REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made and
entered into as of , 1997, by and among SunSource Inc., a Delaware corporation
(the "Company"), and Xxxxxx Brothers (as defined below) and the Senior
Executives (as defined below) (collectively, the "Stockholders").
RECITALS
A. The Company is issuing shares of Common Stock of the Company to the
Stockholders (collectively, the "Shares") in connection with the conversion of
SunSource L.P. to corporate form (the "Conversion").
B. The Company desires to grant to the Stockholders certain
registration rights with respect to the Shares held by the Stockholders.
C. The parties hereto desire to set forth the terms and conditions of
the Company's covenants and agreements in respect of the registration of the
Shares with the Securities and Exchange Commission and all applicable state
securities agencies.
D. In consideration of the premises and the mutual agreements contained
herein, the parties hereby agree as follows:
AGREEMENT
1. Definitions.
As used in this Agreement, the following capitalized terms shall have
the following meanings:
Advice: As defined in the last paragraph of Section 5 hereof.
Common Stock: Shares of the Company's common stock, $.01 par value, as
the same may be constituted from time to time.
Company Notice: As defined in Section 4(a) hereof.
Demand Registration: As defined in Section 3(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder, as in effect from time to time.
Holder: Each of (i) Xxxxxx Brothers and any of its transferees and (ii)
the Senior Executives and their transferees.
Xxxxxx Brothers: LB I Group, Inc., Xxxxxx Ltd. I Inc., Xxxxxx/SDI, Inc.
and Xxxxxx Brothers Capital Partners I, L.P., collectively.
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Lock-up Period: As defined in Section 9(a) hereof.
Person: An individual, partnership, corporation, joint venture, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
Piggyback Notice: As defined in Section 4(a) hereof.
Piggyback Registration Statement: As defined in Section 4(a) hereof.
Prospectus: The prospectus included in any Registration Statement, as
amended or supplemented by any prospectus supplement with respect to the terms
of the offering of any portion of the Registrable Securities covered by the
Registration Statement and all other amendments and supplements to the
Prospectus, including post-effective amendments and all material incorporated by
reference in such Prospectus.
Registrable Securities: (i) all Shares acquired by Xxxxxx Brothers or
any of its affiliates pursuant to the Conversion, (ii) the number of Shares
acquired by the Senior Executives pursuant to the Conversion as set forth on
Schedule 1 hereto and (iii) any securities issued or issuable with respect to
such Shares in clause (i) or (ii) by way of a stock dividend or stock split or
other distribution or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. A Share ceases
to be a Registrable Security when (a) it has been effectively registered under
the Securities Act and disposed of in accordance with the Registration Statement
covering it or (b) it has otherwise been transferred in accordance with the
Securities Act and no further restriction on transfer remains or (c) it can be
sold without restriction under Rule 145(d)(2) or (3) under the Securities Act.
Registration Expenses: As defined in Section 6 hereof.
Registration Statement: Any registration statement of the Company which
covers Registrable Securities pursuant to the provisions of this Agreement,
including (i) the Prospectus, (ii) amendments and supplements to such
Registration Statement, (iii) post-effective amendments, (iv) all exhibits and
all material incorporated by reference in such Registration Statement, (v) any
registration statement pursuant to a Demand Registration and (vi) any Piggyback
Registration Statement.
Securities Act: The Securities Act of 1933, as amended, and the rules
and regulations thereunder as in effect from time to time.
SEC: The Securities and Exchange Commission.
Senior Executives: Each of Xxxxxx X. Xxxxxxxx, Xxxx X. XxXxxxxxx and
Xxxxxx X. Xxxxxxxx and their respective S-corporations parties hereto.
Underwritten Offering: The offering and sale of securities of the
Company covered by any Registration Statement pursuant to a firm commitment
underwriting to an underwriter
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at a fixed price for reoffering or pursuant to agency or best efforts
arrangements with an underwriter.
Unless the context otherwise requires: (i) "or" is not exclusive; and (ii) words
in the singular include the plural and words in the plural include the singular.
2. Securities Subject to this Agreement.
The securities entitled to the benefits of this Agreement are the
Registrable Securities but, with respect to any particular Registrable
Securities, only so long as such security continues to be a Registrable
Security.
