<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): October 20, 1997
Pubco Corporation
(Exact name of registrant as specified in its charter)
Delaware 0-1359 53-0246410
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
3830 Kelley Avenue
Cleveland, Ohio 44114
(Address of principal executive offices)
Registrant's telephone number, including area code: (216) 881-5300
Page 1 of 3 Pages
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Item 2. Acquisition or Disposition of Assets.
a. On October 20, 1997, the Registrant acquired all of the
outstanding capital stock (the "Kroy Shares") of Kroy, Inc.
("Kroy"), a Minnesota corporation, with administrative and sales
offices in Scottsdale, Arizona, manufacturing facilities in
Osceola and St. Croix Falls, Wisconsin, and small warehouse and
office facilities in England, France and Germany. Kroy is a
producer of commercial and industrial labeling printers and
supplies and pioneered the lettering and labeling industry in
the 1970s. The KroyR trademark is registered in over 40
countries. Its products are sold throughout the United States,
Canada and Western Europe. Kroy also manufactures interior
architectural signs from a separate Scottsdale, AZ facility.
All of Kroy's facilities are leased from unaffiliated third
parties.
The acquisition was accomplished through separate purchase
agreements with Kroy's stockholders: Kroy Holding Company,
Marion and Warren Pollock, and Quest Equities Corp., the owners
of 85%, 10% and 5% respectively of the Kroy Shares, for the
aggregate cash sum of $272,500 and upon such additional terms
and conditions as are set forth in such agreements, each of
which are attached hereto and incorporated herein by reference.
In addition, a subsidiary of the Registrant purchased Kroy's
secured bank loan (the "Kroy Loan") from National Bank of
Canada, Kroy's secured lender, for the approximately $5,000,000
amount then outstanding. This subsidiary now provides working
capital to Kroy on a secured basis.
The Registrant used cash on hand to complete the acquisition of
the Kroy Shares and purchase of the Kroy Loan.
b. The Registrant anticipates that Kroy's St. Croix manufacturing
facility will be maintained, but that its Osceola manufacturing
facility will be relocated to the Registrant's facilities in
Cleveland, Ohio in early 1998. The Registrant anticipates that
Kroy's administrative and sales facilities in Scottsdale will be
scaled back and that there will be some consolidation of Kroy's
European facilities.
Item 7. Financial Statements, Pro Forma Financial Information
and Exhibits.
Financial Statements and Pro Forma Financial Information
It is impracticable to provide the required financial statements
for the acquired business and the pro forma financial
information relative to the acquired business at this time.
Such financial statements and pro forma financial information
will be filed as soon as practicable on Form 8-KA, but not later
than 60 days after the filing of this Report.
<PAGE>
Exhibits
Exhibit 10.25 - Stock Purchase Agreement between the Registrant
and Kroy Holding Company.
Exhibit 10.26 - Stock Purchase Agreement between the Registrant
and Marion and Warren Pollock.
Exhibit 10.27 - Stock Purchase Agreement between the Registrant
and Quest Equities Corp.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereto duly authorized.
PUBCO CORPORATION
By /s/ Robert H. Kanner
-------------------------
Robert H. Kanner
President
Date: October 31, 1997
<PAGE>
Exhibit 10.25
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (the "Agreement") is made this 20th day
of October, l997 by and between PUBCO CORPORATION, a corporation
organized and existing under the laws of the State of Delaware ("Pubco")
and KROY HOLDING COMPANY, a corporation organized and existing under the
laws of the State of Delaware ("Holdings").
RECITALS
Holdings is the owner of 85,000 shares (the "Kroy Shares") of the
issued and outstanding common stock of Kroy, Inc., a corporation
organized and existing under the laws of the State of Minnesota
("Kroy"). Pubco desires to purchase all of the Kroy Shares and Holdings
desires to sell all of the Kroy Shares upon the terms and conditions
contained in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises, covenants,
warranties and representations contained in this Agreement, the parties
agree as follows:
1. Purchase and Sale. Upon the terms, subject to the conditions, and in
reliance upon the representations and warranties contained in
Sections 2 and 3 of this Agreement, at a closing of the transactions
contemplated by this Agreement (the "Closing"), Holdings shall sell
and Pubco shall purchase all of the Kroy Shares.
