Exhibit 2.5
QUESTRON TECHNOLOGY, INC.
QUESTRON DISTRIBUTION LOGISTICS, INC.
0000 Xxxxxxxx Xxxxxx, Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
June 29, 1999
Capital Fasteners, Inc.
0000 Xxxx Xxxxx Xxxxx
Xxxx Xxxxx, Xxxxx Xxxxxxxx 00000
Xxxxx X. Xxxxxxxxx Revocable Trust Under Agreement Date June 25, 1999
000 Xxxxxxx Xxxxx
Xxxx Xxxxx, Xxxxx Xxxxxxxx 00000
Gentlemen:
Reference is made to that certain Stock Purchase Agreement, dated as of
April 26, 1999, by and between Questron Distribution Logistics, Inc., Questron
Technology, Inc., Xxxxx X. Xxxxxxxxx and Capital Fasteners, Inc. (as amended,
the "Agreement"). The undersigned hereby agree to amend the Agreement by
replacing in their entirety Exhibits A and B to the Agreement with Exhibits A
and B attached hereto. Except as modified by this letter agreement, all of the
terms, covenants and conditions of the Agreement shall remain in full force and
effect. This letter agreement may be executed in one or more counterparts which,
taken together, shall constitute one and the same document.
Sincerely,
QUESTRON TECHNOLOGY, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and Chief
Executive Officer
QUESTRON DISTRIBUTION LOGISTICS, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx
------------------------
Name: Xxxxxxx X. Xxxxxxxx
Title: Chairman and Chief
Executive Officer
AGREED TO AND ACCEPTED:
XXXXX X. XXXXXXXXX REVOCABLE TRUST UNDER AGREEMENT
DATED JUNE 25, 1999
By: /s/ Xxxxx X. Xxxxxxxxx
------------------------------
Xxxxx X. Xxxxxxxxx, as Trustee
852569.1
Exhibit A
Form of Senior A Note
REVISED DRAFT
FORM OF SENIOR A NOTE
SENIOR A NOTE
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS, AND NEITHER
THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE
OFFERED, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED, UNLESS SO
REGISTERED OR AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS
AVAILABLE.
QUESTRON FINANCE CORP.
$_________ New York, New York
________ __, 1999
FOR VALUE RECEIVED, the undersigned, QUESTRON FINANCE CORP., a Delaware
corporation ("Maker"), hereby promises to pay to the order of _________
("Payee"), an individual residing at ____________________, at such address or at
such other location as Payee shall have specified (by not less than 3 Business
Days' prior written notice to Maker delivered in accordance with Section 11
hereof), the principal amount of $__________, in accordance with the terms set
forth below, in lawful money of the United States of America, together with
interest on the unpaid principal balance from time to time outstanding, at such
address and in such currency, in the manner provided below.
1. Interest. Subject to Section 4 below, Maker promises to pay interest
(calculated on the basis of a 365-day year) on the unpaid principal balance from
time to time outstanding (including, without limitation, with respect to any and
all principal payment deferrals which may occur, from time to time, while this
Note is outstanding), together with any Interest Deficiency Amount (as defined
in Section 4 below) from time to time outstanding hereunder, to the extent
permitted by law, at the rate of 8.5% per annum, payable on a semi-annual basis
(each, an "Interest Payment Period") in arrears on each April 10 and October 10,
commencing April 10, 2000 (each, an "Interest Payment Date").
2. Principal Amount. Subject to Section 4 below, the principal amount
of this Note shall be due and payable in the following three annual
installments: (i) on June 30, 2000 (the "First Payment Date"), Maker shall pay
Payee $_________ [25% of principal]; (ii) on June 30, 2001 (the "Second Payment
Date"), Maker shall pay Payee $_________ [25% of principal]; and (iii) on June
30, 2002 (the "Third Payment Date" and together with the First Payment Date and
the Second Payment Date, each a "Payment Date" and collectively, the "Payment
Dates"), Maker shall pay Payee the remaining principal balance then outstanding
of this Note.
828410.11
1
3. Payments. Any and all payments of principal and interest in
connection with this Note shall be made by certified check to Payee's address
listed in Section 11 (Notice) below or at such other place as Payee or such
other registered holder shall designate to Maker in writing or by wire transfer
of immediately available funds to an account designated by Payee in writing. If
the payment of principal and interest on this Note is due on a day which is not
a Business Day, such payment shall be due on the next succeeding Business Day,
and such extension of time shall be taken into account in calculating the amount
of interest payable under this Note. "Business Day" means any day other than a
Saturday, Sunday or legal holiday in the United States of America.
