EXHIBIT 2.0
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STOCK PURCHASE AGREEMENT
By and Among
QUESTRON TECHNOLOGY, INC.
and
THE SHAREHOLDERS OF COMP ▇▇▇▇, INC. D/B/A ▇▇▇▇ DISTRIBUTION
LISTED ON SCHEDULE 1.1 HERETO
Dated as of December 16, 1996
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STOCK PURCHASE AGREEMENT dated as of December 16, 1996 (herein,
together with the Schedules and Exhibits attached hereto, referred to as the
"Agreement") by and among Questron Technology, Inc. a Delaware corporation
("Buyer"), and the shareholders of Comp ▇▇▇▇, Inc. d/b/a ▇▇▇▇ Distribution, a
Delaware corporation (the "Company"), listed on Schedule 1.1 ("Sellers").
W I T N E S S E T H :
WHEREAS, Sellers are the beneficial and record holders of all of the
shares of capital stock of the Company (the "Shares"); and
WHEREAS, Sellers wish to sell and Buyer wishes to purchase the Shares
upon the terms and subject to the conditions contained in this Agreement.
NOW, THEREFORE, in reliance upon the representations and warranties
made herein and in consideration of the mutual agreements herein contained, the
parties agree as follows:
ARTICLE 1
SALE AND PURCHASE OF SHARES
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1.1 Sale of Shares. At the Closing provided for in Section 2.1, each
Seller shall sell to Buyer (or in Buyer's sole discretion, any subsidiary of
Buyer) all of the Shares beneficially owned by such Seller as set forth in
Schedule 1.1, and Buyer shall purchase the Shares for the aggregate purchase
consideration specified in Section 1.2.
1.2 Purchase Consideration and Payment for Shares. At the Closing,
Buyer shall (a) deliver to Sellers by wire transfers (or certified checks) for
an aggregate amount equal to $3,250,000 (the "Cash Consideration") and (b)
deliver to ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ ("Majority Stockholder") Series IV Warrants (the
"Warrants") to purchase 1,500,000 shares of Buyer's common stock, par value
$.0001 per share ("Buyer Common Stock") and two notes (the "Notes") from Buyer
each for $375,000 in the form of Exhibits A-1 and A-2 hereto. The Cash
Consideration shall be allocated among and delivered to Sellers in accordance
with Schedule 1.1. One of the Notes shall be payable in eighteen months and
bear interest at 10% per annum (in the form of Exhibit A-1) and the second of
the Notes shall be payable in equal monthly installments over a five year
period and bear interest at 10% per annum (in the form of Exhibit A-2). The
Notes shall provide that in the event Majority Shareholder receives net
proceeds from the sale of the Warrants in excess of $375,000 (plus any previous
principal payments on the Notes), the amount of such excess shall reduce the
outstanding amount of the Notes, as more particularly set forth in the Notes.
In the event that, during the period of the Lock-up Agreement (as hereinafter
defined), Buyer's underwriter releases the Majority Stockholder from the
Lock-up Agreement and the Majority Stockholder declines to sell the Warrants
within seven business days of Majority Stockholder receiving written notice of
such release, then, as more particularly set forth in the
Notes, the Notes shall be canceled. In the event of any inconsistency between
the provisions of the Notes and the preceding provisions hereof, the provisions
of the Notes shall control.
1.3 Transactions on the Closing Date. (a) At the Closing, Sellers will
deliver to Buyer the following:
(i) stock certificates, in form suitable for transfer, registered
in the name of each Seller, evidencing the number of Shares set forth
opposite such Seller's name on Schedule 1.1, endorsed in blank or with an
executed blank stock transfer power attached, and with any necessary stock
transfer tax stamps attached thereto;
(ii) all stock certificates, stock books, stock transfer ledgers,
minute books and the corporate seals of the Company;
(iii) resignations of all of the directors and officers of the
Company; and
(iv) each of the certificates and documents contemplated by
Article 6.
(b) At the Closing, Buyer will deliver to Sellers the following:
(i) the Cash Consideration and the Notes; and
(ii) each of the certificates and documents contemplated by
Article 7.
1.4 Deposit. Concurrently with the execution and delivery of this
Agreement, Buyer shall deliver to ▇▇▇▇▇▇▇▇ & Company, P.C., counsel to Majority
Stockholder certificates representing the Warrants as a deposit. Such Warrants
shall, upon the Closing, be subject to no restrictions on transfer, except as
contained in the Lock-Up Agreement and security law restrictions. Buyer and
Majority Stockholder agree that the Warrants shall be canceled and returned to
Buyer in the event this Agreement is terminated.
ARTICLE 2
CLOSING AND TERMINATION
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2.1 Closing. The closing of the transactions provided for herein (the
"Closing") will take place at the offices of ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇▇, counsel to
Buyer's underwriters, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇.▇. ▇▇▇▇▇, at 10:00 A.M.
(local time) on or about January 27, 1997 (the "Closing Date") or at such other
place, time and date as may be agreed upon by Buyer and the Majority
Stockholder.
2.2 Termination. Anything contained in this Agreement other than in
this Section 2.2 to the contrary notwithstanding, this Agreement may be
terminated in writing at any time on or prior to the Closing:
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(a) without liability on the part of any party hereto (unless
occasioned by reason of a breach by any party hereto of any of its
representations, warranties or obligations hereunder) by mutual written
consent of Buyer and the Majority Stockholder;
(b) without liability on the part of any party hereto (unless
occasioned by reason of a breach by any party hereto of any of its
representations, warranties or obligations hereunder) by either Buyer or
Majority Stockholder, if the Closing shall not have occurred on or before
March 31, 1997 (or such later date as may be agreed upon in writing by the
parties hereto);
(c) by Buyer, if any Seller shall breach any of its representations,
warranties or obligations hereunder and such breach shall not have been
cured or waived or Sellers shall not have provided reasonable assurance
that such breach will be cured on or before the Closing Date; or
(d) by the Majority Stockholder, if Buyer shall breach any of its
representations, warranties or obligations hereunder and such breach shall
not have been cured or waived or Buyer shall not have provided reasonable
assurance that such breach will be cured on or before the Closing Date.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SELLERS
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Each Seller severally represents and warrants to Buyer, in the case of
Sections 3.1, 3.4 and 3.6, and each of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇▇ (the "▇▇▇▇▇▇▇▇▇") in the case of the other paragraphs of this Article
3, jointly and severally represents and warrants to Buyer, that:
3.1 Due Execution. This Agreement and the Employment Agreements (as
hereinafter defined) (collectively, the "Agreements"), have been, and will be
as of the Closing Date, duly executed and delivered by such Seller, and
(assuming due execution and delivery by Buyer) this Agreement constitutes, and
each of the other Agreements to which such Sellers are a party when executed
and delivered will constitute, a valid and binding obligation of such Sellers,
enforceable in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency, fraudulent conveyance, moratorium,
reorganization or similar laws affecting creditors' rights generally or by
general equitable principles.
3.2 Corporate Organization and Authority of Company. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware and has all requisite corporate power and
authority to carry on its business as now being conducted and to own its
properties and is duly licensed or qualified and in good standing as a foreign
corporation in each jurisdiction in which it is required to be so licensed or
so qualified, except where the failure to be so licensed or so qualified would
not have a material adverse effect on the financial condition, assets,
liabilities (contingent or otherwise), results of operations or business (a
"Material Adverse Effect") of the Company. The disclosure letter dated
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the date hereof and delivered by the Dinicolas to Buyer and incorporated herein
and made a part hereof (the "Disclosure Letter") sets forth the jurisdictions
in which the Company is qualified to do business. Sellers have heretofore
delivered to Buyer complete and correct copies of the articles of incorporation
and by-laws of the Company as currently in effect.
3.3 Subsidiaries and Equity Investments. Except as set forth in the
Disclosure Letter, the Company has no subsidiaries and does not own, directly
or indirectly, any investments, capital stock or other equity or ownership
interests in any other corporations or business enterprises and is not partner
in any partnership or co-venturer in any joint venture or other business
enterprise. The term "subsidiary" means any corporation or other entity of
which the Company, directly or indirectly, owns or controls capital stock or
ownership interests representing either (i) more than fifty percent of the
general voting power under ordinary circumstances of such corporation or
entity, or (ii) if an entity other than a corporation, more than fifty percent
of the economic interest therein.
3.4 Ownership of Shares. Each Seller is the lawful record and
beneficial owner of that number of Shares set forth opposite his name on
Schedule 1.1. Each Seller owns the Shares set forth opposite his name on
Schedule 1.1 free and clear of all pledges, liens, charges, encumbrances,
easements, security interests, claims, options and restrictions of every kind
("Encumbrances") except for restrictions on transfer generally applicable under
federal and state securities laws and for restrictions set forth in the
Shareholders' Agreement dated as of December 9, 1994 by and among the Company
and the shareholders named therein (the "Shareholders' Agreement"). Upon the
delivery of the Shares in the manner contemplated under Section 1.3, Sellers
will transfer to Buyer valid record and beneficial title to such Shares, free
and clear of all Encumbrances except for restrictions on transfer generally
applicable under federal and state securities laws.
3.5 Capitalization. The authorized capital of the Company consists of
1,000,000 shares of common stock, par value $.01 per share (the "Common
Stock"), of which 651,162 shares are issued and outstanding. No other class of
capital stock or other ownership interests of the Company is authorized,
issued, reserved for issuance or outstanding. All such issued and outstanding
shares of Common Stock have been duly authorized and are validly issued, fully
paid and nonassessable. No shares of Common Stock (including, without
limitation, the Shares), and no options, warrants or other rights, agreements,
commitments or arrangements of any kind to acquire Common Stock, were issued in
violation of (x) any preemptive or other rights or (y) any provision of any
contract, agreement or arrangement of any kind (including, without limitation,
the Shareholders' Agreement). Except as set forth on the Disclosure Letter,
there are no outstanding options, warrants, subscriptions, unsatisfied
preemptive rights, calls or other rights, agreements, commitments or
arrangements of any kind to acquire any of the outstanding, authorized but
unissued, unauthorized or treasury shares of the capital stock of the Company
or any security of any kind convertible into or exchangeable for any such
capital stock. Except as set forth in the Disclosure Letter, there are no
voting trusts, shareholder agreements, proxies or other agreements relating to
the voting, purchase or sale of capital stock (i) between or among the Company
and any of its shareholders and (ii) between or among any of the Company's
shareholders. There is no outstanding bond, debenture, note or other
indebtedness of the Company having the right to vote (or convertible into or
exchangeable for securities having the right to vote) on any matter on which
shareholders of the Company may vote.
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3.6 No Violation. Except as set forth in the Disclosure Letter,
neither Sellers nor the Company are subject to or bound by any provision of:
(a) any law, statute, rule, regulation or judicial or administrative
decision,
(b) (in the case of the Company) its articles of incorporation or
by-laws,
(c) any contract, mortgage, deed of trust, lease, note, shareholders'
agreement, proxy, bond, indenture, other instrument or agreement, license,
permit, trust, custodianship or other restriction, or
(d) any consent, judgment, order, writ, award, injunction or decree of
any court, governmental or regulatory body, administrative agency or
arbitrator,
that would conflict with, prevent or be violated by or that would result in the
creation of any Encumbrance as a result of, or under which there would be a
default or right of termination, amendment, acceleration, revocation,
cancellation or suspension as a result of, the execution, delivery and
performance by Seller of the Agreements to which such Seller is a party and the
consummation of the transactions contemplated thereby. Except as set forth in
the Disclosure Letter, no consent, order, license, permit, approval or
authorization of or declaration, notice or filing with any individual,
corporation, partnership, limited liability company, trust or unincorporated
organization or any government or any agency or political subdivision thereof
(a "Person") is required for the valid execution, delivery and performance by
Seller of the Agreements to which such Seller is a party and the consummation
of the transactions contemplated thereby.
