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): February 12, 1998
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GOVERNMENT TECHNOLOGY SERVICES, INC.
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(Exact name of registrant as specified in its charter)
Delaware 0-19394 54-1248422
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(State or other (Commission (IRS Employer
jurisdiction of File Identification
incorporation) Number) Number)
4100 Lafayette Center Drive, Chantilly, Virginia 20151-1200
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 703-502-2000
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Item 1. Changes in Control of Registrant
Not Applicable.
Item 2. Acquisition or Disposition of Assets
On February 12, 1998, Government Technology Services, Inc. ("GTSI"),
pursuant to an asset purchase agreement, acquired from BTG, Inc. and two of
its subsidiaries (collectively "BTG") substantially all of the assets of
the BTG division that is a reseller of computer hardware, software and
integrated systems to the federal government (the "Division"). The
acquired assets include certain inventory, furniture, fixtures, supplies,
equipment, deposits, rights under acquired contracts and intangible
personal property. In addition, GTSI assumed certain liabilities of BTG to
be performed under specified contracts of BTG relating to the Division and
certain liabilities arising from the ownership or operation of the acquired
assets after the closing. GTSI paid at closing $7,325,265 in cash and
issued 15,375 shares, having a liquidation preference of $15,375,000, of a
new series of preferred stock designated Series C 8% Cumulative Redeemable
Convertible Preferred Stock ("Series C Preferred Stock"). GTSI will pay an
additional $500,000 in cash upon the release of liens on certain items of
equipment which are part of the acquired assets. A portion of the
consideration, $800,000 in cash and 1,538 shares of Series C Preferred
Stock, is being held under an escrow agreement to secure BTG's
indemnification obligations under the asset purchase agreement. Under the
asset purchase agreement, BTG is obligated to repay to GTSI up to $4.5
million to the extent that there is a shortfall in the amounts that GTSI
receives from dispositions of certain noncurrent inventory acquired. GTSI
funded the cash portion of the consideration by drawing on its existing
credit facility with its lenders. The amount of consideration was
determined as a result of arm's-length negotiations between GTSI and BTG.
Prior to the closing, there were no material relationships between BTG and
GTSI or any of its affiliates, directors or officers, or any associate of
any such director or officer. The asset purchase agreement includes
certain non-competition covenants by BTG which will continue in effect
until February 12, 2004.
GTSI has agreed to convene a meeting of stockholders no later than
January 1, 1999 (the "First Meeting") to approve a proposal (the
"Conversion Proposal") to convert the 15,375 shares of Series C Preferred
Stock into GTSI common stock ("Common Stock"). If the Conversion Proposal
is approved, the Series C Preferred Stock will be converted automatically
into that number of shares of Common Stock equal to the liquidation
preference of the Series C Preferred Stock ($15,375,000 or $1,000 per
share) plus all accrued and unpaid dividends thereon divided by the
conversion price of $5.125. If the Conversion Proposal is approved at the
First Meeting, the Series C Preferred Stock will be converted into
3,000,000 shares of Common Stock. If the Conversion Proposal is not
approved at the First Meeting, GTSI has agreed to convene a second meeting
of stockholders no later than January 1, 2000 (the "Second Meeting") to
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approve the Conversion Proposal. GTSI has agreed to recommend that holders
of Common Stock vote in favor of the Conversion Proposal and each current
member of the GTSI board of directors (the "Board") agreed to vote any
Common Stock over which he or she has voting power in favor of the
Conversion Proposal.
