1
--------------------------------------------------------------------------------
EXHIBIT 10.47
QUESTRON TECHNOLOGY, INC.
QUESTRON OPERATING COMPANY, INC.
SECURITIES PURCHASE AGREEMENT
DATED AS OF NOVEMBER 9, 2000
$17,500,000 14.50% SERIES B SENIOR SUBORDINATED NOTES DUE JUNE 30, 2005 OF
QUESTRON OPERATING COMPANY, INC.
750,000 SHARES OF COMMON STOCK OF QUESTRON TECHNOLOGY, INC.
--------------------------------------------------------------------------------
2
TABLE OF CONTENTS PAGE
1. PURCHASE AND SALE OF SECURITIES.......................................1
1.1 Issue of Securities..........................................1
1.2 The Closing..................................................1
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........................................................5
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 Due Authorization; Enforceability...........................10
2.14 Governmental Consent to Sale of Purchased Securities........11
2.15 Xxxx-Xxxxx-Xxxxxx Compliance................................12
2.16 No Defaults.................................................12
2.17 Private Offering of Purchased Securities....................12
2.19 Use of Proceeds.............................................13
2.19 Capitalization..............................................13
2.20 Senior Credit Documents.....................................15
2.21 Solvency....................................................15
2.22 Full Disclosure.............................................15
3. REPRESENTATIONS OF THE PURCHASERS....................................16
3.1 Purchase for Investment.....................................16
3.2 ERISA.......................................................17
4. CLOSING CONDITIONS...................................................18
4.1 Opinions of Counsel.........................................19
4.2 Warranties and Representations True; Compliance.............19
4.3 Officers' Certificates......................................19
4.4 Organic Documents...........................................20
4.5 Legality....................................................20
4.6 Financing Documents.........................................20
4.7 Certain Consents and Agreements.............................21
4.8 Senior Debt.................................................21
4.9 Use of Proceeds; Prepayment of Senior Debt..................22
4.10 Offeree Letter..............................................22
4.11 Private Placement Numbers...................................22
4.12 Fees and Expenses...........................................22
4.13 Transaction Fee.............................................22
4.14 Other Purchasers............................................22
4.15 Proceedings Satisfactory....................................23
4.16 Side Letter.................................................23
i
3
5. INTERPRETATION OF THIS AGREEMENT.....................................23
5.1 Terms Defined...............................................23
5.2 Other Definitions...........................................25
5.3 Directly or Indirectly......................................25
5.4 Section Headings and Table of Contents and Construction.....26
5.5 Governing Law...............................................26
6. MISCELLANEOUS........................................................26
6.1 Communications..............................................26
6.2 Reproduction of Documents...................................27
6.3 Survival; Entire Agreement..................................27
6.4 Successors and Assigns......................................27
6.5 Amendment and Waiver........................................27
6.6 Expenses....................................................28
6.7 Waiver of Jury Trial; Consent to Jurisdiction; Etc..........28
6.8 Indemnification of Each Purchaser...........................29
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
ii
4
QUESTRON TECHNOLOGY, INC.
QUESTRON OPERATING COMPANY, INC.
SECURITIES PURCHASE AGREEMENT
17,500,000 14.50% SERIES B SENIOR SUBORDINATED NOTES DUE JUNE 30, 2005 OF
QUESTRON OPERATING COMPANY, INC.
750,000 SHARES OF COMMON STOCK OF QUESTRON TECHNOLOGY, INC.
Dated as of November 9, 2000
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 ALBION
ALLIANCE MEZZANINE FUND II, L.P., IBJ WHITEHALL BANK & TRUST COMPANY and EXETER
CAPITAL PARTNERS IV, L.P. (collectively, the "PURCHASERS") 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
Seventeen Million Five Hundred Thousand Dollars ($17,500,000) in
aggregate principal amount of its fourteen and fifty one-hundredths
percent (14.50%) Series B 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 seven hundred fifty thousand (750,000)
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.
1.2 THE CLOSING.
(a) PURCHASE AND SALE OF PURCHASED SECURITIES. The Company
hereby agrees to sell to each Purchaser, and each Purchaser, by its
execution and delivery of this Agreement, hereby agrees, severally and
not jointly, to purchase from the Company, in accordance with the
provisions hereof, the aggregate principal
5
amount of Notes set forth below such Purchaser's name on Annex 1 at the
purchase price for such Notes, equal to 93.57142% of the principal
amount of Notes to be purchased, set forth on Annex 1 hereto.
The Parent hereby agrees to sell to each Purchaser, and each
Purchaser, by its execution and delivery of this Agreement, hereby
agrees, severally and not jointly, to purchase from the Parent, in
accordance with the provisions hereof, the aggregate number of Common
Shares set forth below such Purchaser's name on Annex 1, at a purchase
price for Common Shares, equal to $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
November 9, 2000, or such other time and date as the Purchasers, the
Parent and the Company shall agree (the "CLOSING DATE"), at the office
of Xxxxxxx Xxxx LLP, Xxx Xxxxx Xxxxxx, 00xx Xxxxx, Xxxxxxxx,
Xxxxxxxxxxx 00000. At the Closing:
(i) the Company will deliver to each Purchaser one or
more Notes (as set forth below such Purchaser's name on Annex
1), in the denominations indicated on Annex 1, in the
aggregate principal amount of its purchase, dated the Closing
Date and registered in the name of the holder indicated on
Annex 1; and
(ii) the Parent will deliver to each Purchaser one or
more certificates (as set forth below such Purchaser's name on
Annex 1), representing the number of Common Shares indicated
below its name on Annex 1 and registered in the name of the
holder indicated 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) PURCHASES AND OTHER OBLIGATIONS SEVERAL. The sales of the
Purchased Securities to each Purchaser are separate and several sales.
All obligations of any Purchaser under this Agreement extend only to
that Purchaser and to no other Purchaser, and all such obligations are
several and not joint.
1.3 ORIGINAL ISSUE DISCOUNT.
The Parent and the Company and the Purchasers 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 One Hundred Twenty-Five Thousand Dollars ($1,125,000.00). The Parent,
the Company and each Purchaser agree to use the foregoing in preparing all
United States federal, state and local income tax returns and for all other
2
6
income tax purposes with respect to the transactions contemplated by the
Financing Documents.
