Exhibit 10.1
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QUESTRON TECHNOLOGY, INC.
QUESTRON OPERATING COMPANY, INC.
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SECURITIES PURCHASE AGREEMENT
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Dated as of June 29, 1999
$20,000,000 14.50% Senior Subordinated Notes due June 30, 2005 of
Questron Operating Company, Inc.
680,000 Shares of Common Stock of Questron Technology, Inc.
TABLE OF CONTENTS PAGE
1. PURCHASE AND SALE OF SECURITIES............................................1
1.1 Issue of Securities..............................................1
1.2 The Closing......................................................2
1.3 Original Issue Discount..........................................2
2. WARRANTIES AND REPRESENTATIONS OF THE ISSUERS..............................3
2.1 Nature of Business...............................................3
2.2 Financial Statements; Debt; Material Adverse Change..............3
2.3 Subsidiaries and Affiliates......................................4
2.4 Title to Properties..............................................5
2.5 Taxes............................................................6
2.6 Pending Litigation...............................................6
2.7 Corporate Organization and Authority.............................6
2.8 Charter Instruments, Other Agreements............................7
2.9 Restrictions on the Company......................................7
2.10 Compliance with Law..............................................8
2.11 Pension Plans....................................................8
2.12 Environmental Compliance.........................................9
2.13 Year 2000 Compliance............................................10
2.14 Due Authorization; Enforceability...............................10
2.15 Governmental Consent to Sale of Purchased Securities............11
2.16 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance....................................11
2.17 No Defaults.....................................................12
2.18 Private Offering of Purchased Securities........................12
2.19 Use of Proceeds.................................................13
2.20 Capitalization..................................................13
2.21 The Acquisition.................................................14
2.22 Senior Credit Documents.........................................15
2.23 Solvency........................................................15
2.24 Full Disclosure.................................................16
3. REPRESENTATIONS OF THE PURCHASER..........................................16
3.1 Purchase for Investment.........................................16
3.2 ERISA...........................................................17
4. CLOSING CONDITIONS........................................................18
4.1 Opinions of Counsel.............................................18
4.2 Warranties and Representations True; Compliance.................19
4.3 Officers' Certificates..........................................19
4.4 Organic Documents...............................................19
4.5 Legality........................................................20
4.6 Financing Documents.............................................20
4.7 Certain Consents and Agreements.................................20
4.8 Senior Debt.....................................................21
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4.9 Prepayment of Debt..............................................21
4.10 Closing of Acquisition..........................................21
4.11 Offeree Letter..................................................22
4.12 Private Placement Numbers.......................................22
4.13 Fees and Expenses...............................................22
4.15 Transaction Fee.................................................22
4.16 Other Purchasers................................................23
4.17 Proceedings Satisfactory........................................23
5. INTERPRETATION OF THIS AGREEMENT..........................................23
5.1 Terms Defined...................................................23
5.2 Other Definitions...............................................26
5.3 Directly or Indirectly..........................................26
5.4 Section Headings and Table of Contents and Construction.........27
5.5 Governing Law...................................................27
6. MISCELLANEOUS.............................................................27
6.1 Communications..................................................27
6.2 Reproduction of Documents.......................................28
6.3 Survival; Entire Agreement......................................28
6.4 Successors and Assigns..........................................28
6.5 Amendment and Waiver............................................28
6.6 Expenses........................................................28
6.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc..............29
6.8 Indemnification of Each Purchaser...............................30
6.9 Execution in Counterpart........................................31
Annex 1 - Information as to Purchasers
Annex 2 - Payment Instructions at Closing; Address of Company for Notices
Annex 3 - Information as to Company
Exhibit 1.1(a) - Form of Note Agreement
Exhibit 1.1(b) - Form of Charter
Exhibit 4.1(a) - Form of Opinion of Company Counsel
Exhibit 4.1(b) - Form of Opinion of Purchasers' Counsel
Exhibit 4.3(a) - Form of Officers' Certificate - Company
Exhibit 4.3(b) - Form of Officers' Certificate - Parent
Exhibit 4.3(c) - Form of Secretary's Certificate - Company
Exhibit 4.3(d) - Form of Secretary's Certificate - Parent
Exhibit 4.3(e) - Form of Secretary's Certificate - Subsidiary Affiliate
Guarantor
Exhibit 4.6(c) - Form of Affiliate Guaranty
Exhibit 4.6(d) - Form of Investors Rights Agreement
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QUESTRON TECHNOLOGY, INC.
QUESTRON OPERATING COMPANY, INC.
Securities Purchase Agreement
$20,000,000 14.50% Senior Subordinated Notes due June 30, 2005 of
Questron Operating Company, Inc.
680,000 Shares of Common Stock of Questron Technology, Inc.
Dated as of June 29, 1999
[Separately executed by each of the
Purchasers Listed on Annex 1 hereto]
Ladies and Gentlemen:
QUESTRON TECHNOLOGY, INC. (together with any successors and assigns
who become such in accordance herewith, the "Parent"), a Delaware corporation,
and QUESTRON OPERATING COMPANY, INC. (together with any successors and assigns
who become such in accordance herewith, the "Company;" and, together with the
Parent, the "Issuers"), a Delaware corporation, hereby agree with you as set
forth below.
1. PURCHASE AND SALE OF SECURITIES.
1.1 Issue of Securities.
(a) Issue of Notes. The Company will authorize the issue of
Twenty Million Dollars ($20,000,000) in aggregate principal amount of
its fourteen and fifty one-hundredths percent (14.50%) Senior
Subordinated Notes due June 30, 2005 (all such notes, whether
initially issued, or issued in exchange or substitution for any such
note, in each case in accordance with the Note Agreement,
collectively, the "Notes"). The Notes shall be issued pursuant to a
Note Agreement (as may be amended, restated or otherwise modified
from time to time, the "Note Agreement") in the form of Exhibit
1.1(a). The Notes shall be in the form of Attachment A to the Note
Agreement, and shall have the terms as provided in the Note Agreement
and in the Notes.
(b) Issue of Common Shares. The Parent will authorize the
issuance of an aggregate of six hundred eighty thousand (680,000)
shares (the "Common Shares") of its Common Stock. The rights and
obligations of holders of Common Stock shall be governed by the
Charter, which is in the form of Exhibit 1.1(b), and by applicable
law.
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1.2 The Closing.
(a) Purchase and Sale of Purchased Securities. The Company
hereby agrees to sell to you, and you hereby agree to purchase from
the Company, in accordance with the provisions hereof, the aggregate
principal amount of Notes set forth below your name on Annex 1 at the
purchase price for such Notes, equal to ninety-four and ninety
one-hundredths percent (94.90%) of the principal amount of Notes to
be purchased, set forth on Annex 1 hereto.
The Parent hereby agrees to sell to you, and you hereby
agree to purchase from the Parent, in accordance with the provisions
hereof, the aggregate number of Common Shares set forth below your
name on Annex 1, at a purchase price for Common Shares, equal to One
Dollar and Fifty Cents ($1.50) per share, set forth on Annex 1
hereto.
(b) The Closing. The closing (the "Closing") of the sale of
the Purchased Securities will be held at 10:00 a.m., local time, on
June 28, 1999, or such other time and date as the Other Purchasers,
the Parent and the Company and you shall agree (the "Closing Date"),
at the office of Battle ▇▇▇▇▇▇ LLP, ▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇. At the Closing:
(i) the Company will deliver to you one or more
Notes (as set forth below your name on Annex 1), in the
denominations indicated on Annex 1, in the aggregate
principal amount of your purchase, dated the Closing Date
and registered in the name of the holder indicated on Annex
1; and
(ii) the Parent will deliver to you one or more
certificates (as set forth below your name on Annex 1),
representing the number of Common Shares indicated below
your name on Annex 1 and registered in the name of the
holder indicated below your name on Annex 1;
against payment by federal funds wire transfer in immediately
available funds of the purchase price therefor, as directed by the
Company on Annex 2, which shall be an account at a bank located in
the United States of America. The Parent hereby agrees to deliver the
Common Shares in consideration of the Purchasers' execution and
delivery of the Note Agreement and their purchase of the Notes, in
respect of which the Parent shall receive a direct financial benefit.
(c) Other Purchasers. Contemporaneously with the execution
and delivery hereof, the Parent and the Company are entering into a
separate Securities Purchase Agreement identical (except for the name
and signature of the purchaser) to this Agreement (this Agreement and
such other separate Securities Purchase Agreements, each as from time
to time amended or modified, being herein sometimes referred to as
the "Securities Purchase Agreements") with each other purchaser
(individually, an "Other Purchaser," and collectively, the "Other
Purchasers") listed on Annex 1, providing for the sale to each Other
Purchaser of the Purchased Securities set forth below its name on
such Annex. The sales of the Purchased Securities to you and to each
Other Purchaser are separate sales.
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1.3 Original Issue Discount.
You, the Parent and the Company agree that, for all United States
federal, state and local income tax purposes with respect to the transactions
contemplated by the Financing Documents, the original issue discount
attributable to the Notes issued by the Company in accordance with the terms and
conditions of the Securities Purchase Agreement is equal to One Million Twenty
Thousand Dollars ($1,020,000). You, the Parent and the Company agree to use the
foregoing in preparing all United States federal, state and local income tax
returns and for all other income tax purposes with respect to the transactions
contemplated by the Financing Documents.
2. WARRANTIES AND REPRESENTATIONS OF THE ISSUERS
To induce you to enter into this Agreement and to purchase and pay
for the Purchased Securities to be delivered to you at the Closing, the Issuers
jointly and severally warrant and represent, as of the Closing Date, and after
giving effect to the transactions contemplated by the Financing Documents and
the Acquisition Documents and the consummation of the Acquisitions, as follows:
2.1 Nature of Business.
The information memorandum dated _____, 1999 (the "Offering
Memorandum") describes correctly in all material respects the general nature of
the business and principal Properties and assets of the Issuers and the
Subsidiaries.
2.2 Financial Statements; Debt; Material Adverse Change.
(a) Financial Statements.
(i) Of the Parent. The Parent has provided you
with the consolidated financial statements of the Parent
listed on Part 2.2(a)(i) of Annex 3. Such financial
statements present fairly in all material respects the
consolidated financial position of the Parent as of the
respective dates specified therein and the results of its
consolidated operations and cash flows for the respective
periods so specified in conformity with GAAP applied on a
consistent basis throughout the periods involved.
(ii) Of the Acquired Entities. The Parent has
provided you with the consolidated financial statements of
each of the Acquired Entities listed on Part 2.2(a)(ii) of
Annex 3. Each such financial statement presents fairly in
all material respects the consolidated financial position
of the respective Acquired Entity as of the respective
dates specified therein and the results of their operations
and cash flows for the respective periods so specified in
conformity with GAAP applied on a consistent basis
throughout the periods presented.