4. Limitations on Certain Payments; Conversion. (a) To the extent that
accrued and unpaid interest payable on any Interest Payment Date exceeds the
Available Amount (as defined below) as of such date (such difference being
referred to herein as the "Interest Deficiency Amount"), Maker shall defer
payment of that Interest Deficiency Amount to the earlier of (i) the Third
Payment Date or (ii) the next succeeding Interest Payment Date, at which there
exists Available Amount sufficient in amount to make such interest payment, or
any portion thereof.
(b) To the extent that the face amount of any scheduled principal
payment, at the applicable Payment Date, exceeds the difference between (i) the
Available Amount (as defined below) less (ii) the interest paid, or to be paid,
to Payee at any corresponding Interest Payment Date (together with the aggregate
amount of any Interest Deficiency Amounts in respect of any prior Interest
Payment Periods, "Accrued Interest"), then Maker shall pay Payee, in the manner
provided herein, on the applicable Payment Date:
(A) that portion of the required principal payment which is equal to the
difference between the Available Amount less the Accrued Interest (the
"Mandatory Principal Payment");
(B) that portion of the outstanding principal amount of this Note equal to
the difference between the then scheduled principal payment and the
Mandatory Principal Payment (such difference being referred to herein
as a "Conversion Amount") shall be deemed converted on such Payment
Date (each a "Conversion"), in the manner provided in Section 5 below,
into such number of fully paid and non-assessable shares of common
stock, par value $0.001 per share (the "Common Stock"), of Questron
Technology, Inc., a Delaware corporation and the parent corporation of
Maker ("Questron Technology"), as shall be obtained by dividing the
Conversion Amount by the Conversion Price (as defined below) (the
"Conversion Shares"). The "Conversion Price" shall mean the average
closing market price per share of Common Stock for the twenty (20)
trading days ending on the seventh (7th) trading day preceding the
applicable Payment Date, as reported by the Wall Street Journal;
provided, however, with respect to all Payment Dates other than the
Third Payment Date, in no event shall the Conversion Price be less than
$4.00 per share. If, in any such case, the average closing market price
per share of Common Stock for the twenty (20) trading days ending on
the seventh (7th) trading day preceding the applicable Payment Date is
less than $4.00 per share (the "Average Price"), an amount of principal
equal to Conversion Shortfall (as defined below) shall be deferred for
payment on the Third Payment Date; and
828410.11
2
(c) on the Third Payment Date, to the extent there remains outstanding
hereunder any Interest Deficiency Amounts and/or any Conversion Shortfall
amounts (collectively, the "Final Payment Amount"), Maker shall, in its sole
discretion, either (i) pay to Payee, in the manner prescribed in Section 3
above, all or a portion of the Final Payment Amount, or (ii) convert such
portion of the Final Payment Amount that remains unpaid pursuant to the
preceding clause (i) into shares of Questron Technology Common Stock, based on
the average closing market price per share of Common Stock for the twenty (20)
trading days ending on the seventh (7th) trading day preceding the applicable
date of such conversion.
As used herein, "Conversion Shortfall" means an amount equal to the applicable
Conversion Amount, minus the product of (x) the number of Conversion Shares to
be issued as provided above, multiplied by (y) the Average Price. The occurrence
of a Conversion shall not constitute a default or Event of Default hereunder.
(d) For purposes of this Note, "Available Amount" shall mean, subject
to the next succeeding sentence, the dollar amount which is equal to fifty
percent (50%) of the reported consolidated net income of Questron Technology and
its subsidiaries (after adjustment to exclude the operating results of Maker)
for the twelve month period ended on the date of the most recent financial
statements of Questron Technology, as reflected in the most recently filed
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
of Questron Technology preceding the applicable payment date, provided, however,
that the Available Amount shall be deemed to be zero in the event that Questron
Operating Company, Inc., a Delaware corporation and a wholly-owned subsidiary of
Maker ("QOC") is prohibited, pursuant to the terms and conditions of its
instruments for borrowed money, from distributing or dividending funds to Maker
on the applicable payment date. By acceptance of this Note, Payee acknowledges
that this Note is one of a series of Senior A Notes of Maker and that Maker is
concurrently issuing to certain holders a series of Senior B Notes, and agrees
that scheduled, required payments of any Available Amounts to holders of Senior
A Notes and/or Senior B Notes, as the case may be, and any payments required
pursuant to Section 6 below, shall be made pro rata to all such holders to the
extent any such payments are concurrently scheduled or required to be made,
based on the original principal amounts of each respective Senior A Note and/or
Senior B Note, as the case may be, and that as used herein, the term Available
Amount refers only to the pro rata portion thereof relating to this Note.
