<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 16, 1995
REGISTRATION NO. 33-57611
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
REGISTRATION STATEMENT
ON
FORM S-4
(PRE-EFFECTIVE AMENDMENT NO. 5)
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.)
OF INCORPORATION OR CODE NUMBER)
ORGANIZATION)
3 IMPERIAL PROMENADE, STE. 300, SANTA ANA, CA 92707, (714) 437-0099
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------
STEPHEN G. HOLMES, SECRETARY
AMERIQUEST TECHNOLOGIES, INC.
3 IMPERIAL PROMENADE, STE. 300
SANTA ANA, CALIFORNIA 92707
(714) 437-0099
(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. [_]
----------------
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.
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--------------------------------------------------------------------------------
EXHIBIT INDEX IS ON PAGE . PAGE 001 OF 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
-------- ------------------------------------- ------------------------------
<C> <C> <S>
A. INFORMATION ABOUT THE TRANSACTION
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......................... *
B. INFORMATION ABOUT THE REGISTRANT
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> <C> <S>
C. INFORMATION ABOUT THE COMPANY BEING
ACQUIRED
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
AUGUST , 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
September , 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 .82944 shares of newly issued shares of common stock, par value $.01
per share, of AmeriQuest ("AmeriQuest Common Stock"); provided, however, that
in the event that the lesser of (A) the mean trading price of AmeriQuest Common
Stock on the New York Stock Exchange on the fourth trading day prior to the
Meeting Date or (B) the average of the mean trading prices of AmeriQuest Common
Stock on the New York Stock Exchange for each of the 20 trading days prior to
the fourth trading day prior to the Meeting Date (the lesser of the amounts
determined pursuant to (A) or (B) above, the "Market Price"), is less than
$3.00 per share, the Applicable Fraction shall be equal to the sum of (A) the
product of (i) .63075 multiplied by (ii) a quotient, the numerator of which is
$3.00 and the denominator of which is the Market Price plus (B) .19869 (the
"Exchange Ratio"), all as more fully described in the accompanying
Prospectus/Proxy Statement and the Plan of Merger attached as Appendix I
thereto (Robec shareholders will be able to call 1-800-788-4267 beginning the
morning of the third trading day prior to the Meeting Date to learn the final
Exchange).
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") and amended
as of August 4, 1995, 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, after
application of the 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 August 18, 1995 (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.
<PAGE>
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 SEPTEMBER , 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 September
, 1995 (the "Meeting Date") 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 .82944
shares of the common stock, par value $.01 per share, of AmeriQuest
("AmeriQuest Common Stock"), provided, however, that in the event that the
lesser of (A) the mean trading price of AmeriQuest Common Stock on the New
York Stock Exchange on the fourth trading day prior to the Meeting Date or
(B) the average of the mean trading prices of AmeriQuest Common Stock on
the New York Stock Exchange for each of the 20 trading days prior to the
fourth trading day prior to the Meeting Date (the lesser of the amounts
determined pursuant to (A) or (B) above, the "Market Price"), is less than
$3.00 per share, the Applicable Fraction shall be equal to the sum of (A)
the product of (i) .63075 multiplied by (ii) a quotient, the numerator of
which is $3.00 and the denominator of which is the Market Price plus (B)
.19869 (the "Exchange Ratio"). (Robec shareholders will be able to call 1-
800-788-4267 beginning the morning of the third trading day prior to the
Meeting Date to learn the final Exchange Ratio); 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 August 18, 1995 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
August , 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
SEPTEMBER , 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 September , 1995 (the "Meeting
Date") 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 .82944 (the "Applicable Fraction")
shares of the common stock of AmeriQuest ("AmeriQuest Common Stock"),
provided, however, that in the event that the lesser of (A) the mean trading
price of AmeriQuest Common Stock on the New York Stock Exchange on the fourth
trading day prior to the Meeting Date or (B) the average of the mean trading
prices of AmeriQuest Common Stock on the New York Stock Exchange for each of
the 20 trading days prior to the fourth trading day prior to the Meeting Date
(the lesser of the amounts determined pursuant to (A) or (B) above, the
"Market Price"), is less than $3.00 per share, the Applicable Fraction shall
be equal to the sum of (A) the product of (i) .63075 multiplied by (ii) a
quotient, the numerator of which is $3.00 and the denominator of which is the
Market Price plus (B) .19869 (the "Exchange Ratio"). (Robec shareholders will
be able to call 1-800-788-4267 beginning the morning of the third trading day
prior to the Meeting Date to learn the final Exchange Ratio.) 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"), as amended on August 4, 1995, 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 August , 1995.
<PAGE>
AVAILABLE INFORMATION
Robec (SEC File No. 0-18115) and AmeriQuest (SEC File No. 1-10397) 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 (Amendment No. 9) for the year ended June 30, 1994 and its
Quarterly Report on Form 10-Q/A (Amendment No. 1) for the quarter and nine
months ended March 31, 1995, as well as Robec's Annual Report on Form 10-K/A
(Amendment No. 1) for the year ended December 31, 1994 and its Quarterly
Report on Form 10-Q for the six months ended June 30, 1995.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are incorporated herein by reference:
(1) AmeriQuest's Current Report on Form 8-K (including Amendment Nos. 1
thru 3) dated June 14, 1994, the most recent of which was filed May
26, 1995;
(2) AmeriQuest's Annual Report on Form 10-K (including Amendment Nos. 1
thru 9) for the fiscal year ended June 30, 1994, the most recent of
which was filed August 16, 1995;
(3) AmeriQuest's Current Report on Form 8-K (including Amendment No. 1)
dated July 18, 1994, the most recent of which was filed April 6,
1995;
(4) AmeriQuest's Current Report on Form 8-K (including Amendment Nos. 1
thru 4) dated September 12, 1994, the most recent of which was filed
May 9, 1995;
(5) AmeriQuest's Quarterly Report on Form 10-Q (including Amendment Nos.
1 thru 4) for the three months ended September 30, 1994, the most
recent of which was filed May 9, 1995 (and erroneously labeled as
"Amendment No. 3");
(6) AmeriQuest's Current Report on Form 8-K (including Amendment Nos. 1
thru 6) dated as of November 14, 1994, the most recent of which was
filed May 26, 1995;
(7) AmeriQuest's Quarterly Report on Form 10-Q (including Amendment Nos.
1 thru 4) for the six months ended December 30, 1994, the most recent
of which was filed May 26, 1995;
(8) AmeriQuest's Quarterly Report on Form 10-Q (including Amendment No.
1) for the nine months ended March 31, 1995, the most recent of which
was filed May 26, 1995;
(9) AmeriQuest's Current Report on Form 8-K dated June 26, 1995 and filed
July 3, 1995;
(10) AmeriQuest's Current Report on Form 8-K dated August 7, 1995 filed
August 16, 1995;
(11) AmeriQuest's Current Report on Form 8-K dated August 9, 1995, filed
August 16, 1995;
(12) AmeriQuest's Schedule 14F filed August 14, 1995;
(13) Robec's Annual Report on Form 10-K (including Amendment No. 1) for
the fiscal year ended December 31, 1994, the most recent of which
was filed May 10, 1995;
(14) Robec's Quarterly Report on Form 10-Q for the quarter and three
months ended March 31, 1995, which was filed on May 15, 1995;
(15) Robec's Quarterly Report on Form 10-Q for the quarter and six months
ended June 30, 1995, which was filed on August 11, 1995;
(16) Kenfil Inc.'s Annual Report on Form 10-K for the fiscal year ended
June 30, 1993, SEC File No. 0-19905;
(17) Kenfil Inc.'s Quarterly Report on Form 10-Q for the quarter and three
months ended September 30, 1993;
(18) Kenfil Inc.'s Quarterly Report on Form 10-Q for the quarter and six
months ended December 31, 1993;
(19) Kenfil Inc.'s Quarterly Report on Form 10-Q (including Amendment No.
1) for the quarter and nine months ended March 31, 1994, the most
recent of which was filed May 9, 1995.
ii
<PAGE>
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., 3 IMPERIAL PROMENADE, STE. 300, SANTA
ANA, CA 92707. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY SEPTEMBER , 1995.
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/Computer 2000 Purchase Agreement........................ 11
Recent Developments/Default on Loan with Primary Lender..................... 11
Recent Developments/Acquisitions............................................ 11
Termination of Entertainment Software Business and Significant Fourth
Quarter Fiscal 1995 Operating Loss......................................... 11
Recent Losses; Possible Need for Additional Capital......................... 12
Stock Repurchase Agreement.................................................. 13
Integration of Companies.................................................... 13
Need for Product Development; Manufacturing................................. 13
Competition; Dominance of Industry Leaders.................................. 13
Competition; Products and Gross Margin...................................... 14
Dependence upon Key Personnel............................................... 14
Possible Sales by Shareholders.............................................. 14
Volatility of Stock Price; Trading Volume................................... 14
THE SPECIAL MEETING........................................................... 15
Purpose of the Special Meeting.............................................. 15
Record Date; Solicitation of Proxies........................................ 15
Vote Required............................................................... 16
Stock Ownership of Robec by Management and Certain Beneficial Owners........ 17
Certified Public Accountants................................................ 18
BUSINESSES OF THE COMPANIES................................................... 18
AMERIQUEST.................................................................. 18
General................................................................... 18
Incorporation of Certain Information by Reference......................... 19
Recent Developments....................................................... 19
Computer 2000 Investment................................................ 19
Acquisition of NCD...................................................... 23
ROBEC....................................................................... 26
General................................................................... 26
Incorporation of Certain Information by Reference......................... 26
INFORMATION REGARDING THE MERGER.............................................. 26
THE MERGER.................................................................. 26
BACKGROUND OF THE MERGER.................................................... 27
RECOMMENDATION OF THE BOARD OF DIRECTORS OF ROBEC; REASONS FOR THE MERGER... 30
OPINION OF ROBEC'S FINANCIAL ADVISOR........................................ 31
DISSENTERS APPRAISAL RIGHTS................................................. 36
CERTAIN ANTITRUST MATTERS................................................... 38
INTEREST OF CERTAIN PERSONS IN THE MERGER................................... 39
CERTAIN FEDERAL INCOME TAX CONSEQUENCES..................................... 39
Federal Tax Matters....................................................... 39
Tax Consequences to Robec Shareholders.................................... 39
Tax Consequences to Robec and AmeriQuest.................................. 40
Information Reporting..................................................... 40
Backup Withholding........................................................ 40
ACCOUNTING TREATMENT........................................................ 40
</TABLE>
iv
<PAGE>
<TABLE>
<S> <C>
THE PLAN OF MERGER..................................................... 40
The Merger........................................................... 40
Effective Date....................................................... 41
Terms of the Merger.................................................. 41
Payment of Merger Consideration...................................... 41
Surviving Provisions................................................. 42
Dissenting Shares.................................................... 42
THE AMENDED AGREEMENT.................................................. 42
The Exchange......................................................... 42
Robec Stock Options.................................................. 43
Representations and Warranties; Conduct of Business Pending the
Merger.............................................................. 43
Conditions to Consummation of the Merger............................. 44
Indemnification; Insurance........................................... 44
Termination.......................................................... 44
Amendment; Waiver.................................................... 45
Registration Rights.................................................. 45
PRO FORMA FINANCIAL INFORMATION.......................................... 45
CAPITALIZATION........................................................... 51
COMPARATIVE MARKET PRICES OF COMMON STOCK................................ 52
DIVIDEND POLICY.......................................................... 52
DESCRIPTION OF CAPITAL STOCK OF AMERIQUEST............................... 53
General................................................................ 53
Preferred Stock........................................................ 53
Common Stock........................................................... 53
Dividends.............................................................. 53
Voting Rights.......................................................... 54
Liquidation............................................................ 54
Pre-Emptive Rights..................................................... 54
Anti-Takeover Provisions............................................... 54
COMPARISON OF SHAREHOLDER RIGHTS......................................... 54
By-Laws................................................................ 54
Dividend Declarations.................................................. 55
Terms of Directors..................................................... 55
Removal of Directors................................................... 55
Meetings of Shareholders............................................... 55
Action by Shareholders Without Meeting................................. 56
Dissenters Rights...................................................... 56
Supermajority Provisions............................................... 56
Business Combinations with Interested Shareholders..................... 56
Fiduciary Duty......................................................... 57
Derivative Actions..................................................... 57
LEGAL MATTERS............................................................ 57
EXPERTS.................................................................. 58
SHAREHOLDER PROPOSALS.................................................... 59
OTHER MATTERS............................................................ 59
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., 3 Imperial Prom-
enade, Ste. 300, Santa Ana, CA 92707, (714)
437-0099.
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 61 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 scheduled to close on
August 21, 1995, at which time AmeriQuest will
receive $31.25 million cash from Computer 2000
and Computer 2000 will exchange its $18 million
loan for shares of AmeriQuest Common Stock. See
"Businesses of the Companies--AmeriQuest--Re-
cent Developments--Computer 2000 Investment."
Date and Time of Meeting:
A special meeting of shareholders of Robec to
consider and vote upon the Plan of Merger (the
"Special Meeting") will be held on September
, 1995 at 10:00 a.m. (the "Meeting Date").
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: August 18, 1995. 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."
1
<PAGE>
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."
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. AmeriQuest has sufficient voting power to
approve and adopt the Plan of Merger even if no
other shareholders of Robec vote in favor of
such proposal.
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, (3) by calling 1-800-788-4267
anytime during the three business days preced-
ing the Meeting Date and selecting "Option 2--
Change of Vote" and leaving shareholder name,
social security number and voting instruction,
or (4) by request for return of the Proxy at
the Special Meeting. See "The Special Meeting--
Vote Required."
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 .82944 (the
"Applicable Fraction") shares of newly issued
AmeriQuest Common Stock; provided, however,
that in the event that the lesser of (A) the
mean trading price of AmeriQuest Common Stock
on the New York Stock Exchange on the fourth
trading day prior to the Meeting Date or (B)
the average of the mean trading prices of
AmeriQuest Common Stock on the New York Stock
Exchange for each of the 20 trading days prior
to the Meeting Date (the lesser of the amounts
prior to the fourth trading day determined pur-
suant to (A) or (B) above, the "Market Price"),
is less than $3.00 per share, the Applicable
Fraction shall be equal to the sum of (A) the
product of (i) .63075 multiplied by (ii) a quo-
tient, the numerator of which is $3.00 and the
denominator of which is
2
<PAGE>
the Closing Date Market Price plus (B) .19869
(the "Exchange Ratio"). (Robec shareholders
will be able to call 1-800-788-4267 beginning
the morning of the third trading day prior to
the Meeting Date to learn the final Exchange
Ratio.) See "Information 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 Stock to be issued pursuant to the
Merger with the New York Stock Exchange, but
not less the two business days following the
Meeting Date. See "Information Regarding the
Merger--The Plan of Merger--Effective 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." Robec's Board of
Directors has concluded that there have been no
facts relating to Robec since September 20,
1994 which would lead the financial advisor to
conclude that Robec was now worth more than as
of September 20, 1994.
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
3
<PAGE>
Merger have the right to demand an appraisal of
the "fair value" of their shares of Robec Com-
mon 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."
Appointment of Robert H. AmeriQuest has agreed to appoint Robert H.
Beckett as a Director of Beckett, currently the Chairman, Chief Execu-
AmeriQuest After the tive Officer and President of Robec, to the
Exchange: Board of Directors of AmeriQuest as of the
Closing Date and agreed to nominate him for re-
election at each of the next two annual meet-
ings of AmeriQuest stockholders. See "Informa-
tion 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
Calendar 1995
First Quarter............................. 3 1/8 2 1/2
Second Quarter............................ 3 1/4 1 3/4
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 bid quotations reported on the Nasdaq
National Market System for Robec Common Stock
for the calendar periods indicated:
<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
Calendar 1995
First Quarter............................. 1 15/16 1 1/2
Second Quarter............................ 1 13/16 1 1/2
</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 would be issuing stock
that had an equivalent value on that date of
$2.05 per share of Robec Common Stock. On
August 15, 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.
Based on the Exchange Ratio, adjusted to
reflect the decrease in the sale price of
AmeriQuest Common Stock below $3.00 per share,
AmeriQuest would be issuing stock having an
equivalent market value on that date of $
per share of Robec Common Stock. 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 Statements for three years ended June 30,
1994, 1993 and 1992 has been audited by Arthur Andersen LLP, independent public
accountants. Robec's Consolidated Financial Statements for the three years
ended December 31, 1994, 1993 and 1992 has been audited by Coopers & Lybrand
LLP, independent public accountants. NCD's Financial Statements for the two
years ended March 31, 1994 and 1993 have been audited by KPMG Peat Marwick LLP,
independent public accountants. NCD's Statement of Operations for the three
months ended March 31, 1992 has been audited by Hansen, Barnett & Maxwell,
independent public accountants. AmeriQuest's statements of income data for the
nine months ended March 31, 1995 and the balance sheet data at March 31, 1995
and NCD's statement of income data for the six months ended September 30, 1994
and balance sheet data at 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 its 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, Kenfil,
Robec and NCD for the twelve months ended June 30, 1994 and the nine months
ended March 31, 1995 giving effect to the acquisitions and the Computer 2000
Purchase Agreement as if each transaction had occurred on July 1, 1993. The
unaudited pro forma condensed combined balance sheet data as of March 31, 1995,
gives effect to the Company's acquisition of the remaining 49.9 percent of
Robec common stock, not owned by the Company and the Computer 2000 Purchase
Agreement as if they were completed 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. The acquisitions discussed above have been
accounted for under the purchase method of accounting.
6
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
MARCH 31 YEARS ENDED JUNE 30
----------- -----------------------------------------------
1995 1994 1993 1992 1991 1990
----------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
AMERIQUEST
Historical Statement of
Income Data:
Net sales............. $305,664 $ 87,593 $ 73,082 $115,054 $130,062 $187,724
Income (loss) from
operations........... (5,000) (7,274) 487 (9,047) (11,730) 1,245
Income (loss) before
income taxes......... (9,443) (7,971) 236 (9,623) (12,027) 652
Net income (loss)..... (9,443) (7,971) 236 (8,894) (8,501) 405
Earnings (loss) per
share................ (0.52) (1.33) 0.08 (3.04) (2.89) 0.13
Weighted average
shares outstanding... 18,193 5,974 3,061 2,922 2,942 3,156
<CAPTION>
MARCH 31 JUNE 30
----------- -----------------------------------------------
1995 1994 1993 1992 1991 1990
----------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Historical Balance Sheet
Data:
Working capital
(deficit)............ $ (8,508) $ 4,872 $ 5,904 $ 5,217 $ 15,081 $ 22,463
Total assets.......... 170,039 65,145 20,274 23,522 40,747 41,084
Long-term obligations. 572 3,442 1,817 274 1,851 1,134
Shareholders' equity.. 26,447 12,875 8,644 7,952 16,806 26,065
<CAPTION>
NINE MONTHS
ENDED
MARCH 31 YEARS ENDED JUNE 30
----------- -----------------------------------------------
1995 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>
MARCH 31 JUNE 30
----------- -----------------------------------------------
1995 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) Kenfil operating results and balance sheet data for the nine months ended
March 31, 1995 are consolidated with the results of AmeriQuest.
7
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
JUNE 30 YEARS ENDED DECEMBER 31
----------- -----------------------------------------------
1995 1994 1993 1992 1991 1990
----------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
ROBEC
Historical Statement of
Income Data:
Net sales............. $73,100 $141,106 $203,233 $202,564 $201,131 $190,867
Income (loss) from
operations........... (3,217) (4,893) (8,141) (5,353) 4,994 7,890
Income (loss) before
income taxes......... (4,239) (6,148) (9,994) (6,785) 3,237 6,178
Net income (loss)..... (4,239) (6,172) (9,118) (4,589) 2,104 3,956
Earnings (loss) per
share................ (0.95) (1.39) (2.05) (1.03) 0.47 0.87
Weighted average
shares outstanding... 4,439 4,439 4,459 4,459 4,457 4,571
<CAPTION>
JUNE 30 DECEMBER 31
----------- -----------------------------------------------
1995 1994 1993 1992 1991 1990
----------- -------- -------- -------- -------- --------
(UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Historical Balance Sheet
Data:
Working capital......... $ 2,345 $ 6,423 $ 12,208 $ 42,078 $ 45,168 $ 22,788
Total assets............ 33,855 36,049 57,075 65,685 71,750 62,519
Long-term obligations... -- -- -- 21,336 20,000 --
Shareholders' equity ... 3,850 8,089 14,261 23,379 27,964 25,860
</TABLE>
<TABLE>
<CAPTION>
SIX MONTHS THREE MONTHS
ENDED ENDED
SEPTEMBER 30(1) 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... 234 220 220 120 100 100
<CAPTION>
SEPTEMBER 30(1) MARCH 31 DECEMBER 31
--------------- ----------------------------------- ----------------------------
1994 1994 1993 1992 1991 1990
--------------- --------------------- ------------ ----------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
Historical Balance Sheet
Data:
Working capital......... $ 2,335 $ 20,052 $ 620 $ 1,676 $ (200) $ 262
Total assets............ 52,359 51,677 27,984 9,711 9,656 7,153
Long-term obligations... 2,737 21,499 2,663 94 136 135
Shareholders' equity
(deficiency)........... 1,260 11 (619) 1,582 697 500
</TABLE>
(1) NCD operating results and balance sheet data for the subsequent to November
14, 1994 are consolidated with the results of AmeriQuest.
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 NINE MONTHS ENDED
JUNE 30, 1994 MARCH 31, 1995
------------------- -----------------
<S> <C> <C>
Pro Forma Combined Statement of Income
Data:
Net sales.............................. $613,606 $409,227
Income (loss) from operations (3)...... (34,539) (8,044)
Income (loss) before taxes (3)......... (38,433) (11,897)
Net income (loss) (3).................. (37,636)(1) (11,897)
Net income (loss) applicable to common
stockholders (3)...................... (37,636) (11,897)
Net income (loss) per share (3)........ (0.80) (0.24)
Weighted average shares outstanding.... 47,305 49,630
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995
--------------
<S> <C>
Pro Forma Combined Balance Sheet Data:
Working capital............................................... $ 40,742
Total assets.................................................. 172,789
Long-term obligations......................................... 572
Total stockholders' equity.................................... 81,247 (3)
Book value per share (2)...................................... 1.61
Common shares outstanding..................................... 50,650
</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 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 March 31,
1995.
(3) In connection with executive and operating management changes, AmeriQuest
has made the decision to terminate its entertainment software business and
focus its product line offerings by eliminating certain lower margin
products and vendors within its computer hardware distribution business.
As a result, the Company will record a charge in the fourth quarter of
fiscal 1995 estimated to be between $25 million to $30 million associated
with the write-off of the intangible assets related to the entertainment
software business, the write-down of related inventory to liquidation value
and the reserve of customer and vendor receivables to their recoverable
value. In addition to the fourth quarter fiscal 1995 loss related to the
termination of the entertainment software business, the Company expects to
record further substantial fourth quarter operating losses due to the
continued sales volume reductions experienced by the Company and expected
substantial inventory realization reserves associated with the elimination
of certain lower margin products and vendors within the Company's computer
hardware distribution business. These losses are not reflected in the pro
forma financial statements as they relate to activity and management
decisions occurring after the third quarter of fiscal 1995. (See "Risk
Factors--Termination of Entertainment Software Business and Significant
Fourth Quarter Fiscal 1995 Operating Loss").
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 Robec; (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; 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 0.82944 (see "Information Regarding the Merger" for
information on adjustments to the exchange ratio for changes in the quoted
market price for AmeriQuest Common Stock preceding the Merger). 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) AMERIQUEST ROBEC
----------------- PRO FORMA PRO FORMA
AMERIQUEST ROBEC COMBINED(1)(3) COMBINED(2)
---------- ------ -------------- -----------
<S> <C> <C> <C> <C>
Net Income (Loss) Per Share(3)
Twelve months ended
June 30, 1994.................. $(1.33) $(2.52) $(0.80) $(0.92)
Nine months ended
March 31, 1995................. (0.52) (0.92) (0.24) (0.27)
Book Value Per Share at
June 30, 1994.................. 1.31 2.65 2.01 2.30
March 31, 1995................. 1.26 1.76 1.61 1.84
</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 0.82944 (adjusted for AmeriQuest's current
quoted market price--see "Information Regarding the Merger--The Merger") of
a share of AmeriQuest Common Stock for each share of Robec Common Stock.
(3) AmeriQuest's and Robec's 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/COMPUTER 2000 PURCHASE AGREEMENT. On November 14, 1994,
AmeriQuest entered into an Investment Agreement and a Loan Agreement with
Computer 2000 AG ("Computer 2000") which contemplated that Computer 2000 would
invest approximately $50 million in AmeriQuest (the "Investment") in exchange
for a 51% ownership interest in AmeriQuest, including shares already owned by
Computer 2000, and assuming consummation of the Merger. The investment as
originally contemplated by Computer 2000 was tiered. The first tier included an
$18 million advance from Computer 2000, exchangeable for shares of AmeriQuest
Common Stock, and the second tier of $32 million was contingent upon the
monthly and cumulative performance of AmeriQuest in the first half of calendar
1995, approval by AmeriQuest stockholders and certain regulatory approvals.
AmeriQuest failed to achieve the performance goals, therefore AmeriQuest had no
right to compel Computer 2000 to make such investment and was required to
renegotiate the arrangement with Computer 2000. On August 7, 1995, AmeriQuest
executed a Purchase Agreement with Computer 2000 on August 7, 1995 (the
"Purchase Agreement"), which provides that Computer 2000 will complete its $50
million investment in August, 1995 by converting the $18 million advance into
AmeriQuest Common Stock and completing the additional $31.25 million equity
investment, on terms substantially different from those earlier negotiated.
Computer 2000 will beneficially own approximately 62% of AmeriQuest's stock and
have voting and managerial control of AmeriQuest upon closing. Although the
sale of the shares to Computer 2000 will be at a price below the quoted market
price on August 7, 1995, the Board of Directors of AmeriQuest concluded that it
had few alternatives given the financial distress of AmeriQuest. AmeriQuest
also received a fairness opinion from L.H. Friend, Weinress, Frankson &
Presson, Inc. For additional information, see "The Business of the Companies--
AmeriQuest--Recent Developments--Investment by Computer 2000 Investment."
RECENT DEVELOPMENTS/DEFAULT ON LOAN WITH PRIMARY LENDER. AmeriQuest is
currently in default under the terms of the agreement with its primary lender
by reason of its borrowings exceeding its collateral base. However, the primary
lender has continued to provide financing under the working capital line of
credit. AmeriQuest management expects to reduce its borrowings under this line
with a portion of the proceeds from the Computer 2000 investment to a level
where the loan is fully collateralized; however, no assurance can be given that
AmeriQuest's future working capital needs will not exceed its available
borrowings under its credit agreements.
TERMINATION OF ENTERTAINMENT SOFTWARE BUSINESS AND SIGNIFICANT FOURTH QUARTER
FISCAL 1995 OPERATING LOSS. AmeriQuest has made the decision to terminate its
entertainment software business (which involves sales primarily to retailers)
and to focus its management efforts and capital in the higher-margin value-
added products, applications software and computer hardware distribution
businesses. In addition, AmeriQuest is in the process of further focusing its
product line offerings by eliminating certain lower margin products and vendors
within its computer hardware distribution business. The Company will record a
charge in the fourth quarter of Fiscal 1995 estimated to be between $25 million
to $30 million associated with the write-off of the intangible assets related
to the entertainment software business, the write-down of related inventory to
liquidation value and the reserve of customer and vendor receivables to their
recoverable value.
In addition to the fourth quarter fiscal 1995 loss related to the termination
of the entertainment software business, the Company expects to record a further
substantial fourth quarter operating losses due to the continued sales volume
reductions experienced by the Company and expects substantial inventory
realization reserves associated with the elimination of certain lower margin
products and vendors within the Company's computer hardware distribution
business.
11
<PAGE>
RECENT DEVELOPMENTS/ACQUISITIONS. AmeriQuest has a policy of growth, both
internal and by acquisition. On June 6, 1994, AmeriQuest acquired 51.9% of
Kenfil Inc., a distributor of entertainment and other 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"). (See "Termination of
Entertainment Software Business and Significant Fourth Quarter Fiscal 1995
Operating Loss" above for a discussion of the discontinuance of the
entertainment software business.) On September 22, 1994, AmeriQuest acquired
50.1% of Robec from the Principal Shareholders, and it is contemplated that
AmeriQuest will secure ownership of 100% of Robec upon consummation of the
Merger. On November 14, 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."
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 nine months ended March 31, 1995, AmeriQuest
experienced a loss of approximately $9,443,000 compared with a net loss of
approximately $4,889,000 for the same period a year earlier, and anticipates a
significant operating loss for the fourth fiscal quarter ended June 30, 1995.
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 $6,172,000 and $4,239,000 for the year ended December
31, 1994 and the six months ended June 30, 1995, respectively. The Combined
Company is continuing to incur losses as it attempts to restructure its
operations, and there can be no assurance that the Combined Company will be
able to achieve profitability in subsequent periods even though it is cutting
costs significantly in an attempt to achieve a profitable level of operations
as soon as possible. (See "Termination of Entertainment Software Business and
Significant Fourth Quarter Fiscal 1995 Operating Loss.") 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 unit upon the acquisition of NCD. On June 30, 1995
AmeriQuest raised approximately $4,500,000 upon the issuance of AmeriQuest
Common Stock and warrants at $1.75 per unit, with each unit comprised of one
share of AmeriQuest Common Stock and two three-year warrants exercisable at
$1.05 per share. In August 1995, AmeriQuest entered into a Purchase Agreement
with Computer 2000 which among other things calls for the issuance of
approximately 8.1 million shares of AmeriQuest Common Stock in satisfaction of
the $18 million Computer 2000 advance and the issuance of approximately 17.9
million shares of AmeriQuest Common Stock for approximately $31.3 million. The
Purchase Agreement also calls for the issuance of warrants to purchase
approximately 14 million shares of AmeriQuest Common Stock at $0.05 per share
and certain anti-dilution warrants related to additional shares issuable in the
Robec Merger and various other outstanding warrant and option agreements (see
"Recent Developments" for a full description of the terms of the Computer 2000
Purchase Agreement). In the event that the Combined Company does not achieve
profitability over the next year, AmeriQuest may be required to seek additional
financing, but the Investment Agreement with Computer 2000 prohibits the
issuance of additional shares of AmeriQuest Common Stock without its consent.
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.
12
<PAGE>
STOCK REPURCHASE AGREEMENT. AmeriQuest is party to a Stock Repurchase
Agreement dated November 14, 1994 pursuant to which certain former
shareholders of NCD have the right at any time and from time-to-time after
February 13, 1995 to require AmeriQuest to repurchase up to 661,486 shares of
AmeriQuest Common Stock at $3.50 per share for a total potential obligation of
$2,315,201. Suit was filed by the former shareholders of NCD on June 5, 1995
seeking payment by AmeriQuest. To the extent such persons sell their shares
pursuant to an effective Registration Statement (which was declared effective
on July 12, 1995), AmeriQuest will be relieved of that obligation; however to
the extent the proceeds from such resale are insufficient to realize the full
$2,315,201 claimed, AmeriQuest may have to pay the difference in cash
(approximately $1 million at current quoted market prices) or additional
shares of AmeriQuest Common Stock. The action is styled Lee Capital Holdings
et. al. vs. AmeriQuest Technologies, Inc. et. al., Superior Court of the State
of California, County of Orange, Case No. 748039. Unless such shares are sold,
the satisfaction of the amounts claimed from the assets of AmeriQuest could
have a material adverse effect on the Company.
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 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.
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 depends on original equipment manufacturers
("OEMs") to manufacture various portions of its products, but has no
contractual commitments from its suppliers where no single supplier provides
the entirety of any product needs. Although AmeriQuest performs quality
control checks on these components, there can be no assurance that component
defects will not occur in the future. AmeriQuest has in the past experienced
component reliability problems with respect to new components. AmeriQuest
believes that this problem is typical in the industry and it performs 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
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
13
<PAGE>
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; and
AmeriQuest does not maintain key-man insurance policies.
POSSIBLE SALES BY SHAREHOLDERS. AmeriQuest has earlier registered 12,767,364
outstanding shares (52.6%) of AmeriQuest Common Stock on Form S-3 for resale by
certain selling shareholders, including the principal shareholders. AmeriQuest
has also agreed to register the 2,574,287 shares (10.6%) issued on June 30,
1995 and the shares to be issued to Computer 2000 upon consummation of the
transactions contemplated by the Purchase Agreement with Computer 2000. The
sale of such 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.
14
<PAGE>
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 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. However, because AmeriQuest
owns 50.1% of Robec's Common Stock, AmeriQuest has sufficient voting power to
approve and adopt the Plan of Merger even if no other shareholders of Robec
vote in favor of such proposal. AmeriQuest has agreed to vote in favor of the
approval and adoption of the Plan of 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 August 18, 1995 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 5,000,000 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 (1)
giving written notice to the Secretary of Robec, (2) by substitution of a new
Proxy bearing a later date, (3) by calling 1-800-788-4267 any time during the
three business days preceding the Meeting Date and selecting "Option 2--Change
of Vote" and leaving shareholder name, social security number and voting
instruction, or (4) by request for return of the Proxy at the Special Meeting.
Written notices should be sent to Robert S. Beckett, Secretary, Robec, Inc.,
425 Privet Road, Horsham, Pennsylvania 19044.
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
15
<PAGE>
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 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.
16
<PAGE>
STOCK OWNERSHIP OF ROBEC BY MANAGEMENT AND CERTAIN BENEFICIAL OWNERS
The following table sets forth, as of August 1, 1995, or as of such other
date as may be noted below, information related 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 certain named
executive officers of Robec, 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)......................... 281,100 6.33
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 (11 persons)(5)(7)... 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 August 1, 1995 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.
(2) Percentages calculated with reference to an aggregate 4,439,180 shares of
Robec Common Stock outstanding on August 1, 1995.
(3) On September 22, 1994, Messrs. Robert H. Beckett, Robert S. Beckett,
Alexander C. Kramer, Jr. and G. Wesley McKinney, 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) As of December 31, 1994 as reflected in Amendment No. 3 to Schedule 13G
dated March 1995. 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 is deemed to have beneficial ownership of 281,100 shares of
Robec Common Stock as of December 31, 1994, all of which shares are held in
portfolios of DFA Investment Dimensions Group, Inc., a registered open-end
investment company (the "Fund"), or in series of the DFA Investment Trust
Company, a
17
<PAGE>
Delaware business trust (the "Trust"), or the DFA Group Trust and DFA
Participation Trust, investment vehicles for qualified employee benefit
plans, for all of which Dimensional serves as investment manager.
Dimensional disclaims beneficial ownership of all of such shares; (iv)
persons who are officers of Dimensional also serve as officers of the Fund
and the Trust, and in such capacities vote 99,200 shares of Robec Common
Stock owned by the Fund and 16,100 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) 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 3 Imperial
Promenade, Ste. 300, Santa Ana, CA 92707, and its telephone number is (719)
437-0099. AmeriQuest is a Delaware corporation that conducts business through
its subsidiaries.
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. See "Recent Developments--Termination of Entertainment
Software Business."
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.
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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 (Amendment No. 9) 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
Reports on Form 10-Q/A (Amendment No. 4) for the three months ended
September 30, 1994, the six months ended December 30, 1994; and
AmeriQuest's Quarterly Report on Form 10-Q/A (Amendment No. 1) for the nine
months ended March 31, 1995.
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%
ownership interest in AmeriQuest, including shares already owned by Computer
2000. The transaction had been approved by the boards of both companies, and
was 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 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
provided that, subject to certain conditions, on or before September 1, 1995,
Computer 2000 had an option to invest an additional $32 million in AmeriQuest,
which would bring 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 ability of AmeriQuest to require Computer 2000 to make the $32
million investment was 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. AmeriQuest has
failed to meet these profitability conditions and other conditions.
AmeriQuest failed to meet certain conditions of the Investment Agreement.
Computer 2000, its wholly- owned subsidiary ("C2000 Sub") and AmeriQuest
entered into the Purchase Agreement on August 7, 1995 under which Computer 2000
or C2000 Sub will acquire shares of AmeriQuest's Preferred Stock and options,
warrants and certain other rights to purchase shares of AmeriQuest's Common and
Preferred Stock in exchange for delivery of the promissory notes evidencing the
Loan (the "Notes") and payment of $31,250,000, subject to certain conditions.
Under these transactions, Computer 2000 and/or C2000 Sub will acquire control
(approximately 62% of the outstanding voting capital stock) of AmeriQuest. At
the closing provided for in the Purchase Agreement, expected to occur on or
about August 21, 1995, subject to certain conditions, the Loan Agreement and
the Investment Agreement will terminate and the following transactions, among
others, will occur:
(a) Computer 2000 will assign the Notes to AmeriQuest in exchange for the
issuance by AmeriQuest of 810,811 shares of AmeriQuest's Series A Preferred
Stock (convertible into 8,108,110
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<PAGE>
shares of Common Stock, subject to adjustment) and warrants to purchase
657,289 shares of Series D Preferred Stock (convertible up to 6,572,890
shares of Common Stock, subject to adjustment) exercisable at $0.53 per
share of Series D Preferred Stock ($.053 per share of Common Stock on an
as-if-converted to Common Stock basis).
(b) Computer 2000 or C2000 Sub will purchase from AmeriQuest, for
$31,250,000, 1,785,714 shares of Series B Preferred Stock (convertible into
17,857,140 shares of Common Stock, subject to adjustment) and warrants to
purchase 746,186 shares of Series D Preferred Stock (convertible up to
7,461,860 shares of Common Stock, subject to adjustment) exercisable at
$.53 per share of Series D Preferred Stock ($.053 per share of Common Stock
on an as-if-converted to Common Stock basis).
Assuming the exercise of the warrants referred to in paragraphs (a) and (b)
above (the "Warrants"), the conversion of the Preferred Stock issuable upon
such exercise and the conversion of the Preferred Stock issued at the closing
as described in paragraphs (a) and (b), AmeriQuest will have issued 40,000,000
shares of Common Stock at an average purchase price of $1.25 per share and
Computer 2000 and C2000 Sub will own approximately 62% of AmeriQuest's
outstanding voting stock.
The Warrants referred to above will be exercisable in increments equal to
approximately one-eighth of the total number of shares purchasable thereunder
in the event that any of the following gross sales targets (each a "Performance
Milestone") is achieved by AmeriQuest during the eight quarters in the 24-month
period ended June 30, 1997: $150 million for the first quarter, $160 million
for the second quarter, $190 million for the third quarter, $200 million for
the fourth quarter, $220 million for the fifth quarter, $230 million for the
sixth quarter, $270 million for the seventh quarter and $280 million for the
eighth quarter. However, whether or not AmeriQuest achieves any or all of the
Performance Milestones, (i) Warrants for 700,000 shares of Series D Preferred
Stock (convertible up to 7,000,000 shares of Common Stock, subject to
adjustment), in addition to the Warrants exercisable due to the achievement of
any Performance Milestones, will become exercisable on and after July 31, 1996
and (ii) Warrants for the remaining shares of Series D Preferred Stock will
become exercisable on or after July 31, 1997. Moreover, the Warrants may be
exercised at any time to the extent required in order for Computer 2000 and
C2000 Sub to own 51% of the outstanding voting shares of AmeriQuest's capital
stock. The Warrants will cease to be exercisable three years after the closing.
(c) In consideration for Computer 2000's exchange of the Notes and Computer
2000's or C2000 Sub's additional investment of $31,250,000 as described in
paragraphs (a) and (b) above, AmeriQuest will grant to Computer 2000 or
C2000 Sub the following pari passu rights with respect to other outstanding
warrants, options and other rights to acquire shares of AmeriQuest's Common
Stock that AmeriQuest has previously granted, or is obligated to grant in
the future, to others:
(i) If AmeriQuest issues in connection with its acquisition of Robec
any shares in excess of 2,800,000 shares of Common Stock, including all
shares already issued and all shares issued in the future, including
shares issued upon the exercise of options or warrants granted, assumed
or exchanged in connection with the Robec acquisition (such shares as
are so issued in excess of 2,800,000 shares are referred to as the
"Incremental Shares"), then Computer 2000 or C2000 Sub will have the
right, pursuant to certain warrants to be granted by AmeriQuest (the
"Acquisition Maintenance Warrants"), to purchase a number of share of
Series E Preferred Stock as will be convertible into a number of shares
of Common Stock that will be equal to the number of Incremental Shares
that are issued in connection with the Robec acquisition. The exercise
price of the Acquisition Maintenance Warrants will be $1.25 per share
of Series E Preferred Stock ($0.05 per share of Common Stock on an as-
if-converted to Common Stock basis). The Acquisition Maintenance
Warranties will become exercisable at such time, and from time-to-time,
as Incremental Shares are issued and, for each such issuance, will
remain exercisable for six months. See "Information Regarding the
Merger--The Merger" for information on the number of AmeriQuest shares
that may be issued in the Merger to Robec shareholders. Additional
shares may also be issued upon the exercise of Robec options exchanged
in the Merger.
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<PAGE>
(ii) In connection with a private placements in June 1995 by
AmeriQuest of equity securities, AmeriQuest issued stock and warrants
to investors, which included warrants to purchase up to 5,149,574
shares of Common Stock at an exercise price of $1.05 per share (the
"Unit Warrants"). If and to the extent that any of the Unit Warrants
are exercised, then Computer 2000 or C2000 Sub will have the right,
pursuant to certain warrants to be issued by AmeriQuest (the "Unit
Maintenance Warrants"), to purchase a number of Series F Preferred
Stock that will be convertible into a number of shares of Common Stock
equal to the shares issued upon the exercise of the Unit Warrants (the
"Unit Warrant Shares"). The exercise price of the Unit Maintenance
Warrants will be $5.25 per share of Series F Preferred Stock ($.525 per
share of Common Stock on an as-if-converted to Common Stock). The Unit
Maintenance Warrants will become exercisable only if and to the extent
that any Unit Warrant Shares are issued and, for each such issuance,
will remain exercisable for six months.
(iii) AmeriQuest will also grant to Computer 2000 or C2000 Sub an
option (the "Maintenance Option") to purchase a number of shares of
Common Stock (or other equity securities, as applicable) that will be
equal to the number of shares of Common Stock (or other equity
securities) that AmeriQuest issues upon exercise or conversion of all
currently outstanding options, warrants or other rights (other than
shares subject to the unit maintenance warrants and acquisitions
maintenance) to acquire (upon conversion or otherwise) any shares
("Additional Shares") of Common Stock or other equity securities of
AmeriQuest. The Maintenance Option will become exercisable from time-
to-time with respect to each issuance of an Additional Share upon the
issuance of such Additional Share, will terminate six months thereafter
( subject to extension under certain circumstances) and will be
exercisable for the same consideration and on the same terms as the
consideration for which and terms under which such Additional Shares is
issued.
(d) Consistent with Computer 2000 or CS2000 Sub's acquisition of a
majority of AmeriQuest's outstanding voting capital stock, changes will be
made in AmeriQuest's Board of Directors and management. Upon the closing,
three of AmeriQuest's existing directors, Terren Peizer, Eric J. Werner and
William Silvis, will resign from the Board (Gregory A. White resigned as a
director effective July 11, 1995) and five persons designated by Computer
2000 will be appointed directors of AmeriQuest. These designees, who will
constitute a majority of AmeriQuest's Board of Directors, are Steve
DeWindt, Klaus J. Laufen and Dr. Harry Krischik, who are three of Computer
2000's four co-presidents, Mark Mulford, who was a Managing Director of
Frontline Distribution Ltd., a United Kingdom corporation that is Computer
2000's largest non-German subsidiary, and Holger Heims, Computer 2000's
Director of Investment, Tax and Legal. Mr. DeWindt will become Chairman of
the Board and Chief Executive Officer of AmeriQuest, and Mr. Mulford will
become AmeriQuest's President and Chief Operating Officer. Upon appointment
of Computer 2000's designees to the Board, AmeriQuest will enter into an
indemnification agreement with them and will use commercially reasonable
efforts to maintain directors' and officers' liability insurance for their
benefit. In addition, AmeriQuest will enter into similar indemnification
agreements with each existing director of AmeriQuest, and each of those
directors and Computer 2000 will enter into mutual releases for any claims
either party may have against the other, with certain exceptions. Harold L.
Clark, AmeriQuest's Chief Executive Officer, and Stephen G. Holmes,
AmeriQuest's Secretary, Treasurer and Chief Financial Officer, are expected
to resign following the closing and execution of their severance agreements
is a condition to closing. Pursuant to the Amended Agreement, Robert H.
Beckett, Chairman and President of Robec, is to be appointed to
AmeriQuest's Board of Directors following the completion of the Merger.
Pursuant to the Purchase Agreement, Computer 2000 or C2000 Sub, as
applicable, will have certain registration rights with respect to their shares
of AmeriQuest.
Under the Purchase Agreement, Computer 2000 and C2000 Sub have agreed that,
for a three year period following the closing, AmeriQuest or any subsidiary of
AmeriQuest will not (i) merge or consolidate with Computer 2000, C2000 Sub or
any of their affiliates, (ii) sell or otherwise dispose of all or substantially
all its
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assets to Computer 2000, C2000 Sub or any of their affiliates or (iii) adopt
any plan of liquidation or dissolution proposed by Computer 2000, C2000 Sub or
any of their affiliates unless the transaction is approved by the affirmative
vote of at least two-thirds of the outstanding shares of Common Stock of
AmeriQuest held by shareholders other than Computer 2000, C2000 Sub or their
affiliates or unless the fair market value of the consideration received by
holders of AmeriQuest's Common Stock is at least $1.25 per share. Computer 2000
has no present intention to merge or consolidate AmeriQuest with Computer 2000,
C2000 Sub or any of their affiliates.