3.7 Litigation. Except as set forth in the Disclosure Letter, there is
(i) no outstanding consent, order, judgment, injunction, award or decree of any
court, governmental or regulatory body, administrative agency or arbitrator
against or involving the Company, any of its officers or directors as such or
any Seller in its capacity as a shareholder of the Company, (ii) no action,
suit, dispute or governmental, administrative, arbitration or regulatory
proceeding pending or, to Sellers' knowledge, threatened against the Company or
any Seller in its capacity as a shareholder of the Company and (iii) to
Sellers' knowledge, no investigation pending or threatened against or relating
to the Company, any of its officers or directors as such or any Seller in its
capacity as a shareholder (collectively, "Proceedings").
3.8 Personal Property. (a) The Disclosure Letter sets forth (i) the
tangible physical assets of the Company as of the date of this Agreement that
do not constitute real property (including machinery, equipment, tools, dies,
furniture, furnishings, leasehold improvements, software, vehicles, buildings
and fixtures) and that have a book value or replacement value in excess of
$50,000 per item or per category of items and the location by address of such
items; (ii) individual refundable deposits in excess of $10,000 or $25,000 in
the aggregate; and (iii) all outstanding loans or advances made by the Company
to any Person in excess of $20,000.
(b) Except as set forth in the Disclosure Letter, the Company has good
and valid title to all of its material properties and assets that do not
constitute real property, free and
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clear of all Encumbrances. Except as set forth in the Disclosure Letter, the
Company owns, has valid leasehold interests (pursuant to leases disclosed in
the Disclosure Letter) in or valid contractual rights pursuant to contracts
disclosed in the Disclosure Letter (or not required to be disclosed therein due
to the dollar thresholds set forth in Section 3.20(a)(i)) to use, all of the
material assets, tangible and intangible, currently used by, or necessary for
the present conduct of the business of, the Company.
3.9 Real Property. (a) The Disclosure Letter sets forth each and every
parcel of real property or interest in real estate held under a lease or used
by the Company (the "Real Property"). The Company does not own any real
property or interest (other than the leasehold interests referenced in the
Disclosure Letter) in real estate. Sellers have heretofore delivered to Buyer
complete and correct copies of each and every lease and all documents relating
thereto, including any amendments thereto and any assignment thereof.
(b) Except as set forth in the Disclosure Letter, with respect to the
Real Property designated as "leased property" in the Disclosure Letter, the
Company is in peaceful and undisturbed possession of the space and/or estate
under each lease under which it is a tenant, and there are no defaults by it as
tenant thereunder; and to Seller's knowledge, the Company has good and valid
rights of ingress and egress to and from all the Real Property from and to the
public street systems.
3.10 Financial Statements. (a) Sellers have heretofore furnished Buyer
with copies of the following financial statements of the Company: (i) audited
balance sheets as at December 31 for each of the years ended December 31, 1994
and 1995, respectively; (ii) audited statements of operations and retained
earnings and audited statements of cash flows for each of the years ended
December 31, 1994 and 1995; (iii) an unaudited balance sheet (the "Reference
Balance Sheet") as at October 31, 1996 (the "Reference Balance Sheet Date");
and (iv) an unaudited statement of operations and retained earnings (the
"Reference Income Statement") and an unaudited statement of cash flows for the
ten-month period ended October 31, 1996. Except as noted therein and except for
normal year-end adjustments with respect to the unaudited financial statements,
all such financial statements are complete and correct, were prepared in
accordance with generally accepted accounting principles ("GAAP") consistently
applied throughout the periods indicated and present fairly the financial
position of the Company at such dates and the results of its operations and
cash flows for the periods then ended, subject to such inaccuracies, if any,
which are not material in nature or amount.
(b) There are no liabilities, debts, obligations or claims against the
Company of any nature (accrued, absolute or contingent, unasserted or
otherwise), except (i) as and to the extent reflected or reserved against on
the Reference Balance Sheet; (ii) specifically described and identified as an
exception to this paragraph in any of the Schedules delivered to Buyer pursuant
to this Agreement; (iii) incurred since the Reference Balance Sheet Date in the
ordinary course of business consistent with prior practice; or (iv) open
purchase or sales orders or agreements for delivery of goods and services in
the ordinary course of business consistent with prior practice.
3.11 Books and Records. (a) Sellers have made and will make available
for inspection by Buyer all the books of account relating to businesses of the
Company. Such books
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of account of the Company reflect all the material transactions and other
material matters required to be set forth under GAAP applied on a consistent
basis.
(b) The minute books of the Company that have been made
available to Buyer for its inspection contain true and complete records of all
meetings and consents in lieu of meetings of the Board of Directors (and any
committees thereof) of the Company, and of the Company's shareholders, since
January 1, 1994 and accurately reflect all material transactions referred to in
such minutes and consents in lieu of meetings. The stock books that have been
made available to Buyer for its inspection are, since January 1, 1994, true and
complete in all material respects..
3.12 Tax Matters. (a) For purposes of this Agreement,
(i) "Tax" or "Taxes" shall mean any federal, state, local,
foreign or other taxes (including, without limitation, income (net or
gross), gross receipts, profits, alternative or add-on minimum, franchise,
license, capital, capital stock, intangible, services, premium, mining,
transfer, sales, use, ad valorem, payroll, wage, severance, employment,
occupation, property (real or personal), windfall profits, import, excise,
custom, stamp, withholding or estimated taxes), fees, duties, assessments,
withholdings or governmental charges of any kind whatsoever (including
interest, penalties, additions to tax or additional amounts with respect to
such items) relating to the income, operations or properties of the Company
or the ownership thereof (by Sellers);
(ii) "Pre-Closing Periods" shall mean all Tax periods commencing
on or after January 1, 1994 and ending on or before the Closing Date and,
with respect to any Tax period that includes but does not end on the
Closing Date, the portion of such period that ends on and includes the
Closing Date;
(iii) "Returns" shall mean all returns, declarations, reports,
estimates, information returns and statements of any nature regarding Taxes
for any Pre-Closing Period required to be filed by any Person and relating
to the Company;
(iv) "Code" shall mean the Internal Revenue Code of 1986, as
amended; and
(v) the term "Tax deficiency" shall include a reduction in any
net operating losses.
(b) In respect of the Pre-Closing Periods only, except as set forth in
the Disclosure Letter,
(i) all Returns have been or will be timely filed when due in
accordance with all applicable laws;
(ii) all Taxes shown on the Returns have been or will be timely
paid when due;
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(iii) the Returns completely, accurately, and correctly in all
material respects reflected the facts regarding the income, properties,
operations and status of any entity required to be shown thereon;
(iv) the charges, accruals, and reserves for Taxes due, or
accrued but not yet due, relating to the income, properties or operations
of the Company for any Pre- Closing Period as reflected on the books of the
Company are adequate in all material respects to cover such Taxes;
(v) there are no agreements or consents currently in effect for
the extension or waiver of the time (A) to file any Return or (B) for
assessment or collection of any Taxes relating to the Company for any
Pre-Closing Period, and no Person has been requested to enter into any such
agreement or consent;
(vi) all Returns with respect to taxable years ending on or after
December 31, 1993 and on or prior to December 31, 1996 have been examined
by the relevant taxing authorities and closed, or are Returns with respect
to which the applicable statute of limitations, after giving effect to any
extensions and waivers, has expired;
(vii) all Taxes which the Company is required by law to withhold
or collect have been in all material respects duly withheld or collected,
and have been timely paid over to the appropriate governmental authorities
to the extent due and payable;
(viii) there is no action, suit, proceeding, investigation, audit
or claim currently pending, or to Sellers' knowledge, threatened, regarding
any Taxes relating to the Company for any Pre-Closing Period;
(ix) all Tax deficiencies which have been claimed, proposed or
asserted against Sellers or, to Sellers' knowledge, any prior shareholder
of the Company relating to ownership of stock in the Company or against the
Company or any group of which the Company is now or was formerly a member
have been fully paid or finally settled;
(x) no Person has executed or entered into a closing agreement
pursuant to Code Section 7121 (or any comparable provision of state, local
or foreign law) that is currently in force and determines the Tax
liabilities of the Company;
(xi) there is no, and will not be any, agreement or consent made
under Code Section 341(f) (or any comparable provision of state, local or
foreign law) affecting the Company;
(xii) there are no liens for any Tax on the assets of the Company
except liens which arise as a matter of law;
(xiii) there are no tax sharing agreements to which the Company
is now or, to Seller's knowledge, ever has been a party;
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(xiv) the Company is not a party to any agreement, contract,
arrangement or plan that would result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Code
Section 280G (or any comparable provision of state, local or foreign law);
(xv) the Company has not received any written notice of any
reassessment and, to Sellers' knowledge, there are no proposed
reassessments of any property owned or leased by the Company or any other
proposals that would increase the amount of any Tax for which the Company
could be liable;
(xvi) the Company has not agreed, and is not required, to make
any adjustment under Code Section 481(a) (or any comparable provision of
state, local or foreign law) by reason of a change in accounting method or
otherwise;
(xvii) Seller has received no notice that prior to January 1,
1994, (A) any valid election pursuant to Section 1362 of the Code was not
in effect with respect to the Company, (B) valid elections, to the extent
required by local and state laws to qualify the Company as an "S
corporation", were not in effect with respect to the Company and (C) the
Company did not maintain its status as an "S corporation" within the
meaning of Section 1361(a) of the Code. Seller has received no notice that
the Company's elections to be taxed under the provisions of Subchapter S of
the Code for tax years prior to January 1, 1994 and the Company's election
to be taxed as a "C corporation" within the meaning of Section 1361(b) of
the Code for tax years subsequent to December 31, 1993 were not duly made,
proper and effective and in compliance with the applicable requirements of
the Code, the Treasury regulations promulgated thereunder, and state and
local laws. The Company has not been, and will not be, subject to any Tax
under Section 1374 or 1375 of the Code for any taxable year ending on or
after January 1, 1994 and on or prior to the Closing Date; and
(xviii) no power of attorney is currently in effect, and no Tax
ruling has been requested of any governmental authority, with respect to
any Tax matter relating to the Company.
3.13 Employee Matters. (a) The Disclosure Letter attached hereto sets
forth as of the date hereof the name, current annual compensation rate
(including bonus and commissions), title, current base salary rate and accrued
bonus of each present employee of the Company; and a list of any employment,
managerial, advisory, consulting and severance agreements; employee
confidentiality or other agreements protecting proprietary processes, formulae
or information; any employee handbook(s); any reports and/or plans prepared or
adopted pursuant to the Equal Employment Opportunity Act of 1972, as amended;
any affirmative action plans; and each employee benefit or compensation plan,
agreement or arrangement covering present employees of the Company, including
"employee benefit plans" within the meaning of Section 3(3) of the Employee
Retirement Income Security Act of 1974 ("ERISA"), stock purchase, stock option,
fringe benefit, change in control, bonus and deferred compensation plans,
agreements or funding arrangements (collectively, the "Benefit Plans"), whether
sponsored, maintained or contributed to by the Company.