2. Holdings' Representations and Warranties. To induce Pubco to enter
into this Agreement, Holdings represents and warrants to Pubco that:
(i) the Kroy Shares are fully paid and non-assessable and at the
Closing will be owned by Holdings free and clear of all liens and
encumbrances of any type whatsoever other than transfer restrictions
arising under state or federal securities laws and encumbrances
created by or through Pubco; (ii) the Kroy Shares represent 85% of
the issued and outstanding capital stock of Kroy; (iii) the Board of
Directors of Holdings has authorized ( or by the Closing will have
authorized) the execution, delivery and performance of this
Agreement; (iv) Holdings has taken (or by the Closing will have
taken) all action required by law, its Articles of Incorporation or
Charter, its By-Laws or otherwise, to authorize such execution,
delivery and performance of this Agreement and the sale of the Kroy
Shares to Pubco; and (v) this Agreement is a valid and binding
agreement of Holdings enforceable in accordance with its terms,
except as enforceability may be limited by provisions of law relating
to bankruptcy, insolvency, or creditors rights, or by general
principles of equity. The representations and warranties contained
in this Section 2 shall survive the Closing. Except for this Section
2 and the representations contained in Sections 6c and 12, Holdings
makes no representation or warranty, whether explicit or implied, to
Pubco regarding the Kroy Shares or Kroy itself or any other matter.
<PAGE>
3. Pubco's Representations and Warranties. To induce Holdings to enter
into this Agreement, Pubco represents and warrants to Holdings that:
(i) the Board of Directors of Pubco has authorized (or by the Closing
will have authorized) the execution, delivery and performance of this
Agreement; (ii) Pubco has taken (or by the Closing will have taken)
all action required by law, its Certificate of Incorporation, its
By-Laws or otherwise, to authorize such execution, delivery and
performance of this Agreement and the purchase of the Kroy Shares;
and (iii) this Agreement is a valid and binding agreement of Pubco
enforceable in accordance with its terms, except as enforceability
may be limited by provisions of law relating to bankruptcy,
insolvency, or creditors rights, or by general principles of equity.
Pubco further represents and warrants that (i) it understands that
neither the offer nor the sale of the Kroy Shares has been registered
under the Securities Act of 1933, as amended (the "1933 Act"), or any
state securities law; (ii) it is aquiring the Kroy Shares solely for
its own account and not with a view to any distribution or other
disposition thereof; and (iii) it will not transfer the Kroy Shares
except in a transaction that is registered, or is exempt from
registration, under the 1933 Act and any applicable state securities
laws. The representations and warranties contained in this Section
shall survive the Closing.
4. Purchase Price. The purchase price (the "Purchase Price") for the
sale and delivery by Holdings of the Kroy Shares shall be the sum of
$100,000. The Purchase Price shall be paid by wire transfer or bank
check at the Closing.
5. Closing. The closing shall occur as soon as all terms and conditions
to the consummation of this Agreement have been satisfied, but no
later than October 20, 1997. The Closing shall be held at 10:30 C.T.
at the offices of Heller International, Inc. ("Heller
International"), 500 West Monroe Street, Chicago, Illinois 60661, or
at such other time or place as the parties may mutually agree. The
date of the Closing is referred to herein as the "Closing Date".
6. Pubco's Conditions to Closing. The obligation of Pubco to consummate
the transactions contemplated by this Agreement is subject to the
satisfaction at or prior to Closing of the following conditions:
a. Representations and Warranties. The representations and
warranties of Holdings set forth in Section 2 of this Agreement
shall be true, complete and accurate in all material respects as
of the Closing Date.
b. Absence of Suits. No action, suit or proceeding shall have been
instituted to restrain, prohibit or otherwise challenge the
legality of the transactions contemplated herein.
c. Stock Certificates. Holdings shall deliver to Pubco
Certificates evidencing the Kroy Shares, which have been duly
endorsed in blank for transfer. If any of the certificates can
<PAGE>
not be located, Holdings shall deliver a Lost Share Affidavit in
lieu thereof containing customary representations to and
indemnifications of Kroy, which shall survive the Closing.
d. Appointment of Pubco Nominees, Resignation of certain Kroy
Directors Immediately prior to the Closing, the Kroy Board of
Directors shall have been expanded by 4 seats and the persons
designated by Pubco and set forth on Exhibit C shall have been
appointed to fill such new seats on the Closing Date.
