EXHIBIT 2
SIDE LETTER
THIS SIDE LETTER dated as of May 3, 2002 by and among GE
Supply Logistics, LLC, a Delaware limited liability company ("Purchaser"), and
Sellers (as defined below) is executed and delivered in connection with that
certain Asset Purchase Agreement, dated as of April 16, 2002 (the "Asset
Purchase Agreement"), by and between (i) General Electric Company, a New York
corporation ("Assignor"), and (ii) Questron Technology, Inc., a Delaware
corporation ("Questron"), and each of its subsidiaries listed on the signature
page hereto (with Questron, collectively, the "Sellers"). Terms defined in the
Asset Purchase Agreement and not otherwise defined herein are used herein with
the meanings so defined.
WHEREAS, Purchaser is an Affiliate of Assignor; and
WHEREAS, pursuant to Section 13.8 of the Asset Purchase
Agreement, Assignor has the right to assign its rights and obligations under the
Agreement to an Affiliate of Assignor without the prior written consent of
Sellers.
NOW THEREFORE, for good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
To the extent that Purchaser and its Affiliates continue to
occupy any of the leased real property of Sellers after the Closing Date,
Purchaser shall be obligated to pay the applicable monthly rent for such period
of occupancy from and after June 1, 2002.
On the Closing Date, Purchaser shall pay Sellers $1,331,000
(the "Estimated Amount"), which has been calculated as set forth on Schedule A
hereto and such calculation shall be based on the estimated amounts set forth on
the cash balance (the "Estimated Cash Balance") attached as Schedule B hereto.
The Estimated Amount is in addition to the payment of the Purchase Price that
Purchaser is obligated to pay Sellers pursuant to Section 3.1 of the Asset
Purchase Agreement and is in satisfaction of its obligations to fund "Cash"
under Section 2.1(a)(i) of the Asset Purchase Agreement. As a result of
Purchaser's payment of the Estimated Amount, Purchaser shall have no obligation
to pay any additional amount under Section 2.1(a)(i) of the Asset Purchase
Agreement. The Estimated Amount shall be treated as an addition to the Purchase
Price. Sellers shall provide to Purchaser no later than May 8, 2002 a cash
balance (the "Final Cash Balance") which contains the same category of items set
forth on the Estimated Cash Balance and reflects the actual amounts of the
Business as of the close of business on May 3, 2002. Based on the Final Cash
Balance and in accordance with the method of calculation used to calculate the
Estimated Amount as set forth on Schedule A, Sellers
shall calculate (the "Final Calculation") the final amount (the "Final Amount")
of the Business and deliver to Purchaser the Final Calculation at the same time
as the Final Cash Balance. If the Estimated Amount is greater than the Final
Amount, Sellers shall be entitled to retain the first $100,000 of such excess,
and Sellers shall be obligated to immediately pay to Purchaser at the time of
delivery of the Final Calculation, any excess amount above $100,000. If the
Estimated Amount is less than the Final Amount, Purchaser shall under no
circumstance have any obligation to pay Sellers such deficiency. Purchaser shall
have 5 business days after receipt from Sellers of the Final Cash Balance and
the Final Calculation to review the Final Cash Balance and the Final
Calculation. If Purchaser disputes the Final Calculation, Purchaser and Sellers
shall try, in good faith, to resolve any such dispute. If Purchaser and Sellers
determine that any additional amount is owed to Purchaser after resolution of
any dispute, Sellers shall pay Purchaser such amount within 2 business days
after resolution of such dispute.
Purchaser and Sellers hereby agree that the Closing shall be
effective as of the close of business on May 3, 2002.
Sellers acknowledge receipt from Purchaser of the total amount
of $88,031,000, consisting of (a) the bid deposit of $500,000, (b) the balance
of the initial Purchase Price, $86,200,000 and (c) the Estimated Amount of
$1,331,000.
[THE REMAINDER OF THIS PAGE LEFT INTENTIONALLY BLANK;
SIGNATURE PAGES FOLLOW.]