(b) Debt. Part 2.2(b) of Annex 3 lists all Debt of the
Issuers and the Subsidiaries as of the Closing Date, both before and
after giving effect to the transactions contemplated by the Financing
Documents, the Senior Credit Documents and the Acquisition Documents
and the consummation of the Acquisitions, and provides the following
information with respect to each
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item of such Debt: the obligor, each guarantor thereof and each other
Person similarly liable in respect thereof, the holder thereof (to
the knowledge of the Issuers), the outstanding amount, the current
portion of the outstanding amount, the final maturity, required
sinking fund payments, and a description of the collateral securing
such Debt.
(c) Liens. Part 2.2(c) of Annex 3 lists all Liens securing
Debt of the Issuers and the Subsidiaries in existence as of the
Closing Date, both before and after giving effect to the transactions
contemplated by the Financing Documents, the Senior Credit Documents
and the Acquisition Documents and the consummation of the
Acquisitions, and provides the following information with respect to
each Lien: the holder thereof, the outstanding amount secured, the
nature of the Debt and a description of the collateral.
(d) Contingent Obligations. There are no Guaranties or
other contingent obligations in respect of which disclosure is
required, or for which provisions are required to be made, in the
Company's consolidated financial statements in accordance with GAAP,
other than those so disclosed, and for which such provision has been
made, in the financial statements referred to in Section 2.2(a) and
which are described on Part 2.2(a)(i) of Annex 3 or Part 2.2(a)(ii)
of Annex 3, as the case may be.
(e) Material Adverse Change. Since December 31, 1998, there
has been no change in the business, operations, profits, financial
condition, Properties or business prospects of the Issuer and the
Subsidiaries or of the Company and its Subsidiaries except changes
that, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(f) Projections. The Parent has delivered to you projected
financial statements of the Issuers contained in the Offering
Memorandum and those specified in Part 2.2(f) of Annex 3
(collectively, the "Projections"). The assumptions used in
preparation of the Projections were reasonable when made and continue
to be reasonable. Such Projections have been prepared by the
executive or financial personnel of the Company or the Parent in the
light of the business of the Issuers and the Subsidiaries. Such
Projections have been prepared in good faith, have a reasonable basis
and represent the good faith opinion of the Issuers as to the
projected results of the operations of the Issuers and the
Subsidiaries. No material facts have occurred since the preparation
of the Projections that would cause the Projections, taken as a
whole, not to be reasonably attainable, and the Issuers do not have,
on the Closing Date, any material obligations (whether accrued,
matured, absolute, actual, contingent or otherwise) that are not
reflected in the Projections.
(g) Investments. Part 2.2(g) of Annex 3 lists all
Investments of the Company outstanding on the Closing Date which, but
for clause (g) of the definition of Restricted Investments, would be
classified as Restricted Investments in accordance with the
provisions of the Note Agreement.
2.3 Subsidiaries and Affiliates.
(a) Ownership of Subsidiaries. Part 2.3(a) of Annex 3 sets
forth for each Subsidiary:
(i) its full legal name;
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(ii) its jurisdiction of incorporation or
organization;
(iii) the percentage of the Voting Stock which is
held by the Parent and each other Subsidiary; and
(iv) stating if such Subsidiary is an
Insignificant Subsidiary.
All of the Capital Stock of each Subsidiary is owned, directly or
indirectly through another Subsidiary, by the Parent. No
Insignificant Subsidiary is engaged in any business activity
whatsoever.
(b) Affiliates. Part 2.3(b) of Annex 3 sets forth the name
of each Affiliate (other than members of the families of officers and
directors of the Company) and the nature of the affiliation of such
Affiliate.
2.4 Title to Properties.
(a) General. The Issuers and the Subsidiaries have good and
marketable title to all of the Property reflected in the most recent
consolidated balance sheet referred to in Section 2.2 (except as sold
or otherwise disposed of in the ordinary course of business), free
from Liens not permitted by the provisions of the Note Agreement.
Each of the Issuers and the Subsidiaries have maintained and kept, or
caused to be maintained and kept, its respective properties in good
repair, working order and condition (ordinary wear and tear
excepted).
(b) Leases. All leases necessary for the conduct of the
business of the Issuers and the Subsidiaries are valid and subsisting
and are in full force and effect, except for such failures to be
valid and subsisting that, in the aggregate for all such failures,
could not reasonably be expected to have a Material Adverse Effect.
Each lease of real Property grants to the Issuers or Subsidiary party
thereto the right to the quiet enjoyment of the premises leased
thereunder during the term thereof, except where the absence of such
grants, in the aggregate, could not reasonably be expected to have a
Material Adverse Effect.
(c) Intellectual Property. Except as disclosed in Part
2.4(c) of Annex 3:
(i) each of the Issuers and the Subsidiaries owns
or possesses all licenses, permits, franchises,
authorizations, patents, copyrights, service marks,
trademarks and trade names, or rights thereto, that
individually or in the aggregate are Material, without
known conflict with the rights of others;
(ii) no product or practice of an Issuer or any
Subsidiary infringes in any Material respect any license,
permit, franchise, authorization, patent, copyright,
service ▇▇▇▇, trademark, trade name or other right owned by
any other Person;
(iii) there is no Material violation by any
Person of any right of any Issuer or any Subsidiary with
respect to any patent, copyright, service ▇▇▇▇, trademark,
trade name or other right owned or used by an Issuer or any
Subsidiary; and
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(iv) all Material filings in federal and state
offices (including, without limitation, the United States
Patent and Trademark Office) in respect of all such
patents, pending patents, copyrights, service marks,
trademarks and tradenames, and licenses with respect
thereto, necessary to protect the rights therein of the
Issuers and the Subsidiaries against third parties, have
been made.
2.5 Taxes.
(a) Returns Filed; Taxes Paid. All tax returns required to
be filed by the Issuers and the Subsidiaries and each other Person
with which any Issuer or Subsidiary files or has filed a consolidated
return in any jurisdiction have in fact been filed on a timely basis.
All taxes, assessments, fees and other governmental charges upon the
Issuers, the Subsidiaries and any such Person, and upon any of their
respective Properties, income or franchises, that are due and payable
have been paid, except for such failures to pay that, in the
aggregate for all such Persons, could not reasonably be expected to
have a Material Adverse Effect. The Issuers know of no proposed
additional tax assessment against either of them or any such Person
that could reasonably be expected to have a Material Adverse Effect.
(b) Book Provisions Adequate. The amount of the liability
for taxes reflected in each of the balance sheets referred to in
Section 2.2(a) is in each case an adequate provision for taxes as of
the date of such balance sheet (including, without limitation, any
payment due pursuant to any tax sharing agreement) as are or may
become payable by any one or more of the Issuers, the Subsidiaries,
the Acquired Entities and the other Persons consolidated with any of
them in such financial statements in respect of all tax periods
ending on or prior to such dates.
2.6 Pending Litigation.
(a) Pending Litigation. There are no proceedings, actions
or investigations pending against or, to the knowledge of either
Issuer, threatened against or affecting, any Issuer or Subsidiary in
any court or before any Governmental Authority or arbitration board
or tribunal that, in the aggregate for all such proceedings, actions
and investigations, could reasonably be expected to have a Material
Adverse Effect.
(b) No Violations. Neither the Company nor any Subsidiary
is in violation of any judgment, order, writ, injunction or decree of
any court, Governmental Authority, arbitration board or tribunal
that, in the aggregate for all such violations, could reasonably be
expected to have a Material Adverse Effect.
2.7 Corporate Organization and Authority.
Each of the Issuers and each Subsidiary:
(a) is a corporation duly incorporated, validly existing
and in good standing under the laws of its state of incorporation;
(b) has all corporate power and authority necessary to own
and operate its Properties and to carry on its business as now
conducted and as presently proposed to be conducted;
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(c) has all licenses, certificates, permits, franchises and
other governmental authorizations necessary to own and operate its
Properties and to carry on its business as now conducted and as
presently proposed to be conducted, except where the failure to have
such licenses, certificates, permits, franchises and other
governmental authorizations, in the aggregate for all such failures,
could not reasonably be expected to have a Material Adverse Effect;
and
(d) has duly qualified or has been duly licensed, and is
authorized to do business and is in good standing, as a foreign
corporation, in each state in the United States of America and in
each other jurisdiction where it is required to do so, except where
the failure to be so qualified or licensed and authorized and in good
standing, in the aggregate for all such failures, could not
reasonably be expected to have a Material Adverse Effect.
2.8 Charter Instruments, Other Agreements.
Neither Issuer and no Subsidiary is in violation in any respect of:
(a) any term of any charter instrument (including, without
limitation, the Charter) or bylaw; or
(b) any term in any agreement or other instrument to which
it is a party or by which it or any of its Property may be bound,
except for such violations that, in the aggregate for all such
violations, could not reasonably be expected to have a Material
Adverse Effect.
2.9 Restrictions on the Company.
Neither Issuer and no Subsidiary:
(a) is a party to any contract or agreement, or subject to
any charter or other corporate restriction that, in the aggregate for
all such contracts, agreements, and charter and corporate
restrictions, is reasonably likely to have a Material Adverse Effect;
(b) is a party to any contract or agreement that restricts
its right or ability to incur Debt, to make guarantees or to issue
Common Stock of the Company, as the case may be, other than the
Financing Documents and the agreements listed on Part 2.9(b) of Annex
3, none of which restricts the issuance and sale of the Purchased
Securities or the execution and delivery of or the compliance with
this Agreement or the other Financing Documents by the Issuers and
the Affiliate Guarantors;
(c) has agreed or consented to cause or permit in the
future (upon the happening of a contingency or otherwise) any of its
Property, whether now owned or hereafter acquired, to be subject to a
Lien not permitted by the provisions of the Note Agreement; or
(d) is (other than as identified on Part 2.9(d) of Annex 3)
subject to any encumbrance, restriction, limitation or prohibition on
the ability of any Subsidiary, whether by agreement, amendment or
modification of any existing agreement or otherwise, to:
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(i) pay dividends or make any other distributions
on the Capital Stock of such Subsidiary or any other
interest or participation measured by its profits;
(ii) pay any Debt or other indebtedness or
obligation owed to the Company or any other Subsidiary
owning Capital Stock of such Subsidiary;
(iii) make loans or advances to the Company;
(iv) transfer any of its Property to the Company;
or
(v) enter into or become obligated in respect of
the Affiliate Guaranty;
in each case, except for such encumbrances, restrictions, limitations
or prohibitions existing under or by reason of applicable law.
True, correct and complete copies of each of the agreements, if any, listed on
Part 2.9(b) of Annex 3 and Part 2.9(d) of Annex 3 have been provided to you.
