94REV = 0.4x,
TC/94EBIT = 19.9x, and
TC/95EBIT = 11.0x.
Compass also analyzed AmeriQuest's Common Stock price at August 15, 1994,
after AmeriQuest's announcement of the signing of the definitive
acquisition agreement with Robec, and calculated the same multiples based
on the post-signing price of $3 3/4 per share. Such analysis was performed
on a pro forma basis to include Robec's operating results for the twelve
months ended June 30, 1994, though AmeriQuest will account for the
acquisition using the purchase method of accounting, and balance sheet as
of June 30, 1994, and to calculate total capitalization based on the shares
of Robec's Common Stock that would be outstanding immediately following the
acquisition. The calculated values were:
TC/REV = 0.3x,
TC/EBIT = NEGATIVE,
TC/(DEBT+EQUITY) = 1.3x,
TC/94REV = 0.3x,
TC/94EBIT = 44.9x, and
TC/95EBIT = 12.4x.
Compass compared these multiples to those it calculated for comparable
public companies (See Comparable Companies Analysis, below) and concluded
that, with the exception of the TC/94EBIT multiple of 44.9x calculated for
a combined AmeriQuest and Robec, all such multiples were within the range
of multiples calculated for the comparable companies. Inasmuch as the
TC/EBIT multiple had been negative both for Robec and AmeriQuest prior to
the announcements as well as for one of the comparable companies, Compass
did not consider the TC/94EBIT to be a significant valuation measure.
Based on the foregoing, Compass concluded that the market was efficient
in evaluating the business and prospects of Robec and AmeriQuest.
Comparable Companies Analysis.
Compass reviewed financial and market price information for the latest
twelve-month periods with respect to five public companies that it deemed
comparable to Robec and AmeriQuest. The public companies selected were
Gates/F.A. Distributing Inc., IRG Technologies, Inc., Merisel Inc.,
Southern Electronics Corp., and Tech Data Corp.
Each of these companies is exclusively engaged as a distributor of
computer equipment, peripherals and accessories. No significant publicly-
traded competitor of either Robec or AmeriQuest was excluded and no
publicly traded company that was exclusively a computer distributor was
excluded.
Compass derived multiples of Total Capital at August 8, 1994 to the
latest reported (i) revenue, (ii) EBIT and (iii) debt plus book equity for
such comparables. The range of such multiples was 0.1x to 0.5x for TC/REV;
NEGATIVE to 14.4x for TC/EBIT; and 0.8x to 2.0x for TC/(DEBT+EQUITY).
As with the Market Price Analysis above, the range of multiples for Robec
and AmeriQuest were within the range of similar multiples calculated for
the public company comparables.
29
<PAGE>
Comparable Acquisitions Analysis.
Compass analyzed the market information available with respect to recent
reported acquisitions in the computer industry, which analysis was limited
by the scarcity of financial information available because nearly all the
transactions were private transactions, and the lack of comparability of
the companies (with one exception noted below), since none of the acquired
companies, except Kenfil, was engaged purely in distribution related to
computer products. The only information that Compass could find for
publicly announced acquisitions of companies in the computer industry
(other than for Kenfil) was the transaction price, the seller's net
earnings, the seller's revenues and, in some cases, the seller's net worth.
No detail of operating income was available, nor was there any historical
information to show historical growth rates or lack thereof. Furthermore,
no information was available with respect to the amount of debt assumed in
the price paid. All of such information would be required to arrive at a
reasonable conclusion as to the applicability of the calculated multiples
to Robec. However, the range of multiples of price/revenues (which is not
directly comparable because debt is not included in the numerator) and
price/book value (which is not directly comparable because debt is not
included in the denominator) for such acquisitions included the multiples
derived in Compass' analysis of Robec and of the comparable public
companies, as discussed above. The acquisitions analyzed by Compass were
AmeriQuest's June, 1994 announcement of the acquisition of Kenfil, Inc.;
LEGENT Corp.'s 1992 acquisition of GOAL Systems International Inc.; the
acquisition of WICAT Systems Inc. by Jostens Inc. in 1992; Storage
Technology Corp's acquisition of XL/Data Comp. Inc. in 1991; Cadence Design
Systems Inc.'s acquisition of Valid Logic Systems Inc. in 1991; Borland
International Inc.'s acquisition of Ashton-Tate Corp. in 1991; and Computer
Associates International's acquisition of Pansophic Systems Inc. in 1991.
The range of multiples were P/REV = 0.1x to 1.9x; P/E = NEGATIVE to 47.4x;
and P/BK = 0.6x to 5.3x. The range of multiples for AmeriQuest's announced
acquisition of Kenfil was P/E = NEGATIVE; P/REV = 0.1x; and P/BK = 0.6x.
Compass did not calculate values for Robec using these multiples, but
merely compared these multiples to the multiples it calculated in its
comparable companies analysis. It did not give any weight to this analysis
in reaching its conclusion.
Share Price Analysis.
Based on the agreed-upon exchange ratio of .63075 shares of AmeriQuest
Common Stock for each share of Robec Common Stock, Compass analyzed the
value to Robec shareholders of the transaction based upon Robec and
AmeriQuest share prices before and after the letter of intent announcement
and before and after the announcement of the definitive agreement and also
at September 2, 1994. Such analysis is set forth below and indicates that
at each of such dates, the transaction represents a premium to the trading
value of Robec Common Stock.
<TABLE>
<CAPTION>
AMERIQUEST VALUE TO ROBEC WITH
SHARE VALUE TO ROBEC AMERIQUEST AT $3.00
DATE ROBEC SHARE PRICE PRICE EXCHANGE RATIO PER SHARE PER SHARE
---- ----------------- ---------- -------------- -------------- -------------------
<S> <C> <C> <C> <C> <C>
6/23/94 $0.750 $3.125 0.63075 $1.971 $1.892
6/29/94 $0.875 $3.250 0.63075 $2.050 $1.892
7/8/94 $1.875 $3.625 0.63075 $2.286 $1.892
8/5/94 $1.500 $4.000 0.63075 $2.523 $1.892
8/11/94 $1.688 $3.625 0.63075 $2.286 $1.892
8/19/94 $1.938 $3.750 0.63075 $2.365 $1.892
9/2/94 $1.875 $3.500 0.63075 $2.208 $1.892
</TABLE>
Compass also prepared an analysis which is included in the above table
assuming an exchange ratio of $3.00 per share, in accordance with the
provision in the Amended Agreement which provides for additional shares to
be issued to Robec shareholders if the price of AmeriQuest Common Stock on
the business day prior to the Effective Date is less than $3.00 per share.
Compass noted that, based upon Robec's stock price of $ 7/8 prior to the
announcement of the letter of intent, Robec shareholders were receiving
premiums based on AmeriQuest's stock price at September 2, 1994 ($3 1/2) of
152.4% at the exchange ratio and 116.0% at the $3.00 price. When calculated
at Robec's share price before the
30
<PAGE>
announcement of the definitive agreement ($1 11/16), those premiums were
30.8% and 12.0%, respectively. Furthermore, Compass noted that, while the
premium had narrowed at September 2, 1994, when Robec stock traded at $1
7/8, it was still at 17.8% at AmeriQuest's actual price ($3 1/2) and 0.8%
at the $3.00 price.
Contribution Analysis.
Compass analyzed Robec's percentage contribution to 1994 projected EBIT,
1995 projected EBIT, 1994 projected revenues based upon pro forma projected
combined financial results of AmeriQuest, Robec and Kenfil, and also
analyzed Robec's contribution to shareholders' equity. Compass noted that,
following the Merger, the Robec shareholders would hold 14.8% of AmeriQuest
Common Stock. Their contribution to 1994 projected EBIT would be negative,
to 1995 projected EBIT would be 18.6%, to 1994 projected revenue would be
41.2%, and to shareholders' equity would be 26.7%. Compass noted that the
market did not value Robec's prospective earnings, revenues or equity at
the same multiples as it did for AmeriQuest, and noted that if such
respective contributions were weighted in accordance with the multiples
accorded by the market to Robec and AmeriQuest, respectively, Robec's
contribution would be 6.9% of the total. Accordingly, Compass concluded
that, when taking the market's valuation of such parameters into
consideration, the proposed exchange ratio gives Robec's shareholders a
participation in AmeriQuest's equity (14.8%) that represents a 114% premium
over their contribution to pro forma combined results (6.9%).
Conclusion.
Based upon its analyses and assumptions, Compass concluded that as of
September 20, 1994, the Merger was fair, from a financial point of view, to
Robec's shareholders.
Compass, as part of its investment banking business, is regularly engaged
in the valuation of businesses and their securities in connection with
mergers and acquisitions, employee benefit plans and valuations for
corporate, estate and other purposes.
Robec has agreed to pay Compass a fee of $30,000. Robec has also agreed
to reimburse Compass for its reasonable out-of-pocket expenses up to
$1,000, including all reasonable fees and disbursements of counsel, and to
indemnify Compass and certain related persons against certain liabilities
relating to or arising out of its engagement, including certain liabilities
under the federal securities laws. The fee is payable to Compass without
regard to the opinion rendered by Compass and whether or not the Merger is
consummated.
DISSENTERS APPRAISAL RIGHTS
For purposes of this discussion of appraisal rights, the term "Company" means
Robec and, after the Effective Date, the Surviving Corporation.
Pursuant to the Plan of Merger and the BCL, holders of Robec Common Stock
will have dissenters rights in connection with the Merger under BCL Subchapter
15D ("Subchapter 15D"), a copy of which is attached as Appendix IV to this
Prospectus/Proxy Statement, and may object to the Plan of Merger and demand in
writing that the Company pay them the fair value of their Robec Common Stock.
Failure by any dissenting shareholder to comply with any procedure required
by Subchapter 15D may cause a termination of such shareholder's dissenters
rights. The Company will not give any notice of the following requirements
other than as described in this Prospectus/Proxy Statement and as required by
the BCL.
A holder of record of Robec Common Stock may assert dissenters rights as to
fewer than all of the shares of Robec Common Stock registered in such holder's
name only if the holder dissents with respect to all of the Robec Common Stock
beneficially owned by any one person and discloses the name and address of the
person or persons on whose behalf the holder dissents. In that event, the
holder's rights shall be determined as if the shares as to which the holder has
dissented and the other shares were registered in the names of different
holders. A beneficial owner of shares of Robec Common Stock who is not also the
record holder of
31
<PAGE>
such shares may assert dissenters rights with respect to shares held on such
owner's behalf and shall be treated as a dissenting shareholder under the terms
of Subchapter 15D if the beneficial owner submits to the Company, not later
than the time of filing the Notice of Intention to Dissent (as defined below),
a written consent of the record holder. Such beneficial owner may not dissent
with respect to less than all shares of Robec Common Stock beneficially owned
by such beneficial owner.
Holders of Robec Common Stock (or beneficial owners thereof as provided
above) who follow the procedures of Subchapter 15D as outlined below will be
entitled to receive from the Company the fair value of their shares of Robec
Common Stock immediately before the Effective Date, taking into account all
relevant factors but excluding any appreciation or depreciation in anticipation
of the effectuation of the Plan of Merger. Holders of Robec Common Stock (or
beneficial owners thereof) who elect to exercise their dissenters rights must
comply with all of the following procedures to preserve those rights.
Holders of Robec Common Stock (or beneficial owners thereof) who wish to
exercise dissenters rights must file a written notice of intention to demand
the fair value of their shares of Robec Common Stock if the Merger is
effectuated (the "Notice of Intention to Dissent"). Such dissenters must file
the Notice of Intention to Dissent with the Secretary of the Company prior to
the vote by Robec shareholders on the Plan of Merger; they must make no change
in their beneficial ownership of Robec Common Stock from the date of filing
until the Effective Date; and they must refrain from voting their Robec Common
Stock for the approval and adoption of the Plan of Merger. The Notice of
Intention to Dissent must be in addition to and separate from any proxy or vote
against the Plan of Merger.
If the Plan of Merger is approved and adopted by the required vote at the
Special Meeting, the Company will mail a notice (the "Notice of Approval") to
all dissenters who filed a Notice of Intention to Dissent prior to the vote on
the Plan of Merger and who refrained from voting for the approval and adoption
of the Plan of Merger. The Company expects to mail the Notice of Approval
promptly after effectuation of the Merger. The Notice of Approval will state
where and when (the "Demand Deadline") a demand for payment must be sent and
certificates for shares of Robec Common Stock must be deposited in order to
obtain payment; it will supply a form for demanding payment (the "Demand Form")
which includes a request for certification of the date on which the holder, or
the person on whose behalf the holder dissents, acquired beneficial ownership
of the shares of Robec Common Stock; and it will be accompanied by a copy of
Subchapter 15D. Dissenters must ensure that the Demand Form and their
certificates for shares of Robec Common Stock are received by the Company on or
before the Demand Deadline. All mailings to the Company are at the risk of the
dissenter. However, the Company recommends that the Notice of Intention to
Dissent, the Demand Form and the holder's share certificates be sent by
certified mail.
Any holder (or beneficial owner) of Robec Common Stock who fails to file a
Notice of Intention to Dissent, fails to complete and return the Demand Form,
or fails to deposit share certificates with the Company, each within the time
periods provided above, will lose the holder's (or beneficial owner's)
dissenters rights under Subchapter 15D. A dissenter will retain all rights of a
shareholder, or beneficial owner, as the case may be, until those rights are
modified by effectuation of the Plan of Merger.
Upon timely receipt of the completed Demand Form, the Company is required by
the BCL either to remit to dissenters who have returned the Notice of Intention
to Dissent and the completed Demand Form and have deposited their certificates,
the amount the Company estimates to be the fair value for their shares or to
give written notice that no such remittance will be made. The Company does not
intend to make payment of any part of the amounts payable to dissenters until
the fair value of the Robec Common Stock affected by the Merger has been
finally determined. The remittance or notice will be accompanied by:
(1) the closing balance sheet and statement of income of the Company for
the fiscal year ended December 31, 1993, together with the latest available
interim financial statements;
(2) a statement of the Company's estimate of the fair value of the Robec
Common Stock (the "Company's Estimate"); and
(3) a notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of
Subchapter 15D.
32
<PAGE>
If the Company does not remit the amount of its estimate of fair value of the
Robec Common Stock, it will return any certificates that have been deposited,
and may make a notation on any such certificates that a demand for payment in
accordance with Subchapter 15D has been made. If shares carrying such notation
are thereafter transferred, each new certificate issued therefor may bear a
similar notation, together with the name of the original dissenting holder or
owner of such shares. A transferee of such shares will not acquire by such
transfer any rights in the Company other than those which the original
dissenter had after making demand for payment of their fair value.
After the Company gives notice of the Company's Estimate, without remitting
that amount, and if the dissenter believes that the Company's Estimate is less
than the fair value of the shares, the dissenter may send to the Company the
dissenter's own estimate (the "Holder's Estimate") of the fair value of the
shares as contemplated by BCL (S) 1578, which will be deemed a demand for
payment of the amount of the Holder's Estimate. If a dissenter does not file a
Holder's Estimate within 30 days after the mailing by the Company of its
remittance or notice, the dissenter will be entitled to more than the Company's
Estimate.
If, within 60 days after the Effective Date or after the timely receipt by
the Company of any Holder's Estimate, whichever is later, any demands for
payment remain unsettled, the Company may file in the Court of Common Pleas of
Montgomery County, Pennsylvania an application for relief requesting that the
fair value of the Robec Common Stock be determined by the court. There is no
assurance that the Company will file such an application. All dissenters,
wherever residing, whose demands have not been settled will be made parties to
any such appraisal proceeding. The court may appoint an appraiser to receive
evidence and recommend a decision on the issue of fair value. Each dissenter
who is made a party will be entitled to recover the amount by which the fair
value of the dissenter's Robec Common Stock is found to exceed the amount, if
any, previously remitted, plus interest. Interest shall be payable from the
Effective Date until the date of payment at such rate as is fair and equitable
under all the circumstances, taking into account all relevant factors,
including the average rate currently paid by the Company on its principal line
of credit. If the Company fails to file an application for relief, any
dissenter who has made a demand and who has not already settled the dissenter's
claim against the Company may do so in the name of the Company at any time
within 30 days after the expiration of the 60-day period. If a dissenter does
not file an application within the 30-day period, each dissenter entitled to
file an application shall be paid the Company's Estimate and no more, and may
bring an action to recover any amount thereof not previously remitted.
The costs and expenses of such court proceedings, including the reasonable
compensation and expenses of the appraiser appointed by the court, will be
determined by the court and assessed against the Company, except that any part
of the costs and expenses may be apportioned and assessed as the court deems
appropriate against all or some of the dissenters who are parties and whose
action in demanding supplemental payment the court finds to be dilatory or in
bad faith. Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the Company, and
in favor of any or all dissenters, if the Company fails to comply substantially
with the requirements of Subchapter 15D. Such fees and expenses may be assessed
against either the Company or a dissenter, if the court finds that the party
against whom the fees and expenses are assessed acted in bad faith or in a
dilatory manner. If the court finds that the services of counsel for any
dissenter were of substantial benefit to other dissenters similarly situated
and should not be assessed against the Company, it may award such counsel
reasonable fees to be paid out of the amounts awarded to the dissenters who
were benefitted.
Under the BCL, a shareholder of the Company has no right to obtain, in the
absence of fraud or fundamental unfairness, an injunction against the Merger,
nor any right to valuation and payment of the fair value of the holder's shares
because of the Merger, except to the extent provided by the dissenters rights
provisions of Subchapter 15D. The BCL also provides that absent fraud or
fundamental unfairness, the rights and remedies provided by Subchapter 15D are
exclusive.
The foregoing description of the rights of dissenters under Subchapter 15D
should be read in conjunction with Appendix IV to this Prospectus/Proxy
Statement, and is qualified in its entirety by the provisions of Subchapter
15D.
33
<PAGE>
CERTAIN ANTITRUST MATTERS
Pursuant to the requirements of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the Company 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 U.S. Department
of Justice (the "Antitrust Division"). The parties requested and were granted
early termination of the waiting period under the HSR Act with respect to such
filing on August 26, 1994. Even though the HSR Act waiting period has expired,
either 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 Robec or 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.
INTEREST OF CERTAIN PERSONS IN THE MERGER
AmeriQuest has appointed Robert H. Beckett, who is currently the Chairman,
Chief Executive Officer and President of Robec and a Principal Shareholder, to
the Board of Directors of AmeriQuest and has agreed to nominate him for re-
election at each of the next two annual meetings of AmeriQuest stockholders. In
addition, Robert H. Beckett, Robert S. Beckett and Alexander C. Kramer, Jr.
will continue to serve as officers of the Surviving Corporation and Robert H.
Beckett and Robert S. Beckett will continue to serve as directors of the
Surviving Corporation.
AmeriQuest has entered into agreements with Robert H. Beckett, Robert S.
Beckett and Alexander C. Kramer, Jr. that provide for their employment by the
Company for a two-year period following the Exchange at a base salary of not
less than $196,000, $150,000 and $150,000 per year, respectively.
The Amended Agreement also provides for certain indemnification rights for
the Principal Shareholders and the officers and directors of Robec. See "The
Amended Agreement--Indemnification; Insurance." In addition, the Principal
Shareholders have been granted certain registration rights by AmeriQuest. See
"Information Regarding the Merger--The Amended Agreement--Registration Rights."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
FEDERAL TAX MATTERS
The following summary is a general discussion of the material Federal income
tax consequences to Robec's shareholders receiving AmeriQuest Common Stock in
the Merger and to Robec and AmeriQuest. This summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), administrative pronouncements,
judicial decisions and existing Treasury Regulations as of the date hereof, all
of which are subject to change, possibly with retroactive effect. Any such
change could affect the continuing validity of this summary. In the opinion of
Arthur Andersen LLP (see Exhibit for complete opinion), the discussion
below, insofar as it relates to matters of the Federal income tax consequences
to Robec shareholders receiving AmeriQuest Common Stock in the Merger, is an
accurate summary of such matters. Arthur Andersen's opinion is based upon its
best judgment on the application of current law to the facts of the Merger and
is not binding on the courts.
The following discussion does not consider the tax consequences of the Merger
under state, local or foreign tax law. The discussion also does not discuss all
aspects of income taxation that may be relevant to a particular Robec
shareholder or to certain types of shareholders such as financial institutions,
broker-dealers, life insurance companies, tax-exempt organizations, investment
companies and other special status taxpayers.
EACH ROBEC SHAREHOLDER IS STRONGLY URGED TO CONSULT HIS OR HER OWN TAX
ADVISOR REGARDING THE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE
MERGER.
34
<PAGE>
TAX CONSEQUENCES TO ROBEC SHAREHOLDERS
REORGANIZATION. The Exchange and the Merger qualify as a tax-free
reorganization under Section 368 of the Code, which requires in general that
the consideration issued by AmeriQuest to the holders of Robec Common Stock be
stock of AmeriQuest. The AmeriQuest Common Stock initially issued in the
Exchange and the Merger will qualify as stock. Notwithstanding the lack of
compliance with all of the Service's advance ruling guidelines, Arthur Andersen
LLP has concluded that there is substantial authority for the treatment of the
Exchange and Merger as a tax-free reorganization, and Arthur Andersen LLP also
believes this treatment is more likely than not proper. If the Exchange and
Merger qualify as a tax-free reorganization, no gain or loss will be recognized
by a Robec shareholder who receives AmeriQuest Common Stock in the Merger.
BASIS. Shareholders of Robec will take a basis in their new AmeriQuest shares
equal to the basis in their Robec Shares.
RECEIPT OF CASH IN LIEU OF FRACTIONAL SHARES. The receipt of cash in lieu of
any fractional shares of Robec Common Stock pursuant to the Merger will not
affect the question whether the Merger qualifies as a tax-free reorganization.
However, the receipt of such cash will be treated as a taxable redemption in
which the recipient shareholder will recognize gain or loss equal to the
difference between the amount of cash received and the shareholder's basis in
such fractional share.
TAX CONSEQUENCES TO ROBEC AND AMERIQUEST
No gain or loss will be recognized by either Robec or AmeriQuest in the
Merger. Robec will retain its historic basis and holding period in its assets
after the Merger. The basis of AmeriQuest in its stock of Surviving Corporation
immediately after the Merger will be equal to the basis of all Robec
shareholders, including AmeriQuest, in their shares of Robec Common Stock
immediately prior to the Effective Date. In addition, the tax attributes, if
any, of Robec will carry over. If it has not occurred prior to the Merger, the
Merger itself will likely cause a "change of ownership" to both Robec and
AmeriQuest (as defined by Section 382). Because of this, the future utilization
of certain tax attributes, if any, that were generated before the change of
ownership, including net operating loss carryovers, may be restricted.
INFORMATION REPORTING
Treasury Regulations require that every taxpayer who receives stock in
connection with a corporate reorganization must file with his or her income tax
return a statement of facts pertinent to the nonrecognition of gain or loss
upon the transaction, including (i) a statement of the basis of the stock
transferred in the transaction and (ii) a statement of the fair market value of
the stock received in the transaction. In addition, taxpayers are required to
maintain permanent records with respect to the foregoing information. Robec
shareholders will be required to comply with these requirements.
BACKUP WITHHOLDING
Under the backup withholding rules of the Code, a Robec shareholder may be
subject to backup withholding with respect to payments of cash in lieu of
fractional shares. To prevent such backup withholding, a Robec shareholder
must, unless an exception applies under the applicable law and regulations,
provide the payor of such cash with such shareholder's correct taxpayer
identification number ("TIN") on a Substitute Form W-9 and certify under
penalties of perjury that such number is correct and that such shareholder is
not subject to backup withholding. A Substitute Form W-9 will be provided to
each Robec shareholder in a letter of transmittal to be mailed to each
shareholder by AmeriQuest. If the correct TIN and certifications are not
provided, a $50 penalty may be imposed on the shareholder by the Service and
payments of cash to such shareholder may be subject to backup withholding at a
rate of 31%.
ACCOUNTING TREATMENT
The Merger will be accounted for by AmeriQuest as a reorganization of
unaffiliated companies and recorded as a purchase by AmeriQuest for accounting
and financial reporting purposes.
35
<PAGE>
THE PLAN OF MERGER
The following description of the Plan of Merger does not purport to be
complete and is qualified in its entirety by reference to the Plan of Merger, a
copy of which is attached as Appendix I hereto and incorporated herein by prior
reference. Robec shareholders are urged to read the Plan of Merger carefully
and in its entirety.
THE MERGER. The Plan of Merger provides that AmeriQuest Sub will be merged
with and into Robec in accordance with Pennsylvania law, whereupon the separate
existence of AmeriQuest Sub will cease and Robec will survive the Merger as the
Surviving Corporation. On the Effective Date, the conversion of Robec Common
Stock and the conversion of shares of the common stock of AmeriQuest Sub
pursuant to the Plan of Merger will be effected as described below.
EFFECTIVE DATE. Following the adoption of the Plan of Merger and subject to
the satisfaction or waiver of all other conditions to closing contained in the
Amended Agreement discussed below under "The Amended Agreement--Conditions to
Consummation of the Merger," the Merger will become effective on the Effective
Date. The Articles of Merger will be filed as soon as practicable after all
conditions contemplated by the Amended Agreement have been satisfied or waived.
TERMS OF THE MERGER. At the Effective Date:
(i) except for shares of Robec Common Stock owned by AmeriQuest on the
Effective Date which shall be cancelled in the Merger, each share of Robec
Common Stock then issued and outstanding, other than shares owned by Robec
shareholders who perfect their statutory dissenters rights, shall be
converted into .63075 shares of AmeriQuest Common Stock; provided, however,
that in the event the closing price of AmeriQuest Common Stock on the New
York Stock Exchange on the business day prior to the Effective Date as
reported in the Wall Street Journal is less than $3.00 per share, each such
share of Robec Common Stock shall be converted into the number of shares of
AmeriQuest Common Stock equal to the product of (i) .63075 multiplied by
(ii) a quotient, the numerator of which is $3.00 and the denominator of
which is the Closing Date Market Price; and
(ii) each issued and outstanding share of the capital stock of AmeriQuest
Sub shall be converted into one share of common stock, par value $.01 per
share, of the Surviving Corporation.
Robec shareholders will not be issued fractional shares in connection with
the Merger. Instead, each Robec shareholder who would otherwise have been
entitled to a fraction of a share of AmeriQuest Common Stock will receive, at
such time as the holder receives stock certificates representing shares of
AmeriQuest Common Stock, an amount of cash equal to the per share market value
of the AmeriQuest Common Stock (based on the closing price of AmeriQuest Common
Stock on the Effective Date) multiplied by the fraction of a share of
AmeriQuest Common Stock to which such holder would otherwise be entitled. On
and after the Effective Date, the holder of a certificate representing Robec
Common Stock shall cease to have any rights as a shareholder of Robec, except
for the right to surrender his or her certificate in exchange for payment of
the consideration to be received by such holder of Robec Common Stock in the
Merger (the "Merger Consideration").
PAYMENT OF MERGER CONSIDERATION. AmeriQuest will deposit the Merger
Consideration with the Exchange Agent. After the Effective Date, each Robec
shareholder will be entitled to receive, upon surrender to the Exchange Agent
of one or more certificates representing Robec Common Stock, certificates
representing the number of shares of AmeriQuest Common Stock into which such
shares were converted in the Merger and cash in consideration of fractional
shares, as described above. AmeriQuest Common Stock into which Robec Common
Stock will be converted in the Merger shall be deemed to have been issued on
the Effective Date.
In the event that any certificates representing shares of AmeriQuest Common
Stock are to be delivered to or issued in a name other than that in which the
certificates representing shares of Robec Common Stock
36
<PAGE>
surrendered in exchange therefor are registered, there shall be as conditions
of such exchange that the person requesting such exchange pay to the Exchange
Agent any transfer or other taxes required by reason of the issuance of
certificates for such shares of AmeriQuest Common Stock in a name other than
that of the registered holder of the certificate surrendered, or shall
establish to the satisfaction of the Exchange Agent that such tax has been paid
or is not applicable, that the certificates so surrendered shall be properly
endorsed or accompanied by appropriate stock powers and otherwise be in proper
form for transfer and that such transfer otherwise be proper.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, AS TO THE METHOD OF
EXCHANGING CERTIFICATES FORMERLY REPRESENTING SHARES OF ROBEC COMMON STOCK FOR
CERTIFICATES REPRESENTING SHARES OF AMERIQUEST COMMON STOCK WILL BE MAILED TO
ROBEC SHAREHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE DATE. ROBEC SHAREHOLDERS
SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES TO ROBEC OR TO THE
EXCHANGE AGENT PRIOR TO RECEIPT OF SUCH INSTRUCTIONS AND THE TRANSMITTAL
LETTER.
SURVIVING PROVISIONS. The Articles of Incorporation and By-laws of AmeriQuest
Sub will be the Articles of Incorporation and By-laws of the Surviving
Corporation, except that the name of the Surviving Corporation shall be
"AmeriQuest/Robec, Inc." The initial directors and officers of the Surviving
Corporation shall be as follows:
<TABLE>
<C> <S>
Harold L. Clark Director, Chairman of the Board
Robert H. Beckett Director, President and Chief Executive Officer
Robert S. Beckett Director, Vice President and Chief Operating
Officer
Stephen G. Holmes Director, Executive Vice President,
Secretary/Treasurer and Chief Financial Officer
Alexander C. Kramer, Jr. Vice President--Operations
</TABLE>
DISSENTING SHARES. The Plan of Merger provides that shares of Robec Common
Stock that are outstanding immediately prior to the Effective Date and that are
held by shareholders, if any, who are entitled to assert a right to dissent
from the Merger and who demand and validly perfect their rights to receive the
"fair value" of their shares with respect to the Merger under Section 1574 of
the BCL (the "Dissenting Shares") shall be entitled solely to the payment of
the "fair value" of such shares in accordance with the provisions of the BCL;
except that (i) if such demand to receive "fair value" shall be withdrawn upon
the consent of the Surviving Corporation, (ii) if the Plan of Merger shall be
terminated, or the Merger shall not be consummated, (iii) if no demand or
petition for the determination of "fair value" by a court shall have been made
or filed within the time provided in the provisions of the BCL or (iv) if a
court of competent jurisdiction shall determine that such holder of Dissenting
Shares is not entitled to the relief provided by the provisions of the BCL,
then the right of such holder of Dissenting Shares to be paid the "fair value"
of his or her shares of Robec Common Stock shall cease and with respect to
clauses (i), (iii) and (iv) above, such Dissenting Shares shall thereupon be
deemed to have been converted into and to have become exchangeable for, as of
the Effective Date, the right to receive the Merger Consideration with respect
thereto, without any interest thereon, and with respect to clause (ii) above,
the status of such shareholder shall be restored retroactively without
prejudice to any corporate proceeding which may have been taken during the
interim. See "Dissenters Appraisal Rights" and a copy of the text of Subchapter
15D of the BCL attached as Annex III to this Prospectus/Proxy Statement.
THE AMENDED AGREEMENT
THE EXCHANGE. The Amended Agreement provides for the acquisition of Robec by
AmeriQuest in a two-stage transaction: a share exchange between AmeriQuest and
the Principal Shareholders to be followed at a later date by the Merger. In
each stage, the holders of Robec Common Stock receive the same per share
37
<PAGE>
consideration. Pursuant to the Amended Agreement, the first stage Exchange
occurred on September 22, 1994. AmeriQuest has agreed with respect to the
shares of Robec Common Stock obtained in the Exchange that prior to the
Effective Date it will (i) not sell, pledge, assign or otherwise dispose of, or
enter into any contract, option or other arrangement with respect to the sale,
transfer, pledge, assignment or other disposition of, any shares of Robec
Common Stock acquired in the Exchange except to a wholly-owned subsidiary of
AmeriQuest and (ii) vote all shares of Robec Common Stock owned by it on the
Record Date at any annual or special meeting of the shareholders of Robec (a)
in favor of the Plan of Merger, (b) against any action or agreement which would
result in a breach of a representation, warranty or covenant of Robec in this
Agreement or which would otherwise impede, interfere with or attempt to
discourage the Merger and (c) against the nomination or election of any
director other than the current directors of Robec or any successor nominated
by them. As a result of the Exchange, AmeriQuest now owns 50.1% of the
outstanding shares of Robec Common Stock.
ROBEC STOCK OPTIONS. The Amended Agreement provides that on the Effective
Date, AmeriQuest will offer to exchange for each of the then-outstanding
options to purchase Robec Common Stock (collectively, the "Robec Options"),
including, without limitation, all outstanding options granted under Robec's
1989 Stock Option Plan, as amended (the "Robec Plan"), as well as any then
outstanding Robec Options not granted under the Robec Plan, an option to
purchase that number of shares of AmeriQuest Common Stock (collectively, the
"AmeriQuest Options") determined by multiplying the number of shares of Robec
Common Stock subject to such Robec Option on the Effective Date by the Exchange
Ratio, at an exercise price per share of AmeriQuest Common Stock equal to the
exercise price per share of such Robec Option divided by the Exchange Ratio.
AmeriQuest will cause the AmeriQuest Common Stock issuable upon exercise of the
AmeriQuest Options to be registered within 20 days after the Effective Date and
will use its best efforts to maintain the effectiveness of such registration
statement or registration statements for so long as any such AmeriQuest Options
shall remain outstanding, and AmeriQuest will reserve a sufficient number of
shares of AmeriQuest Common Stock for issuance upon exercise of the AmeriQuest
Options.
REPRESENTATIONS AND WARRANTIES; CONDUCT OF BUSINESS PENDING THE MERGER. The
Amended Agreement contains various representations and warranties of AmeriQuest
and Robec relating to, among other things, the following matters (which
representations and warranties are subject, in certain cases, to specified
exceptions): (i) the due incorporation, power and standing of, and similar
corporate matters with respect to, each of Robec and AmeriQuest; (ii) the
absence of any conflict with each of Robec's and AmeriQuest's articles and
certificate of incorporation and bylaws, respectively, and compliance with
applicable laws; (iii) each of Robec's and AmeriQuest's capitalization; (iv)
the authorization, execution, delivery, performance and enforceability of the
Amended Agreement by each such party and of the transactions contemplated
thereby; (v) reports and other documents filed with the SEC and other
regulatory authorities and the accuracy of the information contained therein;
(vi) the absence of certain litigation or other proceedings; (vii) the absence
of any governmental or regulatory authorization, consent or approval required
to consummate the Merger; (viii) the absence of any material default under
agreements; (ix) the absence of any tax delinquencies; (x) the compliance of
financial statements with applicable accounting requirements and their
preparation in accordance with generally accepted accounting principles applied
on a consistent basis, fairly presenting the consolidated financial position of
such companies and each of their consolidated subsidiaries and the consolidated
results of their operations and cash flows for the applicable periods; and (xi)
the absence of undisclosed liabilities. The representations and warranties of
AmeriQuest shall be true as of the Effective Date and shall survive the
Effective Date. The representations and warranties of Robec did not survive the
closing of the Exchange and are therefore of no further force or effect. In
addition, pursuant to the Amended Agreement, AmeriQuest has agreed to carry on
its business, prior to the Effective Date, in the usual and ordinary course,
and has agreed that certain material transactions prior to the Effective Date
require the written consent of Robec.
CONDITIONS TO CONSUMMATION OF THE MERGER. The obligations of AmeriQuest and
Robec to consummate the Merger are subject to the satisfaction of two
conditions: (i) the approval and adoption of the
38
<PAGE>
Plan of Merger by the shareholders of Robec and (ii) that no preliminary or
permanent injunction or other order shall have been issued by any federal or
state court which remains pending and prevents the consummation of the Merger.
In addition, the obligation of Robec to consummate the Merger is subject to the
satisfaction of certain other conditions, including: (i) the Registration
Statement of which this Prospectus/Proxy Statement is a part shall have been
declared effective by the SEC and not be the subject of any stop order or any
other proceeding by the SEC which would bring into question the accuracy and
adequacy of the disclosures contained herein; (ii) the AmeriQuest Common Stock
to be issued in connection with the Merger shall have been approved for listing
on the NYSE subject to official notice of issuance; and (iii) the
representations and warranties of AmeriQuest contained in the Amended Agreement
shall be true on and as of the Effective Date, as if made on that date, except
for any variation permitted by the Amended Agreement, and AmeriQuest shall have
performed all material covenants and obligations and complied with all material
conditions required by the Amended Agreement to be performed or complied with
by it prior to the Effective Date.
INDEMNIFICATION; INSURANCE. The Amended Agreement provides that the Articles
of Incorporation of the Surviving Corporation shall contain the provisions with
respect to indemnification that were included in the Articles of Incorporation
of Robec on the date of the Amended Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six years from the
Effective Date in any manner that would adversely affect the rights thereunder
of individuals who at the Effective Date were directors, officers, employees or
agents of Robec, unless such modifications are required by law. After the
Effective Date (and with respect to the Principal Shareholders, after the
Exchange), AmeriQuest and the Surviving Corporation shall, to the fullest
extent permitted under applicable law or under AmeriQuest's or the Surviving
Corporation's Certificate or Articles of Incorporation or By-Laws, indemnify
and hold harmless each present and former director and officer of Robec, and to
the fullest extent permitted under applicable law, each Principal Shareholder
(collectively, the "Indemnified Parties"), against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission occurring prior to the Effective Date, or arising out of or pertaining
to the transactions contemplated by the Amended Agreement (collectively,
"Damages"), for a period of six years after the execution of the Amended
Agreement. Furthermore, after such six year period, AmeriQuest and the
Surviving Corporation shall, to the fullest extent permitted under applicable
law, indemnify and hold harmless the Principal Shareholder in their capacity as
shareholders against any Damages arising out of or pertaining to the
transactions contemplated by the Amended Agreement. For a period of two years
after the Effective Date, AmeriQuest shall cause the Surviving Corporation to
use its best efforts to maintain in effect, if available, directors' and
officers' liability insurance coverage for those persons who were previously
covered by Robec's directors' and officers' liability insurance policy on terms
comparable to those applicable to the directors and officers of AmeriQuest as
of the execution of the Amended Agreement.
TERMINATION. The Amended Agreement may only be terminated: (i) by mutual
agreement of Robec and AmeriQuest; (ii) by Robec, if there has been a breach by
AmeriQuest of any representation, warranty, covenant or agreement set forth in
the Amended Agreement on the part of AmeriQuest which has or can reasonably be
expected to have a material adverse effect on AmeriQuest and which AmeriQuest
fails to cure prior to the Effective Date (except that no cure period shall be
provided for a breach by AmeriQuest which by its nature cannot be cured); or
(iii) by Robec if the Merger shall not have occurred on or prior to December
31, 1994. Thus, the Amended Agreement may not be terminated by AmeriQuest
without the consent of Robec.
AMENDMENT; WAIVER. The Amended Agreement provides that it may be amended by
the parties thereto, by or pursuant to action taken by their respective Boards
of Directors, at any time before or after approval thereof by the shareholders
of Robec, but, after such approval, no amendment shall be made which changes
the Exchange Ratio or which in any way materially adversely affects the rights
of such shareholders, without such further approval of such shareholders. Any
failure by Robec to comply with any of its respective
39
<PAGE>
obligations, agreements or covenants set forth in the Amended Agreement may be
expressly waived in writing by AmeriQuest. Any amendment to the Amended
Agreement by Robec shall require, in addition to any other approval required by
applicable law or Robec's charter documents, the approval of a majority of the
Robec directors who were directors of Robec prior to the Exchange.
REGISTRATION RIGHTS. Pursuant to the Amended Agreement and the terms of a
Registration Rights Agreement by and between AmeriQuest and each of the
Principal Shareholders, AmeriQuest shall, at its sole expense, prepare and file
a registration statement on Form S-3 under the Securities Act for use by the
Principal Shareholders with respect to the shares of AmeriQuest Common Stock
which they received in connection with the Exchange and which they will receive
in connection with the Merger, and shall have the S-3 Registration Statement
declared effective as soon as practicable. Further, AmeriQuest shall maintain
the effectiveness of the S-3 Registration Statement until such time as such
shares of AmeriQuest Common Stock are no longer deemed to be "restricted
securities" as defined in Rule 144(a)(3) promulgated under the Securities Act.
Should any Principal Shareholder thereafter still be deemed to be an
"affiliate" of AmeriQuest, AmeriQuest shall continue to maintain the
effectiveness of such S-3 Registration Statement for the benefit of such
"affiliate(s)" until such Principal Shareholder shall no longer be deemed an
"affiliate."
40
<PAGE>
PRO FORMA FINANCIAL INFORMATION
The unaudited pro forma condensed combined financial statements reflect the
acquisition of 49 percent of Robec's Common Stock not owned by AmeriQuest, the
acquisition of NCD and the $18 million advance of Computer 2000. The unaudited
pro forma condensed combined statement of income combines the results of
operations of AmeriQuest, Robec and NCD for the twelve months ended June 30,
1994 and the three months ended September 30, 1994 giving effect to the
acquisitions as if they had occurred on July 1, 1993. The historical statement
of income for Robec includes its results prior to its acquisition by
AmeriQuest. The unaudited pro forma condensed combined balance sheet data
combines the balance sheets of AmeriQuest and NCD as of September 30, 1994,
giving effect to the acquisition as if it had occurred on that date. The
acquisitions are accounted for under the purchase method of accounting. The pro
forma information is not necessarily indicative of the operating results or
financial position that would have occurred had the merger been consummated at
the beginning of the periods presented, nor is it necessarily indicative of
future operations results or financial position.
41
<PAGE>
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The following unaudited pro forma condensed combined financial statements
reflect the proposed Merger under the purchase method of accounting.
AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET
SEPTEMBER 30, 1994 (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT SHARES)
<TABLE>
<CAPTION>
AMERIQUEST PRO FORMA PRO FORMA
TECHNOLOGIES, INC. NCD ADJUSTMENTS COMBINED
------------------ ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash................... $ 1,378 $ 127 $ 3,608 (G)(H) $ 5,113
Accounts receivable,
net................... 42,687 21,203 -- 63,890
Inventories............ 47,291 27,369 -- 74,660
Income taxes
receivable............ -- 24 -- 24
Prepaid expenses and
other................. 1,668 1,920 -- 3,588
---------- ------- ------- ----------
Total current assets. 93,024 50,643 3,608 147,275
PROPERTY AND EQUIPMENT,
NET.................... 5,831 965 -- 6,796
INTANGIBLE ASSETS, NET.. 6,426 56 8,934 (G)(H) 15,416
OTHER ASSETS............ 1,449 695 -- 2,144
---------- ------- ------- ----------
$ 106,730 $52,359 $12,542 $ 171,631
========== ======= ======= ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable....... $ 29,722 $27,715 -- $ 57,437
Notes payable.......... 43,211 20,593 (11,287)(G)(H) 52,517
Other.................. 5,358 54 2,954 (G)(H) 8,366
---------- ------- ------- ----------
Total current
liabilities......... 78,291 48,362 (8,333) 118,320
---------- ------- ------- ----------
LONG-TERM DEBT.......... -- 2,737 (2,737) --
OTHER NONCURRENT
LIABILITIES............ -- -- -- --
DEFERRED INCOME TAXES... 267 267
STOCKHOLDERS' EQUITY
Preferred stock, $.01
par value; authorized
10,000,000 shares;
no shares issued and
outstanding........... -- -- -- --
Common stock, $.01 par
value; authorized
30,000,000 shares;
issued and
outstanding
17,136,935 shares..... 171 -- 115 (G)(H) 286
Common stock, $.01 par
value; authorized
10,000,000 shares;
issued and
outstanding 4,599,180
shares................ -- -- -- --
Common stock, $.01 par
value; authorized
10,000,000 shares;
issued and
outstanding 195
shares................ -- -- -- --
Additional paid-in
capital............... 43,683 2,096 22,661 (G)(H) 68,440
Retained deficit....... (15,682) (836) 836 (G)(H) (15,682)
---------- ------- ------- ----------
Total stockholders'
equity.............. 28,172 1,260 23,612 53,044
---------- ------- ------- ----------
$ 106,730 $52,359 $12,542 $ 171,631
========== ======= ======= ==========
OUTSTANDING COMMON
SHARES................. 17,136,935 28,649,810
========== ==========
</TABLE>
42
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR YEAR ENDED JUNE 30, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AMERIQUEST KENFIL ROBEC PRO FORMA PRO FORMA
TECHNOLOGIES, INC. INC. INC. NCD ADJUSTMENTS COMBINED
------------------ -------- -------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET SALES............... $ 87,593 $138,759 $168,446 $218,808 $ -- (E) $613,606
COST OF SALES........... 75,023 128,843 155,836 202,114 -- 561,816
--------- -------- -------- -------- ------ ----------
Gross profit........... 12,570 9,916 12,610 16,694 -- 51,790
OPERATING EXPENSES
Selling, general and
administrative........ 14,144 24,653 22,985 13,259 1,095 (B) 76,136
Restructuring charge
and earthquake
loss(D)............... 5,700 3,430 -- -- -- 9,130
--------- -------- -------- -------- ------ ----------
Income (loss) from
operations............ (7,274) (18,167) (10,375) 3,435 (1,095) (33,476)
OTHER INCOME (EXPENSE)
Other income........... 31 40 -- -- 71
Interest expense....... (728) (2,626) (1,613) (1,908) 930 (C) (5,945)
--------- -------- -------- -------- ------ ----------
(697) (2,586) (1,613) (1,908) 930 (5,874)
--------- -------- -------- -------- ------ ----------
Income (loss) before
taxes................. (7,971) (20,753) (11,988) 1,527 (165) (39,350)
PROVISION FOR INCOME
TAXES.................. -- 17 (814) -- -- (797)
--------- -------- -------- -------- ------ ----------
Net income (loss)(D)... $ (7,971) $(20,770) $(11,174) $ 1,527 $ (165) $ (38,553)(D)
========= ======== ======== ======== ====== ==========
Net income (loss) per
common share and common
share equivalent....... $ (1.33) $ (1.45)
========= ==========
Common and common
equivalent shares...... 5,973,511 26,652,076
========= ==========
</TABLE>
43
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THREE MONTHS ENDED SEPTEMBER 30, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AMERIQUEST ROBEC PRO FORMA PRO FORMA
TECHNOLOGIES, INC. INC. NCD ADJUSTMENTS COMBINED
------------------ ------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
NET SALES............... $ 49,476 $22,351 $61,364 $ -- (E) $ 133,191
COST OF SALES........... 44,704 20,366 56,628 -- 121,698
---------- ------- ------- ----- ----------
Gross profit.......... 4,772 1,985 4,736 -- 11,493
OPERATING EXPENSES
Selling, general and
administrative....... 5,225 2,500 3,582 274 (B) 11,581
---------- ------- ------- ----- ----------
Income (loss) from
operations........... (453) (515) 1,154 (274) (88)
OTHER INCOME (EXPENSE)
Other income.......... 67 -- -- -- 67
Interest expense...... (727) (201) (669) 232 (C) (1,365)
---------- ------- ------- ----- ----------
(660) (201) (669) 232 (1,298)
---------- ------- ------- ----- ----------
Income (loss) before
taxes................ (1,113) (716) 485 (42) (1,386)
PROVISION FOR INCOME
TAXES.................. -- -- -- -- --
---------- ------- ------- ----- ----------
Net income (loss)..... $ (1,113) $ (716) $ 485 $ (42) $ (1,386)
========== ======= ======= ===== ==========
Net income (loss) per
common share and common
share equivalent....... $ (0.10) $ (0.05)
========== ==========
Common and common
equivalent shares...... 11,622,873 29,691,169
========== ==========
</TABLE>
44
<PAGE>
FOOTNOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL
STATEMENTS OF AMERIQUEST TECHNOLOGIES, INC. AND ROBEC INC.
The following footnotes reflect the assumptions made in the preparation of
the Pro Forma Condensed Consolidated Financial Statements.
(A) To effect the purchase of Robec, AmeriQuest will issue approximately
2,800,000 shares of AmeriQuest Common Stock in exchange for 4,459,000
shares of Robec common stock and to eliminate Robec's historical equity.
The AmeriQuest Common Stock is assumed to have a market value of $1.75 per
share at the time of the transaction for a total purchase price of
$4,900,000. Such shares are reflected in the accompanying pro forma
financial statements as outstanding Common Stock. No assurance can be
given that the number of shares to be issued to the Robec shareholders
will not be a greater number than that reflected herein, as the exact
number of shares is subject to adjustment based on the market value of
AmeriQuest Common Stock on the business day prior to the closing. See
"Information Regarding the Merger--The Merger."
(B) To record goodwill amortization over a 10 year life.
(C) Savings of interest expense on notes payable and long-term debt retired
through the issuance of AmeriQuest Common Stock, interest ranging from
9.5% to 13.91%. See Footnotes (G) and (H) below.
(D) The restructuring charge of $5,700,000 included in AmeriQuest's historical
statement of operations relates principally to the write-off of certain
former personal computer joint venture operations. The restructuring
charge and earthquake loss of $4,296,000 included in Kenfil's historical
financials includes charges of $3,430,000 for losses sustained in the
Southern California earthquake and restructuring charges of $866,000
relating to severance costs and lease termination costs. The restructuring
charge of $336,000 included in Robec's historical statement of operations
relates to a reduction in office and warehouse space.
(E) On July 8, 1994, AmeriQuest reacquired 345,091 shares of its Common Stock
from Mr. James D'Jen, a former officer and director of AmeriQuest, as down
payment on an obligation of Mr. D'Jen to exchange 350,000 shares of
AmeriQuest Common Stock, in exchange for all (100%) of the common stock of
AmeriQuest's Singapore subsidiary, CMS Enhancements (S) PTE Ltd. The
Singapore subsidiary is a distributor of commodity disk drives. Sales for
this Singapore subsidiary approximate $20 million annually, with an
approximate breakeven in operating results. Upon the receipt of the
balance of the shares due from Mr. D'Jen, AmeriQuest will be divested of
its Singapore subsidiary.
(F) During fiscal year 1994 AmeriQuest acquired two companies, the impact of
which would be an increase of approximately $20 million in revenues for
the six months not reflected in historical results, with an approximate
breakeven in operating results.
(G) To effect the purchase of NCD, AmeriQuest issued 1,864,767 shares of
AmeriQuest Common Stock plus paid cash of $6,674,263 (including the
redemption of subordinated indebtedness of approximately $3 million) in
exchange for all 195 outstanding shares of NCD common stock and to
eliminate NCD's historical equity. The AmeriQuest Common Stock is assumed
to have market value of $1.75 per share at the time of the transaction for
a total purchase price, including debt redemption, of $9,937,605. This
purchase price exceeds the fair value of the net assets acquired resulting
in goodwill of approximately $8.9 million. Such shares are reflected in
the accompanying pro forma financial statements as outstanding Common
Stock.
(H) The $18 million advanced from Computer 2000 AG to the Company for the
purchase of 8.1 million shares of AmeriQuest Common Stock is reflected as
equity in the accompanying pro forma financial statements. This
transaction is subject to approval by AmeriQuest's shareholders. Computer
2000 has agreed, subject to certain conditions, to invest an additional
$32 million for an approximately 51 percent ownership interest in
AmeriQuest, including shares already owned by AmeriQuest and assuming
consummation of the Merger. See "Businesses of the Companies--Recent
Developments." In addition, AmeriQuest completed a private placement of
equity securities in October, 1994 providing net proceeds of $3,608,000.
The aggregate proceeds were used to fund the cash portion of the NCD
purchase price, repayment of notes payable and the redemption of NCD's
subordinated indebtedness.
45
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of AmeriQuest, as of
September 30, 1994, and as adjusted to give effect to the initial Computer 2000
$18 million advance and all acquisitions occurring prior thereto. See
"Information Regarding the Merger--The Plan of Reorganization--The Merger--
Terms of the Merger."
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA(A)
------------------- --------------------
AMERIQUEST(B) NCD ADJUSTMENTS COMBINED
------------- ----- ----------- --------
<S> <C> <C> <C> <C>
Short-term debt, including current
maturities.......................... $43.2 $20.6 $(11.3) $52.5
Long-term debt, net of current
maturities:
10% junior shareholders' notes due
1997.............................. 0.0 2.7 (2.7) 0.0
----- ----- ------ ------
Total long-term debt............. 0.0 2.7 (2.7) 0.0
Shareholders' equity:
Common Stock....................... 0.2 0.0 0.1 0.3
Additional paid-in capital......... 43.7 2.1 22.6 68.4
Retained earnings (deficit)........ (15.7) (0.8) .8 (15.7)
----- ----- ------ ------
Total shareholders' equity........ 28.2 1.3 23.5 53.0
----- ----- ------ ------
Total capitalization................. $71.4 $21.9 $ 12.2 $105.5
===== ===== ====== ======
</TABLE>
- --------
(A) Includes the effect of the initial $18 million advance from Computer 2000
AG as equity.
(B) The AmeriQuest historical September 30, 1994 consolidated balance sheet
includes the balance sheet of ROBEC.
COMPARATIVE MARKET PRICES OF COMMON STOCK
The following table sets forth the comparative market prices for the shares
of Common Stock of AmeriQuest and Robec. The prices for AmeriQuest Common Stock
reflect the high and low closing prices reported on the New York Stock Exchange
for each calendar quarter since December 31, 1991, while the prices for Robec
Common Stock reflect the high and low last sale prices as reported by the
Nasdaq National Market System for each calendar quarter since December 31,
1991.
<TABLE>
<CAPTION>
AMERIQUEST ROBEC
------------- -------------
1992 HIGH LOW HIGH LOW
---- ------ ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter................................. $3 3/4 $2 3/8 $5 3/4 $3 3/4
Second Quarter................................ 3 1 1/2 5 1/4 2 1/2
Third Quarter................................. 2 1/4 1 1/4 3 1/4 2 1/4
Fourth Quarter................................ 3 3/4 1 1/2 3 1/4 2 1/4
<CAPTION>
1993
----
<S> <C> <C> <C> <C>
First Quarter................................. 3 3/8 2 3 1/4 2 3/8
Second Quarter................................ 3 5/8 2 3 1/4 2 3/8
Third Quarter................................. 3 1/4 2 3 1/4 2 1/4
Fourth Quarter................................ 5 7/8 2 1/2 3 1/4 2 3/8
<CAPTION>
1994
----
<S> <C> <C> <C> <C>
First Quarter................................. 6 4 1/8 2 7/8 1 1/2
Second Quarter................................ 4 1/8 3 1 7/8 1/2
Third Quarter................................. 4 1/4 3 1/8 2 1/8 1 1/4
Fourth Quarter................................ 3 3/4 2 7/8 1 7/8 1 9/16
</TABLE>
46
<PAGE>
On January , 1995, the share price of AmeriQuest Common Stock closed at
per share on the New York Stock Exchange and the last sale price of Robec
Common Stock was per share on the Nasdaq National Market System. On June
29, 1994, the day before the business combination of AmeriQuest and Robec was
publicly announced, the share price of AmeriQuest Common Stock closed at $3.25
per share on the New York Stock Exchange and the last sale price of Robec
Common Stock was $0.88 per share on the Nasdaq National Market System.
As of December 30, 1994 Robec had approximately 96 shareholders of record.
DIVIDEND POLICY
Neither AmeriQuest nor Robec has paid a dividend of any kind in the past 5
years. Any declaration of cash or stock dividends will depend upon AmeriQuest's
earnings, financial position, dividend restrictions in any credit facility and
other relevant factors existing at the time. It is not anticipated that
AmeriQuest will pay dividends in the foreseeable future.
DESCRIPTION OF CAPITAL STOCK OF AMERIQUEST
GENERAL
As of December 16, 1994, the authorized capital stock of AmeriQuest consisted
of 30,000,000 shares of common stock, par value $.01 per share, of which
19,562,620 shares were outstanding (none of which were held as treasury stock)
and 10,000,000 shares of preferred stock, par value $.01 per share, of which no
shares were issued and outstanding. Upon consummation of the Merger and after
the issuance of 1,397,208 shares to Robec shareholders in connection therewith,
approximately 9,040,172 shares of AmeriQuest Common Stock will be available for
issuance by AmeriQuest at the discretion of its Board of Directors. All
outstanding shares of AmeriQuest Common Stock are, and all shares of AmeriQuest
Common Stock issued in connection with the Merger when issued as described
herein will be, fully paid, validly issued and non-assessable. Each share of
AmeriQuest Common Stock has the same relative right as, and is identical in all
respects with, each other share of AmeriQuest Common Stock. The Investment
Agreement between AmeriQuest and Computer 2000 provides that Computer 2000 has
the right to acquire newly issued shares of AmeriQuest to give Computer 2000 a
51% ownership interest in AmeriQuest, including shares of AmeriQuest Common
Stock already owned by Computer 2000, for $50 million, regardless of the total
number of shares of AmeriQuest Common Stock outstanding. Accordingly,
AmeriQuest is seeking stockholder approval to increase the number of shares of
AmeriQuest Common Stock authorized for issuance by AmeriQuest from 30,000,000
shares to 65,000,000 shares.
DIVIDENDS
AmeriQuest may pay cash dividends if, as and when declared by its Board of
Directors, subject to applicable provisions of Delaware law. The holders of
AmeriQuest Common Stock will be entitled to receive and to share equally in
such dividends as may be declared by the Board of Directors of AmeriQuest out
of funds legally available therefor. See "Dividend Policy."
VOTING RIGHTS
Holders of AmeriQuest Common Stock are entitled to one vote for each share
held by them in all matters submitted to the shareholders of AmeriQuest.
Holders of AmeriQuest Common Stock do not have cumulative voting rights in the
election of directors.
LIQUIDATION
In the event of a liquidation, dissolution or winding up of AmeriQuest, the
holders of AmeriQuest Common Stock would be entitled to receive, after payment
of all its debts and liabilities and other payments to holders of preferred
stock, if any, having priority rights, all other assets of AmeriQuest
available. Such stockholders would be entitled to participate ratably in the
net assets available for distribution.
47
<PAGE>
PRE-EMPTIVE RIGHTS
The Certificate of Incorporation of AmeriQuest does not grant holders of
AmeriQuest Common Stock pre-emptive rights.
ANTI-TAKEOVER PROVISIONS
See "Comparison of Shareholder Rights--Business Combinations with Interested
Shareholders."
COMPARISON OF SHAREHOLDER RIGHTS
The following is a summary of material differences between the rights of
holders of Robec Common Stock and the rights of holders of AmeriQuest Common
Stock.
The rights of the shareholders of Robec, a Pennsylvania corporation, are
governed primarily by Pennsylvania law and the Articles of Incorporation and
By-Laws of Robec. Upon consummation of the Merger, Robec shareholders who have
not exercised their statutory dissenters rights will become holders of
AmeriQuest Common Stock. Because AmeriQuest is a Delaware corporation, the
rights of the former Robec shareholders will be governed primarily by Delaware
law and AmeriQuest's Certificate of Incorporation and By-Laws. Except as set
forth below, Robec and AmeriQuest do not believe that there are any material
differences in shareholders' rights under Pennsylvania and Delaware law and the
Articles and Certificate of Incorporation and By-Laws of Robec and AmeriQuest,
respectively. This discussion, however, is not and does not purport to be
complete or to identify all differences that may, under any given fact
situation, be material to shareholders.
BY-LAWS
Under Pennsylvania law the power to adopt, amend or repeal by-laws may be
vested by the by-laws in the directors, with statutory exceptions for certain
actions and subject to the power of shareholders to change such actions.
Pennsylvania law provides that unless the articles of incorporation otherwise
provide, shareholders may change the by-laws without the consent of the
directors. Robec's By-Laws provide its shareholders with the power to alter,
amend or repeal the By-Laws by the majority vote of shareholders at any meeting
at which a quorum is present except that a vote of 66 2/3% of the votes which
shareholders are entitled to cast shall be necessary to alter, amend or repeal
Section 3.2 (dealing with the nomination of directors) and Article IX (dealing
with amendments thereto) thereof. The Board of Directors of Robec may also
alter, amend or repeal the By-Laws subject to the power of the shareholders to
change such action. Under Delaware law a corporation's certificate of
incorporation may confer the power to adopt, amend or repeal by-laws upon the
directors (although it may not divest the stockholders of such power).
AmeriQuest's Certificate of Incorporation expressly authorizes its board of
directors to alter or repeal AmeriQuest's By-Laws subject to the shareholders'
power to change such action.
DIVIDEND DECLARATIONS
Under Pennsylvania law a corporation has the power, subject to restrictions
in its bylaws, to make distributions to its shareholders unless after giving
effect thereto (i) the corporation would not be able to pay its debts as they
become due in the usual course of business, or (ii) the corporation's assets
would be less than the sum of its total liabilities plus the amount that would
be needed upon the dissolution of the corporation to satisfy the preferential
rights, if any, of shareholders having superior preferential rights to those
shareholders receiving the distribution. Under Delaware law the directors may,
subject to any restrictions in a company's certificate of incorporation,
declare and pay dividends, either (i) out of its surplus, defined as the excess
of the net assets of the corporation over the amount determined to be the
capital of the corporation by the board of directors (which amount cannot be
less than the aggregate per value of all issued shares of capital stock), or
(ii) in case there shall be no surplus, out of the net profits for the fiscal
year in which the dividend is declared and the preceding year. The directors of
a Delaware corporation may not declare a dividend out of net profits, however,
if the capital of the corporation is less than the aggregate amount of capital
48
<PAGE>
represented by the issued and outstanding stock of all classes having a
preference upon the distribution of assets. Neither Robec's By-Laws nor
AmeriQuest's Certificate of Incorporation and By-Laws contain limitations on
such powers.
TERMS OF DIRECTORS
Under Pennsylvania law the articles of incorporation may provide that
directors be elected in two or more classes whose terms expire at different
times provided that no single term shall exceed four years. Robec's Articles of
Incorporation provide for three classes of directors, each of which is elected
for three-year terms. Under Delaware law the certificate of incorporation or
by-laws of a company may provide that directors be elected in one, two or three
classes whose terms expire at different times provided that no single term
shall exceed three years. AmeriQuest's Certificate of Incorporation and By-Laws
provide for one class of directors.
REMOVAL OF DIRECTORS
Under Pennsylvania law unless the articles of incorporation or bylaws provide
otherwise, directors may be removed by the shareholders of a corporation for or
without cause, and by the board of directors for any proper cause specified in
the bylaws. Robec's By-Laws provide for such removal by shareholders entitled
to cast a majority of the votes which all shareholders would be entitled to
cast in the election of directors. Under Delaware law directors may be removed,
with or without cause, by the holders of a majority of the stock then entitled
to vote at an election of directors.
MEETINGS OF SHAREHOLDERS
Under Pennsylvania law special meetings of shareholders may be called by the
board of directors, shareholders entitled to cast at least 20% of the votes
which all shareholders are entitled to cast at the particular meeting unless
otherwise provided in the articles of incorporation and by such officers or
other persons as may be provided in the by-laws. Robec's Articles of
Incorporation and By-Laws permit the President, the Board and shareholders
entitled to cast 10% of the vote which all shareholders are entitled to cast to
call a special meeting. Under Delaware law special meetings of stockholders may
be called by the board of directors or by such persons as may be authorized by
the certificate of incorporation or the by-laws. Under AmeriQuest's Certificate
of Incorporation and By-Laws, only the board of directors and designated
committees thereof may call a special meeting.
ACTION BY SHAREHOLDERS WITHOUT MEETING
Under Pennsylvania law the bylaws may provide that any action which may be
taken at a meeting of the shareholders may be taken without a meeting if there
is written consent of shareholders who would have been entitled to cast the
minimum number of votes that would be necessary to authorize the action at a
meeting at which all the shareholders were present and voting. Robec's By-Laws
permit all actions to be taken by unanimous consent and any individual action
to be taken by the larger of two-thirds consent or the minimum percentage
necessary to authorize the action at a duly called meeting. Under Delaware law
unless otherwise provided in the certificate of incorporation, any action
required or which may be taken at any annual or special meeting of stockholders
may be taken without a meeting if written consents shall be obtained from the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to authorize or take such action at a meeting at which
all shares entitled to vote thereat were present and voted. AmeriQuest's By-
Laws permit actions to be taken by the written consent of the minimum votes
required to authorize the actions at a meeting.
DISSENTERS RIGHTS
Under Pennsylvania law shareholders may perfect dissenters rights with regard
to corporate actions involving certain mergers, consolidations, the sale, lease
or exchange of substantially all the assets of another corporation (under
limited circumstances) or the elimination of cumulative voting. However, under
the corporate laws of both states, dissenters rights are generally denied when
a corporation's shares are listed on a national securities exchange or held of
record by more than 2,000 persons. Under Delaware law
49
<PAGE>
stockholders may only perfect appraisal rights with respect to corporate
actions involving mergers or consolidations. Stockholders of AmeriQuest do not
have appraisal rights in connection with the Merger while shareholders of Robec
do have appraisal rights in connection with the Merger.
SUPERMAJORITY PROVISIONS
Under both Pennsylvania and Delaware law the articles of incorporation or
certificate of incorporation, as the case may be, may provide for a higher
shareholder vote requirement than that required by law in order to approve
certain proposed actions or transactions of the corporation. Robec's Articles
of Incorporation and By-Laws require the vote of 66 2/3% of the votes which
shareholders are entitled to cast to (i) alter, amend or repeal Section 3.2
(nomination of directors) and Article IX (amendment of the By-Laws) of Robec's
By-Laws, (ii) repeal or amend Article III (limitation of directors' liability
and indemnification) of the By-Laws and (iii) to amend Article VIII (election
of directors) of the Company's Articles of Incorporation. The AmeriQuest
Certificate of Incorporation and By-Laws contain no supermajority voting
provisions.
BUSINESS COMBINATIONS WITH INTERESTED SHAREHOLDERS
Under Pennsylvania law no business combination (defined to include certain
mergers, sales of assets, sales of 5% or more of outstanding stock, loans,
recapitalizations or liquidations or dissolutions) involving a Pennsylvania
corporation and an interested shareholder (defined to be any holder of 20% or
more of the corporation's voting stock) may be entered into unless (i) approved
by the board of directors of the corporation prior to the interested
shareholder's share acquisition date, (ii) (a) five years have expired since
the acquisition of shares of the corporation by the interested shareholder, and
(b) either (1) a majority of shareholders of the corporation (excluding the
interested shareholder) approves the business combination, or (2) the business
combination is approved by an affirmative vote of all of the holders of all of
the outstanding common shares and satisfies certain minimum statutory
requirements, or (iii) approved (a) by a majority of votes that all
shareholders would be entitled to cast in an election of directors, not
including shares beneficially held by the interested shareholder provided that
(1) the meeting is called no earlier than three months after the interested
shareholder became, and if at the time of the meeting the interested
shareholder is, the beneficial owner of shares entitling the interested
shareholder to cast at least 80% of the votes that all shareholders would be
entitled to cast in an election of directors and (2) the business combination
satisfies certain other minimum statutory conditions, or (b) approved by the
affirmative vote of all of the holders of all of the outstanding common shares.
However, such law does not restrict any offer to purchase all of a
corporation's shares. Robec has opted out of the business combination rule and
therefore such rule does not apply to Robec.
Delaware has a similar law which defines an interested stockholder as a
holder of 5% or more of the corporation's voting stock. The Delaware law is
further distinguished in that it is inapplicable to business combinations
occurring more than three years after the interested stockholder acquired such
status. Exceptions to the rule against such business combinations include: (a)
prior approval by the board of directors of the business combination or the
transaction which resulted in the stockholder becoming an interested
shareholder and (b) subsequent approval of the business combination by the
board of directors and by a vote of at least two-thirds of the outstanding
voting stock of the corporation. The statute contains exceptions for cases in
which, upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, such interested stockholder holds 85% of
the voting stock of the company. The Delaware statute is applicable to
AmeriQuest as AmeriQuest has not opted out of its provisions.
FIDUCIARY DUTY
Under Pennsylvania law a director may, in considering the best interests of a
corporation, consider (i) the effects of any action on shareholders, employees,
suppliers, customers and creditors of the corporation, and upon communities in
which offices or other facilities of the corporation are located, (ii) the
short-term and long-term interests of the corporation, including the
possibility that the best interests of the corporation
50
<PAGE>
may be served by the continued independence of the corporation, (iii) the
resources, intent and conduct of any person seeking to take control of the
corporation and (iv) all other pertinent factors. Delaware law contains no
similar provision.
DERIVATIVE ACTIONS
Under Pennsylvania law a shareholder may maintain a derivative action, even
if the shareholder was not a shareholder at the time of the alleged wrongdoing,
if there is a strong prima facie case in favor of the claim asserted and if the
court determines in its discretion that serious injustice will result without
such action. Under Delaware law a shareholder may bring a derivative action
only if he or she was a shareholder at the time of the alleged wrongdoing and
has made a demand on the board of directors for relief.
LEGAL MATTERS
Certain legal matters with respect to the validity of the shares of
AmeriQuest Common Stock offered hereby will be passed upon for AmeriQuest by
Raymond L. Ridge, Esq., 3901 MacArthur Blvd., Ste. 200, Newport Beach, CA
92660.
EXPERTS
The financial statements of Ameriquest incorporated by reference in this
Prospectus/Proxy Statement and elsewhere in the Registration Statement to the
extent and for the periods in their reports, have been audited by Arthur
Andersen LLP, independent accountants, as indicated in their reports with
respect thereto, and are included herein in reliance upon the authority of said
firm as experts in giving said reports.
The consolidated balance sheets of Robec as of December 31, 1993 and 1992 and
the consolidated statements of operations, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1993, included in
this Prospectus/Proxy Statement, have been incorporated herein in reliance on
the report of Coopers & Lybrand, L.L.P., independent accountants, with respect
thereto, which includes explanatory paragraphs related to the Company's ability
to continue as a going concern and changing its method of accounting for income
taxes, given on the authority of that firm as experts in accounting and
auditing.
The financial statements and schedule of Ross White Enterprises, Inc. (d/b/a
National Computer Distributors) as of March 31, 1994 and 1993, and for the two
years then ended have been included herein and in the registration statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, appearing elsewhere herein, and upon the authority of said firm as
experts in accounting and auditing.
The consolidated balance sheet of NCD as of December 31, 1991 and the
consolidated statements of operations, shareholders' equity, and cash flows for
the year in the period ended December 31, 1991, included in this
Prospectus/Proxy Statement, have been incorporated herein in reliance on the
report of Coopers & Lybrand, L.L.P., independent accountants, with respect
thereto, given on the authority of that firm as experts in accounting and
auditing.
SHAREHOLDER PROPOSALS
Any proposal which an eligible shareholder of Robec desires to have presented
at Robec's next Annual Meeting of Shareholders (if the Merger has not been
consummated prior to the date the meeting is to be held) concerning a proper
subject for inclusion in the proxy statement and for consideration at an annual
meeting will be included in Robec's proxy statement and related proxy card if
it is received by Robec at 425 Privet Road, Horsham, PA 19044, Attention:
Secretary, not later than December 29, 1994.
51
<PAGE>
OTHER MATTERS
The accompanying forms of Proxy are solicited by and on behalf of the
management of Robec whose Notice of Special Meeting is attached to this
Prospectus/Proxy Statement. Robec 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
Robec. 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
Robec may reimburse them for reasonable out-of-pocket expenses incurred by them
in connection therewith.
Robec's board of directors does not intend to bring any other matters before
the Special Meeting and has no reason to believe any other matters will be
presented. If, however, other matters properly presented do come before the
meeting, it is the intention of the persons named as proxy agents in the
enclosed proxy card to vote upon such matters in accordance with their
judgment.
By Order of the Board of Directors,
Robert S. Beckett
Secretary
January , 1995
52
<PAGE>
KPMG PEAT MARWICK LLP
One Biscayne Tower Telephone 305 358 2300 Telefax 305 577 0544
Suite 2900
2 South Biscayne Boulevard
Miami, FL 33131
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Ross White Enterprises, Inc.:
We have audited the accompanying balance sheets of Ross White Enterprises, Inc.
(d/b/a National Computer Distributors) as of March 31, 1994 and 1993, and the
related statements of operations, stockholders' equity (deficit) and cash flows
for each of the years in the two-year period ended March 31, 1994. In connection
with our audits of the financial statements, we also have audited the financial
statement schedule. These financial statements and financial statement schedule
are the responsibility of the Company' s management. Our responsibility is to
express an opinion on these financial statements and financial statement
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Ross White Enterprises, Inc.
(d/b/a National Computer Distributors) as of March 31, 1994 and 1993, and the
results of its operations and its cash flows for each of the years in the two-
year period ended March 31, 1994 in conformity with generally accepted
accounting principles. Also in our opinion, the related financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, present fairly, in all material respects, the information set forth
therein.
KPMG Peat Marwick LLP
July 21, 1994, except as to notes 7,
8, 11(b) and 1l(c) which are as of
September 27, 1994
F-1
<PAGE>
COOPERS COOPERS & LYBRAND L.L.P.
&LYBRAND
a professional services firm
REPORT OF INDEPENDENT ACCOUNTANTS
The Board of Directors
Ross White Enterprises, Inc.
We have audited the accompanying statements of operations, stockholders' equity
(deficit) and cash flows of Ross White Enterprises, Inc. (d/b/a National
Computer Distributors) for the year ended December 31, 1991. In connection with
our audit of the financial statements, we have also audited the financial
statement schedules listed in the index on page S-1 of this Form S-4. These
financial statements and financial statement schedules are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and financial statement schedules based on our audit.
We conduced our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the results of the operations and the cash flows of Ross
White Enterprise, Inc. (d/b/a National Computer Distributors) for the year ended
December 31, 1991 in conformity with generally accepted accounting principles.
In addition, in our opinion, the financial statement schedules referred to
above, when considered in relation to the basic financial statements taken as a
whole, present fairly, in all material respects, the information required to be
included therein.
COOPERS & LYBRAND L.L.P.
Miami, Florida
February 5, 1992
F-2
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
BALANCE SHEETS
March 31, 1994 and 1993
<TABLE>
<CAPTION>
Assets 1994 1993
------ ----------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 112,040 $ 26,051
Trade accounts receivable, net of
allowance for doubtful accounts of
$525,000 and $362,374 as of March 31,
1994 and 1993, respectively 20,095,152 9,004,041
Inventory, net 27,845,858 15,774,300
Notes receivable from stockholders,
current portion 66,630 43,750
Prepaid expenses 323,976 650,274
Income tax receivable 108,000 82,818
Other receivables 1,551,806 862,876
Deferred income taxes 115,000 115,000
----------- -----------
Total current assets 50,218,462 26,559,110
Property and equipment, net 707,526 467,186
Notes receivable from stockholders,
excluding current portion 430,858 507,208
Other assets 262,973 391,520
Costs in excess of net assets acquired,
net of accumulated amortization of
$18,280 and $16,406 as of March 31,
1994 and 1993, respectively 56,720 58,594
----------- -----------
$51,676,539 $27,983,618
=========== ===========
Liabilities and Stockholders' Equity (Deficit)
- ----------------------------------------------
Current liabilities:
Accounts payable $21,569,708 $12,959,557
Bank overdrafts 7,294,232 971,711
Revolving credit agreement--current - 11,481,323
Accrued expenses 1,302,121 510,632
Obligations under capital leases,
current portion - 15,703
----------- -----------
Total current liabilities 30,166,061 25,938,926
Revolving credit agreement 18,762,663 -
Subordinated notes payable 2,687,366 2,591,187
Deferred rent 49,256 48,872
Obligations under capital leases - 23,555
----------- -----------
Total liabilities 51,665,346 28,602,540
Commitments and contingencies
Stockholders' equity (deficit):
Class A common stock, $.01 par value.
Authorized 10,000 shares; issued
and outstanding 183.67 shares 2 2
Class B common stock, $.05 par value.
Authorized 10,000 shares; no shares
issued and outstanding - -
Additional paid-in capital 1,841,700 1,841,700
Accumulated deficit (1,830,509) (2,460,624)
----------- -----------
Total stockholders' equity (deficit) 11,193 (618,922)
----------- -----------
$51,676,539 $27,983,618
=========== ===========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
STATEMENTS OF OPERATIONS
For the years ended March 31, 1994 and 1993, the three months ended
March 31, 1992 (unaudited) and the year ended December 31, 1991
<TABLE>
<CAPTION>
Year Year Three months Year
ended ended ended ended
March 31, March 31, March 31, December 31,
1994 1993 1992 1991
------------ ----------- ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Net sales $196,512,724 113,306,494 15,256,245 40,504,518
Cost of goods sold 181,870,822 107,449,045 14,055,803 36,176,457
------------ ----------- ---------- ----------
Gross profit 14,641,902 5,857,449 1,200,442 4,328,061
Selling, general and administrative expenses 11.297,683 6,700,869 1,081,704 3,595,856
Provision for doubtful accounts 911,545 637,275 - 115,264
------------ ----------- ------------ -----------
Operating profit (loss) 2,432,674 (1,480,695) 118,738 616,941
Other income (expense):
Interest expense (1,805,714) (1,255,652) (67,933) (307,530)
Interest income 3,155 - - -
------------ ----------- ------------ -----------
Income (loss) before income taxes 630,115 (2,736,347) 50,805 309,411
Income tax benefit - 275,723 - -
------------ ----------- ------------ -----------
Net income (loss) $ 630,115 (2,460,624) 50,805 309,411
============ =========== ============ ===========
Net income (loss) per common and common
equivalent share:
Primary $ 3,430 (13,395) 423 3,094
============ =========== ============ ===========
Fully diluted $ 2,859 (13,395) 423 3,094
============ =========== ============ ===========
Weighted average number of common and common
equivalent shares outstanding:
Primary 183.7 183.7 120.2 100
============ =========== ============ ===========
Fully diluted 220.4 220.2 120.2 100
============ =========== ============ ===========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
For the years ended March 31, 1994 and 1993,
the three months ended March 31, 1992 (unaudited)
and the year ended December 31, 1991
<TABLE>
<CAPTION>
Class A Class B Retained Total
Common stock Common stock Common stock Additional earnings Treasury stockholders'
------------- ------------- ------------ paid-in (Accumulated stock equity
Shares Amount Shares Amount Shares Amount capital deficit) (at cost) (deficit)
------ ------ ------ ------ ------ ------ ---------- ------------ --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at
December 31, 1990 100 $ 100 - $ - - $ - 9,900 539,853 (50,000) 499,853
Distributions to
shareholders - - - - - - - (111,907) - (111,907)
Net income - - - - - - - 309,411 - 309,411
--- --- ------ -- --- --- --------- --------- ------ ---------
Balance at
December 31, 1991 100 100 - - - - 9,900 737,357 (50,000) 697,357
Retirement of common
stock (unaudited) (100) (100) - - - (49,900) - 50,000 -
Issuance of common
stock A (unaudited) - - 183.67 2 - - 878,708 - - 878,710
Termination of S
corporation status
(unaudited) - - - - - - 743,162 (743,162) - -
Distributions to
shareholders (unaudited) - - - - - - - (45,000) - (45,000)
Net income (unaudited) - - - - - - - 50,805 - 50,805
--- --- ------ -- --- --- --------- --------- ------ ---------
Balance at March 31, 1992
(unaudited) - - 183.67 2 - - 1,581,870 - - 1,581,872
Net loss - - - - - - - (2,460,624) - (2,460,624)
Issuance of stock
purchase warrants, net - - - - - - 259,830 - - 259,830
--- --- ------ -- --- --- --------- --------- ------ ---------
Balance at March 31, 1993 - - 183.67 2 - - 1,841,700 (2,460,624) - (618,922)
Net income - - - - - - - 630,115 - 630,115
--- --- ------ -- --- --- --------- --------- ------ ---------
Balance at March 31, 1994 - $ - 183.67 $ 2 - $ - 1,841,700 (1,830,509) - 11,193
=== === ====== == === === ========= ========= ====== =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
STATEMENTS OF CASH FLOWS
For the years ended March 31, 1994 and 1993, the three months ended
March 31, 1992 (unaudited) and the year ended December 31, 1991
<TABLE>
<CAPTION>
Three months
Year ended Year ended ended Year ended
March 31, March 31, March 31, December 31,
1994 1993 1992 1991
------------ ---------- ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 630,115 (2,460,624) 50,805 309,411
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization 492,317 221,256 30,469 131,734
Provision for bad debts 911,545 637,275 - 115,264
Provision for inventory obsolescence 500,000 30,000 - -
Deferred tax asset (115,000) (115,000) - -
Gain on disposal of property and equipment (4,784) - - -
Changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable (12,002,656) (7,902,648) 270,830 (510,141)
(Increase) decrease in inventory (12,571,558) (10,604,025) 435,610 (1,735,511)
(Increase) decrease in prepaid expenses 147,488 (324,064) (132,541) 22,263
(Increase) decrease in income tax receivable 89,818 (82,818) - -
(Increase) decrease in other receivables (688,930) 765,860 (301,070) -
(Increase) decrease in other assets 128,547 (284,471) (5,221) 74,774
Increase in accounts payable 8,610,151 6,795,423 232,661 2,999,293
Increase (decrease) in accrued expenses 825,203 (1,755,285) 1,950,384 20,304
Increase (decrease) in customer deposits - - (109,000) 26,316
Increase (decrease) in deferred rent 384 (30,994) (7,748) 34,537
------------ ----------- ----------- ----------
Net cash (used in) provided by operating
activities (13,047,360) (15,110,115) 2,415,179 1,488,244
------------ ----------- ----------- ----------
Cash flows from investing activities:
Purchase of property and equipment (458,194) (301,976) (4,391) (144,891)
Proceeds from disposal of property and equipment 4,500 - - 6,066
Issuance of notes receivable from stockholders - - (93,508) (27,829)
Proceeds from notes receivable from stockholders 22,440 6,250 - -
------------ ----------- ----------- ----------
Net cash used in investing activities (431,254) (295,726) (97,899) (166,654)
Cash flows from financing activities:
Payments on obligations under capital leases (39,258) (34,329) (7,849) (28,256)
Net borrowing under revolving credit agreement 7,281,340 11,460,713 - -
Principal payments on note payable - - (11,227) (10,740)
Increase in bank overdrafts 6,322,521 971,711 - -
Issuance of Class A common stock - - 1,000,000 -
Issuance of subordinated notes, net - 2,509,806 - -
Issuance of stock warrants - 259,830 - -
Payments under floor plan credit arrangement - - (3,600,000) (830,285)
Distribution to shareholders - - (45,000) (111,907)
------------ ----------- ----------- ----------
Net cash (used in) provided by financing
activities 13,564,603 15,167,731 (2,664,076) (981,188)
------------ ----------- ----------- ----------
</TABLE>
(Continued)
F-6
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
STATEMENTS OF CASH FLOWS, CONTINUED
<TABLE>
<CAPTION>
Three months
Year ended Year ended ended Year ended
March 31, March 31, March 31, December 31,
1994 1993 1992 1991
---------- --------- ------------ ------------
(unaudited)
<S> <C> <C> <C> <C>
Net increase (decrease) in cash 85,989 (238,110) (346,796) 340,402
Cash and cash equivalents at beginning of year 26,051 264,161 610,957 270,555
---------- -------- -------- -------
Cash and cash equivalents at end of year $ 112,040 26,051 264,161 610,957
========== ======== ======== =======
Supplemental disclosure:
Interest paid $1,647,465 997,564 37,115 287,805
========== ======== ======== =======
Income taxes paid $ 133,000 125,400 - -
========== ======= ======== =======
</TABLE>
Supplemental disclosure of noncash investing activity: During fiscal 1993, the
Company recorded the notes receivable from stockholders at their present value,
resulting in a discount in the amount of $178,304. Amortization expense related
to the discount for the year ended March 31, 1994 and 1993, amounted to $2,684
and $-0-, respectively. In addition, $33,714 in management incentive bonuses,
included in accrued expenses, were applied against the notes receivable from
stockholders for the year ended March 31, 1994.
See accompanying notes to financial statements.
F-7
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
March 31, 1994 and 1993
(1) ORGANIZATION
Ross White Enterprises, Inc. (d/b/a National Computer Distributors) (the
"Company") is a retailer, wholesaler and distributor of computers,
peripherals and related accessories. The Company conducts its retail
operation under the name of Computer Image. All other operations are
conducted using the name National Computer Distributors.
