EXCHANGE AGREEMENT
Exchange Agreement (this "Agreement") entered into as of the 8th day
of November, 1996 by and among Questron Technology, Inc., a Delaware
corporation (the "Company"), Gulfstream Financial Group, Inc., a Florida
corporation ("Gulfstream"), and Xxxxxxx X. Xxxxxxxxxx, an individual resident
in California ("Xxxxxxxxxx").
W I T N E S S E T H :
WHEREAS, the Company and Gulfstream are party to a Management Advisory
and Consulting Agreement dated as of November 29, 1994 (the "Management
Agreement") pursuant to which Gulfstream will be entitled to acquire warrants
to purchase shares of the Company's common stock for $0.10 per share upon the
satisfaction of certain performance targets; and
WHEREAS, a wholly owned subsidiary of the Company and Xxxxxxxxxx are
party to an Employment Agreement dated as of November 29, 1994 (the "Employment
Agreement") pursuant to which Xxxxxxxxxx will be entitled to acquire warrants
to purchase shares of the Company's common stock for $0.10 per share upon the
satisfaction of certain performance targets; and
WHEREAS, the parties desire to amend the Management Agreement and the
Employment Agreement in the manner hereinafter set forth;
NOW, THEREFORE, for good and valuable consideration, the adequacy and
receipt of which are hereby acknowledged by all of the parties hereto, it is
agreed as follows:
1. Amendment of Management Agreement. The Management Agreement is
hereby amended by deleting Schedule A thereto in its entirety and substituting
the annexed Amended Schedule A to Management Agreement in lieu therefor.
2. Amendment of Employment Agreement. The Employment Agreement is
hereby amended by deleting Schedule A thereto in its entirety and substituting
the following annexed Amended Schedule A to Employment Agreement in lieu
therefor.
3. Option and Warrant Agreements. The Company shall enter appropriate
option agreements substantially in the form of Exhibit I annexed hereto with
Gulfstream and Xxxxxxxxxx to evidence the options granted hereunder. In the
event that any of the performance options referred to on the aforementioned
schedules are earned, the Company shall enter into appropriate option
agreements in substantially the same form. The Company shall also enter into
temporary warrant agreements substantially in the form of Exhibit II annexed
hereto. In the event that the Company consummates the proposed public offering
of units consisting of Series B Convertible Preferred Stock ("Series B
Preferred Stock") and Series IV Common Stock Purchase Warrants
("Series IV Warrants"), the Company shall substitute Series IV Warrant
certificates in the form issued to the public in connection with such public
offering for the temporary warrant agreements in the form of Exhibit II. In the
event that such public offering is not consummated, the temporary warrant
agreements in the form of Exhibit II shall remain in effect until the
expiration thereof.
4. Full Force and Effect. This Agreement shall be subject to the
consummation of the Company's proposed one-for-ten reverse split of its issued
and outstanding Common Stock as soon as practicable following its 1996 Annual
Meeting of Stockholders. Except as expressly set forth herein, the Management
Agreement and the Employment Agreement shall remain in full force and effect.
5. Entire Agreement. This Agreement, together with the exhibits and
schedules hereto and the Management Agreement and the Employment Agreement,
shall constitute the entire agreement of the parties relating to the subject
matter hereof and thereof and supersedes any prior understandings or agreements
relating to such subject matter. No provision of this Agreement may be amended
or waived except by a writing signed by the party sought to be charged.
IN WITNESS WHEREOF, the parties have executed or caused to be executed
on their behalves this Agreement as of the date first above written.
QUESTRON TECHNOLOGY, INC. GULFSTREAM FINANCIAL GROUP, INC.
