Questron files for bankruptcy protection

Questron Technology, Inc., Boca Raton, FL, has signed a definitive purchase agreement with QTI Acquisition Corp. providing for QTI's acquisition of substantially all of Questron's assets and has, together with its subsidiaries, filed for protection under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. The asset sale is subject to customary closing conditions, as well as the completion of a bankruptcy court supervised auction process and bankruptcy court approval. QTI is a newly formed company owned and organized by an affiliate of Sun Capital Partners, Inc.

Questron Technology is a provider of supply chain management solutions and professional inventory logistics management programs for small parts commonly referred to as 'C' inventory items (fasteners and related products) focused on the needs of original equipment manufacturers (OEMs). Questron reported 2000 revenues of $161.6 million (48% increase over 1999 revenues) and operating income of $21.2 million. In its 2000 annual report, the company listed 36 locations in the U.S. and Mexico with more than 500 employees. Questron's top five customer segments in 2000 were aerospace (16%), industrial products (14%), telecommunications (11%), semiconductor (11%), and furniture (10%).

Sun Capital Partners, Inc. is a private investment firm focused on leveraged buyouts. The firm has invested in approximately 30 companies during the past several years with combined annual revenues in excess of $2 billion.

'This filing protects the value of Questron's business for the benefit of Questron's creditors and will help ensure that our customers continue to receive uninterrupted service through the sale process and thereafter,' said Dominic A. Polimeni, chairman and CEO of Questron. While the bankruptcy court reviews the proposed sale to QTI and any other offers that may emerge, Questron believes it has sufficient cash on hand to finance its operations, including supporting the company's post-petition trade and employee obligations, as well as its ongoing operating needs during the process.

'We are very enthusiastic about the prospect of acquiring Questron's business and are excited about investing in a business that is well positioned in its industry,' said M. Steven Liff, vice president at Sun Capital. 'With our capital infusion and operational expertise, the business should have sufficient liquidity and ongoing support to take advantage of revenue growth and to continue to provide excellent service to its strong customer base.'

Under the terms of the agreement, QTI has agreed to acquire substantially all of the assets in exchange for the assumption of the debt outstanding under Questron's senior secured debt facility (currently approximately $81.5 million), the assumption of obligations under Questron's leases, customer contracts and certain other agreements, the issuance of 4% of QTI's capital stock and the funding of up to $500,000 for certain wind-down expenses. QTI has agreed that it will employ all of Questron's employees at the closing and provide them with comparable benefits, and has also indicated that it will employ existing management on terms comparable to their current arrangements. QTI will not assume any other Questron liabilities.

Questron expects that the purchase price payable by QTI will be insufficient to cover all of Questron's liabilities and therefore, Questron's stockholders will not receive any distribution upon completion of the bankruptcy proceedings.

The agreement also provides that if Questron completes an alternate transaction with another bidder, it must pay QTI a fee of $2.5 million and reimburse its legal and due diligence expenses, up to $500,000. Such amounts are payable only out of the proceeds of an alternate transaction, which must exceed QTI's purchase price by $1 million in cash plus such amounts and must be structured in a manner to provide cash sufficient to pay such fee and expenses.