(2) RESTATEMENT
The accompanying financial statements as of, and for the year ended March
31, 1993, have been restated. During fiscal 1994, the Company discovered it
had not recorded liabilities associated with the purchase of inventories
received prior to March 31, 1993; had not reversed certain vendor
receivable accounts after settlement; and had not recorded various
transactions with vendors in which purchases were netted against amounts
due to the Company. The result of the Company' s analysis, as verified by
the Company's independent accountants, was to record in fiscal 1993 an
adjustment to cost of goods sold in the amount of $2,747,803.
(3) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) CASH AND CASH EQUIVALENTS
The Company considers all highly liquid investments with original
maturities of three months or less at the time of purchase to be cash
equivalents. Cash equivalents totaled $30,000 and $-0- at March 31,
1994 and 1993, respectively, and are recorded at cost which
approximates market value.
(b) CASH MANAGEMENT SYSTEM
Under the Company' s cash management system, disbursements cleared by
the bank are reimbursed on a daily basis from the revolving credit
agreement. As a result, checks issued but not yet presented to the
bank are not considered reductions of cash or accounts payable.
Included in bank overdrafts is $7,186,558 and $964,301 at March 31,
1994 and 1993, respectively, for which checks are outstanding. Cash
receipts deposited into an agency account as part of the bank' s
revolving credit agreement are used to reduce the outstanding
borrowings under the revolving credit agreement. As a result, cash
received but unapplied against the outstanding borrowings are not
considered to be cash deposits. Deducted from the outstanding
borrowings under the revolving credit agreement is $2,373,006 and
$325,053 at March 31, 1994 and 1993, respectively, for unapplied cash
receipts.
(c) TRADE ACCOUNTS AND OTHER RECEIVABLES
Trade receivables consist primarily of amounts due from customers for
credit purchases. The Company provides a reserve for uncollectible
trade receivables. Other receivables consist of cooperative
advertising and other amounts earned based on annual promotional and
market development fund agreements with vendors. In general,
F-8
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
vendors provide the Company with various incentive programs. The funds
received under these programs are determined based upon the Company's
purchases or sales of the vendors' products and/or the inclusion of
the vendors' products in the Company's advertising and promotional
programs. Once earned, the funds are applied against product cost or
recorded as a reduction of advertising expense.
(d) INVENTORY
Inventory, which consists primarily of computer equipment and related
products, is stated at the lower of cost or market. Cost is determined
using the first-in, first-out (HFO) method, and is recorded net of
volume and purchase discounts and rebates. Market is based on net
realizable value. Appropriate consideration is given to deteriora-
lion, obsolescence and other factors in evaluating net realizable
value.
Effective April 1, 1993, the Company changed its accounting policy to
include in inventory certain indirect costs associated with
purchasing, handling and storage of inventories. The Company believes
this method better matches sales with these related costs. Previously,
the Company had expensed these costs as incurred. For the year ended
March 31, 1994, allocated purchasing, handling and storage costs
amounts to $742,457, with $101,177 of this amount capitalized in
inventory at March 31, 1994.
(e) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is provided on
the straight-line method over the estimated useful lives of the
assets, using a standard life of five years. Leasehold improvements
are amortized on the straight-line method over the shorter of the
estimated useful lives of the improvements or the term of the related
leases. Gains or losses on disposition of property and equipment are
credited or charged to income.
(f) COSTS IN EXCESS OF NET ASSETS ACQUIRED
The costs of acquisitions in excess of the fair market value of net
assets acquired is being amortized over a 40-year period using the
straight-line method. Amortization expense amounted to $1,875, $1,875,
$469 and $1,875 for the years ended March 31, 1994 and 1993, the three
months ended March 31, 1992 (unaudited) and the year ended December
31, 1991, respectively.
(g) INCOME TAXES
Effective March 31, 1992, the Company was required to change its tax
status from an S corporation to a C corporation. Accordingly,
undistributed earnings on the date the sub-chapter S election was
terminated were reclassified to additional paid-in capital.
Effective April 1, 1992, the Company adopted the provisions of
Financial Accounting Standards Board's SFAS No. 109, Accounting for
Income Taxes. Under the asset and liability method of SFAS No. 109,
deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax basis.
F-9
<PAGE>
ROSS WH1TE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. Under
SFAS No. 109, the effect on deferred tax assets and liabilities of a
change in tax rates is recognized in income in the period that
includes the enactment date. The adoption of SFAS No. 109 by the
Company had a cumulative effect of $13,700 on income (loss) from
operations for the year ended March 31, 1993.
(h) EMPLOYEE BENEFIT PLANS
Effective July 1989, as amended, the Company established a 401(k)
Profit Sharing Plan (the "Plan"). All employees who have completed at
least 12 months of service and attained the age of 21 are eligible.
The Plan allows vesting at 20 percent per year for five years,
beginning after the employees' second year of service. The Plan allows
employees to contribute between 2 percent and 15 percent of their
gross annual taxable salary. In fiscal year 1993, the Company made
matching contributions of 50 percent of that portion of the employee's
amount which did not exceed 10 percent of the employee's gross income.
Effective October 1, 1993, the Company can make a discretionary
matching and profit sharing contribution to the Plan subject to the
approval of the board of directors. The Plan is subject to restriction
on matching contributions for highly compensated employees. Total
employer contributions to the Plan were approximately $61,000,
$64,000, $7,000 and $19,000 during the years ended March 31, 1994 and
1993, the three months ended March 31, 1992 (unaudited) and the year
ended December 31, 1991, respectively.
(i) BUSINESS AND CREDIT CONCENTRATIONS
The Company sells its products primarily to value-added resellers,
dealers and computer retailers throughout the United States and
international markets. No single customer accounted for a significant
amount of the Company's sales, and there were no significant trade
accounts receivable from a single customer. The Company performs
ongoing credit evaluations of its customers and generally does not
require collateral. However, if deemed necessary, the Company may
require certain customers to pay on a cash-on-delivery basis. The
Company maintains reserves for potential credit losses.
Approximately $89.3 million or 45 percent, $73.8 million or 65
percent, $11.2 million or 73 percent and $28 million or 75 percent of
the Company's net sales during the years ended March 31, 1994 and
1993, the three months ended March 31, 1992 (unaudited) and the year
ended December 31, 1991, respectively, were derived from products
supplied by three to four vendors, each supplying 10 percent or
greater of net sales.
(j) INCOME (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE
Primary income (loss) per common and common equivalent share is
computed by dividing net income (loss) by the weighted average number
of common shares outstanding and common stock equivalents. Fully
diluted income (loss) per share has been computed based on the
assumption that the warrants, as discussed in note 8, will be
converted to common stock.
F-10
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
(k) RECLASSIFICATION
Certain amounts included in the financial statements have been
reclassified in order to provide consistent financial presentation.
(4) NOTES RECEIVABLE FROM STOCKHOLDERS
Notes receivable from stockholders consist of the following:
March 31,
------------------
1994 1993
---- ----
Unsecured notes from two stockholders/officers $ 497,488 550,958
Less current portion (66,630) (43,750)
------- -------
Long-term receivable, excluding current portion $ 430,858 507,208
======= =======
The notes receivable from two stockholders/officers are noninterest
bearing. The notes have been recorded at their present value utilizing an
imputed interest rate of 6.34 percent, resulting in an original discount of
$178,304 which will be recognized as interest income over the remaining
terms of the notes. During the years ended March 31, 1994 and 1993, $2,782
and $-0-, respectively, was recognized as interest income, with the
remaining unaccreted balance of $175,523 and $178,304 (included in other
receivables) at March 31, 1994 and 1993, respectively. The notes are
payable in the following quarterly installments, including principal and
interest: (i) $18,750 per quarter commencing June 30, 1994; (ii) $25,000
per quarter commencing June 30, 1995, (iii) and a lump sum payment of
$123,012 due on March 31, 2000. Principal payments are due as follows:
<TABLE>
<CAPTION>
Year ending
March 31, Amount
--------- ------
<S> <C>
1995 $ 66,63O
1996 83,39O
1997 78,280
1998 73,484
1999 68,980
Thereafter 126,724
-------
Total $ 497,488
=======
</TABLE>
F-11
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
(5) OTHER RECEIVABLES
Other receivables are primarily comprised of receivables due from vendors
consisting of the following:
<TABLE>
<CAPTION>
March 31,
---------------------
1994 1993
---- ----
<S> <C> <C>
Due from vendors:
Co-op $ 1,224,210 540,684
Returned merchandise 826,694 762,229
Volume rebates and price protection 2,558,142 307,725
--------- ---------
Subtotal 4,609,046 1,610,638
Other 327,596 322,192
Less amounts offset against accounts payable (3,384,836) (1,069,954)
--------- ---------
Other receivables $ 1,551,806 862,876
========= =========
</TABLE>
(6) PROPERTY AND EQUIPMENT, NET
Property and equipment, net consists of the following:
<TABLE>
<CAPTION>
March 31,
---------------------
1994 1993
---- ----
<S> <C> <C>
Machinery and equipment $ 615,575 574,681
Furniture and fixtures 269,895 -
Leasehold improvements 446,786 401,564
Transportation vehicles 61,667 61,667
--------- ---------
1,393,923 1,037,912
Less accumulated depreciation and
amortization (686,397) (570,726)
--------- ---------
Property and equipment, net $ 707,526 467,186
========= =========
</TABLE>
Depreciation and amortization expense amounted to approximately $218,000,
$138,000, $3,000 and $130,000 during the years ended March 31, 1994 and
1993, the three months ended March 31, 1992 (unaudited) and the year ended
December 31, 1991, respectively.
(7) REVOLVING CREDIT AGREEMENT
On April 27, 1992, as amended, the Company entered into a revolving line of
credit agreement ("revolver") with a bank that originally provided for
borrowings up to a maximum of $22.5 million through April 30, 1994, limited
to specified percentages of eligible accounts receivable and inventory,
with interest at prime plus 1.5 percent, payable on a monthly basis.
Borrowings under the revolving credit agreement are collateralized by the
Company's trade account receivable, inventories, property and equipment,
and general intangibles.
F-12
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
The revolver contains various affirmative and negative covenants, including
requiring the Company to maintain certain specified financial ratios,
including (a) ratio of earnings before taxes to interest; (b) total
liabilities less subordinated debt to total capitalization; (c) total bank
debt to total capitalization, and (d) maintain a minimum level of
capitalization. There are also restrictive covenants including those
covering the amount of dividends and lease obligations, the occurrence of
additional debt, and the amount of capital expenditures and acquisitions.
At March 31, 1994 and 1993, respectively, the Company had an outstanding
balance under the revolver of $18,762,663 and $11,481,323, with an
available balance of $1,364,331 and $2,018,677. The revolver provides for
an early termination fee of 2 percent of the reduction or termination of
the maximum commitment and an annual fee of 3/8 percent of the difference
between the maximum loan commitment and the average daily balance.
Interest expense under the foregoing financing arrangement was $1,346,642
and $805,000 during the fiscal years ended March 31, 1994 and 1993,
respectively.
At March 31, 1994, the Company was not in compliance with the following
covenant requirements arising under the revolving credit agreement and
entered into negotiations with its bank to amend and reinstate the credit
agreement: (i) ratio of total liabilities less subordinated debt to total
capital funds, as defined; (ii) ratio of bank debt to total capital funds;
(iii) ratio of earnings before interest and taxes to interest expense, as
defined; (iv) accounts payable average turnover; (v) expenditures related
to lease payments and capital expenditures; (vi) providing audited
financial statements within 90 days of year-end; (vii) maintaining adequate
books and records; (viii) incurrence of trade debt not more than 60 days
past due, and (ix) maintaining minimum total capital funds. On September 8,
1994, the Company received waivers from its bank which cured all violations
of debt covenants through August 11, 1994.
On August 11, 1994 and September 8, 1994, amendments to the revolving
credit agreement were executed. The amendments modified the financial
covenants relating to the (i) ratio of earnings before interest and taxes
to interest expense, as defined, to be not less than 1.75 to 1 as of the
last day of each quarter, and not less than 1 to 1 as of the last day of
each month other than the last day of each quarter; (ii) increased the
dollar limit on capital expenditures to $500,000 annually; (iii) limited
the aggregate lease payments for real or personal property to $1.75 million
per year; and (iv) required the Company to maintain total capital funds,
which is defined as total assets (excluding certain intangible assets and
shareholder loans) less total liabilities (excluding subordinated notes),
of not less than the amounts set forth below for the periods specified
plus, on a cumulative basis, an additional $250,000 for each quarter ending
after October 31, 1994:
Period Amount
------ ------
June 30, 1994 - September 29, 1994 $ 2,700,000
September 30, 1994 - October 30, 1994 2,950,000
October 31, 1994 and thereafter 5,000,000
F-13
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
In connection with the total capital funds covenant, the Company received a
representation from the majority stockholder to invest up to $1.5 million
in the Company by October 31, 1994 [see note 11(b) and 1l(c)].
In addition, the amended revolving credit agreement modified (i) the
interest rate to prime plus an applicable margin of either 1.5 percent or 3
percent, which is based on the Company' s ratio of total liabilities less
subordinated notes to total capital funds as determined the last day of
each month beginning August 31, 1994, and (ii) increased the early
termination fee to 3 percent of the maximum commitment. The maturity date
of the revolving credit agreement was extended through December 31, 1995.
(8) SUBORDINATED NOTES
On April 3, 1992, the Company issued 12 percent subordinated notes with
detachable stock purchase warrants with an aggregate principal amount of $3
million. Principal is to be paid in seven quarterly installments of
$250,000 commencing on June 30, 1995 with a final installment of $1.25
million due on March 31, 1997, with interest quarterly commencing on June
30, 1992. Interest expense on the subordinated notes was $360,000 and
$357,000 during the fiscal years ended March 31, 1994 and 1993,
respectively.
The detachable subordinated notes contain various affirmative and negative
covenants, including those covering the use of proceeds, the incurrence of
additional debt, the payment of dividends, the amount of capital
expenditures, and those requiring the Company to maintain certain specified
financial ratios. The Company failed to meet the following covenant
requirements which placed the Company in technical default at March31,
1994: (i) providing the holders with monthly financial statements along
with the chief financial officer' s certificate; (ii) providing the holders
with audited financial statements within 90 days of year-end along with
chief financial officer's certificate; (iii) maintaining adequate books and
records; (iv) maintaining total capital funds, as defined; (v) maintaining
a ratio of total revolving credit agreement debt to total capital funds;
(vi) maintaining a ratio of total liabilities, excluding the subordinated
notes, to total capital funds; (vii) maintaining a ratio of net earnings
before interest and taxes to total interest expense; (viii) capital
expenditure restrictions; (ix)complying with its obligations under the
revolving credit agreement; (x) accounts payable turnover, and (xi)
computation of financial covenants in accordance with GAAP. On August 10,
1994 and September 8, 1994, the Company obtained waivers to its
subordinated notes related to the above noted financial covenants. These
waivers were retroactive to March 31, 1994.
On August 11, 1994 and September 8, 1994, the subordinated notes' financial
covenants were amended on the same terms as the revolving credit
agreement's financial covenants, as fully described in note 7.
The detachable warrants can be converted to 20 percent (36.7340 shares) of
the issued and outstanding Class A common stock for an aggregate purchase
price of $1.00. The warrants may be exercised after April 3, 1992 and
expire on March 31, 1997. The warrants were assigned a value of $259,830,
net of deferred taxes and issuance costs, and are included as a component
of additional paid-in capital. In conjunction with the recording of the
stock purchase warrants, the Company established a related imputed original
issue discount on the
F-14
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
subordinated notes which approximated the market yield on the subordinated
notes, without the stock purchase warrants. The Company is accreting the
discount using the effective yield method over the life of the subordinated
notes. Amortization expense, which is included in interest expense,
amounted to $96,179 and $81,383 during the fiscal years ended March 31,
1994 and 1993, respectively. In addition, there are deferred loan fees in
the amount of $127,735 and $125,796 included in other assets as of March
31, 1994 and 1993, respectively. Amortization expense, which is included in
selling, general and administrative expenses, amounted to $41,699 and
$45,245 during the fiscal years ended March 31, 1994 and 1993,
respectively.
On September 26, 1994, the Company entered into an Agreement and Plan of
Reorganization which provided for the repayment of the subordinated notes
and accrued unpaid interest thereon [(see note 1l(c)].
(9) INCOME TAXES
As of April 1, 1992, the date the Company was required to change its tax
status from an S corporation to a C corporation, the Company adopted SFAS
No. 109. The adoption of SFAS No. 109 had a cumulative effect of $13,700
for the year ended March 31, 1993.
Total income tax attributable to the recovery of detachable stock purchase
warrants, which resulted in a reduction in additional paid-in capital for
the tax effect associated with the issuance of stock warrants, amounted to
$191,176 for the year ended March 31, 1993.
The provision for income tax expense (benefit) consists of the following:
<TABLE>
<CAPTION>
March 31,
----------------
1994 1993
---- ----
<S> <C> <C>
Current:
Federal $ - (70,713)
State and local - (12,105)
---- --------
- (82,818)
Deferred:
Federal - (164,710)
State and local - (28,195)
---- --------
- (192,905)
---- --------
Total income tax
expense (benefit) $ - (275,723)
==== ========
</TABLE>
(Continued)
F-15
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
Income tax expense (benefit) from continuing operations differed from the amount
computed by applying the statutory federal income tax rate of 34 percent, to
income (loss) before income taxes as a result of the following:
<TABLE>
<CAPTION>
March 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Computed expense (benefit) $ 214,239 $(930,358)
Increase (decrease) resulting from:
Establishment of valuation allowance - 719,663
State tax benefit - (40,300)
Other - (24,728)
Income tax expense (benefit) associated
with net operating loss carryforward (214,239) -
--------- ---------
Income tax expense (benefit) $ - $(275,723)
========= =========
</TABLE>
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and deferred tax liabilities are presented below:
<TABLE>
<CAPTION>
March 31,
-------------------------
1994 1993
---- ----
<S> <C> <C>
Deferred tax asets:
Accounts receivable, principally due to allowance for
doubtful accounts $ 199,369 $ 81,879
Inventories, principally due to reserves for obsolete
inventory and additional costs inventoried for tax pur-
poses pursuant to the Tax Reform Act of 1986 188,000 12,822
Deferred rent, principally due to accrual for financial
reporting purposes 18,520 18,163
Accrued vacation expense, principally due to accrual for
financial reporting purposes 10,111 9,994
Property and equipment, principally due to differences in
depreciation 5,852 -
Net operating loss carryforwards, principally due to
correction of errors in the prior years 474,052 919,308
--------- ---------
Total gross deferred tax assets 895,904 1,042,166
Less valuation allowance (544,129) (719,663)
--------- ---------
Net deferred tax assets 351,775 322,503
--------- ---------
</TABLE>
(Continued)
F-16
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
March 31,
--------------------
1994 1993
--------- -------
<S> <C> <C>
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation $ - $ (5,135)
Prepaid expenses, principally due to referral
for financial reporting purposes (119,225) (50,435)
Subordinated notes, principally due to an
unamortized discount associated with the
issuance of detachable stock warrants (117,550) (151,933)
--------- ---------
Total gross deferred tax liabilities (236,775) (207,503)
--------- ---------
Net deferred tax asset $ 115,000 $ 115,000
========= =========
</TABLE>
At March 31, 1994, the Company had available net operating loss
carryforwards of $1.26 million for federal and state income tax purposes,
which expire in 2008. A valuation allowance attributable to the net
operating loss carryforward has been established as of March 31, 1994 and
1993 in the amount of $359,052 and $719,663, respectively. Upon a
subsequent acquisition Internal Revenue Code Section 382 could limit the
utilization of net operating loss carryforwards in future periods.
The valuation allowance for deferred tax assets as of March 31, 1994 and
1993 was $544,129 and $719,663, respectively, a decrease of $175,534. In
assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment.
(10) COMMITMENTS AND CONTINGENCIES
(a) LEASES
Substantially all of the Company's facilities, including distribution
centers and retail stores are leased under long-term leases accounted
for as operating leases. In addition, the Company leases office
equipment and vehicles. Under the terms of the leases, the Company is
required to maintain adequate insurance coverage.
The real estate leases generally contain provisions for increases
based on the Consumer Price Index, and contain options to renew at the
then fair rental value. Certain leases provide for scheduled rent
increases or for rent-free periods. In these cases, the Company
recognizes the aggregate rent expense on a straight-line basis over
the lives of the leases, including the rent-free period, resulting in
deferred rent credits of $49,256 and $48,872 as of March 31, 1994 and
1993, respectively, which are being amortized over the terms of the
related leases.
F-17
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
Future minimum annual rental payments required under operating leases that
have initial or remaining noncancelable lease terms in excess of one year
as of March 3l, 1994 are as follows:
<TABLE>
<CAPTION>
Year ended Amount
---------- -----------
<S> <C>
1995 $1,375,700
1996 1,208,805
1997 1,159,965
1998 730,472
1999 177,630
----------
Total minimum lease
payments $4,652,572
==========
</TABLE>
Rent expense included in selling, general and administrative expenses
amounted to approximately $959,000, $725,000, $136,000 and $531,000 for the
years ended March 31, 1994 and 1993, the three months ended March 31, 1992
(unaudited) and the year ended December 31, 1991, respectively.
(b) LEGAL MATTERS
The Company is subject to claims and legal actions that arise in the
ordinary course of their business. Management believes that the ultimate
liability, if any, with respect to these claims and legal actions will not
have a material effect on the financial position or results of operations
of the Company.
(C) RELATED PARTY AGREEMENTS
In March 1992, the Company entered into two five-year consulting agreements
with a stockholder and a subordinated note holder, respectively, which
provides for an aggregate annual fee of $150,000 for services performed for
the Company.
In March 1992, the Company entered into employment agreements with two
stockholders/officers which expire in March 1997. The aggregate annual
average base compensation under such agreements is approximately $390,000.
The respective employment agreements provide such stockholders/officers
with the use of automobiles, full medical coverage, reimbursement for life
insurance policies, paid vacations, cash incentive bonuses, stock incentive
bonus, additional special equity (stock) incentive and substantial
severance pay if the Company terminates the stockholders/officers without
cause. In addition, 25 percent of the incentive bonuses are applied against
the notes receivable from stockholders (see note 4).
F-18
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(d/b/a National Computer Distributors)
NOTES TO FINANCIAL STATEMENTS
(11) SUBSEQUENT EVENTS
(a) EQUITY INFUSION
On June 30, 1994, the Company sold an aggregate of 11.54 shares of
Class A common stock, $.01 par value per share, for an aggregate
consideration of $351,958 to various members of management of the
Company.
(b) MAJORITY STOCKHOLDER'S FINANCING ARRANGEMENT
On September 2, 1994, the Company received a representation from the
majority stockholder that they are prepared to provide, and will
provide the Company with additional subordinated indebtedness and/or
capital contributions in the aggregate amount up to $1.5 million,
which amount should be sufficient to enable the Company to meet, as of
October 31, 1994, the financial covenants as described in notes 7 and
8. On September 26, 1994, the Company entered into an Agreement and
Plan of Reorganization which may modify the majority stockholder's
financing arrangement [(see note 11(c)].
(c) MERGER WITH AMERIQUEST TECHNOLOGIES, INC.
On September 26, 1994, the Company entered into an Agreement and Plan
of Reorganization with AmeriQuest Technologies, Inc. ("AmeriQuest"), a
publicly held company, for the acquisition of the Company by
AmeriQuest pursuant to a merger of the Company into a wholly-owned
subsidiary of AmeriQuest. In connection with the merger, the Company's
common stock and warrants will be exchanged for approximately 1.86
million newly issued shares of AmeriQuest common stock, $3.5 million
in cash, and the purchase by AmeriQuest of the subordinated notes at
face value plus accrued unpaid interest thereon (see note 8). The
merger is subject to the approval of the bank (as defined in note 7)
and any United States federal or state governmental commission, board
or other regulatory body which are required for the consummation of
the merger on or before October 14, 1994 (the "effective date").
In addition, AmeriQuest shall infuse at least $1.5 million into the
Company and shall provide to the majority stockholder a written
conformation that from and after the effective date of the merger, the
majority stockholder would have no further obligation to provide debt
or equity financing to the Company [see note 1l(b)].
F-19
<PAGE>
APPENDIX I
PLAN OF MERGER
MERGING
RI ACQUISITION, INC.
(A PENNSYLVANIA CORPORATION)
AND
WITH AND INTO
ROBEC, INC.
(A PENNSYLVANIA CORPORATION)
RECITALS
A. RI ACQUISITION, INC. (the "Merging Corporation") is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, which is authorized to issue 10,000,000 shares of
Common Stock, par value $.01 per share ("Newco Common Stock"), of which
4,439,180 shares are issued and outstanding, all of which are owned of record
and beneficially by AmeriQuest Technologies, Inc., a Delaware corporation
("AmeriQuest").
B. ROBEC, INC. (the "Surviving Corporation") is a corporation duly organized
and validly existing under the laws of the Commonwealth of Pennsylvania, which
is authorized to issue 10,000,000 shares of Common Stock, par value $.01 per
share, ("Robec Common Stock"), of which 4,439,180 shares are issued and
outstanding and 5,000,000 shares of Preferred Stock, par value $.01 per share,
of which no shares are issued and outstanding.
C. The Board of Directors of the Merging Corporation has adopted resolutions
approving this Plan of Merger in accordance with the Pennsylvania Business
Corporation Law ("BCL"), and directing that it be submitted to the sole
shareholder of the Merging Corporation for adoption.
D. The Board of Directors of the Surviving Corporation has adopted
resolutions approving this Plan of Merger in accordance with the BCL and
directing that it be submitted to the shareholders of the Surviving Corporation
for adoption.
ARTICLE I
THE MERGER
1.1 The Merger. The Merging Corporation and the Surviving Corporation shall
effect a merger (the "Merger") in accordance with and subject to the terms and
conditions of this Plan of Merger (the "Plan"). On the Effective Date (as such
term is defined in Section 1.2 hereof), the Merging Corporation shall be merged
with and into the Surviving Corporation, and the separate existence of the
Merging Corporation, except insofar as it may be continued by law, shall cease,
all with the effect provided in Section 1929 of the BCL.
1.2 Effective Date. Articles of Merger, and such other documents and
instruments as are required by, and complying in all respects with, the BCL
shall be delivered to the Department of State of the Commonwealth of
Pennsylvania. The Merger shall become effective upon the filing of the Articles
of Merger with the Department of State of the Commonwealth of Pennsylvania (the
"Effective Date").
1.3 Further Assurances. If at any time the Surviving Corporation, or its
successors or assigns, shall consider or be advised that any further
assignments or assurances in law or any other acts are necessary or desirable
to (a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its rights, title or interest in, to or under any of the rights,
properties or assets of the Merging Corporation acquired or to be
I-1
<PAGE>
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger, or (b) otherwise carry out the purposes of this Plan, the Merging
Corporation and its proper officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to
execute and deliver all such proper deeds, assignments and assurances in law
and to do all acts necessary or proper to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation
and otherwise to carry out the purposes of this Plan; and the proper officers
and directors of the Surviving Corporation are fully authorized in the name of
the Merging Corporation or otherwise to take any and all such action.
1.4 Amendment or Termination. Notwithstanding shareholder approval of this
Plan, this Plan may be amended or terminated at any time on or before the
Effective Date by agreement of the Boards of Directors of the Merging
Corporation and the Surviving Corporation or terminated by the Surviving
Corporation if the Merger does not occur prior to December 31, 1994, provided
that no amendment may be made which decreases the amount of Merger
Consideration (as such term is defined in Section 3.1 hereof) payable to
holders of Robec Common Stock.
ARTICLE II
CAPITAL STOCK
2.1 Newco Common Stock. At the Effective Date, the number of outstanding
shares of Newco Common Stock shall be identical to the number of outstanding
shares of Robec Common Stock, and each share of Newco Common Stock then issued
and outstanding shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into one share of the Common Stock of
the Surviving Corporation.
2.2 Robec Common Stock. At the Effective Date, except for shares of Robec
Common Stock owned by AmeriQuest and for shares of Robec Common Stock held by
holders of Dissenting Shares (as such term is defined in Section 2.5), each
share of Robec Common Stock then issued and outstanding shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into .63075 (the "Applicable Fraction") of a validly issued, fully paid and
nonassessable share of AmeriQuest Common Stock; provided, however, that in the
event the closing price of AmeriQuest Common Stock on the New York Stock
Exchange on the business day prior to the Effective Date, as reported in the
Wall Street Journal (the "Closing Date Market Price") is less than $3.00 per
share, the Applicable Fraction shall be equal to the product of (i) .63075
multiplied by (ii) a quotient the numerator of which is $3.00 and the
denominator of which is the Closing Date Market Price. Shares of Robec Common
Stock held by AmeriQuest on the Effective Date shall be canceled in the Merger.
2.3 Fractional Shares. No fractional shares of AmeriQuest Common Stock will
be issued in connection with the Merger, but in lieu thereof each holder of
Robec Common Stock who would otherwise be entitled to receive a fraction of a
share of AmeriQuest Common Stock will receive an amount of cash equal to the
Closing Date Market Price of AmeriQuest Common Stock multiplied by the fraction
of a share of AmeriQuest Common Stock to which such holder would otherwise be
entitled, without any interest thereon.
2.4 No Further Rights or Transfers. On and after the Effective Date, the
holder of a Certificate (as such term is defined in Section 3.3 hereof)
representing Robec Common Stock shall cease to have any rights as a shareholder
of Robec, except for the right to surrender his or her Certificate in exchange
for payment of the Merger Consideration.
2.5 Dissenting Shares. Notwithstanding anything herein to the contrary,
shares of Robec Common Stock that are outstanding immediately prior to the
Effective Date and that are held by shareholders, if any, who are entitled to
assert a right to dissent from the Merger and who demand and validly perfect
their rights to receive the "fair value" of their shares with respect to the
Merger under Section 1574 of the BCL (the "Dissenting Shares") shall be
entitled solely to the payment of the "fair value" of such shares in accordance
I-2
<PAGE>
with the provisions of the BCL; except that (i) if such demand to receive "fair
value" shall be withdrawn upon the consent of the Surviving Corporation, (ii)
if this Plan of Merger shall be terminated, or the Merger shall not be
consummated, (iii) if no demand or petition for the determination of "fair
value" by a court shall have been made or filed within the time provided in the
provisions of the BCL or (iv) if a court of competent jurisdiction shall
determine that such holder of Dissenting Shares is not entitled to the relief
provided by the provisions of the BCL, then the right of such holder of
Dissenting Shares to be paid the "fair value" of his shares of Robec Common
Stock shall cease and with respect to clauses (i), (iii) and (iv) above, such
Dissenting Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Date, the right to receive
the Merger Consideration with respect thereto, without any interest thereon,
and with respect to clause (ii) above, the status of such shareholder shall be
restored retroactively without prejudice to any corporate proceeding which may
have been taken during the interim.
ARTICLE III
MERGER PAYMENT PROCEDURE
3.1 Merger Consideration. The certificates which represent shares of
AmeriQuest Common Stock to be issued in accordance with this Agreement to
holders of Robec Common Stock, excluding the holders of Dissenting Shares,
together with any dividends or distributions with respect thereto, and any cash
required in payment of fractional shares pursuant to Section 2.3 hereof, hereby
collectively constitute the "Merger Consideration."
3.2 Exchange Agent. AmeriQuest shall deposit the Merger Consideration with
American Stock Transfer and Trust Company or such other transfer agent as may
be mutually acceptable to both AmeriQuest and Robec (the "Exchange Agent") for
the benefit of holders of Robec Common Stock, promptly after the Effective
Date.
3.3 Transmittal Letter. As soon as practicable after the Effective Date, the
Exchange Agent shall send a notice and transmittal form to each holder of
record of a certificate or certificates theretofore evidencing shares of Robec
Common Stock (such certificates are collectively referred to herein as the
"Certificates"), advising such holder of the effectiveness of the Merger and
the procedure for surrendering to the Exchange Agent such Certificates for
exchange into the Merger Consideration. Upon the surrender of a Certificate to
the Exchange Agent together with and in accordance with such transmittal form,
the holder thereof shall be entitled to receive in exchange therefor the Merger
Consideration payable in respect of each share of Robec Common Stock
represented thereby. Upon such surrender, the Exchange Agent will promptly pay
the Merger Consideration. Each such Certificate shall be deemed for all
purposes to evidence only the right to receive the Merger Consideration.
3.4 Delivery To Person Other Than Registered Holder. If the Merger
Consideration (or any portion thereof) is to be delivered to a person other
than the person in whose name the Certificates surrendered in exchange therefor
are registered, it shall be a condition to the delivery of the Merger
Consideration that the Certificates so surrendered shall be properly endorsed
or accompanied by appropriate stock powers and otherwise be in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay to the Exchange Agent any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of the Exchange Agent
that such taxes have been paid or are not required to be paid.
3.5 Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, the owner of such lost, stolen or destroyed Certificate shall
deliver to the Surviving Corporation a bond in such sum as the Surviving
Corporation may direct as indemnity against any claim that may be made against
the Surviving Corporation with respect to the Certificate alleged to have been
lost, stolen or destroyed.
I-3
<PAGE>
ARTICLE IV
SURVIVING PROVISIONS
4.1 Articles of Incorporation and Bylaws. The Articles of Incorporation of
the Merging Corporation shall survive and be the Articles of Incorporation of
the Surviving Corporation, except that Article I shall be amended to provide
that the name of the Surviving Corporation shall be "AmeriQuest/Robec, Inc."
until thereafter amended in accordance with the provisions therein and as
provided by the BCL. The bylaws of the Merging Corporation shall survive and be
the bylaws of the Surviving Corporation until thereafter amended in accordance
with the provisions therein and as provided in the BCL.
4.2 Directors and Officers. The directors and officers of the Surviving
Corporation shall be as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Harold L. Clark Director, Chairman of the Board
Robert H. Beckett Director, President and Chief Executive
Officer
Robert S. Beckett Director, Vice President and Chief
Operating Officer
Stephen G. Holmes Director, Executive Vice President,
Secretary/Treasurer and Chief Financial
Officer
Alexander C. Kramer, Jr. Vice President--Operations
</TABLE>
Each director and officer listed above shall hold office until the expiration
of his or her term of office or earlier death, resignation or removal in
accordance with the Articles of Incorporation and Bylaws of the Merging
Corporation and applicable law.
I-4
<PAGE>
APPENDIX II
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION is made and
entered into as of the 11th day of August, 1994 by and among AmeriQuest
Technologies, Inc., a Delaware corporation ("AmeriQuest"), Robec, Inc., a
Pennsylvania corporation ("Robec") and Robert H. Beckett, Robert S. Beckett,
Alexander C. Kramer, Jr. and G. Wesley McKinney, who are certain principal
shareholders of Robec (the "Principal Shareholders"), for the acquisition of
Robec by AmeriQuest pursuant to an exchange (the "Exchange") of stock between
AmeriQuest and the Principal Shareholders followed by a merger (the "Merger")
of a wholly-owned subsidiary of AmeriQuest to be formed under the laws of the
Commonwealth of Pennsylvania ("Newco") with and into Robec. The Principal
Shareholders are joining in this Agreement solely for the purposes of agreeing
to be bound by Sections 1.01, 8.06, 8.08 and 8.16 hereof but are intended by
AmeriQuest also to be the beneficiaries of all of the other provisions hereof
which are for their benefit.
WITNESSETH:
WHEREAS, AmeriQuest desires to acquire Robec in a transaction which qualifies
as a tax-free reorganization under Section 368 of the Internal Revenue Code of
1986, as amended;
WHEREAS, management of Robec deems it to be in the best interests of the
shareholders of Robec to receive shares of the Common Stock of AmeriQuest, par
value $.01 per share, ("AmeriQuest Common Stock") upon the merger of Newco with
and into Robec pursuant to the terms hereof and in the plan of merger attached
hereto as Exhibit A (the "Plan of Merger");
WHEREAS, the Principal Shareholders are prepared and willing to assist Robec
in achieving the Merger by exchanging their shares of the Common Stock of
Robec, par value $.01 per share ("Robec Common Stock") for shares of AmeriQuest
Common Stock;
WHEREAS, it is intended that in connection with the Exchange and the Merger
all holders of Robec Common Stock will receive the same consideration per share
for their shares of Robec Common Stock; and
WHEREAS, the parties hereto are parties to an Agreement and Plan of
Reorganization dated as of August 11, 1994 which is amended and restated in its
entirety and superseded hereby.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereby agree as follows:
ARTICLE I.
THE EXCHANGE, MERGER AND RELATED MATTERS
1.01 Exchange of Shares by Principal Shareholders. At the request of Robec
management and in order to assist Robec in effecting the Merger, and subject to
the terms and conditions contained in this Agreement, each of the Principal
Shareholders agrees with AmeriQuest to exchange pro rata a portion of the
number of shares of Robec Common Stock held by such Principal Shareholder (the
"Exchange Shares") for AmeriQuest Common Stock (previously defined as the
"Exchange") such that following the Exchange, AmeriQuest will own at least
50.1% of the outstanding shares of Robec's Common Stock. The closing of the
Exchange is referred to herein as the "Exchange Closing" and shall occur upon
the satisfaction of the applicable conditions and pursuant to the terms as
provided herein at such time and place as the parties shall agree. Upon the
Exchange Closing, each Exchange Share shall be exchanged into .63075 of a
validly issued, fully paid and
II-1
<PAGE>
nonassessable share of AmeriQuest Common Stock; provided, however, that in the
event the closing price of AmeriQuest Common Stock on the New York Stock
Exchange on the business day prior to the Effective Date (as that term is
defined in Section 1.07 hereof) as reported in the Wall Street Journal (the
"Closing Date Market Price") is less than $3.00 per share, on the Effective
Date, the Principal Shareholders shall be entitled to receive additional
validly issued, fully paid and nonassessable shares of AmeriQuest Common Stock
equal to the difference between (a) the product of (i) the number of Robec
Common Shares exchanged in the Exchange multiplied by (ii) .63075 multiplied by
(iii) a quotient the numerator of which is $3.00 and the denominator of which
is the Closing Date Market Price and (b) the number of shares of AmeriQuest
Common Stock received by such Principal Shareholder in the Exchange. No
fractional shares of AmeriQuest Common Stock will be issued in connection with
the Exchange or any adjustment pursuant to this Section 1.01, but in lieu
thereof each Principal Shareholder who would otherwise be entitled to receive a
fraction of a share of AmeriQuest Common Stock will receive an amount in cash
equal to the market value of one share of AmeriQuest Common Stock (based on the
closing price of AmeriQuest Common Stock on the New York Stock Exchange on the
previous business day, as reported in the Wall Street Journal) multiplied by
the fraction of a share of AmeriQuest Common Stock to which such holder would
otherwise be entitled without any interest thereon.
1.02 Registration of Exchange Shares. Pursuant to the terms of a Registration
Rights Agreement in the form attached hereto as Exhibit B (the "Registration
Rights Agreement") by and between AmeriQuest and each of the Principal
Shareholders, AmeriQuest shall, at its expense, prepare and file a registration
statement on Form S-3 or if Form S-3 is not available on another appropriate
registration form (the "S-3 Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act") for use by the Principal
Shareholders receiving restricted securities in connection with the Exchange or
pursuant to the Merger, and shall cause the S-3 Registration Statement to be
declared effective not later than the Effective Date (as such term is defined
in Section 1.07 hereof), provided, however, that if the Merger is not
consummated on or prior to December 31, 1994, or if this Agreement is otherwise
terminated, AmeriQuest shall cause the S-3 Registration Statement to become
effective on the earlier of December 31, 1994 or such termination date, as the
case may be. Further, AmeriQuest shall maintain the effectiveness of the S-3
Registration Statement until such time as the shares covered thereby are no
longer deemed to be "restricted securities" as defined in Rule 144(a)(3) or to
be subject to Rule 145, each as promulgated under the Securities Act. Should
any "selling shareholder" identified in the S-3 Registration Statement
thereafter still be deemed to be an "affiliate" of AmeriQuest, AmeriQuest shall
continue to maintain the effectiveness of such S-3 Registration Statement for
the benefit of such "affiliate(s)" until such selling shareholder shall no
longer be deemed an "affiliate."
1.03 The Merger. On the Effective Date, Newco shall be merged with and into
Robec (previously defined as the "Merger") pursuant to this Agreement and the
Plan of Merger, and the separate corporate existence of Newco shall cease, and
Robec shall continue as the surviving corporation under the laws of the
Commonwealth of Pennsylvania under the name "AmeriQuest/Robec, Inc." (the
"Surviving Corporation"). Newco and Robec are referred to herein as the
"Constituent Corporations" to the Merger.
1.04 Conversion of Shares. On the Effective Date, by virtue of the Merger and
without any action on the part of AmeriQuest, Robec, Newco, the Surviving
Corporation, or any holder of any shares of capital stock of either of the
Constituent Corporations, the shares of capital stock of each of the
Constituent Corporations shall be converted as set forth in the Plan of Merger.
1.05 Treatment of Options. (a) On the Effective Date, AmeriQuest will offer
to exchange each of the then outstanding options to purchase Robec Common Stock
(collectively, the "Robec Options"), including, without limitation, all
outstanding options granted under Robec's 1989 Stock Option Plan, as amended
(the "Robec Plan"), as well as any then outstanding Robec options not granted
under the Robec Plan, for an option to purchase that number of shares of
AmeriQuest Common Stock (collectively, the "AmeriQuest Options") determined by
multiplying the number of shares of Robec Common Stock subject to such Robec
Option on the Effective Date by the Applicable Fraction (as such term is
defined in the Plan of Merger), at an exercise price per share of AmeriQuest
Common Stock equal to the exercise price per share of such Robec
II-2
<PAGE>
Option divided by the Applicable Fraction. If the foregoing calculation results
in an assumed Robec Option being exercisable for a fraction of a share of
AmeriQuest Common Stock, then the number of shares of AmeriQuest Common Stock
subject to such option will be rounded up to the nearest whole number of
shares. The term, exercisability, vesting schedule, status as an "incentive
stock option" under Section 422 of the Code, if applicable, and all other terms
and conditions of the Robec Options will otherwise be unchanged. Continuous
employment with Robec or any subsidiary of Robec prior to the Merger will be
credited to an optionee of Robec for purposes of determining the vesting of the
AmeriQuest Options.
(b) AmeriQuest will cause the AmeriQuest Common Stock issuable upon exercise
of the AmeriQuest Options to be registered on Form S-8 promulgated by the
Securities and Exchange Commission ("SEC") within 20 days after the Effective
Date and will use its best efforts to maintain the effectiveness of such
registration statement or registration statements for so long as any such
AmeriQuest Options shall remain outstanding. With respect to those individuals
who subsequent to the Merger will be subject to the reporting requirements
under Section 16(a) of the Exchange Act (as such term is defined in Section
1.08(c)), AmeriQuest shall administer the Robec Plan assumed pursuant to this
Section 1.05 in a manner that complies with Rule 16b-3 promulgated by the SEC
under the Exchange Act. AmeriQuest will reserve a sufficient number of shares
of AmeriQuest Common Stock for issuance upon exercise of the AmeriQuest
Options.
(c) Promptly after the Effective Date, AmeriQuest will notify in writing each
holder of a Robec Option of the offer to exchange such Robec Option for an
AmeriQuest Option, the number of shares of AmeriQuest Common Stock that are
then subject to such option, and the exercise price of such option, as
determined pursuant to this Section 1.05.
1.06 Board Representation for Robec. The Board of Directors of AmeriQuest
shall cause Robert H. Beckett to be appointed, effective as of the Exchange
Closing, to the Board of Directors of AmeriQuest, to serve until such time as
his successor, if any, is duly elected and qualified to serve, and shall
nominate him for reelection at each of the next two annual meetings of
shareholders.
1.07 Merger Closing. The closing of the Merger contemplated by this Agreement
(the "Merger Closing") shall take place at the offices of Morgan, Lewis &
Bockius, 2000 One Logan Square, Philadelphia, PA 19103 commencing at 10:00
a.m., local time, on the later of (a) the day of the special meeting of Robec
shareholders provided for in Section 1.08(b) hereof or (b) the day on which the
last of the applicable conditions precedent to the Merger set forth in Articles
VIB and VIIB hereof is fulfilled or waived (subject to applicable law), or (c)
at such other time or place or on such other date as AmeriQuest, Robec and
Newco shall agree (the "Merger Closing Date"). On the Merger Closing Date,
Articles of Merger including the Plan of Merger shall be filed with the
Department of State of the Commonwealth of Pennsylvania in accordance with the
provisions of the Pennsylvania Business Corporation Law of 1988 (the "BCL"),
and the Merger shall become effective upon such filing or at such later time on
the Merger Closing Date as may be specified in the filing with the Department
of State of the Commonwealth of Pennsylvania (the "Effective Date").
1.08 Shareholder Approvals and Registration on Form S-4. (a) As soon as
practicable following the execution of this Agreement, AmeriQuest will convene
a special meeting of its stockholders to secure approval of an increase in the
number of authorized shares of AmeriQuest Common Stock necessary to consummate
the Merger and the Kenfil Merger (as such term is defined below). Pursuant to
an Agreement and Plan of Reorganization dated March 31, 1994, as amended, by
and among AmeriQuest, Kenfil Inc. ("Kenfil") and certain shareholders of Kenfil
(the "Kenfil Agreement"), AmeriQuest has acquired 51% of Kenfil in a stock
exchange and agreed to acquire the remaining shares of common stock of Kenfil
in a merger transaction (the "Kenfil Merger") and to issue simultaneously with
the consummation of the Kenfil Merger approximately 1,700,000 shares of
AmeriQuest Common Stock in exchange for approximately $7,300,000 of Kenfil
subordinated debt and approximately 2,000,000 shares of AmeriQuest Common Stock
to certain vendors of Kenfil in satisfaction of approximately $16,500,000 of
trade debt of Kenfil.
(b) As soon as practicable following the execution of this Agreement, Robec
will convene a special meeting of its shareholders to secure the necessary
shareholder authorizations and approvals of this Agreement and the transactions
contemplated herein.
II-3
<PAGE>
(c) The AmeriQuest Common Stock to be issued in the Merger shall be
registered under the Securities Act on a Registration Statement on Form S-4
(the "Form S-4"), and AmeriQuest will pay the filing fee required for any such
filing. In this regard, it will be necessary to file the Form S-4 to serve as a
Prospectus under the Securities Act for the shares so registered and as a
proxy/consent statement ("Prospectus/Proxy-Statement"). As promptly as
practicable after the date of this Agreement, AmeriQuest and Robec shall
prepare and file with the SEC the Form S-4, together with the Prospectus/Proxy
Statement to be included therein and any other documents required by the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in connection with the Merger, and AmeriQuest will pay the
filing fees required for any such filings. Each of AmeriQuest and Robec shall
use its best efforts to respond promptly to any comments of the SEC and to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. AmeriQuest shall also take any action required
to be taken under any applicable state securities or "blue-sky" laws and
regulations of the NYSE in connection with the issuance of the AmeriQuest
Common Stock in connection with the Merger and the listing of such shares on
the NYSE. Robec shall promptly furnish to AmeriQuest all information concerning
Robec and the shareholders of Robec as may be reasonably required in connection
with any action contemplated by this Section 1.08. Each of AmeriQuest and Robec
will notify the other promptly of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff for amendments or
supplements to the Form S-4 or the Prospectus/Proxy Statement or for additional
information and will supply the other with copies of all correspondence with
the SEC or its staff with respect to the Form S-4 or the Prospectus/Proxy
Statement. Whenever any event occurs which should be set forth in an amendment
or supplement to the Form S-4 or the Prospectus/Proxy Statement, AmeriQuest or
Robec, as the case may be, shall promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff, and/or mailing to
shareholders of AmeriQuest and Robec, such amendment or supplement. The parties
will enter into customary indemnification and other agreements and seek
customary "comfort letters" in connection with the Form S-4.
1.09 Tax-Free Exchange. The Exchange and the Merger provided for herein are
intended to constitute one integrated transaction that qualifies as a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the AmeriQuest Common Stock is to be received by
holders of Robec Common Stock on a tax-free basis. Except as specifically
provided in Section 1.01 hereof, the number of shares of AmeriQuest Common
Stock to be issued in the Exchange and the Merger will not be subject to
adjustment for fluctuations in the price of the shares for either AmeriQuest or
Robec. Except for cash paid in lieu of fractional shares, no consideration that
could constitute "other property" within the meaning of Section 356(b) of the
Code is being transferred by AmeriQuest for the Robec Common Stock either in
the Exchange or in the Merger. The parties agree not to take a position on any
tax return inconsistent with this Section 1.09. The parties further agree that
each of Robec and AmeriQuest shall pay their own expenses in connection with
the transactions contemplated hereunder. AmeriQuest represents that it has no
plan or intention to reacquire any of its Common Stock issued either in the
Exchange or in the Merger, that it has no plan or intention to sell or
otherwise dispose of any of the assets of Robec except in the ordinary course
of business, and that it will continue the historic business of Robec or use a
significant portion of Robec's historic business assets in a business.
ARTICLE II.
REPRESENTATION AND WARRANTIES OF AMERIQUEST
AmeriQuest hereby represents and warrants to and agrees with Robec and the
Principal Shareholders that:
2.01 Organization and Good Standing. AmeriQuest is, and on the Effective Date
will be, a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full power and authority to own
its property and to carry on its business as it is now being conducted, and is
not required to be qualified to do business in any jurisdictions other than
California, Massachusetts and Delaware. Newco will on the Effective Date be a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania.
II-4
<PAGE>
2.02 Authorization and Validity of Agreement. AmeriQuest has full corporate
power and authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby. Except for (a) obtaining the approval of its
Board of Directors as contemplated by Section 6.01 hereof and (b) obtaining the
approval of its shareholders as contemplated by Section 1.08(a) hereof, no
other corporate action on the part of AmeriQuest is necessary to the execution
and delivery by AmeriQuest of this Agreement. Upon receipt of the approvals
referred to in the immediately preceding sentence, this Agreement will have
been duly executed and delivered by AmeriQuest and will be a valid and binding
obligation of AmeriQuest enforceable against AmeriQuest in accordance with its
terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought. The performance by Newco on the Effective Date of the
transactions contemplated by the Plan of Merger will have been duly authorized
by AmeriQuest, its sole shareholder, and its Board of Directors and no further
corporate action on the part of Newco is or will be necessary to consummate the
transactions contemplated by this Agreement.
2.03 Capitalization of AmeriQuest. All of AmeriQuest's authorized capital
stock consists of 10,000,000 shares of Common Stock, $.01 par value (previously
referred to as "AmeriQuest Common Stock"), of which 9,862,079 shares are
validly issued and outstanding; and 5,000,000 shares of Preferred Stock, $.01
par value ("AmeriQuest Preferred Stock"), of which 1,099,628 shares of
AmeriQuest Series C Convertible Preferred Stock are issued or outstanding. Upon
approval of the amendment to the AmeriQuest Certificate of Incorporation
contemplated by Section 1.08(a) hereof, AmeriQuest's authorized capital stock
shall consist of 30,000,000 shares of AmeriQuest Common Stock and 5,000,000
shares of AmeriQuest Preferred Stock. All issued and outstanding shares of
AmeriQuest Common Stock are duly authorized, validly issued, fully paid and
nonassessable. There are no options, warrants, contracts or commitments
entitling any person to purchase or otherwise acquire from AmeriQuest any
issued or unissued shares of its capital stock except for (a) 1,500,000 shares
which are the subject of stock options and warrants as described on Appendix I
to this Agreement and (b) an agreement to issue approximately 5,200,000 shares
of AmeriQuest Common Stock upon the closing of the Kenfil Merger. There is no
stock held in the treasury of AmeriQuest.
2.04 Resulting Ownership of AmeriQuest by Robec Shareholders. After the
Effective Date, assuming prior or contemporaneous consummation of the Kenfil
Merger, there will be outstanding approximately 18,961,707 shares of AmeriQuest
Common Stock and no shares of AmeriQuest Preferred Stock, and the current
shareholders of Robec will own approximately 14.76% of the outstanding shares
of AmeriQuest Common Stock. After the Merger, Robec will be a wholly-owned
subsidiary of AmeriQuest.
2.05 SEC Reports. AmeriQuest has delivered or made available to Robec correct
and complete copies of each report, schedule, registration statement and
definitive proxy statement filed by AmeriQuest with the SEC on or after January
1, 1991 (the "AmeriQuest SEC Documents"), which are all of the documents (other
than preliminary material) that AmeriQuest has been required to file with the
SEC on or after January 1, 1991. As of their respective dates or, in the case
of registrations statements, their effective dates, none of the AmeriQuest SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the AmeriQuest
SEC Documents complied when filed in all material respects with the then
applicable requirements of the Securities Act and the Exchange Act and the
rules and regulations thereunder promulgated by the SEC. AmeriQuest has filed
all documents and agreements which were required to be filed as exhibits to the
AmeriQuest SEC Documents.
2.06 Financial Statements. The financial statements of AmeriQuest included in
the AmeriQuest SEC Documents complied as to form in all material respects with
the then applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as
II-5
<PAGE>
may have been indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q promulgated by the SEC) and fairly
present (subject, in the case of unaudited statements, to normal, year-end
audit adjustments) the consolidated financial position of AmeriQuest and its
consolidated subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows (or changes in
financial position prior to the approval of Statement of Financial Accounting
Standards Number 95) for the respective periods then ended.
2.07 Absence of Undisclosed Liabilities. AmeriQuest has no liabilities or
obligations as of the date hereof, secured or unsecured (whether accrued,
absolute, contingent or otherwise), including without limitation tax
liabilities due or to become due, except current liabilities incurred in the
ordinary course of business or in connection with the transaction contemplated
thereby.
2.08 Subsidiaries. The subsidiaries of AmeriQuest (the "AmeriQuest
Subsidiaries") are identified on Appendix II to this Agreement. Each AmeriQuest
Subsidiary is, and on the Effective Date will be, a corporation duly organized,
validly existing and in good standing under its respective jurisdiction of
incorporation, with full power and authority to own its property and to carry
on its business as it is now being conducted. Unless the context requires
otherwise, as used in Sections 2.07-2.22 and 4.01-4.21 of this Agreement, the
term AmeriQuest includes the AmeriQuest Subsidiaries.
2.09 No Violation of Governing Instruments. Except as disclosed on Appendix
III, no provision of the Certificate of Incorporation or By-laws of AmeriQuest
or of any material agreement or instrument to which AmeriQuest is a party or by
which it is bound is or will be violated by the execution and delivery of this
Agreement or by the performance or satisfaction of any agreement or condition
herein contained to be performed or satisfied by AmeriQuest.
2.10 Permits. AmeriQuest possesses all the licenses, franchises, permits,
registrations and other governmental authorizations necessary for the continued
conduct of its business without material interference or interruption.
2.11 Defaults. Except as disclosed on Appendix IV, AmeriQuest is not in
material default under any lease, purchase or sale contract, note, indenture or
loan agreement, or under any other agreement or arrangements which are
material, alone or in the aggregate, to which it is a party or by which it is
bound or, to the knowledge of the officers and directors of AmeriQuest,
affected. AmeriQuest further agrees to obtain all consents or waivers from (i)
those third parties to whom it is indebted and in default (except for amounts
owed to its vendors) and (ii) all third parties to whom it is indebted whose
indebtedness is scheduled for payment prior to the Effective Date, which may be
necessary to prevent the Merger provided for herein from resulting in any
breach, acceleration, default or collection under any such agreements or
arrangements.
2.12 Agreements. Except as set forth on Appendix V, AmeriQuest is not a party
to and is not bound by:
(a) any employment contracts or agreements or any collective bargaining
or labor agreements;
(b) any pension, retirement, stock option, stock purchase, savings,
profit-sharing, deferred compensation, retainer, consultant, bonus, group
insurance, or any vacation pay or severance pay or other incentive or
welfare, contract, plan or so-called fringe benefit agreement;
(c) any contract for the purchase of any materials, supplies, equipment
or inventory, or for the sale of any inventory, except contracts entered
into in the ordinary course of business (i) which do not (as to each)
involve either an unperformed commitment in excess of $300,000 or the
payment of more than $200,000; or (ii) which may not be terminated without
penalty by AmeriQuest within one year from the date hereof; or
(d) any note or agreement relating to any indebtedness except as shown on
AmeriQuest's March 31, 1994 financial statements included in the AmeriQuest
SEC Documents.
II-6
<PAGE>
2.13 Taxes. AmeriQuest has, and on the Effective Date will have, timely filed
all Federal and State and/or local tax returns required to be filed, and have
paid, or made adequate provisions for the payment of, all taxes (whether or not
reflected in its tax returns as filed and whether or not disputed) which may be
or hereafter become due and payable (and/or accruable) in respect of its
operations for all periods prior to the Effective Date, including that portion
of its current fiscal year to and including the Effective Date, to any city,
district, state, the United States, any foreign country or any other taxing
authority, and is not now and on the Effective Date will not be delinquent in
the payment of any tax assessment or government charge. No unpaid tax
deficiencies or additional liabilities of any sort have been proposed by any
governmental representative. No agreements for the extension of time for the
assessment of any amounts of tax have been entered into by or on behalf of
AmeriQuest. AmeriQuest has withheld proper and accurate amounts from its
respective employees for all periods in full and complete compliance with all
tax withholding provisions (including without limitation income tax
withholding, social security and unemployment taxes) of applicable federal,
foreign, state and local laws. The hours worked by and payment made to
employees of AmeriQuest have not been in violation of any applicable federal,
state, foreign or local laws dealing with such matters. All payments due from
AmeriQuest (on account of union employment contracts or otherwise) for employee
profit-sharing, pension benefits and employee health and welfare insurance have
been paid or accrued as a liability on its books. The reserves for taxes
reflected on the financial statements included in the AmeriQuest SEC Documents
are adequate to cover all taxes with respect to the income of AmeriQuest for
the period then ended.
AmeriQuest, on or prior to the Effective Date, agrees to pay all required
federal and state taxes in the time and manner required under applicable
federal and state tax laws with respect to AmeriQuest's operations through the
fiscal year ended June 30, 1994. AmeriQuest is not now and on the Effective
Date will not be delinquent in the payment of any tax assessment or government
charge in respect of AmeriQuest's operations through the Effective Date.
2.14 Accuracy of Corporate Records. The copies of the Certificate of
Incorporation, By-laws, minute books and stock transfer records of AmeriQuest
heretofore or hereafter delivered to Robec or made available to Robec for
examination are complete and correct. The minute books of AmeriQuest contain
complete and accurate records of all meetings and other corporate actions of
its shareholders, directors and committees of its Board of Directors.
2.15 Absence of Litigation. Except as set forth on Appendix VI, AmeriQuest is
not now engaged in or threatened with any litigation or other proceeding in
connection with its affairs involving amounts in excess of $50,000, and has not
been subject to any such litigation or proceeding during the past two (2)
years, and it is not now subject to any decree, order or other governmental
restriction which has a material adverse effect on its business or assets or
which would prevent or hamper the consummation of the Exchange or the Merger
contemplated by this Agreement.
2.16 Insurance. AmeriQuest's insurance coverage is adequate based on its
experience and the experience of similar businesses. AmeriQuest is not now and
on the Effective Date will not be in default in any material respect under any
such policy and such policies will be continued in force and effect up to and
including the Effective Date.
2.17 Employee Benefit Plans and Salaries. There has not been since June 30,
1993 any bonus, profit-sharing, pension, retirement or other similar
arrangement or plan instituted, amended or agreed to by AmeriQuest, or any
increase in the compensation payable or to become payable by it to any of its
officers, employees or agents whose total compensation for services rendered
after any such increase is at an annual rate of more than $100,000 (except for
those persons identified on Appendix VII in the amounts indicated thereon), nor
has any bonus, percentage of compensation or other like benefit accrued to or
for the credit of any of the officers, employees or agents of AmeriQuest
(except for those persons identified on Appendix VII in the amounts indicated
thereon).
II-7
<PAGE>
2.18 Salaries and Pensions. AmeriQuest has no unfunded obligation under any
pension or profit-sharing arrangements for the employees of AmeriQuest,
salaried, non-salaried, union or non-union, including any formal or informal
plans, and all funding arrangements with respect thereto have been made in
accordance with the terms of such plans or arrangements.
2.19 Labor Relations, Financial Condition and Assets. Since June 30, 1993,
there has not been any significant labor trouble or any adverse change in the
financial condition, assets, liabilities, properties, business or results of
operations of AmeriQuest, including but not limited to any cancellation of or
threatened cancellation of any contract, any damage or destruction of property
by fire or casualty, whether or not covered by insurance, or the taking of any
property by condemnation or eminent domain, except as disclosed on Appendix
VIII.
2.20 Regulatory Consents. Except for (a) filings required to be made with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice (the "Antitrust Division") under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "Antitrust
Improvements Act"), (b) the filing of a Prospectus/Proxy Statement with the
Securities and Exchange Commission as a Registration Statement on Form S-4, (c)
any consents or filings made necessary by the financing arrangements of the
Constituent Corporations and AmeriQuest and (d) the filing of the Plan of
Merger with the Department of State of the Commonwealth of Pennsylvania, no
material consent, authorization, order or approval of or filing of a
registration with any governmental commission, board or other regulatory body
is required by AmeriQuest for or in connection with the consummation of the
Merger.
2.21 AmeriQuest Shares. The shares of AmeriQuest Common Stock to be issued in
the transactions contemplated by this Agreement will be, upon issuance, duly
authorized, validly issued, fully paid and nonassessable.
2.22 Full Disclosure. No representation, warranty or other statement relating
to AmeriQuest or Newco contained in this Agreement or information contained in
any certificate, exhibit, appendix or document delivered by AmeriQuest or Newco
pursuant to this Agreement contains any untrue statement of material fact or
omits to state a material fact necessary in order to make the statements made
herein or therein not misleading in light of the circumstances under which they
were made.
2.23 Survival. The representations and warranties of AmeriQuest contained
herein are true on the date hereof and shall continue to be true as of the
Effective Date, except for changes permitted or contemplated by the terms of
this Agreement, and shall survive the Effective Date.
ARTICLE III.
REPRESENTATION AND WARRANTIES OF ROBEC
Robec hereby represents and warrants to and agrees with AmeriQuest that:
3.01 Organization and Good Standing. Robec is, and on the Effective Date will
be, a corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania, with full power and authority to
own its property and to carry on its business as it is now being conducted, and
is not required to be qualified to do business in any jurisdictions other than
those states in which it is now so qualified.
3.02 Authorization and Validity of Agreement. Robec has full corporate power
and authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby. Except for (a) obtaining the approval of its
Board of Directors as contemplated by Section 6.01 hereof and (b) obtaining the
approval of its shareholders as contemplated by Section 1.08 hereof, no other
corporate action on the part of Robec is necessary to the execution and
delivery by Robec of this Agreement. Upon receipt of the approvals referred
II-8
<PAGE>
to in the immediately preceding sentence, this Agreement will have been duly
executed and delivered by Robec and will be a valid and binding obligation of
Robec enforceable against Robec in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
3.03 Capitalization of Robec. All of Robec's authorized capital stock
consists of 10,000,000 shares of Common Stock, par value $.01 per share
(previously referred to as "Robec Common Stock"), of which 4,439,180 shares are
validly issued and outstanding; and 5,000,000 shares of Preferred Stock, par
value $.01 per share, of which no shares are outstanding. All of the issued and
outstanding shares of Robec Common Stock are duly authorized, validly issued,
fully paid and nonassessable. There are no options, warrants, contracts or
commitments entitling any person to purchase or otherwise acquire from Robec
any issued or unissued shares of its capital stock except shares subject to
stock options as outlined on Appendix IX to this Agreement; and 160,000 shares
of Robec Common Stock are held in the treasury of Robec.
3.04 SEC Reports. Robec has delivered or made available to AmeriQuest correct
and complete copies of each report, schedule, registration statement and
definitive proxy statement filed by Robec with the SEC on or after January 1,
1993 (the "Robec SEC Documents"), which are all the documents (other than
preliminary material) that Robec was required to file with the SEC on or after
January 1, 1993. As of their respective dates or, in the case of registrations
statements, their effective dates, none of the Robec SEC Documents (including
all exhibits and schedules thereto and documents incorporated by reference
therein) contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and the Robec SEC Documents complied when filed in all material
respects with the then applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations thereunder promulgated by the SEC.
Robec has filed all documents and agreements which were required to be filed as
exhibits to the Robec SEC Documents.
3.05 Financial Statements. The financial statements of Robec included in the
Robec SEC Documents complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may have been indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q promulgated by the
SEC) and fairly present (subject, in the case of unaudited statements, to
normal, year-end audit adjustments) the consolidated financial position of
Robec and its consolidated subsidiaries as at the respective dates thereof and
the consolidated results of their operations and cash flows (or changes in
financial position prior to the approval of Statement of Financial Accounting
Standards Number 95) for the respective periods then ended.
3.06 Absence of Undisclosed Liabilities. Other than as set forth on the
balance sheet dated December 31, 1993, Robec has no material liabilities or
obligations as of the date hereof, secured or unsecured (whether accrued,
absolute, contingent or otherwise), including without limitation tax
liabilities due or to become due, except current liabilities incurred in the
ordinary course of business since such date or as set forth on any Appendix to
this Agreement.
3.07 Subsidiaries. The subsidiaries of Robec (the "Robec Subsidiaries") are
identified on Appendix X to this Agreement. Each Robec Subsidiary is, and on
the Effective Date will be, a corporation duly organized, validly existing and
in good standing under its respective jurisdiction of incorporation, with full
power and authority to own its property and to carry on its business as it is
now being conducted. Unless the context requires otherwise, as used in Sections
3.06-3.20 and 5.01-5.21 of this Agreement, the term Robec includes the Robec
Subsidiaries.
II-9
<PAGE>
3.08 No Violation of Governing Instruments. Except as disclosed on Appendix
XI, no provision of the Articles of Incorporation or By-laws of Robec or of any
material agreement or instrument to which Robec is a party or by which it is
bound is or will be violated by the execution and delivery of this Agreement or
by the performance or satisfaction of any agreement or condition herein
contained to be performed or satisfied by Robec.
3.09 Permits. Robec possesses all the licenses, franchises, permits,
registrations and other governmental authorizations necessary for the continued
conduct of its business without material interference or interruption.
3.10 Defaults. Except as disclosed on Appendix XII, Robec is not in material
default under any lease, purchase or sale contract, note, indenture or loan
agreement, or under any other agreement or arrangements which are material,
alone or in the aggregate, to which it is a party or by which it is bound.
Robec further agrees to use reasonable efforts to obtain all consents or
waivers from (i) those third parties to whom it is indebted and in default
(except for amounts owed to its vendors) and (ii) all third parties to whom it
is indebted (except for amounts owed to vendors) whose indebtedness is
scheduled for payment prior to the Exchange Closing, which may be necessary to
prevent the Merger provided for herein from resulting in any breach,
acceleration, default or collection under any such agreements or arrangements.
3.11 Agreements. Except as set forth on Appendix XIII, Robec is not a party
to and is not bound by:
(a) any employment contracts or agreements or any collective bargaining
or labor agreements;
(b) any pension, retirement, stock option, stock purchase, savings,
profit-sharing, deferred compensation, retainer, consultant, bonus, group
insurance, or any vacation pay or severance pay or other incentive or
welfare, contract, plan or so-called fringe benefit agreement;
(c) any contract for the purchase of any materials, supplies, equipment
or inventory, or for the sale of any inventory, except contracts entered
into in the ordinary course of business (i) which do not (as to each)
involve either an unperformed commitment in excess of $300,000 or the
payment of more than $200,000; or (ii) which may not be terminated without
penalty by Robec within one year from the date hereof; or
(d) any note or agreement relating to any indebtedness except as shown on
Robec's March 31, 1994 financial statements included in the Robec SEC
Documents.
3.12 Taxes. Robec has, and on the date of the Exchange Closing will have,
timely filed all Federal and State and/or local tax returns required to be
filed, and have paid, or made adequate provisions for the payment of, all taxes
(whether or not reflected in its tax returns as filed and whether or not
disputed) which may be or hereafter become due and payable (and/or accruable)
in respect of its operations for all periods prior to the Exchange Closing,
including that portion of its current fiscal year to and including the Exchange
Closing, to any city, district, state, the United States, any foreign country
or any other taxing authority, and is not now and on the date of the Exchange
Closing will not be delinquent in the payment of any tax assessment or
government charge. No unpaid tax deficiencies or additional liabilities of any
sort have been proposed by any governmental representative. No agreements for
the extension of time for the assessment of any amounts of tax have been
entered into by or on behalf of Robec. Robec has withheld proper and accurate
amounts from its respective employees for all periods in full and complete
compliance with all tax withholding provisions (including without limitation
income tax withholding, social security and unemployment taxes) of applicable
federal, foreign, state and local laws. The hours worked by and payment made to
employees of Robec have not been in violation of any applicable federal, state,
foreign or local laws dealing with such matters. All payments due from Robec
(on account of union employment contract or otherwise) for employee profit-
sharing, pension benefits and employee health and welfare insurance have been
paid or accrued as a liability on its books. The reserves for taxes reflected
on the December 31, 1993 audited financial statements of Robec are adequate to
cover all taxes with respect to the income of Robec for the period then ended.
II-10
<PAGE>
Robec, on or prior to the Exchange Closing, agrees to pay all required
federal and state taxes in the time and manner required under applicable
federal and state tax laws with respect to Robec's operations through the
fiscal year ended December 31, 1993. Robec is not now and on the date of the
Exchange Closing will not be delinquent in the payment of any tax assessment or
government charge in respect of Robec's operations through the date of the
Exchange Closing.
3.13 Accuracy of Corporate Records. The copies of the Articles of
Incorporation, By-laws, minute books and stock transfer records of Robec
heretofore or hereafter delivered or made available to AmeriQuest for
examination are complete and correct. The minute books of Robec contain
complete and accurate records of all meetings and other corporate actions of
its shareholders, directors and the committees of its Board of Directors.
3.14 Absence of Litigation. Except as set forth on Appendix XIV, Robec is not
now engaged in or threatened in writing with any litigation or other proceeding
in connection with its affairs involving amounts in excess of $50,000, and has
not been subject to any such litigation or proceeding during the past two (2)
years and it is not now subject to any decree, order or other governmental
restriction which has a material adverse effect on its business or assets or
which would prevent or hamper the consummation of the Exchange or the Merger
contemplated by this Agreement.
3.15 Insurance. Robec's insurance coverage is adequate based on its
experience and the experience of similar businesses. Robec is not now and on
the Effective Date will not be in default in any material respect under any
such policy and such policies will be continued in force and effect up to and
including the Effective Date.
3.16 Employee Benefit Plans and Salaries. There has not been since December
31, 1993 any bonus, profit-sharing, pension, retirement or other similar
arrangement or plan instituted, amended or agreed to by Robec, or any increase
in the compensation payable or to become payable by it to any of its officers,
employees or agents whose total compensation for services rendered after any
such increase is at an annual rate of more than $100,000 (except as set forth
on Appendix XV), nor has any bonus, percentage of compensation or other like
benefit accrued to or for the credit of any of the officers, employees or
agents of Robec (except as set forth on Appendix XV).
3.17 Salaries and Pensions. Robec has no unfunded obligation under any
pension or profit-sharing arrangements for the employees of Robec, salaried,
non-salaried, union or non-union, including any formal or informal plans, and
the funding arrangements with respect thereto have been made in accordance with
the terms of such plans or arrangements.
3.18 Labor Relations, Financial Condition and Assets. Since December 31,
1993, except as set forth in the Robec SEC Documents, there has not been any
significant labor trouble or any adverse change in the financial condition,
assets, liabilities, properties, business or results of operations of Robec,
any damage or destruction of property by fire or casualty, whether or not
covered by insurance, or the taking of any property by condemnation or eminent
domain, except as disclosed on Appendix XVI or on other Appendices attached
hereto.
3.19 Regulatory Consents. Except for (a) filings required to be made with the
FTC and the Antitrust Division under the Antitrust Improvements Act, (b) the
filing of a Prospectus/Proxy Statement with the Securities and Exchange
Commission as a Registration Statement on Form S-4, (c) any consents or filings
made necessary by the financing arrangements of the Constituent Corporations
and AmeriQuest and (d) the filing of the Plan of Merger with the Department of
State of the Commonwealth of Pennsylvania and appropriate documents, if any,
with the relevant authorities in states in which Robec is qualified to do
business, no material consent, authorization, order or approval of or filing of
a registration with any governmental commission, board or other regulatory body
is required by Robec for or in connection with the consummation of the Exchange
and Merger.
II-11
<PAGE>
3.20 Full Disclosure. No representation, warranty or other statement relating
to Robec contained in this Agreement or information contained in any
certificate, exhibit, appendix or document delivered by Robec pursuant to this
Agreement contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements made herein or therein
not misleading in light of the circumstances under which they were made.
3.21 Survival. The representations and warranties of Robec contained herein
are true on the date hereof and shall continue to be true as of the Exchange
Closing; except for charges permitted or contemplated by the terms of this
Agreement, but shall not survive the Exchange Closing and shall thereafter be
null and void and of no further force or effect.
ARTICLE IV.
CONDUCT OF AMERIQUEST PRIOR TO THE EFFECTIVE DATE
AmeriQuest covenants, warrants and agrees that, from the date hereof to the
Effective Date, except for transactions provided for or herein permitted or
disclosed in an exhibit or appendix hereto or expressly approved of in writing
by Robec, AmeriQuest shall:
4.01 Compensation. Except as disclosed on Appendix VII not increase the rate
of compensation payable or to become payable by it or make, accrue or become
liable for any bonus, profit-sharing, termination or incentive payment (in
excess of the applicable amounts or percentages prevailing at June 30, 1994 to
(a) any of its officers, directors or employees whose compensation is in excess
of $50,000 per annum, or (b) any other of its employees except in the ordinary
and usual course of business.
4.02 Dividends. Not declare or pay any dividend or distribution (in cash or
other property) in respect of any shares of its capital stock.
4.03 Capital Changes. Not purchase, otherwise acquire, sell or issue any
shares of its capital stock, for cash or other consideration, except to honor
outstanding stock option and warrant obligations; nor declare or effect any
stock dividend, stock split or other action that would result in a change in
its authorized and outstanding capitalization.
4.04 Encumbrance of Assets. Not further mortgage, pledge, or subject to any
lien, charge or encumbrance of any kind, any of its assets, tangible or
intangible, exclusive of liens arising as a matter of law in the ordinary
course of business as to which there is no known default.
4.05 Incur Liabilities. Not take any action which would cause it to incur any
material obligation or liability (absolute or contingent) except liabilities
and obligations incurred in the ordinary course of business.
4.06 Debt Retirement. Not discharge or satisfy any lien or encumbrance, or
pay any obligation or liability (absolute or contingent) other than (a) current
liabilities disclosed in the balance sheet dated March 31, 1994 which was
included in the AmeriQuest SEC Documents, and (b) liabilities incurred since
March 31, 1994 in the ordinary course of business.
4.07 Disposition of Assets. Not sell or transfer any of its tangible assets
or cancel any debts or claims, except in each case in the ordinary and usual
course of business, except for the pending sale of CMS Singapore and Any Bus.
4.08 Disposition of Intangibles. Not sell, assign, transfer or otherwise
dispose of patents, trademarks, trade names, copyrights, licenses, customer
lists, trade secrets, product registrations or other intangible assets.
4.09 Waivers. Not knowingly waive any rights of substantial value.
II-12
<PAGE>
4.10 Executory Agreements. Not, except in the ordinary course of business,
modify, amend, alter or terminate (by written or oral agreement, or any manner
of action or inaction) any of its executory agreements of a material nature or
which are material in amount.
4.11 Material Transactions. Except as otherwise contemplated herein, not
enter into any transaction material in nature or amount other than in the
ordinary and usual course of business.
4.12 Long-Term Commitments. Not undertake any major long-term (long-term
being defined as extending over a twelve (12) month period) purchase
commitments or sale commitments, even though within the ordinary course of its
business.
4.13 Insurance. Keep its property and assets insured in amounts and with
coverage at least as great as the amounts and coverage in effect on the date of
this Agreement.
4.14 Preservation of Business. Use its best efforts to preserve the
possession and control of all of its assets, to keep in faithful service its
present officers and key employees, to preserve the goodwill of its suppliers,
customers and others having business relations with it, and to do nothing to
impair its ability to keep and preserve its business existing on the date
hereof.
4.15 Amend Certificate. Not amend its Certificate of Incorporation or By-
laws, or change or agree to change in any manner the rights of its outstanding
capital stock or the character of its principal business, except as
contemplated by Section 1.08(a) hereof.
4.16 Preservation of Assets. Maintain its properties and assets in good
repair, order and condition, reasonable wear and use and damage by fire or
other casualty excepted.
4.17 Maintenance of Records. Maintain its books, accounts and records in the
usual, regular and ordinary manner on a basis consistent with that heretofore
employed.
4.18 Credit Practices. Not extend credit in the sale of its products other
than in accordance with credit practices in effect on the date hereof.
4.19 Retention of Real Estate. Not sell, mortgage, lease, buy or otherwise
acquire any real estate or any interest therein.
4.20 Investigation. Allow, at all reasonable times, following reasonable
advance notice, during normal business hours, Robec's employees, attorneys,
accountants and other authorized representatives, free and full access to its
plants, properties, books, records, documents and correspondence, and all of
the work papers and other documents relating thereto in the possession of its
auditors or counsel, in order that Robec may have full opportunity to make such
investigation as it may desire of AmeriQuest's properties and business.
4.21 Compliance with Law. Comply with all laws applicable to it or to the
conduct of its business and will conduct its business in such manner that on
the Effective Date the representations and warranties contained in this
Agreement shall be true as though such representations and warranties were made
on and as of such date.
4.22 Repayment of Robec Debt. Prior to or contemporaneous with the Exchange
Closing, arrange for a third party to loan on the date of the Exchange Closing
to Robec cash sufficient to repay all of its outstanding indebtedness to
CoreStates Bank, N.A. and Fidelity Bank, N.A. pursuant to the Second Amended
and Restated Credit and Security Agreement dated March 29, 1993, as amended
(the "Credit Agreement"), estimated to be approximately $10,500,000 on the date
hereof.
II-13
<PAGE>
4.23 Retention and Voting of Shares.
(a) Not to sell, transfer, pledge, assign or otherwise dispose of, or
enter into any contract, option or other arrangement with respect to the
sale, transfer, pledge, assignment or other disposition of, any shares of
Robec Common Stock acquired in the Exchange to any person other than to a
wholly-owned subsidiary of AmeriQuest which shall agree in writing prior to
the transfer to be bound by all of the provisions of this Agreement,
including without limitation this Section 4.23.
(b) Vote all shares of Robec Common Stock owned by it on the record date
for any annual or special meeting of the shareholders of Robec, however
called, and in any action by written consent of the shareholders of Robec,
at such meeting (x) in favor of the Plan of Merger, (y) against any action
or agreement which would result in a breach of any representation, warranty
or covenant of Robec in this Agreement or which would otherwise impede,
interfere with or attempt to discourage the Merger and (z) against the
nomination or election of any director other than the current directors of
Robec or any successor nominated by them.
ARTICLE V.
CONDUCT OF ROBEC PRIOR TO THE EXCHANGE CLOSING
Robec covenants, warrants and agrees that, from the date hereof to the
Exchange Closing, except for transactions provided for or herein permitted or
disclosed in an exhibit or appendix hereto or expressly approved of in writing
by AmeriQuest, Robec shall:
5.1 Compensation. Not increase the rate of compensation payable or to become
payable by it or make, accrue or become liable for any bonus, profit-sharing,
termination or incentive payment (in excess of the applicable amounts or
percentages prevailing at December 31, 1993 or set forth in the Employment
Agreements attached as Exhibits hereto for the individuals indicated therein)
to (a) any of its officers, directors or employees whose compensation is in
excess of $50,000 per annum, or (b) any other of its employees except in the
ordinary and usual course of business.
5.2 Dividends. Not declare or pay any dividend or distribution (in cash or
other property) in respect of any shares of its capital stock.
5.3 Capital Changes. Not purchase, otherwise acquire, sell or issue any
shares of its capital stock, for cash or other consideration, except to honor
outstanding stock option and warrant obligations; nor declare or effect any
stock dividend, stock split or other action that would result in a change in
its authorized and outstanding capitalization.
5.4 Encumbrance of Assets. Not further mortgage, pledge or subject to any
lien, charge or encumbrance of any kind, any of its assets, tangible or
intangible, exclusive of liens arising as a matter of law in the ordinary
course of business as to which there is no known default.
5.5 Incur Liabilities. Not take any action which would cause it to incur any
obligation or liability (absolute or contingent) except liabilities and
obligations incurred in the ordinary course of business.
5.6 Debt Retirement. Not discharge or satisfy any lien or encumbrance, or pay
any obligation or liability (absolute or contingent) other than (a) current
liabilities disclosed in the balance sheet dated March 31, 1994 which was
included in the Robec SEC Documents, and (b) liabilities incurred since March
31, 1994 in the ordinary course of business, except as contemplated by Section
4.22 hereof.
5.7 Disposition of Assets. Not sell or transfer any of its tangible assets or
cancel any debts or claims, except in each case in the ordinary and usual
course of business.
5.8 Disposition of Intangibles. Not sell, assign, transfer or otherwise
dispose of patents, trademarks, tradenames, copyrights, licenses, customer
lists, trade secrets, product registrations or other intangible assets.
II-14
<PAGE>
5.9 Waivers. Not knowingly waive any rights of substantial value.
5.10 Executory Agreements. Not, except in the ordinary course of business,
modify, amend, alter or terminate (by written or oral agreement, or any manner
of action or inaction) any of its executory agreements of a material nature or
which are material in amount.
5.11 Material Transactions. Except as otherwise contemplated herein, not
enter into any transaction material in nature or amount other than in the
ordinary and usual course of business.
5.12 Long-Term Commitments. Not undertake any major long-term (long-term
being defined as extending over a twelve (12) month period) purchase
commitments or sale commitments, even though within the ordinary course of its
business, without the prior written consent of AmeriQuest, which consent shall
not be unreasonably withheld or delayed.
5.13 Insurance. Keep its property and assets insured in amounts and with
coverage at least as great as the amounts and coverage in effect on the date of
this Agreement.
5.14 Preservation of Business. Use its best efforts to preserve the
possession and control of all of its assets, to keep in faithful service its
present officers and key employees, to preserve the goodwill of its suppliers,
customers and others having business relations with it, and to do nothing to
impair its ability to keep and preserve its business existing on the date
hereof.
5.15 Amend Articles. Not amend its Articles of Incorporation or By-laws, or
change or agree to change in any manner the rights of its outstanding capital
stock or the character of its principal business.
5.16 Preservation of Assets. Maintain its properties and assets in good
repair, order and condition, reasonable wear and use and damage by fire or
other casualty excepted.
5.17 Maintenance of Records. Maintain its books, accounts and records in the
usual, regular and ordinary manner on a basis consistent with that heretofore
employed.
5.18 Credit Practices. Not extend credit in the sale of its products other
than in accordance with credit practices in effect on the date hereof.
5.19 Retention of Real Estate. Not sell, mortgage, lease, buy or otherwise
acquire any real estate or any interest therein.
5.20 Investigation. Allow, at all reasonable times, following reasonable
advance notice, during normal business hours, AmeriQuest's employees,
attorneys, accountants and other authorized representatives, free and full
access to its plants, properties, books, records, documents and correspondence,
and all of the work papers and other documents relating thereto in the
possession of its auditors or counsel, in order that AmeriQuest may have full
opportunity to make such investigation as it may desire of Robec's properties
and business.
