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Exhibit 2
WAIVER AND AMENDMENT TO
AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT
THIS WAIVER AND AMENDMENT TO AMENDED AND RESTATED LOAN AND SECURITY
AGREEMENT (this "Amendment") is entered into as of June 29, 2001, by and among
QUESTRON TECHNOLOGY, INC., a Delaware corporation ("Questron"), certain of the
direct and indirect Subsidiaries of Questron identified in the Loan Agreement
(as defined below) (individually and collectively, and jointly and severally,
the "Obligors"), each of the Lenders signatory hereto, CONGRESS FINANCIAL
CORPORATION (Florida), a Florida corporation, as administrative agent for the
Lenders ("Administrative Agent"), and ABLECO FINANCE LLC, a Delaware limited
liability company, as collateral agent for the Lender Group ("Collateral
Agent"), in light of the following:
WHEREAS, the signatories hereto entered into that certain Amended and
Restated Loan and Security Agreement, dated as of June 29, 1999 (as amended,
restated, supplemented, or modified from time to time, the "Loan Agreement");
and
WHEREAS, the Obligors have requested that the Lenders waive and amend
certain terms of the Loan Agreement and the Lenders have agreed, under certain
conditions, to waive and amend such terms.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and covenants hereinafter set forth, the parties agree as follows:
1. DEFINITIONS. Capitalized terms used herein and not otherwise defined
herein shall have the meanings ascribed to them in the Loan Agreement. In
addition, the following term as used herein has the meaning set forth below:
EXTRAORDINARY TRANSACTION PROCEEDS - means net proceeds, excluding all
fees, costs and out-of-pocket expenses in connection therewith (including,
without limitation, success fees, break-up fees and other fees of, and costs,
expenses and disbursements of, brokers, finders or investment bankers,
attorneys, accountants, consultants and other professionals relating thereto)
and net of any and all income taxes payable by any Obligor in respect thereof,
disbursed to Questron relating to any extraordinary event including, but not
limited to, the acquisition of funds through the sale of debt or equity, or the
entering into, modification or cancellation of any material contract.
2. WAIVER OF CERTAIN COVENANTS. The financial covenants contained in
Sections 8.3.1 (Total Funded Debt Coverage Ratio), 8.3.2 (Minimum EBITDA), 8.3.3
(Senior Debt Coverage Ratio), 8.3.4 (Minimum Interest Coverage) and for the
quarters ended June 30, 2001 and September 30, 2001 and Section 8.3.5 (Inventory
Coverage) for each month from the date hereof until September 30, 2001 are,
subject to completion of the conditions set forth in Section 9 below, hereby
waived. Such waiver is specific in time and in intent and does not constitute,
nor should it be construed as constituting, except to the extent expressly set
forth herein, a waiver or modification of any term of, or right, power, or
privilege under, the Loan Agreement, the other Loan Documents, or any agreement,
contract, indenture, document, or instrument mentioned therein.
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3. AMENDMENT OF PAYMENT OBLIGATIONS.
(a) Upon the effectiveness of this Amendment, Section 3.2 of
the Loan Agreement is amended to read as follows:
"3.2 PAYMENTS.
(a) The principal due and payable quarterly under the
Term Loans shall be repaid pro rata to the holders of the Term Notes in
installments on the following dates and in the following amounts:
======================================================= ==================================================
Date Quarterly Installment
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December 28, 2001 $5,000,000
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January 1, 2002 $2,500,000
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April 1, 2002 $2,500,000
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July 1, 2002 $3,750,000
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October 1, 2002 $3,750,000
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January 1, 2003 $3,750,000
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April 1, 2003 $3,750,000
======================================================= ==================================================
The outstanding unpaid principal balance and all
accrued and unpaid interest and other amounts due under the Term Loans
shall be due and payable on September 30, 2003. In the event provisions
regarding principal payment contained in any note or other instrument
evidencing the Term Loans (including the Term Notes) conflict with the
provisions regarding principal payments set forth above in this Section
3.2, the provisions of this Section 3.2 shall prevail.
(b) With respect to Revolving Credit Loans, except
where evidenced by notes or other instruments (including the Revolving
Notes) issued or made by Borrower to the Lender specifically containing
payment provisions which are in conflict with this Section 3.2 (in
which event the conflicting provisions of said notes or other
instruments shall govern and control), the Obligations shall be payable
as follows:".