3. Xxxxxx Brothers' Registration Rights.
(a) Demand Registration. At any time after the effective time of the
Conversion, Xxxxxx Brothers may make a written request to the Company for
registration with the SEC under and in accordance with the provisions of the
Securities Act of all or any part of its Registrable Securities (a "Demand
Registration"). Such request shall specify the number of Registrable Securities
to be registered and the intended methods of disposition thereof. Promptly after
receipt of any such request the Company shall give written notice of such
requested registration to all other Holders of Registrable Securities and
thereupon shall, as expeditiously as possible, use its best efforts to effect
the registration under the Securities Act of (i) the Registrable Securities that
the Company has been so requested to register in the Demand Registration, and
(ii) all other Registrable Securities requested to be registered pursuant to the
following sentence. Upon the receipt of such notice from the Company, each
Holder shall be entitled for a period of 15 days from the date of receipt of
such notice to deliver a written request to the Company specifying the number of
his Registrable Securities to be included in such Demand Registration.
(b) Shelf Registration. At any time after the expiration of the Lock-up
Period with respect to the initial Demand Registration, Xxxxxx Brothers may make
a written request to the Company to file a shelf registration statement covering
the remainder of Xxxxxx Brothers' Registrable Securities. Promptly after receipt
of any such request the Company shall, as expeditiously as possible, use its
best efforts to effect the registration under the Securities Act of such
Registrable Securities and shall use its best efforts to keep such shelf
registration statement continuously effective until all such Registrable
Securities have been sold thereunder.
(c) Registration Expenses. In any registration pursuant to this Section
3, the Company will pay all Registration Expenses.
(d) Selection of Underwriters. If any of the Registrable Securities
covered by a registration pursuant to this Section 3 are to be sold in an
Underwritten Offering, the investment banker or investment bankers and manager
or managers that will administer the offering will be selected by Xxxxxx
Brothers.
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(e) Reduction. If a Demand Registration pursuant to this Section 3
involves an underwritten offering and the managing underwriter advises the
Company in writing that, in its opinion, the number of securities requested to
be included in such registration exceeds the number which can be sold in such
offering without having a material adverse effect on the price, timing or
distribution of such securities, the Company will include in such registration
only the Registrable Securities requested to be included in such registration
which, in the opinion of such managing underwriter, can be sold without having
such adverse effect, such amount to be allocated pro rata among all requesting
Holders on the basis of the relative number of shares of Registrable Securities
requested to be included in such registration by each such Holder.
4. Piggyback Registration Rights.
(a) Requests for Piggyback Registration. The Company covenants and
agrees with each Holder that, in the event the Company proposes to file at any
time and from time to time a registration statement on any form for the general
registration of securities under the Securities Act with respect to the offering
of any class of equity security (other than in connection with an offering
solely to the Company's employees pursuant to a registration statement on Form
S-8 under the Securities Act or an offering pursuant to a registration statement
on Form S-4 under the Securities Act, or any successor forms thereto), whether
or not for sale for its own account (a "Piggyback Registration Statement"), then
the Company shall in each such case promptly give written notice (a "Company
Notice") to each Holder of such proposed filing, and such notice shall offer to
each Holder the opportunity to include in such Piggyback Registration Statement
such number of Registrable Securities as each may request. Upon the written
request of any such Holder (a "Piggyback Notice") made within 15 days after the
receipt of any such notice (which request shall specify the Registrable
Securities intended to be sold by such Holder), the Company will use its best
efforts to effect the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register by the Holders
thereof. Notwithstanding the foregoing, the Company shall not be obligated to
register the Registrable Securities of any Holder (i) unless a Piggyback Notice
shall have been received by the Company within 15 days of receipt of the Company
Notice by such Holder, or (ii) if the Company shall, within 10 calendar days
after receipt of a Piggyback Notice, have delivered to any Holder whose
Registrable Securities shall have been the subject of a Piggyback Notice an
opinion of counsel reasonably satisfactory to said Holder to the effect that the
proposed transfer of all such Registrable Securities can be made at such time
without registration in accordance with Rule 145(d) under the Securities Act or
any other exemption from the registration provisions thereof (other than Rule
144A).
The Company shall use its best efforts to cause the underwriter of a
proposed offering, if any, to permit the Holders holding Registrable Securities
requested to be included in the Piggyback Registration Statement to include such
Registrable Securities in the proposed offering on terms and conditions at least
as favorable to the Holders holding such Registrable Securities as those offered
with respect to the other securities of the Company included therein.