5.21 Compliance with Law. Comply with all laws applicable to it or to the
conduct of its respective business and will conduct its business in such manner
that on the date of the Exchange Closing the representations and warranties
contained in this Agreement shall be true as though such representations and
warranties were made on and as of such date.
5.22 Affiliates. At least ten business days prior to the date of the special
meeting of shareholders to be convened by Robec, Robec shall deliver to
AmeriQuest a list of names and addresses of those persons who were, in Robec's
reasonable judgment, at the record date for the Robec special meeting of
shareholders, "Affiliates" of Robec (each such person, together with the
persons identified below, an "Affiliate") within the meaning of Rule 145 of the
rules and regulations promulgated by the SEC under the Securities Act ("Rule
II-15
<PAGE>
145"). If requested by AmeriQuest, Robec shall use its best efforts to deliver
or cause to be delivered to AmeriQuest, prior to the Effective Date, from each
of the Affiliates of Robec identified in the foregoing list, agreements to vote
in favor of the Plan of Merger (collectively, the "Robec Affiliate Agreements")
substantially in a form satisfactory to both AmeriQuest and Robec. AmeriQuest
shall be entitled to place legends on the certificates evidencing any
AmeriQuest Common Stock to be received by such Affiliates pursuant to the terms
of this Agreement and the Plan of Merger, and to issue appropriate stop-
transfer instructions to the transfer agent for AmeriQuest Common Stock,
consistent with the terms of the Robec Affiliate Agreements, whether or not
such Robec Affiliate Agreements are actually delivered to AmeriQuest.
ARTICLE VI.
AMERIQUEST'S CONDITIONS TO CLOSING
A. The obligations of AmeriQuest to effect the Exchange contemplated
hereunder shall be subject to the following express conditions precedent:
6.01 Board Approvals. The Boards of Directors of Robec and AmeriQuest will
have approved this Agreement, following due diligence inquiries acceptable to
the respective Boards of Directors.
6.02 No Litigation. No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any United States federal or state governmental or
regulatory body which prevents consummation of the transactions contemplated by
this Agreement and which is in effect on the date of the Exchange Closing; no
action or proceeding by any governmental or regulatory authority shall have
been commenced or threatened (and be pending or threatened on the date of the
Exchange Closing) against Newco, AmeriQuest, Robec or any of their respective
affiliates, associates, officers, or directors seeking to prevent or
challenging the transactions contemplated by this Agreement; and no action or
proceeding before any federal or state court of competent jurisdiction in the
United States shall have been commenced (and be pending) against Newco,
AmeriQuest, Robec or any of their respective officers or directors seeking to
prevent or challenging the transactions contemplated hereby and seeking
material damages in connection therewith.
6.03 Employment Contracts. Neither Robec nor any of its subsidiaries shall
have executed any employment agreements or labor agreements to which it is not
now a party, and shall not have extended any new severance right or increased
any existing severance right to any employee except as consented to by
AmeriQuest.
6.04 Continued Truth of Warranties. The representations and warranties of
Robec herein contained shall be true on and as of the Exchange Closing in all
material respects with the same force and effect as though made on such date,
except for any variations permitted by this Agreement.
6.05 Performance of Covenants. Robec shall have performed in all material
respects all covenants and obligations and complied with all conditions
required or contemplated by this Agreement to be performed or complied with by
it prior to the Exchange Closing.
6.06 Damages by Casualty. The business, properties, financial condition,
earnings, prospects and operations of Robec shall not have been adversely
affected on or prior to the Exchange Closing in any material way as a result of
any accident or other casualty (whether or not covered by insurance) or any
labor disturbance or Act of God or of the public enemy.
6.07 No Adverse Change. There shall have been no material adverse change in
the business, properties, operations, financial condition or earnings of Robec
since the date hereof, which contemplates, among other things, that, except as
indicated on the Appendices attached hereto, there will be no significant loss
of customers or vendors, but a loss of up to an average of $500,000 per month
on a cumulative basis since July 1, 1994 shall not be considered a material
adverse change with respect to Robec.
II-16
<PAGE>
6.08 Certificate. Robec shall have delivered to AmeriQuest such certificates
and other documents evidencing satisfaction of the foregoing conditions
specified in this Article VI as AmeriQuest shall have reasonably requested.
Unless Robec shall have delivered to AmeriQuest a certificate executed by it
dated prior to the Exchange Closing, certifying that one or more of the
conditions set forth in Section 6.01 through 6.12 of this Agreement have not
been fulfilled, the consummation of the Exchange hereunder shall constitute a
representation and warranty by Robec that each of such conditions has been
fulfilled or satisfied.
6.09 Regulatory Consents. All consents, authorizations, orders and approvals
of, and filings and registrations with, any United States federal or state
governmental commission, board or other regulatory body which are required for
the consummation of the Exchange or the Merger shall have been obtained or
made, and the applicable waiting periods, if any, under the Antitrust
Improvements Act and the rules thereunder shall have expired or been
terminated. No preliminary or permanent injunction or other order by any
federal or state court of competent jurisdiction in the United States or by any
United States federal or state governmental or regulatory body shall have been
issued and remain in effect which prevents the consummation of the Exchange.
6.10 Approval of Legal Matters by Counsel. All legal matters in connection
with this Agreement and the Exchange Closing hereunder shall be approved by
Raymond L. Ridge, Esq., legal counsel for AmeriQuest, in the exercise of
reasonable judgment; and there shall have been furnished to such counsel by
Robec such corporate and other records and information as he may reasonably
have requested for such purpose.
6.11 Opinion of Counsel. Robec shall have furnished AmeriQuest with a
favorable opinion, dated the date of the Exchange Closing, of Morgan, Lewis &
Bockius addressed to Robec and in form and substance satisfactory to AmeriQuest
and its counsel to the effect that:
(a) Robec is a corporation duly incorporated, validly existing, and in
good standing under the laws of the Commonwealth of Pennsylvania; and
(b) Except for obtaining such shareholder approval as is required under
Pennsylvania law, all corporate proceedings required to be taken by or on
the part of Robec to authorize it to carry out this Agreement have been
performed, and this Agreement has been duly executed and delivered by
Robec, is valid and binding upon Robec and is enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and except to the extent
the enforceability is subject to general principles of equity.
6.12 AmeriQuest Shareholder Approval. The required approval from the
shareholders of AmeriQuest which is referred to in Section 1.08(a) hereof shall
have been obtained.
B. The obligations of AmeriQuest to consummate the Merger contemplated
hereunder shall be subject to the following express conditions precedent:
6.13 Completion of Exchange and Fulfillment of Conditions to Exchange. The
Exchange shall have occurred.
6.14 Robec Shareholder Approvals. The required approval from the shareholders
of Robec which is referred to in Section 1.08(b) hereof shall have been
obtained.
6.15 No Litigation. No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any United States federal or state governmental or
regulatory body which prevents consummation of the Merger and which is in
effect on the Merger Closing Date.
ANY OF THE CONDITIONS CONTAINED IN THIS ARTICLE VI MAY BE WAIVED, IN WHOLE OR
IN PART, BY AMERIQUEST.
II-17
<PAGE>
ARTICLE VII.
PRINCIPAL SHAREHOLDERS' AND ROBEC'S CONDITIONS TO CLOSING
A. The obligation of the Principal Shareholders to effect the Exchange
contemplated hereunder shall be subject to the following express conditions
precedent:
7.01 Board Approvals. The Boards of Directors of Robec and AmeriQuest will
have approved this Agreement, following due diligence inquiries acceptable to
the respective Boards of Directors.
7.02 No Litigation. No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any United States federal or state governmental or
regulatory body which prevents consummation of the transactions contemplated by
this Agreement and which is in effect on the date of the Exchange Closing; no
action or proceeding by any governmental or regulatory authority shall have
been commenced or threatened (and be pending or threatened on the date of the
Exchange Closing) against Newco, AmeriQuest, Robec or any of their respective
affiliates, associates, officers, or directors seeking to prevent or
challenging the transactions contemplated by this Agreement; and no action or
proceeding before any federal or state court of competent jurisdiction in the
United States shall have been commenced (and be pending) against Newco,
AmeriQuest, Robec or any of their respective officers or directors seeking to
prevent or challenging the transactions contemplated hereby and seeking
material damages in connection therewith.
7.03 Continued Truth of Warranties. The representations and warranties of
AmeriQuest herein contained shall be true on and as of the Exchange Closing
with the same force and effect as though made as of such date, except for any
variations permitted by this Agreement.
7.04 Performance of Covenants. AmeriQuest shall have performed all material
covenants and obligations and complied with all material conditions required by
this Agreement to be performed or complied with by it prior to the Exchange
Closing.
7.05 Certificate. AmeriQuest shall have delivered to Robec such certificates
and other documents evidencing satisfaction of the foregoing conditions
specified in this Article VII as Robec shall have reasonably requested. Unless
an executive officer of AmeriQuest shall have delivered to Robec a certificate
executed by him, dated prior to the Exchange Closing, certifying that one or
more of the conditions set forth in Section 7.01 through 7.17 hereof have not
been fulfilled, the consummation of the Exchange shall constitute a
representation and warranty by AmeriQuest that each of such conditions has been
fulfilled or satisfied.
7.06 Record Date. The record date for the determination of the Robec
shareholders entitled to vote upon the adoption of the Plan of Merger shall
have been fixed or determined in accordance with Section 1763 of the BCL.
7.07 Regulatory Consents. Except for the filing of the Articles of Merger
with the Department of State of the Commonwealth of Pennsylvania, all consents,
authorizations, orders and approvals of, and filings and registrations with,
any United States federal or state governmental commission, board or other
regulatory body which are required for the consummation of the Exchange or the
Merger shall have been obtained or made, and the applicable waiting periods, if
any, under the Antitrust Improvements Act and the rules thereunder shall have
expired or been terminated. No preliminary or permanent injunction or other
order by any federal or state court of competent jurisdiction in the United
States or by any United States federal or state governmental or regulatory body
shall have been issued and remain in effect which prevents the consummation of
the Exchange or the Merger.
II-18
<PAGE>
7.08 Employment Contracts. Each of Messrs. Robert H. Beckett, Robert S.
Beckett and Alexander C. Kramer, Jr., shall have been offered an employment
contract, in substantially the form attached hereto as Exhibit C with base
salaries in amounts previously agreed to between such employee and AmeriQuest.
Except as otherwise provided in this Section 7.08, neither AmeriQuest nor any
of its subsidiaries shall have executed any employment agreements or labor
agreements to which it is not now a party, and shall not have extended or
increased any severance right to any employee.
7.09 Fairness Opinion. The Board of Directors of Robec shall have received a
"fairness opinion" on the Exchange and the Merger from a firm qualified to
render the same, satisfactory to the Board of Directors of Robec.
7.10 Opinion of Counsel. AmeriQuest shall have furnished Robec and the
Principal Shareholders with a favorable opinion, dated the date of the Exchange
Closing, of Raymond L. Ridge, Esq., addressed to Robec and in form and
substance satisfactory to Robec and its legal counsel, to the effect that:
(a) AmeriQuest is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware.
(b) All corporate proceedings required to be taken by or on the part of
AmeriQuest to authorize it to carry out this Agreement have been performed,
and this Agreement has been performed, and this Agreement has been duly
executed and delivered by AmeriQuest, is valid and binding upon AmeriQuest
and, subject to any insolvency law of general applicability, is enforceable
in accordance with its terms.
(c) The shares to be issued in the Exchange have been duly authorized and
upon receipt by the Principal Shareholders will be duly issued, fully-paid
and nonassessable shares of AmeriQuest Common Stock, duly approved for
listing on the NYSE upon official notice of issuance.
7.11 Third Party Consents. Robec shall have received all consents from third
parties which are required for the consummation of the Exchange or the Merger.
7.12 Horsham Lease. AmeriQuest shall have confirmed that the Surviving
Corporation will continue the existing lease and the use of the Robec office
building and warehouse in Horsham, Pennsylvania as its East Coast distribution
facility through end of the term of such lease.
7.13 No Material Adverse Change. There shall have been no material adverse
change in the business, properties, operations, financial conditions or
earnings of AmeriQuest since the date hereof.
7.14 Registration Rights. AmeriQuest shall have entered into a form of
Registration Rights Agreement with the Principal Shareholders in the form
attached hereto as Exhibit B.
7.15 Approval of Legal Matters by Counsel. All legal matters in connection
with this Agreement and the Exchange Closing hereunder shall be approved by
Morgan, Lewis & Bockius, legal counsel for Robec, in the exercise of reasonable
judgment; and there shall have been furnished to such counsel by AmeriQuest
such corporate and other records and information as they may reasonably have
requested for such purpose.
7.16 New York Stock Exchange Listing. The AmeriQuest Common Stock to be
issued pursuant to the Exchange shall have been approved for listing on the
NYSE upon official notice of issuance.
7.17 Repayment of Robec Debt. AmeriQuest or Robec shall have received
proceeds of a loan in an amount to Robec sufficient to repay all amounts
outstanding under the Credit Agreement pursuant to Section 4.22 hereof.
B. The obligation of Robec to consummate and to effect the Merger
contemplated hereunder shall be subject to the following express conditions
precedent:
II-19
<PAGE>
7.18 Completion of Exchange and Fulfillment of Conditions to Exchange. The
Exchange shall have occurred.
7.19 Effective Registration Statement. The Registration Statement on Form S-4
which is referred to in Section 1.08(c) hereof shall have been declared
effective by the SEC and not be the subject of any stop-order from the SEC or
other proceeding by the SEC which would bring into question the accuracy and
adequacy of the disclosures contained therein.
7.20 Shareholder Approvals. All required approvals from the shareholders of
Robec, Newco and AmeriQuest shall have been obtained.
7.21 New York Stock Exchange Listing. The AmeriQuest Common Stock issued
pursuant to the Exchange and to be issued pursuant to the Merger shall have
been approved for listing on the NYSE upon official notice of issuance.
7.22 Opinion of Counsel. AmeriQuest shall have furnished Robec with a
favorable opinion, dated the Effective Date, of Raymond L. Ridge, Esq.,
addressed to Robec and in form and substance satisfactory to Robec and its
legal counsel, to the effect that:
(a) AmeriQuest is a corporation duly incorporated, validly existing, and
in good standing under the laws of the State of Delaware.
(b) Newco is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania.
(c) All corporate proceedings required to be taken by or on the part of
AmeriQuest to authorize it to carry out this Agreement have been performed,
and this Agreement has been duly executed and delivered by AmeriQuest, is
valid and binding upon AmeriQuest and, subject to any insolvency laws of
general applicability, is enforceable in accordance with its terms.
(d) The shares to be issued in the Merger have been duly authorized and
upon receipt by the Robec shareholders will be duly issued, fully-paid and
nonassessable shares of AmeriQuest Common Stock, duly approved for listing
on the NYSE upon official notice of issuance.
7.23 No Litigation. No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any United States federal or state governmental or
regulatory body which prevents consummation of the Merger and which is in
effect on the Merger Closing Date.
7.24 Continued Truth of Warranties. The representations and warranties of
AmeriQuest herein contained shall be true on and as of the Effective Date with
the same force and effect as though made as of such date, except for any
variations permitted by this Agreement.
7.25 Performance of Covenants. AmeriQuest shall have performed all material
covenants and obligations and complied with all material conditions required by
this Agreement to be performed or complied with by it prior to the Effective
Date.
7.26 Approval of Legal Matters by Counsel. All legal matters in connection
with this Agreement and the Merger Closing hereunder shall be approved by
Morgan, Lewis & Bockius, legal counsel for Robec, in the exercise of reasonable
judgment; and there shall have been furnished to such counsel by AmeriQuest
such corporate and other records and information as they may reasonably have
requested for such purpose.
ANY OF THE CONDITIONS CONTAINED IN THIS ARTICLE VII OTHER THAN SECTION 7.14
MAY BE WAIVED, IN WHOLE OR IN PART, BY ROBEC.
II-20
<PAGE>
ARTICLE VIII.
MISCELLANEOUS
8.01 Broker For AmeriQuest. AmeriQuest represents and warrants that no
person, firm or corporation has acted in the capacity of broker on its behalf
to bring about the negotiation of this Agreement, and agrees to indemnify and
hold harmless Robec, its subsidiaries and affiliates, against any claims or
liabilities asserted against them by any person acting or claiming to act as a
broker or finder on behalf of AmeriQuest.
8.02 Broker for Robec. Robec represents and warrants that it is obligated to
pay to Penn Hudson Financial Group, Inc. a fee of $75,000 (the "Penn Hudson
Fee") in such firm's capacity as a broker on behalf of Robec in connection with
this Agreement. Robec agrees to pay the Penn Hudson Fee prior to or on the
Effective Date and to indemnify and hold harmless AmeriQuest, its subsidiaries
and affiliates, against any claims or liabilities asserted against them by any
other person acting or claiming to act as a broker or finder on behalf of
Robec.
8.03 Notices. Any notices or other communications required or permitted
hereunder to AmeriQuest and Robec shall be sufficiently given if delivered in
person or sent by telephonic facsimile or by registered mail or courier
service, charges prepaid, addressed as follows:
In the case of AmeriQuest:
AmeriQuest Technologies, Inc.
2722 Michelson Drive
Irvine, California
FAX No. (714) 222-6310
ATTENTION: Harold L. Clark, President
In the case of Robec:
Robec Inc.
425 Privet Road
Horsham, Pennsylvania
FAX No. (215) 672-9747
ATTENTION: Robert H. Beckett, Chairman, Chief Executive Officer
and President
With a copy to:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103
FAX No. (215) 963-5299
ATTENTION: Edward B. Cloues II, Esq.
or to such substituted address as any party has given notice to the other in
writing.
8.04 Waivers and Amendments. Any failure by AmeriQuest or of Robec to comply
with any of their respective obligations, agreements or covenants as set forth
herein may be expressly waived in writing by AmeriQuest in the case of a
default by Robec, and by Robec in the case of a default by AmeriQuest.
8.05 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
8.06 Confidentiality. Robec and AmeriQuest will provide to each other and, in
the case of AmeriQuest, to the Principal Shareholders, information concerning
their respective businesses and properties. All such information which each
party may provide (or which it has already provided) to the other party, except
information available to the public through documents filed with the Securities
and Exchange Commission
II-21
<PAGE>
or otherwise available to the public, is hereinafter called the "Confidential
Information." The Confidential Information shall be treated by the receiving
party as confidential and shall be used by the receiving party only for the
purpose of considering the transaction contemplated by this Agreement. Each of
the parties hereto will retain in confidence, and will require its employees,
consultants, professional representatives and agents to retain in confidence,
all Confidential Information of the other party, and neither party will use or
disclose to others, or permit the use or disclosure of, any such Confidential
Information except for such purpose and except for such disclosure to their
employees, consultants, professional representatives and agents as may be
necessary for such purpose.
If either Robec or AmeriQuest terminates this Agreement, each party will
promptly deliver to the other (without retaining copies thereof) any and all
documents and other materials containing the Confidential Information obtained
from the other party in connection with such discussions, and the Principal
Shareholders will do likewise. Additionally, if this Agreement should be
terminated as herein provided, the parties hereto shall each keep confidential
any information (unless readily ascertainable from public information) obtained
from the other party concerning the properties, operations and business of the
other.
8.07 Expenses. The parties hereto shall each pay their own expenses in
connection with this Agreement and the Merger contemplated hereby. The expense
of furnishing documents required under this Agreement shall be borne by the
party obligated to furnish the same.
8.08 Termination of Agreement. This Agreement may be terminated: (a) by
mutual agreement of Robec and AmeriQuest; (b) by AmeriQuest, prior to the
Exchange, if there has been a breach by Robec of any representation, warranty,
covenant or agreement set forth in this Agreement on the part of Robec which
has or can reasonably be expected to have a material adverse effect on Robec
and which Robec fails to cure prior to the Exchange (except that no cure period
shall be provided for a breach by Robec which by its nature cannot be cured) or
if approval of this Agreement by its board of directors pursuant to Section
6.01 hereof is not obtained; (c) by Robec, if there has been a breach by
AmeriQuest of any representation, warranty, covenant or agreement set forth in
this Agreement on the part of AmeriQuest which has or can reasonably be
expected to have a material adverse effect on AmeriQuest and which AmeriQuest
fails to cure prior to the Effective Date (except that no cure period shall be
provided for a breach by AmeriQuest which by its nature cannot be cured) or if
approval of this Agreement by its board of directors pursuant to Section 7.01
hereof or by its shareholders pursuant to Section 1.08(b) hereof is not
obtained; (d) by either party, if the Exchange shall not have occurred on or
prior to September 30, 1994; (e) by Robec, if the Merger shall not have
occurred on or prior to December 31, 1994, or (f) by Robec or any of the
Principal Shareholders if prior to the Exchange Robec decides to accept a
Superior Proposal (as defined in Section 8.09 hereof). Unless a termination is
caused by the willful failure of one of the parties hereto to perform or
satisfy an agreement or condition to be performed or satisfied by it hereunder,
none of the parties hereto shall have any further obligation or liability to
the other parties under this Agreement other than their respective obligations
under Sections 8.06, 8.07 and 8.12 hereof.
8.09 Competing Offers. Notwithstanding the foregoing, in the event that Robec
receives a bona fide proposal relating to the possible acquisition of Robec
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any material portion of its capital stock or assets by any person
other than AmeriQuest, which proposal is, in the reasonable good faith judgment
of the Board of Directors of Robec, financially more favorable to the
shareholders of Robec than the terms of the Merger (a "Superior Proposal"),
nothing contained in this Agreement shall prevent the Board of Directors of
Robec from providing information to the party making the Superior Proposal,
negotiating with the party making the Superior Proposal, communicating the
Superior Proposal to the shareholders of Robec or making a recommendation in
favor of the Superior Proposal if before making such recommendation the Board
of Directors determines in good faith, after consultation with legal counsel,
that such action is required or likely required by reason of the fiduciary
duties of the members of the Board of Directors of Robec to the shareholders of
Robec under applicable law.
II-22
<PAGE>
However, Robec shall immediately notify AmeriQuest of each proposal it may so
receive to afford AmeriQuest the opportunity to counter with a proposal that is
equal to or better than any Superior Proposal that Robec may receive.
8.10 Announcement. Upon execution of this Agreement, AmeriQuest and Robec
promptly will issue a joint press release approved by both AmeriQuest and Robec
announcing the Exchange and the Merger. Thereafter, neither of such parties
shall make any further announcements with respect to this Agreement or the
transactions proposed herein, without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed, provided,
however, that AmeriQuest and Robec may issue such press releases, and make such
other disclosures regarding the transactions contemplated herein, as each
determines (after consultation with legal counsel) are required under
applicable securities laws, NYSE rules or rules of the National Association of
Securities Dealers Automated Quotation system ("NASDAQ").
8.11 Robec Approvals After the Exchange. After the consummation of the
Exchange, any waiver of any condition, or consent to any action, or any
amendment to this Agreement or the Plan of Merger by Robec, shall require, in
addition to any other approval required by applicable law or Robec's Articles
of Incorporation, the approval of a majority of the Robec directors who were
directors of Robec as of the date hereof.
8.12 Indemnification and Insurance. (a) The Certificate of Incorporation of
the Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Articles of Incorporation of Robec on the date
of this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Date in any manner that
would adversely affect the rights thereunder of individuals who at the
Effective Date were directors, officers, employees or agents of Robec, unless
such modification is required by law.
(b) After the Effective Date (and with respect to the Principal Shareholders,
after the Exchange Closing), AmeriQuest and the Surviving Corporation shall, to
the fullest extent permitted under applicable law or under AmeriQuest's or the
Surviving Corporation's Certificate of Incorporation or By-laws, indemnify and
hold harmless each present and former director and officer of Robec and, to the
fullest extent permitted under applicable law, each Principal Shareholder
(collectively, the "Indemnified Parties") against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission occurring prior to the Effective Date, or arising out of or pertaining
to the transactions contemplated by this Agreement (collectively, "Damages"),
for a period of six years after the date hereof. Furthermore, for a period of
six years after the date hereof, AmeriQuest and the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless each Principal Shareholder in his capacity as an accommodating
shareholder against any Damages arising out of or pertaining to the
transactions contemplated by this Agreement. AmeriQuest or the Surviving
Corporation shall, to the fullest extent permitted under applicable law, pay
expenses incurred by an Indemnified Party in advance of a disposition of the
applicable action or suit upon the receipt of an undertaking by such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified hereunder. If for any reason AmeriQuest and the Surviving
Corporation do not promptly fulfill the indemnification and payment obligations
to the Principal Shareholders set forth in this Section 8.12(b), Robec or its
successor shall perform such obligations as though named in such provisions to
the fullest extent permitted under applicable law. The indemnifying party shall
have the right to choose counsel reasonably acceptable to the Indemnified
Parties. Indemnified Parties may not agree to settle claim without the consent
of the indemnifying party, which consent may not be unreasonably withheld.
(c) For a period of six years after the Effective Date, AmeriQuest shall
cause the Surviving Corporation to use its best efforts to maintain in effect,
if available, directors' and officers' liability insurance covering those
persons who are currently covered by Robec's directors' and officers' liability
insurance policy (a copy
II-23
<PAGE>
of which has been heretofore delivered or made available to AmeriQuest) on
terms comparable to those applicable to the then current directors and officers
of AmeriQuest.
8.13 Attorney's Fees. If any action or proceeding is brought by either party
against the other with respect to this Agreement, the prevailing party shall be
entitled to recover attorney's fees and costs in such amount as the court (or
the arbitrators) may adjudge reasonable.
8.14 Further Assurances. Each of Robec and AmeriQuest agree to use its best
efforts to obtain all consents required by it to consummate the transactions
contemplated by this Agreement. Each party agrees to cooperate with the other
and to execute such further instruments, documents and agreements as may be
reasonably requested by the other to evidence and reflect the transactions
contemplated by this Agreement.
8.15 Headings. The headings herein are for convenience of reference only, do
not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions of this Agreement.
8.16 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
8.17 Entire Agreement. All prior negotiations and agreements between the
parties hereto are superseded by this Agreement and there are no
representations, warranties, understandings or agreements other than those
expressly set forth herein, in the attached Appendices or in Exhibits delivered
pursuant hereto, except as modified in writing concurrently herewith or
subsequent hereto.
WHEREFORE, the parties have set their hands on September 21, 1994 but
effective as of August 11, 1994.
AmeriQuest Technologies, Inc.
Attest:
/s/ Stephen G. Holmes /s/ Harold L. Clark
_____________________________________ _____________________________________
Stephen G. Holmes, Harold L. Clark,
Secretary President
Robec, Inc.
Attest:
/s/ Robert S. Beckett /s/ Robert H. Beckett
_____________________________________ _____________________________________
Robert S. Beckett, Robert H. Beckett,
Secretary Chairman, Chief Executive Officer
and President
PRINCIPAL SHAREHOLDERS
Each individual Principal Shareholder is joining in this Amended and Restated
Agreement and Plan of Reorganization in his or her capacity as an individual
shareholder solely for the purpose of agreeing to be bound by Sections 1.01,
8.06, 8.08 and 8.16 hereof.
/s/ Robert H. Beckett
_____________________________________
Robert H. Beckett
/s/ Robert S. Beckett
_____________________________________
Robert S. Beckett
/s/ Alexander C. Kramer, Jr.
_____________________________________
Alexander C. Kramer, Jr.
/s/ G. Wesley McKinney
_____________________________________
G. Wesley McKinney
II-24
<PAGE>
APPENDICES
Appendix I --Stock Options, Warrants and Convertible Securities of AmeriQuest
Appendix II --AmeriQuest's Subsidiaries
Appendix III --Instruments Violated by AmeriQuest being party to the Agreement
Appendix IV --Defaults by AmeriQuest
Appendix V --Certain Material AmeriQuest Agreements
Appendix VI --Certain AmeriQuest Litigation
Appendix VII --AmeriQuest's Highly Compensated Employees
Appendix VIII--AmeriQuest's Labor Concerns and Financial Condition
Appendix IX --Stock Options, Warrants and Convertible Securities of Robec
Appendix X --Robec's Subsidiaries
Appendix XI --Instruments Violated by Robec being party to the Agreement
Appendix XII --Robec's Loans in Default and Scheduled for Repayment Prior to the
Effective Date
Appendix XIII--Certain Material Robec Agreements
Appendix XIV --Certain Robec Litigation
Appendix XV --Robec's Highly Compensated Employees
Appendix XVI --Robec's Labor Concerns and Financial Condition
II-25
<PAGE>
EXHIBITS
Exhibit A--Plan of Merger
Exhibit B--Registration Rights Agreement
Exhibit C--Form of Employment Agreement.
II-26
<PAGE>
APPENDIX III
COMPASS
CAPITAL ADVISORS
September 20, 1994
Board of Directors
Robec, Inc.
425 Privet Road
Horsham, PA 19044
Dear Sirs:
You have asked us to render our opinion as to whether the proposed merger of
Robec, Inc. ("Robec" or the "Company") with a wholly-owned subsidiary of
AmeriQuest Technologies, Inc. ("AmeriQuest"), pursuant to which the outstanding
shares of Robec common stock will be converted to 0.63075 shares of AmeriQuest
common stock (the "Transaction"), is fair, from a financial point of view, to
the current shareholders of the Company.
Compass Capital Advisors ("CCA"), as part of its investment banking business,
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, employee benefit plans, and
valuations for corporate, estate, and other purposes. Neither CCA nor any of
its officers or employees has any interest in AmeriQuest or the Company, and
all of such persons are otherwise independent with respect to the Transaction.
In arriving at our opinion we have:
1. reviewed the Amended and Restated Agreement and Plan of Reorganization
dated as of August 11, 1994 by and among, inter alia, Robec and AmeriQuest,
including the Plan of Merger attached thereto;
2. reviewed the filings of Robec and AmeriQuest with the Securities and
Exchange Commission in 1993 and 1994 to date;
3. reviewed the Company's 1994 budget income statement and 1995 projected
consolidated statement of operations prepared by the Company's management;
4. reviewed AmeriQuest's budget model;
5. reviewed AmeriQuest's internally prepared projected financial
statements for Robec and AmeriQuest operations for 1994 through 1998;
6. reviewed AmeriQuest's Form S-4 Registration Statement, as filed with
the Securities and Exchange Commission on July 20, 1994;
7. reviewed press releases issued by Robec between August 1993 and August
10, 1994 and by AmeriQuest between December 1993 and August 12, 1994;
8. reviewed price and volume information relating to trading in Robec and
AmeriQuest common stock from 1992 through September 16, 1994;
9. reviewed and analyzed market trading and financial information about
certain publicly-traded companies which we deemed to be reasonably similar
to Robec and AmeriQuest;
10. reviewed and analyzed publicly available information with respect to
reported acquisitions in the computer industry;
11. discussed the business and prospects of the Company with its senior
management; and
12. reviewed all of the foregoing with you before forming our opinion.
III-1
<PAGE>
In preparing our opinion, we have relied on the accuracy and completeness of
all information supplied or otherwise made available to us by Robec and
AmeriQuest, and we have not independently verified such information or
undertaken an independent appraisal of the assets of Robec or AmeriQuest. We
assume no responsibility to revise or update our opinion if there is a change
in the financial condition or prospects of Robec or AmeriQuest from that
disclosed or projected in the information we reviewed and set forth above or in
the general, economic or market conditions. This opinion does not constitute a
recommendation to any Robec shareholder as to how any such shareholder should
vote on the Transaction. This opinion does not address the relative merits of
the Transaction and any other transactions or business strategies that may have
been discussed by the Company's Board of Directors as alternatives to the
Transaction or the decision of the Company's Board of Directors to proceed with
the Transaction. Our opinion has been prepared solely for the use of the
Company's Board of Directors in its consideration of the Transaction and may
not be reproduced, summarized, described or referred to or given to any other
person or otherwise made public without CCA's prior written consent, except for
inclusion in full in the proxy statement to be sent to the Company's
shareholders in connection with obtaining shareholder approval of the
Transaction, and in any other filings made by the Company under applicable
securities laws. No opinion is expressed herein as to the price at which the
securities to be issued in the Transaction may trade at any time.
Based upon and subject to the foregoing, it is our opinion that the
Transaction is fair, from a financial point of view, to the shareholders of the
Company.
Compass Capital Advisors
/s/ Gabriel F. Nagy
By __________________________________
Gabriel F. Nagy, A.S.A.
Vice President
III-2
<PAGE>
APPENDIX IV
SUBCHAPTER 15D OF THE PENNSYLVANIA BUSINESS CORPORATION LAW
DISSENTERS RIGHTS
Section
1571. Application and effect of subchapter.
1572. Definitions.
1573. Record and beneficial holders and owners.
1574. Notice of intention to dissent.
1575. Notice to demand payment.
1576. Failure to comply with notice to demand payment, etc.
1577. Release of restrictions or payment for shares.
1578. Estimate by dissenter of fair value of shares.
1579. Valuation proceedings generally.
1580. Costs and expenses of valuation proceedings.
(S)1571. APPLICATION AND EFFECT OF SUBCHAPTER.
(a) GENERAL RULE.--Except as otherwise provided in subsection (b), any
shareholder of a business corporation shall have the right to dissent from, and
to obtain payment of the fair value of his shares in the event of, any
corporate action, or to otherwise obtain fair value for his shares, where this
part expressly provides that a shareholder shall have the rights and remedies
provided in this subchapter. See:
Section 1906(c) (relating to dissenters rights upon special treatment).
Section 1930 (relating to dissenters rights).
Section 1931(d) (relating to dissenters rights in share exchanges).
Section 1932(c) (relating to dissenters rights in asset transfers).
Section 1952(d) (relating to dissenters rights in division).
Section 1962(c) (relating to dissenters rights in conversion).
Section 2104(b) (relating to procedure).
Section 2324 (relating to corporation option where a restriction on
transfer of a security is held invalid).
Section 2325(b) (relating to minimum vote requirement).
Section 2704(d) (relating to dissenters rights upon election).
Section 2705(c) (relating to dissenters rights upon renewal of election).
Section 2907(a) (relating to proceedings to terminate breach of
qualifying conditions).
Section 7104(b)(3) (relating to procedure).
(B) EXCEPTIONS.--
(1) Except as otherwise provided in paragraph (2), the holders of the
shares of any class or series of shares that, at the record date fixed to
determine the shareholders entitled to notice of and to vote at the meeting
at which a plan specified in any of section 1930, 1931(d), 1932(c) or
1952(d) is to be voted on, are either:
(i) listed on a national securities exchange; or
(ii) held of record by more than 2,000 shareholders;
shall not have the right to obtain payment of the fair value of any such
shares under this subchapter.
IV-1
<PAGE>
(2) Paragraph (1) shall not apply to and dissenters rights shall be
available without regard to the exception provided in that paragraph in the
case of:
(i) Shares converted by a plan if the shares are not converted solely
into shares of the acquiring, surviving, new or other corporation or
solely into such shares and money in lieu of fractional shares.
(ii) Shares of any preferred or special class unless the articles,
the plan or the terms of the transaction entitle all shareholders of
the class to vote thereon and require for the adoption of the plan or
the effectuation of the transaction the affirmative vote of a majority
of the votes cast by all shareholders of the class.
(iii) Shares entitled to dissenters rights under section 1906(c)
(relating to dissenters rights upon special treatment).
(3) The shareholders of a corporation that acquires by purchase, lease,
exchange or other disposition all or substantially all of the shares,
property or assets of another corporation by the issuance of shares,
obligations or otherwise, with or without assuming the liabilities of the
other corporation and with or without the intervention of another
corporation or other person, shall not be entitled to the rights and
remedies of dissenting shareholders provided in this subchapter regardless
of the fact, if it be the case, that the acquisition was accomplished by
the issuance of voting shares of the corporation to be outstanding
immediately after the acquisition sufficient to elect a majority or more of
the directors of the corporation.
(C) GRANT OF OPTIONAL DISSENTERS RIGHTS.--The bylaws or a resolution of the
board of directors may direct that all or a part of the shareholders shall have
dissenters rights in connection with any corporate action or other transaction
that would otherwise not entitle such shareholders to dissenters rights.
(D) NOTICE OF DISSENTERS RIGHTS.--Unless otherwise provided by statute, if a
proposed corporate action that would give rise to dissenters rights under this
subpart is submitted to a vote at a meeting of shareholders, there shall be
included in or enclosed with the notice of meeting:
(1) a statement of the proposed action and a statement that the
shareholders have a right to dissent and obtain payment of the fair value
of their shares by complying with the terms of this subchapter; and
(2) a copy of this subchapter.
(E) OTHER STATUTES.--The procedures of this subchapter shall also be
applicable to any transaction described in any statute other than this part
that makes reference to this subchapter for the purpose of granting dissenters
rights.
(F) CERTAIN PROVISIONS OF ARTICLES INEFFECTIVE.--This subchapter may not be
relaxed by any provision of the articles.
(G) CROSS REFERENCES.--See sections 1105 (relating to restriction on
equitable relief), 1904 (relating to de facto transaction doctrine abolished)
and 2512 (relating to dissenters rights procedure).
(S)1572. DEFINITIONS.
The following words and phrases when used in this subchapter shall have the
meanings given to them in this section unless the context clearly indicates
otherwise:
"CORPORATION." The issuer of the shares held or owned by the dissenter
before the corporate action or the successor by merger, consolidation,
division, conversion or otherwise of that issuer. A plan of division may
designate which of the resulting corporations is the successor corporation
for the purposes of this subchapter. The successor corporation in a
division shall have sole responsibility for payments to dissenters and
other liabilities under this subchapter except as otherwise provided in the
plan of division.
IV-2
<PAGE>
"DISSENTER." A shareholder or beneficial owner who is entitled to and
does assert dissenters rights under this subchapter and who has performed
every act required up to the time involved for the assertion of those
rights.
"FAIR VALUE." The fair value of shares immediately before the
effectuation of the corporate action to which the dissenter objects, taking
into account all relevant factors, but excluding any appreciation or
depreciation in anticipation of the corporate action.
"INTEREST." Interest from the effective date of the corporate action
until the date of payment at such rate as is fair and equitable under all
of the circumstances, taking into account all relevant factors including
the average rate currently paid by the corporation on its principal bank
loans.
(S)1573. RECORD AND BENEFICIAL HOLDERS AND OWNERS.
(A) RECORD HOLDERS OF SHARES.--A record holder of shares of a business
corporation may assert dissenters rights as to fewer than all of the shares
registered in his name only if he dissents with respect to all the shares
beneficially owned by any one person and discloses the name and address of the
person or persons on whose behalf he dissents. In that event, his rights shall
be determined as if the shares as to which he has dissented and his other
shares were registered in the names of different shareholders.
(B) BENEFICIAL OWNERS OF SHARES.--A beneficial owner of shares of a business
corporation who is not the record holder may assert dissenters rights with
respect to shares held on his behalf and shall be treated as a dissenting
shareholder under the terms of this subchapter if he submits to the corporation
not later than the time of the assertion of dissenters rights a written consent
of the record holder. A beneficial owner may not dissent with respect to some
but less than all shares of the same class or series owned by the owner,
whether or not the shares so owned by him are registered in his name.
(S)1574. NOTICE OF INTENTION TO DISSENT.
If the proposed corporate action is submitted to a vote at a meeting of
shareholders of a business corporation, any person who wishes to dissent and
obtain payment of the fair value of his shares must file with the corporation,
prior to the vote, a written notice of intention to demand that he be paid the
fair value for his shares if the proposed action is effectuated, must effect no
change in the beneficial ownership of his shares from the date of such filing
continuously through the effective date of the proposed action and must refrain
from voting his shares in approval of such action. A dissenter who fails in any
respect shall not acquire any right to payment of the fair value of his shares
under this subchapter. Neither a proxy nor a vote against the proposed
corporate action shall constitute the written notice required by this section.
(S)1575. NOTICE TO DEMAND PAYMENT.
(A) GENERAL RULE.--If the proposed corporate action is approved by the
required vote at a meeting of shareholders of a business corporation, the
corporation shall mail a further notice to all dissenters who gave due notice
of intention to demand payment of the fair value of their shares and who
refrained from voting in favor of the proposed action. If the proposed
corporate action is to be taken without a vote of shareholders, the corporation
shall send to all shareholders who are entitled to dissent and demand payment
of the fair value of their shares a notice of the adoption of the plan or other
corporate action. In either case, the notice shall:
(1) State where and when a demand for payment must be sent and
certificates for certificated shares must be deposited in order to obtain
payment.
(2) Inform holders of uncertificated shares to what extent transfer of
shares will be restricted from the time that demand for payment is
received.
(3) Supply a form for demanding payment that includes a request for
certification of the date on which the shareholder, or the person on whose
behalf the shareholder dissents, acquired beneficial ownership of the
shares.
(4) Be accompanied by a copy of this subchapter.
IV-3
<PAGE>
(B) TIME FOR RECEIPT OF DEMAND FOR PAYMENT.--The time set for receipt of the
demand and deposit of certificated shares shall be not less than 30 days from
the mailing of the notice.
(S)1576. FAILURE TO COMPLY WITH NOTICE TO DEMAND PAYMENT, ETC.
(A) EFFECT OF FAILURE OF SHAREHOLDER TO ACT.--A shareholder who fails to
timely demand payment, or fails (in the case of certificated shares) to timely
deposit certificates, as required by a notice pursuant to section 1575
(relating to notice to demand payment) shall not have any right under this
subchapter to receive payment of the fair value of his shares.
(B) RESTRICTION ON UNCERTIFICATED SHARES.--If the shares are not represented
by certificates, the business corporation may restrict their transfer from the
time of receipt of demand for payment until effectuation of the proposed
corporate action or the release of restrictions under the terms of section
1577(a) (relating to failure to effectuate corporate action).
(C) RIGHTS RETAINED BY SHAREHOLDER.--The dissenter shall retain all other
rights of a shareholder until those rights are modified by effectuation of the
proposed corporate action.
(S)1577. RELEASE OF RESTRICTIONS OR PAYMENT FOR SHARES.
(A) FAILURE TO EFFECTUATE CORPORATE ACTION.--Within 60 days after the date
set for demanding payment and depositing certificates, if the business
corporation has not effectuated the proposed corporate action, it shall return
any certificates that have been deposited and release uncertificated shares
from any transfer restrictions imposed by reason of the demand for payment.
(B) RENEWAL OF NOTICE TO DEMAND PAYMENT.--When uncertificated shares have
been released from transfer restrictions and deposited certificates have been
returned, the corporation may at any later time send a new notice conforming to
the requirements of section 1575 (relating to notice to demand payment), with
like effect.
(C) PAYMENT OF FAIR VALUE OF SHARES.--Promptly after effectuation of the
proposed corporate action, or upon timely receipt of demand for payment if the
corporate action has already been effectuated, the corporation shall either
remit to dissenters who have made demand and (if their shares are certificated)
have deposited their certificates the amount that the corporation estimates to
be the fair value of the shares, or give written notice that no remittance
under this section will be made. The remittance or notice shall be accompanied
by:
(1) The closing balance sheet and statement of income of the issuer of
the shares held or owned by the dissenter for a fiscal year ending not more
than 16 months before the date of remittance or notice together with the
latest available interim financial statements.
(2) A statement of the corporation's estimate of the fair value of the
shares.
(3) A notice of the right of the dissenter to demand payment or
supplemental payment, as the case may be, accompanied by a copy of this
subchapter.
(D) FAILURE TO MAKE PAYMENT.--If the corporation does not remit the amount of
its estimate of the fair value of the shares as provided by subsection (c), it
shall return any certificates that have been deposited and release
uncertificated shares from any transfer restrictions imposed by reason of the
demand for payment. The corporation may make a notation on any such certificate
or on the records of the corporation relating to any such uncertificated shares
that such demand has been made. If shares with respect to which notation has
been so made shall be transferred, each new certificate issued therefor or the
records relating to any transferred uncertificated shares shall bear a similar
notation, together with the name of the original dissenting holder or owner of
such shares. A transferee of such shares shall not acquire by such transfer any
rights in the corporation other than those that the original dissenter had
after making demand for payment of their fair value.
IV-4
<PAGE>
(S)1578. ESTIMATE BY DISSENTER OF FAIR VALUE OF SHARES.
(A) GENERAL RULE.--If the business corporation gives notice of its estimate
of the fair value of the shares, without remitting such amount, or remits
payment of its estimate of the fair value of a dissenter's shares as permitted
by section 1577(c) (relating to payment of fair value of shares) and the
dissenter believes that the amount stated or remitted is less than the fair
value of his shares, he may send to the corporation his own estimate of the
fair value of the shares, which shall be deemed a demand for payment of the
amount or the deficiency.
(B) EFFECT OF FAILURE TO FILE ESTIMATE.--Where the dissenter does not file
his own estimate under subsection (a) within 30 days after the mailing by the
corporation of its remittance or notice, the dissenter shall be entitled to no
more than the amount stated in the notice or remitted to him by the
corporation.
(S)1579. VALUATION PROCEEDINGS GENERALLY.
(A) GENERAL RULE.--Within 60 days after the latest of:
(1) effectuation of the proposed corporate action;
(2) timely receipt of any demands for payment under section 1575
(relating to notice to demand payment); or
(3) timely receipt of any estimates pursuant to section 1578 (relating to
estimate by dissenter of fair value of shares);
if any demands for payment remain unsettled, the business corporation may file
in court an application for relief requesting that the fair value of the shares
be determined by the court.
(B) MANDATORY JOINDER OF DISSENTERS.--All dissenters, wherever residing,
whose demands have not been settled shall be made parties to the proceeding as
in an action against their shares. A copy of the application shall be served on
each such dissenter. If a dissenter is a nonresident, the copy may be served on
him in the manner provided or prescribed by or pursuant to 42 Pa.C.S. Ch. 53
(relating to bases of jurisdiction and interstate and international procedure).
(C) JURISDICTION OF THE COURT.--The jurisdiction of the court shall be
plenary and exclusive. The court may appoint an appraiser to receive evidence
and recommend a decision on the issue of fair value. The appraiser shall have
such power and authority as may be specified in the order of appointment or in
any amendment thereof.
(D) MEASURE OF RECOVERY.--Each dissenter who is made a party shall be
entitled to recover the amount by which the fair value of his shares is found
to exceed the amount, if any, previously remitted, plus interest.
(E) EFFECT OF CORPORATION'S FAILURE TO FILE APPLICATION.--If the corporation
fails to file an application as provided in subsection (a), any dissenter who
made a demand and who has not already settled his claim against the corporation
may do so in the name of the corporation at any time within 30 days after the
expiration of the 60-day period. If a dissenter does not file an application
within the 30-day period, each dissenter entitled to file an application shall
be paid the corporation's estimate of the fair value of the shares and no more,
and may bring an action to recover any amount not previously remitted.
(S)1580. COSTS AND EXPENSES OF VALUATION PROCEEDINGS.
(A) GENERAL RULE.--The costs and expenses of any proceeding under section
1579 (relating to valuation proceedings generally), including the reasonable
compensation and expenses of the appraiser appointed by the court, shall be
determined by the court and assessed against the business corporation except
that any part of the costs and expenses may be apportioned and assessed as the
court deems appropriate against all or some of the dissenters who are parties
and whose action in demanding supplemental payment under section 1578 (relating
to estimate by dissenter of fair value of shares) the court finds to be
dilatory, obdurate, arbitrary, vexatious or in bad faith.
IV-5
<PAGE>
(B) ASSESSMENT OF COUNSEL FEES AND EXPERT FEES WHERE LACK OF GOOD FAITH
APPEARS.--Fees and expenses of counsel and of experts for the respective
parties may be assessed as the court deems appropriate against the corporation
and in favor of any or all dissenters if the corporation failed to comply
substantially with the requirements of this subchapter and may be assessed
against either the corporation or a dissenter, in favor of any other party, if
the court finds that the party against whom the fees and expenses are assessed
acted in bad faith or in a dilatory, obdurate, arbitrary or vexatious manner in
respect to the rights provided by this subchapter.
(C) AWARD OF FEES FOR BENEFITS TO OTHER DISSENTERS.--If the court finds that
the services of counsel for any dissenter were of substantial benefit to other
dissenters similarly situated and should not be assessed against the
corporation, it may award to those counsel reasonable fees to be paid out of
the amounts awarded to the dissenters who were benefitted.
IV-6
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The General Corporation Law of Delaware (Section 145) gives Delaware
corporations broad powers to indemnify their present and former directors and
officers against expenses incurred in the defense of any lawsuit to which they
are made parties by reason of being or having been such directors or officers,
subject to specified conditions and exclusions; gives a director or officer who
successfully defends an action the right to be so indemnified; and authorizes
the Registrant to buy directors' and officers' liability insurance. Such
indemnification is not exclusive of any other right to which those indemnified
may be entitled under any bylaw, agreement, vote of stockholders or otherwise.
Article VII, Section 7 of the By-laws of the Registrant makes mandatory the
indemnification expressly authorized under the General Corporation Law of
Delaware. The general effect of the provisions in the Registrant's By-laws and
under Delaware law is to provide that the Registrant shall indemnify its
directors and officers against all liabilities and expenses reasonably incurred
in connection with the defense or settlement of any judicial or administrative
proceedings in which they become involved by reason of their status as
corporate directors or officers, if they acted in good faith and in the
reasonable belief that their conduct was neither unlawful (in the case of
criminal proceedings) nor inconsistent with the best interests of the
Registrant. With respect to legal proceedings by or in the right of the
Registrant in which a director or officer is adjudged liable for improper
performance of his duty to the Registrant, indemnification is limited by such
provisions to that amount which is permitted by the court.
The Registrant has not purchased liability policies which indemnify its
officers and directors against loss arising from claims by reason of their
legal liability for acts as officers and directors.
II-1
<PAGE>
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
The following is a list of Exhibits filed as part of the Registration
Statement:
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. TITLE OF DOCUMENT PAGE
------- ----------------- ------------
<C> <S> <C>
2.01 Amended and Restated Agreement and Plan of 71
Reorganization to acquire Robec, Inc.
2.02 Plan of Merger to acquire Robec, Inc. 76
3.01 Certificate of Incorporation of AmeriQuest 85*
3.02 By-laws of AmeriQuest 258**
4.01 Reference is made to Exhibits 3.01 and 3.02, the
Certificate of Incorporation and By-laws, which
define the rights of security holders
4.02 Specimen Common Stock Certificate 274**
5.01 Opinion of Raymond L. Ridge, Esq.
8.01 Opinion of Arthur Andersen & Co. re: tax aspects
10.01 Loan and Security Agreement dated August 19, 1993, as 283**
amended, between AmeriQuest and certain of its
subsidiaries and Silicon Valley Bank.
10.02 Addendum to Agreement for Wholesale Financing-- 365**
Flexible Payment Plan dated September 30, 1993
between CDS Distribution Inc. and IBM Credit
Corporation
10.03 Standard Industrial Lease--Net dated July 26, 1990, as 402**
amended, between AmeriQuest and Varian Associates
(successor-in-interest to Koll Center Irvine East)
10.04 Agreement of Sublease dated December 5, 1994 by and
between AmeriQuest and The Austin Company.
13.01 AmeriQuest's Annual Report on Form 10-K/A as amended
for the fiscal year ended June 30, 1994, filed
pursuant to Section 13 of the Securities Exchange Act
of 1934.
13.02 AmeriQuest's Quarterly Report on Form 10-Q/A as To be filed
amended for the quarter ended September 30, 1994, by amendment.
filed pursuant to Section 13 of the Securities
Exchange Act of 1934.
13.03 AmeriQuest's Current Reports on Form 8-K, as amended, To be filed
dated July 18, 1994, September 12, 1994 and November by amendment.
14, 1994, filed pursuant to Section 13 of
the Securities Exchange Act of 1934.
22.01 Subsidiaries of the Registrant
23.01 Consent of Raymond L. Ridge, Esq., Counsel to
Registrant
23.02 Consent of Arthur Andersen L.L.P. Auditors for the
Registrant
23.03 Consent of Arthur Andersen L.L.P. (contained in
Exhibit 8.01).
23.04 Consent of Coopers & Lybrand, L.L.P., Auditors for
Robec
23.05 Consent of KPMG Peat Marwick LLP, Auditors for NCD
23.06 Consent of Coopers & Lybrand, L.L.P., Auditors for NCD
24.01 Powers of Attorney for the Directors
</TABLE>
- --------
* As contained in the original filing of AmeriQuest's Annual Report on Form
10-K for the year ended June 30, 1994, SEC File No. 1-10397 and incorporated
herein by this reference.
** As contained in the original filing of Registration Statement 33-81726 and
incorporated herein by this reference pursuant to Rule 411(c) under the
Securities Act of 1933, as amended, and Rule 24 of the Commission's Rules of
Practice.
The Index to Financial Statement Schedules is set forth on page S-1 and is
incorporated herein by this reference. The Financial Statement Schedules are on
pages S-1 through S-11, and are incorporated herein by this reference.
II-2
<PAGE>
ITEM 22. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
1. That prior to any public reoffering of the securities registered hereunder
through the use of a prospectus which is part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items
of the applicable form.
2. That every prospectus (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as part of an amendment to the
registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, 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 deliver or cause to be delivered with the prospectus, to each person to
whom the prospectus is sent or given, the latest annual report to security
holders that is incorporated by reference in the prospectus and furnished
pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3 under
the Securities Exchange Act of 1934; and, where interim financial
information required to be presented by Article 3 of Regulation S-X are not
set forth in the prospectus, to deliver, or cause to be delivered to each
person to whom the prospectus is sent or given, the latest quarterly report
that is specifically incorporated by reference in the prospectus to provide
such interim financial information.
4. To respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
5. To supply by means of a post-effective amendment all information concerning
a transaction, and Kenfil Inc., that was not the subject of and included in
this Registration Statement when it became effective.
6. That, for purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to section
13(a) or section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report pursuant
to section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the 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.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "Act"), may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the provisions of the General
Corporation Law of Delaware discussed under Item 14 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 said
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 a 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 said Act
and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Irvine, State of
California, on the 18th day of January, 1995.
AMERIQUEST TECHNOLOGIES, INC.
By: HAROLD L. CLARK
-------------------------------
Harold L. Clark,
Chief Executive Officer
(This Space Intentionally Left Blank)
II-4
<PAGE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION
STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN THE CAPACITIES AND
ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
HAROLD L. CLARK Co-Chairman, Chief Executive January 18, 1995
____________________________________ Officer and Director
Harold L. Clark (Principal Executive
Officer)
GREGORY A. WHITE President, Chief Operating January 18, 1995
____________________________________ Officer
Gregory A. White and Director
STEPHEN G. HOLMES Secretary, Treasurer, Chief January 18, 1995
____________________________________ Financial Officer and
Stephen G. Holmes Director
(Principal Financial and
Accounting Officer)
MARC L. WERNER Chairman of the Board January 18, 1995
____________________________________
Marc L. Werner **
ERIC J. WERNER Director January 18, 1995
____________________________________
Eric J. Werner **
TERREN S. PEIZER Director January 18, 1995
____________________________________
Terren S. Peizer **
Director January , 1995
____________________________________
William T. Walker, Jr.
WILLIAM N. SILVIS Director January 18, 1995
____________________________________
William N. Silvis**
ROBERT H. BECKETT- Director January 19, 1995
____________________________________
Robert H. Beckett**
HAROLD L. CLARK STEPHEN G. HOLMES
____________________________________ ________________________________
Harold L. Clark,* Stephen G. Holmes,**
Attorney-in-Fact Attorney-in-Fact
</TABLE>
II-5
<PAGE>
EXHIBIT 23.01
CONSENT OF COUNSEL
I hereby consent to the reference to myself under the caption "Legal Matters"
in the Prospectus.
RAYMOND L. RIDGE, ESQ.
Newport Beach, California
January 18, 1995
II-6
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
Arthur Andersen LLP
Los Angeles, California
February 6, 1995
II-7
<PAGE>
EXHIBIT 23.04
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of AmeriQuest Technologies, Inc. on Form S-4 of our report on Robec, Inc.'s
Financial Statements, which includes explanatory paragraphs related to Robec's
ability to continue as a going concern and Robec's changing its method of
accounting for income taxes, dated April 13, 1994 on our audits of the
financial statements and the financial statement schedules of Robec, Inc. and
Subsidiaries. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND, L.L.P.
Philadelphia, Pennsylvania
January 17, 1995
II-8
<PAGE>
EXHIBIT 23.05
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
January 18, 1995
II-9
<PAGE>
EXHIBIT 23.06
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of AmeriQuest Technologies, Inc. on Form S-4 of our report on Ross White
Enterprises, Inc. d/b/a "National Computer Distributors" Financial Statements
on our audits of the financial statements and the financial statement schedules
of Ross White Enterprises, Inc. d/b/a "National Computer Distributors." We also
consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND, L.L.P.
Miami, Florida
January 18, 1995
II-10
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
AMERIQUEST'S FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants............................. S-2
Schedule VIII. Valuation and Qualifying Accounts and Reserves........ S-3
Schedule IX. Short-Term Borrowings................................... S-3
ROBEC'S FINANCIAL STATEMENT SCHEDULES
Report of Independent Accountants on Financial Statement Schedules... S-4
Schedule II. Amounts Receivable from Related Parties................. S-5
Schedule VIII. Valuation and Qualifying Accounts..................... S-6
Schedule IX. Short-Term Borrowings................................... S-7
NCD'S FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report......................................... F-1
Schedule VIII. Valuation and Qualifying Accounts..................... S-8
</TABLE>
Financial Statement Schedules Excluded:
All financial statement schedules not included are not applicable, not
required or would contain information which is shown in the financial
statements or notes thereto.
S-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AmeriQuest Technologies, Inc.:
We have audited in accordance with generally accepted auditing standards, the
financial statements of AmeriQuest Technologies, Inc. and subsidiaries included
in its Annual Report to Shareholders, incorporated by reference in this
registration statement and have issued our report thereon dated September 30,
1994. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. The schedules listed in the index are the
responsibility of AmeriQuest's management and are presented for purposes of
complying with the Securities and Exchange Commissions rules and are not part
of the basic financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial statements and,
in our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial statements
taken as a whole.
Arthur Andersen LLP
Los Angeles, California
September 30, 1994
S-2
<PAGE>
SCHEDULE VIII
AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO DEDUCTIONS- BALANCE
BEGINNING COSTS AND ACCOUNTS AT END
DESCRIPTIONS OF PERIOD EXPENSES WRITTEN OFF OF PERIOD
- ------------ ---------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
July 1, 1990 to June 30, 1991.... $ 449,000 $ 327,000 $ 335,000 $ 441,000
========== ========== ========== ==========
July 1, 1991 to June 30, 1992.... $ 441,000 $ 591,000 $ 629,000 $ 403,000
========== ========== ========== ==========
July 1, 1992 to June 30, 1993.... $ 403,000 $ 328,000 $ 478,000 $ 253,000
========== ========== ========== ==========
July 1, 1993 to June 30, 1994....
========== ========== ========== ==========
Inventory Reserve:
July 1, 1990 to June 30, 1991.... $5,401,000 $3,256,000 $ -- $8,657,000
========== ========== ========== ==========
July 1, 1991 to June 30, 1992.... $8,657,000 $ -- $1,232,000 $7,425,000
========== ========== ========== ==========
July 1, 1992 to June 30, 1993.... $7,425,000 $ -- $4,329,000 $3,096,000
========== ========== ========== ==========
July 1, 1993 to June 30, 1994....
========== ========== ========== ==========
</TABLE>
SCHEDULE IX
AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
WEIGHTED
MAXIMUM AVERAGE AVERAGE
CATEGORY OF WEIGHTED AMOUNT AMOUNT INTEREST
AGGREGATE BALANCE AVERAGE OUTSTANDING OUTSTANDING RATE
SHORT-TERM AT END OF INTEREST DURING THE DURING THE DURING THE
BORROWINGS PERIOD RATE PERIOD PERIOD PERIOD
----------- ---------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Bank Note Payable:
July 1, 1990 to June
30, 1991............. $5,072,000 10.50% $5,250,000 $2,573,000 9.69%
========== ====== ========== ========== ======
July 1, 1991 to June
30, 1992............. $1,714,000 10.99% $7,570,000 $3,494,000 14.38%
========== ====== ========== ========== ======
July 1, 1992 to June
30, 1993............. $ 0 10.04% $3,610,000 $ 714,000 34.08%
========== ====== ========== ========== ======
July 1, 1992 to June
30, 1994.............
========== ====== ========== ========== ======
</TABLE>
S-3
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and
Board of Directors of Robec, Inc.:
Our report on the consolidated financial statements of Robec, Inc. and
Subsidiaries, which includes explanatory paragraphs regarding Robec's ability
to continue as a going concern and the adoption of a new method of accounting
for income taxes, is included on Page F-2 of Robec's Annual Report on Form 10-K
and incorporated by reference into this Form S-4. In connection with our audits
of such financial statements, we have also audited the related financial
statement schedules listed in the Index to Financial Statement Schedules on
Page S-1 of this Form S-4.
In our opinion, the financial statement schedules referred to above, when
considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information required to be
included therein.
Coopers & Lybrand, L.L.P.
2400 Eleven Penn Center
Philadelphia, Pennsylvania
April 13, 1994
S-4
<PAGE>
ROBEC INC. AND SUBSIDIARIES
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1993
SCHEDULE II: AMOUNTS RECEIVABLE FROM RELATED PARTIES
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- --------- --------------------- -------------------
BALANCE AT
DEDUCTIONS END OF YEAR
BALANCE AT --------------------- -------------------
BEGINNING AMOUNTS AMOUNTS NON-
NAME OF DEBTOR OF YEAR ADDITIONS COLLECTED WRITTEN-OFF CURRENT CURRENT
-------------- ---------- --------- --------- ----------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
1993
Action International.... $125,000 $ 22,000 $125,000 -- $ 22,000(A) --
-------- -------- -------- --- -------- ---
1992
Action International.... $ 96,000 $125,000 $ 96,000 -- $125,000(A) --
-------- -------- -------- --- -------- ---
1991
Action International.... $106,000 $ 96,000 $106,000 -- $ 96,000(A) --
-------- -------- -------- --- -------- ---
</TABLE>
- --------
(A) Represents a current account receivable to be paid in the ordinary course
of business.
S-5
<PAGE>
ROBEC, INC. AND SUBSIDIARIES
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1993
SCHEDULE VIII: VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------- ---------- ---------- ---------- ----------
BALANCE CHARGE
AT TO COSTS BALANCE
BEGINNING AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
1993
Allowance for doubtful accounts. $1,147,000 $4,544,000 $1,736,000(A) $3,955,000
Inventory valuation allowance... $2,061,000 $2,699,000 $1,335,000(B) $3,425,000
1992
Allowance for doubtful accounts. $ 640,000 $1,670,000 $1,163,000(A) $1,147,000
Inventory valuation allowance... $ 532,000 $6,112,000 $4,583,000(B) $2,061,000
1991
Allowance for doubtful accounts. $ 448,000 $1,353,000 $1,161,000(A) $ 640,000
Inventory valuation allowance... $ 510,000 $ 360,000 $ 338,000(B) $ 532,000
</TABLE>
- --------
(A) Uncollectable accounts written off during the year.
(B) Obsolete inventory disposed of during the year and physical inventory
adjustments.
S-6
<PAGE>
ROBEC, INC. AND SUBSIDIARIES
FOR EACH OF THE THREE YEARS IN THE PERIOD ENDED
DECEMBER 31, 1993
SCHEDULE IX: SHORT-TERM BORROWINGS
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E COLUMN F
-------- ------------- ---------------- ------------------ ------------------ --------------------
CATEGORY OF WEIGHTED-AVERAGE MAXIUM AMOUNT AVERAGE AMOUNT WEIGHTED AVERAGE
AGGREGATE SHORT BALANCE AT INTEREST RATE AT OUTSTANDING DURING OUTSTANDING DURING INTEREST RATE DURING
TERM BORROWINGS END OF PERIOD END OF PERIOD THE PERIOD(A) THE PERIOD(A) THE PERIOD(A)
--------------- ------------- ---------------- ------------------ ------------------ --------------------
<S> <C> <C> <C> <C> <C>
1993
Borrowing under line
of credit(B)........... $19,861,000 6.68% $23,748,000 $21,025,000 6.61%
1992
Borrowing under line of
credit and revolving
credit facility(C)..... $21,336,000 6.00% $24,360,000 $22,449,000 6.25%
1991
Borrowing under line
of credit(B)........... $24,473,000 6.50% $24,473,000 $20,006,000 8.58%
</TABLE>
- --------
(A) Based on month end balances.
(B) The line of credit is due on demand
(C) This includes a $20,000,000 revolving credit facility due March 1, 1995 and
a $1,336,000 line of credit due on demand, which are classified as long-
term.
S-7
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(D/B/A NATIONAL COMPUTER DISTRIBUTORS)
SCHEDULE VIII: VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED MARCH 31, 1994 AND 1993, THE THREE MONTHS ENDED
MARCH 31, 1992 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1991
<TABLE>
<CAPTION>
ADDITIONS
---------------------------------------------------------------
BALANCE
AT CHARGED TO CHARGED TO OTHER CHARGES BALANCE AT
BEGINNING COSTS AND OTHER ACCOUNTS: ADD (DEDUCT): END OF
OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
--------- ---------- --------------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Trade accounts
receivable:
Year ended March 31,
1994:
Allowance for
doubtful accounts.. $362,374 911,545 -- (748,919)(1) 525,000
======== ======= ======= ======== =======
Year ended March 31,
1993:
Allowance for
doubtful accounts.. $ 22,652 637,275 -- (297,553)(1) 362,374
======== ======= ======= ======== =======
Three months ended
March 31, 1992
(unaudited):
Allowance for
doubtful accounts.. $ 78,500 -- -- (55,848)(1) 22,652
======== ======= ======= ======== =======
Year ended December
31, 1991:
Allowance for
doubtful accounts.. $ 10,000 115,264 -- (46,764)(1) 78,500
======== ======= ======= ======== =======
Inventory:
Year ended March 31,
1994:
Allowance for
obsolescence....... $ 30,000 500,000 -- -- 530,000
======== ======= ======= ======== =======
Year ended March 31,
1993:
Allowance for
obsolescence....... $ -- 30,000 -- -- 30,000
======== ======= ======= ======== =======
Three months ended
March 31, 1992
(unaudited):
Allowance for
obsolescence....... $ -- -- -- -- --
======== ======= ======= ======== =======
Year ended December
31, 1991:
Allowance for
obsolescence....... $ -- -- -- -- --
======== ======= ======= ======== =======
</TABLE>
- --------
(1) Write offs
S-8
<PAGE>
REGISTRATION NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
AMERIQUEST TECHNOLOGIES, INC.
----------------
EXHIBITS
TO
REGISTRATION STATEMENT
ON
FORM S-4
UNDER
THE SECURITIES ACT OF 1933
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. TITLE OF DOCUMENT PAGE
------- ----------------- ------------
<C> <S> <C>
2.01 Amended and Restated Agreement and Plan of
Reorganization to acquire Robec, Inc.
2.02 Plan of Merger to acquire Robec, Inc.
3.01 Certificate of Incorporation of AmeriQuest 85*
3.02 By-laws of AmeriQuest 258**
4.01 Reference is made to Exhibits 3.01 and 3.02, the
Certificate of Incorporation and By-laws, which define
the rights of security holders
4.02 Specimen Common Stock Certificate 274**
5.01 Opinion of Raymond L. Ridge, Esq.
8.01 Opinion of Arthur Andersen & Co. re: tax aspects
10.01 Loan and Security Agreement dated August 19, 1993, as 283**
amended, between AmeriQuest and certain of its
subsidiaries and Silicon Valley Bank.
10.02 Addendum to Agreement for Wholesale Financing--Flexible 365**
Payment Plan dated September 30, 1993 between CDS
Distribution Inc. and IBM Credit Corporation
10.03 Standard Industrial Lease--Net dated July 26, 1990, as 402**
amended, between AmeriQuest and Varian Associates
(successor-in-interest to Koll Center Irvine East)
10.04 Agreement of Sublease dated December 5, 1994 by and
between AmeriQuest and The Austin Company.
13.01 AmeriQuest's Annual Report on Form 10-K/A as amended
for the fiscal year ended June 30, 1994, filed
pursuant to Section 13 of the Securities Exchange Act
of 1934.
13.02 AmeriQuest's Quarterly Report on Form 10-Q/A as amended
for the quarter ended September 30, 1994, filed
pursuant to Section 13 of the Securities Exchange Act
of 1934.
13.03 AmeriQuest's Current Reports on Form 8-K, as amended,
dated July 18, 1994, September 12, 1994 and November
14, 1994, filed pursuant to Section 13 of the
Securities Exchange Act of 1934.
22.01 Subsidiaries of the Registrant
23.01 Consent of Raymond L. Ridge, Esq., Counsel to
Registrant
23.02 Consent of Arthur Andersen L.L.P. Auditors for the
Registrant
23.03 Consent of Arthur Andersen L.L.P. (contained in Exhibit
8.01).
23.04 Consent of Coopers & Lybrand, L.L.P., Auditors for
Robec
23.05 Consent of KPMG Peat Marwick LLP, Auditors for NCD
23.06 Consent of Coopers & Lybrand, L.L.P., Auditors for NCD
24.01 Powers of Attorney for the Directors
</TABLE>
- --------
* As contained in the original filing of AmeriQuest's Annual Report on Form
10-K for the year ended June 30, 1994, SEC File No. 1-10397 and incorporated
herein by this reference.
** As contained in the original filing of Registration Statement 33-81726 and
incorporated herein by this reference pursuant to Rule 411(c) under the
Securities Act of 1933, as amended, and Rule 24 of the Commission's Rules of
Practice.
<PAGE>
PROXY PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
ROBEC, INC.
The undersigned hereby acknowledges receipt of the Notice of Special Meeting of
Shareholders and the accompanying Prospectus/Proxy Statement, and revoking all
prior proxies, appoints Robert H. Beckett and Alexander C. Kramer, Jr., and
each of them acting singly, with full power of substitution, the attorney and
proxy of the undersigned, to represent the undersigned and to vote all the
shares of common stock of Robec, Inc. ("Robec"), which the undersigned is
entitled to vote at the Special Meeting of Shareholders of Robec to be held at
the offices of Robec, Inc., 425 Privet Road, Horsham, PA 19044 on February ,
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:
FOR AGAINST ABSTAIN
[_] [_] [_] The proposal to approve and adopt the Plan of Merger (the
"Plan of Merger") pursuant to which (a) RI Acquisition,
Inc., a Pennsylvania corporation and a wholly-owned
subsidiary of AmeriQuest Technologies, Inc., a Delaware
corporation ("AmeriQuest"), will be merged with and into
Robec (the "Merger"), with Robec surviving the Merger as
a wholly-owned subsidiary of AmeriQuest and (b) each
share of common stock, par value $.01 per share, of Robec
that is issued and outstanding on the effective date of
the Merger, other than shares held by AmeriQuest or by
shareholders who perfect their statutory dissenters
rights, will be converted automatically into the right to
receive .63075 shares of the common stock, par value $.01
per share, of AmeriQuest ("AmeriQuest Common Stock"),
subject to adjustment if the closing price of AmeriQuest
Common Stock is below $3.00 per share on the business day
prior to the day on which the Merger becomes effective.
THE BOARD RECOMMENDS A VOTE FOR THE ABOVE PROPOSAL.
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS SPECIFIED. IF NO
SPECIFICATION IS MADE, THE PROXY WILL BE VOTED FOR THE ABOVE PROPOSAL.
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, 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. The signer(s) hereby revokes all proxies heretofore given by
the signer(s) to vote at said meeting or any adjournments thereof.
Dated:_________, 1995
_________________________________
Signature
_________________________________
Signature if held jointly
PLEASE SIGN, DATE AND PROMPTLY RETURN THIS PROXY FORM USING THE ENCLOSED
ENVELOPE.
<PAGE>
APPENDIX I
PLAN OF MERGER
MERGING
RI ACQUISITION, INC.
(A PENNSYLVANIA CORPORATION)
AND
WITH AND INTO
ROBEC, INC.
(A PENNSYLVANIA CORPORATION)
RECITALS
A. RI ACQUISITION, INC. (the "Merging Corporation") is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, which is authorized to issue 10,000,000 shares of
Common Stock, par value $.01 per share ("Newco Common Stock"), of which
4,439,180 shares are issued and outstanding, all of which are owned of record
and beneficially by AmeriQuest Technologies, Inc., a Delaware corporation
("AmeriQuest").
B. ROBEC, INC. (the "Surviving Corporation") is a corporation duly organized
and validly existing under the laws of the Commonwealth of Pennsylvania, which
is authorized to issue 10,000,000 shares of Common Stock, par value $.01 per
share, ("Robec Common Stock"), of which 4,439,180 shares are issued and
outstanding and 5,000,000 shares of Preferred Stock, par value $.01 per share,
of which no shares are issued and outstanding.
C. The Board of Directors of the Merging Corporation has adopted resolutions
approving this Plan of Merger in accordance with the Pennsylvania Business
Corporation Law ("BCL"), and directing that it be submitted to the sole
shareholder of the Merging Corporation for adoption.
D. The Board of Directors of the Surviving Corporation has adopted
resolutions approving this Plan of Merger in accordance with the BCL and
directing that it be submitted to the shareholders of the Surviving Corporation
for adoption.
ARTICLE I
THE MERGER
1.1 The Merger. The Merging Corporation and the Surviving Corporation shall
effect a merger (the "Merger") in accordance with and subject to the terms and
conditions of this Plan of Merger (the "Plan"). On the Effective Date (as such
term is defined in Section 1.2 hereof), the Merging Corporation shall be merged
with and into the Surviving Corporation, and the separate existence of the
Merging Corporation, except insofar as it may be continued by law, shall cease,
all with the effect provided in Section 1929 of the BCL.
1.2 Effective Date. Articles of Merger, and such other documents and
instruments as are required by, and complying in all respects with, the BCL
shall be delivered to the Department of State of the Commonwealth of
Pennsylvania. The Merger shall become effective upon the filing of the Articles
of Merger with the Department of State of the Commonwealth of Pennsylvania (the
"Effective Date").
1.3 Further Assurances. If at any time the Surviving Corporation, or its
successors or assigns, shall consider or be advised that any further
assignments or assurances in law or any other acts are necessary or desirable
to (a) vest, perfect or confirm, of record or otherwise, in the Surviving
Corporation its rights, title or interest in, to or under any of the rights,
properties or assets of the Merging Corporation acquired or to be
I-1
<PAGE>
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger, or (b) otherwise carry out the purposes of this Plan, the Merging
Corporation and its proper officers and directors shall be deemed to have
granted to the Surviving Corporation an irrevocable power of attorney to
execute and deliver all such proper deeds, assignments and assurances in law
and to do all acts necessary or proper to vest, perfect or confirm title to and
possession of such rights, properties or assets in the Surviving Corporation
and otherwise to carry out the purposes of this Plan; and the proper officers
and directors of the Surviving Corporation are fully authorized in the name of
the Merging Corporation or otherwise to take any and all such action.
1.4 Amendment or Termination. Notwithstanding shareholder approval of this
Plan, this Plan may be amended or terminated at any time on or before the
Effective Date by agreement of the Boards of Directors of the Merging
Corporation and the Surviving Corporation or terminated by the Surviving
Corporation if the Merger does not occur prior to December 31, 1994, provided
that no amendment may be made which decreases the amount of Merger
Consideration (as such term is defined in Section 3.1 hereof) payable to
holders of Robec Common Stock.
ARTICLE II
CAPITAL STOCK
2.1 Newco Common Stock. At the Effective Date, the number of outstanding
shares of Newco Common Stock shall be identical to the number of outstanding
shares of Robec Common Stock, and each share of Newco Common Stock then issued
and outstanding shall, by virtue of the Merger and without any action on the
part of the holder thereof, be converted into one share of the Common Stock of
the Surviving Corporation.
2.2 Robec Common Stock. At the Effective Date, except for shares of Robec
Common Stock owned by AmeriQuest and for shares of Robec Common Stock held by
holders of Dissenting Shares (as such term is defined in Section 2.5), each
share of Robec Common Stock then issued and outstanding shall, by virtue of the
Merger and without any action on the part of the holder thereof, be converted
into .63075 (the "Applicable Fraction") of a validly issued, fully paid and
nonassessable share of AmeriQuest Common Stock; provided, however, that in the
event the closing price of AmeriQuest Common Stock on the New York Stock
Exchange on the business day prior to the Effective Date, as reported in the
Wall Street Journal (the "Closing Date Market Price") is less than $3.00 per
share, the Applicable Fraction shall be equal to the product of (i) .63075
multiplied by (ii) a quotient the numerator of which is $3.00 and the
denominator of which is the Closing Date Market Price. Shares of Robec Common
Stock held by AmeriQuest on the Effective Date shall be canceled in the Merger.
2.3 Fractional Shares. No fractional shares of AmeriQuest Common Stock will
be issued in connection with the Merger, but in lieu thereof each holder of
Robec Common Stock who would otherwise be entitled to receive a fraction of a
share of AmeriQuest Common Stock will receive an amount of cash equal to the
Closing Date Market Price of AmeriQuest Common Stock multiplied by the fraction
of a share of AmeriQuest Common Stock to which such holder would otherwise be
entitled, without any interest thereon.
2.4 No Further Rights or Transfers. On and after the Effective Date, the
holder of a Certificate (as such term is defined in Section 3.3 hereof)
representing Robec Common Stock shall cease to have any rights as a shareholder
of Robec, except for the right to surrender his or her Certificate in exchange
for payment of the Merger Consideration.
2.5 Dissenting Shares. Notwithstanding anything herein to the contrary,
shares of Robec Common Stock that are outstanding immediately prior to the
Effective Date and that are held by shareholders, if any, who are entitled to
assert a right to dissent from the Merger and who demand and validly perfect
their rights to receive the "fair value" of their shares with respect to the
Merger under Section 1574 of the BCL (the "Dissenting Shares") shall be
entitled solely to the payment of the "fair value" of such shares in accordance
I-2
<PAGE>
with the provisions of the BCL; except that (i) if such demand to receive "fair
value" shall be withdrawn upon the consent of the Surviving Corporation, (ii)
if this Plan of Merger shall be terminated, or the Merger shall not be
consummated, (iii) if no demand or petition for the determination of "fair
value" by a court shall have been made or filed within the time provided in the
provisions of the BCL or (iv) if a court of competent jurisdiction shall
determine that such holder of Dissenting Shares is not entitled to the relief
provided by the provisions of the BCL, then the right of such holder of
Dissenting Shares to be paid the "fair value" of his shares of Robec Common
Stock shall cease and with respect to clauses (i), (iii) and (iv) above, such
Dissenting Shares shall thereupon be deemed to have been converted into and to
have become exchangeable for, as of the Effective Date, the right to receive
the Merger Consideration with respect thereto, without any interest thereon,
and with respect to clause (ii) above, the status of such shareholder shall be
restored retroactively without prejudice to any corporate proceeding which may
have been taken during the interim.
ARTICLE III
MERGER PAYMENT PROCEDURE
3.1 Merger Consideration. The certificates which represent shares of
AmeriQuest Common Stock to be issued in accordance with this Agreement to
holders of Robec Common Stock, excluding the holders of Dissenting Shares,
together with any dividends or distributions with respect thereto, and any cash
required in payment of fractional shares pursuant to Section 2.3 hereof, hereby
collectively constitute the "Merger Consideration."
3.2 Exchange Agent. AmeriQuest shall deposit the Merger Consideration with
American Stock Transfer and Trust Company or such other transfer agent as may
be mutually acceptable to both AmeriQuest and Robec (the "Exchange Agent") for
the benefit of holders of Robec Common Stock, promptly after the Effective
Date.
3.3 Transmittal Letter. As soon as practicable after the Effective Date, the
Exchange Agent shall send a notice and transmittal form to each holder of
record of a certificate or certificates theretofore evidencing shares of Robec
Common Stock (such certificates are collectively referred to herein as the
"Certificates"), advising such holder of the effectiveness of the Merger and
the procedure for surrendering to the Exchange Agent such Certificates for
exchange into the Merger Consideration. Upon the surrender of a Certificate to
the Exchange Agent together with and in accordance with such transmittal form,
the holder thereof shall be entitled to receive in exchange therefor the Merger
Consideration payable in respect of each share of Robec Common Stock
represented thereby. Upon such surrender, the Exchange Agent will promptly pay
the Merger Consideration. Each such Certificate shall be deemed for all
purposes to evidence only the right to receive the Merger Consideration.
3.4 Delivery To Person Other Than Registered Holder. If the Merger
Consideration (or any portion thereof) is to be delivered to a person other
than the person in whose name the Certificates surrendered in exchange therefor
are registered, it shall be a condition to the delivery of the Merger
Consideration that the Certificates so surrendered shall be properly endorsed
or accompanied by appropriate stock powers and otherwise be in proper form for
transfer, that such transfer otherwise be proper and that the person requesting
such transfer pay to the Exchange Agent any transfer or other taxes payable by
reason of the foregoing or establish to the satisfaction of the Exchange Agent
that such taxes have been paid or are not required to be paid.
3.5 Lost Certificates. If any Certificate shall have been lost, stolen or
destroyed, the owner of such lost, stolen or destroyed Certificate shall
deliver to the Surviving Corporation a bond in such sum as the Surviving
Corporation may direct as indemnity against any claim that may be made against
the Surviving Corporation with respect to the Certificate alleged to have been
lost, stolen or destroyed.
I-3
<PAGE>
ARTICLE IV
SURVIVING PROVISIONS
4.1 Articles of Incorporation and Bylaws. The Articles of Incorporation of
the Merging Corporation shall survive and be the Articles of Incorporation of
the Surviving Corporation, except that Article I shall be amended to provide
that the name of the Surviving Corporation shall be "AmeriQuest/Robec, Inc."
until thereafter amended in accordance with the provisions therein and as
provided by the BCL. The bylaws of the Merging Corporation shall survive and be
the bylaws of the Surviving Corporation until thereafter amended in accordance
with the provisions therein and as provided in the BCL.
4.2 Directors and Officers. The directors and officers of the Surviving
Corporation shall be as follows:
<TABLE>
<CAPTION>
Name Position
---- --------
<S> <C>
Harold L. Clark Director, Chairman of the Board
Robert H. Beckett Director, President and Chief Executive
Officer
Robert S. Beckett Director, Vice President and Chief
Operating Officer
Stephen G. Holmes Director, Executive Vice President,
Secretary/Treasurer and Chief Financial
Officer
Alexander C. Kramer, Jr. Vice President--Operations
</TABLE>
Each director and officer listed above shall hold office until the expiration
of his or her term of office or earlier death, resignation or removal in
accordance with the Articles of Incorporation and Bylaws of the Merging
Corporation and applicable law.
I-4
<PAGE>
APPENDIX II
AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDED AND RESTATED AGREEMENT AND PLAN OF REORGANIZATION is made and
entered into as of the 11th day of August, 1994 by and among AmeriQuest
Technologies, Inc., a Delaware corporation ("AmeriQuest"), Robec, Inc., a
Pennsylvania corporation ("Robec") and Robert H. Beckett, Robert S. Beckett,
Alexander C. Kramer, Jr. and G. Wesley McKinney, who are certain principal
shareholders of Robec (the "Principal Shareholders"), for the acquisition of
Robec by AmeriQuest pursuant to an exchange (the "Exchange") of stock between
AmeriQuest and the Principal Shareholders followed by a merger (the "Merger")
of a wholly-owned subsidiary of AmeriQuest to be formed under the laws of the
Commonwealth of Pennsylvania ("Newco") with and into Robec. The Principal
Shareholders are joining in this Agreement solely for the purposes of agreeing
to be bound by Sections 1.01, 8.06, 8.08 and 8.16 hereof but are intended by
AmeriQuest also to be the beneficiaries of all of the other provisions hereof
which are for their benefit.
