AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of the
30th day of June, 1999, by and among XxxXxxx.xxx, Inc. ("XxxXxxx.xxx"), a
Delaware corporation, SunglassSite, Inc. ("Subsidiary"), a Delaware corporation,
SunSource Technology, Inc. ("SunSource"), a Florida corporation, and G. Xxxxxx
Xxxxxx ("Xxxxxx"), an individual residing at 0000 Xxxxxxx Xxxxx, Xxxx Xxxxxx,
Xxxxxxx, 00000.
W I T N E S S E T H:
WHEREAS, the Board of Directors of each of XxxXxxx.xxx and SunSource
have determined that it is in the best interests of their respective companies
and stockholders to consummate the business combination transaction provided for
herein and in the Certificate of Merger required to be filed under Delaware and
Florida law, pursuant to which SunSource will, subject to the terms and
conditions set forth herein, merge with and into Subsidiary (the "Merger") so
that, upon the Merger, Subsidiary will be the surviving entity and a wholly
owned subsidiary of XxxXxxx.xxx. Upon the effectiveness of the Merger, all the
outstanding capital stock of SunSource will be cancelled and retired in exchange
for the consideration provided for in Section 2.03 hereof;
WHEREAS, the Merger is intended to be treated as a tax-free
reorganization pursuant to the provisions of Section 368(a)(1)(A) of the Code,
by virtue of the provisions of Section 368(a)(2)(D) of the Code; and
WHEREAS, the parties hereto desire to make certain representations,
warranties and agreements in connection with the Merger and also to prescribe
certain conditions to the Merger.
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements contained herein, and intending to be
legally bound hereby, the parties hereto hereby agree as follows:
Article I.
DEFINITIONS
For purposes of this Agreement, the following terms shall have the
respective meanings set forth below:
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, any successor statute thereto and all final or temporary regulations
promulgated thereunder and generally applicable published rulings entitled to
precedential effect.
"Commission" means the Securities and Exchange Commission.
"Environment" means soil, surface waters, ground waters, land,
stream, sediments, surface or subsurface strata and ambient air.
"Environmental Condition" means any condition with respect to the
Environment on any Facility, whether or not yet discovered, which could or does
result in any Losses (as defined in Section 9.01 hereof), including any
condition resulting from the operation of the business of SunSource or the
operation of the business of any subtenant or occupant of any Facility.
"Environmental Laws" means all Governmental Rules relating to injury
to, or the protection of, real or personal property or human health or the
Environment as such Governmental Rules are or were in effect prior to the
Closing Date, including, without limitation, all valid and lawful requirements
of courts and other Governmental Bodies pertaining to reporting, licensing,
permitting, investigation, remediation and removal of emissions, discharges,
releases or threatened releases of Hazardous Substances, chemical substances,
pesticides, petroleum or petroleum products, pollutants, contaminants or
hazardous or toxic substances, materials or wastes, whether solid, liquid or
gaseous in nature, into the Environment, or relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Substances, pollutants, contaminants or hazardous or toxic
substances, materials or wastes, whether solid, liquid or gaseous in nature.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended from time to time, any successor statute thereto and all final or
temporary regulations promulgated thereunder and generally applicable published
rulings entitled to precedential effect.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time, any successor statute thereto and all final or temporary
regulations promulgated thereunder and generally applicable published rulings
entitled to precedential effect.
"XxxXxxx.xxx Stock" means the Common Stock, par value $0.001 per
share, of XxxXxxx.xxx.
"Facility" means any facility which is now or has heretofore been
owned, used or operated by SunSource.
"GAAP" means generally accepted accounting principles in the U.S. in
effect from time to time.
"Governmental Body" means any federal, state, local or foreign
governmental authority or regulatory body, any subdivision, agency, commission
or authority thereof (including, without limitation, environmental protection,
planning and zoning), or any quasi-governmental or private body exercising any
regulatory authority thereunder (including, without limitation, Network
Solutions, Inc.) and any person directly or indirectly owned by and subject to
the control of any of the foregoing, or any court, arbitrator or other judicial
or quasi-judicial tribunal.
"Governmental Rules" means any statute, law, treaty, rule, code,
ordinance, regulation, policy, permit, certificate or order of any Governmental
Body or any judgment, decree, injunction, writ, order or like action of any
Governmental Body, including without limitation any of the foregoing relating to
the sale, marketing and/or distribution of eyewear, corrective lenses and/or any
optical product or accessory over the internet or otherwise.