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(b) For each Benefit Plan, except as set forth on the Disclosure
Letter, each of the following is true:
(i) if such Benefit Plan is an employee pension benefit plan (as
such term is defined in ERISA Section 3(2)) intended to qualify under the
Code, since 1992 the Plan has received at least one favorable determination
letter as to its qualification under the Code (or such a letter has been or
will be applied for prior to expiration of the applicable remedial
amendment period), and to Seller's knowledge nothing has occurred, whether
by action or failure to act, which would cause the loss of such
qualification or which would result in material costs to the Company under
the Internal Revenue Service's Closing Agreement Program, Voluntary
Compliance Resolution Program or Administrative Policy Regarding Sanctions;
(ii) the financial statements of the Company reflect in all
material respects all employee liabilities arising under such Benefit Plan
in a manner satisfying the applicable requirements (if any) of Statement of
Financial Accounting Standards ("SFAS") Nos. 87, 88, 106 and 112;
(iii) there are no actions, suits or claims (other than routine
claims for benefits in the ordinary course) pending, or to Sellers'
knowledge, threatened, and to Sellers' knowledge, there are no facts which
could give rise to any such material actions, suits or claims (other than
routine claims for benefits in the ordinary course);
(iv) neither Sellers, the Company, nor any other party has, with
respect to any such Benefit Plan, engaged in a prohibited transaction, as
such term is defined in Code Section 4975 or ERISA Section 406, which would
subject the Company or Buyer to any Taxes, penalties or other material
liabilities resulting from prohibited transactions under Code Section 4975
or under ERISA Sections 409 or 502(i);
(v) the reporting and disclosure requirements of ERISA have been
complied with in all material respects;
(vi) all contributions and insurance premiums required as of the
Closing Date have been paid in all material respects;
(vii) the execution and delivery of this Agreement by Sellers and
the consummation of the transactions contemplated hereunder, will not
(pursuant to any "change-of-control provision" or otherwise) result in any
additional (or otherwise modify or accelerate any existing or contingent)
obligation or liability (with respect to accrued benefits or otherwise) to
any such Benefit Plan, to any employee or former employee of the Company;
and
(viii) Sellers have delivered to Buyer current, accurate and
complete copies of such Benefit Plan (including the plan document, trust
agreement and other funding or insurance instruments relating thereto) and,
to the extent applicable, copies of the most recent: (A) determination
letter and any outstanding request for a determination letter; (B) Form
5500 with respect to the plan years ending in calendar years 1994, 1995 or
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1996; (C) collective bargaining agreements or other such contracts; and (D)
the general notification to employees of their "COBRA" rights under Code
Section 4980B and ERISA Sections 601-609 and the form of letter(s)
distributed upon the occurrence of a COBRA qualifying event for each
Benefit Plan that is a "group health plan" as defined in Code Section
5000(b)(1) and ERISA Section 607(1).
(c) The Company does not sponsor or maintain (and has not sponsored or
maintained in the calendar years ending 1994, 1995 and 1996) an "employee
pension benefit plan" (within the meaning of Section 3(2) of ERISA) that is
subject to Title IV of ERISA or to the minimum funding requirements of Section
412 of the Code or Part 3 of Title I of ERISA.
(d) The Company does not contribute and is not obligated to contribute
(and has not been obligated to contribute in the calendar years ending 1994,
1995 and 1996) to a "multiemployer plan" (within the meaning of Section
4001(a)(3) of ERISA).
(e) The Company has no employee welfare benefit plans (within the
meaning of ERISA Section 3(1)).
(f) With respect to the Company, except as set forth in the Disclosure
Letter, each of the following is true in all material respects:
(i) the Company is in compliance with all applicable laws and
agreements respecting employment and employment practices, terms and
conditions of employment and wages and hours and occupational safety and
health and, to Sellers' knowledge, is not engaged in any unfair labor
practice within the meaning of Section 8 of the National Labor Relations
Act, and there is no action, suit or legal, administrative, arbitration,
grievance or other proceeding pending or, to Sellers' knowledge,
threatened, or, to Sellers' knowledge, any investigation pending or
threatened against the Company relating to any thereof, and, to Sellers'
knowledge, no basis exists for any such action, suit or legal,
administrative, arbitration, grievance or other proceeding or governmental
investigation;
(ii) there is no labor strike, dispute, slowdown or stoppage
actually pending or, to Sellers' knowledge, threatened against the Company;
(iii) to Sellers' knowledge, none of the employees of the Company
is a member of or represented by any labor union and, there are no attempts
of whatever kind and nature being made to organize any of such employees;
(iv) without limiting the generality of paragraph (iii) above, no
certification or decertification is pending or was filed within the past
twelve months respecting the employees of the Company and, to Sellers'
knowledge, no certification or decertification petition is being or was
circulated among the employees of the Company within the past twelve
months;
(v) no agreement (including any collective bargaining agreement),
arbitration or court decision, decree or order or governmental order which
is binding on
-12-
the Company in any material way limits or restricts the Company from
relocating or closing any of its operations;
(vi) the Company has not experienced any organized work stoppage
in the last five years; and
(vii) there are no administrative proceedings or complaints of
discrimination (including but not limited to discrimination based upon sex,
age, marital status, race, national origin, sexual preference, handicap or
veteran status) pending or, to Sellers' knowledge, threatened, or to
Sellers' knowledge, any investigation pending or threatened before the
Equal Employment Opportunity Commission or any federal, state or local
agency or court. Since January 1, 1994 or prior thereto, there have been no
audits of the equal employment opportunity practices or affirmative action
practices of the Company and, to Sellers' knowledge, no reasonable basis
for any claim regarding such practices exists.
3.14 Intellectual Property. The Disclosure Letter sets forth a list of
all registered trademarks, trademark registrations and applications therefor,
trade names, brand names, all service marks, service ▇▇▇▇ registrations and
applications therefor, all registered trade dress rights, registrations and
applications therefor, patents and patent applications, material registered
copyrights, and applications therefor (including information as to expiration
dates of all the foregoing where applicable) presently owned or used, in whole
or in part, by the Company or for which the Company is licensed. Neither
Sellers nor the Company are licensors in respect of any patents, trade secrets,
inventions, shop rights, copyrights or applications therefor which are used in
the business of the Company.
3.15 Accounts Receivable. The accounts receivable appearing on the
Reference Balance Sheet and all accounts receivable created since that date
through the Closing Date represent in all material respects and will in all
material respects represent valid obligations owing to the Company, have arisen
from bona fide transactions in the ordinary course of business and, to Seller's
knowledge, are fully collectible by the Company in the ordinary course of
business, subject to the reserve for doubtful accounts appearing on the
Reference Balance Sheet.
3.16 Inventory. Except as set forth in the Disclosure Letter, to
Seller's knowledge and in all material respects, the inventories of raw
materials, in-process and finished products of the Company are in good
condition, conform in all material respects with the Company's applicable
specifications and warranties, are not obsolete, and are to Seller's knowledge
saleable as of the date hereof at values not less than the book value amounts
thereof. Adequate reserves have been provided for inventory obsolescence and
the values at which such inventories are carried are in accordance with GAAP
consistently applied.
3.17 No Material Change. Since the Reference Balance Sheet Date, there
has been no material adverse change in the financial condition, assets,
liabilities (contingent or otherwise), results of operations or business of the
Company.
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3.18 Absence of Change or Event. Except as set forth in the Disclosure
Letter, since the Reference Balance Sheet Date, the Company has conducted its
business only in the ordinary course consistent with past practice and has not:
(a) incurred any obligation or liability, absolute, accrued,
contingent or otherwise, whether due or to become due, in excess of $20,000
in the aggregate, except liabilities or obligations incurred in the
ordinary course of business and consistent with prior practice;
(b) mortgaged, pledged or subjected to lien, restriction or any
other Encumbrance any of the property, businesses or assets, tangible or
intangible, of the Company, except for purchase money liens;
(c) sold, transferred, leased to others or otherwise disposed of
any of its assets (or committed to do any of the foregoing), including the
payment of any loans owed, or the making of any loans, to any officer,
director, shareholder or other affiliate of the Company, except for
inventory sold to customers or returned to vendors and payments to any
non-affiliates on account of accounts payable or scheduled payments in
respect of indebtedness for money borrowed disclosed on the Reference
Balance Sheet or in the Schedules, or canceled, waived, released or
otherwise compromised any debt or claim other than in the ordinary course
of business, or any material right;
(d) suffered any damage, destruction or loss (whether or not
covered by insurance) in an amount greater than $25,000, excluding losses,
damage or destruction arising from the flood of Company's principal place
of business on or about October, 1996 (the "Flood Event") which uninsured
loss amount is not in excess of $150,000;
(e) made or committed to make any capital expenditures or capital
additions or betterments in excess of an aggregate of $25,000;
(f) instituted or threatened any litigation, action or proceeding
before any court, governmental or regulatory body, administrative agency or
arbitrator relating to it or its property;
(g) issued, authorized for issuance or sold any capital stock,
notes, bonds or other securities, or any option, warrant or other right to
acquire the same, of the Company, or declared or paid any dividend or made
any other payment or distribution in respect of its capital stock, or
directly or indirectly redeemed, purchased or otherwise acquired any of its
capital stock or any option, warrant or other right to acquire such capital
stock;
(h) increased the compensation of any officer, director, employee
or agent of the Company, directly or indirectly, including by means of any
bonus, pension plan, profit sharing, deferred compensation, savings,
insurance, retirement, or any other employee benefit plan, except in the
case of any employee whose annual base compensation is less than $100,000;
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(i) materially changed any of its business or accounting accrual
practices, including, without limitation, the amount of promotional or
advertising expenditures, investments, marketing, pricing, purchasing,
production, personnel, sales, returns or budgets, accounts receivable or
inventory reserves, or otherwise changed its policies with respect thereto;
(j) made or changed any election concerning Taxes or Tax Returns,
changed an annual accounting period, adopted or changed any accounting
method, filed any amended Return, entered into any closing agreement with
respect to Taxes, settled any Tax claim or assessment or surrendered any
right to claim a refund of Taxes or obtained or entered into any Tax
ruling, agreement, contract, understanding, arrangement or plan;
(k) allowed any Permit (as hereinafter defined) relating to the
business of the Company to lapse or terminate;
(m) materially amended or terminated or received any threat (not
subsequently withdrawn) to terminate, any Contract (as hereinafter
defined);
(n) amended its articles of incorporation or bylaws or merged with or
into or consolidated with any Person, subdivided, combined or in any way
reclassified any shares of its capital stock, or changed or agreed to
change the rights of its capital stock or the character thereof; or
(o) engaged in any other material transaction other than in the
ordinary course of business.
3.19 Compliance With Law. Except as set forth in the Disclosure
Letter, the operations and activities of the Company have complied and are in
compliance in all respects with all applicable federal, state, local and
foreign laws, statutes, rules, regulations, judicial and administrative
decisions and consents, judgments, orders, awards, writs and decrees of any
court, governmental or regulatory body, administrative agency or arbitrator,
including, without limitation, health and safety statutes and regulations and
all environmental laws, including, without limitation, all restrictions,
conditions, standards, limitations, prohibitions, requirements, obligations,
schedules and timetables contained in the environmental laws or contained in
any regulation, code, plan, order, decree, judgment, injunction, notice or
demand letter issued, entered, promulgated or approved thereunder, the failure
of which could have Material Adverse Effect on the Company.
3.20 Contracts and Commitments. (a) The Disclosure Letter sets forth
each written contract or agreement involving a liability or obligation of the
Company equal to or in excess of $10,000 and outstanding as of the date hereof
to which the Company is a party, other than ordinary course of business
purchase orders.
(b) Except as set forth in the Disclosure Letter:
(i) Each of the agreements set forth in the Disclosure Letter
(the "Contracts") was entered into in a bona fide transaction in the
ordinary course of business,
-15-
is valid and binding on the Company (assuming due authorization, execution
and delivery thereof by the other parties thereto) and to Seller's
knowledge is in full force and effect and, upon consummation of the
transactions contemplated hereby, to Seller's knowledge will continue in
full force and effect without penalty. Sellers have heretofore delivered to
Buyer complete and correct copies of the Contracts. There is not under any
Contract: (A) any existing material default by the Company or, to Sellers'
knowledge, by any other party thereto, or (B) any event which, after notice
or lapse of time or both, would constitute a material default by the
Company or, to Sellers' knowledge, by any other party, or result in a right
to accelerate, suspend or terminate or result in a loss of rights of the
Company;
(ii) No purchase contracts (other than inventory purchase
commitments) of the Company continue for a period of more than 12 months;
and
(iii) To Seller's knowledge, the Company is not under any
material liability or material obligation with respect to the return of
inventory or merchandise in the possession of distributors, customers or
other Persons.
3.21 Insurance. (a) The Disclosure Letter sets forth (i) the policies
of insurance presently in force and, without restricting the generality of the
foregoing, those covering the Company's public and product liability and its
personnel, properties, buildings, machinery, equipment, furniture, fixtures and
operations, specifying with respect to each such policy the name of the
insurer, type of coverage, term of policy, limits of liability and annual
premium; (ii) the Company's premiums, deductibles and losses in excess of
$25,000, by year, by type of coverage, for the calendar years 1994, 1995 and
1996 based on information received from the Company's insurance carrier(s);
(iii) all outstanding insurance claims in excess of $10,000 by the Company for
damage to or loss of property or income which have been referred to insurers or
which Sellers believe to be covered by commercial insurance; (iv) general
comprehensive liability policies carried by the Company for the calendar years
1994, 1995 and 1996, including excess liability policies; and (v) any
agreements, arrangements or commitments by or relating to the Company under
which the Company indemnifies any other Person or is required to carry
insurance for the benefit of any other Person. Sellers have heretofore
delivered to Buyer complete and correct copies of the policies and agreements
set forth in the Disclosure Letter.
