STOCKHOLDERS AGREEMENT
Published on August 16, 2001
EXHIBIT D.5
STOCKHOLDERS AGREEMENT
This STOCKHOLDERS AGREEMENT (this "Agreement"), dated as of ___________,
2001, is made by and among Allied Capital Corporation, a Maryland corporation
("Allied"), Maurice P. Andrien, Jr., Joseph M. Corvino, Max W. Hillman, Jr.,
Stephen W. Miller, Richard P. Hillman, George Heredia, Gary Seeds, Terry Rowe,
James Waters, Dennis Blake, Richard Buller, Kenneth Foskey, Michael Mueller,
John Marshall, John McDonnell ("McDonnell") and Mark Yeary (each an "Initial
Minority Holder" and collectively, the "Initial Minority Holders," and together
with Allied, the "Post-Merger Stockholders"), any individual or entity who
becomes a party hereto pursuant to Section 12 hereof (collectively, the "Other
Stockholders" and together with the Initial Minority Holders, the "Minority
Holders") and SunSource , Inc., a Delaware corporation (the "Corporation").
Allied and the Minority Holders are collectively referred to as the
"Stockholders."
WHEREAS, Allied and the Corporation have entered into an Agreement and
Plan of Merger dated as of June 18, 2001 (the "Merger Agreement") pursuant to
which a subsidiary of Allied will be merged with and into the Corporation (the
"Merger");
WHEREAS, upon the consummation of the Merger, the Post-Merger
Stockholders will become the sole stockholders of the Corporation; and
WHEREAS, in anticipation of the Merger, the Post-Merger Stockholders
desire to enter into this Agreement, to be effective upon the consummation of
the Merger, which imposes certain requirements as to the voting of the
Corporation's stock, the sale or transfer of the Corporation's stock and certain
other matters;
NOW, THEREFORE, in consideration of the mutual agreements contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Definitions. In addition to the capitalized terms defined
elsewhere in this Agreement, the following capitalized terms shall have the
following meanings when used in this Agreement:
"Affiliate" means, with respect to any Person, each Person that
controls, is controlled by or is under common control with such Person.
"Allied" has the meaning given to it in the preamble.
"Board" means the Board of Directors of the Corporation.
"Call Exercise Notice" has the meaning given to it in Section 7 hereof.
"Cause" means "Cause" as defined in the relevant Minority Holder's
employment agreement, or if there is no such employment agreement, "Cause"
means:
(i) A willful failure to substantially perform the duties of
employment, other than failure resulting from complete or partial
incapacity due to physical or mental illness or impairment;
(ii) A willful act which constitutes gross misconduct or fraud and
which is injurious to the Corporation;
(iii) Conviction of, or plea of "guilty" or "no contest" to a felony;
or
(iv) A material breach of any duty owed to the Corporation, including
the duty of loyalty and the duties under any confidentiality
agreement.
"Commission" has the meaning given to it in Section 14 hereof.
"Common Stock" means the common stock, par value $0.01 per share, of the
Corporation.
"Corporation" means SunSource, Inc., a Delaware corporation.
"Eligible Directors" has the meaning given it in Section 8 hereof.
"Equity Issuance" means the issuance by the Corporation of any Equity
Securities to any Person other than (a) any securities issued pursuant to the
Corporation's stock option, stock grant, stock purchase, incentive stock bonus
or similar plans which have been approved by the Board, (b) any securities
issued upon conversion, exercise or exchange of securities outstanding or
issued, (c) any securities issued in connection with any stock split or stock
dividend or in connection with any recapitalization of the Corporation, to any
person that at the time of such issuance is a Stockholder, provided that such
securities are issued on a pro rata basis to all Stockholders (d) any securities
issuable to customers, vendors or other Persons in similar commercial situations
with the Corporation (other than Allied or any Affiliate of a Stockholder) in
connection with corporate partnering agreements or other significant commercial
transactions entered into on an arms' length basis and approved by the Board,
(e) any securities issuable in full or partial consideration for the acquisition
(by merger, consolidation, purchase or otherwise) by the Corporation of all or
substantially all of the stock or assets of any other entity or business segment
of any other entity in an arm's length transaction with an entity other than
Allied or an Affiliate of a Stockholder unless the transaction is in compliance
with Section 10 of this Agreement; (f) any securities issuable to a lender
concurrently and in connection with a loan made to the Corporation by such
lender in an arm's length transaction with an entity other than Allied or an
Affiliate of a Stockholder unless the transaction is in compliance with Section
10 of this Agreement and (g) any securities offered pursuant to a registration
statement filed under the Securities Act.
"Equity Security" means common stock and any other security convertible,
exchangeable or exercisable for or into common stock.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Established Value" has the meaning given to it in Section 7 hereof.
"Established Value Per Share" has the meaning given to it in Section 7
hereof.
"Good Reason" means "Good Reason" as defined in the relevant Minority
Holder's employment agreement, or if there is no such applicable provision in an
employment agreement, "Good Reason" means that the Corporation:
(i) has adversely changed the Minority Holder's position from the
position held on the date of this Agreement;
(ii) has adversely and materially changed the Minority Holder's duties
or authority such that they are no longer consistent with the
position held on the date of this Agreement;
(iii) has reassigned the Minority Holder to a work location that is
more than 75 miles from such Minority Holder's present work
location; or
(iv) has, to the extent a Minority Holder has a seat on the Board (but
does not have an applicable provision in an employment
agreement), removed such Minority Holder from the Board for any
reason other than Cause.
"Holder Request" has the meaning given to it in Section 14 hereof.
"Initial Minority Holder" has the meaning given to it in the preamble.
"Issuer Securities" has the meaning given to it in Section 14 hereof.
"Lien" has the meaning given to it in Section 7 hereof.
"Major Holder" means Allied, so long as no other Stockholder holds more
Common Stock than Allied.
"Merger" has the meaning given to it in the recitals.
"Merger Agreement" has the meaning given to it in the recitals.
"Minority Director" has the meaning given to it in Section 8 hereof.
"Notice" has the meaning given to it in Section 19 hereof.
"Offer" has the meaning given to it in Section 3(b) hereof.
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"Offer Notice" has the meaning given to it in Section 9 hereof.
"Options" means options granted by the Corporation for the purchase of
shares of Common Stock.
"Other Stockholder" has the meaning given to it in the preamble.
"Permitted Transferees" has the meaning given to it in Section 5
hereof.
"Person" means an individual, partnership, corporation, limited
liability company, association, joint stock corporation, trust, joint
venture, unincorporated organization or other entity, or a governmental entity
or any department, agency or political subdivision thereof.
"Post-Merger Stockholder" or "Post-Merger Stockholders" has the meaning
given to it in the preamble.
"Post-Merger Stockholders' Pro Rata Share" has the meaning given to it
in Section 9.
"Purchase Interest" means, as to any Initial Minority Holder other than
McDonnell, the shares of Common Stock and Options (including shares of Common
Stock issued upon the exercise of such Options) specified with respect to such
Initial Minority Holder on Schedule A hereto. [NOTE TO DRAFT: Schedule A will
include only purchased Common Stock, rollover options and Common Stock issued
upon exercise of rollover Options. Schedule A will not include new Options or
Common Stock issued upon exercise of new Options.]
"Purchaser" has the meaning given to it in Section 3(b) hereof.
"Put Exercise Notice" has the meaning given to it in Section 7 hereof.
"Qualified Public Offering" means an underwritten public offering by the
Corporation of Common Stock.
"Registrable Securities" has the meaning given to it in Section 14
hereof.