Notwithstanding the foregoing, if the lead managing underwriter shall advise the
Company in writing that, in its opinion, the distribution of the Registrable
Securities requested
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to be included in the Piggyback Registration Statement concurrently with the
securities being registered by the Company would materially adversely affect the
price, timing or distribution of such securities by the Company, then the
Company will include in such registration (i) first, 100% of the securities the
Company proposes to sell and (ii) second, to the extent of the number of
Registrable Securities requested to be included in such registration, which, in
the opinion of such managing underwriter, can be sold without having the adverse
effect referred to above, the number of Registrable Securities which the Holders
have requested to be included in such registration, such amount to be allocated
pro rata among all requesting Holders on the basis of the relative number of
shares of Registrable Securities requested to be included in such registration
by each such Holder.
(b) Registration Expenses. In connection with the registration of
Registrable Securities in accordance with Section 4(a) above, the Company agrees
to pay all Registration Expenses.
5. Registration Procedures.
Whenever any Holder has requested that any Registrable Securities be
registered pursuant to this Agreement, the Company will promptly take all such
actions as may be necessary or desirable to permit the sale of such Registrable
Securities in accordance with the intended method or methods of disposition
thereof, and pursuant thereto the Company will as expeditiously as possible:
(a) with respect to a request to file a Registration Statement
covering Registrable Securities made pursuant to Section 3 hereof, use
its best efforts to prepare and file with the SEC, as soon as
practicable, but in no event later than 45 days after receipt of such
request a Registration Statement on a form for which the Company then
qualifies which is satisfactory to the Company and Xxxxxx Brothers
(unless the offering is made on an underwritten basis, including on a
best efforts underwriting basis, in which event the managing
underwriter or underwriters shall determine the form to be used) and
which form shall be available for the sale of the Registrable
Securities in accordance with the intended method or methods of
distribution thereof, and use its best efforts to cause such
Registration Statement to become effective as soon as practicable after
receipt of such request; the Company shall not file any Registration
Statement pursuant to Section 3 hereof or any amendment thereto or any
Prospectus or any supplement thereof (including such documents
incorporated by reference) to which Xxxxxx Brothers or the
underwriters, if any, shall reasonably object in light of the
requirements of the Securities Act or any other applicable laws or
regulations;
(b) before filing a Registration Statement or Prospectus or
any amendments or supplements thereto (including documents to be
incorporated by reference therein), the Company will within five days
of filing, furnish to the Holders and the underwriters, if any, copies
of all such documents in substantially the form proposed to be filed
(including documents incorporated therein by reference), to enable the
Holders and the underwriters, if any, to review such documents prior to
the filing
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thereof, and the Company shall make such reasonable changes thereto
(including changes to, or the filing of amendments reflecting such
changes to, documents incorporated by reference) as may be reasonably
requested by the Holders and the managing underwriter or underwriters,
if any;
(c) subject to the five-day review period required by
paragraph (b) above, prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be
necessary to keep the Registration Statement continuously effective for
a period of not less than 120 days or such longer period as is required
for the intended method of distribution, or such shorter period which
will terminate when all Registrable Securities covered by such
Registration Statement have been sold or withdrawn; cause the
Prospectus to be supplemented by any required Prospectus supplement,
and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with
the intended methods of disposition by the Holders thereof set forth in
such Registration Statement or supplement to the Prospectus;
(d) notify the Holders and the managing underwriters, if any,
promptly, and (if requested by any such Person) confirm such advice in
writing, (1) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same
has become effective, (2) of any request by the SEC for amendments or
supplements to the Registration Statement or the Prospectus or for
additional information, (3) of the issuance by the SEC of any stop
order suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose, (4) if at any time the
representations and warranties of the Company contemplated by paragraph
(o) below cease to be true and correct, (5) of the receipt by the
Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any
jurisdiction or the initiation or threatening of any proceeding for
such purpose, and (6) of the happening of any event which makes any
statement made in the Registration Statement, the Prospectus or any
document incorporated therein by reference untrue or which requires the
