UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): JULY 14, 2005
EMTEC, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-32789 87-0273300
(State of incorporation) (Commission File No.) (IRS Employer
Identification No.)
572 WHITEHEAD ROAD, BLDG. # 1
TRENTON, NEW JERSEY 08619
(Address of principal executive offices)
Registrant's telephone number: (609) 528-8500
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the Registrant under any of the
following provisions:
|_| Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17
CFR 240.14a-12)
|X| Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
MERGER AGREEMENT
Pursuant to an Agreement and Plan of Merger dated as of July 14, 2005 (the
"Merger Agreement"), by and among Emtec, Inc. (the "Registrant"), Emtec Viasub
LLC, a Delaware limited liability company and wholly-owned subsidiary of the
Registrant ("MergerCo"), and Darr Westwood Technology Corporation, a Delaware
corporation ("Darr"), Darr will merge with and into MergerCo, with MergerCo
remaining as the surviving company (the "Surviving Company") and a wholly-owned
subsidiary of the Registrant (the "Merger").
In connection with the Merger, and as provided in the Merger Agreement,
each of the 500 shares of Darr common stock issued and outstanding immediately
prior to the Merger shall be canceled and extinguished and automatically
converted into (i) 19,056.22 shares of the Registrant's common stock and (ii) a
5-year warrant to purchase shares of Registrant's common stock which shall be
subject to adjustment. The warrant shall evidence the obligation of the
Registrant to issue shares of its capital stock in the aggregate equal to ten
percent (10%) of such stock calculated on a fully diluted basis at the time of
and after giving effect to the exercise of the warrant. The aggregate exercise
price of the warrant is $3,645,752. The per share exercise price shall be equal
to such former Darr stockholders aggregate exercise price divided by the number
of warrant shares received by the Darr stockholder. Additionally, by virtue of
the Merger and without any action on the part of the holders of the equity
interests in MergerCo, each issued and outstanding equity interest of MergerCo
shall be converted into one equity interest of the Surviving Company.
Completion of the Merger is subject, among other matters, to regulatory
filings and the expiration of a 10 day waiting period subsequent to July 14,
2005. Subject to the receipt of institutional financing, which is also a
condition to the completion of the Merger, the Registrant will initiate a self
tender offer to repurchase up to 2,864,584 shares of its then issued and
outstanding common stock having an aggregate purchase price of up to $5.50
million at a price of $1.92 per share. The current stockholders of Darr will not
participate in this tender offer. Certain of the existing directors and officers
of the Registrant intend to participate in this tender offer.
THE REGISTRANT URGES YOU TO READ ITS OFFER TO PURCHASE AND OTHER DOCUMENTS
RELATING TO ITS SELF-TENDER OFFER FILED WITH THE SEC WHEN THEY BECOME AVAILABLE
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. YOU WILL BE ABLE TO OBTAIN SUCH
DOCUMENTS FREE OF CHARGE AT THE SEC'S WEBSITE OR BY WRITING TO THE REGISTRANT AT
572 WHITEHEAD ROAD, BLDG. #1, TRENTON, NEW JERSEY 08619, ATTN: SAM BHATT.
EMPLOYMENT AGREEMENTS
Pursuant to the terms of the Merger Agreement, John Howlett will resign his
position as Chief Executive Officer and Ronald Seitz will resign his position as
President and Chief Operating Officer effective upon consummation of the Merger.
Messrs. Howlett and Seitz will remain with the Registrant as President,
Northeast Operations, and President, Southeast Operations, respectively,
pursuant to the employment agreements that are discussed below.
JOHN HOWLETT
The Registrant entered an employment agreement, dated as of July 14, 2005,
with Mr. Howlett, pursuant to which Mr. Howlett is to serve as the Registrant's
President of Northeast Operations for a period commencing on the effective date
of the Merger (the "Effective Date") and terminating on August 31, 2008,
although this term may be extended annually for additional one-year periods with
the mutual consent of the parties. Under the terms of this agreement, Mr.