The Purchase Agreement also provides that, if AmeriQuest incurs any
liability, costs or expenses in connection with certain contingencies
(primarily related to existing litigation and employee terminations) in excess
of $2,000,000, then AmeriQuest may be required to issue to Computer 2000 or
C2000 Sub additional shares of Common Stock equal to the amount of such excess
divided by $1.25. Further, pursuant to the Purchase Agreement, AmeriQuest has
agreed to indemnify Computer 2000, C2000 Sub and their representative
shareholders, officers, directors, agents, employees, representatives,
attorneys, successors and assigns from losses, costs, expenses and damages
arising out of any misrepresentation or breach by AmeriQuest under the Purchase
Agreement or the related agreements in excess of $100,000 in the aggregate.
Such indemnity will, at Computer 2000's or C2000 Sub's option, be payable in
cash or shares of AmeriQuest's Common Stock valued at the lesser of $1.25 or
the then current market price based on a five day average.
AmeriQuest will receive $31.25 million cash at the closing of the Purchase
Agreement on August 21, 1995. The closing of the Purchase Agreement is subject
to a number of conditions, including receipt of consents and approvals of
financial institutions, the satisfactory completion by AmeriQuest of the
divestiture of AmeriQuest's Singapore subsidiary, the accuracy as of the
closing of AmeriQuest's representations in the Purchase Agreement, the
performance by AmeriQuest of its covenants under the Purchase Agreement and
Computer 2000's and C2000 Sub's reasonable satisfaction with AmeriQuest's
business, financial condition, prospects, employee, vendor and creditor
relations, status of the Robec acquisition and any litigation involving
AmeriQuest. If the Closing does not occur on August 21, 1995 either party may
terminate the Purchase Agreement.
THE TRANSACTIONS PROVIDED FOR IN THE PURCHASE AGREEMENT WOULD NORMALLY
REQUIRE APPROVAL OF SHAREHOLDERS ACCORDING TO THE SHAREHOLDER APPROVAL POLICY
OF THE NEW YORK STOCK EXCHANGE (THE "EXCHANGE"). THE AUDIT COMMITTEE OF THE
BOARD OF DIRECTORS OF AMERIQUEST DETERMINED THAT DELAYS NECESSARY IN SECURING
SHAREHOLDER APPROVAL PRIOR TO THE PROPOSED TRANSACTION WOULD SERIOUSLY
JEOPARDIZE THE FINANCIAL VIABILITY OF AMERIQUEST. AMERIQUEST IS FINANCIALLY
DISTRESSED AND IN THE OPINION OF THE AUDIT COMMITTEE, FINANCIAL SURVIVAL IS
HEAVILY DEPENDENT UPON EFFECTING THE PROPOSED TRANSACTION WITH COMPUTER 2000 AT
THE EARLIEST PRACTICABLE DATE. BECAUSE OF THE DETERMINATION, THE AUDIT
COMMITTEE, PURSUANT TO AN EXCEPTION PROVIDED IN THE EXCHANGE'S SHAREHOLDER
APPROVAL POLICY FOR SUCH A SITUATION, EXPRESSLY APPROVED AMERIQUEST'S OMISSION
TO SEEK THE SHAREHOLDER APPROVAL THAT WOULD OTHERWISE HAVE BEEN REQUIRED UNDER
THAT POLICY. THE EXCHANGE HAS ACCEPTED AMERIQUEST'S APPLICATION OF THE
EXCEPTION.
The authorized number of shares of AmeriQuest's Common Stock are insufficient
to accommodate the transactions provided for in the Purchase Agreement and the
exercise of currently outstanding options, warrants and conversion rights that
AmeriQuest granted prior to the Purchase Agreement. It is contemplated that, as
soon as practicable following the closing, AmeriQuest will seek to amend its
Articles of Incorporation to increase the authorized shares of Common Stock
and, as required, seek approval to increase authorized shares under applicable
employee stock option plans and with respect to outstanding options on other
rights that require shareholder approval, and that Computer 2000 and C2000 Sub
will vote for such amendments and increases. The Preferred Stock to be issued
pursuant to the Purchase Agreement will automatically convert to Common Stock
at such time as the additional requisite shares of Common Stock are authorized.
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. AmeriQuest is only a nominal
defendant, and in the opinion of
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AmeriQuest management this action will have no material adverse effect on
AmeriQuest's financial condition or results of operations. 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.
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 (Leading Edge, Western
Digital and Samsung) are expected to account for only 29% of sales for the year
ending March 31, 1995.
NCD is one of the largest distributors in the United States for Epson storage
products, Leading Edge computers, AOC monitors, Citizen printers, 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
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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 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
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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
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 May 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.
25
<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, 1994.
(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, 1994.
(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 (Amendment No. 1) for the year ended December 31, 1994; 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 for the six months ended June 30, 1995.
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 including without limitation
consummation of the investment by Corporate 2000. 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
.82994 newly issued shares of AmeriQuest Common Stock (previously defined as
the "Applicable Fraction"); provided, however, that in the event that the
lesser of (A) the mean trading price of AmeriQuest Common Stock on the New York
Stock Exchange on the trading day prior to the Meeting Date or (B) the average
of the mean trading prices of AmeriQuest Common Stock on the New York Stock
Exchange for each of the 20 trading days prior to the Meeting Date (the lesser
of the amounts determined pursuant to (A) or (B) above, the "Market Price"), is
less than $3.00 per share, the Applicable Fraction shall be equal to the sum of
(A) the product of (i) .63075 multiplied by (ii) a quotient, the numerator of
which is $3.00 and the denominator of which is the Market Price plus (B) .19869
(the Applicable Fraction including any adjustment thereto having been
previously defined as the "Exchange Ratio"). (Robec shareholders will be able
to call 1-800-788-4267 beginning the morning of the third trading day prior to
the Meeting Date to learn the final 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.
26
<PAGE>
The following table illustrates the consideration to be received by Robec
shareholders applying the Exchange Ratio:
<TABLE>
<CAPTION>
AGGREGATE NUMBER
OF SHARES OF
AMERIQUEST COMMON
CONSIDERATION TO BE STOCK
EXCHANGE RECEIVED FOR 1 SHARE TO BE RECEIVED BY
MARKET PRICE RATIO OF ROBEC COMMON STOCK ROBEC SHAREHOLDERS
------------ -------- --------------------- ------------------
<C> <C> <C> <S>
$3.50 0.82944 $2.90 3,655,398
$3.00 0.82944 $2.49 3,655,398
$2.50 0.95591 $2.39 4,242,036
$2.00 1.14482 $2.28 5,082,040
$1.50 1.46019 $2.19 6,482,046
</TABLE>
Pennsylvania law contains certain restrictions on corporate takeovers. Robec
has expressly elected in its Articles of Incorporation and Bylaws not to be
governed by these provisions of Pennsylvania law. By previously opting out of
the anti-takeover provisions of Pennsylvania law, Robec was able to use a two-
step structure and complete the Exchange prior to shareholder approval of the
Plan of Merger.
BACKGROUND OF THE MERGER
Following an extended period of growth and relatively stable profitability
between 1984 and 1990, Robec began to experience difficulty in 1991 and
incurred substantial losses in 1992, 1993 and the first three quarters of 1994
(Robec's loss continued for the fourth quarter 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 Penn Hudson Financial Group ("Penn Hudson") to
assist it in developing a plan to return to profitability. Penn Hudson 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 restructure
operations 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
27
<PAGE>
each Robec shareholder would receive .5 shares of AmeriQuest Common Stock for
each share of his or her 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 also
questioned whether the transaction needed to be completed in two steps rather
than one step, but was informed by the Chairman that the two-step structure was
a material aspect of AmeriQuest's offer and that the Selling Shareholders were
agreeable to the first step. The Chairman reported that AmeriQuest desired to
consolidate Robec for accounting purposes as soon as possible. Based upon the
fact that all shareholders would ultimately receive the same consideration,
Robec's Board of Directors accepted the two-step structure provided that its
other concerns were addressed. Robec's Board of Directors was informed that
Robec had not received any other substantive acquisition or alternative
financing proposals other than the acquisition proposal submitted by
AmeriQuest. Management also informed the Board of Directors that, in its
opinion, if all alternatives were exhausted and Robec was forced to liquidate,
Robec's assets could only be sold at a deep discount to book value for an
amount not likely to be in excess of Robec's liabilities. 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 with AmeriQuest the concerns expressed by
Robec's Board of Directors, 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. 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
28
<PAGE>
credit for working capital. Robec's Board of Directors challenged the value of
management's projections based upon management's failure to demonstrate that
adequate financing could be arranged to maintain Robec as a stand-alone entity.
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.
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.
Since September 22, 1994, Robec's Board of Directors has met regularly and
been updated by the Chairman as to the status of Robec's operations,
AmeriQuest's transactions and the reasons for the delays in consummating the
Merger.
Due to the delay in the transaction, on June 30, 1995, Robec's Board of
Directors decided to review the proposed Merger in the context of existing
circumstances and requested additional information from AmeriQuest regarding
its current financial position, including (i) information regarding the
Computer 2000 transaction, (ii) the status of defaults and the
undercollateralization asserted by IBM Credit Corporation in connection with
its line of credit to AmeriQuest, (iii) the status of outstanding litigation
proceedings asserted against AmeriQuest and (iv) an updated list of outstanding
AmeriQuest shares and information regarding the issuance of additional
AmeriQuest Common Stock and rights to acquire AmeriQuest Common Stock issued
without Robec's consent in violation of the restrictive covenants set forth in
the Amended Agreement. The Chairman informed Robec's Board of Directors at that
meeting that he had resigned as a director of AmeriQuest on June 26, 1995, but
that he would be willing to be reappointed upon consummation of the Merger.
On July 25, 1995, Robec's Board of Directors met to review AmeriQuest's
response to Robec's Board of Directors' request for additional information. The
Chairman informed Robec's Board of Directors that AmeriQuest had offered
882,000 additional AmeriQuest common shares to compensate Robec's shareholders
29
<PAGE>
for dilution resulting from the issuance of approximately 6,000,000 shares of
AmeriQuest Common Stock in violation of the restrictive covenant set forth in
the Amended Agreement. Robec's dilution percentage of 14.7% was calculated
based upon the percentage of shares of the combined company which Robec's
shareholders would have received had the Merger been consummated on August 11,
1994. Robec's Board of Directors expressed a lack of confidence in AmeriQuest's
existing management and discussed the future prospects of AmeriQuest. Many
directors expressed confidence in Computer 2000 based upon previous meetings
with Computer 2000 management and Computer 2000's general reputation in the
marketplace. Robec's Board of Directors then recommended that the acquisition
by Computer 2000 of a majority voting interest in AmeriQuest be included as an
additional condition to Robec's obligation to consummate the Merger. The Board
decided that if this additional condition were added, Robec would be willing to
forego its current ability to terminate the Amended Agreement at any time. The
Chairman then described a request made by AmeriQuest that AmeriQuest desired to
cap the Exchange Ratio adjustment mechanism at $1.75 per share. The Chairman
indicated that in return for Robec agreeing to such a cap, AmeriQuest would
agree to increase the Applicable Fraction and reduce the base price of the
Exchange Ratio adjustment mechanism from $3.00 per share to $2.50 per share.
After discussion, Robec's Board of Directors directed the Chairman to propose
that the $3.00 per share base price be reduced to $2.25 per share in return for
adding a cap of $1.50 per share (the price at which shares of AmeriQuest Common
Stock were sold in the most recent private placement), and that Robec be given
the ability to terminate the Amended Agreement in the event the Market Price is
below the cap price. Robec's Board of Directors then discussed whether, in
light of the delay in the transaction and the likelihood of an adjustment to
the Exchange Ratio, it was desirable to consult with Compass. Robec's Board of
Directors unanimously determined that, because (i) Robec's financial condition
is no better than its financial condition was as of September 20, 1995, (ii)
Robec's management is not forecasting profits for the foreseeable future, and
thus Robec has no access to the additional capital necessary for Robec to be
viable as an independent entity over the long run, (iii) no other viable option
to combine Robec with any entity other than AmeriQuest had arisen, and (iv) the
final Exchange Ratio is likely to be more, rather than less, favorable to
Robec's shareholders compared with the original Exchange Ratio, it is not
necessary to request Compass to update its opinion.
In subsequent negotiations between AmeriQuest and the Chairman, AmeriQuest
was unwilling to reduce the base price used in the Exchange Ratio and,
consequently, there was no agreement to include a cap to the Exchange Ratio
adjustment mechanism. However, AmeriQuest did agree to the additional 882,000
shares, to condition the Merger upon the consummation of the Investment by
Computer 2000 and certain additional items requested by Robec. On August 4,
1995, Robec entered into Amendment No. 1 to the Agreement and Plan of
Reorganization (the "Amendment") with an amended Plan of Merger attached
thereto.
On August 16, 1995, Robec's Board of Directors unanimously ratified the
Amendment, including the Plan of Merger attached thereto, and unanimously
recommended that holders of Robec Common Stock vote for approval and adoption
of the Plan of Merger.
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
30
<PAGE>
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, procedures followed or otherwise in
connection with Compass rendering its opinion.
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
31
<PAGE>
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 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,
32
<PAGE>
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 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
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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.
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
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<PAGE>
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 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.
On the basis of the Market Price Analysis and the Comparable Companies
Analysis, Compass concluded that the market for both Robec and AmeriQuest
stock was efficient. Compass was unable to arrive at any conclusion based
on its Comparable Acquisitions Analysis. Compass considered the Share Price
Analysis and the Contribution Analysis to be equally important in reaching
its 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. In reaching its conclusion, Compass assumed that
Robec's shareholders would receive AmeriQuest Common Stock valued at not
less than $1.892 per share of Robec Common Stock converted in the Merger.
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
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<PAGE>
valuations for corporate, estate and other purposes. Compass is not
affiliated with either Robec or AmeriQuest, and prior to being retained by
Robec to render the foregoing opinion, had never been employed by Robec or
AmeriQuest.
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. The right to exercise dissenter's rights under Subchapter 15D is the
sole remedy of a holder of Robec Common Stock with respect to the Merger,
absent a showing of fraud or fundamental unfairness in connection with the
Merger. Upon a showing of fraud or fundamental unfairness in connection with
the Merger, a shareholder could seek an injunction against the consummation of
the Merger.
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 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
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<PAGE>
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, 1994, 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.
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.
37
<PAGE>
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.
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.
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INTEREST OF CERTAIN PERSONS IN THE MERGER
AmeriQuest has agreed to appoint 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
for a period of two years after the Effective Date 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. Arthur Andersen
LLP has rendered an opinion with respect to the material tax consequences (see
Exhibit 8.01 for complete opinion). 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.
TAX CONSEQUENCES TO ROBEC SHAREHOLDERS
REORGANIZATION. In the opinion of Arthur Andersen LLP 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.
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<PAGE>
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.
THE PLAN OF MERGER
The following is a description of all the material terms of the Plan of
Merger. The description 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
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<PAGE>
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 .82944 shares of AmeriQuest Common Stock; provided, however,
that in the event that the lesser of (A) the mean trading price of
AmeriQuest Common Stock on the New York Stock Exchange on the trading day
prior to the Meeting Date or (B) the average of the mean trading prices of
AmeriQuest Common Stock on the New York Stock Exchange for each of the 20
trading days prior to the Meeting Date (the lesser of the amounts
determined pursuant to (A) or (B) above, the "Market Price"), is less than
$3.00 per share, the Applicable Fraction shall be equal to the sum of (A)
the product of (i) .63075 multiplied by (ii) a quotient, the numerator of
which is $3.00 and the denominator of which is the Market Price plus (B)
.19869 (the "Exchange Ratio") (Robec shareholders will be able to call 1-
800-788-4267 beginning the morning of the third trading day prior to the
Meeting Date to learn the final Exchange Ratio); 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 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.
41
<PAGE>
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 following is a description of the material terms of the Amended
Agreement. The Amended and Restated Agreement and Plan of Reorganization, dated
as of August 11, 1994, was entered into on September 20, 1994. This Agreement
was amended by Amendment No. 1 to the Agreement and Plan of Merger, dated as of
August 4, 1995 (the "Amendment" together referred to as the "Amended
Agreement"). The description does not purport to be complete and is qualified
in its entirety by reference to the Amended Agreement, a copy of which is
attached as Appendix II hereto.
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 ultimately receive the same per
42
<PAGE>
share consideration. Pursuant to the Amended Agreement, the first stage
Exchange occurred on September 22, 1994 (the "Exchange Closing"). At the
Exchange Closing, each exchanged share of Robec Common Stock (the "Exchange
Shares") was exchanged for .63075 shares of AmeriQuest Common Stock. At the
Merger Closing, each Principal Shareholder will receive, as additional
consideration for each Exchange Share, (1) .19869 shares of AmeriQuest Common
Stock plus (2) in the event that the Market Price is less than $3.00 per share,
on the Effective Date the Principal Shareholders shall be entitled to receive
additional shares of AmeriQuest Common Stock equal to the difference between
(a) .63075 multiplied by a quotient, the numerator of which is $3.00 and the
denominator of which is the Market Price and (b) .63075 (the "Exchange Ratio").
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
43
<PAGE>
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 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; (iii) completion of the Investment by
Computer 2000 and (iv) 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
44
<PAGE>
by its nature cannot be cured); or (iii) by Robec if the Merger shall not have
occurred on or prior to December 31, 1994 and Computer 2000 has not completed
the Investment. 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 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, at its sole expense, prepared and filed 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. AmeriQuest's S-3 Registration Statement was
declared effective on July 12, 1995. 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."
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 and
the effects of the Computer 2000 Purchase Agreement. The unaudited pro forma
condensed combined statement of income combines the results of operations of
AmeriQuest, Kenfil, Robec and NCD for the twelve months ended June 30, 1994 and
the nine months ended March 31, 1995 giving effect to the above transactions as
if they had occurred on July 1, 1993. The historical statement of income for
Robec and NCD includes their results prior to their acquisition by AmeriQuest.
The unaudited pro forma condensed combined balance sheet as of March 31, 1995,
gives effect to the acquisition of 49 percent of Robec's common stock not owned
by AmeriQuest and the Computer 2000 Purchase Agreement as if they 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.
Effective June 6, 1994, AmeriQuest acquired 51 percent of the outstanding
common stock of Kenfil. The remaining 49 percent of outstanding Kenfil common
stock was acquired on September 12, 1994. Effective September 22, 1994,
Ameriquest acquired 50.1 percent of the outstanding common stock of Robec, Inc.
Effective November 15, 1994, AmeriQuest acquired 100 percent of the outstanding
common stock of NCD. The historical operating results of AmeriQuest for the
nine month period ended March 31, 1995 includes the historical operating
results of Kenfil for the complete period and that of Robec and NCD for the
periods of September 22, 1994 to March 31, 1995 and November 15, 1994 to March
31, 1995, respectively. The historical balance sheet of AmeriQuest includes the
historical balance sheets of Kenfil, Robec and NCD at March 31, 1995.
45
<PAGE>
AMERIQUEST TECHNOLOGIES, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED BALANCE SHEET
MARCH 31, 1995 (UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT SHARE AND PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
AMERIQUEST PRO FORMA
TECHNOLOGIES, INC. ADJUSTMENTS PRO FORMA
------------------ ----------- ----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash.................... $ 425 $ -- $ 425
Accounts receivable,
net.................... 58,765 -- 58,765
Inventories............. 69,185 -- 69,185
Prepaid expenses and
other.................. 3,337 -- 3,337
---------- -------- ----------
Total current assets.. 131,712 -- 131,712
PROPERTY AND EQUIPMENT,
NET..................... 6,002 -- 6,002
INTANGIBLE ASSETS, NET... 30,598 2,750 (A)(D) 33,348 (I)
OTHER ASSETS............. 1,727 -- 1,727
---------- -------- ----------
$ 170,039 $ 2,750 $ 172,789
========== ======== ==========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable........ $ 45,819 $(15,250)(H) $ 30,569
Notes payable........... 68,951 (16,000)(H) 52,951
Subordinated notes
payable................ 18,000 (18,000)(H) --
Other................... 7,450 -- 7,450
---------- -------- ----------
Total current
liabilities.......... 140,220 (49,250) 90,970
---------- -------- ----------
LONG-TERM OBLIGATIONS.... 572 -- 572
MINORITY INTEREST........ 2,800 (2,800)(A)(C) --
STOCKHOLDERS' EQUITY
Preferred stock, $.01
par value; authorized
10,000,000 shares;
no shares issued and
outstanding............ -- -- --
Common stock, $.01 par
value.................. 203 260 (H) 500
37 (A)
Additional paid-in cap-
ital................... 51,381 48,990 (H) 105,884
5,513 (A)
Retained deficit........ (24,012) -- (24,012)
Receivables from affil-
iates.................. (1,125) -- (1,125)
---------- -------- ----------
Total stockholders'
equity............... 26,447 54,800 81,247 (B)(I)
---------- -------- ----------
$ 170,039 $ 2,750 $ 172,789
========== ======== ==========
OUTSTANDING COMMON
SHARES.................. 20,984,736 50,649,736
========== ==========
</TABLE>
46
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR YEAR ENDED JUNE 30, 1994
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
<TABLE>
<CAPTION>
AMERIQUEST KENFIL PRO FORMA PRO FORMA
TECHNOLOGIES, INC.(G) INC. ROBEC, INC. NCD ADJUSTMENTS COMBINED
--------------------- -------- ----------- -------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
NET SALES(E)............ $ 87,593 $138,759 $168,446 $218,808 $ -- $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 2,158 (D) 77,199
Restructuring charge
and earthquake
loss(F)............... 5,700 3,430 -- -- -- 9,130
--------- -------- -------- -------- ------ ----------
Income (loss) from
operations............ (7,274) (18,167) (10,375) 3,435 (2,158) (34,539)
OTHER INCOME (EXPENSE)
Other income........... 31 40 -- -- 71
Interest expense....... (728) (2,626) (1,613) (1,908) 2,910 (E) (3,965)
--------- -------- -------- -------- ------ ----------
(697) (2,586) (1,613) (1,908) 2,910 (3,894)
--------- -------- -------- -------- ------ ----------
Income (loss) before
taxes................. (7,971) (20,753) (11,988) 1,527 752 (38,433)
PROVISION FOR INCOME
TAXES.................. -- 17 (814) -- -- (797)
--------- -------- -------- -------- ------ ----------
Net income (loss)(F)... $ (7,971) $(20,770) $(11,174) $ 1,527 $ 752 $ (37,636)(F)(I)
========= ======== ======== ======== ====== ==========
Net income (loss) per
common share and common
share equivalent....... $ (1.33) $ (0.80)(I)
========= ==========
Common and common
equivalent shares...... 5,973,511 47,305,380
========= ==========
</TABLE>
47
<PAGE>
AMERIQUEST TECHNOLOGIES, INC.
PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
FOR NINE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
AMERIQUEST PRO FORMA PRO FORMA
TECHNOLOGIES, INC. ROBEC, INC. NCD ADJUSTMENTS COMBINED
------------------ ----------- ------- ----------- ----------
<S> <C> <C> <C> <C> <C>
NET SALES............... $ 305,664 $22,351 $81,212 $ -- $ 409,227
COST OF SALES........... 285,329 22,450 74,893 -- 382,672
---------- ------- ------- ------ ----------
Gross profit.......... 20,335 (99) 6,319 -- 26,555
OPERATING EXPENSES
Selling, general and
administrative....... 25,335 3,317 4,781 1,166 (D) 34,599
---------- ------- ------- ------ ----------
Income (loss) from
operations........... (5,000) (3,416) 1,538 (1,166) (8,044)
OTHER INCOME (EXPENSE)
Other income
(expense)............ (282) -- -- -- (282)
Interest expense...... (4,161) (201) (924) 1,715 (E) (3,571)
---------- ------- ------- ------ ----------
(4,443) (201) (924) 1,715 (3,853)
---------- ------- ------- ------ ----------
Income (loss) before
taxes................ (9,443) (3,617) 614 549 (11,897)
PROVISION FOR INCOME
TAXES.................. -- -- -- -- --
---------- ------- ------- ------ ----------
Net income (loss)..... $ (9,443) $(3,617) $ 614 $ 549 $ (11,897)(I)
========== ======= ======= ====== ==========
Net income (loss) per
common share and common
share equivalent....... $ (.52) $ (0.24)(I)
========== ==========
Common and common
equivalent shares...... 18,192,672 49,629,963
========== ==========
</TABLE>
48
<PAGE>
FOOTNOTES TO PRO FORMA CONDENSED COMBINED 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 49 percent of Robec common stock not owned by
AmeriQuest, AmeriQuest will issue approximately 3,700,000 shares of
AmeriQuest common stock in exchange for 2,235,000 shares of Robec common
stock, in accordance with the terms of the Amended Robec Merger Agreement
(based on an assumed AmeriQuest quoted market price of $2.00 per share).
The Amended Robec Merger Agreement calls for an increase in the exchange
ratio and a guaranteed AmeriQuest market price of $3.00 per share for all
Robec shares exchanged. The AmeriQuest common stock is valued at a
discounted quoted market price, based upon weighted average discounts
received on recently completed private equity transactions. This valuation
represents management's estimate of its fair market value. For purposes of
these pro forma financial statements, the discounted quoted market price of
AmeriQuest common stock is assumed to be $1.50 per share. 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 quoted market value
of AmeriQuest Common Stock on the business day prior to the closing. See
"Information Regarding the Merger--The Merger."
(B) The Company valued its common stock issued in connection with its Kenfil,
Robec and NCD acquisitions at a discounted quoted market price, based upon
weighted average discounts received on recently completed private equity
cash transactions. This valuation represents management's best estimate of
the fair value of the Company's common stock. This valuation represents a
significant discount from quoted market prices due to the thin public
trading volume and small public float of AmeriQuest common stock.
(C) To eliminate the historical minority interest in Robec.
(D) To record goodwill associated with the completion of the Robec Merger and
amortization of this and previous Fiscal 1995 acquisitions over the
estimated economic life of 10 years.
Management believes that the most significant intangible acquired is that
of the distribution channels. Management has assigned a 10 year economic
life to this intangible asset as that is the period of time that management
expects to derive benefit from existing vendor relationships and market
position. Management determined that 10 years is an appropriate economic
life based upon the historical length of the acquiree's vendor
relationships and the overall size and quality of the vendors and their
product offering.
Management is currently in the process of completing its detailed analysis
of the fair value of Robec and NCD net assets acquired and therefore the
allocation of the purchase price to the various assets and liabilities
acquired, including the amount of goodwill presented herein, may change as
a result of the completed analysis. Management however, does not expect
future purchase price allocation adjustments to have a material effect of
the Company's future results of operations and financial position.
(E) To reduce interest expense associated with the redemptions of the following
debt instruments related to the Kenfil and NCD acquisition and the Computer
2000 investment.
<TABLE>
<CAPTION>
DEBT INSTRUMENT REDEMPTION INTEREST EXPENSE ELIMINATED
-------------------------- -------------------------------
FISCAL YEAR NINE MONTHS ENDED
JUNE 30, 1994 MARCH 31, 1995
------------- -----------------
<S> <C> <C>
Kenfil subordinated debt of $3,175,000... $ 380,000 $ --
NCD subordinated debt of $2,737,000...... 360,000 164,000
AQS notes payable of $27,287,000......... 2,170,000 1,551,000
---------- ----------
$2,910,000 $1,715,000
========== ==========
</TABLE>
As the funds used to finance the NCD acquisition and the redemption of the
above debt instruments were provided by the October 1994 private placement
and the Computer 2000 investment, no forfeited investment earnings are
included in these pro forma financial statements.
49
<PAGE>
(F) 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 earthquake loss of
$3,430,000 included in Kenfil's historical financials is for losses
sustained in the Southern California earthquake.
(G) Effective December 1993, AQS acquired certain assets and assumed certain
liabilities of Management Systems Group and acquired the outstanding stock
of Rhino Sales Company. The impact of these acquisitions to the Pro Forma
Statement of Operations for the year ended June 30, 1994 would be to
increase revenues approximately $20 million, with no effect on net income.
(H) To give effect to the amended Computer 2000 investment agreement entered
into in August, 1995. This agreement calls for the ultimate issuance of
approximately 8,108,000 shares of AmeriQuest Common Stock to Computer 2000
in satisfaction of the $18 million advance made in November, 1994 and the
ultimate issuance of approximately 17,857,000 shares of AmeriQuest common
stock at $1.75 per share for aggregate net proceeds of approximately $31.3
million. These net proceeds will be used to reduce trade and notes payable.
The amended Computer 2000 investment agreement also includes warrants to
purchase an additional 14,034,000 shares of AmeriQuest Common Stock at
$0.05 per share. The agreement also calls for anti-dilution warrants
related to additional shares issuable in the Robec Merger and various other
outstanding warrant and option agreements.
Initially AmeriQuest will issue Preferred Stock in connection with the
Computer 2000 Purchase Agreement. Upon AmeriQuest stockholder approval to
increase the number of authorized shares of AmeriQuest Common Stock, the
AmeriQuest Preferred Stock will convert into the number of Common Stock
shares indicated above.
(I) In connection with executive and operating management changes, AmeriQuest
has made the decision to terminate its entertainment software business and
focus its product line offerings by eliminating certain lower margin
products and vendors within its computer hardware distribution business.
As a result, the Company will record a charge in the fourth quarter of
fiscal 1995 estimated to be between $25 million to $30 million associated
with the write-off of the intangible assets related to the entertainment
software business, the write-down of related inventory to liquidation value
and the reserve of customer and vendor receivables to their recoverable
value. In addition to the fourth quarter fiscal 1995 loss related to the
termination of the entertainment software business, the Company expects to
record further substantial fourth quarter operating losses due to the
continued sales volume reductions experienced by the Company and expected
substantial inventory realization reserves associated with the elimination
of certain lower margin products and vendors within the Company's computer
hardware distribution business. These losses are not reflected in the pro
forma financial statements as they relate to activity and management
decisions occurring after the third quarter of fiscal 1995. (See "Risk
Factors--Termination of Entertainment Software Business and Significant
Fourth Quarter Fiscal 1995 Operating Loss").
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<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of AmeriQuest, as of March
31, 1995, and as adjusted to give effect to the Computer 2000 Purchase
Agreement and to the acquisition of 49 percent of Robec's common stock not
owned by AmeriQuest. See "Information Regarding the Merger--The Plan of
Reorganization--The Merger--Terms of the Merger."
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------- -----------------------
AMERIQUEST ADJUSTMENTS(A) COMBINED
(AMOUNTS IN MILLIONS) ---------- -------------- --------
<S> <C> <C> <C>
Short-term debt, including current
maturities.............................. $ 68.9 $(16.0) $ 52.9
Subordinated note payable................ 18.0 (18.0) --
------ ------ ------
Total debt........................... 86.9 (34.0) 52.9
Minority interest........................ 2.8 (2.8) --
Shareholders' equity:
Common Stock........................... 0.2 0.3 0.5
Additional paid-in capital............. 51.4 54.5 105.9
Retained earnings (deficit)............ (24.0) -- (24.0)
Receivable from affiliates............. (1.1) -- (1.1)
------ ------ ------
Total shareholders' equity............ 26.5 54.8 81.3 (B)
------ ------ ------
Total capitalization..................... $116.2 $ 18.0 $134.2
====== ====== ======
</TABLE>
--------
(A) To give effect to the issuance of 3,700,000 shares of AmeriQuest common
stock for the remaining 49 percent of Robec common stock and the issuance
of approximately 8.1 million shares of AmeriQuest Common Stock in
satisfaction of Computer 2000's $18 million advance and approximately 17.9
million shares of AmeriQuest Common Stock at $1.75 per share (see "Recent
Developments" for a description of the terms of the Computer 2000 Purchase
Agreement). Short term debt will be reduced by $16 million with a portion
of the net proceeds received by AmeriQuest from the Computer 2000
investment.
(B) In connection with executive and operating management changes, AmeriQuest
has made the decision to terminate its entertainment software business and
focus its product line offerings by eliminating certain lower margin
products and vendors within its computer hardware distribution business.
As a result, the Company will record a charge in the fourth quarter of
fiscal 1995 estimated to be between $25 million to $30 million associated
with the write-off of the intangible assets related to the entertainment
software business, the write-down of related inventory to liquidation value
and the reserve of customer and vendor receivables to their recoverable
value. In addition to the fourth quarter fiscal 1995 loss related to the
termination of the entertainment software business, the Company expects to
record further substantial fourth quarter operating losses due to the
continued sales volume reductions experienced by the Company and expected
substantial inventory realization reserves associated with the elimination
of certain lower margin products and vendors within the Company's computer
hardware distribution business. These losses are not reflected in the pro
forma financial statements as they relate to activity and management
decisions occurring after the third quarter of fiscal 1995. (See "Risk
Factors--Termination of Entertainment Software Business and Significant
Fourth Quarter Fiscal 1995 Operating Loss").
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<PAGE>
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
<CAPTION>
1995
----
<S> <C> <C> <C> <C>
First Quarter................................ 3 1/8 2 1/2 1 15/16 1 1/2
Second Quarter............................... 3 1/4 1 3/4 1 13/16 1 1/2
</TABLE>
On August 9, 1995, the share price of AmeriQuest Common Stock closed at $2.25
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 August 4, 1995 Robec had approximately 100 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.
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<PAGE>
DESCRIPTION OF CAPITAL STOCK OF AMERIQUEST
GENERAL
As of August 10, 1995, the authorized capital stock of AmeriQuest consisted
of 30,000,000 shares of common stock, par value $.01 per share, of which
24,303,572 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. AmeriQuest authorized the issuance of
several series of Preferred Stock to accommodate the Investment, such that the
authorized Preferred Stock now consists of a Series A Preferred Stock (810,811
shares), Series B Preferred Stock (1,785,714 shares), Series D Preferred Stock
(1,403,475 shares), Series E Preferred Stock (400,000 shares) and Series F
Preferred Stock (514,857 shares).
PREFERRED STOCK
Each series of Preferred Stock, other than Series E Preferred Stock, is
initially convertible into 10 shares of AmeriQuest's Common Stock and the
Series E Preferred Stock is initially convertible into 25 shares of
AmeriQuest's Common Stock, and the conversion rate of each series of Preferred
Stock is subject to adjustment for stock splits, combination, dividends,
recapitalizations and the like effecting the Common Stock. The Preferred Stock
automatically converts into AmeriQuest Common Stock at such time as there are
sufficient number of authorized shares of Common Stock reserved to effect the
conversion or exercise of all outstanding shares of Preferred Stock and all
rights, options or warrants convertible or exercisable for Preferred Stock. The
Preferred Stock votes with the Common Stock on an as-converted basis, except so
long as any Preferred Stock is outstanding (i) the approval of 85% of the
outstanding shares of a series of Preferred Stock is required to increase the
authorized Preferred Stock of that series or to amend AmeriQuest's Certificate
of Incorporation or Bylaws if such amendment would alter or change the rights,
preferences or privileges of such series of Preferred Stock and (ii) the vote
of a majority of all the outstanding shares of Preferred Stock is required to
increase the total number of authorized shares of Preferred Stock, to authorize
or issue to any securities senior to or on a parity with the Preferred Stock or
for any merger of the Issuer or any sale of all or substantially all of
AmeriQuest's assets, or to increase the size of the Board in excess of nine
members. The Preferred Stock has the right to receive dividends when declared
by the Board equal to the dividends paid with respect to the number of shares
of AmeriQuest Common Stock into which the Preferred Stock is convertible. In
the event of any liquidation, dissolution or winding-up of AmeriQuest,
including by merger or sale of assets, the Preferred Stock shall be entitled to
be paid the original purchase price for such applicable series of Preferred
Stock ($22.20, $17.50, $0.53, $1.25 and $5.25 for Series A, B, D, E and F
Preferred Stock, respectively) plus all unpaid dividends, prior to any payment
to the holders of Common Stock; thereafter all other payments or distribution
shall be made to the holders of Common Stock.
COMMON STOCK
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 Purchase 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 62% ownership interest in AmeriQuest. See "Businesses of
the Companies--AmeriQuest--Recent Developments." Accordingly, AmeriQuest will
seek stockholder approval to increase the number of shares of AmeriQuest Common
Stock authorized for issuance by AmeriQuest from 30,000,000 shares to
100,000,000 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
53
<PAGE>
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.
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
54
<PAGE>
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
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.
55
<PAGE>
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 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
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<PAGE>
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 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.
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EXPERTS
The financial statements and schedules of the Company incorporated by
reference in this Prospectus and elsewhere in the Registration Statement to the
extent and for the periods indicated in their reports, have been audited by
Arthur Andersen LLP, independent public 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 financial statements and the related financial statement schedules
incorporated in this Prospectus by reference from Kenfil Inc.'s Annual Report
on Form 10-K for the year ended June 30, 1993 have been audited by Deloitte &
Touche LLP, independent auditors, as stated in their report, which is
incorporated herein by reference, and has been so incorporated in reliance upon
the report of such firm given upon their authority as experts in accounting and
auditing.
The consolidated balance sheets of Robec as of December 31, 1993 and 1994 and
the consolidated statements of operations, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 1994, 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.
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 incorporated by reference herein and in the
Registration Statement in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants related to such periods incorporated
by reference, and upon the authority of said firm as experts in accounting and
auditing.
The statements of operations, shareholders' equity, and cash flows of NCD for
the three-months ended March 31, 1992, included in this Prospectus/Registration
Statement, have been incorporated herein in reliance on the report of Hansen,
Barnett & Maxwell, independent accountants, with respect thereto, given on the
authority of that firm as experts in accounting and auditing.
The statements of operations, shareholders' equity, and cash flows for the
year in the period ended December 31, 1991, 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.
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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. The deadline for proposals of shareholders to be presented at the
1995 Annual Meeting of Shareholders has passed. Proposals of shareholders
intended to be presented at the 1996 Annual Meeting of Shareholders must be
received not less than 120 days in advance of the date of Robec's proxy
statement released to shareholders in connection with the 1995 Annual Meeting
of Shareholders.
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
August 12, 1995
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<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
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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 within two business days of approval
of this Plan by the shareholders of the Surviving Corporation, 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 .82944 (the "Applicable Fraction") of a validly issued, fully paid and
nonassessable share of AmeriQuest Common Stock; provided, however, that in the
event that the lesser of (A) the mean trading price (determined by dividing by
two the sum of the daily high and low price as reported in the Wall Street
Journal) of AmeriQuest Common Stock on the New York Stock Exchange on the
fourth trading day prior to the day on which Robec shareholders approve and
adopt this Plan (the "Meeting Date") or (B) the average of the mean trading
prices (determined by dividing by two the sum of the daily high and low prices
as reported in the Wall Street Journal) of AmeriQuest Common Stock on the New
York Stock Exchange for each of the twenty trading days prior to the fourth
trading day prior to the Meeting Date (the lesser of the amounts determined
pursuant to (A) or (B) above, the "Market Price"), is less than $3.00 per
share, the Applicable Fraction shall be equal to the sum of (A) the product of
(i) .63075 multiplied by (ii) a quotient, the numerator of which is $3.00 and
the denominator of which is the Market Price plus (B) .19869. 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
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
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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.
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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.
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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
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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
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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.
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(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.
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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
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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.
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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).
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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
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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.
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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.
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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.
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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.
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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.
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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.
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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
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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.
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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.
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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.
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<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:
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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.
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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
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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
<TABLE>
<S> <C>
Exhibit A--Plan of Merger
Exhibit B--Registration Rights Agreement
Exhibit C--Form of Employment Agreement.
</TABLE>
II-26
<PAGE>
AMENDMENT NO. 1 TO THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT NO. 1 (this "Amendment") to the Amended and Restated Agreement
and Plan of Reorganization is made and entered into as of August 4, 1995 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").
W I T N E S S E T H
WHEREAS, AmeriQuest, Robec and the Principal Shareholders are parties to an
Amended and Restated Agreement and Plan of Reorganization made and entered into
as of the 11th day of August, 1994 (the "Agreement");
WHEREAS, AmeriQuest, Robec and the Principal Shareholders desire to amend the
Agreement, as set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration for the
agreements, representations and warranties set forth below, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Section 1.01 of the Agreement is hereby amended to read in its entirety as
follows:
1.01 Exchange of Shares by Principal Shareholders. 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 nonassessable share of
AmeriQuest Common Stock; provided, however, that at the Merger Closing each
Principal Shareholder shall receive, as additional consideration for each
Exchange Share, (1) .19869 of a validly issued, fully-paid and
nonassessable share of AmeriQuest Common Stock plus (2) in the event that
the lesser of (A) the mean trading price (determined by dividing by two the
sum of the daily high and low price as reported in the Wall Street Journal)
of AmeriQuest Common Stock on the New York Stock Exchange on the trading
day prior to the day on which Robec shareholders vote on the approval and
adoption of the Plan of Merger (the "Meeting Date") or (B) the average of
the mean trading prices (determined by dividing by two the sum of the daily
high and low prices as reported in the Wall Street Journal) of AmeriQuest
Common Stock on the New York Stock Exchange for each of the twenty trading
days prior to the Meeting Date (the lesser of the amounts determined
pursuant to (A) or (B) above, the "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 non-assessable shares
of AmeriQuest Common Stock equal to the difference between (a) .63075
multiplied by a quotient, the numerator of which is $3.00 and the
denominator of which is the Market Price and (b) .63075. 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 Market Price) multiplied by the fraction of a share of
AmeriQuest Common Stock to which such holder would otherwise be entitled
without any interest thereon.
II-27
<PAGE>
2. The Plan of Merger attached as Exhibit A to the Agreement is hereby
amended in its entirety as set forth on Schedule I hereto.
3. Section 1.06 of the Agreement is hereby amended in its entirety as
follows:
1.06 Board Representation of Robec. The Board of Directors of AmeriQuest
shall cause Robert H. Beckett to be appointed, effective as of the
Effective Time, 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.
4. Section 1.07 of the Agreement is hereby amended in its entirety as
follows:
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 Meeting Date 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)(the "Merger Closing Date"); provided, however, that in
no case shall the Merger Closing Date be later than the second business day
following the Meeting 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").
5. A new Section 2.24 shall be added as follows:
2.24 Deletion of Robec Customer List Files. AmeriQuest represents,
warrants and covenants that (i) it and its subsidiaries no longer use in
any way whatsoever any customer list of Robec and (ii) that it and its
subsidiaries have deleted the relevant portions of any computer files
containing, and destroyed all originals and copies whatsoever of, any Robec
customer list which AmeriQuest or its subsidiaries have come into
possession of prior to the date hereof.
6. The first sentence of Section 7.08 of the Agreement is hereby amended in
its entirety as follows:
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, continuing
for a period of two years from the Effective Date, with base salaries in
amounts previously agreed to between such employee and AmeriQuest.
7. A new section 7.27 shall be added as follows:
7.27 Investment by Computer 2000. Prior to or contemporaneously with the
Merger Closing, Computer 2000, A.G., a company organized under the laws of
the Federal Republic of Germany ("Computer 2000") shall have invested in
AmeriQuest (the "Investment") on substantially the terms set forth in the
letter from Computer 2000 to AmeriQuest dated July 12, 1995. AmeriQuest
shall promptly provide a copy to Robec of the definitive agreement between
AmeriQuest and Computer 2000 relating to the Investment.
8. Section 8.08(e) of the Agreement is hereby amended in its entirety as
follows:
(e) by Robec, if the Merger shall not have occurred on or prior to
December 31, 1994; provided, however, that this Section 8.08(e) shall be of
no further force or effect following the completion of the Investment, or
9. Except as amended by this Amendment, the Agreement shall remain unchanged
in all other respects and shall remain in full force and effect.
II-28
<PAGE>
10. This Amendment may be executed in two or more counterparts, each of which
shall be deemed to be an original as against any party whose signature appears
thereon, but all of which together shall constitute one and the same
instrument.
11. Each party hereto represents and warrants to each other party hereto that
it has full power and authority to enter into this Amendment, and that this
Amendment constitutes its valid and binding obligation, enforceable against it
in accordance with the terms hereof.
12. All of the terms and provisions of this Amendment and the rights and
obligations of the parties hereto shall be interpreted and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
WHEREFORE, the parties have set their hands on August 4, 1995 but effective
as of August 11, 1994.
Attest: AMERIQUEST TECHNOLOGIES, INC.
/s/ Stephen G. Holmes /s/ Harold L. Clark
------------------------------- -------------------------------
Stephen G. Holmes, Secretary Harold L. Clark, President
Attest: ROBEC, INC.
/s/ Robert S. Beckett /s/ Robert H. Beckett
------------------------------- -------------------------------
Robert C. Beckett, Secretary Robert H. Beckett, Chairman,
Chief Executive Officer and
President
PRINCIPAL SHAREHOLDERS
/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. Welsey McKinney
-------------------------------
G. Wesley McKinney
II-29
<PAGE>
AMENDMENT NO. 2 TO THE AMENDED AND RESTATED
AGREEMENT AND PLAN OF REORGANIZATION
THIS AMENDMENT NO. 2 (this "Amendment") to the Amended and Restated Agreement
and Plan of Reorganization is made and entered into as of August 15, 1995 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").