WITNESSETH:
WHEREAS, AmeriQuest desires to acquire Robec in a transaction which qualifies
as a tax-free reorganization under Section 368 of the Internal Revenue Code of
1986, as amended;
WHEREAS, management of Robec deems it to be in the best interests of the
shareholders of Robec to receive shares of the Common Stock of AmeriQuest, par
value $.01 per share, ("AmeriQuest Common Stock") upon the merger of Newco with
and into Robec pursuant to the terms hereof and in the plan of merger attached
hereto as Exhibit A (the "Plan of Merger");
WHEREAS, the Principal Shareholders are prepared and willing to assist Robec
in achieving the Merger by exchanging their shares of the Common Stock of
Robec, par value $.01 per share ("Robec Common Stock") for shares of AmeriQuest
Common Stock;
WHEREAS, it is intended that in connection with the Exchange and the Merger
all holders of Robec Common Stock will receive the same consideration per share
for their shares of Robec Common Stock; and
WHEREAS, the parties hereto are parties to an Agreement and Plan of
Reorganization dated as of August 11, 1994 which is amended and restated in its
entirety and superseded hereby.
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereby agree as follows:
ARTICLE I.
THE EXCHANGE, MERGER AND RELATED MATTERS
1.01 Exchange of Shares by Principal Shareholders. At the request of Robec
management and in order to assist Robec in effecting the Merger, and subject to
the terms and conditions contained in this Agreement, each of the Principal
Shareholders agrees with AmeriQuest to exchange pro rata a portion of the
number of shares of Robec Common Stock held by such Principal Shareholder (the
"Exchange Shares") for AmeriQuest Common Stock (previously defined as the
"Exchange") such that following the Exchange, AmeriQuest will own at least
50.1% of the outstanding shares of Robec's Common Stock. The closing of the
Exchange is referred to herein as the "Exchange Closing" and shall occur upon
the satisfaction of the applicable conditions and pursuant to the terms as
provided herein at such time and place as the parties shall agree. Upon the
Exchange Closing, each Exchange Share shall be exchanged into .63075 of a
validly issued, fully paid and
II-1
<PAGE>
nonassessable share of AmeriQuest Common Stock; provided, however, that in the
event the closing price of AmeriQuest Common Stock on the New York Stock
Exchange on the business day prior to the Effective Date (as that term is
defined in Section 1.07 hereof) as reported in the Wall Street Journal (the
"Closing Date Market Price") is less than $3.00 per share, on the Effective
Date, the Principal Shareholders shall be entitled to receive additional
validly issued, fully paid and nonassessable shares of AmeriQuest Common Stock
equal to the difference between (a) the product of (i) the number of Robec
Common Shares exchanged in the Exchange multiplied by (ii) .63075 multiplied by
(iii) a quotient the numerator of which is $3.00 and the denominator of which
is the Closing Date Market Price and (b) the number of shares of AmeriQuest
Common Stock received by such Principal Shareholder in the Exchange. No
fractional shares of AmeriQuest Common Stock will be issued in connection with
the Exchange or any adjustment pursuant to this Section 1.01, but in lieu
thereof each Principal Shareholder who would otherwise be entitled to receive a
fraction of a share of AmeriQuest Common Stock will receive an amount in cash
equal to the market value of one share of AmeriQuest Common Stock (based on the
closing price of AmeriQuest Common Stock on the New York Stock Exchange on the
previous business day, as reported in the Wall Street Journal) multiplied by
the fraction of a share of AmeriQuest Common Stock to which such holder would
otherwise be entitled without any interest thereon.
1.02 Registration of Exchange Shares. Pursuant to the terms of a Registration
Rights Agreement in the form attached hereto as Exhibit B (the "Registration
Rights Agreement") by and between AmeriQuest and each of the Principal
Shareholders, AmeriQuest shall, at its expense, prepare and file a registration
statement on Form S-3 or if Form S-3 is not available on another appropriate
registration form (the "S-3 Registration Statement") under the Securities Act
of 1933, as amended (the "Securities Act") for use by the Principal
Shareholders receiving restricted securities in connection with the Exchange or
pursuant to the Merger, and shall cause the S-3 Registration Statement to be
declared effective not later than the Effective Date (as such term is defined
in Section 1.07 hereof), provided, however, that if the Merger is not
consummated on or prior to December 31, 1994, or if this Agreement is otherwise
terminated, AmeriQuest shall cause the S-3 Registration Statement to become
effective on the earlier of December 31, 1994 or such termination date, as the
case may be. Further, AmeriQuest shall maintain the effectiveness of the S-3
Registration Statement until such time as the shares covered thereby are no
longer deemed to be "restricted securities" as defined in Rule 144(a)(3) or to
be subject to Rule 145, each as promulgated under the Securities Act. Should
any "selling shareholder" identified in the S-3 Registration Statement
thereafter still be deemed to be an "affiliate" of AmeriQuest, AmeriQuest shall
continue to maintain the effectiveness of such S-3 Registration Statement for
the benefit of such "affiliate(s)" until such selling shareholder shall no
longer be deemed an "affiliate."
1.03 The Merger. On the Effective Date, Newco shall be merged with and into
Robec (previously defined as the "Merger") pursuant to this Agreement and the
Plan of Merger, and the separate corporate existence of Newco shall cease, and
Robec shall continue as the surviving corporation under the laws of the
Commonwealth of Pennsylvania under the name "AmeriQuest/Robec, Inc." (the
"Surviving Corporation"). Newco and Robec are referred to herein as the
"Constituent Corporations" to the Merger.
1.04 Conversion of Shares. On the Effective Date, by virtue of the Merger and
without any action on the part of AmeriQuest, Robec, Newco, the Surviving
Corporation, or any holder of any shares of capital stock of either of the
Constituent Corporations, the shares of capital stock of each of the
Constituent Corporations shall be converted as set forth in the Plan of Merger.
1.05 Treatment of Options. (a) On the Effective Date, AmeriQuest will offer
to exchange each of the then outstanding options to purchase Robec Common Stock
(collectively, the "Robec Options"), including, without limitation, all
outstanding options granted under Robec's 1989 Stock Option Plan, as amended
(the "Robec Plan"), as well as any then outstanding Robec options not granted
under the Robec Plan, for an option to purchase that number of shares of
AmeriQuest Common Stock (collectively, the "AmeriQuest Options") determined by
multiplying the number of shares of Robec Common Stock subject to such Robec
Option on the Effective Date by the Applicable Fraction (as such term is
defined in the Plan of Merger), at an exercise price per share of AmeriQuest
Common Stock equal to the exercise price per share of such Robec
II-2
<PAGE>
Option divided by the Applicable Fraction. If the foregoing calculation results
in an assumed Robec Option being exercisable for a fraction of a share of
AmeriQuest Common Stock, then the number of shares of AmeriQuest Common Stock
subject to such option will be rounded up to the nearest whole number of
shares. The term, exercisability, vesting schedule, status as an "incentive
stock option" under Section 422 of the Code, if applicable, and all other terms
and conditions of the Robec Options will otherwise be unchanged. Continuous
employment with Robec or any subsidiary of Robec prior to the Merger will be
credited to an optionee of Robec for purposes of determining the vesting of the
AmeriQuest Options.
(b) AmeriQuest will cause the AmeriQuest Common Stock issuable upon exercise
of the AmeriQuest Options to be registered on Form S-8 promulgated by the
Securities and Exchange Commission ("SEC") within 20 days after the Effective
Date and will use its best efforts to maintain the effectiveness of such
registration statement or registration statements for so long as any such
AmeriQuest Options shall remain outstanding. With respect to those individuals
who subsequent to the Merger will be subject to the reporting requirements
under Section 16(a) of the Exchange Act (as such term is defined in Section
1.08(c)), AmeriQuest shall administer the Robec Plan assumed pursuant to this
Section 1.05 in a manner that complies with Rule 16b-3 promulgated by the SEC
under the Exchange Act. AmeriQuest will reserve a sufficient number of shares
of AmeriQuest Common Stock for issuance upon exercise of the AmeriQuest
Options.
(c) Promptly after the Effective Date, AmeriQuest will notify in writing each
holder of a Robec Option of the offer to exchange such Robec Option for an
AmeriQuest Option, the number of shares of AmeriQuest Common Stock that are
then subject to such option, and the exercise price of such option, as
determined pursuant to this Section 1.05.
1.06 Board Representation for Robec. The Board of Directors of AmeriQuest
shall cause Robert H. Beckett to be appointed, effective as of the Exchange
Closing, to the Board of Directors of AmeriQuest, to serve until such time as
his successor, if any, is duly elected and qualified to serve, and shall
nominate him for reelection at each of the next two annual meetings of
shareholders.
1.07 Merger Closing. The closing of the Merger contemplated by this Agreement
(the "Merger Closing") shall take place at the offices of Morgan, Lewis &
Bockius, 2000 One Logan Square, Philadelphia, PA 19103 commencing at 10:00
a.m., local time, on the later of (a) the day of the special meeting of Robec
shareholders provided for in Section 1.08(b) hereof or (b) the day on which the
last of the applicable conditions precedent to the Merger set forth in Articles
VIB and VIIB hereof is fulfilled or waived (subject to applicable law), or (c)
at such other time or place or on such other date as AmeriQuest, Robec and
Newco shall agree (the "Merger Closing Date"). On the Merger Closing Date,
Articles of Merger including the Plan of Merger shall be filed with the
Department of State of the Commonwealth of Pennsylvania in accordance with the
provisions of the Pennsylvania Business Corporation Law of 1988 (the "BCL"),
and the Merger shall become effective upon such filing or at such later time on
the Merger Closing Date as may be specified in the filing with the Department
of State of the Commonwealth of Pennsylvania (the "Effective Date").
1.08 Shareholder Approvals and Registration on Form S-4. (a) As soon as
practicable following the execution of this Agreement, AmeriQuest will convene
a special meeting of its stockholders to secure approval of an increase in the
number of authorized shares of AmeriQuest Common Stock necessary to consummate
the Merger and the Kenfil Merger (as such term is defined below). Pursuant to
an Agreement and Plan of Reorganization dated March 31, 1994, as amended, by
and among AmeriQuest, Kenfil Inc. ("Kenfil") and certain shareholders of Kenfil
(the "Kenfil Agreement"), AmeriQuest has acquired 51% of Kenfil in a stock
exchange and agreed to acquire the remaining shares of common stock of Kenfil
in a merger transaction (the "Kenfil Merger") and to issue simultaneously with
the consummation of the Kenfil Merger approximately 1,700,000 shares of
AmeriQuest Common Stock in exchange for approximately $7,300,000 of Kenfil
subordinated debt and approximately 2,000,000 shares of AmeriQuest Common Stock
to certain vendors of Kenfil in satisfaction of approximately $16,500,000 of
trade debt of Kenfil.
(b) As soon as practicable following the execution of this Agreement, Robec
will convene a special meeting of its shareholders to secure the necessary
shareholder authorizations and approvals of this Agreement and the transactions
contemplated herein.
II-3
<PAGE>
(c) The AmeriQuest Common Stock to be issued in the Merger shall be
registered under the Securities Act on a Registration Statement on Form S-4
(the "Form S-4"), and AmeriQuest will pay the filing fee required for any such
filing. In this regard, it will be necessary to file the Form S-4 to serve as a
Prospectus under the Securities Act for the shares so registered and as a
proxy/consent statement ("Prospectus/Proxy-Statement"). As promptly as
practicable after the date of this Agreement, AmeriQuest and Robec shall
prepare and file with the SEC the Form S-4, together with the Prospectus/Proxy
Statement to be included therein and any other documents required by the
Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), in connection with the Merger, and AmeriQuest will pay the
filing fees required for any such filings. Each of AmeriQuest and Robec shall
use its best efforts to respond promptly to any comments of the SEC and to have
the Form S-4 declared effective under the Securities Act as promptly as
practicable after such filing. AmeriQuest shall also take any action required
to be taken under any applicable state securities or "blue-sky" laws and
regulations of the NYSE in connection with the issuance of the AmeriQuest
Common Stock in connection with the Merger and the listing of such shares on
the NYSE. Robec shall promptly furnish to AmeriQuest all information concerning
Robec and the shareholders of Robec as may be reasonably required in connection
with any action contemplated by this Section 1.08. Each of AmeriQuest and Robec
will notify the other promptly of the receipt of any comments from the SEC or
its staff and of any request by the SEC or its staff for amendments or
supplements to the Form S-4 or the Prospectus/Proxy Statement or for additional
information and will supply the other with copies of all correspondence with
the SEC or its staff with respect to the Form S-4 or the Prospectus/Proxy
Statement. Whenever any event occurs which should be set forth in an amendment
or supplement to the Form S-4 or the Prospectus/Proxy Statement, AmeriQuest or
Robec, as the case may be, shall promptly inform the other of such occurrence
and cooperate in filing with the SEC or its staff, and/or mailing to
shareholders of AmeriQuest and Robec, such amendment or supplement. The parties
will enter into customary indemnification and other agreements and seek
customary "comfort letters" in connection with the Form S-4.
1.09 Tax-Free Exchange. The Exchange and the Merger provided for herein are
intended to constitute one integrated transaction that qualifies as a tax-free
reorganization under Section 368 of the Internal Revenue Code of 1986, as
amended (the "Code"), and the AmeriQuest Common Stock is to be received by
holders of Robec Common Stock on a tax-free basis. Except as specifically
provided in Section 1.01 hereof, the number of shares of AmeriQuest Common
Stock to be issued in the Exchange and the Merger will not be subject to
adjustment for fluctuations in the price of the shares for either AmeriQuest or
Robec. Except for cash paid in lieu of fractional shares, no consideration that
could constitute "other property" within the meaning of Section 356(b) of the
Code is being transferred by AmeriQuest for the Robec Common Stock either in
the Exchange or in the Merger. The parties agree not to take a position on any
tax return inconsistent with this Section 1.09. The parties further agree that
each of Robec and AmeriQuest shall pay their own expenses in connection with
the transactions contemplated hereunder. AmeriQuest represents that it has no
plan or intention to reacquire any of its Common Stock issued either in the
Exchange or in the Merger, that it has no plan or intention to sell or
otherwise dispose of any of the assets of Robec except in the ordinary course
of business, and that it will continue the historic business of Robec or use a
significant portion of Robec's historic business assets in a business.
ARTICLE II.
REPRESENTATION AND WARRANTIES OF AMERIQUEST
AmeriQuest hereby represents and warrants to and agrees with Robec and the
Principal Shareholders that:
2.01 Organization and Good Standing. AmeriQuest is, and on the Effective Date
will be, a corporation duly organized, validly existing and in good standing
under the laws of the State of Delaware, with full power and authority to own
its property and to carry on its business as it is now being conducted, and is
not required to be qualified to do business in any jurisdictions other than
California, Massachusetts and Delaware. Newco will on the Effective Date be a
corporation duly incorporated, validly existing and in good standing under the
laws of the Commonwealth of Pennsylvania.
II-4
<PAGE>
2.02 Authorization and Validity of Agreement. AmeriQuest has full corporate
power and authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby. Except for (a) obtaining the approval of its
Board of Directors as contemplated by Section 6.01 hereof and (b) obtaining the
approval of its shareholders as contemplated by Section 1.08(a) hereof, no
other corporate action on the part of AmeriQuest is necessary to the execution
and delivery by AmeriQuest of this Agreement. Upon receipt of the approvals
referred to in the immediately preceding sentence, this Agreement will have
been duly executed and delivered by AmeriQuest and will be a valid and binding
obligation of AmeriQuest enforceable against AmeriQuest in accordance with its
terms, except that (i) such enforcement may be subject to applicable
bankruptcy, insolvency or other laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses and to the discretion of the court before which any proceeding
therefor may be brought. The performance by Newco on the Effective Date of the
transactions contemplated by the Plan of Merger will have been duly authorized
by AmeriQuest, its sole shareholder, and its Board of Directors and no further
corporate action on the part of Newco is or will be necessary to consummate the
transactions contemplated by this Agreement.
2.03 Capitalization of AmeriQuest. All of AmeriQuest's authorized capital
stock consists of 10,000,000 shares of Common Stock, $.01 par value (previously
referred to as "AmeriQuest Common Stock"), of which 9,862,079 shares are
validly issued and outstanding; and 5,000,000 shares of Preferred Stock, $.01
par value ("AmeriQuest Preferred Stock"), of which 1,099,628 shares of
AmeriQuest Series C Convertible Preferred Stock are issued or outstanding. Upon
approval of the amendment to the AmeriQuest Certificate of Incorporation
contemplated by Section 1.08(a) hereof, AmeriQuest's authorized capital stock
shall consist of 30,000,000 shares of AmeriQuest Common Stock and 5,000,000
shares of AmeriQuest Preferred Stock. All issued and outstanding shares of
AmeriQuest Common Stock are duly authorized, validly issued, fully paid and
nonassessable. There are no options, warrants, contracts or commitments
entitling any person to purchase or otherwise acquire from AmeriQuest any
issued or unissued shares of its capital stock except for (a) 1,500,000 shares
which are the subject of stock options and warrants as described on Appendix I
to this Agreement and (b) an agreement to issue approximately 5,200,000 shares
of AmeriQuest Common Stock upon the closing of the Kenfil Merger. There is no
stock held in the treasury of AmeriQuest.
2.04 Resulting Ownership of AmeriQuest by Robec Shareholders. After the
Effective Date, assuming prior or contemporaneous consummation of the Kenfil
Merger, there will be outstanding approximately 18,961,707 shares of AmeriQuest
Common Stock and no shares of AmeriQuest Preferred Stock, and the current
shareholders of Robec will own approximately 14.76% of the outstanding shares
of AmeriQuest Common Stock. After the Merger, Robec will be a wholly-owned
subsidiary of AmeriQuest.
2.05 SEC Reports. AmeriQuest has delivered or made available to Robec correct
and complete copies of each report, schedule, registration statement and
definitive proxy statement filed by AmeriQuest with the SEC on or after January
1, 1991 (the "AmeriQuest SEC Documents"), which are all of the documents (other
than preliminary material) that AmeriQuest has been required to file with the
SEC on or after January 1, 1991. As of their respective dates or, in the case
of registrations statements, their effective dates, none of the AmeriQuest SEC
Documents (including all exhibits and schedules thereto and documents
incorporated by reference therein) contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, and the AmeriQuest
SEC Documents complied when filed in all material respects with the then
applicable requirements of the Securities Act and the Exchange Act and the
rules and regulations thereunder promulgated by the SEC. AmeriQuest has filed
all documents and agreements which were required to be filed as exhibits to the
AmeriQuest SEC Documents.
2.06 Financial Statements. The financial statements of AmeriQuest included in
the AmeriQuest SEC Documents complied as to form in all material respects with
the then applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, were prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved (except as
II-5
<PAGE>
may have been indicated in the notes thereto or, in the case of the unaudited
statements, as permitted by Form 10-Q promulgated by the SEC) and fairly
present (subject, in the case of unaudited statements, to normal, year-end
audit adjustments) the consolidated financial position of AmeriQuest and its
consolidated subsidiaries as at the respective dates thereof and the
consolidated results of their operations and cash flows (or changes in
financial position prior to the approval of Statement of Financial Accounting
Standards Number 95) for the respective periods then ended.
2.07 Absence of Undisclosed Liabilities. AmeriQuest has no liabilities or
obligations as of the date hereof, secured or unsecured (whether accrued,
absolute, contingent or otherwise), including without limitation tax
liabilities due or to become due, except current liabilities incurred in the
ordinary course of business or in connection with the transaction contemplated
thereby.
2.08 Subsidiaries. The subsidiaries of AmeriQuest (the "AmeriQuest
Subsidiaries") are identified on Appendix II to this Agreement. Each AmeriQuest
Subsidiary is, and on the Effective Date will be, a corporation duly organized,
validly existing and in good standing under its respective jurisdiction of
incorporation, with full power and authority to own its property and to carry
on its business as it is now being conducted. Unless the context requires
otherwise, as used in Sections 2.07-2.22 and 4.01-4.21 of this Agreement, the
term AmeriQuest includes the AmeriQuest Subsidiaries.
2.09 No Violation of Governing Instruments. Except as disclosed on Appendix
III, no provision of the Certificate of Incorporation or By-laws of AmeriQuest
or of any material agreement or instrument to which AmeriQuest is a party or by
which it is bound is or will be violated by the execution and delivery of this
Agreement or by the performance or satisfaction of any agreement or condition
herein contained to be performed or satisfied by AmeriQuest.
2.10 Permits. AmeriQuest possesses all the licenses, franchises, permits,
registrations and other governmental authorizations necessary for the continued
conduct of its business without material interference or interruption.
2.11 Defaults. Except as disclosed on Appendix IV, AmeriQuest is not in
material default under any lease, purchase or sale contract, note, indenture or
loan agreement, or under any other agreement or arrangements which are
material, alone or in the aggregate, to which it is a party or by which it is
bound or, to the knowledge of the officers and directors of AmeriQuest,
affected. AmeriQuest further agrees to obtain all consents or waivers from (i)
those third parties to whom it is indebted and in default (except for amounts
owed to its vendors) and (ii) all third parties to whom it is indebted whose
indebtedness is scheduled for payment prior to the Effective Date, which may be
necessary to prevent the Merger provided for herein from resulting in any
breach, acceleration, default or collection under any such agreements or
arrangements.
2.12 Agreements. Except as set forth on Appendix V, AmeriQuest is not a party
to and is not bound by:
(a) any employment contracts or agreements or any collective bargaining
or labor agreements;
(b) any pension, retirement, stock option, stock purchase, savings,
profit-sharing, deferred compensation, retainer, consultant, bonus, group
insurance, or any vacation pay or severance pay or other incentive or
welfare, contract, plan or so-called fringe benefit agreement;
(c) any contract for the purchase of any materials, supplies, equipment
or inventory, or for the sale of any inventory, except contracts entered
into in the ordinary course of business (i) which do not (as to each)
involve either an unperformed commitment in excess of $300,000 or the
payment of more than $200,000; or (ii) which may not be terminated without
penalty by AmeriQuest within one year from the date hereof; or
(d) any note or agreement relating to any indebtedness except as shown on
AmeriQuest's March 31, 1994 financial statements included in the AmeriQuest
SEC Documents.
II-6
<PAGE>
2.13 Taxes. AmeriQuest has, and on the Effective Date will have, timely filed
all Federal and State and/or local tax returns required to be filed, and have
paid, or made adequate provisions for the payment of, all taxes (whether or not
reflected in its tax returns as filed and whether or not disputed) which may be
or hereafter become due and payable (and/or accruable) in respect of its
operations for all periods prior to the Effective Date, including that portion
of its current fiscal year to and including the Effective Date, to any city,
district, state, the United States, any foreign country or any other taxing
authority, and is not now and on the Effective Date will not be delinquent in
the payment of any tax assessment or government charge. No unpaid tax
deficiencies or additional liabilities of any sort have been proposed by any
governmental representative. No agreements for the extension of time for the
assessment of any amounts of tax have been entered into by or on behalf of
AmeriQuest. AmeriQuest has withheld proper and accurate amounts from its
respective employees for all periods in full and complete compliance with all
tax withholding provisions (including without limitation income tax
withholding, social security and unemployment taxes) of applicable federal,
foreign, state and local laws. The hours worked by and payment made to
employees of AmeriQuest have not been in violation of any applicable federal,
state, foreign or local laws dealing with such matters. All payments due from
AmeriQuest (on account of union employment contracts or otherwise) for employee
profit-sharing, pension benefits and employee health and welfare insurance have
been paid or accrued as a liability on its books. The reserves for taxes
reflected on the financial statements included in the AmeriQuest SEC Documents
are adequate to cover all taxes with respect to the income of AmeriQuest for
the period then ended.
AmeriQuest, on or prior to the Effective Date, agrees to pay all required
federal and state taxes in the time and manner required under applicable
federal and state tax laws with respect to AmeriQuest's operations through the
fiscal year ended June 30, 1994. AmeriQuest is not now and on the Effective
Date will not be delinquent in the payment of any tax assessment or government
charge in respect of AmeriQuest's operations through the Effective Date.
2.14 Accuracy of Corporate Records. The copies of the Certificate of
Incorporation, By-laws, minute books and stock transfer records of AmeriQuest
heretofore or hereafter delivered to Robec or made available to Robec for
examination are complete and correct. The minute books of AmeriQuest contain
complete and accurate records of all meetings and other corporate actions of
its shareholders, directors and committees of its Board of Directors.
2.15 Absence of Litigation. Except as set forth on Appendix VI, AmeriQuest is
not now engaged in or threatened with any litigation or other proceeding in
connection with its affairs involving amounts in excess of $50,000, and has not
been subject to any such litigation or proceeding during the past two (2)
years, and it is not now subject to any decree, order or other governmental
restriction which has a material adverse effect on its business or assets or
which would prevent or hamper the consummation of the Exchange or the Merger
contemplated by this Agreement.
2.16 Insurance. AmeriQuest's insurance coverage is adequate based on its
experience and the experience of similar businesses. AmeriQuest is not now and
on the Effective Date will not be in default in any material respect under any
such policy and such policies will be continued in force and effect up to and
including the Effective Date.
2.17 Employee Benefit Plans and Salaries. There has not been since June 30,
1993 any bonus, profit-sharing, pension, retirement or other similar
arrangement or plan instituted, amended or agreed to by AmeriQuest, or any
increase in the compensation payable or to become payable by it to any of its
officers, employees or agents whose total compensation for services rendered
after any such increase is at an annual rate of more than $100,000 (except for
those persons identified on Appendix VII in the amounts indicated thereon), nor
has any bonus, percentage of compensation or other like benefit accrued to or
for the credit of any of the officers, employees or agents of AmeriQuest
(except for those persons identified on Appendix VII in the amounts indicated
thereon).
II-7
<PAGE>
2.18 Salaries and Pensions. AmeriQuest has no unfunded obligation under any
pension or profit-sharing arrangements for the employees of AmeriQuest,
salaried, non-salaried, union or non-union, including any formal or informal
plans, and all funding arrangements with respect thereto have been made in
accordance with the terms of such plans or arrangements.
2.19 Labor Relations, Financial Condition and Assets. Since June 30, 1993,
there has not been any significant labor trouble or any adverse change in the
financial condition, assets, liabilities, properties, business or results of
operations of AmeriQuest, including but not limited to any cancellation of or
threatened cancellation of any contract, any damage or destruction of property
by fire or casualty, whether or not covered by insurance, or the taking of any
property by condemnation or eminent domain, except as disclosed on Appendix
VIII.
2.20 Regulatory Consents. Except for (a) filings required to be made with the
Federal Trade Commission (the "FTC") and the Antitrust Division of the United
States Department of Justice (the "Antitrust Division") under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "Antitrust
Improvements Act"), (b) the filing of a Prospectus/Proxy Statement with the
Securities and Exchange Commission as a Registration Statement on Form S-4, (c)
any consents or filings made necessary by the financing arrangements of the
Constituent Corporations and AmeriQuest and (d) the filing of the Plan of
Merger with the Department of State of the Commonwealth of Pennsylvania, no
material consent, authorization, order or approval of or filing of a
registration with any governmental commission, board or other regulatory body
is required by AmeriQuest for or in connection with the consummation of the
Merger.
2.21 AmeriQuest Shares. The shares of AmeriQuest Common Stock to be issued in
the transactions contemplated by this Agreement will be, upon issuance, duly
authorized, validly issued, fully paid and nonassessable.
2.22 Full Disclosure. No representation, warranty or other statement relating
to AmeriQuest or Newco contained in this Agreement or information contained in
any certificate, exhibit, appendix or document delivered by AmeriQuest or Newco
pursuant to this Agreement contains any untrue statement of material fact or
omits to state a material fact necessary in order to make the statements made
herein or therein not misleading in light of the circumstances under which they
were made.
2.23 Survival. The representations and warranties of AmeriQuest contained
herein are true on the date hereof and shall continue to be true as of the
Effective Date, except for changes permitted or contemplated by the terms of
this Agreement, and shall survive the Effective Date.
ARTICLE III.
REPRESENTATION AND WARRANTIES OF ROBEC
Robec hereby represents and warrants to and agrees with AmeriQuest that:
3.01 Organization and Good Standing. Robec is, and on the Effective Date will
be, a corporation duly organized, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania, with full power and authority to
own its property and to carry on its business as it is now being conducted, and
is not required to be qualified to do business in any jurisdictions other than
those states in which it is now so qualified.
3.02 Authorization and Validity of Agreement. Robec has full corporate power
and authority to execute and deliver this Agreement and consummate the
transactions contemplated hereby. Except for (a) obtaining the approval of its
Board of Directors as contemplated by Section 6.01 hereof and (b) obtaining the
approval of its shareholders as contemplated by Section 1.08 hereof, no other
corporate action on the part of Robec is necessary to the execution and
delivery by Robec of this Agreement. Upon receipt of the approvals referred
II-8
<PAGE>
to in the immediately preceding sentence, this Agreement will have been duly
executed and delivered by Robec and will be a valid and binding obligation of
Robec enforceable against Robec in accordance with its terms, except that (i)
such enforcement may be subject to applicable bankruptcy, insolvency or other
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses and to the discretion of
the court before which any proceeding therefor may be brought.
3.03 Capitalization of Robec. All of Robec's authorized capital stock
consists of 10,000,000 shares of Common Stock, par value $.01 per share
(previously referred to as "Robec Common Stock"), of which 4,439,180 shares are
validly issued and outstanding; and 5,000,000 shares of Preferred Stock, par
value $.01 per share, of which no shares are outstanding. All of the issued and
outstanding shares of Robec Common Stock are duly authorized, validly issued,
fully paid and nonassessable. There are no options, warrants, contracts or
commitments entitling any person to purchase or otherwise acquire from Robec
any issued or unissued shares of its capital stock except shares subject to
stock options as outlined on Appendix IX to this Agreement; and 160,000 shares
of Robec Common Stock are held in the treasury of Robec.
3.04 SEC Reports. Robec has delivered or made available to AmeriQuest correct
and complete copies of each report, schedule, registration statement and
definitive proxy statement filed by Robec with the SEC on or after January 1,
1993 (the "Robec SEC Documents"), which are all the documents (other than
preliminary material) that Robec was required to file with the SEC on or after
January 1, 1993. As of their respective dates or, in the case of registrations
statements, their effective dates, none of the Robec SEC Documents (including
all exhibits and schedules thereto and documents incorporated by reference
therein) contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and the Robec SEC Documents complied when filed in all material
respects with the then applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations thereunder promulgated by the SEC.
Robec has filed all documents and agreements which were required to be filed as
exhibits to the Robec SEC Documents.
3.05 Financial Statements. The financial statements of Robec included in the
Robec SEC Documents complied as to form in all material respects with the then
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may have been indicated in the notes thereto or, in the
case of the unaudited statements, as permitted by Form 10-Q promulgated by the
SEC) and fairly present (subject, in the case of unaudited statements, to
normal, year-end audit adjustments) the consolidated financial position of
Robec and its consolidated subsidiaries as at the respective dates thereof and
the consolidated results of their operations and cash flows (or changes in
financial position prior to the approval of Statement of Financial Accounting
Standards Number 95) for the respective periods then ended.
3.06 Absence of Undisclosed Liabilities. Other than as set forth on the
balance sheet dated December 31, 1993, Robec has no material liabilities or
obligations as of the date hereof, secured or unsecured (whether accrued,
absolute, contingent or otherwise), including without limitation tax
liabilities due or to become due, except current liabilities incurred in the
ordinary course of business since such date or as set forth on any Appendix to
this Agreement.
3.07 Subsidiaries. The subsidiaries of Robec (the "Robec Subsidiaries") are
identified on Appendix X to this Agreement. Each Robec Subsidiary is, and on
the Effective Date will be, a corporation duly organized, validly existing and
in good standing under its respective jurisdiction of incorporation, with full
power and authority to own its property and to carry on its business as it is
now being conducted. Unless the context requires otherwise, as used in Sections
3.06-3.20 and 5.01-5.21 of this Agreement, the term Robec includes the Robec
Subsidiaries.
II-9
<PAGE>
3.08 No Violation of Governing Instruments. Except as disclosed on Appendix
XI, no provision of the Articles of Incorporation or By-laws of Robec or of any
material agreement or instrument to which Robec is a party or by which it is
bound is or will be violated by the execution and delivery of this Agreement or
by the performance or satisfaction of any agreement or condition herein
contained to be performed or satisfied by Robec.
3.09 Permits. Robec possesses all the licenses, franchises, permits,
registrations and other governmental authorizations necessary for the continued
conduct of its business without material interference or interruption.
3.10 Defaults. Except as disclosed on Appendix XII, Robec is not in material
default under any lease, purchase or sale contract, note, indenture or loan
agreement, or under any other agreement or arrangements which are material,
alone or in the aggregate, to which it is a party or by which it is bound.
Robec further agrees to use reasonable efforts to obtain all consents or
waivers from (i) those third parties to whom it is indebted and in default
(except for amounts owed to its vendors) and (ii) all third parties to whom it
is indebted (except for amounts owed to vendors) whose indebtedness is
scheduled for payment prior to the Exchange Closing, which may be necessary to
prevent the Merger provided for herein from resulting in any breach,
acceleration, default or collection under any such agreements or arrangements.
3.11 Agreements. Except as set forth on Appendix XIII, Robec is not a party
to and is not bound by:
(a) any employment contracts or agreements or any collective bargaining
or labor agreements;
(b) any pension, retirement, stock option, stock purchase, savings,
profit-sharing, deferred compensation, retainer, consultant, bonus, group
insurance, or any vacation pay or severance pay or other incentive or
welfare, contract, plan or so-called fringe benefit agreement;
(c) any contract for the purchase of any materials, supplies, equipment
or inventory, or for the sale of any inventory, except contracts entered
into in the ordinary course of business (i) which do not (as to each)
involve either an unperformed commitment in excess of $300,000 or the
payment of more than $200,000; or (ii) which may not be terminated without
penalty by Robec within one year from the date hereof; or
(d) any note or agreement relating to any indebtedness except as shown on
Robec's March 31, 1994 financial statements included in the Robec SEC
Documents.
3.12 Taxes. Robec has, and on the date of the Exchange Closing will have,
timely filed all Federal and State and/or local tax returns required to be
filed, and have paid, or made adequate provisions for the payment of, all taxes
(whether or not reflected in its tax returns as filed and whether or not
disputed) which may be or hereafter become due and payable (and/or accruable)
in respect of its operations for all periods prior to the Exchange Closing,
including that portion of its current fiscal year to and including the Exchange
Closing, to any city, district, state, the United States, any foreign country
or any other taxing authority, and is not now and on the date of the Exchange
Closing will not be delinquent in the payment of any tax assessment or
government charge. No unpaid tax deficiencies or additional liabilities of any
sort have been proposed by any governmental representative. No agreements for
the extension of time for the assessment of any amounts of tax have been
entered into by or on behalf of Robec. Robec has withheld proper and accurate
amounts from its respective employees for all periods in full and complete
compliance with all tax withholding provisions (including without limitation
income tax withholding, social security and unemployment taxes) of applicable
federal, foreign, state and local laws. The hours worked by and payment made to
employees of Robec have not been in violation of any applicable federal, state,
foreign or local laws dealing with such matters. All payments due from Robec
(on account of union employment contract or otherwise) for employee profit-
sharing, pension benefits and employee health and welfare insurance have been
paid or accrued as a liability on its books. The reserves for taxes reflected
on the December 31, 1993 audited financial statements of Robec are adequate to
cover all taxes with respect to the income of Robec for the period then ended.
II-10
<PAGE>
Robec, on or prior to the Exchange Closing, agrees to pay all required
federal and state taxes in the time and manner required under applicable
federal and state tax laws with respect to Robec's operations through the
fiscal year ended December 31, 1993. Robec is not now and on the date of the
Exchange Closing will not be delinquent in the payment of any tax assessment or
government charge in respect of Robec's operations through the date of the
Exchange Closing.
3.13 Accuracy of Corporate Records. The copies of the Articles of
Incorporation, By-laws, minute books and stock transfer records of Robec
heretofore or hereafter delivered or made available to AmeriQuest for
examination are complete and correct. The minute books of Robec contain
complete and accurate records of all meetings and other corporate actions of
its shareholders, directors and the committees of its Board of Directors.
3.14 Absence of Litigation. Except as set forth on Appendix XIV, Robec is not
now engaged in or threatened in writing with any litigation or other proceeding
in connection with its affairs involving amounts in excess of $50,000, and has
not been subject to any such litigation or proceeding during the past two (2)
years and it is not now subject to any decree, order or other governmental
restriction which has a material adverse effect on its business or assets or
which would prevent or hamper the consummation of the Exchange or the Merger
contemplated by this Agreement.
3.15 Insurance. Robec's insurance coverage is adequate based on its
experience and the experience of similar businesses. Robec is not now and on
the Effective Date will not be in default in any material respect under any
such policy and such policies will be continued in force and effect up to and
including the Effective Date.
3.16 Employee Benefit Plans and Salaries. There has not been since December
31, 1993 any bonus, profit-sharing, pension, retirement or other similar
arrangement or plan instituted, amended or agreed to by Robec, or any increase
in the compensation payable or to become payable by it to any of its officers,
employees or agents whose total compensation for services rendered after any
such increase is at an annual rate of more than $100,000 (except as set forth
on Appendix XV), nor has any bonus, percentage of compensation or other like
benefit accrued to or for the credit of any of the officers, employees or
agents of Robec (except as set forth on Appendix XV).
3.17 Salaries and Pensions. Robec has no unfunded obligation under any
pension or profit-sharing arrangements for the employees of Robec, salaried,
non-salaried, union or non-union, including any formal or informal plans, and
the funding arrangements with respect thereto have been made in accordance with
the terms of such plans or arrangements.
3.18 Labor Relations, Financial Condition and Assets. Since December 31,
1993, except as set forth in the Robec SEC Documents, there has not been any
significant labor trouble or any adverse change in the financial condition,
assets, liabilities, properties, business or results of operations of Robec,
any damage or destruction of property by fire or casualty, whether or not
covered by insurance, or the taking of any property by condemnation or eminent
domain, except as disclosed on Appendix XVI or on other Appendices attached
hereto.
3.19 Regulatory Consents. Except for (a) filings required to be made with the
FTC and the Antitrust Division under the Antitrust Improvements Act, (b) the
filing of a Prospectus/Proxy Statement with the Securities and Exchange
Commission as a Registration Statement on Form S-4, (c) any consents or filings
made necessary by the financing arrangements of the Constituent Corporations
and AmeriQuest and (d) the filing of the Plan of Merger with the Department of
State of the Commonwealth of Pennsylvania and appropriate documents, if any,
with the relevant authorities in states in which Robec is qualified to do
business, no material consent, authorization, order or approval of or filing of
a registration with any governmental commission, board or other regulatory body
is required by Robec for or in connection with the consummation of the Exchange
and Merger.
II-11
<PAGE>
3.20 Full Disclosure. No representation, warranty or other statement relating
to Robec contained in this Agreement or information contained in any
certificate, exhibit, appendix or document delivered by Robec pursuant to this
Agreement contains any untrue statement of material fact or omits to state a
material fact necessary in order to make the statements made herein or therein
not misleading in light of the circumstances under which they were made.
3.21 Survival. The representations and warranties of Robec contained herein
are true on the date hereof and shall continue to be true as of the Exchange
Closing; except for charges permitted or contemplated by the terms of this
Agreement, but shall not survive the Exchange Closing and shall thereafter be
null and void and of no further force or effect.
ARTICLE IV.
CONDUCT OF AMERIQUEST PRIOR TO THE EFFECTIVE DATE
AmeriQuest covenants, warrants and agrees that, from the date hereof to the
Effective Date, except for transactions provided for or herein permitted or
disclosed in an exhibit or appendix hereto or expressly approved of in writing
by Robec, AmeriQuest shall:
4.01 Compensation. Except as disclosed on Appendix VII not increase the rate
of compensation payable or to become payable by it or make, accrue or become
liable for any bonus, profit-sharing, termination or incentive payment (in
excess of the applicable amounts or percentages prevailing at June 30, 1994 to
(a) any of its officers, directors or employees whose compensation is in excess
of $50,000 per annum, or (b) any other of its employees except in the ordinary
and usual course of business.
4.02 Dividends. Not declare or pay any dividend or distribution (in cash or
other property) in respect of any shares of its capital stock.
4.03 Capital Changes. Not purchase, otherwise acquire, sell or issue any
shares of its capital stock, for cash or other consideration, except to honor
outstanding stock option and warrant obligations; nor declare or effect any
stock dividend, stock split or other action that would result in a change in
its authorized and outstanding capitalization.
4.04 Encumbrance of Assets. Not further mortgage, pledge, or subject to any
lien, charge or encumbrance of any kind, any of its assets, tangible or
intangible, exclusive of liens arising as a matter of law in the ordinary
course of business as to which there is no known default.
4.05 Incur Liabilities. Not take any action which would cause it to incur any
material obligation or liability (absolute or contingent) except liabilities
and obligations incurred in the ordinary course of business.
4.06 Debt Retirement. Not discharge or satisfy any lien or encumbrance, or
pay any obligation or liability (absolute or contingent) other than (a) current
liabilities disclosed in the balance sheet dated March 31, 1994 which was
included in the AmeriQuest SEC Documents, and (b) liabilities incurred since
March 31, 1994 in the ordinary course of business.
4.07 Disposition of Assets. Not sell or transfer any of its tangible assets
or cancel any debts or claims, except in each case in the ordinary and usual
course of business, except for the pending sale of CMS Singapore and Any Bus.
4.08 Disposition of Intangibles. Not sell, assign, transfer or otherwise
dispose of patents, trademarks, trade names, copyrights, licenses, customer
lists, trade secrets, product registrations or other intangible assets.
4.09 Waivers. Not knowingly waive any rights of substantial value.
II-12
<PAGE>
4.10 Executory Agreements. Not, except in the ordinary course of business,
modify, amend, alter or terminate (by written or oral agreement, or any manner
of action or inaction) any of its executory agreements of a material nature or
which are material in amount.
4.11 Material Transactions. Except as otherwise contemplated herein, not
enter into any transaction material in nature or amount other than in the
ordinary and usual course of business.
4.12 Long-Term Commitments. Not undertake any major long-term (long-term
being defined as extending over a twelve (12) month period) purchase
commitments or sale commitments, even though within the ordinary course of its
business.
4.13 Insurance. Keep its property and assets insured in amounts and with
coverage at least as great as the amounts and coverage in effect on the date of
this Agreement.
4.14 Preservation of Business. Use its best efforts to preserve the
possession and control of all of its assets, to keep in faithful service its
present officers and key employees, to preserve the goodwill of its suppliers,
customers and others having business relations with it, and to do nothing to
impair its ability to keep and preserve its business existing on the date
hereof.
4.15 Amend Certificate. Not amend its Certificate of Incorporation or By-
laws, or change or agree to change in any manner the rights of its outstanding
capital stock or the character of its principal business, except as
contemplated by Section 1.08(a) hereof.
4.16 Preservation of Assets. Maintain its properties and assets in good
repair, order and condition, reasonable wear and use and damage by fire or
other casualty excepted.
4.17 Maintenance of Records. Maintain its books, accounts and records in the
usual, regular and ordinary manner on a basis consistent with that heretofore
employed.
4.18 Credit Practices. Not extend credit in the sale of its products other
than in accordance with credit practices in effect on the date hereof.
4.19 Retention of Real Estate. Not sell, mortgage, lease, buy or otherwise
acquire any real estate or any interest therein.
4.20 Investigation. Allow, at all reasonable times, following reasonable
advance notice, during normal business hours, Robec's employees, attorneys,
accountants and other authorized representatives, free and full access to its
plants, properties, books, records, documents and correspondence, and all of
the work papers and other documents relating thereto in the possession of its
auditors or counsel, in order that Robec may have full opportunity to make such
investigation as it may desire of AmeriQuest's properties and business.
4.21 Compliance with Law. Comply with all laws applicable to it or to the
conduct of its business and will conduct its business in such manner that on
the Effective Date the representations and warranties contained in this
Agreement shall be true as though such representations and warranties were made
on and as of such date.
4.22 Repayment of Robec Debt. Prior to or contemporaneous with the Exchange
Closing, arrange for a third party to loan on the date of the Exchange Closing
to Robec cash sufficient to repay all of its outstanding indebtedness to
CoreStates Bank, N.A. and Fidelity Bank, N.A. pursuant to the Second Amended
and Restated Credit and Security Agreement dated March 29, 1993, as amended
(the "Credit Agreement"), estimated to be approximately $10,500,000 on the date
hereof.
II-13
<PAGE>
4.23 Retention and Voting of Shares.
(a) Not to sell, transfer, pledge, assign or otherwise dispose of, or
enter into any contract, option or other arrangement with respect to the
sale, transfer, pledge, assignment or other disposition of, any shares of
Robec Common Stock acquired in the Exchange to any person other than to a
wholly-owned subsidiary of AmeriQuest which shall agree in writing prior to
the transfer to be bound by all of the provisions of this Agreement,
including without limitation this Section 4.23.
(b) Vote all shares of Robec Common Stock owned by it on the record date
for any annual or special meeting of the shareholders of Robec, however
called, and in any action by written consent of the shareholders of Robec,
at such meeting (x) in favor of the Plan of Merger, (y) against any action
or agreement which would result in a breach of any representation, warranty
or covenant of Robec in this Agreement or which would otherwise impede,
interfere with or attempt to discourage the Merger and (z) against the
nomination or election of any director other than the current directors of
Robec or any successor nominated by them.
ARTICLE V.
CONDUCT OF ROBEC PRIOR TO THE EXCHANGE CLOSING
Robec covenants, warrants and agrees that, from the date hereof to the
Exchange Closing, except for transactions provided for or herein permitted or
disclosed in an exhibit or appendix hereto or expressly approved of in writing
by AmeriQuest, Robec shall:
5.1 Compensation. Not increase the rate of compensation payable or to become
payable by it or make, accrue or become liable for any bonus, profit-sharing,
termination or incentive payment (in excess of the applicable amounts or
percentages prevailing at December 31, 1993 or set forth in the Employment
Agreements attached as Exhibits hereto for the individuals indicated therein)
to (a) any of its officers, directors or employees whose compensation is in
excess of $50,000 per annum, or (b) any other of its employees except in the
ordinary and usual course of business.
5.2 Dividends. Not declare or pay any dividend or distribution (in cash or
other property) in respect of any shares of its capital stock.
5.3 Capital Changes. Not purchase, otherwise acquire, sell or issue any
shares of its capital stock, for cash or other consideration, except to honor
outstanding stock option and warrant obligations; nor declare or effect any
stock dividend, stock split or other action that would result in a change in
its authorized and outstanding capitalization.
5.4 Encumbrance of Assets. Not further mortgage, pledge or subject to any
lien, charge or encumbrance of any kind, any of its assets, tangible or
intangible, exclusive of liens arising as a matter of law in the ordinary
course of business as to which there is no known default.
5.5 Incur Liabilities. Not take any action which would cause it to incur any
obligation or liability (absolute or contingent) except liabilities and
obligations incurred in the ordinary course of business.
5.6 Debt Retirement. Not discharge or satisfy any lien or encumbrance, or pay
any obligation or liability (absolute or contingent) other than (a) current
liabilities disclosed in the balance sheet dated March 31, 1994 which was
included in the Robec SEC Documents, and (b) liabilities incurred since March
31, 1994 in the ordinary course of business, except as contemplated by Section
4.22 hereof.
5.7 Disposition of Assets. Not sell or transfer any of its tangible assets or
cancel any debts or claims, except in each case in the ordinary and usual
course of business.
5.8 Disposition of Intangibles. Not sell, assign, transfer or otherwise
dispose of patents, trademarks, tradenames, copyrights, licenses, customer
lists, trade secrets, product registrations or other intangible assets.
II-14
<PAGE>
5.9 Waivers. Not knowingly waive any rights of substantial value.
5.10 Executory Agreements. Not, except in the ordinary course of business,
modify, amend, alter or terminate (by written or oral agreement, or any manner
of action or inaction) any of its executory agreements of a material nature or
which are material in amount.
5.11 Material Transactions. Except as otherwise contemplated herein, not
enter into any transaction material in nature or amount other than in the
ordinary and usual course of business.
5.12 Long-Term Commitments. Not undertake any major long-term (long-term
being defined as extending over a twelve (12) month period) purchase
commitments or sale commitments, even though within the ordinary course of its
business, without the prior written consent of AmeriQuest, which consent shall
not be unreasonably withheld or delayed.
5.13 Insurance. Keep its property and assets insured in amounts and with
coverage at least as great as the amounts and coverage in effect on the date of
this Agreement.
5.14 Preservation of Business. Use its best efforts to preserve the
possession and control of all of its assets, to keep in faithful service its
present officers and key employees, to preserve the goodwill of its suppliers,
customers and others having business relations with it, and to do nothing to
impair its ability to keep and preserve its business existing on the date
hereof.
5.15 Amend Articles. Not amend its Articles of Incorporation or By-laws, or
change or agree to change in any manner the rights of its outstanding capital
stock or the character of its principal business.
5.16 Preservation of Assets. Maintain its properties and assets in good
repair, order and condition, reasonable wear and use and damage by fire or
other casualty excepted.
5.17 Maintenance of Records. Maintain its books, accounts and records in the
usual, regular and ordinary manner on a basis consistent with that heretofore
employed.
5.18 Credit Practices. Not extend credit in the sale of its products other
than in accordance with credit practices in effect on the date hereof.
5.19 Retention of Real Estate. Not sell, mortgage, lease, buy or otherwise
acquire any real estate or any interest therein.
5.20 Investigation. Allow, at all reasonable times, following reasonable
advance notice, during normal business hours, AmeriQuest's employees,
attorneys, accountants and other authorized representatives, free and full
access to its plants, properties, books, records, documents and correspondence,
and all of the work papers and other documents relating thereto in the
possession of its auditors or counsel, in order that AmeriQuest may have full
opportunity to make such investigation as it may desire of Robec's properties
and business.
5.21 Compliance with Law. Comply with all laws applicable to it or to the
conduct of its respective business and will conduct its business in such manner
that on the date of the Exchange Closing the representations and warranties
contained in this Agreement shall be true as though such representations and
warranties were made on and as of such date.
5.22 Affiliates. At least ten business days prior to the date of the special
meeting of shareholders to be convened by Robec, Robec shall deliver to
AmeriQuest a list of names and addresses of those persons who were, in Robec's
reasonable judgment, at the record date for the Robec special meeting of
shareholders, "Affiliates" of Robec (each such person, together with the
persons identified below, an "Affiliate") within the meaning of Rule 145 of the
rules and regulations promulgated by the SEC under the Securities Act ("Rule
II-15
<PAGE>
145"). If requested by AmeriQuest, Robec shall use its best efforts to deliver
or cause to be delivered to AmeriQuest, prior to the Effective Date, from each
of the Affiliates of Robec identified in the foregoing list, agreements to vote
in favor of the Plan of Merger (collectively, the "Robec Affiliate Agreements")
substantially in a form satisfactory to both AmeriQuest and Robec. AmeriQuest
shall be entitled to place legends on the certificates evidencing any
AmeriQuest Common Stock to be received by such Affiliates pursuant to the terms
of this Agreement and the Plan of Merger, and to issue appropriate stop-
transfer instructions to the transfer agent for AmeriQuest Common Stock,
consistent with the terms of the Robec Affiliate Agreements, whether or not
such Robec Affiliate Agreements are actually delivered to AmeriQuest.
ARTICLE VI.
AMERIQUEST'S CONDITIONS TO CLOSING
A. The obligations of AmeriQuest to effect the Exchange contemplated
hereunder shall be subject to the following express conditions precedent:
6.01 Board Approvals. The Boards of Directors of Robec and AmeriQuest will
have approved this Agreement, following due diligence inquiries acceptable to
the respective Boards of Directors.
6.02 No Litigation. No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any United States federal or state governmental or
regulatory body which prevents consummation of the transactions contemplated by
this Agreement and which is in effect on the date of the Exchange Closing; no
action or proceeding by any governmental or regulatory authority shall have
been commenced or threatened (and be pending or threatened on the date of the
Exchange Closing) against Newco, AmeriQuest, Robec or any of their respective
affiliates, associates, officers, or directors seeking to prevent or
challenging the transactions contemplated by this Agreement; and no action or
proceeding before any federal or state court of competent jurisdiction in the
United States shall have been commenced (and be pending) against Newco,
AmeriQuest, Robec or any of their respective officers or directors seeking to
prevent or challenging the transactions contemplated hereby and seeking
material damages in connection therewith.
6.03 Employment Contracts. Neither Robec nor any of its subsidiaries shall
have executed any employment agreements or labor agreements to which it is not
now a party, and shall not have extended any new severance right or increased
any existing severance right to any employee except as consented to by
AmeriQuest.
6.04 Continued Truth of Warranties. The representations and warranties of
Robec herein contained shall be true on and as of the Exchange Closing in all
material respects with the same force and effect as though made on such date,
except for any variations permitted by this Agreement.
6.05 Performance of Covenants. Robec shall have performed in all material
respects all covenants and obligations and complied with all conditions
required or contemplated by this Agreement to be performed or complied with by
it prior to the Exchange Closing.
6.06 Damages by Casualty. The business, properties, financial condition,
earnings, prospects and operations of Robec shall not have been adversely
affected on or prior to the Exchange Closing in any material way as a result of
any accident or other casualty (whether or not covered by insurance) or any
labor disturbance or Act of God or of the public enemy.
6.07 No Adverse Change. There shall have been no material adverse change in
the business, properties, operations, financial condition or earnings of Robec
since the date hereof, which contemplates, among other things, that, except as
indicated on the Appendices attached hereto, there will be no significant loss
of customers or vendors, but a loss of up to an average of $500,000 per month
on a cumulative basis since July 1, 1994 shall not be considered a material
adverse change with respect to Robec.
II-16
<PAGE>
6.08 Certificate. Robec shall have delivered to AmeriQuest such certificates
and other documents evidencing satisfaction of the foregoing conditions
specified in this Article VI as AmeriQuest shall have reasonably requested.
Unless Robec shall have delivered to AmeriQuest a certificate executed by it
dated prior to the Exchange Closing, certifying that one or more of the
conditions set forth in Section 6.01 through 6.12 of this Agreement have not
been fulfilled, the consummation of the Exchange hereunder shall constitute a
representation and warranty by Robec that each of such conditions has been
fulfilled or satisfied.
6.09 Regulatory Consents. All consents, authorizations, orders and approvals
of, and filings and registrations with, any United States federal or state
governmental commission, board or other regulatory body which are required for
the consummation of the Exchange or the Merger shall have been obtained or
made, and the applicable waiting periods, if any, under the Antitrust
Improvements Act and the rules thereunder shall have expired or been
terminated. No preliminary or permanent injunction or other order by any
federal or state court of competent jurisdiction in the United States or by any
United States federal or state governmental or regulatory body shall have been
issued and remain in effect which prevents the consummation of the Exchange.
6.10 Approval of Legal Matters by Counsel. All legal matters in connection
with this Agreement and the Exchange Closing hereunder shall be approved by
Raymond L. Ridge, Esq., legal counsel for AmeriQuest, in the exercise of
reasonable judgment; and there shall have been furnished to such counsel by
Robec such corporate and other records and information as he may reasonably
have requested for such purpose.
6.11 Opinion of Counsel. Robec shall have furnished AmeriQuest with a
favorable opinion, dated the date of the Exchange Closing, of Morgan, Lewis &
Bockius addressed to Robec and in form and substance satisfactory to AmeriQuest
and its counsel to the effect that:
(a) Robec is a corporation duly incorporated, validly existing, and in
good standing under the laws of the Commonwealth of Pennsylvania; and
(b) Except for obtaining such shareholder approval as is required under
Pennsylvania law, all corporate proceedings required to be taken by or on
the part of Robec to authorize it to carry out this Agreement have been
performed, and this Agreement has been duly executed and delivered by
Robec, is valid and binding upon Robec and is enforceable in accordance
with its terms, except as may be limited by bankruptcy, insolvency or
similar laws affecting creditors' rights generally and except to the extent
the enforceability is subject to general principles of equity.
6.12 AmeriQuest Shareholder Approval. The required approval from the
shareholders of AmeriQuest which is referred to in Section 1.08(a) hereof shall
have been obtained.
B. The obligations of AmeriQuest to consummate the Merger contemplated
hereunder shall be subject to the following express conditions precedent:
6.13 Completion of Exchange and Fulfillment of Conditions to Exchange. The
Exchange shall have occurred.
6.14 Robec Shareholder Approvals. The required approval from the shareholders
of Robec which is referred to in Section 1.08(b) hereof shall have been
obtained.
6.15 No Litigation. No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any United States federal or state governmental or
regulatory body which prevents consummation of the Merger and which is in
effect on the Merger Closing Date.
ANY OF THE CONDITIONS CONTAINED IN THIS ARTICLE VI MAY BE WAIVED, IN WHOLE OR
IN PART, BY AMERIQUEST.
II-17
<PAGE>
ARTICLE VII.
PRINCIPAL SHAREHOLDERS' AND ROBEC'S CONDITIONS TO CLOSING
A. The obligation of the Principal Shareholders to effect the Exchange
contemplated hereunder shall be subject to the following express conditions
precedent:
7.01 Board Approvals. The Boards of Directors of Robec and AmeriQuest will
have approved this Agreement, following due diligence inquiries acceptable to
the respective Boards of Directors.
7.02 No Litigation. No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any United States federal or state governmental or
regulatory body which prevents consummation of the transactions contemplated by
this Agreement and which is in effect on the date of the Exchange Closing; no
action or proceeding by any governmental or regulatory authority shall have
been commenced or threatened (and be pending or threatened on the date of the
Exchange Closing) against Newco, AmeriQuest, Robec or any of their respective
affiliates, associates, officers, or directors seeking to prevent or
challenging the transactions contemplated by this Agreement; and no action or
proceeding before any federal or state court of competent jurisdiction in the
United States shall have been commenced (and be pending) against Newco,
AmeriQuest, Robec or any of their respective officers or directors seeking to
prevent or challenging the transactions contemplated hereby and seeking
material damages in connection therewith.
7.03 Continued Truth of Warranties. The representations and warranties of
AmeriQuest herein contained shall be true on and as of the Exchange Closing
with the same force and effect as though made as of such date, except for any
variations permitted by this Agreement.
7.04 Performance of Covenants. AmeriQuest shall have performed all material
covenants and obligations and complied with all material conditions required by
this Agreement to be performed or complied with by it prior to the Exchange
Closing.
7.05 Certificate. AmeriQuest shall have delivered to Robec such certificates
and other documents evidencing satisfaction of the foregoing conditions
specified in this Article VII as Robec shall have reasonably requested. Unless
an executive officer of AmeriQuest shall have delivered to Robec a certificate
executed by him, dated prior to the Exchange Closing, certifying that one or
more of the conditions set forth in Section 7.01 through 7.17 hereof have not
been fulfilled, the consummation of the Exchange shall constitute a
representation and warranty by AmeriQuest that each of such conditions has been
fulfilled or satisfied.
7.06 Record Date. The record date for the determination of the Robec
shareholders entitled to vote upon the adoption of the Plan of Merger shall
have been fixed or determined in accordance with Section 1763 of the BCL.
7.07 Regulatory Consents. Except for the filing of the Articles of Merger
with the Department of State of the Commonwealth of Pennsylvania, all consents,
authorizations, orders and approvals of, and filings and registrations with,
any United States federal or state governmental commission, board or other
regulatory body which are required for the consummation of the Exchange or the
Merger shall have been obtained or made, and the applicable waiting periods, if
any, under the Antitrust Improvements Act and the rules thereunder shall have
expired or been terminated. No preliminary or permanent injunction or other
order by any federal or state court of competent jurisdiction in the United
States or by any United States federal or state governmental or regulatory body
shall have been issued and remain in effect which prevents the consummation of
the Exchange or the Merger.
II-18
<PAGE>
7.08 Employment Contracts. Each of Messrs. Robert H. Beckett, Robert S.
Beckett and Alexander C. Kramer, Jr., shall have been offered an employment
contract, in substantially the form attached hereto as Exhibit C with base
salaries in amounts previously agreed to between such employee and AmeriQuest.
Except as otherwise provided in this Section 7.08, neither AmeriQuest nor any
of its subsidiaries shall have executed any employment agreements or labor
agreements to which it is not now a party, and shall not have extended or
increased any severance right to any employee.
7.09 Fairness Opinion. The Board of Directors of Robec shall have received a
"fairness opinion" on the Exchange and the Merger from a firm qualified to
render the same, satisfactory to the Board of Directors of Robec.
7.10 Opinion of Counsel. AmeriQuest shall have furnished Robec and the
Principal Shareholders with a favorable opinion, dated the date of the Exchange
Closing, of Raymond L. Ridge, Esq., addressed to Robec and in form and
substance satisfactory to Robec and its legal counsel, to the effect that:
(a) AmeriQuest is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware.
(b) All corporate proceedings required to be taken by or on the part of
AmeriQuest to authorize it to carry out this Agreement have been performed,
and this Agreement has been performed, and this Agreement has been duly
executed and delivered by AmeriQuest, is valid and binding upon AmeriQuest
and, subject to any insolvency law of general applicability, is enforceable
in accordance with its terms.
(c) The shares to be issued in the Exchange have been duly authorized and
upon receipt by the Principal Shareholders will be duly issued, fully-paid
and nonassessable shares of AmeriQuest Common Stock, duly approved for
listing on the NYSE upon official notice of issuance.
7.11 Third Party Consents. Robec shall have received all consents from third
parties which are required for the consummation of the Exchange or the Merger.
7.12 Horsham Lease. AmeriQuest shall have confirmed that the Surviving
Corporation will continue the existing lease and the use of the Robec office
building and warehouse in Horsham, Pennsylvania as its East Coast distribution
facility through end of the term of such lease.
7.13 No Material Adverse Change. There shall have been no material adverse
change in the business, properties, operations, financial conditions or
earnings of AmeriQuest since the date hereof.
7.14 Registration Rights. AmeriQuest shall have entered into a form of
Registration Rights Agreement with the Principal Shareholders in the form
attached hereto as Exhibit B.
7.15 Approval of Legal Matters by Counsel. All legal matters in connection
with this Agreement and the Exchange Closing hereunder shall be approved by
Morgan, Lewis & Bockius, legal counsel for Robec, in the exercise of reasonable
judgment; and there shall have been furnished to such counsel by AmeriQuest
such corporate and other records and information as they may reasonably have
requested for such purpose.
7.16 New York Stock Exchange Listing. The AmeriQuest Common Stock to be
issued pursuant to the Exchange shall have been approved for listing on the
NYSE upon official notice of issuance.
7.17 Repayment of Robec Debt. AmeriQuest or Robec shall have received
proceeds of a loan in an amount to Robec sufficient to repay all amounts
outstanding under the Credit Agreement pursuant to Section 4.22 hereof.
B. The obligation of Robec to consummate and to effect the Merger
contemplated hereunder shall be subject to the following express conditions
precedent:
II-19
<PAGE>
7.18 Completion of Exchange and Fulfillment of Conditions to Exchange. The
Exchange shall have occurred.
7.19 Effective Registration Statement. The Registration Statement on Form S-4
which is referred to in Section 1.08(c) hereof shall have been declared
effective by the SEC and not be the subject of any stop-order from the SEC or
other proceeding by the SEC which would bring into question the accuracy and
adequacy of the disclosures contained therein.
7.20 Shareholder Approvals. All required approvals from the shareholders of
Robec, Newco and AmeriQuest shall have been obtained.
7.21 New York Stock Exchange Listing. The AmeriQuest Common Stock issued
pursuant to the Exchange and to be issued pursuant to the Merger shall have
been approved for listing on the NYSE upon official notice of issuance.
7.22 Opinion of Counsel. AmeriQuest shall have furnished Robec with a
favorable opinion, dated the Effective Date, of Raymond L. Ridge, Esq.,
addressed to Robec and in form and substance satisfactory to Robec and its
legal counsel, to the effect that:
(a) AmeriQuest is a corporation duly incorporated, validly existing, and
in good standing under the laws of the State of Delaware.
(b) Newco is a corporation duly incorporated, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania.
(c) All corporate proceedings required to be taken by or on the part of
AmeriQuest to authorize it to carry out this Agreement have been performed,
and this Agreement has been duly executed and delivered by AmeriQuest, is
valid and binding upon AmeriQuest and, subject to any insolvency laws of
general applicability, is enforceable in accordance with its terms.
(d) The shares to be issued in the Merger have been duly authorized and
upon receipt by the Robec shareholders will be duly issued, fully-paid and
nonassessable shares of AmeriQuest Common Stock, duly approved for listing
on the NYSE upon official notice of issuance.
7.23 No Litigation. No preliminary or permanent injunction or other order
shall have been issued by any federal or state court of competent jurisdiction
in the United States or by any United States federal or state governmental or
regulatory body which prevents consummation of the Merger and which is in
effect on the Merger Closing Date.
7.24 Continued Truth of Warranties. The representations and warranties of
AmeriQuest herein contained shall be true on and as of the Effective Date with
the same force and effect as though made as of such date, except for any
variations permitted by this Agreement.
7.25 Performance of Covenants. AmeriQuest shall have performed all material
covenants and obligations and complied with all material conditions required by
this Agreement to be performed or complied with by it prior to the Effective
Date.
7.26 Approval of Legal Matters by Counsel. All legal matters in connection
with this Agreement and the Merger Closing hereunder shall be approved by
Morgan, Lewis & Bockius, legal counsel for Robec, in the exercise of reasonable
judgment; and there shall have been furnished to such counsel by AmeriQuest
such corporate and other records and information as they may reasonably have
requested for such purpose.
ANY OF THE CONDITIONS CONTAINED IN THIS ARTICLE VII OTHER THAN SECTION 7.14
MAY BE WAIVED, IN WHOLE OR IN PART, BY ROBEC.
II-20
<PAGE>
ARTICLE VIII.
MISCELLANEOUS
8.01 Broker For AmeriQuest. AmeriQuest represents and warrants that no
person, firm or corporation has acted in the capacity of broker on its behalf
to bring about the negotiation of this Agreement, and agrees to indemnify and
hold harmless Robec, its subsidiaries and affiliates, against any claims or
liabilities asserted against them by any person acting or claiming to act as a
broker or finder on behalf of AmeriQuest.
8.02 Broker for Robec. Robec represents and warrants that it is obligated to
pay to Penn Hudson Financial Group, Inc. a fee of $75,000 (the "Penn Hudson
Fee") in such firm's capacity as a broker on behalf of Robec in connection with
this Agreement. Robec agrees to pay the Penn Hudson Fee prior to or on the
Effective Date and to indemnify and hold harmless AmeriQuest, its subsidiaries
and affiliates, against any claims or liabilities asserted against them by any
other person acting or claiming to act as a broker or finder on behalf of
Robec.
8.03 Notices. Any notices or other communications required or permitted
hereunder to AmeriQuest and Robec shall be sufficiently given if delivered in
person or sent by telephonic facsimile or by registered mail or courier
service, charges prepaid, addressed as follows:
In the case of AmeriQuest:
AmeriQuest Technologies, Inc.
2722 Michelson Drive
Irvine, California
FAX No. (714) 222-6310
ATTENTION: Harold L. Clark, President
In the case of Robec:
Robec Inc.
425 Privet Road
Horsham, Pennsylvania
FAX No. (215) 672-9747
ATTENTION: Robert H. Beckett, Chairman, Chief Executive Officer
and President
With a copy to:
Morgan, Lewis & Bockius
2000 One Logan Square
Philadelphia, PA 19103
FAX No. (215) 963-5299
ATTENTION: Edward B. Cloues II, Esq.
or to such substituted address as any party has given notice to the other in
writing.
8.04 Waivers and Amendments. Any failure by AmeriQuest or of Robec to comply
with any of their respective obligations, agreements or covenants as set forth
herein may be expressly waived in writing by AmeriQuest in the case of a
default by Robec, and by Robec in the case of a default by AmeriQuest.
8.05 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
8.06 Confidentiality. Robec and AmeriQuest will provide to each other and, in
the case of AmeriQuest, to the Principal Shareholders, information concerning
their respective businesses and properties. All such information which each
party may provide (or which it has already provided) to the other party, except
information available to the public through documents filed with the Securities
and Exchange Commission
II-21
<PAGE>
or otherwise available to the public, is hereinafter called the "Confidential
Information." The Confidential Information shall be treated by the receiving
party as confidential and shall be used by the receiving party only for the
purpose of considering the transaction contemplated by this Agreement. Each of
the parties hereto will retain in confidence, and will require its employees,
consultants, professional representatives and agents to retain in confidence,
all Confidential Information of the other party, and neither party will use or
disclose to others, or permit the use or disclosure of, any such Confidential
Information except for such purpose and except for such disclosure to their
employees, consultants, professional representatives and agents as may be
necessary for such purpose.
If either Robec or AmeriQuest terminates this Agreement, each party will
promptly deliver to the other (without retaining copies thereof) any and all
documents and other materials containing the Confidential Information obtained
from the other party in connection with such discussions, and the Principal
Shareholders will do likewise. Additionally, if this Agreement should be
terminated as herein provided, the parties hereto shall each keep confidential
any information (unless readily ascertainable from public information) obtained
from the other party concerning the properties, operations and business of the
other.
8.07 Expenses. The parties hereto shall each pay their own expenses in
connection with this Agreement and the Merger contemplated hereby. The expense
of furnishing documents required under this Agreement shall be borne by the
party obligated to furnish the same.
8.08 Termination of Agreement. This Agreement may be terminated: (a) by
mutual agreement of Robec and AmeriQuest; (b) by AmeriQuest, prior to the
Exchange, if there has been a breach by Robec of any representation, warranty,
covenant or agreement set forth in this Agreement on the part of Robec which
has or can reasonably be expected to have a material adverse effect on Robec
and which Robec fails to cure prior to the Exchange (except that no cure period
shall be provided for a breach by Robec which by its nature cannot be cured) or
if approval of this Agreement by its board of directors pursuant to Section
6.01 hereof is not obtained; (c) by Robec, if there has been a breach by
AmeriQuest of any representation, warranty, covenant or agreement set forth in
this Agreement on the part of AmeriQuest which has or can reasonably be
expected to have a material adverse effect on AmeriQuest and which AmeriQuest
fails to cure prior to the Effective Date (except that no cure period shall be
provided for a breach by AmeriQuest which by its nature cannot be cured) or if
approval of this Agreement by its board of directors pursuant to Section 7.01
hereof or by its shareholders pursuant to Section 1.08(b) hereof is not
obtained; (d) by either party, if the Exchange shall not have occurred on or
prior to September 30, 1994; (e) by Robec, if the Merger shall not have
occurred on or prior to December 31, 1994, or (f) by Robec or any of the
Principal Shareholders if prior to the Exchange Robec decides to accept a
Superior Proposal (as defined in Section 8.09 hereof). Unless a termination is
caused by the willful failure of one of the parties hereto to perform or
satisfy an agreement or condition to be performed or satisfied by it hereunder,
none of the parties hereto shall have any further obligation or liability to
the other parties under this Agreement other than their respective obligations
under Sections 8.06, 8.07 and 8.12 hereof.
8.09 Competing Offers. Notwithstanding the foregoing, in the event that Robec
receives a bona fide proposal relating to the possible acquisition of Robec
(whether by way of merger, purchase of capital stock, purchase of assets or
otherwise) or any material portion of its capital stock or assets by any person
other than AmeriQuest, which proposal is, in the reasonable good faith judgment
of the Board of Directors of Robec, financially more favorable to the
shareholders of Robec than the terms of the Merger (a "Superior Proposal"),
nothing contained in this Agreement shall prevent the Board of Directors of
Robec from providing information to the party making the Superior Proposal,
negotiating with the party making the Superior Proposal, communicating the
Superior Proposal to the shareholders of Robec or making a recommendation in
favor of the Superior Proposal if before making such recommendation the Board
of Directors determines in good faith, after consultation with legal counsel,
that such action is required or likely required by reason of the fiduciary
duties of the members of the Board of Directors of Robec to the shareholders of
Robec under applicable law.
II-22
<PAGE>
However, Robec shall immediately notify AmeriQuest of each proposal it may so
receive to afford AmeriQuest the opportunity to counter with a proposal that is
equal to or better than any Superior Proposal that Robec may receive.
8.10 Announcement. Upon execution of this Agreement, AmeriQuest and Robec
promptly will issue a joint press release approved by both AmeriQuest and Robec
announcing the Exchange and the Merger. Thereafter, neither of such parties
shall make any further announcements with respect to this Agreement or the
transactions proposed herein, without the prior written consent of the other
party, which consent shall not be unreasonably withheld or delayed, provided,
however, that AmeriQuest and Robec may issue such press releases, and make such
other disclosures regarding the transactions contemplated herein, as each
determines (after consultation with legal counsel) are required under
applicable securities laws, NYSE rules or rules of the National Association of
Securities Dealers Automated Quotation system ("NASDAQ").
8.11 Robec Approvals After the Exchange. After the consummation of the
Exchange, any waiver of any condition, or consent to any action, or any
amendment to this Agreement or the Plan of Merger by Robec, shall require, in
addition to any other approval required by applicable law or Robec's Articles
of Incorporation, the approval of a majority of the Robec directors who were
directors of Robec as of the date hereof.
8.12 Indemnification and Insurance. (a) The Certificate of Incorporation of
the Surviving Corporation shall contain the provisions with respect to
indemnification set forth in the Articles of Incorporation of Robec on the date
of this Agreement, which provisions shall not be amended, repealed or otherwise
modified for a period of six years from the Effective Date in any manner that
would adversely affect the rights thereunder of individuals who at the
Effective Date were directors, officers, employees or agents of Robec, unless
such modification is required by law.
(b) After the Effective Date (and with respect to the Principal Shareholders,
after the Exchange Closing), AmeriQuest and the Surviving Corporation shall, to
the fullest extent permitted under applicable law or under AmeriQuest's or the
Surviving Corporation's Certificate of Incorporation or By-laws, indemnify and
hold harmless each present and former director and officer of Robec and, to the
fullest extent permitted under applicable law, each Principal Shareholder
(collectively, the "Indemnified Parties") against any costs or expenses
(including attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any claim,
action, suit, proceeding or investigation, whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission occurring prior to the Effective Date, or arising out of or pertaining
to the transactions contemplated by this Agreement (collectively, "Damages"),
for a period of six years after the date hereof. Furthermore, for a period of
six years after the date hereof, AmeriQuest and the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless each Principal Shareholder in his capacity as an accommodating
shareholder against any Damages arising out of or pertaining to the
transactions contemplated by this Agreement. AmeriQuest or the Surviving
Corporation shall, to the fullest extent permitted under applicable law, pay
expenses incurred by an Indemnified Party in advance of a disposition of the
applicable action or suit upon the receipt of an undertaking by such person to
repay such amount if it shall ultimately be determined that he is not entitled
to be indemnified hereunder. If for any reason AmeriQuest and the Surviving
Corporation do not promptly fulfill the indemnification and payment obligations
to the Principal Shareholders set forth in this Section 8.12(b), Robec or its
successor shall perform such obligations as though named in such provisions to
the fullest extent permitted under applicable law. The indemnifying party shall
have the right to choose counsel reasonably acceptable to the Indemnified
Parties. Indemnified Parties may not agree to settle claim without the consent
of the indemnifying party, which consent may not be unreasonably withheld.
(c) For a period of six years after the Effective Date, AmeriQuest shall
cause the Surviving Corporation to use its best efforts to maintain in effect,
if available, directors' and officers' liability insurance covering those
persons who are currently covered by Robec's directors' and officers' liability
insurance policy (a copy
II-23
<PAGE>
of which has been heretofore delivered or made available to AmeriQuest) on
terms comparable to those applicable to the then current directors and officers
of AmeriQuest.
8.13 Attorney's Fees. If any action or proceeding is brought by either party
against the other with respect to this Agreement, the prevailing party shall be
entitled to recover attorney's fees and costs in such amount as the court (or
the arbitrators) may adjudge reasonable.
8.14 Further Assurances. Each of Robec and AmeriQuest agree to use its best
efforts to obtain all consents required by it to consummate the transactions
contemplated by this Agreement. Each party agrees to cooperate with the other
and to execute such further instruments, documents and agreements as may be
reasonably requested by the other to evidence and reflect the transactions
contemplated by this Agreement.
8.15 Headings. The headings herein are for convenience of reference only, do
not constitute a part of this Agreement, and shall not be deemed to limit or
affect any of the provisions of this Agreement.
8.16 Governing Law. This Agreement shall be governed by the laws of the
Commonwealth of Pennsylvania.
8.17 Entire Agreement. All prior negotiations and agreements between the
parties hereto are superseded by this Agreement and there are no
representations, warranties, understandings or agreements other than those
expressly set forth herein, in the attached Appendices or in Exhibits delivered
pursuant hereto, except as modified in writing concurrently herewith or
subsequent hereto.
WHEREFORE, the parties have set their hands on September 21, 1994 but
effective as of August 11, 1994.
AmeriQuest Technologies, Inc.
Attest:
/s/ Stephen G. Holmes /s/ Harold L. Clark
_____________________________________ _____________________________________
Stephen G. Holmes, Harold L. Clark,
Secretary President
Robec, Inc.
Attest:
/s/ Robert S. Beckett /s/ Robert H. Beckett
_____________________________________ _____________________________________
Robert S. Beckett, Robert H. Beckett,
Secretary Chairman, Chief Executive Officer
and President
PRINCIPAL SHAREHOLDERS
Each individual Principal Shareholder is joining in this Amended and Restated
Agreement and Plan of Reorganization in his or her capacity as an individual
shareholder solely for the purpose of agreeing to be bound by Sections 1.01,
8.06, 8.08 and 8.16 hereof.
/s/ Robert H. Beckett
_____________________________________
Robert H. Beckett
/s/ Robert S. Beckett
_____________________________________
Robert S. Beckett
/s/ Alexander C. Kramer, Jr.
_____________________________________
Alexander C. Kramer, Jr.
/s/ G. Wesley McKinney
_____________________________________
G. Wesley McKinney
II-24
<PAGE>
APPENDICES
Appendix I --Stock Options, Warrants and Convertible Securities of AmeriQuest
Appendix II --AmeriQuest's Subsidiaries
Appendix III --Instruments Violated by AmeriQuest being party to the Agreement
Appendix IV --Defaults by AmeriQuest
Appendix V --Certain Material AmeriQuest Agreements
Appendix VI --Certain AmeriQuest Litigation
Appendix VII --AmeriQuest's Highly Compensated Employees
Appendix VIII--AmeriQuest's Labor Concerns and Financial Condition
Appendix IX --Stock Options, Warrants and Convertible Securities of Robec
Appendix X --Robec's Subsidiaries
Appendix XI --Instruments Violated by Robec being party to the Agreement
Appendix XII --Robec's Loans in Default and Scheduled for Repayment Prior to the
Effective Date
Appendix XIII--Certain Material Robec Agreements
Appendix XIV --Certain Robec Litigation
Appendix XV --Robec's Highly Compensated Employees
Appendix XVI --Robec's Labor Concerns and Financial Condition
II-25
<PAGE>
EXHIBITS
Exhibit A--Plan of Merger
Exhibit B--Registration Rights Agreement
Exhibit C--Form of Employment Agreement.
II-26
<PAGE>
Exhibit 5.01
RAYMOND L. RIDGE
3901 MacArthur Blvd., Suite 200
Newport Beach, California 92660
(714) 252-5434
(714) 639-3573 (Fax)
January 19, 1995
AmeriQuest Technologies, Inc.
2722 Michelson
Irvine, California 92715
Gentlemen:
I am furnishing this opinion to you to be filed as Exhibit 5.01 to the
Registration Statement on Form S-4 (the "Registration Statement") of AmeriQuest
Technologies, Inc. (the "Company") to be filed with the Securities and Exchange
Commission. The Registration Statement relates to the proposed issuance of up to
1,397,208 shares of Common Stock of the Company in connection with its
acquisition of Robec, Inc. ("Robec"). All shares subject of the Registration
Statement are hereinafter referred to as the "Shares."
I am familiar with the proceedings taken by the Company in connection with
the Amended and Restated Agreement and Plan of Reorganization and the Plan of
Merger and the filing of the Registration Statement.
Upon the basis of the foregoing and such investigations as I have deemed
necessary in connection with this opinion I am of the opinion that the shares to
be issued pursuant to the Registration Statement will be legally issued,
fully-paid and nonassessable.
I hereby consent to the filing of this opinion as Exhibit 5.01 to the
Registration Statement, and to the reference to me under the caption "Legal
Matters" in the Registration Statement.
Very truly yours,
/s/ Raymond L. Ridge
RAYMOND L. RIDGE, ESQ.
<PAGE>
[LETTERHEAD OF ARTHUR ANDERSEN LLP]
January 19, 1995
AmeriQuest Technologies Inc.
2722 Michelson Drive
Irvine, California 92715
Dear Ladies/Gentlemen:
RE: TAX OPINION ON PROPOSED MERGER
This tax opinion is on the proposed merger (the "Merger" according to the
"Merger Agreement" dated August 11, 1994, of AmeriQuest/Robec Inc., a
Pennsylvania corporation ("Sub") with and into Robec Inc., a Pennsylvania
corporation ("Target"). The merger is part of the terms of the Agreement and
Plan of Reorganization dated as of August 11, 1994, and the Amendments dated as
of August 11, 1994, (the "Reorganization Agreement") by and among AmeriQuest
Technologies Inc., a Delaware corporation ("Parent"), Sub, Target, and Robert H.
Beckett, Robert S. Beckett, Alexander C. Kramer Jr., and G. Wesley McKinney, who
were certain principal shareholders of Robec (the "Principal Shareholders").
The Merger Agreement and Reorganization Agreement are together referred to as
the "Agreements."
Based upon and subject to the items set forth below, the discussion attached at
Appendix A (which is to be included as part of the Registration Statement under
the caption "Certain Federal Income Tax Consequences") expresses our opinion as
to the material federal income tax consequences applicable to holders of Target
Common Stock.
The following items are critical aspects of our opinion:
1. Scope of Opinion
You have asked for our opinion on the U.S. federal income tax consequences.
We have not considered any nonincome tax, or state, local, or foreign income
tax consequences and, therefore, do not express any opinion regarding the
treatment that would be given the transaction by the applicable authorities
on any nonincome tax or any state, local, or foreign tax issues. We also
express no opinion on nontax issues, such as corporate law or securities law
matters.
<PAGE>
AmeriQuest Technologies Inc.
Page 2
January 19, 1995
2. Language
The language expressed in the Registration Statement, including the "Certain
Federal Income Tax Consequences" section is the responsibility of AmeriQuest.
Arthur Andersen LLP will provide suggested language, but AmeriQuest must
utilize its legal counsel in drafting the ultimate Registration Statement.
3. Facts/Assumptions
In rendering our opinion, we have relied upon the accuracy and completeness
of the facts, information, assumptions, and representations as contained in
(i) the Agreements, (ii) the Continuity of Interest Representations among
Parent, Sub, Target, and certain Shareholders, (iii) the Registration
Statement, (iv) the representations made by AmeriQuest and Robec, and (v)
such other documents as we have deemed necessary or appropriate in order to
enable us to render the opinions. In our analysis, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, and
the authenticity (whether originals or copies) of all documents submitted to
us. Both AmeriQuest and Robec have represented to us that the above contain
all of the facts and assumptions necessary for us to form our opinion;
however, we have not independently audited or otherwise verified any of these
facts or assumptions.
4. Effect of Misstatement of or Changes in Facts, Assumptions, or
Representations
A misstatement or omission of any fact or a change or amendment in any of the
facts, assumptions, or representations we have relied upon may require a
modification of all or a part of this opinion.
5. Responsibility to Update Opinion for Changes in Facts, Assumptions, or
Representations
Our opinion is as of January 19, 1995, and we have no responsibility to
update this opinion for events, transactions, circumstances, or changes in
any of the facts, assumptions, or representations occurring after this date.