making of any changes in the Registration Statement, the Prospectus or
any document incorporated therein by reference in order to make the
statements therein not misleading;
(e) make every reasonable effort to obtain the withdrawal of
any order suspending the effectiveness of the Registration Statement at
the earliest possible moment;
(f) as promptly as practicable after filing with the SEC of
any document which is incorporated by reference into the Registration
Statement or the Prospectus (after initial filing of the Registration
Statement) provide copies of such document to counsel to the Holders
and to the managing underwriters;
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(g) furnish to the Holders and each managing underwriter,
without charge, at least one signed copy of the Registration Statement
and any post-effective amendment thereto, including financial
statements and schedules, all documents incorporated therein by
reference and all exhibits (including those incorporated by reference)
and a reasonable number of conformed copies of all such documents;
(h) deliver to the Holders and the underwriters, if any, as
many copies of the Prospectus (including each preliminary prospectus)
and any amendment or supplement thereto as such Persons may reasonably
request; the Company consents to the use of the Prospectus or any
amendment or supplement thereto by the Holders and the underwriters, if
any, in connection with the offering and sale of the Registrable
Securities covered by the Prospectus or any amendment or supplement
thereto;
(i) prior to the date on which the Registration Statement is
declared effective, use its best efforts to register or qualify or
cooperate with the Holders and the underwriters, if any, and their
respective counsel in connection with the registration or qualification
of such Registrable Securities for offer and sale under the securities
or blue sky laws of such jurisdictions as any seller or underwriter
reasonably requests in writing and do any and all other acts or things
necessary or advisable to enable the disposition in such jurisdictions
of the Registrable Securities covered by the Registration Statement;
provided that the Company will not be required to qualify generally to
do business in any jurisdiction where it is not then so qualified or
take any action which would subject it to general service of process in
any such jurisdiction where it is not then so subject;
(j) cooperate with the Holders and the managing underwriters,
if any, to facilitate the timely preparation and delivery of
certificates representing Registrable Securities to be sold and not
bearing any restrictive legends; and enable such Registrable Securities
to be in such denominations and registered in such names as the
managing underwriters may request at least two business days prior to
any sale of Registrable Securities to the underwriters;
(k) use its best efforts to cause the Registrable Securities
covered by the Registration Statement to be registered with or approved
by such other governmental agencies or authorities within the United
States as may be necessary to enable the seller or sellers thereof or
the underwriters, if any, to consummate the disposition of such
Registrable Securities;
(l) upon the occurrence of any event contemplated by paragraph
(d)(6) above, prepare a supplement or post-effective amendment to the
Registration Statement or the Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of the Registrable Securities,
the Prospectus will not contain an untrue statement of a material fact
or omit to state any material fact necessary to make the statements
therein not misleading;
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(m) use its best efforts to cause all Registrable Securities
covered by the Registration Statement to be listed on each securities
exchange on which similar securities issued by the Company are then
listed if requested by the Holders or the managing underwriters, if
any;
(n) provide a transfer agent and registrar for all Registrable
Securities;
(o) enter into such agreements (including an underwriting
agreement) and take all such other actions in connection therewith as
the Holders or the managing underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting
agreement is entered into and whether or not the registration is an
underwritten registration (1) make such representations and warranties
to the Holders and the underwriters, if any, in form, substance and
scope as are customarily made by issuers to underwriters in primary
underwritten offerings and confirm the accuracy of the same if and when
requested, and matters relating to the compliance of the Registration
Statement and the Prospectus with the Securities Act; (2) obtain
opinions of counsel to the Company and updates thereof (which counsel
and opinions (in form, scope and substance) shall be reasonably
satisfactory to the managing underwriters) addressed to the Holders and
the underwriters, if any, covering the matters customary in
underwritten primary offerings and such other matters as may be
reasonably requested by the Holders and underwriters, if any; (3)
obtain "cold comfort" letters and updates thereof from the Company's
independent certified public accountants addressed to the Holders and
the underwriters, if any, such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters by underwriters in connection with primary underwritten
offerings; (4) if an underwriting agreement is entered into, the same