5. Conversion Procedures; Registration. (a) On any Payment Date on
which a Conversion shall occur, Maker shall cause a notice of conversion (each a
"Conversion Notice") to be delivered to Payee at Payee's address appearing in
Section 11 (Notice) below or to such other registered holder at such other place
as such other registered holder shall designate to Maker in writing specifying
the Conversion Amount, Conversion Price and number of Conversion Shares, no
later than five (5) days prior to the Payment Date upon which any such
conversion shall occur. Promptly upon receipt of a Conversion Notice, Payee or
such other registered holder shall (x)(i) if applicable to the First or Second
Payment Date, surrender this Note for cancellation and a new Note shall be
issued by maker and delivered to the holder in the face amount of the principal
outstanding under this Note after giving effect to the applicable Conversion
and, (ii) if on the Third Payment Date, surrender this Note for cancellation,
and, (y) deliver to maker a written statement specifying the name or names (with
address) in which the Conversion Shares which shall be issuable on such
Conversion shall be issued (provided, however, that Conversion Shares will be
issued in the name of Payee unless otherwise specified as provided herein). The
failure by payee to so surrender the Note, or the failure by Payee or such other
registered holder to present the Note to maker, shall not, in either case,
effect the validity of the Conversion and following
828410.11
3
delivery of such Conversion Notice the Conversion shall, in all cases, be deemed
to have occurred and be effective on the applicable Payment Date and this Note
shall be deemed to evidence the obligation to pay principal in an amount which
gives effect to such conversion.
(b) When surrendered for Conversion, this Note shall, unless the shares
of Common Stock issuable on Conversion are to be issued in the same name as the
name in which this Note is then registered, be duly endorsed by, or accompanied
by instruments of transfer in form satisfactory to Maker duly executed by Payee
or such other registered holder, or their respective duly authorized attorney.
As promptly as practicable following the applicable Payment Date, Maker shall
deliver, or cause to be delivered, to Payee or to such other registered holder,
or on such party's written order, a certificate or certificates for the number
of full shares issuable upon the conversion of this Note, or a portion hereof,
in accordance with the provisions hereof and, if applicable, a check in lieu of
any fractional shares. Upon Conversion of all or any portion of this Note, the
registered holder may be required to execute and deliver to the issuer an
instrument, in form satisfactory to the issuer, representing that the shares
issuable upon conversion hereof are being acquired for investment and not with a
view to distribution within the meaning of the Act, together with such other
certifications and agreements as Maker shall reasonably request.
(c) Questron Technology covenants and agrees to file a registration
statement covering the resale of any Conversion Shares (the "Shelf
Registration") and to use its best efforts to cause such registration statement
to become effective prior to the issuance of the Conversion Shares. Questron
shall use its best efforts to maintain the effectiveness of the Shelf
Registration until such time as the Seller has sold all of its Conversion Share
or such shares are eligible for resale pursuant Rule 144 of the Act, without
limitation. Prior to such time as the applicable Conversion Shares are so
registered, such shares shall be restricted securities under the Act, will not
have been registered under the Act and may not be sold or transferred absent
such registration or unless an exception from registration is available and the
certificates evidencing such shares shall bear an appropriate legend restricting
transfers under the Act. In connection with such registration, Payee or such
other permitted holder of such shares, shall provide to Questron Technology such
information, and execute and deliver such certificates and other agreements, as
it may reasonably request.
6. Mandatory Repayment. (a) To the extent that on any Interest Payment
Date or Payment Date, the Available Amount exceeds the scheduled principal
payment amount and/or interest payment amount (including, without limitation,
accrued Interest Deficiency Amounts) due and owing on such date, such excess
Available Amount shall be used to prepay this Note, in whole, if sufficient, or
otherwise in part, without premium or penalty.
(b) In addition, in the event that (i) Maker, Questron Technology or
QOC consummates (i) a registered public offering of equity securities after the
date hereof (an "Offering"), and (ii) Maker, Questron Technology or QOC
consummates a public or Rule 144A or Regulation D (or their respective
successors) private offering of debt securities after the date hereof for the
purpose of acquiring assets or refinancing indebtedness and "excess proceeds"
are realized therefrom (a "Debt Offering"), Maker shall apply, and Questron
Technology shall cause to be applied, the net proceeds from such Offering or
"excess proceeds" from such Debt Offering, as the case may be, to prepay, in
whole, if sufficient , or otherwise in part, outstanding principal and accrued
and unpaid interest under this Note, without penalty or premium. As used herein
"excess proceeds", means the net proceeds to the applicable company after the
application of proceeds in connection with any acquisition(s) or refinancing,
and the
828410.11
4
payment of related transaction costs. Any partial prepayments of principal shall
be applied to installments of principal in the order of their maturity.