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"Hazardous Substances" means any substance:
(a) the presence of which requires notification, investigation
or remediation under any Environmental Law as in effect prior to the Closing
Date;
(b) which prior to the Closing Date is or becomes defined as a
"hazardous waste", "hazardous material" or "hazardous substance" or "pollutant"
or "contaminant" under any present or future Environmental Law or amendments
thereto including, without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act ("CERCLA") (42 U.S.C. Section 9601 et seq.), the
Resource Conservation and Recovery Act ("RCRA") (42 U.S.C. Section 6901 et
seq.), the Clean Air Act (42 U.S.C. Section 7401 et seq.) and any Environmental
Law applicable to any jurisdiction in which or from which SunSource conducts or
has conducted its business;
(c) which is toxic, explosive, corrosive, flammable,
infectious, radioactive, carcinogenic, mutagenic or otherwise hazardous and is
or becomes regulated by any Governmental Body under Environmental Laws prior to
the Closing Date;
(d) which, without limitation, contains gasoline, diesel fuel
or other petroleum hydrocarbons or volatile organic compounds;
(e) which, without limitation, contains polychlorinated
byphenyls (PCBs) or asbestos or urea formaldehyde foam insulation; or
(f) which, without limitation, contains or emits radioactive
particles, waves or materials, including radon gas.
"Lien" means any mortgage, charge, pledge, lien, security interest,
claim, encumbrance or restriction of any kind or nature.
"Net Sales" means gross sales less chargebacks (which are estimated
at 2% of gross sales but are not calculated until two months subsequent to the
close of any calendar month) and returns.
"Promissory Note" shall have the meaning ascribed thereto in Section
2.03(b).
"Release" means a general release, in substantially the form of
Exhibit C hereto, to be executed by Xxxxxx and each of the directors and
officers of SunSource in favor of Subsidiary.
"Securities Act" means the Securities Act of 1933, as amended from
time to time, any successor statute thereto and all final or temporary
regulations promulgated thereunder and generally applicable published rulings
entitled to precedential effect.
"Tax" or "Taxes" shall mean all federal, state, local or foreign
income, capital gains, profits, gross receipts, payroll, capital stock,
franchise, employment, withholding, social security, unemployment, disability,
real property, personal property, stamp, excise, occupation, sales, use,
transfer, mining, value added, investment credit recapture, alternative or
add-on minimum, environmental, estimated or other taxes, fees, imposts, levies,
duties or assessments of any kind, including any interest, penalty and additions
imposed with respect to such amounts.
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"Tax Authority" shall mean any federal, national, foreign, state,
municipal or other local government, any subdivision, agency, commission or
authority thereof, or any quasi-governmental body or other authority exercising
any taxing or tax regulatory authority.
"Tax Returns" shall mean all returns, reports, declarations,
estimates, information returns and statements (including schedules attached
thereto) required to be filed with or supplied to a Tax Authority with respect
to Taxes.
Article II.
PURCHASE AND SALE
Section 2.01 The Merger. (a) Upon the terms and subject to the
conditions hereof and in accordance with Section 252 of the Delaware General
Corporation Law (the "DGCL") and Sections 607.1107 and 607.1108 of the Florida
Business Corporation Act (the "FBCA"), as promptly as practicable following the
satisfaction or waiver of the conditions set forth in Article V and Article VI
hereof, but in no event later than June 30, 1999, the closing (the "Closing") of
the Merger shall take place at the offices of Rosenman & Colin LLP, 575 Madison
Avenue, New York, New York, or such other place and at such time as the parties
shall agree in writing (the "Closing Date").
(b) Concurrently with the Closing, (i) a certificate of merger (the
"Certificate of Merger"), in form and substance reasonably satisfactory to
XxxXxxx.xxx and SunSource, providing for the merger of SunSource with and into
Subsidiary, shall be duly prepared, executed and filed by XxxXxxx.xxx, as the
sole shareholder of the surviving corporation (the "Surviving Corporation"),
with the Secretary of State of the State of Delaware in accordance with the
relevant provisions of the DGCL and (ii) the appropriate officers of SunSource
and Subsidiary shall execute and acknowledge the articles of merger required by
Section 607.1105 of the FBCA (the "Florida Certificate"), and it shall be filed
with the Secretary of State of the State of Florida in accordance with the FBCA,
and the Merger shall become effective upon completion of the latest of such
filings as are required under the DGCL and the FBCA. The date and time the
Merger becomes effective is referred to herein as the "Effective Time."
Section 2.02 Effects of the Merger. (a) The Merger shall have the
effects set forth in the DGCL and the FBCA and as hereinafter set forth.
Following the Merger, the Surviving Corporation shall (i) continue its corporate
existence under the laws of the State of Delaware, (ii) continue to be a wholly
owned subsidiary of XxxXxxx.xxx, (iii) use the name "SunglassSite, Inc." and
(iv) succeed to all rights, assets, liabilities and obligations of SunSource in
accordance with the DGCL and the FBCA. At the Effective Time, pursuant to
Section 259 of the DGCL and Section 607.1106 of the FBCA, the separate existence
of SunSource shall cease and the Surviving Corporation shall succeed, without
other transfer, to all the rights and property of SunSource and shall be subject
to all the debts and liabilities of SunSource in the same manner as if the
Surviving Corporation had itself incurred them. All rights of creditors and all
Liens upon the property of SunSource shall be preserved unimpaired, provided
that such Liens upon property of SunSource shall be limited to the property
affected thereby immediately prior to the time the Merger is effective. Any
action or proceeding pending by or against SunSource
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may be prosecuted to judgment, which shall bind the Surviving Corporation, or
the Surviving Corporation may be proceeded against or substituted in its place.