shall set forth in full the indemnification and contribution provisions
and procedures of Sections 7 and 8 hereof with respect to all parties
to be indemnified pursuant to said Section; and (5) the Company shall
deliver such documents and certificates as may be requested by the
Holders and the managing underwriters, if any, to evidence compliance
with clause (1) above and with any customary conditions contained in
the underwriting agreement or other agreement entered into by the
Company. The above shall be done at each closing under such
underwriting or similar agreement or as and to the extent required
thereunder;
(p) make available for inspection during normal business hours
by the Holders, any underwriter participating in any disposition
pursuant to such registration statement, and any attorney, accountant
or other agent retained by any such seller or underwriter, all
financial and other records, pertinent corporate documents and
properties of the Company reasonably requested by any such seller,
underwriter, attorney, accountant or agent, and cause the Company's
officers, directors and employees to supply all information reasonably
requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement and otherwise
cooperate in any due diligence investigation in connection with a
public offering of Registrable Securities;
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(q) in connection with any underwritten offering of
Registrable Securities, participate, to the extent reasonably requested
by the managing underwriter or the Holders, in efforts to sell the
Registrable Securities under such offering (including, without
limitation, participating in "road show" meetings with prospective
investors) that would be customary in a primary offering of equity
securities of the Company;
(r) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make generally
available to its security holders, earnings statements satisfying the
provisions of Section 11(a) of the Securities Act, no later than 45
days after the end of any 12-month period (1) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm or best efforts underwriting offering, and (2)
beginning with the first month of the Company's first fiscal quarter
commencing after the effective date of the Registration Statement,
which statements shall cover said 12-month periods.
The Company may require the Holders to furnish to the Company such
information and documents regarding the distribution of such securities and the
seller as the Company may from time to time reasonably request in writing.
The Holders each agree that upon receipt of any notice from the Company
of the happening of any event of the kind described in Section 5(d)(6) hereof,
such Holder will forthwith discontinue disposition of Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 5(l) hereof, or until it is advised in
writing (the "Advice") by the Company that the use of the Prospectus may be
resumed, and has received copies of any additional or supplemental filings which
are incorporated by reference in the Prospectus, and, if so directed by the
Company, each Holder will, or will request the underwriters to, deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable
Securities current at the time of receipt of such notice. If the Company shall
give such notice, the time periods mentioned in Section 5(c) hereof shall be
extended by the number of days during the period from and including the date of
the giving of such notice pursuant to Section 5(d)(6) to and including the date
when the Holders shall have received the copies of the supplemented or amended
prospectus contemplated by Section 5(l) hereof or the Advice.
6. Registration Expenses.
Except as otherwise provided herein, "Registration Expenses" include
all expenses incident to the Company's performance of or compliance with this
Agreement, including without limitation all registration and filing fees,
including with respect to filings required to be made with the National
Association of Securities Dealers, fees and expenses of compliance with
securities or blue sky laws (including reasonable fees and disbursements of
counsel for the underwriters in connection with blue sky qualifications of the
Registrable Securities and determination of their eligibility for investment
under the laws of such jurisdictions as the managing underwriters or holders of
a majority of the Registrable Securities being sold may designate), printing
expenses, messenger, telephone and delivery expenses, and fees and
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disbursements of counsel for the Company and of its independent certified public
accountants (including the expenses of any "cold comfort" letters required by or
incident to such performance), and the fees and expenses incurred in connection
with the listing of the securities to be registered on each securities exchange
on which similar securities issued by the Company are then listed. The Company
shall, in any event, pay its internal expenses (including, without limitation,
all salaries and expenses of its officers and employees performing legal or
accounting duties) and the expense of any annual audit, which are not
"Registration Expenses" for purposes of this Agreement. In no event shall the
Company be liable for the payment of any discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar industry professionals
relating to the distribution of the Registrable Securities.