W I T N E S S E T H
WHEREAS, AmeriQuest, Robec and the Principal Shareholders are parties to an
Amended and Restated Agreement and Plan of Reorganization made and entered into
as of the 11th day of August, 1994, as amended by Amendment No. 1 as of August
4, 1995 (the "Agreement");
WHEREAS, AmeriQuest, Robec and the Principal Shareholders desire to amend the
Agreement, as set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and in consideration for the
agreements set forth below, the parties hereto, intending to be legally bound,
hereby agree as follows:
1. Section 1.01 of the Agreement is hereby amended to read in its entirety as
follows:
1.01 EXCHANGE OF SHARES BY PRINCIPAL SHAREHOLDERS. 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 nonassessable share of
AmeriQuest Common Stock; provided, however, that at the Merger Closing each
Principal Shareholder shall receive, as additional consideration for each
Exchange Share, (1) .19869 of a validly issued, fully-paid and
nonassessable share of AmeriQuest Common Stock plus (2) in the event that
the lesser of (A) the mean trading price (determined by dividing by two the
sum of the daily high and low price as reported in the Wall Street Journal)
of AmeriQuest Common Stock on the New York Stock Exchange on the fourth
trading day prior to the day on which Robec shareholders vote on the
approval and adoption of the Plan of Merger (the "Meeting Date") or (B) the
average of the mean trading prices (determined by dividing by two the sum
of the daily high and low prices as reported in the Wall Street Journal) of
AmeriQuest Common Stock on the New York Stock Exchange for each of the
twenty trading days prior to the fourth trading day prior to the Meeting
Date (the lesser of the amounts determined pursuant to (A) or (B) above,
the "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 non-assessable shares of AmeriQuest Common Stock
equal to the difference between (a) .63075 multiplied by a quotient, the
numerator of which is $3.00 and the denominator of which is the Market
Price and (b) .63075. 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 Market Price) multiplied by the
fraction of a share of AmeriQuest Common Stock to which such holder would
otherwise be entitled without any interest thereon.
II-30
<PAGE>
2. The Plan of Merger attached as Exhibit A to the Agreement is hereby
amended in its entirety as set forth on Schedule I hereto.
3. Except as amended by this Amendment, the Agreement shall remain
unchanged in all other respects and shall remain in full force and effect.
4. This Amendment may be executed in two or more counterparts, each of
which shall be deemed to be an original as against any party whose
signature appears thereon, but all of which together shall constitute one
and the same instrument.
5. Each party hereto represents and warrants to each other party hereto
that it has full power and authority to enter into this Amendment, and that
this Amendment constitutes its valid and binding obligation, enforceable
against it in accordance with the terms hereof.
6. All of the terms and provisions of this Amendment and the rights and
obligations of the parties hereto shall be interpreted and enforced in
accordance with the laws of the Commonwealth of Pennsylvania.
WHEREFORE, the parties have set their hands as of August 15, 1995 but
effective as of August 11, 1994.
AMERIQUEST TECHNOLOGIES, INC.
Attest:
/s/ STEPHEN G. HOLMES /s/ DONALD RESNICK
Stephen G. Holmes, Donald Resnick,
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
/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 MC KINNEY
G. Wesley McKinney
II-31
<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 Original Filing
Reorganization to acquire Robec, Inc.
2.02 Plan of Merger to acquire Robec, Inc. Original Filing
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. Original Filing
8.01 Opinion of Arthur Andersen & Co. re: tax aspects Original Filing
10.01 Loan and Security Agreement dated August 19, 1993, 283**
as 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, 402**
as 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 (Amendment This Filing
No. 9) as amended for the fiscal year ended June
30, 1994.
13.02 AmeriQuest's Quarterly Report on Form 10-Q/A Amendment No. 4
(Amendment No. 1) as amended for the nine months
ended March 31, 1995.
13.03 AmeriQuest's Current Reports on Form 8-K/A, as Amendment No. 3
amended, dated June 14, 1994, July 18, 1994,
September 12, 1994 and November 14, 1994.
13.04 AmeriQuest's Current Report on Form 8-K dated August This Filing
7, 1995
13.05 AmeriQuest's Current Report on Form 8-K dated August This Filing
9, 1995
13.06 AmeriQuest's Schedule 14F filed August 10, 1995 (not Amendment No. 4
filed via EDGAR where Computer 2000 is deemed by
SEC personnel to be a private foreign issuer)
22.01 Subsidiaries of the Registrant **
23.01 Consent of Raymond L. Ridge, Esq., Counsel to This Filing
Registrant
23.02 Consent of Arthur Andersen L.L.P. Auditors for the Amendment No. 4
Registrant
23.03 Consent of Arthur Andersen L.L.P. (contained in
Exhibit 8.01).
23.04 Consent of Deloitte & Touche LLP, Auditors for Amendment No. 4
Kenfil Inc.
23.05 Consent of Coopers & Lybrand, L.L.P., Auditors for Amendment No. 4
Robec
23.06 Consent of KPMG Peat Marwick LLP, Auditors for NCD Amendment No. 4
23.07 Consent of Hansen, Barnett & Maxwell, Auditors for Amendment No. 4
NCD
23.08 Consent of Coopers & Lybrand, L.L.P., Auditors for Amendment No. 4
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 Pre-effective Amendment No. 5 to its Registration
Statement on Form S-4 to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Santa Ana, State of California, on the 15th day
of August, 1995.
AMERIQUEST TECHNOLOGIES, INC.
By: /s/ 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 August 15, 1995
____________________________________ Officer and Director
Harold L. Clark (Principal Executive
Officer)
STEPHEN G. HOLMES Secretary, Treasurer, Chief August 15, 1995
____________________________________ Financial Officer and
Stephen G. Holmes Director
(Principal Financial and
Accounting Officer)
MARC L. WERNER Chairman of the Board August 15, 1995
____________________________________
Marc L. Werner **
ERIC J. WERNER Director August 15, 1995
____________________________________
Eric J. Werner **
TERREN S. PEIZER Director August 15, 1995
____________________________________
Terren S. Peizer **
____________________________________ Director August , 1995
William T. Walker, Jr.
WILLIAM N. SILVIS Director August 15, 1995
____________________________________
William N. Silvis**
</TABLE>
HAROLD L. CLARK STEPHEN G. HOLMES
____________________________________ ____________________________________
Harold L. Clark,* Stephen G. Holmes,**
Attorney-in-Fact Attorney-in-Fact
II-5
<PAGE>
INDEX TO FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
ROBEC'S FINANCIAL STATEMENT SCHEDULES
Schedule II. Valuation and Qualifying Accounts(1)
NCD'S FINANCIAL STATEMENT SCHEDULES
Independent Auditors' Report......................................... S-2
Schedule II. Valuation and Qualifying Accounts....................... S-3
</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.
--------
(1) The schedule required for Robec, Inc. is incorporated herein by reference
to Robec's Annual Report in Form 10-K for the year ended December 31, 1994
(SEC File No. 0-18115) filed March 31, 1995.
S-1
<PAGE>
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 11(c) which are as of
September 27, 1994
S-2
<PAGE>
ROSS WHITE ENTERPRISES, INC.
(D/B/A NATIONAL COMPUTER DISTRIBUTORS)
SCHEDULE II: VALUATION AND QUALIFYING ACCOUNTS
FOR THE FISCAL YEARS ENDED MARCH 31, 1994 AND 1993, THE THREE MONTHS ENDED
MARCH 31, 1992 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:
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:
Allowance for
obsolescence....... $ -- -- -- -- --
======== ======= ======= ======== =======
Year ended December
31, 1991:
Allowance for
obsolescence....... $ -- -- -- -- --
======== ======= ======= ======== =======
</TABLE>
--------
(1) Write offs
S-3
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NO. TITLE OF DOCUMENT NUMBERED PAGE
------- ----------------- ---------------
<C> <S> <C>
2.01 Amended and Restated Agreement and Plan of Original Filing
Reorganization to acquire Robec, Inc.
2.02 Plan of Merger to acquire Robec, Inc. Original Filing
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. Original Filing
8.01 Opinion of Arthur Andersen & Co. re: tax aspects Original Filing
10.01 Loan and Security Agreement dated August 19, 1993, 283**
as 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, 402**
as 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 (Amendment This Filing
No. 9) as amended for the fiscal year ended June
30, 1994.
13.02 AmeriQuest's Quarterly Report on Form 10-Q/A Amendment No. 4
(Amendment No. 1) as amended for the nine months
ended March 31, 1995.
13.03 AmeriQuest's Current Reports on Form 8-K/A, as Amendment No. 3
amended, dated June 14, 1994, July 18, 1994,
September 12, 1994 and November 14, 1994.
13.04 AmeriQuest's Current Report on Form 8-K dated August This Filing
7, 1995
13.05 AmeriQuest's Current Report on Form 8-K dated August This Filing
9, 1995
13.06 AmeriQuest's Schedule 14F filed August 10, 1995 (not Amendment No. 4
filed via EDGAR where Computer 2000 is deemed by
SEC personnel to be a private foreign issuer)
22.01 Subsidiaries of the Registrant **
23.01 Consent of Raymond L. Ridge, Esq., Counsel to This Filing
Registrant
23.02 Consent of Arthur Andersen L.L.P. Auditors for the Amendment No. 4
Registrant
23.03 Consent of Arthur Andersen L.L.P. (contained in
Exhibit 8.01).
23.04 Consent of Deloitte & Touche LLP, Auditors for Amendment No. 4
Kenfil Inc.
23.05 Consent of Coopers & Lybrand, L.L.P., Auditors for Amendment No. 4
Robec
23.06 Consent of KPMG Peat Marwick LLP, Auditors for NCD Amendment No. 4
23.07 Consent of Hansen, Barnett & Maxwell, Auditors for Amendment No. 4
NCD
23.08 Consent of Coopers & Lybrand, L.L.P., Auditors for Amendment No. 4
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 September ,
1995 (the "Meeting Date"), 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 .82944 shares of the
common stock, par value $.01 per share, of AmeriQuest
("AmeriQuest Common Stock"), provided, however, that in the
event that the lesser of (A) the mean trading price of
AmeriQuest Common Stock on the New York Stock Exchange on
the fourth trading day prior to the Meeting Date or (B) the
average of the mean trading prices of AmeriQuest Common
Stock on the New York Stock Exchange for each of the 20
trading days prior to the fourth trading day prior to the
Meeting Date (the lesser of the amounts determined pursuant
to (A) or (B) above, the "Market Price"), is less than $3.00
per share, the Applicable Fraction shall be equal to the sum
of (A) the product of (i) .63075 multiplied by (ii) a
quotient, the numerator of which is $3.00 and the
denominator of which is the Market Price plus (B) .19869.
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>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
(Amendment No. 9)
[ 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. There exists a
question of fact as to whether the actions of Kenfil's employees were instigated
by upper-level management and a question of law as to whether the lower-level
managers of Kenfil are able to take ultra vires actions which can be attributed
to Kenfil. The testimony to date appears fragmented and uncorroborated, such
that a close examination of the evidence deduced to date reveals no clear
evidence that would allow one to conclude that the defendant was in any way
defrauded. Additionally, it appears that the defendant insurance company failed
to terminate the contract upon discovery of the alleged "fraud," and merely
chose to not renew the contract upon its expiration. 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.
---------------
Richard M. Terrell, et al. vs. AmeriQuest Technologies, Inc., was filed
------------------------------------------------------------
December 20, 1994 in the Circuit Court of the State of Oregon for the County of
Washington, Case No. C941228CV. The Company learned by happenstance during the
week of May 11, 1995 that default judgments in the amount of $15.9 million were
entered against it and its former Chief Executive Officer in the Circuit Court
of Washington County, Oregon on February 17, 1995 in favor of certain
shareholders of defunct Microware Corporation ("Microware"). The lawsuit relates
to the Company's decision not to proceed with the acquisition of Microware in
early 1993. The Company has retained Oregon counsel to proceed vigorously with
efforts to petition the Court to vacate the judgment based upon the fact that
the Company's registered agent was not served and the judgment was taken without
the Company's consent or appearance. In the opinion of management the suit is
without merit. The Plaintiffs' claims are premised on a Share Exchange Agreement
dated January 14, 1993 by and between the Company and the Plaintiffs, which was
terminated on January 21, 1993 in light of an ever continuing and accelerating
deterioration in the operations of Microware, which the Company believed to
constitute a "material adverse change" under the Share Exchange Agreement.
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.
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 $.7 million and
thus no appreciable gain or loss was expected to result upon completion of the
transaction. CMS Singapore is expected to generate revenues of approximately $20
million with break-even operating results for fiscal 1995. The disposition, if
completed, will not have a material effect on either the Company's Far East
segment or consolidated results of operations. CMS Singapore is a segment of the
Company's continuing line of business and, as a result, any disposition will not
be accounted for as a discontinued operation. This transaction is the subject of
potential litigation, the ultimate resolution of which is not determinable. Such
potential litigation would be between the Company and the purchaser and would
relate to whether full consideration was received for the proposed transaction.
In the opinion of management such litigation would not have a materially adverse
effect on the Company's future results of operations and financial position.
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).
At March 31, 1995, AmeriQuest had working capital lines of credit of over
$80 million. Borrowings under these accounts bear interest at from 1 to 3
percent over the prime rate and are limited to specified percentages of eligible
accounts receivable (a borrowing base in excess of $50 million) and inventories
(a borrowing base of over $50 million). At March 31, 1995 the Company's
borrowings from its primary lender exceeded its collaterialized base by
approximately $7.5 million. The Company is currently negotiating an expansion of
its collateral with its lenders. Based on contractual advance rates, at May 12,
1995, the Company expects to have credit line availability of approximately $5
million, once the collateral expansion is complete. However, it should also be
noted that at May 12, 1995, the Company was in default to its primary lender by
reason of both (i) its borrowings exceeding its collateral base and (ii) the
entry of a judgment in Oregon on February 17, 1995 totaling $15.9 million. (For
additional information see Item 3. Legal Proceedings.) Accordingly, no assurance
can be given that the Company's primary lender will continue to forbear
collection of the debt owed to it or increase the line of credit.
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 Santa
Ana, State of California, on the 12th day of August, 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 August 12, 1995
------------------------------------------- Executive Officer and Director
Harold L. Clark (Principal Executive Officer)
/s/ Stephen G. Holmes Secretary, Treasurer, Chief August 12, 1995
---------------------------------------- Financial Officer and Director
Stephen G. Holmes (Principal Financial and
Accounting Officer)
/s/ Marc L. Werner Chairman of the Board August 12, 1995
-----------------------------------------
Marc L. Werner**
/s/ Eric J. Werner Director August 12, 1995
-------------------------------------------
Eric J. Werner**
/s/ Terren S. Peizer Director August 12, 1995
-------------------------------------------
Terren S. Peizer**
/s/ William T. Walker, Jr. Director August 12, 1995
-----------------------------------------
William T. Walker, Jr.**
/s/ William N. Silvis Director August 12, 1995
-------------------------------------------
William N. Silvis**
</TABLE>
38
<PAGE>
<TABLE>
<S> <C>
/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 (except
with respect to the matter
discussed in Note 16, as to
which the date is August 11, 1995)
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>
AmeriQuest Technologies, Inc. and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year Ended June 30,
----------------------------------
(Dollars in thousands) 1994 1993 1992
----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $ (7,971) $ 236 $ (8,893)
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 1,107 1,013 1,428
Minority interest - - (798)
Provision for losses on accounts receivable 577 328 591
Provision for losses on inventories 1,714 633 3,388
Benefit for income taxes - - (731)
(Gain) loss on sale of equipment - 33 (3)
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable (1,698) 3,302 (584)
(Increase) decrease in inventories and other (1,447) 953 8,219
(Increase) decrease in other assets 1,500 (1,449) 3,544
Decrease in accounts payable and other (2,190) (3,776) (3,443)
----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) operating activities (8,408) 1,273 2,718
----------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Investing Activities
Purchase of property and equipment (1,546) (1,260) (318)
Net cash received from acquisition of businesses 769 - -
Proceeds from sale of equipment - 17 21
----------------------------------------------------------------------------------------------------------------------------------
Net cash used in investing activities (777) (1,243) (297)
----------------------------------------------------------------------------------------------------------------------------------
Cash Flows from Financing Activities
Issuance of common stock for assets - 150 -
Proceeds from subordinated note payable - 1,505 -
Proceeds from notes payable borrowings 59,381 55,403 104,523
Principal payments on notes payable and capital leases (55,640) (57,072) (107,923)
Proceeds from sale of common stock 7,624 306 33
----------------------------------------------------------------------------------------------------------------------------------
Net cash provided by (used in) financing activities 11,365 292 (3,367)
----------------------------------------------------------------------------------------------------------------------------------
Increase (decrease) in cash 2,180 322 (946)
Cash-beginning of the year 1,020 698 1,644
----------------------------------------------------------------------------------------------------------------------------------
Cash-end of the year $ 3,200 $ 1,020 $ 698
==================================================================================================================================
</TABLE>
Supplemental Disclosures of Cash Flow Information:
Interest on lines of credit: During 1994, 1993 and 1992 the Company paid
interest costs of approximately $728, $277 and
$582, respectively.
Income taxes: During 1994, 1993 and 1992 the Company made no tax
payments.
Noncash investing and financing activities:
Capital leases: During 1994, the Company entered into capital
leases for computer equipment totaling
approximately $180.
Subordinated note
payable conversion: During 1994, the Company issued approximately
522,000 shares of common stock upon the conversion
of a $1,550 subordinated note payable.
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 accompany notes are an integral part of these consolidated financial
statements.
<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. On a quarterly basis, the
Company assesses the recoverabiliy of intangible assets based upon consideration
of past performance and future expectations as to undiscounted cash flow on an
acquisition by acquisition basis to the extent seperately identifiable. To the
extent separate assessment of such acquired intangibles is no longer feasible
(i.e. as a result of integrating multiple acquisitions into a single business
unit) such assessment will be performed on a combined basis as appropriate.
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
Effective June 6, 1994, the Company acquired 51 percent of the outstanding
common stock of Kenfil, Inc. Kenfil, Inc. had a equity deficit at the date of
acquisition and therefore no amounts have been reflected as minority interest in
the accompanying consolidated financial statements.
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% 1,046,254 2,511
Robec, 51% 1,402,800 2,749
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.
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 representing a discounted quoted market price, based upon
weighted average discounts received on recently completed private equity cash
transactions. This valuation represents a significant discount from quoted
market prices due to the thin public trading volume and small public float of
AmeriQuest common stock.
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.
Management believes that the most significant intangible acquired is that of the
distribution channels. Management has assigned a 10 year economic life to this
intangible asset as that is the period of time that management expects to derive
benefit from the existing vendor relationships and market position. Management
determined that 10 years is an appropriate economic life based upon the
historical length of the acquiree's vendor relationships and the overall size
and quality of the acquiree's vendors and their product offerings.
The purchase price allocation associated with the Kenfil acquisition is based
upon the Company's preliminary estimates of the fair value of net assets
acquired. The Company is currently in the process of completing its detailed
analysis of the fair value of Kenfil net assets acquired and therefore the
related intangible assets included in the accompanying financial statements may
change as a result of the completed analysis.
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) (28,541) 1,920
Net income (loss) per share (2.44) .24
Weighted average shares 11,702,467 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 a party to various other legal matters. Based on discussions with
counsel, management believes that the outcome of these matters will not have an
adverse effect on the Company's future financial position or its results of
operations.
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.
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>
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 accrue to AmeriQuest apart from the discontinuance of
unprofitable manufacturing per se, were related to refocusing upon the
distribution portion of the business. Losses reported by AmeriQuest
in 1992 and 1994, apart from restructuring charges, were largely related to
these former manufacturing operations. These restructuring activities in 1994
and 1992 impacted the Company's results of operations as follows:
<TABLE>
<CAPTION>
Quarter Ended Year Ended
September 30, 1994 June 30, 1993
------------------ -------------
(Dollars in thousands)
<S> <C> <C>
Sales reduction as contrasted
to prior year $ - $16,436
Gross profit reduction as
contrasted to prior year - 1,792
Operating expense reduction
as contrasted to prior year 700 6,575
</TABLE>
The benefits from the 1992 restructuring improved profits in 1993 by
appoximately $4.8 million. As to the 1994 restructuring charge, 1995 operations
are impacted by expense reductions only since sales of the proprietary personal
computer developed in 1993 and 1994 never reached material levels. Consolidated
expenses were reduced by approximately $700,000 during the quarter ended
September 30, 1994 as a result of the discontinuance of the personal computer
operations. Management expects a similar level of quarterly expense savings to
benefit the Company through the remainder of fiscal 1995.
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.
50
<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 owed 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 was expected to result upon completion of
the transaction. CMS Singapore is a segment of the Company's continuing
line of business and, as a result, any disposition will not be accounted for as
a discontinued operation. This transaction is the subject of potential
litigation, the ultimate resolution of which is not determinable. Such potential
litigation would be between the Company and the purchaser and would relate to
whether full consideration was received for the proposed transaction. In the
opinion of management such litigation would not have a materially adverse effect
on the Company's future results of operations and financial position.
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.
16. Subsequent Events
During the week of May 11, 1995, the Company learned that, default judgments in
the amount of $15.9 million were entered against the Company and its Chief
Executive Officer in the Circuit Court of Washington County, Oregon on February
17, 1995 in favor of certain shareholders of defunct Microware Corporation
(Microware). The lawsuit relates to the Company's decision not to proceed with
the acquisition of Microware in early 1993.
On June 30, 1995, the Company entered into a settlement agreement with the
plaintiffs of the Microware lawsuit (the Plaintiffs). The settlement agreement
calls for the Company to issue 125,000 shares of its Common Stock to the
Plaintiffs and pay $50,000 in cash in exchange for vacation of the default
judgement. The Plaintiffs have reserved their rights to refile the underlying
lawsuit related to the terminated acquisition.
Based upon discussions with counsel, management believes that the ultimate
outcome of this matter will not have a material adverse effect on the Company's
future financial position or its results of operations.
In November 1994, the Company was advanced $18 million in connection with an
investment agreement with Computer 2000 A.G. (Computer 2000). The advance was to
be satisfied by the issuance to Computer 2000 of up to approximately 8.1 million
shares of Common Stock of the Company at a rate of $2.22 per share, subject to
approval by the stockholders of the Company. The advance will not be satisfied
through the issuance of Common Stock by July 14, 1995, and in accordance with
the terms of the investment agreement, as amended, (in absence of extension by
Computer 2000), the advance and a breakup fee of approximately $1.8 million plus
accrued interest of approximately $800,000 will be payable in cash on August 3,
1995. The Company, at the election of Computer 2000, could alternatively repay
$8.8 million of the advance, the breakup fee and accrued interest and issue to
Computer 2000 new shares which when added to its current holdings would increase
its current ownership to approximately 19.9 percent of the Company's outstanding
Common Stock.
In August 1995, the Company entered into an amended investment agreement with
Computer 2000 calling for the issuance of 8.1 million shares of common stock in
satisfaction of the $18 million advance. In addition, the amended investment
agreement calls for Computer 2000 to purchase approximately 17,857,000 shares of
the Company's common stock for $31,250,000. The amended investment agreement
also calls for the issuance of warrants to purchase approximately 14,000,000
shares of the Company's common stock at $0.05 per share, along with
anti-dilution warrants related to various existing AmeriQuest warrant and stock
option agreements and the Robec Merger Agreement.
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>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
_____________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 7, 1995
------------------------------
AMERIQUEST TECHNOLOGIES, INC.
-------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 1-10397 33-0244136
-------------------------------------------------------------------------------
(State or other jurisdiction of (Commission (IRS Employer
incorporation) File Number) Identification No.)
3 Imperial Promenade, Suite 300 Santa Ana, California 92707
-------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (714) 445-5000
----------------------------
N/A
-------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 1. CHANGES IN CONTROL OF REGISTRANT.
On August 7, 1995, the Registrant entered into a Purchase Agreement
(the "Purchase Agreement") with Computer 2000 AG ("C2000") and Computer 2000
Inc., a wholly-owned subsidiary of C2000 ("Sub"), providing for an investment by
C2000 or Sub in the Registrant as described below. As a result of the
investment, C2000 will acquire a majority equity interest in and operating
control of the Registrant. The transactions provided for in the Purchase
Agreement and the related agreements are summarized below.
PREVIOUS TRANSACTIONS. On August 31, 1994, C2000 purchased 532,000
---------------------
shares of the Series C Preferred Stock of the Registrant for $1,330,000 ($2.50
per share). These shares have since been converted into 532,000 shares of the
Common Stock of the Registrant.
On October 10, 1994, through a trust account, Jochen Tschunke, the
Chairman of the Board of C2000, loaned $600,000 to the Registrant in a private
placement transaction pursuant to which Mr. Tschunke acquired a promissory note
of the Registrant. The promissory note was converted on November 17, 1994 into
250,000 shares of the Registrant's Common Stock (at $2.40 per share) and
warrants to purchase 250,000 additional shares, which warrants were initially
exercisable at $3.50 per share (subsequently adjusted to $2.22 per share as
described below) during the period commencing May 10, 1994 and ending November
10, 1998. Mr. Tschunke's purchase was part of a larger private placement in
which investors provided funds necessary for the Registrant to acquire Ross
White Enterprises, Inc. d/b/a National Computer Distributors ("NCD"). The
warrants issued in such private placement were subject to an exercise price
adjustment with respect to issuances of shares by the Registrant prior to May
14, 1995, and the conversion price of the exchangeable Promissory Notes to C2000
of $2.22 caused the exercise price of such warrants to be adjusted to $2.22.
Pursuant to a Loan Agreement entered into as of November 14, 1994 (the
"Loan Agreement") between C2000 and AmeriQuest 2000, Inc., a wholly-owned
subsidiary of the Registrant (the "Borrower"), C2000 loaned $18 million to the
Borrower (the "Loan"), as evidenced by the Borrower's exchangeable promissory
notes (the "Exchangeable Promissory Notes"). The Exchangeable Promissory Notes
bore interest at the rate of 6.5% per annum and were due and payable on February
28, 1995. The maturity date of the Exchangeable Promissory Notes has
subsequently been extended several times and is currently August 18, 1995. The
interest rate on the Exchangeable Promissory Notes increased on February 28,
1995 to 8.5% per annum. The proceeds of the Loan were loaned by the Borrower to
the Registrant, which loan was evidenced by promissory notes of the Registrant
(the "AmeriQuest Notes"). The Loan was secured, pursuant to a Note Pledge
Agreement, by a pledge by the Borrower of a first priority security interest in
the AmeriQuest Notes and, pursuant to a Stock Pledge Agreement, by a pledge by
the Registrant of a security interest in (i) the shares of common stock of
Robec, Inc., a Pennsylvania corporation ("Robec"), held by the Registrant, (ii)
the shares of common stock of AmeriQuest/NCD, Inc., a Florida corporation
("AQ/NCD"), held by the Registrant, (iii) the shares of common stock of
AmeriQuest/Kenfil, Inc., a Delaware
<PAGE>
corporation ("Kenfil"), held by the Registrant and (iv) all other securities of
Robec, AQ/NCD or Kenfil thereafter acquired by the Registrant or its affiliates.
Concurrently with entering into the Loan Agreement, the Registrant and
C2000 entered into an Investment Agreement (the "Investment Agreement") pursuant
to which, among other matters, (i) in the event that C2000 or Sub assigned the
Notes to the Registrant in accordance with the terms thereof, the Registrant
would be obligated to issue to C2000 8,108,108 shares of the Registrant's Common
Stock at an anticipated price of $2.22 per share (subject to adjustment); (ii)
the Registrant was obligated to issue to C2000, and C2000 had the right to
acquire, additional shares of the Registrant's Common Stock at an anticipated
price of $2.22 per share (subject to adjustment) for an aggregate purchase price
of $32,000,000; and (iii) the Registrant was obligated to grant certain option
rights to C2000 to acquire additional shares of the Registrant's Common Stock.
THE PURCHASE AGREEMENT. Due to changes in circumstances (including the
continuing deterioration of the Registrant's financial condition) and the
failure of certain conditions precedent to C2000's further investment in the
Registrant under the terms of the Investment Agreement, C2000 entered into
negotiations with the Registrant to amend or supersede the Investment Agreement.
As a result of such negotiations, C2000, the Registrant and Sub entered into the
Purchase Agreement on August 7, 1995 pursuant to which C2000 or Sub will,
subject to certain conditions, acquire shares of the Registrant's Preferred
Stock and options, warrants and certain other rights to purchase shares of the
Registrant's Common and Preferred Stock in exchange for surrender of the
Exchangeable Promissory Notes and payment of $31,250,000. Pursuant to the
proposed transactions, C2000 and/or Sub will acquire control (approximately 62%
of the outstanding voting capital stock) of the Registrant. At the closing
provided for in the Purchase Agreement, expected to occur on or about August 21,
1995, subject to certain conditions, the Loan Agreement and the Investment
Agreement will terminate and the following transactions, among others, will
occur:
(a) C2000 will assign the Exchangeable Promissory Notes to the
Registrant in exchange for the issuance by the Registrant of 810,811 shares of
the Registrant's Series A Preferred Stock (convertible into 8,108,110 shares of
Common Stock, subject to adjustment) and warrants to purchase 657,289 shares of
Series D Preferred Stock (convertible up to 6,572,890 shares of Common Stock,
subject to adjustment) exercisable at $.53 per share of Series D Preferred Stock
($.053 per share of Common Stock on an as-if-converted to Common Stock basis).
(b) C2000 or Sub will purchase from the Registrant, for $31,250,000,
1,785,714 shares of Series B Preferred Stock (convertible into 17,857,140 shares
of Common Stock, subject to adjustment) and warrants to purchase 746,186 shares
of Series D Preferred Stock (convertible into 7,461,860 shares of Common Stock,
subject to adjustment) exercisable at $.53 per share of Series D Preferred Stock
($.053 per share of Common Stock on an as-if-converted to Common Stock basis).
Assuming the exercise of the warrants referred to in paragraphs (a)
and (b) above (the "Warrants"), the conversion of the Preferred Stock issuable
upon such exercise, and the conversion of the Series A Preferred Stock and the
Series B Preferred Stock,
2
<PAGE>
the Registrant will have issued 40,000,000 shares of Common Stock at an average
purchase price of $1.25 per share and C2000 and Sub will own approximately 62%
of the Registrant's outstanding voting stock.
The Warrants referred to above will be exercisable in increments equal
to approximately one-eighth of the total number of shares purchasable thereunder
in the event that any of the following gross sales to targets (each a
"Performance Milestone") is achieved by the Registrant during the eight quarters
in the 24-month period ended June 30, 1997: $150 million for the first quarter,
$160 million for the second quarter, $190 million for the third quarter, $200
million for the fourth quarter, $220 million for the fifth quarter, $230 million
for the sixth quarter, $270 million for the seventh quarter and $280 million for
the eighth quarter. However, whether or not the Registrant achieves any or all
of the Performance Milestones, (i) Warrants for 700,000 shares of Series D
Preferred Stock (convertible into 7,000,000 shares of Common Stock, subject to
adjustment), in addition to the Warrants exercisable due to the achievement of
any Performance Milestones, will become exercisable on and after July 31, 1996
and (ii) Warrants for the remaining shares of Series D Preferred Stock will
become exercisable on or after July 31, 1997. Moreover, the Warrants may be
exercised at any time to the extent required in order for C2000 and Sub to own
51% of the outstanding voting shares of the Registrant's capital stock. The
Warrants will cease to be exercisable three years after the closing.
(c) In consideration for C2000's exchange of the Exchangeable
Promissory Notes and C2000's or Sub's additional investment of $31,250,000, as
described in paragraphs (a) and (b) above, the Registrant will grant to C2000 or
Sub the following pari passu rights with respect to other outstanding warrants,
options and other rights to acquire shares of the Registrant's Common Stock that
the Registrant has previously granted, or is obligated to grant in the future,
to others:
(i) If the Registrant issues in connection with its acquisition of
Robec any shares in excess of 2,800,000 shares of Common Stock, including all
shares already issued and all shares issued in the future, including shares
issued upon the exercise of options or warrants granted, assumed or exchanged in
connection with the Robec acquisition (such shares as are so issued in excess of
2,800,000 shares are referred to as the "Incremental Shares"), then C2000 or Sub
will have the right, pursuant to certain warrants to be granted by the
Registrant (the "Acquisition Maintenance Warrants"), to purchase that number of
shares of Series E Preferred Stock as will be convertible into a number of
shares of Common Stock that will be equal to the number of Incremental Shares
that are issued in connection with the Robec acquisition. The exercise price of
the Acquisition Maintenance Warrants will be $1.25 per share of Series E
Preferred Stock ($.05 per share of Common Stock on an as-if-converted to Common
Stock basis). The Acquisition Maintenance Warrants will become exercisable at
such time, and from time-to-time, as Incremental Shares are issued and, with
respect to each such issuance, will remain exercisable for six months.
(ii) In connection with a private placement of equity securities
in June 1995, the Registrant issued to investors, warrants to purchase up to
5,149,574 shares of Registrant's Common Stock at an exercise price of $1.05 per
share (as adjusted) (the "Unit Warrants"). If and to the extent that any of the
Unit Warrants are exercised, then C2000 or Sub will have the right, pursuant to
certain warrants to be issued by the Registrant (the "Unit Maintenance
Warrants"), to purchase that number of shares of Series F Preferred Stock that
will be convertible into a number of shares of Common Stock equal to the shares
issued upon the exercise of the Unit Warrants (the "Unit Warrant Shares"). The
exercise price of the Unit Maintenance Warrants will be
3
<PAGE>
$5.25 per share of Series F Preferred Stock ($.525 per share of Common Stock on
an as-if-converted to Common Stock). The Unit Maintenance Warrants will become
exercisable only if and to the extent that any Unit Warrant Shares are issued
and, each such issuance, will remain exercisable for six months.
(iii) The Registrant will also grant to C2000 or Sub an option
(the "Maintenance Option") to purchase that number of shares of Common Stock (or
other equity securities, as applicable) that will be equal to the number of
shares of Common Stock (or other equity securities) that the Registrant issues
upon exercise or conversion of all currently outstanding options, warrants or
other rights (other than shares subject to the Unit Maintenance Warrants and
Acquisition Maintenance Warrants) to acquire (upon conversion or otherwise) any
shares ("Additional Shares") of Common Stock or other equity securities of the
Registrant. The Maintenance Option will become exercisable from time-to-time
with respect to each issuance of an Additional Share upon the issuance of such
Additional Share, will terminate six months thereafter (subject to extension
under certain circumstances) and will be exercisable for the same consideration
and on the same terms as the consideration for which and terms under which such
Additional Shares are issued.
(d) Concurrently with C2000 or Sub's acquisition of a majority of the
Registrant's outstanding voting capital stock, changes will be made in the
Registrant's Board of Directors and management. Upon the closing, three of the
Registrant's existing directors, Terren Peizer, Eric J. Werner and William
Silvis, will resign from the Board (Gregory A. White resigned as a director
effective July 11, 1995) and five persons designated by C2000 will be appointed
directors of the Registrant. These designees, who will constitute a majority of
the Registrant's Board of Directors, are Steve DeWindt, Klaus J. Laufen and Dr.
Harry Krischik, who are three of C2000's four co-presidents, Mark Mulford, who
is a Managing Director of Frontline Distribution Ltd., a United Kingdom
corporation that is C2000's largest non-German subsidiary, and Holger Heims,
C2000's Director of Investment, Tax and Legal. Mr. DeWindt will become Chairman
of the Board and Chief Executive Officer of the Registrant, and Mr. Mulford will
become the Registrant's President and Chief Operating Officer. Background
information regarding these individuals, as well as certain other information,
has been mailed to the Company's stockholders in accordance with Rule 14f-1
under the Securities Exchange Act of 1934. Upon appointment of C2000's designees
to the Board, the Registrant will enter into an indemnification agreement with
them and will use commercially reasonable efforts to maintain directors' and
officers' liability insurance for their benefit. In addition, the Registrant
will enter into similar indemnification agreements with each existing director
of the Registrant, and each of those directors, AmeriQuest and C2000 will enter
into mutual releases for any claims either party may have against the other,
with certain exceptions. Harold L. Clark, the Registrant's Chief Executive
Officer, and Stephen G. Holmes, the Registrant's Secretary, Treasurer and Chief
Financial Officer, are expected to resign following the closing and execution by
them of mutually acceptable severance agreements is a condition to closing.
Under an amendment entered into by the Registrant and Robec on August 11, 1995
to their agreement for the Registrant's acquisition of Robec, Robert H. Beckett,
President of Robec, Inc., is to be appointed to the Registrant's Board of
Directors following the completion of the Robec acquisition.
Under the Purchase Agreement, C2000 and Sub have agreed that, for a
three year period following the closing, the Registrant or any subsidiary of the
Registrant will not (i) merge or consolidate with C2000, Sub or any of their
affiliates, (ii) sell or otherwise dispose of all or substantially all its
assets to C2000, Sub or any of their affiliates or (iii) adopt any plan of
liquidation or dissolution proposed by C2000, Sub or any of their affiliates
unless the transaction is approved by the affirmative vote of at least two-
thirds of the outstanding shares of Common Stock of the Registrant held by
shareholders other than C2000, Sub or their affiliates or unless the fair market
value of the
4
<PAGE>
consideration received by holders of the Registrant's Common Stock is at least
$1.25 per share.
The Purchase Agreement also provides that, if the Registrant incurs
any liability, costs or expenses in connection with certain contingencies
(primarily related to existing litigation and employee terminations) in excess
of $2,000,000, then the Registrant may be required to issue to C2000 or Sub
additional shares of Common Stock equal to the amount of such excess divided by
$1.25. Further, pursuant to the Purchase Agreement, the Registrant has agreed
to indemnify C2000, Sub and their representative shareholders, officers,
directors, agents, employees, representatives, attorneys, successors and assigns
from losses, costs, expenses and damages arising out of any misrepresentation or
breach by the Registrant under the Purchase Agreement or the related agreements
in excess of $100,000 in the aggregate. Such indemnity will, at C2000's or
Sub's option, be payable in cash or shares of the Registrant's Common Stock
valued at the lesser of $1.25 or the then current market price based on a five
day average.
The closing of the Purchase Agreement is subject to a number of
conditions, including receipt of consents and approvals of financial
institutions, the satisfactory completion by the Registrant of the divestiture
of the Registrant's Singapore subsidiary, the accuracy as of the closing of the
Registrant's representations in the Purchase Agreement, the performance by the
Registrant of its covenants under the Purchase Agreement and C2000's and Sub's
reasonable satisfaction with the Registrant's business, financial condition,
prospects, employee, vendor and creditor relations, status of the Robec
acquisition and any litigation involving the Registrant. While the Purchase
Agreement provides that if the Closing does not occur on or before August 20,
1995, either party may terminate the Purchase Agreement, the Registrant, C2000
and Sub all expect to close the transaction on or about August 21, 1995.
REGISTRATION RIGHTS. All of the shares of the Registrant's Common
-------------------
Stock to be issued to C2000 or Sub in the above-described transactions (the
"Registrable Securities") will be restricted securities, subject to the resale
restrictions of Rule 144 of the Securities Act of 1933, as amended (the
"Securities Act"). The Registrant, C2000 and Sub have entered into a
Registration Rights Agreement which provides that C2000 or Sub can require the
Registrant to register the Registrable Securities with the Securities and
Exchange Commission on Form S-3, or other appropriate form if Form S-3 is not
available, and keep such registration effective for three years. C2000 and Sub
also have the right to require the Registrant to file a registration statement
under the Securities Act covering the registration of the Registrable Securities
then outstanding having an aggregate offering price to the public of not less
than $5,000,000 in which event the Registrant will be required (a) to use its
best efforts to effect, within 100 days following the receipt of such request,
the registration under the Securities Act of all Registrable Securities which
C2000 or Sub requests to be registered and (b) to keep such registration
effective for up to 120 days. C2000 and Sub also have the right to include in
any registration initiated by the Registrant the Registrable Securities held by
either of them.
NO SHAREHOLDER APPROVAL FOR THE TRANSACTIONS UNDER THE PURCHASE
---------------------------------------------------------------
AGREEMENT. The transactions provided for in the Purchase Agreement would
---------
normally require approval of shareholders according to the Shareholder Approval
Policy of the New York Stock Exchange (the "Exchange"). The Audit Committee of
the Board of Directors of the Registrant determined that delays necessary in
securing shareholder approval prior to the proposed transaction would seriously
jeopardize the financial viability of the Registrant. The Registrant is
financially distressed and in the opinion of the Audit Committee, financial
survival is heavily dependent upon effecting the proposed transaction with C2000
at the earliest practicable date. Because of the determination, the Audit
5
<PAGE>
Committee, pursuant to an exception provided in the Exchange's shareholder
approval policy for such a situation, expressly approved the Registrant's
omission to seek the shareholder approval that would otherwise have been
required under that policy. The Exchange has accepted the Registrant's
application of the exception.
AUTHORIZATION OF ADDITIONAL SHARES OF COMMON STOCK. The authorized
--------------------------------------------------
number of shares of the Registrant's Common Stock are insufficient to
accommodate the transactions provided for in the Purchase Agreement and the
exercise of currently outstanding options, warrants and conversion rights that
the Registrant granted prior to the Purchase Agreement. It is contemplated
that, as soon as practicable following the closing, the Registrant will seek to
amend its Articles of Incorporation to increase the authorized shares of Common
Stock and, as required, seek approval to increase authorized shares under
applicable employee stock option plans and with respect to outstanding options
or other rights that require shareholder approval, and that C2000 and Sub will
vote for such amendments and increases. The Preferred Stock to be issued
pursuant to the Purchase Agreement will automatically convert to Common Stock at
such time as the additional requisite shares of Common Stock are authorized.
SOURCE OF FUNDS FOR INVESTMENT. In connection with the investment,
------------------------------
C2000 will contribute the Exchangeable Promissory Notes to Sub. Sub will also
borrow a total of $32,000,000 from Deutsche Bank AG-New York Branch and Chemical
Bank. The loans are due and payable on September 1, 1995. On or prior to
September 1, 1995, C2000 will make a capital contribution to Sub sufficient to
allow Sub to pay off the loans from Deutsche Bank and Chemical Bank.
Pursuant to General Instruction F of Form 8-K, the following documents
are incorporated by reference herein and attached as exhibits hereto:
ITEM 5. OTHER EVENTS.
--------------------
Effective as of July 11, 1995, Mr. Greg White resigned from the
Registrant's Board of Directors. Mr. White's resignation was rendered
concurrently with his resignation as Registrant's Chief Operating Officer.
ITEM 8. CHANGE IN FISCAL YEAR.
-----------------------------
As part of the transactions described in Item 1 above, Registrant will
change its fiscal year end to September 30 to coincide with C2000's fiscal year
end. The change will be reflected in the Registrant's Form 10-Q for the period
ending September 30, 1995.
Exhibits
--------
1. Purchase Agreement dated as of August 7, 1995 by and among
AmeriQuest Technologies, Inc., Computer 2000 AG and Computer 2000, Inc., and
related exhibits attached to the Purchase Agreement.
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 12, 1995 AMERIQUEST TECHNOLOGIES, INC.
By: /s/ Stephen G. Holmes
Name: Stephen G. Holmes
Its: Secretary
6
<PAGE>
EXHIBIT 1
PURCHASE AGREEMENT
This Purchase Agreement (this "Agreement") is made as of August ___, 1995,
---------
by and among AmeriQuest Technologies, Inc., a Delaware corporation (the
"Company"), Computer 2000 AG, a company duly organized under the laws of the
-------
Federal Republic of Germany ("C2000"), and Computer 2000 Inc., a Delaware
-----
corporation that is a wholly-owned subsidiary of C2000 ("Sub").
---
RECITALS
WHEREAS, pursuant to the Loan Agreement dated as of November 14, 1994 (the
"Loan Agreement") between C2000 and AmeriQuest 2000, Inc., a Delaware
--------------
corporation that is a wholly-owned subsidiary of the Company (the "Borrower"),
--------
C2000 provided to Borrower loans totaling $18,000,000 (such loans are
collectively referred to as the "Loan"). The Loan is evidenced by Exchangeable
----
Promissory Notes of the Borrower (the "Notes"). The proceeds of the Loan were
-----
loaned by the Borrower to the Company, which loan was evidenced by promissory
notes of the Company (the "AmeriQuest Notes"). The Loan was secured, pursuant
----------------
to a Note Pledge Agreement, by a pledge by the Borrower of a first priority
security interest in the AmeriQuest Notes and, pursuant to a Stock Pledge
Agreement, by a pledge by the Company of a security interest in (i) the shares
of common stock of Robec, Inc., a Pennsylvania corporation ("Robec"), held by
-----
the Company, (ii) the shares of common stock of AmeriQuest/NCD, Inc., a Florida
corporation ("AQ/NCD"), held by the Company, (iii) the shares of common stock of
------
AmeriQuest/Kenfil, Inc., a Delaware corporation ("Kenfil"), held by the Company
------
and (iv) all other securities of Robec, AQ/NCD or Kenfil thereafter acquired by
the Company or its affiliates (collectively, the "Shares") (the AmeriQuest Notes
------
and the Shares are referred to herein as the "Collateral").
----------
WHEREAS, concurrently with entering into the Loan Agreement, the Company
and C2000 entered into the Investment Agreement dated as of November 14, 1994
(the "Investment Agreement") under which, among other matters, (i) the Company
--------------------
was obligated to issue to C2000 8,108,108 shares of the Company's Common Stock,
par value $0.01 per share ("Common Stock") at $2.22 per share in the event that
------------
C2000 or Sub assigned the Notes to the Company in accordance with the terms
thereof, (ii) the Company was obligated to issue to C2000 additional shares of
the Company's Common Stock for an aggregate purchase price of $32,000,000 and
(iii) the Company was obligated to grant certain option rights to C2000 to
acquire additional shares of the Company's Common Stock.