2. WARRANTIES AND REPRESENTATIONS OF THE ISSUERS
To induce each Purchaser to enter into this Agreement and to purchase
and pay for the Purchased Securities to be delivered to such Purchaser 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 use of the proceeds thereof, as follows:
2.1 NATURE OF BUSINESS.
The management presentations to investors (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. The Parent has provided each
Purchaser with the consolidated financial statements of the Parent and
the Subsidiaries 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 and the Subsidiaries as of the
respective dates specified therein and the results of their
consolidated operations and cash flows for the respective periods so
specified in conformity with GAAP applied on a consistent basis
throughout the periods involved.
(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 and the use of the proceeds thereof, and provides the
following information with respect to each 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 and the use of the proceeds
thereof, 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
3
7
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) OF
ANNEX 3.
(e) MATERIAL ADVERSE CHANGE. Since December 31, 1999, 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 each Purchaser
projected financial statements of the Issuers contained in the Offering
Memorandum and those specified in PART 2.2(F) OF ANNEX 3 (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;
(ii) its jurisdiction of incorporation or
organization; and
(iii) the percentage of the Voting Stock which is
held by the Parent and each other Subsidiary.
All of the Capital Stock of each Subsidiary is owned, directly or
indirectly through another Subsidiary, by the Parent.
(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.
4
8
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 an Issuer 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
xxxx, 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 xxxx, trademark, trade name or
other right owned or used by an Issuer or any Subsidiary; and
(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
5
9
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 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;
(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
6
10
(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 nor any 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:
(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;
7
11
(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 each
Purchaser and the Purchasers' special counsel.
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.
8
12
(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 the
representations of each Purchaser and that of its respective
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 such
Purchaser and, in the event that such Purchaser's representation is
made pursuant to Section 3.2(a) hereof, assuming that PTCE 95-60
applies to exempt such Purchaser's 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:
9
13
(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;
(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 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.
10
14
(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
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.
2.14 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 2.14(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.
11
15
2.15 XXXX-XXXXX-XXXXXX COMPLIANCE.
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
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:
(a) fifteen percent (15%) or more of the total number of
shares of the outstanding Common Stock of the Company; or
(b) 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.
2.16 NO DEFAULTS.
No event has occurred and no condition exists that, upon the execution
and delivery of the Financing 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 Financing Document or Senior
Credit Document.
2.17 PRIVATE OFFERING OF PURCHASED SECURITIES.
(a) NUMBER OF OFFEREES. Neither any Obligor, CIBC Xxxxxxxxxxx
(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 the
Purchasers and the other institutional investors listed on PART
2.15(B)(II)(A) OF ANNEX 3, each of whom was offered all or a portion of
the Purchased Securities at private sale for investment.
(b) CONDUCT OF SALE. Assuming the accuracy of
(i) each Purchaser's representations and warranties
contained in this Agreement; and
(ii) 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 any Purchaser in
12
16
accordance herewith to qualify the Notes under the Trust Indenture Act
of 1939, as amended. In the case of each offer or sale to the
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 Xxxxxxxxxxx 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.
2.18 USE OF PROCEEDS.
(a) USE OF PROCEEDS. The Company shall have applied the
proceeds received in connection with the transactions contemplated by
the Financing Documents to reduce the outstanding balance under its
Revolving Credit Facility and to pay transaction expenses associated
with the transactions contemplated by this Agreement.
(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.
(c) 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.
2.19 CAPITALIZATION.
(a) CAPITALIZATION OF THE COMPANY. PART 2.19(A) OF ANNEX 3
correctly sets forth, after giving effect to the issuance of the
Purchased Securities, use of proceeds thereof 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 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;
13
17
(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 2.15(C) 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 granted by the
Company similar in nature to preemptive rights with respect to any
Capital Stock of the Company.
(b) CAPITALIZATION OF THE PARENT. PART 2.15(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 created by the Issuers, and with respect to the
Common Shares only, are free and clear of any Lien known to the
Issuers. (other than as specified on PART 2.19(B) OF ANNEX 3). Except
as specified on PART 2.19(B) OF ANNEX 3, there are no preemptive
rights, subscription rights, or other contractual rights granted by the
Company similar in nature to preemptive rights with respect to any
Capital Stock of the Parent.
14
18
(c) STOCKHOLDERS AGREEMENTS. Other than as specified on PART
2.19(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 each Purchaser and the Purchasers' special counsel with true,
accurate and complete copies of all agreements referred to in PART
2.19(C) OF ANNEX 3.
2.20 SENIOR CREDIT DOCUMENTS.
The Issuers have provided to each Purchaser and the Purchasers' special
counsel 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.
2.21 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
consummated on the Closing Date and the use of proceeds thereof, 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.
(b) MEETING LIABILITIES. After giving effect to the
transactions contemplated by the Financing Documents and all existing
Debt and other obligations of the Company, 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.
2.22 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 any Purchaser 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
15
19
contained therein and herein, taken as a whole, not misleading. There is no fact
that the Issuers have not disclosed to each Purchaser 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 PURCHASERS
3.1 PURCHASE FOR INVESTMENT.
Each Purchaser, as to itself only, acknowledges that the Notes and
Common Shares sold hereunder are "restricted securities" as that term is defined
in Rule 144 under the Securities Act. Each Purchaser represents, as to itself
only, to the Issuers that such Purchaser and any account maintained by such
Purchaser for whose account it is 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. Each Purchaser further
represents to the Issuers that it is purchasing the Purchased Securities listed
on Annex 1 below its name for such Purchaser's own account, or for the account
of one or more separate accounts maintained by such Purchaser, 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 the right of such Purchaser or account
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
(b) have control over the disposition of all of the assets of
such Purchaser or account to the fullest extent required by any
applicable law; provided that such disposition complies with applicable
law.
Each Purchaser acknowledges receipt of the Offering Memorandum and
further acknowledges that such Purchaser has been afforded the opportunity to
ask such questions as it has 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 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
2.13(a), Section 2.14 and Section 2.17, the Company is relying, to the extent
applicable, upon the representation as aforesaid.
16
20
3.2 ERISA.
Each Purchaser, as to itself only, represents that at least one of the
following statements is an accurate representation as to each source of funds (a
"SOURCE") to be used by such Purchaser to pay the purchase price of the
Purchased Securities:
(a) GENERAL ACCOUNT - such Purchaser is 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 the state of domicile of such Purchaser 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, such Purchaser has 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 such Purchaser in writing
and with respect to which the Issuers hereby warrant and
represent that, as of the Closing Date, neither the Issuers
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
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
17
21
(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 Issuers 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
Issuers 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
2.13(a), Section 2.14 and Section 2.11(e), the Company is relying, to the extent
applicable, upon the aforesaid representation.
4. CLOSING CONDITIONS
The obligations of each Purchaser 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 each Purchaser, at
its own election, of all such obligations.