(b) The insurance policies set forth in the Disclosure Letter are in
full force and effect, all premiums which are due with respect thereto covering
all periods up to and including the date of the Closing have been paid, and no
notice of cancellation or termination has been received with respect to any
such policy. To Seller's knowledge, such policies are sufficient for compliance
with all requirements of law and all agreements to which the Company is a
party; are valid, outstanding and enforceable policies; will remain in full
force and effect through the respective dates set forth in the Disclosure
Letter; and will not in any way be affected by, or terminate or lapse by reason
of, the transactions contemplated by this Agreement. To Seller's knowledge the
Company has not been refused any insurance with respect to the respective
assets or operations of the Company, nor has any such coverage been limited, by
any insurance carrier to which the Company has applied for any such insurance
or with which the Company has carried insurance during the calendar years 1994,
1995 and 1996.
-16-
3.22 Affiliate Interests. (a) No payments other than compensation
payments during calendar years 1994, 1995 and 1996 have been made by the
Company to any officer, director or shareholder of the Company.
(b) Except as set forth in the Disclosure Letter, no shareholder,
officer or director of the Company or any affiliate of any Seller (in each
case, or any family member thereof) (i) has any interest, directly or
indirectly, in any property, real or personal, tangible or intangible,
including without limitation, inventions, patents, trademarks or trade names,
used in or pertaining to the business of the Company, (ii) owns, directly or
indirectly, any interest in (excepting less than 5% stock holdings for
investment purposes in securities of companies which are publicly held and
traded), or is an officer, director, employee or consultant of, any Person
which is, or is engaged in business as, a competitor, lessor, lessee, supplier,
distributor, sales agent or customer of the Company or (iii) has any cause of
action or other claim whatsoever against, or owes any amount to, the Company,
except for claims arising in the ordinary course of business arising from such
Person's employment with the Company and indebtedness described in paragraph
6.7 hereof.
3.23 Customers, Suppliers, Distributors, Etc. (a) Except as set forth
in the Disclosure Letter and except for the loss of such other customers that
will not have a Material Adverse Effect on the Company, since December 31,
1995, no supplier, customer, distributor or sales representative of the Company
has canceled or otherwise terminated, or made any written threat to the Company
or to any of their affiliates to cancel or otherwise terminate, for any reason,
including the consummation of the transactions contemplated hereby, its
relationship with the Company. Except as set forth in the Disclosure Letter and
except for the loss of such relationship that will not have a Material Adverse
Effect on the Company, to Sellers' knowledge no such supplier, customer,
distributor or sales representative intends to cancel or otherwise terminate
its relationship with the Company.
(b) Schedule 3.23 sets forth by dollar volume for the 1996 year to
date the 25 largest customers of the Company.
3.24 Absence of Questionable Payments. Neither the Company nor, to
Sellers' knowledge, any director, officer, agent, employee or other Person
acting on behalf of the Company has used any corporate or other funds for
unlawful contributions, payments, gifts, or entertainment, or made any unlawful
expenditures relating to political activity to government officials or others
or established or maintained any unlawful or unrecorded funds in violation of
Section 30A of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Neither the Company nor, to Sellers' knowledge, any current director,
officer, agent, employee or other Person acting on behalf of the Company has
accepted or received any unlawful contributions, payments, gifts or
expenditures.
3.25 Disclosure. (a) No representations or warranties by Sellers in
this Agreement, including the Exhibits, Schedules and the Disclosure Letter,
and no statement contained in any document (including, without limitation, the
financial statements, certificates and other writings furnished or to be
furnished by Sellers to Buyer or any of its representatives pursuant to the
provisions hereof or in connection with the transactions contemplated hereby),
contains or will contain any untrue statement of material fact or omits or will
omit to state any
-17-
material fact necessary, in light of the circumstances under which it was made,
in order to make the statements herein or therein not misleading. There is no
fact known to the Dinicolas which has a Material Adverse Effect on the Company
which has not been set forth in this Agreement, including any Exhibit or
Schedule or the Disclosure Letter, the financial statements referred to in
Section 3.10 (including the footnotes thereto), any schedule, exhibit, or
certificate delivered in accordance with the terms hereof or any document or
statement in writing which has been supplied by or on behalf of Sellers or the
Company in connection with the transactions contemplated by this Agreement.
(b) Sellers have furnished or caused to be furnished to Buyer complete
and correct copies of all agreements, instruments and documents set forth on
the Disclosure Letter. Each of the Schedules and the Disclosure Letter is
complete and correct.
3.26 Information in Registration Statement. None of the information
supplied or to be supplied by Majority Stockholder for the express purpose of
inclusion or incorporation by reference in (a) the Registration Statement and
(b) any other documents to be filed with the Securities and Exchange Commission
(the "SEC") in connection with the transactions contemplated hereby will, at
the respective times such documents are filed, and, in the case of the
Registration Statement, when it becomes effective, cause the Registration
Statement to contain any untrue statement of a material fact, or omit to state
any material fact necessary in order to make the statements therein in light of
the circumstances under which they were made not misleading.
3.27 Sellers' Knowledge. The term "Sellers' knowledge" shall mean the
actual knowledge of any of the Dinicolas.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
---------------------------------------
Buyer represents and warrants to Sellers that:
4.1 Organization. Buyer is a corporation duly organized and validly
existing and in good standing under the laws of the State of Delaware.
4.2 Corporate Authority. Buyer has full corporate power and authority
to enter into the Agreements to which it is party and to consummate the
transactions contemplated hereby and thereby. The execution, delivery and
performance by Buyer of the Agreements to which it is party have been duly
authorized by all requisite corporate action. This Agreement has been, and each
of the other Agreements to which it is party will be as of the Closing Date,
duly executed and delivered by Buyer, and (assuming due execution and delivery
by Sellers) this Agreement constitutes, and each of the other Agreements when
executed and delivered will constitute, a valid and binding obligation of
Buyer, enforceable in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or similar laws affecting creditors' rights generally or by
general equitable principles.
-18-
4.3 No Violation. Buyer is not subject to or bound by any provision
of:
(a) any law, statute, rule, regulation or judicial or administrative
decision,
(b) any articles or certificate of incorporation or by-laws,
(c) any mortgage, deed of trust, lease, note, shareholders' agreement,
bond, indenture, other instrument or agreement, license, permit, trust,
custodianship or other restriction, or
(d) any judgment, order, writ, injunction or decree of any court,
governmental body, administrative agency or arbitrator,
that would prevent or be violated by, or under which there would be a default
as a result of, the execution, delivery and performance by Buyer of this
Agreement and the consummation of the transactions contemplated hereby. Except
in connection with the Offering (as hereinafter defined), no consent, approval
or authorization of or declaration or filing with any Person is required for
the valid execution, delivery and performance by Buyer of this Agreement and
the consummation of the transactions contemplated hereby.
4.4 Investment Intent. Buyer is acquiring the Shares for its own
account for investment and not with a view to any distribution thereof.
4.5 Capitalization. The shares of Buyer Common Stock issuable upon
exercise of the Warrants, have been adequately reserved and such reservation
will be maintained by Buyer so long as the Warrants remain outstanding.
4.6 Registration Statement and Offering. Buyer represents that it
intends to file with the SEC as soon as possible after the execution of this
Agreement a registration statement for review in connection with an offering of
its Convertible Preferred Stock (the "Offering"), intending to comply with the
provisions of the Securities Act of 1933 (the "Registration Statement"). Buyer,
as of the date hereof, has received no notice from either the SEC or its
underwriter that said Registration Statement will not comply with the
provisions of applicable securities laws. Buyer, as of the date hereof, has
received no notice (verbal or written) from its underwriter that such
underwriter is either not willing to proceed with such Offering or that it
recommends a delay in such Offering because of (i) market conditions, (ii) the
financial or business results or prospects of the Buyer, or (iii) any other
reason, and to Buyer's knowledge, its knows of no basis for any such
underwriter decision based on the foregoing clause (ii).
ARTICLE 5
CERTAIN COVENANTS AND AGREEMENTS OF SELLERS AND BUYER
-----------------------------------------------------
5.1 Conduct of Business Prior to the Closing Date. Sellers agree that,
between the date hereof and the Closing Date:
-19-
(a) Except as contemplated by this Agreement or permitted by written
consent of Buyer, Sellers shall cause the Company to operate its business only
in the ordinary course consistent with prior practice and not to:
(i) take any action of the nature referred to in Section 3.18,
except as permitted therein;
(ii) change the Company's banking or safe deposit arrangements;
(iii) cause or permit indebtedness (which for purposes of this
clause (iii) shall be deemed to exclude trade payables consisting of
accounts payable, deferred taxes and accrued expenses) of the Company to
exceed $25,000 in the aggregate; or
(iv) except as my be required by law, take any action to amend or
terminate any Employee Benefit Plan or adopt any other plan, program,
arrangement or practice providing new benefits or compensation to its
employees.
(b) Sellers shall use their best efforts to preserve the business
organization of the Company intact, to keep available to Buyer the services of
the present officers and employees of the Company and to preserve for Buyer the
good will of the Company's suppliers, customers, distributors, sales
representatives and others having business relations with the Company.
(c) Sellers shall cause the Company to maintain in force the insurance
policies referred to in Schedule 3.21 or insurance policies providing the same
or substantially similar coverage; provided, however, that the Majority
Stockholder will notify Buyer prior to the expiration of any of such insurance
policies.
(d) Except as contemplated by this Agreement or permitted by written
consent of Buyer, no plan, fund, or arrangement disclosed or required to be
disclosed in Schedule 3.13(a) has been or will be:
(i) terminated by the Company other than for expiration of its
terms;
(ii) except as required by law, amended (except as expressly
required by law) in any manner which would directly or indirectly increase
the benefits accrued in a material amount, by any participant thereunder;
or
(iii) except as required by law, amended in any manner which
would materially increase the cost to Buyer of maintaining such plan, fund
or arrangement.
(e) Majority Stockholder shall give Buyer prompt notice of any event,
condition or circumstance occurring from the date hereof through the Closing
Date that would constitute a violation or breach of any representation or
warranty of Sellers of which Majority Stockholder has knowledge, whether made
as of the date hereof or as of the Closing Date, or that would constitute a
violation or breach of any covenant of Sellers contained in this Agreement.
-20-
5.2 Tax Covenants. (a) Sellers shall timely cause to be prepared and
filed by the Company all Returns of the Company due prior to the Closing Date
(taking into account timely filed extensions) and timely pay, or cause to be
paid by the Company, when due all Taxes relating to such Returns except to the
extent that the liability for such Taxes is being contested in good faith by
the Company and proper reserves for any such liability are established on the
books and records of the Company. Prior to the filing of any Return described
in the preceding sentence, Sellers shall provide Buyer with a substantially
final draft of such Return at least fifteen (15) business days prior to the due
date for filing such Return, and Buyer shall have the right to review such
Return prior to the filing of such Return. Buyer shall notify the Majority
Stockholder of any reasonable objections Buyer may have to any items set forth
in such draft Returns, and Buyer and Sellers (acting through the Majority
Stockholder) agree to consult and resolve in good faith any such objection and
to mutually consent to the filing of such Return provided, however, if Seller
and Buyer are unable to agree on any of the items set forth in such draft
Return, and the Company would become subject to late fees and penalties if such
Return is not filed, then Sellers may file such Return and upon resolution of
such disputed items, such Return shall be amended, if necessary. Such Returns
shall be prepared or completed in a manner consistent with prior practice of
Sellers and the Company with respect to Returns concerning the income,
properties or operations of the Company (including elections and accounting
methods and conventions), except as otherwise required by law or regulation or
otherwise agreed to by Buyer prior to the filing thereof, subject to the
proviso of the preceding sentence.