"Repurchase Event" has the meaning given to it in Section 7 hereof.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Stockholder" has the meaning given to it in Section 7 hereof.
"Stockholder" has the meaning given to it in the preamble.
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"Transfer," and variations of it, means and includes: (i) any sale,
assignment, conveyance, exchange, pledge, hypothecation, gift, disposition or
other parting with any indicia or aspect of title, ownership or possession
(including voting rights), whether for consideration or gratuitously,
voluntarily or involuntarily or otherwise, of, in or to any or all shares of
Common Stock or any interest in them and (ii) any granting, whether for
consideration or gratuitously, voluntarily or involuntarily or otherwise, of a
security interest in any or all of the shares of Common Stock or any interest in
them.
"Underwritten Offering" has the meaning given to it in Section 14
hereof.
2. General Restriction on Transfers by Minority Holders. No Minority
Holder shall make or commit to make any Transfer of all or any part of the
shares of Common Stock, or of any beneficial interest therein, now or hereafter
owned by him, except as expressly permitted and in accordance with the
provisions of this Agreement. The Corporation shall not recognize as valid or
give effect to any Transfer of any shares of Common Stock or interests therein
upon the books of the Corporation unless and until the Stockholder desiring to
make such Transfer shall have complied with each provision of this Agreement.
Notwithstanding the foregoing, if a court of competent jurisdiction orders the
Transfer of any shares of Common Stock, such Common Stock shall be subject to
the provision of Sections 2 and 4 hereof but shall have no voting rights nor any
rights under this Agreement except as required by applicable law.
3. Tag Along.
(a) Prior to a Qualified Public Offering, if the Major
Holder proposes to Transfer to an unaffiliated third party (in one or a series
of related transactions) shares of Common Stock constituting in the aggregate
30% or more of the Common Stock owned by the Major Holder, then the Major Holder
shall refrain from effecting such transaction unless, prior to the consummation
thereof, each Minority Holder shall have been afforded the opportunity to join
in such Transfer on a pro rata basis as provided in this Section 3.
(b) Prior to the consummation of any proposed Transfer
of shares of Common Stock by the Major Holder that is subject to this Section 3,
the Major Holder shall cause the person or group that proposes to acquire such
shares of Common Stock (the "Purchaser") to offer (the "Offer") in writing to
each Minority Holder to purchase from each Minority Holder, up to the number of
whole shares of Common Stock owned by each such Minority Holder equal to the
product obtained by multiplying the total number of shares of Common Stock then
owned by such Minority Holder by a fraction, the numerator of which is the
aggregate number of shares of Common Stock proposed to be purchased by the
Purchaser from all the Stockholders (including the Major Holder) and the
denominator of which is the aggregate number of shares of Common Stock then
outstanding and subject to the provisions of this Agreement. Such purchase shall
be made at the price per share and on such other terms and conditions as the
Purchaser has offered to purchase the shares of Common Stock to be sold by the
Major Holder, including any consulting or other fees payable to the Major Holder
to the extent such fees exceed the fair market value of the services to be
provided. Each Minority Holder shall have 15 days from the date of receipt of
the Offer in which to accept such Offer, and
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the closing of such purchase shall occur within 60 calendar days after such
acceptance or at such other time as such Minority Holder and the Purchaser may
agree. The number of shares of Common Stock to be sold to the Purchaser by the
Major Holder shall be reduced by the aggregate number of shares of Common Stock
purchased by the Purchaser from the other Minority Holders pursuant to the
acceptance by them of the Offer in accordance with the provisions of this
Section 3(b).
(c) Any provision herein to the contrary
notwithstanding, the exercise of the rights under this Section 3 shall be
conditioned upon the agreement by each participating Minority Holder to become a
party to any proposed agreement for the sale of shares of Common Stock by the
Major Holder and to execute any agreement, certificate or other document
required to be executed in connection with such sale; provided, however, that no
participating Minority Investor shall be required to give representations or
warranties more extensive than those given by the Major Holder or to provide
indemnities disproportionate (based upon the percentage of sales proceeds to be
received) to those provided by the Major Holder. Failure of any participating
Minority Investor to comply with the provisions of this Section 3(c) shall
constitute a waiver of his or its rights under this Section 3.
4. Take Along.
(a) If, prior to a Qualified Public Offering, the Major
Holder elects to sell all of its shares of Common Stock to a third party or
causes the Corporation to enter into a merger agreement for a merger that will
result in the Stockholders immediately prior to such merger owning less than 50%
of the outstanding common stock of the surviving entity immediately following
such merger, in each case in a bona fide, arm's length transaction, the Minority
Holders will be required, upon written notice from the Major Holder, to (i) sell
all of their shares of Common Stock pursuant to such proposed sale, (ii) vote in
favor of any such transaction proposed by the Major Holders, and (iii) agree to
become a party to any proposed agreement for the sale of such shares of Common
Stock and to execute any agreement, certificate or other documents required to
be executed in connection with such sale, including making such representations
and warranties as, but not more extensive than, those made by the Major Holder
and providing indemnities proportionate (based on the percentage of proceeds to
be received) to those provided by the Major Holder. The sale by the other
Stockholders pursuant to this Section 4 shall be made at the price per share and
on such other terms and conditions as the sale by the Major Holder, including
any consulting or other fees payable to the Major Holder to the extent such fees
exceed the fair market value of the services to be provided. Each Minority
Holder hereby appoints the Corporation attorney-in-fact to execute and deliver
any such proposed agreement and related certificates and documents and to
endorse and deliver to the purchaser each such Minority Holder's shares of
Common Stock. If any Stockholder fails to comply with the provisions of this
Section 4, the Major Holder shall be entitled to treat such failure as breach of
this Agreement for which the Major Holder shall be entitled to specific
performance and/or damages.
(b) Notwithstanding anything herein to the contrary, if
the proposed consideration for a transaction described in Section 4(a) is either
(i) Equity Securities of an entity
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not having its Common Stock listed or admitted to trading on any national
securities exchange or quoted on any NASDAQ market, or (ii) Equity Securities of
an entity having its Common Stock listed or admitted to trading on any national
securities exchange or quoted on any NASDAQ market, but such Equity Securities
to be issued in the transaction will be subject to lock-up restrictions for a
period in excess of 180 days, then, in either such event, each Minority Holder
shall have the option, to be exercised within thirty (30) days of the date of
notice of the transaction, to require the Corporation to purchase, all, but not
less than all of each such Minority Holder's shares of Common Stock and Options
in accordance with the procedures set forth in Section 7.
5. Permitted Transfers. Notwithstanding anything herein to the
contrary, any Minority Holder may Transfer shares of Common Stock to Permitted
Transferees of such Minority Holder who consent in a writing delivered to the
Corporation to be bound by the terms of this Agreement without complying with
the requirements of Section 3, provided that, except in the case of clauses (a)
and (e) below, the transferring Minority Holder retains all voting rights with
respect to such transferred shares of Common Stock. With respect to any Minority
Holder, "Permitted Transferees" means: (a) any other Minority Holders, the Major
Holder, the Corporation or any purchaser under Section 3 or Section 4 hereof (b)
the spouse or lineal descendants (including adopted children) of such Minority
Holder, (c) any trust for the benefit of such Minority Holder or the benefit of
the spouse or lineal descendants (including adopted children) of such Minority
Holder, (d) any corporation or partnership in which such Minority Holder, the
spouse and the lineal descendants (including adopted children) of such Minority
Holder are the direct and beneficial owners of substantially all of the equity
interests; provided, that such Minority Holder, spouse and lineal descendants
(including adopted children) agree in writing, for the benefit of the
Corporation, to remain the direct and beneficial owners of all such equity
interests, (e) the personal representative of such Minority Holder upon such
Minority Holder's death for purposes of administration of such Minority Holder's
estate or upon such Minority Holder's incompetency for purposes of the
protection and management of the assets of such holder and (f) any transferee
which Allied (or, if Allied is no longer the Major Holder, the Corporation)
shall, in its sole discretion, approve in writing.