18
22
4.1 OPINIONS OF COUNSEL.
Each Purchaser shall have received from:
(a) Arent Fox Xxxxxxx Xxxxxxx & Xxxx, PLLC, special counsel
for the Obligors; and
(b) Xxxxxxx Xxxx LLP, the Purchasers' 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 any Purchaser 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 each Purchaser.
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.
Each Purchaser 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
23
(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.
Each Purchaser 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 insurance companies under applicable insurance law (without
regard to any "basket" or "leeway" provisions), and the acquisition thereof
shall not subject any Purchaser to any penalty or other onerous condition
pursuant to any such law or regulation, and each Purchaser shall have received
such evidence as it 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 each Purchaser 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).
20
24
(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).
4.7 CERTAIN CONSENTS AND AGREEMENTS.
(a) 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
the Purchasers and the Purchasers' 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 each Purchaser a consent, in form and
substance acceptable to each Purchaser and the Purchasers' special counsel, to
the transactions contemplated by the Financing Documents:
(i) 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;
(ii) 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;
(iii) permitting each Affiliate Guarantor to enter into and
have outstanding its obligations in respect, of the Affiliate Guaranty;
and
(iv) 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.
(b) OMNIBUS AMENDMENT. An Omnibus Amendment in form and substance
satisfactory to the Purchasers shall have been executed and delivered to each
Purchaser.
4.8 SENIOR DEBT.
(a) SENIOR CREDIT DOCUMENTS. The Company shall deliver to each
of the Purchasers and the Purchasers' special counsel a copy of the
Senior Credit Documents, together with all amendments thereto through
and including the Closing Date, certified as true and correct by an
officer of the Company. Pursuant to the Senior Credit Documents, after
giving effect to the application of the proceeds of the sale of the
Purchased Securities to prepayment of outstanding Senior Debt, the
Company shall have the ability to borrow under a commitment of not less
than Twenty-Two Million Five Hundred Thousand Dollars ($22,500,000.00)
under a revolving credit facility, the borrowing base conditions to
which shall have been satisfied.
(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.
21
25
(c) CONSENTS FROM SENIOR LENDERS. The Purchasers shall have
received a satisfactory consent from the Senior Lenders and the holders
of the June 1999 Notes.
4.9 USE OF PROCEEDS; PREPAYMENT OF SENIOR DEBT.
The Company shall have applied the proceeds received in connection with
the transactions contemplated by the Financing Documents to reduce the
outstanding balance under its Revolving Credit Facility and to pay transaction
expenses associated with the transactions contemplated by this Agreement.
4.10 OFFEREE LETTER.
The Company shall have caused CIBC Xxxxxxxxxxx to deliver to the
Issuers, their special counsel and the Purchasers' special counsel an offeree
letter, in form and substance reasonably satisfactory to each of the Purchasers
and the Purchasers' special counsel, confirming the manner of the offering of
the Purchased Securities by CIBC Xxxxxxxxxxx.
4.11 PRIVATE PLACEMENT NUMBERS.
The Company shall have obtained or caused to be obtained a 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 XxXxxx-Xxxx, Inc. and
each of the Purchasers and the Purchasers' special counsel shall have been
informed of such private placement and CUSIP numbers.
4.12 FEES AND EXPENSES.
All fees and disbursements required to be paid pursuant to Section 6.6
shall have been paid in full.
4.13 TRANSACTION FEE.
The Company shall have paid to each 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 Three Hundred Fifty Thousand
Dollars ($350,000).
4.14 OTHER PURCHASERS.
With respect to each Purchaser, no other Purchaser 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.
22
26
4.15 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 each Purchaser and the Purchasers' special counsel. Each
Purchaser and the Purchasers' special counsel shall have received copies of such
documents and papers as they may reasonably request in connection therewith or
in connection with the Purchasers' special counsel's closing opinion, all in
form and substance satisfactory to the Purchasers and the Purchasers' special
counsel.
4.16 SIDE LETTER.
The Company shall have reached an agreement with certain Purchasers
relating to SBIC matters.
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:
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.
23
27
FINANCING DOCUMENTS - means and includes this Agreement, 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).
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.
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 - the introductory paragraph.
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.
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.
24
28
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 that 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.
5.2 OTHER DEFINITIONS.
The following terms shall have the respective meanings ascribed to such
terms in the Note Agreement:
Affiliate Insignificant Subsidiary
Capital Stock Investment
Debt IRC
Default Lien
DOL Material Adverse Effect
Environmental Protection Law Multiemployer Plan
ERISA Person
ERISA Affiliate Plan
Event of Default Property
Exchange Act Restricted Investment
Fair Market Value Right
Finance Securities Act
Foreign Pension Plan Security
GAAP Senior Agent
Governmental Authority Senior Credit Agreement
Guaranties Senior Lender
Hazardous Materials 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.
25
29
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.
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).
26
30
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 any Purchaser at the closing of the 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
each of the Purchasers and shall survive the delivery to the Purchasers of the
Purchased Securities regardless of any investigation made by the Purchasers or
on behalf of any of them. 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 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
any Purchaser or its successors or assigns. 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 each
Purchaser.
27
31
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 any of the Purchasers relating hereto,
including, without limitation, all reasonable fees and disbursements of the
Purchasers' special counsel, and all reasonable expenses incurred by or on
behalf of any Purchaser or 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 the Purchasers' 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
the Purchasers' 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 the Purchasers'
special counsel rendered after the Closing in connection with the
issuance of the Purchased Securities.
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
28
32
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 AGREEMENT 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.
(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 the other rights and remedies against the Issuers, the Issuers,
jointly and severally, agree to indemnify and hold harmless each Purchaser and
each of its directors, officers, partners, trustees, employees, agents,
investment advisors and affiliates (collectively, the "INDEMNIFIED PARTIES")
against any and all claims (whether valid or not), losses, damages,
29
33
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 the foregoing losses, damages, costs and expenses
shall be payable as and when incurred upon demand of any Indemnified Party.
Without limiting the generality of the foregoing, each such indemnified Persons
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 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 the Purchaser's 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;
(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
30
34
(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.]
31
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed on their behalf as of the date first above written.
QUESTRON TECHNOLOGY, INC.
QUESTRON OPERATING COMPANY, INC.
By:________________________________
Name:
Title:
ALBION ALLIANCE MEZZANINE FUND II, L.P.
By: AA MEZZ II GP, LLC, its General Partner
By: Albion Alliance LLC , its Sole Member
By:________________________________
Name:
Title:
IBJ WHITEHALL BANK & TRUST COMPANY
By:________________________________
Name:
Title:
EXETER CAPITAL PARTNERS IV, L.P.