WHEREAS, in recognition of changes in circumstances and the failure of
certain conditions set forth in the Investment Agreement to be met, the parties
desire to provide for C2000 or Sub to acquire shares of the Company's Preferred
Stock and options, warrants and certain other rights to purchase shares of the
Company's Common and Preferred Stock in exchange for delivery of the Notes and
payment of $31,250,000. The Notes will be assigned to the Company in exchange
for the issuance by the Company of 810,811 shares of the
<PAGE>
Company's Series A Preferred Stock (each share initially convertible into 10
shares of Common Stock) and warrants to purchase 657,289 shares of Series D
Preferred Stock (each share initially convertible into 10 shares or Common
Stock) exercisable at $.53 per share; resulting in, assuming full exercise of
the warrants and the payment of the exercise price therefor and conversion of
the Preferred Stock to Common Stock, the issuance of 14,681,000 shares of the
Company's Common Stock at an average purchase price of approximately $1.25 per
share. In addition in exchange for $31,250,000, the Company will issue to C2000
or Sub 1,785,714 shares of Series B Preferred Stock (each share initially
convertible into 10 shares of Common Stock) and warrants to purchase 746,186
shares of Series D Preferred Stock (each share initially convertible into 10
shares of Common Stock) exercisable at $.53 per share; resulting in, assuming
full exercise of the Warrants and payment of the exercise price therefor and
conversion of the Preferred Stock to Common Stock, the issuance of 25,319,000
shares of the Company's Common Stock at an average purchase price of
approximately $1.25 per share. Furthermore, the Company will issue to C2000 or
Sub options and warrants to enable C2000 or Sub to maintain its ownership
percentage, with all such stock, options, warrants and other rights to be issued
on the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the mutual agreements contained herein
and other good and valuable consideration, the parties hereto agree as follows:
ARTICLE I
1.1 CERTAIN DEFINED TERMS. As used in this Agreement, in addition to the
---------------------
terms defined elsewhere in the Agreement (including in the Recitals), the
following terms will have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"AFFILIATE" will have the meaning ascribed to that term in Rule 12b-2
promulgated under the Exchange Act by the SEC, as in effect on the date hereof.
"CLOSING" will mean the closing provided for in Section 2.4.
"CONTRACTUAL OBLIGATION" means, as to any Person, any provision of any
note, bond or security issued by such Person or of any mortgage, indenture, deed
of trust, lease, license, franchise, contract, agreement, instrument or
undertaking to which such Person is a party or to which it or any of its
property or assets is subject.
"CONVERTIBLE SECURITIES" will mean all options and warrants exercisable for
the Company's Common Stock (or other equity securities), securities convertible
into the Company's Common Stock (or other equity securities) and any other
rights to acquire, directly or indirectly, shares of the Company's Common Stock
(or other equity securities), other than those granted under this Agreement;
provided, however, that the term Convertible Securities will not apply to any
Robec Acquisition Shares (as that term is defined in Section 2.2(a)) or any Unit
Warrant Shares (as that term is defined in Section 2.2(b)).
"ENVIRONMENTAL LAW" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, the Resource Conservation
and
2
<PAGE>
Recovery Act of 1976, as amended, and any applicable statutes, regulations,
rules, ordinances, codes, licenses, permits, orders, approvals, plans,
authorizations, concessions, franchises and similar items of all Governmental
Authorities and all applicable judicial, administrative and regulatory decrees,
judgments and orders, any of which relate to the protection of human health or
the environment from the effects of Hazardous Materials, including, but not
limited to, those pertaining to reporting, licensing, permitting, investigating
and remediating emissions, discharges, releases or threatened releases of
Hazardous Materials into the air, surface water, ground water or land, or relate
to the manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended from
time to time, and the rules and regulations of the SEC promulgated from time to
time thereunder.
"GAAP" means generally accepted accounting principles in the United States
of America.
"GOVERNMENTAL AUTHORITY" means any nation or government, any state or other
political subdivision thereof and any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"HAZARDOUS MATERIAL" means any substance: (i) the presence of which
requires investigation or remediation under any Environmental Law; or (ii) which
is defined as a hazardous waste, hazardous substance, pollutant or contaminant
under any Environmental Law; or (iii) which is toxic, explosive, corrosive,
flammable, infectious, radioactive, carcinogenic, mutagenic or otherwise
hazardous and is regulated by any Governmental Authority; or (iv) which contains
gasoline, diesel fuel or other petroleum hydrocarbons.
"LIEN" means any mortgage, pledge, hypothecation, assignment, encumbrance,
lien (statutory or other) or other security agreement of any kind or nature
whatsoever (including, without limitation, any conditional sale or other title
retention agreement or any financing lease having substantially the same
economic effect as any of the foregoing).
"MATERIAL ADVERSE EFFECT" (a) as used with respect to the Company and/or
any of its Subsidiaries means a material adverse effect on (i) the business,
operations, prospects, property or condition (financial or other) of the Company
and its Subsidiaries taken as a whole or (ii) the ability of the Company or any
Subsidiary to consummate the transactions contemplated by this Agreement or the
Related Agreements or perform its obligations hereunder or thereunder or (iii)
the ability of C2000 and Sub to exercise their rights under this Agreement or
the Related Agreements or as a stockholder of the Company and (b) as used with
respect to C2000 and Sub means a material adverse effect on (i) the business,
operations, prospects, property or condition (financial or other) of C2000 and
Sub and their subsidiaries taken as a whole or (ii) the ability of C2000 and Sub
to consummate the transactions contemplated by this Agreement or the Related
Agreements or perform their obligations
3
<PAGE>
hereunder or thereunder or (iii) the ability of the Company to exercise its
rights under this Agreement or the Related Agreements.
"PERSON" means an individual, partnership, corporation, business trust,
joint stock company, trust, unincorporated association, joint venture, limited
liability company, Governmental Authority or other entity of whatever nature.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement
between the Company, C2000 and Sub to be entered into concurrently herewith, the
form of which is attached hereto as Exhibit E.
---------
"RELATED AGREEMENTS" means collectively each agreement entered into by the
Company, the Borrower, C2000 and/or Sub in connection with this Agreement,
including without limitation the Registration Rights Agreement, the Director's
Indemnification Agreement, the Warrants, Acquisition Maintenance Warrants and
Unit Maintenance Warrants.
"RELATED PERSON" means each Person required under Section 414 of the
Internal Revenue Code of 1986, as amended (the "Code") and the regulations
thereunder to be treated as a single employer with the Company or any
Subsidiary.
"REQUIREMENT OF LAW" means, as to any Person, the Certificate of
Incorporation and By-Laws or other organizational or governing documents of such
Person, and any law, treaty, rule or regulation or determination of an
arbitrator or a court or other Governmental Authority, in each case applicable
to or binding upon such Person or any of its property or to which such Person or
any of its property is subject.
"SEC" means the Securities and Exchange Commission.
"SEC DOCUMENTS" means each statement or report filed by the Company under
the Exchange Act, each registration statement (including amendments thereto),
and any other document filed by the Company or any of its Subsidiaries with the
SEC pursuant to the Securities Act or the Exchange Act, including all schedules
and Company-prepared exhibits thereto.
"SECURITIES ACT" means the Securities Act of 1933, as amended from time to
time, and the rules and regulations of the SEC promulgated from time to time
thereunder.
"SUBSIDIARY" means, as to any Person, a corporation of which shares of
stock having ordinary voting power (other than stock having such power only by
reason of the happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation are at the time owned, or the
management of which is otherwise controlled, directly or indirectly through one
or more intermediaries, or both, by such Person. Unless otherwise qualified,
all references to a "Subsidiary" or to "Subsidiaries" in this Agreement will
---------- ------------
refer to a Subsidiary or Subsidiaries of the Company and will include NCD and
Robec.
"TAX" OR "TAXES" means, with respect to any Person, a net income, gross
income, gross receipts, sales, use, ad valorem, franchise, profits, license,
withholding, payroll,
4
<PAGE>
employment, excise, severance, stamp, transfer, occupation, premium, property or
windfall profit tax, custom duty or other tax, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest and any
penalty, addition to tax or additional amount imposed by any jurisdiction or
other taxing authority (federal, state, local or foreign) on such Person.
"WARRANTS" means those warrants issued by the Company under this Agreement
to C2000 or Sub.
1.2 OTHER DEFINITIONS. The capitalized terms used in this Agreement and
-----------------
not defined in Section 1.1 are defined elsewhere in this Agreement.
ARTICLE II
ISSUANCE OF SECURITIES
2.1 ISSUANCE OF SHARES OF PREFERRED STOCK AND WARRANTS. Subject to the
--------------------------------------------------
terms and conditions set forth herein, the Company will issue and sell to C2000
(or, at C2000's election, Sub), and C2000 (or, at C2000's election, Sub) will
purchase from the Company, at the Closing, shares of Preferred Stock and certain
warrants to purchase shares of the Company's Preferred Stock (the "Warrants") as
--------
follows:
(a) At the Closing:
(i) C2000 (or at C2000's election, Sub) will assign to the Company the
Notes and its security interest in the Collateral and will terminate all
obligations of the Company and the Borrower to C2000 thereunder and under the
Loan Agreement (in addition, all the obligations of C2000 under the Loan
Agreement will be terminated); the Investment Agreement will terminate, and
neither the Company nor C2000 will have any further obligations thereunder; and
(ii) in exchange therefor, the Company will issue to C2000 (or,
at C2000's election, Sub) the following:
(A) 810,811 fully paid and nonassessable shares of the Company's
Series A Preferred Stock, par value $0.01 per share (the "Series A Preferred
------------------
Stock"), the rights, preferences privileges and terms of which Series A
-----
Preferred Stock will be as set forth in the Certificate of Designation attached
hereto as Exhibit A hereto and which shares will initially be convertible (as
---------
provided in the Certificate of Designation) into 8,108,110 fully paid and
nonassessable shares of Common Stock, and
(B) Warrants to purchase from the Company 657,289 fully paid and
nonassessable shares of the Company's Series D Preferred Stock for the exercise
price of $0.53 per share, the terms of which Warrants will be as set forth in
Exhibit B-1 hereto (such terms will provide that, among other things, the
-----------
Warrants will be exercisable (A) upon each of the Company's achievement of
quarterly gross sales targets of $150 million, $160 million, $190 million and
$200 million for the first, second, third and fourth quarters, respectively,
5
<PAGE>
during the 12-month period ending June 30, 1996 (each such quarterly sales
target is referred to herein as a "Performance Milestone"); and (B) the
---------------------
Company's achievement of Performance Milestones of $220 million, $230 million,
$270 million and $280 million for the first, second, third and fourth quarters,
respectively, during the 12-month period ending June 30, 1997; that, upon
achieving any Performance Milestone, warrants for approximately one-eighth of
the total number of shares of Series D Preferred Stock purchasable under the
Warrant will become exercisable as set forth in the Warrant; and that, whether
or not the Company achieves all or any of the Performance Milestones, Warrants
for that number of shares of Series D Preferred Stock as is provided in Exhibit
B-1 (in addition to the warrants for that number of shares of Series D Preferred
Stock purchasable under the Warrant which became exercisable due to the
Company's achievement of the Performance Milestones) will become exercisable on
and after July 31, 1996 and Warrants for the remaining fully paid and
nonassessable shares of Series D Preferred Stock will become exercisable on and
after July 31, 1997, subject in all cases to acceleration of the right to
exercise the Warrant to the extent provided in Exhibit B-1).
-----------
(b) At the Closing:
(i) C2000 (or, at C2000's election, Sub) will pay to the Company
the purchase price of $31,250,000, and
(ii) in exchange therefor, the Company will issue to C2000 (or,
at C2000's election, Sub) the following:
(A) 1,785,714 fully paid and nonassessable shares of the
Company's Series B Preferred Stock, par value $0.01 per share (the "Series B
--------
Preferred Stock"), the terms of which Series B Preferred Stock will be as set
---------------
forth in Exhibit A hereto and which shares will initially be convertible (as
---------
provided under the terms of the Series B Preferred Stock) into 17,857,140 fully
paid and nonassessable shares of Common Stock; and
(B) Warrants to purchase from the Company 746,186 fully paid
and nonassessable shares of the Company's Series D Preferred Stock for the
exercise price of $0.53 per share, the terms of which Warrants will be as set
forth in Exhibit B-2, which shall be the same as the Warrants attached as
--------------
Exhibit B-1 except for number of shares subject to each such Warrant.
2.2 ISSUANCE OF ACQUISITION MAINTENANCE WARRANTS AND UNIT MAINTENANCE
-----------------------------------------------------------------
WARRANTS. Subject to the terms and conditions set forth herein, the Company
--------
will issue to C2000 (or, at C2000's election, Sub), at the Closing, the
following:
(a) Warrants ("Acquisition Maintenance Warrants") to purchase from the
--------------------------------
Company, for the exercise price of $1.25 per share, a number of fully paid and
nonassessable shares of the Company's Series E Preferred Stock equal to one
twenty-fifth of the number of shares of the Company's Common Stock, if any
("Incremental Shares"), that the Company issues (including all shares already
--------------------
issued and all shares that are issued in the future, including shares issue at
any time upon exercise of options or warrants which are issued or exchanged in
the Robec acquisition) in excess of 2,800,000 shares of Common Stock in
connection with the acquisition by the Company of a 100% interest in Robec (such
acquisition includes the shares
6
<PAGE>
of Robec common stock already acquired by the Company as well as the remaining
shares of Robec to be acquired by the Company pursuant to the Amend and Restated
Agreement and Plan of Reorganization dated as of August 11, 1994 between the
Company and Robec, as amended by Amendment No. 1 entered into as of August 4,
1995 and as such agreement may be amended hereafter with the written approval of
C2000 (the "Robec Acquisition Agreement"), which acquisition of such 100%
---------------------------
interest is referred to herein as the "Robec Acquisition"). The terms of the
-----------------
Acquisition Maintenance Warrants will be as set forth in Exhibit C hereto. For
---------
the purposes of this Section 2.2(a), shares of the Company's Common Stock issued
in connection with the Robec Acquisition ("Robec Acquisition Shares") include
------------------------
all shares of Common Stock issued to Robec shareholders in connection with the
Robec Acquisition, any shares of Common Stock issued to employees, creditors,
vendors, brokers or others in connection with the Robec Acquisition and any
shares of Common Stock that are issued upon the exercise of any options,
warrants or other rights which were assumed or exchanged in connection with the
Robec Acquisition (which Robec Acquisition Shares will be deemed to be issued
upon the exercise of the options, warrants or other rights). The Acquisition
Maintenance Warrants will be exercisable only if and to the extent that any
Incremental Shares are issued.
(b) Warrants ("Unit Maintenance Warrants") to purchase from the
-------------------------
Company, for the exercise price of $5.25 per share, a number of fully paid and
nonassessable shares of the Company's Series F Preferred Stock equal to one-
tenth of the number of shares of such Common Stock, if any, that the Company
issues (including any shares already issued and all shares that are issued in
the future) upon the exercise of the Unit Warrants (as that term is defined in
Section 3.5) (the shares issued upon exercise of any Unit Warrants are referred
to herein as "Unit Warrant Shares"). The terms of the Unit Maintenance Warrants
-------------------
will be as set forth in Exhibit D hereto. The Unit Maintenance Warrants will be
---------
exercisable only if and to the extent that any Unit Warrant Shares are issued.
The Company represents to C2000 and Sub that all Unit Warrants are identified in
Schedule 2 hereto and that no more than 5,148,574 Unit Warrant Shares are
----------
subject to issuance by the Company upon the exercise of the Unit Warrants as set
forth in Schedule 2 hereto. If the number of shares of Common Stock subject to
----------
issuance by the Company upon exercise of the Unit Warrants exceeds 5,148,574,
then the number of shares of Series F Preferred Stock issuable upon exercise of
the Unit Maintenance Warrants shall be increased to one-tenth of such increased
number of shares.
2.3 GRANT OF MAINTENANCE OPTION. Subject to the terms and conditions set
---------------------------
forth herein, the Company hereby grants, effective upon the Closing, to C2000
(or, at C2000's election, Sub) an irrevocable option (the "Maintenance Option")
------------------
to purchase from the Company a number of fully paid and nonassessable shares of
the Company's Common Stock (or other equity securities, as applicable) that is
equal to the number of shares of the Company's Common Stock (or other equity
securities) that the Company issues upon exercise or conversion of all currently
outstanding Convertible Securities. (The shares of the Company's Common Stock,
or other equity securities, that the Company issues upon exercise or conversion
of all currently outstanding Convertible Securities are referred to herein as
the "Conversion Shares," and the number of shares of Company's Common Stock, or
-----------------
other equity securities, issuable upon exercise of the Maintenance Option will
be referred to herein as the "Maintenance Shares") C2000 or Sub, as applicable,
------------------
will have the right under the
7
<PAGE>
Maintenance Option to purchase up to the same number of Maintenance Shares for
the same consideration and on the same terms as the consideration for which and
the terms under which the Conversion Shares were issued. The Maintenance Option
will be exercisable with respect to each issuance of a Conversion Share(s)
commencing upon the issuance of such Conversion Shares and terminating six
months after receipt of notice hereunder of any such issuance of Conversion
Shares, provided, however, if at any time during such six month period the
-------- -------
Company does not have sufficient authorized and reserved shares of Common Stock
available for issuance with respect to all of the Company's outstanding rights,
options, warrants and convertible securities, such six month period shall be
automatically extended for such period of time as is necessary to provide C2000
or Sub with a full consecutive six month period during which period the Company
has sufficient reserved shares of Common Stock available for issuance with
respect to all of the Company's outstanding rights, options, warrants and
convertible securities. The Maintenance Option will be immediately exercisable
only if and to the extent that any Conversion Shares are issued. As long as any
such Convertible Securities remain outstanding, immediately upon, but in no
event more than three business days after, the issuance of any Conversion
Shares, the Company shall notify C2000 of such issuance and provide information
as to (i) the number of shares of Common Stock (or other equity securities) so
issued upon exercise or conversion of such Convertible Securities to acquire
shares of the Company's Common Stock (or other equity securities) that were
outstanding as of the date of this Agreement and (ii) the aggregate exercise
price or conversion price of such Convertible Securities, the party who
exercised such Convertible Securities and under what agreement. The number of
shares of Maintenance Shares that can be purchased under the Maintenance Option
will equal the cumulative number of Conversion Shares issued upon exercise or
conversion of Convertible Securities exercised or converted after the date
hereof (subject to adjustment as provided in Section 2.7 hereof) and shall be
exercisable during the operative six month period(s). In the event that C2000 or
Sub, as applicable, wishes to exercise the Maintenance Option, it will give
written notice to the Company specifying the number of Maintenance Shares it
will purchase pursuant to such notice. For the purposes of this Section 2.3, the
term "outstanding Convertible Securities" refers to all Convertible Securities
that the Company has issued as of the Closing or committed to issue as of the
Closing and any Convertible Securities issued hereafter that are a replacement,
substitution or repricing of such currently outstanding Convertible Securities.
The Company represents that all outstanding Convertible Securities are
identified in Schedule 2 hereto.
----------
2.4 THE CLOSING. The Closing will take place as soon as practicable when
-----------
all of the conditions to the Closing set forth in Article VI hereof are
satisfied or waived, at the offices of Fenwick & West, Two Palo Alto Square,
Palo Alto, California 94306, or at such other place as the parties may mutually
agree. The parties currently anticipate that the Closing will occur on or
before August 20, 1995.
2.5 DELIVERY OF SECURITIES. At the Closing, the Company will deliver to
----------------------
C2000 or Sub, as applicable, certificates registered in the name of C2000 or
Sub, as applicable, representing the applicable number of fully paid and
nonassessable shares of Series A Preferred Stock, shares of Series B Preferred
Stock, Warrants, Acquisition Maintenance Warrants and Unit Maintenance Warrants
that are issued by the Company at the Closing as provided in this Article II.
8
<PAGE>
2.6 PURCHASE PRICE. In full consideration for the issuance of the
--------------
securities referred to in Section 2.5 and upon the terms and subject to the
conditions set forth in this Agreement, at the Closing, (a) C2000 will deliver
the Notes to the Company, together with an instrument executed by C2000
assigning to the Company the Notes and terminating all obligations of the
Company and the Borrower to C2000 thereunder and under the Loan Agreement, and
(b) C2000 will pay (or at C2000's election, Sub) to the Company, by wire
transfer of immediately available funds to an account designated by the Company,
$31,250,000.
2.7 ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC.
----------------------------------------------
(a) In the event of any change in the Company's Common Stock by reason
of a stock dividend, stock split, split-up, recapitalization, combination,
exchange of shares, or similar transaction or in the case of the Series A
Preferred Stock, Series B Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock or Series F Preferred Stock (collectively, the "Preferred
---------
Stock") any conversion or other adjustment pursuant to the Certificate of
-----
Designation, then the type and number of shares or securities issuable upon
conversion of the Preferred Stock or subject to the Warrants, Acquisition
Maintenance Warrants, Unit Maintenance Warrants and Maintenance Option (and, in
the case of the Maintenance Option, the purchase or exercise price therefor),
will be adjusted appropriately, and proper provision will be made in the
agreements governing such transaction, so that C2000 or Sub, as applicable, will
receive upon conversion of the Preferred Stock or the exercise of such Warrants,
Acquisition Maintenance Warrants, Unit Maintenance Warrants and Maintenance
Option the same class and number of outstanding shares or other securities or
property that C2000 or Sub, as applicable, would have received in respect of the
Company's Common Stock if such Preferred Stock had been converted, or such
Warrants, Acquisition Maintenance Warrants, Unit Maintenance Warrants and
Maintenance Option had been exercised, immediately prior to such event or the
record date therefor, as applicable.
(b) In the event that Company enters into an agreement (x) to
consolidate with or merge into any Person, other than C2000 or one of its
Subsidiaries, and the Company will not be the continuing or surviving
corporation of such consolidation or merger, (y) to permit any Person, other
than C2000 or one of its Subsidiaries, to merge into Company and Company will be
the continuing or surviving corporation, but, in connection with such merger,
the then outstanding shares of Company's Common Stock will be changed into or
exchanged for stock or other securities of Company or any other Person or cash
or any other property or the shares of Company's Common Stock outstanding
immediately before such merger will after such merger represent less than 50% of
the outstanding common shares and common share equivalents of the Company, or
(z) to sell or otherwise transfer all or substantially all of its assets to any
Person, other than C2000 or one of its Subsidiaries, then, and in each such
case, the agreement governing such transaction will make proper provisions so
that the conversion rights under the terms of the Preferred Stock and the
purchase rights under the Warrants, Acquisition Maintenance Warrants, Unit
Maintenance Warrants and Maintenance Option (and, in the case of the Maintenance
Option, the purchase or exercise price therefor) will be adjusted appropriately
so that, upon the consummation of any such transaction, such conversion rights
and purchase rights will be adjusted so that C2000 or Sub, as applicable, will
receive upon exercise of such conversion right or purchase right the same
9
<PAGE>
class and number of shares or other securities or property that C2000 or Sub, as
applicable, would have received in respect of the Company's Common Stock if the
purchase right or option had been exercised immediately prior to any of the
events addressed in this Section 2.7(b).
2.8 FRACTIONAL SHARES. If in connection with the issuance of any shares
-----------------
of capital stock of the Company under this Agreement the number of shares to be
issued results in a fraction of a share, the fraction will be rounded to the
nearest whole share with one-half of a share being rounded up.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Subject to the exceptions set forth in the letter delivered by the Company
to C2000 concurrently herewith (the "Exceptions Letter"), the Company represents
and warrants to C2000 and Sub that:
3.1 DUE ORGANIZATION. Each of the Company and each of its Subsidiaries is
----------------
(i) duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation (or the equivalent, in the case of a
Subsidiary incorporated in a jurisdiction other than in the United States) and
(ii) duly qualified as a foreign corporation and in good standing under the laws
of each jurisdiction where its ownership, lease or operation of property or the
conduct of its business requires such qualification, except to the extent that
the failure to qualify as a foreign corporation and be in good standing would
not, in the aggregate with all such other failures, have a Material Adverse
Effect. Each of the Company and each of its Subsidiaries has the corporate
power and authority and the legal right to own and operate its property, to
lease the property it operates as lessee and to conduct its business as now
being conducted and as proposed to be conducted, except to the extent the
failure to have such power, authority or legal right would not, in the aggregate
with all such other failures, have a Material Adverse Effect.
3.2 CORPORATE POWER. The Company has all requisite corporate power and
---------------
authority to enter into and deliver this Agreement and each Related Agreement
and to perform its obligations hereunder and thereunder. Complete and correct
copies of the Certificate of Incorporation and By-Laws (or similar charter
documents) of the Company and of each Subsidiary, as amended to date, have been
delivered to C2000. Neither the Company nor any Subsidiary is in default in the
performance, observance or fulfillment of any provision of its Certificate of
Incorporation or By-Laws (or similar charter documents).
3.3 AUTHORIZATION AND VALIDITY OF AGREEMENTS. The execution, delivery and
----------------------------------------
performance by the Company of this Agreement and each Related Agreement and the
consummation by it of the transactions contemplated hereby and thereby have been
duly authorized by the Board of Directors of the Company, and except as
otherwise contemplated by this Agreement no other corporate action on the part
of the Company is necessary for the execution, delivery and performance by it of
this Agreement and each Related Agreement and the consummation by it of the
transactions contemplated hereby and thereby. This Agreement
10
<PAGE>
and each Related Agreement has been duly executed and delivered by the Company,
and this Agreement and each Related Agreement constitutes the legally valid and
binding obligation of the Company, enforceable against it in accordance with its
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors' rights generally or by general equitable principles (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
3.4 GOOD TITLE. Upon payment in full by C2000 or Sub, as applicable, for,
----------
and delivery to C2000 or Sub, as applicable, of certificates representing, any
shares or other warrants, options or rights of Common or Preferred Stock of the
Company issued or granted to C2000 or Sub, as applicable, as contemplated by
this Agreement (whether purchased at the Closing or upon the exercise of any
warrants or options)(the "AmeriQuest Securities") , such AmeriQuest Securities
---------------------
will be duly and validly authorized and issued, fully paid and nonassessable
(and, to the extent that C2000 or Sub, as applicable, is acquiring the
AmeriQuest Securities in good faith without notice of any adverse claim, C2000
or Sub, as applicable, will be the owner of the AmeriQuest Securities free and
clear of any adverse claim). No issuance of AmeriQuest Securities will give
rise to any preemptive or similar rights of any Person under any provision of
applicable law or any provision of the Certificate of Incorporation, By-Laws or
any agreement or instrument of the Company or any Subsidiary.
3.5 CAPITALIZATION. The authorized capital stock of the Company as of the
--------------
date hereof consists of (a) 30,000,000 shares of Common Stock, 24,303,572 shares
of which are or will be issued and outstanding and (b) 5,000,000 shares of
Preferred Stock, $0.01 par value, no shares of which are issued and outstanding.
Immediately before the Closing, the authorized number of shares of Series A
Preferred Stock will be 810,811, the authorized number of shares of Series B
Preferred Stock will be 1,785,714, the authorized number of shares of Series D
Preferred Stock will be 1,403,475, the authorized number of shares of Series E
Preferred Stock will be 400,000, the authorized number of shares of Series F
Preferred Stock will be 514,857, and the Company will have no other series of
Preferred Stock authorized. The rights, privileges and preferences of each
series of Preferred Stock will be as stated in the Certificate of Designations
attached hereto as Exhibit A. All of the shares of Common Stock presently
---------
outstanding are duly authorized, validly issued, fully paid and nonassessable,
such shares have been so issued in full compliance with all federal and state
securities laws and the terms of such Common Stock are as set forth in the
Company's Certificate of Incorporation, a copy of which the Company has
delivered to C2000. Schedule 1 hereto sets forth an accurate listing of all
----------
shares of Common Stock and all other shares of capital stock of the Company that
are issued and outstanding. Assuming the accuracy of C2000's and Sub's
representations and warranties herein, all of the (i) warrants, options or other
rights to acquire shares of the Company's Common and Preferred Stock to be
issued hereunder, (ii) shares of Common and Preferred Stock issued upon exercise
or conversion of such warrants, options or other rights (assuming no change in
applicable law and that such Common and Preferred Stock is issued only to C2000
or Sub), and (iii) shares of Series A Preferred Stock and Series B Preferred
Stock to be issued hereunder, will be duly authorized, validly issued, fully
paid and nonassessable and issued in full compliance with all federal and state
securities laws. Schedule 2 hereto sets forth an accurate listing and
----------
description of (i) the number, type and terms of all Convertible Securities that
are outstanding or that the Company is or may be committed to
11
<PAGE>
issue, (ii) the number and type of securities issued or to be issued pursuant to
or in connection with the Robec Acquisition and (iii) an identification of any
outstanding securities of the Company which contain any antidilution provisions
which may be affected by the transactions contemplated by this Agreement or any
Related Agreement, and a full explanation and calculation of the effect of such
adjustments. Schedule 2 hereto sets forth an accurate listing of all shares of
----------
Common Stock and options to purchase Common Stock held by each (i) Person known
by the Company to own beneficially in excess of five percent (5%) of the Common
Stock, (ii) officer (including any Person who holds the title of Vice President)
or (iii) director of the Company, together with information regarding any
applicable exercise prices, terms of vesting or exercisability. Schedule 3
---------
hereto sets forth an accurate listing of all shares subject to outstanding
warrants issued by the Company pursuant to its recent private placement of Units
consisting of one share of Common Stock and Warrants to buy two shares of Common
Stock (the "Unit Warrants"), the holders of such Unit Warrants, and the number
-------------
of such Unit Warrants so held by each holder, that are outstanding or that the
Company may issue in the future. Except as provided above (and as set forth in
Schedules 2 and 3 hereto), there are no outstanding options, warrants, calls,
-----------------
rights, commitments or agreements of any kind to which the Company is a party or
by which it is bound obligating it to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of the capital stock of any class
of, or other equity interests in, the Company or any securities convertible or
exchangeable into or evidencing the right to purchase any shares of capital
stock of any class of, or other equity interests in, the Company or obligating
the Company to grant, extend or enter into any such option, warrant, call,
right, commitment or agreement. All outstanding shares of the Common Stock and
any outstanding options, warrants or other rights to purchase shares of the
Company's capital stock and any shares of the Company's stock issuable upon
exercise, conversion or exchange thereof, have been issued or granted in
compliance with the registration or qualification provisions of the Securities
Act and any applicable state securities laws, or pursuant to valid exemptions
therefrom. No failure of the Company to comply with any applicable foreign
securities laws in the issuance or grant of the outstanding shares of Common
Stock and any outstanding options, warrants or other rights to purchase shares
of the Company's capital stock and any shares of the Company's stock issuable
upon exercise, conversion or exchange thereof has resulted in a Material Adverse
Effect. As of the date hereof, each share of Common Stock is entitled to one
vote in the election of directors and on all other matters submitted to the
stockholders.
3.6 NO CONFLICT. Except as set forth in Section 3.6 of the Exceptions
-----------
Letter, neither the execution, delivery or performance by the Company or any
Subsidiary of this Agreement or any Related Agreement nor the consummation of
the transactions contemplated hereby and thereby and compliance by the Company
or any Subsidiary with any of the provisions hereof and thereof will (a) require
any consent, approval or notice under, violate, conflict with, or result in a
breach of any provisions of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination of, or accelerate the performance required by, or result in a
right of termination or acceleration, or result in the creation of any Lien upon
any of the properties or assets of the Company or any of its Subsidiaries under,
any of the terms, conditions or provisions of (i) the Certificate of
Incorporation or By-Laws of the Company or any of its Subsidiaries; (ii) any
Bank Document (as defined in Section 3.20) or (iii) any Contractual Obligation
of the
12
<PAGE>
Company or any of its Subsidiaries, except (other than with respect to any Bank
Document or the Loan Documents and the transactions contemplated thereby) (A) to
the extent the failure to obtain any such consent or approval or to give any
such notice would not have a Material Adverse Effect, and (B) for such
violations, conflicts, breaches or defaults which would not, in the aggregate
with all other such failures, violations, conflicts, breaches and defaults, have
a Material Adverse Effect or (b) assuming compliance with the Requirements of
Law applicable to the Purchaser, violate any Requirement of Law the violation of
which would, in the aggregate with all other such violations, have a Material
Adverse Effect. Without limiting the foregoing, Section 3.6 of the Exceptions
Letter sets forth a complete description, including the financial consequences
to the Company and its Subsidiaries, of any rights, benefits or payments which
may arise or be accelerated with respect to employees, directors, officers or
consultants of the Company or its Subsidiaries or with respect to any other
Person as a result of the consummation of the transactions contemplated hereby.
3.7 GOVERNMENTAL CONSENTS. Except as specifically set forth in this
---------------------
Agreement, no consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Authority is required to be
obtained or made by the Company or its Subsidiaries in connection with the
execution and delivery of the Agreement and the Related Agreements or the
consummation of the transactions contemplated hereby by the Company and its
Subsidiaries, except for (a) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws and (b) such other consents, orders, authorizations, filings,
approvals and registrations which if not obtained or made would not in the
aggregate have a Material Adverse Effect.
3.8 SEC DOCUMENTS; FINANCIAL STATEMENTS.
-----------------------------------
(a) C2000 has been provided by the Company with true and complete
copies of each SEC Document and all exhibits to SEC Documents filed with the SEC
since January 1, 1990, which are all the documents (other than preliminary
material) that the Company has been required to file with the SEC since such
date. As of their respective dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act
applicable to the SEC Documents. None of the SEC Documents contained when filed
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading. None of
the Company's current registration statements on Form S-3 under the Securities
Act currently contains any untrue statement of a material fact or any omission
to state a material fact required to be stated therein or necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. The Company has not received any notice or other
communication from any regulatory agency or other Person that any of the SEC
Documents is deficient in any respect, fails to comply with applicable laws,
rules or regulations governing the content or filing of such SEC Document or is
misleading in any material respect, which deficiency, failure or misleading
nature remains uncured. Section 3.8 of the Exceptions Letter sets forth the
current status of all registration statements which are pending with the SEC,
all effective registration statements, and other filings with the SEC, including
outstanding comments from the SEC with respect to the foregoing or any of the
SEC Documents.
13
<PAGE>
(b) The Company has delivered to C2000 true and complete copies of (i)
the audited consolidated balance sheets of the Company and its Subsidiaries at
June 30, 1994, and related consolidated statements of operation and cash flows
of the Company and its Subsidiaries for the twelve months then ended,
accompanied by notes and the certificate of Arthur Andersen & Co., L.L.P.
("Arthur Andersen") independent certified public accountants, (ii) the unaudited
consolidated balance sheets of the Company and its Subsidiaries at May 31, 1995
(the "Latest Balance Sheet"), and the related consolidated statement of
--------------------
operations and cash flows of the Company and its Subsidiaries for the eleven-
month period then ended, and (iii) the unaudited consolidated statement of
operations and cash flows of the Company and its Subsidiaries for the month
ended May 31, 1995. The foregoing financial statements and notes are
collectively referred to herein as the "Financial Statements". The Financial
--------------------
Statements are accompanied by a certificate signed by the Company's chief
financial officer which confirms that (i) he has reviewed the Financial
Statements, (ii) they fairly present the financial condition and results of
operations of the Company and its Subsidiaries, on a consolidated basis, at the
dates and for the periods covered thereby and (iii) the May 31, 1995 and June
30, 1994 Financial Statements, including in all cases the notes thereto, are in
accordance with the books and records of the Company and its Subsidiaries
(which, in turn, are accurate and complete in all material respects), and have
been prepared in accordance with GAAP, consistently applied over the periods
covered thereby. Except as otherwise disclosed in the Exceptions Letter since
June 30, 1994, there has not been any material adverse change in the business,
operations, property or condition (financial or other) of the Company and its
Subsidiaries taken as a whole or any development, event or condition or
combination of developments, events or conditions relating to the Company or its
Subsidiaries of which the Company has knowledge which may result in a Material
Adverse Effect. Other than liabilities which have arisen since the date of the
Latest Balance Sheet in the ordinary course of the business of the Company and
its Subsidiaries (none of which relates to a liability for breach of contract,
breach of warranty, infringement of proprietary rights, lawsuits or similar
claims), neither the Company nor any Subsidiary has any material obligation or
liability (whether accrued, contingent, unliquidated or otherwise, whether or
not known to the Company, whether due or to become due) which is not reflected
on the Latest Balance Sheet. The Company does not know of the assertion of any
material liability against the Company or any Subsidiary, viewed as a whole, of
any nature not fully reflected or reserved against in the Latest Balance Sheet
or in the notes thereto. Except as set forth on Section 3.8 of the Exceptions
Letter, neither the Company nor any Subsidiary is a guarantor, indemnitor or
otherwise liable for any indebtedness or other obligations of any other Person,
firm or corporation.
(c) The Company has provided to C2000 a true and current copy of the
"management's letter" provided by Arthur Andersen in connection with its audit
of the fiscal year ended June 30, 1994 and the Company's response thereto.
Arthur Andersen, as the Company's independent certified public accountants, has
not notified the Company since June 30, 1993 of any material weaknesses or
reportable conditions with respect to the internal controls of the Company or
any of its Subsidiaries.
3.9 ABSENCE OF CERTAIN CHANGES. Except for the transactions contemplated
--------------------------
hereby and except as set forth in the Exceptions Letter, since June 30, 1994
(except where a later date
14
<PAGE>
is indicated below) the Company and its Subsidiaries have conducted their
business only in the ordinary and usual course and there has not been:
(a) since March 31, 1995, any material adverse change in the business,
operations, property or condition (financial or other) of the Company and its
Subsidiaries taken as a whole;
(b) since March 31, 1995, any development, event or condition or
combination of developments, events or conditions relating to the Company or its
Subsidiaries of which the Company has knowledge which may result in a Material
Adverse Effect;
(c) any change, except in the ordinary course of business, in the
contingent obligations of either the Company or any Subsidiary, whether by way
of guaranty, endorsement, indemnity, warranty or otherwise;
(d) any damage, destruction or loss, whether covered by insurance or
not, materially and adversely affecting the properties or business of the
Company and its Subsidiaries taken as a whole;
(e) any declaration, setting aside or payment of any dividend in
respect of the capital stock of the Company or any redemption or acquisition of
such stock by the Company or other distribution of the assets of the Company;
(f) any labor organization activity, termination of key employees or
other disputes involving employees of the Company or its Subsidiaries;
(g) any change of accounting principles, practices or methods of the
Company and its Subsidiaries;
(h) other than sales or other dispositions in the ordinary course of
business, any sale, mortgage, pledge, subjection to Lien or other disposition of
assets of the Company or its Subsidiaries which, individually or in any series
of related transactions, have a value in excess of $150,000;
(i) any amendment or termination of a material contract or agreement
to which the Company or any Subsidiary is a party, the effect of which is
adverse to the Company or any Subsidiary, taken as a whole;
(j) any transactions between the Company and any party which would be
reportable pursuant to Rule 404 of Regulation S-K of the SEC, except as set
forth in Section 3.9 of the Exceptions Letter;
(k) any issuance of securities of the Company except pursuant to the
exercise of options or warrants which were outstanding as of the date hereof and
are listed in Section 3.5 of the Exceptions Letter;
(l) since March 31, 1995, any increase in the compensation or
severance arrangements payable or to become payable by the Company or its
Subsidiaries to any of their
15
<PAGE>
directors, officers or key employees other than increases in the ordinary course
of business consistent with prior practice;
(m) since March 31, 1995, any adoption of, or increase in, any bonus,
incentive compensation, stock option plan and, since June 30, 1994 any adoption
of, or increase in any pension, profit sharing, or retirement, insurance,
medical reimbursement or other employee benefit plan, any employment agreement
or severance arrangement or any payment or arrangement made to, for or with any
officers or key employees of the Company or its Subsidiaries, other than
increases made in the ordinary course of business consistent with prior
practice;
(n) any write-offs or write-downs of accounts receivable or
inventories by the Company or its Subsidiaries other than in the ordinary course
of business and consistent with prior practice;
(o) any borrowings by the Company or its Subsidiaries other than
borrowings in the ordinary course of business, except as set forth in Section
3.9 of the Exceptions Letter;
(p) any failure to replenish the inventory and supplies of the
Company's or any Subsidiary's business in a normal and customary manner
consistent with prior practice, or any purchase or commitment in excess of the
normal, ordinary and usual requirements of its business or at any price
materially in excess of the then current market price or upon terms and
conditions more onerous than those usual and customary in the industry, or any
change in the Company's or any Subsidiary's selling, pricing, advertising or
personnel practices inconsistent with prior practice; or
(q) except as specifically contemplated by this Agreement, any
agreement by the Company or any of its Subsidiaries to take any action described
in this Section 3.9.
3.10 SUBSIDIARIES; INVESTMENTS. All of the Subsidiaries of the Company
-------------------------
are set forth in Section 3.10 of the Exceptions Letter and, except as set forth
therein, the Company owns, directly or indirectly, all shares of the outstanding
capital stock of such Subsidiaries, and, since June 30, 1994 the Company has
not, directly or indirectly, sold or otherwise disposed of any such capital
stock of any such Subsidiaries or made any material investment in, or material
advance of cash to, any Person other than such Subsidiaries. No equity
securities of any Subsidiary of the Company are or may become required to be
issued by reason of any options, warrants or scrip for, right to subscribe to,
calls or commitments of any character whatsoever relating to, or securities or
rights convertible or exchangeable into, shares of any capital stock of any
Subsidiary, and there are no contracts, commitments, understandings or
arrangements by which any such Subsidiary is bound to issue additional shares of
its capital stock, or options, warrants or rights to purchase or acquire any
additional shares of its capital stock. All of the shares of the Subsidiaries
are duly authorized, validly issued, fully paid and nonassessable (or the
equivalent, to the extent the same exists, under foreign law), were issued in
compliance with the registration or qualification provisions of any applicable
federal, foreign or state securities laws or valid exemptions therefrom and are
16
<PAGE>
owned free and clear of any Lien with respect thereto. Except as set forth in
Section 3.10 of the Exceptions Letter and except for shares of capital stock of
the Subsidiaries, neither the Company nor any Subsidiary owns, directly or
indirectly, any equity interest in any Person. To the extent required by
applicable law or the Company's or any Subsidiary's Certificate of
Incorporation, By-Laws or similar charter documents, all transactions between
the Company and such Subsidiary, including, without limitation, the organization
of and capitalization of each Subsidiary and the transfer of assets between the
Company and its Subsidiary, has been duly authorized by the Company's and each
Subsidiary's Board of Directors.
3.11 LEGAL PROCEEDINGS. Except as set forth in Section 3.11 of the
-----------------
Exceptions Letter, (a) there is no pending or, to the best of the Company's
knowledge, threatened claim, action, lawsuit, administrative proceeding,
arbitration, labor dispute or governmental investigation ("Litigation") to which
----------
the Company or any Subsidiary is a party or by which any of the Company's or its
Subsidiaries' material assets may be bound, which, if adversely determined,
could have a Material Adverse Effect, and (b) to the Company's knowledge, no
facts exist that give rise to a valid claim against the Company or any
Subsidiary for breach of an obligation, or for violation of applicable law, rule
or regulation, where such claim could have a Material Adverse Effect. Neither
the Company nor any Subsidiary is subject to any judgment, order, writ,
injunction or decree of any court, arbitrator or other competent governmental or
regulatory authority. Neither the Company nor any Subsidiary has been
permanently or temporarily enjoined by any order, judgment or decree of any
court or other competent governmental or regulatory authority from engaging in
or continuing any conduct or practice in connection with its business, nor
requiring the Company or any Subsidiary to take any action of any kind with
respect to its business.
3.12 CONDUCT OF BUSINESS IN COMPLIANCE WITH REGULATORY REQUIREMENTS. Each
--------------------------------------------------------------
of the Company and its Subsidiaries has complied with each Requirement of Law
promulgated by any Governmental Authority applicable to the operation, conduct
or ownership of the property or business of the Company and the Subsidiaries
(including, without limitation, those relating to the offering and sale of
securities, occupational safety and health, equal employment practices,
antitrust, consumer protection and employee benefits and pensions), except where
such failure to comply with any such Requirement of Law would not reasonably be
expected to have, in the aggregate with all such failures, a Material Adverse
Effect.
3.13 ENVIRONMENTAL MATTERS. To the best knowledge of the Company, after
---------------------
due inquiry, (a) neither the Company nor any of its former or present
Subsidiaries is in material violation of any applicable Environmental Law nor is
the Company or any of its Subsidiaries under investigation or under review by
any Governmental Authority with respect to compliance therewith, or with respect
to the generation, use, treatment, storage or disposal, or the spillage or other
release of any Hazardous Material; (b) neither the Company nor any of its
Subsidiaries has any material liability or is subject to any facts or
circumstances which could reasonably be expected to result in any material
liability of the Company or its Subsidiaries in connection with the past
generation, use, treatment, storage or disposal, or the spillage or other
release of any Hazardous Material, including without limitation, any material
liability for acts or omissions of former subsidiaries or other Persons; (c)
there is no Hazardous Material that may pose any material risk to safety, health
or the environment on or under any property
17
<PAGE>
owned, leased or operated by the Company or its Subsidiaries, currently or in
the past, and there has heretofore been no spillage, discharge, release or
disposal of any such Hazardous Material on or under such property in an amount
and of a nature which could reasonably be expected to result in material
liability to the Company or its Subsidiary; and (d) since January 1, 1994, no
citations, fines, penalties or claims have been asserted against the Company or
its former or present Subsidiaries under any Environmental Law which have not
been reflected in the Financial Statements or which remain outstanding.