Dividends, payable annually in cash or in additional shares of Series
C Preferred Stock at GTSI's option, will begin to accrue commencing on the
earlier of January 1, 1999 and the date on which the First Meeting is held
if at such meeting approval of the Conversion Proposal is not obtained. At
any time on or after the dividend commencement date, GTSI may at its option
redeem, in whole but not in part, all of the Series C Preferred Stock. If
the redemption date occurs during the period from the dividend commencement
date to the date on which the Second Meeting is held, the redemption price
will be equal to the liquidation preference plus accrued and unpaid
dividends thereon to the redemption date plus an amount equal to 8% of the
liquidation preference multiplied by a fraction the numerator of which will
be the number of days from the redemption date to the earlier of (a) the
first anniversary of the First Meeting and (b) January 1, 2000, and the
denominator of which will be 365. If the redemption date occurs on or
after the adjustment date (defined as the earlier of January 1, 2000 and
the date on which the Second Meeting is held if at such meeting approval of
the Conversion Proposal is not obtained), the redemption price will be
equal to the liquidation preference plus accrued and unpaid dividends
thereon to the redemption date plus an amount equal to 2% of the sum of the
liquidation preference and accrued and unpaid dividends thereon
attributable to the period commencing with the adjustment date to the
redemption date.
The holders of a majority of the Series C Preferred Stock, voting as a
single class, have the right to elect to the Board a director designated as
the "Series C Director." In addition, the holders of a majority of the
Series C Preferred Stock have the right to nominate, subject to approval by
the Board, an independent director designated as the "Joint Director." The
Joint Director may not be (a) a director, officer or employee of or
otherwise paid any compensation by any holder of Series C Preferred Stock
or (b) an officer or employee of or otherwise paid any compensation (other
than director's fees) by GTSI. BTG, as the holder of the Series C
Preferred Stock, has elected Dr. Edward H. Bersoff, who is BTG's president
and chief executive officer, as the Series C Director. BTG has nominated
and the Board has approved John M. Toups, a GTSI director since October
1997, as the Joint Director. The rights of the holders of the Series C
Preferred Stock with respect to the Joint Director will automatically
terminate if the total liquidation preference with respect to the Series C
Preferred Stock owned by BTG plus all accrued and unpaid dividends thereon
falls below 66 2/3% of the total liquidation preference of the then
outstanding Series C Preferred Stock plus all accrued and unpaid dividends
thereon.
At the closing on February 12, 1998, BTG and GTSI entered into a
standstill agreement which restricts certain actions by BTG and its
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affiliates (collectively and individually, the "BTG Group") with respect to
GTSI and its securities. BTG agreed that, without the Board's prior
consent, while the BTG Group beneficially owns any Series C Preferred
Stock, the BTG Group will not acquire any Common Stock or other securities
of GTSI entitled to vote generally for the election of directors or
securities convertible into such voting securities (collectively "Voting
Securities") if after such acquisition the BTG Group would beneficially own
5% or more of the Voting Securities outstanding following any such
acquisition; provided that the BTG Group may not acquire any Voting
Securities prior to the earlier of the First Meeting and January 1, 1999.
If the Series C Preferred Stock has been converted to Common Stock as a
result of stockholder approval of the Conversion Proposal, the BTG Group
may not acquire any Voting Securities if after such acquisition the BTG
Group would beneficially own more than 30.8% of the Voting Securities
outstanding following any such acquisition. BTG also agreed that, without
the Board's prior consent, the BTG Group will not (a) deposit any Voting
Securities in a voting trust or subject them to any similar arrangement;
(b) solicit proxies with respect to Voting Securities in opposition to the
recommendation of a majority of the Board with respect to any matter
(subject to certain exceptions); (c) propose to or solicit GTSI
stockholders for the approval of a stockholder proposal except with respect
to the Conversion Proposal; (d) join a partnership or other group to
acquire, hold, vote or dispose of Voting Securities; or (e) make any
proposal to the Board with respect to the acquisition of any beneficial
ownership by the BTG Group or with respect to a merger or consolidation
with, or sale of a substantial portion of GTSI's assets to the BTG Group.
In addition, BTG agreed that, without the Board's prior consent, the BTG
Group will not transfer any Voting Securities, other than (a) to a wholly
owned subsidiary of BTG; (b) pursuant to Rule 144 under the Securities Act
of 1933, as amended; (c) pursuant to any tender or exchange offer
recommended by the Board to GTSI stockholders; (d) pursuant to any public
offering of Voting Securities (subject to certain exceptions); or (e) as a
result of any pledge to a financial institution to secure a loan.