Howlett is entitled to receive a base salary of $230,000, which shall be
increased by 5% each year of the initial term of employment. In addition, Mr.
Howlett is eligible to receive both an annual bonus of $100,000 and a bonus
targeted at 50% of his base salary based upon the achievement by the Registrant
of performance criteria set forth in the employment agreement.
Mr. Howlett's employment is subject to early termination in the event of
his death or disability or in the event that either he or the Registrant elect
to terminate his employment. In the event his employment is terminated for any
reason during the term of the agreement, Mr. Howlett will be entitled to any
earned or accrued but unpaid base salary through the date of termination and to
all amounts payable and benefits accrued under any applicable plan, policy,
program, or practice of the Registrant in which he was a participant during his
employment with the Registrant in accordance with the terms of the employment
agreement. In the case that Mr. Howlett's employment is terminated by the
Registrant without cause or his employment terminates in the event of death or
disability, he will be entitled to his base salary for the entire initial term
of employment and to a pro-rata bonus payment for the year of his termination,
as set forth in the employment agreement.
The employment agreement is effective only upon the consummation of the
Merger. The obligations of Mr. Howlett and the Registrant under the employment
agreement will automatically terminate in the event the Merger is terminated or
not consummated for any reason.
RONALD SEITZ
The Registrant entered an employment agreement, dated as of July 14, 2005,
with Mr. Seitz, pursuant to which Mr. Seitz is to serve as the Registrant's
President of Southeast Operations for a period commencing on the Effective Date
and terminating on August 31, 2008, although this term may be extended annually
for additional one-year periods with the mutual consent of the parties. Under
the terms of this agreement, Mr. Seitz is entitled to receive a base salary of
$230,000, which shall be increased by 5% each year of the initial term of
employment. In addition, Mr. Seitz is eligible to receive both an annual bonus
of $100,000 and a bonus targeted at 50% of his base salary based upon the
achievement by the Registrant of performance criteria set forth in the
employment agreement.
Mr. Seitz's employment is subject to early termination in the event of his
death or disability or in the event that either he or the Registrant elect to
terminate his employment. In the event his employment is terminated for any
reason during the term of the agreement, Mr. Seitz will be entitled to any
earned or accrued but unpaid base salary through the date of termination and to
all amounts payable and benefits accrued under any applicable plan, policy,
program, or practice of the Registrant in which he was a participant during his
employment with the
Registrant in accordance with the terms of the employment agreement. In the case
that Mr. Seitz's employment is terminated by the Registrant without cause or his
employment terminates in the event of his death or disability, he will be
entitled to his base salary for the entire initial term of employment and a
pro-rata bonus payment for the year of his termination, as set forth in the
employment agreement.
The employment agreement is effective only upon the consummation of the
Merger. The obligations of Mr. Seitz and the Registrant under the employment
agreement will automatically terminate in the event the Merger is terminated or
not consummated for any reason.
ITEM 5.01. CHANGES IN CONTROL OF REGISTRANT.
The disclosure contained in Item 1.01 above is incorporated herein by
reference.
The Merger will result in a change-of-control of the Registrant. Upon
consummation of the Merger, the stockholders of Darr will collectively acquire
55.7% of the Registrant's then issued and outstanding shares of common stock of
the Registrant, while the remaining shareholders of the Registrant will own
approximately 44.3% of such issued and outstanding shares, based on 17,094,998
shares outstanding after the Merger. The remaining shareholders of the
Registrant would own approximately 39.8% of the issued and outstanding shares of
the Registrant's common stock if the warrant to purchase an additional 10% of
the shares of the Registrant's common stock is exercised, which, if exercised
immediately after the closing of the Merger, would result in 18,994,442 shares
of common stock outstanding. The share numbers referred to herein do not take
into account the capital structure of the Registrant following the tender offer.
The Merger Agreement provides that upon completion of the Merger, the
Registrant's board of directors will appoint Gregory Chandler, Dinesh Desai,
Keith Grabel, and Brian McAdams as directors of the Registrant. Frank Jerd,
George Raymond, Ronald Seitz, and John Howlett, the Registrant's current board
of directors, will resign immediately after such appointment, although Messrs.