7. Prepayment. Maker may, without premium or penalty, at any time and
from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid calculated to the date of
such prepayment. Any partial prepayments shall be applied to installments of
principal in the order of their maturity. Any mandatory or voluntary prepayment
on this Note shall be applied first to accrued and unpaid interest on this Note
then to the principal.
8. No Guarantees. Neither Questron Technology, nor any affiliate or
subsidiary thereof, or any other person or entity has guaranteed the performance
by Maker or Questron Technology, as the case may be, of their respective
obligations under this Note or the transactions contemplated hereby.
9. Events of Default. (a) Upon the occurrence of any of the following
events of default ("Events of Default"): (i) a Change of Control (as defined
below) shall have occurred; (ii) a case or proceeding under the bankruptcy laws
of the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against Maker or all or any substantial
part of its properties and such petition or application is not dismissed within
ninety (90) days after the date of its filing or Maker shall file any answer
admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner; (iii) a case or proceeding under the
bankruptcy laws of the United States of America now or hereafter in effect or
under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter
in effect (whether at law or equity) is filed by Maker or for all or any part of
its property; or (iv) Maker shall fail to pay (whether in cash or pursuant to a
Conversion) as and when due (whether at stated maturity, by mandatory
prepayment, acceleration or otherwise) any principal on this Note when due and
payable, or shall fail to pay interest on this Note within ten (10) Business
Days after the same becomes due and payable or fails to make payment or
otherwise perform on a timely basis any other obligation or covenant called by
this Note for 30 days following the receipt by Maker of written notice thereof
from Payee (unless Maker shall be diligently pursuing a remedy of such breach in
which event the 30 day period referred to in this clause shall extend to 90
days); then, and in each and every such case, the holder hereof may by notice in
writing to Maker declare all amounts owing hereunder to be due and payable, and
they shall forthwith become due and payable without further action; provided,
however, that Payee by written notice to Maker may waive any default or rescind
and annul any such acceleration, but no such waiver or rescission and annulment
shall extend to or affect any subsequent default or impair any right consequent
thereon or any term, provision or covenant herein.
(b) For purposes of this Note, "Change of Control" shall mean the
occurrence of any of the following events: (i) any "person" as such term is used
in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the applicable entity specified below or any
subsidiary or affiliate thereof or any stockholder (and such stockholder's
affiliates) as of the date hereof and direct transferees thereof, becomes, after
the date hereof, the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of the securities of Maker, QOC, or
Questron Distribution
828410.11
5
Logistics, Inc., representing 50.1% or more of the total voting power
represented by such entity's then outstanding securities that vote generally in
the election of directors ("Voting Securities"), (ii) the merger or
consolidation of any such entity with any other corporation (other than an
affiliate or subsidiary), other than a merger or consolidation in which the
Voting Securities of any such entity outstanding immediately prior thereto
continue to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least a majority of the total
voting power of the surviving entity, or (iii) the sale (in one transaction) of
all or substantially all of the assets of any such entity, other than to a
subsidiary or affiliate of any such entity.
10. Jurisdiction and Related Matters. (a) Maker and Payee irrevocably
consent and submit to the non-exclusive jurisdiction of the State of Delaware
and the United States District Court located in the city of Wilmington, Delaware
and waive any objection based on venue or forum non conveniens with respect to
any action instituted therein arising under this Note or in any way connected
with or related or incidental to this Note whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agrees that any
dispute with respect to any such matters shall be heard only in the courts
described above.
(b) Maker hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth below and service
so made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Payee's option, by service upon
Maker in any other manner provided under the rules of any such courts. Within
thirty (30) days after such service, Maker shall appear in answer to such
process, failing which Maker shall be deemed in default and judgment may be
entered by Payee against Maker for the amount of the claim and other relief
requested.
(c) The validity, interpretation and enforcement of this Note, shall be
governed by the internal laws of the State of Delaware (without giving effect to
principles of conflicts of law).
(d) MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS NOTE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. MAKER
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT PAYEE MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS NOTE WITH ANY COURT AS WRITTEN EVIDENCE
OF ITS CONSENT TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
11. Notice. All notices, requests and demands hereunder shall be in
writing and (i) made to a party at the following addresses:
To Borrower:
Questron Finance Corp.
c/o Questron Technology, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 000X
828410.11
6
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Battle Xxxxxx LLP
Park Avenue Tower 00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, III, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Payee:
[insert name]
[insert address]
Telephone:
Facsimile:
with a copy to:
[to be provided]
Telephone:
Facsimile:
Attention:
or to such other address as either party may designate by written notice to the
other in accordance with this provision, and (i) deemed to have been given or
made: if delivered in person, immediately upon delivery; if by telex, telegram
or facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
12. Amendments. No provision of the Note may be waived, modified,
amended or discharged orally or otherwise, except by a writing duly executed by
Maker and the holder hereof.