(b) Nothing contained herein shall relieve the Obligors of
their interest payment obligations. This Amendment shall modify only the dates
on which Term Loan principal payments are due, and shall not be deemed to change
or modify any other payment obligation provisions under the Loan Agreement or
the Term Notes. After the effectiveness of this Amendment, upon the request of
any Obligor, the holders of the Term Notes shall tender their existing Term
Notes and receive in exchange replacement Term Notes which evidence the
amendment set forth in Section 3(a).
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4. AMENDMENT CONSIDERATION. In order to induce Collateral Agent to
enter into this Amendment and for other good and valuable consideration,
Questron agrees to grant to Collateral Agent that number of shares of Series C
Preferred Stock of Questron, the terms and conditions of which are set forth in
the Certificate of Designations attached hereto as EXHIBIT A (the "Preferred
Stock"), with a liquidation value equal to $750,000; PROVIDED, HOWEVER, that
Questron shall have five (5) Business Days after the date of this Amendment to
issue such Preferred Stock to Collateral Agent. Each of the parties hereto agree
that the delivery of the Preferred Stock is an integral inducement to Collateral
Agent to enter into this Amendment, and failure to deliver such Preferred Stock
within five (5) Business Days shall cause this Amendment to be null and void.
5. CERTAIN PAYMENTS OF OBLIGATIONS.
(a) EXTRAORDINARY TRANSACTION PROCEEDS. In the event that any
of the Obligors receive Extraordinary Transaction Proceeds, the
Obligors shall apply the entire Extraordinary Transaction Proceeds:
(i) FIRST, to the prepayment of a principal amount of
the Term Loans to the extent of principal payments which would
have been required to have been made on or prior to the date
such Extraordinary Transaction Proceeds are received in
respect of the Loan Agreement but for the amendment of the
payment terms by the Lenders under the Loan Agreement;
(ii) SECOND, to the prepayment of a principal amount
of the Term Loans to the extent of principal payments which
would have been required to have been made after the date such
Extraordinary Transaction Proceeds are received in respect of
the Loan Agreement and prior to December 28, 2001, but for the
amendment of the payment terms by the lenders under the Loan
Agreement; and
(iii) THIRD, subject to Section 5(b) of this
Amendment, to prepayment of the Revolving Credit Loans;
PROVIDED, HOWEVER, that such payments shall not be made unless, after
giving effect to such payments, the aggregate unused availability in respect of
the Revolving Credit Loans is greater than $4,000,000.
(b) PAYMENTS OF INTEREST IN RESPECT OF THE NOTES. In the event
that the Obligors shall make any payment of the principal amount of the
Term Loans on or prior to December 28, 2001 (whether pursuant to
Section 5(a) or otherwise) and, after giving effect to such payment,
the aggregate availability in respect of the Revolving Credit Loans is
greater than $4,000,000, then, and in each such case, QOC shall pay to
the holders of the Notes (as such term is defined in the Subordinated
Debt Amendment), substantially contemporaneously with the making of
such payment in respect of the Term Loans, an amount equal to the
lesser of:
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(i) the aggregate amount of accrued an unpaid
interest accrued through the date of such payment in respect
of all the Notes (as such term is defined in the Subordinated
Debt Amendment); and
(ii) the amount by which the aggregate unused
availability in respect of the Revolving Credit Loans exceeds
$4,000,000.
Such amount shall be applied ratably among the Notes (as such term is
defined in the Subordinated Debt Amendment) in accordance with the
unpaid principal amounts thereof and without respect to whether the
Notes are Series A Notes or Series B Notes (as such terms are defined
in the Subordinated Debt Amendment). The failure of QOC to make any
payment required by this Section 5(b) shall cause the termination of
the deferral of interest in respect of the Notes (as such term is
defined in the Subordinated Debt Amendment) pursuant to Section 2.1 of
the Subordinated Debt Amendment.