3.14 PROPERTIES; LIENS AND ENCUMBRANCES. The Company and its Subsidiaries
----------------------------------
have good and marketable title to all of their respective real properties
(except for leasehold interests, in which event the entity directly holding such
interest has a valid leasehold interest) and have marketable title to all of
their respective other properties and assets (except for leased properties and
assets, in which case the lessee has a valid leasehold interest) material to the
business of the Company and its Subsidiaries taken as a whole, subject only to
(a) statutory Liens arising or incurred in the ordinary course of business with
respect to which the underlying obligations are not delinquent or the validity
of which is being contested in good faith by appropriate proceedings, (b) Liens
for Taxes not yet delinquent or the validity of which is being contested in good
faith by appropriate proceedings, (c) Liens to secure any indebtedness reflected
on the Company's June 30, 1994 audited balance sheet, (d) property or assets
acquired subject to Liens since June 30, 1994, (e) Liens and defects in title
that are not in the aggregate material to the business, operations or condition
(financial or other) of the Company and its Subsidiaries taken as a whole and
(f) liens reflected in the Exceptions Letter. The tangible personal property
owned, leased or rented by the Company and its Subsidiaries and the intangible
personal property owned or licensed by the Company and its Subsidiaries
constitute all of the property now used in, and necessary for the conduct of,
the business of the Company and its Subsidiaries in the manner and to the extent
presently conducted or planned. All of the fixed assets and properties listed
on the Latest Balance Sheet, or thereafter acquired or currently used by the
Company and its Subsidiaries, are in good operating condition in all material
respects and are free from any material defect.
3.15 INSURANCE. The Company and each Subsidiary has maintained in full
---------
force and effect, with all premiums due thereon paid, such policies of insurance
and bonds in such amounts and against such risks and losses as are generally
maintained with respect to comparable businesses and properties. Except as set
forth in Section 3.15 of the Exceptions Letter, neither the Company nor any
Subsidiary pays for or owns any "key man" insurance on the life of any employee.
Set forth in Section 3.15 of the Exceptions Letter is a true and complete list
of all insurance policies carried by the Company and its Subsidiaries at any
time during the past 12 months with respect to the business, assets and
operations of the Company and its Subsidiaries, together with, in respect of
each policy, the name of the insurer, the number of the policy, the annual
policy premium payable therefor, the limits of coverage, the deductible amounts,
if any, the expiration date, and each pending claim thereunder, if any.
Complete and correct copies of each current policy have been delivered to the
Purchaser, and each policy shown as current is on the date hereof in full force
and effect.
3.16 ACCOUNTS RECEIVABLE AND INVENTORIES. All of the Company's and its
-----------------------------------
Subsidiaries' accounts receivable and inventory, as of the dates of those
statements, are
18
<PAGE>
reflected on the Financial Statements (and, with respect to inventories
reflected on interim statements, subject to physical inventory and, as to all
information in those statements, customary year-end adjustments in connection
with the preparation of the Company's annual audited financial statements for
the current fiscal year). Such receivables and inventories are owned by the
Company or its Subsidiaries and are not subject to any Lien thereon. All
receivables arose from bona fide sales, and the Company's and its Subsidiaries'
customers do not have return rights not otherwise disclosed or adequately
reserved against in the Financial Statements. Based upon the prior experience of
the Company and its Subsidiaries, (i) the receivables are collectible in
accordance with their terms, (ii) the allowance for doubtful accounts is
adequate to cover all doubtful accounts, (iii) all inventory is shown at the
lower of cost or market, (iv) all inventory is salable in new or otherwise
disclosed condition, and (v) reserves, if any, for such inventory are adequate
according to GAAP (except with respect to inventories reflected on the financial
statements prepared since June 30, 1994, wherein reserves have been established
in accordance with the Company's past practices, subject to customary year-end
adjustments in connection with the preparation of the Company's financial
statements for the current fiscal year).
3.17 VOTING AGREEMENTS. Except as specifically contemplated by this
-----------------
Agreement and in connection with the Robec Agreement, the Company is not a party
or subject to any agreement or understanding, and, to its knowledge, there is no
agreement or understanding between any Persons that affects or relates to the
voting or giving of written consents with respect to any security or the voting
by a director of the Company.
3.18 GOVERNMENT CONTRACTS; EXPORT REGULATION.
---------------------------------------
(a) Neither the Company nor any Subsidiary exports products or
technology subject to U.S. export regulation;
(b) Neither the Company nor any Subsidiary has access to any
classified information, data or technology under any contract with the U.S.
government, including, without limitation, the military services; and,
(c) Neither the Company nor any Subsidiary has conducted its business
in violation of either the Export Administration Act of 1979, as amended, or the
Export Administration Amendment Act of 1981, as amended.
3.19 INTELLECTUAL PROPERTY.
---------------------
(a) Set forth in Section 3.19 of the Exceptions Letter is a true and
correct list of the following properties (hereinafter referred to as
"Intellectual Property Rights"): (i) all United States and foreign patents
-----------------------------
including any extensions, registrations, confirmations, reexaminations, reissues
or renewals thereof, and patent applications, and any divisions, continuations,
in whole or in part, therefor, of the Company and its Subsidiaries ("Patents");
(ii) all registered trademarks and service marks, and all pending applications
therefor, of the Company and its Subsidiaries ("Trademarks"); and (iii) all
----------
permits, grants, licenses, sublicenses, options, rights of first and subsequent
refusal, outstanding offers which, if accepted, would create a legal binding
obligation of the Company and its Subsidiaries, and any
19
<PAGE>
other rights, all relating to Patents or Trademarks and running from the Company
or its Subsidiaries to a Person, or from a third party to the Company or its
Subsidiaries ("License Rights").
--------------
(b) Section 3.19 of the Exceptions Letter sets forth all of the
Intellectual Property Rights material to the conduct of the business of the
Company and its Subsidiaries as now conducted or proposed to be conducted.
Section 3.19 of the Exceptions Letter lists for each identified Intellectual
Property Right the following information: (i) the nature of such Intellectual
Property Right; (ii) the Company's and its Subsidiaries' ownership interest in
such Intellectual Property Rights; (iii) the jurisdiction wherein each
Intellectual Property Right is effective, and for each such jurisdiction the
applicable serial numbers and corresponding filing dates for each such
Intellectual Property Right, and, if applicable, the numbers and dates
corresponding to each approval, registration or grant, respectively; and (iv)
the identities of all licensees or licensors of any License Rights. Section
3.19 of the Exceptions Letter sets forth a list of all documents to which the
Company or any Subsidiary is a party, including all amendments thereto,
representing the License Rights, complete and correct copies of which have been
delivered to the Purchaser. Except as set forth in Section 3.19 of the
Exceptions Letter, the Company and/or its Subsidiaries own, whether pursuant to
assignment or otherwise, the entire right, title and interest in and to the
Patents and Trademarks, and, to the Company's knowledge, no such Patent or
Trademark has been declared invalid, in whole or in part, or abandoned,
dedicated, disclaimed or allowed to lapse for non-payment of fees or taxes or
for any other reason. Except as set forth in Section 3.19 of the Exceptions
Letter or in agreements or other documents representing the License Rights that
are identified in Section 3.19 of the Exceptions Letter, to the Company's
knowledge, (i) the License Rights are in full force and effect and (ii) no such
License Rights have been declared invalid in whole or in part, or abandoned,
dedicated, disclaimed or allowed to lapse for non-payment of fees or taxes or
for any other reason. Except as set forth in Section 3.19 of the Exceptions
Letter, the Company is not aware of any patents held by any Person under which a
license is reasonably likely to be required in connection with the conduct of
the business of the Company or any Subsidiary, as now conducted or as currently
proposed to be conducted. Except as set forth in Section 3.19 of the Exceptions
Letter, the Company does not have any notice of any adverse claim of any Person
with respect to any Intellectual Property Right or asserted against or
threatened to be asserted against the Company with respect to any Intellectual
Property Right.
3.20 MATERIAL CONTRACTS. Except for the Exhibits listed in the Exhibit
------------------
Index to the Annual Report on Form 10-K/A of the Company for the year ended June
30, 1994, and the documents listed on Section 3.20 of the Exceptions Letter,
there is no written contract, debt instrument, lease, employment agreement or
collective bargaining agreement now in effect to which the Company or any of its
Subsidiaries is a party which involves a commitment or liability in excess of
$100,000 or extending for a period of more than 6 months (each such contract,
including those listed as Exhibits to the Annual Report on Form 10K/A of the
Company for the years ended June 30, 1994, as well as the Bank Documents, a
"Material Contract"). (For the purposes of this Agreement the term "Bank
------------------ ----
Documents" refers to the bank agreements, credit agreements, loan documents,
---------
guarantees, subordination agreements or other contracts or documents, or
Contractual Obligations, to which the Company or any of its Subsidiaries is a
party that relate to indebtedness of $250,000 or more.) A copy of each
20
<PAGE>
Material Contract has been delivered to C2000. To the extent the Company or any
Subsidiary is a party thereto, each of the Material Contracts is valid, binding,
in full force and effect and enforceable by the Company and its Subsidiaries in
accordance with its terms, subject to the effect of applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and rules of laws
concerning equitable remedies. Except as otherwise described in the Exceptions
Letter, neither the Company nor any of its Subsidiaries is in default in the
performance of any of its obligations under any Material Contract, except for
defaults which, in the aggregate with all such defaults, would not have a
Material Adverse Effect. Except as otherwise described in the Exceptions Letter,
no event has occurred which (whether with or without notice, lapse of time or
the happening or occurrence of any other event) would constitute a default by
any of the Company or its Subsidiaries under any Material Contract or to the
Company's knowledge by any other party thereto, except for defaults which in the
aggregate with all such defaults would not have a Material Adverse Effect.
3.21 CERTAIN AGREEMENTS. Neither the Company nor any Subsidiary is a
------------------
party to any (a) agreement with any of its executive officers, other employees
or any other Person (i) the benefits of which are contingent, or the terms of
which are materially altered, upon the occurrence of transactions of the nature
contemplated by this Agreement or any Related Agreement, or (ii) providing
severance benefits or other benefits after the termination of employment of such
employee regardless of the reason for such termination of employment which are
conditioned upon a change of control or (b) agreement, instrument, option,
warrant or plan, including, without limitation, any stock option plan, stock
appreciation rights plan, stock purchase plan or any other Employee Plan (as
defined in Section 3.22), any of the benefits of which will be increased, or the
vesting of benefits of which will be accelerated, by the occurrence of any of
the transactions contemplated by this Agreement or any Related Agreement, or the
value of any of the benefits of which will be calculated on the basis of any of
the transactions contemplated by this Agreement or any Related Agreement,
whether or not any such benefit, acceleration or vesting would be subject to
Section 280G of the Code. The Company is not aware that any officer or key
employee (including those persons with the title "Vice President"), or any group
of key employees, intends to terminate their employment with the Company or any
Subsidiary, and the Company and its Subsidiaries do not have a present intention
to terminate the employment of any of the foregoing. The employment of each
officer and employee of the Company or any Subsidiary, subject to general
principles related to wrongful termination of employees, is terminable, to the
best of the Company's knowledge, at the will of the Company or such Subsidiary.
3.22 EMPLOYEE MATTERS. Section 3.22 of the Exceptions Letter lists each
----------------
written and, to the best knowledge of the Company, each unwritten employee
benefit plan, program or arrangement covering present or former employees who
are U.S. citizens or residents or which is otherwise subject to U.S. law
(whether or not subject to ERISA), including, but not limited to, each pension,
profit-sharing, health, welfare, severance, bonus or incentive plan, program or
arrangement to which the Company, any Subsidiary or any Related Person is a
party or by which any of them is bound and under which any of them has or could
have any liability (the "Employee Plans"). With respect to the Employee Plans,
--------------
(a) except as set forth in Section 3.22 of the Exceptions Letter, each Employee
Plan (and related trust) that is
21
<PAGE>
intended to be qualified under Section 401(a) of the Code has received a
favorable determination of such qualification from the Internal Revenue Service,
and, to the best knowledge of the Company, nothing has occurred in the operation
of any such Plan or since the issuance of such determination that cannot be
cured within the remedial amendment period provided by Section 401(b) of the
Code that would prevent any such Employee Plan from remaining so qualified; (b)
the Company and its Subsidiaries are in compliance in all material respects with
the terms of each Employee Plan, the applicable provisions of ERISA, including
the reporting and disclosure requirements thereunder, and the Code and the
regulations thereunder ; (c) no "reportable event" (as described in ERISA and
the regulations thereunder) has occurred with respect to any Employee Plan,
which reportable event could subject the Company or any of its Subsidiaries to
any material liability; (d) no liability to the Pension Benefit Guaranty
Corporation ("PBGC") has been incurred or is expected to be incurred with
respect to any Employee Plan, other than liability for insurance premiums which
are not in default, to which the Company, any Related Person or any Subsidiary
could be subject; (e) to the best of the Company's knowledge, there is no event
or condition which presents a substantial risk of termination of any Employee
Plan by the PBGC, nor are there any proceedings for termination or partial
termination of any such plan instituted by the PBGC or the Internal Revenue
Service, where such termination or partial termination could result in any
material liability to the Company or any Subsidiary or Related Person; (f) with
respect to any pension plans (other than multiemployer plans or multiple
employer plans) that are Employee Plans, (i) the present value (determined on
the basis of actuarial assumptions used in the preparation of the Company's
Financial Statements dated as of June 30, 1994 of the benefit liabilities under
each such plan did not, as of June 30, 1994, exceed the fair market value of the
assets of each such plan available for the payment of such benefits by more than
$50,000, (ii) the present value (determined on the basis of actuarial
assumptions used in the preparation of the Company's Financial Statements dated
as of June 30, 1994) of the benefit liabilities of all such plans in the
aggregate did not, as of June 30, 1994, exceed the fair market value of the
aggregate assets of all such plans available to pay the aggregate benefit
liabilities under all such plans, and (iii) since June 30, 1994, nothing has
occurred that has caused or could reasonably be expected to cause a change in
such funded status that is material with respect to such plans in the aggregate;
(g) neither the Company nor any Subsidiary or Related Person (i) currently makes
any contributions to, nor is any of them required to make any contributions to,
either any multiemployer plan or any multiple employer plan except as disclosed
in Section 3.22 of the Exceptions Letter, (ii) has incurred or is subject to any
liability incurred under Title IV of ERISA which remains unpaid with respect to
either any multiemployer plan or any multiple employer plan nor (iii) intends to
take any action which could reasonably be expected to result in the incurrence
of any material liability under Title IV of ERISA with respect to any such plan;
(h) there are no employees with respect to whom the Company, its Subsidiaries
and Related Persons are obligated to contribute to all multiemployer and
multiple employer plans listed in Section 3.22 of the Exceptions Letter, and
none of such entities intends or reasonably expects to incur any such
contribution obligation with respect to any material number of additional
employees or former employees; (i) neither the Company nor any Subsidiary
provides or has any obligation to provide welfare benefits (as described in
Section 3(1) of ERISA) to any former employee or spouse or dependent of any
former employee, except to the extent disclosed in Section 3.22 of the
Exceptions Letter or required under Section 4980B of
22
<PAGE>
the Code or Section 601 of ERISA; (j) with respect to any and all welfare
benefit plans (as defined in Section 3(1) of ERISA), whether written or
unwritten, which are or have been established or maintained, or to which
contributions are or have been made, by the Company, its Subsidiaries and
Related Persons, to the extent such plans call for the provision of post-
retirement welfare benefits to or in respect of current or former employees, (i)
there are no retirees covered under such plans maintained pursuant to collective
bargaining agreements and (ii) there are no active employees in units for which
the Company or any of its Subsidiaries provides retiree welfare benefit coverage
under such collective bargaining agreements. For purposes of this Section 3.22,
the terms "benefit liabilities" and "multiemployer plan" will have the
respective meanings set forth in Section 4001 of ERISA and the term "multiple
employer plan" will mean a plan referred to in Section 4063 of ERISA. No
Employee Plan provides for the payment of benefits (other than pension or post-
retirement welfare benefits) upon severance or termination of employment. The
aggregate liability of the Company and its Subsidiaries for severance or
termination benefits under all agreements with current and former employees
whose employment has terminated or who have been notified that their employment
will be terminated is listed in the Exceptions Letter. With respect to each
employee benefit plan, program or arrangement that would be an Employee Plan but
for the fact that it does not cover present or former employees who are U.S.
citizens or residents and is not otherwise subject to U.S. law (each, a "Foreign
-------
Plan"), (a) each Foreign Plan has been maintained and operated in all material
----
respects in accordance with the applicable requirements of law, including
requirements of law relating to Tax deductions or income exclusions for
contributions and benefits under such Foreign Plan; and (b) neither the Company
nor any Subsidiary has any unfunded liability with respect to any Foreign Plan
that, when taken together with all other such unfunded liabilities, is material
with respect to the Company or such Subsidiary.
3.23 LABOR MATTERS. To the best knowledge of the Company, since June 30,
-------------
1994 there has been (a) no attempt or plan to organize any employees of the
Company or any Subsidiary, other than insignificant or episodic activity, and
(b) no strike or labor dispute between the Company or any Subsidiary and any
employees, other than ordinary individual grievance claims and proceedings which
in the aggregate would not have a Material Adverse Effect. No employees of the
Company or of any Subsidiary are the subject of any collective bargaining
agreement and neither the Company nor any of its Subsidiaries has any liability
or obligation arising from any collective bargaining agreement.
3.24 TAXES. Except as set forth in Section 3.24 of the Exceptions Letter,
-----
(a) federal income tax returns of the Company and its Subsidiaries have been
closed through the fiscal years ended June 30, 1990, (b) the Company and its
Subsidiaries have filed all returns, declarations and reports and information
returns and statements required to be filed by them before the date hereof
relating to any Taxes with respect to any income, properties or operations of
the Company or any of its Subsidiaries before the date hereof (collectively,
"Returns") other than Returns with respect to which the failure to have filed or
been included in would not in the aggregate with all such other failures have a
Material Adverse Effect and all such Returns were, or will be, correct and
complete in all material respects, (c) the Company and its Subsidiaries have
timely paid in full all Taxes that have been shown as due and payable on the
Returns that have been filed and are not delinquent in the payment of any
23
<PAGE>
amount of Taxes attributable to settlements with Governmental Authorities, (d)
all other Taxes due and payable on or before the date hereof for which neither
filing of returns nor notice of deficiency or assessment is required, of which
either the Company or any of its Subsidiaries has received notice in writing,
have been paid in full other than such Taxes with respect to which the failure
to have paid would not in the aggregate with all such other failures have a
Material Adverse Effect, (e) all Taxes required to be withheld by or on behalf
of the Company or any of its Subsidiaries or with respect to the business
operated by the Company or any of its Subsidiaries or the assets thereof have
been withheld except for Taxes, if any, with respect to which the failure to
withhold would not in the aggregate with all such other failures have a Material
Adverse Effect, and such withheld Taxes have either been duly paid to the proper
Governmental Authority or set aside in accounts for such purpose, (f) no Returns
or Taxes for which the Company or any of its Subsidiaries could be held liable
are currently under audit by any taxing authority and no taxing authority has
given notice in writing that it will commence any such audit, (g) the charges,
accruals and reserves (the "Tax Accrual") for Taxes (including deferred taxes)
currently reflected on the books of the Company and its Subsidiaries are
adequate in accordance with GAAP to cover all unpaid and deferred Tax
liabilities accruing or payable by the Company and its Subsidiaries in respect
of periods that end before the date hereof and for any periods that began before
the date hereof and end after the date hereof to the extent such Taxes are
attributable to the portion of any such period ending at the date hereof
(determined on a closing of the books method), (h) no deficiency for any amount
of Taxes has been proposed, asserted or assessed (in each case, in writing)
against the Company or any of its Subsidiaries, other than deficiencies which in
the aggregate with all other such deficiencies would not have a Material Adverse
Effect, (i) neither the Company nor any of its current Subsidiaries is a party
to any tax sharing agreement with any corporation which is not a member of the
affiliated group of which the Company or such Subsidiary is a member, (j)
neither the Company nor any of its current Subsidiaries has made any election
under Section 341(f) of the Code, (k) neither the Company nor any of its
Subsidiaries is or will be required to make any adjustment pursuant to Section
481(a) of the Code by reason of a change in accounting method initiated by the
Company or any of its Subsidiaries prior to the Closing and neither the Company
nor any of its Subsidiaries has any knowledge that the Internal Revenue Service
has proposed any such adjustment or change in accounting method, (l) neither the
Company nor any Subsidiary has, for the 5-year period preceding the date hereof,
been a United States real property holding corporation within the meaning of
Section 897(c)(2) of the Code, (m) none of the property of the Company or any of
its Subsidiaries is subject to a lease under (i) Section 168(f)(8) of the
Internal Revenue Code of 1954 as in effect prior to the date of enactment of the
Tax Reform Act of 1982 or (ii) Section 7701(h) of the Code or any predecessor
provision, (n) neither the Company nor any of its Subsidiaries is or will be
subject to any constructive elections under Section 338 of the Code or the
regulations thereunder which arise, in whole or in part, by reason of
transactions which have been consummated on or before the date hereof, (o)
neither the Company nor any of its current Subsidiaries (in the case of any
Subsidiary, immediately prior to the acquisition of such Subsidiary by the
Company) is or has been a member of any affiliated group, for purposes of filing
tax returns or paying Taxes at any time, other than the affiliated group of
which the Company is the common parent, (p) none of the Subsidiaries has any
investment in excess of $100,000 in U.S. property within the meaning of Section
956 of the Code and (q) tax operating loss carry
24
<PAGE>
forwards will be recognized for financial reporting purposes under the
provisions of Statement 109.
3.25 REGISTRATION RIGHTS. Except as set forth in the Registration Rights
-------------------
Agreement or in Section 3.25 of the Exceptions Letter, the Company is not under
any obligation to register any of its presently outstanding securities or any of
its securities which may hereafter be issued. To the extent the Company is
under any obligation to register any of its securities, such obligations do not
violate, limit or impede the rights granted to C2000 under the Registration
Rights Agreement.
3.26 MINUTE BOOKS. The Company has delivered or made available to C2000
------------
copies of the minute books of the Company and each Subsidiary, which each
contain a complete and correct record of all meetings of the respective Board of
Directors of the Company and each Subsidiary and committees thereof and all
meetings of each of their respective stockholders and all actions by written
consent without a meeting by each such Board of Directors and committees thereof
and their respective stockholders since their respective date of incorporation,
which each accurately reflect all actions by such directors, and committees
thereof, and by stockholders with respect to all transactions referred to in
such minutes.
3.27 CERTAIN PAYMENTS. To the best of the Company's knowledge, neither
----------------
the Company, any of its Subsidiaries nor any other Person, since its date of
incorporation, formation or organization, has, directly or indirectly, on behalf
of or with respect to the Company or any of its Subsidiaries (a) made or
received any payment that was not legal to make or to receive under applicable
law, (b) engaged in any transaction or made or received any payment that was not
properly recorded on the books of the Company or its Subsidiaries in accordance
with GAAP and applicable law, or (c) created or used any "off-book" account or
fund.
3.28 AFFILIATE TRANSACTIONS. Except as described in the SEC Documents as
----------------------
of the date hereof or in Section 3.5 of the Exceptions Letter, there are no
existing agreements, understandings or arrangements between the Company or any
Subsidiary, on the one hand, and any Affiliates (other than a Subsidiary), on
the other hand, which would have been required to have been disclosed pursuant
to Regulation S-K promulgated under the Exchange Act, and, since such date, the
Company and its Subsidiaries have not entered into any agreements,
understandings or arrangements between the Company and its Subsidiaries, on the
one hand, and any Affiliates (other than a Subsidiary) on the other hand.
3.29 NCD ACQUISITION. Pursuant to that certain Agreement and Plan of
---------------
Reorganization dated as of September 28, 1994, the Company acquired all of the
outstanding shares of NCD in exchange for that number of shares of Company's
Common Stock, cash consideration and other consideration as is described in
Schedule 3, Section 3.29 to the Investment Agreement (the "NCD Acquisition").
---------------
Schedule 3, Section 3.29 to the Investment Agreement also sets forth any other
shares of the Company's Common Stock, options or rights to acquire the Company's
capital stock, or other securities of the Company to be issued or issuable, and
other repurchase agreements or contingent arrangements made, in connection
25
<PAGE>
with any aspect of the NCD Acquisition, including but not limited to employees,
brokers or finders, creditors or vendors.
3.30 ROBEC ACQUISITION. Pursuant to the Robec Acquisition Agreement, the
-----------------
Company is proposing to consummate the Robec Acquisition in exchange for that
number of shares of Common Stock set forth in Schedule 2 hereto. Except as set
----------
forth in Schedule 2, no other shares of the Company's Common Stock, options or
----------
rights to acquire the Company's capital stock or other securities of the Company
will be issued or issuable in connection with any shareholders, employees,
brokers or finders, creditors, vendors or others in connection with the Robec
Acquisition. The status of the Robec Acquisition is described in Section 3.30
of the Exceptions Letter. Except for the Amended and Restated Agreement and the
Plan of Reorganization dated as of August 11, 1994 between the Company and
Robec, as amended by Amendment No. 1 entered into as of August 4, 1995 attached
hereto as Exhibit G, there are no other agreements or understanding related to
the related Robec Acquisition.
3.31 OTHER TRANSACTIONS. Except for the transactions contemplated with
------------------
C2000 and Sub pursuant to this Agreement, the NCD Acquisition and the Robec
Acquisition, neither the Company nor any of its Subsidiaries (i) have reached
agreement for the acquisition of all or a portion of the assets or stock
(currently outstanding or to be issued) of any other entity or (ii) have reached
agreement for the sale or acquisition of all or a substantial portion of the
Company's or any Subsidiaries assets or stock (whether currently outstanding or
to be issued).
3.32 BROKERS, FINDERS, ETC. Neither the Company nor any Subsidiary has
----------------------
employed, or is subject to the valid claim of, any broker, finder or other
financial intermediary, in connection with the transactions contemplated by this
Agreement who might be entitled to a fee or commission.
3.33 FULL DISCLOSURE. The Company has heretofore made all of the books,
---------------
records, agreements and other documents of the Company and its Subsidiaries or
portions thereof relating to the transactions contemplated by this Agreement and
the Related Agreements available to C2000 for inspection and due diligence.
Such books and records, agreements and documents and all other documents and
papers delivered to C2000 by or on behalf of the Company or its Subsidiaries in
connection with this Agreement and the Related Agreements and the transactions
contemplated hereby and thereby are accurate, complete and authentic.
Furthermore, the representations and warranties of the Company and its
Subsidiaries in this Agreement and the Related Agreements and the information
contained in the foregoing materials and furnished to C2000 by the Company or
its Subsidiaries in connection with this Agreement and the Related Agreements
and the transactions contemplated hereby and thereby do not contain any untrue
statement of a material fact and do not omit to state any fact necessary to make
the statements made, in the context in which they are made, not false or
misleading.
3.34 INDEBTEDNESS. Except as set forth in Section 3.34 of the Exceptions
------------
Letter, neither the Company nor any Subsidiary is indebted to any Person in an
amount exceeding $150,000. Section 3.34 of the Exceptions Letter lists each
bank agreement, credit agreement, loan document, guarantee, subordination
agreement or other contract or document, or
26
<PAGE>
Contractual Obligation to which the Company or any of its Subsidiaries is a
party that related to indebtedness of $150,000 or more.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF C2000 AND SUB
C2000 and Sub hereby, jointly and severally, represent and warrant to the
Company as follows:
4.1 DUE ORGANIZATION. Each of C2000 and Sub (i) is duly organized,
----------------
validly existing and in good standing under the laws of its jurisdiction of
incorporation and (ii) has the corporate power and authority and the legal right
to own and operate its property, to lease the property it operates as lessee and
to conduct its business as now being conducted and as proposed to be conducted,
except to the extent the failure to have such power, authority or legal right
would not, in the aggregate with all such other failures, have a Material
Adverse Effect. Sub is duly authorized as a foreign corporation to do business
in the state of California.
4.2 CORPORATE POWER. Each of C2000 and Sub has all requisite corporate
---------------
power and authority to enter into and deliver this Agreement and each Related
Agreement and to perform its obligations hereunder and thereunder. Neither
C2000 nor Sub is in default in the performance, observance or fulfillment of any
provision of its charter documents.
4.3 AUTHORIZATION AND VALIDITY OF AGREEMENT. With respect to each of
---------------------------------------
C2000 and Sub, the execution, delivery and performance by it of this Agreement
and each Related Agreement and the consummation by it of the transactions
contemplated hereby and thereby have been duly authorized by all requisite
corporate action (including, in the case of C2000, due authorization by the
Managing Board of Directors (referred to as the "Vorstand" in German) and the
Supervisory Board (referred to as the "Aufsichtsrat" in German) of C2000, and,
in the case of Sub, due authorization by the Board of Directors and sole
stockholder of Sub). Except as otherwise contemplated by this Agreement, no
other corporate action on the part of C2000 or Sub is necessary for the
execution, delivery and performance by C2000 or Sub, as applicable, of this
Agreement and each Related Agreement and the consummation by C2000 or Sub, as
applicable, of the transactions contemplated hereby and thereby. This Agreement
and each Related Agreement has been duly executed and delivered by C2000 and
Sub, and this Agreement and the Related Agreements constitute the legally valid
and binding obligations of C2000 and Sub, enforceable against them in accordance
with their respective terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors' rights generally or by general equitable
principles (regardless of whether such enforceability is considered in a
proceeding in equity or at law).
4.4 INVESTMENT INTENT. The securities to be acquired by C2000 or Sub, as
-----------------
applicable, pursuant to Article II are being acquired by C2000 or Sub, as
applicable, solely for its own account, for investment purposes only, and with
no present intention of distributing,
27
<PAGE>
selling or otherwise disposing of the securities, other than in accordance with
applicable federal and state securities laws.
4.5 SOPHISTICATION. Each of C2000 and Sub is able to bear the economic
--------------
risk of an investment in the securities acquired by it pursuant to this
Agreement and has such knowledge and experience in financial and business
matters that it is capable of evaluating the merits and risks of the proposed
investment and therefore has the capacity to protect its own interests in
connection with the purchase of the securities. Each of C2000 and Sub has had
access to and has reviewed and understood all material information, including
financial statements, concerning the Company that it deems necessary or
advisable in order to evaluate the risks and merits of entering into this
transaction and acquiring the securities to be issued hereunder. Each of C2000
and Sub has been given the opportunity to ask questions and receive answers from
the Company and any Persons acting on behalf of the Company and has made such
further investigation as it deemed appropriate with respect to the transactions
contemplated hereby. Each of C2000 and Sub acknowledge that the information
disclosed to them demonstrates that there has been, since June 30, 1994, a
material adverse change in the business, condition (financial and otherwise) and
results of operations of the Company.
4.6 BROKERS, FINDERS, ETC. Except for the engagement of Chemical
----------------------
Securities Inc., neither C2000 nor Sub has employed, or is it subject to the
valid claim of any broker, finder or other financial intermediary in connection
with the transactions contemplated by this Agreement who might be entitled to a
fee or commission. C2000 shall be solely responsible for all fees, expenses and
disbursements of Chemical Securities, Inc.
ARTICLE V
COVENANTS
5.1 ACCESS TO INFORMATION. From and after the date of this Agreement and
---------------------
until the Closing, upon reasonable notice, the Company will (and will cause each
of the Subsidiaries to) afford the officers, employees, counsel, accountants and
other authorized representatives of C2000 and its Affiliates (collectively,
"Representatives") access during normal business hours throughout the term of
----------------
this Agreement, to its properties, books and records (including, without
limitation, tax returns and financial records) and, during such period, the
Company will (and will cause each of the Subsidiaries to) furnish promptly all
information requested by C2000 or Representatives (except where any such
information is subject to a good faith claim of attorney-client, work product or
other privilege which would be adversely affected by complying with such a
request for information or where the Company is contractually precluded from
making such disclosure) and provide C2000 and Representatives with an
opportunity to interview such of its employees (and, with the prior consent of
the Company, certain of its major suppliers and customers) concerning its
business, properties and personnel as C2000 may reasonably request.
5.2 ADVICE OF CHANGES. From and after the date of this Agreement and
-----------------
until the Closing or the earlier termination of this Agreement, the Company will
promptly advise C2000 in writing (a) of any event occurring subsequent to the
date of this Agreement that
28
<PAGE>
would render any representation or warranty of the Company or any Subsidiary
contained in this Agreement or the Related Agreements, as if made on or as of
the date of such event, untrue or incomplete in any material respect, (b) of any
event having a Material Adverse Effect with respect to the Company and its
Subsidiaries taken as a whole, and (c) of any breach by the Company or any
Subsidiary of any covenant or agreement contained in this Agreement or the
Related Agreements. To ensure compliance with this Section 5.2, the Company will
deliver to C2000 as soon as practicable, but in any event within 30 days after
the end of each monthly accounting period ending after the date of this
Agreement, an unaudited consolidated balance sheet, statement of operations and
statement of cash flows for the Company, which financial statements will be
prepared in the ordinary course of business in accordance with the Company's
books and records and GAAP as of their respective dates and the results of the
Company's operations for the periods then ended.
5.3 CONDUCT OF BUSINESS. Except as permitted or required by this
-------------------
Agreement, or otherwise consented to or approved in writing by C2000, during the
period commencing on the date hereof and until the Closing the Company covenants
and agrees to comply with the obligations of subparagraphs (a) through (l) of
Section 5.4 of the Investment Agreement as if those subparagraphs were set forth
herein, and further covenants and agrees not to take any action or to permit any
of its Subsidiaries to take any action that would have a Material Adverse Effect
with respect to the Company or any of its Subsidiaries.
5.4 ROBEC. The Company will use its best efforts to close as soon as
-----
practicable the Robec Acquisition on the terms described in the Robec
Acquisition Agreement.
5.5 CERTAIN DEFAULTS. From and after the date of this Agreement and until
----------------
the Closing the Company will give prompt notice to C2000 of (a) any notice of
default received by it or any of its Subsidiaries under any material instrument
or agreement to which the Company or any of its Subsidiaries is a party or by
which it or any of its Subsidiaries is bound, and (b) any suit, action or
proceeding instituted or threatened against or affecting the Company or any of
its Subsidiaries.
5.6 SATISFACTION OF CONDITIONS PRECEDENT. The Company will use its best
------------------------------------
efforts to satisfy or cause to be satisfied all the conditions precedent to the
obligations of C2000 and Sub, and the Company will use its best efforts to cause
the transactions contemplated by this Agreement to be consummated.
5.7 FURTHER ACTIONS. Subject to the terms and conditions hereof, each of
---------------
the Company, the Borrower, C2000 and Sub agrees to use commercially reasonable
efforts to obtain all written consents, take, or cause to be taken, all action
and to do, or cause to be done, all things reasonably necessary, proper or
advisable to consummate and make effective the transactions contemplated by this
Agreement and the Related Agreements and to satisfy the conditions hereto and
thereto.
5.8 LISTING OF SHARES; PRESS RELEASE. The Company will, at its expense,
--------------------------------
use its best efforts to cause all shares of the Company's Common Stock to be
issued hereunder or pursuant to the conversion of the Preferred Stock or upon
exercise of any of the rights granted
29
<PAGE>
hereunder or under the Related Agreements to be approved for listing on the New
York Stock Exchange, subject to notice of issuance, and will provide prompt
notice to the New York Stock Exchange of the issuance of each of such shares.
The Company will obtain confirmation from the New York Stock Exchange that the
transactions contemplated by this Agreement and the Related Agreements, without
obtaining stockholder approval, do not violate rules 312 or 313 of the New York
Stock Exchange. The Company will promptly after the execution hereof issue a
press release and mail to the Company's stockholders a letter, in the forms that
have been approved by the Company, C2000 and the New York Stock Exchange,
regarding this Agreement and the Related Agreements and the reasons therefor.
5.9 REGISTRATION RIGHTS AGREEMENT. The Company will comply with the
-----------------------------
provisions regarding registration rights contained in the Registration Rights
Agreement.
5.10 BOARD OF DIRECTORS
------------------
(a) Upon the Closing, Marc Werner, Hal Clark, Steve Holmes and Bill
Walker will continue as directors of the Company. Concurrently with the
execution and delivery of this Agreement, each of the other directors will
deliver to the Company their executed written resignations as directors of the
Company, effective as of the Closing. Upon the Closing, the remaining directors
of the Company will appoint as directors of the Company Robert Beckett, Steve
DeWindt, Mark Mulford, Holger Heims, Harry Krischik and Klaus Laufen. The
parties anticipate that, immediately after the Closing, Steve DeWindt and Mark
Mulford will be appointed by the Board of Directors of the Company as the Chief
Executive Officer and Chief Operating Officer, respectively, of the Company.
(b) From the date of this Agreement until the Closing or the earlier
termination of this Agreement, the Company will not increase the authorized
number of members of its Board of Directors from its current size of nine.
5.11 INDEMNIFICATION AND INSURANCE.
-----------------------------
(a) The Company will enter into a Director's Indemnification Agreement
in the form attached hereto as Exhibit F with each of the current directors of
---------
the Company and each of C2000's designees upon such person's election or
appointment to the Board of Directors, provided that each such director and
C2000 will have entered into mutual releases in the form included in Exhibit F.
---------
(b) After the date of the Agreement, the Company will to use its
commercially reasonable efforts to maintain in effect directors' and officers'
liability insurance of at least the same coverage and amounts as currently in
existence.
5.12 EQUITY METHOD ACCOUNTING. The Company will promptly furnish to C2000
------------------------
all information that is required by GAAP to enable C2000 to account for its
investment in the Company pursuant to the equity method, to the extent
reasonably available to the Company. To the extent reasonably requested by
C2000, the Company will, and will cause its employees, independent public
accountants and other representatives to furnish information, to the extent
reasonably available, regarding the Company to, and otherwise cooperate with,
C2000 so as to
30
<PAGE>
enable C2000 and its Affiliates to prepare financial statements in accordance
with GAAP in the United States and to comply with its reporting requirement and
other disclosure obligations under applicable United States and German
securities or other laws and regulations.
5.13 CONSENTS. The Company will use diligently use its best efforts to
--------
obtain as promptly as possible (i) all consents, approvals, orders, waivers or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any court or any federal or state governmental authority or
third party (including, without limitation, Bank of Boston, IBM Credit
Corporation and Congress Financial) required on the part of the Borrower, the
Company or any of its Subsidiaries in connection with the consummation of the
transactions contemplated by this Agreement and (ii) a written agreement from
each of IBM Credit Corporation, Bank of Boston and any other lending institution
(such as Congress Financial) to which the Company is indebted in any amount in
excess of $150,000 that such financing institutions will, upon the Closing of
this Agreement and subject to the existing terms of the financing institution's
Loan Documents extend the Company's credit facility for 12 months after the
Closing.
5.14 AGREEMENTS WITH ROBEC'S AFFILIATES. The Company will diligently use
----------------------------------
its best efforts to obtain as promptly as possible written agreements of Robert
Beckett and Robert Beckett, Jr. in the form attached hereto as Exhibit H.
---------
5.15 FILING CERTIFICATE OF DESIGNATION. The Company will promptly file
---------------------------------
with the Delaware Secretary of State a Certificate of Designation in the form
set forth in Exhibit A hereto.
---------
5.16 NO INTERIM ISSUANCE OF SECURITIES. During the period commencing with
---------------------------------
the date of this Agreement and ending at the Closing, the Company will not issue
any shares of Common Stock, Convertible Securities or other securities or rights
or commitments with respect to securities of the Company or any of its
Subsidiaries without first obtaining the written consent of C2000 for the
issuance, including the specific terms thereof, but excluding issuances pursuant
to the exercise of existing and outstanding rights, options, warrants and
similar Convertible Securities.
5.17 BUCKET. The Company hereby represents to C2000 and Sub that the
------
Company will not incur any liability, costs or expenses in connection with
matters referred to in the Bucket Contingencies list attached hereto as Exhibit
-------
I (the "Contingencies") in excess of $2,000,000 in the aggregate (the "Bucket
- ------------- ------
Amount"). If and to the extent the Company incurs aggregate liability, costs
------
and expenses in connection with the Contingencies in excess of the Bucket
Amount, the Company will promptly issue to C2000 (or, at C2000's election, Sub)
a number of shares of the Company's Common Stock equal to the amount of such
excess divided by $1.25. For the purposes of this Section 5.17, the Company
will not be deemed to incur any liability, costs or expenses in connection with
a Contingency involving an employee termination to the extent that the amount
paid to such employee with respect to termination does not exceed the amount
payable pursuant to the terms of the employee's employment agreement for a
termination without cause.
31
<PAGE>
5.18 CHANGE OF FISCAL YEAR. The Company will change its fiscal year to
---------------------
begin on the first day of October and end on the last day of September each year
with such new fiscal year to begin on October 1, 1995.
5.19 ADDITIONAL SHARES. The Company will use its best efforts to obtain
-----------------
the necessary approvals, including the calling of a shareholder meeting and
submission of required proxy statement, to increase to 100,000,000 the number of
authorized shares of the Company's Common Stock. C2000 agrees to vote its
shares in favor of such increase.
5.20 OUTSTANDING OPTIONS. In order to provide for sufficient authorized
-------------------
shares to cover outstanding options and warrants listed in Section 3.5, Schedule
1 of the Exceptions Letter, C2000 will vote its shares at the next shareholders'
meeting to approve (i) an increase in the authorized number of shares of the
Company's Common Stock to such number as is necessary to provide sufficient
reserved shares for such outstanding options and warrants and (ii) an increase
in the authorized number of shares under any Employee Stock Option Plans under
which such options were issued as is necessary to provide sufficient reserved
shares for such outstanding options.
5.21 ACCOUNTING TREATMENT. During the period from the date of this
--------------------
Agreement to the Closing, the Company will reflect in its financial statements
appropriate write-off of goodwill and appropriate reserves of write-downs of
inventory and uncollectability of receivables related to the retail business and
appropriate reserves for the Company's continuing consolidation efforts. The
Company will inform C2000 prior to the Closing of the specific actions it
proposes to take with respect to such reserves and will take prior to the
Closing.
5.22 PROTECTION OF MINORITY RIGHTS.
-----------------------------
(a) C2000 and Sub agree that for a three year period following the
Closing the affirmative vote of not less than two-thirds (2/3) of the
outstanding shares of Common Stock of the Company held by shareholders other
than C2000, Sub and/or any of their respective Affiliates ("Interested
----------
Shareholders") shall be required for the approval of any Business Combination
------------
(as hereinafter defined) of the Company with an Interested Shareholder in which
the cash or the fair market value of the property, securities or other
consideration to be received per share by holders of the Company's Common Stock
is less than $1.25 (with appropriate adjustments for recapitalizations and stock
splits, stock dividends and like distributions).
For the purpose of this subsection (a), the term "Business
Combination" shall mean the following transactions: (i) a merger or
consolidation of the Company or any subsidiary of the Company with C2000, Sub or
any other entity that is controlled by Interested Shareholders; (ii) the sale or
other disposition by the Company or a subsidiary of the Company of all or
substantially all of its assets; or (iii) the adoption of any plan or proposal
for the liquidation or dissolution of the Corporation proposed by or on behalf
of an Interested Shareholder.
32
<PAGE>
(b) C2000 and Sub agree that any and all material transactions between
any Interested Shareholder(s) and the Company shall be in effected in accordance
with any fiduciary duties that C2000 or Sub may have under applicable Delaware
law.
ARTICLE VI
CONDITIONS PRECEDENT TO CLOSING
6.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PARTIES. None of the parties
----------------------------------------------
hereto will be obligated to consummate at the Closing any of the transactions
provided for herein if any preliminary or permanent injunction or other order
issued by any federal or state court of competent jurisdiction in the United
States or by any United States federal or state Governmental Authority nor any
statute, rule, regulation or executive order promulgated or enacted by any
United States federal or state Governmental Authority which is in effect at the
Closing restrains, enjoins or otherwise prohibits the consummation of such
transaction at the Closing.
6.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF C2000 AND SUB. The obligation
----------------------------------------------------
of C2000 and Sub to consummate at the Closing any of the transactions provided
for herein is subject to the satisfaction, at or prior to the Closing, of each
of the following additional conditions:
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of the Company contained herein will be true and complete in all
material respects on the date hereof and at and as of the Closing, with the same
force and effect as though made at and as of the Closing, except for changes
reasonably acceptable to C2000.
(b) Performance of Agreement. The Company will have performed and
------------------------
complied in all material respects with all agreements, covenants and conditions
contained in this Agreement to be performed or complied with by them at or prior
to the Closing.
(c) Certificate. C2000 will have received a certificate of the
-----------
Company, dated the date of the Closing, executed by and on behalf of the Company
by its President and Chief Financial Officer, to the effect that the conditions
specified in paragraphs (a) and (b) above have been fulfilled as to the Company.
(d) Secretary's or Assistant Secretary's Certificate. C2000 will have
------------------------------------------------
received from the Company a certificate, dated the date of the Closing, of the
Company's Secretary or Assistant Secretary certifying the incumbency of those
officers of the Company executing this Agreement or any Related Agreement or any
closing documents delivered hereunder or thereunder. Attached to such
certificate will be (i) a copy of the Certificate of Incorporation and By-Laws
of the Company, certified by such Secretary or Assistant Secretary as in effect
at all relevant times and (ii) certified copies of the resolutions of the Board
of Directors authorizing the execution and delivery of this Agreement and the
Related Agreements and the consummation of the transactions contemplated herein
and therein.
33
<PAGE>
(e) Legal Opinion. C2000 will have received an opinion of Raymond L.
-------------
Ridge, counsel to the Company, in form and substance reasonably satisfactory to
C2000.