13. Section Headings, Construction. (a) The headings of Sections and
Subsections in this Note are provided for convenience only and will not affect
its construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Note unless otherwise
specified.
(b) All words used in this Note will be construed to be of such gender
or number as
828410.11
7
the circumstances require. Unless otherwise expressly provided, the words
"hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
QUESTRON FINANCE CORP.
By: _________________________
Name:
Title:
AGREED TO AND ACCEPTED (solely with
respect to Sections 4(b)(B) and (C),
5(c) and 6(b) hereof and as of the
date first-above written):
QUESTRON TECHNOLOGY, INC.
By: ________________________
Name:
Title:
828410.11
8
Exhibit B
Form of Senior B Note
REVISED DRAFT
FORM OF SENIOR B NOTE
SENIOR B NOTE
NEITHER THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF
HAVE BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED
(THE "ACT"), OR UNDER APPLICABLE STATE SECURITIES LAWS, AND NEITHER
THIS NOTE NOR THE SECURITIES ISSUABLE UPON CONVERSION HEREOF MAY BE
OFFERED, SOLD, OR OTHERWISE TRANSFERRED OR ASSIGNED, UNLESS SO
REGISTERED OR AN EXEMPTION FROM REGISTRATION UNDER SAID ACT IS
AVAILABLE.
QUESTRON FINANCE CORP.
$______________ New York, New York
_____ __, 2000
FOR VALUE RECEIVED, the undersigned, QUESTRON FINANCE CORP., a Delaware
corporation ("Maker"), hereby promises to pay to the order of
___________________ ("Payee"), an individual residing at __________, __________,
at such address or at such other location as Payee shall have specified (by not
less than three (3) days' prior written notice to Maker), the principal amount
of $___________, in accordance with the terms set forth below, in lawful money
of the United States of America, together with interest on the unpaid principal
balance from time to time outstanding, at such address and in such currency, in
the manner provided below.
1. Interest. Subject to Section 4 below, Maker promises to pay interest
(calculated on the basis of a 365-day year) on the unpaid principal balance from
time to time outstanding, together with any Interest Deficiency Amount (as
defined in Section 4 below) from time to time outstanding hereunder, to the
extent permitted by law, at the annual rate of 8.5% per annum, payable on a
semi-annual basis (each, an "Interest Payment Period") in arrears on each April
10 and October 10, commencing April 10, 2001 (each, an "Interest Payment Date").
2. Principal Amount. Subject to Section 4 below, the outstanding
principal amount of this Note (the "Principal Amount") shall be due and payable
on __________, 2002 (the "Principal Payment Date");
3. Payments. Any and all payments of principal and interest in
connection with this Note shall be made by certified check to Payee's address
listed in Section 11 (Notice) below or at such other place as Payee or such
other registered holder shall designate to Maker in writing or by wire transfer
of immediately available funds to an account designated by Payee in writing. If
the payment of principal
830267.10
1
and interest on this Note is due on a day which is not a Business Day, such
payment shall be due on the next succeeding Business Day, and such extension of
time shall be taken into account in calculating the amount of interest payable
under this Note. "Business Day" means any day other than a Saturday, Sunday or
legal holiday in the United States of America.
4. Limitations on Certain Payments; Conversion. (a) To the extent that
accrued and unpaid interest payable on any Interest Payment Date exceeds the
Available Amount (as defined below) as of such date (such difference being
referred to herein as the "Interest Deficiency Amount"), Maker shall defer
payment of that Interest Deficiency Amount to the earlier of (i) the Principal
Payment Date or (ii) the next succeeding Interest Payment Date, at which there
exists Available Amount sufficient in amount to make such interest payment, or
any portion thereof.