Contemporaneous with the Closing, all directors of Kroy other
than the persons set forth on Exhibit C and other than Warren
Pollock shall have resigned.
e. Certificate(s) of Good Standing. Holdings shall have delivered
to Pubco separate Certificates of Good Standing issued by the
States of Minnesota, Arizona, and Wisconsin to the effect that
Kroy is in good standing in each jurisdiction.
f. Cancellation Tax Sharing Agreement and Other Intercompany
Indebtedness. Holdings shall have delivered a document to Kroy
(i) evidencing cancellation of the tax sharing agreement between
Kroy and Holdings; (ii) cancelling any intercompany obligations
owing by Kroy to Holdings under such tax sharing agreement;
(iii) cancelling any other obligations of Kroy to Holdings,
whether or not arising from the tax sharing agreement; and (iv)
certifying that there are no obligations of any kind of Kroy to
any direct or indirect parent or affiliate of Holdings.
g. Release of Claims. Holdings shall have executed and delivered
to Kroy a counterpart of a Release in the form of Exhibit A.
7. Holdings' Conditions to Closing. The obligation of Holdings to
consummate the transactions contemplated by this Agreement is subject
to the satisfaction at or prior to Closing of the following
conditions:
a. Representations and Warranties. The representations and
warranties of Pubco set forth in Section 3 of this Agreement
shall be true, complete and accurate in all material respects as
of the Closing Date.
b. Absence of Suits. No action, suit or proceeding shall have been
instituted to restrain, prohibit or otherwise challenge the
legality of the transactions contemplated herein.
c. Release of Guarantee. Holdings shall have received confirmation
from Heller Financial, Inc. ("Heller Financial") that it has
received a release from National Canada Finance Corporation
("NCFC") of the Heller Financial's guarantee of certain
obligations of Kroy under Kroy's April 10, 1995 Credit
Agreement, as amended (the "NCFC Release").
<PAGE>
d. Safeco Bond. Pubco shall have delivered to Heller Investments,
Inc. ("Heller Investments") a standby Letter of Credit issued by
Key Bank National Association in the amount of $667,000 to
collateralize Heller Investment's exposure to Safeco Insurance
Company of America ("Safeco") for posting a bond (the "Safeco
Bond") for Kroy's portion of the judgment awarded in the
litigation known by the parties as the K-Sun Litigation (the
"K-Sun Litigation").
e. Release of Claims. Kroy shall have executed and delivered to
Holdings a counterpart of a Release in the form of Exhibit B.
f. Special Releases. Kroy shall have provided written evidence,
reasonably satisfactory to Holdings, that as of the Closing: (i)
Kenneth Cleveland Associates, Inc. ("Associates") has no claims
against Holdings arising out of its affiliation with Kroy; (ii)
Gust Rosenfeld PLC ("Gust Rosenfeld") has no claims against
Holdings or Heller Financial, including those set forth in that
certain letter agreement dated April 9, 1997, arising out of its
representation of Kroy; and (iii) Barrington has no claims
against Holdings arising out of its affiliation with Kroy.
8. Heller International Indemnification. To induce Pubco to enter into
this Agreement, Heller International hereby indemnifies and holds
harmless Pubco and Kroy and their respective affiliates,
stockholders, directors, officers, employees and agents, and each of
the heirs, executors, successors and assigns of any of the foregoing,
from and against any and all claims, losses, damages and reasonable
expenses (collectively, "Claims and Losses") that any of them may
incur as a result of Kroy's inclusion in any consolidated federal,
state or local income tax return filed by Heller International (or
its Affiliates) for any tax period prior to and including the Closing
Date. Pubco or Kroy, as the case may be, shall give Heller
International prompt written notice of any matter which it believes
gives rise to indemnification under this Section 8 and, to the extent
that such matter involves a claim by a third party, Heller
International shall be entitled to assume the defense thereof.
9. Pubco Indemnification. Pubco and Holdings agree that the intention
of this Agreement, as between Pubco and Holdings, is to transfer to
Pubco all risks, liabilities and benefits associated with the
ownership of the Kroy Shares by Pubco after the Closing and the
ownership and operation of Kroy and its business by Pubco after the
Closing. To that end, from and after the Closing Date, Pubco hereby
indemnifies and holds harmless Holdings, and its affiliates,
stockholders directors, officers, employees and agents, and each of
the heirs, executors, successors and assigns of any of the foregoing,
from and against any and all Claims and Losses that any of them may
incur which arise out of Pubco's ownership of the Kroy Shares or the
ownership or operation of Kroy and its business, including, without
limitation, (i) any and all liability of Kroy to the plaintiff in the
K-Sun Litigation and (ii) any and all expenses of Kroy incurred in
connection with its defense of the K-Sun Litigation.