6. Termination of Employment. (a) In the event that the employment
with the Corporation of any Initial Minority Holder other than McDonnell is
terminated for any reason, such Initial Minority Holder shall have the ability
to require the Corporation to purchase all, but not less than all, of such
Initial Minority Holder's Purchase Interest in accordance with Section 7;
provided that if such termination is a termination for Cause or a resignation
without Good Reason, the Corporation shall not be obligated to close on such
purchase until the date that is the two (2) year anniversary of the date of the
applicable Put Exercise Notice.
(b) In the event that the employment with the
Corporation of (i) any Initial Minority Holder other than McDonnell is
terminated by the Corporation for Cause or such Initial Minority Holder resigns
without Good Reason (excluding, for the avoidance of doubt and without
limitation, termination of employment due to the non-renewal of an employment
agreement at the end of its stated term), or (ii) any Minority Holder that is
not an Initial Minority Holder is terminated for any reason, the Corporation
will have a call option to purchase all, but
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not less than all, of the shares of Common Stock and Options owned by such
Initial Minority Holder or such Minority Holder, as applicable, in accordance
with the procedures set forth in Section 7.
7. Valuation and Exercise Procedures. For purposes of the purchase
of any shares of Common Stock of the Corporation under Section 4(b) and Section
6 the following provisions shall apply:
(a) Each Minority Holder or the Corporation shall
exercise the sale or purchase right provided in Section 4(b), Section 6(a) or
Section 6(b), as applicable, by giving written notice within forty-five (45)
days of the notice required by Section 4(a) or within 180 days after a
termination of employment, as applicable (each a "Repurchase Event"), to the
Corporation (the "Put Exercise Notice" in the case of notice provided by a
Minority Holder (in such capacity, a "Selling Stockholder") or the "Call
Exercise Notice" in the case of a notice provided by the Corporation). Such Put
Exercise Notice or Call Exercise Notice, as applicable, shall specify (i) the
proposed Established Value Per Share and (ii) any other information reasonably
requested by the Corporation or the Selling Stockholders.
(b) For purposes hereof, the "Established Value Per
Share" means an amount equal to (A) the "Established Value" (as defined in
subsection (c) below), without giving regard to restrictions on Transfer under
this Agreement or other illiquidity of the Common Stock, or the Stockholder's
position as a Minority Holder, divided by (B) the fully diluted number (as
modified in the following sentence) of shares of Common Stock of the
Corporation. In the case of Options, only Options that have vested as of the
purchase date shall be subject to repurchase hereunder and the Established
Value Per Share calculation shall only take into account vested options reduced
by the exercise price thereof.
(c) For purposes hereof, the "Established Value" shall
be the value as agreed upon by the Selling Stockholder and Corporation within
thirty (30) days from the date of the Put Exercise Notice or Call Exercise
Notice, as the case may be. If the Selling Stockholder and the Corporation are
unable to so agree on the Established Value within such thirty (30) day period,
then the Selling Stockholder and the Corporation shall, within thirty (30) days
after the expiration of such sixty (60) day period, jointly retain a third-party
appraiser. Such appraiser shall submit an Established Value to the Corporation
and the Selling Stockholder within thirty (30) days of being retained, which
value shall be binding on the Corporation and the Selling Stockholder for all
purposes. If the parties are unable to agree on a mutually acceptable
third-party appraiser, the Corporation shall promptly instruct its independent
auditors to provide to the Corporation and the Selling Stockholder a list of
five (5) independent appraisal firms of recognized national standing. An
appraisal firm will be deemed "independent" if it has no existing relationship
or engagement with the Corporation, its parent or the independent auditors
providing the list (other than ordinary course arms' length engagements by such
auditors). Each of the Corporation and the Selling Stockholder shall
alternately, starting with the Selling Stockholder, strike one name from the
list until one appraisal firm remains and such remaining appraisal firm shall be
promptly retained by the Corporation and shall submit an Established Value to
the Corporation and the Selling Stockholder within thirty (30) days of being
appointed. The Corporation shall bear the fees, costs and expenses of any
appraiser selected hereunder. In any appraisal
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conducted hereunder, the Established Value shall be determined on a going
concern basis for a private company and as otherwise provided in Section 7(b),
and the Established Value Per Share shall give effect to the payment of the
applicable exercise prices for Options included in the calculation of the fully
diluted outstanding Common Stock of the Corporation.
(d) At the closing, the Selling Stockholder or such
Selling Stockholder's estate, beneficiaries or personal representatives shall
deliver to the Corporation, against payment of the aggregate purchase price by
the Corporation, by certified or bank check or wire transfer of immediately
available federal funds to such account as the Selling Stockholder may
designate, stock certificates, together with stock powers duly endorsed in
blank, evidencing the shares of Common Stock being purchased by the Corporation.
(e) All shares of Common Stock to be sold by a Selling
Stockholder hereunder shall be delivered to the Corporation at the closing free
and clear of all liens, claims, charges and encumbrances whatsoever ("Liens").
The Corporation will be entitled to receive customary representations as to
Selling Stockholder's title, authority and capacity to sell such shares of
Common Stock. The Selling Stockholder agrees to take all such actions as the
Corporation shall request as necessary to vest in the Corporation at such
closing good title to such common stock, free and clear of all Liens.
(f) The closing of a transaction pursuant to this
Section 7, including settlement on the purchase of shares of Common Stock, shall
occur within thirty (30) days after (i) the completion of the valuation provided
for in this Section 7, and (ii) the obtaining of any necessary third party or
governmental consents or approvals.
(g) Notwithstanding anything to the contrary contained
herein, in the event a purchase of Common Stock (or the payment of the purchase
price) by the Corporation would (i) violate or conflict with any statute, rule,
injunction, regulation, order, judgment or decree applicable to the Corporation
or any of its direct or indirect subsidiaries or by which its properties is
bound or affected, or (ii) result in any breach of, or constitute a default (or
an event which with notice or lapse of time, or both, would become a default)
under, or give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a Lien on any of the property or
assets of the Corporation or any of its direct or indirect subsidiaries pursuant
to any note, bond, mortgage, indenture, contract, agreement, lease, license,
franchise or other instrument or obligation to which the Corporation or any of
its direct or indirect subsidiaries is a party or by which any of its properties
is bound or affected, then any and all rights and obligations of the Corporation
to purchase shares of Common Stock hereunder shall be suspended until the date
which falls thirty (30) days following such time as such prohibition first
lapses or is waived and no such default would be caused. The Corporation shall
use its best efforts to obtain waiver of any such prohibition, or cure any such
violation, breach or default with respect to it, but shall not be obligated to
incur any additional interest or other costs or charges or make any prepayment
with respect to any indebtedness in connection with such efforts. The
Corporation shall use its best efforts to obtain from its lenders, and to
maintain, the right to redeem up to $2,000,000 of Common Stock and Options from
the Minority Holders during each fiscal year. The Corporation agrees that such
redemption basket shall be used first,
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to satisfy any put obligation of the Corporation under Section 4(b) or Section
6(a) and second, to satisfy any obligation of the Corporation upon the exercise
its call right under Section 6(b). In the event that the Corporation is unable
to pay cash for the purchase of Common Stock hereunder, it shall use its best
efforts to obtain from its lenders the right to issue in lieu of cash an
unsecured, subordinated, 50% current-pay promissory note that shall be in form
and substance satisfactory to the Corporation's lenders.