Seitz and Howlett will remain with the Registrant in executive capacities
pursuant to respective 3-year employment agreements. Accordingly, following the
Merger, Gregory Chandler, Dinesh Desai, Keith Grabel, and Brian McAdams will
constitute the entire board of directors of the Registrant.
ITEM 5.02. DEPARTURE OF DIRECTORS OR PRINCIPAL OFFICERS; ELECTION OF DIRECTORS;
APPOINTMENT OF PRINCIPAL OFFICERS.
The disclosure contained in Items 1.01 and 5.02 above is incorporated
herein by reference.
Upon completion of the Merger, it is anticipated that Frank Jerd, George
Raymond, Ronald Seitz, and John Howlett will resign from our board of directors
and Gregory Chandler, Dinesh Desai, Keith Grabel, and Brian McAdams will be
appointed directors of the Registrant.
Upon the consummation of the Merger, the positions of the following
principal officers will change as indicated in the following table.
NAME CURRENT POSITION POSITION UPON CONSUMMATION OF MERGER
John Howlett Chief Executive Officer President, Northeast Operations
Ronald Seitz President, Chief Operating Officer President, Southeast Operations
Sam Bhatt Vice President-Finance, Treasurer Vice President-Finance, Secretary
(Principal Financial and Accounting
Officer)
Effective upon the consummation of the Merger, Dinesh Desai will be
appointed Chief Executive Officer, Keith Grabel will be appointed President,
Westwood Operations, and Stephen Donnelly will be appointed Chief Financial
Officer.
DINESH DESAI (AGE 55) -- From 1986 to the present, Mr. Desai has been the
Chairman and CEO of DARR Global Holdings, Inc., a management consulting firm.
Since 2004, he has served as Chairman on the Board of Directors of two private
corporations, Westwood Computer Corporation and DARR Westwood Technology
Corporation. Mr. Desai has also served as a member of the Board of Directors of
the Enterprise Center, a Nonprofit Organization. Mr. Desai holds a Bachelor of
Science Degree in chemical engineering from the Indian Institute of Technology
in Bombay, India, and a Masters of Science Degree in both chemical and
industrial engineering from Montana State University. He earned an Masters in
Business Administration from Temple University in 1978.
KEITH GRABEL (AGE 53) -- Since 2000, Mr. Grabel has held the positions of
president and director of Westwood Computer Corporation. For the past year, he
has also served as president and director of DARR Westwood Technology Corp. Mr.
Grabel graduated from the University of Miami School of Business in 1974.
STEPHEN DONNELLY (AGE 47) -- Since 2002, Mr. Donnelly has been the Chief
Financial Officer of DARR Global Holdings, Inc. a management consulting firm.
Since 2004, he has served as an officer for Westwood Computer Corporation.
Between 1993 and 2002, Mr. Donnelly worked as a Manager and Managing Director
for Acquisition Management Services, Inc., a merger and acquisition advisory
firm. Prior to that, he has worked as a Director of Operations for a
privately-held human resource and employee benefits software developer and as a
Financial Manager for a healthcare organization. Mr. Donnelly began his career
with the accounting firm of PriceWaterhouse. He is a Certified Public Accountant
with a Bachelor's degree in Accounting from Villanova University (in 1980).
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS.
(a) Financial Statements of Businesses Acquired - None
(b) Pro Forma Financial Information - None
(c) Exhibits:
EXHIBIT NO. DESCRIPTION
2.1 Agreement and Plan of Merger dated as of July 14, 2005, by
and among the Registrant, MergerCo and Darr
10.1 Employment Agreement, dated as of July 14, 2005, between the
Registrant and John Howlett
10.2 Employment Agreement, dated as of July 14, 2005, between the
Registrant and Ronald Seitz
10.3 Form of Warrant
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.
Dated: July 20, 2005
EMTEC, INC.
By: /s/ Sam Bhatt
-----------------------------------
Name: Sam Bhatt
Title: Vice President-Finance, Treasurer