Item
1.01.
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Entry
Into a Material Definitive
Agreement.
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Zones, Inc - Recent Material EventFirst Amendment to Plan of
Merger
On
November 17, 2008, we entered into the First Amendment to Agreement and Plan of
Merger (the “First Amendment”) with Zones Acquisition Corp. (“ZAC”), which is
owned by Firoz H. Lalji (“Mr. Lalji”), our Chairman of the Board,
Chief Executive Officer and majority shareholder. The First Amendment amended
the Agreement and Plan of Merger, dated July 30, 2008 (the “Original
Agreement”), between us and ZAC, pursuant to which ZAC will merge with and into
Zones, with Zones continuing as the surviving corporation. Following the closing
of the merger, Zones will become a private company wholly owned by Mr. Lalji and
certain of his related parties.
The First
Amendment amended the Original Agreement to reduce the consideration payable to
holders of our common stock, other than Zones, ZAC, Mr. Lalji, his wife Najma
Lalji, their adult daughter Natasha Lalji or The Firoz and Najma Lalji
Foundation (collectively, the “Continuing Shareholders”), or shareholders who
perfected dissenters’ rights under applicable law, from $8.65 to $7.00 per share
in cash, without interest and less any applicable withholding
taxes.
The First
Amendment also amends the Original Agreement to: (1) eliminate certain
conditions to ZAC’s obligation to close the merger; (2) eliminate the
termination fee payable by us to ZAC in the event the Original Agreement, as
amended by the First Amendment, (the “Amended Agreement”) is terminated under
certain circumstances; (3) increase the reverse termination fee payable by
ZAC to us from $750,000 to $5.0 million in the event the Amended Agreement is
terminated under certain circumstances; (4) provide for an additional 10
calendar day period during which we are permitted to initiate, solicit,
encourage and enter into and maintain discussions or negotiations regarding
competing takeover proposals; and (5) provide for specific performance of ZAC’s
obligations to pursue financing for the merger in the event the currently
specified financing becomes unavailable.
The
merger is expected to close on or before December 31, 2008. Mr. Lalji has
informed us that he intends to provide approximately $20.0 million of the
merger consideration at or prior to closing. Another $15.0 million of the
merger consideration is expected to be funded at or prior to closing from a
credit facility expected to be entered into with GE Capital. The remaining
approximately $19.0 million of merger consideration is expected to be
funded on January 2, 2009 from the GE Capital credit facility and other sources
that are available to the surviving company. Mr. Lalji has also agreed to
personally guarantee the funding of the final approximately $19.0 million
of merger consideration on January 2, 2009 if it is not otherwise funded in a
timely manner.
We will
send supplemental proxy materials to shareholders, and we expect to convene the
previously scheduled special shareholders meeting on November 19, 2008 but
immediately adjourn it until a later meeting date in December 2008. The merger
requires the approval of a majority of the outstanding shares of Zones common
stock and the approval of a majority of the number of shares of Zones common
stock present in person or by proxy and voting at the special meeting (other
than shares held by Mr. Lalji and certain of his related parties). As previously
announced, the record date for the special shareholders meeting remains October
6, 2008.
Limited
Guarantee
In
connection with the First Amendment, Mr. Lalji also entered into a Limited
Guarantee, dated November 17, 2008 (the “Limited Guarantee”), in favor of us,
pursuant to which he agreed to guarantee ZAC’s obligation to pay us the
termination fee, subject to certain conditions, in an amount up to $5.0
million.
Voting
Agreement
Mr. and
Mrs. Lalji have also entered into a separate shareholder voting and support
agreement, dated November 17, 2008 (the “Voting Agreement”), with us, pursuant
to which Mr. and Mrs. Lalji have delivered to us an irrevocable proxy appointing
William C. Keiper (the chairman of the Special Committee) and John H. Bauer (a
member of the Special Committee), respectively, as proxies to vote all of Mr.
and Mrs. Lalji’s shares of Zones common stock in favor of the approval of the
merger, and the approval and adoption of the Amended Agreement, and the other
transactions contemplated thereby. In addition, pursuant to the
Voting Agreement, Mr. and Mrs. Lalji have each agreed, among other things, to
vote their respective shares of common stock: (a) against any action or
agreement that would result in a breach of any covenant, representation or
warranty, or any other obligation of a shareholder, ZAC or Zones in connection
with the merger; (b) upon our election to terminate the merger in
connection with a superior proposal, then in favor of adoption of the superior
proposal and approval of the transactions contemplated thereby, and (c) in
support of the adjournment of the special meeting of the shareholders scheduled
to occur on November 19, 2008. The
foregoing summary of the First Amendment, Voting Agreement and Limited Guarantee
does not purport to be complete and is subject to, and qualified in its entirety
by, the full text of the First Amendment, Voting Agreement and Limited
Guarantee, which are attached as Exhibit 2.1, Exhibit 2.2 and Exhibit 2.3,
respectively, and incorporated herein by reference.
On
November 18, 2008, we issued a press release announcing that we had entered into
the First Amendment, the Voting Agreement and the Limited
Guarantee. A copy of the press release is attached as Exhibit 99.1
hereto.
(d)
Exhibits:
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.
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