By: Exeter IV Advisors, L.P.
By: Exeter IV Advisors, Inc.
By:________________________________
Name:
Title
[Signature Page to Securities Purchase Agreement]
36
ANNEX 1
INFORMATION AS TO PURCHASERS
====================================================================================================================
PURCHASER NAME ALBION ALLIANCE MEZZANINE FUND II, L.P.
--------------------------------------------------------------------------------------------------------------------
Name in Which Note is Registered ALBION ALLIANCE MEZZANINE FUND II, L.P.
--------------------------------------------------------------------------------------------------------------------
Note Registration Number; Principal S-1; $10,000,000
Amount of Note
--------------------------------------------------------------------------------------------------------------------
Purchase Price of Notes $9,357,143.50
--------------------------------------------------------------------------------------------------------------------
Number of Common Shares 428,571
--------------------------------------------------------------------------------------------------------------------
Purchase Price of Shares $642,856.50
--------------------------------------------------------------------------------------------------------------------
Payments on Account of Note
Method Federal Funds Wire Transfer
Account Information for transaction fees:
Albion Alliance LLC
IBJ Xxxxxxxx Bank & Trust Co.
ABA # 000-000-000
A/C 01098103
for interest and principal payments:
Albion Alliance Mezzanine Fund II, X.X.
Xxxxx Manhattan Bank
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX
ABA # 000-000-000
Acct. # 323-216528
Re: (See "Accompanying Information" below)
--------------------------------------------------------------------------------------------------------------------
Accompanying Information Name of Company: Questron Operating Company, Inc.
Description of
Security: 14.5% Series B Senior Subordinated Notes
due June 30, 2005
PPN: 74837# AB 6
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
--------------------------------------------------------------------------------------------------------------------
Address for Notices Related to Alliance Capital Management LP
Payments 000 Xxxxx Xxxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Attn: Xx. Xxxxx Xxxxx, 6th Floor
--------------------------------------------------------------------------------------------------------------------
Address for All Other Notices Albion Alliance LLC
0000 Xxxxxx xx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxx X. Xxxxxx
====================================================================================================================
Annex 1-1
37
====================================================================================================================
PURCHASER NAME ALBION ALLIANCE MEZZANINE FUND II, L.P.
--------------------------------------------------------------------------------------------------------------------
Other Instructions ALBION ALLIANCE MEZZANINE FUND II, L.P.
By: AA MEZZ II GP, LLC, its General Partner
By: Albion Alliance LLC , its Sole Member
By:________________________________
Name:
Title:
--------------------------------------------------------------------------------------------------------------------
Instructions re Delivery of Note Equitable Life Assurance Society of the U.S.
1290 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xx. Xxxxx Xxxxxx
--------------------------------------------------------------------------------------------------------------------
Tax Identification Number 00-0000000
====================================================================================================================
Annex 1-2
38
====================================================================================================================
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
--------------------------------------------------------------------------------------------------------------------
Note Registration Number; Principal S-2; $4,000,000
Amount of Note
--------------------------------------------------------------------------------------------------------------------
Purchase Price of Notes $3,742,856.50
--------------------------------------------------------------------------------------------------------------------
Number of Common Shares 171,429
--------------------------------------------------------------------------------------------------------------------
Purchase Price of Shares $257,143.50
--------------------------------------------------------------------------------------------------------------------
Payments on Account of Note
Method Federal Funds Wire Transfer
Account Information IBJ Whitehall Bank & Trust Company
ABA No. 000-000-000
Attn: Commercial Loan Department
Xxxxxxx Xxxxx
--------------------------------------------------------------------------------------------------------------------
Accompanying Information Name of Company: Questron Operating Company, Inc.
Description of
Security: 14.5% Series B Senior Subordinated Notes
due June 30, 2005
PPN: 74837# AB 6
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
--------------------------------------------------------------------------------------------------------------------
Address for Notices Related to IBJ Whitehall Bank & Trust Company
Payments Xxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx
Tel: 000-000-0000
--------------------------------------------------------------------------------------------------------------------
Address for All Other Notices IBJ Whitehall Bank & Trust Company
Xxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx-Xxxxx Xxxxxx
Tel: 000-000-0000
Attn: Xxxxxx Xxxxxx
Tel: 000-000-0000
--------------------------------------------------------------------------------------------------------------------
Other Instructions: IBJ WHITEHALL BANK & TRUST COMPANY
By:__________________________
Name:
Title:
====================================================================================================================
Annex 1-3
39
====================================================================================================================
PURCHASER NAME IBJ WHITEHALL BANK & TRUST COMPANY
--------------------------------------------------------------------------------------------------------------------
Instructions re Delivery of IBJ Whitehall Bank & Trust Company
Securities Xxx Xxxxx Xxxxxx, 0xx Xxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx-Xxxxx Xxxxxx
Tel: 000-000-0000
Attn: Xxxxxx Xxxxxx
Tel: 000-000-0000
--------------------------------------------------------------------------------------------------------------------
Tax Identification Number 000000000
====================================================================================================================
Annex 1-4
40
====================================================================================================================
PURCHASER NAME EXETER CAPITAL PARTNERS IV, L.P.
--------------------------------------------------------------------------------------------------------------------
Name in Which Note is Registered Exeter Capital Partners IV, L.P.
--------------------------------------------------------------------------------------------------------------------
Note Registration Number; Principal S-3; $3,500,000
Amount of Note
--------------------------------------------------------------------------------------------------------------------
Purchase Price of Notes $3,275,000.00
--------------------------------------------------------------------------------------------------------------------
Number of Common Shares 150,000
--------------------------------------------------------------------------------------------------------------------
Purchase Price of Shares $225,000.00
--------------------------------------------------------------------------------------------------------------------
Payments on Account of Note
Method Federal Funds Wire Transfer
Account Information for transaction fees:
Chase Manhattan Bank 00 X. 00xx Xxxxxx
Xxx Xxxx, XX 00000 ABA # 000-000-000
Acct. # 0000-000-00000
Acct. Name: Exeter Venture Management Corporation
for interest and principal payments:
Chase Manhattan Bank
000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
ABA # 000-000-000
Acct. # 13-409-0025-865
Acct. Name: Exeter Capital Partners IV, L.P.
--------------------------------------------------------------------------------------------------------------------
Accompanying Information Name of Company: Questron Operating Company, Inc.
