United
States
Securities
and Exchange Commission
Washington,
DC 20549
SCHEDULE
14A
Proxy
Statement Pursuant to Section 14(a) of the Securities
Exchange
Act of 1934
Filed by
the Registrant
S
Filed by
a Party other than the Registrant
£
Check the
appropriate box:
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£
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Preliminary
Proxy Statement
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£
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Confidential,
for Use of the Commission
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Only (as
permitted by Rule 14a-6(e)(2))
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£
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Definitive
Proxy Statement
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S
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Definitive
Additional Materials
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£
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Soliciting
Material Pursuant to Rule 14a-12
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ZONES,
INC.
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(Name
of Registrant as Specified in Its Charter)
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(Name
of Person(s) Filing Proxy Statement, if Other Than the
Registrant)
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Payment
of Filing Fee (Check the appropriate box):
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£
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Fee
computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
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(1) Title
of each class of securities to which transaction applies:
(2) Aggregate
number of securities to which transaction applies:
(3) Per
unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
(4) Proposed
maximum aggregate value of transaction:
(5) Total
fee paid:
£
Fee
paid previously with preliminary materials:
£
Check
box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2)
and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount
Previously Paid:
(2) Form,
Schedule or Registration Statement No.:
(3) Filing
Party:
(4) Date
Filed:
On
November 18, 2008, Zones, Inc. issued the following press release:
Zones
Announces Amendment to Merger Agreement with Zones Acquisition
Corp.
AUBURN, Wash.
(November 18,
2008) — Zones, Inc. (Nasdaq: ZONS) announced today that it has entered into an
amendment to the merger agreement that it previously entered into with Zones
Acquisition Corp. (“ZAC”), which is owned by Firoz H. Lalji, Zones’ Chairman of
the Board, Chief Executive Officer and majority shareholder. The amended merger
agreement provides that each share of Zones common stock (other than those held
by Mr. Lalji and certain of his related parties) will be converted into the
right to receive $7.00 in cash, without interest and less any applicable
withholding taxes. Following the closing of the merger, Zones will
become a private company wholly owned by Mr. Lalji and certain of his related
parties.
Zones
previously announced that, in order to reflect changed general economic
conditions, it had updated its financial projections for 2009 to assume an 11.1%
decline from Zones’ projected 2008 sales, which is an approximately 21% decrease
compared to previously projected 2009 sales. In light of the updated
2009 financial projections, Mr. Lalji, on behalf of ZAC, had indicated to
the special committee, consisting of independent members of Zones’ board of
directors, that he believed the surviving corporation would find it difficult to
remain within the lender’s financial covenants if it borrowed the amount of debt
financing required to consummate the merger at the previously agreed price of
$8.65 per share.
In order
to reduce the risks associated with the transaction, ZAC and Zones have amended
the merger agreement and have revised other terms of the transaction. In
addition to reducing the per-share price in the merger, the amendment also
(i) eliminates certain conditions to ZAC’s obligation to close the merger,
(ii) eliminates the break-up fees and expenses that had been potentially
payable by Zones to ZAC, (iii) increases the reverse break-up fee
potentially payable by ZAC to Zones from $750,000 to $5 million, and
(iv) allows Zones to seek specific performance of ZAC’s obligations to
pursue financing for the merger in the event the currently specified financing
becomes unavailable. In connection with the execution of the amendment, Mr.
Lalji and his wife (together owning a majority of Zones’ outstanding stock) have
agreed to vote their shares in favor of the amended merger agreement. In
addition, Mr. Lalji has personally guaranteed the increased reverse break-up fee
of $5 million.
The
merger is expected to close on or before December 31, 2008. Mr. Lalji has
informed Zones that he intends to provide approximately $20 million of the
merger consideration at or prior to closing. Another $15 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 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 this approximately $19 million of
consideration on January 2, 2009 if it is not otherwise funded in a timely
manner. There can be no assurance that the GE Capital credit facility will be
available to finance the merger. Although Zones may seek specific performance of
ZAC’s obligations to pursue financing for the merger, it may be difficult, or
impossible, for Mr. Lalji and ZAC to obtain alternative financing on acceptable
terms and conditions.