7. Indemnification.
(a) Indemnification by Company. The Company shall indemnify and hold
harmless each Holder, its officers and employees and each person, if any, who
controls any Holder within the meaning of the Securities Act, from and against
any loss, claim, damage or liability, joint or several, or any action in respect
thereof (including, but not limited to, any loss, claim, damage, liability or
action relating to purchases and sales of the Registrable Securities), to which
that Holder, officer, employee or controlling person may become subject, under
the Securities Act or otherwise, insofar as such loss, claim, damage, liability
or action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement,
Prospectus or preliminary prospectus, or in any amendment or supplement thereto
or (ii) the omission or alleged omission to state in any Registration Statement,
Prospectus or preliminary prospectus, or in any amendment or supplement thereto,
any material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse each Holder and each such
officer, employee and controlling person promptly upon demand for any legal or
other expenses reasonably incurred by that Holder, officer, employee or
controlling person in connection with investigating or defending or preparing to
defend against any such loss, claim, damage, liability or action as such
expenses are incurred; provided, however, that the Company shall not be liable
in any such case to the extent that any such loss, claim, damage, liability or
action arises out of, or is based upon, any untrue statement or alleged untrue
statement or omission or alleged omission made in any Registration Statement,
Prospectus, preliminary prospectus or in any such amendment or supplement in
reliance upon and in conformity with the written information furnished to the
Company by or on behalf of any Holder specifically for inclusion therein. The
foregoing indemnity agreement shall be in addition to any liability which the
Company may otherwise have to any Holder or to any officer, employee or
controlling person of that Holder. The Company will also indemnify underwriters,
their officers and directors and each Person who controls such Persons (within
the meaning of the Securities Act) (i) to the same extent as provided above with
respect to the indemnification of each Holder of Registrable Securities and (ii)
is customarily required of issuers by such underwriters.
(b) Indemnification by Holders. Each Holder, severally and not jointly,
shall indemnify and hold harmless the Company, its officers and employees, each
of its directors
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and each person, if any, who controls the Company within the meaning of the
Securities Act, from and against any loss, claim, damage or liability, joint or
several, or any action in respect thereof, to which the Company or any such
director, officer, employee or controlling person may become subject, under the
Securities Act or otherwise, insofar as such loss, claim, damage, liability or
action arises out of, or is based upon, (i) any untrue statement or alleged
untrue statement of a material fact contained in any Registration Statement,
Prospectus or preliminary prospectus, or in any amendment or supplement thereto,
or (ii) the omission or alleged omission to state in any Registration Statement,
Prospectus, preliminary prospectus or in any amendment or supplement thereto any
material fact required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that the untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with the written information furnished to the
Company by or on behalf of that Holder specifically for inclusion therein, and
shall reimburse the Company and any such director, officer, employee or
controlling person for any legal or other expenses reasonably incurred by the
Company or any such director, officer, employee or controlling person in
connection with investigating or defending or preparing to defend against any
such loss, claim, damage, liability or action as such expenses are incurred. The
foregoing indemnity agreement shall be in addition to any liability which any
Holder may otherwise have to the Company or any such director, officer, employee
or controlling person. The Holders will also indemnify underwriters, their
officers and directors and each Person who controls such Persons (within the
meaning of the Securities Act) (i) to the same extent as provided above with
respect to the indemnification of the Company and (ii) is customarily required
of selling stockholders by such underwriters. In no event shall the liability of
a Holder hereunder or in the underwriting agreement be greater in amount than
the dollar amount of the proceeds received by such Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation. The
Company shall be entitled to receive indemnities from underwriters to the same
extent as provided above with respect to information so furnished in writing by
such Persons.
(c) Conduct of Indemnification Proceedings. Promptly after receipt by
an indemnified party under this Section 7 of notice of any claim or the
commencement of any action, the indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under this Section 7,
notify the indemnifying party in writing of the claim or the commencement of
that action; provided, however, that the failure to notify the indemnifying
party shall not relieve it from any liability which it may have under this
Section 7 except to the extent it has been materially prejudiced by such failure
and, provided further, that the failure to notify the indemnifying party shall
not relieve it from any liability which it may have to an indemnified party
otherwise than under this Section 7. If any such claim or action shall be
brought against an indemnified party, and it shall notify the indemnifying party
thereof, the indemnifying party shall be entitled to participate therein and, to
the extent that it wishes, jointly with any other similarly notified
indemnifying party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the indemnifying party
to the indemnified party of its election to assume the defense of such claim or
action, the indemnifying party shall not be liable to the indemnified party
under this Section 7 for any legal or other expenses subsequently incurred by
the indemnified party in connection with the defense thereof other than
reasonable costs of investigation; provided,
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however, that Xxxxxx Brothers shall have the right to employ counsel to
represent jointly Xxxxxx Brothers and those other Holders and their respective
officers, employees and controlling persons who may be subject to liability
arising out of any claim in respect of which indemnity may be sought by the
Holders against the Company under this Section 7 if, in the reasonable judgment
of Xxxxxx Brothers, it is advisable for Xxxxxx Brothers and those Holders,
officers, employees and controlling persons to be jointly represented by
separate counsel, and in that event the fees and expenses of such separate
counsel shall be paid by the Company. Each indemnified party, as a condition of
the indemnity agreements contained in Sections 7(a) and 7(b), shall use its best
efforts to cooperate with the indemnifying party in the defense of any such
action or claim. No indemnifying party shall (i) without the prior written
consent of the indemnified parties (which consent shall not be unreasonably
withheld), settle or compromise or consent to the entry of any judgment with
respect to any pending or threatened claim, action, suit or proceeding in
respect of which indemnification or contribution may be sought hereunder
(whether or not the indemnified parties are actual or potential parties to such
claim or action) unless such settlement, compromise or consent includes an
unconditional release of each indemnified party from all liability arising out
of such claim, action, suit or proceeding, or (ii) be liable for any settlement
of any such action effected without its written consent (which consent shall not
be unreasonably withheld), but if settled with its written consent or if there
be a final judgment of the plaintiff in any such action, the indemnifying party
agrees to indemnify and hold harmless any indemnified party from and against any
loss of liability by reason of such settlement or judgment.