Under the standstill agreement, after the date the Series C Preferred
Stock is converted to Common Stock as a result of stockholder approval of
the Conversion Proposal, GTSI will have the option to repurchase all, but
not less than all, of the Voting Securities beneficially owned by the BTG
Group if any of the following occurs: (a) the Continuing Directors (as
defined) of BTG fail to constitute a majority of the BTG board of
directors; (b) no member of any slate of directors recommended by the BTG
board is elected to the BTG board by the stockholders of BTG in any
election; or (c) the BTG board approves, or BTG executes, an agreement
providing for a merger or consolidation of BTG, a sale of substantially all
of BTG's assets or any similar transaction (subject to certain exceptions).
After the date the Series C Preferred Stock is converted to Common Stock
and until such time as the BTG Group beneficially owns less than 15% of
GTSI's outstanding Voting Securities, (a) the BTG Group will be entitled to
designate one person for nomination to the holders of Common Stock for
election to the Board (the "BTG Designee"), (b) the BTG Group will be
entitled to designate one additional person for nomination to the holders
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of Common Stock for election to the Board, who will be an independent
person approved by the Board in its sole discretion (the "Joint Designee"),
and (c) GTSI has agreed to nominate and recommend for approval such BTG
Designee and such Joint Designee at each annual meeting of stockholders for
the election of directors to the Board. The standstill agreement will
continue in effect until February 12, 2004 and thereafter for long as the
BTG Group beneficially owns Series C Preferred Stock or 5% or more of the
Voting Securities, but in no event longer than February 12, 2008.
Item 3. Bankruptcy or Receivership
Not Applicable.
Item 4. Changes in Registrant's Certifying Accountant
Not Applicable.
Item 5. Other Events
Not Applicable.
Item 6. Resignation of Registrant's Directors
Not Applicable.
Item 7. Financial Statements and Exhibits
(a) Financial Statements of Business Acquired.
The financial statements relating to the business acquired from
BTG are not available at this time. Such financial statements will be
filed by amendment not later than 60 days after the date this report is
required to be filed.
(b) Pro Forma Financial Information.
The required pro forma financial information is not available at
this time. Such information will be filed at the time the required
financial statements are filed.
(c) Exhibits.
10.30 Asset Purchase Agreement dated as of February 12, 1998
among GTSI, BTG, Inc., BTG Technology Systems, Inc. and
Concept Automation, Inc. of America (excluding
attachments and exhibits).
10.31 Standstill Agreement between GTSI and BTG, Inc. dated
as of February 12, 1998.
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10.32 Certificate of Designations, Preferences and Rights of
Series C 8% Cumulative Redeemable Convertible Preferred
Stock of GTSI filed February 12, 1998 with the
Secretary of State of Delaware.
99.1 Press release dated February 12, 1998
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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, thereunto duly authorized.
Date: February 26, 1998
GOVERNMENT TECHNOLOGY SERVICES, INC.
By: /s/ M. DENDY YOUNG
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M. Dendy Young
President and Chief Executive Officer
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INDEX TO EXHIBITS
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EXHIBIT |
NUMBER | DESCRIPTION
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10.30 | Asset Purchase Agreement dated as of February 12, 1998 among
GTSI, BTG, Inc., BTG Technology Systems, Inc. and Concept
Automation, Inc. of America (excluding attachments and
exhibits)
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10.31 | Standstill Agreement between GTSI and BTG, Inc. dated as of
February 12, 1998
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10.32 | Certificate of Designations, Preferences and Rights of Series
C 8% Cumulative Redeemable Convertible Preferred Stock of GTSI
filed February 12, 1998 with the Secretary of State of
Delaware
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99.1 | Press release dated February 12, 1998
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