(b) Buyer and Majority Stockholder shall cooperate with each other in
responding to any audit or proceeding relating to any Returns (including any
proceeding relating to the Company for Pre-Closing Periods). Notwithstanding
anything to the contrary contained or implied in this Agreement, (i) without
the prior written approval of Buyer (which shall not be unreasonably withheld
or delayed), neither Sellers nor any affiliate thereof shall agree or consent
to compromise or settle, either administratively or after the commencement of
litigation, any issue or claim arising in any such audit or proceeding, or
otherwise agree or consent to any Tax liability, to the extent that any such
compromise, settlement, consent or agreement shall materially affect the Tax
liability of Buyer, any of its affiliates or the Company (including, but not
limited to, the imposition of Tax deficiencies, the material reduction of asset
basis or cost adjustments, the lengthening of any amortization or depreciation
periods, the denial of material amortization or depreciation deductions, or the
material reduction of loss or credit carry-forwards).
(c) Buyer shall promptly notify the Majority Stockholder upon receipt
by Buyer, any affiliate of Buyer or the Company of notice of any pending or
threatened Tax audits or assessments relating to the income, properties or
operations of the Company, in each case for Pre-Closing Periods only, so long
as Pre-Closing Periods remain open; provided, however, that failure by Buyer to
comply with this Section 5.2(c) shall not affect Buyer's right to
indemnification relating to Taxes if such failure does not prejudice the rights
of Sellers. Sellers shall promptly notify Buyer upon receipt by any Seller or
any affiliate thereof of notice of any pending or threatened Tax audits or
assessments relating to the income, properties or operations of the Company, in
each case for Pre-Closing Periods only; provided, however, that the failure by
Sellers to comply with this Section 5.2(c) shall not affect Sellers' right to
indemnification if such failure does not prejudice the rights of Buyer.
-21-
(d) Neither Sellers nor any affiliate of any Seller shall, without the
prior written consent of Buyer, file, or cause to be filed, any amended Tax
return or claim for Tax refund, with respect to the Company, to the extent that
any such filing shall materially affect the Tax liability of Buyer, any of its
affiliates or the Company (including, but not limited to, the imposition of Tax
deficiencies, the material reduction of asset basis or cost adjustments, the
lengthening of any amortization or depreciation periods, the denial of material
amortization or depreciation deductions, or the material reduction of loss or
credit carry-forwards).
(e) Any and all powers of attorney relating to Tax matters concerning
the Company shall be terminated as to the Company on or prior to the Closing
Date and shall have no further force or effect.
(f) After the Closing Date, Buyer and Sellers shall provide each
other, and Buyer shall cause the Company to provide Sellers, with such
cooperation and information relating to the Company as either party reasonably
may request in (A) filing any Tax return, amended return or claim for refund,
(B) determining any Tax liability or a right to refund of Taxes, (C) conducting
or defending any audit or other proceeding in respect of Taxes or (D)
effectuating the terms of this Agreement. The parties shall retain, and Buyer
shall cause the Company to retain, all returns, schedules and work papers, and
all material records and other documents relating thereto, until the expiration
of the statute of limitation (and, to the extent notified by any party, any
extensions thereof) of the taxable years to which such returns and other
documents relate and, unless such returns and other documents are offered and
delivered to Sellers or Buyer, as applicable, until the final determination of
any Tax in respect of such years. Any information obtained under this Section
5.2 shall be kept confidential, except as may be otherwise necessary in
connection with filing any Tax return, amended return, or claim for refund,
determining any Tax liability or right to refund of Taxes, or in conducting or
defending any audit or other proceeding in respect of Taxes. Notwithstanding
the foregoing, neither Sellers nor Buyer, nor any of their affiliates, shall be
required unreasonably to prepare any document, or determine any information not
then in its possession, in response to a request under this Section 5.2(f).
(g) Buyer shall have received from each Seller, on or before the
Closing Date, an affidavit to the effect that Seller is not a "foreign person"
within the meaning of Code Section 1445. If, on or before the Closing Date,
Buyer shall not have received such affidavit from any Seller, Buyer may
withhold from the Purchase Consideration payable at Closing to such Seller
pursuant hereto such sums as are required to be withheld therefrom under
Section 1445 of the Code.
(h) Sellers shall be liable for, and shall pay when due, (i) any
transfer, gains, documentary, sales, use, registration, stamp, value added or
other similar Taxes payable by reason of the transactions contemplated by this
Agreement or attributable to the sale, transfer or delivery of the Shares
hereunder and (ii) other Taxes imposed on Sellers or any former shareholder of
the Company for which Buyer or the Company is held liable. Other than in the
case of Returns and other documentation that is required to be filed by the
Company after the Closing Date, Sellers shall, at their own expense, file all
necessary Tax returns and other documentation with respect to all such Taxes.
-22-
5.3 Expenses and Finder's Fees. Buyer and Sellers will bear their own
expenses in connection with this Agreement and its performance. Sellers, on the
one hand, and Buyer, on the other hand, each represent and warrant to the other
that the negotiations relative to this Agreement and the transactions
contemplated hereby have been carried on in such a manner as not to give rise
to any valid claims against the other party or the Company for a brokerage
commission, finder's fee or other like payment.
5.4 Access to Information and Confidentiality. Sellers agree that
until the Closing, Buyer may conduct such reasonable investigation with respect
to the business, business prospects, assets, liabilities (contingent or
otherwise), results of operations, employees and financial condition of the
Company as will permit Buyer to evaluate the transactions contemplated by this
Agreement. Until the Closing, Sellers shall afford Buyer reasonable access to
the premises, books, records and business affairs of the Company (and, to the
extent directly relating thereto, of Sellers) for purposes of conducting such
investigation and, promptly after the end of each month (without demand or
notice), shall furnish Buyer with copies of an unaudited balance sheet as of
the end of such month and unaudited statements of income and cash flows for
such month, in each case prepared consistent with the standards set forth in
the second sentence of Section 3.10(a). Each of Sellers and Buyer will hold and
will cause their respective representatives to hold in strict confidence,
unless compelled to disclose by judicial or administrative process, or, in the
opinion of its counsel, by other requirements of law, all documents and
information concerning the Company furnished to Buyer and all documents and
information concerning Buyer furnished to Sellers in connection with the
transactions contemplated by this Agreement, on the terms and subject to the
conditions contained in the Confidentiality Agreement dated September 9, 1996
between Buyer and the Company, which shall survive delivery of this Agreement
but shall be deemed to be of no further force and effect following the Closing.
5.5 No Solicitation. Sellers shall not, and shall direct the Company
and its affiliates, officers, employees, representatives or agents not to,
directly or indirectly, encourage, solicit, initiate or engage in discussions
or negotiations with, or provide any non-public information to, any Person
concerning any merger, sales of substantial assets, sales of shares of capital
stock or similar transactions involving the Company or enter into any agreement
with respect thereto. Sellers will promptly communicate to Buyer the terms of
any proposal which it may receive in respect of all such transactions
prohibited by the foregoing.
5.6 Press Releases. Except as required by law or stock exchange
regulation, any public announcements regarding the transactions contemplated
hereby shall be made only with the mutual consent of the Majority Stockholder
and Buyer.
5.7 Transitional Assistance. Sellers shall reasonably cooperate with
and assist Buyer in the orderly transfer of the business of the Company after
the Closing Date. Such cooperation and assistance shall include but not be
limited to the physical transfer of any books, records and computer software of
the Company.
5.8 Conditions. Sellers shall use their best efforts to fulfill or
cause the fulfillment of the conditions set forth in Article 6. Buyer shall use
its best efforts to fulfill or cause the fulfillment of the conditions set
forth in Article 7, and Buyer covenants and agrees that,
-23-
subject to its underwriters requirements, it shall use its reasonable best
efforts to cause the Registration Statement to be declared effective by the
Closing Date and to complete the Offering by the Closing Date.
5.9 Lock-Up. Majority Stockholder shall execute and deliver to Buyer
and Buyer's underwriters a lock-up agreement in the form of Exhibit B hereto
(the "Lock-up Agreement").
5.10 Notice as to Offering. Buyer agrees to provide the Majority
Stockholder, between the date hereof and the Closing Date, with immediate
notice of any indication of Buyer's underwriter, with respect to the Offering,
to Buyer (verbal or written) during such time period, that such underwriter is
either not willing to proceed with such Offering or that it recommends a delay
in such Offering because of (i) market conditions, (ii) the financial or
business results of prospects of the Buyer, or (iii) any other reason.
ARTICLE 6
CONDITIONS PRECEDENT OF BUYER
Buyer need not consummate the transactions contemplated by this
Agreement unless the following conditions shall be fulfilled or waived:
6.1 Representations and Warranties. Except as otherwise contemplated
or permitted by this Agreement, (a) the representations and warranties of
Sellers contained in this Agreement and in any certificate or document
delivered to Buyer pursuant hereto shall be deemed to have been made again at
and as of the Closing Date and shall then be true in all material respects,
except to the extent that any such representation or warranty is made as of a
specified date, in which case such representation or warranty shall have been
true in all material respects as of such date and (b) Sellers shall have
performed and complied with all material agreements and conditions required by
this Agreement to be performed or complied with by Sellers prior to or on the
Closing Date, and Buyer shall have been furnished with a certificate of the
Majority Stockholder, dated the Closing Date, certifying to the effect of
clauses (a) and (b) of this Section 6.1.
6.2 Opinion of Counsel. Buyer shall have been furnished with an
opinion dated the Closing Date of ▇▇▇▇▇▇▇▇ & Company, P.C., counsel for Sellers
and the Company, in form and substance reasonably acceptable to Buyer.
6.3 No Actions. No action, suit, or proceeding before any court or
governmental or regulatory authority shall be pending, no investigation by any
governmental or regulatory authority shall have been commenced, and no action,
suit or proceeding by any governmental or regulatory authority shall have been
threatened, against Buyer, Sellers, the Company or any of the principals,
officers or directors of any of them, seeking to restrain, prevent or change
the transactions contemplated hereby or questioning the legality or validity of
any such transactions or seeking damages in connection with any such
transactions.
-24-
6.4 Consents. All consents of third parties, including, without
limitation, governmental authorities and non-governmental self-regulatory
agencies, and all filings with and notifications of governmental authorities,
regulatory agencies (including non-governmental self-regulatory agencies) or
other entities which regulate the business of Buyer, Sellers or the Company
necessary on the part of Buyer, Sellers or the Company, to the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and to permit the continued operation of the respective
businesses of Buyer and the Company in substantially the same manner
immediately after the Closing Date as theretofore conducted, other than routine
post-closing notifications or filings, shall have been obtained or effected.
6.5 Employment Agreements. Each of ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇.
▇'▇▇▇▇▇, ▇▇▇▇▇ ▇'▇▇▇▇▇ and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ shall have executed and delivered an
Employment Agreement substantially in the form attached hereto as Exhibits C-1
through C-3, respectively (together with the exhibits attached thereto, the
"Employment Agreements").
6.6 Termination of Rights under Shareholder Agreements. Buyer shall
have received satisfactory evidence that all rights, claims and other interests
of any nature of all present shareholders of the Company arising under the
Shareholders' Agreement shall have been satisfied and discharged or shall
otherwise have terminated or been canceled.
6.7 Outstanding Shareholder Loans. Any outstanding loans from or
guarantees by the Company to or for the benefit of any Seller shall have been
satisfied and discharged or otherwise have terminated or been canceled, and
Sellers and the Company shall have delivered to Buyer satisfactory evidence
thereof; provided that, as of the date hereof, the Majority Stockholder is
indebted to the Company in the amount of $41,076.25 and the company is indebted
to the Majority Stockholder in the amount of approximately $96,000, which such
amounts shall be offset at the Closing, and the net balance due the Majority
Stockholder by the Company shall be paid on demand of Majority Stockholder
following the Closing.
6.8 Effectiveness of Registration Statement. The Registration
Statement with respect to the Share Consideration shall be effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such purpose
shall be pending before or threatened by the SEC.