(b) To the extent that the face amount of the scheduled principal
payment, at the Principal Payment Date, exceeds the difference between (i) the
Available Amount (as defined below) less (ii) the interest paid, or to be paid,
to Payee at any corresponding Interest Payment Date (together with the aggregate
amount of any Interest Deficiency Amounts in respect of any prior Interest
Payment Periods, "Accrued Interest"), then:
(A) on the Principal Payment Date, Maker shall pay Payee, in the manner
provided herein, that portion of the required principal payment which
is equal to the difference between the Available Amount less the
Accrued Interest (the "Mandatory Principal Payment"); and
(B) on the Principal Payment Date, that portion of the outstanding
principal amount of this Note equal to the difference between the then
scheduled principal payment and the Mandatory Principal Payment (such
difference being referred to herein as a "Conversion Amount"), together
with any accrued Interest Deficiency Amounts that remain unpaid
pursuant to Section 4(a) above, shall be deemed converted on the
Principal Payment Date (the "Conversion"), in the manner provided in
Section 5 below, into such number of fully paid and non-assessable
shares of common stock, par value $0.001 per share (the "Common
Stock"), of Questron Technology, Inc., a Delaware corporation and the
parent corporation of Maker ("Questron Technology"), as shall be
obtained by dividing the Conversion Amount, plus the amount of any such
accrued and unpaid Interest Deficiency Amounts, by the Conversion Price
(as defined below) (the "Conversion Shares"). The "Conversion Price"
shall mean the average closing market price per share of Common Stock
for the twenty (20) trading days ending on the seventh (7th) trading
day preceding the Principal Payment Date, as reported by the Wall
Street Journal.
(c) For purposes of this Note, "Available Amount" shall mean, subject
to the next succeeding sentence, the dollar amount which is equal to fifty
percent (50%) of the reported consolidated net income of Questron Technology and
its subsidiaries (after adjustment to exclude the operating results of Maker)
for the twelve month period ended on the date of the most recent financial
statements of Questron Technology, as reflected in the most recently filed
Annual Report on Form 10-K or Quarterly Report on Form 10-Q, as the case may be,
of Questron Technology preceding the applicable payment date, provided, however,
that the Available Amount shall be deemed to be zero in the event that Questron
Operating Company, Inc., a Delaware corporation and a wholly-owned subsidiary of
Maker ("QOC"), is prohibited, pursuant to the terms and conditions of its
instruments for borrowed money, from
830267.10
2
distributing or dividending funds to Maker on the applicable payment date. By
acceptance of this Note, Payee acknowledges that this Note is one of a series of
Senior B Notes of Maker and that Maker is concurrently issuing to certain
holders a series of Senior A Notes, and agrees that scheduled, required payments
of any Available Amounts to holders of Senior B Notes and/or Senior A Notes, as
the case may be, and any payments required pursuant to Section 6 below, shall be
made pro rata to all such holders to the extent any such payments are
concurrently scheduled or required to be made, based on the original principal
amounts of each respective Senior B Note and/or Senior A Note, as the case may
be, and that as used herein, the term Available Amount refers only to the pro
rata portion thereof relating to this Note.
5. Conversion Procedures; Registration. (a) If a Conversion is to occur
on the Principal Payment Date, Maker shall cause a notice of conversion (each a
"Conversion Notice") to be delivered to Payee at Payee's address appearing in
Section 11 (Notice) below or to such other registered holder at such other place
as such other registered holder shall designate to Maker in writing specifying
the Principal Amount, Conversion Price and number of Conversion Shares, no later
than five (5) days prior to the Principal Payment Date upon which any such
conversion shall occur. Promptly upon receipt of a Conversion Notice, Payee or
such other registered holder shall (x) surrender this Note for cancellation, and
(y) deliver to Maker a written statement specifying the name or names (with
address) in which the Conversion Shares which shall be issuable on such
Conversion shall be issued (provided, however, that Conversion Shares will be
issued in the name of Payee unless otherwise specified as provided herein). The
failure by Payee to so surrender the Note, or the failure by Payee or such other
registered holder to present the Note to Maker, shall not, in either case,
effect the validity of the Conversion and following delivery of such Conversion
Notice the Conversion shall, in all cases, be deemed to have occurred and be
effective on the Principal Payment Date and this Note shall be deemed to
evidence the obligation to issue the Conversion Shares.
(b) When surrendered for Conversion, this Note shall, unless the shares
of Common Stock issuable on Conversion are to be issued in the same name as the
name in which this Note is then registered, be duly endorsed by, or accompanied
by instruments of transfer in form satisfactory to Maker duly executed by Payee
or such other registered holder, or their respective duly authorized attorney.
As promptly as practicable following the Principal Payment Date, Maker shall
deliver, or cause to be delivered, to Payee or to such other registered holder,
or on such party's written order, a certificate or certificates for the number
of full shares issuable upon the conversion of this Note, or a portion hereof,
in accordance with the provisions hereof and, if applicable, a check in lieu of
any fractional shares. Upon Conversion of all or any portion of this Note, the
registered holder may be required to execute and deliver to the issuer an
instrument, in form satisfactory to the issuer, representing that the shares
issuable upon conversion hereof are being acquired for investment and not with a
view to distribution within the meaning of the Act, together with such other
certifications and agreements as Maker shall reasonably request.