6. Premise of Opinions
The opinions expressed herein are based solely upon our interpretation of the
Internal Revenue Code and income tax regulations as interpreted by court
decisions and by rulings and procedures issued by the IRS as of the date of
this letter.
<PAGE>
AmeriQuest Technologies Inc.
Page 3
January 19, 1995
7. Weight of Opinion
In analyzing the authorities relevant to the potential tax issues outlined in
the opinions, we have applied the standards of "substantial authority" and
"more likely than not proper," as used in IRC Section 6662 under current law.
Based upon our analysis, we have concluded that there is substantial
authority for the indicated tax treatment of the transaction, and we also
believe the indicated tax treatment of the transaction is more likely than
not proper.
8. Effect of Our Opinion on Tax Authorities
The opinions expressed herein are not binding on the Internal Revenue
Service, and there can be no assurance that the Internal Service will not
take a position contrary to any of the opinions expressed herein.
The opinions expressed herein reflect our assessment of the probable outcome
of litigation and other adversarial proceedings based solely on an analysis
of the existing tax authorities relating to the issues. It is important,
however, to note that litigation and other adversarial proceedings are
frequently decided on the basis of such matters as negotiation and
pragmatism. Furthermore, in recent years, the court of law has exhibited a
willingness to interpret prior authorities, as well as to develop new
theories, in order to reach a conclusion which will maximize tax revenues.
We have not considered the effect of such negotiation, pragmatism, and
judicial willingness upon the outcome of such potential litigation or other
adversarial proceedings.
The opinions expressed herein reflect what we regard to be the material
federal income tax effects to Target shareholders of the merger;
nevertheless, they are opinions only and should not be taken as an assurance
of the ultimate tax treatment.
9. Responsibility for Effect of Changes in Relevant Authorities
The discussion and conclusions set forth herein are based upon the Code,
Treasury Regulations, and existing administrative and judicial
interpretations thereof as of January 19, 1995, all of which are subject to
change. If there is a change, including a change having retroactive effect,
in the Code, Treasury Regulations, Internal Revenue Service rulings or
releases, or in the prevailing judicial interpretation of the foregoing, the
opinions expressed herein would necessarily have to be re-evaluated in light
of any such changes. We have no responsibility to update this opinion for
changes in the above-listed law and authority occurring after the above date.
<PAGE>
AmeriQuest Technologies Inc.
Page 4
January 19, 1995
10. Restrictions on Use of Opinion
This opinion is furnished to you solely for use in connection with the
Registration Statement. We hereby consent to the filing of this opinion as
an exhibit to the Registration Statement. We also consent to the references
to Arthur Andersen LLP under the heading "Certain Federal Income Tax
Consequences" in the Registration Statement.
Very truly yours,
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
<PAGE>
TAX SECTION OF REGISTRATION STATEMENT
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
FEDERAL TAX MATTERS
The following summary is a general discussion of the material federal income tax
consequences to the Robec shareholders receiving AmeriQuest Common Stock in the
Merger and to Robec and AmeriQuest. This summary is based upon the Internal
Revenue Code of 1986, as amended (the "Code"), administrative pronouncements,
judicial decisions, and existing Treasury Regulations as of the date hereof, all
of which are subject to change, possibly with retroactive effect. Any such
change could affect the continuing validity of this summary. In the opinion of
Arthur Andersen LLP (see Exhibit for complete opinion), the discussion
------
below, insofar as it relates to matters of the Federal income tax consequences
to Robec shareholders receiving AmeriQuest Common Stock in the Merger, is an
accurate summary of such matters. Arthur Andersen LLP's opinion is based upon
its best judgment on the application of current law to the facts of the Merger
and is not binding on the courts.
The following discussion does not consider the tax consequences of the Merger
under state, local, and foreign tax law. The discussion also does not discuss
all aspects of income taxation that may be relevant to a particular Robec
shareholder or to certain types of shareholders such as financial institutions,
broker-dealers, life insurance companies, tax-exempt organizations, investment
companies, and other special status taxpayers.
EACH ROBEC SHAREHOLDER IS STRONGLY URGED TO CONSULT HIS OR HER OWN TAX ADVISOR
REGARDING THE FEDERAL, STATE, LOCAL, AND FOREIGN TAX CONSEQUENCES OF THE MERGER.
TAX CONSEQUENCES TO ROBEC SHAREHOLDERS
REORGANIZATION. The Merger qualifies as a tax-free reorganization under
Section 368 of the Code, which requires in general that the consideration issued
by AmeriQuest to the holders of Robec Common Stock be stock of AmeriQuest. The
AmeriQuest Common Stock initially issued in the Merger will qualify as stock.
Notwithstanding the lack of compliance with all of the Service's advance ruling
guidelines, we have concluded that there is substantial authority for the
treatment of this merger as a tax-free reorganization, and we also believe this
treatment is more likely than not proper. If the Merger qualifies as a tax-free
reorganization, no gain or loss will be recognized by a Robec shareholder who
receives AmeriQuest Common Stock in the Merger.
BASIS. Shareholders of Robec will take a basis in their new AmeriQuest shares
equal to the basis in their Robec Shares.
EXHIBIT , APPENDIX
----- -----
<PAGE>
Tax Section of Registration Statement
Page 2
January 19, 1995
RECEIPT OF CASH IN LIEU OF FRACTIONAL SHARES. The receipt of cash in lieu of
any fractional shares of Robec Common Stock pursuant to the Merger will not
affect the question whether the Merger qualifies as a tax-free reorganization.
However, the receipt of such cash will be treated as a taxable redemption in
which the recipient shareholder will recognize gain or loss equal to the
difference between the amount of cash received and the shareholder's basis in
such fractional share.
TAX CONSEQUENCES TO ROBEC AND AMERIQUEST
No gain or loss will be recognized by either Robec or AmeriQuest in the Merger.
Robec will retain its historic basis and holding period in its assets after the
Merger. The basis of AmeriQuest in its stock of Surviving Corporation
immediately after the Merger will be equal to the basis of all Robec
shareholders, including AmeriQuest, in their shares of Robec Common Stock
immediately prior to the Effective Date. In addition, the tax attributes, if
any, of Robec will carry over. In addition, if it has not occurred prior to the
Merger, the Merger itself will likely cause a "change of ownership" to both
Robec and AmeriQuest (as defined by Section 382). Because of this ,the future
utilization of certain tax attributes, if any, that were generated before the
change of ownership, including net operating loss carryovers, may be restricted.
INFORMATION REPORTING
Treasury Regulations require that every taxpayer who receives stock in
connection with a corporate reorganization must file with his or her income tax
return a statement of facts pertinent to the nonrecognition of gain or loss upon
the transaction, including: (i) a statement of the basis of the stock
transferred in the transaction and (ii) a statement of the fair market value of
the stock received in the transaction. In addition, taxpayers are required to
maintain permanent records with respect to the foregoing information. Robec
shareholders will be required to comply with these requirements.
<PAGE>
Tax Section of Registration Statement
Page 3
January 19, 1995
BACKUP WITHHOLDING
Under the backup withholding rules of the Code, a Robec shareholder may be
subject to backup withholding with respect to payments of cash in lieu of
fractional shares. To prevent such backup withholding, a Robec shareholder
must, unless an exception applies under the applicable law and regulations,
provide the payor of such cash with such shareholder's correct taxpayer
identification number ("TIN") on a Substitute Form W-9 and certify under
penalties of perjury that such number is correct and that such shareholder is
not subject to backup withholding. A Substitute Form W-9 will be provided to
each Robec shareholder in the letter of transmittal to be mailed to each
shareholder. If the correct TIN and certifications are not provided, a $50
penalty may be imposed on the shareholder by the Service, and payments of cash
to such shareholder may be subject to backup withholding at a rate of 31
percent.
<PAGE>
Exhibit 10.04
AGREEMENT OF SUBLEASE
between
THE AUSTIN COMPANY
Sublandlord
and
AMERIQUEST TECHNOLOGIES, INC.
Subtenant
Premises:
A portion of
MACARTHUR PLACE
3 Imperial Promenade
Santa Ana, California
<PAGE>
1. Subleasing of Premises..................................... 1
2. Term....................................................... 1
3. Rents...................................................... 2
4. Condition of the Premises.................................. 3
5. Incorporation of the Master Lease.......................... 4
6. Covenant of Quiet Enjoyment................................ 8
7. Assignment and Undersubletting............................. 8
8. Alterations................................................ 10
9. Security Deposit........................................... 11
10. Notices.................................................... 11
11. Parking.................................................... 12
12. Signage.................................................... 12
13. Master Landlord's Consent.................................. 12
14. Miscellaneous.............................................. 13
15. Participation Agreement; Agreement Regarding Engineering
and Construction Services................................ 14
16. Binding Effect............................................. 14
<PAGE>
THIS AGREEMENT OF SUBLEASE (this "Sublease"), is made as of the 5th day of
December, 1994, between THE AUSTIN COMPANY, an Ohio corporation presently having
an office address at Suites 200 and 300, 3 Imperial Promenade, Santa Ana,
California ("Sublandlord"), and AMERIQUEST TECHNOLOGIES, INC., a Delaware
corporation presently having an office address at 2722 Michelson Drive, Irvine,
California ("Subtenant").
WITNESETH:
WHEREAS Brookfield Imperial, Inc., a California corporation is the
successor in interest to BCE Development Inc. ("Master Landlord") under that
certain lease dated June 27, 1989, as amended by amendments thereto dated
October 24, 1991 and September 23, 1992 (as so and hereafter amended, the
"Master Lease") demising portions (the "Premises") of the building known as
MacArthur Place, Suites 200 and 300, 3 Imperial Promenade, Santa Ana, California
(the "Building") to Sublandlord as Tenant thereunder. (All capitalized terms not
otherwise defined herein shall have the meanings given them in the Master
Lease.)
WHEREAS Sublandlord desires to sublease to Subtenant, and Subtenant desires
to sublease from Sublandlord, the Premises on the terms and conditions contained
herein;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
it is mutually agreed as follows:
1. Subleasing of Premises. Sublandlord hereby subleases to Subtenant,
------------------------
and Subtenant hereby hires from Sublandlord, all of the Premises.
2. Term.
-----
The term of this Sublease shall commence on April 1, 1995 (the
"Commencement Date"), and shall end on March 31, 2006 (the "Expiration Date") or
on such earlier date upon which such term shall expire or be terminated pursuant
to any of the conditions or covenants of this Sublease or pursuant to law;
provided, however, that if Sublandlord is unable to deliver possession of the
Premises to Subtenant on the Commencement Date set forth above because Master
Landlord has not consented to this Sublease, Sublandlord shall not be subject to
any liability for its failure to give possession and the validity of this
Sublease shall not be impaired, nor shall the same be construed to extend the
term of this Sublease, and the "Commencement Date" shall be that date after
receipt by Sublandlord of the Master Landlord's consent and delivery of
possession of the Premises to Subtenant. Notwithstanding the foregoing,
Sublandlord shall use its best reasonable efforts to vacate on or about March 1,
1995 in which
<PAGE>
case the Commencement Date shall commence on the date of such vacating.
In order to accommodate Subtenant's special needs, prior to the
Commencement Date Sublandlord shall use its reasonable best efforts to make
portions of the Premises available for the installation of Tenant Improvements
provided Subtenant complies with Section 8.2 below.
3. Rents.
------
3.1 Subtenant shall pay to Sublandlord fixed rent at the rate of $1.70
per square foot of the Premises per month which amount is $93,467.70 ("Fixed
Rent"), with the first full month's Fixed Rent payable upon execution of this
Sublease and with each subsequent month's Fixed Rent payable on the first day of
each month following the Commencement Date; provided, however, that if the
Commencement Date is other than the first day of a month (a) the first payment
due shall be calculated on a pro-rata basis considering the portion of the month
falling on or after the Commencement Date and (b) the payment due on the first
day of any month in which shall occur any anniversary of the Commencement Date
shall be calculated on a pro-rata basis considering the rate of fixed rent
applicable to each portion of such month. Sublandlord shall abate the Fixed Rent
payments due for months two (2) through sixteen (16) of this Sublease by fifty
percent (50%) for each of such fifteen (15) months, provided that Subtenant is
not in default with respect to any of its obligations under this Sublease at the
commencement of any such month. The square footage of the Premises shall be as
calculated by the Master Landlord under the Master Lease.
3.2 In addition to the Fixed Rent, Subtenant shall pay monthly
commencing in January, 1996 all incremental expenses referred to in the Master
Lease as "Operating Expenses" in excess of those amounts calculated for calendar
1995, based on the assumption that such 1995 Operating Expenses are based on the
higher of (i) a ninety-five percent (95%) occupancy rate, or (ii) the actual
occupancy rate. The intent of the parties under this provision is that
Sublandlord shall be responsible during the Term hereof for the Operating
Expenses each year of the Term up to but not in excess of the annual obligation
therefor relating to calendar 1995.
3.3 As used herein the term "additional rent" shall refer to all sums
of money which shall become due from and payable by Subtenant to Sublandlord
hereunder, other than fixed rent, and the term "rents" shall refer to fixed rent
and additional rent. All rents shall be payable in lawful money of the United
States at
2
<PAGE>
such place and to such person as Sublandlord shall from time to time designate.
3.4 Subtenant shall promptly pay all rents as and when the same shall
become due and payable without set-off, offset or deduction of any kind
whatsoever except as otherwise provided for herein and, in the event of
Subtenant's failure to pay any additional rent when due, Sublandlord shall have
all of the rights and remedies provided for herein or at law or in equity in the
case of non-payment of fixed rent.
3.5 Sublandlord's failure during the term of this Sublease to prepare
and deliver any statements or bills required or permitted to be delivered to
Subtenant hereunder, or Sublandlord's failure to make a demand under this
Sublease, shall not in any way be deemed to be a waiver of, or cause Sublandlord
to forfeit or surrender, its rights to collect any rents which may have become
due pursuant to this Sublease during the term hereof. Subtenant's liability for
rents accruing during the term of this Sublease shall survive the expiration or
sooner termination of this Sublease.
3.6 Subtenant shall have the right, subject to obtaining all reviews,
approvals and consents required by the Master Lease, to perform certain
Subtenant improvements to the Premises such as partitioning, doors, floor
coverings (the "Tenant Improvements"). Sublandlord shall, upon receipt of bona
fide receipts from third parties for such Tenant Improvements, reimburse
Subtenant up to a maximum of $200,000 which sum shall then be repaid thereafter
along with an interest factor of 10% per annum on the unpaid balance by
Subtenant to Sublandlord along with Fixed Rent on a fully-amortized basis over
the remaining Term. The reimbursement shall be accomplished with one (1)
payment by Sublandlord to Subtenant and at the time of such payment and as a
condition thereto Subtenant shall execute an amendment to this Sublease which
sets forth the amount and exact repayment terms of this amount.
4. Condition of the Premises.
--------------------------
Subtenant represents that it has examined (or waived examination of) the
Premises. Sublandlord has not made and does not make any representations or
warranties as to the physical condition of the Premises (including any latent
defects in or to the Premises), the uses to which the Premises may be put, or
any other matter or thing affecting or relating to the Premises, except as
specifically set forth in this Sublease. Subtenant agrees to accept the Premises
in their "as is" condition as of the date hereof as the same may be affected by
reasonable wear and tear after the date hereof, and (b) Sublandlord shall have
no obligation whatsoever to alter, improve, decorate or otherwise prepare the
Premises for Subtenant's occupancy.
3
<PAGE>
The disposition of all trade fixtures, furniture and equipment presently
existing at the Premises shall be the subject of a separate letter agreement
between Sublandlord and Subtenant which letter agreement shall not be a
condition to the effectiveness of this Sublease.
5. Incorporation of the Master Lease.
----------------------------------
5.1 Sublandlord represents that a true and complete copy of the Master
Lease is attached hereto as Exhibit A. Sublandlord shall not voluntarily
surrender the Master Lease or amend the same in a manner adverse to Subtenant.
If the Master Lease shall terminate for any reason then this Sublease shall also
terminate without liability of either party to the other on account thereof;
provided, however, that if such termination of the Master Lease shall have
arisen out of
(a) any default by Sublandlord as tenant thereunder not arising
out of any default by Subtenant as tenant hereunder, or
(b) a voluntary surrender by Sublandlord in violation of the
preceding sentence,
then such termination shall be deemed to be a violation of Section 6 hereof and
Sublandlord shall be liable to Subtenant to the extent provided by applicable
law on account thereof. This Sublease is expressly subject to all of the
obligations of Sublandlord as tenant under the Master Lease.
5.2 Except as otherwise expressly provided in, or otherwise
inconsistent with, this Sublease, the provisions of the Master Lease listed
below (the "Incorporated Provisions") are hereby incorporated in this Sublease
by reference with the same force and effect as if set forth at length herein,
except that unless the context requires otherwise,
(i) references in such provisions to Landlord shall be deemed to
refer to Sublandlord,
(ii) references in such provisions to Tenant shall be deemed to
refer to Subtenant,
(iii) references in such provisions to the Premises or the Demised
Premises shall be deemed to refer to the Premises hereunder,
(iv) references in such provisions to other Incorporated
Provisions shall be deemed to refer to such Incorporated Provisions as
incorporated herein,
4
<PAGE>
(v) references in such provisions to superior leases shall be deemed
to refer to leases to which the Master Lease is subordinate and references in
such provisions to superior mortgages shall refer to mortgages to which the
Master Lease is subordinate,
(vi) references in such provisions to subleases, sublettings or
subtenants shall be deemed to refer to undersubleases, undersublettings or
undersubtenants,
(vii) whenever, pursuant to any of the Incorporated Provisions as
incorporated herein, Subtenant is required to furnish insurance, indemnification
or other similar protection to or for Sublandlord, or to take some act as
designated or directed by Sublandlord or to the satisfaction of Sublandlord,
Subtenant shall be required to furnish the same to or for Master Landlord and
Sublandlord, or to take the same as designated or directed by Master Landlord or
Sublandlord or to the satisfaction of Master Landlord and Sublandlord,
(viii) whenever, pursuant to any of the Incorporated Provisions as
incorporated herein, Subtenant is required to obtain the consent or approval of
Sublandlord to or with respect to any act, omission or thing (e.g. to any
undersublease or assignment or to the making of any alterations, installations,
additions or improvements), Subtenant shall be required to obtain the consent or
approval of Master Landlord and Sublandlord to or with respect to such act,
omission or thing,
(ix) whenever, pursuant to any of the Incorporated Provisions as
incorporated herein, Subtenant grants any release, waiver or similar thing to
Sublandlord, Subtenant shall be deemed to have granted the same to Master
Landlord and Sublandlord,
(x) whenever, pursuant to any of the Incorporated Provisions as
incorporated herein, Subtenant grants Sublandlord any right of entry, access or
use of the Premises, Subtenant shall be deemed to have granted such right to
Master Landlord and Sublandlord,
(xi) time periods provided for in the Incorporated Provisions shall be
shortened or lengthened, as the case may be, as necessary so that actions or
omissions relating thereto may be coordinated with the corresponding actions or
omissions under the Master Lease or performed within the time required by the
Master Lease.
The Incorporated Provisions of the Master Lease are all of the provisions
thereof except for Sections 56 and 57 rights to which are reserved by
Sublandlord.
5
<PAGE>
5.3 Notwithstanding anything to the contrary contained in this
Sublease (including any of the Incorporated Provisions as herein incorporated),
Sublandlord shall not be obligated
(i) to provide any of the services that Master Landlord has agreed in
the Master Lease to provide or is required by law to provide, or
(ii) to make any of the repairs or restorations that Master Landlord
has agreed in the Master Lease to make or is required by law to make, or
(iii) to comply with any laws or requirements of public authorities,
or
(iv) to take or to refrain from taking any other action that Master
Landlord has agreed in the Master Lease to take or to refrain from taking or is
required by law to take or to refrain from taking (including, in either case,
any obligations with respect to giving consents, approvals, etc.), or
(v) to perform any obligation that Master Landlord has agreed in the
Master Lease to perform,
and Sublandlord shall have no liability to Subtenant on account of any failure
of Master Landlord (or Sublandlord) to provide, make, comply with, take, refrain
from taking, or perform any of the foregoing. With reference to the foregoing,
Sublandlord agrees:
(a) upon Subtenant's request, to use reasonable efforts, at
Subtenant's expense (such expense to be prepaid by Subtenant prior to
Sublandlord commencing or continuing to act under this clause (a)), to (x)
compel Master Landlord to provide, make, comply, take, refrain from taking or
perform the same or (y) recover damages on account of Master Landlord's failure
to do so, including within such reasonable efforts the commencement and
prosecution, at Subtenant's expense, of an action at law or in equity, and
(b) that, if any right or remedy of Sublandlord or any duty or
obligation of Master Landlord in either case under any of the Incorporated
Provisions is subject to or conditioned upon Sublandlord's making any demand
upon Master Landlord or giving any notice, request or statement to Master
Landlord or taking any other action then, if Subtenant shall so request,
Sublandlord, at Subtenant's expense (such expense to be prepaid by Subtenant
prior to Sublandlord commencing or continuing to act under this clause (b)),
shall make such demand, give such notice, request or statement or take such
other act.
6
<PAGE>
Subtenant shall defend, indemnify and hold harmless Sublandlord from and against
any and all loss, cost, damage and expense incurred by Sublandlord under or in
connection with (1) any such efforts and/or such action, proceeding, or
arbitration including reasonable attorneys fees, pursuant to clause (a) above,
or (2) any such demand, notice, request, statement or act, pursuant to clause
(b) above. Prior to taking or continuing to take any action under this Section
5.3, Sublandlord, from time to time, may require Subtenant to increase the
amount of the security deposit under Section 9 by such amount as Sublandlord
shall determine in order to secure the faithful performance by Subtenant of its
obligations under this Section 5.3.
5.4 Whenever Subtenant desires to do any act or thing which requires
the consent or approval of Sublandlord under any of the Incorporated Provisions
as incorporated herein:
(a) Subtenant shall not do such act or thing without first having
obtained the consent or approval of Master Landlord and Sublandlord;
(b) Sublandlord's right to withhold consent or approval shall be
independent of Master Landlord's right; and
(c) without limiting Sublandlord's right to withhold consent or
approval in any instance and notwithstanding any Incorporated Provision or
provision of law requiring Sublandlord to act reasonably, Sublandlord shall be
entitled, without liability to Subtenant on account thereof, to withhold consent
or approval whenever and for so long as Master Landlord shall withhold its
consent or approval, regardless of whether or not Master Landlord is entitled to
withhold such consent or approval and regardless of whether Master Landlord may
have liability to Sublandlord or Subtenant on account thereof; and
(d) Subtenant shall not request Master Landlord's consent or approval
directly; unless Sublandlord shall have determined to withhold its consent or
approval, the provisions of Section 5.3 above shall be applicable to the
obtaining of Master Landlord's consent or approval; neither Sublandlord's
forwarding Subtenant's request to Master Landlord nor Sublandlord's other
efforts to obtain Master Landlord's consent or approval shall constitute
Sublandlord's consent or approval, and the same shall be without prejudice to
Sublandlord's right to withhold consent or approval.
5.5 Notwithstanding any other provision of this Sublease,
Subtenant shall perform all of its obligations hereunder at such times, by such
dates or within such periods as shall be required to avoid any default under the
Master Lease from
7
<PAGE>
continuing beyond the period for notice and grace provided for in the Master
Lease; provided, however, that in no event shall this Section 5.5 extend the
time, date or period by or within which Subtenant is required to perform.
5.6 Subtenant shall indemnify Sublandlord from any loss, cost, damage
or expense (including reasonable attorneys fees) arising out of any failure by
Subtenant to perform any of its obligations under this Sublease, including any
loss, cost, damage or expense which may result from any default under or
termination of the Master Lease arising by reason of any such failure.
6. Covenant of Quiet Enjoyment. So long as Subtenant pays all of the
-----------------------------
fixed rent and additional rent hereunder and performs all of Subtenant's other
obligations hereunder, Subtenant shall peaceably and quietly have, hold and
enjoy the Premises subject, nevertheless, to the obligations of this Sublease
and to the Master Lease, and to any leases, mortgages and other rights and
encumbrances superior in priority to this Sublease.
7. Assiqnment and Undersublettinq.
-------------------------------
7.1 Except as provided by and in accordance with the procedure set
forth in Section 26 of the Incorporated Provisions as incorporated herein,
(a) this Sublease shall not be assigned, encumbered or otherwise
transferred,
(b) the Premises shall not be undersublet by Subtenant in whole
or in part, and
(c) the Premises shall not be suffered or permitted to be used or
occupied by any person other than Subtenant, in whole or in part,
without the prior written consent of Master Landlord and Sublandlord in each
instance. Any such consent, assignment, encumbrance or other transfer, and
any such undersublease, use or occupancy shall be subject to all of the
Incorporated Provisions, except that in the event of any proposed assignment or
sublease Subtenant receives rent or other consideration, either initially or
over the Term of the Sublease (although in no event shall Sublandlord have any
right to receive any portion of any amount paid to Subtenant in connection with
a sale of its business, even if such amount is based in part on the value of
this Sublease), in excess of the rent called for hereunder or, in case of the
sub-sublease of a portion of the Premises, in excess of such rent allocable to
such portion on a rentable square footage basis, after appropriate adjustments
to assure that all other payments called
8
<PAGE>
for hereunder are taken into account, and after first deducting all costs
incurred by Subtenant in connection with the assignment or subletting, Subtenant
in connection with the assignment or subletting, including, without limitation,
broker's commissions, attorneys' fees, lease assumption payments and tenant
improvements, Subtenant shall pay to Sublandlord at Sublandlord's sole election
in writing either (i) all of the excess of each such payment of rent or other
consideration received by Subtenant promptly after its receipt in which case
Subtenant shall have no further liability to Sublandlord under this Sublease; or
(ii) one half (1/2) of such excess in which case Subtenant shall not be relieved
of any liabilities under this Sublease. With respect to any of the foregoing
(a) Sublandlord's right to withhold consent or approval shall be
independent of Master Landlord's right and, without limiting Sublandlord's right
to withhold consent or approval for any other reason, it is specifically agreed
that (i) when requesting Sublandlord's consent, Subtenant shall submit detailed
financial information regarding the proposed assignee or undersubtenant, and
(ii) Sublandlord may reasonably withhold consent or approval if Sublandlord is
not satisfied with the financial strength of the proposed assignee or
undersubtenant;
(b) without limiting Sublandlord's right to withhold consent or
approval in any instance and notwithstanding any Incorporated Provision or
provision of law requiring Sublandlord to act reasonably, Sublandlord shall be
entitled, without liability to Subtenant on account thereof, to withhold consent
or approval whenever and for so long as Master Landlord shall withhold its
consent or approval, regardless of whether or not Master Landlord is entitled to
withhold such consent or approval and regardless of whether Master Landlord may
have liability to Sublandlord or Subtenant on account thereof; and
(c) Subtenant shall not request Master Landlord's consent or approval
directly; unless Sublandlord shall have determined to withhold its consent or
approval, the provisions of Section 5.3 above shall be applicable to the
obtaining of Master Landlord's consent or approval; neither Sublandlord's
forwarding Subtenant's request to Master Landlord nor Sublandlord's other
efforts to obtain Master Landlord's consent or approval shall constitute
Sublandlord's consent or approval, and the same shall be without prejudice to
Sublandlord's right to withhold consent or approval.unless Sublandlord shall
have determined to withhold its consent or approval, the provisions of Section
5.3 above shall be applicable to the obtaining of Master Landlord's consent or
approval.
9
<PAGE>
7.2 Any undersublease shall be subject and subordinate to this
Sublease. No assignment shall be valid or effective unless and until the
assignee shall have delivered to Sublandlord an instrument, in form reasonably
satisfactory to Sublandlord, pursuant to which the assignee assumes the due
observance and performance of all of the obligations of Subtenant hereunder.
7.3 No assignment or undersublease shall release the Subtenant named
herein or any of its successors from any liability hereunder. If this Sublease
is assigned or the Premises or any part thereof are undersublet in violation of
this Sublease Sublandlord may collect rents from or accept performance from the
assignee or undersubtenant and no such collection or acceptance shall effect any
such release.
8. Alterations.
------------
8.1 Notwithstanding the incorporation herein of Section 14 of the
Master Lease, except as provided in this Section 8.1, Sublandlord shall not have
the right to require Subtenant to remove alterations, installations, additions
or improvements from the Premises; provided, however, that Subtenant shall be
required to remove from the Premises any of such items made or installed by it
which, pursuant to the Master Lease, Sublandlord is required to remove.
Sublandlord shall forward to Subtenant any notice received from Master Landlord
requiring the removal of any of such items and any such notice shall be binding
on Subtenant, regardless of when received by it. Subtenant's removal obligations
pursuant to this Section 8.1 shall also include all related restoration as
required by Sections 3 and 40 of the Master Lease or any other applicable
provision thereof.
8.2 Subtenant shall not commence or prosecute any alterations,
installation, addition or improvements unless, in addition to having complied
with all other provisions of this Sublease and the Incorporated Provisions as
incorporated herein, Subtenant shall have furnished to Sublandlord (a) a fixed
price general contract covering the same, and (b) payment and performance bonds
in favor of Sublandlord guaranteeing lien free completion of the work in form,
amount and issued by a surety satisfactory to Sublandlord in its reasonable
judgement. Additionally, if Master Landlord shall require that any of the same
be removed at the end of the term then Subtenant, prior to commencing the same,
shall increase the amount of the security deposit under Section 9 by such amount
as Sublandlord shall determine in order to secure the faithful performance by
Subtenant of its obligations under Section 8.1.
10
<PAGE>
9. Security Deposit.
----------------
As security for the faithful performance of its obligations hereunder,
Subtenant shall deposit with Sublandlord the sum of $196,282.17, of which
$93,467.70 shall be applied to the first month's rent (as set forth in Section 3
above). Sublandlord need not keep such sum separate from its general funds.
Upon any failure by Subtenant timely to perform any of its obligations
hereunder, Sublandlord may apply all or any portion of the sum deposited to the
obligation which Sublandlord has failed timely to perform, or any other
obligations of Subtenant under this Sublease. In case of any such application,
Subtenant shall, immediately upon demand of Sublandlord, deposit additional
funds with Sublandlord to restore the sum on deposit to the amount required by
the first sentence of this Section 9 (or as the same may have been increased
pursuant to Section 5.3 or 8.2), less application of the first month's rent.
After the termination of this Sublease, if Subtenant shall have duly and
faithfully performed each and every one of its obligations hereunder,
Sublandlord shall return the sum on deposit to Subtenant, without interest.
Sublandlord's right of application with respect to amounts deposited pursuant to
Section 5.3 or 8.2 shall not be limited to the obligations with respect to which
such deposit was made.
10. Notices. Any notice, statement, demand, consent, approval, advice
-------
or other communication required or permitted to be given, rendered or made by
either party to the other, pursuant to this Sublease or pursuant to any
applicable law or requirement of public authority (collectively, "Notice") shall
be in writing and shall be deemed to have been properly given, rendered or made
only if sent by personal delivery, receipted by the party to whom addressed, or
by registered or certified mail, return receipt requested, posted in a United
States post office station or depositary in the continental United States,
addressed
(i) to Subtenant at its address first abovewritten, Attention:
President, or
(ii) to Sublandlord, 3650 Mayfield Road, Cleveland, Ohio 44121, Attn:
President with a copy to McDermott, Will & Emery, 1301 Dove Street, Suite 500,
Newport Beach, California 92660, Attn: John B. Miles, Esq.
Either party may, by Notice actually received, designate (i) a different address
in the United States for Notices intended for it, and (ii) require the other
party to provide a copy of any Notices to any other person at any other address
in the United States.
11
<PAGE>
11. Parking. Subject to the provisions of Section 40 of the Master Lease
-------
pertaining to the parking rights granted to Sublandlord, Subtenant shall have
the right to utilize all of the parking spaces allocated to Sublandlord under
Sections l(k) of the Master Lease (the "Allocated Spaces"), and Sublandlord
shall transfer to Subtenant on or prior to the Commencement Date all of the
parking cards and/or any other access devices for the same to the extent
provided to Sublandlord by Master Landlord.
Notwithstanding any provisions to the contrary herein or in the Master
Lease, Subtenant shall have the right to use the Allocated Spaces free of any
additional charge for the first five (5) years of this Sublease. Thereafter,
Subtenant shall pay to Sublandlord, on a monthly basis as additional rent, $25
per space for years six (6) through eleven (11) of this Sublease and thereafter
as provided for in Paragraph 40 of the Master Lease.
In the event Subtenant desires additional parking spaces in excess of
the Allocated Spaces, Sublandlord shall request such additional parking rights
from Master Landlord but shall have no obligation to provide any excess spaces
or reduce the Fixed Rent or any amounts payable hereunder in the event Master
Landlord does not approve Sublandlord's request. Any excess spaces approved
by Master Landlord shall be subject to the parking charges set forth in Section
40 of the Master Lease, and Subtenant shall be solely responsible for any and
all such charges.
12. Signage. Subtenant shall be entitled to Sublandlord's signage rights as
-------
set forth in Section 55 of the Master Lease, subject to the review and approval
of such signage by the Master Landlord and the City of Santa Ana. The cost of
removal of the Sublandlord's signage, together with the costs of all Subtenant's
signage and the installation, maintenance and ultimate removal thereof shall be
at Subtenant's sole expense. Sublandlord shall promptly take possession of its
signage after removal of Subtenant.
13. Master Landlord's Consent. As an inducement to the Master Landlord
-------------------------
to consent to this Sublease, and as required by Section 26(d) of the Master
Lease, Sublandlord and Subtenant each agree as follows:
(a) This Sublease shall be subject and subordinate to the Master Lease
and to all mortgages recorded against the Building and underlying land prior to
the date hereof;
(b) Landlord may enforce the provisions of this Sublease, including
the collection of rent;
(c) In the event of termination of the Master Lease for any reason,
including without limitation, a voluntary surrender by
12
<PAGE>
Sublandlord, or in the event of any re-entry or repossession of the Premises by
Master Landlord, Master Landlord may, at its option, either
(i) terminate the Sublease or;
(ii) take over all of the right, title and interest of Sublandlord, as
sublessor, under this Sublease, in which case Subtenant shall attorn to Master
Landlord, provided that Master Landlord shall not (1) be liable for any previous
act or omission of Sublandlord under this Sublease; (2) be subject to any
defense or offset previously accrued in favor of Subtenant against Sublandlord;
or (3) be bound by any previous payment by Subtenant or more than one month's
rent.
14. Miscellaneous.
-------------
(a) The obligations of Sublandlord hereunder accruing at any time
shall be binding only upon the owner, at that time, of the leasehold estate
under the Master Lease, and each purchaser or transferee of such leasehold
estate shall be deemed to have assumed the obligations of Sublandlord hereunder
accruing during the period of its ownership. Sublandlord's liability under this
Sublease and any other liability of Sublandlord relating or with respect to the
Premises shall be limited to Sublandlord's leasehold estate under the Master
Lease and any judgement entered against Sublandlord on or with respect to such
liability may be enforced only against such leasehold estate, any other recourse
being expressly waived by Subtenant.
(b) Sublandlord shall have no liability to Subtenant on account of any
failure or refusal by Master Landlord to grant any approval or consent.
Moreover, Sublandlord shall have no liability to Subtenant on account of any
failure or refusal by Sublandlord to grant any approval or consent. In any
instance in which Sublandlord is required by any provision of this Sublease
(including any of the Incorporated Provisions as incorporated herein) or
applicable law to not unreasonably withhold consent or approval, Subtenant's
sole remedy shall be an action for specific performance or injunction requiring
Sublandlord to grant such consent or approval, all other remedies which would
otherwise be available being hereby waived by Subtenant.
(c) Subtenant represents and warrants to Sublandlord that Subtenant
has dealt with no broker, agent or finder in connection with this Sublease other
than Lee & Associates, and Sublandlord represents and warrants to Subtenant that
Sublandlord has dealt with no broker, agent or finder in connection with this
Sublease other than CB Commercial and the Spiezia Corporation (all three (3)
together, the "Recognized Brokers") and Subtenant and Sublandlord
13
<PAGE>
each hereby agree to indemnify the other against any claim for commission or
other compensation in connection with this Sublease made against the other party
by any broker, agent or finder other than the Recognized Brokers, including
attorneys fees incurred by such other party in the defense of any such claim.
(d) Except as provided in Section 4, this Sublease contains the
entire agreement between the parties and all prior negotiations and agreements
are merged in this Sublease. Any agreement hereafter made shall be
ineffective to change, modify or discharge this Sublease in whole or in part
unless such agreement is in writing and signed by the parties hereto. No
provision of this Sublease shall be deemed to have been waived by Sublandlord or
Subtenant unless such waiver be in writing and signed by Sublandlord or
Subtenant, as the case may be. The covenants and agreement contained in this
Sublease shall bind and inure to the benefit of Sublandlord and Subtenant and
their respective permitted successors and assigns.
(e) In the event that any provision of this Sublease shall be held to
be invalid or unenforceable in any respect, the validity, legality or
enforceability of the remaining provisions of this Sublease shall be unaffected
thereby.
(f) Capitalized terms used herein shall have the same meanings as are
ascribed to them in the Master Lease, unless otherwise expressly defined herein.
(g) The submission of this document by Sublandlord to Subtenant shall
not constitute an offer by Sublandlord and Sublandlord shall not be bound in any
way unless and until this Sublease is executed and delivered by both parties.
15. Participation Agreement; Agreement Regardinq Engineering and
------------------------------------------------------------
Construction Services. Sublandlord and Subtenant acknowledge that Sublandlord
- ---------------------
has entered into the following two agreements with Master Landlord: (1)
Participation Agreement dated as of June 27, 1989, pertaining to the transfer,
assignment and conveyance to Sublandlord of an appreciated value interest (as
defined therein) in the Building, and (2) Agreement dated as of June 27, 1989,
wherein Sublandlord is granted the right to negotiate for and/or perform certain
engineering and construction related services in connection with the Building
(collectively, the "Unrelated Agreements"). Subtenant acknowledges and agrees
that it shall have no right nor interest in any respect whatsoever in the
Unrelated Agreements arising from this entry into this Sublease or otherwise.
16. Binding Effect. This Sublease shall be binding on the parties hereto
--------------
only upon full execution and delivery of this Sublease by both Sublandlord and
Subtenant.
14
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement of
Sublease as of the day and year first above written.
SUBLANDLORD:
THE AUSTIN COMPANY
By:
-------------------------------------
Its: Executive Vice President
------------------------------------
Chief Financial Officer
15
<PAGE>
SUBTENANT:
AMERIQUEST TECHNOLOGIES, INC.
By:
-------------------------------------
Its
-------------------------------------
By:
-------------------------------------
Its
-------------------------------------
16
<PAGE>
Consent of the Master Landlord
------------------------------
Master Landlord hereby consents to the foregoing Sublease, and approves and
agrees to the provisions thereof to the extent applicable to Master Landlord.
BROOKFIELD IMPERIAL, INC.,
a California corporation
By:
---------------------------------
Its:
--------------------------------
17
<PAGE>
Exhibit A
Master Lease
------------
<PAGE>
FIRST AMENDMENT TO OFFICE BUILDING LEASE
----------------------------------------
This FIRST AMENDMENT TO OFFICE BUILDING LEASE is entered into as of
the 24th day of October, 1991, by and between THE AUSTIN COMPANY, an Ohio
corporation ("Tenant"), and BROOKFIELD LAND COMPANY INC., a California
corporation ("Landlord"), for the premises commonly known as Suites 200 and 300,
3 Imperial Promenade, Santa Ana, California ("Premises").
For good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Landlord, as the successor in interest to BCE
Development Inc., and Tenant, being parties to that certain Office Building
Lease dated June 27, 1989, as supplemented pursuant to that certain Notice of
Lease Term Dates and Tenant's Percentage dated April 1, 1991 by and between
Landlord and Tenant (collectively, the "Lease"), hereby express their mutual
desire and intent to further supplement and amend certain terms and conditions
of the Lease as hereinafter provided.
1. PREMISES. Paragraph l(i) of the Lease regarding Premises is
--------
hereby amended as follows:
The rentable square footage of the Premises was thought to be
54,389. The rentable square footage of the Premises is actually
54,981.
2. RENT. Paragraph 1(o) of the Lease regarding Annual Basic Rent
----
and Monthly Basic Rent is hereby amended as follows:
The initial installments of Annual Basic Rent and Monthly Basic
Rent were respectively thought to be $1,044,268.80 and
$87,022.40. The Annual Basic Rent and Monthly Basic Rent
respectively are actually $1,055,635.20 and $87,969.60.
3. TENANT'S PERCENTAGE. Paragraph l(g) of the Lease regarding
-------------------
Tenant's Percentage is hereby amended as follows:
Tenant's Percentage was thought to be 22.77%. Tenant's Percentage
is actually 22.97%.
The rentable square footage of the Building was thought to be
238,885. The rentable square footage of the Building is actually
239,303.
<PAGE>
4. PARKING. Paragraph l(k) of the Lease regarding Parking is hereby
-------
amended as follows:
The appropriate number of parking spaces allocated to Tenant was
thought to be 173. The correct number of parking spaces allocated
to Tenant is actually 174.
5. OPERATING EXPENSES. Paragraph 6(b) of the Lease regarding
------------------
Operating Expenses is hereby amended as follows:
Landlord's estimate of the amount of Tenant's monthly
installments of Operating Expenses, based upon Tenant's
Percentage, for the remainder of the 1991 calendar year, was
equal to the monthly sum of $35,352.85. Landlord's new estimate
of the amount of Tenant's monthly installments of Operating
Expenses, based upon Tenant's Percentage as corrected herein, for
the remainder of the 1991 calendar year, shall be equal to the
monthly sum of $35,737.65.
6. INCORPORATION.
-------------
Except as modified herein, all other terms and ' conditions of
the Lease between the parties above described shall continue unmodified and in
full force and effect.
7. RECONCILIATION.
--------------
Due with Tenant's next monthly installment of Annual Basic Rent
shall be payment of Landlord's determination of the total amount of shortfall in
Annual Basic Rent and Operating Expenses which has accrued since April 1, 1991,
the Commencement Date of the Term of the Lease.
LANDLORD: TENANT:
BROOKFIELD LAND COMPANY INC., THE AUSTIN COMPANY, an
a California corporation Ohio corporation
By: By:
-------------------------- ------------------------------
Name: Name:
--------------------- -------------------------
Title: Title:
--------------------- -------------------------
-2-
<PAGE>
SECOND AMENDMENT TO OFFICE BUILDING LEASE
-----------------------------------------
This SECOND AMENDMENT TO OFFICE BUILDING LEASE ("Amendment") is made and
entered into as of this 23rd day of September , 1992, by and between THE AUSTIN
---- ---------
COMPANY, an Ohio corporation ("Tenant"), and BROOKFIELD IMPERIAL INC., a
California corporation ("Landlord"), with respect to the facts set forth in the
Recitals below:
RECITALS:
A. BCE Development Inc., a Delaware corporation ("BCE"), and Tenant
previously entered into that certain Office Building Lease dated June 27, 1989
(the "Original Lease"), covering certain office premises commonly known as
Suites 200 and 300, 3 Imperial Promenade, Santa Ana, California, more
particularly described in the Original Lease (the "Premises"). Landlord is the
successor in interest, by intermediate assignment, to BCE under the Original
Lease with regard to the Premises.
B. The Original Lease was supplemented pursuant to that certain
Notice of Lease Term Dates and Tenant's Percentage dated April 1, 1991 (the
"Notice"), by and between Landlord and Tenant, and was amended pursuant to that
certain First Amendment to Office Building Lease entered into as of October 24,
1991 (the "First Amendment"), by and between Landlord and Tenant. The Original
Lease, as supplemented and amended pursuant to the Notice and the First
Amendment, are hereinafter collectively referred to as the "Lease."
C. Landlord and Tenant desire to further amend the Lease as
hereinafter provided.
AGREEMENT:
NOW, THEREFORE, Landlord and Tenant agrees as follows:
1. Paragraph 20(a). Paragraph 20(a) of the Original Lease is hereby
---------------
entirely deleted and replaced with the following:
"(a) Tenant shall indemnify, defend and hold Landlord harmless
from all claims arising from Tenant's use of the Premises or the
<PAGE>
conduct of its business or from any activity, work or thing done,
permitted or suffered by Tenant in or about the Premises, the Building
or the Common Area. Tenant shall further indemnify, defend and hold
Landlord harmless from all claims arising from any breach or default
in the performance of any obligation to be performed by Tenant under
the terms of this Lease, or arising from the neglect, fault or
omission of Tenant or of its agents, contractors, employees or
invitees, and from and against all costs, attorneys' fees, expenses
and liabilities incurred in or about such claim or any action or
proceeding brought thereon. In case any action or proceeding shall be
brought against Landlord by reason of any such claim, Tenant, upon
notice from Landlord, shall defend the same at Tenant's expense.
Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons in the
Premises from any cause whatsoever except that which is caused by the
negligence or willful misconduct of Landlord or its agents,
contractors, servants or employees, or the failure of Landlord to
observe any of the terms and conditions of this Lease where such
failure has persisted for an unreasonable period of time after written
notice of such failure."
2. Paraqraph 20{b). The first sentence of Paragraph 20(b) of the
---------------
Original Lease is hereby entirely deleted and replaced with the following:
"Neither Landlord nor any partner, director, officer, agent or
employee of Landlord shall be liable to Tenant or its partners,
directors, officers, contractors, agents, employees, invitees,
sublessees or licensees, for any loss, injury or damage to Tenant or
to any other person or to its or their property in the Premises,
except to the extent (but subject to the limitations contained in
Paragraph 48 hereof) such injury, damage or loss is caused by or
results from the negligence or willful misconduct of Landlord or its
agents, contractors, servants or employees in the operation or
maintenance of the Building or the Site."
-2-
<PAGE>
3. Paragraph 20(c). Paragraph 20(c) of the Original Lease is hereby entirely
----------------
deleted and replaced with the following:
"(c) Notwithstanding any provision of this Lease to the contrary, Tenant
shall not be required to defend, save harmless and indemnify Landlord from any
liability for injury, loss, accident or damage to any person or property
resulting from Landlord's negligent acts or omissions or willful misconduct or
that of its agents, contractors, servants, employees or licensees in connection
with Landlord's activities on or about the Premises, and Landlord hereby
indemnifies and agrees to hold Tenant harmless (but subject to the limitations
contained in Paragraph 48 hereof) from and against Landlord's negligence or
willful misconduct or that of its agents, contractors, servants or employees in
connection with Landlord's activities or failure to act on or about the Premises
and Landlord shall defend the same at Landlord's expense."
4. Paragraph 25(a)(ii). The first sentence of Paragraph 25(a)(ii) of the
--------------------
Original Lease is hereby entirely deleted and replaced with the following:
"The failure by Tenant to observe or perform any of the express covenants or
provisions of this Lease to be observed or performed by Tenant, other than as
specified in Subparagraph 25(a)(i) above, where such failure shall continue for
a period of thirty (30) days after written notice thereof from Landlord to
Tenant."
5. Paragraph 48(a). Paragraph 48(a) of the Original Lease is hereby entirely
----------------
deleted and replaced with the following:
"(a) The sole and exclusive remedies shall be against Landlord's
interests in (i) any applicable insurance proceeds, and (ii) the Building;
provided, however, with regard to the remedy against Landlord's interest in the
Building, if Landlord's equity in the Building is less than Ten Million Dollars
($10,000,000), then Tenant's remedy against the Building shall be limited to
Landlord's equity in the Building first, then
-3-
<PAGE>
against any assets of Landlord, up to a maximum of Ten Million
($10,000,000)."
6. No Other Modifications. Except as modified in this Amendment, the Lease
-----------------------
remains unmodified and in full force and effect. To the extent of any conflict
between the terms of the Lease and the terms of this Amendment, the terms of
this Amendment shall prevail and control.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment as of
the date first written above.
"Landlord" BROOKFIELD IMPERIAL INC., A
California corporation
By: /s/ John M. Gillespie By: /s/ H. Gordon MacKenzie
----------------------- -------------------------
Name: John M. Gillespie Name: H. Gordon MacKenzie
----------------- -------------------
Title: Vice President Title: President
---------------- -------------------
"Tenant" THE AUSTIN COMPANY, an Ohio
corporation
By: /s/ James R. Anderson
--------------------------
Name: James R. Anderson
---------------------
Title: VP & CFO - Secretary
& Treasurer
-4-
<PAGE>
MACARTHUR PLACE
OFFICE BUILDING LEASE
BETWEEN
BCE DEVELOPMENT INC.
("LANDLORD")
AND
THE AUSTIN COMPANY
("TENANT")
<PAGE>
OFFICE BUILDING LEASE
TABLE OF CONTENTS
-----------------
Paqe
----
1. TERMS AND DEFINITIONS ............................ 1
2. PREMISES AND COMMON AREAS LEASED ................. 3
3. TERM.............................................. 5
4. POSSESSION ....................................... 7
5. ANNUAL BASIC RENT ................................ 8
6. RENT ADJUSTMENT .................................. 10
7. SECURITY DEPOSIT ................................. 13
8. USE............................................... 14
9. NOTICES .......................................... 16
10. BROKERS .......................................... 16
11. HOLDING OVER ..................................... 16
12. TAXES ON TENANT'S PROPERTY ....................... 17
13. CONDITION OF PREMISES ............................ 17
14. ALTERATIONS ...................................... 18
15. REPAIRS .......................................... 19
16. LIENS ............................................ 22
17. ENTRY BY LANDLORD ................................ 22
18. UTILITIES AND SERVICES ........................... 23
19. BANKRUPTCY ....................................... 24
20. INDEMNIFICATION AND EXCULPATION OF LANDLORD ...... 24
21. DAMAGE TO TENANT'S PROPERTY ...................... 26
22. TENANT'S INSURANCE ............................... 26
23. DAMAGE OR DESTRUCTION ............................ 29
24. EMINENT DOMAIN ................................... 33
25. DEFAULTS AND REMEDIES ............................ 34
26. ASSIGNMENT AND SUBLETTING ........................ 37
27. SUBORDINATION .................................... 39
28. ESTOPPEL CERTIFICATE ............................. 4O
29. ARBITRATION ...................................... 41
30. RULES AND REGULATIONS ............................ 42
31. CONFLICT OF LAWS ................................. 43
32. SUCCESSORS AND ASSIGNS ........................... 43
33. SURRENDER OF PREMISES ............................ 43
34. PROFESSIONAL FEES ................................ 43
35. PERFORMANCE BY TENANT ............................ 43
36. MORTGAGEE PROTECTION ............................. 44
37. DEFINITION OF LANDLORD ........................... 44
38. WAIVER ........................................... 45
39. IDENTIFICATION OF TENANT ......................... 45
40. PARKING .......................................... 45
41. FORCE MAJEURE .................................... 47
42. TERMS AND HEADINGS ............................... 47
-i-
<PAGE>
Page
----
43. EXAMINATION OF LEASE ............................. 47
44. TIME ............................................. 47
45. PRIOR AGREEMENT; AMENDMENTS ...................... 48
46. SEPARABILITY...................................... 48
47. RECORDING ........................................ 48
48. LIMITATION ON LIABILITY .......................... 48
49. TRAFFIC IMPACT ......................... ......... 49
50. AIR TRAFFIC ...................................... 49
51. MODIFICATION FOR LENDER .......................... 49
52. FINANCIAL STATEMENTS ............................. 49
53. QUIET ENJOYMENT .................................. 49
54. TENANT AS CORPORATION OR PARTNERSHIP ............. 50
55. SIGNAGE .......................................... 50
56. MOVING COSTS ..................................... 51
57. RIGHT OF FIRST NEGOTIATION TO PURCHASE ........... 51
SIGNATURE PAGE ....................................... 52
EXHIBITS:
A-I Outline of Floor Plan of Premises
A-II Site Plan
B Work Letter Agreement
C Notice of Lease Term Dates and Tenant's Percentage
D Standards for Utilities and Services
E Sample Form of Tenant Estoppel Certificate
F Rules and Regulations
G Parking Rules and Regulations
H Procedure for Determination of Square Footage
-ii-
<PAGE>
MACARTHUR PLACE
OFFICE BUILDING LEASE
---------------------
THIS OFFICE BUILDING LEASE ("Lease") is made as of the 27th day of June,
1989, by and between BCE DEVELOPMENT INC., a Delaware corporation ("Landlord"),
and THE AUSTIN COMPANY, an Ohio corporation ("Tenant").
1. TERMS AND DEFINITIONS. For the purposes of this Lease, the
-----------------------
following terms shall have the following definitions and meanings:
(a) Landlord: BCE Development Inc.
(b) Landlord's address:
1 Park Plaza, Suite 1000
Irvine, California 92714
(c) Tenant: The Austin Company
(d) Building address: [To be supplied at a later date as provided in
Paragraph 3(a) below]
(e) Suite number(s): [To be supplied at a later date as provided in
Paragraph 3(a) below]
(f) Floors upon which the Premises are located: 2 and 3.
(g) Premises: Those certain premises defined in Subparagraph 2(a)
below.
(h) Site: The parcel of real property defined in Subparagraph 2(a)
below.
(i) Minimum rentable square feet within Premises: Fifty Thousand
(50,000) square feet, provided that such amount shall be adjusted by Landlord's
architect upon completion of the working plans and specifications for the build
out of the Premises pursuant to the Work Letter Agreement, and the exact amount
of rentable square feet within the Premises shall be determined by Landlord's
architect upon completion of the improvements pursuant to the Work Letter
Agreement. Tenant shall be entitled to designate the exact configuration of the
Premises, subject to Landlord's reasonable approval. Tenant shall have the right
<PAGE>
to designate such configuration not later than the date by which Tenant submits
to Landlord preliminary plans for the layout of the Premises pursuant to the
Work Letter Agreement, and Landlord shall have a period of ten (10) business
days within which to approve or reasonably disapprove the proposed
configurations submitted by Tenant. Landlord shall be deemed reasonable in
disapproving any proposed configuration unless any space not included within the
Premises as configured by Tenant is contiguous in nature and reasonably
susceptible to leasing by Landlord at reasonable rental rates. The calculations
regarding the rentable square footage of the Premises shall be made in
accordance with the method of measuring rentable office space specified in the
American National Standard Institute Publication ANSI 265.101980 (the "BOMA
Standard"). In the event Tenant objects to Landlord's determination of rentable
area as described above, the procedures set forth in Exhibit "H" attached hereto
and incorporated herein shall apply.
(j) Term: Fifteen Lease Years.
(k) Parking: 160 vehicle parking spaces for the first 50,000 square
feet of rentable area. In the event the Premises are determined (in accordance
with Paragraph l(i)) to be larger than 50,000 rentable square feet, Tenant shall
be entitled to one (1) additional parking space for each additional 333 gross
square feet.
(l) Tenant Improvement Allowance: $20.00 per square foot of rentable
area.
(m) Tenant Improvements: All work performed by Tenant to prepare the
Premises for occupancy pursuant to the Work Letter Agreement described in
Subparagraph 2(a) below.
(n) Commencement Date: The date on which the term of this Lease shall
commence as determined in accordance with Paragraph 7 of the Work Letter
Agreement.
(o) Initial Annual Basic Rent: $19.20 per rentable square foot;
Monthly Basic Rent: $1.60 per rentable square foot.
(p) Annual Estimated Operating Expense Charge: $7.00 per rentable
square foot. This is an estimate only. Tenant's Percentage (as defined below) of
Operating Expenses shall be charged to Tenant in accordance with Paragraph 6(b)
below. The aggregate amount of rentable square feet of the Premises shall be
determined in accordance with Subparagraph 1(i).
<PAGE>
-2-
(q) Tenant's Percentage: 20.84%, which shall be adjusted upon the
determination of the exact number of rentable square feet within the Premises to
equal a fraction whose numerator is the number of rentable square feet within
the Premises determined in accordance with Subparagraph l(i) above and whose
denominator is the approximate number of rentable square feet within the
Building as determined by Landlord's architect in accordance with the BOMA
Standard.
(r) Broker: Coldwell Banker.
(s) Tenant's Construction Representative:
--------------------------
- ----------------------------------------------------------------------.
(t) Landlord's Construction Representative: Dave Forrest, Vice
President of Construction.
(u) Use: Any lawful use.
(v) Exhibits: A-I through H, inclusive, which Exhibits are attached to
this Lease and are incorporated herein by this reference.
2. PREMISES AND COMMON AREAS LEASED.
---------------------------------
(a) Landlord hereby leases to Tenant and Tenant hereby leases from
Landlord the Premises contained within the suite(s) designated in Subparagraph
l(e), outlined on the Floor Plan attached hereto and marked Exhibit "A-I" and
-------------
incorporated herein by this reference, in that certain building located at the
address designated in Subparagraph l(d) above which, together with its related
parking facilities (collectively, the "Building"), is located on the Site
outlined on the Site Plan attached hereto as Exhibit "A-II" and incorporated
---------------
herein by this reference, and to be improved by Tenant with the Tenant
Improvements described in the Work Letter Agreement, a copy of which is attached
hereto and marked Exhibit "B" and which is incorporated herein by this
------------
reference, said Premises being agreed, for the purposes of this Lease, to have
an area consisting of approximately the number of Rentable Square Feet
designated in Subparagraph l(i) (the actual number of which shall be determined
as described therein) and being situated on the floors designated in
Subparagraph l(f) above. The Premises shall have a balcony overlooking the water
garden and the floors constituting the Premises may be connected by an interior
staircase, at Tenant's election, and the cost of such interior staircase may be
a part of and payable from the Tenant Improvement Allowance as set forth in the
Work Letter Agreement.
<PAGE>
The parties hereto agree that said letting and hiring is upon and
subject to the terms, covenants and conditions herein set forth and Tenant
covenants as a material part of the consideration for this Lease to keep and
perform each and all of said terms, covenants and conditions by it to be kept
and performed and that this Lease is made upon the condition of such
performance.
(b) Subject to Subparagraph (c) below, Tenant shall have the
nonexclusive right to use in common with other tenants in the Building and the
Site and subject to the Rules and Regulations referred to in Paragraph 30
below and all covenants, conditions and restrictions affecting the Site, the
following areas ("Common Areas") appurtenant to the Premises:
(i) The Building's common entrances, lobbies, restrooms,
elevators, stairways and accessways, loading docks, ramps, drives and
platforms and any passageways and serviceways thereto, and the common
pipes, conduits, wires and appurtenant equipment serving the Premises;
(ii) Loading and unloading areas, trash areas, parking
areas, roadways, sidewalks, walkways, parkways, driveways and landscaped
areas and similar areas and facilities appurtenant to the Building.
(c) Landlord reserves the right from time to time without
unreasonable interference with Tenant's use:
(i) To install, use, maintain, repair and replace pipes,
ducts, conduits, wires and appurtenant meters and equipment for service
to other parts of the Building above the ceiling surfaces, below the
floor surfaces, within the walls and in the central core areas, and to
relocate any pipes, ducts, conduits, wires and appurtenant meters and
equipment included in the Premises which are located in the Premises or
located elsewhere outside the Premises, and to expand the Building;
(ii) To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of
driveways, entrances, parking spaces, parking areas, loading and
unloading areas, ingress, egress, direction of traffic, landscaped
areas and walkways;
-4-
<PAGE>
(iii) To temporarily close or designate for other uses any of
the Common Areas so long as reasonable access to the Premises remains
available;
(iv) To designate other land outside the boundaries of the
Building or the Site to be a part of the Common Areas;
(v) To add additional buildings and improvements to the
Common Areas and/or the Site;
(vi) To use the Common Areas while engaged in making
additional improvements, repairs or alterations to the Building or the
Site, or any portion thereof;
(vii) To do and perform such other acts and make such other
changes in, to or with respect to the Common Areas, the Building, or the
Site as Landlord may, in the exercise of sound business judgment, deem to
be appropriate.
3. TERM.
-----
(a) Original Term. The Term of this Lease shall be for the period
--------------
designated in Subparagraph 1, commencing on the Commencement Date, and ending
on the last day of the month in which the expiration of such period occurs,
unless the Term hereby demised shall be sooner terminated as hereinafter
provided. The Commencement Date, the date upon which the Term of this Lease
shall end, the rentable square feet within the Premises and Tenant's
Percentage shall be determined in accordance with the provisions of Paragraph
1, the Building address and suite numbers will be determined when available,
and all of such matters will be specified in Landlord's Notice of Lease Term
Dates and Tenant's Percentage ("Notice"), in the form of Exhibit "C" which is
-----------
attached hereto and is incorporated herein by this reference, and shall be
served upon Tenant as provided in Paragraph 9, after Landlord delivers or
tenders possession of the Premises to Tenant. The Notice shall be binding upon
Tenant unless Tenant objects to the Notice in writing, served upon Landlord as
provided for in Paragraph 9 hereof, within ten (10) business days of Tenant's
receipt of the Notice.
(b) Options to Extend.
-----------------
(i) Grant of Options. So long as Tenant is not then in
------------------
material default hereunder, Tenant shall have an option to extend the
Term of this Lease for an additional period of five (5) years and, if
such option is exercised, for a second consecutive additional period
<PAGE>
of five (5) years. The options hereby granted must be exercised by
Tenant by delivery to Landlord of written notice to that effect at
least nine (9) months, but not more than twenty-four (24) months,
prior to the end of the initial Term or preceding option term of this
Lease, as the case may be. The failure of Tenant to exercise its first
extension option shall thereby terminate the second extension option.
(ii) Option Term Rental. If Tenant shall exercise its option
to extend the Term of this Lease for either of the two additional five
(5) year periods in accordance with subparagraph (a) above, then as of
the beginning of each of such five (5) year periods, the Annual Basic
Rent shall be adjusted to an amount equal to the then fair market
rental for such space. Reference herein to "fair market rental" shall
mean the rental payable in the Cities of Santa Ana, Newport Beach,
Irvine and Costa Mesa, California, for comparable space in the then
existing condition of the Premises and improved with such tenant
improvements as are then existing in the Premises. Upon the later to
occur of thirty (30) days from the date that Tenant exercises an
option to extend the Term and eight (8) months prior to the
commencement of any extended Term, Landlord and Tenant shall attempt,
for a period of twenty (20) days, to negotiate in good faith the "fair
market rental" for the Premises for the applicable option period. In
the event Landlord and Tenant shall be unable, despite their good
faith efforts, to agree upon the fair market rental for the Premises
within such 20-day period, the decision as to the fair market rental
shall be determined as follows:
Landlord and Tenant shall, within fifteen (15) days after the above-
described twenty (20) day period, each select an independent MAI
appraiser experienced in appraising property similar to the Building
to determine the fair market rental rate in accordance with the
standards set forth above. The two appraisers initially appointed
shall select a third independent MAI appraiser within five (5)
calendar days after notice from either Landlord or Tenant. Such
third appraiser shall conduct an independent appraisal to determine
such fair market rental rate. The three (3) appraisals so determined
shall be examined and those two (2) appraisals which are
-6-
<PAGE>
closest in amounts shall be mathematically averaged and that average
shall be used to establish the rental to be determined pursuant to
this section. Landlord and Tenant shall each pay the cost of their
respectively selected appraisers and Landlord and Tenant shall share
the cost of the third appraiser equally. Pending resolution of the
fair market rental rate, Tenant shall pay the Annual Basic Rent in
effect at the expiration of the term. Any appropriate adjustments
shall be made by Landlord and Tenant within ten (10) days after
final determination of the new Annual Basic Rent. Time is strictly
of the essence with respect to the time periods set forth in this
paragraph.
(c) Riqht of First Refusal to Lease Contiguous Space. So long as
------------------------------------------------
Tenant is not then in material default under this Lease, and for the Term
of this Lease, Landlord hereby agrees not to lease any portion of any space
unoccupied and available on the balance of the second (2nd) or third (3rd)
floor, and on the fourth floor of the Building (the "Contiguous Space"),
unless and until Landlord shall, by written notice (the "Offer Notice"),
have offered to lease the Contiguous Space to Tenant upon the same terms
and conditions as specified in the Offer Notice, setting forth each and
every term and condition of any prospective lease which Landlord is willing
to accept. This right of first refusal shall be a continuing right of first
refusal. Tenant shall accept in writing the terms and conditions set forth
in the Offer Notice, if at all, within ten (10) days of Landlord's delivery
of the Offer Notice to Tenant. Tenant's failure to deliver its acceptance
within such ten (10) day period shall conclusively be deemed to be a
rejection by Tenant of the offer set forth in the Offer Notice. If Tenant
fails to accept any term set forth in the Offer Notice, Landlord shall be
entitled to enter into the lease upon terms and conditions set forth in the
Offer Notice, or upon such terms which are not less favorable to Landlord.
Tenant's failure to accept the terms set forth in the Offer Notice shall
not constitute a waiver of any future right on the part of Tenant with
respect to any other prospective lease which Landlord is willing to make or
accept.
4. POSSESSION. Tenant agrees that, if Tenant is unable to complete the
----------
Tenant Improvements and occupy the Premises on or prior to the date set forth in
the Work Schedule
-7-
<PAGE>
described in the Work Letter Agreement, then this Lease shall not be void or
voidable, nor shall Landlord be liable to Tenant for any loss or damage
resulting therefrom, but the Commencement Date and the expiration date of the
above Term shall be extended as set forth in the Work Letter Agreement, except
as otherwise provided in the Work Letter Agreement. If, however, Tenant is able
to complete the Tenant Improvements and occupy the Premises, then the
Commencement Date and the expiration date of the Term shall be accelerated as
set forth in the Work Letter Agreement. Notwithstanding anything set forth
herein to the contrary, in the event that Landlord delays in the delivery to
Tenant of possession of the Premises, thereby preventing Tenant from completing
the Tenant Improvements prior to January 1, 1991, Tenant shall be entitled to
recover from Landlord, as Tenant's sole and exclusive remedy as a result of such
delay (without, however, prejudicing Tenant's rights under the Construction
Contract), one-half (1/2) of any "holdover rent" payable by Tenant to the then
landlord of the building currently occupied by Tenant or to another landlord if
Tenant is required to temporarily relocate. Notwithstanding the foregoing, in
the event the delay in delivering to Tenant possession of the Premises is due
solely to Landlord's voluntary election to suspend construction, Tenant shall be
entitled to recover from Landlord one hundred percent (100%) of any "holdover
rent" for a period equal to the period attributable to such voluntary
suspension. Landlord and Tenant hereby agree to cooperate to negotiate with
Tenant's current landlord an extension to Tenant's lease upon the most favorable
terms available to Tenant. For purposes of this Lease, "holdover rent" shall
mean and refer to rent payable by Tenant to the then landlord of the Building
currently occupied by Tenant or to another landlord if Tenant is required to
temporarily relocate in excess of the rent payable by Tenant as of December 31,
1990.
5. ANNUAL BASIC RENT.
-----------------
(a) Annual Basic Rent shall be free for the first fourteen (14)
months of the Lease Term. Tenant agrees to pay Landlord as Annual Basic
Rent for the Premises the Annual Basic Rent designated in Subparagraph 1(0)
(subject to adjustment as hereinafter provided) in twelve (12) equal
monthly installments, each in advance on the first day of each calendar
month during the Term, commencing in the fifteenth (15th) month of the
Term, except that the fifteenth (15th) month's rent shall be paid upon the
Commencement Date. If the Term of this Lease commences or ends on a day
other than the first day of a calendar month, then the rent for such period
shall be prorated in the proportion that the number of days this
-8-
<PAGE>
Lease is in effect during such period bears to thirty (30). In addition to
the Annual Basic Rent, Tenant agrees to pay as additional rent the amount
of rent adjustments and other charges required by this Lease. All rent
shall be paid to Landlord, without prior demand and without any deduction
or offset (except as provided herein), in lawful money of the United States
of America, at the address of Landlord designated in Subparagraph l(b)
hereof or to such other person or at such other place as Landlord may from
time to time designate in writing.
(b) The rental payable by Tenant shall be increased in accordance
with and by the amounts set forth in the following schedule:
(i) Commencing on the fifth (5th) anniversary of the
Commencement Date, the Annual Basic Rent shall be increased to $23.40 per
rentable square foot per year (i.e. Monthly Basic Rent of $1.95 per
rentable square foot per month).
(ii) Commencing on the tenth (10th) anniversary of the
Commencement Date, the Annual Basic Rent shall be increased to $24.00 per
rentable square foot per year (i.e. Monthly Basic Rent of $2.00 per
rentable square foot per month).
(c) Late Charqes. In the event Tenant fails to pay any installment
------------
of rent within ten (10) days following the date due or in the event Tenant
fails to make any other payment for which Tenant is obligated under this Lease
within ten (10) days following the date due, such late amount shall accrue
interest commencing thirty (30) days thereafter and Tenant shall pay Landlord
as additional rent such interest on such amount at the lesser of the then
prevailing prime rate as announced from time to time by Bank of America plus
one (1) percentage point or the maximum rate permitted by law from the date
such amount became due until such amount is paid, and Tenant shall pay to
Landlord concurrently with such late payment amount, as additional rent, a
late charge equal to three percent (3%) of the amount due to compensate
Landlord for the extra costs incurred as a result of such late payment. The
parties agree that such interest and late charge represents a fair and
reasonable estimate of the detriment that Landlord will suffer by reason of
late payment by Tenant. Acceptance of any such interest and late charge shall
not constitute a waiver of the Tenant's default with respect to the overdue
amount, or prevent Landlord from exercising any of the other rights and
remedies available to Landlord.
-9-
<PAGE>
6. RENT ADJUSTMENT.
---------------
(a) For the purposes of this Subparagraph 6(a), the following terms
are defined as follows:
Tenant's Percentage: Tenant's Percentage shall mean that portion of
-------------------
the total rentable area of the Building occupied by Tenant as set forth as a
percentage in Subparagraph l(q) above.
Annual Estimated Operating Expense Charge: Annual Estimated Operating
-----------------------------------------
Expense Charge shall mean Tenant's Percentage of the Operating Expenses, which
Landlord has estimated to be the amount set forth in Subparagraph l(p) above.
Operatinq Expenses: Operating Expenses shall consist of all direct
------------------
costs of operation and maintenance of the Building and the Common Areas,
including any expansions to the Common Areas by Landlord ("Operating Expenses"),
as determined by standard accounting practices, calculated (as to expenses that
vary with occupancy) assuming the Building is fully occupied, including the
following costs by way of illustration, but not limitation: any and all
assessments Landlord must pay for the Building pursuant to any covenants,
conditions or restrictions, reciprocal easement agreements, tenancy-in-common
agreements or similar restrictions and agreements affecting the Building or the
Site; real property taxes and assessments and any taxes or assessments hereafter
imposed in lieu thereof; rent taxes, gross receipt taxes (whether assessed
against Landlord or assessed against Tenant and paid by Landlord, or both);
water and sewer charges; accounting, legal and other consulting fees; the net
cost and expense of any rental insurance covering the Building for any period
reasonably necessary for Landlord to restore the Building in the event of a
casualty, and such additional insurance for which Landlord is responsible
hereunder or which Landlord or any first mortgagee with a lien affecting the
Premises reasonably deems necessary in connection with the operation of the
Building; utilities; janitorial services; security; labor; utilities surcharges,
or any other costs levied, assessed or imposed by, or at the direction of, or
resulting from statutes or regulations or interpretations thereof, promulgated
by any federal, state, regional, municipal or local government authority in
connection with the use or occupancy of the Building or the Premises or the
parking facilities serving the Building or the Premises; the reasonable cost
(amortized over its useful life as Landlord shall reasonably determine) of any
capital
-10-
<PAGE>
improvements made to the Building in order to reduce Operating Expenses; costs
incurred in the management of the Building, if any (including supplies, on site
management office rent, wages and salaries of employees used in the management,
operation and maintenance of the Building, and payroll taxes and similar
governmental charges with respect thereto), and a management fee of the Building
(commensurate with management fees being charged in connection with the
management of other first-class office buildings in the general vicinity of the
Building, but in no event greater than fifteen percent (15%) of the annual
Operating Expenses, excluding from the calculation of such Operating Expenses
such fee (and any management fee paid to any third party, including any
affiliate of Landlord, shall be deducted from such management fee and shall not
be added as an item of Operating Expenses for purposes of this Paragraph); air
conditioning; waste disposal; heating; ventilating; elevator repair and
maintenance; supplies; materials; equipment; tools; repair and maintenance of
the non-structural portions of the Building, but including the plumbing,
heating, ventilating, air conditioning and electrical systems installed or
furnished by Landlord; maintenance costs, including utilities and payroll
expenses, rent of personal property used in maintenance, and all other upkeep of
the Building, the Common Areas and the Development; costs and expenses of
gardening and landscaping; maintenance of signs (other than Tenant's signs);
personal property taxes levied on or attributable to personal property used in
connection with the entire Building, including Common Areas; reasonable audit or
verification fees; and the costs and expenses of repairs, resurfacing,
repairing, maintenance, painting, lighting, cleaning, refuse removal, security
and similar items, including appropriate reserves. Operating Expenses shall not
include depreciation on the Building, or equipment therein, Landlord's executive
salaries or real estate brokers' commissions.
Operating Expenses shall not include Landlord's general and
administrative overhead costs, costs of enforcement of leases, debt service of
debts secured by the Building or the Site or a portion thereof, penalties for
late payment of taxes, items that would be characterized as capital expenses
under generally accepted accounting principles (except as otherwise herein
provided), costs of correcting construction defects and any costs for which
Landlord is reimbursed by a tenant, insurance proceeds or the like. Further, any
services provided by affiliates of Landlord must be at competitive market rates.
-11-
<PAGE>
As used herein, the term "real property taxes" shall include any form
of assessment, license fee, license tax, business license fee, commercial rent
tax, levy, charge, tax or similar imposition, imposed by any authority having
the direct power to tax, including any city, county, state or federal
government, or any school, agricultural, lighting, drainage or other improvement
or special assessment district thereof, as against any legal or equitable
interest of Landlord in the Premises, including, but not limited to, the
following:
(i) any tax on Landlord's "right" to other income from the Premises
or as against Landlord's business of leasing the Premises;
(ii) any assessment, tax, fee, levy or charge in substitution,
partially or totally, of any assessment, tax, fee, levy or charge
previously included within the definition of real estate tax, including but
not limited to, any assessments, taxes, fees, levies and charges that may
be imposed by governmental agencies for such services as fire protection,
street, sidewalk and road maintenance, refuse removal and for other
governmental services formerly provided without charge to property owners
or occupants. It is the intention of Tenant and Landlord that all such new
and increased assessments, taxes, fees, levies and charges be included
within the definition of "real property taxes" for the purposes of this
Lease;
(iii) any assessment, tax, fee, levy or charge allocable to or
measured by the area of the Premises or the rent payable hereunder,
including, without limitation, any gross income tax or excise tax levied by
the State, city or federal government, or any political subdivision
thereof, with respect to the receipt of such rent, or upon or with respect
to the possession, leasing, operating, management, maintenance, alteration,
repair, use or occupancy by Tenant of the Premises, or any portion thereof;
Notwithstanding any provision of this Subparagraph 6(a) expressed or
implied to the contrary, "real property taxes" shall not include Landlord's
federal, state or local income, franchise, inheritance or estate taxes. Landlord
hereby further agrees that in the event Landlord enters into a lease provision
reducing or eliminating as an item of "real property taxes" any increase to real
property taxes attributable to a change of
-12-
<PAGE>
ownership with respect to any tenant in the Building occupying space equal to or
greater than 15,000 rentable square feet, Landlord shall make such provision
available to Tenant and such provision shall become part of this Lease.
(b) Tenant shall pay to Landlord as additional rent Tenant's
Percentage of the Operating Expenses paid or incurred by Landlord for any
calendar year. For each calendar year during the Term of the Lease, or portion
thereof, Tenant shall pay its percentage of Landlord's estimate of the Operating
Expenses for that year, which estimate may be changed from time to time by
Landlord. This estimated amount shall be divided into twelve (12) equal monthly
installments. Tenant shall pay to Landlord, concurrently with the regular
monthly rent payment next due following the receipt of the estimate for the
first calendar year of the Lease Term, an amount equal to one monthly
installment multiplied by the number of months from the Commencement Date to the
month of such payment, both months inclusive. Subsequent installments shall be
payable concurrently with the regular monthly rent payments for the balance of
that calendar year and shall continue until the next calendar year's estimate is
rendered. If, in any calendar year, Tenant's Percentage of actual Operating
Expenses is less than the estimate for that year, then upon receipt of
Landlord's statement, any overpayment made by Tenant on the monthly installment
basis shall be credited towards the next monthly rent falling due and the
estimated monthly installments of Tenant's Percentage of Operating Expenses
shall be adjusted to reflect such lower Operating Expenses for the most recent
calendar year. Similarly, if Tenant's percentage of the actual Operating
Expenses for any calendar year is greater than the estimated payments made by
Tenant for such year, Tenant shall pay the amount of such difference to Landlord
on the regular monthly rent payment date next following Tenant's receipt of
Landlord's statement of actual Operating Expenses.
(c) Even though the Term has expired and Tenant has vacated the
Premises, when the final determination is made of Tenant's Percentage of
Operating Expenses for the year in which this Lease terminates, Tenant shall
immediately pay any increase due over the estimated expenses paid and,
conversely, any overpayment made in the event said expenses decrease shall be
rebated by Landlord to Tenant.
7. SECURITY DEPOSIT. [Intentionally Deleted]
------------------
-13-
<PAGE>
8. USE. Tenant shall use the Premises for the uses set forth in
---
Subparagraph l(u) above, and shall not use or permit the Premises to be used for
any other purpose without the prior written consent of Landlord. Nothing
contained herein shall be deemed to give Tenant any exclusive right te such use
in the Building. Tenant shall not use or occupy the Premises in violation of law
or of the Certificate of Occupancy issued for the Building, and shall, upon
written notice from Landlord, discontinue any use of the Premises which is
declared by any governmental authority having jurisdiction to be a violation of
law or of said Certificate of Occupancy. Tenant shall comply with any direction
of any governmental authority having jurisdiction which shall, by reason of the
nature of Tenant's use or occupancy of the Premises, impose any duty upon Tenant
or Landlord with respect to the Premises or with respect to the use or
occupation thereof. Tenant shall comply with all rules, orders, regulations and
requirements of the Pacific Fire Rating Bureau or any other organization
performing a similar function. Tenant shall promptly, upon demand, reimburse
Landlord for any additional premium charged for such policy by reason of
Tenant's failure to comply with the provisions of this Paragraph. Tenant shall
not do or permit anything to be done in or about the Premises which will in any
way obstruct or interfere with the rights of other tenants or occupants of the
Building or the Development, or injure or annoy them, or use or allow the
Premises to be used for any improper, immoral, unlawful or objectionable
purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about
the Premises. Tenant shall comply with all restrictive covenants and obligations
created by private contracts which affect the use and operation of the Premises,
the Building, the Common Areas or the Site. Tenant shall not commit or suffer to
be committed any waste in or upon the Premises and shall keep the Premises in
first class repair and appearance. Landlord reserves the right to prescribe the
weight and position of all files, safes and heavy equipment which Tenant desires
to place in the Premises so as to properly distribute the weight thereof.
Further, Tenant's business machines and mechanical equipment which cause
vibration or noise that may be transmitted to the Building structure or to any
other space in the Building shall be so installed, maintained and used by Tenant
as to eliminate such vibration or noise. Tenant shall be responsible for all
structural engineering required to determine structural load. Tenant covenants
by and for itself and its successors and assigns, and all entities claiming
under or through it, and this Lease is made and accepted upon and subject to the
following conditions:
That there shall be no discrimination against or segregation of any
person or group of persons on
-14-
<PAGE>
account of sex, race, color, religion, marital status, national origin
or ancestry, in the leasing, subleasing, transferring, use or
enjoyment of the Premises herein leased nor shall Tenant itself, or
any entity claiming under or through it, establish or permit any such
practice or practices of discrimination or segregation with reference
to the selection, location, number, use or occupancy of tenants,
lessees, sublessees, subtenants or vendees in the Premises herein
leased.
Notwithstanding the foregoing, it is hereby agreed that a violation of the
above-described covenant shall not entitle Landlord to terminate this Lease, but
rather to enjoin any act or practice prohibited by the above-described
provisions, or to seek any other remedy available at law as a result of such
violation. Further, the foregoing is not intended to create any third party
beneficiary rights. Tenant and its employees shall comply with any
Transportation Demand Management ("TDM') Program which has been or may hereafter
be adopted in connection with the development of the project of which the Site
is a part ("MacArthur Place"). Tenant acknowledges that such TDM Program
constitutes a mandatory traffic mitigation measure which has been made a part of
the zoning approval for MacArthur Place and accordingly may cause Tenant some
degree of inconvenience. Therefore, Tenant hereby expressly agrees to cooperate
in the formation of, and comply in full with the provisions of, the TDM Program.
Additionally, Tenant shall (A) participate in any employee commute
transportation surveys reasonably required by Landlord, (B) participate in and
financially support any transportation management association created for
MacArthur Place, (C) provide or ensure access to commuter information and other
information relating to adherence to any governmental regulations, orders or the
like bearing upon transportation to or from MacArthur Place, and (D) adhere to
any reasonable measures that Landlord may enact in order to comply with the TDM
Program and the provisions of any private covenants, conditions and restrictions
relating thereto which are now, or may hereafter become, of record with respect
to MacArthur Place. Notwithstanding the foregoing, Landlord hereby agrees to
make available for Tenant's review any and all written information proposed or
submitted by Landlord in connection with the TDM Program. It is hereby further
agreed that, notwithstanding the foregoing, any measure proposed by Landlord in
order to comply with the TDM Program shall be reasonably necessary for purposes
of ensuring Landlord's compliance with any applicable land use entitlements
granted by the City of Santa Ana or any of its related departments or agencies,
and further, that any such measure shall not unreasonably interfere with
Tenant's business and
-15-
<PAGE>
work schedules. Tenant shall further have the right to participate in the
formulation of any plan involving Tenant in connection with the TDM Program.
9. NOTICES. Any notice required or permitted to be given hereunder
-------
must be in writing and may be given by personal delivery or by mail, and if
given by mail shall be deemed sufficiently given if sent by registered or
certified mail addressed to Tenant at the Building, or to Landlord at each of
the addresses designated in Subparagraph l(b). Either party may specify a
different address for notice purposes by written notice to the other, except
that the Landlord may in any event use the Premises as Tenant's address for
notice purposes.
10. BROKERS. Tenant warrants that it has had no dealings with any real
-------
estate broker or agent in connection with the negotiation of this Lease, except
for those certain brokers whose names are set forth in Subparagraph l(s) whose
commission shall be payable by Landlord, and that it knows of no other real
estate broker or agent who is or might be entitled to a commission in connection
with this Lease. If either party has dealt with any other person or real estate
broker with respect to leasing or renting space in the Building, such party
shall be solely responsible for the payment of any fee due said person or firm
and such party shall hold the other party free and harmless against any
liability in respect thereto, including attorneys' fees and costs.
11. H0LDING OVER. If Tenant holds over after the expiration or
------------
earlier termination of the term hereof without the express written consent of
Landlord, Tenant shall become a Tenant at sufferance only, at a rent rate equal
to one hundred ten percent (110%) of the rent in effect upon the date of such
expiration (subject to adjustment as provided in Paragraphs 6 hereof and
prorated on a daily basis), and otherwise subject to the terms, covenants and
conditions herein specified, so far as applicable. Acceptance by Landlord of
rent after such expiration or earlier termination shall not result in a renewal
of this Lease. The foregoing provisions of this Paragraph 11 are in addition to
and do not affect Landlord's right of re-entry or any rights of Landlord
hereunder or as otherwise provided by law. If Tenant fails to surrender the
Premises upon the expiration of this Lease despite demand to do so by Landlord,
Tenant shall indemnify and hold Landlord harmless from any actual out-of-pocket
loss or liability, including without limitation, any claim made by any
succeeding tenant founded on or resulting from such failure to surrender and any
attorneys' fees and costs.