6.9 Consummation of the Offering. Buyer shall have consummated its
public offering of its Convertible Preferred Stock resulting in gross proceeds
to Buyer of not less than $5,000,000.
6.10 Termination of Rights to Acquire Options. The Company's
obligation to grant non-qualified stock options to employees (as described in
Footnote 8 to the Company's Financial Statements) shall be terminated.
6.11 Minimum Net Worth. The Company shall have a minimum net worth, as
of the last day of the month preceding the Closing, of not less than $825,000.
6.12 Lock-Up Agreement. Buyer shall have received the Lock-up
Agreement duly executed by the Majority Stockholder.
-25-
ARTICLE 7
CONDITIONS PRECEDENT OF SELLERS
-------------------------------
Sellers need not consummate the transactions contemplated hereby
unless the following conditions shall be fulfilled:
7.1 Representations and Warranties. Except as otherwise contemplated
or permitted by this Agreement, (a) the representations and warranties of Buyer
contained in this Agreement or in any certificate or document delivered to
Sellers pursuant hereto shall be deemed to have been made again at and as of
the Closing Date and shall then be true in all material respects and (b) Buyer
shall have performed and complied with all material agreements and conditions
required by this Agreement to be performed or complied with by it prior to or
on the Closing Date, and the Majority Stockholder shall have been furnished a
certificate of an appropriate officer of Buyer, dated the Closing Date,
certifying to the effect of clauses (a) and (b) of this Section 7.1.
7.2 Opinion of Buyer's Counsel. The Majority Stockholder shall have
been furnished with an opinion dated the Closing Date of counsel for Buyer, in
form and substance reasonably acceptable to Majority Stockholder.
7.3 No Actions. No action, suit, or proceeding before any court,
governmental or regulatory authority, administrative agency or arbitrator shall
be pending, no investigation by any governmental or regulatory authority shall
have been commenced, and no action, suit or proceeding by any Person shall have
been threatened, against Sellers seeking to restrain, prevent, or change the
transactions contemplated hereby or questioning the legality or validity of any
such transactions or seeking damages in connection with any such transactions.
7.4 Consents. All consents of third parties including, without
limitation, governmental authorities, and non-governmental self-regulatory
agencies, and all filings with and notifications of governmental authorities,
regulatory agencies (including non-governmental self-regulatory agencies) or
other entities which regulate the business of Sellers, necessary on the part of
Sellers, to the execution and delivery of this Agreement and the consummation
of the transactions contemplated hereby, other than routine post-closing
notifications or filings, shall have been obtained or effected.
7.5 Employment Agreements. Buyer shall have caused the Employment
Agreements to be duly executed and delivered by the Company.
7.6 Effectiveness of Registration Statement. The Registration
Statement with respect to the Share Consideration shall be effective under the
Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such purpose
shall be pending before or threatened by the SEC.
-26-
ARTICLE 8
INDEMNIFICATION
8.1 Indemnification by Sellers. Effective only from and upon the
occurrence of the Closing, and subject to Section 8.3 below, each of the
Dinicolas hereby agrees to jointly and severally defend, indemnify and hold
harmless Buyer and the Company and their respective successors, assigns and
affiliates (collectively, the "Buyer Indemnitees") from and against any and all
losses, deficiencies, liabilities, damages, assessments, judgments, costs and
expenses, including reasonable attorneys' fees (both those incurred in
connection with the defense or prosecution of the indemnifiable claim and those
incurred in connection with the enforcement of this provision), including,
without limitation, Environmental Liabilities and Costs (collectively, "Buyer
Losses"), caused by, resulting from or arising out of:
(a) (i) breaches of representation or warranty under this Agreement on
the part of any Seller; and (ii) failures by any of the Dinicolas (whether
as Sellers or Majority Shareholder) to perform or otherwise fulfill any
undertaking or other agreement or obligation under this Agreement;
(b) (i) any and all Taxes imposed on the Company (including, without
limitation, Taxes relating to the Tax liability of Sellers to the extent
any governmental authority seeks to impose such Taxes on the Company) for,
or relating to, periods commencing with January 1, 1994 and subsequent
thereto, and prior to the date of the the Closing to the extent the
charges, accruals and reserves therefor as reflected on the books of the
Company as of the date of the Closing are inadequate to cover such Taxes
and (ii) any Tax liability of the Company resulting from the Company's
election as of January 1, 1994 to be taxed as a "C corporation" (including,
without limitation, any Tax liability resulting from such change in
status); and
(c) any and all actions, suits, proceedings, claims, demands, incident
to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted in respect of which a Buyer Indemnitee
proposes to demand indemnification ("Buyer Indemnified Claims"), Buyer or such
other Buyer Indemnitee shall promptly notify the Majority Stockholder thereof,
provided further, however, that, subject to Section 8.3 below, the failure to
so notify the Majority Stockholder shall not reduce or affect Sellers'
obligations with respect thereto except to the extent that Sellers are
materially prejudiced thereby. Subject to rights of or duties to any insurer or
other third Person having liability therefor, the Majority Stockholder shall
have the right promptly upon receipt of such notice (after acknowledging
responsibility for such Buyer Indemnified Claim) to assume the control of the
defense, compromise or settlement of any such Buyer Indemnified Claims
(provided that any compromise or settlement must be reasonably approved by
Buyer), including, at its own expense, employment of counsel reasonably
satisfactory to Buyer; provided, however, that if the Majority Stockholder
shall have exercised its right to assume such control, Buyer may, in its sole
discretion and at its expense, employ counsel to represent it (in addition to
counsel employed by the Majority Stockholder) in any such matter. So long as
the Majority Stockholder is contesting any such
-27-
Buyer Indemnified Claim in good faith, Buyer and each other Buyer Indemnitee
shall not pay or settle any such Buyer Indemnified Claim.
8.2 Indemnification by Buyer. Buyer hereby agrees to defend, indemnify
and hold harmless Sellers and their respective successors, assigns and
affiliates (collectively, "Seller Indemnitees") from and against any and all
losses, deficiencies, liabilities, damages, assessments, judgments, costs and
expenses, including attorneys' fees (both those incurred in connection with the
defense or prosecution of the indemnifiable claim and those incurred in
connection with the enforcement of this provision) (collectively, "Seller
Losses"), resulting from or arising out of:
(a) (i) breaches of representation and warranty hereunder on the part
of Buyer and (ii) failures by Buyer to perform or otherwise fulfill any
undertaking or agreement or obligation hereunder; and
(b) any and all actions, suits, proceedings, claims and demands
incident to any of the foregoing or such indemnification;
provided, however, that if any claim, liability, demand, assessment, action,
suit or proceeding shall be asserted in respect of which a Seller Indemnitee
proposes to demand indemnification ("Seller Indemnified Claims"), Seller or
such other Seller Indemnitee shall notify Buyer thereof, provided further,
however, that the failure to so notify Buyer shall not reduce or affect Buyer's
obligations with respect thereto except to the extent that Buyer is materially
prejudiced thereby. Subject to rights of or duties to any insurer or other
third Person having liability therefor, Buyer shall have the right promptly
upon receipt of such notice to assume the control of the defense, compromise or
settlement of any such Seller Indemnified Claims (provided that any compromise
or settlement must be reasonably approved by Seller) including, at its own
expense, employment of counsel reasonably satisfactory to Seller; provided,
however, that if Buyer shall have exercised its right to assume such control,
Seller may, in its sole discretion and at its expense, employ counsel to
represent it (in addition to counsel employed by Buyer) in any such matter. So
long as Buyer is contesting any such Seller Indemnified Claim in good faith,
Seller or such other Seller Indemnitees shall not pay or settle any such Seller
Indemnified Claim.
8.3 Limitation on Liability. The aggregate liability of the Dinicolas
under this Article 8 shall be limited as follows:
(a) There shall be no liability whatsoever under Section 8.1(a)(i) or
under Section 8.1(c) (in respect of matters arising under Section
8.1(a)(i)) on the part of the Dinicolas until the Buyer Losses from the
occurrence of Buyer Indemnified Claims arising under Section 8.1(a)(i) or
under Section 8.1(c) (in respect of matters arising under Section
8.1(a)(i)) exceed in the aggregate $50,000, in which event the Dinicolas
shall be liable for all such amounts exceeding said $50,000, but such
liability will be limited in the aggregate (including, without limitation,
for costs of defense of Buyer Indemnitees) to $500,000;
(b) There shall be no liability whatsoever under Section 8.1(b) or
under Section 8.1(c) (in respect of matters arising under Section 8.1(b))
until the Buyer Losses from the occurrence of Buyer Indemnified Claims
arising thereunder exceed in the
-28-
aggregate $115,000, in which event the Dinicolas shall be liable for all
such amounts exceeding said $115,000; and
(c) No claim for indemnification under Section 8.1(a)(i) for a breach
of any representation or warranty or under Section 8.1(c) in respect of
such breach shall be made after the date, if any, on which the survival
period for such representation or warranty expires in accordance with
Section 9.1 hereof, and the liability of the Dinicolas with respect thereto
shall then cease, except with respect to claims made on or prior to the
applicable date of expiration as set forth in Section 9.1, which claims
shall survive such expiration. No claim for indemnification under Section
8.1(b) or under Section 8.1(c) in respect to a claim arising under Section
8.1(b) shall be made after the date one year after the expiration of the
applicable statute of limitations for claims of the nature described in
Section 8.1(b).
ARTICLE 9
SURVIVAL OF REPRESENTATIONS, WARRANTIES AND COVENANTS
-----------------------------------------------------
9.1 Representations, Warranties and Covenants. The covenants contained
in this Agreement shall survive the Closing Date without limitation. The
representations and warranties contained herein shall survive the Closing Date
for a period of one year, except that any representation or warranty of Sellers
contained in Sections 3.1, 3.4 and 3.5 shall survive the Closing Date without
limitation, and any representation or warranty of Sellers contained in Section
3.12 (Tax Matters) shall survive until the expiration of one year after the
expiration of the applicable statute of limitations.
ARTICLE 10
NON-COMPETITION BY SELLERS AND NO SOLICITATION
----------------------------------------------
10.1 Non-Compete. Majority Stockholder shall not, and shall not permit
any of their respective affiliates to, for a period of three years from the
Closing, compete, directly or indirectly, with the Company.
10.2 Non-Solicitation. Majority Stockholder agrees that he shall not,
for a period of three years after the Closing Date, employ any person who was
employed by the Company or any of its affiliates or induce such person to
accept employment other than with the Company and its affiliates.
10.3 Remedies. Each Seller recognizes that a breach or threatened
breach by him of his obligations under this Article 10 would cause irreparable
injury to the Company, and the Company shall be entitled to seek preliminary
and permanent injunctions enjoining him from violating this Article 10, in
addition to any other remedies which may be available.
-29-
ARTICLE 11
MISCELLANEOUS
-------------
11.1 Cooperation. Each of the parties hereto shall use its reasonable
efforts to take or cause to be taken all actions, to cooperate with the other
party hereto with respect to all actions, and to do or cause to be done all
things necessary, proper or advisable to consummate and make effective the
transactions contemplated by this Agreement.
11.2 Waiver. Any failure of Sellers to comply with any of their
respective obligations or agreements herein contained may be waived only in
writing by Buyer. Any failure of Buyer to comply with any of its obligations or
agreements herein contained may be waived only in writing by the Majority
Stockholder.
11.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given upon receipt of: hand
delivery; certified or registered mail, return receipt requested; or telecopy
transmission with confirmation of receipt:
(i) If to Sellers, to:
Comp ▇▇▇▇, Inc.
d/b/a ▇▇▇▇ Distribution
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇.▇. ▇▇▇▇▇▇▇▇
(with a copy to)
▇▇▇▇▇▇▇▇ & Company, P.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
-30-
(ii) If to Buyer, to
Questron Technology, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
(with a copy to)
Winthrop, Stimson, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
Such names and addresses may be changed by written notice to each person listed
above.
11.4 Governing Law and Consent to Jurisdiction; Dispute Resolution.
(a) This Agreement shall be governed by and construed in accordance with the
internal substantive laws and not the choice of law rules of the State of
Delaware.