<PAGE>
10. Further Assurances. Pubco and Holdings agree that, from time to
time, whether before, at or after the Closing Date, they will, at the
expense of the requesting party, execute and deliver such further
instruments of conveyance and transfer and take such other action as
may be reasonably requested by either Pubco or Holdings to carry out
the purposes and intents of this Agreement and to vest further title
to Pubco in the Kroy Shares. To the extent that such further
assurance requires the signature or other cooperation of Heller
Financial, Heller Investments, Heller International or any other
Affiliate, Holdings agrees to use its best efforts to secure such
signature or cooperation.
11. Certain Tax Matters. Heller International and Pubco hereby agree to
jointly make an election under Section 338(h)(10) of the Internal
Revenue Code of 1986, as amended, and to jointly make an election
under any similar state or local statute as Heller International and
Pubco may designate, with respect to the transactions provided for in
this Agreement. Heller International and Pubco will each execute
such documents, provide such information and otherwise cooperate with
the other as such party may reasonably request to enable Heller
International and Pubco to file all forms and other documents
relating to this election with the Internal Revenue Service and any
applicable state or local authorities as soon as possible.
Notwithstanding the immediately preceeding sentence, Heller
International and Pubco agree that all such forms and other documents
shall in fact be filed with the Internal Revenue Service and all
applicable state or local authorities no later than 180 days after
the Closing Date.
12. Kroy Tax Refund. Heller International and Holdings confirm and agree
that the pending federal income tax refund of approximately $365,000
which was applied for by Holdings on behalf of Kroy on Internal
Revenue Service Form 1139 (i) has not yet been received by either
Heller International, Holdings or Kroy; (ii) when issued, shall be
the sole property of Kroy; and (iii) if received by either Heller
International or Holdings (or any of their respective affiliates)
shall be promptly endorsed and delivered by such party to Kroy.
13. Termination This Agreement may be terminated and the transactions
contemplated hereby abandoned at any time prior to Closing:
a. Mutual Consent. By the mutual written consent of Pubco and
Holdings.
b. Failure to Close by October 20, 1997. By either party hereto if
the transactions contemplated by this Agreement have not been
consummated on or before the close of business in Scottsdale, AZ
on October 20, 1997.
<PAGE>
c. By Pubco. By Pubco if the conditions to its obligations
hereunder have not been satisfied on or before Closing.
d. By Holdings. By Holdings if the conditions to its obligations
hereunder have not been satisfied on or before Closing.
e. Effect of Termination. In the event of the termination or
abandonment of this Agreement as provided herein, this Agreement
shall become void and shall have no force or effect without any
liability on the part of Pubco or Holdings to each other,
provided, however, that this Section shall not relieve any
liability of any party to the other if such termination occurred
because a party willfully failed materially to perform any of
its obligations under this Agreement.
14. Amendment, Governing Law, Successors and Assigns, Counterparts,
Entire Agreement. This Agreement
a. Amendment. May be amended at any time, but only by a writing
signed by all parties hereto.
b. Governing Law. Shall be construed under and in accordance with
the laws of the State of Arizona without regard to conflict of
laws principles.
c. Assignability. Shall not be assignable by any party hereto and
no person not a party to this Agreement shall have any rights
hereunder.
d. Binding Effect. Shall be binding upon and shall inure to the
benefit of the parties hereto and their respective successors
and permitted assigns.
d. Counterparts. May be executed in two or more counterparts, all
of which shall be considered one and the same agreement and
shall be effective when one or more counterparts shall have been
signed by and delivered to each of the parties.
e. Entire Agreement. This Agreement together with the documents
delivered to the parties contemporaneously herewith and at
Closing embody the entire agreement and understandings between
the parties and supersedes all prior agreements and
understandings among them relating to the subject matter hereof,
including any understandings embodied in that certain Term Sheet
dated September 11, 1997, which Term Sheet the parties agree is
non-binding.
15. Captions. The captions in this Agreement are included for
convenience only and shall not in any way affect the interpretation
or construction of any provisions hereof.
16. Notices. Any notices or other communication required or permitted
hereunder shall be sufficiently given if personally delivered, or
<PAGE>
sent by certified mail postage prepaid, sent by overnight courier
(providing proof of delivery) or faxed to the parties at the
following addresses and fax numbers (or at such other address or fax
number for a party as shall be specified by like notice):
To Pubco: Pubco Corporation
3830 Kelley Avenue
Cleveland, Ohio 44ll4
Attn: Robert H. Kanner, President
FAX: (216) 881-8380
With copy to: Stephen R. Kalette
Vice President & General Counsel
at the same address and Fax number
To Holdings Kroy Holding Company
c/o Heller Equity Capital Corp.
500 West Monroe Street
Chicago, IL 60661
Attn: President
Fax: (312) 441-7236
With copy to: Charles Brissman
Senior Counsel
At the same address
Fax: (312) 441-7173
With an additional
copy to: Gust Rosenfeld PLC
201 North Central Avenue
Suite 3300
Phoenix, Arizona 85073-3300
Attn: Stephen W. Watkinson, Esq.
Fax: (602) 254-4878
16. Miscellaneous
a. Expenses. Except as otherwise provided herein, the parties
hereto shall pay their respective expenses, including the fees,
disbursements and expenses of their respective attorneys and
accountants, in connection with the negotiation and preparation
of this Agreement and the consummation of the transactions
contemplated hereby. This Section shall be construed as an
allocation of costs incurred in connection with this Agreement
in the event it is either terminated without breach or
consummated. It shall not be construed as a limitation of
damages recoverable by either party in the event of a breach.
b. Taxes. Except as otherwise provided herein, any tax
consequences to any party resulting from the transactions
contemplated by this Agreement shall be the sole responsiblity
and liability of that party.
IN WITNESS WHEREOF, the parties have each caused this Agreement to be
executed as of the day and year first above written.
PUBCO CORPORATION
By /s/ Robert H. Kanner
------------------------------
Robert H. Kanner, President
KROY HOLDING COMPANY
By /s/ Thomas B. Lally
-----------------------------
Thomas B. Lally, President
Executed solely with respect to Sections 11 and 12 above:
HELLER INTERNATIONAL CORPORATION
By /s/ Charles P. Brissman
-----------------------------
Title: Assistant Secretary
-------------------------
<PAGE>
Exhibit 10.26
Pubco Corporation
3830 Kelley Avenue
Cleveland, OH 44114
October 9, 1997
Warren and Marion Pollock
7301 Baltursol Lane
Charlotte, NC 28210
Re: Kroy, Inc.
Dear Mr. and Mrs. Pollock:
The following sets forth our mutual agreement by which Pubco Corporation
("Pubco") agrees to purchase, and Warren and Marion Pollock (together,
the "Pollocks") agree to sell, all of the Pollocks' shares and interest
in Kroy, Inc. ("Kroy").
At a closing, simultaneously with and conditioned on Pubco's purchase of
all shares of Kroy, Inc. owned by Kroy Holding Company, Pubco will
purchase and the Pollocks will sell all of the shares of Kroy owned by
the Pollocks for a total purchase price of $115,000 (equivalent to $11.50
per share).
The Pollocks represent and warrant to Pubco that the Pollocks own 10,000
shares of Kroy Common Stock, representing 10% of Kroy's outstanding
Common Stock, that such shares are owned by the Pollocks free and clear
of all liens and encumbrances, that such shares are fully paid and
non-assessable, that the Pollocks have the power to execute and perform
this agreement, that this agreement is the valid and binding agreement of
the Pollocks, and that such 10,000 shares are the only shares of any
class of stock of Kroy owned by the Pollocks.
Pubco represents and warrants to the Pollocks that this agreement is the
valid and binding agreement of Pubco and that Pubco has the corporate
power to execute and perform this Agreement.
Pubco agrees to offer to purchase the Kroy shares owned by Quest Equities
Corp. ("Quest") on the same terms and conditions and at the same price
per share as the purchase of the Pollock shares. Pubco and the Pollocks
acknowledge that such shares owned by Quest are the subject of an Equity
Sharing Agreement dated January 14, 1991 and an Escrow Agreement dated
November 22, 1993. The Pollocks will cooperate with Pubco in attempting
to achieve a purchase and sale of the Quest shares.
At the closing, the Pollocks will cause delivery of a certificate(s) for
the 10,000 shares, duly endorsed for transfer in blank, and Pubco will
deliver the $115,000 purchase price by wire transfer or official check
pursuant to written instructions of the Agent under such Escrow
Agreement. Also at the closing, Warren Pollock will deliver his
resignation as a Director of Kroy.
<PAGE>
W. and M. Pollock
Re: Kroy, Inc.