By /s/ XXXXXX X. XXXXX By /s/ XXXXXXX X. XXXXXXXX
-------------------------- --------------------------
Treasurer President
/s/ XXXXXXX X. XXXXXXXXXX
--------------------------
Xxxxxxx X. Xxxxxxxxxx
-2-
AMENDED SCHEDULE A
TO
MANAGEMENT AGREEMENT
Gulfstream is hereby granted the following options and rights:
(a) Options. Options to acquire 120,000 shares of Common Stock for a
per share purchase price equal to the average of the closing bid and asked
prices of the Common Stock as of November 8, 1996.
(b) Warrants. Warrants to acquire 1,000,000 shares of Common Stock.
The exercise price of the Warrants is to be the same as for the Series IV
Warrants expected to be issued in the proposed public offering of the Company's
securities in or about January 1997. If such proposed offering is not
consummated, the exercise price shall be 115% of the average of the closing bid
and asked prices as November 8, 1996.
(c) Performance Options. Options to acquire additional shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock at the date of grant if the pre-tax income targets set forth below are
met or exceeded in any fiscal year up to and including fiscal year 2001:
No. of Additional
Shares Pre-tax Income at Least
------ -----------------------
333,333 $2,500,000
333,333 $3,500,000
333,334 $4,500,000
All share amounts set forth above have been adjusted to reflect the
proposed one-for-ten reverse split of the Company's issued and outstanding
common stock. No further adjustment to such share amounts will be effected in
the event such reverse split is completed. In the event the reverse split is
consummated, any exercise prices based upon pre-split prices will be multiplied
by a factor of ten. Once a target has been met and the appropriate award has
been made, no further award shall be made until one or more of the higher
targets has been met. If for any given year, more than one previously
unattained target has been met, the award shall be cumulative. The pre-tax
income of any businesses acquired by the Company during the relevant period
shall be included in the pre-tax income of the Company for the purposes of
determining whether the foregoing targets have been equalled or exceeded.
AMENDED SCHEDULE A
TO
EMPLOYMENT AGREEMENT
Xxxxxxxxxx is hereby granted the following options and rights:
(a) Options. Options to acquire 30,000 shares of Common Stock for a
per share purchase price equal to the average of the closing bid and asked
price of the Common Stock as of November 8, 1996.
(b) Warrants. Warrants to acquire 250,000 shares of Common Stock. The
exercise price of the Warrants is to be the same as for the Series IV Warrants
expected to be issued in the proposed public offering of the Company's
securities in or about January 1997. If such proposed offering is not
consummated, the exercise price shall be 115% of the average of the closing bid
and asked prices as of November 8, 1996.
(c) Performance Options. Options to acquire additional shares of
Common Stock at an exercise price equal to the fair market value of the Common
Stock at the date of grant if the pre-tax income targets set forth below are
met or exceeded in any fiscal year up to and including fiscal year 2001:
No. of Additional
Shares Pre-tax Income at Least
------ -----------------------
166,667 $2,500,000
166,667 $3,500,000
166,666 $4,500,000
All share amounts set forth above have been adjusted to reflect the
proposed one-for-ten reverse split of the Company's issued and outstanding
common stock. No further adjustment to such share amounts will be effected in
the event such reverse split is completed. In the event the reverse split is
consummated, any exercise prices based upon pre-split prices will be multiplied
by a factor of ten. Once a target has been met and the appropriate award has
been made, no further award shall be made until one or more of the higher
targets has been met. If for any given year, more than one previously
unattained target has been met, the award shall be cumulative. The pre-tax
income of any business acquired by the Company during the relevant period shall
be included in the pre-tax income of the Company for the purposes of
determining whether the foregoing targets have been equalled or exceeded.
Exhibit I
NO. OF SHARES: _______
QUESTRON TECHNOLOGY, INC.