-16-
<PAGE>
12. TAXES ON TENANT'S PROPERTY.
--------------------------
(a) Tenant shall be liable for and shall pay, at least ten (10) days
before delinquency, all taxes levied against any personal property or trade
fixtures placed by Tenant in or about the Premises. If any such taxes on
Tenant's personal property or trade fixtures are levied against Landlord or
Landlord's property or if the assessed value of the Premises is increased by the
inclusion therein of a value placed upon such personal property or trade
fixtures of Tenant and if Landlord, after written notice to Tenant, pays the
taxes based upon such increased assessment, which Landlord shall have the right
to do regardless of the validity thereof, but only under proper protest if
requested by Tenant, Tenant shall, upon demand, repay to Landlord the taxes so
levied against Landlord, or the portion of such taxes resulting from such
increase in the assessment.
(b) If the Tenant Improvements in the Premises, whether installed,
and/or paid for by Landlord or Tenant and whether or not affixed to the real
property so as to become a part thereof, are assessed for real property tax
purposes at a valuation higher than the valuation at which tenant improvements
conforming to Landlord's "Building Standard" for other space in the Building are
assessed, then the real property taxes and assessments levied against the
Building by reason of such excess assessed valuation shall be deemed to be taxes
levied against personal property of Tenant and shall be governed by the
provisions of Paragraph 12(a) above. If the records of the County Assessor are
not available or sufficiently detailed to serve as a basis for making said
determination, the actual cost of construction shall be used. The foregoing
provision shall be consistently applied to all tenants of the Building.
13. CONDITION OF PREMISES. Tenant acknowledges that neither Landlord
---------------------
nor any agent of Landlord has made any representation or warranty with respect
to the Premises, the Building, the Parking Facilities or any other portion of
the Development or with respect to the suitability of same for the conduct of
Tenant's business. The taking of possession of the Premises by Tenant shall
conclusively establish that the Building was in satisfactory condition (for
Tenant's purposes) at such time. Without limiting the foregoing, Tenant's
execution of the Notice attached hereto as Exhibit "C" shall constitute a
------------
specific acknowledgment and acceptance of the various start-up inconveniences
that may be associated with the use of the Building, the Parking Facilities, the
Common Areas
-17-
<PAGE>
and other portions of the Development such as certain construction obstacles
including scaffolding, delays in use of freight elevator service, certain
elevators not being available to Tenant, the passage of work crews using
elevators, uneven air conditioning services and other typical conditions
incident to recently constructed office buildings.
14. ALTERATIONS.
-----------
(a) Except as set forth in the Work Letter Agreement, Tenant
shall make no alterations, additions or improvements in or to the Premises
without Landlord's prior written consent, and then only by contractors or
mechanics approved by Landlord. Tenant shall submit to Landlord plans and
specifications for any proposed alterations, additions or improvements to
the Premises, and may not make such alterations, additions or improvements
until Landlord has approved of such plans and specifications. Tenant shall
reimburse Landlord, upon Landlord's demand therefor, for the reasonable
costs and expenses incurred by Landlord in reviewing such plans and
specifications. Tenant shall construct such alterations, additions or
improvements in accordance with the plans and specifications approved by
Landlord, and shall not amend or modify such plans and specifications
without Landlord's prior written consent. If the proposed change requires
the consent or approval of any lessor of a superior lease, or the holder of
a mortgage encumbering the Premises, such consent or approval must be
secured prior to the construction of such alteration, addition or
improvement. Tenant agrees that there shall be no construction of
partitions or other obstructions which might interfere with Landlord's free
access to mechanical installations or service facilities of the Building or
interfere with the moving of Landlord's equipment to or from the enclosures
containing said installations or facilities. All such work shall be done at
such times and in such manner as Landlord may from time to time designate.
Tenant covenants and agrees that all work done by Tenant shall be performed
in full compliance with all laws, rules, orders, ordinances, regulations
and requirements of all governmental agencies, offices and boards having
jurisdiction, and in full compliance with the rules, regulations and
requirements of the Pacific Fire Rating Bureau, and of any similar body.
Before commencing any work, Tenant shall give Landlord at least ten (10)
days written notice of the proposed commencement of such work. Tenant
further covenants and agrees that any mechanic's lien filed against the
Premises or against the Building for work claimed to have been done for, or
materials claimed to have been furnished to Tenant, will be discharged by
-18-
<PAGE>
Tenant, by bond or otherwise, within (10) ten days after the filing
thereof, at the cost and expense of Tenant. All alterations, additions or
improvements upon the Premises made by either party, including (without
limiting the generality of the foregoing) all wall covering, built-in
cabinet work, paneling and the like, shall, unless Landlord elects
otherwise, become the property of Landlord, and shall remain upon, and be
surrendered with the Premises, as a part thereof, at the end of the Term
hereof, except that Landlord may, by written notice to Tenant, require
Tenant to remove all partitions, counters, railings and the like installed
by Tenant, and Tenant shall repair all damage resulting from such removal
or, at Landlord's option, shall pay to Landlord all reasonable costs
arising from such removal.
(b) All articles of personal property and all business and trade
fixtures, machinery and equipment, furniture and movable partitions owned
by Tenant or installed by Tenant at its expense in the Premises shall be
and remain the property of Tenant and may be removed by Tenant at any time
during the Lease Term when Tenant is not in default hereunder. If Tenant
shall fail to remove all of its effects from the Premises upon termination
of this Lease for any cause whatsoever, Landlord may, at its option, remove
the same in any manner that Landlord shall choose, and store said effects
without liability to Tenant for loss thereof. In such event, Tenant agrees
to pay Landlord upon demand any and all expenses incurred in such removal,
including court costs and attorneys' fees and storage charges on such
effects, for any length of time that the same shall be in Landlord's
possession. Landlord may, at its option, without notice, sell said effects,
or any of the same, at private sale and without legal process, for such
price as Landlord may obtain and apply the proceeds of such sale upon any
amounts due under this Lease from Tenant to Landlord and upon the expense
incident to the removal and sale of said effects.
15. REPAIRS.
-------
(a) By entry hereunder, Tenant accepts the Premises as being in
good and sanitary order, condition and repair. Tenant shall keep, maintain
and preserve the Premises in first class condition and repair, and shall,
when and if needed, at Tenant's sole cost and expense, make all repairs to
the Premises and every part thereof, including, without limitation, the
interior surfaces of the ceilings, walls and floors, all doors, all
interior windows, all non-Building standard plumbing, pipes,
-19-
<PAGE>
electrical wiring, switches, furnishings and special items and equipment
installed by or at the expense of Tenant. Tenant shall, upon the expiration
or sooner termination of the Term hereof, surrender the Premises to
Landlord in the same condition as when received, usual and ordinary wear
and tear excepted. Landlord shall have no obligation to alter, remodel,
improve, repair, decorate or paint the Premises or any part thereof. The
parties hereto affirm that Landlord has made no representations to Tenant
respecting the condition of the Premises, the Building or the Common Areas
except as specifically herein set forth.
(b) Anything contained in Paragraph 15(a) above to the contrary
notwithstanding, Landlord shall repair and maintain the structural portions
of the Building and the Building standard plumbing, heating, ventilating,
air conditioning, elevator and electrical systems, and Tenant shall be
solely responsible for the repair and maintenance of any of such items if
they are above Building standard. If any maintenance and repairs which
would otherwise be the responsibility of Landlord hereunder are
necessitated in part or in whole by the act, neglect or omission of any
duty by Tenant, its agents, servants, employees or invitees, Tenant shall
pay to Landlord, as additional rent, the reasonable cost of such
maintenance and repairs. Landlord shall not be liable for any failure to
make any such repairs or to perform such maintenance unless such failure
shall persist for an unreasonabale time after written notice of the need of
such repairs or maintenance is given to Landlord by Tenant. Notwithstanding
any provision set forth in this Lease to the contrary, if Tenant provides
written notice to Landlord of an event or circumstance which, in Tenant's
reasonable judgment, requires the action of Landlord with respect to repair
and/or maintenance, and Landlord fails to provide such action within a
reasonable period of time, given the circumstances, after the receipt of
such written notice, or if Landlord responds to such request by providing
Landlord's written consent to the taking of such action by Tenant, then
Tenant may proceed to take the required action upon delivery of an
additional written notice to Landlord specifying that Tenant is taking such
required action, and if such action was required under the terms of this
Lease to be taken by Landlord, then Tenant shall be entitled to prompt
reimbursement by Landlord for Tenant's documented, actual and reasonable
costs and expenses in taking such action (unless, pursuant to the Lease,
Tenant is solely responsible for the cost of such repair). Landlord may
prohibit Tenant from taking such action by providing written notice to
Tenant stating that, in Landlord's
-20-
<PAGE>
reasonable judgment, Tenant is not entitled to take such action and
Landlord is not required to take such action, or otherwise stating the
reasons why Landlord believes that such action might be detrimental to the
best interests of the tenants of and/or the Building, in which event
Tenant's sole remedy shall be to proceed pursuant to the arbitration
procedures set forth in Paragraph 29 hereof. In the event that Tenant is
permitted to take such action as aforesaid and if Tenant takes such action,
and such work could adversely affect the Building's mechanical, electrical,
life safety, heating, ventilating, air conditioning and/or elevator
systems, Tenant shall use only those contractors used by Landlord in the
Building for work on such systems. If such contractors are unwilling or
unable to perform such work, Tenant may retain the services of qualified,
reputable and licensed contractors, subject to Landlord's approval of such
contractors (which approval shall not be unreasonably withheld or delayed),
familiar with first-class and class-A, institutional-quality, high-rise
buildings who possess a reputation for excellence and reliability at least
equal to the contractor(s) designated by Landlord. Further, if Landlord
does not deliver a detailed written objection to Tenant within thirty (30)
days after receipt of an invoice by Tenant for its costs of taking action
which Tenant claims should have been taken by Landlord, and if such invoice
from Tenant sets forth a reasonably particularized breakdown of its costs
and expenses in connection with taking such action on behalf of Landlord,
then Tenant shall be entitled to deduct from Tenant's Percentage of
Operating Expenses payable by Tenant under the Lease the amount set forth
in such invoice. If, however, Landlord delivers to Tenant written notice
within thirty (30) days after receipt of Tenant's invoice, disputing such
costs or setting forth, in reasonable particularity, Landlord's reasons for
its claim that such action was not required of Landlord pursuant to the
terms of the Lease, then Tenant shall not be entitled to such deduction,
but as Tenant's sole remedy, Tenant may proceed to claim a default by
Landlord (unless Landlord pays under protest and proceeds to dispute such
payment) or, if elected by either Landlord or Tenant, the matter shall
proceed to resolution in accordance with Paragraph 29 hereof. Except as
expressly provided in Paragraph 23 hereof, or unless arising from
Landlord's negligence, there shall be no abatement of rent and no liability
of Landlord by reason of any injury to or interference with Tenant's
business arising from the making of any repairs, alterations or
improvements in or to any portion of the Building or the Premises or in or
to fixtures, appurtenances and equipment therein. Tenant waives the
-21-
<PAGE>
right to make repairs at Landlord's expense under any law, statute or
ordinance now or hereafter in effect.
(c) As between Landlord and Tenant, Landlord is recognized as the
owner of telephone cable and related wiring (but not the telephone switch
board which shall remain Tenant's property) serving the Premises and
situated in the Common Areas of the Building (the "Telephone Cable").
Tenant shall be responsible for the maintenance of all Telephone Cable.
Tenant access to the Common Areas for the purposes of installing and
maintaining the Telephone Cable is conditioned upon Landlord's approval of
Tenant's telephone service contract and appropriate insurance policies
being obtained by the entity installing the Telephone Cable. Landlord shall
not be responsible and shall have no liability for interruption in or
failures of telephone service. Tenant shall abide by all reasonable,
written and non-discriminatory rules and regulations hereafter promulgated
by Landlord regarding access to the Telephone Cable. Tenant shall
indemnify, defend and hold Landlord harmless from and against any and all
claims, losses, liabilities, costs and expenses, including, without
limitation, actual attorneys' fees, incurred by Landlord and related to
Tenant's access to or work upon the Telephone Cable.
16. LIENS. Tenant shall not permit to be filed against the Building
------
nor against Tenant's leasehold interest in the Premises, any mechanics',
materialmens' or other liens. Landlord shall have the right at all reasonable
times to post and keep posted on the Premises any notices which it deems
necessary for protection from such liens. If any such liens are filed, Landlord
may, without waiving its rights and remedies based on such breach of Tenant and
without releasing Tenant from any of its obligations, cause such liens to be
released by any reasonable (as determined by Landlord in its sole but reasonable
judgment) means, including a release bond. Tenant shall pay to Landlord at once,
upon notice by Landlord, any sum paid by Landlord to remove such liens, together
with interest at the maximum rate per annum permitted by law from the date of
such payment by Landlord.
17. ENTRY BY LANDLORD. Subject to prior notice, oral or written,
-------------------
Landlord reserves and shall at any and all times have the right to enter the
Premises to inspect the same, to supply janitor service and any other service to
be provided by Landlord to Tenant hereunder, to show the Premises to prospective
purchasers or tenants (during the last nine (9) months of the term, as it may
from time to time be extended), to post notices of nonresponsibility, to alter,
improve or
-22-
<PAGE>
repair the Premises or any other portion of the Building, all without being
deemed guilty of any eviction of Tenant and without abatement of rent. Landlord
may, in order to carry out such purposes, erect scaffolding and other necessary
structures where reasonably required by the character of the work to be
performed, provided that the business of Tenant shall be interfered with as
little as reasonably practicable. Except for claims arising from Landlord's
negligence, Tenant hereby waives any claim for damages for any injury or
inconvenience to or interference with Tenant's business, any loss of occupancy
or quiet enjoyment of the Premises, and any other loss in, upon and about the
Premises. Landlord shall at all times have and retain a key with which to unlock
all doors in the Premises, excluding Tenant's vaults and safes. Landlord shall
have the right to use any and all means which Landlord may deem proper to open
said doors in an emergency in order to obtain entry to the Premises. Any entry
to the Premises obtained by Landlord by any of said means, or otherwise, shall
not be construed or deemed to be a forcible or unlawful entry into the Premises,
or an eviction of Tenant from the Premises or any portion thereof, and any
damages caused on account thereof shall be paid by Tenant. It is understood and
agreed that no provision of this Lease shall be construed as obligating Landlord
to perform any repairs, alterations or decorations except as otherwise expressly
agreed herein by Landlord.
18. UTILITIES AND SERVICES. Landlord agrees to furnish or cause to be
----------------------
furnished to the Premises the utilities and services described in the Standards
for Utilities and Services, attached hereto as Exhibit "D", subject to the
conditions and in accordance with the standards set forth therein. Landlord's
failure to furnish any of the foregoing items when such failure is not the
result of Landlord's negligence and is caused by (i) accident, breakage or
repairs; (ii) strikes, lockouts or other labor disturbance or labor dispute of
any character; (iii) governmental regulation, moratorium or other governmental
action; (iv) inability despite the exercise of reasonable diligence to obtain
electricity, water or fuel; or by (v) any other cause beyond Landlord's
reasonable control, shall not result in any liability to Landlord. In addition,
Tenant shall not be entitled to any abatement or reduction of rent by reason of
such failure, no eviction of Tenant shall result from such failure and Tenant
shall not be relieved from the performance of any covenant or agreement in this
Lease because of such failure, unless Tenant is unable to conduct its business
in the Premises for three (3) consecutive business days. In the event of any
failure, stoppage or interruption thereof, Landlord shall diligently attempt to
resume service promptly. If Tenant requires or utilizes more water or electrical
power than is considered
-23-
<PAGE>
reasonable or normal by Landlord, Landlord may at its option require Tenant to
pay, as additional rent, the cost, as fairly determined by Landlord, incurred by
such extraordinary usage. In addition, Landlord may install separate meter(s)
for the Premises, at Landlord's sole expense, and Tenant thereafter shall pay
all charges of the utility providing service and Landlord shall make an
appropriate adjustment to Tenant's Operating Expenses calculation to account for
the fact Tenant is directly paying such metered charges.
19. BANKRUPTCY. If Tenant shall file a petition in bankruptcy under
------------
any provision of the Bankruptcy Code as then in effect, or if Tenant shall be
adjudicated a bankrupt in involuntary bankruptcy proceedings and such
adjudication shall not have been vacated within one hundred twenty (120) days
from the date thereof, or if a receiver or trustee of Tenant's property shall be
appointed and the order appointing such receiver or trustee shall not be set
aside or vacated within one hundred twenty (120) days after the entry thereof,
or if Tenant shall assign Tenant's estate or effects for the benefit of
creditors, then in any such event Landlord may terminate this Lease, if Landlord
so elects, with or without notice of such election and with or without entry or
action by Landlord. In such case, notwithstanding any other provisions of this
Lease, Landlord, in addition to any and all rights and remedies allowed by law
or equity, shall, upon such termination, be entitled to recover damages in the
amount provided in Paragraph 25(b) hereof. Neither Tenant nor any person
claiming through or under Tenant or by virtue of any statute or order of any
court shall be entitled to possession of the Premises but shall surrender the
Premises to Landlord. Nothing contained herein shall limit or prejudice the
right of Landlord to recover damages by reason of any such termination equal to
the maximum allowed by any statute or rule of law in effect at the time when,
and governing the proceedings in which, such damages are to be proved; whether
or not such amount is greater, equal to or less than the amount of damages
recoverable under the provisions of this Paragraph 19.
20. INDEMNIFICATION AND EXCULPATION OF LANDLORD.
--------------------------------------------
(a) Tenant shall indemnify, defend and hold Landlord harmless
from all claims arising from Tenant's use of the Premises or the conduct of
its business or from any activity, work or thing done, permitted or
suffered by Tenant in or about the Premises, the Building or the Common
Area. Tenant shall further indemnify, defend and hold Landlord harmless
from all claims arising from any breach or default in the performance of
any obligation to be performed by Tenant under the terms of this Lease, or
-24-
<PAGE>
arising from any act, neglect, fault or omission of Tenant or of its
agents, contractors, employees or invitees, and from and against all costs,
attorneys' fees, expenses and liabilities incurred in or about such claim
or any action or proceeding brought thereon. In case any action or
proceeding shall be brought against Landlord by reason of any such claim,
Tenant, upon notice from Landlord, shall defend the same at Tenant's
expense by counsel approved in writing by Landlord. Tenant, as a material
part of the consideration to Landlord, hereby assumes all risk of damage to
property or injury to persons in, upon or about the Premises from any cause
whatsoever except that which is caused by the negligence or willful
misconduct of Landlord or the failure of Landlord to observe any of the
terms and conditions of this Lease where such failure has persisted for an
unreasonable period of time after written notice of such failure. Tenant
hereby waives all its claims in respect thereof against Landlord.
(b) Neither Landlord nor any partner, director, officer, agent or
employee of Landlord shall be liable to Tenant or its partners, directors,
officers, contractors, agents, employees, invitees, sublessees or
licensees, for any loss, injury or damage to Tenant or to any other person,
or to its or their property, except to the e~tent such injury, damage or
loss is caused by or results from the negligence or willful misconduct of
Landlord or its employees in the operation or maintenance of the Building
or the Site. Further, neither Landlord nor any partner, director, officer,
agent or employee of Landlord shall be liable for any such damage caused by
other lessees or persons in or about the Building or the Site, or caused by
quasi-public work.
(c) Notwithstanding any provision of this Lease to the contrary,
Tenant shall not be required to defend, save harmless and indemnify
Landlord from any liability for injury, loss, accident or damage to any
person or property resulting from Landlord's negligent acts or omissions or
willful misconduct or that of its agents, contractors, servants, employees
or licensees in connection with Landlord's activities on or about the
Premises, and Landlord hereby indemnifies and agrees to hold Tenant
harmless from and against Landlord's negligence or willful misconduct or
that of its agents, contractors, servants, employees or licensees in
connection with Landlord's activities on or about the Premises.
(d) The exclusion from either Landlord's or Tenant's indemnity
and the agreement by Landlord and Tenant
-25-
<PAGE>
to so indemnify and hold the other harmless in accordance with the terms of
this Lease are not intended to and shall not relieve any insurance carrier
of its obligations under policies required to be carried by Landlord or
Tenant pursuant to the provisions of this Lease to the extent that
the indemnified party has suffered property damage and/or interruption of
its business and such policies cover (or, if such policies would have been
carried as required, would have covered) the property so damaged and/or the
interruption of such business by the negligent acts or omissions or willful
misconduct of the indemnifying party or those of its agents; provided,
however, that the provisions of this sentence shall in no way be construed
to imply the availability of any double or duplicate coverage following the
primary liability of such carriers or of such implied carriers. All
insurance of either party shall be at a commercially reasonable level.
Regardless of whether insurance is carried by either party in excess of a
commercially reasonable level, neither party shall be entitled to the
benefits, including waiver of subrogation benefits, of the excess coverage
of the other, over the coverage required by this Lease or, if no such
limits are set forth, then over the coverage which would be commercially
reasonable for the respective parties to carry solely with respect to the
Building and the Premises.
21. DAMAGE TO TENANT'S PRQPERTY. Except as caused by or resulting from
---------------------------
Landlord's negligence or willful misconduct, and subject to the provisions of
Paragraph 20, Landlord or its agents shall not be liable for (i) any damage to
any property entrusted to employees of the Building, (ii) loss or damage to any
property by theft or otherwise, (iii) any injury or damage to persons or
property resulting from any latent defect in the Premises or in the Building or
from fire, explosion, falling plaster, steam, gas, electricity, water or rain
which may leak from any part of the Building, or from the pipes, appliances or
plumbing work therein or from the roof, street or sub-surface or from any other
place or resulting from dampness or any other cause whatsoever. Landlord or its
agents shall not be liable for interference with light or other incorporeal
hereditaments. Tenant shall give prompt notice to Landlord in case of fire or
accidents in the Premises or in the Building, or of defects therein or in the
fixtures or equipment.
22. TENANT'S INSURANCE.
------------------
(a) Tenant shall, during the Term hereof and any other period of
occupancy, at its sole cost and expense, keep in full force and effect the
following insurance:
-26-
<PAGE>
(i) Standard form property insurance insuring against the
perils of fire, extended coverage, vandalism, malicious mischief, special
extended coverage ("All-Risk") and sprinkler leakage. This insurance
policy shall be upon all property owned by Tenant, for which Tenant is
legally liable or that was installed at Tenant's expense, and which is
located in the Building including, without limitation, furniture,
fittings, installations, fixtures (other than Tenant improvements
installed by Landlord), and any other personal property, in an amount not
less than the full replacement cost thereof.
(ii) Commercial General Liability Insurance insuring Tenant
against any liability arising out of the lease, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such
insurance shall be in the amount of $3,000,000 Combined Single Limit for
injury to, or death of one or more persons in an occurrence, and for
damage to tangible property (including loss of use) in an occurrence,
with such liability amount to be adjusted from time to time in accordance
with prevailing standards for Class A buildings in the Santa Ana, Newport
Beach, Irvine and Costa Mesa areas. The policy shall insure the hazards
of the Premises and Tenant's operations thereon, independent contractors,
contractual liability (covering the indemnity contained in Paragraph 20
hereof) and shall (1) name Landlord as an additional insured, (2) contain
a cross liability provision and (3) contain a provision that the
insurance provided the Landlord hereunder shall be primary and non-
contributing with any other insurance available to the Landlord.
(iii) Workers' Compensation and Employer's Liability insurance
(as required by state law).
(b) All policies shall be consistent with the requirements set
forth herein and shall be taken out with insurance companies holding a
General Policyholders Rating of "A" and a Financial Rating of "VII" or
better, as set forth in the most current issue of Best's Insurance Guide.
Within ten (10) days after the execution of this Lease, and prior to
occupancy of the Premises, Tenant shall deliver to Landlord copies of
policies or certificates evidencing the existence of the amounts and forms
of coverage satisfactory to Landlord. No such policy shall be cancellable
or reducible in coverage below that which is required hereunder except
after thirty (30) days prior written
-27-
<PAGE>
notice to Landlord. Tenant shall, within ten (10) days prior to the
expiration of such policies, furnish Landlord with renewals or
"binders" thereof, or Landlord may order such insurance and charge the cost
thereof to Tenant as additional rent. If Landlord obtains any insurance
that is the responsibility of Tenant under this Paragraph 22, Landlord
shall deliver to Tenant a written statement setting forth the cost of any
such insurance and showing in reasonable detail the manner in which it has
been computed.
(c) During the Term of this Lease, Landlord shall insure the
Building (to the extent Landlord is the owner thereof) (excluding any
property which Tenant is obligated to insure under Subparagraphs 22(a) and
(b) hereof) against damage with All-Risk insurance to the extent of one
hundred percent (100%) replacement value and public liability insurance
with the coverage hereinafter set forth. The policy of liability insurance,
shall provide for coverage in the amount of Three Million Dollars
($3,000,000) Combined Single Limit for injury to or death of one or more
persons in an occurrence, with such liability amount to be adjusted from
time to time in accordance with prevailing standards for Class A buildings
in the Santa Ana-Newport Beach-Irvine-Costa Mesa areas and shall name
Tenant as an additional insured. Landlord may, but shall not be obligated
to, obtain and carry any other form or forms of insurance as it or
Landlord's mortgagees may reasonably determine advisable. Notwithstanding
any contribution by Tenant to the cost of insurance premiums, as provided
herein; Tenant acknowledges it has no right to receive any proceeds payable
to Landlord from any insurance policies carried by Landlord, except as set
forth in Paragraph 48 hereof.
(d) Tenant will not keep, use, sell or offer for sale in or upon
the Premises any article which may be prohibited by any insurance policy
periodically in force covering the Building. If Tenant's occupancy or
business in, or on, the Premises, whether or not Landlord has consented to
the same, results in any increase in premiums for the insurance
periodically carried by Landlord with respect to the Building or the
Parking Facilities, Tenant shall pay any such increase in premiums as
additional rent within ten (10) days after being billed therefor by
Landlord. In determining whether increased premiums are a result of
Tenant's use of the Premises, a schedule issued by the organization
computing the insurance rate on the Building or the Tenant Improvements
showing the various components of such rate, shall be conclusive evidence
of the several items and charges which make up such rate.
-28-
<PAGE>
Tenant shall promptly comply with all reasonable requirements of the
insurance authority or any present or future insurer relating to the
Premises.
(e) If any of Landlord's insurance policies shall be cancelled or
cancellation shall be threatened or the coverage thereunder reduced or
threatened to be reduced in any way because of the use of the Premises or
any part thereof by Tenant or any assignee or subtenant of Tenant or by
anyone Tenant permits on the Premises and, if Tenant fails to remedy the
condition giving rise to such cancellation, threatened cancellation,
reduction of coverage, threatened reduction of coverage, increase in
premiums, or threatened increase in premiums, within forty-eight (48) hours
after notice thereof, Landlord may, at its option, declare a default, and
Tenant shall promptly pay the cost thereof to Landlord as additional rent.
Landlord shall not be liable for any damage or injury caused to any
property of Tenant or of others located on the Premises resulting from such
entry. If Landlord is unable, or elects not to remedy such condition, then
Landlord shall have all of the remedies provided for in this Lease in the
event of a default by Tenant. Notwithstanding the foregoing provisions of
this Subparagraph 22(e), if Tenant fails to remedy as aforesaid, Tenant
shall be in default of its obligation hereunder and Landlord shall have no
obligation to remedy such default.
(f) All policies of insurance required of Landlord or Tenant
hereunder shall include a clause or endorsement denying the insurer any
rights of subrogation against the other party to the extent rights have
been waived by the insured before the occurrence of injury or loss.
Landlord and Tenant waive any rights of recovery against the other for
injury or loss due to hazards covered by policies of insurance containing
such a waiver of subrogation clause or endorsement to the extent of the
injury or loss covered thereby.
23. DAMAGE OR DESTRUCTION.
---------------------
(a) In the event of the total destruction of the Building, i.e.,
damage to an extent of fifty percent (50%) or more of the insurable value
of the Building, whether or not the cause of such destruction is covered by
insurance, at Landlord's option, as soon as reasonably possible thereafter,
Landlord shall commence repair, reconstruction and restoration of the
Building and prosecute the same diligently to completion, in which event
this Lease shall remain in full force and effect; or within ninety (90)
days
-29-
<PAGE>
after such damage, elect not to so repair, reconstruct or restore the
Building, in which event this Lease shall terminate. In either event,
Landlord shall give Tenant written notice of its intention within said
ninety (90) day period. In the event Landlord elects not to restore the
Building, this Lease shall be deemed to have terminated as of the date of
such total destruction.
(b) In the event of a partial destruction of the Building, to an
extent not exceeding fifty percent (50%) of the full insurable value
thereof, and provided that such partial destruction is caused by an event
covered by insurance required to be carried by Landlord pursuant to Section
22(c), Landlord shall commence and proceed diligently with the work of
repair, reconstruction and restoration and this Lease shall continue in
full force and effect.
(c) In the event of a partial destruction of the Building, i.e., to an
extent not exceeding fifty percent (50%) of the full insurable value
thereof, and such destruction is not caused by an event covered by
insurance required to be carried by Landlord pursuant to Section 22(c), and
provided the actual cost of construction to restore the Building as a
result of such destruction would not exceed ten percent (10%) of the then
full replacement cost of the Building, Landlord shall, as soon as
reasonably possible, commence the repair, reconstruction and restoration of
the Building and proceed diligently with the work of repair, reconstruction
and restoration and this Lease shall continue in full force and effect. If
Landlord elects not to restore the Building, Landlord shall be entitled
within ninety (90) days after such damage, to elect to terminate this Lease
by giving Tenant written notice of its intention within said ninety (90)
day period. In the event Landlord elects not to restore the Building, this
Lease shall be deemed to have terminated as of the date of such
destruction.
(d) In the event Landlord provides for terms and conditions more
favorable than the above with respect to any lease entered into by the
Landlord with respect to the Building with any tenant occupying in excess
of 15,000 rentable square feet, Landlord hereby agrees that such terms and
conditions shall apply with full force and effect to this Lease.
(e) In the event of damage to the Premises which may be repaired,
reconstructed or restored within a period of eighteen (18) months from the
date of the happening of
-30-
<PAGE>
such casualty, and further provided that the Premises are damaged by a
peril covered by insurance required to be carried by Landlord pursuant to
Section 22(c), Landlord shall, as soon as reasonably possible thereafter,
commence the repair, reconstruction and restoration of the Premises, and
prosecute the same diligently to completion in which event this Lease shall
remain in full force and effect. Such period of reconstruction shall be
estimated by an architect or contractor selected by Landlord, subject to
Tenant's reasonable approval. Such eighteen (18) month period shall include
all time periods required for adjustment of losses with the applicable
insurance carrier, finalization of plans, and the issuance of all building
permits. In the event the period of repair, reconstruction and restoration
would require a period in excess of eighteen (18) months, Landlord or
Tenant, at its option, may terminate this Lease by providing Tenant with
written notice of its intention within ninety (90) days following the date
of such damage. In the event Landlord or Tenant elects not to restore the
Premises as aforesaid, this Lease shall be deemed to have terminated as of
the date of such total destruction.
(f) In the event of damage to the Premises which is not covered by
insurance required to be carried by Landlord pursuant to Section 22(c),
Landlord shall nevertheless commence the repair, reconstruction and
restoration of the Premises and prosecute the same diligently to completion
unless such damage exceeds twenty-five percent (25%) of the full insurable
value thereof, in which event Landlord, at its option, shall be entitled to
terminate this Lease by giving Tenant written notice of its intention
within ninety (90) days of such damage. Notwithstanding the foregoing,
Tenant may elect to cancel Landlord's notice of termination by notifying
Landlord within twenty (20) days of receipt of Landlord's notice, and by
concurrently providing Landlord with a financial arrangement reasonably
satisfactory to Landlord for the remaining costs in excess of twenty-five
percent (25%) necessary to restore the Premises as estimated by Landlord.
In such event, this Lease shall remain in full force and effect and
Landlord shall proceed diligently with the work of repair, reconstruction
and restoration.
(g) Upon any termination of this Lease under any of the provisions of
this Paragraph 23, the parties shall be released without further obligation
to the other from the date possession of the Premises is surrendered to
Landlord except for items which have theretofore accrued and are then
unpaid.
-31-
<PAGE>
(h) In the event of repair, reconstruction or restoration by Landlord
as herein provided, the rent payable under this Lease shall be abated
proportionately with the degree to which Tenant's use of the Premises is
impaired during the period of such repair, reconstruction or restoration;
provided that there shall be no abatement of rent if such damage is the
result of Tenant's intentional wrongdoing. Tenant shall not be entitled to
any compensation or damages from Landlord for loss in the use of the whole
or any part of the Premises and/or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction or restoration.
(i) Neither Landlord nor Tenant shall be released from any of their
obligations under this Lease except to the extent and upon the conditions
expressly stated in this Paragraph 23. Notwithstanding anything to the
contrary contained in this Paragraph 23, if Landlord is delayed or
prevented from repairing or restoring the damaged Premises within eighteen
(18) months after the occurrence of such damage or destruction by reason of
acts of God, war, governmental restrictions, inability to procure the
necessary labor or materials, or other cause beyond the control of
Landlord, Landlord or Tenant, at its option, may terminate this Lease,
whereupon Landlord shall be relieved of its obligation to make such repairs
or restoration and Tenant shall be released from its obligations under this
Lease as of the end of said one year period.
(j) If Landlord is obligated to or elects to repair or restore as
herein provided, Landlord shall be obligated to make repair or restoration
only of those portions of the Building and the Premises which were
originally provided at Landlord's expense, and the repair and restoration
of items within the Premises not provided at Landlord's expense shall be
the obligation of Tenant.
(k) Notwithstanding anything to the contrary contained in this
Paragraph 23, either party may elect to terminate this Lease in the event
the damage resulting from any casualty covered under this Paragraph 23
occurs during the last twelve (12) months of the Term of this Lease or any
extension hereof.
(l) The provisions of California Civil Code Section 1932, Subsection
2, and Section 1933, Subsection 4, and any other similarly enacted statute
or court decision relating to the abatement or termination of a lease upon
destruction of the leased premises, are hereby waived by Tenant; and the
provisions of this Paragraph shall govern in case of such destruction.
-32-
<PAGE>
24. EMINENT DOMAIN.
--------------
(a) In case all of the Premises, or such part thereof as shall
substantially interfere with Tenant's use and occupancy thereof (as reasonably
determined by Tenant), shall be taken for any public or quasi-public purpose by
any lawful power or authority by exercise of the right of appropriation,
condemnation or eminent domain, or sold to prevent such taking, either party
shall have the right to terminate this Lease effective as of the date possession
is required to be surrendered to said authority. Tenant shall be entitled to
recover one-half (1/2) of any award made by the taking authority which is
specifically attributable to the value of Tenant's leasehold interest; provided,
however, except as herein expressly set forth, Tenant shall not assert any claim
against Landlord or the taking authority for any compensation because of such
taking, and Landlord shall be entitled to receive the entire amount of any award
without deduction for any estate or interest of Tenant. In the event the amount
of property or the type of estate taken shall not substantially interfere with
the conduct of Tenant's business, Landlord shall be entitled to the entire
amount of the award without deduction for any estate or interest of Tenant,
Landlord shall restore the Premises to substantially their same condition prior
to such partial taking, and a proportionate allowance shall be made to Tenant
for the rent corresponding to the time during which, and to the part of the
Premises of which, Tenant shall be so deprived on account of such taking and
restoration. Nothing contained in this Subparagraph shall be deemed to give
Landlord any interest in any award made to Tenant for the taking of personal
property and fixtures belonging to Tenant, or any allowance made for the
relocation of Tenant's business and/or goodwill.
(b) In the event of taking of the Premises or any part thereof for
temporary use, (i) this Lease shall be and remain unaffected thereby and rent
shall not abate, and (ii) Tenant shall be entitled to receive for itself such
portion or portions of any award made for such use with respect to the period of
the taking which is within the Term, provided that if such taking shall remain
in force at the expiration or earlier termination of this Lease, Tenant shall
then pay to Landlord a sum equal to the reasonable cost of performing Tenant's
obligations under Paragraph 15 with respect to surrender of the Premises and
upon such payment shall be excused from such obligations. For purpose of this
Subparagraph 24(b), a temporary taking shall be defined as a taking for a period
of 270 days or less.
-33-
<PAGE>
25. DEFAULTS AND REMEDIES.
---------------------
(a) The occurrence of any one or more of the following events shall
constitute a default hereunder by Tenant:
(i) The failure by Tenant to make any payment of rent or
additional rent or any other payment required to be made by Tenant
hereunder, as and when due, where such failure shall continue for a
period of ten (10) days after written notice thereof from Landlord to
Tenant; provided, however, that any such notice shall be in lieu of, and
not in addition to, any notice required under California Code of Civil
Procedure Section 1161 regarding unlawful detainer actions.
(ii) The failure by Tenant to observe or perform any of the
express or implied covenants or provisions of this Lease to be observed
or performed by Tenant, other than as specified in Subparagraph 25(a)(i)
or (ii) above, where such failure shall continue for a period of thirty
(30) days after written notice thereof from Landlord to Tenant. Any such
notice shall be in lieu of, and not in addition to, any notice required
under California Code of Civil Procedure Section 1161 regarding unlawful
detainer actions or any similar successor statute. If the nature of
Tenant's default is such that more than thirty (30) days are reasonably
required for its cure, then Tenant shall not be deemed to be in default
if Tenant shall commence such cure within said thirty (30) day period and
thereafter diligently prosecute such cure to completion.
(iii) (1) The making by Tenant of any general assignment for the
benefit of creditors; (2) the filing by or against Tenant of a petition
to have Tenant adjudged a bankrupt or a petition for reorganization or
arrangement under any law relating to bankruptcy (unless, in the case of
a petition filed against Tenant, the same is dismissed within one hundred
twenty (120) days); (3) the appointment of a trustee or receiver to take
possession of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where possession is not
restored to Tenant within one hundred twenty (120) days; or (4) the
attachment, execution or other judicial seizure of substantially all of
Tenant's assets located at the Premises or of Tenant's interest in this
Lease where such seizure is not discharged within one hundred twenty
(120) days.
-34-
<PAGE>
(b) In the event of any such default by Tenant, in addition to any
other remedies available to Landlord at law or in equity, including, without
limitation, the remedies of Civil Code Section 1951.4 and any successor statute,
Landlord shall have the immediate option to terminate (upon at least ten (10)
days prior written notice thereof to Tenant) this Lease and all rights of Tenant
hereunder. In the event that Landlord shall elect to so terminate this Lease
then Landlord may recover from Tenant:
(i) The worth at the time of award of any unpaid rent which
had been earned at the time of such termination; plus
(ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time
of award exceeds the amount of such rent loss that Tenant proves could
have been reasonably avoided; plus
(iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the Term after the time of award exceeds
the amount of such rent loss that Tenant proves could be reasonably
avoided; plus
(iv) any other amount necessary to compensate Landlord for all
the detriment proximately caused by Tenant's failure to perform Tenant's
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom.
As used in Subparagraphs 25(b)(i) and (ii) above, the "worth at the
time of award" is computed by allowing interest at the maximum rate permitted by
law. As used in Subparagraph 25(b)(iii) above, the "worth at the time of award"
is computed by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).
(c) In the event of any such default by Tenant, Landlord shall also
have the right, with or without terminating this Lease, to re-enter the Premises
and remove all persons and property from the Premises; such property may be
removed and stored in a public warehouse or elsewhere at the cost of and for the
account of Tenant. No re-entry or taking possession of the Premises by Landlord
pursuant to this Paragraph 25(c) shall be construed as an election to terminate
this Lease unless a written notice of such intention is given to Tenant or
unless the termination thereof is decreed by a court of competent jurisdiction.
-35-
<PAGE>
(d) In the event of the vacation or abandonment of the Premises by
Tenant or in the event that Landlord shall elect to re-enter as provided above
or shall take possession of the Premises pursuant to legal proceeding or
pursuant to any notice provided by law, then if Landlord does not elect to
terminate this Lease as provided above, Landlord may from time to time, without
terminating this Lease, either recover all rent as it becomes due or relet the
Premises or any part thereof for the Term of this Lease on terms and conditions
as Landlord in its sole discretion may deem advisable with the right to make
alterations and repairs to the Premises.
In the event that Landlord shall elect to so relet, then rents
received by Landlord from such reletting shall be applied: first, to the payment
of any indebtedness other than rent due hereunder from Tenant to Landlord;
second, to the payment of any cost of such reletting; third, to the payment of
the cost of any alterations and repairs to the Premises; fourth, to the payment
of rent due and unpaid hereunder and the residue, if any, shall be held by
Landlord and applied to payment of future rent as the same may become due and
payable hereunder. Should that portion of such rents received from such
reletting during any month, which is applied to the payment of rent hereunder,
be less than the rent payable during that month by Tenant hereunder, then Tenant
shall pay such deficiency to Landlord immediately upon demand therefor by
Landlord. Such deficiency shall be calculated and paid monthly. Tenant shall
also pay to Landlord, as soon as ascertained, any costs and expenses incurred by
Landlord in such reletting or in making such alterations and repairs not covered
by the rents received from such reletting.
(e) All rights, options and remedies of Landlord contained in this
Lease shall be construed and held to be cumulative, and no one of them shall be
exclusive of the other, and Landlord shall have the right to pursue any one or
all of such remedies or any other remedy or relief which may be provided by law,
whether or not stated in this Lease. No waiver of any default of Tenant
hereunder shall be implied from any acceptance by Landlord of any rent or other
payments due hereunder or any omission by Landlord to take any action on account
of such default if such default persists or is repeated, and no express waiver
shall affect defaults other than as specified in said waiver. The consent or
approval of Landlord to or of any act by Tenant requiring Landlord's consent or
approval shall not be deemed to waive or render unnecessary Landlord's consent
or approval to or of any subsequent similar acts by Tenant.
-36-
<PAGE>
26. ASSIGNMENT AND SUBLETTING.
-------------------------
(a) Tenant shall not voluntarily or by operation of law, assign,
encumber or transfer its interest in this Lease or in the Premises or lease
all or any part of the Premises, or allow any other person or entity to occupy
or use all or any part of the Premises, without first obtaining Landlord's prior
written consent, which consent Landlord shall not unreasonably withhold. Any
assignment, encumbrance or sublease without Landlord's prior written consent
shall be voidable at Landlord's election and shall constitute a default.
Notwithstanding the foregoing, Tenant shall have the right to sublet up to fifty
percent (50%) of the Premises without the prior consent of Landlord, so long as
Tenant shall then occupy and shall continue to occupy not less than one full
floor within the Premises, and so long as the identity and proposed use of any
subtenant is reasonably compatible with the first-class nature of the Building.
In the event of any such subletting, the notification provisions under
Subparagraph (c) shall apply with full force and effect.
(b) Notwithstanding anything set forth in this Paragraph 26 to the
contrary, Tenant shall be entitled to assign or sublet this Lease without
Landlord's consent to any subsidiary, affiliate or controlling corporation or to
any company which may result from a merger or consolidation by or with Tenant,
or from any private sale or public offering of shares of stock in Tenant, or any
such subsidiary, affiliate or controlling corporation, or to any company or to
any other entity in which Tenant is selling all or substantially all of its
operating assets, or to a successor entity (such as, by way of example, a
master limited partnership) resulting from a reorganization of Tenant's
corporate structure, provided that Tenant either (i) following any such merger,
consolidation, reorganization, private stock sale, public offering or sale,
retains a net worth of not less than Twenty Million Dollars ($20,000,000), or
(ii) has a net worth of Ten Million Dollars ($10,000,000) and, for the duration
of the Lease (or until such earlier time as Tenant's net worth is restored to at
least Twenty Million Dollars [$20,000,000]), provides Landlord with an
unconditional and irrevocable letter of credit, renewable annually, issued by a
lender reasonably satisfactory to Landlord, and upon terms and conditions
satisfactory to Landlord in the amount of one-half (1/2) one year's Annual Basic
Rent. For purposes of this paragraph, Tenant's "net worth" shall be reflected in
an audited financial statement issued by a certified public accounting firm
reasonably satisfactory to Landlord and the net worth established by such
financial statement, shall show no more than ten percent (10%) of the assets
attributable to
-37-
<PAGE>
goodwill. Notwithstanding the terms of Subparagraph (c) below, Tenant shall
only be required to notify Landlord of any assignment or subletting under this
Subparagraph within thirty (30) days after such event, and will provide
Landlord with all required financial information and, if applicable, the
above-described letter of credit.
(c) In the event Tenant desires to assign, hypothecate or otherwise
transfer this Lease or sublet the Premises, then at least thirty days prior to
the date when Tenant desires the assignment or sublease to be effective (the
"Assignment Date"), Tenant shall give Landlord a notice (the "Assignment
Notice"), which shall set forth the name, address and business of the proposed
assignee or sublessee, information (including references) concerning the
character, ownership, and financial condition of the proposed assignee or
sublessee, the Assignment Date, any ownership or commercial relationship between
Tenant and the proposed assignee or sublessee, and the consideration and all
other material terms and conditions of the proposed assignment or sublease, all
in such detail as Landlord shall reasonably require. If Landlord reasonably
requests additional detail, the Assignment Notice shall not be deemed to have
been received until Landlord receives such additional detail, and
Landlord may withhold consent to any assignment or sublease until such
information is provided to it.
(d) within thirty (30) days of Landlord's receipt of such Assignment
Notice, and additional information requested by Landlord concerning the proposed
assignee's or sublessee's financial responsibility, Landlord shall elect, in
writing, one of the following: (a) consent to such proposed assignment,
encumbrance or sublease, or (b) refuse such consent, with specific reasons in
writing for such refusal. Landlord's approval will not be unreasonably withheld.
In addition, a condition to Landlord's consent to any assignment, transfer or
hypothecation of this Lease shall be the delivery to Landlord of a true copy of
the fully executed instrument of assignment, transfer or hypothecation, and the
delivery to Landlord of an agreement executed by the assignee in form and
substance satisfactory to Landlord and expressly enforceable by Landlord,
whereby the assignee assumes and agrees to be bound by all of the terms and
provisions of this Lease and to perform all of the obligations of Tenant
hereunder. As a condition to Landlord's consent to any sublease, such sublease
shall provide that it is subject and subordinate to this Lease and to all
mortgages; that Landlord may enforce the provisions of the sublease, including
collection of rent; that in the event
-38-
<PAGE>
of termination of this Lease for any reason, including without limitation a
voluntary surrender by Tenant, or in the event of any reentry or repossession of
the Premises by Landlord, Landlord may, at its option, either (i) terminate the
sublease or (ii) take over all of the right, title and interest of Tenant, as
sublessor, under such sublease, in which case such sublessee shall attorn to
Landlord, but that nevertheless Landlord shall not (1) be liable for any
previous act or omission of Tenant under such sublease, (2) be subject to any
defense or offset previously accrued in favor of the sublessee against Tenant,
or (3) be bound by any previous prepayment by sublessee of more than one month's
rent.
(e) Whether or not Landlord shall consent to an assignment or sublease
under the provisions of this Paragraph 26, Tenant shall pay Landlord's
processing costs and attorneys' fees (not to exceed Five Hundred Dollars
[$500.00]) incurred in determining whether or not to so consent. If for any
proposed assignment or sublease Tenant receives rent or other consideration,
either initially or over the Term of the sublease (although in no event shall
Landlord have any right to receive any portion of any amount paid to Tenant in
connection with a sale of its business, even if such amount is based in part on
the value of this Lease), in excess of the rent called for hereunder or, in case
of the sublease of a portion of the Premises, in excess of such rent allocable
to such portion on a rentable square footage basis, after appropriate
adjustments to assure that all other payments called for hereunder are taken
into account, and after first deducting all costs incurred by Tenant in
connection with the assignment or subletting, including, without limitation,
broker's commissions, attorneys' fees, lease assumption payments and tenant
improvements, Tenant shall pay to Landlord as additional rent hereunder one
quarter (1/4) of the excess of each such payment of rent or other consideration
received by Tenant promptly after its receipt. Landlord's waiver or consent to
any assignment or subletting shall not relieve Tenant or any assignee or
sublessee from any obligation under this Lease whether or not accrued. Occupancy
of all or part of the Premises by parent or subsidiary companies of Tenant shall
not be deemed an assignment or subletting.
27. SUBORDINATION. Without the necessity of any additional document
-------------
being executed by Tenant for the purpose of effecting a subordination, and at
the election of Landlord or any mortgagee with a lien on the Building or the
Site or any ground lessor with respect to the Building or the Site, but
provided, however, that any such mortgagee, or ground lessor recognizes
-39-
<PAGE>
this Lease and Tenant's right to occupy the Premises pursuant thereto and
subject to the terms thereof, this Lease shall be subject and subordinate at all
times to:
(a) all ground leases or underlying leases which may now exist or
hereafter be executed affecting the Building or the Site or both; and
(b) the lien of any mortgage or deed of trust which may now exist or
hereafter be executed in any amount for which the Building, the Site, ground
leases or underlying leases, or Landlord's interest or estate in any of said
items is specified as security.
Notwithstanding the foregoing, Landlord shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or any such
liens to this Lease. In the event that any ground lease or underlying lease
terminates for any reason or any mortgage or deed of trust is foreclosed or a
conveyance in lieu of foreclosure is made for any reason, Tenant shall,
notwithstanding any subordination, attorn to and become the Tenant of the
successor-in-interest to Landlord, and such mortgagee or ground lessor shall
recognize this Lease and Tenant's right to occupy the Premises pursuant thereto
and subject to terms thereof. Tenant covenants and agrees to execute and deliver
within fifteen (15) business days after receipt thereof, any reasonable
additional documents evidencing the priority or subordination of this Lease with
respect to any such ground leases or underlying leases or the lien of any such
mortgage or deed of trust and provided that such documents contain appropriate
provisions recognizing this Lease as required hereby. Should Tenant fail to sign
and return any such documents within fifteen (15) business days of request,
Tenant shall be in default. Landlord hereby agrees to obtain from any lender
with a lien encumbering the Building a non-disturbance agreement in a form
reasonably satisfactory to Tenant, which shall provide that so long as Tenant is
in compliance with the terms of this Lease, Tenant's use, occupancy and
enjoyment of the Premises shall not be disturbed by such lender.
28. ESTOPPEL CERTIFICATE.
--------------------
(a) Within fifteen (15) business days following any written request
which Landlord may make from time to time, Tenant shall execute and deliver to
Landlord a statement, in a form substantially similar to the form of Exhibit "E"
-----------
attached hereto, certifying: (i) the date of commencement of this Lease; (ii)
the fact that this Lease is unmodified and in full force and effect (or, if
there have been modifications hereto, that this Lease is in full force
-40-
<PAGE>
and effect, and stating the date and nature of such modifications); (iii) the
date to which the rent and other sums payable under this Lease have been paid;
(iv) that to Tenant's best knowledge there are no current defaults under this
Lease by either Landlord or Tenant except as specified in Tenant's statement;
and (v) such other matters reasonably requested by Landlord. Within fifteen (15)
business days following Tenant's written request therefor, Landlord shall
deliver to Tenant a like statement. Landlord and Tenant intend that any
statement delivered pursuant to this Paragraph 28 may be relied upon by any
mortgagee, beneficiary, purchaser or prospective purchaser of the Building or
any interest therein, or of Tenant's business or this Lease or any interest
therein.
(b) Either party's failure to deliver such statement within such time
shall be conclusive upon such party (i) that this Lease is in full force and
effect, without modification except as may be represented in the statement, (ii)
that there are no uncured defaults in the requesting party's performance, and
(iii) that not more than one (1) month's rent has been paid in advance. Either
party's failure to deliver said statement to the requesting party within ten
(10) working days of receipt shall constitute a default under this Lease.
29. ARBITRATION.
-----------
(a) Application of Paragraph. Whenever there exists a dispute between
------------------------
Landlord and Tenant which by the express terms of this Lease is to be decided by
arbitration, the provisions of this Paragraph shall apply.
(b) Initiating Arbitration; Selection of Arbitrators. Within thirty
------------------------------------------------
(30) days after either party requests arbitration of any dispute, matter or
question, or within thirty (30) days after one party agrees to the request of
the other party to arbitrate any other matter, each party shall appoint one
arbitrator, and within fifteen (15) days thereafter the two appointed
arbitrators shall select a third arbitrator. If either party shall fail to make
such appointment within said 30-day period, the other party shall appoint the
second arbitrator. If the two appointed arbitrators shall fail to select a third
arbitrator within said 15-day period, the parties shall mutually select the
third arbitrator. If the parties are unable to agree within fifteen (15) days,
then either party may, upon at least five (5) days' prior written notice to the
other party, request either the presiding judge of the Orange County Superior
Court, acting in his private and nonjudicial capacity, or the
-41-
<PAGE>
American Arbitration Association, to choose an arbitrator to fill the vacancy.
Such judge or the AAA, as applicable, may thereupon appoint an arbitrator to
complete the panel of three arbitrators. All arbitrators shall be impartial and
unrelated, directly or indirectly, so far as employment of services is
concerned, to Landlord or Tenant or to any person directly or indirectly related
to Landlord or Tenant. In any arbitration proceeding involving any specialized
area of knowledge or competence, the arbitrators shall have substantial
knowledge and experience in such specialized area.
(c) Procedures; Limitations on Authority. The three arbitrators shall
------------------------------------
investigate the facts and shall hold hearings at which the parties may present
evidence and arguments, be represented by counsel and conduct cross-examination.
The three arbitrators shall render a written decision upon the matter presented
to them by majority vote within ninety (90) days after the date upon which the
last arbitrator is appointed. If the three arbitrators shall fail to render a
decision within said 90-day period, the parties shall extend the time for
decision as necessary. The decision rendered in such arbitration shall be final
and binding on the parties and judgment thereon may be entered by any court
having jurisdiction thereof. Neither party shall be considered in default
hereunder during the pendency of arbitration proceedings relating to a disputed
default. The arbitrators shall determine in which proportion the parties shall
bear the cost of the arbitration, except that each party shall bear the fees and
expenses of the arbitrator appointed by or on behalf of it and one-half (1/2) of
the fees and expenses of the third arbitrator, if any, and each party shall bear
the fees and expenses of its own counsel, witnesses and other consultants. In
determining any question, matter or dispute before them, the arbitrators shall
apply the provisions of this Lease without varying therefrom in any respect.
They shall not have the power to add to, modify or change any of the provisions
of this Lease. Pending a determination of the arbitrators, neither party shall
be entitled to suspend or withhold performance, and the parties shall conduct
business under this Lease as if such dispute had not arisen.
30. RULES AND REGULATIONS. Tenant shall faithfully observe and comply
---------------------
with the "Rules and Regulations," a copy of which is attached hereto and marked
Exhibit "F," and all reasonable and nondiscriminatory modifications thereof and
- -----------
additions thereto from time to time put into effect by Landlord. Landlord shall
not be responsible to Tenant for the violation or non-performance by any other
tenant or occupant of the Building of any of said Rules and Regulations.
-42-
<PAGE>
31. CONFLICT OF LAWS. This Lease shall be governed by and construed
----------------
pursuant to the laws of the State of California.
32. SUCCESSORS AND ASSIGNS. Except as otherwise provided in this
----------------------
Lease, all of the covenants, conditions and provisions of this Lease shall be
binding upon and shall inure to the benefit of the parties hereto and their
respective heirs, personal representatives, successors and assigns.
33. SURRENDER OF PREMISES. The voluntary or other surrender of this
---------------------
Lease by Tenant, or a mutual cancellation thereof, shall not work a merger, and
shall, at the option of Landlord, operate as an assignment to it of any or all
subleases or subtenancies. Upon the expiration or termination of this Lease,
Tenant shall peaceably surrender the Premises and all alterations and additions
thereto, broom clean the Premises, leave the Premises in good order, repair and
condition, free from any and all Hazardous Materials deposited, or caused to be
deposited by Tenant, reasonable wear and tear excepted, and comply with the
provisions of Paragraph 15. The delivery of keys to any employee of Landlord or
to Landlord's agent or any employee thereof shall not be sufficient to
constitute a termination of this Lease or a surrender of the Premises.
34. PROFESSIONAL FEES.
-----------------
(a) In any action for possession of the Premises, for the recovery of
any sum due under this Lease, or because of the breach of any provisions of this
Lease, or for any other relief hereunder, or in the event of any other
litigation between the parties with respect to this Lease, then all costs and
expenses, including without limitation, its actual professional fees such as
appraisers' accountants' and attorneys' fees, incurred by the prevailing party
therein shall be paid by the other party, which obligation on the part of the
other party shall be deemed to have accrued on the date of the commencement of
such action and shall be enforceable whether or not the action is prosecuted to
judgment.
(b) If Landlord is named as a defendant in any suit brought against
Tenant in connection with or arising out of Tenant's occupancy hereunder, Tenant
shall pay to Landlord its costs and expenses incurred in such suit, including
without limitation, its actual professional fees such as appraisers',
accountants' and attorneys' fees.
35. PERFORMANCE BY TENANT. All covenants and agreements to be
---------------------
performed by Tenant under any of the terms of this Lease shall be performed by
Tenant at Tenant's sole cost and
-43-
<PAGE>
expense and without any abatement of rent. If Tenant shall fail to pay any sum
of money owed to any party other than Landlord, for which it is liable
hereunder, or if Tenant shall fail to perform any other act on its part to be
performed hereunder, and such failure shall continue for ten (10) days after
notice thereof by Landlord, Landlord may, without waiving or releasing Tenant
from obligations of Tenant, but shall not be obligated to, make any such payment
or perform any such other act to be made or performed by Tenant. All sums so
paid by Landlord and all necessary incidental costs together with interest
thereon at the maximum rate permissible by law, from the date of such payment by
Landlord, shall be payable to Landlord on demand. Tenant covenants to pay any
such sums, and Landlord shall have (in addition to any other right or remedy of
Landlord) all rights and remedies in the event of the non-payment thereof by
Tenant as are set forth in Paragraph 25.
36. MORTGAGEE PROTECTION. In the event of any default on the part of
--------------------
Landlord, Tenant will give notice by registered or certified mail to any
beneficiary of a deed of trust or mortgage covering the Premises whose address
shall have been furnished to Tenant and a written request made for such notice,
and shall offer such beneficiary or mortgagee a reasonable opportunity to cure
the default, including time to obtain possession of the Premises by power of
sale or a judicial foreclosure, if such should prove necessary to effect a cure.
37. DEFINITIQN QF LANDLORD. The term "Landlord," as used in this
----------------------
Lease, so far as covenants or obligations on the part of Landlord are concerned,
shall be limited to mean and include only the owner or owners, at the time in
question, of the fee title of the Premises or the lessees under any ground
lease, if any. In the event of any transfer, assignment or other conveyance or
transfers of any such title, and provided such transferee assumes Landlord's
obligations hereunder in writing, Landlord herein named (and in case of any
subsequent transfers or conveyances, the then grantor) shall be automatically
freed and relieved from and after the date of such transfer, assignment or
conveyance of all liability as respects the performance of any covenants or
obligations on the part of Landlord contained in this Lease thereafter to be
performed. Without further agreement, the transferee of such title shall be
deemed to have assumed and agreed to observe and perform any and all obligations
of Landlord hereunder, during its ownership of the Premises. Landlord shall
immediately give Tenant written notice of any such transfer. Landlord may
transfer its interest in the Premises without the consent of Tenant and such
transfer or subsequent transfer shall not be deemed a violation on Landlord's
part of any of the terms and conditions of this Lease.
-44-
<PAGE>
38. WAIVER. The waiver by Landlord of any breach of any term, covenant
------
or condition herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other term, covenant or condition herein
contained, nor shall any custom or practice to which the parties may have
adhered in the administration of the terms hereof be deemed a waiver of or in
any way affect the right of Landlord to insist upon the performance by Tenant in
strict accordance with said terms. The subsequent acceptance of rent hereunder
by Landlord shall not be deemed to be a waiver of any preceding breach by Tenant
of any term, covenant or condition of this Lease, other than the failure of
Tenant to pay the particular rent so accepted, regardless of Landlord's
knowledge of such preceding breach at the time of acceptance of such rent. No
acceptance by Landlord of a lesser sum than the basic rent and additional rent
or other sum then due shall be deemed to be other than on account of the
earliest installment of such rent or other amount due, nor shall any endorsement
or statement on any check or any letter accompanying any check be deemed an
accord and satisfaction, and Landlord may accept such check or payment without
prejudice to Landlord's right to recover the balance of such installment or
other amount or pursue any other remedy provided in this Lease.
39. IDENTIFICATION OF TENANT. If more than one person executes this
------------------------
Lease as Tenant, (a) each of them is jointly and severally liable for the
keeping, observing and performing of all of the terms, covenants, conditions,
provisions and agreements of this Lease to be kept, observed and performed by
Tenant, and (b) the term "Tenant" as used in this Lease shall mean and include
each of them jointly and severally. The act of or notice from, or notice or
refund to, or the signature of any one or more of them, with respect to the
tenancy of this Lease, including, but not limited to, any renewal, extension,
expiration, termination or modification of this Lease, shall be binding upon
each and all of the persons executing this Lease as Tenant with the same force
and effect as if each and all of them had so acted or so given or received such
notice or refund or so signed.
40. PARKING. Unless Tenant is in default hereunder, Tenant shall be
-------
entitled to the number of vehicle parking spaces designated in Subparagraph
l(k). Initially, twenty-five (25) of Tenant's vehicle parking spaces shall be
reserved for Tenant's executives which shall be located in reasonably close
proximity to the elevator located in the parking facilities. If Tenant shall
exercise any of its rights granted herein to lease additional space in the
Building, it shall be entitled to one additional unreserved parking space for
each 333 gross square feet and the charge therefor shall be commensurate with
the rate Tenant is being charged for Tenant's other parking spaces pursuant to
this Paragraph. Landlord reserves the right to adopt
-45-
<PAGE>
a tandem parking system for the Building. Should Tenant request additional
vehicle parking spaces from Landlord (over and above the number of parking
spaces to which Tenant is entitled, as set forth above), Landlord shall have the
right, in its reasonable discretion depending on availability, to elect whether
or not to provide Tenant with the requested additional vehicle parking spaces.
Tenant's use of its vehicle parking spaces to which it is entitled, as set forth
above, shall be free of charge to Tenant during years one (1) through five (5)
of the Lease Term. Tenant's use of its vehicle parking spaces to which it is
entitled, as set forth above, shall be charged to Tenant at the rate of $65.00
per vehicle parking space per month during years six (6) through ten (10) of the
Lease Term. For the remainder of the Lease Term and in the event Tenant
exercises its option(s) to extend the Term of this Lease, Tenant shall pay
Landlord for such vehicle parking spaces at the rate of ninety-five (95%) of the
prevailing monthly rate set by Landlord from time to time based upon charges for
parking in similar first class office buildings in the Cities of Santa Ana,
Irvine, Newport Beach and Costa Mesa, California ("Rate"). Except for additional
parking spaces allotted to Tenant as a result of Tenant leasing additional space
as provided herein, Tenant's use of parking spaces in excess of the number
designated in Subparagraph l(k) or reserved spaces in excess of twenty-five
(25), which parking spaces have been requested by Tenant and provided by
Landlord in accordance with this Paragraph 40, shall be charged to Tenant at the
Rate set by Landlord. Landlord may assign any unreserved and unassigned vehicle
parking spaces and/or make all or a portion of such spaces reserved, if it
determines in its sole and absolute discretion that it is necessary for orderly
and efficient parking and/or advantageous to the proper planning for the
Building. Except as specifically provided above, Tenant shall not use more
parking spaces than said number. In the event Landlord has not assigned specific
spaces to Tenant, Tenant shall not use any spaces which have been so
specifically assigned by Landlord to other tenants or for such other uses as
visitor parking or which have been designated by governmental entities with
competent jurisdiction as being restricted to certain uses.
(a) Tenant shall not permit or allow any vehicles that belong to or
are controlled by Tenant or Tenant's employees, suppliers, shippers, customers
or invitees to be loaded, unloaded or parked in areas other than those
designated by Landlord for such activities.
(b) If Tenant permits or allows any of the prohibited activities
described in this Paragraph 40, then Landlord shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove or tow away the vehicle involved.
-46-
<PAGE>
(c) Landlord reserves the right at any time to (i) substitute an
equivalent number of parking spaces in a parking structure or subterranean
parking facility or in a surface parking area within a reasonable distance of
the Premises, and (ii) charge visitors and invitees of Tenant for parking in the
parking areas appurtenant to the Building.
(d) The use by Tenant, its employees and invitees, of the parking
facilities of the Building shall be on the terms and conditions set forth in
Exhibit "G" attached hereto and by this reference incorporated herein, and shall
- -----------
be subject to such other agreement between Landlord and Tenant as may
hereinafter be established.
41. FORCE MAJEURE. Landlord shall have no liability whatsoever to
-------------
Tenant on account of (a) the inability of Landlord to fulfill, or delay in
fulfilling, any of Landlord's obligations under this Lease by reason of strike,
other labor trouble, governmental preemption or priorities or other controls in
connection with a national or other public emergency, or shortages of fuel,
supplies or labor resulting therefrom, or any other cause, whether similar or
dissimilar to the above, beyond Landlord's reasonable control; or (b) any
failure or defect in the supply, quantity or character of electricity or water
furnished to the Premises, by reason of any requirement, act or omission of the
public utility or others furnishing the Building with electricity or water, or
for any other reason, whether similar or dissimilar to the above, beyond
Landlord's reasonable control. If this Lease specifies a time period for
performance of an obligation of Landlord, that time period shall be extended by
the period of any delay in Landlord's performance caused by any of the events of
force majeure described above.
42. TERMS AND HEADINGS. The words "Landlord" and "Tenant" as used herein
------------------
shall include the plural as well as the singular. Words used in any gender
include other genders. The paragraph headings of this Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.
43. EXAMINATION OF LEASE. Submission of this instrument for examination
--------------------
or signature by Tenant does not constitute a reservation of or option for lease,
and it is not effective as a lease or otherwise until execution by and delivery
to both Landlord and Tenant.
44. TIME. Time is of the essence with respect to the performance of
----
every provision of this Lease in which time of performance is a factor.
-47-
<PAGE>
45. PRIOR AGREEMENT; AMENDMENTS. This Lease contains all of the
---------------------------
agreements of the parties hereto with respect to any matter covered or mentioned
in this Lease, and no prior agreement or understanding or letter or proposal
pertaining to any such matter shall be effective for any purpose. No provisions
of this Lease may be amended or added to except by an agreement in writing
signed by the parties hereto or their respective successors-in-interest.
46. SEPARABILITY. Any provision of this Lease which shall prove to be
------------
invalid, void or illegal in no way affects, impairs or invalidates any other
provision hereof, and such other provisions shall remain in full force and
effect.
47. RECORDING. Neither Landlord nor Tenant shall record this Lease
---------
nor a short form memorandum thereof without the consent of the other.
48. LIMITATION ON LIABILITY. In consideration of the benefits
-----------------------
accruing hereunder, and subject to the provisions herein set forth, Tenant and
all successors and assigns covenant and agree that, in the event of any actual
or alleged failure, breach or default hereunder by Landlord:
(a) The sole and exclusive remedy shall be against the Landlord's
interest in any applicable insurance proceeds and in the Building, provided that
Landlord's equity in the Building is not less than Ten Million Dollars
($10,000,000), and provided that in the event such equity is less than Ten
Million Dollars ($10,000,000), Tenant's sole and exclusive remedy shall be
against Owner's equity in the Building first, then against any assets of
Landlord, up to a maximum of Ten Million Dollars ($10,000,000).
(b) No partner of Landlord shall be sued or named as a party in any
suit or action (except as may be necessary to secure jurisdiction of the
partnership);
(c) No service of process shall be made against any partner of
Landlord (except as may be necessary to secure jurisdiction of the partnership);
(d) No partner of Landlord shall be required to answer or otherwise
plead to any service of process;
(e) No judgment will be taken against any partner of Landlord;
(f) Any judgment taken against any partner of Landlord may be vacated
and set aside at any time nunc pro tunc;
-48-
<PAGE>
(g) No writ of execution will ever be levied against the assets of
any partner of Landlord;
(h) The obligations under this Lease do not constitute personal
obligations of the individual partners, directors, officers or shareholders of
Landlord, and Tenant shall not seek recourse against the individual partners,
directors, officers or shareholders of Landlord or any of their personal assets
for satisfaction of any liability in respect to this Lease;
(i) These covenants and agreements are enforceable both by Landlord
and also by any partner of Landlord.
49. TRAFFIC IMPACT. Tenant acknowledges that traffic control and flow
--------------
is a major concern of the County of Orange and the City of Santa Ana, of
Landlord and of each tenant in the Building and surrounding buildings.
Therefore, Tenant agrees that it will cooperate with Landlord in reasonable
efforts which may be undertaken by Landlord independently of or in cooperation
with the County of Orange and the City of Santa Ana or other property owners to
alleviate the traffic impact of the Building on the local area streets and
highways.
50. AIR TRAFFIC. Tenant acknowledges that the Building and the area in
-----------
which the Building is located is subject to sight, sound and overflight by
general aviation aircraft.
51. MODIFICATION FOR LENDER. If, in connection with obtaining
-----------------------
construction, interim or permanent financing for the Building the lender shall
request reasonable modifications in this Lease as a condition to such financing,
Tenant will not unreasonably withhold, delay or defer its consent thereto,
provided that such modifications do not increase the obligations of Tenant
hereunder or adversely affect the leasehold interest hereby created or Tenant's
rights hereunder.
52. FINANCIAL STATEMENTS. At any time during the Term of this Lease,
---------------------
Tenant shall upon ten (10) days prior written notice from Landlord, provide
Landlord with the most current available financial statement and financial
statements of Tenant (but not Tenant's parent company) of the two (2) years
prior to the current financial statement year. Such obligation is specifically
limited to financial statements already available and Tenant shall have no
obligation to prepare additional statements or change its customary format or
content.
53. QUIET ENJOYMENT. Landlord covenants and agrees with Tenant that
---------------
upon Tenant paying the rent required under this Lease and paying all other
charges and performing all of the
-49-
<PAGE>
covenants and provisions aforesaid on Tenant's part to be observed and performed
under this Lease, Tenant shall and may peaceably and quietly have, hold and
enjoy the Premises in accordance with this Lease.
54. TENANT AS CORPORATION OR PARTNERSHIP. If Tenant executes this
------------------------------------
Lease as a corporation or partnership, then Tenant and the persons executing
this Lease on behalf of Tenant represent and warrant that such entity is duly
qualified to do business in California and that the individuals executing this
Lease on Tenant's behalf are duly authorized to execute and deliver this Lease
on its behalf, in the case of a corporation, in accordance with a duly adopted
resolution of the board of directors of Tenant, a copy of which is to be
delivered to Landlord on execution hereof, and in accordance with the by-laws of
Tenant, and in the case of a partnership, in accordance with the partnership
agreement and the most current amendments thereto, if any, copies of which are
to be delivered to Landlord on execution hereof, and that this Lease is binding
upon Tenant in accordance with its terms.
55. SIGNAGE.
-------
(a) Tenant Signage on the Building. Tenant (including any permittee
-------------------------------
or assignee of Tenant's interest in the Lease) shall be entitled to exclusive
signage at the top of the Building on the side facing the street on the main
entrance to the Building, and the side facing the internal water garden. Such
signs shall be of Tenant's logo only and shall be in accordance with City Code
requirements. One such sign may be "backlit." The cost of all signage
identifying Tenant and the installation, maintenance and ultimate removal of
such signage shall be at Tenant's sole expense. The installation, maintenance
and ultimate removal of the signage by Tenant shall be accomplished in
compliance with all of the provisions of this Lease, including, without
limitation, the provisions of the Work Letter Agreement relating to work
performed by Tenant in or about the Building. Such signage shall strictly comply
with all restrictive covenants and obligations created by private contracts or
instruments which affect the use and operation of the Premises, the Building,
the Common Area or the Site, as well as with the laws, rules, orders,
regulations, criteria and specifications adopted by all governmental entities
with jurisdiction.
(b) Tenant's Right to Approve Signage. Tenant shall have the right
---------------------------------
to approve any other exterior Building signs situated on the Site and
identifying other tenants of the Building. Tenant shall not unreasonably
withhold its approval of such signage. Within fifteen (15) business days
-50-
<PAGE>
following the date Landlord delivers to Tenant such information as Tenant
reasonably deems material with respect to such other signs on the Site, Tenant
shall either approve such signs or disapprove such signs, in which event, Tenant
shall specify in writing the reasonable grounds on which its disapproval is
based. After revising such signs pursuant to Tenant's comments, Landlord shall
then have the right to resubmit to Tenant, and Tenant shall have the right to
approve, such signs in accordance with the procedure described above.
Notwithstanding the foregoing, Tenant shall have the right to approve, in its
sole, absolute and subjective discretion, any signs on the exterior of the
Building or elsewhere on the Site that relate to a business competitor of Tenant
(i.e., an entity which is in the business of providing design, engineering and
construction services for profit). The rights of Tenant under the provisions of
this Paragraph 55(b) are contingent upon Tenant not being in material default
under the Lease at the time Tenant's rights are asserted.
56. MOVING COSTS. Landlord hereby agrees to contribute up to Fifty
------------
Thousand Dollars ($50,000) towards the reasonable cost of Tenant's relocation to
the Premises from its current location at 18800 Von Karman Avenue, Irvine,
California. Landlord shall reimburse Tenant for such reasonable costs up to the
stated limit, upon Tenant's occupancy of the Premises and presentation to
Landlord by Tenant of paid invoices relating to the moving and relocation of
Tenant's personal property.
57. RIGHT OF FIRST NEGOTIATION TO PURCHASE. Provided this Lease is not
--------------------------------------
terminated due to a default by Tenant, and Tenant is not then in default, in the
event that from time to time during the Term of the Lease Landlord desires to
sell its interest in the Building, and not as a part of the sale of the Building
with any other property within the MacArthur Place Project, Landlord shall
notify Tenant of such desire and the terms and conditions thereof to Tenant
("Landlord's Sale Notice"). Tenant shall have a period of five (5) business days
from receipt of Landlord's Sale Notice within which to exercise its Right of
First Negotiation (as defined below) by delivery to Landlord of written notice
stating Tenant's intention to enter negotiations with Landlord concerning the
purchase and sale of the Building. Upon Tenant's timely election to exercise
this Right of First Negotiation, Landlord and Tenant shall promptly enter, and
pursue in good faith for a period of five (5) business days (the "Negotiation
Period"), negotiations in an effort to reach agreement concerning the purchase
by Tenant of the Building ("Right of First Negotiation"). If, however, either
(i) Tenant fails to timely elect to exercise this Right of First Negotiation, or
(ii) at the expiration of the Negotiation Period
-51-
<PAGE>
Landlord and Tenant have failed to reach agreement concerning the purchase by
Tenant of the Building, then Landlord shall be entitled to place the Building on
the open market for purchase by third parties on any terms satisfactory to
Landlord and this Right of First Negotiation shall terminate and be of no
further force and effect. Tenant shall defend, indemnify and hold Landlord
harmless from and against any losses, damages, costs, liabilities and/or
expenses (including attorneys' fees) arising out of Tenant's interference with
Landlord's negotiations regarding the sale of the Building following the
termination of this Right of First Termination.
IN WITNESS WHEREOF, the parties have executed this Lease as of the
date first above written.
LANDLORD: BCE DEVELOPMENT INC., a Delaware
corporation
By:
-------------------------------
Its:
---------------------------
By:
-------------------------------
Its:
---------------------------
TENANT: THE AUSTIN COMPANY, an Ohio
corporation
By:
-------------------------------
Its:
---------------------------
By:
-------------------------------
Its:
---------------------------
-52-
<PAGE>
SECOND FLOOR PLAN
-----------------
EXHIBIT "A-1"
-------------
Page 1 of 2
<PAGE>
THIRD FLOOR PLAN
----------------
EXHIBIT "A-1"
-------------
Page 2 of 2
<PAGE>
SITE PLAN
---------
(CROSS-HATCHED AREA)
MACARTHUR PLACE
VESTING TENTATIVE MAP NO. 13216
SITE - PARCEL 8 OF
VESTING TENTATIVE
MAP NO. 13216 (PARAMETERS
OF SITE SUBJECT
TO REVISIONS ON
FINAL MAP WHEN RECORDED)
EXHIBIT "A-II"
<PAGE>
WORK LETTER AGREEMENT
---------------------
THIS WORK LETTER AGREEMENT is entered into as of the ____________day
of ______________, 19___, by and between BCE DEVELOPMENT INC., a Delaware
corporation ("Landlord") and THE AUSTIN COMPANY, an Ohio corporation ("Tenant").
RECITALS:
---------
A. Concurrently with the execution of this Work Letter Agreement,
Landlord and Tenant have entered into a lease (the "Lease") covering certain
premises (the "Premises") more particularly described in the Lease. Terms used
herein and not otherwise defined herein shall have the meanings ascribed to them
in the Lease.
B. In order to induce Tenant to enter into the Lease (which is
hereby incorporated by reference to the extent that the provisions of this Work
Letter Agreement may be applicable thereto) and in consideration of the mutual
covenants hereinafter contained, Landlord and Tenant hereby agree as follows:
1. COMPLETION SCHEDULE
Promptly following the date of this Work Letter Agreement, Tenant
shall deliver to Landlord, for Landlord's review and approval, a schedule (the
"Work Schedule") setting forth an approximate timetable for the planning and
completion of the installation of the Tenant Improvements (as hereinafter
defined) to be constructed in the Premises. The Work Schedule shall set forth
each of the various items of work to be done by or approved by Landlord and
Tenant in connection with the completion of the Tenant Improvements. Such
schedule shall be submitted to Landlord for its approval and, upon approval by
both Landlord and Tenant, such schedule shall become the basis for completing
the Tenant Improvements work.
2. TENANT IMPROVEMENTS
Reference herein to "Tenant Improvements" shall include all work to be
done in the Premises pursuant to the Tenant Improvement Plans described in
Paragraph 3 below, including, but not limited to, partitioning, doors, ceilings,
floor coverings,
EXHIBIT "B"
----------
<PAGE>
finishes (including paint and wall covering), electrical (including lighting,
switching, telephones, outlets, etc.), plumbing, heating, ventilating and air
conditioning, fire protections, cabinets and other mill work.
3. TENANT IMPROVEMENT PLANS
As soon as reasonably practicable after the execution of this Lease,
Tenant shall cause to be prepared a space plan for the layout of the Premises.
Based upon such space plan, Tenant shall cause to be prepared final working
drawings and specifications for the Tenant Improvements. Such final working
drawings and specifications may be referred to herein as the "Tenant Improvement
Plans."
4. FINAL PRICING AND DRAWING SCHEDULE
After preparing the space plan and after Landlord's written approval
thereof in accordance with the Work Schedule, Tenant shall cause its architect
to prepare and submit to Landlord the final working drawings and specifications
referred to as the Tenant Improvement Plans in Paragraph 3 hereof. Such Tenant
Improvement Plans shall be approved by Landlord and Tenant in accordance with
the Work Schedule and shall thereafter be submitted by Tenant to the appropriate
governmental body for plan checking and a building permit. Landlord reserves the
right to disapprove any proposed Tenant Improvements which Landlord reasonably
believes will adversely affect any Building systems. Tenant shall cause to be
made any changes in the Tenant Improvement Plans necessary to obtain the
building permit. Concurrent with the plan checking, Tenant shall have prepared a
final pricing for Landlord's approval, taking into account any modifications
which may be required to reflect changes in the Tenant Improvement Plans
required by the City or County in which the Premises are located. After final
approval of the Tenant Improvement Plans by the appropriate governmental body,
no further material changes to the Tenant Improvement Plans may be made without
the prior written approval from both Landlord and Tenant, such approval not to
be unreasonably withheld.
5. CONSTRUCTION OF TENANT IMPROVEMENTS
After the Tenant Improvement Plans have been prepared and approved,
the final pricing has been approved and a building permit for the Tenant
Improvements has been issued, Tenant will complete the Tenant Improvements in
accordance with the Work Schedule and the Tenant Improvement Plans and the
provisions of
-2-
<PAGE>
this Work Letter Agreement. Landlord shall have the right to approve
subcontractors selected by Tenant and to review and approve subcontractors'
bids. Landlord's approval shall not be unreasonably withheld. The cost of such
work shall be paid as provided in Paragraph 6 hereof.
6. PAYMENT OF COST OF THE TENANT IMPROVEMENTS
(a) Landlord hereby grants to Tenant a "Tenant Improvements
Allowance" of $20.00 per rentable square foot of the Premises. All costs
relating to the Tenant Improvements work in excess of the Tenant
Improvements Allowance shall be paid by Tenant. Provided Tenant is not then
in material default under the Lease and a minimum of $15 per rentable
square foot in construction costs are incurred by Tenant in constructing
the Tenant Improvements in accordance with the Tenant Improvement Plans and
the provisions of this Work Letter Agreement, the difference between the
actual cost of the Tenant Improvements work (if it is less than the Tenant
Improvements Allowance) and the Tenant Improvements Allowance shall be
credited by Landlord to Tenant against the Annual Basic Rent first due
under the terms of the Lease. Such Tenant Improvements Allowance shall be
used only to reimburse Tenant for costs incurred by Tenant to build out the
Premises and shall include costs relating to:
(i) The reasonable costs incurred by Tenant in preparing the
space plan and the final working drawings and specifications,
including mechanical, electrical and structural drawings and of all
other aspects of the Tenant Improvement Plans;
(ii) The payment of permit and license fees relating to
construction of the Tenant Improvements;
(iii) Construction of the Tenant Improvements, including,
without limitation, the following:
(1) Installation within the Premises of all
partitioning, doors, floor coverings, finishes, ceilings, wall
coverings and painting millwork, similar items not installed by
Landlord, and, at Tenant's option, an internal staircase.
(2) All electrical wiring, lighting fixtures, outlets
and switches, and other electrical work to be installed within
the Premises and not installed by Landlord.
-3-
<PAGE>
(3) The furnishing and installation of all duct work,
terminal boxes, defusers and accessories required for the
completion of the heating, accessories required for the
completion of the heating, ventilation and air conditioning
systems within the Premises, including the cost of meter and key
control for the after-hour air conditioning, which devises have
not been furnished or installed by Landlord.
(4) All fire and life safety control systems such as
fire walls, sprinklers, halon, fire alarms, including piping,
wiring and accessories installed within the Premises by Tenant.
(5) All plumbing, fixtures, pipes, and accessories to
be installed within the Premises by Tenant.
(b) Tenant shall, by the tenth (10th) day of each month ("Current
Month"), deliver to Landlord an application for payment in the form of a typed
statement ("Statement"), sworn to and notarized if required. Said Statement
shall be applicable to work performed by Tenant in connection with constructing
the Tenant Improvements during the period commencing on the first day of the
previous month and ending on the last day of said preceding month ("Payment
Request Period"). Evidence of the absence of liens in connection with the work
which is the subject of the Statement and which may be required by Landlord or
any construction lender which has provided financing for the Building shall be
delivered with the Statement. The Statement shall constitute a representation by
Tenant that the Tenant Improvements work identified therein as having been
performed pursuant to subcontracts or this Work Letter Agreement have been
performed in accordance with the requirements of this Work Letter Agreement.
(c) Landlord will review the Statement for each Payment Request Period
and will pay to Tenant ninety percent (90%) of such amount as Landlord approves
on or about the fifth (5th) day of the month following the Current Month;
provided, however, in the event Owner does not approve the Statement for reasons
related to defective, unsatisfactory or nonconforming Tenant Improvements work
or the performance thereof by Tenant, its subcontractors or anyone for which
they are responsible, Landlord will only be obligated to pay that portion which
it approves. Within five (5) days following Landlord's receipt of a Statement,
Landlord shall notify Tenant, in writing, of the reason, if any, for
-4-
<PAGE>
withholding any portion of the amount set forth in the Statement. Any single
payment, or series of payments, by Landlord in excess of said ninety percent
(90%) sum shall not constitute a waiver of the Landlord's rights to pay only
ninety percent (90%) in the future. Except for sums withheld for defective or
nonconforming Tenant Improvements work that is later remedied to Landlord's
reasonable satisfaction, no portion of the sums retained by Landlord pursuant to
this paragraph shall be payable until final payment is made as provided below.