(f) Additional Documents, Matters, Conditions and Litigation. C2000
--------------------------------------------------------
will have received each additional document, instrument, legal opinion or item
of information reasonably requested by C2000, including, without limitation, a
copy of any debt instrument, security agreement or other material contract to
which the Company may be a party. All corporate and other proceedings, and all
documents, instruments and other legal matters in connection with the
transactions contemplated by this Agreement will be reasonably satisfactory in
form and substance to C2000. C2000 shall be satisfied with the Company's
business, financial condition, prospects, employee, vendor and creditor
relations, status of the Robec Acquisition, and any litigation involving the
Company, including any litigation disclosed in the Exceptions Letter. In
addition there shall not have been initiated or threatened any new litigation
against the Company, its Board of Directors or C2000 except as is disclosed in
the Exceptions Letter.
(g) Material Adverse Change in Company. There will not have occurred
----------------------------------
after the date hereof any event resulting in a Material Adverse Effect as to the
business, operations, financial condition or prospects of the Company and its
Subsidiaries.
(h) Accounting Treatment. The actions taken with respect to
--------------------
accounting described in Section 5.21 shall be reasonably satisfactory to C2000.
(i) Other Actions. The following actions will have been taken: (i)
-------------
the resignation of directors referred to in Section 5.10 will have been received
and the remaining directors will have appointed, effective as of the Closing,
new directors, as provided in Section 5.10; (ii) the Director's Indemnification
Agreements and releases will have been entered into as provided in Section 5.11;
(iii) the consents, approvals, orders, waivers or authorizations, registrations,
qualifications, designations, declarations and filings will have been obtained
as provided in Section 5.13(i) and the agreements will have been obtained as
provided in Section 5.13(ii); (iv) the agreements will have been obtained as
provided in Section 5.14; (v) the Certificate of Designation will have been
filed and become effective as provided in Section 5.16; (vi) written agreements,
in such form as is reasonably satisfactory to C2000, will have been obtained
from each of the holders of the Unit Warrants to the effect that the exercise
price of the Unit Warrants for the Unit Warrant Share will be $1.05 per share
and that any price protection provisions existing for the benefit of such
holders, whether contained in the related Subscription Agreement or Unit
Warrant, is waived with respect to issuances of Preferred Stock or other
securities to C2000 or Sub, and (vii) executed severance agreements with each of
Harold Clark and Stephen Holmes shall have been delivered to C2000 and (viii)
the Company shall have duly and validly concluded the transaction with James
D'Jen resulting in the Company receiving and cancelling 350,000 shares of its
Common Stock and James D'Jen receiving all outstanding shares of the Company's
Singapore subsidiary, without any further obligations or liabilities of the
Company.
34
<PAGE>
6.3 CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY. The obligation of
--------------------------------------------------
the Company to consummate at the Closing any of the transactions provided for
herein is subject to the satisfaction, at or prior to the Closing, of each of
the following additional conditions:
(a) Accuracy of Representations and Warranties. The representations
------------------------------------------
and warranties of C2000 and Sub contained herein will be true and complete in
all material respects at and as of the Closing, with the same force and effect
as though made at and as of the Closing, except for changes permitted or
contemplated by this Agreement.
(b) Performance of Agreements. C2000 and Sub will have performed and
-------------------------
complied in all material respects with all agreements, covenants and conditions
contained in this Agreement and any Related Agreement to be performed or
complied with by them prior to or at the Closing.
(c) Certificate. The Company will have received a certificate of
-----------
C2000 and Sub, officer executed on behalf of C2000 and Sub by an executive
officer thereof, dated the date of the Closing, to the effect that the
conditions specified in paragraphs (a) and (b) above have been fulfilled.
(d) Indemnification Agreement. The Director's Indemnification
-------------------------
Agreements and releases will have been entered into as provided in Section 5.11.
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVERS
7.1 TERMINATION. This Agreement may be terminated and the transactions
-----------
contemplated hereby may be abandoned:
(a) by mutual consent of C2000 and the Company;
(b) by either C2000 or the Company prior to the Closing, if all the
conditions to that party's performance at the Closing will not have been
satisfied or waived by the close of business on August 20, 1995 other than as a
result of a breach of this Agreement by the terminating party;
(c) by either C2000 or the Company, if a permanent injunction or other
order by any federal or state court which would make illegal or otherwise
restrain or prohibit the consummation of the transactions provided for in this
Agreement will have been issued and will have become final and nonappealable;
(d) by the Company, if any representations of C2000 or Sub in this
Agreement (with such changes as may been made therein in compliance with this
Agreement) will be materially false or if C2000 or Sub will have committed a
material breach of its obligations under this Agreement and will have failed to
cure such breach after reasonable notice thereof (but in any event within ten
days after such notice).
35
<PAGE>
(e) by C2000, if any representations of the Company in this Agreement
(with such changes as may been made therein in compliance with this Agreement)
will be materially false or if the Company will have committed a material breach
of its obligations under this Agreement and will have failed to cure such breach
after reasonable notice thereof (but in any event within ten days after such
notice).
7.2 PROCEDURE UPON TERMINATION. In the event of the termination of this
--------------------------
Agreement by any party in accordance with Section 7.1, such party shall promptly
give written notice thereof to the other parties hereto and this Agreement will
terminate and the transactions contemplated hereby will be abandoned without
further action by any of the parties hereto, except that Articles III, IV, VIII
and IX and the Registration Rights Agreement will survive any such termination.
In addition, if the Investment Agreement is then terminated in accordance with
Section 7.3 thereof, the Company will be obligated to pay C2000 the break up fee
provided for in such Section 7.3 but will not be required to pay C2000 any
additional break up fee under this Agreement.
7.3 AMENDMENT AND MODIFICATION; WAIVER. Subject to applicable law, this
----------------------------------
Agreement may be amended, modified and supplemented by a written instrument
authorized and executed on behalf of C2000 and the Company. No waiver by either
party of any of the provisions hereof will be effective unless explicitly set
forth in writing and executed by the party so waiving. Except as provided in
the preceding sentence, no action taken pursuant to this Agreement, including,
without limitation, any investigation by or on behalf of either party, will be
deemed to constitute a waiver by the party taking such action of compliance with
any representations, warranties, covenants or agreements contained herein and in
any documents delivered or to be delivered pursuant to this Agreement and in
connection with the Closing hereunder. The waiver by either party hereto of a
breach of any provision of this Agreement will not operate or be construed as a
waiver of any other or subsequent breach.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION. During the Indemnification Period (as defined
---------------
below), the Company shall indemnify and hold harmless C2000, Sub and their
respective shareholders, officers, directors, agents, employees,
representatives, attorneys, successors and assigns (hereinafter referred to
individually as an "Indemnified Person" and collectively as "Indemnified
------------------ -----------
Persons") from and against any and all losses, costs, damages, liabilities,
expenses, claims, demands, actions and causes of action, including, without
limitation, reasonable attorneys' fees and expenses and any diminution in the
value of Securities owned by an Indemnified Person (hereinafter referred to as
"Damages"), arising out of any inaccuracy or breach of or default in connection
--------
with any of the representations or warranties at the time made or deemed to be
made, or any of the covenants or agreements made, by the Company in this
Agreement or any Related Agreement. The Company shall not be obligated to
provide indemnification under this Section 8.1 unless and until the aggregate
Damages for which one or more Indemnified Persons seeks such indemnification
exceeds
36
<PAGE>
$100,000, in which event the Company shall be obligated to provide such
indemnification for those Damages and for all other Damages. For the purposes
of this Article VIII, the "Damages" will not include any liability, costs or
expenses incurred by the Company in connection with any Contingencies.
8.2 INDEMNIFICATION PERIOD. The "Indemnification Period" shall mean
---------------------- ----------------------
that period commencing on the date hereof and terminating four years thereafter,
except in all cases as to matters which an Indemnified Party has given written
notice of a Claim for Indemnification (as defined below) during the
Indemnification Period, in which case the Indemnification Period with respect
thereto shall continue until such Claim for Indemnification is finally resolved
and the Company's indemnification obligations under Section 8.1 hereof with
respect thereto are fully satisfied.
8.3 PROSECUTION OR DEFENSE OF A CLAIM. After the receipt by an
---------------------------------
Indemnified Person of notice or discovery of any claim, damage or legal action
or proceeding giving rise to indemnification rights under Section 8.1 hereof (a
"Claim for Indemnification"), such Indemnified Person will give the Company
-------------------------
written notice of the Claim for Indemnification in accordance with Section 8.4
hereof. Within the earlier of thirty days after such written notice or ten days
before any answer must be filed with the court respecting the Claim for
Indemnification, the Company may, at its sole expense, elect to take all
necessary steps properly to contest and prosecute to conclusion the Claim for
Indemnification to the extent it involves third parties; provided, however, that
the Company may only compromise or settle the Claim for Indemnification if the
Indemnified Person has granted prior written consent thereto, which consent (a)
shall not be unreasonably withheld and (b) shall be deemed given by the
Indemnified Person if such person does not respond within 30 days after receipt
of written notice of such compromise or settlement (or such shorter notice as
may be reasonable under the circumstances), but in no event (even in extreme
circumstances) less than 48 hours after such receipt. If the Company makes the
foregoing election, then the Indemnified Person will have the right at its own
expense to participate in (but not to control or direct) all proceedings. If
the Company does not make such election, then the Indemnified Person shall be
free to handle the prosecution or defense of such Claim for Indemnification. In
any case, the party not in control of a Claim for Indemnification will cooperate
with the other party in the conduct of the prosecution or defense of such Claim
for Indemnification.
8.4 NOTICE OF CLAIM FOR INDEMNIFICATION. Each notice of a Claim for
------------------------------------
Indemnification by an Indemnified person (the "Notice of Claim for
-------------------
Indemnification") will be in writing and will contain, to the extent reasonably
---------------
available to such Indemnified Person, (i) an estimate of the maximum amount of
the Damages (which amount may be revised by such Indemnified Person at any time)
and (ii) a brief description of the facts, circumstances or events giving rise
to the Damages, including, without limitation, the identity and address of any
third-party claimant and copies of any formal demand or complaint.
37
<PAGE>
8.5 RESOLUTION OF NOTICE OF CLAIM. Any Notice of Claim for
-----------------------------
Indemnification delivered by an Indemnified Person to the Company pursuant to
Section 8.4 hereof will be resolved as follows:
(a) In the event that the Company does not contest in writing to the
Indemnified Person the underlying liability upon which a Notice of Claim for
Indemnification is based, the Company shall pay to such Indemnified Person
within 30 calendar days after that Notice of Claim for Indemnification is
delivered to the Company the amount demanded therein.
(b) In the event that the Company gives written notice contesting all
or a portion of a Notice of Claim for Indemnification to such Indemnified Person
(a "Contested Claim for Indemnification") within the 30-day period provided
-----------------------------------
above, the Company's liability under that Contested Claim for Indemnification
will be settled by binding arbitration. The final decision of the arbitrator
will be furnished to the Company, the Purchaser and such Indemnified Person in
writing and will constitute a conclusive determination of the issue in question,
binding upon such parties.
(i) Any Contested Claim for Indemnification shall be settled by
arbitration in Orange County, California and, except as herein specifically
stated, in accordance with the commercial arbitration rules of the American
Arbitration Association ("AAA Rules") then in effect. However, in all events,
---------
the provisions of this Article VIII shall govern over any conflicting rules
which may now or hereafter be contained in the AAA Rules. Any judgment upon the
award rendered by the arbitrator may be entered in any court having jurisdiction
over the subject matter thereof. The arbitrator shall have the authority to
grant any equitable and legal remedies that would be available in any judicial
proceeding instituted to resolve a Contested Claim for Indemnification.
(ii) Any such arbitration will be conducted before a single arbitrator
who will be compensated for his or her services at a rate to be determined by
the parties or by the American Arbitration Association, but based upon
reasonable hourly or daily consulting rates for the arbitrator in the event the
parties are not able to agree upon his or her rate of compensation.
(iii) The American Arbitration Association will have the authority to
select an arbitrator from a list of arbitrators who are partners in a nationally
recognized firm of independent certified public accountants from the management
advisory services department (or comparable department or group) of such firm or
are partners in a major law firm acceptable to both the Company and such
Indemnified Person; provided, however, that such firm cannot be the firm of
certified public accountants then auditing the books and records of either party
or providing management or advisory services for either party.
(iv) The Company and such Indemnified Person will each pay 50% of the
initial compensation to be paid to the arbitrator in any such arbitration and
38
<PAGE>
50% of the costs of transcripts and other normal and regular expenses of the
arbitration proceedings; provided, however, that the prevailing party in any
arbitration will be entitled to an award of attorneys' fees and costs, and all
costs of arbitration, including those provided for above, will be paid by the
losing party, and the arbitrator will be authorized to make such determinations.
(v) Upon the conclusion of any arbitration proceedings hereunder, the
arbitrator will render findings of fact and conclusions of law and a written
opinion setting forth the basis and reasons for any decision reached and will
deliver such documents to the Purchaser, the Company and such Indemnified Party,
along with a signed copy of the award. The arbitrator chosen in accordance with
these provisions will not have the power to alter, amend or otherwise affect the
terms of the arbitration provisions set forth herein or any other provision of
this Agreement or any Related Agreement. Except as specifically otherwise
provided in this Agreement, arbitration will be the sole and exclusive remedy of
the parties for any Contested Claim for Indemnification arising out of this
Article VIII.
(c) Any amount owed by the Company to such Indemnified Person
hereunder shall be paid, in the sole discretion of C2000, in cash or shares of
Common Stock (all such shares so paid are collectively referred to herein as the
"Damage Shares"). In order to determine the number of Damage Shares to be
-------------
delivered in payment of a Claim for Indemnification, each such Damage Share
shall be valued at the lesser of (i) $1.25 or (ii) the average closing bid price
of the Common Stock on the New York Stock Exchange during the five consecutive
trading days ending upon the earlier of the date that (i) the Company agrees to
pay such Claim for Indemnification or (ii) an arbitrator determines that the
Company is liable for such Claim for Indemnification.
(d) An Indemnified Party need not exhaust any other remedies that may
be available to it before it proceeds directly in accordance with the provisions
of this Article VIII. The assertion of any single Claim for Indemnification
hereunder will not bar any Indemnified Person from asserting other Claims for
Indemnification hereunder.
ARTICLE IX
GENERAL PROVISIONS
9.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES. Regardless of any
------------------------------------------
investigation made by or on behalf of either party, all representations and
warranties contained in or made in writing by the Company, C2000 or Sub pursuant
to this Agreement will survive the Closing.
9.2 EXPENSES; CERTAIN FEES. Whether or not the transactions contemplated
----------------------
by this Agreement are completed, each party will pay its own fees and expenses
incurred in connection with the negotiation, preparation, execution and
performance of this Agreement,
39
<PAGE>
including, without limitation, the fees and expenses of attorneys, accountants
and other advisors.
9.3 NOTICES. All notices, requests, demands, waivers and other
-------
communications required or permitted to be given under this Agreement will be in
writing and will be deemed to have been duly given if delivered personally or
mailed, either by certified or registered mail with postage prepaid or by
national or international overnight courier, or sent by facsimile, as follows:
(a) if to the Company or the Borrower, to:
AmeriQuest Technologies, Inc.
MacArthur Place
3 Imperial Promenade
Santa Ana, CA 92707
Facsimile: (714) 513-2450
Attention: Chief Executive Officer
with a copy to:
Gibson, Dunn & Crutcher
4 Park Plaza
Irvine, CA 92714
Facsimile: (714) 451-4220
Attention: Thomas D. Magill, Esq.
(b) if to C2000 or Sub, to:
Computer 2000 AG
Wolfratshauser Strasse 84
81379 Munchen, Germany
Facsimile: 011-49-8972490-405
Attention: Vorstand
with a copy to:
Fenwick & West
Two Palo Alto Square
Palo Alto, CA 94306
Facsimile: (415) 857-0361
Attention: Dennis R. DeBroeck, Esq. and
Edwin N. Lowe, Esq.
or to such other Person or address as either party will specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications will be deemed to have been received (i) if given by personal
40
<PAGE>
delivery or by facsimile, on the date of personal delivery or by facsimile ,
(ii) if by nationally or internationally recognized overnight courier, on the
fourth business day following dispatch.
9.4 ENTIRE AGREEMENT. The Loan Agreement and Investment Agreement shall
----------------
remain in full force and effect until the Closing hereunder at which time such
agreements shall terminate and be superseded by this Agreement. Subject to the
preceding sentence, this Agreement and the Related Agreements (including the
Schedules and Exhibits hereto and thereto) constitute the entire agreement among
the parties hereto with respect to the subject matter hereof and thereof and
supersede all prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof and thereof.
9.5 BINDING EFFECT, BENEFIT. This Agreement will inure to the benefit of
-----------------------
and be binding upon the parties hereto and their respective successors, assigns,
executors and legal representatives. Nothing in this Agreement, expressed or
implied, is intended to confer on any Person other than the parties hereto or
their respective successors and assigns, any rights, remedies, obligations or
liabilities under or by reason of this Agreement.
9.6 ASSIGNABILITY. Except as provided below, this Agreement will not be
-------------
assigned by either party hereto without the prior written consent of the other
party. C2000 may, without the Company's consent, assign all or a portion of its
rights and obligations hereunder or under the Related Agreements to one or more
Subsidiaries of C2000 or to any Person that directly or indirectly controls
C2000; provided, that any such Subsidiary or Person (i) agrees to be bound by
---------
the provisions of this Agreement or such Related Agreement(s) to the same extent
as C2000, (ii) will be subject to any claims or defenses the Company will have
against C2000 and (iii) executes an assignment and assumption agreement in form
and substance reasonably acceptable to the Company. Notwithstanding any
assignment by C2000 in accordance with the foregoing provisions, C2000 will
continue to be liable for any obligations hereunder.
9.7 DISCLOSURES. Except as otherwise required by law, no public
-----------
announcement or press release will be made by either party with respect to this
Agreement or the transaction contemplated hereby without the prior written
consent of the other party, which consent will not unreasonably be withheld.
The Company and C2000 each agrees to use its best efforts to forward to the
other party for its prior review any filings with regulatory agencies regarding
this Agreement or the transactions contemplated hereby. Each party agrees to
consider in good faith any comments of the other party concerning such filings.
9.8 SECTION HEADINGS. The Section headings contained in this Agreement
----------------
are inserted for reference purposes only and will not affect the meaning or
interpretation of this Agreement.
9.9 COUNTERPARTS. This Agreement may be executed in multiple
------------
counterparts, each of which will be deemed to be an original, and all of which
together will be deemed to be one and the same instrument.
9.10 APPLICABLE LAW. This Agreement and the legal relations between the
--------------
parties hereto will be governed by and construed in accordance with the laws of
the State of Delaware
41
<PAGE>
without regard to conflicts of laws principles thereof to the extent that such
principles would apply the law of another jurisdiction.
9.11 NO RECOURSE AGAINST OTHERS. No recourse under or upon any
--------------------------
obligation, representation, warranty or covenant in this Agreement, or for any
claim based hereon or otherwise in respect hereof, will be had against any past,
present, or future officer, employee, partner or director, as such, of the
Company, C2000 or Sub or of any successor Person or assignee thereof, either
directly or indirectly, as the case may be, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment or
penalty or otherwise; it being expressly agreed that this Agreement is solely a
corporate obligation of each of the parties hereto, and any such successor or
assignee, and that no such personal liability whatever will attach to, or is or
will be incurred by, the officers, employees or directors, as such, of any such
party, or of any successor or assignee of any such party, under or by reason of
this Agreement. For the purposes of this Section 9.11 any reference to any
party also includes each of such party's current or future Subsidiaries.
9.12 SEVERABILITY. In case any provision of this Agreement will be
------------
invalid, illegal or unenforceable in any jurisdiction, then as to such
jurisdiction only, such provision will to the extent of such prohibition or
unenforceability be deemed severed from the remainder of this Agreement and the
validity, legality and enforceability of the remaining provisions will not in
any way be affected or impaired thereby.
9.13 NO WAIVER. No waiver of any breach or default hereunder of any party
---------
hereto will be deemed a waiver of any default or breach subsequently occurring.
9.14 REMEDIES NOT EXCLUSIVE. No remedy conferred by any of the specific
----------------------
provisions of this Agreement is intended to be exclusive of any other remedy and
each remedy will be cumulative and will be in addition to every other remedy
given hereunder or now or hereafter existing at law or in equity or by statute
or otherwise. No remedy will be deemed to be a limitation on the amount or
measure of damages resulting from any breach of this Agreement. The election of
any one or more remedies will not constitute a waiver of the right to pursue
other available remedies.
9.15 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES TRIAL BY JURY
--------------------
IN ANY LITIGATION IN ANY COURT ARISING OUT OF (I) THIS AGREEMENT OR ANY RELATED
AGREEMENT (II) THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR
ENFORCEMENT HEREOF OR THEREOF, OR (III) ANY CLAIM OR DISPUTE HOWEVER ARISING
BETWEEN THE PARTIES HERETO.
9.16 INTERPRETATION. The words "include", "includes" and "including" when
--------------
used herein shall be deemed in each case to be followed by the words "without
limitation."
9.17 RULES OF CONSTRUCTION. The parties hereto agree that they have been
---------------------
represented by counsel during the negotiation and execution of this Agreement
and, therefore, waive the application of any law, regulation, holding or rule of
construction providing that
42
<PAGE>
ambiguities in an agreement or other document will be construed against the
party drafting such agreement or document.
43
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.
COMPANY:
AMERIQUEST TECHNOLOGIES, INC. A
DELAWARE CORPORATION
By:
--------------------------
Name:
--------------------
Title:
-------------------
C2000:
COMPUTER 2000 AG, A COMPANY DULY
ORGANIZED UNDER THE LAWS OF THE
FEDERAL REPUBLIC OF GERMANY
By:
--------------------------
Name:
--------------------
Title:
-------------------
SUB:
COMPUTER 2000 INC., A DELAWARE
CORPORATION
By:
--------------------------
Name:
--------------------
Title:
-------------------
[SIGNATURE PAGE TO PURCHASE AGREEMENT]
44
<PAGE>
Exhibits
A Certificate of Designation
B-1 Form of Achievement Warrant
B-2 Form of Achievement Warrant
C Form of Acquisition Maintenance Warrant
D Form of Unit Maintenance Warrant
E Form of Registration Rights Agreement
F Form of Director's Indemnification Agreement
G Amendment No. 1 to Robec Agreement
H Agreement of Robert Beckett and Robert Beckett, Jr.
I Bucket Contingencies List
Schedules
1 All outstanding shares of the Company's Common Stock
2 All (a) Robec Acquisition Shares, (b) Unit Warrant Shares and
(c) outstanding Convertible Securities, including all outstanding
obligations of the Company, whether accrued or accruing, contingent or
otherwise, to issue any shares of its Common Stock or other securities
3 Detail for Unit Warrants
45
<PAGE>
EXHIBIT B-1
-----------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS.
---
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS.
Warrant to Purchase a Maximum of
657,289 Shares of Series D Preferred Stock
(subject to adjustment)
ACHIEVEMENT WARRANT:
WARRANT TO PURCHASE SERIES D PREFERRED STOCK
OF
AMERIQUEST TECHNOLOGIES, INC.
VOID AFTER AUGUST ___, 1998
This certifies that, for good and valuable consideration, Computer 2000
Inc., a company duly organized under the laws of Delaware (together with its
permitted transferees and assigns, "Holder"), is entitled, subject to the terms
and conditions of this Warrant, before August __, 1998 (the "Expiration Date")
---------------
and in accordance with the schedule in Section 1 hereof, to purchase from
AmeriQuest Technologies, Inc., a Delaware corporation (the "Company"), up to Six
-------
Hundred Fifty Seven Thousand, Two Hundred and Eighty-Nine (657,289) shares of
the Company's Series D Preferred Stock, par value $0.01 per share (the "Warrant
-------
Stock"), as constituted on August __, 1995 (the "Issue Date"), at the price of
----- ----------
$0.53 per share (the "Purchase Price") upon surrender of this Warrant at the
--------------
principal office of the Company together with a duly executed subscription in
the form attached hereto as Attachment 1 (the "Subscription") and simultaneous
------------
payment of the full Purchase Price therefor in lawful money of the United States
as provided herein. The Purchase Price and the number and character of shares
of Warrant Stock purchasable hereunder are subject to adjustment as
<PAGE>
provided herein. As used herein, the term "Warrant" shall include this
-------
Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.
1. EXERCISE. Subject to compliance with all applicable securities laws,
--------
this Warrant may be exercised in accordance with the following provisions:
1.1 Performance Milestones.
----------------------
In the event the Company achieves target quarterly gross sales of at least
the amount set forth below for such quarter ("Performance Milestones"), then
----------------------
this Warrant becomes exercisable for 82,161 shares of the Company's Series D
Preferred Stock at the Purchase Price with respect to each quarter in which
Performance Milestones are achieved:
<TABLE>
<CAPTION>
Calendar Quarter Ended Performance Milestones
------------------------------------ ----------------------
<S> <C>
September 30, 1995 $150 million
December 31, 1995 $160 million
March 31, 1996 $190 million
June 30, 1996 $200 million
September 30, 1996 $220 million
December 31, 1996 $230 million
March 31, 1997 $270 million
June 30, 1997 $280 million
</TABLE>
Quarterly gross sales for the Company shall be determined pursuant to the
Company's financial statements prepared in accordance with generally accepted
accounting principles consistently applied.
1.2 Performance Milestones Dates.
----------------------------
(a) Whether or not any of the Performance Milestones occur, this
Warrant may be exercised at any time on or after July 31, 1996 but before July
20, 1997 for 327,830 shares of the Company's Series D Preferred Stock, in
addition to the number of shares of Common Stock which became exercisable under
Section 1.1 due to achieving the Performance Milestones for any of the quarters
ended September 30, 1995, December 31, 1995, March 31, 1996 or June 30, 1996, at
the Purchase Price. The number of shares exercisable under this Section 1.2(a)
shall be reduced by that number of shares of Warrant Stock purchased pursuant to
Section 1.3 below.
(b) Whether or not any of the Performance Milestones occur, this
Warrant may be exercised at any time on or after July 31, 1997 but before the
Expiration Date for all the Warrant Stock. Except for adjustments as provided
in Section 5 hereof, the Holder is entitled, subject to the terms and conditions
of this Warrant, to purchase up to, but no more than, 657,289 shares of the
Company's Series D Preferred Stock. Any and all purchase rights to this Warrant
shall lapse August __, 1998.
1.3 Acceleration of Exercise. Notwithstanding the provisions of Section
------------------------
1.2, if at any time hereafter, the aggregate shares of Common and Preferred
Stock held by the
-2-
<PAGE>
Holder and Computer 2000 represent less than 51% of the total voting power of
the Company, Holder shall be permitted to exercise this Warrant to the extent
necessary to obtain such number of shares of Warrant Stock as will provide
Holder and Computer 2000, when combined with the shares of Common and Preferred
Stock then held by the Holder or Computer 2000, with shares representing 51% of
the total voting power of the Company.
1.4 Exercise. The Holder can exercise this Warrant to the extent it
--------
becomes exercisable in accordance with the preceding provisions, in whole or in
part, on any business day prior to the Expiration Date, by surrendering this
Warrant at the principal executive office of the Company (or such other office
or agency as the Company may designate by notice in writing to the Holder in
accordance with Section 13), together with the Subscription duly executed by the
Holder and payment in full of the Purchase Price for the number of shares of
Warrant Stock to be purchased upon such exercise. Upon a partial exercise, this
Warrant shall be surrendered, and a new Warrant of the same tenor for purchase
of the number of remaining shares of Warrant Stock not previously purchased
shall be issued by the Company to the Holder. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on the date of
its surrender for exercise and payment in full to the Company of the Purchase
Price as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date.
As soon as practicable on or after such date, the Company shall issue and
deliver to the Holder a certificate or certificates for the number of whole
shares of Warrant Stock issuable upon such exercise. This Warrant may be
exercised only for whole shares of Warrant Stock. No fractional shares may be
issued upon any exercise of this Warrant.
2. VALID ISSUANCE. All shares of Warrant Stock issued upon the exercise
--------------
of this Warrant in accordance with the terms hereof shall be validly issued,
fully paid and non-assessable. The Company shall not be required to pay any tax
or other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Warrant Stock in any name other than that of the
Holder of this Warrant, and in such case the Company shall not be required to
issue or deliver any stock certificate or security until such tax or other
charge has been paid, or it has been established to the Company's satisfaction
that no tax or other charge is due.
3. REPRESENTATIONS OF HOLDER; TRANSFER RESTRICTIONS.
------------------------------------------------
3.1 Representations. By accepting this Warrant, Holder makes the
---------------
representations set forth in Sections 4.4 and 4.5 of the Purchase Agreement (the
"Purchase Agreement"), dated as of August __, 1995, by and among the Company,
------------------
the Holder, and Computer 2000 AG, a company duly organized under the laws of the
Federal Republic of Germany, and agrees to the restrictions set forth in 3.2
below, and, by exercising this Warrant in whole or in part, Holder agrees that
Holder will then represent and will be deemed to represent that such
representations are true and complete as of the date of such exercise.
3.2 Transfer Restrictions. Except as provided below, Holder agrees not to
---------------------
make any transfer of all or any portion of this Warrant or the Warrant Stock
unless and until such transfer is registered under the 1933 Securities Act, as
amended and all applicable state securities laws or exemptions are available
therefrom.
-3-
<PAGE>
4. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
---------------------
Warrant, this Warrant and all rights hereunder may be transferred, in whole or
in part, on the books of the Company maintained for such purpose at the
principal office of the Company referred to above, by the Holder hereof in
person, or by duly authorized attorney and upon surrender of this Warrant
properly endorsed. Upon any permitted partial transfer, the Company will issue
and deliver to the transferring Holder a new Warrant or Warrants with respect to
the shares of Warrant Stock not so transferred. Each Holder of this Warrant
consents and agrees that the person in possession of this Warrant may be treated
by the Company, and all other persons dealing with this Warrant, as the absolute
owner hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding; provided,
--------
however that until a transfer of this Warrant is duly registered on the books of
------
the Company, the Company may treat the Holder hereof as the owner for all
purposes.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number and
-------------------------------------------------
character of shares of Warrant Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities or property at the time receivable or
issuable upon exercise of this Warrant) and the Purchase Price therefor, are
subject to adjustment upon occurrence of the following events after the Original
Issue Date:
5.1 Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc.
---------------------------------------------------------------------
The Purchase Price of this Warrant and the number of shares of Warrant Stock
issuable upon exercise or conversion of this Warrant (or any shares of stock or
other securities at the time issuable upon exercise of this Warrant) shall each
be proportionally adjusted to reflect any stock dividend, stock split, reverse
stock split, combination of shares, reclassification, recapitalization or other
similar event altering the number of outstanding shares of Common Stock (or such
other stock or securities into which the Common Stock may be converted or
exchanged); provided, however, that no adjustment shall be made under this
-------- -------
Section 5.1 for the issuance of Common Stock upon conversion or exercise of any
convertible stock, options, warrants or rights existing on the date hereof or
issued pursuant to the terms of the Purchase Agreement or any Related Agreements
(as defined in the Purchase Agreement).
5.2 Adjustment for Capital Reorganization, Consolidation, Merger. If any
------------------------------------------------------------
reorganization of the capital stock of the Company, or any consolidation or
merger of the Company with or into another corporation, or the sale of all or
substantially all of the Company's assets to another corporation shall be
effected in such a way that holders of Common Stock will be entitled to receive
stock, securities or assets with respect to or in exchange for their Common
Stock, then in each such case, the Holder of this Warrant, upon the exercise of
this Warrant (as provided in Section 1), at any time after the consummation of
such capital reorganization, consolidation, merger or sale, shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the exercise or conversion, as applicable, of this Warrant prior to such
consummation, the stock or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in this Section 5; and in each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property
receivable upon the exercise of this Warrant after such consummation.
-4-
<PAGE>
5.3 Conversion of Warrant Stock. At such time as the Preferred Stock of
---------------------------
the Company is automatically converted into Common Stock pursuant to Section
1.5(b) of the Certificate of Designations filed with the Delaware Secretary of
State with respect to the Company's Series D Preferred Stock ("Certificate of
--------------
Designations") and a sufficient number of authorized shares of Common Stock
------------
exists to effect the exercise of all unexercised warrants under this or any
other warrants held by Holder and any transferee of Holder into Common Stock
(pursuant to the formula set forth below) then, from and after the date on which
such Preferred Stock is so converted (the "Conversion Date"): (i) this Warrant
---------------
will be exercisable for Common Stock of the Company and the term "Warrant Stock"
-------------
(wherever used in this Warrant) will thereafter mean the Company's Common Stock;
(ii) the number of shares of Common Stock for which this Warrant will be
exercisable will equal that number of shares of Common Stock into which all of
the shares of Series D Preferred Stock that may be acquired under this Warrant
(whether before or after the Conversion Date) would have been convertible into
as of the Conversion Date pursuant to the Certificate of Designations had this
Warrant been exercised in full immediately prior to the Conversion Date; and
(iii) the Purchase Price will be the price obtained by dividing (a) the Purchase
Price in effect immediately prior to the Conversion Date by (b) the number of
shares of Common Stock (including fractional shares) into which each share of
Series D Preferred Stock would have been convertible into pursuant to the
Certificate of Designations immediately prior to the Conversion Date (subject to
subsequent adjustment as provided herein).
6. REGISTRATION RIGHTS. The Warrant Stock shall be entitled to the
-------------------
registration rights set forth in the Registration Rights Agreement dated as of
August __, 1995 between the Company and the Holder, and the Holder and the
Company hereby agree to be bound by all the provisions of such agreement which
relate to registration rights, as if the Holder was a "Holder" of "Registrable
Securities" as those terms are defined in such agreement.
7. NO IMPAIRMENT. Subject to the provisions of Section 5, the Company
-------------
will not, by amendment of its Certificate of Incorporation or bylaws, or through
reorganization, consolidation, merger, dissolution, issue or sale of securities,
sale of assets or any other voluntary action, willfully avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder of this Warrant against impairment.
8. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in
-----------------------------
either the Purchase Price or in the number of shares of Warrant Stock, or other
stock, securities or property receivable on the exercise of this Warrant, the
Chief Financial Officer of the Company shall compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing the facts upon which such adjustment is based,
including a statement of the adjusted Purchase Price. The Company will
forthwith mail a copy of each such certificate to the Holder of this Warrant.
9. NOTICES OF RECORD DATE. In case:
----------------------
(a) the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time receivable upon the exercise of this
Warrant) for the purpose of entitling them to receive any dividend or
distribution; or
-5-
<PAGE>
(b) of any reclassification, recapitalization, consolidation or merger of
the Company with or into another corporation; or any conveyance of all or
substantially all of the assets of the Company to another corporation in which
holders of the Company's stock are to receive stock, securities or property of
another corporation; or any dissolution, liquidation or winding-up of the
Company;
then, and in each such case, the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such dividend or distribution,
and stating the amount and character of such dividend, or (ii) the date on which
such reclassification, recapitalization, consolidation, merger, conveyance,
dissolution, liquidation, or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Warrant Stock (or such
stock or securities as at the time are receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Warrant Stock (or such
other stock or securities) for securities or other property deliverable upon
such reclassification, recapitalization, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
ten days prior to the date therein specified.
10. LOSS OR MUTILATION. Upon receipt by the Company of evidence
------------------
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant, and of a written indemnity agreement
satisfactory to the Company, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor.
11. RESERVATION OF WARRANT STOCK. The Company shall at all times reserve
----------------------------
and keep available out of its authorized but unissued shares of Warrant Stock,
solely for the purpose of effecting the exercise of this Warrant, such number of
its shares of Warrant Stock as shall from time to time be sufficient to effect
the exercise of this Warrant, and if at any time (including without limitation
the date hereof) the number of authorized but unissued shares of Warrant Stock
shall not be sufficient to effect the exercise of this Warrant, the Company will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Warrant Stock to such number
of shares as shall be sufficient for such purpose.
12. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Warrant does not by
---------------------------------------
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of affirmative action by Holder to purchase
Warrant Stock by exercise of this Warrant, no provisions of this Warrant and no
enumeration herein of the rights or privileges of the Holder shall cause such
Holder to be a shareholder of the Company for any purpose.
13. NOTICES. All notices and other communications from the Company to the
-------
Holder shall be (a) delivered to the Holder or (b) sent by facsimile
transmission or mailed by first-class mail, postage prepaid, to the facsimile
number or the address, as the case may be, furnished to the Company in writing
by the Holder and appearing on the books of the Company.
-6-
<PAGE>
14. CHANGE; WAIVER. Neither this Warrant nor any term hereof may be
--------------
amended or waived except by an instrument in writing signed by the party against
which enforcement of the amendment or waiver is sought.
15. HEADINGS. The headings in this Warrant are for purposes of
--------
convenience in reference only, and will not be deemed to constitute a part
hereof.
16. LAW GOVERNING. This Warrant will be construed and enforced in
-------------
accordance with, and governed by, the laws of the State of Delaware, excluding
that body of law applicable to conflicts of law.
Dated: August ___, 1995
AMERIQUEST TECHNOLOGIES, INC.
By:
----------------------------------------
President
By:
----------------------------------------
Secretary
-7-
<PAGE>
ATTACHMENT 1
------------
SUBSCRIPTION FORM
-----------------
(To be executed only upon exercise of Warrant)
To: AmeriQuest Technologies, Inc.
The undersigned Holder of the accompanying Warrant irrevocably exercises
this Warrant for the purchase of ____________ shares of Series D Preferred Stock
of AmeriQuest Technologies, Inc. purchasable with this Warrant, and herewith
makes payment therefor, all at the price and on the terms and conditions
specified in this Warrant and hereby confirms that the representations set forth
in Sections 4.4 and 4.5 of the Purchase Agreement (as defined in the Warrant)
are true and complete with respect to the undersigned as of the date hereof.
_____________________
(Date)
(Name of Holder)
-------------------------------------------
By:
---------------------------------------
Its:
--------------------------------------
Address:
----------------------------------
-------------------------------------------
<PAGE>
EXHIBIT B-2
-----------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS.
---
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS.
Warrant to Purchase a Maximum of
746,186 Shares of Series D Preferred Stock
(subject to adjustment)
ACHIEVEMENT WARRANT:
WARRANT TO PURCHASE SERIES D PREFERRED STOCK
OF
AMERIQUEST TECHNOLOGIES, INC.
VOID AFTER AUGUST ___, 1998
This certifies that, for good and valuable consideration, Computer 2000
Inc., a company duly organized under the laws of Delaware (together with its
permitted transferees and assigns, "Holder"), is entitled, subject to the terms
------
and conditions of this Warrant, before August __, 1998 (the "Expiration Date")
---------------
and in accordance with the schedule in Section 1 hereof, to purchase from
AmeriQuest Technologies, Inc., a Delaware corporation (the "Company"), up to
-------
Seven Hundred Forty Six Thousand, One Hundred and Eighty-Six (746,186) shares of
the Company's Series D Preferred Stock, par value $0.01 per share (the "Warrant
-------
Stock"), as constituted on August __, 1995 (the "Issue Date"), at the price of
----- ----------
$0.53 per share (the "Purchase Price") upon surrender of this Warrant at the
--------------
principal office of the Company together with a duly executed subscription in
the form attached hereto as Attachment 1 (the "Subscription") and simultaneous
------------
payment of the full Purchase Price therefor in lawful money of the United States
as provided herein. The Purchase Price and the number and character of shares
of Warrant Stock purchasable hereunder are subject to adjustment as
<PAGE>
provided herein. As used herein, the term "Warrant" shall include this Warrant
and any warrants delivered in substitution or exchange therefor as provided
herein.
1. EXERCISE. Subject to compliance with all applicable securities laws,
--------
this Warrant may be exercised in accordance with the following provisions:
1.1 Performance Milestones.
----------------------
In the event the Company achieves target quarterly gross sales of at least
the amount set forth below for such quarter ("Performance Milestones"), then
----------------------
this Warrant becomes exercisable for 93,273 shares of the Company's Series D
Preferred Stock at the Purchase Price with respect to each quarter in which
Performance Milestones are achieved:
<TABLE>
<CAPTION>
Calendar Quarter Ended Performance Milestones
------------------------------------ ----------------------
<S> <C>
September 30, 1995 $150 million
December 31, 1995 $160 million
March 31, 1996 $190 million
June 30, 1996 $200 million
September 30, 1996 $220 million
December 31, 1996 $230 million
March 31, 1997 $270 million
June 30, 1997 $280 million
</TABLE>
Quarterly gross sales for the Company shall be determined pursuant to the
Company's financial statements prepared in accordance with generally accepted
accounting principles consistently applied.
1.2 Performance Milestones Dates.
----------------------------
(a) Whether or not any of the Performance Milestones occur, this
Warrant may be exercised at any time on or after July 31, 1996 but before July
20, 1997 for 372,170 shares of the Company's Series D Preferred Stock, in
addition to the number of shares of Common Stock which became exercisable under
Section 1.1 due to achieving the Performance Milestones for any of the quarters
ended September 30, 1995, December 31, 1995, March 31, 1996 or June 30, 1996, at
the Purchase Price. The number of shares exercisable under this Section 1.2(a)
shall be reduced by that number of shares of Warrant Stock purchased pursuant to
Section 1.3 below.
(b) Whether or not any of the Performance Milestones occur, this
Warrant may be exercised at any time on or after July 31, 1997 but before the
Expiration Date for all the Warrant Stock. Except for adjustments as provided
in Section 5 hereof, the Holder is entitled, subject to the terms and conditions
of this Warrant, to purchase up to, but no more than, 746,186 shares of the
Company's Series D Preferred Stock. Any and all purchase rights to this Warrant
shall lapse August __, 1998.
1.3 Acceleration of Exercise. Notwithstanding the provisions of Section
------------------------
1.2, if at any time hereafter, the aggregate shares of Common and Preferred
Stock held by the
-2-
<PAGE>
Holder and Computer 2000 represent less than 51% of the total voting power of
the Company, Holder shall be permitted to exercise this Warrant to the extent
necessary to obtain such number of shares of Warrant Stock as will provide
Holder and Computer 2000, when combined with the shares of Common and Preferred
Stock then held by the Holder or Computer 2000, with shares representing 51% of
the total voting power of the Company.
1.4 Exercise. The Holder can exercise this Warrant to the extent it
--------
becomes exercisable in accordance with the preceding provisions, in whole or in
part, on any business day prior to the Expiration Date, by surrendering this
Warrant at the principal executive office of the Company (or such other office
or agency as the Company may designate by notice in writing to the Holder in
accordance with Section 13), together with the Subscription duly executed by the
Holder and payment in full of the Purchase Price for the number of shares of
Warrant Stock to be purchased upon such exercise. Upon a partial exercise, this
Warrant shall be surrendered, and a new Warrant of the same tenor for purchase
of the number of remaining shares of Warrant Stock not previously purchased
shall be issued by the Company to the Holder. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on the date of
its surrender for exercise and payment in full to the Company of the Purchase
Price as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date.
As soon as practicable on or after such date, the Company shall issue and
deliver to the Holder a certificate or certificates for the number of whole
shares of Warrant Stock issuable upon such exercise. This Warrant may be
exercised only for whole shares of Warrant Stock. No fractional shares may be
issued upon any exercise of this Warrant.
2. VALID ISSUANCE. All shares of Warrant Stock issued upon the exercise
--------------
of this Warrant in accordance with the terms hereof shall be validly issued,
fully paid and non-assessable. The Company shall not be required to pay any tax
or other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Warrant Stock in any name other than that of the
Holder of this Warrant, and in such case the Company shall not be required to
issue or deliver any stock certificate or security until such tax or other
charge has been paid, or it has been established to the Company's satisfaction
that no tax or other charge is due.
3. REPRESENTATIONS OF HOLDER; TRANSFER RESTRICTIONS.
------------------------------------------------
3.1 Representations. By accepting this Warrant, Holder makes the
---------------
representations set forth in Sections 4.4 and 4.5 of the Purchase Agreement (the
"Purchase Agreement"), dated as of August __, 1995, by and among the Company,
------------------
the Holder, and Computer 2000 AG, a company duly organized under the laws of the
Federal Republic of Germany, and agrees to the restrictions set forth in 3.2
below, and, by exercising this Warrant in whole or in part, Holder agrees that
Holder will then represent and will be deemed to represent that such
representations are true and complete as of the date of such exercise.
3.2 Transfer Restrictions. Except as provided below, Holder agrees not to
---------------------
make any transfer of all or any portion of this Warrant or the Warrant Stock
unless and until such transfer is registered under the 1933 Securities Act, as
amended and all applicable state securities laws or exemptions are available
therefrom.
-3-
<PAGE>
4. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
---------------------
Warrant, this Warrant and all rights hereunder may be transferred, in whole or
in part, on the books of the Company maintained for such purpose at the
principal office of the Company referred to above, by the Holder hereof in
person, or by duly authorized attorney and upon surrender of this Warrant
properly endorsed. Upon any permitted partial transfer, the Company will issue
and deliver to the transferring Holder a new Warrant or Warrants with respect to
the shares of Warrant Stock not so transferred. Each Holder of this Warrant
consents and agrees that the person in possession of this Warrant may be treated
by the Company, and all other persons dealing with this Warrant, as the absolute
owner hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding; provided,
--------
however that until a transfer of this Warrant is duly registered on the books of
------
the Company, the Company may treat the Holder hereof as the owner for all
purposes.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number and
-------------------------------------------------
character of shares of Warrant Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities or property at the time receivable or
issuable upon exercise of this Warrant) and the Purchase Price therefor, are
subject to adjustment upon occurrence of the following events after the Original
Issue Date:
5.1 Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc.