STOCK OPTION GRANT AGREEMENT
THIS AGREEMENT, made as of _________________, among QUESTRON
TECHNOLOGY, INC., a Delaware corporation ("Company"), with an address of 0000
Xxxxxxxx Xxxxxx, Xxxxx 000, Xxxx Xxxxx, Xxxxxxx 00000 and
________________________ ("Optionee"), with an address of .
1. GRANT OF OPTION
The Company, effective ________________ ("Date of Grant"), hereby
grants to the Optionee the right and the option ("Option") to purchase
all or any part of an aggregate of ______ shares of the Company's
Common Stock ($.001 per share par value) ("Common Stock") on the terms
and conditions herein set forth. Dividends, subscription rights, etc.
declared with respect to Common Stock prior to the exercise of the
Option are not included in the Option. This Option is granted pursuant
to an Exchange Agreement dated as of November 8, 1996 by and among the
Company, the Optionee and the other party named therein.
2. PURCHASE PRICE
The purchase price of the shares of Common Stock subject to the Option
shall be $____ per share subject to the adjustment as provided in
Section 5 below.
3. TERMS OF OPTION
A. EXPIRATION DATE. Notwithstanding anything herein to the
contrary, this option shall be exercisable during the ten
(10) years from the date hereof or such shorter time as
prescribed herein.
B. EXERCISE. This Option shall be exercised, in whole, or, from
time to time, in part, by written notice received by the
Secretary or Treasurer of the Company not later than 5:00
P.M. prevailing local time, on or prior to the day the Option
is to expire, specifying the number of shares of Common Stock
to be purchased, and accompanied by full payment by certified
or bank check or such other instrument as the Company may
accept. Payment in full or in part may also be made in the
form of shares of Common Stock owned by the Optionee, which
shall be free and clear of all liens, encumbrances and
restrictions of any kind whatsoever and Optionee may be
requested to represent and warrant to such effect and to take
such other steps with respect to this form of payment as the
Company shall require. Any such exercise shall also be
subject to receipt by the Company of the representation and
undertaking set forth in Section 4C hereof. Upon such
payment the Company will thereafter deliver or cause to be
delivered to the Optionee, at the office of the Company, a
certificate or certificates for the number of shares with
respect to which
this Option is being exercised, registered in the name of the
Optionee; provided, however, that if any law or regulation or
order of the Securities and Exchange Commission or other body
having jurisdiction in the premises shall require the Company
or Optionee (or other individual or individuals) to take any
action in connection with the shares then being purchased,
the delivery of the certificate or certificates for such
shares shall be delayed for the period necessary to take and
complete such action.
C. SECURITIES LAW RESTRICTIONS. The Company is under no
obligation to file a registration statement under the
Securities Act of 1933 ("Act") with respect to the shares
of Common Stock subject to the Option. Unless a registration
statement under the Act has been filed and remains effective
with respect to such shares, the Company shall require that
the offer and sale of such shares be exempt from the
registration provisions of the Act. As a condition of such
exemption, the Company shall require a representation and
undertaking, in form and substance satisfactory to counsel
for the Company, that the Optionee is acquiring the shares
for the Optionee's own account for investment and not with
a view to the distribution or resale thereof and shall
otherwise require such representations and impose such
conditions as shall establish to the Company's satisfaction
that the offer and sale of such shares issuable upon the
exercise of the Option will not constitute a violation of
the Act or any similar state act affecting the offer
and sale. If such shares are issued in an exempt
transaction, such shares shall bear the following
restrictive legend:
"The shares represented by this
certificate have not been registered under
the Securities Act of 1933 and may not be
sold, pledged, or otherwise transferred
except pursuant to an effective
registration statement under said Act, Rule
144 or an opinion of counsel acceptable to
the Company that some other exemption from
registration is available."
If said shares were registered under the Act, to the extent that
Optionee is an "affiliate" of the Company, any reoffers or resales of
Common Stock acquired pursuant to the Plan, must be held indefinitely
unless (i) distribution of said Stock has been made registered under
the Act, (ii) a sale of said Stock is made in conformity with the
provisions of Rule 144 issued by the Securities and Exchange
Commission under the Act, or (iii) in the opinion of counsel
acceptable to the Company some other exemption from registration is
available.