6. ACKNOWLEDGEMENT. The Lenders hereby acknowledge and agree with
Section 3.2 of the Subordinated Debt Amendment, which shall state as follows
(capitalized terms used in the following Section 3.2 shall have the meanings
ascribed to them in the Subordinated Debt Amendment):
"3.2 REMEDIES STANDSTILL. The Parent and the Company agree
that, notwithstanding the further proviso to Section 7.4 of
the Existing Note Agreements, the date of the commencement of
any Suspension Period in respect of any Intervening Event of
Default shall be deemed to have been June 30, 2001, with the
effect that the holders of the Notes, on or after January 2,
2002, shall be entitled to exercise any Remedies in respect of
any Intervening Event of Default without being subject to any
Suspension Period. The foregoing sentence shall not limit or
change any requirement to defer the exercise of Remedies in
respect of the first proviso to Section 7.4 or pursuant to
Section 6.2, and shall not limit the effect of any other
subordination provision of the Note Agreements (including,
without limitation, Section 7.3)."
7. CONSENT. The Lenders hereby consent to the terms of the Subordinated
Debt Amendment, in the form attached hereto as EXHIBIT D.
8. REPRESENTATIONS AND WARRANTIES. The Obligors hereby represent and
warrant to the Required Lenders that:
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(a) The execution, delivery, and performance of this Amendment
are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law,
rule, regulation, or any order, judgment, decree, writ, injunction, or
award of any arbitrator, court, or governmental authority, or of the
terms of its governing documents, or of any contract or undertaking to
which it is a party or by which any of its properties may be bound or
affected if the result thereof is reasonably likely to result in a
Material Adverse Change;
(b) This Amendment constitutes the Obligors' legal, valid, and
binding obligation, enforceable against the Obligors in accordance with
its terms;
(c) There is no litigation or proceeding pending or threatened
against or affecting the Obligors, its business, operations, or
properties that reasonably could be expected to have a Material Adverse
Change;
(d) No written information, certification, or report submitted
to the Lender Group by the Obligors' pursuant to this Amendment
contains any material misstatement of fact or omits to state a material
fact or any fact necessary to make the information not false or
misleading in any material respect;
(e) The reaffirmation and consent of QTI attached hereto as
EXHIBIT B constitutes QTI's legal, valid, and binding obligations,
enforceable against QTI in accordance with its terms;
(f) The reaffirmation and consent of QTI attached hereto as
EXHIBIT B has been duly executed and delivered by QTI;
(g) The reaffirmation and consent of QFC attached hereto as
EXHIBIT C constitutes QFC's legal, valid, and binding obligations,
enforceable against QFC in accordance with its terms; and
(h) The reaffirmation and consent of QFC attached hereto as
EXHIBIT C has been duly executed and delivered by QFC.
9. CONDITIONS PRECEDENT TO WAIVER AND AMENDMENT. The effectiveness of
this Amendment shall be conditioned upon:
(a) the representations and warranties in the Loan Agreement
as amended by this Amendment, and the other Loan Documents being true
and correct in all respects on and as of the date hereof, as though
made on such date (except to the extent that such representations and
warranties relate solely to an earlier date);
(b) there having been no injunction, writ, restraining order,
or other order of any nature prohibiting, directly or indirectly, the
consummation of the transactions contemplated herein issued and
remaining in force by any governmental authority against the Lender
Group;
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(c) receipt by Collateral Agent of the Subordinated Debt
Amendment under the Subordinated Debt Documents, in the form attached
hereto as EXHIBIT D;
(d) receipt by Collateral Agent of a Secretary's Certificate
with attached certified Certificate of Designations for the Preferred
Stock as in effect as of the date hereof;
(e) receipt by Collateral Agent of certificates evidencing the
Preferred Stock required to be issued under Section 4 above;
(f) receipt by Collateral Agent of signature pages from all
Lenders as required by Section 12.3.1(b) of the Loan Agreement;
(g) receipt by Collateral Agent of the reaffirmation and
consent of QTI attached hereto as EXHIBIT B, duly executed and
delivered by an authorized official of QTI;
(h) receipt by Collateral Agent of the reaffirmation and
consent of QFC attached hereto as EXHIBIT C, duly executed and
delivered by an authorized official of QFC; and
(i) receipt by Collateral Agent of all expenses and costs
incurred by Collateral Agent in entering into this Amendment, including
attorney's fees.
10. COUNTERPARTS. This Amendment my be executed in one or more
counterparts (by original or facsimile signature), each of which shall be deemed
an original, but all of which together shall constitute one and the same
instrument.