2.10 Compliance with Law.
Neither Issuer and no Subsidiary is in violation of any law,
ordinance, governmental rule or regulation to which it is subject, except for
such violations that, in the aggregate, could not reasonably be expected to have
a Material Adverse Effect.
2.11 Pension Plans.
(a) Operation of Plans; Liabilities. The Issuers and each
ERISA Affiliate have operated and administered each Plan in
compliance with all applicable laws except for such instances of
noncompliance as have not resulted in and could not reasonably be
expected to result in a Material Adverse Effect. Neither Issuer and
no ERISA Affiliate has incurred any liability pursuant to Title I or
IV of ERISA or the penalty or excise tax provisions of the IRC
relating to any Plan and no event, transaction or condition has
occurred or exists that could reasonably be expected to result in the
incurrence of any such liability by an Issuer or any ERISA Affiliate,
or in the imposition of any Lien on any of the rights, Properties or
assets of an Issuer or any ERISA Affiliate, in either case pursuant
to Title I or IV of ERISA or to such penalty or excise tax provisions
or to section 401(a)(29) or 412 of the IRC, other than such
liabilities or Liens as individually or in the aggregate would not
have a Material Adverse Effect.
(b) Relationship of Benefit Liabilities to Plan Assets. The
present value of the aggregate benefit liabilities under each of the
Plans (other than Multiemployer Plans), determined as of the end of
such Plan's most recently ended plan year on the basis of the
actuarial assumptions specified for funding purposes in such Plan's
most recent actuarial valuation report, did not exceed the aggregate
current value of the assets of such Plan allocable to such benefit
liabilities. The term "benefit liabilities" has the meaning specified
in section 4001 of ERISA and the terms "current value" and "present
value" have the meaning specified in section 3 of ERISA.
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(c) Withdrawal Liabilities. The Issuers and their ERISA
Affiliates have not incurred withdrawal liabilities (and are not
subject to contingent withdrawal liabilities) under section 4201 or
4204 of ERISA in respect of Multiemployer Plans, other than such
liabilities as individually or in the aggregate would not have a
Material Adverse Effect.
(d) Postretirement Benefit Obligations. The expected
postretirement benefit obligation (determined as of the last day of
the Parent's most recently ended fiscal year in accordance with
Financial Accounting Standards Board Statement No. 106, without
regard to liabilities attributable to continuation coverage mandated
by section 4980B of the IRC) of the Issuers and the Subsidiaries will
not have a Material Adverse Effect.
(e) Prohibited Transactions. The execution and delivery of
the Financing Documents and the issuance and sale of the Purchased
Securities hereunder will not involve any transaction that is subject
to the prohibitions of section 406 of ERISA or in connection with
which a tax could be imposed pursuant to section 4975(c)(1)(A)-(D) of
the IRC. The representation by the Issuers in the foregoing sentence
is made in reliance upon and subject to the accuracy of your
representation (and that of your transferees) in Section 3.2 as to
the Sources of the funds used to pay the purchase price of the
Purchased Securities to be purchased by you and, in the event that
your representation is made pursuant to clause (a) of Section 3.2
hereof, assuming that PTCE 95-60 applies to exempt your purchase and
holding of the Purchased Securities.
(f) Foreign Pension Plans. Neither Issuer nor any
Subsidiary has, maintains or is required to contribute to, any
Foreign Pension Plan.
2.12 Environmental Compliance.
(a) Compliance - Except as disclosed on Part 2.12(a) of
Annex 3, each of the Issuers and the Subsidiaries is in compliance
with all Environmental Protection Laws in effect in each jurisdiction
where it is presently doing business or is located, other than any
non-compliance which could not reasonably be expected to have a
Material Adverse Effect.
(b) Liability - Except as disclosed on Part 2.12(b) of
Annex 3, neither Issuer and no Subsidiary is subject to any liability
under any Environmental Protection Law that, individually or in the
aggregate, could reasonably be expected to have a Material Adverse
Effect.
(c) Notices - Except as disclosed on Part 2.12(c) of Annex
3, neither Issuer and no Subsidiary has received any:
(i) written notice from any Governmental
Authority by which any of its present or previously-owned
or leased real Properties has been designated, listed, or
identified in any manner by any Governmental Authority
charged with administering or enforcing any Environmental
Protection Law as a hazardous substance disposal or removal
site, "Superfund" clean-up site, or candidate for
remediation or closure pursuant to any Environmental
Protection Law;
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(ii) written notice of any Lien arising under or
in connection with any Environmental Protection Law that
has attached to any revenues of, or to, any of its owned or
leased real Properties; or
(iii) summons, citation, notice, directive,
letter, or other written communication from any
Governmental Authority concerning any releasing, spilling,
leaking, pumping, pouring, emitting, emptying, dumping, or
disposing of any hazardous substance into the environment
in violation of any Environmental Protection Law;
which, in any such case, relates to or makes reference to an event or
condition which could reasonably be expected to have a Material
Adverse Effect.
2.13 Year 2000 Compliance.
The internal computing systems and applications (including those
affected by information received from its suppliers and vendors) of the Issuers
and the Subsidiaries are, or will be on or before October 31, 1999, Year 2000
Compliant so that the advent of the year 2000 and its impact upon such computer
systems and on the computer systems of the suppliers and vendors of the Issuers
and the Subsidiaries that are Material is not expected to have a Material
Adverse Effect.
2.14 Due Authorization; Enforceability.
(a) Sale of Purchased Securities is Legal and Authorized.
The issuance, sale and delivery of the Purchased Securities, the
execution and delivery by each Obligor of each of the Financing
Documents to which it is a party and compliance by each Obligor with
all of the provisions of such Financing Documents:
(i) is within the corporate powers of such
Obligor; and
(ii) is legal and does not conflict with, result
in any breach of any of the provisions of, constitute a
default under, or result in the creation of any Lien (other
than Liens permitted by the provisions of the Note
Agreement) upon any Property of such Obligor under the
provisions of:
(A) any agreement, charter instrument,
bylaw or other instrument to which such Obligor
is a party or by which such Obligor is or may be
bound;
(B) any order, judgment, decree, or
ruling of any court, arbitrator or Governmental
Authority applicable to such Obligor or any of
its Property; or
(C) any statute or other rule or
regulation of any Governmental Authority
applicable to such Obligor or any of its
Property.
(b) Obligations are Enforceable. Each Obligor has duly
authorized by all necessary action on its part each of the Financing
Documents to which it is a party. Each such Financing Document has
been executed and delivered by one or more duly authorized officers
of each
10
Obligor which is or purports to be a party thereto, and constitutes a
legal, valid and binding obligation of each such Obligor enforceable
in accordance with its terms, except that:
(i) the enforceability thereof may be limited by
applicable bankruptcy, reorganization, arrangement,
insolvency, moratorium, or other similar laws affecting the
enforceability of creditors' rights generally and subject
to the availability of equitable remedies; and
(ii) rights to indemnity and contribution
contained therein may be limited by applicable law or
public policy.
2.15 Governmental Consent to Sale of Purchased Securities.
(a) Neither the nature of the Obligors nor of any of their
businesses or Properties, nor any relationship between any Obligor
and any other Person, nor any circumstance in connection with the
offer, issuance, sale or delivery of the Purchased Securities and the
Affiliate Guarantees and the execution and delivery of any Financing
Document, nor the performance of the obligations of any Obligor
hereunder or thereunder, is such as to require a consent, approval or
authorization of, or pre-filing, registration or qualification with,
any Governmental Authority on the part of any Obligor as a condition
thereto, except for:
(i) such consents, approvals, authorizations,
pre-filings, registrations and qualifications described on
Part 2.15(a) of Annex 3, all of which have been obtained on
or prior to the Closing Date; and
(ii) such consents, approvals, authorizations,
pre-filings, registrations and qualifications which, if not
obtained, could not, in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(b) Neither the issuance and sale of the Purchased
Securities and the Affiliate Guarantees, nor the incurrence of the
Debt and the other obligations represented thereby, nor the execution
and delivery of the Financing Documents and the performance of the
obligations of the Obligors hereunder and thereunder:
(i) is subject to regulation under the Investment
Company Act of 1940, as amended, the Public Utility Holding
Company Act of 1935, as amended, the Transportation Acts of
the United States of America (49 U.S.C.), as amended, or
the Federal Power Act, as amended; and
(ii) violates any provision of any statute or
other rule or regulation of any Governmental Authority
applicable to any Obligor.
2.16 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Compliance.
(a) With Respect to the Acquisition. With respect to each
Acquisition of each Acquired Entity, either:
11
(i) each of the Company and the Sellers with
respect to such Acquired Entity have filed a Notification
and Report Form under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act with the
Federal Trade Commission and the Antitrust Division; the
waiting period (together with any extensions thereof)
specified in the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act shall have expired
or shall have been terminated by the Federal Trade
Commission and the Antitrust Division; and neither the
Federal Trade Commission nor the Antitrust Division shall
have taken any action to enjoin the consummation of the
Acquisition or notified either the Company or the Seller in
writing of its intent to do so; or
(ii) such Acquisition is exempt from the
provisions of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act, and neither the
Company nor the Seller has any obligation to file a
Notification and Report Form thereunder with the Federal
Trade Commission or the Antitrust Division.
(b) With Respect to the Purchase of the Purchased
Securities. As a result of the purchase of the Common Shares and the
consummation of the other transactions contemplated by or in the
Financing Documents and the Acquisition Documents, (and assuming that
no Purchaser (together with its affiliates), will be the beneficial
owner of any Capital Stock or Rights of the Parent other than the
Common Shares) no Purchaser, together with its affiliates, will hold
(as such term is defined in 16 C.F.R. ss.801.1(c)) either:
(i) fifteen percent (15%) or more of the total
number of shares of the outstanding Common Stock of the
Company; or
(ii) Common Stock having a Fair Market Value of
Fifteen Million Dollars ($15,000,000) or more.
Based upon the foregoing, neither the Company nor any Purchaser is
required to file a Notification and Report Form thereunder with the
Federal Trade Commission or the Antitrust Division with respect to
the purchase and sale of the Common Shares.
2.17 No Defaults.
No event has occurred and no condition exists that, upon the
execution and delivery of the Financing Documents, the Acquisition Documents and
the Senior Credit Documents and the issuance and sale of the Purchased
Securities, would constitute a Default or an Event of Default or a breach,
default or event of default under any Acquisition Document or Senior Credit
Document.