(d) The last progress payment shall be due and payable thirty-five
(35) days after recordation of a valid Notice of Completion with respect to the
Tenant Improvements work; provided, that Tenant has first delivered to Landlord
such other evidences of Tenant's full payment of subcontractors (with the
exception of retentions and final payments which are to be paid out of the final
payment by Landlord to Tenant) and the absence of any liens generated by the
Tenant Improvements work as may be required by the Landlord (i.e. either lien
releases in accordance with California Civil Code Section 3262 or a release bond
in accordance with California Civil Code Section 3143 and Section 3171).
(e) The Statement shall only include amounts for work authorized under
this Work Letter Agreement and actually performed.
(f) Final payment, constituting that portion of the unpaid balance of
the Tenant Improvements Allowance to which Tenant is entitled pursuant to the
provisions of this Work Letter Agreement, shall be paid by Landlord to Tenant
when the Tenant Improvements have been completed, inspected and approved by
Landlord for conformance with the approved Tenant Improvement Plans and Tenant
is in possession of and legally occupying (pursuant to a valid certificate of
occupancy obtained by Tenant) the Premises in accordance with the provisions of
the Lease, which final payment shall in no event occur prior to the date on
which the last progress payment is due as provided above.
7. COMPLETION AND RENTAL COMMENCEMENT DATE
Provided the Common Areas are substantially completed and Tenant has
reasonable access to the Premises, the Term of the Lease shall not commence
until the earlier of (i) substantial completion of construction of the Tenant
Improvements, or (ii) the date Tenant occupies the Premises. Tenant agrees to
use
-5-
<PAGE>
diligent efforts to substantially complete construction of the Tenant
Improvements and occupy the Premises within eighteen (18) months from issuance
of applicable building permits for the Building; Landlord and Tenant agree to
use diligence to obtain such permits. However, if there shall be a delay in
substantial completion of the Tenant Improvements as a result of:
(a) Landlord's failure to approve any item for which Landlord's
approval is required or to perform any other obligation in accordance with
and by the date specified in the Work Schedule;
(b) Landlord's changes in the Tenant Improvement Plans after
their approval by Landlord; or
(c) any other delay reasonably attributable to the fault of
Landlord or beyond Tenant's control,
then the commencement of the Term of the Lease and the rental commencement date
shall be delayed by the number of days of such delay, but in no event beyond the
date that Tenant occupies the Premises. In this regard, it is understood that
Tenant is acting as the general contractor for Landlord in connection with the
construction of the Building, and therefore (i) Landlord will exercise little,
if any, control over the progress of construction of the Building and/or the
Tenant Improvements, and (ii) only delays which are permitted "force majeure"
delays under Tenant's construction contract with Landlord shall be deemed to be
"delays beyond Tenant's control" for purposes of this Agreement.
On the other hand, if there shall be a delay in completion of the
Tenant Improvements as a result of:
(a) Tenant's failure to approve any item for which Tenant's
approval is required or to perform any other obligation in accordance with
and by the date specified in the Work Schedule;
(b) Tenant's inability to obtain materials or supplies not
readily available;
(c) Tenant's changes in the Tenant Improvement Plans after their
approval by Tenant; or
(d) any other delays reasonably attributable to the fault of
Tenant, including any delays caused by Tenant as the general contractor for
the construction of the Building,
then the commencement of the Term of the Lease and the rental commencement date
shall be accelerated by the number of days of such delay.
-6-
<PAGE>
8. MISCELLANEOUS
(a) At no time shall Tenant do or permit anything to be done whereby
the Building or the Site may be subjected to any mechanic's or other liens or
encumbrances arising out of the Tenant Improvements work.
(b) Once Tenant has commenced the Tenant Improvements work, Tenant
will promptly, diligently and continuously pursue the same to successful
completion in full compliance with the Tenant Improvement Plans, the Work
Schedule and this Work Letter Agreement.
(c) Tenant will perform all Tenant Improvements work in a safe and
lawful manner. Tenant shall at its sole expense comply with all applicable
laws and all regulations and requirements of, and all licenses and permits
issued by, all municipal or other governmental bodies with jurisdiction.
Copies of all filed documents and all permits and licenses shall be provided
to Landlord. Any Tenant Improvements work not acceptable to the Department of
Building and Safety, or not reasonably satisfactory to Landlord, shall be
promptly repaired or replaced at Tenant's expense. Notwithstanding any failure
by Landlord to object to any such Tenant Improvements work, Landlord shall
have no responsibility therefor. Tenant shall notify Landlord in writing not
less than ten (10) days prior to the commencement of any Tenant Improvements
work as to name, telephone number and responsible party for each and every
contractor and/or subcontractor who is about to commence work.
(d) Tenant hereby indemnifies and agrees to defend and hold Landlord
harmless from and against any and all suits, claims, actions, losses, costs or
expenses (including, without limitation, claims for Workers' Compensation) of
any nature whatsoever together with attorneys' fees for counsel of Landlord's
choice, arising out of or in connection with the Tenant Improvements work or
the performance of the Tenant Improvements work (including, but not limited
to, claims for breach of warranty, personal injury or property damage).
(e) No Tenant Improvements work shall proceed without Tenant first
acquiring Workers' Compensation and public liability insurance and property
damage insurance, with minimum coverage of $3,000,000 and with companies
reasonably satisfactory to Landlord and on forms used on a customary basis by
Tenant. Not less than thirty (30) days before commencing the Tenant
Improvements work, certificates of such insurance shall be furnished to
Landlord or, if requested, the original policies thereof shall be submitted
-7-
<PAGE>
for Landlord's approval. All such policies shall provide that thirty (30) days
prior notice must be given to Landlord before termination or cancellation. All
insurance policies maintained by Tenant pursuant to this Work Letter Agreement
shall name Landlord and any lender with an interest in the Premises as
additional insureds. Subcontractors shall be required to maintain reasonable
coverage, and such policies shall name Tenant, Landlord and any lender with an
interest in the Premises as additional insureds.
(f) Landlord shall have no responsibility for the Tenant
Improvements work and Tenant will remedy at Tenant's own expense and be
responsible for any and all defects in all such Tenant Improvements work that
may appear during or after the completion thereof whether the same shall
affect the Premises in particular or any parts of the Building in general.
Tenant shall reimburse Landlord for any extra expense incurred by Landlord by
reason of faulty Tenant Improvements work done by Tenant or Tenant's
subcontractors, by reason of delays caused by such Tenant Improvements work,
or by reason of inadequate cleanup.
(g) If the performance of the Tenant Improvements work shall require
that additional services or facilities (including, but not limited to, extra
elevator services, hoisting, cleanup or other cleaning services, trash
removal, field supervision, or ordering of materials) be provided, Tenant
shall pay Landlord a reasonable charge therefor.
(h) All of Tenant's subcontractors, employees, servants and agents
must work in harmony with and shall not interfere with any labor employed by
Landlord, or Landlord's contractors or by any other tenant or its contractors.
(i) Any work to be performed in areas adjacent to the Premises shall
be pursued only after obtaining Landlord's express written permission and
shall be done only if an agent or employee of Landlord is present; Tenant will
reimburse Landlord for the expense of any such employee or agent.
(j) Tenant or Tenant's subcontractors will in no event be allowed to
install plumbing, mechanical, electrical wiring or fixtures, acoustical or
integrated ceilings, without the prior written approval from Landlord with
respect to the manner of such installation. In addition to the foregoing, all
data processing and other special electrical equipment shall be installed only
under the supervision of Landlord or Landlord's electrical contractor.
(k) Notwithstanding subparagraph (j) above, Tenant agrees to be
entirely responsible for the maintenance or the
-8-
<PAGE>
balancing of any heating, ventilating or air conditioning system installed by
Tenant and/or maintenance of the electrical or plumbing Work installed by Tenant
and/or for maintenance of lighting fixtures, partitions, doors, hardware or any
other installations made by Tenant. Such maintenance shall be performed only by
a contractor or contractors approved in writing in advance by Landlord.
(l) Nothing herein contained shall be construed as (i) constituting
Tenant as Landlord's agent for any purpose whatsoever, or (ii) a waiver by
Landlord of any of the terms or provisions of the Lease. Any default by Tenant
with respect to any portion of this Work Letter Agreement, at Landlord's option,
shall be deemed a breach of the Lease as to which Landlord shall have all the
rights and remedies as in the case of a breach of said Lease.
IN WITNESS WHEREOF, this Work Letter Agreement is executed as of the
date first above written.
"TENANT" THE AUSTIN COMPANY, an
Ohio corporation
By:
--------------------------------
Its:
----------------------------
By:
--------------------------------
Its:
----------------------------
"LANDLORD" BCE DEVELOPMENT INC., a
Delaware corporation
By:
--------------------------------
Its:
----------------------------
By:
--------------------------------
Its:
----------------------------
-9-
<PAGE>
NOTICE OF LEASE TERM DATES
AND TENANT'S PERCENTAGE
--------------------------
To: The Austin Company Date:
------------------------
----------------------------
----------------------------
Re: Lease dated __________________, 19___, between _____________________
______________________________________________ ("Landlord"), and THE AUSTIN
COMPANY, an Ohio corporation ("Tenant"), concerning Suite _____________________
located at _________________________________________________________.
Gentlemen:
In accordance with the subject Lease, we wish to advise and/or confirm
as follows:
1. That the Premises have been accepted herewith by the Tenant as
being substantially complete in accordance with the subject Lease and that there
is no patent deficiency in construction.
2. That the Tenant has possession of the subject Premises and
acknowledges that under the provisions of the subject Lease the term of said
Lease shall commence as of ____________________ for a term of fifteen (15)
years, ending on ______________________________.
3. That in accordance with the subject Lease, monthly installments
of Annual Basic Rent shall commence to accrue on _________________________.
4. If the Commencement Date of the subject Lease is other than the
first day of the month, the first billing will contain a pro rata adjustment.
Each billing thereafter shall be for the full amount of the monthly installment
as provided for in said Lease.
5. Except as otherwise set forth in the Lease, Rent is due and
payable in advance on the first day of each and every month during the term of
said Lease. Your rent checks should be made payable to _______________________
at _________________________________.
6. The number of Rentable Square Feet within the Premises is
_______________________ square feet.
7. The number of Rentable Square Feet within the Building is
_______________________ square feet.
EXHIBIT C.
----------
<PAGE>
8. Tenant's Percentage, as adjusted based upon the number of
Rentable Square Feet within the Premises, is ______%.
9. The Building address and the suite number(s) of the Premises are
________________________________________________.
AGREED AND ACCEPTED
TENANT: THE AUSTIN COMPANY,
an Ohio corporation
By:
------------------------------------
Print Name:
----------------------------
Its:
--------------------------------
By:
------------------------------------
Print Name:
----------------------------
Its:
--------------------------------
LANDLORD: --------------------------------------,
a
-------------------------------------
By:
------------------------------------
Print Name:
----------------------------
Its:
--------------------------------
By:
------------------------------------
Print Name:
----------------------------
Its:
--------------------------------
-2-
<PAGE>
STANDARDS FOR UTILITIES AND SERVICES
------------------------------------
The following standards for utilities and services are in effect.
Landlord reserves the right to adopt nondiscriminatory modifications and
additions hereto.
As long as Tenant is not in default under any of the terms, conditions,
provisions or agreements of this Lease, Landlord shall:
1. Provide non-attended automatic elevator facilities Monday
through Friday, except holidays, from 7 a.m. to 6 p.m., and have one elevator
available for Tenant's use at all other times.
2. On Monday through Friday, except holidays, from 7 a.m. to 6 p.m.
and on Saturday from 9 a.m. to 1 p.m. (and other times for a reasonable
additional charge to be fixed by Landlord), ventilate the Premises and furnish
air conditioning or heating on such days and hours, when in the reasonable
judgment of Landlord it may be required for the comfortable occupancy of the
Premises. The air conditioning system achieves maximum cooling when the window
coverings are extended to the full length of the window opening and adjusted to
a 45 degree angle upwards. Landlord shall not be responsible for room
temperatures if Tenant does not keep all window coverings in the Premises
extended to the full length of the window opening and adjusted to a 45 degree
angle upwards whenever the system is in operation. Tenant agrees to cooperate
fully at all times with Landlord, and to abide by all reasonable regulations and
requirements which Landlord may prescribe for the proper function and protection
of said air conditioning system. Tenant agrees not to connect any apparatus,
device, conduit or pipe to the Building chilled and hot water air conditioning
supply lines. Tenant further agrees that neither Tenant nor its servants,
employees, agents, visitors, licensees or contractors shall at any time enter
the mechanical installations or facilities of the Building or the Development or
adjust, tamper with, touch or otherwise in any manner affect said installations
or facilities. The cost of maintenance and service calls to adjust and regulate
the air conditioning system shall be charged to Tenant if the need for
maintenance work results from either Tenant's adjustment of room thermostats or
Tenant's failure to comply with its obligations under this Exhibit, including
keeping window coverings extended to the full length of the window opening and
adjusted to a 45 degree angle upwards. Such work shall be charged at hourly
rates equal to then-current journeyman's wages for air conditioning mechanics.
EXHIBIT "D"
-----------
<PAGE>
3. Landlord shall furnish to the Premises, during the usual
business hours on business days, electric current as required by the Building
standard office lighting and fractional horsepower office business machines in
an amount not to exceed .025 KWH per square foot per normal business day. Tenant
agrees, should its electrical installation or electrical consumption be in
excess of the aforesaid quantity or extend beyond normal business hours, to
reimburse Landlord monthly for the measured consumption at the average cost per
kilowatt hour charged to the Building during the period. If a separate meter is
not installed at Tenant's cost, such excess cost will be established by an
estimate agreed upon by Landlord and Tenant, and if the parties fail to agree,
such cost shall be established by an independent licensed engineer selected in
Landlord's reasonable discretion. Tenant agrees not to use any apparatus or
device in, upon or about the Premises which may in any way increase the amount
of such services usually furnished or supplied to said Premises, and Tenant
further agrees not to connect any apparatus or device with wires, conduits or
pipes, or other means by which such services are supplied, for the purpose of
using additional or unusual amounts of such services without the written consent
of Landlord. Should Tenant use the same to excess, the refusal on the part of
Tenant to pay upon demand of Landlord the amount established by Landlord for
such excess charge shall constitute a breach of the obligation to pay rent under
this Lease and shall entitle Landlord to the rights therein granted for such
breach. Tenant's use of electric current shall never exceed the capacity of the
feeders to the Building, or the risers or wiring installation and Tenants shall
not install or use or permit the installation or use of any computer or
electronic data processing equipment in the Premises without the prior written
consent of Landlord.
4. Water will be available in public areas for drinking and
lavatory purposes only, but if Tenant requires, uses or consumes water for any
purpose in addition to ordinary drinking and lavatory purposes, of which fact
Tenant constitutes Landlord to be the sole judge, Landlord may install a water
meter and thereby measure Tenant's water consumption for all purposes. Tenant
shall pay Landlord for the cost of the meter and the cost of the installation
thereof and throughout the duration of Tenant's occupancy Tenant shall keep said
meter and installation equipment in good working order and repair at Tenant's
own cost and expense, in default of which Landlord may cause such meter and
equipment to be replaced or repaired and collect the cost thereof from Tenant.
Tenant agrees to pay for water consumed, as shown on said meter, as and when
bills are rendered, and on default in making such payment, Landlord may pay such
charges and collect the same from Tenant. Any such costs or expenses incurred,
or payments made by Landlord for any of the reasons or
-2-
<PAGE>
purposes hereinabove stated shall be deemed to be additional rent payable by
Tenant and collectible by Landlord as such.
5. Provide janitor service to the Premises, provided the same are
used exclusively as offices, and are kept reasonably in order by Tenant, and
unless otherwise agreed to by Landlord and Tenant no one other than persons
approved by Landlord shall be permitted to enter the Premises for such purposes.
If the Premises are not used exclusively as offices, they shall be kept clean
and in order by Tenant, at Tenant's expense, and to the satisfaction of
Landlord, and by persons approved by Landlord. Tenant shall pay to Landlord the
cost of removal of any of Tenant's refuse and rubbish to the extent that the
same exceeds the refuse and rubbish usually attendant upon the use of the
Premises as offices.
6. Landlord reserves the right to stop service of the elevator,
plumbing, ventilation, air conditioning and electrical systems, when necessary,
by reason of accident or emergency or for repairs, alterations or improvements,
when in the judgment of Landlord such actions are desirable or necessary to be
made, until said repairs, alterations or improvements shall have been completed,
and Landlord shall have no responsibility or liability for failure to supply
elevator facilities, plumbing, ventilating, air conditioning or electric
service, when prevented from so doing by strike or accident or by any cause
beyond Landlord's reasonable control, or by laws, rules, orders, ordinances,
directions, regulations or by reason of the requirements of any federal, state,
county or municipal authority or failure of gas, oil or other suitable fuel
supply or inability by exercise of reasonable diligence to obtain gas, oil or
other suitable fuel supply. It is expressly understood and agreed that any
covenants on Landlord's part to furnish any services pursuant to any of the
terms, covenants, conditions, provisions or agreements of this Lease, or to
perform any act or thing for the benefit of Tenant, shall not be deemed breached
if Landlord is unable to furnish or perform the same by virtue of a strike or
labor trouble or any other cause whatsoever beyond Landlord's control.
-3-
<PAGE>
SAMPLE FORM OF
TENANT ESTOPPEL CERTIFICATE
---------------------------
The undersigned, _______________________________, a _____________________
("Landlord"), with a mailing address c/o _____________________________________
___________________________________ and ______________________________________
a ____________________ ("Tenant"), hereby certify to _________________________
__________________, a _________________________, as follows:
1. Attached hereto is a true, correct and complete copy of that
certain lease dated ______________________, 19____, between Landlord and Tenant
(the "Lease"), which demises premises located at _____________________________
______________________________________________________________________________.
The Lease is now in full force and effect and has not been amended, modified or
supplemented, except as set forth in Paragraph 4 below.
2. The term of the Lease commenced on __________________________,
19___.
3. The term of the Lease shall expire on _______________________,
19___.
4. The Lease has: (Initial one)
(_______) not been amended, modified, supplemented, extended, renewed
or assigned.
(_______) been amended, modified, supplemented, extended, renewed or
assigned by the following described agreements, copies of which are
attached hereto:
5. Tenant has accepted and is now in possession of said premises.
6. Tenant and Landlord acknowledge that the Lease will be assigned
to __________________________________________________ and that no modification,
adjustment, revision or cancellation of the Lease or amendments thereto shall be
effective unless written consent of ___________________________________________
is obtained, and that until further notice, payments under the Lease may
continue as heretofore.
7. The amount of fixed monthly rent is $_______________.
EXHIBIT "E"
-----------
<PAGE>
8. The amount of security deposits (if any) is $_____________.
No other security deposits have been made.
9. Tenant is paying the full lease rental which has been paid in
full as of the date hereof. No rent or other charges under the Lease have been
paid for more than thirty (30) days in advance of its due date.
10. All work required to be performed by Landlord under the Lease has
been completed.
11. To Tenant's knowledge, there are no defaults on the part of the
Landlord or Tenant under the Lease.
12. To Tenant's knowledge, Tenant has no defense as to its obligations
under the Lease and claims no set-off or counterclaim against Landlord.
13. Tenant has no right to any concession (rental or otherwise) or
similar compensation in connection with renting the space it occupies except as
provided in the Lease. All provisions of the Lease and the amendments thereto
(if any) referred to above are hereby ratified.
The foregoing certification is made with the knowledge
that ______________________________ is about to fund a loan to Landlord
or _____________________________________ is about to purchase the Project (or
part thereof) from Landlord and that _________________________________________
is relying upon the representations herein
-2-
<PAGE>
made in funding such loan or in purchasing the Project (or part thereof).
IN WITNESS WHEREOF, this certificate has been duly executed and
delivered by the authorized officers of the undersigned as of ________________,
19___.
LANDLORD:
------------------------------------
------------------------------------
By:
---------------------------------
Print Name:
-------------------------
Its:
-----------------------------
By:
---------------------------------
Print Name:
-------------------------
Its:
-----------------------------
TENANT:
------------------------------------
------------------------------------
By:
---------------------------------
Print Name:
-------------------------
Its:
-----------------------------
By:
---------------------------------
Print Name:
-------------------------
Its:
-----------------------------
SAMPLE ONLY
[NOT FOR EXECUTION]
-3-
<PAGE>
RULES AND REGULATIONS
---------------------
1. Except as specifically provided in the Lease to which these
Rules and Regulations are attached, no sign, placard, picture, advertisement,
name or notice shall be installed or displayed on any part of the outside or
inside of the Building or the Development (in these Rules and Regulations, the
term "Development" is used interchangeably with the term "Site" as defined in
the Lease) without the prior written consent of Landlord. Landlord shall have
the right to remove, at Tenant's expense and without notice, any sign installed
or displayed in violation of this rule. All approved signs or lettering on doors
and walls shall be printed, painted, affixed or inscribed at the expense of
Tenant by a person or company designated by Landlord.
2. If Landlord objects in writing to any curtains, blinds, shades,
screens or hanging plants or other similar objects attached to or used in
connection with any window or door of the Premises, or placed on any windowsill,
which is visible from the exterior of the Premises, Tenant shall immediately
discontinue such use. Tenant shall not place anything against or near glass
partitions or doors or windows which may appear unsightly from outside the
Premises.
3. Tenant shall not obstruct any sidewalks, halls, passages, exits,
entrances, elevators, escalators, or stairways of the Development. The halls,
passages, exits, entrances, shopping malls, elevators, escalators and stairways
are not open to the general public, but are open, subject to reasonable
regulations, to Tenant's business invitees. Landlord shall in all cases retain
the right to control and prevent access thereto of all persons whose presence in
the judgment of Landlord would be prejudicial to the safety, character,
reputation and interest of the Development and its tenants; provided that
nothing herein contained shall be construed to prevent such access to persons
with whom any tenant normally deals in the ordinary course of its business,
unless such persons are engaged in illegal or unlawful activities. No tenant and
no employee or invitee of any tenant shall go upon the roof(s) of the
Development.
4. The directory of the Building or the Development will be
provided exclusively for the display of the name and location of tenants only
and Landlord reserves the right to exclude any other names therefrom.
5. All cleaning and janitorial services for the Development and the
Premises shall be provided exclusively through Landlord, and except with the
written consent of Landlord, no person or persons other than those approved by
EXHIBIT "F"
-----------
<PAGE>
Landlord shall be employed by Tenant or permitted to enter the Development for
the purpose of cleaning the same. Tenant shall not cause any unnecessary labor
by carelessness or indifference to the good order and cleanliness of the
Premises.
6. Landlord will furnish Tenant, free of charge, with two keys to
each door lock in the Premises. Landlord may make a reasonable charge for any
additional keys. Tenant shall not make or have made additional keys, and Tenant
shall not alter any lock or install any new additional lock or bolt on any door
of the Premises. Tenant, upon the termination of its tenancy, shall deliver to
Landlord the keys to all doors which have been furnished to Tenant, and in the
event of loss of any keys so furnished, shall pay Landlord therefor.
7. If Tenant requires telegraphic, telephonic, burglar alarm,
satellite dishes, antennae or similar services, it shall first obtain, and
comply with, Landlord's instructions in their installation.
8. Freight elevator(s) shall be available for use by all tenants in
the building, subject to such reasonable scheduling as Landlord, in its
discretion, shall deem appropriate. No equipment, materials, furniture,
packages, supplies, merchandise or other property will be received in the
Building or carried in the elevators except between such hours and in such
elevators as may be designated by Landlord. Tenant's initial move in and
subsequent deliveries of bulky items, such as furniture, safes and similar items
shall unless otherwise agreed in writing by Landlord, be made during the hours
of 6:00 p.m. to 6:00 a.m. or on Saturday or Sunday. Deliveries during normal
office hours shall be limited to normal office supplies and other small items.
No deliveries shall be made which impede or interfere with other tenants or the
operation of the Building.
9. Tenant shall not place a load upon any floor of the Premises
which exceeds the load per square foot which such floor was designed to carry
and which is allowed by law. Landlord shall have the right to prescribe the
weight, size and position of all equipment, materials, furniture or other
property brought into the Building. Heavy objects shall, if considered necessary
by Landlord, stand on such platforms as determined by Landlord to be necessary
to properly distribute the weight, which platforms shall be provided at Tenant's
expense. Business machines and mechanical equipment belonging to Tenant, which
cause noise or vibration that may be transmitted to the structure of the
building or to any space therein to such a degree as to be objectionable to
Landlord or to any tenants in the Building, shall be placed and maintained by
Tenant, at Tenant's expense, on vibration eliminators or other devises
sufficient to eliminate noise or vibration. The persons employed to move such
equipment
-2-
<PAGE>
in or out of the Building must be acceptable to Landlord. Landlord will not be
responsible for loss of, or damage to, any such equipment or other property from
any cause, and all damage done to the Building by maintaining or moving such
equipment or other property shall be repaired at the expense of Tenant.
10. Tenant shall not use or keep in the Premises any kerosene,
gasoline or inflammable or combustible fluid or material other than those
limited quantities necessary for the operation or maintenance of office
equipment. Tenant shall not use or permit to be used in the Premises any foul or
noxious gas or substance, or permit or allow the Premises to be occupied or used
in a manner offensive or objectionable to Landlord or other occupants of the
Building by reason of noise, odors or vibrations, nor shall Tenant bring into or
keep in or about the Premises any birds or animals.
11. Tenant shall not use any method of heating or air conditioning
other than that supplied by Landlord.
12. Tenant shall not waste electricity, water or air conditioning and
agrees to cooperate fully with Landlord to assure the most effective operation
of the Building's heating and air conditioning and to comply with any
governmental energysaving rules, laws or regulations of which Tenant has actual
notice, and shall refrain from attempting to adjust controls. Tenant shall keep
corridor doors closed, and shall keep all window coverings pulled down.
13. Except as set to the contrary in the Lease, Landlord reserves the
right, exercisable without notice and without liability to Tenant, to change the
name and street address of the Building.
14. Landlord reserves the right to exclude from the Building between
the hours of 6 p.m. and 7 a.m. the following day, or such other hours as may be
established from time to time by Landlord, and on Sundays and legal holidays,
any person unless that person is known to the person or employee in charge of
the Building or has a pass or is properly identified. Tenant shall be
responsible for all persons for whom it requests passes and shall be liable to
Landlord for all acts of such persons. Landlord shall not be liable for damages
for any error with regard to the admission to or exclusion from the Building of
any person. Landlord reserves the right to prevent access to the Building in
case of invasion, mob, riot, public excitement or other commotion by closing the
doors or by other appropriate action.
15. Tenant shall close and lock the doors of its Premises and entirely
shut off all water faucets or other water
-3-
<PAGE>
apparatus, and electricity, gas or air outlets before Tenant and its employees
leave the Premises. Tenant shall be responsible for any damage or injuries
sustained by other tenants or occupants of the Building or by Landlord for
noncompliance with this rule.
16. Tenant shall not obtain for use on the Premises ice, drinking
water, food, beverage, towel or other similar services or accept barbering or
bootblacking service upon the Premises, except at such hours and under such
regulations as may be fixed by Landlord.
17. The toilet rooms, toilets, urinals, wash bowls and other apparatus
shall not be used for any purpose other than that for which they were
constructed and no foreign substance of any kind whatsoever shall be thrown
therein. The expense of any breakage, stoppage or damage resulting from the
violation of this rule shall be borne by the tenant who, or whose employees or
invitees, shall have caused it.
18. Tenant shall not sell, or permit the sale at retail of newspapers,
magazines, periodicals, theater tickets or any other goods or merchandise to the
general public in or on the Premises. Tenant shall not make any room-to-room
solicitation of business from other tenants in the Development. Tenant shall not
use the Premises for any business or activity other than that specifically
provided for in this Lease.
19. Tenant shall not install any radio or television antenna,
loudspeaker, satellite dishes or other devices on the roof(s) or exterior walls
of the Building or the Development. Tenant shall not interfere with radio or
television broadcasting or reception from or in the Development or elsewhere.
20. Tenant shall not mark, drive nails, screw or drill into the
partitions, woodwork or plaster or in any way deface the Premises or any part
thereof, except in accordance with the provisions of the Lease pertaining to
alterations. Landlord reserves the right to direct electricians as to where and
how telephone and telegraph wires are to be introduced to the Premises. Tenant
shall not cut or bore holes for wires. Tenant shall not affix any floor covering
to the floor of the Premises in any manner except as approved by Landlord.
Tenant shall repair any damage resulting from noncompliance with this rule.
21. Tenant shall not install, maintain or operate upon the Premises
any vending machines without the written consent of Landlord.
-4-
<PAGE>
22. Canvassing, soliciting and distribution of handbills or any other
written material, and peddling in the Development are prohibited, and Tenant
shall cooperate with Landlord to prevent such activities.
23. Landlord reserves the right to exclude or expel from the
Development any person who, in Landlord's judgment, is intoxicated or under the
influence of liquor or drugs or who is in violation of any of the Rules and
Regulations of the Building.
24. Tenant shall store all its trash and garbage within its Premises
or in other facilities provided by Landlord. Tenant shall not place in any trash
box or receptacle any material which cannot be disposed of in the ordinary and
customary manner of trash and garbage disposal. All garbage and refuse disposal
shall be made in accordance with directions issued from time to time by
Landlord.
25. The Premises shall not be used for the storage of merchandise held
for sale to the general public, or for lodging or for manufacturing of any kind,
nor shall the Premises be used for any improper, immoral or objectional purpose.
No cooking shall be done or permitted on the Premises without Landlord's
consent, except the use by Tenant of Underwriters' Laboratory approved equipment
for brewing coffee, tea, hot chocolate and similar beverages shall be permitted,
and the use of a microwave oven for employees use shall be permitted, provided
that such equipment and use is in accordance with all applicable federal, state,
county and city laws, codes, ordinances, rules and regulations.
26. Tenant shall not use in any space or in the public halls of the
Development any hand truck except those equipped with rubber tires and side
guards or such other material-handling equipment as Landlord may approve. Tenant
shall not bring any other vehicles of any kind into the Building or the
Development.
27. Without the written consent of Landlord, Tenant shall not use the
name of the Building or the Development in connection with or in promoting or
advertising the business of Tenant except as Tenant's address.
28. Tenant shall comply with all safety, fire protection and
evacuation procedures and regulations established by Landlord or any
governmental agency.
29. Tenant assumes any and all responsibility for protecting its
Premises from theft, robbery and pilferage, which includes keeping doors locked
and other means of entry to the Premises closed.
-5-
<PAGE>
30. To the extent Landlord reasonably deems it necessary to exercise
exclusive control over any portions of the Common Areas for the mutual benefit
of the tenants in the Development, Landlord may do so subject to non-
discriminatory additional Rules and Regulations.
31. Tenant's requirements will be attended to only upon appropriate
application to Landlord's asset management office for the Development by an
authorized individual. Employees of Landlord shall not perform any work or do
anything outside of their regular duties unless under special instructions from
Landlord, and no employee of Landlord will admit any person (Tenant or
otherwise) to any office without specific instructions from Landlord.
32. Landlord may waive any one or more of these Rules and Regulations
for the benefit of Tenant or any other tenant, but no such waiver by Landlord
shall be construed as a waiver of such Rules and Regulations in favor of Tenant
or any other tenant, nor prevent Landlord from thereafter enforcing any such
Rules and Regulations against any or all of the tenants of the Development.
33. These Rules and Regulations are in addition to, and shall not be
construed to in any way modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of the Lease.
34. The Landlord reserves the right to make such other and reasonable
Rules and Regulations as, in its judgment, may from time to time be needed for
safety and security, for care and cleanliness of the Development and for the
preservation of good order therein. Tenant agrees to abide by all such Rules and
Regulations herein above stated and any additional rules and regulations which
are adopted.
35. Tenant shall be responsible for the observance of all of the
foregoing rules by Tenant's employees, agents, clients, customers, invitees and
guests.
36. Tenant shall not store any materials on the exterior balcony and
shall keep such balcony free of any debris, nor shall Tenant maintain any
furniture on said balcony without Landlord's prior written consent.
-6-
<PAGE>
PARKING RULES AND REGULATIONS
-----------------------------
The following rules and regulations shall govern the use of the parking
facilities which are appurtenant to the Building.
1. Landlord assumes no responsibility for any damage to any vehicle
parked in the parking areas or for any goods left in any such vehicle. All such
liability is specifically assumed by the operator of any such vehicle as a
condition to parking.
2. Tenant shall not park or permit the parking of any vehicle under
its company in any parking areas designated by Landlord as areas for parking by
visitors to the Building. Tenant shall not leave vehicles in the parking areas
overnight nor park any vehicles in the parking areas other than automobiles,
motorcycles, motor driven or non-motor driven bicycles or four wheeled trucks.
No propane or natural gas powered vehicles shall be allowed to park in the
parking areas.
3. Parking stickers or any other device or form of identification
supplied by Landlord as a condition of use of the parking facilities shall
remain the property of Landlord. Such parking identification device must be
displayed as requested and may not be mutilated in any manner. The serial number
of the parking identification device may not be obliterated. Devices are not
transferable and any device in the possession of an unauthorized holder will be
void. Landlord reserves the right to require that a reasonable security deposit
be paid to Landlord for each parking area and/or Building access card issued to
Tenant.
4. No overnight or extended term storage of vehicles shall be
permitted.
5. Vehicles must be parked entirely within painted stall lines of a
single parking stall.
6. All directional signs and arrows must be observed.
7. The speed limit within all parking areas shall be five (5) miles
per hour.
8. Parking is prohibited:
(a) in areas not striped for parking;
(b) in aisles;
EXHIBIT "G"
-----------
<PAGE>
(c) where "no parking" signs are posted;
(d) on ramps;
(e) in cross-hatched areas; and
(f) in such other areas as may be designated by Landlord or
Landlord's Parking Operator.
9. Every parker is required to park and lock his own vehicle. All
responsibility for damage to vehicles is assumed by the parker.
10. Loss or theft of parking identification devices from automobile
must be reported to garage manager immediately, and a lost or stolen report must
be filed by the customer at that time. Landlord has the right to exclude any car
from the parking facilities that does not have an identification device.
11. Any parking identification devices reported lost or stolen found
on any unauthorized car will be confiscated and the illegal holder will be
subject to prosecution.
12. Lost or stolen devices found by the purchaser must be reported to
the Parking Facility Office immediately to avoid confusion.
13. Washing, waxing, cleaning or servicing of any vehicle in any area
not specifically reserved for such purpose is prohibited.
14. The parking operators, managers or attendants are not authorized
to make or allow any exceptions to these rules and regulations.
15. Landlord reserves the right to refuse the sale of monthly stickers
or other parking identification devices to any tenant or person and/or his
agents or representatives who willfully refuse to comply with these rules and
regulations and all unposted City, State or Federal ordinances, laws or
agreements.
16. Landlord reserves the right to modify and/or adopt such other
reasonable and non-discriminatory rules and regulations for the parking
facilities as it deems necessary for the operation of the parking facilities.
Landlord may refuse to permit any person who violates these rules to park in the
parking facilities, and any violation of the rules shall subject the car to
removal, at such car owner's expense.
-2-
<PAGE>
PROCEDURE FOR DETERMINATION OF SQUARE FOOTAGE
---------------------------------------------
1. Landlord and Tenant shall each appoint a space planner and each
such space planner shall determine the rentable area of the Premises. Each such
space planner shall be appointed within fifteen (15) days after Tenant notifies
Landlord of its objection to Landlord's (or its architect's) determination of
such area.
2. In the event the space planners so appointed do not agree on the
area in question, which determination shall be made within ten (10) days
following appointment of the respective space planner, the two (2) space
planners shall, within ten (10) days following the last determination, agree
upon and appoint a third space planner.
3. The third space planner shall determine the area in question
within ten (10) days following its appointment and the three (3) determinations
shall be examined and the two (2) which are the closest shall be mathematically
averaged and that average shall be used to establish the area in question.
4. Landlord and Tenant shall each pay the cost of their respective
space planners and Landlord and Tenant shall share the cost of the third space
planner equally. Pending resolution of the area in question, Tenant shall pay
Annual Basic Rent and its share of Operating Expenses based upon the square
footage initially determined by Landlord (or its architect). Any appropriate
adjustments shall be made by Landlord and Tenant within ten (10) days after
final determination of the area in question. Time is strictly of the essence
with the respect to the time periods set forth in this section. If either
Landlord or Tenant fails to appoint a space planner within the time period set
forth above, the space planner appointed by one of them shall make a
determination, notify Landlord and Tenant thereof, and such space planner's
determination shall be binding upon Landlord and Tenant.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 4)
[ X ] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the fiscal year ended June 30, 1994
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from ______ to _______
COMMISSION FILE NO. 1-10397
AmeriQuest Technologies, Inc.
------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 33-0244136
- ------------------------------------------------------ --------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2722 Michelson Dr. Irvine, California 92715
- ------------------------------------------------------ --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (714) 222-6000
--------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -----------------------
Common Stock, $.01 par value New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No .
--------- --------
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of September 22, 1994 is approximately $47,950,480. For purposes
of making this calculation only, the Registrant has defined "affiliates" as
including all officers, directors and beneficial owners of more than 10% of the
outstanding Common Stock of the Registrant.
The number of shares outstanding of the Registrant's Preferred and Common Stock
as of September 22, 1994: Common Stock, $.01 par value, 17,181,453 shares.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Exhibit Index is on page 034. Page 001 of 75 pages.
<PAGE>
PART I
ITEM 1. BUSINESS.
--------
THE COMPANY
- -----------
AmeriQuest Technologies, Inc., a Delaware corporation ("AmeriQuest"),
maintains its principal executive offices at 2722 Michelson Drive, Irvine,
California, and its telephone number is (714) 222-6000. AmeriQuest conducts its
business through its subsidiaries.
CDS Distribution, Inc., a Delaware corporation ("CDS Distribution") and
Robec, Inc., a Pennsylvania corporation ("Robec") market and sell, as
distributors, hardware products for the personal computer market.
AmeriQuest/Kenfil Inc. ("Kenfil"), markets and sells, as a distributor, software
products for the personal computer market.
CMS Enhancements, Inc., a California corporation ("CMS Enhancements") is a
supplier of hard disk drive subsystems for IBM compatible and other leading
personal and business computers, including Apple, Compaq and others. Hard disk
drives allow personal computers, which otherwise often lack sufficient data
storage capacity, to perform many widely used, sophisticated business
applications. CMS Enhancements also offers disk array, magneto optical, CD-ROM,
floppy disk drives and magnetic tape back-up subsystems having a variety of data
storage capacities as well as personal computers, networking, graphics,
communications and connectivity and accessory products.
AmeriQuest currently markets more than 2,000 products to original equipment
manufacturers, value-added resellers and dealers throughout the United States
and in many foreign countries, including national and regional distributors and
large reseller computer chains such as ComputerLand, Intelligent Electronics and
InaCom.
RECENT DEVELOPMENTS
- -------------------
On December 3, 1993, the Board of Directors resolved that AmeriQuest should
renew its efforts to pursue a direction of becoming a major distributor of
computers and related products in the United States. In pursuing this direction,
the Board of Directors realigned the management of AmeriQuest. On February 11,
1994 Mr. Jim Farooquee resigned as a Director and officer of AmeriQuest, and on
February 23, 1994 Mr. James D'Jen resigned as a Director.
-----------------------------
AmeriQuest acquired 51.9% ownership of Kenfil on June 6, 1994 pursuant to
the provisions of an Agreement and Plan of Reorganization dated March 31, 1994.
On September 12, 1994, the shareholders of Kenfil and AmeriQuest approved
the proposed merger of "AmeriQuest/Kenfil Inc.," a wholly-owned subsidiary of
AmeriQuest, with and into Kenfil (the "Merger"). The Merger became effective
shortly thereafter, and AmeriQuest is now the sole shareholder of
AmeriQuest/Kenfil Inc.
2
<PAGE>
Kenfil is a distributor of microcomputer software. Its key vendors include
Corel, Broderbund, Symantec, Quarterdeck Office Systems and IBM.
-----------------------------
On June 30, 1994, AmeriQuest effected a placement of 833,333 shares of its
Common Stock and 416,667 Warrants, as "Units", each comprised of two shares of
AmeriQuest Common Stock and one Warrant, to foreign nationals, at $4.80 per Unit
for total net proceeds of $2,000,000. The Warrants are exercisable at any time
and from time-to-time until June 30, 1996 at an exercise price of $5.00 per
share; and can only be exercised by persons who are foreign nationals.
-----------------------------
On August 31, 1994, AmeriQuest effected a placement of 532,000 shares of
its Common Stock to a person who is a foreign national at $2.50 per share for a
total of $1,330,000.
-----------------------------
AmeriQuest acquired 50.1 percent of the issued and outstanding shares of
Robec on September 22, 1994 upon the issuance of 1,402,805 shares of its Common
Stock in exchange for Common Stock held by certain principal shareholders of
Robec in a first-stage exchange pursuant to AmeriQuest's two phase acquisition
of Robec.
Subject to approval by Robec's shareholders, the remaining shares of Robec
Common Stock will be exchanged in a merger transaction (the "Merger") at the
same conversion ratio of 0.63075 shares of AmeriQuest for each share of Robec
Common Stock. The Merger is expected to be completed in December, 1994.
Robec is a national value-added distributor of microcomputer systems,
peripherals and accessories. Its key vendors include Acer, IBM, MultiTech,
Okidata, Unisys and Wyse.
-----------------------------
On September 25, 1994, AmeriQuest entered into a definitive Agreement and
Plan of Reorganization pursuant to which it will acquire 100% of the issued and
outstanding capital stock of Ross White Enterprises, Inc., a Florida corporation
d/b/a "National Computer Distributors" ("NCD"). NCD markets and sells, as a
distributor, hardware products for the personal computer market. AmeriQuest
will issue 1,864,767 shares of its Common Stock and pay approximately $3,473,120
cash in this transaction.
NCD is a national value-added distributor of microcomputer systems,
peripherals and accessories. Its key vendors include AST, CTX, Samsung, Leading
Edge, Western Digital, Panasonic, and Goldstar.
-----------------------------
AmeriQuest has also contracted with Mr. James D'Jen, a former director and
officer of AmeriQuest, to exchange all of the issued and outstanding shares of
CMS Enhancements (S) PTE
3
<PAGE>
Ltd., a Singapore corporation wholly-owned by AmeriQuest in exchange for 350,000
shares of AmeriQuest Common Stock. On July 8, 1994 Mr. D'Jen delivered 345,091
shares. Upon the receipt of the balance due, AmeriQuest will be divested of this
Singapore subsidiary. Sales for the Singapore subsidiary approximate $20 million
annually, with an approximate break-even on operations.
CDS DISTRIBUTION
- ----------------
CDS Distribution is a national valued-added wholesale distributor of
microcomputers and related products to value-added resellers ("VARs"), dealers
and computer retailers, representing the aggregation of businesses of acquired
companies, i.e. Vitronix, Inc., Rhino Sales Company and Management Systems Group
("MSG"), all of which were acquired in December, 1993. CDS Distribution
markets, sells and supports a variety of products ranging from individual
components, which are typically sold in volume, to complete systems that have
been fully configured, assembled and tested prior to delivery to its customers.
CDS Distribution's historic strategy has been to emphasize the sale of these
complete systems and to provide a high level of value-added services, including
consultation on component selection and system configuration and provision of
system assembly and testing and technical support services. As a result of
competitive pressures, reduced profit margins and the way in which other,
similar distributors have changed their businesses, CDS Distribution is now
placing more emphasis on telemarketing as its primary sales method. CDS
Distribution also provides a variety of training programs and educational
seminars designed to enhance its customers' technical capabilities.
CDS Distribution's vendors include leading manufacturers such as IBM, AST,
NEC, Apple, Acer, Altos, SunSoft, Telebit, Novell and Multi-tech Systems. CDS
Distribution focuses its marketing efforts on the products of a limited number
of key vendors in order to become one of the leading distributors for each of
its principal vendors. This enables CDS Distribution to develop product-specific
technical expertise that enhances its value-added support services. CDS
Distribution attempts to minimize competition among vendors' products while
maintaining some overlap to provide protection against product shortages or
discontinuations.
Price discounting by its competitors has forced CDS Distribution to reduce
its prices, resulting in deteriorating gross margins for commodity products.
The effects of such price discounting on the Company are reflected in the
periodic net sales and gross margins as reflected elsewhere herein. CDS
Distribution is pursuing a broad restructuring program which includes, among
other items cost reductions, the closing of certain offices and warehouse
locations, downsizing of the employee base, consolidation of inventory and a
change in emphasis among the methods by which sales are obtained.
PRODUCTS
CDS Distribution seeks to maintain products from nationally-recognized
vendors that provide all the components most VARs require to fully configure
their computer systems. All new products are extensively tested prior to
inclusion in CDS Distribution's distribution network.
The following is a description of the major categories of products
currently sold by CDS Distribution and the principal current vendors of those
products.
4
<PAGE>
Microcomputers--CDS Distribution distributes desktop and portable personal
computers and multiuser microcomputers manufactured by Acer, Altos, IBM, AST,
Apple, NEC and Leading Edge.
Printers--CDS Distribution distributes a broad line of dot matrix, laser
and ink-jet printers manufactured by Lexmark, Pennant, Canon, NEC and Genicom.
Monitors and Terminals--CDS Distribution distributes monitors and terminals
manufactured by CTX, Goldstar, Relisys and NEC.
Local Area Networks--A local area network ("LAN") permits microcomputers to
communicate with one another and to function on an integrated basis. CDS
Distribution distributes LAN software and specialized hardware products
manufactured by C Net, GVC, Novell and Oilcom.
Accessories and Supplies--CDS Distribution distributes hard and floppy disk
drives, board products, diskettes, stand-by power supplies, modems and other
communications products, accessories and supplies manufactured by numerous
companies including Boca Research, GVC, IBM, Turnhead, CMS and Epson.
Software--CDS Distribution sells a variety of operating system and LAN
software products generally as part of its systems sales. CDS Distribution has
also commenced the sale of certain applications software. Among the
manufacturers of these software products are IBM and SunSoft.
VENDOR RELATIONS
To maintain a strong relationship with its principal vendors, CDS
Distribution focuses on marketing the products of a limited number of key
vendors. CDS Distribution selects its product line to minimize competition among
vendors' products while maintaining some overlap to provide protection against
product shortages or discontinuations. In addition, CDS Distribution enhances
its relationship with its vendors by providing feedback on products, assisting
in new product development, working with vendors to develop marketing programs
and offering vendors the opportunity to provide seminars to CDS Distribution's
customers at CDS Distribution facilities.
CDS Distribution, like most hardware distributors, sells products
throughout the United States for vendors on a non-exclusive basis without
geographic restrictions. CDS Distribution has distribution agreements with most
of its vendors and believes they are in the form customarily used by each vendor
and generally contain provisions which allow termination by either party upon as
little as 30 days' notice. Most of CDS Distribution's major distribution
agreements provide price protection by giving CDS Distribution a credit, subject
to specified limitations, in the amount of any price reductions by the vendor
between the time of the initial sale to CDS Distribution and the subsequent sale
by CDS Distribution to its customer. Most of the major distribution agreements
also give CDS Distribution qualified return privileges on slow-moving inventory.
CDS Distribution's distribution agreements do not restrict CDS Distribution from
selling similar products manufactured by competitors. Any minimum purchase
provisions in CDS Distribution's distribution agreements are at levels that CDS
Distribution believes do not impose significant risk.
From time to time, the demand for certain products sold by CDS Distribution
exceeds the supply available from the vendor. CDS Distribution believes that its
ability to compete has not been adversely affected to a material extent by these
periodic shortages, although sales may be adversely
5
<PAGE>
affected for an interim period. In order to limit the impact of such shortages,
CDS Distribution generally attempts to include comparable products from more
than one vendor in its product line and endeavors to provide direction to its
customers in their selection of products.
SALES AND DISTRIBUTION
CDS Distribution has divided its sales operations into three regions.
Within each region, there are several branch offices, each supervised by a
branch manager and having one or more account managers who are teamed with an
inside sales assistant, generally on a one-to-one basis. Compensation of each
account manager and sales assistant is based, in part, on the profits generated
from sales to the account manager's customers. The account manager is a
technically-trained salesperson and is responsible for opening new accounts and
serving all established accounts in the branch manager's customer base. CDS
Distribution also utilizes volume sales specialists at its offices who sell
largely through telemarketing.
In three of CDS Distribution's branch offices, the account manager is
supported by a systems specialist who provides engineering and operating systems
technical support on more sophisticated systems. In addition, the systems
specialists are supported by technology managers located at CDS Distribution's
main offices in Irvine, California.
Customer orders are generally made by a toll-free telephone call to a sales
assistant in CDS Distribution's main offices or a branch office, and the order
is entered onto CDS Distribution's computer system. The sales assistant has
access to available information on inventory and customer credit status and,
upon reviewing this data, can enter the order immediately. Shipment is usually
made the same day, except on orders that require assembly and testing. Customers
also may pick up their orders at the main offices or at the Atlanta branch
office. All orders are handled on a prepayment, COD or credit basis depending on
the customer's creditworthiness and previous payment history. In addition, CDS
Distribution assists some resellers in obtaining equipment financing through
third-party floor planning programs.
CDS Distribution permits the return of products within certain time limits
and under certain conditions subject to a restocking charge, provided that the
products are unused. Products that are defective upon arrival are handled on a
manufacturers' warranty return basis without any restocking charge.
CDS Distribution estimates that a majority of its sales are to VARs and
value-added dealers. No customer has accounted for more than 10% of CDS
Distribution's net sales during 1994, 1993 or 1992. International sales are not
significant to CDS Distribution's operations. Sales by CDS Distribution are not
seasonal to any material extent. Because of CDS Distribution's prompt delivery
times, it maintains no substantial backlog of orders.
KENFIL
- ------
Kenfil's principal executive offices are located at 2722 Michelson Drive,
Irvine, CA 92715 (714) 222-6000. Kenfil was formed as a partnership in 1983 and
was incorporated in California in 1984. In April 1992, Kenfil reincorporated in
the state of Delaware, and completed a 3,100 for 1 common stock split. Kenfil
completed its initial public offering in February, 1993.
6
<PAGE>
Kenfil is a distributor that focuses predominantly on microcomputer
software. Kenfil presently carries over 3,500 software titles from over 200
software publishers for sale to approximately 1,100 resellers. Kenfil's vendors
include many of the leading software publishers such as Symantec Corporation,
Quarterdeck Office Systems, Corel Systems Corporation, ChipSoft, Inc.,
Broderbund Software Inc., IBM Software, Maxis Software, The Learning Company
Inc., Walt Disney Computer Software, Inc. and Sierra On-Line, Inc. Kenfil's
reseller customers include superstores, software specialty retailers, mail order
companies, mass merchants and corporate resellers, such as CompUSA, Computer
City (part of Tandy Corp.), Software Etc., Inc., Micro Warehouse, Inc.,
Price/Costco, Inc. and Best Buy.
PRODUCTS
Kenfil presently offers over 3,500 software titles, most of which range in
suggested retail price from approximately $30 to $500. Kenfil primarily carries
products for the three most popular microcomputer operating systems: MS-DOS,
Microsoft Windows and Apple Macintosh. Kenfil focuses on software products in
the high growth categories such as the business application, utilities,
graphics, communications, consumer (education and entertainment) and
productivity segments. Kenfil also carries certain accessories. However, due to
such factors as new product launches and upgrades, the seasonal nature of
certain products and shifts in demand for software products, the list of
Kenfil's best selling products varies from time to time.
PUBLISHERS
Kenfil currently purchases software products from over 200 publishers.
Product purchasing decisions are based on profit potential, sales trends, cost,
availability and return privileges. Kenfil has contractual relationships with
many of its major publishers covering price, payment terms and return
privileges. These contracts are generally non-exclusive, and have terms of
between one and three years, many with automatic renewal provisions. The
agreements generally provide Kenfil with stock balancing and price protection
provisions which reduce in part Kenfil's risk of loss due to slow-moving
inventory or vendor price reductions. Kenfil has, from time to time, experienced
losses resulting from its inability to return obsolete inventory to publishers.
CUSTOMERS
Kenfil generally focuses on selling software to large software resellers.
Kenfil only sells products to resellers that meet Kenfil's financial and other
qualifications. Kenfil's customer base currently consists of approximately 1,100
resellers. For qualified resellers, Kenfil generally ships its products on net
30 day terms. Reseller customers include:
Superstores. These large stores sell hardware and software to both retail
and corporate end-users. Such customers of Kenfil include CompUSA, Computer
City, Fry's Electronics, Best Buy, Elek-Tek, and Micro Electronics Inc.
(MicroCenter).
Software Specialty Retailers. These reseller customers sell through their
own retail outlets to end-users and also may sell directly to corporate
customers. Such reseller customers of Kenfil include the Electronics Boutique,
Inc., Software etc. and Babbage's.
7
<PAGE>
Mail Order. These customers sell primarily through catalogs and
telemarketing to corporate accounts and end-users. These customers include Micro
Warehouse, Inc. and Multiple Zones International Inc.
Mass Merchants. These customers generally concentrate on high volume
software products, carry relatively few titles and emphasize entertainment and
educational programs. Kenfil's customers in this category include Price/Costco,
Inc.
Corporate Resellers. These resellers sell software to large corporate
accounts and provide higher levels of service, including software selection,
procurement services and technical support. Such reseller customers of Kenfil
include Corporate Software Inc., 800 Software, SoftMart, Inc. and Software
Spectrum, Inc.
Kenfil's general policy is to accept returns only of defective or
misshipped products or prior versions of products which have been upgraded.
However, as an accommodation to its customers Kenfil accepts returned products
outside of this policy where Kenfil believes it has the commensurate right of
return from the publisher. Kenfil maintains product return reserves which it
believes to be adequate.
SALES AND MARKETING
As of June 30, 1994 Kenfil had 13 salespeople. Kenfil's sales operations
are divided into two regions with each region managed by a regional manager who
reports to the vice president of sales. Kenfil's sales personnel have access to
Kenfil's management information system which provides them with on-line, real
time information regarding inventory levels, pricing, customer purchasing trends
and product sales trends, as well as the customer's available credit. Kenfil
provides customers with direct access to its sales personnel through dedicated
sales telephone and facsimile lines, in order to provide better service and
maximize sales opportunities. Members of Kenfil's sales staff initiate targeted
out-bound sales calls as well as take and enter customer orders and respond to
customer inquiries. Kenfil's sales personnel also negotiate additional marketing
and advertising funds from publishers for the benefit of Kenfil's customers.
Kenfil works on an ongoing basis with its publishers and resellers in
developing specific marketing and promotional programs. Kenfil, through its
marketing department, develops and publishes a broad array of brochures, pocket
guides, catalogs, posters and other marketing material designed to obtain shelf
space for its publishers, and assists publishers in developing complete
marketing strategies tailored to promote individual software products. Kenfil
also consults with and advises publishers on the design of their product
packaging and positioning and on advertising. Kenfil advertises on behalf of its
publishers in major industry publications such as Computer Reseller News and
Computer Retail Week, with advertising campaigns produced entirely by Kenfil's
marketing department. Kenfil also provides many of its reseller customers with
customized marketing materials which the resellers in turn utilize for their own
customers.
INTERNATIONAL OPERATIONS AND SALES
Kenfil currently has two wholly-owned subsidiaries in the Far East. Although
international sales represented approximately 5% or less of net sales in each of
the last three fiscal years, such sales
8
<PAGE>
make a significant contribution to pretax income. No assurances can be given
that international sales will continue at this level or make a significant
contribution to pretax income in future periods.
ROBEC
- -----
The predecessor of Robec, Inc. ("Robec") was incorporated in Nevada in 1977.
On August 16, 1989, this predecessor company was merged into a new Pennsylvania
corporation to form Robec. The authorized capital stock of Robec consists of 10
million shares of Common Stock, $.01 par value per share, and 5 million shares
of Preferred Stock, $.01 par value per share. In October 1989, Robec completed
the initial public offering of its Common Stock, receiving net proceeds of
approximately $12.7 million through the sale of 1,350,000 shares of Common
Stock. The net proceeds of the public offering were used to repay bank
borrowings, part of which were incurred to fund a dividend paid to shareholders
of record prior to the offering in connection with the termination of Robec's
status as a corporation subject to taxation under Subchapter S of the Code. In
February 1990, Robec acquired certain assets and assumed certain liabilities of
J. Crew, Inc., doing business as Electronic Marketing Specialists, Inc., which
was engaged in the distribution of microcomputers.
Robec is primarily a national valued-added wholesale distributor of
microcomputers and related products to value-added resellers (''VARs''), dealers
and computer retailers and primarily operates in this one business segment.
Robec markets, sells and supports a variety of products ranging from individual
components, which are typically sold in volume, to complete systems that have
been fully configured, assembled and tested prior to delivery to its customers.
Robec's historic strategy has been to emphasize the sale of these complete
systems and to provide a high level of value-added services, including
consultation on component selection and system configuration and provision of
system assembly and testing and technical support services. As a result of
competitive pressures, reduced profit margins and the way in which other,
similar distributors have changed their businesses, Robec is now placing more
emphasis on telemarketing as its primary sales method. Robec also provides a
variety of training programs and educational seminars designed to enhance its
customers' technical capabilities. In March 1994, Robec began, in respect to new
customers, to discontinue its maintenance services and sales of spare parts and
supplies for microcomputers and related products. Robec believes that the
discontinuation of these services will not have a material effect on its
inventory or results of operations.
Robec's vendors include leading manufacturers such as Acer, Altos, Digi-Board,
Fujitsu, IBM, Okidata, Multi-tech Systems, Samsung, Texas Instruments, Unisys,
Wyse and Zenith. Robec focuses its marketing efforts on the products of a
limited number of key vendors in order to become one of the leading distributors
for each of its principal vendors. This enables Robec to develop product-
specific technical expertise that enhances its value-added support services.
Robec attempts to minimize competition among vendors' products while maintaining
some overlap to provide protection against product shortages or
discontinuations.
PRODUCTS
Robec seeks to maintain products from nationally-recognized vendors that
provide all the components most VARs require to fully configure their computer
systems. All new products are extensively tested prior to inclusion in Robec's
distribution network.
9
<PAGE>
The following is a description of the major categories of products currently
sold by Robec and the principal current vendors of those products.
Microcomputers--Robec distributes desktop and portable personal computers and
multiuser microcomputers manufactured by Acer, Altos, IBM, Samsung, Texas
Instruments, Unisys, Wyse and Zenith.
Printers--Robec distributes a broad line of dot matrix, laser and ink-jet
printers manufactured by Citizen, Fujitsu, Okidata and Texas Instruments.
Monitors and Terminals--Robec distributes monitors and terminals manufactured
by CTX, Qume, Relisys, Samsung, Sony, Unisys and Wyse.
Local Area Networks--A LAN permits microcomputers to communicate with one
another and to function on an integrated basis. Robec distributes LAN software
and specialized hardware products manufactured by Digi-Board, D-Link, Proteon,
Samsung, Unisys and Western Digital. Many of these products are offered with
Novell, Moses Computers or EMEX software.
Accessories and Supplies--Robec distributes hard and floppy disk drives, board
products, diskettes, stand-by power supplies, modems and other communications
products, accessories and supplies manufactured by numerous companies including
Boca Research, Colorado Memory Systems, Mountain Computer, Multi-Tech Systems,
Sony, UDS and 3M.
Software--Robec sells a variety of operating system and LAN software products
generally as part of its systems sales. Robec has also commenced the sale of
certain applications software. Among the manufacturers of these software
products are Data Access and Novell.
VENDOR RELATIONS
To maintain a strong relationship with its principal vendors, Robec focuses on
marketing the products of a limited number of key vendors. Robec selects its
product line to minimize competition among vendors' products while maintaining
some overlap to provide protection against product shortages or
discontinuations. In addition, Robec enhances its relationship with its vendors
by providing feedback on products, assisting in new product development, working
with vendors to develop marketing programs and offering vendors the opportunity
to provide seminars to Robec's customers at Robec facilities.
Robec, like most hardware distributors, sells products throughout the United
States for vendors on a non-exclusive basis without geographic restrictions.
Robec has distribution agreements with most of its vendors and believes they are
in the form customarily used by each vendor and generally contain provisions
which allow termination by either party upon as little as 30 days' notice. Most
of Robec's major distribution agreements provide price protection by giving
Robec a credit, subject to specified limitations, in the amount of any price
reductions by the vendor between the time of the initial sale to Robec and the
subsequent sale by Robec to its customer. Most of the major distribution
agreements also give Robec qualified return privileges on slow-moving inventory.
Robec's distribution agreements do not restrict Robec from selling similar
products manufactured
10
<PAGE>
by competitors. Any minimum purchase provisions in Robec's distribution
agreements are at levels that Robec believes do not impose significant risk.
From time to time, the demand for certain products sold by Robec exceeds the
supply available from the vendor. Robec believes that its ability to compete has
not been adversely affected to a material extent by these periodic shortages,
although sales may be adversely affected for an interim period. In order to
limit the impact of such shortages, Robec generally attempts to include
comparable products from more than one vendor in its product line and endeavors
to provide direction to its customers in their selection of products.
COMPETITION
- -----------
Competition in the distribution of microcomputer products is intense.
Principal national distributors are Ingram Micro D, Inc., Merisel, Inc. and Tech
Data Corporation. CDS Distribution and Robec also compete with numerous
manufacturers, resellers, retailers and regional distributors. Most of CDS
Distribution's and Robec's major competitors have substantially greater
financial resources than CDS Distribution or Robec, even on a combined basis.
Competition is primarily based upon availability of product, price, speed of
delivery, convenience, technical support and other support services. CDS
Distribution believes that it is generally competitive with respect to each of
these factors and that its principal, competitive advantages are its technical
support and other support services, and speed of delivery.
The software distribution industry is highly competitive. Competition within
the industry is based primarily on price and product availability, and to a
lesser extent on the speed of delivery and the level of marketing and other
services provided. Certain of Kenfil's competitors have substantially greater
financial resources than Kenfil. Kenfil's principal competitors include national
distributors such as Ingram Micro Inc. and Merisel, Inc., both of which
distribute hardware products in addition to software. In addition, Kenfil
competes with regional distributors and certain publishers that sell their
products directly to resellers. Because of the intense competition within the
industry, software distributors, including Kenfil, have low gross and operating
margins. Consequently, Kenfil's profitability is highly dependent upon effective
management and control of costs.
The manner in which microcomputer software products are distributed and sold
is changing, and new methods of distribution may emerge or expand. Software
publishers have sold, and may intensify their efforts to sell, their products
directly to resellers and end-users, including certain major reseller customers
of Kenfil. From time to time certain publishers have instituted programs for the
direct sale of large-order quantities of software to major corporate accounts,
and these types of programs may continue to be used by various publishers. In
addition, certain major publishers have implemented programs for master copy
distribution of software (site licensing). These programs generally grant an
organization the right to make any number of copies of software for distribution
within the organization provided that the organization pays a fee to the
publisher for each copy made. Also, publishers may attempt to increase the
volume of software products distributed electronically to end-user's
microcomputers. If these programs become more common or if other methods of
distribution of software become accepted, Kenfil's business and financial
results could be materially adversely affected. Kenfil believes that the total
range of services it provides to its customers cannot be easily substituted by
publishers, particularly because publishers do not offer the scope of services
or product offerings required by most of Kenfil's reseller customers. However,
there
11
<PAGE>
can be no assurance that publishers will not increase their efforts to sell
substantial quantities of software directly to resellers and end-users. Kenfil
believes that inflation has not had a material effect on its operations.
EMPLOYEES
- ---------
As of August 31, 1994, CDS Distribution had 190 full-time employees, including
90 persons employed in sales, sales support and marketing functions. None of CDS
Distribution's employees are covered by a collective bargaining agreement. CDS
Distribution considers its relations with its employees to be good.
As of June 30, 1994, Kenfil had 130 full-time employees. On July 5, 1994, the
operations of Kenfil were consolidated with those of CDS Distribution and the
number of Kenfil's employees was reduced to 38, including 11 temporary
employees, all 38 of whom are sales/marketing personnel or
administration/accounting personnel.
As of June 30, 1994, Robec had 195 full-time employees, including 79 persons
employed in sales, sales support and marketing functions. None of Robec's
employees are covered by a collective bargaining agreement. Robec considers its
relations with its employees to be good.
ITEM 2. PROPERTIES.
----------
AMERIQUEST
AmeriQuest's principal offices are located in leased facilities in Irvine,
California. AmeriQuest, CDS Distribution, Kenfil and CMS Enhancements are all
housed primarily in this facility, which consists of approximately 161,000
square feet of office and warehouse space. This facility will be lost to
AmeriQuest on December 31, 1994, at which time it will move its executive and
accounting offices to new office space. Although AmeriQuest has not yet
committed itself to a given location, in the opinion of management there is
sufficient office space readily available in the Irvine area to accommodate its
needs.
AmeriQuest and Kenfil's distribution facilities were consolidated at its
present location in Wilmington, Ohio. However, with the acquisition of Robec it
is likely that East Coast facilities will be maintained in Robec's facility in
Horsham, Pennsylvania, while only a small returns warehouse will be maintained
in California.
ROBEC
Robec's executive, administrative and main sales offices are located in
Robec's facility in suburban Philadelphia, Pennsylvania. This facility consists
of 36,000 square feet of office space and 69,000 square feet of warehouse space.
The current owner of this facility is a partnership affiliated with the
management of Robec.
Robec's branch offices generally consist of between 900 and 10,200 square feet
of office space, depending on market size. The Atlanta branch contains 19,200
square feet, including both
12
<PAGE>
office and warehouse space. Robec's branch offices are equipped with
standardized telephone, security and computer systems which Robec installs and
programs.
Robec leases all of its offices, four of which are leased from partnerships
affiliated with the management of Robec. The leases generally provide for a
base minimum rental per square foot. In addition, Robec is generally responsible
for its pro rata share of maintenance expenses for common areas, real estate
taxes and insurance. Robec is evaluating its current needs for branch offices
and expects to reduce both the number and sizes of its branch offices during
1994. Robec's current leases generally permit the early termination of the lease
upon payment of a penalty equal to the amount of one year's rent. If Robec
should desire to extend any of the current leases, Robec believes that
extensions on satisfactory terms, or alternative locations, generally would be
available, although there can be no assurance that Robec would be able to
negotiate further extensions of any particular lease.
Summary Table
- -------------
The following table sets forth information regarding the regional offices of
AmeriQuest and its subsidiaries.
<TABLE>
<CAPTION>
LOCATION SQUARE FEET LEASE EXPIRATION YEAR OPENED
- --------------------- ----------- ------------------- -----------
<S> <C> <C> <C>
AMERIQUEST
Irvine, CA 161,000 12/31/94 1990
Norcross, GA 2,050 mo.-mo. 1994
ROBEC
Asheville, NC(1) 10,200 9/09/94 1985
Atlanta, GA 19,200 1/31/95(2) 1985
Boston, MA 15,100 4/30/94(3) 1984
Chicago, IL 1,775 12/31/98(2) 1988
Denver, CO 2,300 10/31/95 1986
Kansas City, KS 977 9/30/98(2) 1988
Los Angeles, CA 4,169 6/30/98 1990
Orlando, FL 8,100 4/22/95 1990
Horsham, PA(1) 111,000 12/31/96 1978
Phoenix, AZ 27,500 9/30/94 1988
Salt Lake City, UT 2,300 12/31/95 1990
San Francisco, CA 1,680 5/6/98 1990
Seattle, WA 2,100 8/30/94 1990
Washington, DC(1) 7,600 12/31/95 1983
Youngstown, OH(1) 6,700 11/30/96 1983
- --------------
</TABLE>
(1) The Robec offices, which include the main offices and warehouse facility in
Horsham, Pennsylvania, are leased from partnerships affiliated with the
management of Robec. The main offices and warehouse facility in Horsham,
Pennsylvania contain 105,000 square feet, and the additional 6,000 square
feet included in the foregoing table reflects space in a
13
<PAGE>
warehouse that was closed in the first quarter of 1994 and formerly was
leased from an affiliated partnership. During the first quarter of 1994,
Robec entered into a lease with an affiliated partnership for 6,000 square
feet of retail space located in suburban Philadelphia.
(2) These leases have renewal options to extend the lease term for five years,
with rent based upon the then market rate or a specified formula.
(3) This lease has a renewal option to extend the lease term for two years,
with rent based upon the then market rate.
ITEM 3. LEGAL PROCEEDINGS.
-----------------
AmeriQuest is both a plaintiff and defendant from time-to-time in lawsuits
incidental to its business. The management of AmeriQuest believes that none of
such current proceedings individually or in the aggregate, will have a material
adverse effect on AMERIQUEST. While not expected to be of material effect to
the Company, Kenfil Inc. vs. RLI Insurance Company, Superior Court of the State
-------------------------------------
of California, County of Los Angeles, No. BC 108564 filed July 12, 1994,
involves litigation instituted by Kenfil Inc. to recover additional monies for
the damage it incurred in the Northridge earthquake of January 17, 1994. The
defendant cross-claimed on August 12, 1994 for return of the $840,000 it had
paid on claims submitted by Kenfil Inc., based on affidavits from former Kenfil
employees alleging that they had been instructed following the earthquake to
intentionally destroy additional inventory. The defendant's theory is that it
is not obligated to even cover that portion of the damage cause by the
earthquake because of the possible fraud involved with such actions; while the
management of Kenfil maintains that only that portion of damages actually
incurred by the earthquake were submitted as claimed losses. Although there are
pictures available to prove the actual damage immediately following the
earthquake, no assurance can be given that the defendant will not ultimately
prevail. The ability of Kenfil Inc. to satisfy any possible future judgement is
dependent on the results of its future operations. However, such a judgement
would not directly impact the other subsidiaries of AmeriQuest nor AmeriQuest
itself.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
On September 12, 1994, the shareholders of Kenfil and AmeriQuest approved
the proposed merger of "AmeriQuest/Kenfil Inc.," a wholly-owned subsidiary of
AmeriQuest, with and into Kenfil Inc. (the "Merger"). The Merger has since
become effective, and AmeriQuest is now the sole shareholder of
AmeriQuest/Kenfil Inc. In connection with the Merger, AmeriQuest issued
1,046,252 shares of its Common Stock to the Kenfil minority shareholders,
1,894,360 shares to the holders of Kenfil Inc's subordinated debt and 2,788,353
shares to Kenfil Inc's vendors. The vote on this matter was 6,636,184 shares
FOR, 21,000 shares AGAINST and 2,815 shares ABSTAINED.
In order to accommodate the Merger, the shareholders of AmeriQuest also
approved an amendment to AmeriQuest's Certificate of Incorporation to increase
the number of authorized shares of Common Stock of AmeriQuest from 10,000,000
shares to 30,000,000 shares. The vote on this matter was 6,875,775 shares FOR,
25,129 shares AGAINST and 3,997 shares ABSTAINED. A total of 11,005,625 shares
were outstanding and entitled to vote on the record date.
14
<PAGE>
ITEM 4A. EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The following table sets forth certain information regarding the current
officers of AmeriQuest.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------ --- ---------------------------------------------------------------
<S> <C> <C>
Harold L. Clark 58 Director, Co-Chairman and Chief Executive Officer
Gregory A. White* 42 Director*, President* and Chief Operating Officer*
Stephen G. Holmes 48 Director, Secretary/Treasurer and Chief Financial Officer
Carol L. Miltner 52 Executive Vice President--Sales & Marketing
Howard B. Crystal 49 Senior Vice President - Marketing and Purchasing
Peter D. Lytle 37 Senior Vice President--Operations
William F. Gibson III 40 Vice President and Comptroller
Peter S. H. Grubstein 39 Senior Vice President
Irwin A. Bransky 43 President and Chief Executive Officer of AmeriQuest/Kenfil Inc.
Robert H. Beckett** 61 Director** and President of Robec, Inc.
- --------------
</TABLE>
* Mr. White will be appointed to the Board of Directors and elected President
and Chief Operating Officer upon the acquisition of NCD.
** Mr. Beckett will be appointed to the Board of Directors at its next
meeting.
The officers are elected by the Board of Directors and serve at the
discretion of the Board of Directors, subject, however, to the provisions of
their Employment Agreements, which provide for severance payments in the event
of termination for other than "cause," as defined in each employment agreement.
The severance rights range from one to two years of salary, during which time
they are prohibited from competing with AmeriQuest or its subsidiaries.
Harold L. Clark was named President and Chief Executive Officer of
AmeriQuest on December 3, 1993. He was appointed to serve as a Director on March
4, 1994. Prior to December 1993 he served as President and Chief Executive
Officer of CDS Distribution, Inc., a subsidiary of AmeriQuest, from April 1993
to December 1993. From February 1991 to December 1992, he served as President,
Chief Operating Officer and Director of Everex Systems, Inc. ("Everex"). From
1989 through 1991, he served as a computer industry consultant. From 1984 to
1989, he served as the President of Ingram Micro, Inc. Dr. Clark received a B.S.
Degree from Bryant College, an MBA from Pepperdine University, and has earned a
Doctor of Education Degree from Nova University.
*Gregory A. White will join AmeriQuest upon the acquisition of NCD by
AmeriQuest as a Director and as President and Chief Operating Officer. Mr.
White has served as President and Chief Executive Officer of NCD for more than
the last five years. Mr. White holds a Master of Science degree in Management
Sciences from the University of South Florida.
Stephen G. Holmes joined AmeriQuest as its Chief Financial Officer,
Secretary and Treasurer in January 1992, after serving as a general partner and
a managing partner of Arthur Andersen & Co. from 1978 until 1992. Mr. Holmes was
appointed to serve as a Director on March 4, 1994. Mr. Holmes was educated at
the University of Colorado and the University of Rochester, from which he
received a B.S. degree, and is licensed to practice as a certified public
accountant in the State of California and other states.
15
<PAGE>
Carol L. Miltner joined AmeriQuest in December 1993 as Executive Vice
President--Sales & Marketing. From April 1991 to December 1993, she conducted
her own consulting and seminar business on sales techniques in the computer
industry. From April 1989 to April 1991 she served as Senior Vice President of
Sales for Merisel. From 1985 to April 1989 she served as Senior Vice President
of Sales for Micro D, Inc.
Howard B. Crystal joined AmeriQuest in July, 1994 as Senior Vice President
- - Marketing and Purchasing. From October 1992 to July 1994 he served as
President of AmeriWats, Inc., a telecommunications company. From February 1991
to July 1993 he served as Senior Vice President - Sales and Marketing for
Everex, Inc. From May 1989 to February 1991 he served as Senior Vice President
- - Sales and Marketing for TechData. Mr. Crystal holds a Bachelor of Science in
Electrical Engineering from the New Jersey Institute of Technology and an MBA
from Rutgers University.
Peter D. Lytle joined AmeriQuest in December 1993 as Senior Vice President-
- -Operations. From 1983 to September 1993 he was employed by InaCom Corporation
and its predecessors, where his last position was Regional President/General
Manager--California. Mr. Lytle is a Certified Public Accountant and holds a
Bachelor of Arts degree in Business Administration with an emphasis in
accounting from Western Michigan University.
William F. Gibson III joined AmeriQuest in June 1988, and since January,
1994 has been the Vice President and Comptroller of AmeriQuest. He is a
Certified Public Accountant and holds a Bachelor of Science degree from
University of California--Berkeley in Business Administration.
Peter S. H. Grubstein served as Chief Operating Officer of Kenfil Inc. from
January 1994 until its acquisition was completed on September 12, 1994. Prior
to his involvement with Kenfil Inc., he served as President of Grubstein
Holdings Ltd., a private equity investment firm for more than five years. Mr.
Grubstein holds a bachelor's degree from Yale College.
Irwin A. Bransky founded Kenfil Inc. in 1983 and has been President and
Chief Executive Officer of Kenfil Inc. since that time. Mr. Bransky holds a
B.S. degree in Business Administration and a master's diploma in Personnel
Administration from the Graduate School of University of Witwaterstrand, South
Africa.
Robert H. Beckett has served as the President and Chief Executive Officer
of Robec, Inc. for more than the last five years. Mr. Beckett holds a Bachelor
of Science degree in Mechanical Engineering from Worcester Polytechnic
Institute.
16
<PAGE>
Part II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
---------------------------------------------------------------------
The following table sets forth the market prices for the shares of Common
Stock of AmeriQuest. The prices reflect the high and low closing prices quoted
on the New York Stock Exchange for each calendar quarter since December 31,
1991.
<TABLE>
<CAPTION>
AMERIQUEST
----------
1992 High Low
- ---------------------- ------ ------
<S> <C> <C>
First Quarter $3 3/4 $2 3/8
Second Quarter 3 1 1/2
Third Quarter 2 1/4 1 1/4
Fourth Quarter 3 5/8 2
1993
- ----------------------
First Quarter 3 3/8 2
Second Quarter 3 5/8 2
Third Quarter 3 1/4 2
Fourth Quarter 5 3/4 2 1/2
1994
- ----------------------
First Quarter 6 4 1/8
Second Quarter 4 1/8 3
Third Quarter 4 1/4 3 1/8
- --------------------------------------------
</TABLE>
On September 30, 1994, the stock of AmeriQuest closed at $3.25 per share on the
New York Stock Exchange.
As of August 22, 1994 AmeriQuest had approximately 531 shareholders of record
and Kenfil had approximately 117 shareholders of record.
17
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data has been derived from
and should be read in conjunction with the audited consolidated financial
statements of AmeriQuest, and the notes thereto, and with "Management's
Discussion and Analysis of Results of Operations and Financial Condition",
included elsewhere herein and incorporated herein by this reference (dollars in
thousands, except per share data).
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
1994 1993 1992 1991 1990
----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Net sales (1) $ 87,593 $ 73,082 $ 115,053 $ 130,062 $ 187,724
Income (loss) before taxes (7,971) 236 (9,623) (12,027) 652
Net income (loss)(2) (7,971) 236 (8,893) (8,501) 405
Earnings (loss) per share (1.33) 0.08 (3.04) (2.89) 0.13
Total assets 65,145 20,274 23,522 40,747 41,084
Long-term obligations 3,442 1,817 274 1,851 1,134
Stockholders' equity 12,875 8,644 7,952 16,806 26,065
Weighted average
shares outstanding 5,973,511 3,060,908 2,921,588 2,941,666 3,155,756
</TABLE>
(1) The sales increase in 1994 compared to 1993 was largely due to the
initiation of a broader distribution strategy. Year to year sales declines
from 1991 to 1993 were principally due to an eroding customer base and
reduced emphasis on commodity products.
(2) Losses in 1994, 1992 and 1991 related principally to corporate
restructurings in 1994 and 1992 and erosion of the customer base in 1991 to
1993 not offset by operating cost decreases.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
Business Strategy
AmeriQuest is following a business strategy of growth by acquisition,
consistent with the consolidation that is occurring in the maturing personal
computer market place. This strategy creates the following risks involving the
ability to successfully:
- Consolidate the operations of previously unaffiliated businesses, some of
which were unprofitable
- Combine the business cultures of diverse operations
- Obtain adequate capital resources to complete acquisitions and working
capital required for continuing operations
The following reflects the net changes in each specified account as regards the
implementation of the business strategy of the Company:
18
<PAGE>
<TABLE>
<CAPTION>
Increase (Decrease) During the Period
------------------------------------------------------
Quarter Ended Year Ended Year Ended
September 30, June 30, 1994, June 30, 1993,
1994, Compared to Compared to Compared to
Quarter Ended Year Ended Year Ended
June 30, 1994 June 30, 1993 June 30, 1992
------------------ --------------- ---------------
(Dollars in Thousands)
<S> <C> <C> <C>
Sales
Due to acquisitions $20,817 $14,267 $ 3,102
Continuing operations 4,042 244 (28,637)
Restructuring - - (16,436)
Net change 24,859 14,511 (41,971)
Gross Profit
Due to acquisitions 1,913 771 434
Continuing operations (79) 256 1,855
Restructuring - - (1,792)
Net change 1,834 1,027 497
Operating Expenses
Due to acquisition 1,845 2,598 547
Continuing operations (2,483) 490 (3,009)
Restructuring (700) 5,700 (6,575)
Net change (1,338) 8,788 (9,037)
Other (income) Expense
Due to acquisition 357 544 38
Continuing operations (57) (98) 367
Net change 300 446 (325)
Net Income
Due to acquisition (289) (2,371) (151)
Continuing operations 2,461 (136) 4,497
Restructuring charge 700 (5,700) 4,783
Net change 2,782 (8,207) 9,129
</TABLE>
The working capital for these changes has generally been provided by bank credit
line facilities and the issuance of common stock as to acquisitions.
Net Sales
AmeriQuest is in a single line of business, namely the distribution of
personal and other computing hardware and software products. AmeriQuest has
also emphasized value-added assembly of certain products, limited in fiscal year
1994 to mass storage devices. In prior years, operations emphasized the
assembly of personal computers, which efforts have been discontinued with
restructured operations focusing on broader based distribution of the products
of others.
19
<PAGE>
During the year ended June 30, 1994, with emphasis upon a broader based
distribution strategy net sales increased 20% as contrasted with the prior year.
For the year ended June 30, 1993, net sales decreased 36% from the prior year
due primarily to erosion of the then customer base of AmeriQuest and reduced
emphasis on commodity products. In fiscal year 1994 the customer erosion
experienced in the prior year was more than offset by the operational activities
of the acquired entities.
Sales returns and allowances are not a significant economic risk to
AmeriQuest, and generally average less than 10% percent of sales. Separately,
an integral aspect of AmeriQuest's business is to exchange products sold to
customers which are either incompatible units or do not work for a variety of
technical and other reasons. If such products are ultimately determined to be
defective, AmeriQuest, under contract terms with its vendors, is able to return
such products to its vendors. Under such exchange arrangements AmeriQuest's
economic risk is nominal and generally limited to the costs of freight and
technical services, both current period charges to expense. Price concessions
to larger customers are generally arranged under pre-determined contractual
provisions and are not significant. An aggregate warranty and returns reserve
of approximately $1 million is reflected in the balance sheet of AmeriQuest at
June 30, 1994.
Inasmuch as the Company began its distribution operations in December 1993,
the effect of market development funds received through June 30, 1994, was not
significant.
The Company manages its inventories by maintaining sufficient quantities to
achieve high order fill rates while at the same time attempting to stock only
those products in high demand with a rapid turnover rate. Inventory balances
will fluctuate as the Company adds new product lines and when appropriate, makes
large purchases and cash purchases from manufacturers when the terms of such
purchases are considered advantageous. The Company's contracts with most of its
vendors provide price protection and stock return privileges to reduce the risk
of loss to the Company due to manufacturer price reductions and slow moving or
obsolete inventory. In the event of a vendor price reduction, the Company
generally receives a credit for products in inventory. In addition, the Company
has the right to return a certain percentage of purchases, subject to certain
limitations. Historically, price protection and stock return privileges as well
as the Company's inventory management procedures have helped to reduce the risk
of loss of carrying inventory.
Cost of Sales and Gross Profit
During the year ended June 30, 1994, cost of sales was 86% of net sales due
principally to intense price competition for AmeriQuest's products, combined
with reserves established to reflect the price erosion on certain products. For
fiscal 1993, cost of sales was approximately 84%, also due principally to
intense price competition for AmeriQuest's products, combined with reserves
established to reflect the price erosion on certain products. Cost of sales for
the year ended June 30, 1992 was approximately 90% reflecting the effect of
reserves to adjust the cost of AmeriQuest's inventories to market price.
AmeriQuest has operated to more than offset the otherwise adverse effects of
declining gross margins in its industry by emphasizing higher value-added
products, however, while margins per se have been maintained and even increased,
such margin pressures served to reduce the breadth of AmeriQuest's commodity
product lines and the net sales level achieved historically.