8. Board Membership. Each of the parties hereto agrees to take all
action necessary, including, but not limited to, the voting of their shares of
Common Stock, the execution of written consents, the calling of special
meetings, the removal of directors, the filling of vacancies on the Board, the
waiving of notice and the attending of meetings so as to cause (i) the number of
members of the Board to be seven (7); (ii) four (4) of the seats on the Board to
be nominees of the Major Holder and (iii) three (3) of the seats on the Board to
comprise the following person (the "Minority Directors"), subject to the
restrictions set forth below:
(a) Upon consummation of the Merger, the Minority
Directors as provided for in this Section 8 shall be Maurice P. Andrien, Max W.
Hillman and Stephen W. Miller. Each Minority Director shall continue as a
director until he ceases to be employed by the Corporation for any reason,
provided that Mr. Miller shall serve on the Board for a period of two (2) years
from the date hereof regardless of whether he is employed by the Corporation.
(b) At such time as any one or more of Mr. Andrien,
Mr. Max W. Hillman or Mr. Miller ceases to be employed by the Corporation, or
otherwise resigns from the Board, the vacancy created thereby shall be filled
by Joseph M. Corvino and Richard P. Hillman (together with Mr. Andrien, Mr. Max
W. Hillman and Mr. Miller collectively, the "Eligible Directors"), in that
order, so long as such Person is still employed by the Corporation. At such
time as fewer than three (3) Eligible Directors are employed by the
Corporation, the number of Minority Directors on the Board shall be reduced
to equal the number of Eligible Directors and the number of members of the Board
shall be reduced by an equal amount.
9. Pre-emptive Rights.
(a) General. In the event that the Corporation
intends to consummate an Equity Issuance, the Corporation shall provide the
Post-Merger Stockholders with a right of first refusal to purchase all or a
portion of his or its pro rata portion of such Equity Securities, on the terms
and conditions offered by the Corporation. The Post-Merger Stockholders' pro
rata portion is equal to the ratio of (x) the number of shares of Common Stock
issued and the number of shares of Common Stock issuable upon the exercise of
outstanding Options to all of the Post-Merger
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Stockholders immediately prior to such issuance to (y) the total number of
shares of Common Stock outstanding immediately prior to such issuance (the
"Post-Merger Stockholders' Pro Rata Share").
(b) Procedure. The Corporation shall provide the
Post-Merger Stockholders not less than thirty (30) days prior written notice
(the "Offer Notice") of such Equity Issuance, together with the details and
terms of such intended transaction, including the identity of the proposed
investor or investors. Each Post-Merger Stockholder shall respond to the
Corporation within fifteen (15) days of receiving the Offer Notice notifying the
Corporation whether or not it desires to purchase Equity Securities in such
Equity Issuance and stating the number of such securities the Post-Merger
Stockholder desires to purchase.
(c) Unsubscribed Shares. In the event that the
Post-Merger Stockholders fail to exercise in full the right of first refusal
within the applicable time period, then, with respect to the issuance of such
unsubscribed shares of Common Stock, the rights of such Post-Merger Stockholders
under this Section 9 shall expire and the Corporation shall have 120 days
thereafter to contract to sell such Equity Securities to the identified investor
or investors at a price and upon general terms not more favorable to such
investor or investors than specified in the Offer Notice; provided, that if the
investor is the Major Holder or an Affiliate of the Major Holder such sale shall
also be subject to the provisions of Section 10. In the event that the
Corporation has not contracted to sell such Equity Securities within such 120
day period, then the Corporation shall not thereafter issue or sell any such
securities without again first offering them to the Post-Merger Stockholders
pursuant to this Section 10.
10. Transaction with the Corporation. (a) All transactions between
the Corporation and any Stockholder shall be conducted on an arms' length basis
and on terms that are no less favorable to the Corporation as would be obtained
in a prevailing market arms' length transaction for a similarly situated entity
with a person not a Stockholder.
(b) The Minority Stockholders hereby approve the
following transactions between the Corporation and Allied, if consummated
substantially under the terms attached hereto as Schedules B-1 through B-4;
(i) The sale of SunSource Technical Services,
Inc., ("STS"), the application of the proceeds of such sale and the related
financing of STS (Schedule B-1);
(ii) The distribution of the Corporation's
limited partnership interest in GC-Sun Holdings L.P. (Schedule B-2);
(iii) The provision by Allied of up to a $40
million mezzanine facility to the Corporation (Schedule B-3); and
(iv) the Management Agreement between Allied
and the Corporation (Schedule B-4).
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11. Subsequent Minority Holders. The Corporation shall not issue or
sell any shares of Common Stock or issue any Options to any other Person not
party to this Agreement, including any officers or employees of the Corporation,
unless such Person agrees by a written consent to be bound by the terms of this
Agreement in the capacity of a Minority Holder as though he or she were an
original signatory hereto. Upon the delivery to the Corporation of such consent,
such Person shall be bound by and entitled to the benefits of this Agreement in
such capacity.
12. Stock Ownership. Each Stockholder severally represents and
warrants that he or it is the record and beneficial owner of the shares of
Common Stock of the Corporation, after giving effect to the consummation of the
transactions contemplated by the Merger Agreement, set forth opposite such
Stockholder's name on the signature page hereto.
13. Legend. The Corporation shall stamp or imprint each certificate
or other instrument representing shares of Common Stock, throughout the term of
this Agreement, with a legend in substantially the following form:
"The shares of capital stock represented by this Certificate may not be
sold, transferred, encumbered or otherwise dealt with except in
compliance with the terms and conditions of a Stockholders Agreement by
and among the Corporation and its Stockholders. A copy of the
Stockholders Agreement, including any amendments thereto, is on file at
the principal office of the Corporation. Any person intending to deal in
or with this Certificate is hereby put on notice that the Corporation
may refuse to recognize any sale, transfer or encumbrance of the shares
represented by the Certificate if the terms and conditions of such
Stockholders Agreement are not first properly complied with. The
securities represented hereby may not be sold, pledged, hypothecated or
otherwise disposed of unless registered under the Securities Act of
1933, as amended, and any applicable state securities law, or unless an
exemption from applicable registration requirements is available."
14. Registration Rights.
14.1 Demand Registrations. (a) At any time after the initial Qualified
Public Offering pursuant to a registration statement under the Securities Act,
the Major Holder may request in writing that the Corporation effect the
registration under the Securities Act of all or part of the Registrable
Securities (as hereinafter defined) held by the Major Holder, specifying in the
request the number and type of Registrable Securities to be registered by and
the intended method of disposition thereof (such notice is hereinafter referred
to as a "Holder Request"). Upon receipt of such Holder Request, the Corporation
will promptly give written notice of such requested registration to all other
holders of Registrable Securities, which other holders shall have the right to
include the Registrable Securities held by them in such registration and
thereupon the Corporation will, as expeditiously as possible, use its best
efforts to effect the registration under the Securities Act of:
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(i) the Registrable Securities which the
Corporation has been so requested to register by the Major Holder; and
(ii) all other Registrable Securities which the
Corporation has been requested to register by any other holder thereof
having rights thereto by written request given to the Corporation within
thirty (30) days after the giving of such written notice by the
Corporation (which request shall specify the intended method of
disposition of such Registrable Securities), all to the extent necessary
to permit the disposition (in accordance with the intended methods
thereof as aforesaid) of the Registrable Securities so to be registered;
provided, however, that notwithstanding the provisions of Section 14.1(a), the
Corporation shall not be obligated to file a registration statement pursuant to
this Section 14.1:
(1) unless the Corporation shall have received request
for such registration with respect to at least 10% of the outstanding Common
Stock on a fully diluted basis; or
(2) within the six month period immediately following
the effective date of any registration previously effected by the Corporation
pursuant to this Section 14.1.