2.18 Private Offering of Purchased Securities.
(a) Number of Offerees. Neither any Obligor, CIBC
▇▇▇▇▇▇▇▇▇▇▇ (the only agent, broker or dealer retained by any Obligor
in connection with the sale of the Purchased Securities) nor any
other Person acting on behalf of any Obligor has offered any of the
Purchased Securities or any Security of any Obligor similar to either
the Notes, the Common Shares or the Affiliate Guarantees for sale to,
or solicited offers to buy any thereof from, or otherwise approached
or negotiated with respect thereto with, any prospective purchaser,
other than (i) the institutional
12
investors (including you) listed on Part 2.18 of Annex 3, each of
whom was offered all or a portion of the Purchased Securities at
private sale for investment and (ii) the Sellers.
(b) Conduct of Sale. Assuming the accuracy of
(i) the Purchasers' representations and
warranties contained in each Securities Purchase Agreement;
(ii) the information contained in each Securities
Purchase Agreement; and
(iii) the information contained in the offeree
letter referred to in Section 4.11,
the sale hereunder of Notes and Common Shares is exempt from the
registration and prospectus delivery requirements of the Securities
Act and it is not necessary in connection with the sale of the Notes
and Common Shares to you in accordance herewith to qualify the Notes
under the Trust Indenture Act of 1939, as amended. In the case of
each offer or sale to you and the Other Purchasers of the Notes and
Common Shares, no form of general solicitation or general advertising
was used by the Issuers or the officers, directors or employees of
either of them, or, to the Issuers' knowledge, by [CIBC] or its
officers, directors or employees, including advertisements, articles,
notices or other communications published in any newspaper, magazine
or similar medium or broadcast over television or radio, and any
seminar or meeting whose attendees were invited by any general
solicitation or general advertising.
2.19 Use of Proceeds.
(a) Use of Proceeds. The Company shall apply the proceeds
from the sale of the Purchased Securities as specified on Part
2.19(a) of Annex 3.
(b) Margin Regulations. None of the transactions
contemplated in any of the Financing Documents (including, without
limitation, the use of the proceeds from the sale of the Purchased
Securities) violates, will violate or will result in a violation of
section 7 of the Exchange Act, or any regulation issued pursuant
thereto, including, without limitation, Regulation T, Regulation U or
Regulation X of the Board of Governors of the Federal Reserve System,
12 C.F.R., Chapter II.
(a) Absence of Foreign or Enemy Status. Neither the sale of
the Purchased Securities nor the use of proceeds from the sale
thereof will result in a violation of any of the foreign assets
control regulations of the United States Treasury Department (31 CFR,
Subtitle B, Chapter V, as amended), or any ruling issued thereunder
or any enabling legislation or Presidential Executive Order in
connection therewith.
2.20 Capitalization.
(a) Capitalization of the Company. Part 2.20(a) of Annex 3
correctly sets forth, after giving effect to the issuance of the
Purchased Securities and the consummation of all other transactions
contemplated by this Agreement on the Closing Date:
13
(i) the authorized and outstanding shares of the
Capital Stock and other Securities of the Company
(specifying the type, class or series of all such Capital
Stock and other Securities and whether such Capital Stock
and other Securities are voting or non-voting);
(ii) for each legal and beneficial holder of the
Company's Capital Stock, the identity of such holder, the
number of shares of each class of Capital Stock held by
such holder and the percentage of the shares of each class
so held;
(iii) all Rights of the Company, together with
descriptions of the terms thereof; and
(iv) all obligations (contingent or otherwise) of
the Company to repurchase or otherwise acquire or retire
any shares of Capital Stock or Rights of the Company.
All such outstanding shares of Capital Stock have been duly
authorized and validly issued and are fully paid, non-assessable and
free and clear of any Lien (other than as specified on Part 2.20(a)
of Annex 3). Except as specified on Part 2.20(a) of Annex 3, there
are no preemptive rights, subscription rights, or other contractual
rights similar in nature to preemptive rights with respect to any
Capital Stock of the Company.
(b) Capitalization of the Parent. Part 2.20(b) of Annex 3
correctly sets forth, after giving effect to the issuance of the
Purchased Securities and the consummation of all other transactions
contemplated by this Agreement on the Closing Date:
(i) the authorized and outstanding shares of the
Capital Stock and other Securities of the Parent
(specifying the type, class or series of all such Capital
Stock and other Securities and whether such Capital Stock
and other Securities are voting or non-voting);
(ii) for each beneficial owner of more than five
percent (5%) of the Parent's Capital Stock, the identity of
such owner, the number of shares of each class of Capital
Stock held by such holder and the percentage of the shares
of each class so held (it being understood that, except
with respect to officers or directors of the Parent and
other Affiliates, the Issuers are making this
representation solely in reliance upon Schedules 13D and
13G under the Exchange Act and Forms 3, 4 and 5 under the
Exchange Act delivered to the Parent);
(iii) all Rights of the Parent, together with
descriptions of the terms thereof; and
(iv) all obligations (contingent or otherwise) of
the Parent to repurchase or otherwise acquire or retire any
shares of Capital Stock or Rights of the Parent.
All such outstanding shares of Capital Stock have been duly
authorized and validly issued, are fully paid and non-assessable, and
are free and clear of any Lien known to the Issuers (other than as
specified on Part 2.20(b) of Annex 3). Except as specified on Part
2.20(b) of Annex 3, there are
14
no preemptive rights, subscription rights, or other contractual
rights similar in nature to preemptive rights with respect to any
Capital Stock of the Parent.
(c) Stockholders Agreements. Other than as specified on
Part 2.20(c) of Annex 3, there is no agreement or understanding
between or among the holders of the Capital Stock or Rights of the
Parent or the Company regarding the Capital Stock of the Company. The
Company has provided you with true, accurate and complete copies of
all agreements referred to in Part 2.20(c) of Annex 3.
2.21 The Acquisition.
(a) All Documents Provided; No Other Agreements. The
Issuers have provided to you true, correct and complete copies of the
Acquisition Documents. There is no agreement or understanding between
any of the parties to the Acquisition Documents except as set forth
in the Acquisition Documents.
(b) Closing of the Acquisition. The Acquisitions have been
closed, or are closing contemporaneously with the sale of the
Purchased Securities hereunder, in accordance with the Acquisition
Documents, and no closing condition of the Acquisition Documents was
waived by any Obligor. On the Closing Date, each of the
representations and warranties made by any Obligor and, to the best
knowledge of the Issuers, the Sellers in the Acquisition Documents is
true and correct in all material respects. The Company has acquired,
or is acquiring contemporaneously with the sale of the Purchased
Securities hereunder, such title to the Acquired Entity as is
purported to be acquired pursuant to the Acquisition Documents.
(c) Governmental Consent. All consents, approvals and
authorizations of, and filings, registrations and qualifications
with, any Governmental Authority on the part of the Obligors and the
Sellers required in connection with the consummation of the
Acquisition have been obtained or made and remain in full force and
effect.
2.22 Senior Credit Documents.
The Issuers have provided to you true, correct and complete copies of
the Senior Credit Documents, and there is no agreement or understanding between
or among any Obligor or Subsidiary, the Senior Agent or any of the Senior
Lenders except as set forth in the Senior Credit Documents.
2.23 Solvency.
(a) Assets Greater than Liabilities. The fair value of the
business and assets of the Company (and of the Company and its
Subsidiaries, on a consolidated basis) exceeds, as of and after
giving effect to the transactions contemplated by the Financing
Documents and the Senior Credit Agreements and consummated on the
Closing Date, the liabilities of the Company (including, without
limitation, the Notes and all other Debt of the Company (and, as the
case may be, of the Company and the Subsidiaries, on a consolidated
basis)) as of such time.
15
(b) Meeting Liabilities. After giving effect to the
transactions contemplated by the Financing Documents and the Senior
Credit Documents, the Company (and the Company and its Subsidiaries,
on a consolidated basis):
(i) will not be engaged in any business or
transaction, or about to engage in any business or
transaction, for which the Company (or, as the case may be,
the Company and its Subsidiaries, on a consolidated basis)
has unreasonably small assets or capital (within the
meaning of the Uniform Fraudulent Transfer Act, the Uniform
Fraudulent Conveyance Act and section 548 of the Federal
Bankruptcy Code); and
(ii) will be able to pay its debts as they
mature.
(c) Intent. Each Obligor is entering into the Financing
Documents with no intent to hinder, delay, or defraud either current
creditors or future creditors of any Obligor.
2.24 Full Disclosure.
Neither the statements made in this Agreement, the Offering
Memorandum, the financial statements referred to in Section 2.2, nor any other
written statement furnished by or on behalf of any Obligor to you in connection
with the negotiation or the closing of the sale of the Purchased Securities,
taken as a whole, contain any untrue statement of a material fact or omit a
material fact necessary to make the statements contained therein and herein,
taken as a whole, not misleading. There is no fact that the Issuers have not
disclosed to you in writing that has had or, so far as the Issuers can now
reasonably foresee, could reasonably be expected to have, a Material Adverse
Effect.
3. REPRESENTATIONS OF THE PURCHASER
3.1 Purchase for Investment.
You acknowledge that the Notes and Common Shares sold hereunder are
"restricted securities" as that term is defined in Rule 144 under the Securities
Act. You represent to the Issuers that each of (i) you and (ii) any account
maintained by you for whose account you are purchasing the Notes and Common
Shares is a financially sophisticated institutional investor, is an "accredited
investor" as the term is defined in Rule 501(a) of Regulation D under the
Securities Act, has such knowledge and experience in business and financial
matters as to be capable of evaluating the merits and risks of an investment in
the Notes and Common Shares and has the capacity to protect its interest in
connection with the acquisition hereunder of the Notes and Common Shares. You
further represent to the Issuers that you are purchasing the Purchased
Securities listed on Annex 1 below your name for your own account, or for the
account of one or more separate accounts maintained by you, for investment
purposes only and with no present intention of, or view to, distributing such
Purchased Securities or any part thereof except in compliance with the
Securities Act, but without prejudice to your right at all times to:
(a) sell or otherwise dispose of all or any part of the
Purchased Securities under a registration statement filed under the
Securities Act, or in a transaction exempt from the registration
requirements of such Act, including a transaction complying with and
pursuant to Rule 144A; and
16
(b) have control over the disposition of all of your assets
to the fullest extent required by any applicable law; provided that
such disposition complies with applicable law.
You acknowledge receipt of the Offering Memorandum and further
acknowledge that you have been afforded the opportunity (i) to ask such
questions as you have deemed necessary of, and to receive answers from,
representatives of the Issuers concerning the terms and conditions of the
offering of the Purchased Securities and the merits and risks of investing in
the Purchased Securities and (ii) to obtain such additional information which
the Issuers possess or can acquire that is necessary to verify the accuracy and
completeness of the information contained in the Offering Memorandum.
It is understood that, in making the representations set out in
Section 2.14(a) and Section 2.15, the Company is relying, to the extent
applicable, upon your representation as aforesaid.