20
<PAGE>
Operating Expenses
For the years ended June 30, 1994, 1993 and 1992, selling, general and
administrative expenses were approximately 16%, 14% and 12% of net sales, as
AmeriQuest beginning in 1992 expanded its employee base and acquired new
facilities to support additional product lines to accommodate revenue growth.
In 1994 and 1992 AmeriQuest restructured its operations and related charges
aggregated $5.7 million and $4.5 million. The components of the restructuring
charges for each period presented follow (dollars in thousands):
<TABLE>
<CAPTION>
Year ended June 30,
----------------------------
<S> <C> <C>
1994 1992
------ ------
Employee terminations $ 500 $1,100
Facilities abandonment 300 --
Discontinued product lines 4,900 3,400
------ ------
$5,700 $4,500
====== ======
</TABLE>
Inasmuch as these restructurings were initiated in the middle of each respective
fiscal year, the efforts were largely completed by each year end and the related
expenditures were largely incurred at those dates. The discontinued product
lines related to the then direct manufacture of both personal computers and tape
drive storage units utilizing proprietary designs with open architecture to the
myriad of compatible personal computing hardware and software available in the
marketplace. Such discontinuance was part and parcel to the current emphasis on
distribution per se of products generally manufactured and assembled by others.
The quantification of the components of the restructurings follows:
<TABLE>
<CAPTION>
Tape Drive
Personal Computer Storage Unit
Manufacture Manufacture
----------------- -------------
<S> <C> <C>
Employee terminations
Number 40 130
Location Irvine, CA Singapore;
Irvine, CA
Facilities abandonment
Square footage 20,000 Sublet
Continuing lease
obligations
Amount per month $10,000 -
Product discontinuance
Capitalized software 1,700 -
Equipment - 200
Loss on inventory
disposition 1,800 3,200
Contractual obligations
Manufacturing 1,100 -
Marketing, other 300 -
</TABLE>
21
<PAGE>
All related costs were largely incurred prior to each fiscal year end, except
for the following accruals as to the 1994 restructuring:
Date Amount
---- ------
Lease obligations Through 1995 $200
Accruals Through 1994 $200
The benefits that inurred to AmeriQuest apart from the discontinuance of
unprofitable manufacturing per se, were related to refocusing upon distribution
and the core strengths inherent within AmeriQuest. Losses reported by AmeriQuest
in 1992 and 1994, apart from restructuring charges, were largely related to
these former manufacturing operations.
Operating Results
Annual and quarterly operating results for Far Eastern activities of the
Company are relatively consistent from period to period in 1994, 1993 and 1992,
without regard to the discontinuance of the tape drive assembly operation in
Singapore in 1992. The annual and quarterly operating results of the domestic
operations of the Company during the three years ended June 30, 1994, have
varied considerably during the transition over which the former emphasis on
manufacturing was largely phased out for all but mass storage assembly of disk
drives, in favor of an increased emphasis on broad line distribution of the
products of many manufacturers and other suppliers. During this transition
period revenue as well as cost variations are largely a function of manufactured
product line discontinuances offset by revenue increases from acquired
distribution operations.
Research and Development
AmeriQuest significantly curtailed its research and development expenditures
beginning in fiscal year 1993 as AmeriQuest began to emphasize its distribution
capabilities and thus reliance upon the products of others. Such research and
development expenditures aggregated .03% of net sales in fiscal 1994 and in
excess of 1% of net sales in 1993 and 1992 and relate to the assembled storage
products of AmeriQuest. The decreased emphasis on research and development may
ultimately limit any competitive advantages of the Company as regards mass
storage product development.
Interest Expense
Interest expense increased during the fiscal year ended June 30, 1994, to .8%
of net sales, as contrasted to prior year costs, as a result of AmeriQuest's
reliance on its bank line of credit to finance increased accounts receivable and
inventories. During the year ended June 30, 1992, interest expense decreased to
.4% of net sales from .5% for fiscal year 1993.
Income Taxes
In the years ended June 30, 1994 and 1993 no income tax expense resulted due
to losses or the availability of tax operating loss carry forwards. For the
year ended June 30, 1992, AmeriQuest reported a tax benefit of approximately 8%
of pretax losses, resulting from the carryback of AmeriQuest's tax losses to
prior periods.
Inflation
To date, AmeriQuest has not been significantly affected by inflation.
Moreover, technological changes in the electronics industry have generally
resulted in price reductions, despite increases in
22
<PAGE>
certain costs which may be affected by inflation. In addition, many electronic
components of comparable quality can currently be purchased outside of the
United States at favorable prices.
Liquidity and Capital Resources
Beginning in 1993 and reaching a much greater activity level in mid 1994 and
continuing thereafter, acquisitions have largely been funded through the direct
issuance of Common Stock of AmeriQuest, coupled with supplemental cash proceeds
from private placement offerings to unrelated parties. This profile is expected
to continue for future acquisitions. The proposed disposition of an Asian
subsidiary is solely for AmeriQuest stock previously issued, without the use or
benefit of cash resources. The actual and pro forma effects of these
transactions are reflected in the unaudited pro forma condensed consolidated
balance sheet contained elsewhere herein.
In fiscal years 1994 and 1992 AmeriQuest initiated a restructuring to focus
the scope of its operations on distribution. Such restructuring spanned
organizational aspects of joint venture operations, product and production
alignment, market channel and customer delineation, vendor arrangements and
personnel capabilities. Generally the restructuring involved reducing the
emphasis on assembly operations, other than for storage devices, and focusing on
distribution operations. As previously stated, aggregate charges of this effort
which was substantially completed in each respective period, approximated $4.5
million in fiscal 1992 and $5.7 million in fiscal 1994. The concurrent use of
cash resources for these charges was largely provided by proceeds from the
liquidation of inventories and the issuance of Common Stock.
As AmeriQuest introduced products which carry higher gross margins than do the
commodity products which historically accounted for much of AmeriQuest's
revenues, available working capital was invested in higher levels of inventories
in fiscal year 1994. During the years ended June 30, 1993 and 1992, AmeriQuest
concentrated on reducing levels of inventories. In this regard AmeriQuest
liquidated a significant percentage of its cost reserved inventory in those
years.
<TABLE>
<CAPTION>
Year ended June 30,
(Dollars in thousands)
1994 1993 1992
-------- -------- -------
<S> <C> <C> <C>
Inventory at June 30,
net of reserve $24,165 $ 7,000 $ 8,586
======= ======= =======
Beginning balance $ 3,096 $ 7,425 $ 8,657
Charged to expense 1,714 633 3,388
Deductions from
disposition (2,177) (4,962) (4,620)
------- ------- -------
Ending balance $ 2,633 $ 3,096 $ 7,425
======= ======= =======
</TABLE>
Thus the inventory reserve decreased significantly during fiscal years 1992 to
1994 due to the liquidation of aged inventory and at the same time inventories
increased appreciably in fiscal 1994
23
<PAGE>
related to the inventory stock of acquired businesses, recorded net of any
valuation reserve and thus any former reserves are not reflected per se. As to
--- --
receivables, those accounts of acquired businesses are reflected at the date of
acquisition at amounts expected to be collected, without reserves established as
a separate item and thus during fiscal year 1994 the appreciable increase in
acquired accounts receivable is not matched with a proportionate increase in the
collectibility reserve. Inasmuch as the acquisitions of AmeriQuest have occurred
throughout fiscal year 1994, a determination of inventory turns and days' sales
in receivables at June 30, 1994 is not meaningful based upon aggregate fiscal
year 1994 reported sales by AmeriQuest.
In the distribution segment of its operations, AmeriQuest and its competitors
are subject to continual technological changes and relatively short product
marketing cycles, generally less than a year in duration. As such, AmeriQuest,
in order to be competitive,, must maintain efficient sales and marketing staffs.
AmeriQuest monitors the average daily sales of its current product lines and
provides reserves generally as it experiences price erosion approaching the net
realizable value of each product class and deterioration in its prior sales
volumes of each product cycle.
As to its storage products, AmeriQuest is subject to component availability
and thus the need to stock sufficient raw materials to effect a continuous flow
of finished goods. The liquidation of component parts other than in the
ordinary course of business as finished products, is a speculative arena and
typically the liquidating value of components is at substantial discounts (up to
90% discount by brokerage) and thus the realization of inventory costs is highly
dependent upon continued business operations.
Cash utilized in operations was approximately $8.4 million in 1994. During
1993 cash generated from operations exceeded $1.2 million and the restructuring
in 1992 was offset by operating asset decreases resulting in cash generated from
operations of approximately $2.7 million. In 1994, 1993 and 1992 property
purchases were limited to approximately $1.5 million, $1.3 million and $.3
million, respectively. Bank borrowings increased by approximately $23 million
in 1994 (of which, approximately $19 million was assumed in acquisitions of
businesses), principally utilized to fund acquired assets. Borrowings in 1993
and 1992 were highly variable and did not exceed $3.6 million and $7.6 million,
respectively, during those years. In 1994 stock issuances supplemented borrowed
resources and were largely required to complete the business acquisitions of
AmeriQuest and fund the restructuring. The net effect of these operating,
investing and financing cash flows over the three year period ended June 30,
1994 was a positive cash flow, with net cash generated in 1994 and 1993 of $2.2
million and approximately $.3 million, respectively, and with a net cash use of
$.9 million in 1992.
The management of the Company expects to implement a cost reduction and
efficiency program for its core distribution operations during fiscal year 1995
in an effort to eliminate the continuing impact of those attributes which
created the cash loss from operations of $8.4 million realized in 1994. This
program will focus on centralized administrative operations, product procurement
efficiencies and a continuing cost/benefit analysis of resource allocation.
At September 1994, AmeriQuest has working capital lines of credit of over $50
million, including a $20 million facility extended to Robec, Inc. Borrowings
under these accounts bear interest at from 1 to 3 percent over the prime rate
and are limited to specified percentages of AmeriQuest's eligible accounts
receivable (a borrowing base in excess of $20 million) and inventories (a
borrowing base of over $20 million).
24
<PAGE>
AmeriQuest has leased facilities for its U.S. operations with aggregate
monthly rental expense of approximately $100,000 at June 30, 1994. Other lease
obligations of AmeriQuest aggregate approximately $30,000 per month at June 30,
1994. No material commitments are in place as to required capital expenditures
at June 30, 1994.
In November 1994 the Company entered into an agreement to sell a controlling
interest, 51%, of it's common stock to Computer 2000 A.G., a publicly held
German company in the same line of business. The aggregate proceeds of $50
million are scheduled for injection to the Company in late 1994 as to $18
million and in September 1995 as to the remaining $32 million. Such proceeds,
when coupled with the existing cash and credit resources of the Company, should
allow for reasonable continued expansion of the operations of the Company.
Management believes that its existing product lines will enable AmeriQuest to
generate sufficient cash through operations, supplemented by the periodic use of
its lines of credit, to finance a continuation of AmeriQuest's existing business
over the next twelve months. However, as AmeriQuest continues planned
acquisitions, significant cash resources will be required to effect this effort.
There is no assurance that required funds for planned acquisitions will be
available, or that sufficient funds can either be obtained or if available, that
such funds can be secured at commercially acceptable rates or costs.
Proposed Accounting Standards
The Financial Accounting Standards Board has proposed certain accounting
standards which may impact the financial reporting of AmeriQuest in future
periods. If adopted, and principally related to post retirement and employment
benefits, such proposed standards would not have a material impact on the
financial statements of AmeriQuest.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The financial statements, notes thereto, and the report of independent public
accountants thereon are included herein. Supplementary data, including
quarterly financial information, is included following the financial statements.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
25
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------
The following table sets forth certain information regarding the current
directors and officers of AmeriQuest.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------- --- ---------------------------------------------------------------
<S> <C> <C>
Marc L. Werner* 37 Chairman of the Board of Directors
Eric J. Werner* 32 Director
Terren S. Peizer 35 Director
William N. Silvis 67 Director
William T. Walker, Jr. 63 Director
Robert H. Beckett** 61 Director**, President of Robec, Inc.
Harold L. Clark 58 Director, Co-Chairman and Chief Executive Officer
Gregory A. White*** 42 Director***, President*** and Chief Operating Officer***
Stephen G. Holmes 48 Director, Secretary/Treasurer and Chief Financial Officer
Carol L. Miltner 52 Executive Vice President--Sales & Marketing
Howard B. Crystal 49 Senior Vice President - Marketing and Purchasing
Peter D. Lytle 37 Senior Vice President--Operations
William F. Gibson III 40 Vice President and Comptroller
Peter S. H. Grubstein 39 Senior Vice President
Irwin A. Bransky 43 President and Chief Executive Officer of AmeriQuest/Kenfil Inc.
- --------------
</TABLE>
* Messrs. Marc L. Werner and Eric J. Werner are first cousins.
** Mr. Robert H. Beckett will be appointed to the Board at its next meeting
pursuant to the Amended and Restated Agreement and Plan of Reorganization
dated as of August 11, 1994 (the "Robec Acquisition Agreement") pursuant to
which AmeriQuest will acquire Robec, Inc. AmeriQuest is also obligated
under the Robec Acquisition Agreement to nominate Mr. Beckett for
reelection to the Board of Directors each of the next two years.
*** Mr. White will be appointed to the Board of Directors and elected President
and Chief Operating Officer pursuant to the Agreement and Plan of
Reorganization dated September 26, 1994 (the "NCD Acquisition Agreement")
pursuant to which AmeriQuest will acquire NCD. AmeriQuest is also
obligated under the NCD Acquisition Agreement to nominate Mr. White for
reelection to the Board of Directors so long as Mr. White is employed by
AmeriQuest.
Marc L. Werner has been employed by Werner Co. since 1986, and currently
serves as Treasurer, Chief Financial Officer and Director for Werner Co. and
various companies affiliated with Werner Co. Mr. Werner is a Certified Public
Accountant, and holds a Bachelor of Science degree in Accounting from Northern
Illinois University.
Eric J. Werner has been employed by Werner Co. since 1988, and currently
serves as Secretary, General Counsel and Director for Werner Co. and various
companies affiliated with Werner Co. Mr. Werner holds a Bachelor of Science
degree in Industrial Engineering from Pennsylvania State University and a
Jurisprudence Doctorate degree from Boston University--School of Law.
26
<PAGE>
Terren S. Peizer is an independent, full-time investor. For the last five
years he has been engaged in his investment activities first as President of
Financial Group Holdings, Inc. and subsequently as President of Beachwood
Financial Company, Inc. Mr. Peizer also serves as a Director of Urethane
Technologies, Inc.
William N. Silvas joined AmeriQuest's Board of Directors in December 1988. He
has served as General Manager, Commercial Products Division, of Research and
Development Laboratory, Inc. from 1987 to the present. From 1986 to 1987, Mr.
Silvis was self-employed as a management consultant for various companies,
including AmeriQuest. From 1984 to 1986, Mr. Silvas was Senior Vice President
of Sales and Marketing for Gateway Computer, a retail computer products chain.
Previously, he had been employed by IBM for 31 years in various sales and
management positions.
William T. Walker, Jr. has been the principal of Walker Associates, a
corporate financial consultant for investment banking, since 1985. From 1969
through 1985, he was employed by Bateman Eichler, Hill Richards, a Los Angeles
based investment banker, in various capacities, including serving on its Board
of Directors and Executive Committee, and as Executive Vice President, Manager
of Investment Banking and Chairman of the Underwriting Committee. Mr. Walker has
been a Member of the Board of Directors of the Securities Industry Association,
a Governor of the Pacific Coast Stock Exchange and has served on the American
Stock Exchange Advisory Committee. Mr. Walker also serves as a Director of Go-
Video, Inc. and Fortune Petroleum.
Robert H. Beckett has served as the President and Chief Executive Officer of
Robec, Inc. for more than the last five years. Mr. Beckett holds a Bachelor of
Science degree in Mechanical Engineering from Worcester Polytechnic Institute.
Harold L. Clark was named President and Chief Executive Officer of AmeriQuest
on December 3, 1993. He was appointed to serve as a Director on March 4, 1994.
Prior to December 1993 he served as President and Chief Executive Officer of CDS
Distribution, Inc., a subsidiary of AmeriQuest, from April 1993 to December
1993. From February 1991 to December 1992, he served as President, Chief
Operating Officer and Director of Everex Systems, Inc. ("Everex"). From 1989
through 1991, he served as a computer industry consultant. From 1984 to 1989, he
served as the President of Ingram Micro, Inc. Dr. Clark received a B.S. Degree
from Bryant College, an MBA from Pepperdine University, and has earned a Doctor
of Education Degree from Nova University.
*Gregory A. White will join AmeriQuest upon the acquisition of NCD by
AmeriQuest as a Director and as President and Chief Operating Officer. Mr.
White has served as President and Chief Executive Officer of NCD for more than
the last five years. Mr. White holds a Master of Science degree in Management
Sciences from the University of South Florida.
Stephen G. Holmes joined AmeriQuest as its Chief Financial Officer, Secretary
and Treasurer in January 1992, after serving as a general partner and a managing
partner of Arthur Andersen & Co. from 1978 until 1992. Mr. Holmes was appointed
to serve as a Director on March 4, 1994. Mr. Holmes was educated at the
University of Colorado and the University of Rochester, from which he received a
B.S. degree, and is licensed to practice as a CPA in the State of California and
other states.
27
<PAGE>
Carol L. Miltner joined AmeriQuest in December 1993 as Executive Vice
President--Sales & Marketing. From April 1991 to December 1993, she conducted
her own consulting and seminar business on sales techniques in the computer
industry. From April 1989 to April 1991 she served as Senior Vice President of
Sales for Merisel. From 1985 to April 1989 she served as Senior Vice President
of Sales for Micro D, Inc.
Howard B. Crystal joined AmeriQuest in July, 1994 as Senior Vice President -
Marketing and Purchasing. From October 1992 to July 1994 he served as President
of AmeriWats, Inc., a telecommunications company. From February 1991 to July
1993 he served as Senior Vice President - Sales and Marketing for Everex, Inc.
From May 1989 to February 1991 he served as Senior Vice President - Sales and
Marketing for TechData. Mr. Crystal holds a Bachelor of Science in Electrical
Engineering from the New Jersey Institute of Technology and an MBA from Rutgers
University.
Peter D. Lytle joined AmeriQuest in December 1993 as Senior Vice President--
Operations. From 1983 to September 1993 he was employed by InaCom Corporation
and its predecessors, where his last position was Regional President/General
Manager--California. Mr. Lytle is a Certified Public Accountant and holds a
Bachelor of Arts degree in Business Administration with an emphasis in
accounting from Western Michigan University.
William F. Gibson III joined AmeriQuest in June 1988, and since January, 1994
has been the Vice President and Comptroller of AmeriQuest. He is a Certified
Public Accountant and holds a Bachelor of Science degree from University of
California--Berkeley in Business Administration.
Irwin A. Bransky founded Kenfil Inc. in 1983 and has been President and Chief
Executive Officer of Kenfil Inc. since that time. Mr. Bransky holds a B.S.
degree in Business Administration and a master's diploma in Personnel
Administration from the Graduate School of University of Witwaterstrand, South
Africa.
Peter S. H. Grubstein served as Chief Operating Officer of Kenfil Inc. from
January 1994 until its acquisition was completed on September 12, 1994. Prior
to his involvement with Kenfil Inc., he served as President of Grubstein
Holdings Ltd., a private equity investment firm. Mr. Grubstein holds a
bachelor's degree from Yale College.
28
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
----------------------
The following table provides information concerning the annual and long-term
compensation of the Chief Executive Officer of AmeriQuest and each of the four
other highest paid executive officers who served as such at the end of fiscal
year 1994 for services rendered to AmeriQuest and its subsidiaries in all
capacities during the fiscal years 1994, 1993 and 1992.
<TABLE>
<CAPTION>
Long-Term All Other
Annual Compensation/(1)/ Compensation Compensation
------------------------- -------------------- ------------
Name and Stock Option
Principal Position Year Salary Bonus Awards (shares)/(2)/
- -------------------------- --------- -------------- -------- --------------------
<S> <C> <C> <C> <C> <C>
Harold L. Clark, 1994 $134,861/(3)/ -0- 250,000 shs. -0-
President and 1993 $ 18,000/(3)/ -0- -0- -0-
Chief Executive 1992 -0- -0- -0- -0-
Officer
Carol L. Miltner, 1994 $ 75,000 $28,125 100,000 shs. -0-
Executive Vice 1993 -0- -0- -0- -0-
President - 1992 -0- -0- -0- -0-
Sales and Marketing
Stephen G. Holmes, 1994 $130,819 -0- 100,000 shs. -0-
Secretary/Treasurer 1993 $100,000 -0- -0- -0-
Chief Financial 1992 $ 43,590 -0- -0-
Officer
Michael J. Rusert/(4)/, 1994 $130,050 -0- 100,000 shs.(4) 136,762(4)
Executive Vice 1993 $104,200 $15,000 -0- -0-
President and 1992 $ 63,859 -0- -0- -0-
Chief Operating Officer
Peter D. Lytle, 1994 $ 56,139 -0- 40,000 shs. -0-
Senior Vice 1993 -0- -0- -0- -0-
President - 1992 -0- -0- -0- -0-
Operations
Jim Farooquee/ (5)/ 1994 $ 36,717 -0- -0- $611,602
Former President 1993 $160,000 -0- -0- -0-
and Chief 1992 $160,700 -0- -0- -0-
Executive
Officer
</TABLE>
_________________________________
(1) In fiscal years 1994 and 1993, no executive officer received perquisites or
other personal benefits, securities or property which exceeded the lesser of
$50,000 or 10% of such executive officer's salary and bonus. Information
with respect to such types of compensation for years prior to fiscal year
1993 is not required to be provided.
(2) Stock options awarded in fiscal 1994 were non-qualified stock options
exercisable at $2.00 per share and are subject to the approval of
shareholders.
(3) Includes compensation received as a consultant in the applicable period in
the amounts of $59,861 and $18,000, respectively.
29
<PAGE>
(4) Michael J. Rusert left AmeriQuest on October 4, 1994. Upon his departure he
received a severance payment equal to nine months of salary ($112,500),
accrued but unpaid vacation pay ($12,262), the forgiveness of indebtedness
($12,000) and vested, non-qualified stock options exercisable at $2.00 per
shares (50,000 options). He was entitled to receive salary for two-years,
but elected to forego that right for the severance compensation described
above. He will be replaced by Mr. Gregory A. White, currently the President
of NCD. See "Item 4A. Executive Officers of the Registrant."
(5) On February 11, 1994, Mr. James Farooquee resigned his position as President
and Chief Executive Officer of AmeriQuest in lieu of $750,000 of severance
pay, Mr. Farooquee received $200,000 cash and forgiveness of his
indebtedness to AmeriQuest in the amount of $411,602. Mr Farooquee also
cancelled his claims for continuation of stock options earlier granted and
payment of accrued but unpaid vacation time. The parties also executed a
Mutual Release of All Claims.
OPTION GRANTS
The following table provides, as to the Chief Executive Officer and each of
the four other highest paid executive officers who served as such at the end of
fiscal year 1994, information concerning individual grants of stock options made
during fiscal year 1994.
<TABLE>
<CAPTION>
% of Total
No. of Options Potential Realizable Value
Securities Granted to at Assumed Annual Rates
Underlying Employees Exercise of Stock Price Appreciation
Options in Fiscal Price Expiration for Option Term(1)(2)(3)
-----------------------------
Name Granted Year 1994 (per share) Date 0% 5% 10%
- ----------------------------- ---------- --------------- ------------- ------------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Harold L. Clark 250,000 100% $2.00 12/3/99 $0 $170,000 $385,000
Carol L. Miltner 100,000 100% $2.00 12/3/99 $0 $ 68,000 $154,000
Stephen G. Holmes 100,000 100% $2.00 12/3/99 $0 $ 68,000 $154,000
Michael J. Rusert(4) 100,000 100% $2.00 12/3/99 $0 $ 68,000 $154,000
Peter D. Lytle 40,000 100% $2.00 12/3/99 $0 $ 27,000 $ 62,000
- -----------------------------
</TABLE>
(1) The options granted are non-qualified stock options which vest in 25%
increments every 14 months, with the first 25% to vest on February 3, 1995,
and every 14 months thereafter.
(2) The potential realizable values shown in these columns illustrate the
results of hypothetical annual rates of appreciation compounded annually
from the date of grant until the end of the option term, assuming an
initial investment equal to the aggregate exercise price shown for the
option grant. These amounts are reported net of the option exercise price
(which may be paid by delivery of already-owned shares of Common Stock),
but before any taxes associated with the exercise or subsequent sale of the
underlying shares.
(3) The dollar amounts in these columns are based on the hypothetical annual
rates of appreciation noted and are therefore not intended to forecast
possible future appreciation, if any, of the price of AmeriQuest's Common
Stock. Alternative formulas for determining potential realizable value
have not been utilized because AmeriQuest is not aware of any formula which
will determine with reasonable accuracy a present value based on future
unknown or volatile factors. There can be no assurance that the dollar
amounts reflected in these columns will be achieved. Actual gains, if any,
on stock option exercises are dependent on the future performance of the
Common Stock and overall market conditions, as well as the executive
officer's continued employment through the vesting period.
(4) Michael J. Rusert left AmeriQuest on October 4, 1994. He will be replaced
by Mr. Gregory A. White, currently the President of NCD. See "Item 4A.
Executive Officers of the Registrant."
30
<PAGE>
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table provides, as to the Chief Executive Officer of
AmeriQuest and each of the four other highest paid executive officers who served
as such at the end of fiscal year 1994, information concerning unexercised stock
options at June 30, 1994. None of the executive officers exercised any stock
options during fiscal year 1994.
<TABLE>
<CAPTION>
Number of Value of Unexercised
Unexercised Options In-the-Money Options at
at June 30, 1994 June 30, 1994/(1)/
------------------------------------------ -----------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
- ------------------------ ------------------- -------------------- ------------------- -------------------
<S> <C> <C> <C> <C>
Harold L. Clark, -0- 250,000 shs. -0- $343,750
Carol L. Miltner -0- 100,000 shs. -0- $137,500
Stephen G. Holmes 6,667 100,000 shs. $13,334 $137,500
Michael J. Rusert/(2)/ -0- 100,000 shs. -0- $137,500
Peter D. Lytle -0- 40,000 shs. -0- $ 55,000
- -----------------------------
</TABLE>
(1) Based on the closing price of AmeriQuest's Common Stock on the New York
Stock Exchange on June 30, 1994.
(2) Michael J. Rusert left AmeriQuest on October 4, 1994. He will be replaced
by Mr. Gregory A. White, currently the President of NCD. See "Item 4A.
Executive Officers of the Registrant."
COMPENSATION OF OUTSIDE DIRECTORS
AmeriQuest pays non-employee Directors $500 per quarter. In addition, non-
employee Directors receive $1,000 per year for each committee of which they are
a member. AmeriQuest has and will continue to pay the expenses of its non-
employee Directors in attending Board meetings. All directors are also eligible
to receive stock options as a form of compensation.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the year ended June 30, 1993, AmeriQuest granted options to each of
Messrs. Walker and Silvis to purchase 5,000 shares of AmeriQuest's Common Stock
at $1.50 per share. Such options were originally due to vest over a three-year
period; however, on December 3, 1993 the Board resolved that such options should
immediately vest, and be increased to 20,000 shares each exercisable at $1.875
per share. Mr. Silvas has exercised his option in full, but Mr. Walker still
holds his option. The proposal to adjust the stock options arrangements in favor
of Messrs. Walker and Silvis was proposed by the new directors without regard to
any compensation that might be paid to others pursuant to recommendation of the
Compensation Committee.
On March 4, 1994, the independent members of the Board of Directors
authorized AmeriQuest to grant five-year, non-qualified stock options to Mr.
Terren S. Peizer and Manufacturers Indemnity and Insurance Company of America in
the amounts of 400,000 shares and 150,000 shares, respectively, as additional
incentive for Messrs. Terren S. Peizer and Marc L. Werner to assist AmeriQuest
with its avowed policy of growth by acquisition. The options do not vest until
such time as AmeriQuest's operations attain a sales "run rate" of $300 Million
per year. The exercise price is $4.50 per share.
31
<PAGE>
Messrs. Marc L. Werner, Terren S. Peizer and William N. Silvis serve on the
Compensation Committee. While there are no "interlocks" between such
individuals and other companies with which they are affiliated or associated,
AmeriQuest granted options during fiscal 1994 to Mr. Terren S. Peizer and
Manufacturers Indemnity and Insurance Company of America, a company affiliated
with Mr. Werner, to secure the services of Messrs. Peizer and Werner in
connection with the projected efforts they were to expend in assisting
AmeriQuest in its acquisition of other companies. For additional information
see "Item 13. Certain Relationships and Related Transactions." below, which is
incorporated herein by this reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
The following table sets forth, as of September 22, 1994, 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 executive officers for which executive compensation
information is provided, 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 September 22, 1994
---------------------------------------------
Number of Shares Percent of Class(8)
---------------- -------------------
Name and Address of Beneficial Owner
- ------------------------------------
<S> <C> <C>
Chrysler Capital Corporation 1,452,919 8.45%
225 High Ridge Road
Stamford, Connecticut 06905
Robert H. Beckett 900,656 5.24%
425 Privet Road
Horsham, PA 19044
DIRECTORS AND OFFICERS(6)(7)
- --------------------------------
Marc L. Werner 615,273(1)* 3.58%
Eric J. Werner 541,273(1)* 3.15%
Terren S. Peizer 496,000(2) 2.89%
William N. Silvis --0-- *
William T. Walker, Jr. 20,000(3)* *
Harold L. Clark --0-- *
Stephen G. Holmes 6,667(4)* *
Carol L. Miltner --0-- *
Howard B. Crystal --0-- *
Peter D. Lytle --0-- *
William F. Gibson, III 5,100(4) *
Irwin A. Bransky 471,579 2.74%
Peter S.H. Grubstein 559,595(5) 3.23%
All officers and directors as
a group (13 persons)(9) 2,180,214(1) 12.69%
- --------------------------------
</TABLE>
* Denotes less than 1%
32
<PAGE>
(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 535,273 shares of
AmeriQuest Common Stock held by Manufacturers Indemnity and Insurance Company of
America. 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 496,000 shares of AmeriQuest Common Stock
held by Wendover Financial Company L.P. All such shares are included in the
foregoing table.
(3) All of the shares reflected in the name of Mr. Walker 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 of the option were increased on December 3, 1993
from 10,000 shares to 20,000 shares, and afforded immediate vesting.
(4) Represents stock options currently vested and issuable upon exercise of
such options.
(5) The number of shares listed for Mr. Grubstein includes 107,000 shares of
AmeriQuest Common Stock issuable in consequence of the assumption by AmeriQuest
of Kenfil's obligation under a Warrant issued to Corporate Efficiency
Consulting, L.P., a New Jersey limited partnership ("CEC") for 315,000 shares of
Kenfil Common Stock.
(6) The address for the executive officers and directors and proposed directors
is: 2722 Michelson Drive, Irvine, California 92715.
(7) Each executive officer and director has sole voting and investment power
with respect to the shares listed, unless otherwise indicated.
(8) 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 is divided
by the sum of the number of shares of AmeriQuest's Common Stock outstanding on
September 22, 1994 (17,181,453 shares) plus the number of shares of Common Stock
subject to outstanding stock options and warrants exercisable currently or
within 60 days of September 22, 1994 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.
(9) Includes 138,667 shares currently vested and issuable upon exercise of
outstanding options and warrants.
33
<PAGE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
On March 4, 1994, the independent members of the Board of Directors
authorized AmeriQuest to grant five-year, non-qualified stock options to Mr.
Terren S. Peizer and Manufacturers Indemnity and Insurance Company of America in
the amounts of 400,000 shares and 150,000 shares, respectively, as additional
incentive for Messrs. Terren S. Peizer and Marc L. Werner to assist AmeriQuest
with its avowed policy of growth by acquisition. The options do not vest until
such time as AmeriQuest's operations attain a sales "run rate" of $300 Million
per year. The Stock Option Agreements do not define "run rate," but management
believes that AmeriQuest has already achieved a level of sales which would
satisfy such a test. The exercise price is $4.50 per share.
SEVERANCE ARRANGEMENTS WITH PRECEDING MANAGEMENT
On February 11, 1994, Mr. James Farooquee resigned his position as President
and Chief Executive Officer of AmeriQuest. In lieu of $750,000 of severance pay,
Mr. Farooquee received $200,000 cash and forgiveness of his indebtedness to
AmeriQuest in the amount of $411,602. Mr. Farooquee also cancelled his claims
for continuation of stock options earlier granted and payment of accrued but
unpaid vacation time. The parties also executed a Mutual Release of All Claims.
_________________________________
On February 23, 1994, Mr. James D'Jen entered into an Amendment to Employment
Agreement which amended his earlier Employment Agreement with AmeriQuest. The
Amendment provided for the payment of $150,000 per year through June 30, 1994,
only, the immediate vesting of all options earlier granted to Mr. D'Jen (but
with a proviso that all such options must be exercised on or before December 31,
1994), and payment of eight weeks of accrued and unpaid vacation time. Such
arrangements were in lieu of $495,000 in severance pay.
AmeriQuest also contracted with Mr. D'Jen to exchange all of the issued and
outstanding shares of CMS Enhancements (S) PTE Ltd., a Singapore corporation
wholly-owned by AmeriQuest in exchange for 350,000 shares of AmeriQuest Common
Stock. On July 8, 1994 Mr. D'Jen delivered 345,091 shares. Upon the receipt of
the balance due, AmeriQuest will be divested of this Singapore subsidiary. Sales
for the Singapore subsidiary approximate $20 million annually, but do not
effectively contribute to AmeriQuest's current strategy where the Singaporean
subsidiary had gross margins which averaged only 3% of sales with an approximate
break-even on operations.
34
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
----------------------------------------------------------------
(a) Financial Statements and Schedules
(1) Financial Statements included in Part II of this Report:
Page Reference
--------------
Report of Independent Public Accountants......... 40
Balance Sheets at June 30, 1994 and 1993......... 41
Statements of Operations for each of the
three years ended June 30, 1994................ 42
Statements of Stockholders' Equity for
each of the three years ended June 30, 1994... 43
Statements of Cash Flows for each of
the three years ended June 30, 1994........... 39
Notes to Financial Statements.................... 46
(2) Financial Statement Schedules
Schedule VIII - Valuation and Qualifying
Accounts and Reserves......................... 52
Schedule IX - Short-term Borrowings.............. 52
(b) Reports on Form 8-K
Current Report on Form 8-K dated July 18, 1994
reporting the pending disposition of the
Registrant's Singapore subsidiary.
Current Report on Form 8-K dated September 12, 1994
reporting the acquisition of Kenfil and 50.1% of Robec.
35
<PAGE>
(c) Exhibits
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Location of
Exhibit No. Title of Document Page No. Filing
- ----------- ------------------------------------------------------- ------------------ ------------------------
<S> <C> <C> <C>
2.01* Amended and Restated Agreement and Plan of 7 SEC File 0-18115
Reorganization dated as of August 11, 1994 by, Current Report on Form
between and among AmeriQuest, Robec and 8-K dated Sept. 22, 1994
certain principal shareholders of Robec
2.02* Agreement and Plan of Reorganization dated September 50 Original Form
26, 1994 by, between and among AmeriQuest, Ross White 10-K for June 30, 1994
Enterprises, Inc. d/b/a "National Computer Distributors
("NCD") and the shareholders of NCD
3.01* Certificate of Incorporation of AmeriQuest 85 SEC File 1-10397
as amended Original Form
10-K for June 30, 1994
3.02* By-laws of AmeriQuest 189 SEC File 33-81726
4.01* Reference is made to Exhibits 3.01 and 3.02,
the Certificate of Incorporation and Bylaws,
which define the rights of security holders
4.02* Specimen Stock Certificate 274 SEC File 33-81726
10.01* Loan and Security Agreement dated, 283 SEC File 33-81726
August 19, 1993, as amended, between
AmeriQuest and certain of its subsidiaries
and Silicon Valley Bank
10.02* Addendum to Agreement for Wholesale 365 SEC File 33-81726
Financing - Flexible Payment
Plan dated September 30, 1993 between
CDS Distribution Inc. and IBM Credit
Corporation
10.03* Standard Industrial Lease - Net dated 402 SEC File 33-81726
July 26, 1990, as amended, between AmeriQuest
and Varian Associates (successor-in-interest
to Koll Center Irvine East)
10.04* Amended and Restated Loan and Security Agreement 118 Original Form
dated as of July 1, 1992 by and between AmeriQuest/ 10-K for June 30, 1994
Kenfil Inc. and American National Bank and Trust
Company of Chicago
10.05* Incentive Stock Option Plan SEC File 2-96539
10.06* Employee Stock Bonus Plan SEC File 33-23809
10.07 Form of Employment Agreement for Messrs. Harold L. 332 Original Form
Clark, Stephen G. Holmes, Peter Lytle, William 10-K for June 30, 1994
F. Gibson, Howard B. Crystal and Ms. Carol L.
Miltner
10.08 Stock Option Agreement dated March 4, 1994 53 Amendment No. 4 to
between AmeriQuest and Terren S. Peizer 10-K/A for June 30, 1994
10.09 Stock Option Agreement dated March 4, 1994 58 Amendment No. 4 to
between AmeriQuest and Manufacturers Indemnity 10-K/A for June 30, 1994
and Insurance Company of America
10.10 Exchange Agreement between AmeriQuest and Mr. 62 Amendment No. 4 to
James D'Jen for the disposition of CMS Enhancements 10-K/A for June 30, 1994
21.01 Subsidiaries of AmeriQuest 351 Original Form
10-K for June 30, 1994
27.01 Financial Data Schedule 66
</TABLE>
36
<PAGE>
<TABLE>
<S> <C> <C> <C>
24.01 Powers of Attorney for Messrs. 50 First Form 10-K/A filed
Marc L. Werner, Eric J. Werner October 26, 1994
Terren S. Peizer, William
T. Walker, Jr. and William N. Silvis
</TABLE>
_________________________________
* Incorporated herein by reference to the indicated filing pursuant to Rule
12b-32 under the Securities Exchange Act of 1934, as amended, and Rule 24 of the
Commission's Rules of Practice.
37
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1933, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Irvine,
State of California, on the 3rd day of February, 1995.
AMERIQUEST TECHNOLOGIES, INC.
By:/s/ Harold L. Clark
-------------------------------------
Harold L. Clark, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons in the capacities and on
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ Harold L. Clark Co-Chairman of the Board, Chief February 3, 1995
- ------------------------------------------- Executive Officer and Director
Harold L. Clark (Principal Executive Officer)
/s/ Gregory A. White President, Chief Operating February 3, 1995
- ---------------------------------------- Officer and Director
Gregory A. White
/s/ Stephen G. Holmes Secretary, Treasurer, Chief February 3, 1995
- ---------------------------------------- Financial Officer and Director
Stephen G. Holmes (Principal Financial and
Accounting Officer)
/s/ Marc L. Werner Chairman of the Board February 3, 1995
- -----------------------------------------
Marc L. Werner**
/s/ Eric J. Werner Director February 3, 1995
- -------------------------------------------
Eric J. Werner**
/s/ Terren S. Peizer Director February 3, 1995
- -------------------------------------------
Terren S. Peizer**
/s/ William T. Walker, Jr. Director February 3, 1995
- -----------------------------------------
William T. Walker, Jr.**
/s/ William N. Silvis Director February 3, 1995
- -------------------------------------------
William N. Silvis**
</TABLE>
38
<PAGE>
<TABLE>
<S> <C> <C>
/s/ Robert H. Beckett Director February , 1995
- ----------------------------------------
Robert H. Beckett
/s/ Harold L. Clark /s/ Stephen G. Holmes
- ------------------------------------------- ------------------------------------------
Harold L. Clark,* Stephen G. Holmes,**
Attorney-in-Fact Attorney-in-Fact
</TABLE>
39
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To AmeriQuest Technologies, Inc.:
We have audited the accompanying consolidated balance sheets of AmeriQuest
Technologies, Inc. (a Delaware corporation, formerly CMS Enhancements, Inc.) and
subsidiaries (AmeriQuest) as of June 30, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the three years in the period ended June 30, 1994. These financial
statements and the schedules referred to below are the responsibility of
AmeriQuest's management. Our responsibility is to express an opinion on these
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of AmeriQuest Technologies, Inc.
and subsidiaries as of June 30, 1994 and 1993 and the results of their
operations and their cash flows for each of the three years in the period ended
June 30, 1994 in conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedules listed in the index on page
35 are presented for purposes of complying with the Securities and Exchange
Commissions rules and are not part of the basic financial statements. These
schedules have been subjected to the auditing procedures applied in our audits
of the basic financial statements and, in our opinion, fairly state in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
ARTHUR ANDERSEN LLP
Orange County, California
September 30, 1994
40
<PAGE>
AmeriQuest Technologies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, June 30,
(Dollars in thousands) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 3,200 $ 1,020
Accounts receivable, less allowances
for doubtful accounts of $477 and
$253 as of June 30, 1994 and 1993,
respectively 24,708 7,247
Inventories 24,165 7,000
Other current assets 1,627 450
-------- --------
Total current assets 53,700 15,717
-------- --------
PROPERTY AND EQUIPMENT, NET 4,078 2,285
INTANGIBLE ASSETS, NET 6,490 --
OTHER ASSETS 877 2,272
-------- --------
$ 65,145 $ 20,274
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 23,408 $ 9,138
Notes payable 23,059 --
Other current liabilities 2,361 675
-------- --------
Total current liabilities 48,828 9,813
-------- --------
SUBORDINATED NOTES PAYABLE TO
SHAREHOLDERS 3,175 1,550
-------- --------
DEFERRED INCOME TAXES 267 267
-------- --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value;
authorized 10,000,000 shares;
no shares issued and outstanding -- --
Common stock, $.01 par value;
authorized 30,000,000 shares; issued
and outstanding, 9,857,779 and
3,180,710, shares, as of June 30, 1994
and 1993, respectively 99 32
Additional paid-in capital 27,345 15,210
-------- --------
Accumulated deficit (14,569) (6,598)
-------- --------
Total stockholders' equity 12,875 8,644
$ 65,145 $ 20,274
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
41
<PAGE>
AmeriQuest Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
(Dollars in thousands, except per share data) Year Ended June 30,
- --------------------------------------------------------------------------------
1994 1993 1992
--------- --------- ---------
<S> <C> <C> <C>
NET SALES $ 87,593 $ 73,082 $ 115,053
COST OF SALES 75,023 61,539 104,007
--------- --------- ---------
Gross profit 12,570 11,543 11,046
--------- --------- ---------
OPERATING EXPENSES
Selling, general and administrative 14,119 10,274 14,085
Restructuring charge 5,700 -- 4,500
Research and development 25 782 1,508
--------- --------- ---------
19,844 11,056 20,093
--------- --------- ---------
Income (loss) from operations (7,274) 487 (9,047)
--------- --------- ---------
OTHER (INCOME) EXPENSE
Other income (31) (26) (6)
Interest expense 728 277 582
--------- --------- ---------
697 251 576
--------- --------- ---------
Income (loss) before taxes (7,971) 236 (9,623)
BENEFIT FOR INCOME TAXES -- -- (730)
--------- --------- ---------
Net income(loss) $ (7,971) $ 236 $ (8,893)
========= ========= =========
Net income (loss) per common share
and common share equivalent $ (1.33) $ 0.08 $ (3.04)
========= ========= =========
Weighted average shares outstanding 5,973,511 3,060,908 2,921,588
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
42
<PAGE>
AmeriQuest Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Additional Retained
Common Stock Paid-In (Deficit)
-------------------
(Dollars in thousands) Shares Amount Capital Earnings
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Balances at June 30, 1991 2,910,149 $ 29 $ 14,718 $ 2,059
Exercise of employee stock options (Note 9) 11,374 -- 33 --
Common stock issued to employees 4,000 -- 6 --
Net loss for the year ended
June 30, 1992 -- -- -- (8,893)
- -------------------------------------------------------------------------------------------------------
Balances at June 30, 1992 2,925,523 29 14,757 (6,834)
Common stock issued to
unrelated parties (Note 9) 143,000 2 286 --
Common stock issued for
assets (Note 2) 100,000 1 149 --
Exercise of employee stock options (Note 9) 12,187 -- 18 --
Net income for the year ended
June 30, 1993 -- -- -- 236
- -------------------------------------------------------------------------------------------------------
Balances at June 30, 1993 3,180,710 32 15,210 (6,598)
Common stock issued to
unrelated parties (Note 9) 4,905,072 49 9,054 --
Common stock issued for
businesses acquired (Note 2) 1,730,330 17 3,011 --
Exercise of employee stock options (Note 9) 41,667 1 70 --
Net loss for the year ended
June 30, 1994 -- -- -- (7,971)
- -------------------------------------------------------------------------------------------------------
Balances at June 30, 1994 9,857,779 $ 99 $ 27,345 $ (14,569)
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
43
<PAGE>
AmeriQuest Technologies, Inc. and Subsidiaries
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June 30, June 30,
(Dollars in thousands) 1994 1993
- ---------------------------------------------------------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash $ 3,200 $ 1,020
Accounts receivable, less allowances
for doubtful accounts of $477 and
$253 as of June 30, 1994 and 1993,
respectively 24,708 7,247
Inventories 24,165 7,000
Other current assets 1,627 450
-------- --------
Total current assets 53,700 15,717
-------- --------
PROPERTY AND EQUIPMENT, NET 4,078 2,285
INTANGIBLE ASSETS, NET 6,490 --
OTHER ASSETS 877 2,272
-------- --------
$ 65,145 $ 20,274
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 23,408 $ 9,138
Notes payable 23,059 --
Other current liabilities 2,361 675
-------- --------
Total current liabilities 48,828 9,813
-------- --------
SUBORDINATED NOTES PAYABLE TO
SHAREHOLDERS 3,175 1,550
-------- --------
DEFERRED INCOME TAXES 267 267
-------- --------
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST -- --
STOCKHOLDERS' EQUITY
Preferred stock, $.01 par value;
authorized 10,000,000 shares;
no shares issued and outstanding -- --
Common stock, $.01 par value;
authorized 30,000,000 shares; issued
and outstanding, 9,857,779 and
3,180,710, shares, as of June 30, 1994
and 1993, respectively 99 32
Additional paid-in capital 27,345 15,210
-------- --------
Accumulated deficit (14,569) (6,598)
-------- --------
Total stockholders' equity 12,875 8,644
$ 65,145 $ 20,274
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
44
<PAGE>
Noncash investing and financing activities (continued)
Businesses acquired: During 1994, the Company acquired three businesses
summarized as follows:
<TABLE>
<S> <C>
Fair value of assets acquired $ 43,537
Liabilities assumed (40,459)
Common stock issued (3,028)
-------
Cash paid 50
Less cash acquired (819)
-------
Net cash received from acquisitions $ (769)
=======
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
45
<PAGE>
AmeriQuest Technologies, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. Summary of Significant Accounting Policies
Basis of consolidation
The consolidated financial statements include the accounts of AmeriQuest
Technologies, Inc., a Delaware corporation, (formerly CMS Enhancements, Inc.)
and its majority and wholly-owned subsidiaries, collectively referred to as the
Company. All significant intercompany accounts and transactions have been
eliminated.
Inventories
Inventories consist principally of computer hardware and software held for
resale and are stated at the lower of first-in, first-out cost or market.
Reserves for inventory obsolescence and slow moving product are provided based
upon specified criteria, such as recent sales activity and date of purchase.
Property and equipment
Property and equipment are stated at cost. Depreciation and amortization are
computed using the straight line method over estimated useful lives as follows:
Equipment 5 years
Furniture and fixtures 5 years
Leasehold improvements Lease term
Vehicles 3 to 5 years
Maintenance, repairs and minor renewals are charged directly to expense as
incurred. Additions and betterments to property and equipment are capitalized.
When assets are disposed of, the related cost and accumulated depreciation
thereon are removed from the accounts and any resulting gain or loss is included
in operations.
Intangible assets
The excess of the cost to acquire businesses over the fair value of the net
assets acquired and other acquired intangibles are amortized using the
straight-line method over ten years from the date of acquisition. The
amortization of intangible assets generally relates to the expectation that the
underlying value will benefit the Company over a period of years. From time to
time, however at least quarterly, the Company assesses the availability of
anticipated benefits based upon past performance and future expectations as to
undiscounted cash flow.
Market development funds
In general, vendors provide various incentive programs to the Company. The funds
received under these programs are determined based on purchases and/or sales of
the vendors' product and the performance of certain training, advertising and
other market development activities. Revenue associated with these funds is
recorded when earned either as a reduction of selling, general and
administrative expenses or product cost, according to the specific nature of the
program.
Restructuring charge
The costs of transitioning the operations of the Company and thereby
substantially altering the ongoing business of the Company are accrued at the
time the related decision is made and implementation begun.
Accounting period
In 1994, the Company adopted a policy whereby the Company's fiscal year ends on
the Friday closest to June 30. The year ending dates for the past three fiscal
years were July 1, 1994, June 30, 1993 and June 30, 1992, respectively. For
presentation purposes, all of the aforementioned fiscal year ends are referred
to as June 30. The adoption of this new accounting period had no material effect
on the accompanying consolidated financial statements.
Sales recognition
Sales are recorded as of the date shipments are made to customers. Sales returns
and allowances are reflected as a reduction in sales and reflected in inventory
at expected net realizable value. The Company permits the return of products
within certain time limits and will exchange returned products. Products that
are defective upon arrival are handled on a warranty return basis with the
Company's vendors. The Company provides for product warranty and return
obligations at the point of sale based on estimated and expected future costs
for which a reserve of approximately $1 million was in place at June 30, 1994.
Income taxes
Effective July 1, 1993, the Company changed its method of accounting for income
taxes from the deferred method to the liability method required by Statement of
Financial Accounting Standards No. 109 "Accounting for Income Taxes." As
permitted under these rules, prior year financial statements have not been
restated. The change to the liability method of accounting for income taxes had
no material effect on the accompanying consolidated financial statements.
Net income (loss) per common share and common share equivalent
Net income (loss) per common share and common share equivalent is computed by
dividing net income (loss) by the weighted average number of shares of common
stock and common stock equivalents outstanding. Common stock equivalents that
increase earnings per share or decrease loss per share were excluded from the
computation.
Minority interest
Minority interest reflects the equity position of minority shareholders in those
entities in which the Company maintains a majority interest. No minority
interest is reflected in the accompanying balance sheets since all such holdings
are deemed to be without value.
46
<PAGE>
- --------------------------------------------------------------------------------
In process at June 30, 1994 (completed by September 1994)
Proposed Accounting Standard
The Financial Accounting Standards Board has proposed certain accounting
standards which may impact the financial reporting of AmeriQuest in future
periods. If adopted, and as principally related to post retirement and
employment benefits, such proposed standards would not have a material impact on
the financial statements of AmeriQuest.
Reclassifications
Certain amounts in the prior periods have been reclassified to conform to the
current year's presentation.
2. Acquisitions
The Company is pursuing a growth through acquisition strategy of acquiring
regional distributors with the ultimate goal of creating a national distributor
of value added computers, subsystems and peripherals.
The success of this strategy is dependent upon the ability of the Company to
effectively consolidate and integrate the operations of the acquired
businesses, combine different cultures and obtain adequate financing to
complete acquisitions and fund working capital requirements.
Since 1993, the acquisitions of the Company have included:
Completed by June 30, 1993
Vitronix, Inc. ("Vitronix")
As of March 1993, the Company acquired certain assets of Vitronix for common
stock of the Company. Vitronix is a distributor computer products and
services, specializing in UNIX applications, and is based in Boston,
Massachusetts.
Completed by June 30, 1994
Management Systems Group("MSG")
As of December 1993, the Company acquired certain assets and assumed certain
liabilities of MSG for common stock of the Company and certain contingent
consideration. MSG is a distributor of computer products and services,
specializing in systems and networking applications, and is based in Long
Island, New York.
Rhino Sales Company ("Rhino")
As of December 1993, the Company acquired the outstanding common stock of Rhino
for a combination of cash and common stock of the Company. Rhino is a
distributor of computer products and services, specializing in UNIX
applications, and is based in Fenton, Michigan.
Kenfil Inc. ("Kenfil")
As of June 1994, the Company acquired 51% of the outstanding common stock of
Kenfil for common stock of the Company. Kenfil distributes microcomputer
software and is based in Southern California.
Kenfil Inc. ("Kenfil")
As of September 1994, the Company acquired the remaining outstanding 49% of the
common stock of Kenfil and converted certain trade and subordinated debt of
Kenfil for common and convertible preferred stock of the Company.
Robec, Inc. ("Robec")
As of September 1994, the Company acquired 51% of the outstanding common stock
of Robec for common stock of the Company. Robec is a distributor of computer
products and services, specializing in systems and UNIX applications, and is
based in Horsham, Pennsylvania.
In process at September 1994
Robec, Inc. ("Robec")
The Company proposes to acquire the remaining 49% of outstanding common stock of
Robec during 1995.
National Computer Distributors ("NCD")
As of September 1994, the Company entered into an agreement to acquire the
outstanding common stock of NCD for cash and common stock of the Company. NCD
is a distributor of computer products and services, specializing in systems and
connectivity applications, and is based in Fort Lauderdale, Florida. This
proposed transaction is expected to be completed in November 1994.
The following summarizes the cost of the Company's acquisitions (dollars in
thousands):
<TABLE>
<CAPTION>
Common Common Stock Cash
Company Shares Issued Consideration Consideration
------- ------------- ------------- -------------
<S> <C> <C> <C>
Completed by June 30, 1993
Vitronix 100,000 $ 150
--------- -----
Completed by June 30, 1994
MSG 400,000 700
Rhino 200,000 350 $ 50
Kenfil,51% 1,130,330 1,978
--------- -----
1,730,330 3,028
--------- -----
Completed by September 1994 (Unaudited)
Kenfil, 49% 1,069,670 1,872
Robec, 51% 1,402,800 2,455
In process at September 1994 (Unaudited)
Robec, 49% 1,397,195
NCD 1,864,767
</TABLE>
The accompanying consolidated financial statements do not include the effects of
those transactions not completed by June 30, 1994, however, certain pro forma
balance sheet information relative to such later transactions is included
elsewhere herein.
The acquisitions were accounted for using the purchase method and, accordingly,
the financial statements include the results of their operations from the
effective acquisition dates. AS to
47
<PAGE>
- --------------------------------------------------------------------------------
common stock consideration, all such acquisitions are reflected utilizing a per
share valuation of $1.75, indicative of management's estimate of the fair value
of such shares. This estimate was based on consideration of the more
substantial private placements of common stock offerings of the Company,
irrespective of the quoted market price of the Company's trading common stock.
Although during fiscal year 1994 the trading range of the common stock of the
Company ranged from a low of $2 to a high of $6 per share, these values are
reflective of relatively small trading volumes.
The contingent consideration granted to certain of the former owners of the
acquired businesses is dependent upon the attainment of certain defined profit
objectives of the acquired companies and consists of the right to acquire common
stock of the Company at previously agreed upon prices, additional cash
consideration or the issuance of additional common stock. Additional contingent
consideration earned in connection with the attainment of the profit objectives,
if any, will be reflected as an increase in the excess of cost over the fair
value of net assets acquired. As to the specific acquisitions of the Company,
such potential contingent common stock and cash consideration is less than
$400,000 in the aggregate and is limited to the MSG and Rhino acquisitions.
The following unaudited pro forma combined information shows the results of the
Company's operations for the fiscal years ended June 30, 1994 and 1993 as
though the MSG, Rhino and Kenfil acquisitions had occurred as of the beginning
of those periods (in thousands except per share data):
<TABLE>
<CAPTION>
Year Ended June 30, 1994 1993
<S> <C> <C>
Revenues $ 241,350 $ 289,863
Net income (loss) (25,869) 1,920
Net income (loss) per share (3.22) .24
Weighted average shares 8,031,710 8,031,710
</TABLE>
The pro forma results have been prepared for comparative purposes only and are
not necessarily indicative of the actual results of operations had the
acquisitions taken place at the beginning of the indicated period or the results
that may occur in the future. Furthermore, the pro forma results do not give
effect to cost savings which may occur as a result of the consolidation of the
acquired companies.
3. Inventories
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Finished goods $ 19,977 $ 2,747
Raw materials and subassemblies 4,188 4,253
- --------------------------------------------------------------------------------
$ 24,165 $ 7,000
================================================================================
</TABLE>
Inventories are reflected net of reserves of approximately $2.6 million and $3.1
million at June 30, 1994 and 1993, respectively. Inventories do not contain any
labor or overhead.
The Company manages its inventories by maintaining sufficient quantities to
achieve high order fill rates while at the same time attempting to stock only
those products in high demand with a rapid turnover rate. Inventory balances
will fluctuate as the Company adds new product lines and when appropriate, makes
large purchases and cash purchases from manufacturers when the terms of such
purchases are considered advantageous. The Company's contracts with most of its
vendors provide price protection and stock return privileges to reduce the risk
of loss to the Company due to manufacturer price reductions and slow moving or
obsolete inventory. In the event of a vendor price reduction, the Company
generally receives a credit for products in inventory. In addition, the Company
has the right to return a certain percentage of purchases, subject to certain
limitations. Historically, price protection and stock return privileges as well
as the Company's inventory management procedures have helped to reduce the risk
of loss of carrying inventory.
4. Property and Equipment
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Equipment $ 5,106 $ 4,908
Furniture and fixtures 5,563 2,597
Leasehold improvements 433 724
11,102 8,229
Less accumulated depreciation and
amortization 7,024 5,944
- --------------------------------------------------------------------------------
$ 4,078 $ 2,285
================================================================================
</TABLE>
5. Intangible Assets
Intangible assets consists of the following (in thousands):
<TABLE>
<CAPTION>
================================================================================
June 30, 1994
<S> <C>
Excess of cost of businesses
over fair value of net assets
acquired $ 4,091
Distribution rights 2,400
Other 210
Accumulated amortization 211
- --------------------------------------------------------------------------------
$ 6,490
================================================================================
</TABLE>
Represented as to acquiree by (in thousands):
<TABLE>
<CAPTION>
June 30, 1994
- --------------------------------------------------------------------------------
<S> <C>
Kenfil $ 4,308
MSG 2,205
Rhino 188
- --------------------------------------------------------------------------------
$ 6,701
================================================================================
</TABLE>
The life of each intangible asset category is presumed to be 10 years.
6. Notes Payable
The Company maintains lines of credit with financial institutions which in the
aggregate provide for revolving credit of over $30 million at June 30, 1994.
Under these facilities approximately $23 million was drawn at June 30, 1994 with
then available but undrawn funds of approximately $7 million. Interest on these
credit facilities is based on the published prime rate plus a specified
percentage ranging from 1% to 3% (at June 30, 1994 the prime rate was 7.25%).
Borrowings under these facilities are
48
<PAGE>
- --------------------------------------------------------------------------------
limited to a contractual percentage of eligible inventories and receivables. At
June 30, 1994, all inventories and accounts receivable were pledged as
collateral under these facilities and the lenders hold liens on substantially
all of the other assets owned by the Company. The terms of the lending
agreements include certain restrictive covenants which require the maintenance
of specified financial covenants generally related to tangible net worth,
working capital attributes and total debt to tangible net worth. As of June 30,
1994, the Company was in compliance with these covenants.
As part of the acquisition of Kenfil, the Company assumed certain subordinated
note payable obligations of Kenfil totaling $3,175,000 as of June 30, 1994. This
amount includes a note payable to a financial institution and notes payable to
two stockholders of the Company. Such notes bear interest ranging from 9.5% to
13.91% and were originally payable at various dates through September 22, 1997.
These obligations were settled subsequent to June 30, 1994 through the issuance
of the Company's common stock in conjunction with the purchase of the remaining
49% of Kenfil in September 1994.
7. Income Taxes
The benefit for income taxes consists of the following (in thousands):
<TABLE>
<CAPTION>
Year Ended June 30, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Currently payable-
Federal $ -- $ -- $ (129)
State -- -- (2)
- --------------------------------------------------------------------------------
-- -- (131)
- --------------------------------------------------------------------------------
Deferred taxes-
Current -- 7 (124)
Long-term -- (7) (475)
- --------------------------------------------------------------------------------
-- -- (599)
- --------------------------------------------------------------------------------
$ -- $ -- $ (730)
================================================================================
</TABLE>
The deferred tax asset (liability) of the Company consists of the following (in
thousands):
<TABLE>
<CAPTION>
June 30, 1994 1993
- --------------------------------------------------------------------------------
<S> <C> <C>
Inventory reserves $ 481 $ 150
Depreciation 331 300
Allowance for doubtful accounts 153 100
Other (487) (267)
Net operating loss carryforwards 4,800 1,800
Valuation allowance (5,545) (2,350)
- --------------------------------------------------------------------------------
$ (267) $ (267)
================================================================================
</TABLE>
The principal elements accounting for the difference between income taxes
computed at the statutory rate and the effective rate are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ended June 30, 1994 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Federal tax expense
(credit) computed at
statutory rate $ (3,200) $ 80 $ (3,272)
State taxes, net of
federal benefit -- 15 2
Tax (benefit from) earnings of
foreign operations -- (24) --
Effect of U.S. and foreign
net operating losses 3,200 (71) 2,540
- --------------------------------------------------------------------------------
$ -- $ -- $ (730)
- --------------------------------------------------------------------------------
</TABLE>
At June 30, 1994, the Company had an income tax operating loss carryforward of
in excess of $12 million, which is available to offset earnings in future
periods through 2008. The Company acquired approximately $10 million of net
operating losses upon completing the acquisition of Kenfil in September 1994, as
well as Kenfil's deferred tax assets and liabilities. The benefit of Kenfil's
tax attributes are not available until June 1995. The Company and Kenfil
experienced "ownership changes" in 1994 for income tax purposes, which changes
will result in future annual limitations on the utilization of net operating
loss carryforwards.
8. Commitments and Contingencies
The Company leases its corporate office, warehouse space and certain equipment
under operating leases. Future minimum rental commitments for all
non-cancellable operating leases at June 30, 1994 are as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended June 30,
- --------------------------------------------------------------------------------
<S> <C>
1995 $ 1,049
1996 365
1997 70
1998 18
1999 & thereafter 21
- --------------------------------------------------------------------------------
$ 1,523
================================================================================
</TABLE>
Total rental expense under non-cancellable agreements for the years ended June
30, 1994, 1993 and 1992 was approximately $1,083,000, $694,000 and $925,000,
respectively.
The Company is from time to time involved in various lawsuits generally
incidental to its business operations, primarily collection actions and vendor
disputes. In the opinion of management, the outcome of these matters will not
have a material adverse effect on the financial statements.
The Company is contingently liable at June 30, 1994 under the terms of
repurchase agreements with financial institutions providing inventory financing
for dealers of the Company's products. The contingent liability under those
agreements approximates the amount financed, reduced by the resale value of any
products which may be repurchased, and the risk of loss is spread over numerous
dealers and financial institutions. Losses under these agreements have been
immaterial in the past. Sales under these agreements during the years ended
June 30, 1994, 1993 and 1992 were approximately $7 million, $6 million, and $12
million, respectively.
9. Common Stock
Common stock issued to unrelated parties in fiscal 1993 and 1994 follows:
<TABLE>
<CAPTION>
Net
Date Description Shares Proceeds
- ---- ----------- ------ --------
<S> <C> <C> <C>
February, 1993 Regulation S 143,000 $ 288
August, 1993 Regulation S 150,000 348
December, 1993 Change of control 3,400,000 5,305
December, 1993 Debt conversion 521,739 1,500
June, 1994 Regulation S 833,333 1,950
--------- ------
4,905,072 $9,103
========= ======
</TABLE>
In fiscal 1994, warrants to acquire common stock of the Company were issued to
unrelated parties aggregating 416,667 shares, are exercisable at $5 per share
(the then quoted market price) and expire in June 1996. Additionally, in fiscal
year 1994, the Company issued to a financial institution, warrants to acquire
60,000 shares of common stock of the Company at $2.75 per
49
<PAGE>
- --------------------------------------------------------------------------------
share (the then quoted market price), expiring in August 1998. The Company has
instituted various stock option plans which authorize the granting of options to
key employees, directors, officers, vendors and customers to purchase shares of
the Company's common stock. All grants of options during the years presented
have been to employees or directors and were granted at the then quoted market
price. A summary of shares available for grant and the options outstanding under
the plans are as follows:
<TABLE>
<CAPTION>
Shares Available Options Price
for Grant Outstanding Range
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Balances, June 30, 1991 193,115 91,544 $ 3.00
Options granted (100,000) 100,000 1.50
Options exercised -- (11,374) 3.00
Cancelled 41,385 (41,385) --
- --------------------------------------------------------------------------------
Balances, June 30, 1992 134,500 138,782 1.50-3.00
1993 stock option plan 140,000 -- --
Options granted (73,000) 73,000 2.00-2.50
Options exercised -- (12,187) 1.50
Cancelled 6,750 (6,750) 2.50
- --------------------------------------------------------------------------------
Balances, June 30, 1993 208,250 192,845 1.50-2.50
1994 stock option plan 250,000 -- --
Options granted (20,000) 20,000 2.38-4.50
Options exercised -- (41,667) 1.50-2.00
Cancelled 78,818 (78,818) --
- --------------------------------------------------------------------------------
Balances June 30, 1994 517,068 92,360 $ 1.50-4.50
================================================================================
</TABLE>
The 92,360 options outstanding are exercisable at varying periods, 72,360
currently and 20,000 through 1996.
Also, during fiscal year 1994 and subject to shareholder approval, the Company
granted new management and certain directors options to acquire an aggregate of
650,000 and 550,000 shares of common stock of the Company at exercise prices of
$2 and $4.50 (the then quoted market price), respectively. Management options
are exercisable at the rate of 25% each 14 months and director options are
exercisable upon achievement of a sales run rate of $300 million.
In September 1994, the shareholders approved an increase in the authorized
common stock of the Company from 10 to 30 million shares, the effect of which is
reflected herein.
10. Settlement with Former Officer
During 1994, in conjunction with the resignation of the Company's president, the
Company paid the former president $125,000 in settlement of severance, unpaid
vacation pay and other benefits. In addition, the Company also forgave
approximately $360,000 in amounts receivable from such officer which represented
prior advances and accrued interest.
11. Investments
During 1994, the Company acquired 40% of the common stock of a California based
computer distributor in exchange for certain development rights to one of the
Company's former product lines. As part of this acquisition the Company is
required to make capital contributions up to $200,000 of which $25,000 has been
made as of June 30, 1994. The operating activities of such company have not been
significant and the Company's investment is recorded under the cost method
inasmuch as the Company does not exercise significant influence over the
investee company. Specifically, the Company has no seat on the Board of
Directors and there is no officer or employee of the Company who serves the
investee company in any capacity.
12. Operations
During fiscal years 1992 and 1994, the Company restructured certain of its
activities in order to emphasize and streamline its operations, consistent with
its core capabilities in value-added distribution. Such restructuring spanned
organizational aspects of product and production alignment, market channel and
customer delineation, vendor arrangements and personnel capabilities. In 1994
and 1992 AmeriQuest restructured its operations and related charges aggregated
$5.7 million and $4.5 million. The components of the restructuring charges for
each period presented follow (dollars in thousands):
<TABLE>
<CAPTION>
Year ended June 30,
-----------------------
1994 1992
---- ----
<S> <C> <C>
Employee terminations $ 500 $1,100
Facilities abandonment 300 --
Discontinued product lines 4,900 3,400
----- -----
$5,700 $4,500
===== =====
</TABLE>
Inasmuch as these restructurings were initiated in the middle of each respective
fiscal year, the efforts were largely completed by each year end and the related
expenditures were largely incurred at those dates. The discontinued product
lines related to the then direct manufacture of both personal computers and tape
drive storage units utilizing proprietary designs with open architecture to the
myriad of compatible personal computing hardware and software available in the
marketplace. The restructuring charges consisted of incremental direct costs and
such costs were largely incurred and paid in each respective fiscal year, other
than for approximately $400,000 which extended through 1995 for the fiscal year
1994 charge.
13. Foreign Sales Information
A summary of the Company's operations by geographic area for the last three
years is as follows (in thousands):
<TABLE>
<CAPTION>
Year Ended
June 30, 1994 U.S. Far East Elimination Consolidated
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 62,089 $ 25,504 $ -- $ 87,593
Transfers between geographic areas 4,107 298 (4,405) --
- -------------------------------------------------------------------------------------------------------------------
Net sales $ 66,196 $ 25,802 $ (4,405) $ 87,593
- -------------------------------------------------------------------------------------------------------------------
Loss from operations $ (7,182) $ (92) $ -- $ (7,274)
- -------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 62,584 $ 2,561 $ -- $ 65,145
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended
June 30, 1993 U.S. Far East Elimination Consolidated
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 50,342 $ 22,740 $ -- $ 73,082
Transfers between geographic areas -- 3,086 (3,086) --
- -------------------------------------------------------------------------------------------------------------------
Net sales $ 50,342 $ 25,826 $ (3,086) $ 73,082
- -------------------------------------------------------------------------------------------------------------------
(Loss) income from operations $ 647 $ (160) $ -- $ 487
- -------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 17,170 $ 3,104 $ -- $ 20,274
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Year Ended
June 30, 1992 U.S. Far East Elimination Consolidated
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers $ 106,710 $ 8,343 $ -- $ 115,053
Transfers between geographic areas -- 10,022 (10,022) --
- -------------------------------------------------------------------------------------------------------------------
Net sales $ 106,710 $ 18,365 $ (10,022) $ 115,053
- -------------------------------------------------------------------------------------------------------------------
Loss from operations $ (4,792) $ (4,418) $ 163 $ (9,047)
- -------------------------------------------------------------------------------------------------------------------
Identifiable assets $ 29,848 $ 5,850 $ (12,176) $ 23,522
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
United States sales include export sales of approximately $2.3 million, $2
million and $14.4 million made principally to Europe, Latin America, the Far
East and Canada in fiscal years 1994, 1993 and 1992, respectively.
<PAGE>
14. Vendor Transactions
The Company's largest inventory vendor accounted for approximately 20% of the
Company's inventory purchases during the year ended June 30, 1994. At June 30,
1994, the Company owned that vendor approximately $4 million. Another vendor
accounted for approximately 25% and 22% of purchases for fiscal years 1993 and
1992, respectively. A third vendor accounted for approximately 14% of inventory
purchases in fiscal year 1993.
15. Disposition
In July 1994, the Company entered into an agreement to sell its Singapore
subsidiary, CMS Enhancements (S) PTE Ltd., ("CMS Singapore") to a former officer
and director of the Company. The Company expects to exchange all of the stock of
CMS Singapore for 350,000 shares of the Company's previously issued common
stock, of which approximately 345,000 shares were received by the Company as of
September 1994. The book value of CMS Singapore is approximately $1.5 million
and thus no appreciable gain or loss is expected to result upon completion of
the transaction. Upon ultimate disposition, the sale will be accorded accounting
treatment as a segment of continuing operations and not as the discontinuance of
a line of business. However, currently the disposition, while not completed, is
the subject of potential litigation, the ultimate resolution of which is not
determinable. Such potential litigation relates to whether full consideration
was received for the proposed transaction and the Company expects that recision
of the sale may be possible.
CMS Singapore is a distributor of commodity disk drives. Sales of this Asian
subsidiary approximated $20 million for the year ended June 30, 1994. In the
opinion of management, the terms of the transaction were negotiated at
"arm's-length" at a point in time that the former officer and director was
estranged from the Company.
Results by Quarter (Unaudited)
(In thousands, except per share data)
Fiscal year ended June 30, 1994
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Revenues $ 19,560 $ 20,286 $ 23,130 $ 24,617
Operating income (loss) $ 138 $ (4,878) $ 392 $ (2,926)
Net income (loss) 62 (4,950) 203 (3,286)
Net income (loss) per common share $ 0.02 $ (0.63) $ 0.03 (0.33)
Common shares outstanding 3,330,710 7,862,516 7,865,916 9,857,779
</TABLE>
(In thousands, except per share data)
Fiscal year ended June 30, 1993
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter
<S> <C> <C> <C> <C>
Revenues $ 20,570 $ 18,890 $ 15,701 $ 17,921
Operating Income $ 129 $ 125 $ 121 $ 112
Net income $ 51 $ 61 $ 83 $ 41
Net income per common share $ 0.02 $ 0.02 $ 0.03 $ 0.01
Common shares outstanding 2,925,523 2,989,593 2,997,754 3,180,710
</TABLE>
Shareholder Information
A copy of the Company's Annual Report on Form 10-K, filed each year with the
Securities and Exchange Commission, may be obtained by shareholders without
charge. Such request or any additional request for financial information should
be addressed to Investor Relations Department, AmeriQuest Technologies, Inc.,
2722 Michelson Drive, Irvine, CA 92715, 714/222-6000.
Market Information
The Company's common stock is traded on the New York Stock Exchange under the
symbol AQS. The range of high and low transaction prices for the common stock as
reported by the New York Stock Exchange for fiscal 1994 and 1993, are as
follows:
<TABLE>
<CAPTION>
Fiscal 1994
Quarter
Ended High Low
<S> <C> <C>
Sep. 30, 1993 3 1/4 2
Dec. 31, 1993 5 3/4 2 1/2
Mar. 31, 1994 6 4 1/8
Jun. 30, 1994 4 1/8 3
</TABLE>
<TABLE>
<CAPTION>
Fiscal 1993
Quarter
Ended High Low
<S> <C> <C>
Sep. 30, 1992 2 1/4 1 1/4
Dec. 31, 1992 3 3/4 1 1/2
Mar. 31, 1993 3 3/8 2
Jun. 30, 1993 3 5/8 2
</TABLE>
There were 849 shareholders of record as of June 30, 1994. The Company has not
paid cash dividends and does not expect to declare or pay cash dividends in the
foreseeable future.
Annual Meeting of Shareholders
Monday, December 12, 1994, 2:00 p.m.
AmeriQuest Technologies, Inc.
2722 Michelson Drive, Irvine, CA 92715, 714/222-6000
51
<PAGE>
SCHEDULE VIII
AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
(Dollars in Thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charged to Deductions- Balance
Beginning Cost and Accounts at End
Descriptions of Period Expenses Written Off of Period
------------ ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Allowance for Doubtful Accounts:
July 1, 1991 to June 30, 1992 $ 441 $ 591 $ 629 $ 403
========== ========== =========== =========
July 1, 1992 to June 30, 1993 $ 403 $ 328 $ 478 $ 253
========== ========== =========== =========
July 1, 1993 to June 30, 1994 $ 253 $ 577 $ 353 $ 477
========== ========== =========== =========
Inventory Reserve:
July 1, 1991 to June 30, 1992 $ 8,657 $ 3,388 $ 4,620 $ 7,425
========== ========== =========== =========
July 1, 1992 to June 30, 1993 $ 7,425 $ 633 $ 4,962 $ 3,096
========== ========== =========== =========
July 1, 1993 to June 30, 1994 $ 3,096 $ 1,714 $ 2,177 $ 2,633
========== ========== =========== =========
</TABLE>
SCHEDULE IX
AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
SHORT-TERM BORROWINGS
(Dollars in Thousands)
<TABLE>
<CAPTION>
Weighted
Maximum Average Average
Category of Weighted Amount Amount Interest
Aggregate Balance Average Outstanding Outstanding Rate
Short-term at End of Interest During the During the During the
Borrowings Period Rate Period Period Period
----------- --------- -------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C>
Bank Notes Payable:
July 1, 1991 to June 30, 1992 $ 1,714 10.99% $ 7,570 $ 3,494 14.38%
========= ====== =========== =========== ======
July 1, 1992 to June 30, 1993 $ 0 10.04% $ 3,610 $ 714 34.08%
========= ====== =========== =========== ======
July 1, 1993 to June 30, 1994 $ 23,059 8.05% $ 24,652 $ 12,144 6.79%
========= ====== =========== =========== ======
</TABLE>
<PAGE>
EXHIBIT 22.01
<TABLE>
====================================================================================================================================
AMERIQUEST
TECHNOLOGIES, INC.
====================================================================================================================================
<S> <C> <C> <C> <C>
100% 50.1% 100% 100% 100%
- ----------- ---------- ----------- ---------------------- ---------------------------------------------------------
Ameriquest/ Robec, Inc. Ameriquest/ CDS CMS Enhancement, Inc.
NCD, INC. (Penn.) Kenfil Inc. Distribution Inc. (Delaware)
(Florida) (Delaware) (Vitronix, MSG, Rhino)
(Delaware)
- ----------- ---------- ----------- ---------------------- ---------------------------------------------------------
------------- ----------------- ----------------------
AnyBus CMS CMS
Technology Enhancements, Enhancements,
Corporation Inc. Inc.
(California) (s) PTE Ltd. (Aust.) Pty.LTD/
(Singapore)
------------- ----------------- ---------------------
</TABLE>
<PAGE>
EXHIBIT 23.01
CONSENT OF COUNSEL
I hereby consent to the reference to myself under the caption "Legal Matters"
in the Prospectus.
RAYMOND L. RIDGE, ESQ.
Newport Beach, California
January 18, 1995
II-6
<PAGE>
EXHIBIT 23.02
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports and to all references to our Firm included in or made a part of this
registration statement.
Arthur Andersen LLP
Los Angeles, California
February 6, 1995
II-7
<PAGE>
EXHIBIT 23.04
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of AmeriQuest Technologies, Inc. on Form S-4 of our report on Robec, Inc.'s
Financial Statements, which includes explanatory paragraphs related to Robec's
ability to continue as a going concern and Robec's changing its method of
accounting for income taxes, dated April 13, 1994 on our audits of the
financial statements and the financial statement schedules of Robec, Inc. and
Subsidiaries. We also consent to the reference to our firm under the caption
"Experts."
COOPERS & LYBRAND, L.L.P.
Philadelphia, Pennsylvania
January 17, 1995
II-8
<PAGE>
EXHIBIT 23.05
INDEPENDENT AUDITORS' CONSENT
We consent to the use of our report included herein and to the reference to
our firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
January 18, 1995
II-9
<PAGE>
EXHIBIT 23.06
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this registration statement
of AmeriQuest Technologies, Inc. on Form S-4 of our report on Ross White
Enterprises, Inc. d/b/a "National Computer Distributors" Financial Statements
on our audits of the financial statements and the financial statement schedules
of Ross White Enterprises, Inc. d/b/a "National Computer Distributors." We also
consent to the reference to our firm under the caption "Experts."
COOPERS & LYBRAND, L.L.P.
Miami, Florida
January 18, 1995
II-10
<PAGE>
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR
I hereby authorize, as a director of AmeriQuest Technologies, Inc. (the
"Corporation"), the filing (1) with the Securities and Exchange Commission and
(2) with any of the respective states as may be necessary to comply with the
securities laws of such states, of Registration Statements on Forms S-3 and S-4
relating to the acquisition of Robec, Inc. pursuant to the terms and conditions
of that certain Amended and Restated Agreement and Plan of Reorganization dated
August 11, 1994 by and between AmeriQuest Technologies, Inc. and Robec, Inc.,
and such other documents as may be required by such authorities.
I hereby consent to the filing by the Corporation of such Registration
Statements, and to reference to my name in the Registration Statements as a
"Director" of the Corporation. I hereby appoint Harold L. Clark and Stephen G.
Holmes as my attorneys-in-fact with power to either of them to sign any and all
amendments or documents required to complete any post-effective amendments and
reports to such Registration Statement filed on behalf of the Corporation.
DATED the 21st day of November, 1994.
/s/ Marc L. Werner
-------------------------
Marc L. Werner
<PAGE>
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR
I hereby authorize, as a director of AmeriQuest Technologies, Inc. (the
"Corporation"), the filing (1) with the Securities and Exchange Commission and
(2) with any of the respective states as may be necessary to comply with the
securities laws of such states, of Registration Statements on Forms S-3 and S-4
relating to the acquisition of Robec, Inc. pursuant to the terms and conditions
of that certain Amended and Restated Agreement and Plan of Reorganization dated
August 11, 1994 by and between AmeriQuest Technologies, Inc. and Robec, Inc.,
and such other documents as may be required by such authorities.
I hereby consent to the filing by the Corporation of such Registration
Statements, and to reference to my name in the Registration Statements as a
"Director" of the Corporation. I hereby appoint Harold L. Clark and Stephen G.
Holmes as my attorneys-in-fact with power to either of them to sign any and all
amendments or documents required to complete any post-effective amendments and
reports to such Registration Statement filed on behalf of the Corporation.
DATED the 21st day of November, 1994.
/s/ Eric J. Werner
-------------------------
Eric J. Werner
<PAGE>
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR
I hereby authorize, as a director of AmeriQuest Technologies, Inc. (the
"Corporation"), the filing (1) with the Securities and Exchange Commission and
(2) with any of the respective states as may be necessary to comply with the
securities laws of such states, of Registration Statements on Forms S-3 and S-4
relating to the acquisition of Robec, Inc. pursuant to the terms and conditions
of that certain Amended and Restated Agreement and Plan of Reorganization dated
August 11, 1994 by and between AmeriQuest Technologies, Inc. and Robec, Inc.,
and such other documents as may be required by such authorities.
I hereby consent to the filing by the Corporation of such Registration
Statements, and to reference to my name in the Registration Statements as a
"Director" of the Corporation. I hereby appoint Harold L. Clark and Stephen G.
Holmes as my attorneys-in-fact with power to either of them to sign any and all
amendments or documents required to complete any post-effective amendments and
reports to such Registration Statement filed on behalf of the Corporation.
DATED the 21st day of November, 1994.
/s/ Terren S. Peizer
-------------------------
Terren S. Peizer
<PAGE>
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR
I hereby authorize, as a director of AmeriQuest Technologies, Inc. (the
"Corporation"), the filing (1) with the Securities and Exchange Commission and
(2) with any of the respective states as may be necessary to comply with the
securities laws of such states, of Registration Statements on Forms S-3 and S-4
relating to the acquisition of Robec, Inc. pursuant to the terms and conditions
of that certain Amended and Restated Agreement and Plan of Reorganization dated
August 11, 1994 by and between AmeriQuest Technologies, Inc. and Robec, Inc.,
and such other documents as may be required by such authorities.
I hereby consent to the filing by the Corporation of such Registration
Statements, and to reference to my name in the Registration Statements as a
"Director" of the Corporation. I hereby appoint Harold L. Clark and Stephen G.
Holmes as my attorneys-in-fact with power to either of them to sign any and all
amendments or documents required to complete any post-effective amendments and
reports to such Registration Statement filed on behalf of the Corporation.
DATED the 21st day of November, 1994.
/s/ William N. Silvis
-------------------------
William N. Silvis
<PAGE>
APPOINTMENT OF ATTORNEY-IN-FACT
AND
CONSENT OF DIRECTOR
I hereby authorize, as a director of AmeriQuest Technologies, Inc. (the
"Corporation"), the filing (1) with the Securities and Exchange Commission and
(2) with any of the respective states as may be necessary to comply with the
securities laws of such states, of Registration Statements on Forms S-3 and S-4
relating to the acquisition of Robec, Inc. pursuant to the terms and conditions
of that certain Amended and Restated Agreement and Plan of Reorganization dated
August 11, 1994 by and between AmeriQuest Technologies, Inc. and Robec, Inc.,
and such other documents as may be required by such authorities.
I hereby consent to the filing by the Corporation of such Registration
Statements, and to reference to my name in the Registration Statements as a
"Director" of the Corporation. I hereby appoint Harold L. Clark and Stephen G.
Holmes as my attorneys-in-fact with power to either of them to sign any and all
amendments or documents required to complete any post-effective amendments and
reports to such Registration Statement filed on behalf of the Corporation.
DATED the 19 day of January, 1995.
/s/ Robert H. Beckett
-------------------------
Robert H. Beckett