For purposes hereof, "Registrable Securities" shall mean
(A) all shares of Common Stock and now or hereafter owned of record or
beneficially by any of the Stockholders, and (B) any shares of Common Stock
issued or issuable by the Corporation in respect of any shares of Common Stock
referred to in the foregoing clause (A) by way of a stock dividend or stock
split or in connection with a combination or subdivision of shares,
reclassification, recapitalization, merger, consolidation or other
reorganization of the Corporation. As to any particular Registrable Securities
that have been issued, such securities shall cease to be Registrable Securities
when (i) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of under such registration statement, (ii) they shall have
been distributed to the public pursuant to Rule 144 under the Securities Act,
(iii) they shall have been otherwise Transferred, and new certificates therefor
not bearing a legend restricting further Transfer shall have been delivered by
the Corporation, and subsequent Transfer of them shall not require their
registration or qualification under the Securities Act or any similar state law
then in force, or (iv) they shall have ceased to be outstanding.
(b) The Corporation shall not be obligated to file more
than an aggregate of two registration statements pursuant to Section 14.1(a)
hereof.
(c) If the Corporation proposes to effect a
registration requested pursuant to this Section 14.1 by the filing of a
registration statement on Form S-3 (or any similar short-form registration
statement) and the intended method of distribution is through a firm commitment
underwriting (an "Underwritten Offering"), the Corporation will comply with any
request by the managing underwriter to effect such registration on another
permitted form if such
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managing underwriter advises the Corporation that, in its opinion, the use of
another form of registration statement is of material importance to the success
of such proposed offering.
(d) A registration requested pursuant to Section 14.1
(a) hereof will not be deemed to have been effected unless it has become
effective under the Securities Act; provided, however, that if after it has
become so effective, the offering of Registrable Securities pursuant to such
registration is interfered with by any stop order, injunction or other order or
requirement of the Securities and Exchange Commission (the "Commission") or
other governmental agency or court, such registration will be deemed not to have
been effected.
(e) The Corporation will pay all Registration Expenses
(as defined in subsection (f) in Section 14.2) in connection with each of the
registrations of Registrable Securities effected by it pursuant to this Section
14.1.
(f) Whenever a requested registration pursuant to this
Section 14.1 involves an Underwritten Offering, the only shares of Common Stock
that may be included in such Offering are (i) Registrable Securities, and (ii)
securities of the Corporation being offered and sold for the Corporation's
behalf in such Offering ("Issuer Securities").
(g) If a registration pursuant to this Section 14.1
involves an Underwritten Offering and the managing underwriter shall advise the
Corporation that, in its judgment, the number of shares of Common Stock proposed
to be included in such Underwritten Offering should be limited due to market
conditions, then the Corporation will promptly so advise each holder of
Registrable Securities that has requested registration, and the Issuer
Securities, if any, shall first be excluded from such Underwritten Offering to
the extent necessary to meet such limitation. If further exclusions are
necessary to meet such limitation, the number of Registrable Securities of each
such holder shall be excluded pro rata (until such limitation has been met),
based on the respective number of shares of Registrable Securities as to which
registration has been requested by such holder.
(h) By making a Holder Request, a Requesting Holder
shall be deemed to have (i) a present intention to sell the Registrable
Securities covered thereby, (ii) agreed to execute all consents, powers of
attorney and other documents required in order to cause the registration
statement to become effective, (iii) agreed, if the offering is at the market,
to give the Corporation written notice of the first bona fide offering of the
Registrable Securities covered thereby and to use the prospectus forming a part
of the registration statement for only the period permitted by the Securities
Act and the rules and regulations promulgated by the Commission thereunder, (iv)
agreed, subject to adverse events regarding the selling price of the Registrable
Securities covered thereby, to utilize the method of distribution of such
Registrable Securities proposed in the Holder Request, and (v) agreed, in
connection with the disposition of the Registrable Securities covered thereby,
to comply with any applicable rules and regulations promulgated by the
Commission under the Securities Exchange Act of 1934, as amended (the "Exchange
Act").
14.2 Piggyback Registrations. (a) If, at any time after the initial
Qualified Public Offering, the Corporation proposes to register any of its
Equity Securities under the
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Securities Act (other than a registration on Form S-4 or S-8 or any successor or
similar forms thereto and other than pursuant to a registration under Section
14.1), whether or not for sale for its own account, on a form and in a manner
that would permit registration of Registrable Securities for sale to the public
under the Securities Act, it will give written notice to all the holders of
Registrable Securities promptly of its intention to do so, describing such
securities and specifying the form and manner and the other relevant facts
involved in such proposed registration (including, without limitation (i)
whether or not such registration will be in connection with an underwritten
offering of Registrable Securities and, if so, the identity of the managing
underwriter and whether such offering will be pursuant to a "best efforts" or
"firm commitment" underwriting, and (ii) the price, net of any underwriting
commissions, discounts and the like, at which the Registrable Securities are
reasonably expected to be sold) if such disclosure is acceptable to the managing
underwriter. Upon the written request of any such holder delivered to the
Corporation within thirty (30) days after the receipt of any such notice (which
request shall specify the Registrable Securities intended to be disposed of by
such holder and the intended method of disposition thereof), the Corporation
will use best efforts to effect the registration under the Securities Act of all
of the Registrable Securities that the Corporation has been so requested to
register; provided, however, that:
(i) If, at any time after giving such written notice of
its intention to register its securities and prior to the effective date of the
registration statement filed in connection with such registration, the
Corporation shall determine for any reason not to register such securities, the
Corporation may, at its election, give written notice of such determination to
each holder of Registrable Securities who made a request as hereinabove provided
and thereupon the Corporation shall be relieved of its obligation to register
any Registrable Securities in connection with such registration (but not from
its obligation to pay the Registration Expenses in connection therewith),
without prejudice, however, to the rights of the Major Holder to request that a
registration subsequently be effected under Section 14.1 hereof.
(ii) If such registration involves an Underwritten
Offering, all holders of Registrable Securities requesting to be included in the
Corporation's registration must sell their Registrable Securities to the
underwriters selected by the Corporation on the same terms and conditions as
apply to the Corporation or the other selling Stockholders participating
therein. No registration effected under this Section 14.2 shall relieve the
Corporation of its obligation to effect registration upon request under Section
14.1.
(b) The Corporation shall not be obligated to effect
any registration of Registrable Securities under this Section 14.2 incidental to
the registration of any of its securities in connection with mergers,
acquisitions, exchange offers, dividend reinvestment plans or stock option or
other employee benefit plans.
(c) The Registration Expenses incurred in connection
with each registration of Registrable Securities requested pursuant to this
Section 14.2 shall be paid by the Corporation.
(d) If a registration pursuant to this Section 14.2
involves an Underwritten Offering and the managing underwriter advises the
Corporation that, in its opinion,
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the number of securities proposed to be included in such registration should be
limited due to market conditions, then the Corporation will promptly notify each
holder of Registrable Securities that has requested registration, and the
Registrable Securities of each such holder shall be excluded pro rata (until
such limitation has been met), based on the respective number of shares of
Registrable Securities as to which registration has been requested by all such
holders.