3.2 ERISA.
You represent that at least one of the following statements is an
accurate representation as to each source of funds (a "Source") to be used by
you to pay the purchase price of the Purchased Securities:
(a) General Account - you are an insurance company and the
Source is an "insurance company general account," as such term is
defined in DOL Prohibited Transaction Class Exemption 95-60 (issued
July 12, 1995) ("PTCE 95-60"), and there is no "employee benefit
plan" (as defined in section 3(3) of ERISA and section 4975(e)(1) of
the IRC), treating as a single plan all plans maintained by the same
employer (and affiliates thereof as defined in section V(a)(1) of
PTCE 95-60) or by the same employee organization, with respect to
which the amount of the general account reserves and liabilities for
all contracts held by or on behalf of such plan, exceeds 10% of the
total reserves and liabilities of such general account as determined
under PTCE 95-60 (exclusive of separate account liabilities) plus
surplus, as set forth in the National Association of Insurance
Commissioners Annual Statement filed with your state of domicile and
that such acquisition is eligible for and satisfies the other
requirements of such exemption; or
(b) Separate Account - the Source is a separate account:
(i) 10% Pooled Separate Account - that is an
insurance company pooled separate account, within the
meaning of DOL Prohibited Transaction Class Exemption 90- 1
(issued January 29, 1990), and to the extent that there is
any employee benefit plan, or group of plans maintained by
the same employer or employer organization, whose assets in
such separate account exceed ten percent (10%) of the
assets of such separate account, you have disclosed the
names of such plans to the Issuer in writing; or
(ii) Identified Plan Assets - that is comprised
of employee benefit plans identified by you in writing and
with respect to which the Issuers hereby warrant and
represent that, as of the Closing Date, neither the Issuer
nor any ERISA Affiliate is a "party in interest" (as
defined in section 3 of ERISA) or a "disqualified person"
(as defined in section 4975 of the Code) with respect to
any plan so identified; or
(iii) Guarantied Separate Account - that is
maintained solely in connection with fixed contractual
obligations of an insurance company, under which any
amounts
17
payable, or credited, to any employee benefit plan having
an interest in such account and to any participant or
beneficiary of such plan (including an annuitant) are not
affected in any manner by the investment performance of the
separate account (as provided by 29 CFR
ss.2510.3-101(h)(1)(iii)); or
(c) QPAM - the Source constitutes assets of an "investment
fund" (within the meaning of Part V of the QPAM Exemption) managed by
a "qualified professional asset manager" or "QPAM" (within the
meaning of Part V of the QPAM Exemption), no employee benefit plan's
assets that are included in such investment fund, when combined with
the assets of all other employee benefit plans established or
maintained by the same employer or by an affiliate (within the
meaning of section V(c)(1) of the QPAM Exemption) of such employer or
by the same employee organization and managed by such QPAM, exceed
twenty percent (20%) of the total client assets managed by such QPAM,
the conditions of Part I(c) and (g) of the QPAM Exemption are
satisfied, neither the QPAM nor a person controlling or controlled by
the QPAM (applying the definition of "control" in section V(e) of the
QPAM Exemption) owns a five percent (5%) or more interest in the
Company and:
(i) the identity of such QPAM; and
(ii) the names of all employee benefit plans
whose assets are included in such investment fund;
have been disclosed to the Issuer in writing; or
(d) Governmental Plans - the Source is a governmental plan
or a church plan; or
(e) Identified Plans - the Source is one or more employee
benefit plans, or a separate account or trust fund comprised of one
or more employee benefit plans, each of which has been identified to
the Company in writing; or
(f) Exempt Plans - the Source does not include assets of
any employee benefit plan, other than a plan exempt from the coverage
of ERISA, or
As used in this Section 3.2, the terms "employee benefit plan", "governmental
plan" "church plan" and "separate account" shall have the respective meanings
assigned to such terms in section 3 of ERISA.
It is understood that, in making the representations set out in
Section 2.14(a), Section 2.15 and Section 2.11(e), the Company is relying, to
the extent applicable, upon your representation as aforesaid.
4. CLOSING CONDITIONS
Your obligations under this Agreement, including, without limitation,
the obligation to purchase and pay for the Purchased Securities, are subject to
the following conditions precedent, and the failure by the Issuers to satisfy
all such conditions shall relieve you, at your election, of all such
obligations.
18
4.1 Opinions of Counsel.
You shall have received from:
(a) Battle ▇▇▇▇▇▇ LLP, special counsel for the Obligors;
and
(b) ▇▇▇▇ & ▇▇▇▇▇▇, your special counsel;
closing opinions, each dated as of the Closing Date, and substantially in the
respective forms set forth in Exhibit 4.1(a) and Exhibit 4.1(b) and as to such
other matters as you may reasonably request. This Section 4.1 shall constitute
direction by the Issuers to such counsel named in Section 4.1(a) to deliver such
closing opinion to you.
4.2 Warranties and Representations True; Compliance.
(a) Warranties and Representations True. The warranties and
representations contained in Section 2 shall be true on the Closing
Date with the same effect as though made on and as of that date.
(b) Compliance with this Agreement and Financing Documents.
The Obligors shall have performed and complied with all agreements
and conditions contained herein and in the other Financing Documents
that are required to be performed or complied with by the Obligors on
or prior to the Closing Date, and such performance and compliance
shall remain in effect on the Closing Date.
4.3 Officers' Certificates.
You shall have received:
(a) Company Officers' Certificate - a certificate dated the
Closing Date and signed (on behalf of the Company) by two (2) Senior
Officers of the Company, substantially in the form of Exhibit 4.3(a);
(b) Parent Officers' Certificate - a certificate dated the
Closing Date and signed (on behalf of the Parent) by two (2) Senior
Officers of the Parent, substantially in the form of Exhibit 4.3(b);
(c) Company Secretary's Certificate - a certificate dated
the Closing Date and signed (on behalf of the Company) by the
Secretary or an Assistant Secretary of the Company, substantially in
the form of Exhibit 4.3(c);
(d) Parent Secretary's Certificate - a certificate dated
the Closing Date and signed (on behalf of the Parent) by the
Secretary or an Assistant Secretary of the Parent, substantially in
the form of Exhibit 4.3(d); and
19
(e) Subsidiary Affiliate Guarantor Secretary's Certificates
- a certificate from each Subsidiary which is an Affiliate Guarantor,
dated the Closing Date and signed (on behalf of such Affiliate
Guarantor) by the Secretary or an Assistant Secretary of such
Affiliate Guarantor, substantially in the form of Exhibit 4.3(e).
4.4 Organic Documents.
You shall have received:
(a) Good Standing Certificates -- For each Obligor, a
long-form certificate of good standing or equivalent certificate or
certificates of the Secretary of State of its state or other
jurisdiction of incorporation, certifying its due incorporation, good
standing and satisfactory tax status and listing all charter
documents with respect to such Obligor on file with such Secretary of
State; and
(b) Charter Documents - with respect to each Obligor,
copies of all charter documents on file with the Secretary of State
of its state or other jurisdiction of incorporation, certified by the
such Secretary of State to be true, correct and complete.
4.5 Legality.
The Purchased Securities shall on the Closing Date qualify as a legal
investment for you under applicable insurance law (without regard to any
"basket" or "leeway" provisions), and the acquisition thereof shall not subject
you to any penalty or other onerous condition pursuant to any such law or
regulation, and you shall have received such evidence as you may reasonably
request to establish compliance with this condition.
4.6 Financing Documents.
(a) Note Agreement; Notes. The Company shall have executed
and delivered to each Purchaser the Note Agreement. The Company shall
have issued to each such Purchaser Notes in the respective principal
amounts set forth below such Purchaser's name on Annex 1.
(b) Charter; Common Share Certificates. The Charter shall
be in the form of Exhibit 1.1(b). The Parent shall have executed and
delivered to each Purchaser certificates representing the Common
Shares in the respective numbers of Common Shares set forth below
such Purchaser's name on Annex 1.
(c) Affiliate Guaranty. Each of the Affiliate Guarantors
shall have executed and delivered to you the Affiliate Guaranty (as
may be amended, restated or otherwise modified from time to time in
accordance with the terms thereof, the "Affiliate Guaranty") in the
form of Exhibit 4.6(c).
(d) Investors Rights Agreement. The Parent shall have
executed and delivered to each Purchaser an Investors Rights
Agreement (as may be amended, restated or otherwise modified from
time to time in accordance with the terms thereof, the "Investors
Rights Agreement") in the form of Exhibit 4.6(d).
20
4.7 Certain Consents and Agreements.
Each holder of Debt, Capital Stock or Rights of any Obligor, and each
other Person, the consent of which is, in the reasonable judgment of you and
your special counsel, necessary or desirable to permit any Obligor to enter into
the transactions contemplated by this Agreement and to perform its respective
obligations in respect of the Financing Documents, shall have executed and
delivered to you a consent, in form and substance acceptable to you, to the
transactions contemplated by the Financing Documents:
(a) permitting the Company to enter into, and to incur and
have outstanding the indebtedness and all other obligations in
respect of, this Agreement, the Note Agreement and the Notes and to
issue and sell the Notes;
(b) permitting the Parent to enter into, and to have
outstanding its obligations in respect of, this Agreement and the
Investors Rights Agreement, and to issue and sell the Common Shares;
(c) permitting each Affiliate Guarantor to enter into and
have outstanding its obligations in respect, of the Affiliate
Guaranty; and
(d) waiving any default or event of default which might
have occurred by virtue of the execution and delivery of this
Agreement and the other Financing Documents.
4.8 Senior Debt.
(a) Senior Credit Documents. The Company, the Senior Agent
and the Senior Lenders shall have entered into the Senior Credit
Documents, which documents shall be in form and substance
satisfactory to you. The Company shall deliver to you a copy of fully
executed counterparts of the Senior Credit Documents, certified as
true and correct by an officer of the Company. Pursuant to the Senior
Credit Documents, the Company shall have:
(i) received proceeds of not less than Fifty-Two
Million Five Hundred Thousand Dollars ($52,500,000) in
respect of term loans thereunder; and
(ii) have the ability to borrow under a
commitment of not less than Twenty-Two Million Five
Hundred Thousand Dollars ($22,500,000) under a revolving
credit facility, the borrowing base conditions to which
shall have been satisfied; up to Three Million Dollars
($3,000,000) of which commitment may be drawn at closing.
(b) No Defaults; Satisfaction of Conditions Precedent. No
event shall have occurred and no condition shall exist that shall
prohibit the Company from borrowing under the Senior Credit Documents
and all conditions precedent to closing specified in the Senior
Credit Documents shall have been satisfied on or prior to the Closing
Date and you shall have received such evidence of the satisfaction of
such conditions precedent as you shall deem appropriate.