Description of
Security: 14.5% Series B Senior Subordinated Notes
due June 30, 2005
PPN: 74837# AB 6
Due Date and Application (as among
principal, Make-Whole Amount and
interest) of the payment being made:
--------------------------------------------------------------------------------------------------------------------
Address for All Other Notices Exeter Capital Partners IV, LP
00 X. 00xx Xx.
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx Xxx
--------------------------------------------------------------------------------------------------------------------
Other Instructions: Exeter Capital Partners IV, L.P.
By: Exeter IV Advisors, L.P.
By: Exeter IV Advisors, Inc.
By:__________________________
Name: Xxxxx X. Xxx
Title: President
====================================================================================================================
Annex 1-5
41
====================================================================================================================
PURCHASER NAME EXETER CAPITAL PARTNERS IV, L.P.
--------------------------------------------------------------------------------------------------------------------
Instructions re Delivery of Exeter Capital Partners IV, LP
Securities 00 X. 00xx Xx.
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx Xxx
--------------------------------------------------------------------------------------------------------------------
Tax Identification Number 00-0000000
====================================================================================================================
Annex 1-6
42
ANNEX 2
PAYMENT INSTRUCTIONS AT CLOSING;
ADDRESS OF COMPANY FOR NOTICES
PAYMENTS FROM THE PURCHASERS WILL HEREBY BE MADE AS FOLLOWS:
ALBION ALLIANCE MEZZANINE FUND II, L.P.
Wire to Company....................................................$9,791,428.57
Wire to Xxxxxxx Xxxx LLP in respect of
Company's obligation to pay legal fees pursuant to
Section 6.6 of the Securities Purchase Agreement.......................28,571.43
Wire Transaction Fee from Albion Alliance Mezzanine Fund II,
L.P. to Albion Alliance LLC in respect of the Company's
Obligation to pay the Transaction Fee to Albion Alliance
Mezzanine Fund II, L.P.
(less $20,000 already paid)...........................................180,000.00
----------
10,000,000.00
IBJ WHITEHALL BANK & TRUST COMPANY
Wire to Company....................................................$3,908,571.43
Wire to Xxxxxxx Xxxx LLP in respect of
Company's obligation to pay legal fees pursuant to
Section 6.6 of the Securities Purchase Agreement.......................11,428.57
Retain in Respect of Transaction Fee...................................80,000.00
---------
4,000,000.00
EXETER CAPITAL PARTNERS IV, L.P.
Wire to Company....................................................$3,420,000.00
Wire to Xxxxxxx Xxxx LLP in respect of
Company's obligation to pay legal fees pursuant to
Section 6.6 of the Securities Purchase Agreement.......................10,000.00
Retain in Respect of Transaction Fee...................................70,000.00
---------
3,500,000.00
Annex 2-1
43
WIRING INSTRUCTIONS:
COMPANY
Congress Financial Corporation Florida
Chase Manhattan Bank
ABA # 000-000-000
Account # 000-000-000
Reference Questron Technology
XXXXXXX XXXX LLP
Sovereign Bank New England
Hartford, CT
ABA # 000-000-000
Account # 000-000-00000
Reference 718418/108394 GSH
ALBION ALLIANCE LLC
IBJ Xxxxxxxxx Bank & Trust Co.
ABA # 000-000-000
Account # 00000000
ADDRESS OF COMPANY FOR NOTICES:
Questron Operating Company, Inc.
0000 Xxxxxxxx Xxx., Xxxxx 0000
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attn: Xxxxxxx Xxxxxxxx
Chairman & CEO
Attn: Xxxxxx Xxxxxxxx
President & CFO
Annex 2-2
44
WIRING INSTRUCTIONS:
COMPANY
Congress Financial Corporation Florida
Chase Manhattan Bank
ABA # 02100000021
Account # 000-000-000
Reference Questron Technology
XXXXXXX XXXX LLP
Sovereign Bank New England
Hartford, CT
ABA # 000-000-000
Account # 000-000-00000
Reference 718418/108394 GSH
ALBION ALLIANCE LLC
IBJ Xxxxxxxxx Bank & Trust Co.
ABA # 000-000-000
Account # 00000000
ADDRESS OF COMPANY FOR NOTICES:
Questron Operating Company, Inc
0000 Xxxxxxxx Xxx., Xxxxx 0000
Xxxx Xxxxx, Xxxxxxx 00000
Telephone: 000-000-0000
Facsimile: 000-000-0000
Attn: Xxxxxxx Xxxxxxxx
Chairman & CEO
Xxxxxx Xxxxxxxx
President & CFO
Annex 2-3
45
ANNEX 3
PART 2.2(A)
QUESTRON TECHNOLOGY, INC. AND SUBSIDIARIES FINANCIAL STATEMENTS
Three months ended June 30, 2000
Consolidated Balance Sheet at June 30, 2000 (unaudited) and December 31, 1999
Consolidated Statement of Income (unaudited) for the Three Months and Six Months
Ended June 30, 2000 and 1999
Consolidated Statement of Cash Flows (unaudited) for the Six Months Ended
June 30, 2000 and 1999
Notes to Consolidated Financial Statements (unaudited)
Year ended December 31, 1999
Report of Independent Auditors
Consolidated Balance Sheet at December 31, 1999
Consolidated Statement of Income for the Years Ended December 31, 1999 and 1998
Consolidated Statement of Cash Flows for the Years Ended December 31, 1999
and 1998
Notes to Financial Statements
Annex 3-1
46
ANNEX 3
PART 2.2(B)
DEBT OF THE ISSUERS AND SUBSIDIARIES
BEFORE GIVING EFFECT TO THE TRANSACTIONS:
==========================================================================================================================
OBLIGOR GUARANTORS HOLDER OUT-STANDING CURRENT FINAL REQUIRED COLLATERAL
AND OTHERS AMOUNT PORTION OF MATURITY SINKING
SIMILARLY OUTSTANDING FUND
LIABLE AMOUNT PAYMENTS
==========================================================================================================================
The Parent Subsidiaries Lenders for $75.75 $2.5 million 09/24/03 N/A Substantially
of Parent whom Congress million all property
Financial Corp of Parent and
is agent under its
6/29/99 Loan subsidiaries
and Security
Agreement, as
amended
--------------------------------------------------------------------------------------------------------------------------
The Company Parent; Albion Alliance $7.2 $0 06/30/05 N/A None
indirect Mezzanine Fund million
Subsidiaries LP
of Parent
--------------------------------------------------------------------------------------------------------------------------
The Company Parent; Alliance $5.1 $0 06/30/05 N/A None
indirect Investment million
Subsidiaries Opportunity Fund
of Parent
--------------------------------------------------------------------------------------------------------------------------
The Company Parent; The Equitable $5.1 $0 06/30/05 N/A None
indirect Life Assurance million
Subsidiaries Society of the
of Parent United States
--------------------------------------------------------------------------------------------------------------------------
The Company Parent; IBJ Whitehall $3.1 $0 06/30/05 N/A None
indirect Bank & Trust Co. million
Subsidiaries
of Parent
--------------------------------------------------------------------------------------------------------------------------
Questron None Note payable $132,668 $75,000 03/2002 N/A None
Distribution w/r/t Xxxx
Logistics, Inc. Acquisition (Xx
Xxxxxxxx)
--------------------------------------------------------------------------------------------------------------------------
The Parent None GE Capital $188,980 $72,131 12/2003 N/A Computer
(lease) equipment
--------------------------------------------------------------------------------------------------------------------------