(e) In connection with any Underwritten Offering with
respect to which holders of Registrable Securities shall have requested
registration pursuant to this Section 14.2, the Corporation shall have the right
to select the managing underwriter with respect to the offering.
(f) For purposes hereof, "Registration Expenses" means
any and all out-of-pocket expenses incident to the Corporation's performance or
compliance with Section 14 hereof, including, without limitation, all
Commission, stock exchange or registration and filing fees, all fees and
expenses of complying with securities and blue sky laws (including reasonable
fees and disbursements of underwriters' counsel in connection with blue sky
qualification and stock exchange filings), all fees and expenses of the transfer
agent and registrar, if any, for the Registrable Securities, all printing
expenses, the fees and disbursements of counsel for the Corporation and of its
independent auditors, public accountants, including the expenses of any special
audits and/or "cold comfort" letters required by or incident to such performance
and compliance, and the reasonable fees and disbursements of one counsel
reasonably acceptable to the Corporation and retained by the Requesting Holders,
but excluding underwriting discounts and commissions and applicable transfer and
documentary stamp taxes, if any, which shall be borne by the seller of the
securities in all cases.
14.3 Registration Procedures. (a) If and whenever the Corporation
is required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in Section 14.1 or
14.2 hereof, the Corporation will, as expeditiously as possible:
(i) Prepare and, in any event within 60 calendar days
after the end of the period within which requests for registration may
be given to the Corporation (or within 90 days after the end of such
period if such period ends during the first month or the last month of
the Corporation's fiscal year), file with the Commission a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become and remain
effective; provided that, in the case of a registration provided for in
Section 14.1 or 14.2 hereof, before filing a registration statement or
prospectus or any amendments or supplements thereto, the Corporation
will furnish to the counsel selected by the Requesting Holders copies of
all such documents proposed to be filed, which documents will be subject
to the timely and reasonable review of such counsel; and provided,
further, that the Corporation may discontinue any registration of its
securities that is being effected pursuant to Section 14.2 at any time
prior to the effective date of the registration statement relating
thereto.
(ii) Prepare and file with the Commission such
amendments (including post-effective amendments) and supplements to such
registration statement and the
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prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period as may be requested by the
Requesting Holders not exceeding nine months and to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or
sellers thereof set forth in such registration statement.
(iii) Furnish to each holder of Registrable Securities
covered by the registration statement and to each underwriter, if any,
of such Registrable Securities such number of copies of a prospectus and
preliminary prospectus for delivery in conformity with the requirements
of the Securities Act, and such other documents as such Person may
reasonably request in order to facilitate the public sale or other
disposition of the Registrable Securities.
(iv) Use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under such
other securities or blue sky laws of such jurisdictions as each seller
shall reasonably request, and do any and all other acts and things which
may be reasonably necessary or advisable to enable such seller to
consummate the disposition of the Registrable Securities owned by such
seller in such jurisdictions, except that the Corporation shall not for
any such purpose be required (A) to qualify to do business as a foreign
corporation in any jurisdiction where, but for the requirements of this
Section 14.3.(a)(iv), it is not then so qualified, or (B) to subject
itself to taxation in any such jurisdiction, or (C) to take any action
which would subject it to general or unlimited service of process in any
such jurisdiction where it is not then so subject.
(v) Use its best efforts to cause such Registrable
Securities covered by such registration statement to be registered or
qualified with or approved by such other governmental agencies or
authorities (including, without limitation, state securities
commissions) as may be necessary to enable the seller or sellers thereof
to consummate the disposition of such Registrable Securities, subject,
however, to the limitations set forth in clauses (A), (B) and (C) of
Section 14.3(a)(iv) hereof.
(vi) Immediately notify each seller of Registrable
Securities covered by such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the
Securities Act within the appropriate period mentioned in Section
14.3(a)(ii), if the Corporation becomes aware that the prospectus
included in such registration statement, as then in effect, includes an
untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing; use
its best efforts to prepare and file an appropriate amendment or
supplement to such prospectus and to cause such amendment or supplement
to become effective; and, at the request of any such seller, deliver a
reasonable number of copies of an amended or supplemental prospectus as
may be necessary so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus shall not include an untrue
statement of a material
- 17 -
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing.
(vii) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make generally
available to its security holders, in each case as soon as practicable,
but not later than 90 calendar days after the close of the period
covered thereby (180 calendar days in case the period covered
corresponds to a fiscal year of the Corporation), an earnings statement
of the Corporation which will satisfy the provisions of Section 11(a) of
the Securities Act.
(viii) Use its best efforts in cooperation with the
underwriters, if any, to list such Registrable Securities on each
securities exchange as they may reasonably designate, which securities
exchanges shall be acceptable to the Corporation.
(ix) In the event the offering is an Underwritten
Offering, use its best efforts to obtain a "cold comfort" letter from
the independent public accountants for the Corporation in customary form
and covering such matters of the type customarily covered by such
letters as the Requesting Holders reasonably request in order to effect
an Underwritten Offering of such Registrable Securities.
(x) Execute and deliver all instruments and documents
(including in an Underwritten Offering an underwriting agreement in
customary form) and take such other actions and obtain such certificates
and opinions as the Requesting Holders reasonably request in order to
effect an underwritten public offering of such Registrable Securities.
(b) Each holder of Registrable Securities will, upon
receipt of any notice from the Corporation of the happening of any event of the
kind described in Section 14.3(a) (vi), forthwith discontinue disposition of the
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by Section 14.3(a) (vi).
(c) If the Corporation proposes to effect a
registration for any Underwritten Offering, including without limitation for its
initial Qualified Public Offering, each holder of Registrable Securities agrees,
whether or not such holder's Registrable Securities are included in such
registration, not to effect any public sale or distribution, including any sale
pursuant to Rule 144 under the Securities Act, of any Registrable Securities or
of any security convertible into or exchangeable or exercisable for any
Registrable Securities (other than as part of such Underwritten Offering),
without the consent of the managing underwriter, during a period commencing
seven days before and ending 180 days (or such lesser number as the managing
underwriter shall designate) after the effective date of such registration.
(d) If a registration pursuant to Section 14.1 or 14.2
involves an Underwritten Offering, the Corporation agrees, if so required by the
managing underwriter, not to effect any public sale or distribution of any of
its equity or debt securities, as the case may be, or securities convertible
into or exchangeable or exercisable for any of such equity or debt
- 18 -
securities, as the case may be, during a period commencing seven days before and
ending 180 (or such lesser number as the managing underwriter shall designate)
days after the effective date of such registration, except for such Underwritten
Offering or except in connection with a stock option plan, stock purchase plan,
savings or similar plan, or an acquisition, merger or exchange offer.
(e) If a registration pursuant to Section 14.1 or 14.2
involves an Underwritten Offering, any holder of Registrable Securities
requesting to be included in such registration may elect, in writing, prior to
the effective date of the registration statement filed in connection with such
registration, not to register such securities in connection with such
registration, unless such holder has agreed with the Corporation or the managing
underwriter to limit its right under this Section 14.3.
(f) In any registration pursuant to Section 14.1 or
14.2, each holder of Registrable Securities requesting to be included in such
registration shall furnish to the Corporation all such information as the
Corporation may reasonably request from such holder concerning such holder and
its intended method of distribution of Registrable Securities to enable the
Corporation to include such information in the registration statement.