(c) Questron Technology covenants and agrees to file a registration
statement covering the resale of any Conversion Shares (the "Shelf
Registration") and to use its best efforts to cause such registration statement
to become effective prior to the issuance of the Conversion Shares. Questron
shall use its best efforts to maintain the effectiveness of the Shelf
Registration until such time as the Seller has sold all of its Conversion Share
or such shares are eligible for resale pursuant Rule 144 of the Act, without
limitation. Prior to such time as the applicable Conversion Shares are so
registered, such shares shall be restricted securities under the Act, will not
have been registered under the Act and may not be sold or transferred absent
such registration or unless an exception from registration is available and the
830267.10
3
certificates evidencing such shares shall bear an appropriate legend restricting
transfers under the Act. In connection with such registration, Payee or such
other permitted holder of such shares, shall provide to Questron Technology such
information, and execute and deliver such certificates and other agreements, as
it may reasonably request.
6. Mandatory Repayment. (a) To the extent that on any Interest Payment
Date or on the Principal Payment Date, the Available Amount exceeds the
scheduled principal payment amount and/or interest payment amount (including,
without limitation, accrued Interest Deficiency Amounts) due and owing on such
date, such excess Available Amount shall be used to prepay this Note, in whole,
if sufficient, or otherwise in part, without premium or penalty.
(b) In addition, in the event that (i) Maker, Questron Technology or
QOC consummates (i) a registered public offering of equity securities after the
date hereof (an "Offering"), and (ii) Maker, Questron Technology or QOC
consummates a public or Rule 144A or Regulation D (or their respective
successors) private offering of debt securities after the date hereof for the
purpose of acquiring assets or refinancing indebtedness and "excess proceeds"
are realized therefrom (a "Debt Offering"), Maker shall apply, and Questron
Technology shall cause to be applied, the net proceeds from such Offering or
"excess proceeds" from such Debt Offering, as the case may be, to prepay, in
whole, if sufficient , or otherwise in part, outstanding principal and accrued
and unpaid interest under this Note, without penalty or premium. As used herein
"excess proceeds", means the net proceeds to the applicable company after the
application of proceeds in connection with any acquisition(s) or refinancing,
and the payment of related transaction costs. Any partial prepayments of
principal shall be applied to installments of principal in the order of their
maturity.
7. Prepayment. Maker may, without premium or penalty, at any time and
from time to time, prepay all or any portion of the outstanding principal
balance due under this Note, provided that each such prepayment is accompanied
by accrued interest on the amount of principal prepaid calculated to the date of
such prepayment. Any voluntary prepayment on this Note shall be applied first to
accrued and unpaid interest on this Note then to the principal.
8. No Guarantees. Neither Questron Technology, nor any affiliate or
subsidiary thereof, or any other person or entity has guaranteed the performance
by Maker or Questron Technology, as the case may be, of their respective
obligations under this Note or the transactions contemplated hereby.
9. Events of Default. (a) Upon the occurrence of any of the following
events of default ("Events of Default"): (i) a Change of Control (as defined
below) shall have occurred; (ii) a case or proceeding under the bankruptcy laws
of the United States of America now or hereafter in effect or under any
insolvency, reorganization, receivership, readjustment of debt, dissolution or
liquidation law or statute of any jurisdiction now or hereafter in effect
(whether at law or in equity) is filed against Maker or all or any substantial
part of its properties and such petition or application is not dismissed within
ninety (90) days after the date of its filing or Maker shall file any answer
admitting or not contesting such petition or application or indicates its
consent to, acquiescence in or approval of, any such action or proceeding or the
relief requested is granted sooner; (iii) a case or proceeding under the
bankruptcy laws of the United States of America now or hereafter in effect or
under any insolvency, reorganization, receivership, readjustment of debt,
dissolution or liquidation law or statute of any jurisdiction now or hereafter
in effect (whether at law or equity) is filed by Maker or for all or any part of
its property; or (iv) Maker shall fail to pay (whether in cash or pursuant to a
Conversion) as and when due (whether at stated maturity, by
830267.10
4
mandatory prepayment, acceleration or otherwise) any principal on this Note when
due or interest on this Note within ten (10) Business Days after the same
becomes due and payable or fails to make payment or otherwise perform on a
timely basis any other obligation or covenant called by this Note for thirty
(30) days following the receipt by Maker of written notice thereof from Payee
(unless Maker shall be diligently pursuing a remedy of such breach in which
event the thirty (30) day period referred to in this clause shall extend to
ninety (90) days); then, and in each and every such case, the holder hereof may
by notice in writing to Maker declare all amounts owing hereunder due and
payable, and they shall forthwith become due and payable without further action;
provided, however, that Payee by written notice to Maker may waive any default
or rescind and annul any such acceleration, but no such waiver or rescission and
annulment shall extend to or affect any subsequent default or impair any right
consequent thereon or any term, provision or covenant herein.