11. ENTIRE AMENDMENT. This Amendment, and terms and provisions hereof,
constitute the entire agreement among the parties pertaining to the subject
matter hereof and supersedes any and all prior or contemporaneous amendments
relating to the subject matter hereof. Except as expressly amended hereby, the
Loan Agreement and other Loan Documents shall remain unchanged and in full force
and effect. To the extent any terms or provisions of this Amendment conflict
with those of the Loan Agreement or other Loan Documents, the terms and
provisions of this Amendment shall control. This Amendment is a Loan Document.
12. GOVERNING LAW. All issues concerning the enforceability, validity
and binding effect of this Amendment will be governed by and construed in
accordance with the laws of the State of New York without giving effect to any
choice of law or conflict of law provision or rule (whether of the State of New
York or any other state or jurisdiction) that would cause the application of the
law of any state or jurisdiction other than the State of New York. Any action
involving this Amendment or any dispute hereunder shall only be brought in the
state and federal courts residing in New York.
13. AMENDMENTS. This Amendment cannot be altered, amended, changed or
modified in any respect or particular unless each such alteration, amendment,
change or modification shall
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have been agreed to by each of the parties and reduced to writing in its
entirety and signed and delivered by each party.
14. MISCELLANEOUS.
(a) Upon the effectiveness of this Amendment, each reference
in the Loan Agreement to "this Agreement", "hereunder", "herein", "hereof" or
words of like import referring to the Loan Agreement shall mean and refer to the
Loan Agreement as amended by this Amendment.
(b) Upon the effectiveness of this Amendment, each reference
in the Loan Documents to the "Loan Agreement", "thereunder", "therein",
"thereof" or words of like import referring to the Loan Agreement shall mean and
refer to the Loan Agreement as amended by this Amendment.
[SIGNATURE PAGES TO FOLLOW]
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IN WITNESS WHEREOF, the undersigned have executed
this Amendment as of the date first above written.
QUESTRON TECHNOLOGY, INC., a Delaware
corporation
QUESTRON DISTRIBUTION LOGISTICS,
INC., a Delaware corporation
INTEGRATED MATERIAL SYSTEMS, INC.,
an Arizona corporation
POWER COMPONENTS, INC., a Pennsylvania
corporation
CALIFORNIA FASTENERS, INC., a California
corporation
COMP ▇▇▇▇, INC., a Delaware corporation
FAS-TRONICS, INC., a Texas corporation
FORTUNE INDUSTRIES, INC., a Texas
corporation
QUESTRON OPERATING COMPANY, INC., a
Delaware corporation
QUESTRON FINANCE CORP., a Delaware
corporation
ACTION THREADED PRODUCTS, INC., an
Illinois corporation
ACTION THREADED PRODUCTS OF
GEORGIA, INC., a Georgia corporation
ACTION THREADED PRODUCTS OF
MINNESOTA, INC., a Minnesota
corporation
CAPITAL FASTENERS, INC., a North Carolina
corporation
R.S.D. SALES CO. INC., a New York corporation
B&G SUPPLY COMPANY, INC., a Texas
corporation
By:
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Name:
-----------------------------------------
Title: Responsible Officer for each
of the above-listed Obligors
[signature pages continue]
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ABLECO FINANCE LLC, a Delaware
limited liability company, as
Collateral Agent and a Lender
By:
----------------------------------
Title:
-------------------------------
A2 FUNDING LP, as a Lender
By: A2 FUND MANAGEMENT LLC,
its General Partner
By:
----------------------
Title:
------------------
[signature pages continue]
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CONGRESS FINANCIAL CORPORATION
(FLORIDA), a Florida corporation, as
Administrative Agent and a Lender
By:
----------------------------------
Title:
-------------------------------
[signature pages continue]
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KZH ING-2 LLC, a Delaware limited liability
company, as a Lender
By:
----------------------------------------
Title:
-------------------------------------
KZH ING-3 LLC, a Delaware limited liability
company, as a Lender
By:
---------------------------------------
Title:
------------------------------------
ING HIGH INCOME PRINCIPAL
PRESERVATION FUND HOLDINGS, LDC,
as a Lender
By: ING Capital Advisors, Inc.,
as Investment Advisor
By__________________________
Its Authorized Signatory
[signature pages continue]
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MASSACHUSETTS MUTUAL LIFE
INSURANCE COMPANY, as a Lender
By:
--------------------------------------
Title:
SIMSBURY CLO LIMITED, as a Lender
By: Massachusetts Mutual Life Insurance
Company, as Collateral Agent
By:
-------------------------------