4. ADJUSTMENTS
In the event of any merger, reorganization, consolidation,
recapitalization (including but not limited to the issuance of Common
Stock or any securities convertible into Common Stock in exchange for
securities of the Company), stock dividend, stock split or reverse
stock split, extraordinary distribution with respect to the Common
Stock or other similar change in corporate structure affecting the
Common Stock, such substitution or adjustments shall be made in the
aggregate number of shares of Common Stock then subject to the Option
and in the Option price as may be determined to be appropriate by the
Board of Directors of the Company, in its sole discretion; provided,
however, that the number of shares of Common Stock subject to this
Option shall always be a whole number.
5. TAXES
The Company's obligation to deliver shares of Common Stock upon
exercise of this Option in whole or in part, shall be subject to
satisfaction of any applicable federal, state and local tax
obligations.
-2-
6. ACCEPTANCE OF PROVISIONS
The execution of this Agreement by the Optionee shall constitute the
Optionee's acceptance of and agreement to all of the terms and
conditions of this Agreement.
7. NOTICES
All notices and other communications required or permitted under this
Agreement shall be in writing and shall be given either by (i)
personal delivery or regular mail or, (ii) first class registered or
certified mail, return receipt requested. Except as otherwise provided
in Section 4B hereof on the exercise, in whole or in part, of the
Option, any such communication shall be deemed to have been given on
the date of receipt in the cases referred to in clause (i) of the
preceding sentence and on the second day after the date of mailing in
the cases referred to in clause (ii) of the preceding sentence. All
such communications to the Company shall be addressed to it, to the
attention of its Secretary or Treasurer, at its the principal office
at the address first set forth above, and to the Optionee at its
addresses first set forth above, or, in each case, to such other
person or address as may be designated by like notice hereunder.
8. SHARES RESERVED
The Company shall at all times during the term of this Agreement
reserve and keep available such number of shares of its Common Stock
as will be sufficient to satisfy the requirements of this Agreement,
and shall pay all original issue taxes on the exercise of this Option,
and all other fees and expenses necessarily incurred by the Company in
connection therewith.
9. SUCCESSORS
This Agreement shall be binding upon any successor of the Company.
10. MISCELLANEOUS
This Agreement contains a complete statement of all the arrangements
between the parties with respect to its subject matter, and this
Agreement shall be governed by and construed in accordance with the
laws of the State of Delaware applicable to agreements made and to be
performed exclusively in Delaware. The headings in this Agreement are
solely for convenience of reference and shall not affect its meaning
or interpretation.
QUESTRON TECHNOLOGY, INC. OPTIONEE
By:________________________________ ______________________
President
-3-
Exhibit II
----------
No. WIV Series IV Warrants
STOCK PURCHASE WARRANT CERTIFICATE FOR
PURCHASE OF COMMON STOCK OF
QUESTRON TECHNOLOGY, INC.
THIS CERTIFIES THAT FOR VALUE RECEIVED
_____________________________ or registered assigns (the "Registered Holder")
is the owner of __________ Series IV Redeemable Common Stock Purchase Warrants
("Warrants"). This Warrant Certificate and each Warrant represented hereby are
subject to in all respects the terms and conditions set forth in the Warrant
Agreement (the "Warrant Agreement") to be entered into by the Company in
connection with the public offering (the "Offering") of Units each consisting
of one share of Series B Convertible Preferred Stock and one Warrant. By his
acceptance of this Certificate, the Registered Holder hereby agrees that he
shall accept at the closing of the Offering a certificate evidencing the
Warrants identical in all respects to the form issued to the public investors
pursuant to the Warrant Agreement ("Public Warrants"). In the event that the
Offering is not consummated and the Public Warrants are not issued, the
Warrants will have an exercise price of $4.3125 per share and the Company
agrees to offer the Registered Holder substantially the same terms and
conditions as would have been in effect under the Warrant Agreement.
QUESTRON TECHNOLOGY, INC.
By:__________________________
Date: _____________________, 1996