The Zones
board of directors, acting upon the unanimous recommendation of the special
committee, and by a unanimous vote of the directors (without the participation
of Mr. Lalji in deliberations or voting), has determined that the merger and the
amended merger agreement are fair to, advisable to and in the best interest of
Zones’ unaffiliated shareholders, and has approved the merger and approved and
adopted the amended merger agreement and the other transactions contemplated
thereby. The Zones board of directors (with Mr. Lalji abstaining) has also
unanimously recommended that the Zones shareholders vote in favor of the merger
and the amended merger agreement.
Under the
amended merger agreement, there is a new “go-shop” provision whereby the special
committee, with the assistance of its independent advisors, is permitted to
solicit superior acquisition proposals from third parties until November 28,
2008. There can be no assurance that the go-shop process will result in an
alternative transaction.
Zones
will send supplemental proxy materials to shareholders, and expects 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.
About
Zones, Inc.
Zones,
Inc. is a single-source direct marketing reseller of name-brand information
technology products to the small-to-medium-sized business market, enterprise
accounts and public sector accounts. Zones sells these products
through outbound and inbound account executives, a national field sales force,
catalogs and the Internet. Zones offers more than 150,000 products
from leading manufacturers including Adobe, Apple, Avaya, Cisco, HP, IBM,
Kingston, Lenovo, Microsoft, NEC, Nortel Networks, Sony, Symantec and
Toshiba.
Incorporated
in 1988, Zones, Inc. is headquartered in Auburn, Washington. Buying information
is available at
http://www.zones.com
,
or by calling 800-258-2088. The Company’s investor relations
information can be accessed online at
www.zones.com/IR
.
Forward
Looking Statements
This
press release may contain statements that are forward-looking. These statements
are made pursuant to the safe harbor provision of the Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations that are subject to risks and uncertainties that could cause actual
results to differ materially from historical results or those anticipated. These
risk factors include, without limitation, the effect of fluctuating or
unfavorable economic conditions on IT purchasing trends and price competition,
and Zones’ ability to appropriately react to those changing conditions; the
inherent uncertainties involved in projections of financial results, which are,
at best, estimations of future performance and are significantly more unreliable
in times of economic turbulence; future growth; account executive hiring and
productivity; increased expenses of being a public company; pressure on margin;
competition; state tax uncertainties; rapid technological change and inventory
obsolescence; reliance on vendor relationships; dependence on personnel;
potential disruption of business from information systems failure; reliance on
outsourced distribution; variations in gross profit margin percentages due to
vendor programs and credits, product and customer mix, pricing strategies, and
economic conditions; the occurrence of any event, change or other circumstances
that could give rise to the termination of the merger agreement for the
going-private transaction; the inability to complete the going-private
transaction due to the failure to obtain the company shareholder approval or the
special shareholder approval described in the proxy statement or the failure to
satisfy other conditions to consummation of the going-private transaction; the
failure to obtain the necessary debt and equity financing for the going-private
transaction; the failure of the going-private transaction to close for any other
reason; and other risks and uncertainties detailed in the Company’s filings with
the SEC.
Information
about the Previously Announced Merger and Where to Find It
In
connection with the proposed merger, Zones has filed, or will file, a definitive
proxy statement, a proxy statement supplement and related materials with the
Securities and Exchange Commission. INVESTORS AND SECURITY HOLDERS ARE STRONGLY
ADVISED TO READ THE DEFINITIVE PROXY STATEMENT AND, WHEN AVAILABLE, THE PROXY
STATEMENT SUPPLEMENT, BECAUSE THEY CONTAIN IMPORTANT INFORMATION ABOUT THE
PROPOSED MERGER AND THE PARTIES THERETO. Investors and security holders may
obtain a free copy of the definitive proxy statement, proxy statement supplement
(after it is filed) and other documents filed by Zones at the Securities and
Exchange Commission’s website at http://www.sec.gov. The definitive proxy
statement, proxy statement supplement (after it is filed) and such other
documents may also be obtained for free from Zones by directing such request to
Zones, Inc., 1102 15th Street SW, Suite 102, Auburn, Washington 98001,
Attention: Investor Relations; Telephone (253) 205-3000.
Zones and
its directors, executive officers and certain other members of its management
and employees may be deemed to be participants in the solicitation of proxies
from its stockholders in connection with the proposed merger. Information
regarding the interests of Zones’ participants in the solicitation is included
in the definitive proxy statement and proxy statement supplement.
Contact:
Ronald
McFadden
Zones,
Inc.
Chief
Financial Officer
253-205-3000
C-3
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