4.9 Prepayment of Debt.
21
The Company shall have prepaid Debt specified in Part 2.2(b) of Annex
3 as being prepaid in connection with the transactions contemplated by the
Financing Documents, the Senior Credit Documents and the Acquisition Documents
in an aggregate amount of Forty-Six Million Fifty Thousand Dollars
($46,050,000).
4.10 Closing of Acquisitions.
(a) Acquisition Documents; Consummation of Acquisition. The
Acquisition Documents shall be in form and substance satisfactory to
you and your special counsel. The Company shall have delivered to you
copies of the fully executed Acquisition Documents (including,
without limitation, copies of the opinions delivered in connection
with the consummation of the Acquisitions), certified as true and
correct by an officer of the Company. The Acquisitions shall have
been consummated substantially in accordance with the terms of the
Acquisition Documents, without waiver of any closing condition set
forth therein.
(b) Purchase Price; Transaction Costs. The aggregate
initial purchase price for the Acquired Entities shall not exceed
Thirty-Three Million Four Hundred Fifty Thousand Dollars
($33,450,000), which shall consist of not more than Twenty-Five
Million Dollars ($25,000,000) paid in cash, shares of Common Stock
having a Fair Market Value of not more than Three Million Four
Hundred Fifty Thousand Dollars ($3,450,000) and Seller Notes in an
aggregate principal amount not exceeding Five Million Dollars
($5,000,000); provided, however, that the Acquisitions may provide
for payment in the year 2000 to the Sellers of an additional amount,
based on the Acquired Businesses performing as expected in 1999, of
not more than Four Million Three Hundred Thousand Dollars
($4,300,000), which shall consist of not more than One Million Seven
Hundred Eighty-Three Thousand Dollars ($1,783,000) paid in cash,
shares of Common Stock having a Fair Market Value of not more than
Seven Hundred Thirty-Four Thousand Dollars ($734,000) and Seller
Notes in an aggregate principal amount not exceeding One Million
Seven Hundred Eighty-Three Thousand Dollars ($1,783,000). The
transaction costs in connection with the transactions contemplated by
the Financing Documents, the Acquisition Documents and the Senior
Credit Documents shall not have exceeded Three Million Six Hundred
Thousand Dollars ($3,600,000) in the aggregate.
(c) Terms of Seller Notes. The terms of the Seller Notes,
and of any documents, agreements or other instruments executed in
connection therewith, including, without limitation, the payment
terms, subordination provisions, covenants, rights and remedies
thereof, shall be acceptable to you in your discretion. You shall
have received copies, certified as true, accurate and complete by the
Secretary or Assistant Secretary of the Parent, of the Seller Notes
and all documents, agreements or other instruments executed in
connection therewith.
4.11 Offeree Letter.
The Company shall have caused CIBC ▇▇▇▇▇▇▇▇▇▇▇ to deliver to the
Issuers, their special counsel and your special counsel an offeree letter, in
form and substance reasonably satisfactory to you and each of the Other
Purchasers, confirming the manner of the offering of the Purchased Securities by
CIBC ▇▇▇▇▇▇▇▇▇▇▇.
22
4.12 Private Placement Numbers.
The Company shall have obtained or caused to be obtained private
placement number for the Notes and a CUSIP number for the Common Shares from the
CUSIP Service Bureau of Standard & Poor's, a division of ▇▇▇▇▇▇-▇▇▇▇, Inc. and
you shall have been informed of such private placement numbers.
4.13 Fees and Expenses.
All fees and disbursements required to be paid pursuant to Section
6.6 shall have been paid in full.
4.15 Transaction Fee.
The Company shall have paid to you and each Other Purchaser (or, if
another Person is designated on Annex 1 to receive the transaction fee on behalf
of any Purchaser, to such other Person on such Purchaser's behalf) the
transaction fee set forth on Annex 1, the aggregate amount of which shall be
Four Hundred Thousand Dollars ($400,000).
4.16 Other Purchasers.
None of the Other Purchasers shall have failed to execute and deliver
the Note Agreement, the Investors Rights Agreement or any other Financing
Document to be executed and delivered by it, or to accept delivery of or make
payment for the Purchased Securities.
4.17 Proceedings Satisfactory.
All proceedings taken in connection with the issuance and sale of the
Purchased Securities and all documents and papers relating thereto shall be
satisfactory to you and your special counsel. You and your special counsel shall
have received copies of such documents and papers as you or they may reasonably
request in connection therewith or in connection with your special counsel's
closing opinion, all in form and substance satisfactory to you and your special
counsel.
5. INTERPRETATION OF THIS AGREEMENT
5.1 Terms Defined.
As used herein, the following terms have the respective meanings set
forth below or set forth in the Section hereof following such term:
Acquired Entities - means Action Threaded Products, Inc.; Olympic &
Electronic Hardware; and Capital Fasteners, Inc.
Acquisition Documents - means:
(a) with respect to Action Threaded Products, Inc., the
Stock Purchase Agreement, dated as of May 7, 1999, by and among the
Parent, Questron Distribution Logistics, Inc., Action Threaded
Products, Inc., and the other Persons signatory thereto;
23
(b) with respect to Capital Fasteners, Inc., the Stock
Purchase Agreement, dated as of April 26, 1999, by and among the
Parent, Questron Distribution Logistics, Inc., ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇,
and Capital Fasteners, Inc.; and
(c) with respect to Metro Form Corporation (d/b/a Olympic &
Electronic Hardware), the Asset Purchase Agreement, dated as of March
11, 1999, by and among the Parent, Questron Distribution Logistics,
Inc., Metro Form Corporation (d/b/a Olympic & Electronic Hardware)
and the other Persons signatory thereto.
.
Acquisitions - means the acquisitions by the Company of each of the
Acquired Entities, whether, in each case, by acquisition by the Company of all
or substantially all of the Property of such Acquired Entity or of all of the
Capital Stock of such Acquired Entity, or by virtue of a merger of consolidation
of such Acquired Entity with or into a Subsidiary of the Company which results
in the Company holding all of the Capital Stock of such Acquired Entity; and, in
each case, pursuant to the Acquisition Documents.
Affiliate Guarantor - means the Parent, Finance and each Subsidiary
on the Closing Date (other than any Insignificant Subsidiary)..
Affiliate Guaranty - Section 4.6(c).
Agreement, this - means this Securities Purchase Agreement, as it may
be amended, restated or otherwise modified from time to time.
Charter - means the Certificate of Incorporation of the Parent, as
amended through the date hereof, in the form of Exhibit 1.1(b).
Closing - Section 1.2(b).
Closing Date - Section 1.2(b).
Common Shares - Section 1.1(b).
Common Stock - means the Common Stock, par value $.001 per share, of
the Parent, together with the associated Share Purchase Rights attached thereto.
Company - has the meaning specified in the introductory sentence.
Financing Documents - means and includes this Agreement, the
identical Securities Purchase Agreements executed by the Other Purchasers, the
Note Agreement, the Notes, the Affiliate Guaranty, the certificates representing
the Common Shares, the Investors Rights Agreement and the other agreements,
certificates and instruments to be executed pursuant to the terms of each of the
foregoing, as each may be amended, restated or otherwise modified from time to
time.
Indemnified Party - Section 6.8.
Investors Rights Agreement - Section 4.6(d).
24
Issuers - has the meaning specified in the introductory sentence.
Material -- means material in relation to the business, operations,
affairs, financial condition, assets, properties, or prospects of the Issuers
and the Subsidiaries, taken as a whole, or having any effect upon the legality,
validity or enforceability of the Financing Documents.
Note Agreement - Section 1.1(a).
Notes - Section 1.1(a).
Obligors - means and includes the Company and each Affiliate
Guarantor.
Offering Memorandum - Section 2.1.
Other Purchasers - Section 1.2(c).
Parent - has the meaning specified in the introductory sentence.
Proceeding - Section 6.8.
Projections - Section 2.2(f).
PTCE 95-60 -- Section 3.2(a).
Purchased Securities - means the Notes and the Common Shares to be
purchased by the Purchasers pursuant to Section 1.2 of this Agreement.
Purchasers - means you and the Other Purchasers.
QPAM Exemption - means Prohibited Transaction Class Exemption 84-14
issued by the DOL.
Rule 144A - means Rule 144A promulgated under the Securities Act, 17
C.F.R. ss.230.144A, as such rule may be amended from time to time.
Securities Purchase Agreement - Section 1.2(c).
Seller Notes - means notes issued by Questron Finance Corp., a
Delaware corporation and Subsidiary of the Parent, to the Sellers as part of the
consideration paid for the Acquired Entities.
Sellers - means:
(a) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇,
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (with respect to Action Threaded Products,
Inc.);
(b) ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and the ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ Revocable
Trust dated June __ 1999, with ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ as Grantor and
Trustee (Assignee) (with respect to Capital Fasteners, Inc.); and
25
(c) ▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ (with respect to Metro
Form Corporation (d/b/a Olympic & Electronic Hardware).
Senior Credit Documents - means the Senior Credit Agreement and each
other agreement, document or instrument executed in connection therewith or
Guaranteeing or securing the obligations of any obligor in respect thereof.
Share Purchase Rights - means the preferred share purchase rights
issued pursuant to the Share Purchase Rights Agreement.
Share Purchase Rights Agreement - means the Rights Agreement, dated
as of October 23, 1998, between the Parent and American Stock Transfer & Trust
Company, as Rights Agent, as amended and modified from time to time in
accordance with its terms.
Source - Section 3.2.
Subsidiary - means, at any time, with respect to any Person, any
other Person which would be treated as a subsidiary of such Person in accordance
with GAAP at such time. The term "Subsidiary," as used herein without regard to
any particular Person, means a Subsidiary of the Parent and includes, without
limitation, the Company.
Year 2000 Compliant - means that the Issuers' and the Subsidiaries'
hardware and software systems, with respect to the operation of their business,
will:
(a) handle satisfactorily date information involving any
and all dates before, during and/or after January 1, 2000, including
accepting input, providing output and performing date calculations in
whole or in part; and
(b) operate accurately, without Material interruption, on
and in respect of any and all dates before, during and/or after
January 1, 2000 and without any Material change in performance.
5.2 Other Definitions.
The following terms shall have the respective meanings ascribed to
such terms in the Note Agreement:
26
Affiliate
Capital Stock
Debt
Default
DOL
Environmental Protection Law
ERISA
ERISA Affiliate
Event of Default
Exchange Act
Fair Market Value
Finance
Foreign Pension Plan
GAAP
Governmental Authority
Guaranties
Hazardous Materials
Insignificant Subsidiary
Investment
IRC
Lien
Material Adverse Effect
Multiemployer Plan
Person
Plan
Property
Restricted Investment
Right
Securities Act
Security
Senior Agent
Senior Lender
Senior Officer
Voting Stock
5.3 Directly or Indirectly.
Where any provision herein refers to action to be taken by any
Person, or which such Person is prohibited from taking, such provision shall be
applicable whether such action is taken directly or indirectly by such Person,
including actions taken by or on behalf of any partnership in which such Person
is a general partner.