---------------------------------------------------------------------
The Purchase Price of this Warrant and the number of shares of Warrant Stock
issuable upon exercise or conversion of this Warrant (or any shares of stock or
other securities at the time issuable upon exercise of this Warrant) shall each
be proportionally adjusted to reflect any stock dividend, stock split, reverse
stock split, combination of shares, reclassification, recapitalization or other
similar event altering the number of outstanding shares of Common Stock (or such
other stock or securities into which the Common Stock may be converted or
exchanged); provided, however, that no adjustment shall be made under this
--------
Section 5.1 for the issuance of Common Stock upon conversion or exercise of any
convertible stock, options, warrants or rights existing on the date hereof or
issued pursuant to the terms of the Purchase Agreement or any Related Agreements
(as defined in the Purchase Agreement).
5.2 Adjustment for Capital Reorganization, Consolidation, Merger. If any
------------------------------------------------------------
reorganization of the capital stock of the Company, or any consolidation or
merger of the Company with or into another corporation, or the sale of all or
substantially all of the Company's assets to another corporation shall be
effected in such a way that holders of Common Stock will be entitled to receive
stock, securities or assets with respect to or in exchange for their Common
Stock, then in each such case, the Holder of this Warrant, upon the exercise of
this Warrant (as provided in Section 1), at any time after the consummation of
such capital reorganization, consolidation, merger or sale, shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the exercise or conversion, as applicable, of this Warrant prior to such
consummation, the stock or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in this Section 5; and in each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property
receivable upon the exercise of this Warrant after such consummation.
-4-
<PAGE>
5.3 Conversion of Warrant Stock. At such time as the Preferred Stock of
---------------------------
the Company is automatically converted into Common Stock pursuant to Section
1.5(b) of the Certificate of Designations filed with the Delaware Secretary of
State with respect to the Company's Series D Preferred Stock ("Certificate of
--------------
Designations") and a sufficient number of authorized shares of Common Stock
------------
exists to effect the exercise of all unexercised warrants under this or any
other warrants held by Holder and any transferee of Holder into Common Stock
(pursuant to the formula set forth below) then, from and after the date on which
such Preferred Stock is so converted (the "Conversion Date"): (i) this Warrant
---------------
will be exercisable for Common Stock of the Company and the term "Warrant Stock"
-------------
(wherever used in this Warrant) will thereafter mean the Company's Common Stock;
(ii) the number of shares of Common Stock for which this Warrant will be
exercisable will equal that number of shares of Common Stock into which all of
the shares of Series D Preferred Stock that may be acquired under this Warrant
(whether before or after the Conversion Date) would have been convertible into
as of the Conversion Date pursuant to the Certificate of Designations had this
Warrant been exercised in full immediately prior to the Conversion Date; and
(iii) the Purchase Price will be the price obtained by dividing (a) the Purchase
Price in effect immediately prior to the Conversion Date by (b) the number of
shares of Common Stock (including fractional shares) into which each share of
Series D Preferred Stock would have been convertible into pursuant to the
Certificate of Designations immediately prior to the Conversion Date (subject to
subsequent adjustment as provided herein).
6. REGISTRATION RIGHTS. The Warrant Stock shall be entitled to the
-------------------
registration rights set forth in the Registration Rights Agreement dated as of
August __, 1995 between the Company and the Holder, and the Holder and the
Company hereby agree to be bound by all the provisions of such agreement which
relate to registration rights, as if the Holder was a "Holder" of "Registrable
Securities" as those terms are defined in such agreement.
7. NO IMPAIRMENT. Subject to the provisions of Section 5, the Company
-------------
will not, by amendment of its Certificate of Incorporation or bylaws, or through
reorganization, consolidation, merger, dissolution, issue or sale of securities,
sale of assets or any other voluntary action, willfully avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder of this Warrant against impairment.
8. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in
-----------------------------
either the Purchase Price or in the number of shares of Warrant Stock, or other
stock, securities or property receivable on the exercise of this Warrant, the
Chief Financial Officer of the Company shall compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing the facts upon which such adjustment is based,
including a statement of the adjusted Purchase Price. The Company will
forthwith mail a copy of each such certificate to the Holder of this Warrant.
9. NOTICES OF RECORD DATE. In case:
----------------------
(a) the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time receivable upon the exercise of this
Warrant) for the purpose of entitling them to receive any dividend or
distribution; or
-5-
<PAGE>
(b) of any reclassification, recapitalization, consolidation or merger of
the Company with or into another corporation; or any conveyance of all or
substantially all of the assets of the Company to another corporation in which
holders of the Company's stock are to receive stock, securities or property of
another corporation; or any dissolution, liquidation or winding-up of the
Company;
then, and in each such case, the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such dividend or distribution,
and stating the amount and character of such dividend, or (ii) the date on which
such reclassification, recapitalization, consolidation, merger, conveyance,
dissolution, liquidation, or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Warrant Stock (or such
stock or securities as at the time are receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Warrant Stock (or such
other stock or securities) for securities or other property deliverable upon
such reclassification, recapitalization, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
ten days prior to the date therein specified.
10. LOSS OR MUTILATION. Upon receipt by the Company of evidence
------------------
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant, and of a written indemnity agreement
satisfactory to the Company, and (in the case of mutilation) upon surrender and
cancellation of this Warrant, the Company will execute and deliver in lieu
thereof a new Warrant of like tenor.
11. RESERVATION OF WARRANT STOCK. The Company shall at all times reserve
----------------------------
and keep available out of its authorized but unissued shares of Warrant Stock,
solely for the purpose of effecting the exercise of this Warrant, such number of
its shares of Warrant Stock as shall from time to time be sufficient to effect
the exercise of this Warrant, and if at any time (including without limitation
the date hereof) the number of authorized but unissued shares of Warrant Stock
shall not be sufficient to effect the exercise of this Warrant, the Company will
take such corporate action as may, in the opinion of its counsel, be necessary
to increase its authorized but unissued shares of Warrant Stock to such number
of shares as shall be sufficient for such purpose.
12. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Warrant does not by
---------------------------------------
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of affirmative action by Holder to purchase
Warrant Stock by exercise of this Warrant, no provisions of this Warrant and no
enumeration herein of the rights or privileges of the Holder shall cause such
Holder to be a shareholder of the Company for any purpose.
13. NOTICES. All notices and other communications from the Company to the
-------
Holder shall be (a) delivered to the Holder or (b) sent by facsimile
transmission or mailed by first-class mail, postage prepaid, to the facsimile
number or the address, as the case may be, furnished to the Company in writing
by the Holder and appearing on the books of the Company.
-6-
<PAGE>
14. CHANGE; WAIVER. Neither this Warrant nor any term hereof may be
--------------
amended or waived except by an instrument in writing signed by the party against
which enforcement of the amendment or waiver is sought.
15. HEADINGS. The headings in this Warrant are for purposes of
--------
convenience in reference only, and will not be deemed to constitute a part
hereof.
16. LAW GOVERNING. This Warrant will be construed and enforced in
-------------
accordance with, and governed by, the laws of the State of Delaware, excluding
that body of law applicable to conflicts of law.
Dated: August ___, 1995
AMERIQUEST TECHNOLOGIES, INC.
By:
----------------------------------------
President
By:
----------------------------------------
Secretary
-7-
<PAGE>
ATTACHMENT 1
------------
SUBSCRIPTION FORM
-----------------
(To be executed only upon exercise of Warrant)
To: AmeriQuest Technologies, Inc.
The undersigned Holder of the accompanying Warrant irrevocably exercises
this Warrant for the purchase of ____________ shares of Series D Preferred Stock
of AmeriQuest Technologies, Inc. purchasable with this Warrant, and herewith
makes payment therefor, all at the price and on the terms and conditions
specified in this Warrant and hereby confirms that the representations set forth
in Sections 4.4 and 4.5 of the Purchase Agreement (as defined in the Warrant)
are true and complete with respect to the undersigned as of the date hereof.
_____________________
(Date)
--------------------------------------------
(Name of Holder)
By:
----------------------------------------
Its:
--------------------------------------
Address:
-----------------------------------
-------------------------------------------
<PAGE>
EXHIBIT C
---------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS.
---
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS.
ACQUISITION MAINTENANCE WARRANT:
WARRANT TO PURCHASE SERIES E PREFERRED STOCK
OF
AMERIQUEST TECHNOLOGIES, INC.
AUGUST __, 1995
This certifies that, for good and valuable consideration, Computer 2000
Inc., a company duly organized under the laws of Delaware (together with its
permitted transferees and assigns, "Holder"), is entitled, subject to the terms
------
and conditions of this Warrant, to purchase from AmeriQuest Technologies, Inc.,
a Delaware corporation (the "Company"), that number of shares of the Company's
-------
Series E Preferred Stock, par value $0.01 per share, as is determined in
accordance with Section 1 hereof, as constituted on August ___, 1995 (the "Issue
-----
Date"), at the price of $1.25 per share (the "Purchase Price") upon surrender of
---- --------------
this Warrant at the principal office of the Company together with a duly
executed subscription in the form attached hereto as Attachment 1 (the
"Subscription") and simultaneous payment of the full Purchase Price therefor in
-------------
lawful money of the United States as provided herein. The Purchase Price and
the number and character of shares of Warrant Stock purchasable hereunder are
subject to adjustment as provided herein. As used herein, the term "Warrant"
-------
shall include this Warrant and any warrants delivered in substitution or
exchange therefor as provided herein. Capitalized terms used and not otherwise
defined herein shall have the respective meanings set forth in the Purchase
Agreement (the "Purchase Agreement") dated as of August __, 1995, by and among
------------------
the Company, the Holder, and Computer 2000 AG, a company duly organized under
the laws of the Federal Republic of Germany.
<PAGE>
1. EXERCISE. In connection with the Robec Acquisition (as defined in the
--------
Purchase Agreement), the Company expects to issue an aggregate of at least 2.8
million shares of the Company's Common Stock, including any shares previously
issued (such 2.8 million shares as appropriately adjusted for any Common Stock
dividends, splits or combinations or similar event are herein referred to as the
"Threshold Shares"), in exchange for all of the outstanding shares of Robec. In
----------------
the event that the Company, in connection with the Robec Acquisition, issues
Robec Acquisition Shares (as defined in the Purchase Agreement) in excess of
number of Threshold Shares (the "Excess Shares"), the Holder shall be entitled
-------------
under this Warrant to purchase from the Company at the Purchase Price that
number of shares of Series E Preferred Stock equal to one twenty-fifth (subject
to adjustment under Section 5 hereof) of the Excess Shares (the "Warrant
-------
Stock"). The Company may issue the Excess Shares over a period of time. Each
-----
issue of Common Stock constituting some or all of the Excess Shares shall be
referred to as the "Incremental Shares." In each instance that the Company
------------------
issues the Incremental Shares (the "Incremental Issue Date"), this Warrant may
----------------------
be exercised for that number of shares of Warrant Stock as determined above
commencing on the Incremental Issue Date and terminating six months after the
Notice Date as set forth below. The Holder may forego its right to exercise
this Warrant with respect to certain Incremental Shares without waiving its
rights under this Warrant to any other Incremental Shares.
Upon the issuance of any shares of its Common Stock in connection with the
Robec Acquisition, the Company shall immediately notify the Holder of such
issuance (the "Notice") (but in no event not more than three business days
------
thereafter), as to (i) the number of shares of Common Stock so issued and (ii)
the aggregate number of shares of Common Stock issued through the date of such
exercise as part of or in connection with the Robec Acquisition. The date the
Holder receives the Notice is herein referred to as the "Notice Date."
-----------
The Holder can exercise this Warrant to the extent it becomes exercisable
in accordance with the preceding provisions, in whole or in part, on any
business day during the operative six-month period(s), by surrendering this
Warrant at the principal executive office of the Company (or such other office
or agency as the Company may designate by notice in writing to the Holder in
accordance with Section 13), together with the Subscription duly executed by the
Holder and payment in full of the Purchase Price for the number of shares of
Warrant Stock to be purchased upon such exercise. Upon a partial exercise, this
Warrant shall be surrendered, and a new Warrant of the same tenor for purchase
of the number of remaining shares of Warrant Stock not previously purchased
shall be issued by the Company to the Holder. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on the date of
its surrender for exercise and payment in full to the Company of the Purchase
Price as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date.
As soon as practicable on or after such date, the Company shall issue and
deliver to the Holder a certificate or certificates for the number of whole
shares of Warrant Stock issuable upon such exercise. This Warrant may be
exercised only for whole shares of Warrant Stock. No fractional shares may be
issued upon any exercise of this Warrant.
2. VALID ISSUANCE. All shares of Warrant Stock issued upon the exercise
--------------
of this Warrant in accordance with the terms hereof shall be validly issued,
fully paid and non-assessable. The Company shall not be required to pay any tax
or other charge imposed in
-2-
<PAGE>
connection with any transfer involved in the issue of any certificate for shares
of Warrant Stock in any name other than that of the Holder of this Warrant, and
in such case the Company shall not be required to issue or deliver any stock
certificate or security until such tax or other charge has been paid, or it has
been established to the Company's satisfaction that no tax or other charge is
due.
3. REPRESENTATIONS OF HOLDER; TRANSFER RESTRICTIONS.
------------------------------------------------
3.1 Representations. By accepting this Warrant, Holder makes the
---------------
representations set forth in Sections 4.4 and 4.5 of the Purchase Agreement, and
agrees to the restrictions set forth in Section 3.2 below, and, by exercising
this Warrant in whole or in part, Holder agrees that Holder will then represent
and will be deemed to represent that such representations are true and complete
as of the date of such exercise.
3.2 Transfer Restrictions. Except as provided below, Holder agrees not to
---------------------
make any transfer of all or any portion of this Warrant or the Warrant Stock
unless and until such transfer is registered under the 1933 Securities Act as
amended and all applicable state securities laws or exceptions therefrom are
available.
4. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
---------------------
Warrant, this Warrant and all rights hereunder may be transferred, in whole or
in part, on the books of the Company maintained for such purpose at the
principal office of the Company referred to above, by the Holder hereof in
person, or by duly authorized attorney, upon surrender of this Warrant properly
endorsed. Upon any permitted partial transfer, the Company will issue and
deliver to the transferring Holder a new Warrant or Warrants with respect to the
shares of Warrant Stock not so transferred. Each Holder of this Warrant
consents and agrees that the person in possession of this Warrant may be treated
by the Company, and all other persons dealing with this Warrant, as the absolute
owner hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding; provided,
--------
however that until a transfer of this Warrant is duly registered on the books of
------
the Company, the Company may treat the Holder hereof as the owner for all
purposes.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number and
-------------------------------------------------
character of shares of Warrant Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities or property at the time receivable or
issuable upon exercise of this Warrant) and the Purchase Price therefor, are
subject to adjustment upon occurrence of the following events after the Original
Issue Date:
5.1 Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc.
---------------------------------------------------------------------
The Purchase Price of this Warrant and the number of shares of Warrant Stock
issuable upon exercise or conversion of this Warrant (or any shares of stock or
other securities at the time issuable upon exercise of this Warrant) shall each
be proportionally adjusted to reflect any stock dividends, stock split, reverse
stock split, combination of shares, reclassification, recapitalization or other
similar event altering the number of outstanding shares of Common Stock (or such
other stock or securities) into which the Common Stock may be converted or
exchanged; provided, however, that no adjustment shall be made under this
--------
Section 5.1 for the issuance of Common Stock upon conversion or exercise of any
convertible stock, options,
-3-
<PAGE>
warrants or rights existing on the date hereof or issued pursuant to the terms
of the Purchase Agreement or any Related Agreements (as defined in the Purchase
Agreement).
5.2 Adjustment for Capital Reorganization, Consolidation, Merger. If any
------------------------------------------------------------
reorganization of the capital stock of the Company, or any consolidation or
merger of the Company with or into another corporation, or the sale of all or
substantially all of the Company's assets to another corporation shall be
effected in such a way that holders of Common Stock will be entitled to receive
stock, securities or assets with respect to or in exchange for their Common
Stock, then in each such case, the Holder of this Warrant, upon the exercise of
this Warrant (as provided in Section 1), at any time after the consummation of
such capital reorganization, consolidation, merger or sale, shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the exercise or conversion, as applicable, of this Warrant prior to such
consummation, the stock or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in this Section 5; and in each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property
receivable upon the exercise of this Warrant after such consummation.
5.3 Conversion of Warrant Stock. At such time as the Preferred Stock of
---------------------------
the Company is automatically converted into Common Stock pursuant to Section
1.5(b) of the Certificate of Designations filed with the Delaware Secretary of
State with respect to the Company's Series E Preferred Stock ("Certificate of
--------------
Designations") and a sufficient number of authorized shares of Common Stock
------------
exists to effect the exercise of all unexercised warrants under this or any
other warrants held by Holder and any transferee of Holder into Common Stock
(pursuant to the formula set forth below) then, from and after the date on which
such Preferred Stock is so converted (the "Conversion Date"): (i) this Warrant
---------------
will be exerciseable for Common Stock of the Company and the term "Warrant
-------
Stock" (wherever used in this Warrant) will thereafter mean the Company's Common
-----
Stock; (ii) the number of shares of Common Stock for which this Warrant will be
exerciseable will equal that number of shares of Common Stock into which all of
the shares of Series E Preferred Stock that may be acquired under this Warrant
(whether before or after the Conversion Date) would have been convertible into
as of the Conversion Date pursuant to the Certificate of Designations had this
Warrant been exercised in full immediately prior to the Conversion Date; and
(iii) the Purchase Price will be the price obtained by dividing (a) the Purchase
Price in effect immediately prior to the Conversion Date by (b) the number of
shares of Common Stock (including fractional shares) into which each share of
Series E Preferred Stock would have been convertible into pursuant to the
Certificate of Designations immediately prior to the Conversion Date (subject to
subsequent adjustment as provided herein).
6. REGISTRATION RIGHTS. The Warrant Stock shall be entitled to the
-------------------
registration rights set forth in the Registration Rights Agreement dated as of
August __, 1995 between the Company and the Holder, and the Holder and the
Company hereby agree to be bound by all the provisions of such agreement which
relate to registration rights, as if the Holder was a "Holder" of "Registrable
Securities" as those terms are defined in such agreement.
7. NO IMPAIRMENT. Subject to the provisions of Section 5, the Company
-------------
will not, by amendment of its Certificate of Incorporation or bylaws, or through
reorganization,
-4-
<PAGE>
consolidation, merger, dissolution, issue or sale of securities, sale of assets
or any other voluntary action, willfully avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the Holder of this Warrant against impairment.
8. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in
-----------------------------
either the Purchase Price or in the number of shares of Warrant Stock, or other
stock, securities or property receivable on the exercise of this Warrant, the
Chief Financial Officer of the Company shall compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing the facts upon which such adjustment is based,
including a statement of the adjusted Purchase Price. The Company will
forthwith mail a copy of each such certificate to the Holder of this Warrant.
9. NOTICES OF RECORD DATE. In case:
----------------------
(a) the Company shall take a record of the holders of its Common Stock (or
other stock or securities at the time receivable upon the exercise of this
Warrant) for the purpose of entitling them to receive any dividend or
distribution ; or
(b) of any reclassification or recapitalization, consolidation or merger of
the Company with or into another corporation; or any conveyance of all or
substantially all of the assets of the Company to another corporation in which
holders of the Company's stock are to receive stock, securities or property of
another corporation; or any dissolution, liquidation of winding-up of the
Company;
then, and in each such case, the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such dividend or distribution,
and stating the amount and character of such dividend, or (ii) the date on which
such reclassification, recapitalization, consolidation, merger, conveyance,
dissolution, liquidation, or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Warrant Stock (or such
stock or securities as at the time are receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Warrant Stock (or such
other stock or securities) for securities or other property deliverable upon
such reclassification, recapitalization, consolidation, merger, conveyance,
dissolution, liquidation or winding-up. Such notice shall be mailed at least
ten days prior to the date therein specified.
10. LOSS OR MUTILATION. Upon receipt by the Company of evidence
------------------
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant, and of a written indemnity agreement
reasonably satisfactory to the Company, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
in lieu thereof a new Warrant of like tenor.
11. RESERVATION OF WARRANT STOCK. The Company shall at all times reserve
----------------------------
and keep available out of its authorized but unissued shares of Warrant Stock,
solely for the purpose of effecting the exercise of this Warrant, such number of
its shares of Warrant Stock as shall from time to time be sufficient to effect
the exercise of this Warrant, and if at any time
-5-
<PAGE>
(including without limitation the date hereof) the number of authorized but
unissued shares of Warrant Stock shall not be sufficient to effect the exercise
of this Warrant, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Warrant Stock to such number of shares as shall be sufficient for such
purpose.
12. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Warrant does not by
---------------------------------------
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of affirmative action by Holder to purchase
Warrant Stock by exercise of this Warrant, no provisions of this Warrant and no
enumeration herein of the rights or privileges of the Holder shall cause such
Holder to be a shareholder of the Company for any purpose.
13. NOTICES. All notices and other communications from the Company to the
-------
Holder shall be (a) delivered to the Holder or (b) sent by facsimile
transmission or mailed by first-class mail, postage prepaid, to the facsimile
number or the address, as the case may be, furnished to the Company in writing
by the Holder and appearing on the books of the Company.
14. CHANGE; WAIVER. Neither this Warrant nor any term hereof may be
--------------
amended or waived except by an instrument in writing signed by the party against
which enforcement of the amendment or waiver is sought.
15. HEADINGS. The headings in this Warrant are for purposes of
--------
convenience in reference only, and will not be deemed to constitute a part
hereof.
16. LAW GOVERNING. This Warrant will be construed and enforced in
-------------
accordance with, and governed by, the laws of the State of Delaware, excluding
that body of law applicable to conflicts of law.
Dated: August ___, 1995
AMERIQUEST TECHNOLOGIES, INC.
By:
--------------------------------------
President
By:
--------------------------------------
Secretary
-6-
<PAGE>
ATTACHMENT 1
------------
SUBSCRIPTION FORM
-----------------
TO THE
------
ACQUISITION MAINTENANCE WARRANT
-------------------------------
(To be executed only upon exercise of Warrant)
To: AmeriQuest Technologies, Inc.
The undersigned Holder of the accompanying Acquisition Maintenance Warrant
irrevocably exercises this Warrant for the purchase of ____________ shares of
Series E Preferred Stock of AmeriQuest Technologies, Inc. purchasable with this
Warrant, and herewith makes payment therefor, all at the price and on the terms
and conditions specified in this Warrant and hereby confirms that the
representations set forth in Sections 4.4 and 4.5 of the Purchase Agreement (as
defined in the Warrant) are true and complete with respect to the undersigned as
of the date hereof.
_____________________
(Date)
-------------------------------------------
(Name of Holder)
By:
---------------------------------------
Its:
---------------------------------------
Address:
-----------------------------------
<PAGE>
EXHIBIT D
---------
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS.
---
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND
APPLICABLE STATE SECURITIES LAWS PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS.
Warrant to Purchase 514,857 Shares
of Series F Preferred Stock,
Subject to Adjustment
UNIT MAINTENANCE WARRANT:
WARRANT TO PURCHASE SERIES F PREFERRED STOCK
OF
AMERIQUEST TECHNOLOGIES, INC.
This certifies that, for good and valuable consideration, Computer 2000
Inc., a company duly organized under the laws of Delaware (together with its
permitted transferees and assigns, "Holder"), is entitled, subject to the terms
------
and conditions of this Warrant, to purchase from AmeriQuest Technologies, Inc.,
a Delaware corporation (the "Company"), that number of shares of the Company's
-------
Series F Preferred Stock, par value $0.01 per share, as constituted on August
___, 1995 (the "Issue Date"), as are determined in accordance with Section 1
----------
hereof, at the price of $5.25 per share (the "Purchase Price") upon surrender of
--------------
this Warrant at the principal office of the Company together with a duly
executed subscription in the form attached hereto as Attachment 1 (the
"Subscription") and simultaneous payment of the full Purchase Price therefor in
-------------
lawful money of the United States as provided herein. The Purchase Price and
the number and character of shares of Warrant Stock purchasable hereunder are
subject to adjustment as provided herein. As used herein, the term "Warrant"
-------
shall include this Warrant and any warrants delivered in substitution or
exchange therefor as provided herein. Capitalized terms used and not otherwise
defined herein shall have the respective meanings set forth in the Purchase
Agreement (the "Purchase Agreement") dated as of August __, 1995, by and among
------------------
<PAGE>
the Company, the Holder, and Computer 2000 AG, a company duly organized under
the laws of the Federal Republic of Germany.
1. EXERCISE. In the event that the Company issues Common Stock upon the
--------
exercise of any of the Unit Warrants (the "Unit Warrant Stock"), the Holder
------------------
shall be entitled to purchase under this Warrant from the Company at the
Purchase Price that number of shares of Series F Preferred Stock ("Warrant
-------
Stock") equal to one-tenth (subject to adjustment under Section 5 hereof) of the
-----
number of shares of Unit Warrant Stock so issued, up to a maximum of 514,857
shares of Warrant Stock (subject to the adjustment as provided below and in
Section 5 hereof). This Warrant may be exercised at any time after the issuance
of Unit Warrant Stock and prior to the "Expiration Date" to the extent that the
Company issues Unit Warrant Stock. The Company shall immediately notify the
Holder upon, but in no event not more than three business days after, the
issuance of Unit Warrant Stock (the "Notice") as to (i) the number of shares of
Unit Warrant Stock issued upon such exercise of the Unit Warrants and (ii) the
aggregate number of shares of Unit Warrant Stock issued through the date of such
issuance upon the exercise of the Unit Warrants. The date the Holder receives
the Notice is herein referred to as the "Notice Date." The Company represents
-----------
and warrants that the maximum number of shares of Unit Warrant Stock that may be
issued is 5,148,574 shares of Common Stock. If the number of shares issued by
the Company upon exercise of Unit Warrants exceeds 5,148,574 shares of Common
Stock, then the number of shares of Series F Preferred Stock subject to this
Warrant shall be increased to one-tenth (subject to adjustment under Section 5
hereof) of such number of total shares.
In each instance that the Company issues any Unit Warrant Stock (the "Unit
----
Warrant Stock Issuance Date") this Warrant may be exercised for that number of
---------------------------
shares of Warrant Stock as determined above at any time commencing on the Unit
Warrant Stock Issuance Date and terminating six months after the Notice Date.
The Holder can exercise this Warrant to the extent it becomes exercisable
in accordance with the preceding provisions, in whole or in part, on any
business day during the operative six-month period(s) by surrendering this
Warrant at the principal executive office of the Company (or such other office
or agency as the Company may designate by notice in writing to the Holder in
accordance with Section 13), together with the Subscription duly executed by the
Holder and payment in full of the Purchase Price for the number of shares of
Warrant Stock to be purchased upon such exercise. Upon a partial exercise, this
Warrant shall be surrendered, and a new Warrant of the same tenor for purchase
of the number of remaining shares of Warrant Stock not previously purchased
shall be issued by the Company to the Holder. This Warrant shall be deemed to
have been exercised immediately prior to the close of business on the date of
its surrender for exercise and payment in full to the Company of the Purchase
Price as provided above, and the person entitled to receive the shares of
Warrant Stock issuable upon such exercise shall be treated for all purposes as
the holder of record of such shares as of the close of business on such date.
As soon as practicable on or after such date, the Company shall issue and
deliver to the Holder a certificate or certificates for the number of whole
shares of Warrant Stock issuable upon such exercise. This Warrant may be
exercised only for whole shares of Warrant Stock. No fractional shares may be
issued upon any exercise of this Warrant.
-2-
<PAGE>
2. VALID ISSUANCE. All shares of Warrant Stock issued upon the exercise
--------------
of this Warrant in accordance with the terms hereof shall be validly issued,
fully paid and non-assessable. The Company shall not be required to pay any tax
or other charge imposed in connection with any transfer involved in the issue of
any certificate for shares of Warrant Stock in any name other than that of the
Holder of this Warrant, and in such case the Company shall not be required to
issue or deliver any stock certificate or security until such tax or other
charge has been paid, or it has been established to the Company's satisfaction
that no tax or other charge is due.
3. REPRESENTATIONS OF HOLDER; TRANSFER RESTRICTIONS.
------------------------------------------------
3.1 Representation. By accepting this Warrant, Holder makes the
--------------
representations set forth in Sections 4.4 and 4.5 of the Purchase Agreement, and
agrees to the restrictions set forth in 3.2 below, and, by exercising this
Warrant in whole or in part, Holder agrees that Holder will then represent and
will be deemed to represent that such representations are true and complete as
of the date of such exercise.
3.2 Transfer Restrictions. Except as provided below, Holder agrees not
---------------------
to make any transfer of all or any portion of this Warrant or the Warrant Stock
unless and until such transfer is registered under the 1933 Securities Act as
amended and all applicable state securities laws or exemptions therefrom are
available.
4. TRANSFER AND EXCHANGE. Subject to the terms and conditions of this
---------------------
Warrant, this Warrant and all rights hereunder may be transferred, in whole or
in part, on the books of the Company maintained for such purpose at the
principal office of the Company referred to above, by the Holder hereof in
person, or by duly authorized attorney, upon surrender of this Warrant properly
endorsed. Upon any permitted partial transfer, the Company will issue and
deliver to the transferring Holder a new Warrant or Warrants with respect to the
shares of Warrant Stock not so transferred. Each Holder of this Warrant
consents and agrees that the person in possession of this Warrant may be treated
by the Company, and all other persons dealing with this Warrant, as the absolute
owner hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding; provided,
--------
however that until a transfer of this Warrant is duly registered on the books of
------
the Company, the Company may treat the Holder hereof as the owner for all
purposes.
5. ADJUSTMENT OF PURCHASE PRICE AND NUMBER OF SHARES. The number and
-------------------------------------------------
character of shares of Warrant Stock issuable upon exercise of this Warrant (or
any shares of stock or other securities or property at the time receivable or
issuable upon exercise of this Warrant) and the Purchase Price therefor, are
subject to adjustment upon occurrence of the following events after the Original
Issue Date:
5.1 Adjustment for Stock Splits, Stock Dividends, Recapitalizations,
---------------------------------------------------------------
etc. The Purchase Price of this Warrant and the number of shares of Warrant
----
Stock issuable upon exercise or conversion of this Warrant (or any shares of
stock or other securities at the time issuable upon exercise of this Warrant)
shall each be proportionally adjusted to reflect any stock dividend, stock
split, reverse stock split, combination of shares, reclassification,
recapitalization or other similar event altering the number of outstanding
shares of Common Stock (or such other stock or securities into which the Common
Stock may be converted or
-3-
<PAGE>
exchanged); provided, however, that no adjustment shall be made under this
--------
Section 5.1 for the issuance of Common Stock upon conversion or exercise of any
convertible stock, options, warrants or rights existing on the date hereof or
issued pursuant to the terms of the Purchase Agreement or any Related Agreements
(as defined in the Purchase Agreement).
5.2 Adjustment for Capital Reorganization, Consolidation, Merger. If
------------------------------------------------------------
any reorganization of the capital stock of the Company, or any consolidation or
merger of the Company with or into another corporation, or the sale of all or
substantially all of the Company's assets to another corporation shall be
effected in such a way that holders of Common Stock will be entitled to receive
stock, securities or assets with respect to or in exchange for their Common
Stock, then in each such case, the Holder of this Warrant, upon the exercise of
this Warrant (as provided in Section 1), at any time after the consummation of
such capital reorganization, consolidation, merger or sale, shall be entitled to
receive, in lieu of the stock or other securities and property receivable upon
the exercise or conversion, as applicable, of this Warrant prior to such
consummation, the stock or other securities or property to which such Holder
would have been entitled upon such consummation if such Holder had exercised
this Warrant immediately prior thereto, all subject to further adjustment as
provided in this Section 5; and in each such case, the terms of this Warrant
shall be applicable to the shares of stock or other securities or property
receivable upon the exercise of this Warrant after such consummation.
5.3 Conversion of Warrant Stock. At such time as the Preferred Stock
---------------------------
of the Company is automatically converted into Common Stock pursuant to Section
1.5(b) of the Certificate of Designations filed with the Delaware Secretary of
State with respect to the Company's Series F Preferred Stock ("Certificate of
--------------
Designations") and a sufficient number of authorized shares of Common Stock
------------
exists to effect the exercise of all unexercised warrants under this or any
other warrants held by Holder and any transferee of Holder into Common Stock
(pursuant to the formula set forth below) then, from and after the date on which
such Preferred Stock is so converted (the "Conversion Date"): (i) this Warrant
---------------
will be exerciseable for Common Stock of the Company and the term "Warrant
-------
Stock" (wherever used in this Warrant) will thereafter mean the Company's Common
-----
Stock; (ii) the number of shares of Common Stock for which this Warrant will be
exerciseable will equal that number of shares of Common Stock into which all of
the shares of Series F Preferred Stock that may be acquired under this Warrant
(whether before or after the Conversion Date) would have been convertible into
as of the Conversion Date pursuant to the Certificate of Designations had this
Warrant been exercised in full immediately prior to the Conversion Date; and
(iii) the Purchase Price will be the price obtained by dividing (a) the Purchase
Price in effect immediately prior to the Conversion Date by (b) the number of
shares of Common Stock (including fractional shares) into which each share of
Series F Preferred Stock would have been convertible into pursuant to the
Certificate of Designations immediately prior to the Conversion Date (subject to
subsequent adjustment as provided herein).
6. REGISTRATION RIGHTS. The Warrant Stock shall be entitled to the
-------------------
registration rights set forth in the Registration Rights Agreement dated as of
August __, 1995 between the Company and the Holder, and the Holder and the
Company hereby agree to be bound by all the provisions of such agreement which
relate to registration rights, as if the Holder was a "Holder" of "Registrable
Securities" as those terms are defined in such agreement.
-4-
<PAGE>
7. NO IMPAIRMENT. Subject to the provisions of Section 5, the Company
-------------
will not, by amendment of its Certificate of Incorporation or bylaws, or through
reorganization, consolidation, merger, dissolution, issue or sale of securities,
sale of assets or any other voluntary action, willfully avoid or seek to avoid
the observance or performance of any of the terms of this Warrant, but will at
all times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder of this Warrant against impairment.
8. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment in
-----------------------------
either the Purchase Price or in the number of shares of Warrant Stock, or other
stock, securities or property receivable on the exercise of this Warrant, the
Chief Financial Officer of the Company shall compute such adjustment in
accordance with the terms of this Warrant and prepare a certificate setting
forth such adjustment and showing the facts upon which such adjustment is based,
including a statement of the adjusted Purchase Price. The Company will
forthwith mail a copy of each such certificate to the Holder of this Warrant.
9. NOTICES OF RECORD DATE. In case:
----------------------
(a) the Company shall take a record of the holders of its Common Stock
(or other stock or securities at the time receivable upon the exercise of this
Warrant) for the purpose of entitling them to receive any dividend or
distribution; or
(b) of any reclassification or recapitalization, consolidation or
merger of the Company with or into another corporation; or any conveyance of all
or substantially all of the assets of the Company to another corporation in
which holders of the Company's stock are to receive stock, securities or
property of another corporation; or any dissolution, liquidation or winding-up
of the Company;
then, and in each such case, the Company will mail or cause to be mailed to the
Holder of this Warrant a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such dividend or distribution,
and stating the amount and character of such dividend, or (ii) the date on which
such reclassification or recapitalization, consolidation, merger, conveyance,
dissolution, liquidation, or winding-up is to take place, and the time, if any
is to be fixed, as of which the holders of record of Warrant Stock (or such
stock or securities as at the time are receivable upon the exercise of this
Warrant) shall be entitled to exchange their shares of Warrant Stock (or such
other stock or securities) for securities or other property deliverable upon
such consolidation, merger, conveyance, dissolution, liquidation or winding-up.
Such notice shall be mailed at least ten days prior to the date therein
specified.
10. LOSS OR MUTILATION. Upon receipt by the Company of evidence
------------------
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant, and of a written indemnity agreement
reasonably satisfactory to the Company, and (in the case of mutilation) upon
surrender and cancellation of this Warrant, the Company will execute and deliver
in lieu thereof a new Warrant of like tenor.
11. RESERVATION OF WARRANT STOCK. The Company shall at all times reserve
----------------------------
and keep available out of its authorized but unissued shares of Warrant Stock,
solely for the
-5-
<PAGE>
purpose of effecting the exercise of this Warrant, such number of its shares of
Warrant Stock as shall from time to time be sufficient to effect the exercise of
this Warrant and if at any time (including without limitation the date hereof)
the number of authorized but unissued shares of Warrant Stock shall not be
sufficient to effect the exercise of this Warrant, the Company shall take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Warrant Stock to such number of shares as
shall be sufficient for such purpose.
12. NO RIGHTS OR LIABILITIES AS SHAREHOLDER. This Warrant does not by
---------------------------------------
itself entitle the Holder to any voting rights or other rights as a shareholder
of the Company. In the absence of affirmative action by Holder to purchase
Warrant Stock by exercise of this Warrant, no provisions of this Warrant and no
enumeration herein of the rights or privileges of the Holder shall cause such
Holder to be a shareholder of the Company for any purpose.
13. NOTICES. All notices and other communications from the Company to the
-------
Holder shall be (a) delivered to the Holder or (b) sent by facsimile
transmission or mailed by first-class mail, postage prepaid, to the facsimile
number or the address, as the case may be, furnished to the Company in writing
by the Holder and appearing on the books of the Company.
14. CHANGE; WAIVER. Neither this Warrant nor any term hereof may be
--------------
amended or waived except by an instrument in writing signed by the party against
which enforcement of the amendment or waiver is sought.
15. HEADINGS. The headings in this Warrant are for purposes of
--------
convenience in reference only, and will not be deemed to constitute a part
hereof.
16. LAW GOVERNING. This Warrant will be construed and enforced in
-------------
accordance with, and governed by, the laws of the State of Delaware, excluding
that body of law applicable to conflicts of law.
Dated: August ___, 1995
AMERIQUEST TECHNOLOGIES, INC.
By:
----------------------------------------
President
By:
----------------------------------------
Secretary
-6-
<PAGE>
ATTACHMENT 1
------------
SUBSCRIPTION FORM
-----------------
TO THE
------
UNIT MAINTENANCE WARRANT
------------------------
(To be executed only upon exercise of Warrant)
To: AmeriQuest Technologies, Inc.
The undersigned Holder of the accompanying Unit Maintenance Warrant
irrevocably exercises this Warrant for the purchase of ____________ shares of
Series F Preferred Stock of AmeriQuest Technologies, Inc. purchasable with this
Warrant, and herewith makes payment therefor, all at the price and on the terms
and conditions specified in this Warrant and hereby confirms that the
representations set forth in Sections 4.4 and 4.5 of the Purchase Agreement (as
defined in the Warrant) are true and complete with respect to the undersigned as
of the date hereof.
_____________________
(Date)
--------------------------------------------
(Name of Holder)
By:
-----------------------------------------
Its:
---------------------------------------
Address:
-----------------------------------
<PAGE>
EXHIBIT E
---------
REGISTRATION RIGHTS AGREEMENT
-----------------------------
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as of
---------
_________, 1995 by and among AmeriQuest Technologies, Inc., a Delaware
corporation ("Company"), Computer 2000 AG, a company duly organized under the
-------
laws of the Federal Republic of Germany ("C2000"), and Computer 2000 Inc., a
-----
Delaware corporation and a subsidiary of C2000 ("Sub").
---
RECITALS
--------
WHEREAS, C2000, Sub and Company are entering into a Purchase Agreement
dated as of the date hereof (the "Purchase Agreement"), providing for, among
------------------
other things, the sale and issuance by Company to C2000 or Sub of shares of
Company's Series A Preferred Stock and Series B Preferred Stock (which shares
will be convertible into shares of Common Stock of Company) and the granting by
Company to C2000 or Sub of various warrants and options to purchase additional
shares of Common and Preferred Stock of Company; and
WHEREAS, pursuant to the Purchase Agreement, C2000 or Sub is to be granted
certain registration rights with respect to the shares of Company's Common Stock
issued by Company to C2000 or Sub pursuant to the Purchase Agreement or the
terms of the securities issued thereunder;
NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:
1. Registration Rights. The Company covenants and agrees as
-------------------
follows:
1.1 Definitions. For purposes of this Section 1:
-----------
(a) The term "register," "registered," and "registration" refer to a
registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the
"Act"), and the declaration or ordering of effectiveness of such registration
---
statement or document;
(b) The term "Registrable Securities" means (1) the Common Stock of
----------------------
Company sold to C2000 or Sub pursuant to the Purchase Agreement, (2) the Common
Stock of Company issuable or issued upon exercise of any warrant, option or
right granted to C2000 or Sub by Company pursuant to the Purchase Agreement or
any Related Agreement (as defined in the Purchase Agreement), (3) the Common
Stock of Company issuable or issued upon conversion of any shares of Series A
Preferred Stock, Series B Preferred Stock, Series D Preferred Stock, Series E
Preferred Stock or Series F Preferred Stock issuable pursuant to the Purchase
Agreement, or (4) any Common Stock of Company issued as (or issuable upon the
conversion or exercise of any warrant, right or other security which is issued
as) a dividend or other distribution with respect to, or in exchange for or in
replacement of, such Common Stock,
<PAGE>
excluding in all cases, however, any Registrable Securities sold by a person in
a transaction in which his rights under this Section 1 are not assigned;
(c) The number of shares of "Registrable Securities then outstanding"
---------------------------------------
shall be determined by adding the number of shares of Common Stock outstanding
which are, and the number of shares of Common Stock issuable pursuant to then
exercisable or convertible securities which are, Registrable Securities.
(d) The term "Holder" means, with respect to Sections 1.2 and 1.12,
------
any person owning or having the right to acquire Registrable Securities, as
defined in clauses (1), (2) or (3) of Section 1.1(b) of this Agreement, or any
assignee thereof in accordance with Section 1.13 hereof, and with respect to
Section 1.3, any person owning or having the right to acquire Registrable
Securities or any assignee thereof in accordance with Section 1.13 hereof; and
(e) The term "Form S-3" means such form under the Act as in effect on
--------
the date hereof or any registration form under the Act subsequently adopted by
the Securities and Exchange Commission ("SEC") which permits inclusion or
---
incorporation of substantial information by reference to other documents filed
by Company with the SEC.
1.2 Request for Registration.
------------------------
(a) If Company shall receive at any time or from time to time a
written request(s) from the Holders of at least twenty-five percent (25%) of the
Registrable Securities then outstanding that Company file a registration
statement under the Act covering the registration of the Registrable Securities
then outstanding having an aggregate offering price to the public of not less
than $5,000,000, then Company shall, within ten (10) days following the receipt
thereof, give written notice of such request to all Holders and shall, subject
to the limitations of subsection 1.2(b), effect as soon as practicable, and in
any event shall use its best efforts to effect within one hundred twenty (120)
days following the receipt of such request, the registration under the Act of
all Registrable Securities which the Holders request to be registered within
twenty (20) days following the mailing of such notice by Company in accordance
with paragraph 2.5.
(b) If the Holders initiating the registration request hereunder
("Initiating Holders") intend to distribute the Registrable Securities covered
--------------------
by their request by means of an underwriting, they shall so advise Company as a
part of their request made pursuant to this Section 1.2 and Company shall
include such information in the written notice referred to in subsection 1.2(a).
The underwriter will be selected by Company and shall be reasonably acceptable
to a majority in interest of the Initiating Holders. In such event, the right
of any Holder to include his Registrable Securities in such registration shall
be conditioned upon such Holder's participation in such underwriting and the
inclusion of such Holder's Registrable Securities in the underwriting to the
extent provided herein. All Holders proposing to distribute their securities
through such underwriting shall (together with Company as provided in subsection
1.4(e)) enter into an underwriting agreement in customary form with the
underwriter or underwriters selected for such underwriting by Company.
Notwithstanding any other provision of this Section 1.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the
-2-
<PAGE>
Initiating Holders shall so advise all Holders of Registrable Securities which
would otherwise be underwritten pursuant hereto, and the number of shares of
Registrable Securities that may be included in the underwriting shall be
allocated among all Holders thereof, including the Initiating Holders, in
proportion (as nearly as practicable) to the amount of Registrable Securities of
Company owned by each Holder.
(c) Notwithstanding the foregoing, if Company shall furnish to Holders
requesting a registration statement pursuant to this Section 1.2, a certificate
signed by the President of Company stating that in the good faith judgment of
the Board of Directors of Company, it would be seriously detrimental to Company
and its stockholders for such registration statement to be filed and it is
therefore essential to defer the filing of such registration statement, Company
shall have the right to defer taking action with respect to such filing for a
period of not more than one hundred twenty (120) days after receipt of the
request of the Initiating Holders; provided, however, that Company may not
utilize this right more than once in any twelve month period.
1.3 Company Registration. If (but without any obligation to do
--------------------
so) Company proposes to register (including for this purpose a registration
effected by Company for shareholders other than the Holders) any of its Common
Stock under the Act in connection with the public offering of such securities
solely for cash (other than a registration relating solely to the sale of
securities to participants in a Company stock plan, or a registration on any
form which does not include substantially the same information as would be
required to be included in a registration statement covering the sale of the
Registrable Securities or an SEC Rule 145 transaction), Company shall, at such
time, promptly give each Holder written notice of such registration. Upon the
written request of each Holder given within twenty (20) days after mailing of
such notice by Company in accordance with Section 2.5, Company shall, subject to
the provisions of Section 1.8, cause to be registered under the Act all of the
Registrable Securities that each such Holder has requested to be registered.