8. Contribution.
(a) If the indemnification provided for in Section 7 shall for any
reason be unavailable to or insufficient to hold harmless an indemnified party
under Section 7(a) or 7(b) in respect of any loss, claim, damage or liability,
or any action in respect thereof, referred to therein, then each indemnifying
party shall, in lieu of indemnifying such indemnified party, contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability, or action in respect thereof, in such proportion as
is appropriate to reflect the relative fault of the Company on the one hand and
the Holders on the other with respect to the statements or omissions which
resulted in such loss, claim, damage or liability, or action in respect thereof,
as well as any other relevant equitable considerations. The relative fault shall
be determined by reference to whether the untrue or alleged untrue statement of
a material fact or omission or alleged omission to state a material fact relates
to information supplied by the Company or the Holders, the intent of the parties
and their relative knowledge, access to information and opportunity to correct
or prevent such statement or omission.
(b) The Company and the Holders agree that it would not be just and
equitable if contributions pursuant to this Section 8 were to be determined by
pro rata allocation or by any other method of allocation which does not take
into account the equitable considerations referred to herein. The amount paid or
payable by an indemnified party as a result of the loss, claim, damage or
liability, or action in respect thereof, referred to above in this Section 8
shall be deemed to include, for purposes of this Section 8, any legal or other
expenses
13
reasonably incurred by such indemnified party in connection with investigating
or defending any such action or claim. Notwithstanding the provisions of this
Section 8, no Holder shall be required to contribute any amount in excess of the
amount of proceeds received by such Holder upon the sale of Registrable
Securities giving rise to such contribution obligation exceeds the amount of any
damages which such Holder has otherwise paid or become liable to pay by reason
of any untrue or alleged untrue statement or omission or alleged omission giving
rise to such contribution obligation. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Holders' obligations to contribute as provided
in this Section 8 are several in proportion to the amount of proceeds received
by each Holder upon the sale of Registrable Securities giving rise to such
obligations and not joint.
9. Lock-up Agreements.
(a) The Company and each Holder agrees that, if any registration
statement is filed by the Company in connection with an underwritten public
offering hereunder, it shall not effect any sale or distribution of shares of
Common Stock during the period ("Lock-up Period") prior to and after the
effective date of such registration statement as may be reasonably requested
(with reasonable prior notice) by the managing underwriter of the underwritten
public offering (except as part of such public offering).
(b) The Company agrees not to effect any primary sale or distribution
of any Common Stock prior to the earlier of (i) the closing of the first
secondary offering of Registrable Securities pursuant to Section 3(a) and (ii)
the nine-month period following the date of the Conversion, except for the
issuance of Common Stock to any person in connection with an acquisition by the
Company or its subsidiaries of any business from such person, provided that such
person agrees not to sell any such Common Stock prior to such date without the
consent of the Holders.
10. Public Information.
For a period of three years after the date of this Agreement, the
Company shall cause "adequate current public information" (as such term is used
in Rule 144 promulgated under the Securities Act) to be maintained and shall
timely file all reports required pursuant to the Exchange Act.