California None Xxxxx Fargo $15,751 $12,000 06/2002 N/A Computer
Fasteners, Inc. (lease) equipment and
trucks
--------------------------------------------------------------------------------------------------------------------------
Comp Xxxx, Inc. None Siemens (lease) $6,892 $5,000 10/2001 N/A Phone system
--------------------------------------------------------------------------------------------------------------------------
The Parent None Amplicon $345,270 $127,890 09/2003 N/A Furniture &
Financial equipment
==========================================================================================================================
Annex 3-2
47
AFTER GIVING EFFECT TO THE TRANSACTIONS:
==========================================================================================================================
OBLIGOR GUARANTORS HOLDER OUT-STANDING CURRENT FINAL REQUIRED COLLATERAL
AND OTHERS AMOUNT PORTION OF MATURITY SINKING
SIMILARLY OUTSTANDING FUND
LIABLE AMOUNT PAYMENTS
==========================================================================================================================
The Company Guarantor the Purchasers $17.5 $0 6/30/05 N/A None
Subsidiaries million
--------------------------------------------------------------------------------------------------------------------------
The Parent Subsidiaries Lenders for $59.25 $2.5 million 09/24/03 N/A Substantially
of Parent whom Congress million all property
Financial Corp of Parent and
is agent under its
6/29/99 Loan subsidiaries
and Security
Agreement, as
amended
--------------------------------------------------------------------------------------------------------------------------
The Company Parent; Albion Alliance $7.2 $0 06/30/05 N/A None
indirect Mezzanine Fund million
Subsidiaries LP
of Parent
--------------------------------------------------------------------------------------------------------------------------
The Company Parent; Alliance $5.1 $0 06/30/05 N/A None
indirect Investment million
Subsidiaries Opportunity Fund
of Parent
--------------------------------------------------------------------------------------------------------------------------
The Company Parent; The Equitable $5.1 $0 06/30/05 N/A None
indirect Life Assurance million
Subsidiaries Society of the
of Parent United States
--------------------------------------------------------------------------------------------------------------------------
The Company Parent; IBJ Whitehall $3.1 $0 06/30/05 N/A None
indirect Bank & Trust Co. million
Subsidiaries
of Parent
--------------------------------------------------------------------------------------------------------------------------
Questron None Note payable $132,668 $75,000 03/2002 N/A None
Distribution w/r/t Xxxx
Logistics, Inc. Acquisition (Xx
Xxxxxxxx)
--------------------------------------------------------------------------------------------------------------------------
The Parent None GE Capital $188,980 $72,131 12/2003 N/A Computer
(lease) equipment
--------------------------------------------------------------------------------------------------------------------------
California None Xxxxx Fargo $15,751 $12,000 06/2002 N/A Computer
Fasteners, Inc. (lease) equipment and
trucks
--------------------------------------------------------------------------------------------------------------------------
Comp Xxxx, Inc. None Siemens (lease) $6,892 $5,000 10/2001 N/A Phone system
--------------------------------------------------------------------------------------------------------------------------
The Parent None Amplicon $345,270 $127,890 09/2003 N/A Furniture &
Financial equipment
==========================================================================================================================
Annex 3-3
48
ANNEX 3
PART 2.2(C)
LIENS OF THE ISSUES AND SUBSIDIARIES
BEFORE GIVING EFFECT TO THE TRANSACTIONS:
====================================================================================================================
HOLDER OUTSTANDING AMOUNT SECURED NATURE OF THE DEBT DESCRIPTION OF COLLATERAL
====================================================================================================================
Lenders for whom Congress $75.75 million senior credit facility Substantially all property
Financial Corp is agent of Parent and its
under 6/29/99 Loan and subsidiaries
Security Agreement, as
amended
--------------------------------------------------------------------------------------------------------------------
GE Capital (the Parent) $188,980 computer lease computer equipment
--------------------------------------------------------------------------------------------------------------------
Xxxxx Fargo (California $ 15,751 computer and truck lease computer equipment and
Fasteners, Inc.) trucks
--------------------------------------------------------------------------------------------------------------------
Siemens (Xxxx Distribution) $ 6,892 telephone system lease telephone system
--------------------------------------------------------------------------------------------------------------------
Amplicon Financial (Questron $ 345,270 furniture and equipment furniture and equipment
Technology, Inc.) lease
====================================================================================================================
AFTER GIVING EFFECT TO THE TRANSACTIONS:
====================================================================================================================
HOLDER OUTSTANDING AMOUNT SECURED NATURE OF THE DEBT DESCRIPTION OF COLLATERAL
====================================================================================================================
Lenders for whom Congress $56.5 million senior credit facility Substantially all property
Financial Corp is agent of Parent and its
under 6/29/99 Loan and subsidiaries
Security Agreement, as
amended
--------------------------------------------------------------------------------------------------------------------
Lenders for whom Congress $2.75 million ($22.5 revolving credit facility Substantially all property
Financial Corp is agent million undrawn) (forming part of the of Parent and its
under 6/29/99 Loan and senior credit facility), subsidiaries
Security Agreement, as including a sub-facility
amended of up to $2.5 million for
letters of credit
--------------------------------------------------------------------------------------------------------------------
GE Capital (the Parent) $188,980 computer lease computer equipment
--------------------------------------------------------------------------------------------------------------------
Xxxxx Fargo (California $ 15,751 computer and truck lease computer equipment and
Fasteners, Inc.) trucks
--------------------------------------------------------------------------------------------------------------------
Siemens (Xxxx Distribution) $ 6,892 telephone system lease telephone system
--------------------------------------------------------------------------------------------------------------------
Amplicon Financial (Questron $ 345,270 furniture and equipment furniture and equipment
Technology, Inc.) lease
====================================================================================================================
Annex 3-4
49
ANNEX 3
PART 2.2(G)
INVESTMENTS
None.