(b) Any dispute, claim or controversy arising out of or relating to
this Agreement, or the interpretation or breach thereof, shall be referred to
arbitration under the rules of the American Arbitration Association, to the
extent such rules are not inconsistent with this Section 11.4. Judgment upon
the award of the arbitrators may be entered in any court having jurisdiction
thereof or such court may be asked to judicially confirm the award and order
its enforcement, as the case may be. The demand for arbitration shall be made
within a reasonable time after the claim, dispute or other matter in question
has arisen, and in any event shall not be made after the date when institution
of legal or equitable proceedings, based on such claim, dispute or other matter
in question, would be barred by the applicable statute of limitations.
(c) The arbitration panel shall consist of three arbitrators, one of
whom shall be appointed by each party hereto. The two arbitrators thus
appointed shall choose the third arbitrator; provided, however, that if the two
arbitrators are unable to agree on the appointment of the third arbitrator,
either arbitrator may petition the American Arbitration Association to make the
appointment.
(d) The place of arbitration shall be New York.
-31-
11.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
11.6 Headings. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
11.7 Entire Agreement. This Agreement, including the Exhibits and
Schedules hereto and the documents referred to herein, embodies the entire
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
11.8 Amendment and Modification. This Agreement may be amended or
modified only by written agreement of the parties hereto.
11.9 Binding Effect; Benefits. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns; nothing in this Agreement, express or implied, is
intended to confer on any Person other than the parties hereto and their
respective successors and assigns (and, to the extent provided in Sections 8.1
and 8.2, the other Buyer Indemnitees and Seller Indemnitees) any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
11.10 Assignability. This Agreement shall not be assignable by any
party hereto without the prior written consent of the other parties provided
that Buyer may assign its rights under the Agreement to any affiliate of Buyer,
except in the event of any such assignment to an affiliate of Buyer, Buyer
shall guarantee the obligations hereunder of "Buyer" and shall be a joint maker
on the Notes.
-32-
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
QUESTRON TECHNOLOGY, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇*
/s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇*
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
/s/ ▇▇▇▇▇ ▇'▇▇▇▇▇
---------------------------------
▇▇▇▇▇ ▇'▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
---------------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
* by Power of Attorney
-33-
Schedule 1.1
COMP ▇▇▇▇, INC.
CAPITALIZATION
December 16, 1996
Stockholder Name No. Common Stock Shares
----------------- -----------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 420,000
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇ 80,000
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇▇ 20,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ 20,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 20,000
▇▇▇▇▇ ▇'▇▇▇▇▇ 32,557.85
▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇ 32,557.85
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 26,046.30
Total Outstanding 651,162
Total Authorized 1,000,000
(all $.01 par, common stock)
EXHIBIT A-1
FORM OF NOTE A
$375,000 January __, 1997
(a) Principal.
For value received, Questron Technology, Inc., a Delaware corporation
("Maker"), promises to pay to the order of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
("Holder"), at ______________________, or at such other place as
Holder may from time to time designate in writing, the principal sum
of three hundred seventy five thousand dollars ($375,000), or so much
thereof as shall be outstanding hereunder, together with accrued
interest from the date of this Note (this "Note") on the unpaid
principal; provided, however, that in the event Holder receives net
proceeds("Warrant Proceeds") from the sale of Maker's Series IV
Warrants (the "Warrants") received by the Holder pursuant to that
certain Stock Purchase Agreement dated as of December __, 1996 by and
among Maker and the shareholders of Comp ▇▇▇▇, Inc. D/B/A ▇▇▇▇
Distribution (the "Stock Purchase Agreement") that are in excess of
$375,000, then such excess shall be applied to reduce the outstanding
principal amount of this Note, and, to the extent the Warrant
Proceeds, together with any payments of principal received by Holder
under this Note are in excess of $750,000, then such excess shall be
applied to reduce the outstanding principal amount of that certain
Note B of Maker dated the date hereof for $375,000 maturing in 2000.
(b) Payment of Principal.
The outstanding principal balance hereunder and all accrued interest
shall be due and payable on that date eighteen month from the date
hereof ("Maturity Date").
(c) Prepayment.
Maker may, at any time, and from time to time, prepay the outstanding
principal balance under this Note, in whole or in part, so long as
such payment is accompanied by payment of all accrued but unpaid
interest payable hereunder. Any such prepayment shall be applied,
first, to accrued but unpaid interest and, second, to the remaining
outstanding principal balance hereof.
(d) Interest Rate and Payment.
From the date of this Note until payment in full of the principal
hereof, the outstanding principal hereunder shall bear interest at the
rate of 10% per annum based on a year of 360 days.
(e) Lawful Money.
#20161954.3
Principal and interest are payable in lawful money of the United
States of America.
(f) Event of Default.
If the Maker shall fail to make payment of principal or interest when
due pursuant to the terms hereof; or if the Maker is adjudicated
bankrupt or insolvent by a court of competent jurisdiction or makes an
assignment for the benefit of creditors; or if the Maker shall
petition for any proceedings in bankruptcy or liquidation or for the
reorganization or adjustment of indebtedness of the Maker; or if any
involuntary petition for any proceedings in bankruptcy or liquidation
or for the reorganization or the readjustment of indebtedness of the
Maker shall be filed, or any case or proceeding shall be commenced by
any person other than the Maker under applicable bankruptcy or
insolvency laws now or hereafter existing, against the Maker, and such
petition, case or proceeding shall remain undischarged for more than
thirty (30) days, whether or not consecutive (each an "Event of
Default"); then all principal and accrued interest hereunder will
become payable in full, without the need for any further action by the
Holder hereof. The Maker agrees to pay all costs and expenses,
including all attorneys' fees, for the collection or enforcement of
this Note upon an Event of Default.
(g) Remedies.
Upon the occurrence of an Event of Default, then, at the option of
Holder, the entire balance of principal, together with all accrued
interest thereon, without demand or notice, shall immediately become
due and payable. The Maker hereby absolutely and irrevocably waiver
notice of acceptance, presentment, notice of demand, notice of
non-payment, protest, notice of protest, suit and all other conditions
precedent in connection with the deliver, acceptance, collection
and/or enforcement of the Note or any collateral or security therefor.
The Maker hereby absolutely and irrevocably consents and submits to
the jurisdiction of the courts of the Commonwealth of Massachusetts,
and of any Federal court located in the said Commonwealth, in
connection with any actions or proceedings by the Holder hereof
arising out of or relating of this Note. In any such action or
proceeding, the Maker absolutely and irrevocably waives personal
service of any summons, complaint, declaration or any other process
and hereby absolutely and irrevocably agrees that the service thereof
may be made, in addition to other methods permitted by law, by
certified, registered or first class mail directed to the Maker at
______________________________, or such other address of which the
Maker shall have given notice to the Holder by certified, registered
or first class mail.
(h) Restriction on Transferability.
This Note may not be transferred or assigned in whole or in part
without the prior written consent of Maker.
(i) Severability.
Every provision of this Note is intended to be severable. In the event
any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid
A-2
for any reason whatsoever, such illegality or invalidity shall not
affect the balance of the terms and provisions hereof, which terms and
provisions shall remain binding and enforceable.
(j) Headings.
Headings at the beginning of each numbered Section of this Note are
intended solely for convenience and are not to be deemed or construed
to be a part of this Note.
(k) Choice of Law.
This Note shall be governed by and construed in accordance with the
laws of the State of Delaware.
(l) Cancellation of this Note.
In the event that, prior to the expiration of the eighteen (18) month
period of the Lock-up Agreement (as defined in the Stock Purchase
Agreement), Maker's underwriter releases Holder from the Lock-up
Agreement in connection with a proposed transaction to sell the
Warrants and Holder declines to sell the Warrants in such transaction
within seven business days of receipt by Holder of written notice of
sail release, then this Note shall be automatically canceled.
QUESTRON TECHNOLOGY, INC.,
a Delaware corporation
By: _______________________
Name:
Title:
▇-▇
▇▇▇▇▇▇▇ ▇-▇
FORM OF NOTE B
$375,000 January __, 1997
(a) Principal.
For value received, Questron Technology, Inc., a Delaware corporation
("Maker"), promises to pay to the order of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
("Holder"), at ______________________, or at such other place as
Holder may from time to time designate in writing, the principal sum
of three hundred seventy five thousand dollars ($375,000), or so much
thereof as shall be outstanding hereunder, together with accrued
interest from the date of this Note (this "Note") on the unpaid
principal; provided, however, that in the event Holder receives net
proceeds ("Warrant Proceeds") from the sale of Maker's Series IV
Warrants (the "Warrants") received by the Holder pursuant to that
certain Stock Purchase Agreement dated as of December __, 1996 by and
among Maker and the shareholders of Comp ▇▇▇▇, Inc. D/B/A ▇▇▇▇
Distribution (the "Stock Purchase Agreement"), that are in excess of
$375,000, then such excess shall be applied to reduce the outstanding
principal amount of that certain Note A of Maker dated the date hereof
for $375,000 maturing in 1998 (the "Eighteen Month Note") and to the
extent the Warrants Proceeds, together with any payments of principal
received by Holder under the Eighteen Month Note are in excess of
$750,000, then such excess shall be applied to reduce the outstanding
principal amount of this Note.
(b) Payment of Principal.
The outstanding principal balance hereunder, together with interest at
the rate of 10% per annum shall be payable as follows: commencing one
month from the date hereof and continuing on the same day of each
successive month thereafter, monthly payments of principal and
interest on amounts of principal remaining unpaid from time to time
shall be due and payable in 60 equal payments of $7,967.64; provided
that all outstanding and unpaid principal and accrued interest shall
be paid in full on the date five years from the date hereof.
(c) Prepayment.
Maker may, at any time, and from time to time, prepay the outstanding
principal balance under this Note, in whole or in part, so long as
such payment is accompanied by payment of all accrued but unpaid
interest payable hereunder. Any such prepayment shall be applied,
first, to accrued but unpaid interest and, second, to the remaining
outstanding principal balance hereof.
(d) Interest Rate and Payment.
From the date of this Note until payment in full of the principal
hereof, the outstanding principal hereunder shall bear interest at the
rate of 10% per annum.
(e) Lawful Money.
Principal and interest are payable in lawful money of the United
States of America.
(f) Event of Default.
If the Maker shall fail to make payment of principal or interest when
due pursuant to the terms hereof; or if the Maker is adjudicated
bankrupt or insolvent by a court of competent jurisdiction or makes an
assignment for the benefit of creditors; or if the Maker shall
petition for any proceedings in bankruptcy or liquidation or for the
reorganization or adjustment of indebtedness of the Maker; or if any
involuntary petition for any proceedings in bankruptcy or liquidation
or for the reorganization or the readjustment of indebtedness of the
Maker shall be filed, or any case or proceeding shall be commenced by
any person other than the Maker under applicable bankruptcy or
insolvency laws now or hereafter existing, against the Maker, and such
petition, case or proceeding shall remain undischarged for more than
thirty (30) days, whether or not consecutive (each an "Event of
Default"); then all principal and accrued interest hereunder will
become payable in full, without the need for any further action by the
Holder hereof. The Maker agrees to pay all costs and expenses,
including all attorneys' fees, for the collection or enforcement of
this Note upon an Event of Default.
(g) Remedies.
Upon the occurrence of an Event of Default, then, at the option of
Holder, the entire balance of principal, together with all accrued
interest thereon, without demand or notice, shall immediately become
due and payable. The Maker hereby absolutely and irrevocably waiver
notice of acceptance, presentment, notice of demand, notice of
non-payment, protest, notice of protest, suit and all other conditions
precedent in connection with the deliver, acceptance, collection
and/or enforcement of the Note or any collateral or security therefor.
The Maker hereby absolutely and irrevocably consents and submits to
the jurisdiction of the courts of the Commonwealth of Massachusetts,
and of any Federal court located in the said Commonwealth, in
connection with any actions or proceedings by the Holder hereof
arising out of or relating of this Note. In any such action or
proceeding, the Maker absolutely and irrevocably waives personal
service of any summons, complaint, declaration or any other process
and hereby absolutely and irrevocably agrees that the service thereof
may be made, in addition to other methods permitted by law, by
certified, registered or first class mail directed to the Maker at
______________________________, or such other address of which the
Maker shall have given notice to the Holder by certified, registered
or first class mail.