11. Miscellaneous.
(a) Remedies. Without limiting the rights of any Holder to pursue all
other legal and equitable remedies available for any breach of the provisions of
this Agreement, including recovery of damages, each will be entitled to specific
performance of their rights under this Agreement. The Company expressly agrees
that monetary damages would not be adequate compensation for any loss incurred
by any Holder by reason of a breach by the Company of the provisions of this
Agreement and that such Holder would sustain irreparable harm, and therefore the
Company further agrees that any such Holder shall be entitled to
14
specific performance to prevent any such breach or any continuing breach hereof
and the Company waives the defense in any action for specific performance that a
remedy at law would be adequate.
(b) No Inconsistent Agreements. The Company will not on or after the
date of this Agreement enter into any agreement with respect to its securities
which is inconsistent with the rights granted to the Holders in this Agreement
or otherwise conflicts with the provisions hereof. The Company has not
previously entered into any agreement with respect to its securities granting
any registration rights to any Person.
(c) Notices. All notices, requests, demands and other communications
provided for by this Agreement shall be in writing (including telecopier or
similar writing) and shall be deemed to have been given at the time when mailed
in any general or branch office of the Untied States Postal Service, enclosed in
a registered or certified postpaid envelope, or sent by Federal Express or other
similar overnight courier service, addressed to the address of the parties
stated below or to such changed address as such party may have fixed by notice
or, if given by telecopier, when such telecopy is transmitted and the
appropriate answerback is received.
(i) If to the Company:
SunSource Inc.
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attn: Xxxxxx X. Xxxxxxxx
(ii) If to Xxxxxx Brothers:
c/x Xxxxxx Brothers Inc.
3 World Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Fax: (000) 000-0000
Attn: Xxxxx Xxxxxxxx
(iii) If to any Senior Executive:
c/o SunSource Inc.
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
Fax: (000) 000-0000
Attn: [Name of Senior Executive]
(d) Successors and Assigns. This Agreement is solely for the benefit of
the parties and their respective successors and assigns, including any Holder.
Nothing herein shall be construed to provide any rights to any other entity or
individual.
15
(e) Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same document.
(f) Headings. Section headings are for convenience only and do not
control or affect the meaning or interpretation of any terms or provisions of
this agreement.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York governing contracts to be made
and performed therein without giving effect to principles of conflicts of law,
and, with respect to any dispute arising out of this Agreement, each party
hereby consents to the exclusive jurisdiction of the courts sitting in such
State.
(h) Severability. Should any part, term, condition or provision hereof
or the application thereof be declared illegal, invalid or otherwise
unenforceable or in conflict with any other law by a court of competent
jurisdiction, the validity of the remaining parts, terms, conditions or
provisions of this Agreement shall not be affected thereby, and the illegal,
invalid or unenforceable portions of this Agreement shall be and hereby are
redrafted to conform with applicable law, while leaving the remaining portions
of this Agreement intact, except to the extent necessary to conform to the
redrafted portions hereof.
(i) Entire Agreement. This Agreement and the letter agreement dated
December __, 1996 among the Stockholders set forth the entire agreement and
understanding between the parties and supersedes all proposals, commitments,
writings, negotiations, discussions, agreements and understandings, oral or
written, of every kind and nature among them concerning the subject matter
hereof. This Agreement may not be amended or otherwise modified except in a
writing signed by both parties hereto. No discharge of the terms hereof shall be
deemed valid unless by full performance by the parties or by a writing signed by
the parties. A waiver by any party of any breach or violation of any this
Agreement shall not be deemed or construed as a waiver of any other breach or
violation hereof.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
SUNSOURCE INC.
By:
---------------------------------
Name:
Title:
LB I GROUP INC.
By:
---------------------------------
16
Name:
Title:
XXXXXX LTD. I INC.
By:
---------------------------------
Name:
Title:
XXXXXX/SDI, INC.
By:
---------------------------------
Name:
Title:
THE SENIOR EXECUTIVES
DOTMAR CORP.
By:
-------------------------- ---------------------------------
Name: Xxxxxx X. Xxxxxxxx
JPM CORP.
By:
-------------------------- ---------------------------------
Name: Xxxx X. XxXxxxxxx
NORVED CORP.
By:
-------------------------- ---------------------------------
Name: Xxxxxx X. Xxxxxxxx
