UNITED STATES
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): June 28, 2000
Computone Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-16172 23-2472952
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(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
1060 Windward Ridge Parkway, Suite 100, Alpharetta, Georgia 30005
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 625-0000
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N/A
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(Former name or former address, if changed since last report)
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Item 2. Acquisition or Disposition of Assets.
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On June 28, 2000, Computone Corporation (the "Registrant") acquired
Multi-User Solutions, Ltd. ("Multi-User") from its shareholders, Darrin S.
Sherrill and John H. Gardner, Jr. (the "Shareholders"). The acquisition was
effected by the merger (the "Merger") of New Computone Corporation ("Newco"), a
wholly owned subsidiary of the Registrant with Multi-User, a Georgia
corporation, with Newco as the surviving corporation in the Merger. Multi-User
thereupon became a wholly owned subsidiary of the Registrant. The Merger was
effected pursuant to an Agreement and Plan of Merger (the "Merger Agreement")
dated as of April 12, 2000 among the Registrant, Newco, Multi-User and the
Shareholders, a copy of which Merger Agreement is filed as Exhibit 2.1 to this
Form 8-K Report, and an amendment (the "Amendment") to the Merger Agreement
dated as of May 19, 2000, a copy of which Amendment is filed as Exhibit 2.2 to
this Form 8-K Report.
Upon the Merger, each of the 1,000 outstanding shares of common stock of
Multi-User were cancelled and extinguished and converted into the right to
receive $4,000 in cash, an aggregate of $4,000,000, and 800 shares of the
Registrant's common stock, an aggregate of 800,000 shares (collectively, the
"Merger Consideration"). The Merger Consideration is subject to an increase by
up to $750,000 in cash and by the issuance of 150,000 shares of the Registrant's
common stock, depending upon the satisfaction of specified performance
objectives. The Merger Consideration was determined by arms' length negotiations
between the Registrant and Multi-User and took into account the following
principal factors regarding Multi-User: the assets and liabilities of
Multi-User, the results of operations of Multi-User over the last several years
and the management of Multi-User. The source of the cash portion of the Merger
Consideration was a portion of the net proceeds of a private placement effected
by the Registrant on June 28, 2000. Reference is made to Item 5 hereof for
additional information regarding the private placement.
No material relationship exists between the Registrant or any of its
affiliates or any director or officer of the Registrant or any associate of such
directors or officers and Multi-User or any of its affiliates or any director or
officer of Multi-User or any associate of such directors or officers.
Upon the Merger, the Registrant entered into a Registration Rights
Agreement (the "Registration Agreement") with each of the Shareholders, an
Employment Agreement (the "Employment Agreements") with each of the
Shareholders, an Escrow and Indemnification Agreement (the "Escrow Agreement")
with each of the Shareholders and the Escrow Agent named therein and an
Investment Representation Agreement (the "Investment Agreements") with each of
the Shareholders.
The following brief summary of the Registration Agreement, the Employment
Agreements, the Escrow Agreement and the Investment Agreements is qualified by
reference to the full text of such agreements, a copy of each of which is
included as an appendix to Exhibit 2.1 to this Form 8-K Report.
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The Registration Agreement
Pursuant to the Registration Agreement, the Registrant granted the
Shareholders the right, exercisable once under certain conditions, to demand
that the Registrant effect the registration of the Registrant's common stock
issued to the Shareholders under the Merger Agreement. Such right may not be
exercised until after December 31, 2000. In the Registration Agreement, the
Registrant has also granted the Shareholders unlimited "piggyback" registration
rights.
The Escrow Agreement
Pursuant to the Escrow Agreement, the Shareholders deposited $200,000 in
cash (the "Cash Escrow") and 100,000 shares of the Registrant's common stock
(the "Stock Escrow") delivered as part of the Merger Consideration to an
independent escrow agent to be held in escrow to secure the indemnification
obligation of the Shareholders under the Merger Agreement. Subject to the
conditions of the Escrow Agreement, including the absence of any pending claims
by the Registrant, the Cash Escrow will be released to the Shareholders on or
after July 31, 2001 and the Stock Escrow will be released to the Shareholders on
or after July 31, 2002.
The Employment Agreements
Under the Employment Agreements, each of the Shareholders agreed to be
employed by the Registrant in a specified capacity for a period of three years
following the closing of the Merger on June 28, 2000. The Employment Agreements
also provide for the compensation of the Shareholders, for Mr. Sherrill to serve
as an employee and an officer of the Registrant and of Multi-User and for Mr.
Gardner to serve as an employee and an officer of Multi-User, and for specified
employee benefits as well as certain incentive compensation if specified
performance objectives are met. Upon the expiration of the terms of the
Employment Agreements, the Shareholders will not be subject to any competitive
restrictions, except that they may not make use of confidential information of
the Registrant or solicit employees or customers of the Registrant for a
specified period of time following expiration of the Employment Agreements.