5.4 Section Headings and Table of Contents and Construction.
(a) Section Headings and Table of Contents, etc. The titles
of the Sections of this Agreement and the Table of Contents of this
Agreement appear as a matter of convenience only, do not constitute a
part hereof and shall not affect the construction hereof. The words
"herein," "hereof," "hereunder" and "hereto" refer to this Agreement
as a whole and not to any particular Section or other subdivision.
References to Sections are, unless otherwise specified, references to
Sections of this Agreement. References to Annexes and Exhibits are,
unless otherwise specified, references to Annexes and Exhibits
attached to this Agreement.
(b) Construction. Each covenant contained herein shall be
construed (absent an express contrary provision herein) as being
independent of each other covenant contained herein, and compliance
with any one covenant shall not (absent such an express contrary
provision) be deemed to excuse compliance with one or more other
covenants.
5.5 Governing Law.
THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO ANY CONFLICTS OF LAW RULES WHICH WOULD REQUIRE THE APPLICATION OF THE
LAW OF ANY OTHER JURISDICTION.
27
6. MISCELLANEOUS
6.1 Communications.
(a) Method; Address. All communications hereunder shall be
in writing and shall be delivered either by hand or by nationwide
overnight courier, or by facsimile transmission followed by delivery
by hand or by nationwide overnight courier sent on the day of the
sending of such facsimile transmission. Communications to either
Issuer shall be addressed as set forth on Annex 2, or at such other
address of which the Company or the Parent shall have notified each
Purchaser. Communications to the Purchasers shall be addressed as set
forth on Annex 1.
(b) When Given. Any communication addressed and delivered
as herein provided shall be deemed to be received when actually
delivered to the address of the addressee (whether or not delivery is
accepted) or received by the telecopy machine of the recipient. Any
communication not so addressed and delivered shall be ineffective.
(c) Service of Process. Notwithstanding the foregoing
provisions of this Section 6.1, service of process in any suit,
action or proceeding arising out of or relating to this Agreement or
any document, agreement or transaction contemplated hereby shall be
delivered in the manner provided in Section 6.7(c).
6.2 Reproduction of Documents.
This Agreement and all documents relating hereto, including, without
limitation, consents, waivers and modifications that may hereafter be executed,
documents received by you at the closing of your purchase of the Purchased
Securities (except the Purchased Securities themselves), and financial
statements, certificates and other information previously or hereafter furnished
to any Purchaser, may be reproduced by the Issuers or any Purchaser by any
photographic, photostatic, microfilm, micro-card, miniature photographic,
digital or other similar process and each Purchaser may destroy any original
document so reproduced. Any such reproduction shall be admissible in evidence as
the original itself in any judicial or administrative proceeding (whether or not
the original is in existence and whether or not such reproduction was made by an
Issuer or such Purchaser in the regular course of business) and any enlargement,
facsimile or further reproduction of such reproduction shall likewise be
admissible in evidence. Nothing in this Section 6.2 shall prohibit an Issuer or
any Purchaser from contesting the accuracy or validity of any such reproduction.
6.3 Survival; Entire Agreement.
All warranties, representations, certifications and covenants made by
the Issuers herein or in any certificate or other instrument delivered by or on
behalf of any Obligor hereunder shall be considered to have been relied upon by
you and shall survive the delivery to you of the Purchased Securities regardless
of any investigation made by you or on your behalf. All statements in any
certificate or other instrument delivered by or on behalf of any Obligor
pursuant to the terms hereof shall constitute warranties and representations by
the Issuers hereunder. All obligations hereunder ( including, without
limitation, reimbursement obligations in respect of costs, expenses and fees)
shall survive the termination hereof. Subject to the preceding sentence, this
Agreement and the other Financing Documents embody the entire
28
agreement and understanding among the Issuers and the Purchasers, and supersede
all prior agreements and understandings, relating to the subject matter hereof.
6.4 Successors and Assigns.
This Agreement shall inure to the benefit of and be binding upon the
successors and assigns of each of the parties hereto. The provisions hereof are
intended to be for the benefit of the Purchasers and their successors and
assigns, and shall be enforceable by any Purchaser, successor or assignee
whether or not an express assignment of rights hereunder shall have been made by
you or your successor or assign. Anything contained in this Section 6.4
notwithstanding, the Issuers may not assign any of their respective rights,
duties or obligations hereunder without the prior written consent of all
Purchasers.
6.5 Amendment and Waiver.
This Agreement may be amended, and the observance of any term hereof
may be waived, with (and only with) the written consent of the Issuers and you.
6.6 Expenses.
Whether or not the Purchased Securities are sold, the Issuers,
jointly and severally, shall pay, at the Closing (if the Purchased Securities
are sold, and otherwise upon receipt of any statement or invoice therefor), all
reasonable fees, expenses and costs incurred by you relating hereto, including,
without limitation, all reasonable fees and disbursements of your special
counsel, and all reasonable expenses incurred by you or on your behalf or the
behalf of any Obligor in complying with each of the conditions to the Closing
set forth in Section 4. Without limiting the generality of the foregoing, the
Issuers agree to pay:
(a) contemporaneously with the Closing, the invoice
presented by your special counsel at least one Business Day prior to
the Closing Date, which invoice will include all accrued fees and
disbursements of such special counsel, together with an estimate for
the additional fees and disbursements of such counsel necessary to
complete the Closing and all post-Closing matters relating thereto
(including, without limitation, preparation of Closing files); and
(b) within thirty (30) days of receipt of a final statement
presented following the Closing and completion of all post-Closing
work, reconciling the actual amount due with the amount paid pursuant
to the estimated invoice referred to in Section 6.6(a), any balance
due your special counsel pursuant to such invoice and statement (and,
in the event that a balance is due the Issuers pursuant to such
invoice and statement, such special counsel shall remit that balance
to the Company); and
(c) any additional statement for reasonable fees and
disbursements (promptly upon receipt thereof) of your special counsel
rendered after the Closing in connection with the issuance of the
Purchased Securities.
29
6.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc.
(a) Waiver of Jury Trial. TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY
WAIVE ANY RIGHT ANY OF THEM MAY HAVE TO A TRIAL BY JURY IN RESPECT OF
ANY LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
AGREEMENT OR ANY OF THE DOCUMENTS, AGREEMENTS OR TRANSACTIONS
CONTEMPLATED HEREBY.
(b) Consent to Jurisdiction. ANY SUIT, ACTION OR PROCEEDING
ARISING OUT OF OR RELATING TO THIS AGREEMENT, OR ANY OF THE
DOCUMENTS, AGREEMENTS OR TRANSACTIONS CONTEMPLATED HEREBY OR ANY
ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY JUDGMENT IN
RESPECT OF ANY BREACH UNDER THIS AGREEMENT OR ANY DOCUMENT OR
AGREEMENT CONTEMPLATED HEREBY MAY BE BROUGHT BY SUCH PARTY IN ANY
FEDERAL DISTRICT COURT LOCATED IN NEW YORK CITY, NEW YORK OR ANY NEW
YORK STATE COURT OF COMPETENT JURISDICTION LOCATED IN NEW YORK CITY,
NEW YORK AS SUCH PARTY MAY IN ITS SOLE DISCRETION ELECT, AND BY THE
EXECUTION AND DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY SUBMIT TO THE NON-EXCLUSIVE IN
PERSONAM JURISDICTION OF EACH SUCH COURT, AND EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES AND AGREES NOT TO ASSERT IN ANY PROCEEDING
BEFORE ANY TRIBUNAL, BY WAY OF MOTION, AS A DEFENSE OR OTHERWISE, ANY
CLAIM THAT IT IS NOT SUBJECT TO THE IN PERSONAM JURISDICTION OF ANY
SUCH COURT. IN ADDITION, EACH OF THE PARTIES HERETO IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION THAT IT
MAY NOW OR HEREAFTER HAVE TO THE LAYING OF VENUE IN ANY SUIT, ACTION
OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT OR ANY
DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY BROUGHT IN ANY
SUCH COURT, AND HEREBY IRREVOCABLY WAIVES ANY CLAIM THAT ANY SUCH
SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT
IN AN INCONVENIENT FORUM.
(c) Service of Process. EACH PARTY HERETO IRREVOCABLY
AGREES THAT PROCESS PERSONALLY SERVED OR SERVED BY U.S. REGISTERED
MAIL AT THE ADDRESSES PROVIDED HEREIN FOR NOTICES SHALL CONSTITUTE,
TO THE EXTENT PERMITTED BY LAW, ADEQUATE SERVICE OF PROCESS IN ANY
SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREE-
MENT OR ANY DOCUMENT, AGREEMENT OR TRANSACTION CONTEMPLATED HEREBY,
OR ANY ACTION OR PROCEEDING TO EXECUTE OR OTHERWISE ENFORCE ANY
JUDGMENT IN RESPECT OF ANY BREACH HEREUNDER OR UNDER ANY DOCUMENT OR
AGREEMENT CONTEMPLATED HEREBY. RECEIPT OF PROCESS SO SERVED SHALL BE
CONCLUSIVELY PRESUMED AS EVIDENCED BY A DELIVERY RECEIPT FURNISHED BY
THE UNITED STATES POSTAL SERVICE OR ANY COMMERCIAL DELIVERY SERVICE.
30
(d) Other Forums. NOTHING HEREIN SHALL IN ANY WAY BE DEEMED
TO LIMIT THE ABILITY OF ANY PURCHASER TO SERVE ANY WRITS, PROCESS OR
SUMMONSES IN ANY MANNER PERMITTED BY APPLICABLE LAW OR TO OBTAIN
JURISDICTION OVER THE COMPANY IN SUCH OTHER JURISDICTION, AND IN SUCH
OTHER MANNER, AS MAY BE PERMITTED BY APPLICABLE LAW.