(h) Restriction on Transferability.
This Note may not be transferred or assigned in whole or in part
without the prior written consent of Maker.
A-2
(i) Severability.
Every provision of this Note is intended to be severable. In the event
any term or provision hereof is declared by a court of competent
jurisdiction to be illegal or invalid for any reason whatsoever, such
illegality or invalidity shall not affect the balance of the terms and
provisions hereof, which terms and provisions shall remain binding and
enforceable.
(j) Headings.
Headings at the beginning of each numbered Section of this Note are
intended solely for convenience and are not to be deemed or construed
to be a part of this Note.
(k) Choice of Law.
This Note shall be governed by and construed in accordance with the
laws of the State of Delaware.
(l) Cancellation of this Note.
In the event that, prior to the expiration of the eighteen (18) month
period of the Lock-up Agreement (as defined in the Stock Purchase
Agreement), Maker's underwriter releases Holder from the Lock-up
Agreement in connection with a proposed transaction to sell the
Warrants and Holder declines to sell the Warrants in such transaction
within seven business days of receipt by Holder of written notice of
said release, then this Note shall be automatically canceled.
QUESTRON TECHNOLOGY, INC.,
a Delaware corporation
By: ______________________
Name:
Title:
A-3
EXHIBIT B
Biltmore Securities, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
RE: QUESTRON TECHNOLOGY, INC.
Gentlemen:
The undersigned is the beneficial and record holder of
1,500,000 Series IV Warrants to purchase common stock (the "Warrants") of
Questron Technology, Inc., a Delaware corporation (the "Company"). In
connection with the proposed public offering of securities of the Company (the
"Offering"), the undersigned agrees not to directly or indirectly, for a period
of eighteen (18) months following the effective date of the Offering, offer,
sell (including by effecting any short sale), loan, hypothecate, pledge, grant
any option for the sale of, acquire any option to dispose of, transfer or gift
(except for estate planning or charitable transfer or other private sales,
provided the transferees agree to be bound by the same restrictions on
transfer), or otherwise dispose of any Warrants without obtaining your prior
written consent (which consent may be withheld or granted in your discretion).
The undersigned acknowledges and agrees that in order to enforce the covenants
contained in this letter agreement, the Company will impose stop-transfer
instructions with respect to the Warrants owned by the undersigned until the
end of such eighteen (18) month period for transfers other than those
exceptions described above.
Date:
Signed: ________________________
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
EXHIBIT C-1
EMPLOYMENT AGREEMENT
Agreement made this day of [1996] between QUESTRON
TECHNOLOGY, INC. (herein referred to as the "Company" or the "Employer"), and
_____________ [insert name of executive] (the "Executive").
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to accept/continue employment with the Company, but only on
the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements hereinafter set forth, the Company and the Executive hereby agree as
follows:
(y) Term. Unless sooner terminated as provided in Section 6
of the Agreement, the term of this Agreement shall be for a three-year period
commencing on the date hereof, provided that the parties may agree in writing
to extend such term for any additional period.
(z) Employment. The Executive shall serve the Company as its
_____________ [insert title]. During the term of this Agreement, the Executive
shall, except during vacation or sick leave, devote the whole of his time,
attention and skill during usual business hours (and outside those hours when
reasonably necessary to his duties hereunder) to his duties hereunder;
faithfully and diligently perform such duties and exercise such powers as may
be from time to time reasonably assigned to or vested in him by the Company's
Board of Directors (the "Board") or by any officer of the Company superior to
the Executive; and use his best efforts to promote the interests of the
Company. The Executive may be required in pursuance of his duties hereunder to
perform similar services in a similar capacity at the same
location for any company controlling, controlled by or under common control
with the Company (such companies hereinafter collectively called "Affiliates").
The Executive shall obey all policies of the Company and applicable policies of
its Affiliates to which he has received written notice.
(aa) Compensation. During the term of this Agreement, the
Company shall pay the Executive a salary at an annual rate of ___________
[insert amount which shall be not less (as to total amount and as to allocation
between contingent and non-contingent portions) than the amount equal to the
sum of all compensation received by employee from Comp ▇▇▇▇, Inc. for calendar
year 1996], which shall be payable biweekly.
4. Benefits. The Executive shall be entitled to such
retirement benefits, health and other welfare plan coverage, life insurance,
expense accounts, vacation time, sick leave, perquisites of office, fringe
benefits, eligibility to immediately participate (and vest, giving full credit
for employee's tenure with Comp ▇▇▇▇, Inc., in accordance with the provisions
of each of the following plans) in Quest Electronic Hardware, Inc.'s 401(k),
and Questron Technology, Inc.'s ESOP and stock option plan, plus any employment
benefits as the Company provides to any or all its employees.
5. Nonassignment. The performance by the Executive of his
duties under this Agreement is his personal obligation and may not be delegated
by him. However, the Executive may delegate duties and responsibilities to
other employees or agents of the Company incident to normal and customary
management practices. Neither party hereto may assign any rights hereunder. Any
purported delegation or assignment shall be void. The foregoing
notwithstanding, however, the Company may assign this Agreement to any
Affiliate of the Company.
6. Termination. Unless sooner terminated in accordance with
the following provisions of this paragraph 6, the Company shall continue to
employ the Executive and the Executive shall continue to work for the Company,
during the term of this Agreement.
(I) The employment of Executive hereunder shall terminate
upon (i) the death of Executive; and (ii) at the option of Employer, upon
not less than thirty (30) days' prior written notice to Executive or his
legal representative, in the event that Executive becomes disabled. Executive
shall be deemed to be disabled if by reason of physical or mental incapacity or
disability, he is unable to render the services to be rendered by him pursuant
to this Agreement for a continuous period of ninety (90) successive days or for
shorter periods aggregating one hundred twenty (120) days or more during any
twelve (12) successive months (the advice of a reputable physician mutually
acceptable to Employer and Executive as to the existence of any such incapacity
or disability to be final and binding upon the parties).
(II) In the event of any willful misconduct, active fraud
or gross negligence by the Executive in connection with his employment
hereunder, the Employer shall have the right to terminate the term of
employment by giving the Executive notice in writing of the reason for such
proposed termination. If the Executive shall not have corrected such conduct to
the satisfaction of the Employer within thirty days after such notice, this
Agreement shall terminate and the Employer shall have no further obligation to
the Executive hereunder other than as provided by subsection (d) of this
Section 6, but the restrictions on the Executive's activities contained in
Sections 7 and 8 and the obligations of the Executive contained therein shall
continue in effect as provided therein.
(III) The Company may terminate the Executive's employment
at any time without cause. In the event that the Executive is
terminated without cause, the Company shall continue to pay the Executive
biweekly at a rate equivalent to his compensation, plus
benefits described in paragraph 4 above until the end of the term of this
Agreement. Such payments to the Executive by the Company will be in full and
complete satisfaction (except as provided in subsection d below) of any and all
obligations owing to the Executive pursuant to this Agreement (excluding any
common law claims, rather than contractual claims under this Agreement, which
may exist in connection with such termination).
(IV) Upon termination pursuant to a, b or c above, the
Company shall pay the Executive or his estate any salary and other
employment benefits earned and unpaid to the date of termination, and any
outstanding funds advanced by the Company to or on behalf of the Executive
shall become immediately due and payable.
7. Intellectual Property; Confidentiality.
(a) Intellectual Property. Executive agrees that
all ideas, sketches, designs, prototypes, samples, patterns, and related work
product developed by him during the term of employment which related directly
or indirectly to the business of Employer or any of its subsidiaries or
affiliates, will be the property of Employer and that he will, at Employer's
request and cost, do whatever is reasonably necessary to secure the rights
thereto to Employer.
(b) Confidentiality. Except as required pursuant
to a court order or applicable law, Executive agrees that he will not
divulge to anyone (other than Employer or any persons employed or designated by
Employer) any knowledge or information of any type whatsoever of a confidential
nature relating to the business of Employer or any of its subsidiaries or
affiliates, including, without limitation, all types of trade secrets.
Executive further agrees not to disclose, publish or make use of any such
knowledge or information of a confidential nature without the prior written
consent of Employer.
8. Competition.
(a) The Executive agrees that during his
employment at the Company and for a period of six months after termination
of his employment, he will not directly or indirectly, whether or
not for compensation and whether or not as an employee, be engaged in or have
any financial interest in any business competing with the business of the
Company or any of its Affiliates within any state, region or locality in which
the Company or such Affiliate is then doing business. For purposes of this
Agreement, the Executive shall be deemed to be engaged in or to have a
financial interest in such a business if he is an employee, officer, director,
or partner, of any person, partnership, corporation, trust or other entity
which is engaged in such a business, or if he directly or indirectly performs
services for such entity or if he beneficially owns an equity interest, or
interest convertible into equity, in any such entity; provided, however, that
the foregoing shall not prohibit the Executive from owning, for the purpose of
passive investment, less than 5% of any class of securities of a publicly held
corporation.
(b) The Executive agrees that during his
employment at the Company and for a period of six months after the termination
of his employment, he will not knowingly interfere with or disrupt, or attempt
to interfere with or disrupt, the relationship, contractual or otherwise,
between the Company or any of its Affiliates and any customer, supplier or
employee of the Company or such Affiliate.
(c) The Executive agrees that he shall not,
for a period of six months after the termination of his employment, employ
any person who was employed by the Company or any of its Affiliates or induce
such person to accept employment other than with the Company and its Affiliates.
(d) The Executive recognizes that a breach or
threatened breach by him of his obligations under this Section 8 would cause
irreparable injury to the Company, and the
Company shall be entitled to seek preliminary and permanent injunctions
enjoining him from violating this Section 8 in addition to any other remedies
which may be available. In the event that the Executive is receiving payments
pursuant to subsection (c) of Section 6, the obligations under all provisions
of this Section 8 shall continue so long as Employer continues to make such
payments, but not beyond three years from the date hereof.
9. Addresses. Any notice or other communication required
or permitted under this Agreement shall be effective only if it is in writing
and delivered personally or sent by registered or certified mail, postage
prepaid, addressed as follows:
If to the Company:
Questron Technology, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
If to the Executive:
[insert]
or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.
10. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Massachusetts.
11. Headings. The headings herein are for convenience of
reference only and shall not be deemed to be part of the substance of this
Agreement.
12. Entire Agreement, Etc. This Agreement constitutes the
entire agreement between the parties hereto with respect to the Executive's
employment by the Company, and
supersedes and is in full substitution for any and all prior understandings or
agreements with respect to the Executive's employment.
13. Amendments. This Agreement may be amended only by an
instrument in writing signed by the parties hereto, and any provision hereof
may be waived only by an instrument in writing signed by the party or parties
against whom or which enforcement of such waiver is sought. The failure of
either party hereto at any time to require the performance by the other party
hereto of any provision hereof shall in no way affect the full right to require
such performance at any time thereafter, nor shall the waiver by either party
hereto of a breach of any provision hereof be taken or held to be a waiver of
any succeeding breach of such provision or a waiver of the provision itself or
a waiver of any other provision of this Agreement.
14. Binding Effect. This Agreement is binding on and is for
the benefit of the parties hereto and their respective successors, heirs,
executors, administrators and other legal representatives.
15. Severability. If any provision of this Agreement, or
portion thereof, is so broad, in scope or duration, so as to be unenforceable,
such provision or portion thereof shall be interpreted to be only so broad as
is enforceable.
16. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which shall
constitute one and the same instrument.
17. Survival. The obligations of the Executive set forth in
Sections 7, 8 and 10 represent independent covenants by which the Executive is
and will remain bound notwithstanding any breach by the Company hereunder,
and shall survive the termination of this Agreement.
IN WITNESS WHEREOF, the Company and the Executive have
executed this Agreement as of the date first written above.
[insert name of Executive] QUESTRON TECHNOLOGY, INC.
______________________________ By: _____________________________
Name:
Title: