<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): March 2, 2000
-------------
SUNSOURCE INC.
(Exact Name of Registrant Specified in Charter)
Delaware 1-13293 23-2874736
------------------- ---------------- -------------------
(State or Other (Commission File (I.R.S. Employer
Jurisdiction of Number) Identification No.)
Incorporation)
3000 One Logan Square
Philadelphia, PA 19103
------------------------- --------------
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (215) 282-1290
----------------
-------------------------------------------
(Former Name or Former Address, if Changed Since Last Report)
Page 1 of 9
Exhibit Index on page 9
<PAGE>
Item 2. Acquisition or Disposition of Assets.
On March 2, 2000, the Company completed a previously announced transaction with
GC SUN Holdings, L.P. (the "Partnership"), a newly-formed partnership affiliated
with Glencoe Capital, L.L.C. ("Glencoe ") a Chicago-based private equity
investment firm, pursuant to that certain Contribution Agreement by and among
SunSource Inc., SunSource Industrial Services Company, Inc., Kar Products Inc.,
A&H Holding Company, Inc., SunSource Canada Investment Company, A. & H. Bolt &
Nut Company Limited and the Partnership, dated as of February 10, 2000, as
amended by that certain Amendment No. 1 to Contribution Agreement, dated as of
March 2, 2000 (as amended, the "Contribution Agreement").
Pursuant to and at the closing of the transactions contemplated by the
Contribution Agreement, among other things, (1) the Company, through certain of
its indirect wholly-owned subsidiaries, contributed all of the equity interests
of Kar Products, LLC (as successor by merger to Kar Products Inc.) ("Kar
Products") and A. & H. Bolt & Nut Company Limited to the Partnership in exchange
for an aggregate 49% limited partnership interest in the Partnership, and (2)
affiliates of Glencoe, together with certain other investors, contributed an
aggregate of $22.5 million in cash (and committed to contribute an additional
$3.5 million in cash) to the Partnership in exchange for a 50.9% limited
partnership interest and a 0.1% general partnership interest in the Partnership.
In addition, in connection with the closing, a portion of the cash proceeds of
the equity and debt financing of the Partnership and its subsidiaries was used
to repay certain intercompany indebtedness in the amount of $105 million owed by
Kar Products to another wholly-owned subsidiary of the Company, which funds were
concurrently used to repay a portion of the outstanding indebtedness of the
Company and its subsidiaries under the existing credit facility with PNC Bank,
National Association, as administrative agent. The relative amount of
consideration received by the Company in exchange for its contribution was
determined by the parties in arms-length negotiations.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
------------------------------------------------------------------
(a) Not applicable.
(b) Pro forma Financial Information.
(c) Exhibits.
Exhibit No. Description of Document
2.1 Contribution Agreement by and among SunSource Inc.,
SunSource Industrial Services Company, Inc., KAR
Products Inc., A&H Holding Company, Inc., SunSource
Canada Investment Company, A. & H. Bolt & Nut Company
Limited and GC-SUN Holdings, L.P. dated as of February
10, 2000.
2.2 Amendment No. 1 to Contribution Agreement by and among
SunSource Inc., SunSource Industrial Services Company,
Inc., Kar Products, LLC (as successor by merger to
Kar Products Inc.), A&H Holding Company, Inc.,
SunSource Canada Investment Company, A. & H. Bolt & Nut
Company Limited and GC-SUN Holdings, L.P. dated as of
March 2, 2000.
99.1 Press Release dated March 2, 2000
Page 2 of 9
<PAGE>
SUNSOURCE INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
INTRODUCTION
On March 2, 2000 (the "Closing Date"), SunSource Inc. (the "Company") completed
a transaction with GC Sun Holdings, L.P. (the "Partnership"), a newly-formed
partnership affiliated with Glencoe Capital, L.L.C. ("Glencoe") of Chicago, a
private equity investment firm pursuant to a contribution agreement among the
parties (the "Contribution Agreement").
Pursuant to the Contribution Agreement, the Company, through certain of its
wholly owned subsidiaries, contributed all of the interests of its Kar Products
Inc. subsidiary and its A & H Bolt & Nut Company Limited subsidiary (the
"Contributed Entities") to the Partnership in exchange for an aggregate 49%
interest in the Partnership. At the closing, affiliates of Glencoe, together
with certain other investors, contributed $22.5 million in cash (and committed
to contribute an additional $3.5 million in cash) in exchange for an aggregate
51% interest in the Partnership. In addition, the Partnership repaid certain
intercompany indebtedness in the amount of $105 million owed to the Company (the
"Transaction"). The contributions by the Company and Glencoe and the repayment
of debt by the Partnership as outlined above reflect the Transaction.
The accompanying pro forma consolidated balance sheet and pro forma consolidated
statement of income give effect to the Transaction.
The pro forma financial information is unaudited and assumes that the
transaction for which pro forma effects are shown occurred as of December 31,
1999 for the pro forma consolidated balance sheet and as of January 1, 1999 for
the pro forma consolidated statement of income (the "Pro Forma Consolidated
Financial Information").
The Pro Forma Consolidated Financial Information presented herein is not
necessarily indicative of what the financial position or results of operations
would have been had the Transaction occurred on those dates, nor are they
necessarily indicative of the future results of operations of the Company.
Management believes the pro forma adjustments reflected in the accompanying
consolidated balance sheet and consolidated statement of income give effect to
all material changes arising from the Transaction. The Pro Forma Consolidated
Financial Information should be read in conjunction with the historical
consolidated financial information and related notes included in the Company's
report on Form 10-K for the year ended December 31, 1998 and report on Form 10Q
for the quarter ended September 30, 1999.
Page 3 of 9
<PAGE>
SUNSOURCE INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1999
(UNAUDITED)
(dollars in thousands)
<TABLE>
<CAPTION>
Contributed
Entities Pro Forma
Historical (a) Adjustments Pro Forma
---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 5,186 $ (2,502) $ - $ 2,684
Accounts receivable, net 65,141 (17,475) - 47,666
Inventories 92,691 (17,968) - 74,723
Deferred income taxes 7,110 86 - 7,196
Net assets held for sale 35,249 - - 35,249
Income taxes receivable 11,669 - 1,853 (c) 13,522
Other current assets 5,226 (834) - 4,392
--------- ---------- -------- ----------
Total current assets 222,272 (38,693) $ 1,853 185,432
Property and equipment, net 17,282 (5,511) - 11,771
Goodwill an other intangibles, net 52,404 (20,385) - 32,019
Deferred financing fees 3,493 - - 3,493
Deferred income taxes 5,865 (559) - 5,306
Cash surrender value of life insurance policies 14,190 - - 14,190
Other assets 7,511 (246) 2,639 (b) 9,904
--------- ---------- -------- ----------
Total assets $ 323,017 $ (65,394) $ 4,492 $ 262,115
========= ========== ======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Accounts payable $ 44,358 $ (7,658) $ - $ 36,700
Notes payable 376 - - 376
Current portion of capitalized lease obligations 923 - - 923
Dividends / distributions payable 1,019 - - 1,019
Deferred tax liability 929 - - 929
Current portion of senior secured term loan 3,750 - - 3,750
Accrued expenses:
Salaries and wages 5,343 (1,875) - 3,468
Income and other taxes 3,299 (1,013) - 2,286
Accrued losses on discontinued operation 2,703 - - 2,703
Other accrued expenses 23,961 (3,740) - 20,221
--------- ---------- -------- ----------
Total current liabilities 86,661 (14,286) - 72,375
Senior notes - - - -
Senior secured term loan 17,750 - (1,554)(d) 16,196
Bank revolving credit 102,791 - (102,791)(d) -
Capitalized lease obligations 1,509 - - 1,509
Deferred compensation 14,173 - - 14,173
Other liabilities 2,148 (1,954) - 194
--------- ---------- -------- ----------
Total liabilities 225,032 (16,240) (104,345) 104,447
--------- ---------- -------- ----------
Guaranteed preferred beneficial interests in the
Company's junior subordinated debentures 115,200 - - 115,200
--------- ---------- -------- ----------
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $.01 par, 1,000,000 shares
authorized, none issued - - - -
Common stock, $.01 par, 20,000,000 shares authorized, 72 - - 72
Additional paid-in capital 21,342 - - 21,342
Retained earnings (25,297) (50,480) 108,837 (e) 33,060
Unearned compensation (283) - - (283)
Accumulated other comprehensive income (4,344) 1,326 - (3,018)
Treasury stock (8,705) - - (8,705)
--------- ---------- -------- ----------
Total stockholders' equity (deficit) (17,215) (49,154) 108,837 42,468
--------- ---------- -------- ----------
Total liabilities and stockholders'
equity (deficit) $ 323,017 $ (65,394) $ 4,492 $ 262,115
========= ========== ======== ==========
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL INFORMATION
Page 4 of 9
<PAGE>
SUNSOURCE INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1999
(UNAUDITED)
(dollars in thousands, except for share amounts)
<TABLE>
<CAPTION>
Contributed
Entities Pro Forma
Historical (f) Adjustments Pro Forma
----------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
Net sales $ 555,652 $ (124,780) $ - $ 430,872
Cost of sales 326,399 (38,576) - 287,823
Cost of sales - Inventory write-down
related to restructuring 2,130 - - 2,130
----------- ----------- -------- -----------
Gross profit 227,123 (86,204) - 140,919
----------- ----------- -------- -----------
Operating expenses:
Selling, general and administrative expenses 218,437 (67,291) - 151,146
Depreciation 4,272 (1,060) - 3,212
Amortization 1,847 (665) - 1,182
----------- ----------- -------- -----------
Total operating expenses 224,556 (69,016) - 155,540
----------- ----------- -------- -----------
Provision for litigation matters -
divested operations - - - -
Transaction and other related costs
Restructuring charges and asset write-off 8,118 (1,020) - 7,098
Gain on curtailment of defined benefit
pension plan 5,608 - - 5,608
Other income 685 (52) 2,639 (g) 3,272
----------- ----------- -------- -----------
Income (loss) from operations 742 (16,220) 2,639 (12,839)
Interest expense, net 9,724 6 (8,248)(h) 1,482
Distributions on guaranteed preferred
beneficial interests 12,232 - - 12,232
----------- ----------- -------- -----------
Income (loss) from continuing operations
before provision (benefit) for income taxes (21,214) (16,226) 10,887 (26,553)
Provision (benefit) for income taxes (10,100) (1,853)(i) (11,953)
----------- ----------- -------- -----------
Income (loss) from continuing operations (11,114) (14,600)
----------- -----------
Discontinued operations
Income (loss) from operations of discontinued
Harding segment, less applicable income
taxes of ($1,080) (2,188) (2,188)
Estimated loss on disposal of discontinued Harding
segment (23,834) (23,834)
----------- -----------
Income (loss) from discontinued operations (26,022) (26,022)
----------- -----------
Income (loss) before extraordinary item (37,136) (40,622)
Extraordinary loss from early extinguishment
of debt, less applicable income taxes of ($126)
in the 1999 period (235) (235)
----------- -----------
Net income (loss) $ (37,371) $ (40,857)
=========== ===========
Basic and diluted income (loss) per common share:
Income (loss) from continuing operations $ (1.65) $ (2.16)
Income (loss) from operations of discontinued
Harding segment, net of taxes (0.33) (0.32)
Estimated loss on disposal of discontinued
Harding segment (3.53) (3.53)
----------- -----------
Income (loss) before extraordinary item (5.51) (6.01)
Extraordinary loss from early extinguishment
of debt, net of taxes (0.03) (0.03)
----------- -----------
Net income (loss) $ (5.54) $ (6.04)
=========== ===========
Weighted average number of
outstanding common shares 6,747,142 6,747,142
</TABLE>
SEE ACCOMPANYING NOTES TO PRO FORMA FINANCIAL INFORMATION
Page 5 of 9
<PAGE>
SUNSOURCE INC. AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
(dollars in thousands)
1. Basis of Presentation
The Pro Forma Consolidated Financial Information is unaudited and assumes
that the Transaction for which the pro forma effects are shown occurred as
of December 31, 1999, for the pro forma consolidated balance sheet and as of
January 1, 1999, for the pro forma consolidated statement of income.
The gain of approximately $53,000 and other non-recurring charges related to
this Transaction have been excluded from the accompanying pro forma
consolidated statement of income as such amounts do not represent on-going
income or costs of operations.
2. Pro forma adjustments to consolidated balance sheet:
(a) Adjustment to reflect the elimination of historical assets and
liabilities of the Contributed Entities as of December 31, 1999.
(b) Adjustment to reflect 49% equity in net income of the Partnership for
the twelve months ended December 31, 1999.
(c) Adjustment to reflect increase in income taxes receivable as a result
of the Transaction.
(d) Adjustment to reflect repayment of outstanding senior secured term loan
and bank revolving credit borrowings with proceeds received from the
Partnership for repayment of certain intercompany indebtedness in the
aggregate amount of $105,000, less payments of cash expenses on the
Transaction of $655.
(e) Adjustment to equity to reflect pro forma adjustments (a) through (c)
noted above.
Page 6 of 9
<PAGE>
SUNSOURCE INC. AND SUBSIDIARIES, continued
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
(dollars in thousands)
3. Pro forma adjustments to consolidated statement of income for the twelve
months ended December 31, 1999:
(f) Adjustment to reflect elimination of the results of operations of the
Contributed Entities for the twelve months ended December 31, 1999.
(g) Adjustment to reflect the Company's 49% interest in the net income of
the Partnership for the twelve months ended December 31, 1999
incorporating historical earnings of the Contributed Entities for the
1999 year adjusted for interest expense expected to be incurred by the
Partnership based on effective interest rates at the Closing Date and
adjusted for non-cash charges of $988 related to purchase accounting.
(h) Adjustment to reflect reduced interest expense resulting from the
repayment of the outstanding bank revolving line of credit and senior
secured term loan based on weighted average interest rates incurred
during 1999. (reference Note 2--pro forma adjustment (e).
(i) Adjustment to reflect additional consolidated net tax benefits as a
result of pro forma adjustments (e), (f) and (g) noted above.
Page 7 of 9
<PAGE>
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 hereunto duly authorized.
SUNSOURCE INC.
Date: March 17, 2000 By: /s/ Joseph M. Corvino
----------------------------------
Joseph M. Corvino
Vice President- Finance and Chief
Financial Officer
Page 8 of 9
<PAGE>
EXHIBIT INDEX
- -------------
EXHIBIT NO. DESCRIPTION OF DOCUMENT
- ----------- -----------------------
2.1 Contribution Agreement by and among SunSource Inc., SunSource
Industrial Services Company, Inc., KAR Products Inc., A & H
Holding Company, Inc., SunSource Canada Investment Company,
A. & H. Bolt & Nut Company Limited and GC-SUN Holdings,
L.P. dated as of February 10, 2000.
2.2 Amendment No. 1 to Contribution Agreement by and among
SunSource Inc., SunSource Industrial Services Company, Inc.,
Kar Products LLC (as successor by merger to Kar Products,
Inc.), A&H Holding Company, Inc., SunSource Canada
Investment Company, A. & H. Bolt & Nut Company Limited and
GC-SUN Holdings, L.P. dated as of March 2, 2000.
99.1 Press Release dated March 2, 2000
Page 9 of 9
<PAGE>
================================================================================
CONTRIBUTION AGREEMENT
by and among
SUNSOURCE INC.,
SUNSOURCE INDUSTRIAL SERVICES COMPANY, INC.,
KAR PRODUCTS INC.,
A&H HOLDING COMPANY, INC.,
SUNSOURCE CANADA INVESTMENT COMPANY,
A. & H. BOLT & NUT COMPANY LIMITED,
and
GC-SUN HOLDINGS, L.P.
Dated as of February 10, 2000
================================================================================
<PAGE>
CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT, dated as of February 10, 2000
(together with the Schedules and Exhibits hereto, this "Agreement"), is by and
among SUNSOURCE INC., a Delaware corporation ("SunSource"), SUNSOURCE INDUSTRIAL
SERVICES COMPANY, INC., a Delaware corporation ("Parent"), KAR PRODUCTS INC., a
Delaware corporation ("Kar Products"), SUNSOURCE CANADA INVESTMENT COMPANY, an
unlimited liability company organized under the laws of the Province of Nova
Scotia ("SunSource Canada"), A&H HOLDING COMPANY, INC., a Michigan corporation
("A&H Holding"), and A. & H. BOLT & NUT COMPANY LIMITED, a company organized
under the laws of the Province of Ontario ("A&H Bolt"), and GC-SUN HOLDINGS,
L.P., a Delaware limited partnership (the "Partnership").
RECITALS
WHEREAS, as of the date hereof, (i) SunSource indirectly owns
all of the issued and outstanding shares of capital stock of Parent; (ii) Parent
directly owns all of the issued and outstanding shares of capital stock of Kar
Products; (iii) Kar Products directly owns all of the issued and outstanding
shares of capital stock of A&H Holding; (iv) A&H Holding directly owns all of
the issued and outstanding shares of capital stock of SunSource Canada; and (v)
SunSource Canada directly owns all of the issued and outstanding shares of
capital stock of (A) A&H Bolt and (B) J.N. Fauver (Canada) Ltd., a company
organized under the laws of the Province of Ontario ("Fauver");
WHEREAS, on or prior to the Closing Date and in accordance
with the terms and conditions of this Agreement, (i) Parent will, and SunSource
will cause Parent to, form a single-member Delaware limited liability company,
wholly-owned by Parent ("Kar LLC" and, together with Kar Products, the "Kar
Entities"), with and into which Parent will merge Kar Products, with Kar LLC as
the surviving entity in such merger (the "Kar Merger"); (ii) following the Kar
Merger, Kar LLC will, and SunSource and Parent will cause Kar LLC to, transfer
and assign all of the issued and outstanding shares of capital stock of A&H
Holding to Parent (the "Holding Stock Transfer"); and (iii) SunSource Canada
will, and SunSource, Parent and A&H Holding will cause SunSource Canada to
transfer all of the shares of capital stock of Fauver (the "Fauver Shares") to
1394066 Ontario Inc., a newly formed wholly-owned Canadian subsidiary of A&H
Holding organized under the laws of the Province of Ontario (the "Fauver Share
Distribution" and, collectively with the Kar Merger, the Holding Stock Transfer
and the transactions described in Article VI of this Agreement, the
"Intercompany Transactions"); and
WHEREAS, upon the terms and subject to the conditions of this
Agreement, on the Closing Date (i) the Partnership desires to acquire from
Parent, and Parent desires (and SunSource desires to cause Parent), to
contribute to the Partnership the Kar Interest (the "Kar Contribution"), and
(ii) the Partnership desires to acquire from A&H Holding, and A&H Holding
desires (and SunSource and Parent desire to cause A&H Holding) to contribute to
the Partnership, the Canada Shares (the "Canada Contribution" and, collectively
with the Kar
<PAGE>
Contribution, the "Contributions"), in each case in exchange for Units in the
Partnership as set forth in this Agreement.
NOW, THEREFORE, in consideration of the respective
representations, warranties, covenants, conditions, agreements and premises
contained herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
ARTICLE I.
DEFINITIONS
Section 1.1 Certain Defined Terms. As used in this Agreement,
the following terms shall have the following meanings. Any of such terms, unless
the context otherwise requires, may be used in the singular or the plural.
"Action" shall mean any claim, action, cause of action, suit,
order, writ, litigation, labor dispute, injunction, judgement, decree, criminal
prosecution, arbitration, inquiry, proceeding or investigation by or before any
Governmental Authority or arbitral body.
"Affiliate" shall mean, with respect to any specified Person,
any other Person that directly, or indirectly through one or more
intermediaries, controls, is controlled by, or is under common control with,
such specified Person.
"Ancillary Agreements" shall mean, collectively, (i) the
Partnership Agreement, (ii) the Intercompany Transaction Documents and all
related agreements, certificates, instruments or other documents executed,
delivered, filed or otherwise required to effect or consummate the Intercompany
Transactions, including the Kar LLC Operating Agreement, (iii) any agreements,
amendments to existing agreements or other documents to be executed at or prior
to the Closing by any Employee in accordance with this Agreement, (iv) the Fee
Agreements, (v) the Registration Rights Agreement, and (vi) the Unit Pledge
Agreement.
"Assumed Liabilities" shall mean (i) the Intercompany
Indebtedness, (ii) those Current Liabilities of the Expediter Entities included
(and only to the extent included) in the calculation of Closing Net Working
Capital on the Final Closing Date Balance Sheet (expressly excluding foreign
income taxes reflected on the Year-End Balance Sheet as an accrued expense in
excess of $189,000), (iii) Liabilities in connection with the performance from
and after the Closing of all Contracts to which the Expediter Entities are
parties (but not with respect to or arising out of or relating to any breach or
misrepresentation relating to such Contract prior to the Closing), and (iv)
those Liabilities set forth on Exhibit A attached hereto, but, if an amount is
reflected on such Exhibit A with respect to any such Liability, only to the
extent of such amount. Notwithstanding anything in this Agreement to the
contrary and without limiting the generality of any other provision of this
Agreement, the term "Assumed Liabilities" shall not include, and shall expressly
exclude, any Liability for United States federal and state income Taxes.
"Business Day" shall mean any day that is not a Saturday, a
Sunday or other day on which banks are required or authorized by law to be
closed in the City of New York.
2
<PAGE>
"Canada Shares" shall mean all of the shares of capital stock
of SunSource Canada issued and outstanding immediately prior to the Closing.
"Code" shall mean the Internal Revenue Code of 1986, as
amended, and the rules and regulations promulgated thereunder.
"Competition Act (Canada)" shall mean the Competition Act
(Canada), R.S.C. 1985, c. C-34, C. 19, as amended.
"Contract" shall mean any written agreement or instrument and
any legally binding oral agreement, commitment or understanding, including
without limitation, any evidence of indebtedness, or any lease or license.
"Contributed Entities" shall mean, collectively, SunSource
Canada and the Expediter Entities.
"Contributors" shall mean, collectively, Parent, in respect of
the Kar Contribution, and A&H Holding, in respect of the Canada Contribution.
"control" (including the terms "controlled by" and "under
common control with") shall mean, with respect to the relationship between or
among two or more Persons, the possession, directly or indirectly, of the power
to direct or cause the direction of the affairs or management of a Person,
whether through the ownership of voting securities, by contract or otherwise,
including, without limitation, the ownership, directly or indirectly, of
securities having the power to elect a majority of the board of directors or
similar body governing the affairs of such Person.
"Current Assets" shall mean the current assets of the
Expediter Entities, excluding deferred income taxes reflected as a current
asset.
"Current Liabilities" shall mean the current liabilities of
the Expediter Entities, excluding deferred income taxes reflected as a current
liability.
"Damages" shall mean: (i) with respect to the indemnification
obligations of SunSource pursuant to Section 9.2(a) of this Agreement, any and
all costs, losses (including, without limitation, diminution in value), Taxes,
Liabilities, obligations, damages (including special damages), lawsuits,
deficiencies, claims, demands, and expenses (whether or not arising out of a
Claim), including, without limitation, reasonable attorneys' fees, interest,
penalties, costs of mitigation, losses in connection with any Environmental Laws
(including, without limitation, any clean-up or remedial action), lost profits,
all amounts which would constitute Damages but for payments received under any
insurance policy the premium for which has been paid by any Person that is an
Affiliate of SunSource (other than the Expediter Entities) (payments received
under any insurance policy for which the premium has been paid by the Expediter
Entities prior to the Closing Date shall not constitute Damages) and all amounts
paid in investigation, defense or settlement of any of the foregoing, and (ii)
with respect to the indemnification obligations of the Partnership pursuant to
Section 9.2(b) of this Agreement, any and all costs, losses (including, without
3
<PAGE>
limitation, diminution in value), Taxes, Liabilities, obligations, damages
(including special damages), lawsuits, deficiencies, claims, demands, and
expenses (whether or not arising out of a Claim), including, without limitation,
reasonable attorneys' fees, interest, penalties, costs of mitigation, losses in
connection with any Environmental Laws (including, without limitation, any
clean-up or remedial action) and all amounts paid in investigation, defense or
settlement of any of the foregoing. As used in this Agreement, Damages shall not
be limited to matters asserted by third parties against an Indemnified Party,
but shall include Damages incurred or sustained by an Indemnified Party in the
absence of third party claims. Payments by an Indemnified Party of Damages for
which such party is indemnified hereunder shall not be a condition precedent to
recovery. Notwithstanding anything to the contrary in this Agreement, Damages
shall expressly include punitive damages, exemplary damages, multiple damages
and other penalty damages (other than those payable between or among the Parties
which do not arise out of a third party claim for such Damages).
"Debt Financing" shall mean the combination of senior bank
debt and subordinated financing extended to the Partnership as of the Closing
which, when combined with the Glencoe Contribution, will be sufficient to (i)
refinance and retire the Intercompany Indebtedness, (ii) pay in full and satisfy
all Transaction Expenses payable by the Partnership, and (iii) provide adequate
working capital for the operation of the Contributed Entities and the
Partnership subsequent to the Closing, and which will in all events be
specifically limited in recourse to the assets of the borrowers and credit
parties thereunder and without recourse to any partner in the Partnership.
"Employee" shall mean any individual employed or engaged
(including, without limitation, as an independent sales agent) by, on a
full-time, part-time or temporary basis, any of the Expediter Entities, whether
on an at-will basis or pursuant to a Contract or otherwise, including, without
limitation, all officers of the Expediter Entities and all Sales Employees.
"Encumbrance" shall mean any claim, lien, pledge, option,
charge, easement, restrictive covenant, option to purchase, rights of first
refusal, right of first offer, security interest, deed of trust, mortgage,
right-of-way, encroachment, building or use restriction, conditional sales
agreement, encumbrance or other right of third parties, whether voluntarily
incurred or arising by operation of law, and includes, without limitation, any
agreement to give any of the foregoing in the future, any contingent sale or
other title retention agreement or lease in the nature thereof or other
encumbrance or title defect of any kind.
"Environmental Laws" shall mean all applicable federal, state,
provincial, municipal, district and local Laws, and all orders, consent orders,
judgments, notices, permits or demand letters issued, promulgated or entered
pursuant thereto, relating to pollution or protection of the environment
(including, without limitation, ambient air, surface water, ground water, land
surface, or subsurface strata), including, without limitation, (i) Laws relating
to emissions, discharges, releases or threatened releases of Hazardous Materials
into the environment, and (ii) Laws relating to the identification, generation,
manufacture, processing, distribution, use, treatment, storage, disposal,
recovery, transport or other handling of Hazardous Materials. The term
"Environmental Laws" shall include, without limitation, the Comprehensive
4
<PAGE>
Environmental Response, Compensation and Liability Act of 1980, as amended
("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe Drinking
Water Act, as amended, the Clean Air Act, as amended, the Occupational Safety
and Health Act, as amended, and all analogous laws promulgated or issued by any
federal, state, provincial or other Governmental Authority.
"ERISA" shall mean the Employee Retirement Income Security Act
of 1974, as amended, and the rules and regulations promulgated thereunder.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations promulgated thereunder.
"Expediter Assets" shall mean all of the assets, properties,
businesses and rights of the Expediter Entities of every kind, nature, character
and description, whether real, personal or mixed, tangible or intangible,
accrued or contingent, or otherwise relating to or utilized in or held for use
in connection with the Expediter Business, directly or indirectly, in whole or
in part, whether or not carried on the books and records of the Expediter
Entities, and wherever located, including, without, limitation, the Expediter
Inventory, the Expediter Properties and the Expediter Software.
"Expediter Business" shall mean, collectively, the respective
businesses of the Expediter Entities as presently conducted.
"Expediter Entities" shall mean, collectively, the Kar
Entities and A&H Bolt.
"Expediter Inventory" shall mean all inventory of the
Expediter Entities held for resale or reflected as inventory on the Final
Closing Date Balance Sheet, wherever located, including, without limitation, all
raw materials, work-in-process, finished products, wrapping, supply and
packaging items and similar items of inventory with respect to the Expediter
Business.
"Fee Agreements" shall mean the Glencoe Fee Letters and each
other fee agreement entered into by the GC-SUN Holdings II, L.P., a subsidiary
of the Partnership, on the one hand, and any of Glencoe Capital, SunSource or
SunSource Corporate Group, Inc., on the other hand, as of the Closing Date with
respect to the payment of management or transaction fees by GC-SUN Holdings II,
L.P. to such parties.
"Final Closing Date Balance Sheet" shall mean the Closing Date
Balance Sheet as finally agreed to by the parties or otherwise determined in
accordance with Section 2.3 of this Agreement.
"Final Closing Net Tangible Asset Value" shall mean the Net
Tangible Asset Value as reflected in and calculated from the Final Closing Date
Balance Sheet.
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"Final Closing Net Working Capital" shall mean the Net Working
Capital as reflected in and calculated from the Final Closing Date Balance
Sheet.
"GAAP" shall mean United States generally accepted accounting
principles and practices as in effect from time to time or, with respect to any
Canadian entity, Canadian generally accepted accounting principles and practices
as in effect from time to time.
"Glencoe Capital" shall mean Glencoe Capital, L.L.C., an
Illinois limited liability company.
"Glencoe Contribution" shall mean the $22.5 million cash
contribution by an Affiliate of Glencoe Capital to the capital of the
Partnership at the Closing in the amount reflected on the Closing Date
Capitalization Certificate.
"Glencoe Fee Letters" shall mean those certain fee letters
executed by GC-SUN Holdings II, L.P. in favor of Glencoe Capital as of the
Closing Date with respect to the payment of management and transactions fees,
respectively.
"Governmental Authority" shall mean any federal, state,
provincial or local or any foreign government, governmental, regulatory or
administrative authority, agency or commission or any court, tribunal or
judicial body.
"Governmental Order" shall mean any order, writ, injunction,
decree, stipulation, determination or award entered by or with any Governmental
Authority.
"Hazardous Materials" shall mean all pollutants, contaminants,
chemicals, wastes, and any other carcinogenic, ignitable, corrosive, reactive,
toxic or otherwise hazardous substances, dangerous goods or materials (whether
solids, liquids or gases) subject to regulation, control or remediation under
Environmental Laws, including, without limitation, persistent organic compounds,
petroleum, urea formaldehyde, flammable, explosive and radioactive materials,
PCBs, pesticides, herbicides, asbestos, sludge, slag, acids, metals, solvents
and waste waters.
"Holding Units" shall mean the Units in the Partnership issued
to A&H Holding by the Partnership pursuant to Section 2.1(b) of this Agreement.
"Income Tax Act (Canada)" shall mean the Income Tax Act
(Canada), R.S.C. 1985, c. 1 (5th Supp.), as amended.
"Intercompany Indebtedness" shall mean an aggregate of $105
million in indebtedness (including in such aggregate amount principal and
accrued interest on intercompany notes and accrued management fees), which may
be reduced as set forth in Section 2.6 of this Agreement, as reflected on the
Chief Financial Officer's certificate delivered at the Closing pursuant to
Section 2.5(a)(vi) of this Agreement (which shall reflect any such reduction).
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"Intellectual Property" shall mean all patents, registered and
unregistered copyrights, registered and unregistered trademarks and service
marks, tradenames, all applications or registrations for any of the foregoing,
and trade names, brandmarks, brand names, trade dress, logos, Internet domain
names, trade secrets, know-how, show-how, third-party licenses, database or
custom software applications and any similar type of proprietary intellectual
property or technology right.
"Investment Canada Act" shall mean the Investment Canada Act,
R.S.C. 1985, c. 28 (1st Supp.), as amended.
"Kar Interest" shall mean all of the membership interests in
Kar LLC issued and outstanding immediately prior to the Closing.
"Kar LLC Operating Agreement" shall mean the Limited Liability
Company Operating Agreement of Kar LLC to be entered into in connection with the
Kar Merger in the form attached hereto as Exhibit B.
"Knowledge" shall mean (i) with respect to the Partnership,
the actual knowledge after reasonable investigation of the executive officers of
the Partnership, and (ii) with respect to any of the SunSource Entities, the
actual knowledge after reasonable investigation of (A) any director or officer
of any of the SunSource Entities, and (B) any of the following persons to the
extent not a director or officer of a SunSource Entity: Edward Tofani, Patrick
Garvey, Kenneth Gerland, Leo Sofianos, Lawrence Rutkowski, Dolores Kruger,
Robert Campbell, Bruce Knowlton, Patricia McCallister, Timothy O'Rourke and
Brian Frank.
"Law" shall mean any statute, law, by-law, ordinance,
regulation or rule, code or policy of any Governmental Authority.
"Letter Agreement" shall mean that certain letter agreement
dated November 22, 1999 between SunSource and Glencoe Capital.
"Liabilities" shall mean any and all direct or indirect
liability, indebtedness, obligation, commitment, expense, claim, deficiency,
guaranty or endorsement of or by any person of any type, whether accrued,
absolute, contingent, matured, liquidated or unliquidated, matured or unmatured
or otherwise, including, without limitation, Tax liabilities, liabilities in
respect of products and liabilities arising under any Environmental Law.
"Material Adverse Effect" shall mean any change, circumstance
or event that, individually or in the aggregate with all other such changes,
circumstances and events, is or is reasonably likely to have a material adverse
effect on (i) the condition (financial or otherwise), business, earnings,
results of operations, assets, liabilities or operations of the Expediter
Business or any of the Contributed Entities, (ii) the operation of the Expediter
Business or any of the Contributed Entities in substantially the manner as
presently operated, or (iii) the ability of the Partnership or any of the
SunSource Entities to consummate the transactions contemplated by this
Agreement.
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"Minimum Net Tangible Asset Value" shall mean $5,511,000.
"Minimum Net Working Capital" shall mean $24,793,000.
"Net Tangible Asset Value" shall mean the value of the assets
of the Expediter Entities reflected as "Property and Equipment, Net" on the
Final Closing Date Balance Sheet.
"Net Working Capital" shall mean, as of any specified date,
the difference between the Current Assets of the Expediter Entities and the
Current Liabilities of the Expediter Entities, as each is reflected on a
combined, carve-out balance sheet with respect to the Expediter Entities as of
such date, prepared in accordance with GAAP and in a manner consistent with the
preparation of the Year-End Balance Sheet.
"Ordinary Course of Business" shall mean the ordinary course
of the Expediter Business consistent with past custom and practice (including
with respect to pricing, quantity and frequency).
"Organizational Documents" shall mean the charter, articles,
memorandum or certificate of incorporation or association, partnership
agreement, certificate of limited partnership, operating agreement, limited
liability company agreement, certificate of formation, by-laws, stockholder or
shareholder agreements and/or other similar formation and governance agreements
of an entity, whether or not filed with a Governmental Authority.
"Overlapping Liability" shall mean any Retained Liability
which arises out of any circumstance, event or condition which, if known on the
date hereof or at the Closing Date, would be required to be set forth on the
Disclosure Schedule with respect to any representation contained in Sections
3.11(b) (Contracts) (excluding returns of goods or products sold, and rebates or
refunds with respect to goods or products sold, prior to the Closing), 3.12
(Compliance with Law), 3.13 (Litigation), 3.14 (Employees; Employee Benefit
Plans), 3.16 (Intellectual Property), 3.17 (Environmental Laws) or 3.18 (other
than income Taxes) of this Agreement.
"Parent Units" shall mean the Units in the Partnership issued
to Parent by the Partnership pursuant to Section 2.1(b) of this Agreement.
"Partnership Agreement" shall mean that certain Agreement of
Limited Partnership of GC-SUN Holdings, L.P., dated as of February 8, 2000,
between GC-SUN G.P., Inc., as general partner, and GC-SUN, Inc., as sole limited
partner, as the same shall be amended and restated as of the Closing to reflect
the Contributions and the other transactions contemplated hereby to read
substantially as set forth in Exhibit C attached hereto, together with such
modifications as may be proposed by any of the lenders providing the Debt
Financing and consented to by SunSource and the Partnership, such consent not to
be unreasonably withheld.
"Party" or "Parties" shall mean the SunSource Entities, the
Partnership and any other entity from time to time a party to this Agreement (by
assignment, succession or otherwise) or any amendment, supplement or
modification of this Agreement.
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"Permits" shall mean all licenses, franchises, permits
(including zoning and use permits), approvals, authorizations, consents, orders
or similar rights from, or notices to or filings or registrations with, any
Governmental Authority relating to the operation, ownership, lease or license of
the assets or properties of any Person or the past, present or anticipated
conduct of operation of its business.
"Permitted Encumbrances" shall mean (i) liens for taxes,
assessments and governmental charges or levies not yet due and payable where the
associated liability is reflected on the Year-End Balance Sheet or, following
the Closing, the Final Closing Date Balance Sheet, (ii) survey exceptions,
easements (to the extent same have been complied with) and such other similar
encumbrances on title to real property as do not in the aggregate materially
adversely affect the use, occupancy, value or marketability of any Owned
Property or Leased Property, (iii) mechanics', carriers', workers', repairmen's,
warehousemen's or other statutory liens arising in the Ordinary Course of
Business in respect of obligations not overdue or which have been bonded over
and are being contested in good faith, and (v) deposits or pledges that are
statutory obligations to secure workmen's compensation, unemployment insurance,
old age benefits or other social security obligations under any applicable Law
made or established in the Ordinary Course of Business.
"Person" shall mean any individual, partnership, firm,
corporation, association, trust, unincorporated organization, joint venture,
limited liability company, unlimited liability company or other entity, whether
or not party to this Agreement.
"Post-Closing Tax Period" shall mean (i) for all United States
Tax purposes, any Tax period beginning on the day after the Closing Date, and
(ii) for all Canadian Tax purposes, any Tax period beginning at or after the
Closing.
"Pre-Closing Tax Period" shall mean (i) for all United States
Tax purposes, any Tax period ending on or prior to the Closing Date, and (ii)
for all Canadian Tax purposes, any Tax period ending at or prior to the Closing.
"Record Books" shall mean the minute books, stock ledger or
other ledger of interests or shares, records of proceedings, and other records
of directors, stockholders, members, partners, committees, boards or other
owners or governing body action or proceeding, whether or not filed with a
Governmental Authority.
"Registration Rights Agreement" shall mean that certain
Registration Rights Agreement to be entered into by the partners in the
Partnership as of the Closing Date with respect to the Units in substantially
the form attached hereto as Exhibit D.
"Representative" shall mean any officer, director, principal,
attorney, stockholder financial advisor, lender, accountant, general or limited
partner, member, trustee, agent, employee or other representative of a Person or
its Affiliates.
"Retained Liabilities" shall mean all Liabilities of any of
the SunSource Entities or any of their Affiliates to the extent relating to,
arising out of or in connection with events, circumstances or conditions
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existing or arising prior to the Closing Date, other than the Assumed
Liabilities.
"Return" or "Returns" shall mean all returns, declarations,
reports, claims for refund or information returns or statements relating to
Taxes, including any schedule or attachment thereto, and including any amendment
thereof filed or to be filed with any Tax Authority in connection with the
determination, assessment or collection of Taxes.
"Sales Employees" shall mean all Employees who are employed or
otherwise engaged as part of the sales force of the Expediter Entities,
including, without limitation, the executive vice president of sales and other
sales executives and all division vice presidents, district sales managers, zone
sales managers, sales supervisors and area managers.
"Scheduled Contracts" shall mean those Contracts set forth or
which are required to be set forth on Schedule 3.11(a) of the Disclosure
Schedule.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
"Subsidiary" or "Subsidiaries" shall mean any and all
corporations, partnerships, association, trust, joint venture, limited liability
companies, unlimited liability companies and other entities with respect to
which any Person, directly or indirectly, own securities or interest having the
power to elect a majority of the board of directors or similar body governing
the affairs of such entity.
"SunSource Entities" shall mean, collectively, SunSource,
Parent, A&H Holding, SunSource Canada and the Expediter Entities.
"Tax" or "Taxes" shall mean, with respect to any Person, any
federal, state, provincial, local, or foreign income, gross receipts, license,
payroll, employment, employer health, excise, severance, stamp, occupation,
premium, windfall profits, environmental (including taxes under Section 59A of
the Code), customs duties, capital stock, capital, commercial concentration,
business, franchise, profits, withholding, social security, unemployment,
disability, real property, personal property, local development charges, sales,
use, transfer, land transfer, registration, value added, goods and services,
alternative or add-on minimum, estimated, or other tax of any kind whatsoever,
including any interest, penalty, or addition thereto, whether disputed or not,
for which such Person may be liable (including any such Tax related to any other
person or entity for which such Person is liable, by contract, as transferee or
successor, by law or otherwise).
"Tax Authority" or "Taxing Authority" shall mean any domestic,
foreign, federal, national, state, provincial, county or municipal or other
local government, any subdivision, agency, commission or authority thereof, or
any quasi-governmental body exercising any taxing authority or any other
authority exercising Tax regulatory authority.
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"Tax Regulations" shall mean the Treasury Regulations
(including temporary regulations) promulgated by the United States Department of
Treasury with respect to the Code or other federal Tax statutes.
"Unit" shall have the meaning set forth in the Partnership
Agreement.
"Unit Percentage" shall have the meaning set forth in the
Partnership Agreement.
"Year-End Balance Sheet" shall mean the audited, combined,
carve-out balance sheet of Kar Products and A&H Bolt as of December 31, 1999,
prepared in accordance with GAAP, a copy of which is attached hereto as Exhibit
E.
Section 1.2 Other Defined Terms. The following terms shall
have the meanings defined for such terms in the Sections set forth below:
Term Section
---- -------
1998 Restructuring 8.2(d)
Accounting Expert 2.3(c)
Acquisition Exclusivity Period 5.12
ADA 3.22
Aggregate SunSource Units 2.1(b)
Agreement Preamble
A&H Bolt Preamble
A&H Holding Preamble
Bank 8.2(h)
Canada Contribution Recitals
Claim 9.2(c)
Closing 2.4
Closing Date 2.4
Closing Date Balance Sheet 2.3(a)
Closing Date Capitalization Certificate 2.5(b)(v)
Closing Net Tangible Asset Value 2.3(a)
Closing Net Working Capital 2.3(a)
Contributions Recitals
Designated Consent 2.6
Disclosure Schedule Article III
Employee Benefit Plans 3.14(b)
Equity Rights 3.3(b)
ERISA Affiliate 3.14(e)
Estimated Closing Net Working Capital 2.2
Expediter Competing Business 5.13(c)(i)
Existing Credit Agreement 8.2(h)
Expediter Property 3.15(b)
Expediter Software 3.16(d)
Fauver Recitals
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Fauver Share Distribution Recitals
Fauver Shares Recitals
Financial Statements 3.8(a)
Holding Stock Transfer Recitals
HSR Act 3.6
Illinois Property 3.15(a)(v)
Indemnified Party 9.2(c)
Indemnifying Party 9.2(c)
Insurance Policies 3.19(a)
Intercompany Transaction Documents 3.4(b)
Intercompany Transactions Recitals
Kar Contribution Recitals
Kar Entities Recitals
Kar LLC Recitals
Kar Merger Recitals
Kar Products Preamble
Leased Property 3.15(b)
Licensed Software 3.16(c)
MROs 5.13(c)(i)
Non-Compete Period 5.13(a)
Objection Period 2.3(b)
OEMs 5.13(c)(i)
Owned Property 3.15(a)
Parent Preamble
Participate 5.13(c)(iii)
Partnership Preamble
Partnership Indemnified Parties 9.2(a)
Permitted Entry 5.13(c)(iii)
Proposed Acquisition 5.12
Public Filings 5.9(b)
Records 5.11(c)
Reimbursement 9.2(e)
Required Consents 8.2(d)
Sales Employment Agreements 3.11(c)
SEC Reports 3.8(b)
Section 116 5.3(c)
Statement of Objections 2.3(b)
Subsequent Disclosure 9.3(e)
SunSource Preamble
SunSource Business 5.13(c)(ii)
SunSource Canada Preamble
Tax Claim 9.4(b)
Tax Compliance Certificates 5.3(c)
Tax Indemnified Party 9.4(b)
Tax Indemnifying Party 9.4(b)
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Title Company 3.15(a)(v)
Title IV Plan 3.14(l)
Transaction Expenses 11.1
Transferred Employees 6.1(a)
Unit Pledge Agreement 9.5(a)
Windsor Property 3.15(a)(v)
Year 2000 Compliant 3.16(f)
Section 1.3 Other Interpretive Provisions. The words "hereof",
"herein" and "hereunder" and words of similar import when used in this Agreement
shall refer to this Agreement as a whole and not to any particular provision of
this Agreement, and Section, Schedule and Exhibit references are to this
Agreement unless otherwise specified. When used in this Agreement, the words
"the transactions contemplated by this Agreement" or words of similar import
shall refer to and include, without limitation, the Intercompany Transactions.
The words "include", "includes and "including" shall be deemed to be followed by
the phrase "without limitation." The meanings given to terms defined herein
shall be equally applicable to both the singular and plural forms of such terms.
ARTICLE II.
CONTRIBUTIONS TO THE PARTNERSHIP
Section 2.1 Contributions; Issuance of Units
(a) Contributions by Parent and A&H Holding. Upon the terms
and subject to the conditions contained in this Agreement, on the Closing Date:
(i) Kar Contribution. Parent will contribute, convey,
transfer, assign and deliver to the Partnership the Kar Interest, free
and clear of any and all Encumbrances (other than those created by the
Partnership Agreement, the Kar LLC Operating Agreement or existing
under federal or state securities Laws).
(ii) Canada Contribution. A&H Holding will contribute,
convey, transfer, assign and deliver to the Partnership the Canada
Shares, free and clear of any and all Encumbrances (other than those
created by the Partnership Agreement or existing under federal,
provincial or state securities Laws).
(b) Issuance of Units. In consideration of the Contributions
of Parent and A&H Holding pursuant to Section 2.1(a) of this Agreement, as of
the Closing, the Partnership shall issue and deliver to the Contributors, free
and clear of any and all Encumbrances (other than those created by the
Partnership Agreement, the Kar LLC Operating Agreement or existing under
federal, provincial or state securities Laws), an aggregate of 49,000 Units in
the Partnership (the "Aggregate SunSource Units"), which Aggregate SunSource
Units shall be allocated between the Contributors as specified in writing to the
Partnership at least three (3) Business Days prior to the Closing, which
allocation shall be reasonably satisfactory to the Partnership.
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Section 2.2 Closing Date Net Working Capital Adjustment. On or
prior to the Closing Date, SunSource shall deliver to the Partnership a written
estimate of the Net Working Capital as of the Closing Date (the "Estimated
Closing Net Working Capital"). If the Minimum Net Working Capital exceeds the
Estimated Closing Net Working Capital, SunSource shall pay such excess amount to
the Partnership at the Closing; provided, however, that no payments shall be
made to any Party in the event the Estimated Closing Net Working Capital equals
or exceeds the Minimum Net Working Capital. Any payment required to be made
under this Section 2.2 shall be made at Closing in cash by wire transfer of
immediately available funds to a bank account designated by the Partnership in
writing prior to the Closing. Without limiting the generality of the foregoing,
SunSource represents and warrants to the Partnership that there is a positive
cash balance at the Expediter Entities as of the Closing.
Section 2.3 Post-Closing Adjustments
(a) Closing Date Balance Sheet. Within sixty (60) days
following the Closing Date, the Partnership shall prepare or cause to be
prepared, in accordance with GAAP and in a manner consistent with the Year-End
Balance Sheet and as if the Closing Date were a fiscal year end, an unaudited
combined, carve-out balance sheet of the Expediter Entities as of the Closing
Date (the "Closing Date Balance Sheet") reflecting (i) the Net Working Capital
immediately prior to the Closing (the "Closing Net Working Capital"), and (ii)
the Net Tangible Asset Value immediately prior to the Closing (the "Closing Net
Tangible Asset Value"), or from which the Closing Net Working Capital and the
Closing Net Tangible Asset Value, respectively, can be calculated, and shall
cause a copy of the Closing Date Balance Sheet to be delivered to SunSource.
(b) Statement of Objections. Unless SunSource provides
specific written notice to the Partnership setting forth a good faith objection
to any portion of the Closing Date Balance Sheet relating to the calculation of
either the Closing Net Working Capital or the Closing Net Tangible Asset Value
on the basis that such portion shall not have been prepared in accordance with
Section 2.3(a) of this Agreement (the "Statement of Objections"), prior to the
close of business on the thirtieth (30th) day following the receipt by SunSource
of the Closing Date Balance Sheet from the Partnership (the "Objection Period"),
the Closing Date Balance Sheet (and the Closing Net Working Capital and the
Closing Net Tangible Asset Value reflected thereon or calculated therefrom)
shall thereafter be binding upon the SunSource Entities and the Partnership for
purposes of the post-closing adjustments set forth in this Section 2.3. If
SunSource delivers to the Partnership a Statement of Objections before the
expiration of the Objection Period, then those aspects relating to the
calculation of the Closing Net Working Capital or the Closing Net Tangible Asset
Value objected to in the Statement of Objections shall not thereafter be binding
until resolved in accordance with this Section 2.3.
(c) Resolution of Objections. SunSource and the Partnership
shall discuss the objections set forth in the Statement of Objections in good
faith and shall attempt to resolve such objections by mutual written agreement.
If the Parties reach such an agreement, such agreement shall be reflected in a
written amendment to the Closing Date Balance Sheet signed by each of SunSource
and the Partnership, and such Closing Date Balance Sheet, as so amended, shall
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<PAGE>
be the Final Closing Date Balance Sheet (and the resultant Closing Net Working
Capital and Closing Net Tangible Asset Value, each as reflected in and
calculated from such Final Closing Date Balance Sheet, as amended, shall be the
Final Closing Net Working Capital and the Final Closing Net Tangible Asset
Value) and shall become binding upon the SunSource Entities and the Partnership
for purposes of the post-closing adjustments set forth in this Section 2.3. If
SunSource and the Partnership do not reach such written agreement by the close
of business on the thirtieth (30th) day following delivery to the Partnership of
the Statement of Objections, the Partnership and SunSource will jointly select
the New York office of one of the five (5) largest United States independent
certified public accountants (other than PriceWaterhouseCoopers and Ernst &
Young) that has no material business relationships with the Partnership or
SunSource or its Affiliates (the "Accounting Expert"), who, acting as an expert
and not as an arbitrator, shall resolve those matters still in dispute with
respect to the Closing Date Balance Sheet and, as applicable, the Closing Net
Working Capital and Closing Net Tangible Asset Value. If the Partnership and
SunSource fail to agree on an Accounting Expert within forty-five (45) Business
Days after the receipt by the Partnership of the Statement of Objections, either
the Partnership or SunSource may request the American Arbitration Association to
appoint such an Accounting Expert (or another accounting firm if all five
accounting firms decline to or are disqualified from accepting the dispute), and
such appointment shall be conclusive and binding upon the Partnership and the
SunSource Entities. Any adjustments to the Closing Date Balance Sheet made by
the Accounting Expert shall be the Final Closing Date Balance Sheet (and any
adjustments to either the Closing Net Working Capital or the Closing Net
Tangible Asset Value shall be the Final Closing Net Working Capital or the Final
Closing Net Tangible Asset Value, as applicable). The Accounting Expert's
resolution of the matters in dispute shall be final and binding on the
Partnership and the SunSource Entities. The Accounting Expert shall make a
determination as soon as practicable and in any event within thirty (30) days
(or such other time as the Partnership and SunSource shall agree in writing)
after its engagement. The Partnership and SunSource agree that any adjustments
made pursuant to this Section 2.3 shall be made without regard to materiality.
Notwithstanding any other provision of this Agreement, including, but not
limited to, any provision stating that remedies shall be cumulative and not
exclusive, this Section 2.3(c) provides the sole and exclusive method for
resolving any and all disputes of each and every nature whatever that may arise
between or among the parties with respect to the Closing Net Tangible Asset
Value, the Closing Net Working Capital and the Closing Date Balance Sheet. All
Parties hereto and their respective Affiliates and Representatives hereby
irrevocably waive, relinquish and surrender all rights to, and agree that they
will not attempt to, resolve any such dispute or disputes in any manner other
than as set forth in this Section 2.3(c), including, but not limited to, through
litigation. All Parties hereto and their respective Affiliates and
Representatives further agree that if one or more of them should initiate any
attempt to resolve any such dispute or disputes in any manner other than the
sole and exclusive manner set forth in this Section 2.3(c), such initiators
shall pay and reimburse all fees, costs and expenses incurred by any other Party
as a result of, in connection with or related to said attempt or attempts.
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(d) Post-Closing Adjustment Amounts
(i) Net Working Capital Adjustment. If the Minimum Net
Working Capital exceeds the Final Closing Net Working Capital, then
SunSource shall pay to the Partnership the difference, if any, between
the Minimum Net Working Capital and the Final Closing Net Working
Capital (provided that SunSource shall receive a credit against the
amount of such adjustment for any amount actually paid to the
Partnership pursuant to Section 2.2 of this Agreement and shall be
reimbursed to the extent of any excess credit). If the Final Closing
Net Working Capital equals or exceeds the Minimum Closing Net Working
Capital, the Partnership shall reimburse SunSource to the extent of any
amounts actually paid to the Partnership by SunSource at the Closing
pursuant to Section 2.2 of this Agreement.
(ii) Net Tangible Asset Value Adjustment. If the Minimum
Net Tangible Asset Value exceeds the Final Closing Net Tangible Asset
Value, SunSource shall pay to the Partnership the difference between
the Minimum Net Tangible Asset Value and the Final Closing Net Tangible
Asset Value; provided, however, that no payments shall be made to any
Party in the event the Final Closing Net Tangible Asset Value equals or
exceeds the Minimum Net Tangible Asset Value.
(e) Payment of Adjustment Amounts; Net Payment. All payments
under this Section 2.3 shall be made in cash by wire transfer of immediately
available funds to a bank account designated by the Partnership in writing. Any
post-Closing adjustment amount payable under this Section 2.3 shall be paid
within five (5) Business Days of the time such amounts are finally determined
and become binding on the Parties pursuant to this Section 2.3, such final
determination to be evidenced by a written acknowledgment of the Partnership and
SunSource to such effect or, in the absence thereof, a written determination
pursuant to Section 2.3(c) of this Agreement by the Accounting Expert. To the
extent SunSource and the Partnership are to pay the other (or the designees
thereof) any adjustment amounts pursuant to this Section 2.3, such amount shall
be netted together and either SunSource or the Partnership, as the case may be,
shall thereupon be responsible for paying the net amount.
(f) Limitations on Review By Accounting Expert.
Notwithstanding anything set forth in this Section 2.3, the scope of any dispute
to be resolved by the Accounting Expert shall be limited to whether the amounts
set forth on the Closing Date Balance Sheet were obtained from and in accordance
with the books and records of the Expediter Entities and are in accordance with
GAAP, and whether there were errors of fact or mathematical errors in the
Closing Date Balance Sheet or the calculation of the Closing Net Working Capital
or Closing Net Tangible Asset Value, and the Accounting Expert is not to make
any further determination. In resolving any disputed item, the Accounting Expert
may not assign a value to any particular item greater than the greatest value
for such item claimed by the Partnership or SunSource or less than the smallest
value for such item claimed by the Partnership or SunSource, in each case as
presented to the Accounting Expert.
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(g) Fees of Accounting Expert. In the event any dispute is
submitted to the Accounting Expert for resolution as provided in Section 2.3(c)
of this Agreement, the fees and expenses of the Accounting Expert (and any
arbitrator appointing such expert, if applicable) shall be borne by the
Partnership.
(h) Access to Information. The Partnership and the SunSource
Entities will make the work papers and back-up materials used in preparing the
Closing Date Balance Sheet, and the books, records and financial staff of the
SunSource Entities, available to the other Party and their accountants and other
Representatives, and the Accounting Expert at reasonable times and upon
reasonable notice at any time during (i) the preparation by the Partnership of
the Closing Date Balance Sheet, (ii) the review by SunSource of the Closing Date
Balance Sheet, and (iii) the resolution of the Parties of any objections
thereto.
Section 2.4 Closing. Subject to the terms and conditions of
this Agreement, the Closing of the transactions contemplated by this Agreement
(the "Closing") shall be held as soon as practicable following the satisfaction
or waiver of all the conditions precedent to the obligations of the Parties set
forth in Article VIII (other than conditions which are not capable of being
satisfied until the Closing Date) or such later date as mutually agreed upon in
writing by SunSource and the Partnership (the "Closing Date") at the offices of
Latham & Watkins, Sears Tower, Suite 5800, Chicago, Illinois 60606.
Notwithstanding the foregoing, the Intercompany Transactions shall occur and be
consummated prior to the Closing Date in accordance with Section 5.6 of this
Agreement.
Section 2.5 Closing Deliveries
(a) Closing Deliveries by the SunSource Entities. At the
Closing, the SunSource Entities shall deliver to the Partnership:
(i) all instruments evidencing the Kar Interest and the
Canada Shares and all other instruments, certificates, assignment
agreements, bills of sale and other documents necessary to effect the
Contributions, each in form and substance reasonably satisfactory to
the Partnership;
(ii) all instruments, certificates, filings, notices and
other documents evidencing the consummation of the Intercompany
Transactions, each in form and substance reasonably satisfactory to the
Partnership;
(iii) the various certificates, instruments, opinions and
documents required to be delivered by the SunSource Entities as
conditions to Closing pursuant to Section 8.2 of this Agreement;
(iv) the Tax Compliance Certificates required to be
obtained in accordance with Section 5.3(c) of this Agreement and the
certificates contemplated by Section 7.1(c) of this Agreement;
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(v) executed counterparts to each of the Ancillary
Agreements to which any of the SunSource Entities is a party,
including, without limitation, counterparts to the Partnership
Agreement executed by each Contributor;
(vi) an officer's certificate executed by the Chief
Financial Officer of SunSource certifying as to the $105 million
aggregate amount of Intercompany Indebtedness (which shall reflect any
reduction in Intercompany Indebtedness pursuant to Section 2.6 of this
Agreement); and
(vii) an officer's certificate of a duly authorized
officer of each of the Contributors certifying as to customary
representations and warranties with respect to a private placement of
securities.
(b) Closing Deliveries by the Partnership. At the Closing, the
Partnership shall deliver, or cause to be delivered, to the SunSource Entities:
(i) instruments evidencing, respectively, the Parent Units
and the Holding Units (each in the form provided in the Partnership
Agreement) and all other instruments, certificates and other documents
necessary to effect the issuance by the Partnership of the Parent Units
to Parent and the Holding Units to A&H Holding pursuant to Section
2.1(b) of this Agreement, each in form and substance reasonably
satisfactory to SunSource (which instruments shall, as of the Closing,
be subject to the pledge thereof to the Bank, as agent, pursuant to the
Existing Credit Agreement and the pledge thereof to the Partnership
pursuant to Section 9.5(a) of this Agreement);
(ii) the various certificates, instruments and documents
required to be delivered as conditions to Closing pursuant to Section
8.1 of this Agreement;
(iii) executed counterparts to each of the Ancillary
Agreements to which the Partnership is a party;
(iv) counterparts to the Partnership Agreement executed by
each general and limited partner in the Partnership (other than the
Contributors); and
(v) an officer's certificate executed by the Secretary of
the general partner of the Partnership certifying as to the
capitalization of the Partnership as of the Closing Date (after giving
effect to the Contributions and to the issuance of warrants in
connection with the Debt Financing) (the "Closing Date Capitalization
Certificate").
(c) Form of Documents. To the extent that a form of any document to be
delivered hereunder is not attached as an Exhibit hereto, such document shall be
in form and substance and shall be executed and delivered in a manner reasonably
satisfactory to the Parties.
Section 2.6 Adjustment to Intercompany Indebtedness. If the SunSource
Entities shall have failed to obtain the consent specified on Exhibit M attached
hereto (the "Designated Consent") and the Partnership shall have advised
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SunSource that it intends to waive the condition to Closing set forth in Section
8.2(r) of this Agreement, the amount of Intercompany Indebtedness shall be
reduced as provided on Exhibit M; provided, however, that the amount of such
reduction shall not be greater than $1,000,000.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF SUNSOURCE
SunSource represents and warrants to the Partnership that the
statements contained in this Article III are correct and complete as of the date
of this Agreement and will be correct and complete as of the Closing Date (as
though made at such time and as though the Closing Date were substituted for the
date of this Agreement throughout this Article III, except to the extent such
representations speak expressly as of an earlier date), except as set forth in
the disclosure schedule delivered by SunSource to the Partnership on the date
hereof and executed by an authorized representative of SunSource and accepted by
an authorized representative of the Partnership (the "Disclosure Schedule").
Section 3.1 Organization and Qualification. Each of the SunSource
Entities is duly organized, validly existing and in good standing under the laws
of their respective jurisdictions of organization as set forth on Schedule
3.1(a) of the Disclosure Schedule. Each of the SunSource Entities has all
requisite power and authority to conduct their respective business and to own,
lease and operate its properties and assets where now, and at the Closing will
be, conducted, owned, leased or operated. Each of the Contributed Entities is
and, at or prior to the Closing Date will be, duly licensed or qualified to do
business in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such license or qualification
necessary (such jurisdictions are listed on Schedule 3.1(b) of the Disclosure
Schedule). Complete and correct copies of the Organizational Documents of each
of the SunSource Entities have been provided to the Partnership prior to the
date hereof. The Record Books of each of the SunSource Entities are correct and
complete in all material respects and have been provided to the Partnership
prior to the date hereof. None of the SunSource Entities are in default under or
in violation of any provision of their Organizational Documents.
Section 3.2 Authority; Enforceability. Each of the SunSource Entities
has all requisite corporate or company power and authority, and prior to Closing
will have taken all corporate or company action necessary, to execute and
deliver this Agreement and the Ancillary Agreement to which each such entity is
a party, to consummate the transactions contemplated by this Agreement and by
the Ancillary Agreements and to perform their respective obligations hereunder
and thereunder. The execution and delivery by each of the SunSource Entities of
this Agreement and of each Ancillary Agreement to which each such entity is a
party and the consummation by each of the SunSource Entities of the transactions
contemplated hereby and thereby have been duly approved by the requisite
stockholders of each SunSource Entity that is a corporation (other than
SunSource) or an unlimited liability company and by the requisite members of
each SunSource Entity that is a limited liability company. No other proceedings
on the part of the SunSource Entities are necessary to authorize the execution
and delivery of this Agreement and the Ancillary Agreements to which each such
entity is a party and the consummation of the transactions contemplated hereby
and thereby. This Agreement and the Ancillary Agreements have been duly executed
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and delivered by each of the SunSource Entities party hereto and thereto, and
constitute legal, valid and binding obligations of each of the SunSource
Entities, enforceable against such entities in accordance with their terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar Laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law).
Section 3.3 Capitalization
(a) Set forth on Schedule 3.3(a) of the Disclosure Schedule is the
number of authorized, issued and outstanding shares of capital stock or other
membership or ownership interests of each of the Contributed Entities. All of
the issued and outstanding shares of capital stock of Parent are owned
beneficially by SunSource. All of the issued and outstanding shares of capital
stock of Kar Products are, and upon the formation of Kar LLC and after giving
affect to the Kar Merger all of the limited liability company interests of Kar
LLC will be, owned beneficially and of record by Parent and Parent has (and with
respect to Kar LLC will have) good and valid title thereto. All of the issued
and outstanding shares of capital stock of A&H Holding are owned beneficially
and of record by Kar Products (provided that (i) after giving effect to the Kar
Merger all of such shares will be owned beneficially and of record by Kar LLC,
and Kar LLC will have good and valid title thereto, and (ii) after giving effect
to the Holding Stock Transfer, all of such shares will be owned beneficially and
of record by Parent, and Parent will have good and valid title thereto). All of
the issued and outstanding shares of capital stock of SunSource Canada are owned
beneficially and of record by A&H Holding and A&H Holding has good and valid
title thereto. All of the issued and outstanding shares of capital stock of A&H
Bolt are owned beneficially and of record by SunSource Canada and SunSource
Canada has good and valid title thereto. All of the issued and outstanding
shares of capital stock or other membership or ownership interests of each of
the Contributed Entities have been validly issued, are fully paid and
nonassessable and have not been issued in violation of any preemptive or similar
rights or any Law and, except as set forth on Schedule 3.3(a) of the Disclosure
Schedule, are free and clear of any Encumbrances.
(b) There are no outstanding or authorized (i) options, warrants,
calls, rights or any other agreements, arrangements or commitments relating to
the sale, issuance or voting of any shares of capital stock of, or other
membership or ownership interests in, the Contributed Entities, (ii) securities
or other instruments convertible into, exchangeable for or evidencing the right
to purchase any shares of capital stock of, or other membership or ownership
interests in, the Contributed Entities, or (iii) equity appreciation, phantom
equity, profit participation or similar rights with respect to the capital stock
of, or other membership or ownership interests in, the Contributed Entities
(clauses (i), (ii) and (iii) are hereinafter referred to collectively as "Equity
Rights"). The representations in this Section 3.3(b) are qualified by the fact
that, upon consummation of the Kar Merger, the capital stock of Kar Products
will be cancelled in accordance with the terms of the Kar Merger.
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Section 3.4 Intercompany Transactions
(a) The SunSource Entities have the requisite corporate and company
power and authority to take any action required in connection with the
Intercompany Transactions. The taking of any actions by any of the SunSource
Entities in connection with the Intercompany Transactions has been, or will be
prior to the consummation thereof, duly and validly authorized by all necessary
corporate or company action, and requisite stockholder (other than with respect
to SunSource), shareholder or member action, on the part of each of the
SunSource Entities, and no additional authorization on the part of any of the
SunSource Entities will be necessary in order to authorize or consummate the
Intercompany Transactions as contemplated by this Agreement.
(b) All documents related to the Intercompany Transactions (the
"Intercompany Transaction Documents") have been or will be duly executed by each
of the SunSource Entities party thereto and, as and if required by applicable
Law, filed with the appropriate Governmental Authority. Each Intercompany
Transaction Document will constitute a legal, valid and binding obligation of
each of the SunSource Entities party thereto, enforceable against each in
accordance with its terms. The Intercompany Transaction Documents will effect
the Intercompany Transactions in accordance with all applicable Law.
(c) Upon consummation of the Closing, the Partnership will have been
transferred good and valid title to the Kar Interest and the Canada Shares, free
and clear of any Encumbrances (other than those created by the Partnership
Agreement or existing under federal, provincial or state securities Laws).
(d) None of the SunSource Entities is, and after giving effect to the
Intercompany Transactions none of the SunSource Entities will be, insolvent.
Section 3.5 No Conflict or Violation. The execution, delivery or
performance by the SunSource Entities of this Agreement and the Ancillary
Agreements to which each such entity is a party, the consummation of the
transactions contemplated hereby and thereby and the compliance by the SunSource
Entities with any of the provisions hereof and thereof, do not and will not (a)
violate, conflict with or result in the breach of any provision of the
Organizational Documents of any of the SunSource Entities, (b) conflict with or
violate any Law, Governmental Order or material Permit pertaining to the
SunSource Entities, or (c) except as set forth in Schedule 3.5(c) of the
Disclosure Schedule, conflict with, result in any breach of, constitute a
default (or event which with the giving of notice or lapse of time, or both,
would become a default) under, require any consent under, or give to others any
rights of termination, amendment or acceleration of, or serve as a condition
precedent to any right or result in the creation of any Encumbrance on the Kar
Interest or the Canada Shares or on any of the Expediter Assets pursuant to, (i)
any Scheduled Contract or (ii) any other Contract to which any of the SunSource
Entities is a party or subject or by which any of the SunSource Entities or the
Kar Interest or the Canada Shares or any of the Expediter Assets or the
Expediter Business is bound or affected, except with respect to clause (ii)
above for such conflicts, breaches, defaults, consents, rights and Encumbrances
with respect to any such Contract, as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
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Section 3.6 Governmental Consents. The execution, delivery and
performance by the SunSource Entities of this Agreement and of the Ancillary
Agreements to which each such entity is a party and the transactions
contemplated hereby and thereby do not and will not require any consent,
approval, authorization, satisfaction or other order of, review or action by,
filing with or notification to any Governmental Authority, including, without
limitation, under the Competition Act (Canada), the Investment Canada Act
(except notification thereunder by the Partnership following the Closing Date)
and the Income Tax Act (Canada) (except in connection with obtaining the Tax
Compliance Certificates), except that SunSource makes no representation as to
any requirements under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act").
Section 3.7 Subsidiaries; No Outside Activities; Assets. After giving
effect to the Intercompany Transactions, there will be no Person in which the
Contributed Entities, directly or indirectly, own any equity or other ownership
interest or any Equity Rights, other than the ownership of all of the capital
stock of A&H Bolt by SunSource Canada. The Expediter Business has been and will
be through the Closing conducted solely through the Expediter Entities. The
Expediter Assets constitute all of the assets used in the conduct of the
Expediter Business as presently conducted. There are no assets which are used in
the conduct of the Expediter Business as presently conducted which are not
included in the Expediter Assets.
Section 3.8 Financial Information
(a) SunSource has delivered to the Partnership (i) the Year-End Balance
Sheet and the audited, combined, carve-out balance sheets of Kar Products and
A&H Bolt at December 31, 1998 and December 31, 1997, and (ii) the audited,
combined, carve-out statements of income, changes in invested capital and
stockholders' deficit and cash flows of Kar Products and A&H Bolt for the years
ended December 31, 1999, 1998 and 1997 (collectively, the "Financial
Statements"). Such Financial Statements have been prepared in accordance with
GAAP, applied on a consistent basis throughout the periods covered thereby, and
fairly present the financial condition, Liabilities, results of operations and
cash flows of Kar Products and A&H Bolt as of the dates thereof and for the
periods referred to therein and are consistent with the books and records of the
SunSource Entities.
(b) SunSource has filed all required reports, schedules, forms,
statements and other documents required to be filed by it with the Securities
and Exchange Commission with respect to periods commencing on or after January
1, 1998 (collectively, including all exhibits thereto, the "SEC Reports"). None
of the SEC Reports, as of their respective dates (and, if amended or superseded
by a filing prior to the date of this Agreement or of the Closing Date, then on
the date of such filing), contained any untrue statement of a material facts or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading. Each of the financial statements (including the related
notes) included in the SEC Reports presents fairly, in all material respects,
the consolidated financial position and consolidated results of operations and
cash flows of SunSource and its subsidiaries as of the respective dates and for
the respective periods set forth therein, all in conformity with GAAP, applied
on a consistent basis throughout the periods covered thereby, and subject, in
the case of unaudited interim financial statements, to the absence of complete
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notes and normal year-end adjustments. All of the SEC Reports, as of their
respective dates (and as of the date of any amendment thereto), complied as to
form in all material respects with the applicable requirements of the Securities
Act of 1933, as amended, and the Exchange Act and the rules and regulations
promulgated, respectively, thereunder.
Section 3.9 No Undisclosed Liabilities. Except as set forth on Schedule
3.9 of the Disclosure Schedule, there are no Liabilities of the Contributed
Entities, other than Liabilities (a) reflected as a liability or reserved
against on the Year-End Balance Sheet, or (b) incurred since September 30, 1999
in the Ordinary Course of Business (but excluding any Liability which results
from, arises out of, relates to, is in the nature of, or was caused by any
breach of Contract, breach of warranty, tort, infringement, or violation of
Law).
Section 3.10 Absence of Certain Changes or Events
(a) Except as set forth in Schedule 3.10(a) of the Disclosure Schedule,
since September 30, 1999, there has not been any material adverse change in the
condition (financial or otherwise), business, earnings, results of operations,
assets, liabilities, prospects or operations of the Expediter Business or any of
the Expediter Entities.
(b) Since September 30, 1999, the Expediter Entities have conducted the
Expediter Business only in the Ordinary Course of Business and have used all
commercially reasonable efforts consistent with past practice to preserve the
Expediter Business relationships. Without limiting the generality of the
foregoing, except as described on Schedule 3.10(b) of the Disclosure Schedule,
since September 30, 1999:
(i) none of the SunSource Entities has sold, leased,
transferred, granted or suffered to exist any Encumbrance or assigned
any of the Expediter Assets, tangible or intangible, other than for
fair consideration in the Ordinary Course of Business;
(ii) none of SunSource Entities has entered into or been
granted or applied for any Contract or Permit (or series of related
Contracts or Permits) relating to the Expediter Assets or the Expediter
Business either involving more than $25,000 in the aggregate or outside
the Ordinary Course of Business;
(iii) no party (including the SunSource Entities) has
accelerated, terminated, modified, or cancelled any agreement,
contract, lease, or license (or series of related agreements,
contracts, leases and licenses) relating to the Expediter Assets or the
Expediter Business which involves more than $25,000 in the aggregate
and to which the one of the SunSource Entities is a party or by which
any of them is bound;
(iv) none of the SunSource Entities has merged or
consolidated with, or made any capital investment in, any loan to, or
any acquisition of the securities or assets of, any other Person (or
series of related capital investments, loans, and acquisitions) either
involving more than $25,000 or outside the Ordinary Course of Business;
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(v) other than the Intercompany Indebtedness, none of the
SunSource Entities has issued any note, bond or other debt security or
created, incurred, assumed or guaranteed any indebtedness for borrowed
money or any capitalized lease obligation;
(vi) none of the SunSource Entities has delayed or
postponed the payment of accounts payable or other Liabilities relating
to the Expediter Entities, the Expediter Assets or the Expediter
Business other than in the Ordinary Course of Business;
(vii) none of the SunSource Entities has cancelled,
compromised, waived, failed to exercise or released any right or claim
(or series of related rights and claims) with respect to the Expediter
Assets or the Expediter Business either involving more than $10,000 in
the aggregate or outside the Ordinary Course of Business;
(viii) none of the SunSource Entities has granted any
license or sublicense of any rights under or with respect to any
Intellectual Property used in the conduct of the Expediter Business;
(ix) except as contemplated by the Intercompany
Transactions, none of the SunSource Entities has issued, delivered,
awarded, granted or sold, or authorized or proposed the issuance,
delivery, award, grant or sale (including the grant of any liens,
limitations on voting rights or other Encumbrances) of, any shares of
any class of capital stock (including shares held in treasury) or
membership or ownership interests in any of the Contributed Entities or
any Equity Rights with respect thereto, or amended or otherwise
modified the terms of any such capital stock, membership or ownership
rights or Equity Rights with respect thereto;
(x) none of the SunSource Entities has experienced any
damage, destruction, or loss (whether or not covered by insurance) to
the Expediter Assets in excess of $2,500 individually or $25,000 in the
aggregate;
(xi) none of the SunSource Entities has made any loan to,
or entered into any other transaction with, any of the directors or
officers of the Expediter Entities or any of the Employees or any of
their family members which will not be repaid or cancelled at Closing
(other than routine travel advances for employees in the Ordinary
Course of Business);
(xii) none of the SunSource Entities has entered into any
Contract concerning employment or consulting, or modified the terms of
any existing Contract or agreement therefor, or any collective
bargaining agreement relating, in any such case, to the Expediter
Entities or the Expediter Business;
(xiii) none of the SunSource Entities has granted any
increase in the base compensation of any Employee in excess of 7.5% of
such Employee's base compensation prior to such increase or outside the
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Ordinary Course of Business, or made any other change in the employment
terms of any Employee outside the Ordinary Course of Business;
(xiv) except as expressly contemplated by Section 6.1 of
this Agreement, none of the SunSource Entities has adopted, amended,
modified, or terminated any Employee Benefit Plan affecting the
Employees or in which any Employee is entitled to participate;
(xv) none of the SunSource Entities has made or pledged to
make any charitable or other capital contribution on behalf of any of
the Contributed Entities which remains unfulfilled in excess of $5,000
in the aggregate;
(xvi) none of the SunSource Entities has granted or
suffered to exist any Encumbrance (other than Permitted Encumbrances)
with respect to any Expediter Assets;
(xvii) none of the SunSource Entities has made any capital
expenditure or commitment for any capital expenditure relating to the
Expediter Entities in excess of $25,000 individually or $50,000 in the
aggregate;
(xviii) none of the SunSource Entities has amended its
Organizational Documents;
(xix) none of the SunSource Entities has made any change
in any material accounting practices customarily followed by it;
(xx) there has not been any other material occurrence,
event, incident, action, failure to act, or transaction outside the
Ordinary Course of Business involving the Contributed Entities, the
Expediter Assets or the Expediter Business;
(xxi) none of the SunSource Entities has made any change
in its pricing or materially changed its sales or purchasing practices
relating to the Expediter Business, and, without limiting the
generality of the foregoing, there has been no trade loading (i.e. the
accelerated sale of goods resulting in inventory levels at customers in
excess of ordinary course levels); and
(xxii) none of the SunSource Entities has entered into any
Contract or other arrangement or understanding to do any of the
foregoing.
Section 3.11 Contracts
(a) Except as contemplated by this Agreement and the Intercompany
Transaction Documents or as set forth on Schedule 3.11(a) of the Disclosure
Schedule, none of the SunSource Entities is a party to, and none of the
respective capital stock or other membership or ownership interests in the
SunSource Entities or the Expediter Assets or the Expediter Business is subject
to, any Contract (or group of related Contracts) concerning, containing or
effecting:
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(i) covenants limiting the freedom of the Contributed
Entities after the date hereof to engage in any line of business in any
geographic area or to compete with any Person;
(ii) partnership, limited liability company (excluding
Organizational Documents) or joint venture agreements;
(iii) creating, incurring, assuming or guaranteeing (or
may create, incur, assume or guarantee) indebtedness (including
capitalized lease obligations) or which has imposed (or may impose) any
Encumbrance on any Expediter Asset;
(iv) any Encumbrance (other than Permitted Encumbrances);
(v) guaranty of performance;
(vi) the sale, transfer, lease, license or parting with
possession or ownership of any of the Contributed Entities or any part
thereof or any Expediter Properties;
(vii) the lease of personal property to or from any Person
providing for lease payments (individually or in the aggregate under
any master or universal lease agreement) in excess of $10,000 per
annum;
(viii) the purchase or sale of raw materials, commodities,
supplies, products, or other personal property, or for the furnishing
or receipt of services, the performance of which will extend over a
period of more than six (6) months, result in a material loss to the
Expediter Entities or involve consideration in excess of $25,000 from
one supplier or customer;
(ix) capital expenditures for the Expediter Business,
which are not subject to cancellation without penalty or premium on not
more than thirty (30) days' notice by the applicable SunSource Entity
in excess of $25,000 individually or $50,000 in the aggregate;
(x) the employment of any individual on a full-time,
part-time, consulting, or other basis providing or likely to result in
annual compensation, including, without limitation, all benefits, in
excess of $75,000 per annum;
(xi) advance or loan of any amount to the directors,
officers or members of the Contributed Entities of any Employee outside
the Ordinary Course of Business;
(xii) provisions with respect to which the consequences of
a default or termination could have a Material Adverse Effect;
(xiii) otherwise material to the Expediter Business or the
Expediter Assets; or
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<PAGE>
(xiv) any proposal (whether oral or written) to enter into
any contract, agreement or other arrangement with respect to any of the
matters referred to in the foregoing clauses (i)-(xiii).
(b) Except as set forth on Schedule 3.11(b) of the Disclosure Schedule,
with respect to each Scheduled Contract:
(i) such Scheduled Contract is a legal, valid and binding
obligation of the SunSource Entity party thereto and, to the Knowledge
of the SunSource Entities, the other parties thereto, and each
Scheduled Contract will continue to be a legal, valid and binding
obligation in full force and effect on identical terms following the
consummation of the transactions contemplated hereby;
(ii) none of the SunSource Entities is in default under
any such Scheduled Contract;
(iii) to the Knowledge of the SunSource Entities, no other
Person that is a party to such Scheduled Contract is in default
thereunder; and
(iv) to the Knowledge of the SunSource Entities, no event
has occurred or will occur upon the Closing and no circumstance exists
or will exist upon the Closing that (with or without the giving of
notice, the lapse of time or both) gives any Person (other than the
SunSource Entity that is a party to such Contract) the right to declare
a default, exercise any remedy under, accelerate the maturity or
performance of, serves as condition precedent to any right under, or
terminate such Scheduled Contract or render any provision thereof void
or voidable.
(c) Except as set forth on Schedule 3.11(c) of the Disclosure Schedule,
all Sales Employees have executed one of the form agreements attached hereto as
Exhibit F (the "Sales Employment Agreements"). Each of the Sales Employment
Agreements contains terms regarding confidentiality or non-competition
substantially similar to the provisions with respect thereto of one of such
forms attached hereto as Exhibit F. Each Sales Employment Agreement, including,
without limitation, such confidentiality or non-competition provisions therein,
is, and following the Closing will continue to be, in full force and effect and
the consummation of the transactions contemplated by this Agreement and the
Ancillary Agreements will not cause a breach or default under any of the Sales
Employment Agreements or result in any right of any Sales Employee to terminate
such agreements or otherwise invalidate the confidentiality or non-competition
provisions therein. No Sales Employment Agreements has been altered or modified
in any material respect (and none of the provisions therein regarding
confidentiality or non-competition has been altered or modified in any respect)
from the terms set forth in Exhibit F and none of such agreements have been
terminated.
Section 3.12 Compliance with Law. Each of the SunSource Entities and
their respective predecessors are in compliance in all material respects with
all Laws and Governmental Orders applicable to them and, to the Knowledge of the
SunSource Entities, no Action has been initiated or threatened alleging any
failure to so comply. Schedule 3.12 of the Disclosure Schedule sets forth a
complete list of the material Permits pertaining to the Contributed Entities,
the Expediter Assets or the Expediter Business. The Permits listed in Schedule
3.12 of the Disclosure Schedule are all the Permits required to own or operate
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the Expediter Assets and the Expediter Business in compliance in all material
respects with all Laws. Such Permits are in full force and effect in accordance
with their terms, and there have been no violations thereof and no proceedings
are pending or, to the Knowledge of the SunSource Entities, threatened, which
could result in a revocation or limitation thereof or any expiration without
renewal thereof. To the Knowledge of the SunSource Entities, no circumstance,
event or condition has occurred or exists involving or affecting the Contributed
Entities or the Employees or otherwise relating to the Expediter Assets or the
Expediter Business which could give rise to a claim of employment discrimination
or harassment.
Section 3.13 Litigation. Except as set forth on Schedule 3.13 of the
Disclosure Schedule, there are no Actions pending or, to the Knowledge of the
SunSource Entities, threatened against the SunSource Entities, the Expediter
Assets, the Expediter Business or any of the officers, directors or members of
the Contributed Entities or their Representatives, Employees or Persons
indemnified by any of them which could have a Material Adverse Effect. None of
the SunSource Entities is a party to or subject to or in default under any
Governmental Order which could have a Material Adverse Effect. To the Knowledge
of the SunSource Entities, no event has occurred or circumstances or condition
exists, which could give rise to any Action against any of the Contributed
Entities, the Expediter Assets or the Expediter Business.
Section 3.14 Employees; Employee Benefit Plans
(a) Except for those individuals set forth on Schedule 3.14(a) of the
Disclosure Schedule, no individual employed or engaged (including, without
limitation, as an independent sales agent), whether pursuant to a Contract or
otherwise, by SunSource or its Affiliates (other than the Expediter Entities)
who is not solely an Employee of the Expediter Entities works primarily for or
provides services primarily to the Expediter Entities, whether pursuant to a
Contract or otherwise. All Employees of the Expediter Entities in Canada are
employed or engaged (as an independent agent or otherwise) by A&H Bolt.
(b) Schedule 3.14(b) of the Disclosure Schedule identifies each
"employee benefit plan", as defined in Section 3(3) of ERISA (whether or not
subject to ERISA or the laws of the United States), each stock option, stock
purchase, severance or termination, bonus, incentive pay, performance,
compensation, profit sharing, deferred profit sharing, stock appreciation,
phantom stock, vacation pay, sick pay, employee loan, disability,
hospitalization, health, medical, dental, life insurance, supplementary
employment insurance, retirement savings, pension, supplemental pension,
registered retirement savings, retirement compensation, supplemental
unemployment or deferred compensation plan or arrangement and each other
employee fringe benefit plan, agreement, program, policy, practice, undertaking
or arrangement, that is currently maintained by any of the Expediter Entities,
or under which any of the Expediter Entities has or will have any liability or
contingent liability, or which is otherwise contributed to for the benefit of
current or former Employees or any directors or officers of the Expediter
Entities (or any of their eligible beneficiaries and dependents), whether
written or oral, formal or informal, funded or unfunded, registered or
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unregistered, insured or self-insured (collectively, "Employee Benefit Plans").
The SunSource Entities have made available to the Partnership (i) true and
complete copies of all Employee Benefit Plans (or in the case of unwritten
Employee Benefit Plans, descriptions thereof), including, without limitation,
with respect to each Employee Benefit Plan, all amendments to the Employee
Benefit Plans, and any trust or other funding arrangement, (ii) Form 5500s for
each Employee Benefit Plan for the three most recent plan years, (iii) the most
recently completed actuarial valuation for each Employee Benefit Plan for which
an actuarial report is required by ERISA or other Law or applicable Governmental
Authority or for financial reporting purposes, (iv) the most recent summary plan
description for each Employee Benefit Plan for which a summary plan description
is required by ERISA or other Law or applicable Governmental Authority, (v) the
most recent financial statement or accounting statements for each Employee
Benefit Plan, where applicable, (vi) annual information returns and other
returns, filings and notices to or from any of the Expediter Entities to or from
any Governmental Authority in the last three (3) years relating to any Employee
Benefit Plan, (vii) all current booklets, summaries, manuals and written
communications of a general nature distributed to or made available to any
current or former Employees concerning any of the Employee Benefit Plans, (viii)
copies of the most recent letters of confirmation of registration of the
Employee Benefit Plans or determination regarding tax qualified status, where
applicable, and (ix) copies of any current statements of investment policies and
goals prepared in respect of the Employee Benefit Plans (whether or not such
statements have been filed with the applicable Governmental Authorities).
(c) Except as set forth in Schedule 3.14(c) of the Disclosure Schedule,
(i) there is no pending or, to the Knowledge of the SunSource Entities,
threatened Action (other than routine claims for payment of benefits) relating
to any current or former Employee or any Employee Benefit Plan nor does any fact
exist which could reasonably be expected to give rise to any such Action (other
than routine claims for payment of benefits); (ii) there is no labor strike,
labor dispute, work slowdown, stoppage or lockout actually pending or, to the
Knowledge of the SunSource Entities, threatened against the Expediter Entities,
the Expediter Assets or the Expediter Business; (iii) there is no unfair labor
practice, labor arbitration or grievance proceeding pending or, to the Knowledge
of the SunSource Entities, threatened against the Expediter Entities, the
Expediter Assets or the Expediter Business, (iv) the SunSource Entities have
been in compliance with all Laws regarding employment and employment practices,
including, without limitation, terms and conditions of employment, wages and
hours, worker's compensation and plant closings with respect to the Employees,
and (v) the SunSource Entities have complied with and honored the terms and
conditions of employment, express or implied, of the Employees.
(d) Except as set forth in Schedule 3.14(d) of the Disclosure Schedule,
(i) none of the Employees is covered by any contract or collective bargaining
agreement with any labor union or similar organization, (ii) no labor union or
similar organization has been certified to represent the Employees or has
applied to represent any of the Employees or, to the Knowledge of the SunSource
Entities, is attempting to organize the Employees so as to represent such
Employees, (iii) none of the Employees in Canada is covered by a contract of
employment which provides an Employee with anything other than reasonable notice
of termination or provides an Employee with any rights, options or entitlements
upon the change in control or ownership of any of the SunSource Entities, the
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Expediter Business or the Expediter Assets, (iv) none of the Employees is
covered by a "multiemployer plan" (as defined in Section 3(37) of ERISA), and
(v) none of the Employee Benefit Plans provides or promises post-retirement
health or life or any other post-retirement welfare benefits to current or
former Employees, except to the extent required under any applicable state law
or under Section 601 of ERISA.
(e) None of the SunSource Entities or their Affiliates or any entity
required to be combined with any of the foregoing entities under Section 414(b),
Section 414(c), Section 414(m), or Section 414(o) of the Code (an "ERISA
Affiliate") has incurred any cost, fee, expense, liability, claim, suit,
obligation, or other damage under Title IV of ERISA that could give rise to the
imposition of any liability, cost, fee, expense, or obligation, which would be
reasonably expected to become a liability of the Partnership or any of its
Affiliates, and, to the Knowledge of the SunSource Entities, no facts or
circumstances exist that could give rise to any such cost, fee, expense,
liability, claim, suit, obligation, or other damage, which would be reasonably
expected to become a liability of the Partnership or any of its Affiliates.
(f) Except as set forth on Schedule 3.14(f) of the Disclosure Schedule,
each Employee Benefit Plan which is intended to be qualified under Section
401(a) of the Code has received a determination letter from the Internal Revenue
Service that such plan is so qualified and, to the Knowledge of the SunSource
Entities, no fact or circumstances exist which would adversely affect the
qualified status of such plan in form or operation.
(g) No SunSource Entity or any ERISA Affiliate thereof has incurred any
unpaid liability for any penalty or tax under Sections 4971, 4972, 4975, 4976,
4979, or 4980 of the Code or Section 502 of ERISA.
(h) Each of the Employee Benefit Plans that is a "group health plan"
(as defined in Section 5000(b) of the Code) has at all times been in compliance
in all material respects with the provisions of Section 4980B of the Code and
Parts 6 and 7 of Title I of ERISA and any similar applicable state laws. No
Employee Benefit Plan is funded by a trust described in Section 501(c)(9) of the
Code or subject to the provisions of Section 505 of the Code.
(i) Except as set forth on Schedule 3.14(i) of the Disclosure Schedule,
each Employee Benefit Plan is, and has been, established, registered (where
required), qualified, administered, funded (where required) and invested in
compliance in all material respects with the terms thereof and all applicable
Laws. With respect to each Employee Benefit Plan, all required filings and
reports have been made in a timely and complete manner with all Governmental
Authorities. All obligations of the Expediter Entities to or under the Employee
Benefit Plans (whether pursuant to the terms thereof or any applicable Laws)
have been satisfied, and there are no outstanding defaults or violations
thereunder by the Expediter Entities nor do the SunSource Entities have any
Knowledge of any default or violation by any other party to any Employee Benefit
Plan. Full payment has been made in a timely manner of all amounts which are
required to be made as contributions, payments or premiums to or in respect of
any Employee Benefit Plan under applicable Law or under any Employee Benefit
Plan or any agreement relating to a Employee Benefit Plan and no Taxes,
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penalties or fees are owing or assessable under any such Employee Benefit Plan.
The SunSource Entities have made adequate provision for reserves to meet
contributions that have not been made because they are not yet due under the
terms of any Employee Benefit Plan or related agreements. Benefits under all
Employee Benefit Plans are as represented and have not been increased subsequent
to the date as of which documents have been provided and there have been no
promised improvements, increases or changes to the benefits provided under any
Employee Benefit Plan except as set forth on Schedule 3.14(i) of the Disclosure
Schedule.
(j) Except as set forth in Schedule 3.14(j) of the Disclosure Schedule,
the execution and delivery of, and performance of the transactions contemplated
by, this Agreement and the Ancillary Agreements will not (either alone or upon
the occurrence of any additional or subsequent events) constitute an event under
any Employee Benefit Plan or individual agreement that will or may result in any
payment (whether of severance pay or otherwise), acceleration of funding,
vesting or increase in benefits with respect to any current or former Employee.
(k) No amount that could be received (whether in cash or property or
the vesting of property) as a result of the consummation of the transactions
contemplated by this Agreement by any Employee or officer or director of any
Expediter Entity who is a "disqualified individual" (as such term is defined in
proposed Treasury Regulation Section 1.280G-1) under any employment, severance
or termination agreement, other compensation arrangement or Employee Benefit
Plan currently in effect could be characterized as an "excess parachute payment"
(as defined in Section 280G(b)(1) of the Code).
(l) Each Employee Benefit Plan which is subject to Title IV of ERISA or
the minimum funding requirements of Section 412 of the Code (a "Title IV Plan"),
has met the minimum funding requirements of Sections 412 of the Code and Section
302 of ERISA, and no Title IV Plan has an "accumulated funding deficiency"
(whether or not waived) within the meaning of Section 412 of the Code and
Section 302 of ERISA. Schedule B to the most recent Form 5500 with respect to
each Title IV Plan is complete and accurate in all material respects. Since the
date of each such Schedule B, there has been no material adverse change in the
funding status or financial condition of the Title IV Plan relating to the Form
5500. None of the SunSource Entities nor any of their respective ERISA
Affiliates is required to provide security to a Title IV Plan under Section
401(a)(29) of the Code due to an amendment to a Title IV Plan that results in an
increase in current liability for the plan year.
(m) To the Knowledge of the SunSource Entities, no event has occurred
with respect to any registered Employee Benefit Plan which would result in the
revocation of the registration of such Employee Benefit Plan or which would
entitle any Person (without the consent of the sponsor of such Employee Benefit
Plan) to wind up or terminate any such Employee Benefit Plan, in whole or in
part, or could otherwise reasonably be expected to have an adverse effect on the
tax status of any such Employee Benefit Plan.
(n) No material changes have occurred in respect of any Employee
Benefit Plan since the date of the most recent financial, accounting, actuarial
or other report, as applicable, issued in connection with such Employee Benefit
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Plan, which could reasonably be expected to render the relevant report
misleading in any material respect.
(o) All data with respect to any current or former Employee necessary
to administer each Employee Benefit Plan is in the possession of the applicable
Expediter Entity and can be converted to a form which is sufficient for the
proper administration of all Employee Benefit Plans in accordance with the terms
thereof and all applicable Laws.
(p) There are no going-concern unfunded actuarial liabilities, past
service unfunded liabilities or solvency deficiencies with respect to any of the
Employee Benefit Plans. No contribution holidays have been taken under any of
the Employee Benefit Plans, and there have been no withdrawals of assets or
transfers of assets from any Employee Benefit Plan, except in accordance with
applicable Laws. No Expediter Entity has received or applied for any payment of
surplus assets out of any Employee Benefit Plan.
(q) No Employee Benefit Plan which provides benefits to current or
former Employees (or their beneficiaries or dependants) of A&H Bolt also
provides benefits to current or former employees (or their beneficiaries or
dependants) of any other Person.
Section 3.15 Properties
(a) Schedule 3.15(a) of the Disclosure Schedule lists, and describes by
reference to the owner, municipal address and legal description, all real
property owned, legally or beneficially, by the SunSource Entities which is used
or useful in the Expediter Business (collectively, the "Owned Properties" and
each, an "Owned Property"). Except as described on Schedule 3.15(a) of the
Disclosure Schedule, with respect to each Owned Property:
(i) the identified owner of such Owned Property is the
sole beneficial and (where its interests are registrable) the sole
registered owner of all of its assets and interests, and has good and
marketable title to the Owned Property in fee simple, free and clear of
any Encumbrance, except for Permitted Encumbrances, which Permitted
Encumbrances do not, in the aggregate, materially adversely impair the
current use, occupancy, or value, or the marketability of title, of the
Owned Property subject thereto;
(ii) there are no pending or, to the Knowledge of the
SunSource Entities, threatened expropriation or condemnation
proceedings, lawsuits or administrative or other Actions relating to
the Owned Properties that would materially and adversely affect the
current use, occupancy, value or marketability thereof;
(iii) there are no material structural defects in any of
the buildings or improvements situated on any Owned Property;
(iv) the building systems, structures, fixtures or
improvements, owned, leased or used on the Owned Properties are, to the
Knowledge of the SunSource Entities, in all respects in good condition
and working order (reasonable wear and tear excepted), and are adequate
for the operation of the Expediter Business as presently operated;
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(v) the legal description for the Owned Property located
in Des Plaines, Illinois (the "Illinois Property") describes such
property fully and adequately, and Commonwealth Land Title Insurance
Company (the "Title Company") will affirmatively insure to the
Partnership that the legal description for the Owned Property located
in Windsor, Ontario (Canada) (the "Windsor Property") describes such
property fully and adequately, and, except as shown on the surveys of
the Owned Properties prepared or commissioned by International Land
Services and, dated, in the case of the Illinois Property, December 21,
1999, and, in the case of the Windsor Property, December 13, 1999 (as
revised December 21, 1999), the buildings and improvements thereon (x)
are not in violation of applicable setback requirements, zoning by-laws
and ordinances and are not subject to any variances therefrom, and (y)
do not materially encroach on any adjoining land or easement which may
burden the land, and the land does not serve any adjoining property for
any purpose inconsistent with the use of the land, and the Owned
Property is not located within any flood plain or subject to any
similar type restriction for which any Permits necessary to the use
thereof have not been obtained;
(vi) all facilities have received all approvals of
Governmental Authorities (including Permits) required in connection
with the ownership or operation thereof and have been operated and
maintained in compliance in all material respects with applicable Laws;
(vii) except as disclosed on Schedule 3.15(a)(vii) of the
Disclosure Schedule, (x) there are no leases, subleases, licenses,
concessions, or other agreements (including, without limitation, with
respect to food services, parking and other concessions), written or
oral, granting to any party or parties the right of use or occupancy of
any portion of any Owned Property, (y) there are no outstanding options
to purchase, lease or use, rights of first refusal to purchase the
parcels of real property or any portions of any Owned Property or any
interest therein, and (z) there are no third parties (including any
SunSource Entities other than the Contributed Entities) in possession
of, or having a right to occupy, any portion of any Owned Property;
(viii) all facilities located on any portion of any Owned
Property are fully serviced and supplied with utilities and other
services necessary for the operation of such facilities, including gas,
electricity, water, telephone, sanitary sewer, and storm sewer, all of
which services are provided via public roads or via permanent,
irrevocable, appurtenant easements benefiting such Owned Property; and
(ix) each Owned Property abuts on and has direct vehicular
access to a public road, or has access to a public road via a
permanent, irrevocable, appurtenant easement benefiting such Owned
Property.
(b) Schedule 3.15(b) of the Disclosure Schedule lists and describes
briefly all real property leased, subleased or licensed to the Expediter
Entities ("Leased Property" and, together with Owned Property, the "Expediter
Property"). Attached to Schedule 3.15(b) of the Disclosure Schedule are rent and
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concession settlement statements for each Leased Property for the year ended
December 31, 1999. The SunSource Entities have delivered to the Partnership
complete and correct copies of the leases and subleases with respect to the
Leased Properties (as amended to date). With respect to each lease and sublease
listed in Schedule 3.15(b) of the Disclosure Schedule:
(i) the lease or sublease is legal, valid, binding,
enforceable and in full force and effect, and will continue to be
legal, valid, binding, enforceable, and in full force and effect
following the consummation of the transactions contemplated hereby;
(ii) no party to the lease or sublease is in material
breach or default, and no event has occurred which, with notice or
lapse of time, would constitute a breach or default or permit
termination, modification, or acceleration thereunder;
(iii) no party to the lease or sublease has repudiated any
provision thereof;
(iv) there are no disputes, oral agreements, or
forbearance programs in effect as to the lease or sublease;
(v) with respect to each sublease, the representations and
warranties set forth in subsections (i) through (v) above are true and
correct with respect to the underlying lease;
(vi) all rent or security deposits with respect to any
Leased Property are reflected on the Year-End Balance Sheet;
(vii) none of the SunSource Entities have assigned,
transferred, conveyed, mortgaged, deeded in trust, or encumbered any
interest in the leasehold or subleasehold with respect to the Leased
Properties;
(viii) all facilities leased or subleased thereunder have
received all approvals of Governmental Authorities (including Permits)
required to be obtained by the Expediter Entities in connection with
the operation thereof and have been operated and maintained in
compliance in all material respects with applicable Laws;
(ix) there are no material structural defects in any of
the buildings or improvements situated on the Leased Properties;
(x) the building systems, structures, fixtures or
improvements, owned, leased or used by the Expediter Entities on the
Leased Properties are, to the Knowledge of the SunSource Entities, in
all respects in good condition and working order (reasonable wear and
tear excepted), and are adequate for the operation of the Expediter
Business as presently operated; and
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(xi) all facilities leased or subleased thereunder are
adequately supplied and serviced with utilities and other services
necessary for the operation of such facilities.
(c) The Expediter Entities (i) have good and marketable title to, or a
valid leasehold interest in, the Expediter Assets (other than the Owned Property
or the Leased Property) used or held for use by them, located on their premises,
or acquired after the date thereof, free and clear of all Encumbrances, other
than Permitted Encumbrances and subject to the rights of customers of the
Expediter Entities in and to Expediter Inventory under purchase orders or
contracts entered into in the Ordinary Course of Business, and (ii) own or lease
all buildings, machinery, equipment and other tangible assets necessary for the
conduct of the Expediter Business as presently conducted and as presently
proposed to be conducted.
(d) Each tangible Expediter Asset is free from material defects (patent
and, to the Knowledge of the SunSource Entities, latent), is not subject to any
disputes with a Governmental Authority or third Person, has been maintained in
accordance with normal industry practice, is in good operating condition and
repair (subject to normal wear and tear), and is suitable for the purposes for
which it presently is used and presently is proposed to be used.
Section 3.16 Intellectual Property
(a) All Intellectual Property used or held for use in the Expediter
Business is owned or licensed for use by the Expediter Entities. Schedule
3.16(a) of the Disclosure Schedule sets forth a complete and correct list of all
patents, registered and unregistered copyrights, registered and unregistered
trademarks and service marks, tradenames and all applications for any of the
foregoing and Internet domain names owned by the Expediter Entities. All such
Intellectual Property set forth on Schedule 3.16(a) of the Disclosure Schedule
is owned by the Expediter Entities free and clear of all Encumbrances and the
Expediter Entities are not obligated to make any payments of any kind in respect
thereof.
(b) Schedule 3.16(b) of the Disclosure Schedule sets forth a complete
list of all licenses granted by or to any of the Expediter Entities with respect
to any Intellectual Property (other than Licensed Software) used in the conduct
of the Expediter Business. All such Intellectual Property reflected on Schedule
3.16(b) of the Disclosure Schedule as licensed, leased or otherwise used, but
not owned by, the Expediter Entities are used by the Expediter Entities pursuant
to terms of a binding Contract under which the Expediter Entities have the right
to use such Intellectual Property as currently used and intended to be used in
the Expediter Business without payment of any royalty or other fee, except as
set forth on Schedule 3.16(b) of the Disclosure Schedule.
(c) Schedule 3.16(c) of the Disclosure Schedule contains a complete and
accurate list of all computer software, databases and other material
computer-related Intellectual Property that are used by and are licensed or
leased to the Expediter Entities (or as to which the Expediter Entities have
otherwise obtained the right to use), other than commercially available
over-the-counter "shrinkwrap" software (the "Licensed Software"). Schedule
3.16(c) of the Disclosure Schedule also sets forth a list of all license fees,
rents, royalties or other charges that the Expediter Entities are required or
obligated to pay with respect to the Licensed Software. Prior to the date of
this Agreement, the Expediter Entities have delivered to the Partnership true
and complete copies of all agreements under which the Expediter Entities have
the right to use the Licensed Software. The Expediter Entities are in compliance
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with all provisions of any license, lease or other similar agreement pursuant to
which Expediter Entities have rights to use the Licensed Software, except where
the failure to be in compliance would not give rise to a right of termination on
behalf of the licensor of such Licensed Software or otherwise impair the rights
of, or the anticipated benefits of such Licensed Software to, the Expediter
Entities.
(d) Schedule 3.16(d) of the Disclosure Schedule contains a list or
description of all software and related Intellectual Property developed or owned
by the Expediter Entities and which is used in operating or directing products
that are sold by the Expediter Entities and in connection with the Expediter
Business. Such software and the Licensed Software (collectively the "Expediter
Software") constitutes all software, other than commercially available
over-the-counter "shrinkwrap" software, used in relation to the Expediter
Business. The consummation of the transactions contemplated by this Agreement
and the Ancillary Agreements will not cause a breach or default under any
license or similar agreement relating to the Expediter Software or impair the
ability to use the Expediter Software in the same manner as such Expediter
Software is currently used or intended to be used by the Expediter Entities,
provided that, following the Closing, the Partnership complies and causes the
Expediter Entities to comply with the terms of any agreements relating to the
Expediter Software. To the Knowledge of the SunSource Entities, (i) the
Expediter Entities are not infringing or diluting any intellectual property
rights of any other Person with respect to the Expediter Software, and (ii) no
other Person is infringing any Intellectual Property rights of the Expediter
Entities with respect to the Expediter Software.
(e) None of the SunSource Entities are currently in receipt of any
notice of violation of, and, to the Knowledge of the SunSource Entities, none of
the SunSource Entities are violating, the rights of any Person in any
Intellectual Property used in the conduct of the Expediter Business. No Person
has claimed or, to the Knowledge of the SunSource Entities, is threatening to
claim the right to use and license any of the Intellectual Property. Except in
the Ordinary Course of Business, the Expediter Entities have not granted to any
Person the right to use or license any Intellectual Property used in the conduct
of the Expediter Business.
(f) The Expediter Assets, Expediter Software and Expediter Business
and, to the Knowledge of the SunSource Entities, the Licensed Software, are Year
2000 Compliant. Schedule 3.16(f) of the Disclosure Schedule contains a true,
correct and complete list of all written studies, audits, surveys, reports and
investigations conducted by or on behalf of, or provided to, the SunSource
Entities with respect to the foregoing, and a description of all efforts to
analyze, modify or replace all computer software, including, without limitation,
Expediter Software, which the SunSource Entities have deemed necessary or
appropriate in connection with assessing whether the Expediter Assets, Expediter
Software and Expediter Business are Year 2000 Compliant. For purposes of this
Agreement, "Year 2000 Compliant" shall mean that all computer equipment and
software operates and correctly processes data such that:
(i) calculations using dates execute utilizing a four digit year;
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(ii) the software functionality, including but not limited
to, entry, inquiry, maintenance and update (whether on-line, batch or
otherwise) shall support four digit year processing;
(iii) interfaces and reports shall support four digit year
processing;
(iv) successful transition to the year 2000 using the
correct system date shall have occurred without human intervention or
adverse consequences;
(v) after the transition to the year 2000, processing with
a four digit year shall occur without human intervention;
(vi) such computer equipment and software can reasonably
be expected to calculate all leap years from and after January 1, 2000
correctly; and
(vii) correct results shall be produced in forward and
backward date calculation spanning century boundaries (there are no
years stored as two digits).
Section 3.17 Environmental Laws
(a) The SunSource Entities are and, to the Knowledge of the SunSource
Entities have at all times been, in compliance in all material respects with all
applicable Environmental Laws in connection with the leasing, ownership,
manufacture, operation and condition of the Expediter Assets, including, without
limitation, the Owned Property and the Leased Property, and the Expediter
Business. There are no pending violations or alleged violations by the SunSource
Entities or any Affiliate thereof pertaining to the Expediter Assets, including,
without limitation, the Owned Properties or the Leased Properties, or the
Expediter Business of any Environmental Laws asserted by any Governmental
Authority or third party.
(b) There is no past or ongoing release, emission or discharge of
Hazardous Materials into the environment in quantities requiring remediation or
reporting under any Environmental Laws to, on, from or within (i) any real
property currently owned or operated by the Expediter Entities, or (ii) to the
Knowledge of the SunSource Entities, any real property previously owned or
operated by the Expediter Entities. All environmental assessments, reports and
investigations with respect to any property currently or previously owned or
operated by the Expediter Entities or in connection with the Expediter Business
in the possession, custody or control of the SunSource Entities are identified
on Schedule 3.17(b) of the Disclosure Schedule and have been made available to
the Partnership prior to the date hereof.
(c) There is no Action pending or, to the Knowledge of the SunSource
Entities threatened, by any employee or other Person alleging personal injury or
property damage as the result of the operation of the Expediter Business or the
release of Hazardous Materials related to the operation of the Expediter
Business.
(d) Except as set forth in Schedule 3.17(d) of the Disclosure Schedule,
there are no Hazardous Materials in quantities regulated by any Environmental
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Laws located on, contained in or otherwise part of any property owned or
operated by the Expediter Entities or in connection with the Expediter Business.
With respect to the Expediter Business, none of the SunSource Entities has
arranged for the transportation, storage, treatment or disposal of any Hazardous
Materials at any property or site not owned or controlled by it that has given
rise to any liability under any Environmental Law or to any property not
licensed to accept Hazardous Materials.
(e) Except as set forth in Schedule 3.17(e) of the Disclosure Schedule,
there are no landfills, lagoons, impoundments, waste piles, drum storage areas,
or storage tanks (above or underground) on any property currently owned or
operated by the Expediter Entities, or, to the Knowledge of the SunSource
Entities, on any property previously owned or operated by the Expediter
Entities.
(f) There is no Action pending or, to the Knowledge of the SunSource
Entities, threatened by a third party or before a Governmental Authority
involving any of the Expediter Entities, the Expediter Assets or the Expediter
Business: (i) for alleged violation of or noncompliance with (including, to the
Knowledge of the SunSource Entities, by any predecessor or prior owner or
occupier) any Environmental Law, or (ii) relating to the release into the
environment of any Hazardous Material, whether or not occurring at, on, under,
or involving a site owned or operated by the Expediter Entities or in connection
with the Expediter Business.
(g) None of the SunSource Entities has received any written notice
regarding an actual or alleged material violation of any Environmental Laws by
any of the SunSource Entities or pertaining to the Expediter Business.
Section 3.18 Taxes
(a) Except as set forth on Schedule 3.18(a) of the Disclosure Schedule,
all Returns required to be filed by, or with respect to any activities of, the
Contributed Entities have been timely filed and such Returns are true, correct
and complete. All Taxes which were shown to be due on such Returns have been
timely paid or are adequately provided for on the Year-End Balance Sheet. The
reserves for Taxes reflected in the Year-End Balance Sheet have been determined
in accordance with GAAP and are adequate for the payment of all Taxes incurred
or which may be incurred through the date hereof and through the Closing Date.
There is no action, suit, proceeding, investigation, claim or audit now pending
or, to the Knowledge of the SunSource Entities, threatened with respect to the
Contributed Entities in respect of any Taxes, and there are no such matters
under discussion with any Governmental Authority. All Taxes relating to the
income, properties or operations the Contributed Entities which the Contributed
Entities were required by law to withhold or collect, including without
limitation, sales and use and employment taxes, have been duly withheld or
collected, and have been timely paid over to the proper Tax Authorities to the
extent due and payable. The Contributed Entities are not party to any Tax
sharing, indemnity, allocation or similar agreements. Except as set forth on
Schedule 3.18(a) of the Disclosure Schedule, no extension of a statute of
limitations relating to Taxes is in effect with respect to any of the
Contributed Entities, and none of the SunSource Entities has requested or
entered into any agreement or other arrangement or executed any waiver with
respect to any of the Contributed Entities providing for any extension of time
within which (i) to file any Return, (ii) to file any elections, designations or
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similar filings relating to Taxes, (iii) the Contributed Entities are required
to pay or remit any Taxes or amounts on account of Taxes, or (iv) any Taxing
Authority may assess or collect Taxes. No claim has been made within the last
three years by a Taxing Authority in a jurisdiction where any of the Contributed
Entities does not file Returns that the Contributed Entities may be subject to
taxation in that jurisdiction. There are no liens for Taxes (other than for
current Taxes not yet due and payable) upon any of the Expediter Assets. Without
limiting the foregoing, since September 30, 1999, none of the SunSource Entities
has made any election or filed any waiver or extension with respect to Taxes or
any Tax limitation period or has settled any Tax audit or dispute with any Tax
Authority on a basis that would have a material impact on the Tax liability of
any of the Contributed Entities for a Post-Closing Tax Period. All material
elections with respect to Taxes affecting the Contributed Entities are set forth
on Schedule 3.18(a) of the Disclosure Schedule.
(b) Except pursuant to this Agreement, in connection with the Fauver
Share Distribution or as set forth on Schedule 3.18(b) of the Disclosure
Schedule, for purposes of the Income Tax Act (Canada), or any other applicable
Canadian federal or provincial Law with respect to Taxes, no Person or group of
Persons has ever acquired or had the right to acquire control of any Contributed
Entity. In the case of SunSource Canada and A&H Bolt: (i) none of Sections 78,
80, 80.01, 80.02, 80.03 or 80.04 of the Income Tax Act (Canada), or any
equivalent provision of any other applicable Canadian federal or provincial Law
with respect to Taxes, have applied or will apply to such entity at any time up
to and including the Closing Date; (ii) neither has acquired property from a
non-arm's length Person, within the meaning of the Income Tax Act (Canada), for
consideration, the value of which is less than the fair market value of the
property acquired in circumstances which could subject either of them to
liability under Section 160 of the Income Tax Act (Canada); (iii) neither has
received a dividend that has been subject to Section 55(2) of the Income Tax Act
(Canada); (iv) the subscription price for any shares of capital stock issued to
or by SunSource Canada or A&H Bolt or to or by any other entity that is a
non-arm's length Person within the meaning of the Income Tax Act (Canada) was
equal to the fair market value thereof, measured at the time of issuance; and
(v) for all transactions between either of SunSource Canada or A&H Bolt and any
Person not resident of Canada with whom either SunSource Canada or A&H Bolt was
not dealing at an arm's length during a Tax year commencing after 1998 and
ending on or before the Closing Date, SunSource Canada or A&H Bolt, as the case
may be, has made or obtained records or documents that meet the requirements of
paragraphs 247(4)(a)-(c) of the Income Tax Act (Canada). A&H Bolt is duly
registered under subdivision (d) of Division V of Part IX of the Excise Tax Act
(Canada), R.S.C., 1985, c. E-15, as amended, with respect to the goods and
services tax and harmonized sales tax and under Division I of Chapter VIII of
Title I of the Quebec Sales Tax Act, R.S.Q., c. T-0.1, as amended, with respect
to the Quebec sales tax, and the registration numbers thereunder for A&H Bolt
are 100087741RT0001 and 1145877743, respectively. The shares of capital stock of
A&H Holding are not "taxable Canadian property" within the meaning and for
purposes of the Income Tax Act (Canada).
(c) SunSource Canada is a disregarded entity for United States federal
income Tax purposes, as provided in Treasury Regulation Section
1.301.7701-3(b)(2). A&H
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Bolt (i) is not engaged in a United States trade or business for federal income
tax purposes, and (ii) is not a passive foreign investment company within the
meaning of the Code. There are no overall foreign losses that have been
allocated to A&H Bolt under Treasury Regulation Section 1.1502-9(c). Neither
SunSource Canada nor A&H Bolt has participated in or cooperated with an
international boycott or been requested to do so in connection with any
transaction or proposed transaction. The basis of certain assets and the
internal basis in certain stock for United States federal and Canadian income
tax purposes is as set forth on Schedule 3.18(c) of the Disclosure Schedule.
(d) The transactions contemplated herein are not subject to the tax
withholding provisions of Subchapter A of Chapter 3 of the Code or of any other
provision of Law with respect to withholding. None of the SunSource Entities has
been a "United States real property holding corporation" within the meaning of
Section 897(c)(2) of the Code during the applicable period specified in Section
897(c)(1)(A)(ii) of the Code.
(e) None of SunSource nor any of its Affiliates would be required to
include any amount in gross income with respect to SunSource Canada or A&H Bolt
pursuant to Section 951 of the Code if the taxable years of such entities were
deemed to end on the day after the Closing Date. A&H Bolt does not have an
investment in "United States property" for purposes of Section 956 of the Code.
A&H Bolt will not be required to recognize for Tax purposes in a Post-Closing
Tax Period any income or gain which would otherwise have been recognized in a
Pre-Closing Tax Period but for SunSource or the Contributed Entities effecting a
change in method of accounting or otherwise deferring the recognition of income
or gain to a Post-Closing Tax Period.
(f) Schedule 3.18(f) of the Disclosure Schedule sets forth with respect
to A&H Bolt (i) the estimated amount of current and accumulated earnings and
profits as of the date hereof and the amount expected as of the Closing Date,
and (ii) the estimated amount of previously taxed income within the meaning of
Section 959 of the Code as of the date hereof and the amount expected as of the
Closing Date (taking into account the amount of any dividend to SunSource under
Section 1248 of the Code from the transactions contemplated by this Agreement).
Section 3.19 Insurance
(a) Schedule 3.19(a) of the Disclosure Schedule sets forth the
following information with respect to each insurance policy (including policies
providing property, casualty, liability, and workers' compensation coverage and
bond and surety arrangements) (the "Insurance Policies") to which any of the
SunSource Entities has been a party, a named insured, or otherwise the
beneficiary of coverage at any time within the past five (5) years and which
relates to the Expediter Entities, the Expediter Assets or the Expediter
Business:
(i) the name, address, and telephone number of the agent;
(ii) the name of the insurer, the name of the
policyholder, and the name of each covered insured;
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(iii) the policy number and the period of coverage;
(iv) the scope (including an indication of whether the
coverage was on a claims made, occurrence, or other basis) and amount
(including a description of how deductibles and ceilings are calculated
and operate) of coverage; and
(v) a description of any retroactive premium adjustments
or other loss-sharing arrangements.
(b) With respect to each such Insurance Policy: (i) the policy is
legal, valid and binding, and enforceable in accordance with its terms, and in
full force and effect; (ii) to the extent not terminated pursuant to Section 5.5
of this Agreement, the policy will continue to be legal, valid, binding, and
enforceable in accordance with its terms, and in full force and effect on
identical terms following the consummation of the transactions contemplated
hereby; (iii) none of the SunSource Entities nor any other party to the policy
is in breach or default (including with respect to the payment of premiums or
the giving of notices), and no event has occurred which, with notice or the
lapse of time, would constitute such a breach or default, or permit termination,
modification, or acceleration, under the policy; (iv) there are no outstanding
unpaid premiums regarding claims made under such Insurance Policies and no
notices of cancellation or nonrenewal have been received by any of the SunSource
Entities; (v) no insurer has advised any of the SunSource Entities that it
intends to reduce coverage or increase premiums; and (vi) no party to the policy
has repudiated any provision thereof. Each of the Expediter Entities has been
covered during the past ten (10) years (or since the date of its formation if
less than ten (10) years) by insurance in scope and amount customary and
reasonable for the businesses in which it has engaged during the aforementioned
period. Schedule 3.19(b) of the Disclosure Schedule describes any self-insurance
arrangements affecting the Expediter Entities.
Section 3.20 Brokers. Except for the Glencoe Fee, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the SunSource Entities.
Section 3.21 Notes and Accounts Receivable; Minimum Cash. All notes and
accounts receivable of the Expediter Entities are reflected properly on their
books and records, are valid receivables subject to no set-offs or
counterclaims, are current and collectible within one hundred twenty (120) days,
and will be collected in accordance with their terms at their recorded amounts,
subject only to the reserve for bad debts set forth on the Final Closing Date
Balance Sheet.
Section 3.22 Americans With Disabilities Act Compliance. Except as set
forth on Schedule 3.22 of the Disclosure Schedule, the facilities owned and
leased by the Expediter Entities are in compliance in all material respects with
the Americans with Disabilities Act of 1990 (the "ADA") to the extent the ADA is
applicable thereto. None of the SunSource Entities has received any notice to
the effect that, or otherwise been advised that, the facilities are not in
compliance with the ADA and none of the SunSource Entities has any reason to
anticipate that any existing circumstances at any of the facilities are likely
to result in violation of the ADA.
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Section 3.23 Bank Accounts. Schedule 3.23 of the Disclosure Schedule
contains a true and correct list of the names of each bank, savings and loan, or
other financial institution in which the SunSource Entities have an account
relating to the Expediter Entities and the Expediter Business, including cash
contribution accounts (or safe deposit boxes) and the names of all Persons
authorized to draw thereon or with access thereto.
Section 3.24 Inventory. All Expediter Inventory has been acquired and
maintained in accordance with the regular business practices of the Expediter
Entities, consists of new and unused items of a quality and quantity usable or
saleable in the Ordinary Course of Business, and is valued at reasonable amounts
based on the normal valuation policies of the Expediter Entities at prices equal
to the lower of cost or market value on a first-in, first-out basis. None of
such Expediter Inventory is obsolete, unusable, slow-moving, damaged or
unsalable in the Ordinary Course of Business, except for such items of Expediter
Inventory which have been written down to realizable market value, or for which
adequate reserves have been provided.
Section 3.25 Intercompany and Affiliate Relationships. Schedule 3.25 of
the Disclosure Schedule sets forth (a) each Contract in effect as of the date
hereof between any of the Contributed Entities or their Affiliates or
Representatives, on the one hand, and any of SunSource or its Affiliates or
former Affiliates, or to which any SunSource Entity other than the Contributed
Entities is a party which affects or relates to the Contributed Entities, the
Expediter Assets or the Expediter Business, and (b) each transaction from
December 31, 1999 through the date hereof involving the transfer of any cash,
property, assets or rights to or from the Contributed Entities to any of
SunSource or its Affiliates or former Affiliates and any commitments of any of
such parties to engage in any such transactions in the future (other than the
Intercompany Indebtedness). Each such Contract is, and each such transaction was
effected, on terms equivalent to those which would have been established in an
arms-length negotiation.
Section 3.26 Representations Regarding SunSource Canada. SunSource
Canada, since its formation, has been, and is and will continue through the
Closing to be a holding company with no assets (tangible or intangible, real or
personal), Liabilities, Contracts, employees, properties, operations or
business, other than its ownership of all of the shares of capital stock of A&H
Bolt and, prior to the Fauver Share Distribution, its ownership of all of the
shares of capital stock of Fauver.
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF the Partnership
The Partnership hereby represents and warrants to the
SunSource Entities as follows:
Section 4.1 Organization. The Partnership is duly formed, validly
existing and in good standing under the laws of the State of Delaware.
Section 4.2 Authority. The Partnership has the partnership power and
authority to execute and deliver this Agreement and the Ancillary Agreements to
which it is a party and to perform its obligations hereunder and thereunder. The
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execution and delivery by the Partnership of this Agreement and the Ancillary
Agreements to which it is a party, and the performance by the Partnership of its
obligations hereunder and thereunder have been duly authorized by all necessary
partnership action on the part of the Partnership.
Section 4.3 Enforceability. This Agreement and the Ancillary Agreements
to which the Partnership is a party have been duly executed and delivered by the
Partnership and constitute a legal, valid and binding obligation of the
Partnership, enforceable against the Partnership in accordance with its terms,
subject to the effects of bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium and other similar Laws relating to or affecting
creditors' rights generally and general equitable principles (whether considered
in a proceeding in equity or at law).
Section 4.4 No Conflict or Violation. The execution, delivery and
performance by the Partnership of this Agreement and the Ancillary Agreements to
which it is a party and the consummation of the transactions contemplated hereby
and thereby do not and will not (a) violate, conflict with or result in the
breach of any provision of the Organizational Documents of the Partnership, (b)
conflict with or violate any Law, Governmental Order or Permit applicable to the
Partnership or any of its assets or properties, except for such conflicts or
violations as would not, individually or in the aggregate, reasonably be
expected to have a material adverse effect on the ability of the Partnership to
perform its obligations under this Agreement, or (c) conflict with, result in
any breach of, constitute a default (or event which with the giving of notice or
lapse of time, or both, would become a default) under, require any consent
under, or give to others any rights of termination, amendment or acceleration
of, or result in the creation of any Encumbrance on any of the assets or
properties of the Partnership (other than in connection with the Debt Financing)
pursuant to, any note, bond, mortgage or indenture, contract, agreement, lease,
license, permit or franchise to which the Partnership is a party or by which any
of its assets or properties is bound or affected, except for such conflicts,
breaches, defaults, consents, rights and Encumbrances, as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
Section 4.5 Governmental Consents. The execution, delivery and
performance by the Partnership of this Agreement do not and will not require any
consent, approval, authorization, satisfaction or other order of, review or
action by, filing with or notification to any Governmental Authority, except for
(i) notification under the Investment Canada Act by the Partnership following
the Closing Date, and (ii) those that may be required by the nature of the
business or ownership of the Partnership. No filing or notification under the
HSR Act is required in connection with the execution of this Agreement by the
Parties hereto or the consummation of the transactions contemplated hereby.
Section 4.6 Issuance of Interest. The Parent Units and the Holding
Units to be issued to the Contributors, respectively, upon completion of the
transactions described in Article II hereof will be duly authorized and validly
issued, subject to the terms of the Partnership Agreement.
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Section 4.7 Capitalization of the Partnership. The capitalization of
the Partnership immediately prior to the Closing is set forth on Exhibit G,
which sets forth the name of each general and limited partner of the Partnership
immediately prior to the Closing, the amount of capital contributions made by
each partner of the Partnership immediately prior to the Closing and the
percentage interests of each partner in the Partnership immediately prior to the
Closing. The capitalization of the Partnership as of the Closing will be set
forth on the Closing Date Capitalization Certificate delivered to the SunSource
Entities by the Partnership at the Closing pursuant to Section 2.5(b)(v) of this
Agreement which shall set forth the name of each general and limited partner of
the Partnership as of the Closing (after giving effect to the Contributions and
the issuance of warrants in connection with the Debt Financing), the amount of
capital contributions made or to be made by each partner of the Partnership
(indicating whether such contributions are classified as preferred or base
capital) as of the Closing and the number of Units owned (which, in the case of
the general and limited partners who are Affiliates of Glencoe Capital, shall
equal 51,000 Units in the aggregate) by each partner and the corresponding Unit
Percentage represented thereby (giving effect to the issuance of the Parent
Units and the Holding Units pursuant to this Agreement). All of the Units
outstanding as of the Closing Date and all of the Parent Units and the Holding
Units to be issued to Parent and A&H Holding, respectively, on the Closing Date
pursuant to this Agreement are duly authorized and validly issued.
Section 4.8 Business of the Partnership. The Partnership has not
conducted any business operations and has not engaged in any transactions since
its formation other than in connection with its formation and the transactions
contemplated by this Agreement and the Ancillary Documents or in connection with
the Debt Financing or as contemplated by the Letter Agreement.
Section 4.9 Brokers. Except for the Glencoe Fee, no broker, finder or
investment banker is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of the Partnership.
ARTICLE V.
ADDITIONAL AGREEMENTS
Section 5.1 Conduct of Business Prior to the Closing
(a) Except as contemplated by this Agreement, pending the Closing, the
Expediter Entities shall, and the SunSource Entities (other than the Expediter
Entities) shall cause the Expediter Entities to, conduct the Expediter Business
in all material respects only in the Ordinary Course of Business, to use all
commercially reasonable efforts to preserve substantially intact the business
organization of the Expediter Entities, to maintain and keep the Expediter
Assets in good repair and condition, to pay the proper amount of Taxes and
installments and remittances of Taxes within the time prescribed under any
applicable Law, to comply in all material respects with all applicable Laws and
to use all commercially reasonable efforts consistent with past practice to
preserve its business relationships, all to the end of preserving the Expediter
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Business and the operations of the Expediter Entities. Without limiting the
generality of the foregoing, except as contemplated by this Agreement, the
Contributed Entities shall not, and the SunSource Entities (other than the
Contributed Entities) shall not permit the Contributed Entities to, do any of
the following without the prior written consent of the Partnership (which
consent shall not be unreasonably withheld):
(i) sell, lease, transfer, or assign any of its assets,
tangible or intangible, other than items held for sale for a fair
consideration in the Ordinary Course of Business;
(ii) enter into any Contract (or series of related
Contracts) either involving more than $25,000 in the aggregate or
outside the Ordinary Course of Business;
(iii) accelerate, terminate, modify, or cancel any
Contract (or series of related Contracts) involving more than $25,000
in the aggregate relating to the Expediter Business to which any of the
Expediter Entities is a party or by which any of the Expediter Assets
is bound or affected;
(iv) make any changes in its key management structure,
including, without limitation, the hiring of additional officers;
(v) settle or compromise any Action or claim, except for
Actions or claims settled in the Ordinary Course of Business and not
involving more than $5,000 in settlement or compromise (without giving
effect to insurance proceeds) or any form of consent or decree as to
the conduct of any aspect of the Expediter Business;
(vi) allow or permit to be done any act by which any of
its insurance policies may be suspended, impaired or cancelled;
(vii) except in connection with and to facilitate the
Intercompany Transactions, issue, deliver, award, grant or sell, or
authorize or propose the issuance, delivery, award, grant or sale
(including the grant of any liens, limitations on voting rights or
other Encumbrances) of, any shares of any class of capital stock
(including shares held in treasury) or other membership or ownership
interests or any Equity Rights with respect thereto, or amend or
otherwise modify the terms of any such capital stock or other
membership or ownership rights or Equity Rights with respect thereto;
(viii) merge or consolidate with, or make any capital
investment in, any loan to, or any acquisition of the securities or
assets of, any other Person (or series of related capital investments,
loans, and acquisitions) either involving more than $25,000 or outside
the Ordinary Course of Business;
(ix) issue any note, bond, or other debt security or
create, incur, assume, or guaranty any indebtedness for borrowed money
or capitalized lease obligation;
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(x) delay or postpone the payment of accounts payable or
other Liabilities outside the Ordinary Course of Business;
(xi) cancel, compromise, waive, fail to exercise or
release any right or claim (or series of related rights and claims)
either involving more than $10,000 or outside the Ordinary Course of
Business;
(xii) grant any license or sublicense of any rights under
or with respect to any Intellectual Property;
(xiii) except in connection with the Intercompany
Transactions, declare, set aside, or pay any dividend or make any
distribution with respect to its capital stock or member interest
(whether in cash or in kind) or redeem, purchase, or otherwise acquire
any of its capital stock or membership interest;
(xiv) take any action or fail to act such that (A) any
representation or warrant in Article III hereof to become untrue or
incorrect, including without limitation, in Section 3.13 of this
Agreement or (B) any condition to closing set forth in Section 8.2 of
this Agreement could fail to be satisfied;
(xv) enter into any Contract or other arrangement or
understanding to do any of the foregoing.
Section 5.2 Access to Information
(a) From the date hereof until the Closing, each of the SunSource
Entities shall afford the Representatives of the Partnership, at the sole risk
and expense of the Partnership, with reasonable access, during normal business
hours and upon reasonable advance notice, to the offices, properties,
facilities, books and records of the SunSource Entities, as the Partnership
reasonably deems necessary or advisable, and to those Employees to whom the
Partnership reasonably requests access. All information obtained by the
Partnership and its employees, agents and its Representatives pursuant to this
Section 5.2 shall be kept confidential in accordance with the Letter Agreement.
(b) In order to facilitate the resolution of any claims made by or
against or incurred by the SunSource Entities prior to the Closing, for a period
of four (4) years following the Closing (or, with respect to any books and
records necessary for the preparation and filing of any Returns, reports or
forms or the defense of any Tax audit, claim or assessment, until ninety (90)
days after the expiration of the applicable statute of limitations period as
provided in Section 7.1(a) hereof), the Partnership shall cause the Contributed
Entities to, (i) retain the books and records of the Contributed Entities
relating to periods prior to the Closing and (ii) upon reasonable notice, afford
the Representatives of the SunSource Entities reasonable access (including the
right to make photocopies, at the SunSource Entities' expense), during normal
business hours, to such books and records; provided that SunSource shall, or
shall cause Parent or A&H Holding to, reimburse the Partnership promptly upon
demand for all out-of-pocket expenses incurred by the Partnership in connection
therewith.
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(c) In order to facilitate the resolution of any claims made by or
against or incurred by the Partnership or the Contributed Entities after the
Closing or for any other reasonable purpose, for a period of four (4) years
following the Closing (or, with respect to any books and records necessary for
the preparation and filing of any Returns, reports or forms or the defense of
any Tax audit, claim or assessment, until ninety (90) days after the expiration
of the applicable statute of limitations period as provided in Section 7.1(a)
hereof), the SunSource Entities shall (i) retain the books and records which
relate to the Contributed Entities for periods prior to the Closing and which
shall not otherwise have been delivered to the Partnership or the Contributed
Entities, and (ii) upon reasonable notice, afford the Representatives of the
Partnership and the Contributed Entities reasonable access (including the right
to make photocopies, at the expense of the Partnership), during normal business
hours, to such books and records; provided that the Partnership shall reimburse
the SunSource Entities promptly upon demand for all out-of-pocket expenses
incurred by such entities in connection therewith.
(d) In the event and for so long as the Partnership actively is
contesting or defending against any Action, suit, proceeding, hearing,
investigation, charge, complaint, claim, or demand in connection with any fact,
situation, circumstance, status, condition, activity, practice, plan,
occurrence, event, incident, action, failure to act, or transaction on or prior
to the Closing Date involving the Contributed Entities, the Expediter Assets or
the Expediter Business, the SunSource Entities will cooperate with the
Partnership and its Representatives in the contest or defense, make available
their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at
the sole cost and expense of the Partnership (unless the Partnership is entitled
to indemnification therefor under Article IX hereof).
Section 5.3 Regulatory and Other Authorizations; Notices and Consents
(a) Each of the Parties hereto shall use all commercially reasonable
efforts to obtain all permits, authorizations, consents, orders and approvals
of, and give all notices to or make all filings with, all Governmental
Authorities that may be or become necessary or appropriate for its execution and
delivery of, and the performance of its obligations pursuant to, this Agreement
and will cooperate fully with each other party hereto in promptly seeking to
obtain all such permits, authorizations, consents, orders and approvals and to
give all such notices or make all such filings and to supply as promptly as
practicable to the appropriate Governmental Authorities any additional
information and documentary material that may be requested pursuant thereto.
Each Party further agrees to promptly inform the other Parties of any
communication received by it from any Governmental Authority regarding any of
the transactions contemplated hereby and to keep such other Parties apprised of
the status of any such communications; provided, however, that the Partnership
shall not be required to disclose communications with Governmental Authorities
regarding the Investment Canada Act to any other Party. Each Party agrees to use
all commercially reasonable efforts to contest any Action seeking to restrain,
enjoin or alter the transactions contemplated by this Agreement and to avoid the
imposition of such restraint, injunction or alteration, and if any such
Governmental Order has been granted, to use all commercially reasonable efforts
to have such Governmental Order vacated or lifted. Each Party hereunder may
require that non-public or confidential commercial information designated by
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such Party shall be furnished only to outside counsel of the other Party and not
to such other Party in accordance with the terms of a joint defense and
confidentiality agreement to be entered into among the Parties at such time.
(b) SunSource shall, or shall cause the other SunSource Entities, to
use all commercially reasonable efforts to obtain all required consents and
approvals of, and to give all required notices to, third parties, including,
without limitation, such consents, approvals and notices as the Partnership may
reasonably request, in connection with the execution of this Agreement and the
consummation of the transactions contemplated by this Agreement. The Partnership
shall cooperate and use commercially reasonable efforts to assist in obtaining
such consents and approvals and in giving such notices.
(c) A&H Holding shall obtain and deliver to the Partnership on or prior
to the Closing Date a clearance certificate or certificates issued by the
Minister of National Revenue of Canada under Section 116 of the Income Tax Act
(Canada) ("Section 116") with respect to (i) the contribution and transfer of
the Canada Shares to the Partnership pursuant to Section 2.1(a)(ii) of this
Agreement having a certificate limit (within the meaning of Section 116) equal
to the aggregate of the consideration paid for the Canada Shares pursuant to the
terms of this Agreement, and (ii) the Fauver Share Distribution having a
certificate limit (within the meaning of Section 116) equal to the aggregate of
the consideration paid for the Fauver Shares (collectively, the "Tax Compliance
Certificates").
Section 5.4 Notice of Developments. Prior to the Closing, promptly
after obtaining Knowledge of any of the following, each Party shall give notice
thereof in writing to the other Parties of: (i) the occurrence (or
non-occurrence) of any event, circumstance or fact arising subsequent to the
date of this Agreement which would result in the failure to satisfy any of the
conditions set forth in Section 8.1 or Section 8.2 of this Agreement, as
applicable, (ii) the occurrence, or failure to occur, of any event which
occurrence or failure would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Closing Date, and (iii) any failure of a
Party hereto, as the case may be, or of any Affiliate thereof, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; provided, however, that no such notification shall affect the
representations or warranties of the Parties or the conditions to the
obligations of the Parties hereunder and that the delivery of any notice
pursuant to this Section 5.4 shall not limit the remedies available hereunder
and shall not be deemed to amend or supplement the Disclosure Schedule or to
prevent or cure any misrepresentation, breach of warranty or breach of covenant.
Section 5.5 Insurance; Risk of Loss
(a) As of the close of business on the Closing Date: (i) SunSource
shall be permitted to terminate or cause its Affiliates to terminate all
insurance coverage relating to the Contributed Entities and the Expediter
Business, the Expediter Assets and the Employees under the general corporate
policies of insurance of SunSource for the benefit of its Subsidiaries, with the
exception of the directors and officers liability insurance policy covering the
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directors and officers of the Expediter Entities which will be maintained for a
period of three (3) years; provided, however, that (A) no such termination of
any occurrence policy in force as of the Closing Date shall be effected so as to
prevent SunSource from recovering under such policies for losses from events
occurring prior to the Closing Date, and (B) no such termination of any
claims-made policy in force as of the Closing Date shall be effected so as to
prevent the Contributed Entities from recovering under such policies for losses
from events occurring prior to the Closing Date, whether or not SunSource or the
Contributed Entities shall have received notice of claims relating to such
events on or before the Closing Date; provided, however, that the Partnership or
the Contributed Entities shall give written notice to SunSource promptly
following the time any such claim relating to an event occurring prior to the
Closing Date is made, filed or reported after the Closing Date, and (ii) subject
to Article IX, the Partnership shall become solely responsible for all insurance
coverage and related risk of loss with respect to the Contributed Entities based
on events occurring on or after the Closing Date.
(b) To the extent that, after the Closing Date, any Party reasonably
requires any information regarding claim data, payroll or other information in
order to make claims or filings with insurance carriers, the other Party shall,
or shall cause the applicable Affiliate of such Party to, promptly supply such
information.
(c) With respect to each parcel of Owned Property which is listed on
Schedule 3.15(a) of the Disclosure Schedule, SunSource will cause the Expediter
Entities to obtain from the Title Company an ALTA Owner's Policy of Title
Insurance Form B-1992 or equivalent policy (deleting any creditors' rights
exception therein) issued by a title insurer reasonably satisfactory to the
Partnership (and, if requested by the Partnership, reinsured in whole or in part
by one or more insurance companies and pursuant to a direct access agreement
reasonably acceptable to the Partnership), in such amount as the Partnership
reasonably may determine to be the fair market value of such Owned Property
(including all improvements located thereon), insuring title to such Owned
Property to be in the applicable Expediter Entity as of the Closing (subject
only to Permitted Encumbrances). Each title insurance policy delivered under
this Section 5.5(c) shall (A) insure title to the real property and all recorded
easements benefiting such real property, (B) contain an "extended coverage
endorsement" insuring over the general exceptions contained customarily in such
policies, (C) contain an ALTA Zoning Endorsement 3.1 (or equivalent), (D)
contain an endorsement insuring that the real property described in the title
insurance policy is the same real estate as shown on the survey delivered with
respect to such property, (E) contain an endorsement insuring that each street
adjacent to the real property is a public street and that there is direct and
unencumbered pedestrian and vehicular access to such street from the real
property, (F) if the real property consists of more than one record parcel,
contain a "contiguity" endorsement insuring that all of the record parcels are
contiguous to one another, (G) contain a "non-imputation" endorsement to the
effect that title defects known to the officers, directors and stockholders of
the owner prior to the Closing shall not be deemed "facts known to the insured"
for purposes of the policy, (H) contain owner's comprehensive, tax parcel and
plat and subdivision endorsements, (I) contain affirmative coverage over the
failure of closure of the legal description to the Owned Property, and (J)
contain such other endorsements and coverages as may be requested by the
Partnership.
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Section 5.6 Consummation of Intercompany Transactions. The SunSource
Entities agree to consummate the Intercompany Transactions no later than one (1)
Business Day prior to the Closing Date. Without limiting the generality of the
foregoing, (a) Parent and Kar Products agree, and SunSource agrees to cause
Parent and Kar Products, to effectuate the Kar Merger by, among other things:
(i) properly forming Kar LLC pursuant to the Kar LLC Operating Agreement, and
(ii) merging Kar Products with and into Kar LLC pursuant to and in accordance
with Section 264 of the General Corporation Law of the State of Delaware, with
Kar LLC as the surviving entity in the Kar Merger; (b) Parent and Kar Products
agree, and SunSource agrees to cause Parent and Kar Products, to effectuate the
Holding Stock Transfer following the Kar Merger by causing all of the capital
stock of A&H Holding to be transferred and assigned from Kar Products to Parent;
and (c) SunSource Canada agrees, and SunSource, Parent and A&H Holding agree to
cause SunSource Canada to cause the Fauver Share Distribution. The SunSource
Entities shall provide the Partnership with copies of all of the applicable
Intercompany Transaction Documents at least five (5) Business Days prior to the
proposed consummation of any of the Intercompany Transactions or as may be
reasonably requested by the Partnership. The SunSource Entities will not effect
any transaction or take any other action involving the Contributed Entities or
otherwise that is inconsistent with the consummation of, or is not a part of,
the Intercompany Transactions.
Section 5.7 Domain Names; Internet Sites. At the Closing, the SunSource
Entities shall (a) transfer, convey and assign to the Partnership all right,
title and interest in the domain names set forth in Schedule 3.16(a) of the
Disclosure Schedule, and (ii) transfer to the Partnership a copy of the contents
of the Internet and Intranet web sites, web pages and/or site content operated
or maintained by or on behalf of the Expediter Entities, solely to the extent
such contents relate to the Expediter Business. In connection with such
transfer, the Partnership shall remove all "SUNSOURCE" trademarks, tradenames
and logos from such materials.
Section 5.8 Intercompany Accounts and Agreements. Except as set forth
in Exhibit H attached hereto and except for this Agreement, any Fee Agreement to
which SunSource Corporate Group, Inc. is a party, SunSource agrees to cause all
Contracts, including, without limitation, intercompany notes, between or among
SunSource or any of its Affiliates (other than the Contributed Entities), on the
one hand, and the Contributed Entities, on the other hand, and those Contracts
and transactions set forth or required to be set forth on Schedule 3.25 of the
Disclosure Schedule, to be terminated as to the Contributed Entities on or prior
to the Closing Date, without cost or Liability to, and with a full release of,
the Contributed Entities. Except as expressly provided in Section 6.1 of this
Agreement, none of the SunSource Entities shall unilaterally terminate or
intentionally breach any of the Contracts or transactions set forth on Exhibit
H. The Parties acknowledge that (other than with respect to the agreement
relating to the Designated Consent) the Partnership shall not be obligated to
participate under any of such Contracts.
Section 5.9 Further Assurances; Cooperation
(a) Upon the terms and subject to the conditions contained in this
Agreement, each of the Parties hereto agree, both before and after the Closing
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(i) to use their respective commercially reasonable efforts to take, or cause to
be taken, all actions, and to do, or cause to be done, all things, necessary,
proper or advisable under applicable Law, to effect or consummate any of the
transactions contemplated by this Agreement (including the satisfaction, but not
waiver, of the conditions to Closing set forth in Article VIII of this
Agreement) and to obtain the Debt Financing, (ii) at the reasonable request of
any other Party, to execute and deliver such documents and other instruments as
may be necessary, proper or advisable to effect or consummate any of the
transactions contemplated by this Agreement, and (iii) to cooperate with each
other in connection with the foregoing and in connection with the Debt
Financing. The SunSource Entities further agree, from and after the Closing, to
take all actions and execute any document or other instrument necessary to
transfer and assign to the Partnership or, at the Partnership's request, the
applicable Expediter Entity, any assets related to or in connection with the
Expediter Business required to be, or which should have been, included in the
Expediter Assets.
(b) The SunSource Entities acknowledge that the Financial Statements
and other information with respect to the Expediter Entities or the Expediter
Business may be used in connection with the Debt Financing, including, if
applicable, in connection with a Rule 144A offering memorandum and a
registration statement filed under the Securities Act (the "Public Filings") to
be issued or filed by the Partnership. SunSource shall (and shall cause its
Affiliates to) cooperate in a commercially reasonable manner prior to the
Closing to provide information sufficient for the preparation of any required
Public Filings, in each case, at the sole expense of the Partnership. The
cooperation of the SunSource Entities required by this Section 5.9 shall
include, without limitation, (i) compiling the requisite financial information,
including supplying financial information for purposes of comfort letters to be
issued in connection with Public Filings, (ii) granting Glencoe Capital and its
Affiliates and Representatives, the Partnership or its accountants or other
Representatives or the lenders providing the Debt Financing full and complete
access to the books and records of the Contributed Entities and to any personnel
knowledgeable about such books and records (including independent accountants),
in each case to the extent reasonably requested by the party seeking such
access, (C) signing customary management representation letters related to the
Financial Statements and any comfort letters, and (D) using commercially
reasonable efforts to furnish necessary financial information for additional
periods prior to the Closing as may be reasonably requested by any such party.
Section 5.10 Accounts. Immediately upon the Closing, SunSource shall
cause to be notified all banks holding any account set forth on Schedule 3.23 of
the Disclosure Schedule, that the persons having signature authority for such
accounts no longer have signature authority with respect thereto and shall
cooperate with the Partnership in effecting the transfer of such accounts to the
name of the Partnership or its designee.
Section 5.11 Transition Cooperation; Books and Records
(a) The Parties shall cooperate with each other, and shall cause their
respective Representatives to cooperate with each other, for a period of one
hundred eighty (180) days after the Closing to ensure the orderly transition of
the Contributed Entities and the Expediter Business contributed to the
Partnership and to minimize any disruption to their respective businesses that
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might result from the consummation of the transactions contemplated hereby.
After the Closing, upon reasonable written notice, the Parties shall furnish or
cause to be furnished to each other and their employees, counsel, auditors and
other Representatives access, during normal business hours, to such information
and assistance relating to the Contributed Entities as is reasonably necessary
for financial reporting and accounting matters, the preparation and filing of
any Returns, reports or forms or the defense of any Tax audit, claim or
assessment. Each Party shall reimburse the other for reasonable out-of-pocket
costs and expenses incurred in assisting any other Party pursuant to this
Section 5.11(a). No Party shall be required by this Section 5.11(a) to take any
action that would unreasonably disrupt its normal operations (or, in the case of
the Partnership, the business or operations of any of the Expediter Entities).
(b) To the extent any of the Required Consents shall not have been
obtained prior to Closing (and the condition set forth in Section 8.2 shall have
been waived by the Partnership) or with respect to any Contracts subject to
indemnity by SunSource pursuant to Section 9.2(a)(v) of this Agreement, the
Partnership agrees not to take any action with respect to obtaining such consent
without the approval of SunSource, which approval shall not be unreasonably
withheld. In the event the Partnership and SunSource agree to seek such consent,
the parties will mutually cooperate in all matters related thereto.
(c) As soon as reasonably practical after the Closing Date, the
SunSource Entities shall deliver or cause to be delivered to the Partnership all
agreements, documents, books, records and files, including records and files
stored on computer disks or tapes or any other storage medium (collectively,
"Records") in their possession or the possession of any of their Affiliates or
Representatives relating to the business and operations of any of the Expediter
Entities; provided, however, that:
(i) The Partnership recognizes that certain Records may
relate primarily to subsidiaries or divisions of SunSource other than
the Contributed Entities and that SunSource may retain such Records and
shall provide copies of the relevant portions thereof relating to the
Contributed Entities and the Expediter Business to the Partnership;
(ii) The SunSource Entities may retain any Returns,
reports or forms, and the Partnership shall be provided with copies of
such Returns, reports or forms, only to the extent that they relate to
separate Returns (including such Returns that are included in part of a
Return relating to SunSource and its Affiliates) or separate Tax
liability of the Contributed Entities; provided, however, that in no
event shall the Partnership be denied access to any information
necessary for the preparation and filing of any Returns that include
the Contributed Entities after the Closing Date.
Section 5.12 No Solicitation. From the date hereof until the earlier of
the Closing Date or the termination of this Agreement in accordance with its
terms (the "Acquisition Exclusivity Period"), the SunSource Entities hereby
covenant and agree not to, and agree to cause each other not to, permit any of
the members of their respective boards of directors or members, or any of their
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respective Representatives to, directly or indirectly, (i) solicit or entertain
any inquiries or proposals or enter into or continue any discussion,
negotiations or agreements relating to the sale or other disposition, directly
or indirectly, of the Contributed Entities (whether through a merger,
reorganization, stock purchase or otherwise) or all or any material portion of
the Expediter Business or the Expediter Assets (a "Proposed Acquisition") to or
with any Person other than the Partnership pursuant to this Agreement, or (ii)
provide any assistance or any information to any Person other than the
Partnership relating to any Proposed Acquisition. Each of the SunSource Entities
agrees that it will immediately cease and cause to be terminated any existing
activities, discussions or negotiations with any parties (other than the
Partnership) heretofore conducted, or the provision by any of the SunSource
Entities or their respective Representatives of information to any party (other
than the Partnership) to which information heretofore has been provided. If,
after the date hereof, any of the SunSource Entities receives any such inquiry
or proposal or request for information, or offer to discuss or negotiate any
Proposed Acquisition, the applicable SunSource Entity will immediately provide
notice thereof to the Partnership.
Section 5.13 Covenant Not to Compete
(a) For a period of five (5) years from and after the Closing Date (the
"Non-Compete Period"):
(i) SunSource shall not, and shall cause its Affiliates
and subsidiaries not to, (A) Participate in an Expediter Competing
Business or any other business which the Expediter Entities may
hereafter enter or engage in, except that the foregoing shall not apply
to (x) a Permitted Entry, or (y) an opportunity with respect to
Participating in an Expediter Competing Business not engaged in prior
to the Closing Date is presented by SunSource or any such Affiliate to
the Partnership and, within a reasonable time thereafter, such business
is not pursued or is not reasonably likely to be pursued by the
Partnership or any of the Expediter Entities, (B) directly or
indirectly, for itself or on behalf of any other Person, contact or do
business with any customer of any Expediter Competing Business or
solicit business, patronage or orders from customers of any Expediter
Competing Business, other than such customers who are also customers
with respect to any SunSource Business at any time, or (C) hire or
directly or indirectly entice or solicit or seek to induce or attempt
to induce or influence any of the Employees or any of the Transferred
Employees to leave their employment with the Expediter Entities or in
any way interfere with the relationship between the Partnership or its
Affiliates and any employees of any Expediter Competing Business; and
(ii) the Partnership shall not, and shall cause its
subsidiaries not to, (A) Participate in any SunSource Business
(provided that this limitation shall in no way effect any of Glencoe
Capital or its Affiliates or investors, other than the Partnership and
its subsidiaries), except if the Partnership or such subsidiary is a
Permitted Entrant; (B) directly or indirectly, for itself or on behalf
of any other Person, contact or do business with any customer of any
SunSource Business or solicit business, patronage or orders from
customers of any SunSource Business, other than such customers who are
also customers with respect to any Expediter Competing Business at any
time, or (C) hire or directly or indirectly entice or solicit or seek
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to induce or attempt to induce or influence any of the employees to
leave their employment with SunSource or in any way interfere with the
relationship between SunSource or its Affiliates and any employees of
any SunSource Business.
(b) During the Non-Compete Period, none of SunSource nor any of its
Affiliates shall induce or attempt to induce any supplier, agent, licensee,
licensor, franchisee, customer or other business relation of the Partnership and
its Affiliates to cease doing business with them or in any way interfere with
the relationship between the Partnership or its Affiliates and such business
relations.
(c) As used in this Section 5.13, (i) "Expediter Competing Business"
shall mean any business or line of business conducted by the Expediter Entities
at any time during the twelve (12) month period prior to the Closing, including,
without limitation, the distribution of maintenance and repair parts, tools,
lubricants, additives and other related items in the United States, and Canada
and Mexico to original equipment manufacturers ("OEMs"), maintenance, repair and
operation customers ("MROs"), and transportation-related customers, (ii)
"SunSource Business" shall mean any business or line of business (other than the
Expediter Business) (A) engaged in by SunSource or any of its Affiliates at any
time during the twelve (12) month period prior to the Closing which is described
or disclosed by SunSource in the final prospectus included in the Registration
Statement on Form S-2 (Reg. No. 333-44733), the Annual Report on Form 10-K for
the fiscal year ended December 31, 1998, or any Quarterly Report on Form 10-Q
filed by SunSource with respect to any fiscal period ended during the 1999
calendar year, (B) engaged in by Axxess Technologies, Inc. to the extent such
business is acquired by SunSource, and (C) without limiting the generality of
the foregoing clause (A), the distribution of (x) fastener and related items and
non-fastener products (such as keys and letters, numbers and signs) and
value-added merchandising services in the United States, Canada, Mexico, Central
and South America to national and regional home centers, lumberyards, mass
merchants, hardware stores and grocery and drug stores, and (y) hydraulic,
pneumatic, electronic and filtration parts and equipment and related items,
including engineering design and equipment repair services to OEM and MRO
customers in the United States, Canada and Mexico, (iii) "Participate" shall
mean to have any direct or indirect interest in any enterprise, whether as an
officer, director, employee, partner, sole proprietor, agent, representative,
independent contractor, consultant, franchisor, franchisee, creditor, owner or
otherwise, but shall not include the ownership of less than one percent (1%) of
the stock of a publicly-held corporation whose stock is traded on a national
securities exchange or in the over-the-counter market. For purposes of this
Section 5.13, each of the following shall constitute a "Permitted Entry" by any
party subject to this Section 5.13: (A) sales by the Expediter Entities to
retail customers who were customers of the Expediter Entities within the twelve
(12) month period prior to the Closing, (B) sales by SunSource or any of its
Affiliates or subsidiaries to retail customers, (C) sales of hydraulic products
to OEMs and MROs in the United States, Canada and Mexico, (D) the entry by
SunSource or any Affiliate or subsidiary thereof into a business which is not a
SunSource Existing Business or an Expediter Competing Business.
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(d) If the final judgment of a court of competent jurisdiction declares
that any term or provision of this Section 5.13 is invalid or unenforceable, the
Parties agree that the court making the determination of invalidity or
unenforceability shall have the power to reduce the scope, duration, or area of
the term or provision, to delete specific words or phrases, or to replace any
invalid or unenforceable term or provision with a term or provision that is
valid and enforceable and that comes closest to expressing the intention of the
invalid or unenforceable term or provision, and this Agreement shall be
enforceable as so modified after the expiration of the time within which the
judgment may be appealed.
(e) The SunSource Entities agree that the Partnership or its
Affiliates, and the Partnership and its Affiliates agree that the SunSource
Entities, may suffer irreparable harm from a breach of any of the covenants or
agreements of such Parties or any of their respective Affiliates contained in
this Section 5.13. In the event of an alleged or threatened breach by a Party or
any of its respective Affiliates of any of the provisions of this Section 5.13,
the other Party or its Affiliates or their respective successors and assigns
may, in addition to all other rights and remedies existing in their favor, apply
to any court of competent jurisdiction for specific performance and/or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof (including the extension of the Non-Compete Period by a period
equal to the length of the violation of this Section 5.13). In the event an
alleged breach or violation by any Party or any of its Affiliates of any of the
provisions of this Section 5.13, the Non-Compete Period shall be tolled if such
alleged breach or violation is resolved against such Party or the applicable
Affiliate thereof.
(f) In the event the Partnership is sold to any third party, the
Partnership shall have the right to terminate this Section 5.13 as to both, but
not as to one, party.
(g) The Parties acknowledge that the covenants in this Section 5.13 are
intended to benefit the Partnership, the Expediter Entities and any Affiliates
of the Partnership, on the one hand, and SunSource and its Affiliates, on the
other hand, from and after the Closing. Nothing in this Section 5.13 shall limit
or affect the ability of the Partnership or its subsidiaries, including, without
limitation, the Expediter Entities, from and after the Closing, to operate and
conduct the Expediter Business.
Section 5.14 Tax Status of Kar LLC. Kar LLC will not at any time make
an election pursuant to Treasury Regulations Section 301.7701-3 to be treated as
an association taxable as a corporation for United States federal income tax
purposes.
Section 5.15 Year 2000 Compliance. Prior to the Closing, SunSource will
provide the Partnership with assurances and substantiations (including, but not
limited to, the results of internal or external audit reports) acceptable to the
Partnership indicating that the Expediter Entities and the Expediter Business
are Year 2000 Compliant.
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ARTICLE VI.
EMPLOYEE MATTERS
Section 6.1 Employees
(a) As part of the Intercompany Transactions and prior to Closing, the
SunSource Entities shall cause the employment of each employee of a SunSource
Entity who is not already an employee of an Expediter Entity and who works
primarily for or provides services primarily to the Expediter Entities to be
transferred to the applicable Expediter Entity (the "Transferred Employees").
All Transferred Employees shall be given credit under each employee benefit
plan, program, policy or arrangement of the Expediter Entities in which the
employees are eligible to participate for all service with the SunSource
Entities or any predecessor employer (to the extent such credit was given by the
SunSource Entities) for purposes of eligibility, vesting, severance and vacation
entitlement. The Expediter Entities shall cause the group health plan maintained
by them to: (i) waive any waiting periods, evidence of insurability requirements
or preexisting condition limitations, and (ii) honor any deductible, co-payment
and out-of-pocket expenses incurred by the Transferred Employees and their
beneficiaries under the SunSource Entities group health plans preceding such
transfer.
(b) The Parties intend that either prior to Closing or as soon as
administratively feasible thereafter all Employee Benefit Plans (other than
equity-based plans) which provide benefits to Employees of the Kar Entities will
be sponsored and/or maintained exclusively by the Kar Entities. Accordingly, as
part of the Intercompany Transactions and either prior to Closing or as soon as
administratively feasible thereafter, SunSource (and Parent, where applicable)
shall take all action necessary and proper to (i) spin-off that portion of the
SunSource Industrial Services Companies Savings and Investment Plan attributable
to Employees of the Kar Entities into a 401(k) Plan established by the Kar
Entities exclusively for the benefit of the Employees of the Kar Entities, which
such spin-off shall comply with the requirements of Section 414(l) of the Code,
(ii) clone or transfer to the Kar Entities any insurance contracts, other
funding arrangements or benefit plans maintained by Parent which provide
employee welfare benefits to Employees of the Kar Entities, and (iii) spin-off
and transfer to the Kar Entities the liabilities and account balances and any
assets related thereto under the SunSource Inc. Deferred Compensation Plan for
Key Employees attributable to Employees of the Kar Entities.
(c) SunSource and/or Parent shall provide, or cause any administrator
of any Employee Benefit Plan to provide, the Expediter Entities with all
information and data as it may reasonably request in order for the Expediter
Entities to administer the Employee Benefit Plans transferred to such Expediter
Entities under this Section 6.1.
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ARTICLE VII.
TAX MATTERS
Section 7.1 Tax Matters
(a) Access to Tax-Related Information. SunSource and the Partnership
each acknowledge that the other will need access from time to time after the
Closing Date to certain accounting and Tax records and information maintained or
held by SunSource and its Affiliates and Representatives or by the Partnership
and its Affiliates and Representatives, as the case may be, to the extent such
records and information pertain to the Contributed Entities, the Expediter
Assets or the Expediter Business with respect to events occurring prior to the
Closing Date, in the case of SunSource, or following the Closing Date, in the
case of the Partnership. Accordingly, each of SunSource and the Partnership
agree, and agree to cause their respective Affiliates and Representatives, (i)
to use their reasonable best efforts to properly retain and maintain such
records until ninety (90) days after the expiration of the applicable statute of
limitations period, (ii) to allow the other Party and its respective Affiliates
and Representatives, at mutually acceptable times and dates, to inspect, review
and make copies of such records as such other Party may deem reasonably
necessary or appropriate from time to time, such activities to be conducted
during normal business hours and at the expense of the Party conducting such
inspection and review (except to the extent indemnified pursuant to Article IX
of this Agreement), and (iii) to notify the other Party in writing, prior to the
destruction of any Tax records or other information pertaining to the
Contributed Entities or the Expediter Business with respect to Taxes and to
provide such other Party the opportunity to make and retain copies of any such
Tax records or other information.
(b) Filing of Tax Returns. SunSource, at its expense, shall be
responsible for the preparation and filing of any income Tax Return relating to
any Pre-Closing Tax Period, including, without limitation, any amended
consolidated, combined, unitary or other Return for taxable years ending on or
prior to the Closing Date that are required as a result of examination
adjustments made by the Internal Revenue Service or by the applicable state,
local or foreign Taxing Authorities for such taxable years as finally
determined. For those jurisdictions in which separate Returns are filed by the
Contributed Entities, any required amended Returns for taxable years ending on
or prior to the Closing Date resulting from such examination adjustments, as
finally determined, shall be prepared by SunSource, at its expense, and
furnished for signature and filing at least thirty (30) days prior to the due
date for filing such Returns.
(c) Transfer and Other Taxes; Withholding. All transfer, documentary,
sales, use, registration and other similar Taxes (including all applicable real
estate transfer Taxes, but excluding income Taxes) and related fees (including
any penalties, interest and additions to Tax) incurred in connection with this
Agreement and the transactions contemplated hereby shall be borne by the
Partnership, except that any and all such Taxes, including income Taxes, in
connection with the Intercompany Transactions shall be borne solely by
SunSource. The SunSource Entities and the Partnership shall cooperate timely in
making all filings, returns, reports and forms as may be required to comply with
the provisions of all Laws relating to such Taxes. The SunSource Entities shall
deliver to the Partnership at the Closing all necessary forms and certificates
complying with applicable Law, duly executed and acknowledged, certifying that
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the transactions contemplated by this Agreement are exempt from withholding
under the Code (including Section 1445 thereunder) and any provision of foreign,
state or local Law.
(d) Termination of Tax Sharing Agreements. SunSource shall cause the
provisions of any Tax sharing agreement or similar agreement between SunSource
or any of its Affiliates, on the one hand, and the Contributed Entities on the
other hand, to be terminated on or before the Closing Date, without liability on
the part of or recourse to the Contributed Entities.
(e) Filing of SunSource Canada Return. Within five (5) Business Days
following the date hereof, SunSource Canada shall, and SunSource and the other
SunSource Entities shall cause SunSource Canada, to file its Return for the year
ended April 30, 1999 (and for any other prior years where any such Return is
past due and has not yet been filed) with the applicable Tax Authorities in
Canada. Within five (5) Business Days following the date hereof, A&H Bolt shall,
and SunSource and the other SunSource Entities shall cause A&H Bolt to, file any
T-106 forms with the applicable Tax Authorities which were not previously filed
and which would have been required to be filed by applicable Law.
ARTICLE VIII.
CONDITIONS TO CLOSING
Section 8.1 Conditions to Obligations of the SunSource Entities. The
obligations of the SunSource Entities to consummate the transactions
contemplated by this Agreement shall be subject to the satisfaction (or waiver
by the SunSource Entities), at or prior to the Closing, of each of the following
conditions:
(a) Representations and Warranties. All representations and warranties
of the Partnership contained in this Agreement that are qualified by materiality
or Material Adverse Effect shall be true and correct as of the date hereof and
as of the Closing Date as if made on the Closing Date (except for
representations and warranties which by their terms speak as of a specific date,
which need only be true and correct as of such date), and all representations
and warranties of the Partnership contained in this Agreement that are not so
qualified shall be true and correct in all material respects as of the date
hereof and as of the Closing Date as if made as of the Closing Date (except for
representations and warranties which by their terms speak as of a specific date,
which need only be true and correct as of such date).
(b) Performance of Agreements and Covenants. The Partnership shall have
duly performed and complied with in all material respects all of its agreements
and covenants pursuant to this Agreement on or prior to the Closing Date.
(c) No Order. No Action shall be pending or threatened before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation thereof, (iii) affect adversely the right of the Partnership to own
the Contributed Interests and to own and control the Contributed Entities
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following the Closing, or (iv) affect adversely the right or powers of the
Partnership or any of the Expediter Entities to own the Expediter Assets and to
operate the Expediter Business (and no such injunction, judgment, order, decree,
ruling, or charge shall be in effect).
(d) Consents; Regulatory Compliance and Approval. All consents,
approvals and waivers from, registrations and filings with and notices to
Governmental Authorities necessary to permit the consummation of the
transactions contemplated by this Agreement shall have been obtained, unless the
failure to obtain any such consent, approval or waiver or make such registration
or filing or give such notice could not reasonably be expected to have a
Material Adverse Effect.
(e) Financing. The Partnership shall have obtained and received the
proceeds of the Debt Financing and the Glencoe Contribution, and shall have paid
to Parent an amount equal in cash sufficient to satisfy in full of the
Intercompany Indebtedness.
(f) Officer's Certificates. The Partnership shall have delivered to
SunSource a certificate signed by a duly authorized officer of the Partnership
to the effect that each of the conditions specified in Sections 8.1(a) and (b)
of this Agreement is satisfied in all respects, and the Partnership shall have
delivered, or caused to be delivered, to SunSource the Closing Date
Capitalization Certificate.
(g) Ancillary Agreements. The Partnership shall have executed and
delivered each of the Ancillary Agreements to which it is a party.
(h) Legal Opinion. SunSource shall have received from Latham & Watkins
an opinion of counsel addressed to SunSource and dated as of the Closing Date in
form and substance satisfactory to the SunSource with respect to the matters set
forth on Exhibit I attached hereto.
Section 8.2 Conditions to Obligations of the Partnership. The
obligations of the Partnership to consummate the transactions contemplated by
this Agreement shall be subject to the satisfaction (or waiver by the
Partnership in writing), at or prior to the Closing, of each of the following
conditions:
(a) Representations and Warranties. All representations and warranties
of the SunSource Entities contained in this Agreement that are qualified by
materiality or Material Adverse Effect shall be true and correct as of the date
hereof and as of the Closing Date as if made on the Closing Date (except for
representations and warranties which by their terms speak as of a specific date
or time, which need only be true and correct as of such date), and all
representations and warranties of the SunSource Entities contained in this
Agreement that are not so qualified shall be true and correct in all material
respects as of the date hereof and as of the Closing Date as if made as of the
Closing Date (except for representations and warranties which by their terms
speak as of a specific date, which need only be true and correct as of such
date).
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(b) Performance of Agreements and Covenants. The SunSource Entities
shall have duly performed and complied with in all material respects all of
their respective agreements and covenants pursuant to this Agreement on or prior
to the Closing Date.
(c) No Order. No Action shall be pending or threatened before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction or before any arbitrator wherein an unfavorable injunction,
judgment, order, decree, ruling, or charge would (i) prevent consummation of any
of the transactions contemplated by this Agreement, (ii) cause any of the
transactions contemplated by this Agreement to be rescinded following
consummation, (iii) affect adversely the right of the Partnership to own the
Contributed Interests and to own and control the Contributed Entities following
the Closing, or (iv) affect adversely the right or powers of the Partnership or
any of the Expediter Entities to own the Expediter Assets and to operate the
Expediter Business (and no such injunction, judgment, order, decree, ruling, or
charge shall be in effect).
(d) Consents; Regulatory Compliance and Approval. All consents,
approvals and waivers from, registrations and filings with and notices to
Governmental Authorities necessary to permit the consummation of the
transactions contemplated by this Agreement shall have been obtained, unless the
failure to obtain any such consent, approval or waiver or make such registration
or filing or give such notice could not reasonably be expected to have a
Material Adverse Effect, and all consents, approvals and waivers from, or
notices to, as the case may be, required under or otherwise necessary to avoid
any breach, default, violation of any anti-assignment clause, cancellation or
acceleration or triggering of any rights under those Contracts and Permits set
forth on Exhibit J attached hereto with respect to the consummation of the
transactions contemplated hereby or in connection with the corporate
reorganization and restructuring of SunSource and its subsidiaries consummated
in December 1998 (the "1998 Restructuring") or both (as specified on such
Exhibit J) shall have been obtained substantially on the form of consent
provided to, and approved by, the Partnership prior to the date hereof (the
"Required Consents"), without, in any case, any material increase in any
payments thereunder or any other material adverse change or condition to the
granting of such consent or approval.
(e) Intercompany Transactions. The Intercompany Transactions shall have
been duly consummated pursuant to the terms of this Agreement in accordance with
all applicable Laws on terms and in a manner satisfactory to the Partnership.
(f) Ancillary Agreements; Documentation. Each of the SunSource Entities
shall have executed and delivered each of the Ancillary Agreements to which it
is a party. The form and substance of all agreements, certificates, opinions,
instruments and other documents relating to the due authorization and completion
of the transactions contemplated by this Agreement or otherwise required to
effect the transactions contemplated hereby and all corporate and limited
liability company actions and proceedings taken on or prior to the Closing in
connection with the performance by the SunSource Entities of their respective
obligations under this Agreement shall be reasonably satisfactory to the
Partnership.
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(g) Financing. The Partnership shall have obtained and received the
proceeds of the Debt Financing and the Glencoe Contribution.
(h) Payoff of Indebtedness; Release of Liens. The Partnership shall be
satisfied in its sole discretion that any proceeds received by SunSource or any
Affiliate thereof in satisfaction of the Intercompany Indebtedness pursuant to
this Agreement shall have been paid to PNC Bank, National Association (the
"Bank"), as lender and agent for the lenders under that certain Revolving
Credit, Term Loan, Guaranty and Security Agreement, dated as of December 15,
1999 (the "Existing Credit Agreement"), by and among SunSource, Kar Products and
the other Borrowers party thereto, those certain Guarantors signatory thereto as
guarantors (including Parent, A&H Holding, SunSource Canada and A&H Bolt), the
Bank and the other lenders signatory thereto, in partial satisfaction of the
loans and other extensions of credit under and pursuant to the Existing Credit
Agreement, and that the Intercompany Indebtedness has been canceled and retired,
without cost or Liability to, and with a full release of, the Contributed
Entities, by the obligee thereof. In addition, the Partnership shall have
received evidence of such payment from the Bank, as lender and agent for the
lenders under the Existing Credit Agreement, in the form of a payoff letter or
other instrument satisfactory to the Partnership. The Partnership shall have
received releases, in form and substance satisfactory to the Partnership,
effective to (i) release all Encumbrances in favor of the Bank or the other
lenders under the Existing Credit Agreement or any other Person on or relating
to the Contributed Entities, the shares of capital stock of SunSource Canada,
the Kar Interest, the Canada Shares or any of the Expediter Assets, including,
without limitation, UCC termination statements and releases of any and all
mortgages or other liens on any Owned Property or Leased Property, and (ii)
release all Contributed Entities as borrowers, credit parties, guarantors or any
other capacity under the Existing Credit Agreement, without, in any case, any
cost or Liability to the Contributed Entities. In addition to the foregoing, A&H
Bolt shall terminate, or cause to be terminated, A&H Bolt's $2,500,000 line of
credit with Bank of Nova Scotia and all agreements evidencing or in connection
with such line of credit and shall cause to be released any and all liens,
pledges, security interests or other Encumbrances in favor of the Bank of Nova
Scotia with respect thereto, without cost or liability to, and with a full
release of, the Contributed Entities.
(i) Officer's Certificates. Each of the SunSource Entities shall have
delivered to the Partnership a certificate signed by an appropriate officer
thereof to the effect that each of the conditions specified in Sections 8.2(a),
(b), (e) and (g) of this Agreement have been satisfied in all respects, and the
Chief Financial Officer of SunSource shall have delivered to the Partnership the
certificate required to be delivered at the Closing pursuant to Section
2.5(a)(vi) of this Agreement.
(j) Legal Opinions. The Partnership shall have received (i) from
Morgan, Lewis & Bockius LLP, outside counsel to the SunSource Entities, an
opinion of counsel dated as of the Closing Date addressed to Partnership, in
form and substance satisfactory to Partnership with respect to the matters set
forth on Exhibit K-1 attached hereto, and (ii) from Wilson Walker Hochberg
Slopen LLP, outside Canadian counsel to certain SunSource Entities, an opinion
of counsel dated as of the Closing Date addressed to Partnership, in form and
substance satisfactory to the Partnership with respect to the matters set forth
on Exhibit K-2 attached hereto.
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(k) Resignations. The Partnership shall have received the resignations
and releases, effective as of the Closing, of each director, officer and manager
of the Expediter Entities whom the Partnership shall have identified in writing
prior to the Closing.
(l) No Material Adverse Effect. Since the date hereof, there shall not
have occurred or arisen any change, event or circumstance (or series thereof,
whether or not related) that could reasonably be expected to have a Material
Adverse Effect.
(m) Closing Date Adjustment Payments. All payments due and owing the
Partnership pursuant to Section 2.2 of this Agreement shall have been paid.
(n) Employment and Other Agreements. Each of the individuals identified
on Exhibit L-1 attached hereto shall have entered into an employment agreement
in substantially the form attached hereto as Exhibit L-2 with respect to each
such individual, upon terms satisfactory to the Partnership.
(o) Section 116 Certificates. The Tax Compliance Certificates
contemplated by Section 5.3(c) of this Agreement shall have been obtained by A&H
Holding and delivered to the Partnership.
(p) Termination of Intercompany Agreements. The SunSource Entities
shall have terminated those Contracts, transactions and other agreements
required to have been terminated pursuant to Section 5.8 of this Agreement.
(q) Certain Agreements. The agreements contemplated by Section 9.3(e)
of the Partnership Agreement among the Persons holding equity interests in the
Partnership as of the Closing Date shall have been delivered in a form
reasonably satisfactory to the Partnership.
(r) Designated Consent. SunSource shall have obtained the Designated
Consent.
ARTICLE IX.
INDEMNIFICATION
Section 9.1 Survival of Representations, Etc. All of the
representations, warranties, covenants and agreements of the Parties contained
in this Agreement and in any Ancillary Agreement or any other certificate,
instrument or document delivered pursuant hereto shall survive the Closing;
provided, however, that (a) except as provided in subsections (b) through (f)
below, the representations and warranties contained in this Agreement shall
survive for a period of eighteen (18) months following the Closing; (b) the
representations and warranties contained in Section 3.14 (Employees; Employee
Benefit Plans) and Section 3.18 (Taxes) of this Agreement shall survive until
the expiration of the applicable statute of limitations, without giving effect
to any consensual extension of such period, (c) the representations and
warranties contained in Section 3.17 (Environmental Laws) shall survive the
Closing for a period of five (5) years, (c) the representation and warranty
contained in Section 3.6 (Governmental Consents) relating solely to the
Competition Act (Canada) shall survive the Closing for a period of three (3)
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years; (e) the representations and warranties contained in Sections 3.1
(Organization and Qualification), 3.2 (Authority; Enforceability), 3.3
(Capitalization), 3.4 (Intercompany Transactions), 3.7 (Subsidiaries; No Outside
Activities; Assets), 3.15(a)(i) and (c)(i) (Properties), 3.26 (Representations
Regarding SunSource Canada), 4.1 (Organization), 4.2 (Authority), 4.3
(Enforceability), 4.7 (Closing Date Capitalization) and 4.8 (Business of the
Partnership) of this Agreement shall survive in perpetuity with respect to the
matters addressed in such sections; and (f) indemnification under Section
9.2(a)(iii) of this Agreement with respect to an Overlapping Liability shall
survive for a period of eighteen (18) months (other than (i) an Overlapping
Liability relating to Section 3.14 (Employees; Employee Benefit Plans) or
Section 3.18 (Taxes), which shall survive until the expiration of the applicable
statute of limitations, without giving effect to any consensual extension of
such period, and (ii) an Overlapping Liability relating to Section 3.17
(Environmental Laws), which shall survive until the expiration of five (5)
years). The termination of the representations, warranties or indemnities
provided in this Section 9.1 shall not affect the rights of any Party in respect
of any claim with respect to which notice has been given under this Article IX
prior to the expiration of the applicable survival period provided in this
Section 9.1 (or such later period as provided in Section 9.4(c) of this
Agreement).
Section 9.2 Indemnification
(a) Indemnification by SunSource. From and after the Closing, SunSource
shall indemnify, save and hold harmless the Partnership and its Affiliates
(including, following the Closing, the Contributed Entities) and their
respective Representatives and each of their respective Employee Benefit Plans
(and their Representatives) (collectively, the "Partnership Indemnified
Parties") from and against any and all Damages in connection with, arising out
of, resulting from or incident to:
(i) any misrepresentation or breach of warranty in
connection with any of the representations or warranties given or made
by SunSource in this Agreement and in the Ancillary Agreements or any
other agreement, certificate, instrument or other document executed and
delivered by any of the SunSource Entities pursuant hereto (without
regard to any qualification thereof as to materiality or Material
Adverse Effect);
(ii) any breach of any covenant or agreement by (A)
SunSource or Parent, or (B) any of the Contributed Entities (but only
to the extent breached prior to or at Closing), contained in this
Agreement or in the Ancillary Agreements or any other agreement,
certificate, instrument or other document executed and delivered by the
SunSource Entities pursuant hereto (without regard to any qualification
thereof as to materiality or Material Adverse Effect);
(iii) any of the Retained Liabilities;
(iv) the failure of any of the Contributed Entities or
their predecessors to be qualified to do business in any jurisdiction
in which such qualification is or was at any time prior to the Closing
required under applicable Law;
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(v) the 1998 Restructuring, including, without limitation,
any (A) violation or breach of any provision of the Organizational
Documents of SunSource or any of its Affiliates as in effect at the
time of the 1998 Restructuring, (B) violation of any Law, Governmental
Order or Permit applicable to SunSource or any of its Affiliates or any
of their respective assets or properties in connection with the 1998
Restructuring, or (C) breach of, default under, failure to obtain any
consent under, or termination, amendment or acceleration of, or
creation of any Encumbrance on any of the assets or properties of
SunSource or its Affiliates pursuant to, any note, bond, mortgage or
indenture, Contract, agreement, lease, license, permit or franchise in
effect at the time of the 1998 Restructuring to which SunSource or any
of its Affiliates (or any predecessor thereto) is or was a party or by
which any of its assets or properties are or were bound or affected, in
the case of any of clauses (A), (B) and/or (C), resulting from, in
connection with or with respect to the 1998 Restructuring;
(vi) (A) any environmental Liabilities or conditions of
any kind relating to or in connection with the Windsor Property or the
ownership or operation thereof by A&H Bolt, including, without
limitation, any such Liabilities or conditions arising prior to the
ownership or operation thereof by A&H Bolt, any release of Hazardous
Materials to, by or from the Windsor Property or any of the matters
described or reported in that certain Phase I Geo Environmental Site
Assessment, dated January 7, 2000, relating to the Windsor Property
prepared by C.T. Oil & Materials Engineering, Inc. and the revised
version thereof dated January 25, 2000, or (B) the existence of or any
remediation or removal with respect to asbestos in, on or related to
the Leased Property and the buildings, facilities and other
improvements thereon in Itasca, Illinois to the extent such Damages
exceed $30,000 (provided, that, notwithstanding the foregoing
provisions of this Section 9.2(a)(vi), to the extent remediation is
conducted by the Partnership with respect to such property, Damages for
conducting such remediation shall be limited to the greater of (x)
those Damages resulting from remediation required by Environmental
Laws, or (y) those Damages resulting from remediation consistent with
the operation of the applicable property as an industrial site;
(vii) the ownership of Fauver by SunSource Canada and the
operation and business of Fauver;
(viii) the failure to obtain any of the Required Consents
(regardless of any waiver of the condition to Closing set forth in
Section 8.2(d) with respect to such Required Consents), or the failure
to obtain any consent, approval and waiver from, or notice to, as the
case may be, required under or otherwise necessary to avoid any breach,
default, violation of any anti-assignment clause, cancellation or
acceleration or triggering of any rights under (A) that certain License
Agreement dated March 23, 1995 between Computer Associates
International, Inc. and Kar Products, and (B) that certain Lease
Agreement dated July 1, 1982 between Dr. Gunther Vogelsan, trustee, and
Kar Products, as amended; and
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(ix) the Intercompany Transactions, other than with
respect to any failure to obtain a consent under any Contract
(excluding those Contracts as to which a Required Consent is to be
obtained by the SunSource Entities and regardless of any waiver of the
condition to Closing set forth in Section 8.2(d) with respect to such
Required Consents).
(b) Indemnification by the Partnership. From and after the Closing, the
Partnership shall indemnify, save and hold harmless SunSource and its Affiliates
and their respective Representatives and each of their respective Employee
Benefit Plans (and their Representatives) from and against and all Damages
arising out of, resulting from or incident to:
(i) any misrepresentation or breach of warranty in
connection with any of the representations or warranties given or made
by the Partnership in this Agreement and in the Ancillary Agreements or
any other agreement, certificate, instrument or other document executed
and delivered by the Partnership pursuant hereto (without regard to any
qualification thereof as to materiality or Material Adverse Effect);
(ii) any breach of any covenant or agreement by the
Partnership contained in this Agreement and in the Ancillary Agreements
or any other agreement, certificate, instrument or other document
executed and delivered by the Partnership pursuant hereto (without
regard to any qualification thereof as to materiality or Material
Adverse Effect);
(iii) the ownership, use, operation or management of the
business or assets or the Contributed Entities after the Closing Date
(except to the extent such matter or the circumstances, event or
conditions out of which such matter arose is subject to indemnification
(disregarding any limitations set forth in this Agreement) under
Section 9.2(a) of this Agreement); or
(iv) the Assumed Liabilities (except to the extent such
matter or the circumstances, event or conditions out of which such
matter arose relates to the Assumed Liabilities specified in clauses
(iii) or (iv) of the definition thereof and is subject to
indemnification (disregarding any limitations set forth in this
Agreement) under Section 9.2(a)(i) of this Agreement).
(c) Notice of Claims; Defense of Claims. Any Party seeking
indemnification under this Agreement (the "Indemnified Party") shall give the
Party from whom indemnification is being sought (the "Indemnifying Party")
notice of any claim, Action or matter which such Indemnified Party has
determined has given or could give rise to Damages for which indemnification may
be sought under this Section 9.2 or would otherwise give rise to a right of
indemnification under this Agreement (a "Claim"), as soon as practicable after
the Party seeking indemnification becomes aware of such Claim; provided,
however, that the failure to provide such notice shall not relieve the
Indemnifying Party from any of its obligations under this Section 9.2 except to
the extent the Indemnifying Party is materially prejudiced by such failure. Upon
receipt of such notice, the Indemnifying Party shall be entitled at its cost,
risk and expense to assume and control the defense and investigation of such
Claim, and to employ and engage counsel of its choice, if the Indemnifying Party
gives notice of its intention to do so to the Indemnified Party within thirty
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(30) days of the receipt of such notice; provided, however, that if there exists
a material conflict of interest (other than one that is of a monetary nature) or
if the Indemnified Party has been advised by counsel that there may be one or
more legal defenses available to it that are different from or additional to
those available to the Indemnifying Party, which, in either case, would make it
inappropriate for the same counsel to represent both the Indemnified Party and
the Indemnifying Party, then the Indemnified Party shall be entitled to retain
its own counsel, at the expense of the Indemnifying Party (but the Indemnifying
Party shall not be obligated to pay the reasonable fees and expenses of more
than one separate counsel for all Indemnified Parties, taken together). In the
event the Indemnifying Party exercises the right to undertake any such defense
against any such Claim as provided in this Section 9.2(c), (i) the Indemnified
Party may, at its own cost, participate in the investigation, trial and defense
of such Claim and any appeal arising therefrom, and (ii) the Indemnified Party
agrees to cooperate with the Indemnifying Party in such defense and make
available to the Indemnifying Party, all witnesses, records, materials and
information in the Indemnified Party's possession or under the Indemnified
Party's control relating thereto as may be reasonably required by the
Indemnifying Party. In the event the Indemnifying Party fails to assume the
defense of such Claim within thirty (30) days after receipt of notice thereof,
(i) the Indemnified Party against which such Claim has been asserted shall have
the right to undertake the defense, compromise or settlement of such Claim on
behalf of, at the expense of and for the account and risk of the Indemnifying
Party, and (ii) the Indemnifying Party agrees to cooperate with the Indemnified
Party in such defense and make available to the Indemnified Party, all
witnesses, records, materials and information in the Indemnifying Party's
possession or under the Indemnifying Party's control relating thereto as may be
reasonably required by the Indemnified Party.
(d) Settlement of Claims. The Indemnifying Party shall not, without the
written consent of the Indemnified Party (which consent shall not be
unreasonably withheld), (i) settle or compromise any Claim or consent to the
entry of any judgment which does not include as an unconditional term thereof
the delivery by the claimant or plaintiff to the Indemnified Party of a written
release from all liability in respect of such Claim of all Indemnified Parties
affected by such Claim or (ii) settle or compromise any Claim if the settlement
imposes equitable remedies or material obligations on the Indemnified Party
other than financial obligations for which such Indemnified Party will be
indemnified hereunder. No Claim which is being defended in good faith by the
Indemnifying Party in accordance with the terms of this Agreement shall be
settled or compromised by the Indemnified Party without the written consent of
the Indemnifying Party (which consent shall not be unreasonably withheld).
(e) Reduction of Damages. To the extent any Damages of an Indemnified
Party are reduced by receipt of payment (i) under insurance policies which are
not subject to retroactive adjustment or other reimbursement to the insurer in
respect of such payment, or (ii) from third parties not affiliated with the
Indemnified Party, such payments (net of the expenses of the recovery thereof)
(such net payment, a "Reimbursement") shall be credited against any such
Damages; provided, however, (x) the pendency of such payments shall not delay or
reduce the obligation of the Indemnifying Party to make payment to the
Indemnified Party in respect of such Damages, and (y) the Indemnified Party
shall have no obligation, hereunder or otherwise, to pursue payment under or
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from any insurer or third party in respect of such Damages. If any Reimbursement
is obtained subsequent to payment by an Indemnifying Party in respect of any
Damages, such Reimbursement shall be promptly paid over to the Indemnifying
Party.
(f) Indemnification With Respect to Tax Matters. Notwithstanding
anything to the contrary in this Section 9.2 and in Section 9.3 of this
Agreement, the respective indemnification obligations of the Parties hereunder
with respect to Tax matters (including any breach of the representations and
warranties contained in Section 3.18 (Taxes) of this Agreement) shall be
governed by Section 9.4 of this Agreement.
Section 9.3 Limits on Indemnification
(a) No amount shall be payable by any Indemnifying Party pursuant to
(i) Sections 9.2(a)(i) (other than arising under Section 3.26) or 9.2(a)(iii)
(but only to the extent pertaining to an Overlapping Liability) of this
Agreement, or (ii) Section 9.2(b)(i) of this Agreement, unless the aggregate
amount of Damages subject to indemnification under clause (i) or (ii) above, as
the case may be, exceeds $750,000 (but then only those Damages in excess of such
amount shall be payable); provided, however, that the foregoing shall not apply
to Damages arising out of, resulting from or incident to Liabilities with
respect to the matters set forth in Section 9.4 of this Agreement, other than as
set forth in clause (A) below. SunSource shall be entitled to the following
credits against amounts payable for Damages otherwise subject to indemnification
under Section 9.2(a) (but any such Damages shall, without applying such credit,
count toward the $750,000 threshold set forth in the preceding sentence): (A)
with respect to Taxes (other than income Taxes), an aggregate credit in the
amount of $50,000, (B) with respect to a misrepresentation under Section 3.21 of
this Agreement, an aggregate credit in an amount equal to the amount, if any, by
which the Final Closing Net Working Capital exceeds the Minimum Net Working
Capital, and (C) with respect to Damages arising out of returns of goods or
products sold, or rebates or refunds with respect to goods or products sold, a
credit equal to the amount reserved for such returns, rebates or refunds on the
Year-End Balance Sheet. No Indemnifying Party shall be liable for Damages
pursuant to this Article IX in excess of $52,500,000 in the aggregate; provided,
however, that the foregoing shall not apply to (i) Damages arising out of,
resulting from or incident to Liabilities with respect to the matters set forth
in Section 9.4 of this Agreement, or (ii) Damages indemnifiable under Section
9.2(a)(vi)(A) of this Agreement.
(b) None of the limitations set forth in Section 9.3(a) of this
Agreement or the limitations on survival set forth in Section 9.1 of this
Agreement shall apply in the event any such Damages arise out of an intentional
misrepresentation or fraud by any Party or any Affiliate of such Party.
(c) If any adjustment is finally determined and made pursuant to and in
the manner set forth in Section 2.4 of this Agreement, upon the payment to the
applicable Party of any amounts so adjusted, the Parties hereto shall thereafter
waive any claim for indemnification under this Article IX relating to the Final
Closing Date Balance Sheet and the calculation of Final Closing Net Working
Capital and Final Closing Net Tangible Asset Value.
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(d) With respect to any Damages indemnifiable pursuant to Section
9.2(a)(v) of this Agreement, the Parties agree that the Damages associated with
the loss of the benefits of any Contract shall be limited to the benefits which
would have inured to the Partnership or its Affiliates through the later of (i)
the specified expiration of the term of such Contract (including any automatic
extensions), and (ii) December 31, 2001.
(e) With respect to any Damages arising out of any event, circumstance
or fact first disclosed pursuant to Section 5.4 of this Agreement (a "Subsequent
Disclosure"), if such Subsequent Disclosure relates to any event, condition or
circumstance which either (i) first arose after the date of this Agreement, or
(ii) is the result of a material adverse change in or related to an event,
circumstance or fact previously disclosed, then if the Closing shall have
occurred (and any condition to Closing relating thereto shall have been waived),
the amount of Damages indemnifiable pursuant to Sections 9.2(a)(i) (other than
arising under Section 3.26) or 9.2(b)(i) of this Agreement with respect to the
matter which is the subject of such Subsequent Disclosures shall be limited to
$500,000 in the aggregate.
(f) Except for any equitable relief, including, without limitation,
injunctive relief or specific performance, to which any Party hereto may be
entitled, the indemnification provided in this Article IX shall be the sole
remedy of any Party with respect to this Agreement, except as may be provided in
Section 9.5(a) of this Agreement and other than with respect to any Damages
incurred by an Indemnified Party as a result of fraud or an intentional breach
of this Agreement on the part of any Indemnifying Party or its Affiliates.
Section 9.4 Tax Indemnification
(a) Indemnification by SunSource. SunSource shall indemnify and hold
harmless the Partnership Indemnified Parties from any and all Damages (i) with
respect to Taxes of the SunSource Entities for all Pre-Closing Tax Periods, (ii)
arising out of any Tax sharing agreements among any of the SunSource Entities or
to which the Contributed Entities are a party, or (iii) in connection with,
arising out of, resulting from or incident to any breach by SunSource or any of
its Affiliates of any covenant contained in Article VII of this Agreement, or of
Section 3.18 (Taxes) of this Agreement (without regard to any qualification
contained therein as to materiality or a Material Adverse Effect), except to the
extent otherwise indemnified pursuant to clause (i) above. Estimated Taxes paid
by or on behalf of the Contributed Entities on or prior to the Closing Date
shall be credited to Taxes with respect to the Pre-Closing Tax Period.
(b) Notice of Tax Claims; Defense of Tax Claims. If a claim (a "Tax
Claim") shall be made by any Taxing Authority, which, if successful, could
result in a party or any of its Affiliates or Representatives being entitled to
indemnification pursuant to this Section 9.4 (a "Tax Indemnified Party"), such
Tax Indemnified Party shall promptly and in any event no more than thirty (30)
days following such party's notice of such claim, give written notice to the
other party (the "Tax Indemnifying Party") of such Tax Claim; provided, however,
the failure to give such notice shall only relieve the Tax Indemnifying Party
from its indemnification obligations hereunder to the extent it is actually
prejudiced by such failure. The Parties and each of their respective Affiliates
shall reasonably cooperate with each other in contesting any Tax Claim.
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Such cooperation shall include the retention and, upon the request of the party
or parties controlling the proceedings relating to such Tax Claim, the provision
to such party or parties of records and information which are reasonably
relevant to such Tax Claim, and making employees available on a mutually
convenient basis to provide additional information or explanation of any
material provided hereunder or to testify at proceedings relating to such Tax
Claim. The provisions of Section 9.2 and Section 9.3 of this Agreement, to the
extent not inconsistent with the provisions of this Section 9.4(b), shall be
applicable to any Tax indemnification provided under this Section 9.4.
(c) Survival of Tax Indemnification. Notwithstanding anything to the
contrary in this Agreement, the ability of any Tax Indemnified Party to make any
claim for indemnification pursuant to this Section 9.4 relating to Taxes shall
survive the Closing until ninety (90) days after the expiration of the
applicable statute of limitations, without giving effect to any consensual
extension of such period.
Section 9.5 Security; Partnership's Right to Withhold and Set-Off
(a) As of the Closing Date, the Contributors shall pledge to the
Partnership, as security for the indemnification obligations of SunSource
pursuant to this Article IX, the Parent Units and the Holding Units, in each
case free and clear of all Encumbrances (other than any senior liens in favor of
the Bank) pursuant to a Unit Pledge Agreement in substantially the form attached
hereto as Exhibit N (the "Unit Pledge Agreement").
(b) Notwithstanding anything to the contrary in this Agreement, and
regardless of other means of obtaining payment, the Partnership is hereby
authorized at any time and from time to time (upon identification of any
contingent or unmatured liability for which the Partnership is or may be
entitled to indemnification under this Article IX), to withhold and set-off and
apply against any amounts owing or that may be owed to any of the SunSource
Entities by the Partnership under this Agreement, provided in each case that
such amount has been determined to be due by written agreement of the Parties or
the final judgment of a Governmental Authority. The rights of the Partnership
under this Section 9.5 shall include, without limitation, the right to withhold
and retain any distributions to any partner of the Partnership which is an
Affiliate of SunSource to the extent provided under the Partnership Agreement.
Any such withholding, setoff, retention or application by the Partnership shall
not constitute a default under, or give any right of dissolution, amendment or
other similar rights under the Partnership Agreement.
Section 9.6 Waiver by the SunSource Entities. Each of the SunSource
Entities hereby waives, and acknowledges and agrees that it shall not have and
shall not exercise or assert (or attempt to exercise or assert), any right of
contribution, right of indemnity or other right or remedy against any of the
Contributed Entities or the Partnership in connection with any indemnification
obligation or any other liability to which such SunSource Entity may become
subject under or in connection with this Agreement or the ownership of the
Contributed Entities or the Expediter Assets or the operation of the Expediter
Business prior to the Closing.
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ARTICLE X.
TERMINATION AND WAIVER
Section 10.1 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) by the mutual written consent of SunSource and the Partnership;
(b) by either SunSource or the Partnership upon written notice if the
Closing shall not have occurred on or prior to March 15, 2000; provided,
however, that the right to terminate this Agreement pursuant to this Section
10.1(b) shall not be available to any Party whose failure to fulfill any
obligation under this Agreement shall have been the cause of, or shall have
resulted in, the failure of the Closing to occur on or prior to such date;
(c) by either SunSource or the Partnership in the event that a court of
competent jurisdiction or other Governmental Authority shall have issued a final
order, decree or ruling (other than a temporary restraining order), or taken any
other action, having the effect of permanently restraining, enjoining or
otherwise prohibiting the consummation of the transactions contemplated by this
Agreement, and all appeals with respect to such order, decree, ruling or action
have been exhausted or the time for appeal thereof shall have expired; provided,
however, that the right to terminate this Agreement under this Section 10.1(c)
shall not be available to any Party who shall not have complied with its
obligations under Section 5.3 of this Agreement;
(d) by SunSource upon written notice in the event of a material breach
of any representation or warranty of the Partnership contained in this Agreement
or any covenant or agreement to be performed or complied with by the Partnership
pursuant to the terms of this Agreement, which breach (i) has continued without
cure for a period of thirty (30) days following notice thereof by SunSource to
the Partnership and (ii) would result in a condition to Closing set forth in
Section 8.1 of this Agreement not being satisfied (which condition has not been
waived by SunSource in writing); or
(e) by the Partnership upon written notice in the event of a material
breach of any representation or warranty of the SunSource Entities contained in
this Agreement or any covenant or agreement to be performed or complied with by
the SunSource Entities pursuant to the terms of this Agreement, which breach (i)
has continued without cure for a period of thirty (30) days following notice
thereof by the Partnership to SunSource and (ii) would result in a condition to
Closing set forth in Section 8.2 of this Agreement not being satisfied (which
condition has not been waived by the Partnership in writing).
Section 10.2 Effect of Termination. In the event of any termination of
this Agreement in accordance with Section 10.1 of this Agreement, this Agreement
shall forthwith become void and of no further force or effect and there shall be
no liability on the part of any Party hereto to any other Party, except that
nothing herein shall relieve any Party hereto from liability for any willful
breach of this Agreement occurring prior to any such termination. Upon any
termination of this Agreement, each Party hereto shall promptly redeliver all
documents, work papers and other materials of any other Party relating to the
transactions contemplated hereby, to the Party furnishing the same.
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ARTICLE XI.
GENERAL PROVISIONS
Section 11.1 Expenses. Except as otherwise specified in this Agreement
or in the Letter Agreement, the Partnership shall be solely responsible for all
costs and expenses (including, without limitation, fees and disbursements of
counsel, financial advisors, accountants and other Representatives and
commitment and other fees and expenses relating to the Debt Financing), incurred
in connection with this Agreement, the Ancillary Agreements and all other
agreements, instruments and other documents contemplated hereby and the
consummation of the transactions contemplated hereby and thereby (collectively,
"Transaction Expenses").
Section 11.2 Notices. Any notices or other communications required or
permitted under, or otherwise in connection with, this Agreement or the
Ancillary Agreements shall be in writing and shall be deemed to have been duly
given when delivered in person or upon confirmation of receipt when transmitted
by facsimile transmission (but only if followed by transmittal by national
overnight courier or hand for delivery on the next business day) or on receipt
after dispatch by registered or certified mail, postage prepaid, addressed, or
on the next business day if transmitted by national overnight courier, in each
case as follows:
(a) if to any of the SunSource Entities, to:
SunSource Inc.
One Logan Square, Suite 3000
Philadelphia, Pennsylvania 19103
Telecopy: (215) 282-1290
Attention: Joseph M. Corvino
with a copy to (but not as required notice hereunder):
Morgan Lewis & Bockius
1701 Market Street
Philadelphia, Pennsylvania 10017
Telecopy: (215) 963-4751
Attention: Thomas J. Sharbaugh, Esq.
(b) if to the Partnership, to:
GC-SUN Holdings, L.P.
c/o Glencoe Capital, L.L.C.
190 S. LaSalle Street, Suite 2330
Chicago, Illinois 60603
Telecopy: (312) 795-0455
Attention: Ronald D. Wray
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with a copy to (but not as required notice hereunder):
Latham & Watkins
233 S. Wacker Drive
Sears Tower, Suite 5800
Chicago, Illinois 60606
Telecopy: (312) 993-9767
Attention: Mark D. Gerstein, Esq.
or such other address as the person to whom notice is to be given has furnished
in writing to the other parties. A notice of change in address shall not be
deemed to have been given until received by the addressee.
Section 11.3 Publicity. Each of the SunSource Entities and the
Partnership agree that, from the date hereof through the Closing Date, no public
release or announcement concerning the transactions contemplated hereby shall be
issued or made by either Party without the prior written consent of the other
Party (which consent shall not be unreasonably withheld), except as such release
or announcement may be advisable or required by Law or the rules or regulations
of any United States or foreign securities exchange on which such Party's
securities are listed, in which case the Party required to make the release or
announcement shall use all reasonable efforts to consult with the other Parties
and shall allow the other Party reasonable time to comment on such release or
announcement in advance or such issuance. Notwithstanding the foregoing, the
SunSource Entities and the Partnership shall cooperate to prepare press releases
to be issued at the time of the execution of this Agreement by the Parties
hereto and on the Closing Date. The SunSource Entities and the Partnership agree
to keep the terms of this Agreement confidential, except to the extent required
by applicable Law or for financial reporting purposes and except that the
Parties may disclose the terms hereof to (a) their respective Affiliates and
Representatives as necessary in connection with the ordinary conduct of their
respective businesses (so long as such Affiliates and Representatives agree to
keep the terms of this Agreement confidential), (b) the lenders providing the
Debt Financing, and (c) lenders providing financing to SunSource or its
Affiliates.
Section 11.4 Headings; Table of Contents. The descriptive headings
contained in this Agreement and table of contents of this Agreement are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 11.5 Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any Law or
public policy, all other terms and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
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original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
Section 11.6 Entire Agreement. This Agreement (including all schedules,
exhibits, documents, and materials hereunder referred to), the Letter Agreement
and the Ancillary Agreements constitute the entire agreement of the parties
hereto with respect to the subject matter hereof and supersede all prior
agreements and undertakings, both written and oral, among the parties hereto
with respect to the subject matter hereof.
Section 11.7 Assignment. This Agreement may not be assigned (by
operation of law or otherwise) by the SunSource Entities without the prior
written consent of the Partnership, which consent may be granted or withheld in
its reasonable discretion, except for an assignment by operation of law in
connection with the Kar Merger. This Agreement may not be assigned (by operation
of law or otherwise) by the Partnership without the prior written consent of
SunSource, which consent may be granted or withheld in its sole discretion,
except that the Partnership may, without the prior written consent of any
SunSource Entity, transfer or assign this Agreement by operation of law or
otherwise to any wholly-owned Affiliate of the Partnership, provided the
Partnership remains bound by its obligations under this Agreement.
Notwithstanding anything in this Agreement, including, without limitation, this
Section 11.7, (a) the Partnership may, without the prior consent of any Person,
collaterally assign any or all of its rights under this Agreement to the
lenders, or agents therefor, providing the Debt Financing (and any refinancings
or replacements in whole or in part thereof), and (b) any of the SunSource
Entities may, without the prior consent of any Person, collaterally assign any
or all of its rights under this Agreement to the Bank pursuant to the Existing
Credit Agreement (and any refinancings or replacements in whole or in part
thereof). Any attempted assignment in violation of this Section 11.7 shall be
null and void.
Section 11.8 No Third Party Beneficiaries. This Agreement shall be
binding upon and inure solely to the benefit of the Parties hereto and their
permitted assigns and nothing herein, express or implied, is intended to or
shall confer upon any other Person any legal or equitable right, benefit or
remedy of any nature whatsoever under or by reason of this Agreement.
Section 11.9 Amendment. This Agreement may not be amended except by an
instrument in writing signed by the Parties hereto.
Section 11.10 Waiver. Any Party to this Agreement may (a) extend the
time for the performance of any of the obligations or other acts of any other
Party, (b) waive any inaccuracies in the representations and warranties of
another Party contained herein or in any document delivered by another Party
pursuant hereto, or (c) waive compliance with any of the covenants, agreements
or conditions of another Party contained herein. Any such extension or waiver
shall be valid only if set forth in an instrument in writing signed by the Party
to be bound thereby. Any waiver of any term or condition shall not be construed
as a waiver of any subsequent breach or a subsequent waiver of the same term or
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condition, or a waiver of any other term or condition, of this Agreement. The
failure of any Party to assert any of its rights hereunder shall not constitute
a waiver of any of such rights.
Section 11.11 GOVERNING LAW; WAIVER OF JURY TRIAL. THIS AGREEMENT SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK, WITHOUT REGARD TO ANY CONFLICTS OF LAWS. ALL ACTIONS AND PROCEEDINGS
ARISING OUT OF OR RELATING TO THIS AGREEMENT SHALL BE HEARD AND DETERMINED IN
ANY FEDERAL COURT SITTING IN THE BOROUGH OF MANHATTAN, UNLESS THERE IS NO
FEDERAL COURT JURISDICTION, IN WHICH CASE THE ACTION OR PROCEEDING SHALL BE
HEARD AND DETERMINED IN ANY STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, AND
THE PARTIES HERETO HEREBY IRREVOCABLY SUBMIT TO THE EXCLUSIVE JURISDICTION OF
SUCH COURTS IN ANY SUCH ACTION OR PROCEEDING AND IRREVOCABLY WAIVE THE DEFENSE
OF AN INCONVENIENT FORUM WITH RESPECT THERETO. THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVE THEIR RESPECTIVE RIGHTS TO TRIAL BY JURY OF ANY CAUSE OF
ACTION, CLAIM, COUNTERCLAIM OR CROSS-COMPLAINT IN ANY ACTION OR OTHER PROCEEDING
BROUGHT BY ANY PARTY HERETO AGAINST ANY OTHER PARTY OR PARTIES HERETO WITH
RESPECT TO ANY MATTER ARISING OUT OF, OR IN ANY WAY CONNECTED WITH OR RELATED
TO, THIS AGREEMENT OR ANY PORTION THEREOF, WHETHER BASED UPON CONTRACTUAL,
STATUTORY, TORTIOUS OR OTHER THEORIES OF LIABILITY. EACH PARTY IRREVOCABLY
CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING
BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PARTY AT ITS ADDRESS FOR NOTICE
UNDER SECTION 11.2 OF THIS AGREEMENT. NOTHING IN THIS SECTION 11.11 SHALL AFFECT
THE RIGHT OF ANY PARTY HERETO TO SERVE LEGAL PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW. THE CONSENTS TO JURISDICTION SET FORTH IN THIS SECTION 11.11
SHALL NOT CONSTITUTE GENERAL CONSENTS TO SERVICE OF PROCESS IN THE VENUES
SPECIFIED ABOVE AND SHALL HAVE NO EFFECT FOR ANY PURPOSE EXCEPT AS PROVIDED IN
THIS SECTION 11.11 AND SHALL NOT BE DEEMED TO CONFER RIGHTS ON ANY PERSON OTHER
THAN THE PARTIES HERETO.
Section 11.12 Specific Performance. Each of the Parties hereto
acknowledges and agrees that the other Parties hereto would be damaged
irreparably in the event any of the provisions of this Agreement are not
performed in accordance with their specific terms or otherwise are breached.
Accordingly, each of the Parties agrees that the other Parties shall be entitled
to an injunction or injunctions to prevent breaches of the provisions of this
Agreement and to specifically enforce this Agreement and the terms and
provisions hereof in any action instituted in any court having jurisdiction over
the Parties and the matter (subject to the provisions set forth in Section 11.11
of this Agreement), in addition to any other remedy to which they may be
entitled, at law or in equity.
Section 11.13 Disclosure Schedule; Effect of Investigation. Nothing in
the Disclosure Schedule shall be deemed adequate to disclose an exception to a
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representation or warranty made herein, unless, subject to the following two
sentences, such exception is identified in the applicable Section of the
Disclosure Schedule and the nature of such exception is reasonably apparent from
such disclosure. The Disclosure Schedule shall be arranged in numbered schedules
corresponding to the Section and subsections contained in Article III of this
Agreement and shall be complete with cross-references where and as appropriate.
Any information, item or other disclosure set forth in any section, schedule or
other portion of the Disclosure Schedule shall be deemed to have been set forth
in all other applicable portions hereof, if the relevance of such disclosure to
such other portion is reasonably apparent from the facts specified in such
disclosure. Subject to the limitation set forth in Section 9.3(e) of this
Agreement (and to the extent applicable), (a) the right to indemnification,
payment of Damages or other remedy based on any of the representations,
warranties, covenants and agreements herein will not be affected by any
investigation conducted with respect to, or any Knowledge acquired (or capable
of being acquired) at any time, whether before or after the execution and
delivery of this Agreement or the Closing Date, with respect to the accuracy or
inaccuracy of or compliance with, any such representation, warranty, covenant,
or obligation, and (b) the waiver of any condition based on the accuracy of any
representation or warranty, or on the performance of or compliance with any
covenant or agreement, will not affect the right to indemnification, payment of
Damages, or other remedy based on such representations, warranties, covenants
and agreements.
Section 11.14 Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
[Signature page follows]
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
GC-SUN HOLDINGS, L.P.
By: GC-SUN G.P., Inc., its general partner
By: /s/ Ronald D. Wray
-----------------------------------
Name: Ronald D. Wray
Title: President
SUNSOURCE INC.
By: /s/ Joseph M. Corvino
-----------------------------------------
Name: Joseph M. Corvino
Title: Vice President-Finance
SUNSOURCE INDUSTRIAL SERVICES COMPANY, INC.
By: /s/ Joseph M. Corvino
-----------------------------------------
Name: Joseph M. Corvino
Title: Secretary
KAR PRODUCTS INC.
By: /s/ Joseph M. Corvino
-----------------------------------------
Name: Joseph M. Corvino
Title: Secretary
<PAGE>
A&H HOLDING COMPANY, INC.
By: /s/ Joseph M. Corvino
-----------------------------------------
Name: Joseph M. Corvino
Title: Vice President-Finance
SUNSOURCE CANADA INVESTMENT COMPANY
By: /s/ Joseph M. Corvino
-----------------------------------------
Name: Joseph M. Corvino
Title: President
A. & H. BOLT & NUT COMPANY LIMITED
By: /s/ Joseph M. Corvino
-----------------------------------------
Name: Joseph M. Corvino
Title: Assistant Secretary
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION> Page
<S> <C>
ARTICLE I. DEFINITIONS............................................................................................2
Section 1.1 Certain Defined Terms.................................................................2
Section 1.2 Other Defined Terms..................................................................11
Section 1.3 Other Interpretive Provisions........................................................13
ARTICLE II. CONTRIBUTIONS TO THE PARTNERSHIP.....................................................................13
Section 2.1 Contributions; Issuance of Units.....................................................13
Section 2.2 Closing Date Net Working Capital Adjustment..........................................14
Section 2.3 Post-Closing Adjustments.............................................................14
Section 2.4 Closing..............................................................................17
Section 2.5 Closing Deliveries...................................................................17
Section 2.6 Adjustment to Intercompany Indebtedness..............................................18
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF SUNSOURCE.........................................................19
Section 3.1 Organization and Qualification.......................................................19
Section 3.2 Authority; Enforceability............................................................19
Section 3.3 Capitalization.......................................................................20
Section 3.4 Intercompany Transactions............................................................21
Section 3.5 No Conflict or Violation.............................................................21
Section 3.6 Governmental Consents................................................................22
Section 3.7 Subsidiaries; No Outside Activities; Assets..........................................22
Section 3.8 Financial Information................................................................22
Section 3.9 No Undisclosed Liabilities...........................................................23
Section 3.10 Absence of Certain Changes or Events.................................................23
Section 3.11 Contracts............................................................................25
Section 3.12 Compliance with Law..................................................................27
Section 3.13 Litigation...........................................................................28
Section 3.14 Employees; Employee Benefit Plans....................................................28
Section 3.15 Properties...........................................................................32
Section 3.16 Intellectual Property................................................................35
Section 3.17 Environmental Laws...................................................................37
Section 3.18 Taxes................................................................................38
Section 3.19 Insurance............................................................................40
Section 3.20 Brokers..............................................................................41
Section 3.21 Notes and Accounts Receivable; Minimum Cash..........................................41
Section 3.22 Americans With Disabilities Act Compliance...........................................41
Section 3.23 Bank Accounts........................................................................42
Section 3.24 Inventory............................................................................42
Section 3.25 Intercompany and Affiliate Relationships.............................................42
Section 3.26 Representations Regarding SunSource Canada...........................................42
</TABLE>
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<TABLE>
<CAPTION>
<S> <C>
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF the Partnership....................................................42
Section 4.1 Organization.........................................................................42
Section 4.2 Authority............................................................................42
Section 4.3 Enforceability.......................................................................42
Section 4.4 No Conflict or Violation.............................................................43
Section 4.5 Governmental Consents................................................................43
Section 4.6 Issuance of Interest.................................................................43
Section 4.7 Capitalization of the Partnership....................................................43
Section 4.8 Business of the Partnership..........................................................44
Section 4.9 Brokers..............................................................................44
ARTICLE V. ADDITIONAL AGREEMENTS.................................................................................44
Section 5.1 Conduct of Business Prior to the Closing.............................................44
Section 5.2 Access to Information................................................................46
Section 5.3 Regulatory and Other Authorizations; Notices and Consents............................47
Section 5.4 Notice of Developments...............................................................48
Section 5.5 Insurance; Risk of Loss..............................................................48
Section 5.6 Consummation of Intercompany Transactions............................................50
Section 5.7 Domain Names; Internet Sites.........................................................50
Section 5.8 Intercompany Accounts and Agreements.................................................50
Section 5.9 Further Assurances; Cooperation......................................................50
Section 5.10 Accounts.............................................................................51
Section 5.11 Transition Cooperation; Books and Records............................................51
Section 5.12 No Solicitation......................................................................52
Section 5.13 Covenant Not to Compete..............................................................53
Section 5.14 Tax Status of Kar LLC................................................................55
Section 5.15 Year 2000 Compliance.................................................................55
ARTICLE VI. EMPLOYEE MATTERS.....................................................................................56
Section 6.1 Employees............................................................................56
ARTICLE VII. TAX MATTERS.........................................................................................57
Section 7.1 Tax Matters..........................................................................57
ARTICLE VIII. CONDITIONS TO CLOSING..............................................................................58
Section 8.1 Conditions to Obligations of the SunSource Entities..................................58
Section 8.2 Conditions to Obligations of the Partnership.........................................59
ARTICLE IX. INDEMNIFICATION......................................................................................62
Section 9.1 Survival of Representations, Etc.....................................................62
Section 9.2 Indemnification......................................................................63
Section 9.3 Limits on Indemnification............................................................67
Section 9.4 Tax Indemnification..................................................................68
Section 9.5 Security; Partnership's Right to Withhold and Set-Off................................69
</TABLE>
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<CAPTION>
<S> <C>
Section 9.6 Waiver by the SunSource Entities.....................................................69
ARTICLE X. TERMINATION AND WAIVER................................................................................70
Section 10.1 Termination..........................................................................70
Section 10.2 Effect of Termination................................................................70
ARTICLE XI. GENERAL PROVISIONS...................................................................................71
Section 11.1 Expenses.............................................................................71
Section 11.2 Notices..............................................................................71
Section 11.3 Publicity............................................................................72
Section 11.4 Headings; Table of Contents..........................................................72
Section 11.5 Severability.........................................................................72
Section 11.6 Entire Agreement.....................................................................73
Section 11.7 Assignment...........................................................................73
Section 11.8 No Third Party Beneficiaries.........................................................73
Section 11.9 Amendment............................................................................73
Section 11.10 Waiver...............................................................................73
Section 11.11 GOVERNING LAW; WAIVER OF JURY TRIAL..................................................74
Section 11.12 Specific Performance.................................................................74
Section 11.13 Disclosure Schedule; Effect of Investigation.........................................74
Section 11.14 Counterparts.........................................................................75
</TABLE>
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Exhibits (omitted)*
Exhibit A - Specified Assumed Liabilities
Exhibit B - Form of Operating Agreement (Kar LLC)
Exhibit C - Form of Partnership Agreement
Exhibit D - Form of Registration Rights Agreement
Exhibit E - Balance Sheet dated December 31, 1999
Exhibit F - Form of Sales Employment Agreements
Exhibit G - Pre-Closing Capitalization of the Partnership
Exhibit H - Retained Intercompany Agreements
Exhibit I - Form of Legal Opinion of Latham & Watkins
Exhibit J - Required Consents
Exhibit K-1 - Form of Legal Opinion of Morgan, Lewis & Bockius LLP
Exhibit K-2 - Form of Legal Opinion of Wilson Walker Hochberg Slopen LLP
Exhibit L-1 - Designated Employees
Exhibit L-2 - Form of Employment Agreement
Exhibit M - Designated Consent
Exhibit N - Form of Unit Pledge Agreement
- -----------------
* The Company agrees to furnish supplementally a copy of any omitted schedule to
the Commission upon request.
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AMENDMENT NO. 1
TO CONTRIBUTION AGREEMENT
THIS AMENDMENT NO. 1 TO CONTRIBUTION AGREEMENT (this
"Amendment") is entered into as of March 2, 2000 by and among SUNSOURCE INC., a
Delaware corporation ("SunSource"), SUNSOURCE INDUSTRIAL SERVICES COMPANY, INC.,
a Delaware corporation ("Parent"), KAR PRODUCTS LLC (as successor by merger to
Kar Products, Inc.), a Delaware limited liability company ("Kar Products"),
SUNSOURCE CANADA INVESTMENT COMPANY, an unlimited liability company organized
under the laws of the Province of Nova Scotia ("SunSource Canada"), A&H HOLDING
COMPANY, INC., a Michigan corporation ("A&H Holding"), A. & H. BOLT & NUT
COMPANY LIMITED, a company organized under the laws of the Province of Ontario
("A&H Bolt"), and GC-SUN HOLDINGS, L.P., a Delaware limited partnership (the
"Partnership"). Capitalized terms used in this Amendment and not otherwise
defined herein shall have the meanings ascribed to them in the Contribution
Agreement (as defined below).
RECITALS
WHEREAS, SunSource, Parent, Kar Products, SunSource Canada,
A&H Holding, A&H Bolt and the Partnership entered into that certain Contribution
Agreement, dated as of February 10, 2000 (as further amended, supplemented,
restated or otherwise modified from time to time, the "Contribution Agreement");
and
WHEREAS, the parties signatory hereto desire to amend the
Contribution Agreement as set forth herein;
NOW THEREFORE, in consideration of the mutual covenants herein
and other good and valuable consideration, the parties hereto agree as follows:
Section 1 Amendments to the Contribution Agreement.
As of the date hereof and prior to the Closing, the parties
hereby amend the Contribution Agreement and the Exhibits and Schedules thereto
as follows:
(a) Section 1.1 (Certain Defined Terms) of the Contribution
Agreement is hereby amended:
(i) by inserting the following definition immediately
after the definition of "Ancillary Agreements":
"Assignment Agreement" shall mean that certain
Assignment Agreement to be executed by SunSource Industrial as
of the Closing Date effecting the Contribution and assignment
of the Kar Interest to the Partnership pursuant to this
Agreement."
<PAGE>
(ii) by inserting the following sentence at the end
of the definition of "Current Liabilities":
"The parties hereto acknowledge and agree that the
term "Current Liabilities" shall not include the Intercompany
Indebtedness."
(iii) by inserting the following definition
immediately after the definition of "Environmental Laws":
"Equity Holders Agreement" shall mean that certain
Equity Holders Agreement to be entered into by the
Partnership, SunSource, the Contributors and the other parties
signatory thereto as of the Closing Date in substantially the
form attached hereto as Exhibit O".
(iv) by inserting the phrase "the Partnership and/or"
immediately after the phrase "entered into by" in the second line of
the definition of "Fee Agreements".
(v) by (x) deleting the word "and" in the last line
of the definition of "Ancillary Agreements", and (y) inserting the
phrase ", (vii) the Assignment Agreement and the other instruments,
certificates, assignment agreements, bills of sale and other documents
effecting the Contributions delivered pursuant to Section 2.5(a)(i) of
this Agreement, and (viii) the Equity Holders Agreement" immediately
prior to the period at the end of such definition.
(b) Section 1.2 (Other Defined Terms) is hereby amended to
insert a reference to "UPS Rates" under the column heading "Term" and a
corresponding reference thereto to "9.2(a)(x)" under the column heading
"Section", in each case immediately after the respective references to "Unit
Pledge Agreement" and the corresponding section reference thereto.
(c) Section 2.6 (Adjustment to Intercompany Indebtedness) of
the Contribution Agreement is hereby deleted in its entirety and the phrase
"[Intentionally deleted]" is substituted therefor (and the corresponding
reference to Section 2.6 in the Table of Contents to the Contribution Agreement
is hereby deleted and the phrase "[Intentionally deleted]" is substituted
therefor).
(d) Section 8.2 (Conditions to Obligations of the Partnership)
of the Contribution Agreement is hereby amended:
(i) by deleting the phrase "the conditions specified
in Sections 8.2(a), (b), (e) and (g) of this Agreement" in the third
line of subsection (i) thereof and substituting therefor "the
conditions specified in Sections 8.2(a), (b) and (e) of this
Agreement".
(ii) by deleting subsection (r) thereof in its
entirety.
2
<PAGE>
(e) Section 9.1 (Survival of Representations, Etc.) of the
Contribution Agreement is hereby amended by deleting the phrase "without giving
effect to any consensual extension of such period" at the end of subsection (b)
thereof and substituting therefor "without giving effect to any consensual
extension of such period by the Partnership or its subsidiaries after the
Closing".
(f) Section 9.2 (Indemnification) of the Contribution
Agreement is amended (i) by deleting the word "and" at the end of paragraph
(viii) of subsection (a) thereof and (ii) by inserting the following immediately
after paragraph (ix) of subsection (a) thereof:
"(x) the aggregate difference in each fiscal quarter
between (A) the actual freight costs incurred by the
Partnership and its subsidiaries for shipping packages
(internally or to customers) and (B) the freight costs which
would have been incurred by the Partnership and its
subsidiaries had they received a 27.5% discount from the
United Parcel Service's published UPS Commercial Ground
Service Rate Chart in effect at that time ("UPS Rates") on
such shipping; provided, however, (1) such indemnity shall
expire with respect to shipping occurring on and after August
23, 2003 and (2) the difference calculated in any fiscal
quarter shall in no event be less than zero or exceed the
lesser of (x) the amount which would have been calculated
(under clause (A) above) had the Partnership and its
subsidiaries received a 23% discount from UPS Rates on such
shipping and (y)(I) during calendar year 2000, $55,000 per
fiscal quarter (or prorated portion thereof based on calendar
days), (II) during calendar year 2001, $60,500 per fiscal
quarter (or prorated portion thereof based upon calendar
days), (III) during calendar year 2002, $66,500 per fiscal
quarter (or prorated portion thereof based upon calendar days)
and (IV) during calendar year 2003, $73,150 per fiscal quarter
(or prorated portion thereof based upon calendar days); and
(xi) any and all Liabilities arising out of or
relating to the Lenz Oil Service, Inc. site in Downers Grove
Township, Du Page County, Illinois."
(g) Section 9.4 (Tax Indemnification) of the Contribution
Agreement is hereby amended:
(i) by deleting the word "or" immediately after the
comma at the end of clause (ii) of subsection (a) thereof and by
inserting the following language at the end of the first sentence of
subsection (a) thereof:
", or (iv) imposed under Section 116(5) of the Income
Tax Act (Canada) in respect of the contribution and transfer
of the Canada Shares to the Partnership pursuant to Section
2.1(a)(ii) of this Agreement in the event that: (A) A&H
Holding fails to deliver to the Partnership the Tax Compliance
Certificate referred to in Section 5.3(c)(i) of this Agreement
on or before the last business day that is not more than
3
<PAGE>
thirty (30) days after the end of the month in which the
effective date of such contribution and transfer occurred or
(B) the fair market value of the Canada Shares at the
effective date of such contribution and transfer is determined
to be an amount in excess of the certificate limit fixed by a
certificate issued under Section 116 by A&H Holding and the
Partnership or by the Canada Customs and Revenue Agency and
agreed to by A&H Holding and the Partnership, or in the event
of their disagreement, by a tribunal or court of competent
jurisdiction (after all appeal rights have been exhausted or
all times for appeal have expired without appeals having been
taken)."
(ii) by deleting the phrase "without giving effect to
any consensual extension of such period" at the end of subsection (c)
thereof and substituting therefor "without giving effect to any
consensual extension of such period by the Partnership or its
subsidiaries after the Closing".
(h) Section 9.5 (Security; Partnership's Right to Withhold and
Set-Off) of the Contribution Agreement is hereby amended:
(i) by inserting the phrase "the amount of any
Damages" immediately after the word "apply" in the fifth line of
subsection (b) thereof.
(ii) by inserting the following immediately after
subsection (b) thereof:
"(c) Notwithstanding anything to the contrary in this
Agreement and without limiting the terms of Section 9.5(b) of
this Agreement, and regardless of other means of obtaining
payment, the Partnership is hereby authorized at any time and
from time to time to withhold and set-off and apply Damages
arising under Section 9.2(a)(x) of this Agreement against any
amounts owing or that may be owed to any of the SunSource
Entities pursuant to the Fee Agreements. Any such withholding,
set-off, retention or application by the Partnership shall not
constitute a default under, or give any right of dissolution,
amendment or other similar rights under the Fee Agreements.
Absent fraud or manifest error, the calculation by the
Partnership's outside auditor, if requested, of amounts to be
calculated under Section 9.2(a)(x) shall be final and binding
upon the Indemnifying Party in such circumstances."
(i) Section 11.2 (Notices) of the Contribution Agreement is
hereby amended by deleting the phrase "Suite 2330" in subsection (b) thereof and
substituting the phrase "Suite 2830" therefor.
(j) Exhibit M to the Contribution Agreement is hereby deleted
in its entirety and the phrase "[Intentionally deleted]" is substituted therefor
(and the corresponding reference to "Exhibit M - Designated Consent" in the List
of Exhibits to the Contribution Agreement is hereby deleted and the phrase
"[Intentionally deleted]" is substituted therefor).
4
<PAGE>
(k) The Contribution Agreement is hereby amended by adding as
Exhibit O to the Contribution Agreement the "Form of Equity Holders Agreement"
attached hereto as Annex I. The List of Exhibits in the Contribution Agreement
is hereby amended by inserting a reference at the end thereof to "Exhibit O -
Form of Equity Holders Agreement".
(l) Schedule 3.17(b) of the Disclosure Schedule is hereby
amended to add the following at the end of the disclosure:
"10. Letter from the Office of the Attorney General of the
State of Illinois dated February 9, 2000 relating to the Lenz Oil
Service, Inc. site in Du Page County, Illinois."
Section 2 Reference to and Effect Upon the Contribution Agreement.
(a) Except as expressly set forth in this Amendment, the
Contribution Agreement (including all Exhibits and Schedules thereto) shall
remain in full force and effect in all respects and is hereby ratified and
confirmed.
(b) The execution, delivery and effectiveness of this
Amendment shall not operate as a waiver of any right, power or remedy of any of
the parties under the Contribution Agreement, nor constitute a waiver of any
provision of the Contribution Agreement (including the Exhibits and Schedules
thereto) or any Ancillary Agreement, except as expressly set forth in this
Amendment. Upon the effectiveness of this Amendment, each reference in the
Contribution Agreement to "this Agreement", "hereunder", "hereof", "herein" or
words of similar import shall mean and refer to the Contribution Agreement as
amended hereby.
Section 3 GOVERNING LAW.
THIS AMENDMENT SHALL BE SUBJECT TO SECTION 11.11 OF THE
CONTRIBUTION AGREEMENT AS IF IT WERE PART OF SUCH CONTRIBUTION AGREEMENT.
Section 4 Headings.
Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this amendment
for any other purposes.
Section 5 Counterparts.
This Amendment may be executed in any number of counterparts,
each of which when so executed shall be deemed an original but all such
counterparts shall constitute one and the same instrument.
[Signature page follows]
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed as of the date first written above by their respective
officers thereunto duly authorized.
GC-SUN HOLDINGS, L.P.
By: GC-SUN G.P., Inc., its general partner
By: /s/ Ronald D. Wray
--------------------------------
Name: Ronald D. Wray
Title: President
SUNSOURCE INC.
By: /s/ Joseph M. Corvino
-----------------------------------------
Name: Joseph M. Corvino
Title: Vice President-Finance
SUNSOURCE INDUSTRIAL SERVICES COMPANY, INC.
By: /s/ Joseph M. Corvino
-----------------------------------------
Name: Joseph M. Corvino
Title: Secretary
KAR PRODUCTS, LLC (as successor by
merger to Kar Products, Inc.)
By: /s/ Joseph M. Corvino
-----------------------------------------
Name: Joseph M. Corvino
Title: Manager
<PAGE>
A&H HOLDING COMPANY, INC.
By: /s/ Joseph M. Corvino*
----------------------------------------------
Name: Joseph M. Corvino
Title: Vice President-Finance
SUNSOURCE CANADA INVESTMENT COMPANY
By: /s/ Joseph M. Corvino
----------------------------------------------
Name: Joseph M. Corvino
Title: President
A. & H. BOLT & NUT COMPANY LIMITED
By: /s/ Joseph M. Corvino*
---------------------------------------------
Name: Joseph M. Corvino
Title: Assistant Secretary
<PAGE>
EXHIBIT 99.1
SunSource Forms Partnership With Glencoe Capital
Company Receives $105 Million in Cash Proceeds
PHILADELPHIA, March 2 /PRNewswire/ -- SunSource Inc. (NYSE: SDP - news, SDP.PR -
news; the "Company" or "SunSource") announced today that it has completed an
agreement with a newly-formed partnership affiliated with Glencoe Capital,
L.L.C. ("Glencoe") of Chicago, a private equity investment firm. The new
partnership will be jointly owned by SunSource and Glencoe. SunSource
contributed its expediter businesses comprising Kar Products, Inc. and A&H Bolt
& Nut Company Limited (collectively, "Kar") and Glencoe contributed cash equity
to the new partnership, GC Sun Holdings, L.P.
Maurice P. Andrien, Jr., SunSource President and Chief Executive Officer, said
that the Company received about $105 million in cash proceeds from the
transaction and will hold a 49% interest in the Partnership. Affiliates of
Glencoe will hold a 51% controlling interest in and will manage the Partnership.
Andrien commented that "the business venture with Glencoe provides a growth
opportunity for the Kar business while enabling SunSource to pursue strategic
initiatives centered around its core businesses. The Kar transaction with
Glencoe, along with the December 1999 debt refinancing and the Company's
recently announced plan to sell its Harding Glass subsidiary, continues
management's focus on streamlining its operations."
David S. Evans, President and Chief Executive Officer of Glencoe, stated that
Glencoe is very excited to implement its strategic growth plan for Kar in
conjunction with its Executive Network Group.
Kar had earnings before interest, taxes, depreciation and amortization of almost
$20 million in 1999, adjusted for non-recurring items, on revenues of about $125
million. SunSource will account for its investment in the Partnership on a
de-consolidated basis and expects to record a pre-tax gain on the Kar
transaction of about $55 million excluding transaction expenses.
The transaction also restores SunSource's stockholders equity to a significant
positive position of over $33 million or about $5.00 per common share from its
deficit position of $17 million at December 31, 1999.
SunSource Inc. is one of the nation's leading providers of value-added services
and products to retail and industrial markets in North America. The Company's
Industrial Services businesses provide parts supply, engineering and repair
services throughout the U.S., Canada and Mexico. Kar Products offers
distribution of maintenance and repair parts and personalized inventory
<PAGE>
management services. The Hillman Group is a leading provider to hardware outlets
of merchandising systems, in-store service work and small parts such as
fasteners, letters, signs and keys.
Glencoe Capital L.L.C. invests capital on behalf of private investors, pension
funds and insurance companies. Glencoe is supported by its proprietary Executive
Network which consists of over forty Fortune 1000 CEOs and COOs, successful
entrepreneurs and executives with highly specialized skills. The Executive
Network is divided into six specialty groups, each led by a chairman with 25
plus years of business leadership experience.
This press release contains statements by the Company that involve risks and
uncertainties and may constitute forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. Such statements reflect
management's current views and are based upon certain assumptions relating to
the success of acquisitions, integration plans, strategic growth plans and
overall economic conditions. Actual results could differ materially from those
currently anticipated as a result of a number of factors, including the risks
and uncertainties discussed under the captions "Risk Factors" -- Risks
Associated with Acquisitions set forth in Item I of the Company's Annual Report
on Form 10-K for the year ended December 31, 1998, as filed with the Securities
and Exchange Commission. Given these uncertainties, current or prospective
investors are cautioned not to place undue reliance on any such forward-looking
statements. Furthermore, the Company disclaims any obligation or intent to
update any such forward-looking statement to reflect future events or
developments.
For more information on the Company, please visit
www.prnewswire.com/comp/115271.html.