6.8 Indemnification of Each Purchaser.
From and at all times after the date of this Agreement, and in
addition to all of your other rights and remedies against the Issuers, the
Issuers, jointly and severally, agree to indemnify and hold harmless you and
each of your directors, officers, partners, employees, agents, investment
advisors and affiliates (collectively, the "Indemnified Parties") against any
and all claims (whether valid or not), losses, damages, liabilities, costs and
expenses of any kind or nature whatsoever (including, without limitation,
reasonable attorneys' fees, costs and expenses), incurred by or asserted against
any Indemnified Party, from and after the date hereof, whether direct, indirect
or consequential, as a result of or arising from or in any way relating to any
suit, action or proceeding (including any inquiry or investigation) by any
Person, whether threatened or initiated, asserting a claim for any legal or
equitable remedy against any Person under any statute or regulation, including,
but not limited to, any federal or state securities laws, or under any common
law or equitable cause or otherwise, arising from or in connection with the
negotiation, preparation, execution, performance or enforcement of this
Agreement or the other Financing Documents or any transactions contemplated
herein or therein, or any of the transactions contemplated hereunder
(collectively, the "Proceedings"), whether or not such Indemnified Party is a
party to any such Proceeding; provided, however, that no Indemnified Party shall
have the right to be indemnified hereunder for any liability resulting from the
willful misconduct or gross negligence of such Indemnified Party or breach by
such Indemnified Party of its own obligations under this Agreement. All of your
foregoing losses, damages, costs and expenses shall be payable as and when
incurred upon your demand. Without limiting the generality of the foregoing,
each such indemnified Person shall be entitled to collect, and, subject to the
following paragraph, the Issuers shall be obligated to advance to each such
Person, to the fullest extent permitted by applicable law, all expenses
(including, without limitation, reasonable fees and disbursements of counsel)
attendant to defending against any such claims (whether valid or not), losses,
damages, liabilities, costs and expenses when and as incurred, regardless of
whether any judicial determination of your entitlement to such indemnity has
been made, until or unless a final judicial determination that such Indemnified
Party is not entitled to such indemnity, in which case, such Indemnified Party
shall promptly repay to the Issuers, with interest at the applicable statutory
rate applicable to judgments in the relevant jurisdiction, all amounts so
advanced by either Issuer. The obligations of the Issuers and your rights under
this Section 6.8 shall survive the termination of this Agreement.
If any Proceeding shall be brought or asserted or threatened to be
brought or asserted against an Indemnified Party in respect of which indemnity
may be sought from the Issuers hereunder, such Indemnified Party shall promptly
notify the Issuers in writing, and the Issuers may, in their sole discretion,
promptly upon receipt of such notice, assume the defense thereof, including the
employment of counsel (who may be counsel for either of the Issuers) reasonably
satisfactory to such Indemnified Party and the payment of all expenses therefor.
If the Issuers elect to assume the defense of any such Proceeding, the
Indemnified Party shall have the right, in its sole discretion, to employ
separate counsel in any such action and to participate in the defense thereof,
but the fees and expenses of such counsel shall be the expense of such
Indemnified Party unless;
31
(a) either of the Issuers has agreed to pay such fees and expenses;
(b) each of the Issuers shall have elected not to assume the defense
of such Proceeding or shall have failed to promptly assume the defense of such
Proceeding or shall have failed to employ counsel reasonably satisfactory to
such Indemnified Party in any such Proceeding; or
(c) the named parties to any such Proceeding (including any impleaded
parties) include both such Indemnified Party and either of the Issuers, and such
Indemnified Party shall have been advised by counsel that there may be one or
more legal defenses available to such Indemnified Party that are different from
or additional to those available to that Issuer (in which case, if such
Indemnified Party notifies the Issuers in writing that it elects to employ
separate counsel at the expense of the Issuers, the Issuers shall not have the
right to assume the defense of such Proceeding on behalf of such Indemnified
Party, it being understood, however, that the Issuers shall not, in connection
with any one such Proceeding or separate but substantially similar or related
Proceedings in the same jurisdiction arising out of the same general allegations
or circumstances, be liable for the reasonable fees and expenses or more than
one separate firm of attorneys at any time for such Indemnified Party and any
other Indemnified Parties, which firm shall be designated in writing by such
Indemnified Parties). The Issuers shall not be liable for any settlement of any
Proceeding by an Indemnified Party effected without the Issuers' written consent
(which consent shall not be unreasonably withheld). In addition, the Indemnified
Party shall cooperate with the Issuers and their representatives in connection
with the defense or investigation of any claim or other matter for which
indemnification is sought, as reasonably requested by the Issuers.
6.9 Execution in Counterpart.
This Agreement may be executed in one or more counterparts and shall
be effective when at least one counterpart shall have been executed by each
party hereto, and each set of counterparts that, collectively, show execution by
each party hereto shall constitute one duplicate original.
[Remainder of page intentionally blank. Next page is signature page.]
32
If this Agreement is satisfactory to you, please so indicate by
signing the acceptance at the foot of a counterpart hereof and returning such
counterpart to the Company, whereupon this Agreement shall become binding among
us in accordance with its terms.
Very truly yours,
QUESTRON TECHNOLOGY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
QUESTRON OPERATING COMPANY, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chairman and Chief Executive
Officer
Accepted:
ALLIANCE INVESTMENT OPPORTUNITIES FUND, L.L.C.
By: Alliance Investment Opportunities Management, L.L.C., as Managing Member
By: Alliance Capital Management, L.P. as Managing Member
By: Alliance Capital Management Corporation, as General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President
ALBION ALLIANCE MEZZANINE FUND, L.P.
By: Albion Alliance LLC, its General Partner
By: /s/ U. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: U. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
THE EQUITABLE LIFE ASSURANCE
SOCIETY OF THE UNITED STATES
By: /s/ U. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------
Name: U. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Investment Officer
IBJ WHITEHALL BANK & TRUST COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
----------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
ANNEX 1
INFORMATION AS TO PURCHASERS
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Purchaser Name ALBION ALLIANCE MEZZANINE FUND, L.P.
Name in Which Note is Registered ALBION ALLIANCE MEZZANINE FUND, L.P.
Name in Which Common Shares are
Registered (if different from above)
Note Registration Number; Principal R-1; $7,000,000
Amount Note
Purchase Price of Notes $6,643,000
Number of Common Shares 238,000
Purchase Price of Shares $357,000
Transaction Fee $140,000
Address for Payment IBJ Whitehall Bank & Trust Company
ABA No. ▇▇▇-▇▇▇-▇▇▇
For the account of Albion Alliance LLC
Account No. ▇▇▇▇▇▇▇▇
Tax ID No. ▇▇-▇▇▇▇▇▇▇
Address for all written Albion Alliance Mezzanine Fund, L.P.
communications c/o Albion Alliance LLC
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Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Other Instructions Signature Page Format:
ALBION ALLIANCE MEZZANINE FUND, L.P.
By: Albion Alliance LLC, its General
Partner
By:_____________________
Name:
Title:
Instructions re Delivery of Note The Equitable Life Assurance Society of
the United States
1290 Avenue of the Americas
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Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, 12th Floor
Tax Identification Number ▇▇-▇▇▇▇▇▇▇
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Annex 1-1
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Purchaser Name ALLIANCE INVESTMENT OPPORTUNITIES
FUND, LLC
Name in Which Note is Registered INLETSIDE & Co.
Name in Which Common Shares are
Registered (if different from above)
Note Registration Number; Principal R-2; $5,000,000
Amount Note
Purchase Price of Notes $4,745,000
Number of Common Shares 170,000
Purchase Price of Shares $255,000
Transaction Fee $100,000
Address for Payment ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇ ▇▇.
▇▇▇ No. 011 0000 28
Attn: Mutual Fund Services
Ref: Alliance Investment Opportunities
Fund-M376
Account No. 5985-0420
Address for all written Alliance Investment Opportunities
communications Fund, LLC
c/o Albion Alliance LLC
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Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Alliance Capital Management
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Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Other Instructions Signature Page Format:
ALLIANCE INVESTMENT OPPORTUNITIES FUND,
LLC
By: Alliance Investment Opportunities
Management, L.L.C., as Managing
Member
By: Alliance Capital Management L.P.,
as Managing Member
By: Alliance Capital Management
Corporation, as General Partner
By: _______________________________
Name:
Title:
Instructions re Delivery of the Note Alliance Capital Management
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Attn: ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
Tax Identification Number ###-##-####
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Annex 1-2
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Purchaser Name THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
Name in Which Note is Registered THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
Name in Which Common Shares are
Registered (if different from above)
Note Registration Number; Principal R-3; $5,000,000
Amount Note
Purchase Price for Notes $4,745,000
Number of Common Shares 170,000
Purchase Price for Shares $255,000
Transaction Fee $100,000
Address for Payment IBJ Whitehall Bank & Trust Company
ABA No. ▇▇▇-▇▇▇-▇▇▇
For the account of Albion Alliance LLC
Account No. ▇▇▇▇▇▇▇▇
Tax ID No. ▇▇-▇▇▇▇▇▇▇
Address for all written The Equitable Life Assurance Society of
communications the United States
c/o Albion Alliance LLC
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Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Tel: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Other Instructions Signature Page Format:
THE EQUITABLE LIFE ASSURANCE SOCIETY OF
THE UNITED STATES
By:_____________________
Name:
Title:
Instructions re Delivery of the Note The Equitable Life Assurance
Society of the United States
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Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, 12th Floor
Tax Identification Number ▇▇-▇▇▇▇▇▇▇
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Annex 1-3
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Purchaser Name IBJ WHITEHALL BANK & TRUST COMPANY
Name in Which Note is Registered IBJ WHITEHALL BANK & TRUST COMPANY
Name in Which Common Shares are IBJ WHITEHALL CAPITAL CORPORATION
Registered (if different from above)
Note Registration Number; Principal R-4; $3,000,000
Amount Note
Purchase Price of Notes $2,847,000
Number of Common Shares 102,000
Purchase Price of Shares $153,000
Transaction Fee $60,000
Address for Payment IBJ Whitehall Bank & Trust Company
ABA No. ▇▇▇-▇▇▇-▇▇▇
Attn: Commercial Loan Department,
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Address for all written IBJ Whitehall Bank & Trust Company
communications ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
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Attn: ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇
Other Instructions: Signature Page Format:
IBJ WHITEHALL BANK & TRUST COMPANY
By:_____________________
Name:
Title:
Instructions re Delivery of the Note IBJ Whitehall Bank & Trust Company
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Attn: ▇▇▇▇-▇▇▇▇▇ ▇▇▇▇▇▇
Tax Identification Number ▇▇▇▇▇▇▇▇▇
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Annex 1-4
ANNEX 2
PAYMENT INSTRUCTIONS AT CLOSING;
ADDRESS OF COMPANY FOR NOTICES
Bank: The Chase Manhattan Bank, N.A.
ABA #: 021 000 021
A/C: 322 020 565
A/C Name: Congress Financial Corp. (Florida)
RE: Questron / [Identify Purchasers]
Address for Notices to the Parent:
Questron Technology, Inc.
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Address for Notices to the Company:
Questron Operating Company, Inc.
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With a copy, in either case, to:
Battle ▇▇▇▇▇▇ LLP
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Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.