(b) For purposes of this Note, "Change of Control" shall mean the
occurrence of any of the following events: (i) any "person" as such term is used
in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the applicable entity specified below or any
subsidiary or affiliate thereof or any stockholder (and such stockholder's
affiliates) as of the date hereof and direct transferees thereof, becomes, after
the date hereof, the "beneficial owner" (as defined in Rule 13d-3 of the
Exchange Act), directly or indirectly, of the securities of Maker, QOC or
Questron Distribution Logistics, Inc., representing 50.1% or more of the total
voting power represented by such entity's then outstanding securities that vote
generally in the election of directors ("Voting Securities"), (ii) the merger or
consolidation of any such entity with any other corporation (other than an
affiliate or subsidiary), other than a merger or consolidation in which the
Voting Securities of any such entity outstanding immediately prior thereto
continue to represent (either by remaining outstanding or by being converted
into Voting Securities of the surviving entity) at least a majority of the total
voting power of the surviving entity, or (iii) the sale (in one transaction) of
all or substantially all of the assets of any such entity, other than to a
subsidiary or affiliate of any such entity.
10. Jurisdiction and Related Matters. (a) Maker and Payee irrevocably
consent and submit to the non-exclusive jurisdiction of the State of Delaware
and the United States District Court located in the city of Wilmington, Delaware
and waive any objection based on venue or forum non conveniens with respect to
any action instituted therein arising under this Note or in any way connected
with or related or incidental to this Note whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agrees that any
dispute with respect to any such matters shall be heard only in the courts
described above.
(b) Maker hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth below and service
so made shall be deemed to be completed five (5) days after the same shall have
been so deposited in the U.S. mails, or, at Payee's option, by service upon
Maker in any other manner provided under the rules of any such courts. Within
thirty (30) days after such service, Maker shall appear in answer to such
process, failing which Maker shall be deemed in default and judgment may be
entered by Payee against Maker for the amount of the claim and other relief
requested.
(c) The validity, interpretation and enforcement of this Note, shall be
governed by the internal laws of the State of Delaware (without giving effect to
principles of conflicts of law).
830267.10
(d) MAKER HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION ARISING UNDER THIS NOTE WHETHER NOW EXISTING
OR HEREAFTER ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. MAKER
HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT PAYEE MAY FILE AN
ORIGINAL COUNTERPART OF A COPY OF THIS NOTE WITH ANY COURT AS WRITTEN EVIDENCE
OF ITS CONSENT TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.
11. Notice. All notices, requests and demands hereunder shall be in
writing and (i) made to a party at the following addresses:
To Borrower:
Questron Finance Corp.
c/o Questron Technology, Inc.
0000 Xxxxxxxx Xxxxxx
Xxxxx 000X
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. Xxxxxxxx
Tel: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Battle Xxxxxx LLP
Park Avenue Tower 00 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Xxxxxx, III, Esq.
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
To Payee:
[insert name]
[insert address]
Telephone:
Facsimile:
with a copy to:
[to be provided]
Telephone:
Facsimile:
Attention:
830267.10
or to such other address as either party may designate by written notice to the
other in accordance with this provision, and (i) deemed to have been given or
made: if delivered in person, immediately upon delivery; if by telex, telegram
or facsimile transmission, immediately upon sending and upon confirmation of
receipt; if by nationally recognized overnight courier service with instructions
to deliver the next business day, one (1) business day after sending; and if by
certified mail, return receipt requested, five (5) days after mailing.
12. Amendments. No provision of the Note may be waived, modified,
amended or discharged orally or otherwise, except by a writing duly executed by
Maker and the holder hereof.
13. Section Headings, Construction. (a) The headings of Sections and
Subsections in this Note are provided for convenience only and will not affect
its construction or interpretation. All references to "Section" or "Sections"
refer to the corresponding Section or Sections of this Note unless otherwise
specified.
(b) All words used in this Note will be construed to be of such gender
or number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
QUESTRON FINANCE CORP.
By: _________________________
Name:
Title:
AGREED TO AND ACCEPTED (solely with
respect to Sections 4(b)(B), 5(c)
and 6(b) hereof and as of the date
first-above written):
QUESTRON TECHNOLOGY, INC.
By: __________________________
Name:
Title:
830267.10