(g) It is understood that in any Underwritten Offering
in addition to any shares of Common Stock (the "initial shares") the
underwriters have committed to purchase, the underwriting agreement may grant
the underwriters an option to purchase up to a number of additional shares of
Common Stock (the "option shares") equal to 15% of the initial shares (or such
other maximum amount as the National Association of Securities Dealers, Inc. may
then permit), solely to cover over-allotments. Shares of Common Stock proposed
to be sold by the Corporation and the other sellers shall be allocated between
initial shares and option shares as agreed or, in the absence of agreement, on a
pro rata basis among all such holders on the basis of the relative number of
shares of Registrable Securities each such holder has requested to be included
in such registration.
(h) Notwithstanding anything to the contrary herein,
the Corporation shall not be required to include any Registrable Securities of
any holder in the event that the Corporation shall obtain an opinion of its
counsel that all such requested Registrable Securities may then be sold without
registration under Rule 144 or other provision of the Securities Act.
14.4 Indemnification. (a) In the event of any registration of any
securities under the Securities Act pursuant to Section 14.1 or 14.2, the
Corporation will, and it hereby agrees to, indemnify and hold harmless, to the
extent permitted by law, each seller of any Registrable Securities covered by
such registration statement, such seller's directors, officers and employees or
general and limited partners (and directors, officers and employees thereof and,
if such seller is a portfolio or investment fund, its investment advisors or
agents), each other person who participates as an underwriter in the offering or
sale of such securities and each other person, if any, who controls such seller
or any such underwriter within the meaning of the Securities Act, as follows:
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(i) against any and all loss, liability, claim, damage
or expense whatsoever arising out of or based upon an untrue statement or
alleged untrue statement of a material fact contained in any registration
statement (or any amendment or supplement thereto), including all documents
incorporated therein by reference, or the omission or alleged omission therefrom
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of an untrue statement or
alleged untrue statement of a material fact contained in any preliminary
prospectus or prospectus (or any amendment or supplement thereto) or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein not misleading;
(ii) against any and all loss, liability, claim or
damage and expense whatsoever to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of the
Corporation; and
(iii) against any and all expenses reasonably incurred by
them in connection with investigating, preparing or defending against any
litigation, or investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission, to the
extent that any such expense is not paid under subparagraph (i) or (ii) above;
provided, however, that this indemnity does not apply to any loss, liability,
claim, damage or expense to the extent arising out of an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with written information furnished to the Corporation by or on
behalf of any underwriter or any seller expressly for use in the preparation of
any registration statement (or any amendment thereto) or any preliminary
prospectus or prospectus (or any amendment or supplement thereto); and provided,
further, that the Corporation will not be liable to any person who participates
as an underwriter in the offering or sale of Registrable Securities or any other
person, if any, who controls such underwriter within the meaning of the
Securities Act, under the indemnity agreement in this Section 14.4(a) with
respect to any preliminary prospectus or final prospectus or final prospectus as
amended or supplemented, as the case may be, to the extent that any such loss,
claim, damage or liability of such underwriter or controlling Person resulted
from the fact that such underwriter sold Registrable Securities to a Person to
whom there was not sent or given, at or prior to the written confirmation of
such sale, a copy of the final prospectus or of the final prospectus as then
amended or supplemented, which is most recent, if the Corporation has previously
furnished copies thereof to such underwriter. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
such seller or any such director, officer, general or limited partner,
investment advisor or agent, underwriter or controlling Person and shall survive
the transfer of such securities by such seller.
- 20 -
(b) The Corporation may require, as a condition to
including any Registrable Securities in any registration statement filed in
accordance with Section 14.1 and 14.2, that the Corporation shall have received
an undertaking reasonably satisfactory to it from the prospective seller of such
Registrable Securities or any underwriter to indemnify and hold harmless (in the
same manner and to the same extent as set forth in Section 14.4(a)) the
Corporation and its directors, officers or controlling Persons or any other
prospective seller with respect to any statement or alleged statement in or
omission or alleged omission from such registration statement, any preliminary,
final or summary prospectus contained therein, or any amendment or supplement,
if such statement or alleged statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Corporation by or on behalf of such seller or underwriter specifically stating
that it is for use in the preparation of such registration statement,
preliminary, final or summary prospectus or amendment or supplement. Such
indemnity shall remain in full force and effect regardless of any investigation
made by or on behalf of the Corporation or any such director, officer or
controlling Person or any other prospective seller and shall survive the
transfer of such securities by such seller. In that event, the obligations of
the underwriter and such sellers pursuant to this Section 14.4 are to be several
and not joint; provided, however, that each such seller's liability under this
Section 14.4 shall be limited to an amount equal to the net proceeds (after
deducting the underwriting discount and expenses) received by such seller from
the sale of Registrable Securities held by such seller pursuant to this
Agreement.
(c) Promptly after receipt by an indemnified party
hereunder of written notice of the commencement of any action or proceeding
involving a claim referred to in this Section 14.4, such indemnified party will,
if a claim in respect thereof is to be made against any indemnifying party, give
written notice to such indemnifying party of the commencement of such action;
provided, however, that the failure of any indemnified party to give notice as
provided herein shall not relieve the indemnifying party of its obligations
under this Section 14.4, except to the extent that the indemnifying party is
actually prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgement a conflict of interest between such indemnified and
indemnifying parties may exist in respect of such claim (in which case the
indemnifying party shall not be liable for the fees and expenses of more than
one counsel for a majority of the sellers of Registrable Securities, or more
than one counsel for the underwriters in connection with any one action or
separate but similar or related actions), the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with any
other indemnifying party similarly notified, to the extent that it may wish with
counsel reasonably satisfactory to such indemnified party, and after notice from
the indemnifying party to such indemnified party of its election so to assume
the defense thereof, the indemnifying party will not be liable to such
indemnified party for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof.
(d) The Corporation and each seller of Registrable
Securities shall provide for the foregoing indemnity (with appropriate
modifications) in any underwriting agreement with respect to any required
registration or other qualification of securities under any federal or state law
or regulation of any governmental authority.
- 21 -
14.5 Contribution. In order to provide for just and equitable
contribution in circumstances under which the indemnity contemplated by Section
14.4 is for any reason not available, the parties required to indemnify by the
terms thereof shall contribute to the aggregate losses, liabilities, claims,
damages and expenses of the nature contemplated by such indemnity agreement
incurred by the Corporation, any seller of Registrable Securities and one or
more of the underwriters, except to the extent that contribution is not
permitted under Section 11(f) of the Securities Act. In determining the amounts
which the respective parties shall contribute, there shall be considered the
relative benefits received by each party from the offering of the Registrable
Securities (taking into account the portion of the proceeds of the offering
realized by each), the parties' relative knowledge and access to information
concerning the matter with respect to which the claim was asserted, the
opportunity to correct and prevent any statement or omission and any other
equitable considerations appropriate under the circumstances. The Corporation
and each person selling securities agree with each other that no seller of
Registrable Securities shall be required to contribute any amount in excess of
the amount such seller would have been required to pay to an indemnified party
if the indemnity under Section 14.4(b) were available. The Corporation and each
such seller will agree with each other and the underwriters of the Registrable
Securities, if requested by such underwriters, that it would not be equitable if
the amount of such contribution were determined by pro rata or per capita
allocation (even if the underwriters were treated as one entity for such
purpose) or for the underwriters' portion of such contribution to exceed the
percentage that the underwriting discount bears to the initial public offering
price of the Registrable Securities. For purposes of this Section 14.4, each
Person, if any, who controls an underwriter within the meaning of Section 15 of
the Securities Act, shall have the same rights to contribution as such
underwriter, and each director and each officer of the Corporation who signed
the registration statement, and each Person, if any, who controls the
Corporation or a seller of Registrable Securities within the meaning of Section
15 of the Securities Act shall have the same rights to contribution as the
Corporation or a seller of Registrable Securities, as the case may be.