Title:
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EXHIBIT A
CERTIFICATE OF DESIGNATIONS FOR SERIES C PREFERRED STOCK
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EXHIBIT B
REAFFIRMATION AND CONSENT
All capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to them in that certain Waiver and
Amendment of Loan and Security Agreement, dated as of June __, 2001 (the
"Amendment"). The undersigned hereby (a) represents and warrants to the Lender
Group that the execution, delivery, and performance of this Reaffirmation and
Consent are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any material contract or undertaking to which it is a party or by
which any of its properties may be bound or affected; (b) consents to the waiver
of certain conditions and payment requirements of the Loan Agreement by the
Amendment; (c) acknowledges and reaffirms its obligations owing to the Lender
Group under the QTI Guaranty and any other Loan Documents to which it is a
party; and (d) agrees that each of the QTI Guaranty and any other Loan Documents
to which it is a party is and shall remain in full force and effect in
accordance with the terms thereof. Although the undersigned has been informed of
the matters set forth herein and has acknowledged and agreed to same, it
understands that the Lender Group has no obligations to inform it of such
matters in the future or to seek its acknowledgement or agreement to future
amendments, and nothing herein shall create such a duty. Delivery of an executed
counterpart of this Reaffirmation and Consent by telefacsimile shall be equally
as effective as delivery of an original executed counterpart of this
Reaffirmation and Consent. Any party delivering an executed counterpart of this
Reaffirmation and Consent by telefacsimile also shall deliver an original
executed counterpart of this Reaffirmation and Consent but the failure to
deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Reaffirmation and Consent. This
Reaffirmation and Consent shall be governed by the laws of the State of New
York, as more fully set forth in Section 20 of the QTI Guaranty.
QUESTRON TECHNOLOGY, INC.,
a Delaware corporation
By:________________________
Title:
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EXHIBIT C
REAFFIRMATION AND CONSENT
All capitalized terms used herein but not otherwise defined
herein shall have the meanings ascribed to them in that certain Waiver and
Amendment of Loan and Security Agreement, dated as of June __, 2001 (the
"Amendment"). The undersigned hereby (a) represents and warrants to the Lender
Group that the execution, delivery, and performance of this Reaffirmation and
Consent are within its corporate powers, have been duly authorized by all
necessary corporate action, and are not in contravention of any law, rule, or
regulation, or any order, judgment, decree, writ, injunction, or award of any
arbitrator, court, or governmental authority, or of the terms of its charter or
bylaws, or of any material contract or undertaking to which it is a party or by
which any of its properties may be bound or affected; (b) consents to the waiver
of certain conditions and payment requirements of the Loan Agreement by the
Amendment; (c) acknowledges and reaffirms its obligations owing to the Lender
Group under the QFC Guaranty and any other Loan Documents to which it is a
party; and (d) agrees that each of the QFC Guaranty and any other Loan Documents
to which it is a party is and shall remain in full force and effect in
accordance with the terms thereof. Although the undersigned has been informed of
the matters set forth herein and has acknowledged and agreed to same, it
understands that the Lender Group has no obligations to inform it of such
matters in the future or to seek its acknowledgement or agreement to future
amendments, and nothing herein shall create such a duty. Delivery of an executed
counterpart of this Reaffirmation and Consent by telefacsimile shall be equally
as effective as delivery of an original executed counterpart of this
Reaffirmation and Consent. Any party delivering an executed counterpart of this
Reaffirmation and Consent by telefacsimile also shall deliver an original
executed counterpart of this Reaffirmation and Consent but the failure to
deliver an original executed counterpart shall not affect the validity,
enforceability, and binding effect of this Reaffirmation and Consent. This
Reaffirmation and Consent shall be governed by the laws of the State of New
York, as more fully set forth in Section 20 of the QFC Guaranty.
QUESTRON FINANCE CORP.,
a Delaware corporation
By:
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Title:
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EXHIBIT D
FORM OF SUBORDINATED DEBT AMENDMENT
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