The Investment Agreements
Under the Investment Agreements, each of the Shareholders agreed to hold
the Registrant's common stock received in the Merger for investment and to make
no public distribution of such common stock except as permitted by the
Registration Agreement.
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Item 5. Other Events.
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On June 28, 2000, the Registrant completed a private placement to a group
of accredited investors and realized gross proceeds from the sale of 1,249,674
shares of the Registrant's common stock, par value $.01 per share, at a price of
$3.25 per share and (ii) the Registrant's issuance of an 11% promissory note in
the principal amount of $2,500,000 due December 28, 2001 (the "Promissory Note")
together with a warrant to purchase 392,577 shares of the Registrant's common
stock, $.01 par value, exercisable until June 28, 2003 at $3.25 per share (the
"Warrant"). On June 28, 2000, the Registrant entered into a Purchase Agreement
with LC Capital Partners, LP relating to the Promissory Note and the Warrant. A
copy of the Promissory Note, the Warrant and the Purchase Agreement are filed as
Exhibits 99.1, 99.2 and 99.3 to this Form 8-K Report, respectively. Reference is
made to the text of such documents for further information as to the terms and
conditions thereof.
On June 30, 2000, the Registrant issued a press release reporting the
consummation of the Merger Agreement and of the private placement. A copy of the
press release is included as Exhibit 99.4 to this Form 8-K Report.
Item 7. Financial Statements and Exhibits.
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(a) Financial statements of business acquired:
Pursuant to Item 7(a)(4) of Form 8-K, the historical financial
statements of Multi-User Solutions, Ltd. Required by Rule 3-05 of
Regulation S-X will be filed not later than September 11, 2000 under cover
of Form 8-KA.
(b) Pro forma financial information:
Pursuant to Item 7(b)(2) of Form 8-K, the pro forma financial
information required by Article 11 of Regulation S-X with respect to the
acquisition of Multi-User Solutions, Ltd. will be filed not later than
September 11, 2000 under cover of Form 8-KA.
(c) Exhibits:
*2.1 Agreement and Plan of Merger among Computone Corporation, New
Computone Corporation, Multi-User Solutions, Ltd., Darrin S.
Sherrill and John H. Gardner, Jr., with Appendices A through D,
dated as of April 12, 2000.
2.2 Amendment to Agreement and Plan of Merger dated as of May 19,
2000 to Agreement and Plan of Merger dated as of April 12, 2000
among Computone Corporation, New Computone Corporation,
Multi-User Solutions, Ltd., Darrin S. Sherrill and John H.
Gardner, Jr.
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99.1 Promissory Note issued by Computone Corporation to LC Capital
Partners, LP dated as of June 28, 2000.
99.2 Warrant issued by Computone Corporation to LC Capital Partners,
LP for the purchase of 392,577 shares of common stock, $.01 par
value, of Computone Corporation dated as of June 28, 2000.
99.3 Purchase Agreement dated as of June 28, 2000 between Computone
Corporation and LC Capital Partners, LP.
99.4 News Release of Computone Corporation dated June 30, 2000.
* Schedules omitted. Registrant agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request.
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SIGNATURES
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.
COMPUTONE CORPORATION
By: /s/ Perry J. Pickerign
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Perry J. Pickerign,
President and Chief Executive Officer
Date: July 13, 2000
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EXHIBIT INDEX
Exhibit No. Description of Exhibit
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*2.1 Agreement and Plan of Merger among Computone Corporation, New
Computone Corporation, Multi-User Solutions, Ltd., Darrin S.
Sherrill and John H. Gardner, Jr., with Appendices A through D,
dated as of April 12, 2000.
2.2 Amendment to Agreement and Plan of Merger dated as of May 19,
2000 to Agreement and Plan of Merger dated as of April 12, 2000
among Computone Corporation, New Computone Corporation,
Multi-User Solutions, Ltd., Darrin S. Sherrill and John H.
Gardner, Jr.
99.1 Promissory Note issued by Computone Corporation
to LC Capital Partners, LP dated as of June 28,
2000.
99.2 Warrant issued by Computone Corporation to LC
Capital Partners, LP for the purchase of 392,577
shares of common stock, $.01 par value, of
Computone Corporation dated as of June 28, 2000.
99.3 Purchase Agreement dated as of June 28, 2000
between Computone Corporation and LC Capital
Partners, LP.
99.4 News Release of Computone Corporation dated June 30, 2000.
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* Schedules omitted. Registrant agrees to furnish supplementally a copy of any
omitted schedule to the Commission upon request.
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