Annex 3-5
50
ANNEX 3
PART 2.3(A)
OWNERSHIP OF SUBSIDIARIES
====================================================================================================================
FULL LEGAL NAME JURISDICTION OF PERCENTAGE OF VOTING STOCK
INCORPORATION OR HELD BY PARENT AND EACH
ORGANIZATION OTHER SUBSIDIARY
====================================================================================================================
Questron Finance Corp. Delaware 100% by Parent
--------------------------------------------------------------------------------------------------------------------
Questron Operating Company, Inc. Delaware 100% by Questron Finance Corp.
--------------------------------------------------------------------------------------------------------------------
Questron Distribution Logistics, Inc. Delaware 100% by Questron Operating Company,
Inc.
--------------------------------------------------------------------------------------------------------------------
Fortune Industries, Inc. Texas 100% by Questron Distribution
Logistics, Inc.
--------------------------------------------------------------------------------------------------------------------
Fas-Tronics, Inc. Texas 100% by Questron Distribution
Logistics, Inc.
--------------------------------------------------------------------------------------------------------------------
California Fasteners, Inc. California 100% by Questron Distribution
Logistics, Inc.
--------------------------------------------------------------------------------------------------------------------
Comp Xxxx, Inc. (d/b/a Xxxx Distribution) Delaware 100% by Questron Distribution
Logistics, Inc.
--------------------------------------------------------------------------------------------------------------------
Action Threaded Products, Inc. Illinois 100% by Questron Distribution
Logistics, Inc.
--------------------------------------------------------------------------------------------------------------------
Capital Fasteners, Inc. North Carolina 100% by Questron Distribution
Logistics, Inc.
--------------------------------------------------------------------------------------------------------------------
R.S.D. Sales Co. Inc. New York 100% by Questron Distribution
Logistics, Inc.
--------------------------------------------------------------------------------------------------------------------
B & G Supply Company, Inc. Texas 100% by Questron Distribution
Logistics, Inc.
--------------------------------------------------------------------------------------------------------------------
Integrated Material Systems, Inc. Arizona 100% by Questron Operating Company,
Inc.
--------------------------------------------------------------------------------------------------------------------
Power Components, Inc. Pennsylvania 100% by Questron Operating Company,
Inc.
--------------------------------------------------------------------------------------------------------------------
Action Threaded Products of Georgia, Inc. Georgia 100% by Action Threaded Products,
Inc.
--------------------------------------------------------------------------------------------------------------------
Action Threaded Products of Minnesota, Inc. Minnesota 100% by Action Threaded Products,
Inc.
====================================================================================================================
In addition, the Parent owns, directly or indirectly, 100% of the voting stock
of two inactive subsidiaries: Power II, Inc. and Questnet Components, Inc.
Neither of those two corporations has any material assets.
Annex 3-6
51
ANNEX 3
PART 2.3(B)
AFFILIATES
=====================================================================================================================
NAME NATURE OF AFFILIATION
=====================================================================================================================
Questron Technology, Inc. Indirect owner (through Questron Finance Corp.) of 100% of the voting stock of
Questron Operating Company, Inc.
---------------------------------------------------------------------------------------------------------------------
Questron Finance Corp. Direct owner of 100% of the voting stock of Questron Operating Company, Inc.
---------------------------------------------------------------------------------------------------------------------
Questron Operating Company, Direct owner of 100% of the voting stock of Questron Distribution Logistics, Inc.
Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx Chairman, Chief Executive Officer, and Director of:
Questron Technology, Inc.
Questron Finance Corp.
Questron Operating Company, Inc.
Questron Distribution Logistics, Inc.
Comp Xxxx, Inc.
Integrated Material Systems, Inc.
Power Components, Inc.
California Fasteners, Inc.
Fas-Tronics, Inc.
Fortune Industries, Inc.
Capital Fasteners, Inc.
R.S.D. Sales Co. Inc.
B & G Supply Company, Inc.
Action Threaded Products, Inc.
Action Threaded Products of Georgia, Inc.
Action Threaded Products of Minnesota, Inc.
=====================================================================================================================
Annex 3-7
52
=====================================================================================================================
NAME NATURE OF AFFILIATION
=====================================================================================================================
Xxxxxx X. Xxxxxxxx President, Chief Financial Officer, Treasurer and Director of:
Questron Technology, Inc.
Questron Finance Corp.
Questron Operating Company, Inc.
Chief Financial Officer, Treasurer and Director of:
Questron Distribution Logistics, Inc.
Comp Xxxx, Inc.
Integrated Material Systems, Inc.
Power Components, Inc.
California Fasteners, Inc.
Fas-Tronics, Inc.
Fortune Industries, Inc.
Capital Fasteners, Inc.
R.S.D. Sales Co. Inc.
B & G Supply Company, Inc.
Action Threaded Products, Inc.
Action Threaded Products of Georgia, Inc.
Action Threaded Products of Minnesota, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxxxxxx X. London Director of Questron Technology, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. XxXxxxxx, Xx. Director of Questron Technology, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxx Vice President of Questron Technology, Inc.
Director of:
Questron Technology, Inc.
Questron Finance Corp.
Questron Operating Company, Inc.
Questron Distribution Logistics, Inc.
Comp Xxxx, Inc.
Integrated Material Systems, Inc.
Power Components, Inc.
California Fasteners, Inc.
Fas-Tronics, Inc.
Fortune Industries, Inc.
Capital Fasteners, Inc.
R.S.D. Sales Co. Inc.
B & G Supply Company, Inc.
Action Threaded Products, Inc.
Action Threaded Products of Georgia, Inc.
Action Threaded Products of Minnesota, Inc.
=====================================================================================================================
Annex 3-8
53
=====================================================================================================================
NAME NATURE OF AFFILIATION
=====================================================================================================================
Xxx Xxxxxx Secretary of:
Questron Technology, Inc.
Questron Finance Corp.
Questron Operating Company, Inc.
Questron Distribution Logistics, Inc.
Comp Xxxx, Inc.
Integrated Material Systems, Inc.
Power Components, Inc.
California Fasteners, Inc.
Fas-Tronics, Inc.
Fortune Industries, Inc.
Capital Fasteners, Inc.
R.S.D. Sales Co. Inc.
B & G Supply Company, Inc.
Action Threaded Products, Inc.
Action Threaded Products of Georgia, Inc.
Action Threaded Products of Minnesota, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxx Director of Questron Technology, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxxxx Vice President of Questron Technology, Inc.
Western Regional Vice President of Questron Distribution Logistics, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxx Vice President of Questron Technology, Inc.