14.6 Rule 144. If the Corporation shall have filed a registration
statement pursuant to the requirements of Section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Corporation covenants that it will file the reports required to be filed by it
under the Securities Act and the Exchange Act and the rules and regulations
adopted by the Commission thereunder (or, if the Corporation is not required to
file such reports, it will, upon the request of any holder of Registrable
Securities, make publicly available other information contemplated by Rule 144
under the Securities Act). From and after such time as the Corporation is
required to file reports and other documents with the Commission pursuant to the
Exchange Act, so long as any holder owns Registrable Securities that have not
been registered under the Securities Act, the Corporation shall furnish to such
holder upon request a written statement by the Corporation as to its compliance
with the reporting requirements of Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Corporation, and such other reports and documents so filed as such holder may
reasonably request in availing himself of any rule or regulation of the
Commission allowing him to sell any such Registrable Securities without
registration.
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15. Effectiveness of this Agreement. This Agreement will become
effective upon the consummation of the Merger. This Agreement shall be null and
void and of no force or effect if the Merger Agreement is terminated prior to
the consummation of the Merger. Upon the consummation of the Merger, the parties
hereto shall cause the Corporation to execute a copy of this Agreement and
become a party to this Agreement.
16. Amendments and Waivers. The provisions of this Agreement may be
amended only upon the written agreement of the Corporation, the Stockholder or
Stockholders holding a majority of the Common Stock, and by Minority Holders
holding a majority of the Common Stock held by all Minority Holders; provided
that the provisions of Section 14 of this Agreement may be amended upon the
written agreement of the Corporation and the Stockholder or Stockholders holding
a majority of the Common Stock; provided further that such proposed amendment is
not disproportionately adverse to the Minority Stockholders. Any waiver, permit,
consent or approval of any kind or character on the part of any holders of any
provisions or conditions of this Agreement must be made in writing and shall be
effective only to the extent specifically set forth in such writing.
17. Successors and Assigns. Except as limited by Section 2 hereof,
all covenants and agreements contained in this Agreement by or on behalf of any
of the parties hereto shall bind and inure to the benefit of the respective
permitted successors and assigns of the parties hereto, and each transferee of
all or any portion of the Common Stock held by the parties hereto, whether so
expressed or not.
18. Descriptive Headings. The descriptive headings of this Agreement
are inserted for convenience of reference only and do not constitute a part of
and shall not be utilized in interpreting this Agreement.
19. Notices. Each notice, demand, request, request for approval,
consent, approval, disapproval, designation or other communication (each of the
foregoing being referred to herein as a "Notice") required or desired to be
given or made under this Agreement shall be in writing (except as otherwise
provided in this Agreement), and shall be effective and deemed to have been
received (i) when delivered in person, (ii) when sent by fax with receipt
acknowledged, (iii) five days after having been mailed by certified or
registered United States mail, postage prepaid, return receipt requested, or
(iv) the next business day after having been sent by a nationally recognized
overnight mail or courier service, receipt requested. Notices shall be addressed
as follows (a) If to any Stockholder, at the address or fax number set forth on
the records of the Corporation or at such other address or fax number as such
party shall have furnished to the Corporation in writing, or (b) if to any
assignee or transferee of a Post-Merger Stockholder, at such address or fax
number as such assignee or transferee shall have furnished the Corporation in
writing, or (c) if to the Corporation, at the address set forth below, or (d) in
any case, to such address as may have been provided to the parties by notice as
set forth in this Section 19:
If to the Corporation to:
SunSource, Inc.
One Logan Square
Philadelphia, PA 19103
Facsimile: (215) 282-1309
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Attn: Chief Executive Officer
20. Governing Law. THIS AGREEMENT AND THE RIGHTS AND DUTIES OF THE
PARTIES HERETO SHALL BE GOVERNED BY THE LAWS OF THE STATE OF DELAWARE WITHOUT
REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF.
21. Execution in Counterparts. This Agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original, and such counterparts together shall constitute one
instrument.
22. Consent to Jurisdiction. The Corporation and each of the
Stockholders hereby irrevocably agree that any suit, action, proceeding or claim
against it arising out of or in any way relating to this Agreement, or any
judgment entered by any court in respect thereof, may be brought or enforced in
the state or federal courts located in the state of Delaware, and the
Corporation and each of the Stockholders hereby irrevocably waive, to the
fullest extent permitted by law, any objection which they may now or hereafter
have to the venue of any proceeding brought in Delaware and further irrevocably
waive any claims that any such proceeding has been brought in an inconvenient
forum.
23. Waiver of Jury Trial. The Corporation and each of the
Stockholders hereby expressly waive any right to a trial by jury in any action
or proceeding to enforce or defend any right, power or remedy under or in
connection with this Agreement or under or in connection with any amendment,
instrument, document or agreement delivered or which may in the future be
delivered in connection herewith or arising from any relationship existing in
connection with this Agreement, and agree that any such action shall be tried
before a court and not before a jury. The terms and provisions of this Section
23 constitute a material inducement for the parties entering into this
Agreement.
24. Remedies. Each of the parties to this Agreement shall be entitled
to enforce its rights under this Agreement specifically, to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights existing in its favor. The parties hereto agree and acknowledge
that money damages may not be an adequate remedy for any breach of the
provisions of this Agreement and that any party shall be entitled to immediate
injunctive relief or specific performance without bond or the necessity of
showing actual monetary damages in order to enforce or prevent any violations of
the provisions of this Agreement.
25. Severability. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be prohibited
by or invalid under applicable law, such provision shall be ineffective only to
the extent of such prohibition or invalidity, without invalidating the remainder
of this Agreement.
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26. Final Agreement. This Agreement entered into by the parties
hereto constitutes the complete and final agreement of the parties concerning
the matters referred to herein, and supersedes all prior agreements and
understandings.
27. Joint Participating in Drafting. The language used herein shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and no rule of strict construction will be applied against any
party to this Agreement.
28. Termination. Except as otherwise provided herein and except for
the provision of Section 14 hereof, this Agreement shall terminate upon: (a) the
closing of the initial Qualified Public Offering; (b) the dissolution of the
Corporation; or (c) upon the execution of a written instrument in accordance
with Section 16 hereof.
[Signatures on next page.]
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This Stockholders Agreement was executed as of the date first set forth
above.
POST-MERGER STOCKHOLDERS:
ALLIED CAPITAL CORPORATION
1919 Pennsylvania Ave., 3rd Floor
Washington, D.C. 20006
Fax: (202) 973-6351
By:
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Name: G. Cabell Williams
Title: Managing Director
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Maurice P. Andrien, Jr.
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Joseph M. Corvino
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Max W. Hillman, Jr.
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Stephen W. Miller
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Richard P. Hillman
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George Heredia
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Gary Seeds
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Terry Rowe
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James Waters
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Dennis Blake
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Richard Buller
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Kenneth Foskey
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Michael Mueller
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John McDonnell
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Mark Yeary
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John Marshall
To be executed upon the consummation of the Merger:
SUNSOURCE, INC.
One Logan Square
Philadelphia, PA ______
By:
--------------------------------------
Name:
Title:
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