1.4 Obligations of Company. Whenever required under this
----------------------
Section 1 to effect the registration of any Registrable Securities, Company
shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use its best efforts to cause such
registration statement to become effective, and, upon the request of the Holders
of a majority of the Registrable Securities registered thereunder, keep such
registration statement effective for up to one hundred twenty (120) days in the
case of a registration statement pursuant to Sections 1.2 and 1.3 hereof and for
up to three (3) years in the case of a registration pursuant to Section 1.12
hereof, from the date that such registration was requested.
(b) Prepare and file with the SEC such amendments and supplements to
such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Act with respect to the disposition of all securities covered by such
registration statement.
(c) Furnish to the Holders such numbers of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Act,
-3-
<PAGE>
and such other documents as they may reasonably request in order to facilitate
the disposition of Registrable Securities owned by them.
(d) Use its best efforts to register and qualify the securities
covered by such registration statement under such other securities or Blue Sky
laws of such jurisdictions as shall be reasonably requested by the Holders,
provided that Company shall not be required in connection therewith or as a
condition thereto to qualify to do business or to file a general consent to
service of process in any such states or jurisdictions.
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Each Holder participating
in such underwriting shall also enter into and perform its obligations under
such an agreement.
(f) Notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing, in which
event such Holder shall immediately cease use of such prospectus until such time
as the Company informs Holder that Holder may use such prospectus or deliver to
the Holder an amendment thereto.
1.5 Furnish Information.
-------------------
(a) It shall be a condition precedent to the obligations of Company to
take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to Company such
information regarding itself, the Registrable Securities held by it, and the
intended method of disposition of such securities as shall be required to effect
the registration of such Holder's Registrable Securities.
(b) The Company shall have no obligation with respect to any
registration requested pursuant to Section 1.2 or Section 1.12 if, due to a
failure of any selling Holder to provide the information required pursuant to
subsection 1.5(a), the number of shares or the anticipated aggregate offering
price of the Registrable Securities to be included in the registration does not
equal or exceed the number of shares or the anticipated aggregate offering price
required to originally trigger Company's obligation to initiate such
registration as specified in subsection 1.2(a) or subsection 1.12(b)(2),
whichever is applicable.
1.6 Expenses of Demand Registration. All expenses other than
-------------------------------
underwriting discounts and commissions incurred in connection with
registrations, filings or qualifications pursuant to Section 1.2, including
(without limitation) all registration, filing and qualification fees, printers'
and accounting fees, fees and disbursements of counsel for Company, and the
reasonable fees and disbursements of one counsel for the selling Holders shall
be borne by Company; provided, however, that Company shall not be required to
pay for any expenses of any registration proceeding begun pursuant to Section
1.2 if the registration request is subsequently withdrawn at the request of the
Holders of a majority of the Registrable Securities
-4-
<PAGE>
to be registered (in which case all Participating Holders shall bear such
expenses), unless the Holders of a majority of the Registrable Securities agree
to forfeit their right to one demand registration pursuant to Section 1.2.
1.7 Expenses of Company Registration. The Company shall bear
--------------------------------
and pay all expenses incurred in connection with any registration, filing or
qualification of Registrable Securities with respect to the registrations
pursuant to Section 1.3 for each Holder (which right may be assigned as provided
in Section 1.13), including (without limitation) all registration, filing, and
qualification fees, printers' and accounting fees relating or apportionable
thereto, fees and disbursements of counsel for Company, and the reasonable fees
and disbursements of one counsel for the Selling Holders, but excluding
underwriting discounts and commissions relating to Registrable Securities.
1.8 Underwriting Requirements. In connection with any offering
-------------------------
involving an underwriting of shares of Company's Common Stock, Company shall not
be required under Section 1.3 to include any of the Holders' securities in such
underwriting unless they accept the terms of the underwriting as agreed upon
between Company and the underwriters selected by Company, and then only in such
quantity as the underwriters determine in their sole discretion will not
jeopardize the success of the offering by Company. If the total amount of
securities, including Registrable Securities, requested by shareholders to be
included in such offering exceeds the amount of securities sold other than by
Company that the underwriters determine in their sole discretion is compatible
with the success of the offering, then Company shall be required to include in
the offering only that number of such securities, including Registrable
Securities, or no securities, as determined below, which the underwriters
determine in their sole discretion will not jeopardize the success of the
offering (the securities so included to be apportioned pro rata among the
selling shareholders according to the total amount of securities entitled to be
included therein owned by each selling shareholder) or in such other proportions
as shall mutually be agreed to by such selling shareholders or otherwise), but
in no event shall (i) any Registrable Securities as defined by clause (4) of
Section 1.1(b) of this Agreement be included prior to inclusion of all
Registrable Securities as defined by clauses (1), (2) or (3) of Section 1.1(b)
which the Holders thereof desire to sell in the offering, (ii) any
nonregistrable securities held by Company employees be included prior to
inclusion of Registrable Securities of all selling Holders or (iii) the amount
of securities of the selling Holders included in the offering be reduced below
twenty-five percent (25%) of the total amount of securities included in such
offering. For purposes of the preceding parenthetical concerning apportionment,
for any selling shareholder which is a holder of Registrable Securities and
which is a partnership or corporation, the partners, retired partners and
shareholders of such holder, or the estates and family members of any such
partners and retired partners and any trusts for the benefit of any of the
foregoing persons shall be deemed to be a single "selling shareholder," and any
-------------------
pro rata reduction with respect to such "selling shareholder" shall be based
-------------------
upon the aggregate amount of shares carrying registration rights owned by all
entities and individuals included in such "selling shareholder," as defined in
-------------------
this sentence.
1.9 Delay of Registration. No Holder shall have any right to
---------------------
obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this Section 1.
-5-
<PAGE>
1.10 Indemnification. In the event any Registrable Securities
---------------
are included in a registration statement under this Section 1:
(a) To the extent permitted by law, Company will indemnify and hold
harmless each Holder, any underwriter (as defined in the Act) for such Holder
and each person, if any, who controls such Holder or underwriter within the
meaning of the Act or the Securities Exchange Act of 1934, as amended (the "1934
----
Act"), against any losses, claims, damages, or liabilities (joint or several) to
---
which they may become subject under the Act, insofar as such losses, claims,
damages, or liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively, a "Violation"): (i) any untrue statement or alleged untrue
---------
statement of a material fact contained in such registration statement, including
any preliminary prospectus or final prospectus contained therein or any
amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by Company of the Act, the 1934 Act, or any rule or regulation
promulgated under the Act or the 1934 Act; and Company will pay to each such
Holder, underwriter or controlling person any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(a) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of Company (which consent shall not
be unreasonably withheld), nor shall Company be liable in any such case for any
such loss, claim, damage, liability, or action to the extent that it arises out
of or is based upon a Violation which occurs in reliance upon and in conformity
with written information furnished expressly for use in connection with such
registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each selling Holder will indemnify
and hold harmless Company, each of its directors, each of its officers who has
signed the registration statement, each person, if any, who controls Company
within the meaning of the Act, any underwriter, any other Holder selling
securities in such registration statement and any controlling person of any such
underwriter or other Holder, against any losses, claims, damages, or liabilities
(joint or several) to which any of the foregoing persons may become subject,
under the Act, the 1934 Act or other federal or state law, insofar as such
losses, claims, damages, or liabilities (or actions in respect thereto) arise
out of or are based upon any Violation, in each case to the extent (and only to
the extent) that such Violation occurs in reliance upon and in conformity with
written information furnished by such Holder expressly for use in connection
with such registration; and each such Holder will pay reasonable legal fees and
other expenses, as incurred by any person intended to be indemnified pursuant to
this subsection 1.10(b), in connection with investigating or defending any such
loss, claim, damage, liability, or action; provided, however, that the indemnity
agreement contained in this subsection 1.10(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Holder, which consent shall
not be unreasonably withheld; provided, that, in no event shall any indemnity
under this subsection 1.10(b) exceed the gross proceeds from the offering
received by such Holder.
(c) Promptly after receipt by an indemnified party under this Section
1.10 of notice of the commencement of any action (including any governmental
action),
-6-
<PAGE>
such indemnified party will, if a claim in respect thereof is to be
made against any indemnifying party under this Section 1.10, deliver to the
indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; provided, however, that an indemnified party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel,
with the fees and expenses to be paid by the indemnifying party, if
representation of such indemnified party by the counsel retained by the
indemnifying party would be inappropriate due to actual or potential differing
interests between such indemnified party and any other party represented by such
counsel in such proceeding. The failure to deliver written notice to the
indemnifying party within a reasonable time following the commencement of any
such action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this
Section 1.10, but the omission so to deliver written notice to the indemnifying
party will not relieve it of any liability that it may have to any indemnified
party otherwise than under this Section 1.10.
(d) If the indemnification provided for in this Section 1.10 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party hereunder, shall contribute to the amount paid or payable by such
indemnified party as a result of such loss, liability, claim, damage, or expense
in such proportion as is appropriate to reflect the relative fault of the
indemnifying party on the one hand and of the indemnified party on the other in
connection with the statements or omissions that resulted in such loss,
liability, claim, damage, or expense as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or the
omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information, and opportunity to correct or prevent such
statement or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in conflict
with the foregoing provisions, the provisions in the underwriting agreement
shall control.
(f) The obligations of Company and the Holder under this Section 1.10
shall survive the completion of any offering of Registrable Securities in a
registration statement under this Section 1, and otherwise.
1.11 Reports Under the 1934 Act. With a view to making available
--------------------------
to the Holders the benefits of Rule 144 promulgated under the Act and any other
rule or regulation of the SEC that may at any time permit a Holder to sell
securities of Company to the public without registration or pursuant to a
registration on Form S-3, Company agrees to:
-7-
<PAGE>
(a) make and keep public information available, as those terms are
understood and defined in SEC Rule 144, at all times after ninety (90) days
after the effective date of the first registration statement filed by Company
for the offering of its securities to the general public;
(b) file with the SEC in a timely manner all reports and other
documents required of Company under the Act and the 1934 Act; and
(c) furnish to any Holder, so long as the Holder owns any Registrable
Securities, forthwith upon request (i) a written statement by Company that it
has complied with the reporting requirements of SEC Rule 144 (at any time after
ninety (90) days after the effective date of the first registration statement
filed by Company), the Act and the 1934 Act (at any time after it has become
subject to such reporting requirements), or that it qualifies as a registrant
whose securities may be resold pursuant to Form S-3 (at any time after it so
qualifies), if such statement(s) are correct, (ii) a copy of the most recent
annual or quarterly report of Company and such other reports and documents so
filed by Company, and (iii) such other information as may be reasonably
requested in availing any Holder of any rule or regulation of the SEC which
permits the selling of any such securities without registration or pursuant to
such form.
1.12 Form S-3 Registration. In case Company shall receive from
---------------------
any Holder or Holders a written request or requests that Company effect a
registration on Form S-3 (or on another appropriate form if a Form S-3 is not
available) and any related qualification or compliance with respect to all or a
part of the Registrable Securities owned by such Holder or Holders, Company
will:
(a) promptly give written notice of the proposed registration, and any
related qualification or compliance, to all other Holders; and
(b) as soon as practicable, effect such registration and all such
qualifications and compliances as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Holder's or
Holders' Registrable Securities as are specified in such request, together with
all or such portion of the Registrable Securities of any other Holder or Holders
joining in such request as are specified in a written request given within 15
days after receipt of such written notice from Company; provided, however, that
Company shall not be obligated to effect any such registration, qualification or
compliance, pursuant to this Section 1.12: (1) if Form S-3 is not available for
such offering by the Holders; (2) if the Holders, together with the holders of
any other securities of Company entitled to inclusion in such registration,
propose to sell Registrable Securities and such other securities (if any) at an
aggregate price to the public (net of any underwriters' discounts or
commissions) of less than $1,000,000; (3) if Company shall furnish to the
Holders a certificate signed by the President of Company stating that in the
good faith judgment of the Board of Directors of Company, it would be seriously
detrimental to Company and its shareholders for such Form S-3 Registration to be
filed or declared effective at such time, in which event Company shall have the
right to defer the filing of the Form S-3 registration statement for a period of
not more than 120 days after receipt of the request of the Holder or Holders
under this Section 1.12; provided, however, that Company shall not utilize this
right more than once in any twelve month period; (4) if Company
-8-
<PAGE>
has, within the twelve (12) month period preceding the date of such request,
already effected two registrations on Form S-3 for the Holders pursuant to this
Section 1.12; or (5) if such Form S-3 registration is in any particular
jurisdiction in which Company would be required to qualify to do business or to
execute a general consent to service of process in effecting such registration,
qualification or compliance.
(c) Subject to the foregoing, Company shall file a registration
statement covering the Registrable Securities and other securities so requested
to be registered as soon as practicable after receipt of the request or requests
of the Holders. All expenses incurred in connection with a registration
requested pursuant to Section 1.12, including (without limitation) all
registration, filing, qualification, printer's and accounting fees and the
reasonable fees and disbursements of one counsel for the selling Holder or
Holders and counsel for Company, but excluding any underwriters' discounts or
commissions associated with Registrable Securities, shall be borne by Company.
Registrations effected pursuant to this Section 1.12 shall not be counted as
demands for registration or registrations effected pursuant to Sections 1.2 or
1.3.
1.13 Assignment of Registration Rights. The rights to cause
---------------------------------
Company to register Registrable Securities pursuant to this Section 1 may be
assigned (but only with all related obligations) by a Holder to a transferee or
assignee of such securities who, after such assignment or transfer, holds at
least 500,000 shares of Registrable Securities (subject to appropriate
adjustment for stock splits, stock dividends, combinations and other
recapitalizations), provided Company is, within a reasonable time after such
transfer, furnished with written notice of the name and address of such
transferee or assignee and the securities with respect to which such
registration rights are being assigned and provided such assignee agrees to be
bound to the provisions contained herein and in the Stock Agreements under which
such securities were purchased; and provided, further, that such assignment
shall be effective only if immediately following such transfer the further
disposition of such securities by the transferee or assignee is restricted under
the Act. The minimum number of shares required above for assignment or transfer
shall not apply to assignments or transfers by a Holder to a partner,
shareholder, parent, child or spouse of the Holder or to the Holder's estate or
a trust or partnership established for the benefit of the Holder of Holder's
parent, child or spouse (collectively, "Affiliated Transferees"), provided such
assignee agrees to be bound to the provisions contained herein and in the Stock
Agreements under which such securities were purchased; and provided, further,
that such assignment shall be effective only if immediately following such
transfer the further disposition of such securities by the transferee or
assignee is restricted under the Act. For the purposes of determining the
number of shares of Registrable Securities held by a transferee or assignee, the
holdings of transferees and assignees of a partnership who are partners or
retired partners of such partnership (including spouses and ancestors, lineal
descendants and siblings of such partners or spouses who acquire Registrable
Securities by gift, will or intestate succession) shall be aggregated together
and with the partnership; provided that all Affiliated Transferees who would not
qualify individually for assignment of registration rights shall have a single
attorney in-fact for the purpose of exercising any rights, receiving notices or
taking any action under this Section 1.
1.14 Limitations on Subsequent Registration Rights. From and
---------------------------------------------
after the date of this Agreement, Company shall not, without the prior written
consent of the Holders of a
-9-
<PAGE>
majority of the outstanding Registrable Securities, enter into any agreement
with any holder or prospective holder of any securities of Company (other than
to a then current officer or director of Company) which would allow such holder
or prospective holder (a) to include such securities in any registration filed
under Section 1.2 hereof, unless under the terms of such agreement, such holder
or prospective holder may include such securities in any such registration only
to the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holders which is included or (b) to make a
demand registration which could result in such registration statement being
declared effective prior to the date set forth in subsection 1.2(a) or within
ninety (90) days following the effective date of any registration effected
pursuant to Section 1.2.
1.15 "Market Stand-off" Agreement. Each of C2000 or Sub hereby
---------------------------
agrees that, during the period of duration specified by Company and an
underwriter of common stock or other securities of Company, following the
effective date of a registration statement of Company filed under the Act (such
period not to exceed 120 days after such effective date), it shall not, to the
extent requested by Company and such underwriter, directly or indirectly sell,
offer to sell, contract to sell (including, without limitation, any short sale),
grant any option to purchase or otherwise transfer or dispose of (other than to
donees who agree to be similarly bound) any securities of Company held by it at
any time during such period except Registrable Securities included in such
Registration; provided, however, that all officers and directors of Company and
all holders of more than 5% of the capital stock then outstanding of Company
enter into similar agreements.
In order to enforce the foregoing covenant, Company may impose stop-
transfer instructions with respect to the Registrable Securities of each Holder
(and the shares or securities of every other person subject to the foregoing
restriction) until the end of such period.
2. Miscellaneous.
-------------
2.1 Successors and Assigns. Except as otherwise provided
----------------------
herein, the terms and conditions of this Agreement shall inure to the benefit of
and be binding upon the respective successors and assigns of the parties
(including transferees of any shares of Registrable Securities). Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
2.2 Governing Law. This Agreement shall be governed by and
-------------
construed under the laws of the State of Delaware as applied to agreements among
Delaware residents entered into and to be performed entirely within Delaware.
2.3 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
-10-
<PAGE>
2.4 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
2.5 Notices. Unless otherwise provided, all notices and other
-------
communications pursuant to this Agreement shall be in writing and deemed to be
sufficient if contained in a written instrument and shall be deemed given if
delivered personally, telecopied,
-11-
<PAGE>
sent by nationally or internationally recognized overnight courier or mailed by
registered or certified mail (return receipt requested), postage prepaid, to the
parties at the following address (or at such other address for a party as shall
be specified by like notice):
If to Company: AmeriQuest Technologies, Inc.
MacArthur Place
3 Imperial Promenade
Santa Ana, CA 92707
Facsimile: (714) 513-2450
Attention: Chief Executive Officer
With a copy to: Gibson, Dunn & Crutcher
4 Park Plaza
Irvine, CA 92714
Facsimile: (714) 451-4220
Attention: Thomas D. Magill, Esq.
If to C2000 or Sub: Computer 2000 AG
Wolfratshauser Strasse 84
81379 Munchen Germany
Facsimile: 011-49-8972490-405
Attention: Vorstand
With a copy to: Fenwick & West
Two Palo Alto Square
Palo Alto, California 94306
Attention: Gordon K. Davidson, Esq. and
Dennis R. DeBroeck, Esq.
Facsimile: (415) 857-0361
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of a telecopy, when the party receiving such copy shall have confirmed
receipt of the communication, (c) in the case of delivery by nationally or
internationally recognized overnight courier, on the fifth business day
following dispatch, and (d) in the case of mailing, on the third business day
following such mailing.
2.6 Expenses. If any action at law or in equity is necessary to
--------
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to reasonable attorneys' fees, costs and necessary disbursements in
addition to any other relief to which such party may be entitled.
2.7 Amendments and Waivers. Any term of this Agreement may be
----------------------
amended and the observance of any term of this Agreement may be waived (either
generally or in
-12-
<PAGE>
a particular instance and either retroactively or prospectively), only with the
written consent of Company and the Holders of a majority of the Registrable
Securities then outstanding. Any amendment or waiver effected in accordance with
this paragraph shall be binding upon each Holder of any Registrable Securities
then outstanding, each future Holder of all such Registrable Securities, and
Company.
2.8 Severability. If one or more provisions of this Agreement
------------
are held to be unenforceable under applicable law, such provision shall be
excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
2.9 Aggregation of Stock. All shares of Registrable Securities
--------------------
held or acquired by affiliated entities or persons shall be aggregated together
for the purposes of determining the availability of any rights under this
Agreement.
2.10 Entire Agreement; Amendment; Waiver. This Agreement
-----------------------------------
constitutes the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
2.11 Representation of Company. The Company warranties and
-------------------------
represents that the grant herein of registration rights to the Holders does not
contravene, violate or breach any agreement or understanding to which Company is
a party.
[THE REST OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date above written.
AMERIQUEST TECHNOLOGIES, INC.
-----------------------------
By:
-----------------------------------
Name:
Its:
COMPUTER 2000 AG:
----------------
By:
----------------------------------
Name:
Its:
SUB:
---
By:
-----------------------------------
Name:
Its:
[SIGNATURE PAGE TO REGISTRATION RIGHTS AGREEMENT]
-14-
<PAGE>
EXHIBIT F
---------
AMERIQUEST TECHNOLOGIES, INC.
DIRECTOR'S INDEMNIFICATION AGREEMENT
AND RELEASE
This Director's Indemnification Agreement, dated as of _____________, 199_,
is made by and between AmeriQuest Technologies, Inc., a Delaware corporation
(the "Company"), and _________________, a director [and officer] of the Company
-------
(the "Indemnitee").
----------
RECITALS
A. The Company is aware that competent and experienced persons are
increasingly reluctant to serve as directors or officers of corporations unless
they are protected by comprehensive liability insurance and/or indemnification,
due to increased exposure to litigation costs and risks resulting from their
service to such corporations, and due to the fact that the exposure frequently
bears no reasonable relationship to the compensation of such directors and
officers;
B. Based upon their experience as business managers, the Board of
Directors of the Company (the "Board") has concluded that, to retain and attract
-----
talented and experienced individuals to serve as officers and directors of the
Company, and to encourage such individuals to take the business risks necessary
for the success of the Company, it is necessary or desirable for the Company to
contractually indemnify officers and directors, and to assume for itself maximum
liability for expenses and damages in connection with claims against such
officers and directors in connection with their service to the Company;
C. Section 145 of the General Corporation Law of Delaware ("Section 145"),
-----------
the corporate law under which the Company is organized, empowers the Company to
indemnify by agreement its officers, directors, employees and agents, and
persons who serve, at the request of the Company, as directors, officers,
employees or agents of other corporations or enterprises, and expressly provides
that the indemnification provided by Section 145 is not exclusive; and
D. The Company has requested the Indemnitee to serve or continue to serve
as a director or officer of the Company and desires that the Indemnitee be free
from undue concern for claims for damages arising out of or related to such
services to the Company.
AGREEMENT
<PAGE>
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows:
-2-
<PAGE>
1. DEFINITIONS.
-----------
1.1 Agent. For the purposes of this Agreement, "agent" of the
-----
Company means any person who is or was a director or officer of the Company or a
subsidiary of the Company; or is or was serving at the request of, for the
convenience of, or to represent the interest of the Company or a subsidiary of
the Company as a director or officer of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise or an affiliate of the
Company; or was a director or officer of a foreign or domestic corporation which
was a predecessor corporation of the Company or a subsidiary of the Company, or
was a director or officer of another enterprise or affiliate of the Company at
the request of, for the convenience of, or to represent the interests of such
predecessor corporation. The term "enterprise" includes any employee benefit
plan of the Company, its subsidiaries, affiliates and predecessor corporations.
1.2 Expenses. For purposes of this Agreement, "expenses" includes
--------
all direct and indirect costs of any type or nature whatsoever (including,
without limitation, all attorneys' fees, expenses and related disbursements and
other out-of-pocket costs) actually and reasonably incurred by the Indemnitee in
connection with the investigation, defense or appeal of a proceeding or
establishing or enforcing a right to indemnification or advancement of expenses
under this Agreement, Section 145 or otherwise; provided, however, that expenses
shall not include any judgments, fines, ERISA excise taxes or penalties or
amounts paid in settlement of a proceeding.
1.3 Proceeding. For the purposes of this Agreement, "proceeding"
----------
means any threatened, pending, or completed action, suit or other proceeding,
whether civil, criminal, administrative, investigative or any other type
whatsoever.
1.4 Subsidiary. For purposes of this Agreement, "subsidiary" means
----------
any corporation of which more than 50% of the outstanding voting securities is
owned directly or indirectly by the Company, by the Company and one or more
other subsidiaries, or by one or more other subsidiaries.
2. AGREEMENT TO SERVE. The Indemnitee agrees to serve and/or continue to
------------------
serve as an agent of the Company, at the will of the Company (or under separate
agreement, if such agreement exists), in the capacity Indemnitee currently
serves as an agent of the Company, faithfully and to the best of his ability so
long as he is duly appointed or elected and qualified in accordance with the
applicable provisions of the charter documents of the Company or any subsidiary
of the Company; provided, however, that Indemnitee may at any time and for any
reason resign from such position (subject to any contractual obligation that
Indemnitee may have assumed apart from this Agreement) and that the Company or
any subsidiary shall have no obligation under this Agreement to continue
Indemnitee in any such position.
-3-
<PAGE>
3. DIRECTORS' AND OFFICERS' INSURANCE. The Company shall use its best
----------------------------------
efforts to maintain in effect a policy of directors' and officers' liability
insurance ("D&O Insurance"), on such terms and conditions of at least the same
-------------
coverage and amounts as currently in existence.
4. MANDATORY INDEMNIFICATION. Subject to Section 9 below, the Company
-------------------------
shall indemnify the Indemnitee:
4.1 Third Party Actions. If the Indemnitee is a person who was or is
-------------------
a party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Company) by reason of the fact that he is or
was an agent of the Company, or by reason of anything done or not done by him in
any such capacity, against any and all expenses and liabilities of any type
whatsoever (including, but not limited to, judgments, fines, ERISA excise taxes
or penalties, and amounts paid in settlement) actually and reasonably incurred
by him in connection with the investigation, defense, settlement, trial,
litigation or appeal of such proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action or proceeding by judgment, order, settlement, conviction, or upon a plea
of nolo contendere or its equivalent, shall not, of itself, create a presumption
---------------
that (i) Indemnitee did not act in good faith and in a manner which Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, or (ii) with respect to any criminal action or proceeding, Indemnitee
had reasonable cause to believe that Indemnitee's conduct was unlawful; and
4.2 Derivative Actions. If the Indemnitee is a person who was or is
------------------
a party or is threatened to be made a party to any proceeding by or in the right
of the Company to procure a judgment in its favor by reason of the fact that he
is or was an agent of the Company, or by reason of anything done or not done by
him in any such capacity, against any amounts paid in the defense or settlement
of any such proceeding and all expenses and other liabilities actually and
reasonably incurred by him in connection with the investigation, defense,
settlement, or appeal of such proceeding if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Company; except that no indemnification under this subsection shall be made
in respect of any claim, issue or matter as to which such person shall have been
finally adjudged to be liable to the Company by a court of competent
jurisdiction due to willful misconduct of a culpable nature in the performance
of his duty to the Company, unless and only to the extent that the Court of
Chancery or the court in which such proceeding was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such amounts which the Court of Chancery or such other court shall
deem proper; and
4.3 Exception for Amounts Paid by Insurance. Notwithstanding the
---------------------------------------
foregoing, but without limiting the Company's obligations hereunder to honor its
-4-
<PAGE>
indemnification obligations promptly, the Company shall not be obligated to
indemnify the Indemnitee for expenses or liabilities of any type whatsoever
(including, but not limited to, judgments, fines, ERISA excise taxes or
penalties, and amounts paid in settlement) to the extent such have been paid
directly to Indemnitee by D&O Insurance.
5. PARTIAL INDEMNIFICATION. If the Indemnitee is entitled under any
-----------------------
provision of this Agreement to indemnification by the Company for some or a
portion of any expenses or liabilities of any type whatsoever (including, but
not limited to, judgments, fines, ERISA excise taxes or penalties, and amounts
paid in settlement) incurred by him in the investigation, defense, settlement,
trial, litigation or appeal of a proceeding but not entitled, however, to
indemnification for all of the total amount thereof, the Company shall
nevertheless indemnify the Indemnitee for such total amount except as to the
portion thereof to which the Indemnitee is not entitled to the indemnification.
6. MANDATORY ADVANCEMENT OF EXPENSES.
---------------------------------
6.1 Advancement. Subject to Section 9 below, the Company shall
-----------
advance all expenses incurred by the Indemnitee in connection with the
investigation, defense, settlement or appeal of any proceeding to which the
Indemnitee is a party or is threatened to be made a party by reason of the fact
that the Indemnitee is or was an agent of the Company or by reason of anything
done or not done by him in any such capacity. Indemnitee hereby undertakes to
repay such amounts advanced only if, and to the extent that, it shall ultimately
be determined that the Indemnitee is not entitled to be indemnified by the
Company under the provisions of this Agreement, the Certificate of Incorporation
or Bylaws of the Company, the General Corporation Law of Delaware or otherwise.
The advances to be made hereunder shall be paid by the Company to the Indemnitee
within thirty (30) days following delivery of a written request therefor by the
Indemnitee to the Company.
6.2 Exception. Notwithstanding the foregoing provisions of this
---------
Section 6, the Company shall not be obligated to advance any expenses to
Indemnitee arising from a lawsuit filed directly by (but not derivatively on
behalf of) the Company against the Indemnitee if an absolute majority of the
members of the Board of Directors reasonably determines in good faith, within
thirty (30) days of Indemnitee's request to be advanced expenses, that the facts
known to them at the time such determination is made demonstrate clearly and
convincingly that the Indemnitee acted in bad faith or in a manner that such
person did not believe to be in, or not opposed to, the best interests of the
Company. If such a determination is made, Indemnitee may have such decision
reviewed by another forum, in the manner set forth in Sections 8.3, 8.4 and 8.5
hereof, with all references therein to "indemnification" being deemed to refer
to "advancement of expenses," and the burden of proof shall be on the Company to
demonstrate that, based on the facts known at the time, the Indemnitee acted in
a manner set forth in the previous sentence. The Company may not avail itself
of this Section 6.2 as to a given lawsuit if, at any time after the occurrence
of the activities or omissions that are the primary focus of the lawsuit, the
Company has undergone a change in control. For this purpose a change in control
shall mean (a) a given shareholder or
-5-
<PAGE>
group of affiliated shareholders increasing their beneficial ownership interest
in the Company by at least 20 percentage points without advance Board approval,
(b) a merger or consolidation of the Company in which the Company is not the
surviving entity, or (c) a sale of more than 50% of the assets of the Company.
7. NOTICE AND OTHER INDEMNIFICATION PROCEDURES.
-------------------------------------------
7.1 Promptly after receipt by the Indemnitee of notice of the
commencement of or the threat of commencement of any proceeding, the Indemnitee
shall, if the Indemnitee believes that indemnification with respect thereto may
be sought from the Company under this Agreement, notify the Company of the
commencement or threat of commencement thereof.
7.2 If, at the time of the receipt of a notice of the commencement of
a proceeding pursuant to Section 7.1 hereof, the Company shall promptly honor
its indemnification obligations hereunder, and if the Company has D&O Insurance
in effect, the Company shall give prompt notice of the commencement of such
proceeding to the insurers in accordance with the procedures set forth in the
respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, or
reimburse the Company for amounts paid by it on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such policies.
7.3 In the event the Company shall be obligated to advance the
expenses for any proceeding against the Indemnitee, the Company, if appropriate,
shall be entitled to assume the defense of such proceeding, with counsel
approved by the Indemnitee, upon the delivery to the Indemnitee of written
notice of its election to do so. After delivery of such notice, approval of
such counsel by the Indemnitee and the retention of such counsel by the Company,
the Company will not be liable to the Indemnitee under this Agreement for any
fees of counsel subsequently incurred by the Indemnitee with respect to the same
proceeding, provided that (a) the Indemnitee shall have the right to employ his
own counsel in any such proceeding at the Indemnitee's expense; (b) the
Indemnitee shall have the right to employ his own counsel in connection with any
such proceeding, at the expense of the Company, if such counsel serves in a
review, observer, advice and counseling capacity and does not otherwise
materially control or participate in the defense of such proceeding; and (c) if
(i) the employment of counsel by the Indemnitee has been previously authorized
by the Company, (ii) the Indemnitee shall have reasonably concluded that there
may be a conflict of interest between the Company and the Indemnitee in the
conduct of any such defense or (iii) the Company shall not, in fact, have
employed counsel to assume the defense of such proceeding, then the fees and
expenses of Indemnitee's counsel shall be at the expense of the Company.
8. DETERMINATION OF RIGHT TO INDEMNIFICATION.
-----------------------------------------
8.1 To the extent the Indemnitee has been successful on the merits or
otherwise in defense of any proceeding referred to in Section 4.1 or 4.2 of this
Agreement or in the defense of any claim, issue or matter described therein, the
Company shall indemnify
-6-
<PAGE>
the Indemnitee against expenses actually and reasonably incurred by him in
connection with the investigation, defense or appeal of such proceeding, or such
claim, issue or matter, as the case may be.
8.2 In the event that Section 8.1 is inapplicable, or does not apply
to the entire proceeding, the Company shall nonetheless indemnify the Indemnitee
unless the Company shall prove by clear and convincing evidence to a forum
listed in Section 8.3 below that the Indemnitee has not met the applicable
standard of conduct required to entitle the Indemnitee to such indemnification.
8.3 The Indemnitee shall be entitled to select the forum in which the
validity of the Company's claim under Section 8.2 hereof that the Indemnitee is
not entitled to indemnification will be heard from among the following:
(a) A quorum of the Board consisting of directors who are not parties
to the proceeding for which indemnification is being sought;
(b) The stockholders of the Company;
(c) Legal counsel selected by the Indemnitee, and reasonably approved
by the Board, which counsel shall make such determination in a written opinion;
or
(d) A panel of three arbitrators, one of whom is selected by the
Company, another of whom is selected by the Indemnitee, and the last of whom is
selected by the first two arbitrators so selected.
8.4 As soon as practicable, and in no event later than 30 days after
written notice of the Indemnitee's choice of forum pursuant to Section 8.3
above, the Company shall, at its own expense, submit to the selected forum in
such manner as the Indemnitee or the Indemnitee's counsel may reasonably
request, its claim that the Indemnitee is not entitled to indemnification; and
the Company shall act in the utmost good faith to assure the Indemnitee a
complete opportunity to defend against such claim.
8.5 If the forum listed in Section 8.3 hereof selected by Indemnitee
determines that Indemnitee is entitled to indemnification with respect to a
specific proceeding, such determination shall be final and binding on the
Company. If the forum listed in Section 8.3 hereof selected by Indemnitee
determines that Indemnitee is not entitled to indemnification with respect to a
specific proceeding, the Indemnitee shall have the right to apply to the Court
of Chancery of Delaware, the court in which that proceeding is or was pending or
any other court of competent jurisdiction, for the purpose of determining
whether Indemnitee is entitled to indemnification and enforcing the Indemnitee's
right to indemnification pursuant to the Agreement.
8.6 Notwithstanding any other provision in this Agreement to the
contrary, the Company shall indemnify the Indemnitee against all expenses
incurred by the
-7-
<PAGE>
Indemnitee in connection with any hearing or proceeding under this Section 8
involving the Indemnitee and against all expenses incurred by the Indemnitee in
connection with any other proceeding between the Company and the Indemnitee
involving the interpretation or enforcement of the rights of the Indemnitee
under this Agreement unless a court of competent jurisdiction finds that each of
the material claims and/or defenses of the Indemnitee in any such proceeding was
frivolous or not made in good faith.
9. EXCEPTIONS. Any other provision herein to the contrary
----------
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
9.1 Claims Initiated by Indemnitee. To indemnify or advance expenses
------------------------------
to the Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by the Indemnitee and not by way of defense, except with respect to
proceedings specifically authorized by the Board of Directors or brought to
establish or enforce a right to indemnification and/or advancement of expenses
under this Agreement, the charter documents of the Company or any subsidiary, or
any statute or law or otherwise, but such indemnification or advancement of
expenses may be provided by the Company in specific cases if a majority of the
Board of Directors finds it to be appropriate; or
9.2 Unauthorized Settlements. To indemnify the Indemnitee hereunder
------------------------
for any amounts paid in settlement of a proceeding unless the Company consents
in advance in writing to such settlement, which consent shall not be
unreasonably withheld; or
9.3 Unlawful Indemnification. To indemnify the Indemnitee if a final
------------------------
decision by a court having jurisdiction in the matter shall determine that such
indemnification is not lawful. In this respect, the Company and the Indemnitee
have been advised that the Securities and Exchange Commission takes the position
that indemnification for liabilities arising under the federal securities laws
is against public policy and is, therefore, unenforceable and that claims for
indemnification should be submitted to appropriate courts for adjudication; or
9.4 Excluded Acts. To indemnify Indemnitee for any acts or omissions
-------------
or transactions from which a director may not be lawfully indemnified under the
Delaware General Corporation Law; or
9.5 Lack of Good Faith. To indemnify Indemnitee for any expenses
------------------
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous; or
9.6 Claims Under Section 16(b). To indemnify Indemnitee for expenses
--------------------------
and the payment of profits arising from the purchase and sale by Indemnitee of
-8-
<PAGE>
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute.
10. NON-EXCLUSIVITY. The provisions for indemnification and advancement
---------------
of expenses set forth in this Agreement shall not be deemed exclusive of any
other rights which the Indemnitee may have under any provision of law, the
Company's Certificate of Incorporation or Bylaws, the vote of the Company's
stockholders or disinterested directors, other agreements, or otherwise, both as
to action in Indemnitee's official capacity and to action in another capacity
while occupying his position as an agent of the Company, and the Indemnitee's
rights hereunder shall continue after the Indemnitee has ceased acting as an
agent of the Company and shall inure to the benefit of the heirs, executors and
administrators of the Indemnitee.
11. GENERAL PROVISIONS
------------------
11.1 Interpretation of Agreement. It is understood that the parties
---------------------------
hereto intend this Agreement to be interpreted and enforced so as to provide
indemnification and advancement of expenses to the Indemnitee to the fullest
extent now or hereafter permitted by law, except as expressly limited herein.
11.2 Severability. If any provision or provisions of this Agreement
------------
shall be held to be invalid, illegal or unenforceable for any reason whatsoever,
(a) the validity, legality and enforceability of the remaining provisions of the
Agreement (including, without limitation, all portions of any paragraphs of this
Agreement containing any such provision held to be invalid, illegal or
unenforceable, that are not themselves invalid, illegal or unenforceable) shall
not in any way be affected or impaired thereby, and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, all
portions of any paragraphs of this Agreement containing any such provision held
to be invalid, illegal or unenforceable, that are not themselves invalid,
illegal or unenforceable) shall be construed so as to give effect to the intent
manifested by the provision held invalid, illegal or unenforceable and to give
effect to Section 11.1 hereof.
11.3 Modification and Waiver. No supplement, modification or
-----------------------
amendment of this Agreement shall be binding unless executed in writing by both
of the parties hereto. No waiver of any of the provisions of this Agreement
shall be deemed or shall constitute a waiver of any other provision hereof
(whether or not similar) nor shall such waiver constitute a continuing waiver.
11.4 Subrogation. In the event of payment under this Agreement, the
-----------
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all documents required and shall do
all acts that may be necessary or desirable to secure such rights and to enable
the Company effectively to bring suit to enforce such rights.
-9-
<PAGE>
11.5 Counterparts. This Agreement may be executed in one or more
------------
counterparts, which shall together constitute one agreement.
11.6 Successors and Assigns. The terms of this Agreement shall bind,
----------------------
and shall inure to the benefit of, the successors and assigns of the parties
hereto.
11.7 Notice. All notices, requests, demands and other communications
------
under this Agreement shall be in writing and shall be deemed duly given (a) if
delivered by hand and receipted for by the party addressee or (b) if mailed by
certified or registered mail with postage prepaid, on the third business day
after the mailing date. Addresses for notice to either party are as shown on
the signature page of this Agreement, or as subsequently modified by written
notice.
11.8 Governing Law. This Agreement shall be governed exclusively by
-------------
and construed according to the laws of the State of Delaware, as applied to
contracts between Delaware residents entered into and to be performed entirely
with Delaware.
11.9 Consent to Jurisdiction. The Company and the Indemnitee each
-----------------------
hereby irrevocably consent to the jurisdiction of the courts of the State of
Delaware for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement.
The parties hereto have entered into this Indemnity Agreement effective as
of the date first written above.
AMERIQUEST TECHNOLOGIES, INC.
By:
---------------------------------
Its:
--------------------------------
Title:
-----------------------------
Address: MacArthur Place
3 Imperial Promenade
Santa Ana, CA 92707
INDEMNITEE:
By:
---------------------------------
Name:
------------------------------
Address:
---------------------------
---------------------------
-10-
<PAGE>
MUTUAL RELEASE
Computer 2000 AG, a company organized under the laws of the Federal
Republic of Germany ("C2000"), and __________________ ("Director"), a director
----- --------
[and officer] of AmeriQuest Technologies, Inc., a Delaware corporation (the
"Company"), enter into this Mutual Release as of ______________, 1995.
--------
In consideration for the release by Director set forth below, C2000, acting
for itself and, to the extent it is legally able to do so, all other C2000
Persons (as defined below), hereby releases Director and Director's affiliates
from and against any and all claims of every kind or nature, whether known or
unknown, accrued or accruing, contingent or otherwise, that C2000 or any of its
subsidiaries, affiliates, partners, shareholders, officers, directors,
controlling persons, employees, representatives or agents, successors or assigns
(each a "C2000 Person") may have against Director and Director's affiliates
------------
arising out of the fact that Director is or was a director or officer of the
Company or by reason of anything done or not done by him in any such capacity,
unless Director acted (or failed to act) fraudulently, in bad faith or in a
manner that Director did not believe to be in the best interests of the Company.
In consideration for the release by C2000 set forth above, Director hereby
releases C2000 and each C2000 Person from and against any and all claims of
every kind or nature, whether known or unknown, accrued or accruing, contingent
or otherwise, that Director or any of Director's affiliates may have against
C2000 and any C2000 Person arising out of C2000's transactions or agreements or
proposed transactions or agreements with the Company or any of its subsidiaries,
affiliates, officers, directors, shareholders, controlling persons, employees,
representatives or agents (each a "Company Person") or anything done or not done
--------------
by C2000 or any C2000 Person with respect to Director, any of Director's
affiliates, the Company or any Company Person, unless C2000 or such C2000
Person, as applicable, acted (or failed to act) fraudulently, in bad faith or in
a manner that C2000 or such C2000 person, as applicable, did not believe to be
in the best interests of C2000 or the Company.
Each of C2000 and Director acknowledges that the foregoing release of each
applies to claims which the releasing party does not know of or suspect to exist
in such party's favor, whether through ignorance, oversight, error, negligence
or otherwise and which, if known, would materially affect such party's decision
to enter into this Mutual Release, and each waives all rights under Section 1542
of the California Civil Code (or under any similar law) that states as follows:
"A general release does not extend to claims which the creditor does
not know or suspect to exist in his favor at the time of executing the
release, which if known by him must have materially affected his
settlement with the debtor."
Each of C2000 and Director represent and agree (a) that in executing this
Mutual Release such party is not relying on any representation, promise or
statement made by anyone
-11-
<PAGE>
that is not set forth herein and (b) that such party has not assigned,
transferred or purported to assign or transfer to any other person or entity.
IN WITNESS WHEREOF, the parties have executed this Mutual Release as of the
date first set forth above.
DIRECTOR:
------------------------------------
C2000:
Computer 2000 AG
By:
---------------------------------
Title:
-----------------------------
By:
---------------------------------
Title:
------------------------------
-12-
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
CURRENT REPORT
ON
FORM 8-K
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report: August 9, 1995
AMERIQUEST TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware
--------------------------------------------------------------------------------
(State of other jurisdiction of incorporation)
1-10397 33-0244136
--------------------------------------------------------------------------------
(Commission File Number) (IRS Employer Identification No.)
3 Imperial Promenade, Suite 300, Santa Ana, CA 92707
--------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(714) 445-5000
--------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
--------------------------------------------------------------------------------
(Former name or former address, if changed since last report)
1
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
------------------------------------
On July 8, 1994, AmeriQuest Technologies, Inc. ("AQS") reacquired 345,091
shares of its Common Stock from Mr. James D'Jen, a former officer and director
of AQS, as down payment on an obligation of Mr. D'Jen to exchange 350,000 shares
of AQS Common Stock in exchange for all (100%) of the common stock of AQS's
Singapore subsidiary, CMS Enhancements (S) PTE Ltd. A dispute arose between AQS
and Mr. D'Jen late in 1994 and continued into early 1995 at which time AQS
reissued the 345,091 shares to Mr. D'Jen and rescinded the exchange transaction.
Since early 1995, the Company has continued to evaluate the claims asserted
by Mr. D'Jen and the deteriorating value to the Company of the Singapore
operation in comparison to other Far Eastern operations held by AQS, and
concluded that it is in the best interests of the Company to consummate the
transaction on the terms of the original Exchange Agreement. On August 9, 1995,
effective as of June 30, 1995, the parties settled this dispute and
simultaneously concluded and ratified the exchange of CMS Enhancements (S) PTE
Ltd. to Mr. D'Jen for 350,000 shares of AQS Common Stock, which were then
delivered to AQS.
The Singapore company is a distributor of commodity disk drives. Sales for
this Singaporean subsidiary approximated $20 million annually, but did not
effectively contribute to the current strategy wherein its gross margin averaged
only 3% of sales.
In the opinion of management, the terms of the transaction were negotiated
at "arm's-length," at a point in time that Mr. D'Jen was estranged from the
Company.
At June 30, 1995 the financial attributes of the Singapore operation were
as follows:
<TABLE>
<CAPTION>
(000s)
------
<S> <C>
Consideration exchanged:
Receivables $1,894
Inventory 660
Trade payables (875)
------
Net book value $ 679
------
Consideration received:
350,000 AQS Common Shares at $2 $ 700
======
</TABLE>
No gain or loss is reflected; the net difference is treated as a
"reserve".
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
---------------------------------
(a) Inasmuch as the exchange and CMS Enhancements(s) PTE LTD. is not a
"significant subsidiary" no financial statements are required.
(b) No pro forma financial information is required.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERIQUEST TECHNOLOGIES, INC.
/s/ Stephen G. Holmes
-------------------------
Stephen G. Holmes
Secretary, Treasurer and Chief Financial Officer
Dated: August 11, 1995
3
<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
August 15, 1995
II-6