October 9, 1997
Page 2
Subject to such closing, the Pollocks hereby release Kroy, Kroy's
stockholders (including Kroy Holding Company and its affiliates),
affiliates, employees, officers and directors, and Pubco from any and all
claims, liability or obligation to the Pollocks, or either of them, in
any way arising out of the business and affairs of Kroy, the Pollock's
purchase, sale and/or ownership of shares of Kroy, the separate sale to
Pubco of Kroy Holding Company's shares in Kroy, Warren Pollock's service
as a Director of Kroy or in any way related to Kroy.
The foregoing release is self executing and deemed in full force and
effect upon the closing of this transaction. If requested by Pubco, the
Pollocks will deliver at closing a separate release reaffirming the terms
of this release.
This agreement supercedes any prior agreements or understandings
concerning the subject matter including the Term Sheet dated September 11,
1997.
Please signify your agreement with these terms by signing and returning
to Pubco the enclosed copy of this letter.
Sincerely,
/s/ Robert H. Kanner
--------------------------
Robert H. Kanner
President
RHK:cm
Enc.
Accepted and Agreed to this 16th day of October, 1997.
/s/ Warren Pollock
--------------------------
Warren Pollock
/s/ Marion Pollock
-------------------------
Marion Pollock
<PAGE>
Exhibit 10.27
Pubco Corporation
3830 Kelley Avenue
Cleveland, OH 44114
October 15, 1997
Quest Equities Corp.
Attention: Michael Scinto
8 Old Canal Crossing
Farmington, CT 06032
Re: Kroy, Inc.
Ladies and Gentlemen:
The following sets forth our mutual agreement by which Pubco Corporation
("Pubco") agrees to purchase, and Quest Equities Corp. ("Quest") agrees
to sell, all of Quest's shares and interest in Kroy, Inc. ("Kroy").
At a closing, simultaneously with and conditioned on Pubco's purchase
of all shares of Kroy, Inc. owned by Kroy Holding Company, Pubco will
purchase and Quest will sell all of the shares of Kroy owned by Quest
for a total purchase price of $57,500 (equivalent to $11.50 per share).
Quest represents and warrants to Pubco that Quest owns 5,000 shares of
Kroy Common Stock, representing 5% of Kroy's outstanding Common Stock,
that such shares are owned by Quest free and clear of all liens and
encumbrances, that such shares are fully paid and non-assessable, that
Quest has the corporate power to execute and perform this agreement, that
this agreement is the valid and binding agreement of Quest, and that such
5,000 shares are the only shares of any class of stock of Kroy owned by
Quest.
Pubco represents and warrants to Quest that this agreement is the valid
and binding agreement of Pubco and that Pubco has the corporate power to
execute and perform this Agreement.
Pubco and Quest acknowledge that such shares owned by Quest are the
subject of an Equity Sharing Agreement dated January 14, 1991 and an
Escrow Agreement dated November 22, 1993.
At the closing, Quest will cause delivery of a certificate(s) for the
5,000 shares, duly endorsed for transfer in blank, and Pubco will deliver
the $57,500 purchase price by wire transfer or official check pursuant to
the written instructions of the Escrow Agent under such Escrow Agreement.
<PAGE>
Quest Equities Corp.
Re: Kroy, Inc.
October 15, 1997
Page 2
Subject to such closing, Quest hereby releases Kroy, Kroy's stockholders
(including Kroy Holding Company and its affiliates), affiliates,
employees, officers and directors, and Pubco from any and all claims,
liability or obligation to Quest, in any way arising out of the business
and affairs of Kroy, Quest's purchase, sale and/or ownership of shares of
Kroy, the separate sale to Pubco of Kroy Holding Company's shares in
Kroy, or in any way related to Kroy.
The foregoing release is self executing and deemed in full force and
effect upon the closing of this transaction. If requested by Pubco,
Quest will deliver at closing a separate release reaffirming the terms of
this release.
Please signify your agreement with these terms by signing and returning
to Pubco the enclosed copy of this letter. If this letter is not signed
and returned by Quest, or in the event this transaction does not close,
in either case on or before the close of business in Scottsdale, Arizona
on October 20, 1997 for any reason, then this agreement and Pubco's
assent hereto is null and void and of no further force and effect.
Sincerely,
/s/ Robert H. Kanner
-------------------------
Robert H. Kanner
President
RHK:cm
3631M
Enc.
Accepted and Agreed to this 16th day of October, 1997.
Quest Equities Corp.
by /s/ Michael Scinto
----------------------
its Vice President
----------------------