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IN WITNESS WHEREOF, the parties hereto have caused this Side Letter to
be duly executed as of the date first above written.
PURCHASER:
GE SUPPLY LOGISTICS, LLC
By:
-------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Secretary
SELLERS:
QUESTRON TECHNOLOGY, INC.
QUESTRON DISTRIBUTION LOGISTICS, INC.
INTEGRATED MATERIAL SYSTEMS, INC.
POWER COMPONENTS, INC.
FAS-TRONICS, INC.
FORTUNE INDUSTRIES, INC.
ACTION THREADED PRODUCTS, INC.
CAPITAL FASTENERS, INC.
B&G SUPPLY COMPANY, INC.
R.S.D. SALES CO. INC.
CALIFORNIA FASTENERS, INC.
COMPWARE, INC.
QUESTNET COMPONENTS, INC.
QUESTRON FINANCE CORP.
QUESTRON OPERATING COMPANY, INC.
POWER TOO, INC.
ACTION THREADED PRODUCTS OF
GEORGIA, INC.
ACTION THREADED PRODUCTS OF
MINNESOTA, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and Chief Executive
Officer for each of the
above-listed Sellers
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SCHEDULE A
CASH ADJUSTMENTS AT CLOSING*
AGAINST SELLERS' NEGATIVE BOOK BALANCE OF ($1,027,492.04)
$302,000 = Facility and personnel property lease payments
$300,000 = Purchaser payment (or reimbursement to Sellers) of COD
Inventory shipments received on 5/3/02
$250,000 = Additional Purchaser Payment
$852,000
AGAINST PURCHASER'S $500,000 CASH COMMITMENT
$500,000
(12,000) = cure payment
(9,000) = title insurance
--------
$479,000
TOTAL CASH ADJUSTMENTS AT CLOSING*
---------------------------------
$852,000
$479,000
$1,331,000 = Paid by Purchaser to Sellers at Closing
------------------------------------------
*1. Purchaser shall not have any obligation to make any additional payments,
even if post-closing adjustments are in Seller's favor.
2. If post-closing adjustments are in Purchasers' favor, Sellers shall not be
obligated to make any payments unless and until such adjustments exceed
$100,000 (in relation to the estimated adjustments at Closing), in which
event Sellers shall pay Purchasers the dollar amount of any such
adjustments that exceed $100,000.
SCHEDULE B
QUESTRON TECHNOLOGY, INC.
BOOK CASH BALANCE AND RECONCILIATION
AND CALCULATION OF AMOUNT DUE TO (FROM) QUESTRON AT CLOSING
--------------------------------------------------------------------------------
BANK BALANCES:
Silicon Valley Bank (102.54)
Landmark Bank 14,159.60
Bank of America 1,156.81
First Natl Bank of Long Island 31,855.79
First Union - small account 441.22
First Midwest Bank 6,502.86
Xxxxx Fargo MMA 2,956.03
First Union Master Funding 130,806.84
First Union Lockbox 16,847.63
Xxxxx Fargo Lockbox 307,258.28
----------- -------------
Total bank balance 511,882.52
OUTSTANDING CHECKS/WIRES/DISBURSEMENTS:
Questron Technology, Inc. 159,737.50
Questron Distribution Logistics, Inc. 473,171.35
IMS Corporation 14,719.65
Power Components, Inc. 2,200.00
Branch xxxxx cash accounts 848,857.83
Estimate of additional CODs on 5/3/02 300,000.00
Less: Estimate of 5/3/02 lockbox deposit (150,000.00)
Less: Friday clearings (109,311.77)
------------ -------------
Total outstanding checks
1,539,374.56
BOOK BALANCE (1,027,492.04)
BALANCE TO BE LEFT BEHIND FOR WIND DOWN EXPENSES 500,000.00
-------------
AMOUNT DUE TO (FROM) QUESTRON AT CLOSING 1,527,492.04
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