EXHIBIT 10.3
CONTRIBUTION AGREEMENT
CONTRIBUTION AGREEMENT, dated as of March__, 1997, between
SunSource Inc., a Delaware corporation (the "Corporation") and Xxxxxx Brothers
Holdings Inc., a Delaware corporation ("Xxxxxx Brothers").
BACKGROUND
The Corporation has been formed to accomplish the conversion
(the "Conversion") of SunSource L.P. (the "Partnership") to corporate form. In
the Conversion, (i) the outstanding Class A limited partnership interests will
be converted into 11.6% Trust Preferred Securities (the "Trust Preferred
Securities") issued by SunSource Capital Trust (the "Trust") and cash and (ii)
the outstanding Class B limited partnership interests will be converted into
Common Stock of the Corporation (the "Common Stock").
Also as part of the Conversion, a subsidiary of Xxxxxx
Brothers, Xxxxxx/SDI, Inc., which is the general partner of SDI Partners I,
L.P., the general partner of the Partnership (the "General Partner"), and
certain members of management (the "Management Employees") who are the limited
partners of the General Partner, will receive Common Stock in exchange for their
interests in the General Partner. 75,000 shares of Common Stock (the "Escrow
Shares") to be received by the Management Employees will be placed in escrow to
be distributed after two years if all distributions on the Trust Preferred
Securities have then been paid.
The Trust's Declaration of Trust provides that, in the case of
the occurrence of a Tax Event (as defined therein), under certain circumstances
the Trust may redeem the Trust Preferred Securities at a redemption price of
101% of liquidation preference ($25.25) if the redemption occurs within five
years of the effective time of the Conversion (an "Initial Tax Redemption") and
$25 thereafter.
The purpose of this Agreement is to provide for contribution
by Xxxxxx Brothers to the Corporation of a portion of the premium payable upon
an Initial Tax Redemption if the Escrow Shares are still held in escrow and
Xxxxxx Brothers and its Affiliates have disposed of some or all of the Common
Stock received by it or its Affiliates in the Conversion. For purposes of this
Agreement "Affiliates" of Xxxxxx Brothers shall mean Xxxxxx LTD I, Inc.,
Xxxxxx/SDI, Inc. and Xxxxxx Brothers Capital Partners I to the extent of the
general partnership interest held in it by LB I Group, Inc.
NOW, THEREFORE, in consideration of the consideration to be
received by Xxxxxx Brothers or its Affiliates in the Conversion, Xxxxxx Brothers
agrees as follows:
Section 1. Contribution. Upon the occurrence of an Initial Tax
Redemption, Xxxxxx Brothers will pay, or cause one of its subsidiaries to pay,
to the Corporation in cash an amount equal to the product obtained by
multiplying: (i) 1% of the per share liquidation
preference of the Trust Preferred Securities by (ii) the number of shares of
Trust Preferred Securities redeemed under the Initial Tax Redemption by (iii) a
fraction, the numerator of which is equal to the number of Escrow Shares held in
escrow at the time of the Initial Tax Redemption, and the denominator of which
is equal to the number of Escrow Shares held in escrow immediately after the
Conversion by (iv) a fraction, the numerator of which is equal to the number of
shares of Common Stock held by Xxxxxx Brothers and its Affiliates immediately
after the Conversion minus the number of shares of Common Stock held by Xxxxxx
Brothers and its Affiliates at the time of the Initial Tax Redemption, and the
denominator of which is equal to the total number of shares of Common Stock
outstanding immediately after the Conversion. All share numbers shall be
appropriately adjusted for any stock splits or stock dividends. Such payment
will be made within 15 days after the Corporation and Xxxxxx Brothers have
agreed in writing to the calculation of the amount due pursuant to this Section.
Section 2. Term. This Agreement shall terminate upon the
second anniversary of the effective time of the Conversion.
Section 3. Governing Law. This Agreement shall be governed in
all respects by the laws of the State of Delaware applicable to contracts made
and to be performed in that State.
Section 4. Notices. Notices under this Agreement shall be
given:
(i) If to the Corporation:
SunSource Inc.
0000 Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxxxx
(ii) If to Xxxxxx Brothers:
c/x Xxxxxx Brothers Inc.
3 World Financial Center
Xxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxxx
or to such other address as a party shall designate in writing to the other
party.
IN WITNESS WHEREOF, the parties hereto have caused this
Contribution Agreement to be duly executed as of the date first above written.
SUNSOURCE INC.
By
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Title:
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XXXXXX BROTHERS HOLDINGS INC.
By
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Title:
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