President and Director of Integrated Material Systems, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxxxxxxxx X. Xxxxxxxx Controller of:
Questron Technology, Inc.
Questron Finance Corp.
Questron Operating Company, Inc.
Questron Distribution Logistics, Inc.
Comp Xxxx, Inc.
Integrated Material Systems, Inc.
Power Components, Inc.
California Fasteners, Inc.
Fas-Tronics, Inc.
Fortune Industries, Inc.
Capital Fasteners, Inc.
R.S.D. Sales Co. Inc.
B & G Supply Company, Inc.
Action Threaded Products, Inc.
Action Threaded Products of Georgia, Inc.
Action Threaded Products of Minnesota, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxxx President of Comp Xxxx, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxxxx President of Power Components, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxxxx Xxxxxxxxxx President of Fas-Tronics, Inc.
=====================================================================================================================
Annex 3-9
54
=====================================================================================================================
NAME NATURE OF AFFILIATION
=====================================================================================================================
Xxxxxxx Xxxxxxx Vice President of Questron Technology, Inc.
President of Fortune Industries, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxxx X. Xxxxxxxxx President of Capital Fasteners, Inc.
---------------------------------------------------------------------------------------------------------------------
Xxxx X. Xxxxxx President of:
Action Threaded Products, Inc.
Action Threaded Products of Georgia, Inc.
Action Threaded Products of Minnesota, Inc.
=====================================================================================================================
Annex 3-10
55
ANNEX 3
PART 2.4(C)
INTELLECTUAL PROPERTY
None.
Annex 3-11
56
ANNEX 3
PART 2.9(B)
AGREEMENTS RESTRICTING THE RIGHT TO INCUR DEBT
1. The Senior Credit Documents.
2. $20 million Senior Subordinated Debt.
Annex 3-12
57
ANNEX 3
PART 2.9(D)
RESTRICTIONS ON DIVIDENDS AND THE INCURRENCE OF DEBT
1. The Senior Credit Documents.
2. $20 million Senior Subordinated Debt.
Annex 3-13
58
ANNEX 3
ENVIRONMENTAL COMPLIANCE
PART 2.12(A)
None.
PART 2.12(B)
None.
PART 2.12(C)
None.
Annex 3-14
59
ANNEX 3
PART 2.14(A)
GOVERNMENTAL CONSENTS
None.
Annex 3-15
60
ANNEX 3
PART 2.17(A)
OFFEREES OF PURCHASED SECURITIES
Albion Alliance Mezzanine Fund, L.P.
IBJ Whitehall Bank & Trust Company
Exeter Capital Partners IV, L.P.
Annex 3-16
61
ANNEX 3
PART 2.19(A)
CAPITALIZATION OF QUESTRON OPERATING COMPANY, INC.
(i) The authorized Capital Stock and other securities of the Company
consists of 1000 shares of voting Common Stock.
The outstanding Capital Stock and other securities of the Company
consists of 1000 shares of voting Common Stock.
(ii) 100% of the Common Stock of the Company is owned by Questron Finance
Corp. which, in turn, is wholly owned by the Parent.
(iii) None.
(iv) None.
Annex 3-17
62
ANNEX 3
PART 2.19(B)
CAPITALIZATION OF QUESTRON TECHNOLOGY, INC.
(i) The authorized and outstanding shares of Capital Stock and other
Securities of the Parent is:
======================================================================================================================
CLASS NUMBER OF SHARES ISSUED VOTING OR NUMBER OF SHARES AUTHORIZED BUT
AND OUTSTANDING NON-VOTING UNISSUED
======================================================================================================================
common stock, par value $0.001 8,493,404 Voting 11,506,596
per share
----------------------------------------------------------------------------------------------------------------------
preferred stock 0 10,000,000
======================================================================================================================
(ii) Beneficial holders of more than 5% of Parent's Common Stock
(percentages do not give effect to Closing Date transactions):
======================================================================================================================
NAME SHARES WARRANTS OPTIONS TOTAL OWNERSHIP
======================================================================================================================
Xxxxxxx Xxxxxxxx 144,821 500,000 576,265 1,221,086 7.9%
----------------------------------------------------------------------------------------------------------------------
The Xxxxxxxx Family 130,137 500,000 576,265 1,206,402 7.8%
----------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxxxxxxx 113,339 250,000 560,000 923,339 6.0%
----------------------------------------------------------------------------------------------------------------------
Xxxx Xxxxx 563,037 0 324,621 887,658 5.7%
======================================================================================================================
(iii) The Rights of the Parent are as follows:
A. Series IV Warrants to issue 3,998,000 shares of common stock
at $5.75 exercisable currently through March 4, 2002;
B. 2,065,000 Performance Options are held by affiliates and
employees. The strike prices of the Options are as follows:
(i) 166,667 options at $7.75 and (ii) 1,898,333 at $4.50;
C. Approximately 120,000 unissued shares of restricted Common
Stock have been reserved by Parent in connection with the
acquisitions of Action Threaded Products, Inc. and Olympic
Fasteners and Electronic Hardware;
E. 264,000 Stock Options are held by affiliates. The strike
prices of the Options are as follows: (i) 30,000 at $3.75;
(ii) 90,000 at $6.00; (iii) 50,000 at $4.50; (iv) 10,000 at
$4.89; (v) 30,000 at $4.00; and (vi) 54,000 at prices between
$3.875 and $8.250;
F. 1,003,033 Employee Stock Options are held by employees. The
strike prices of the Options are as follows: (i) 30,000 at
$6.00; (ii) 10,300 at $4.80; (iii) 74,000 at $6.625; (iv)
355,551 at $3.56; and (v) 533,182 unissued options under the
1996 Employee Stock Option Plan; and
Annex 3-18
63
G. A Shareholders' Rights Plan, by and between Questron
Technology, Inc. and American Stock Transfer & Trust Company,
as rights agent, was approved by Questron Technology, Inc.'s
Board of Directors on September 22, 1998.
(iv) There are no obligations of the Parent to repurchase or otherwise
acquire or retire any shares of Capital Stock or Rights of the Parent,
other than the put agreement in place with the former shareholders of
California Fasteners, Inc. and R.S.D. Sales Co. Inc. as disclosed in
the consolidated financial statements included in the Parent's Annual
Report on Form 10-K for 1999.
The Issuers have not imposed any Liens on the outstanding shares of Capital
Stock of the Parent.
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
Parent.
Annex 3-19
64
ANNEX 3
PART 2.20(C)
STOCKHOLDERS AGREEMENTS
None.
Annex 3-20