(b) At the Effective Time, each share of common stock of SunSource
issued and outstanding immediately prior to the Effective Time shall, by reason
of the Merger and without any action by the holder thereof, be cancelled and
retired.
Section 2.03 Merger Consideration. At the Effective Time, all of the
collective shares of common stock, $25.00 par value, of SunSource (the
"SunSource Common Stock") issued and outstanding immediately prior to the
Effective Time shall, by reason of the Merger and without any action by the
holder thereof, be converted into the right to receive the following aggregate
consideration (the "Merger Consideration"):
(a) $212,500 in immediately available funds;
(b) a promissory note for the principal amount of $212,500,
substantially in the form of Exhibit A hereto (the "Promissory Note"), which
note shall be unsecured, payable in full on the earlier of (i) the first
anniversary of the Closing or (ii) consummation by XxxXxxx.xxx of a public
offering transaction for gross proceeds of at least $10,000,000; and
(c) 283,334 shares of XxxXxxx.xxx Stock (the "Transferred Shares"),
66,667 of which will be held in escrow, pursuant to an escrow agreement (the
"Escrow Agreement"), substantially in the form of Exhibit D hereto, which the
parties shall enter into on the Closing Date, for a period of six months
following the Closing Date, as security for the representations, warranties and
covenants made by Xxxxxx and SunSource in this Agreement.
Section 2.04 Directors and Officers, Articles of Incorporation;
By-laws. At the Effective Time, the Board of Directors of the Surviving
Corporation shall consist of Xxxx Xxxxx and Xxxx Xxxxxx, each to hold office in
accordance with the Articles of Incorporation and By-laws of the Surviving
Corporation. The Articles of Incorporation and By-laws of Subsidiary at the
Effective Time shall be the Articles of Incorporation and By-laws of the
Surviving Corporation after the Effective Time, and thereafter may be amended in
accordance with their respective terms and applicable law.
Section 2.05 Reorganization. The parties intend that the Merger be
treated as a plan of reorganization under Section 368(a)(1)(A) and 368(a)(2)(D)
of the Code. The XxxXxxx.xxx Stock issued in the Merger will be issued solely in
exchange for the SunSource Common Stock, and no other transaction (other than
the Merger and as provided in this Agreement) is intended to be an adjustment to
the consideration paid for the SunSource Common Stock. The parties intend that,
aside from that portion of the Merger Consideration set forth in Section 2.03(a)
and (b), no consideration that could constitute "other property" within the
meaning of Section 356(a) of the Code is being transferred by XxxXxxx.xxx for
the purchased shares of SunSource Common Stock. The parties shall not take a
position on any tax return or before any taxing authority that is inconsistent
with this Section 2.05 unless otherwise required by a final and binding
determination or resolution of a Governmental Body with appropriate
jurisdiction, and each party agrees to promptly notify the other party of any
assertion by any taxing authority of any position that is inconsistent with this
Section 2.05.
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Article III.
REPRESENTATIONS AND WARRANTIES OF XXXXXX AND SUNSOURCE
Xxxxxx and SunSource, jointly and severally, represent and warrant
to XxxXxxx.xxx and Subsidiary, that:
Section 3.01 Organization and Good Standing. SunSource is and at the
Closing will be a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida and has and will have the
corporate power and authority to own or lease all of its properties and assets
and to carry on its business as it is now being conducted.
Section 3.02 Foreign Qualification. SunSource is not licensed or
qualified to do business as a foreign corporation in any jurisdiction, and the
character and location of the assets owned or leased by SunSource and, to the
best knowledge of SunSource and Xxxxxx, the nature or conduct of SunSource's
business as it is now being conducted do not make any such license or
qualification necessary.
Section 3.03 Capitalization; Authority of Seller. (a) Xxxxxx is the
sole shareholder of SunSource and has good and valid title to all issued and
outstanding shares of SunSource Common Stock free and clear of all Liens.
(b) Xxxxxx and SunSource each have the power and authority to
execute and deliver this Agreement, the Release, substantially in the form of
Exhibit C hereto, to be executed by Xxxxxx and each of the directors and
officers of SunSource in favor of Subsidiary, and all other documents hereby and
thereby contemplated to be executed by Xxxxxx and/or SunSource to consummate the
transactions hereby and thereby contemplated and to take all other actions
required to be taken pursuant to the provisions hereof and thereof. The
execution, delivery and performance of this Agreement and all other documents
hereby contemplated to be executed by Xxxxxx and/or SunSource has been, and the
consummation by Xxxxxx and SunSource of the transactions hereby and thereby
contemplated has been, duly authorized by all necessary action, corporate or
otherwise, of Xxxxxx and/or SunSource, as applicable. Xxxxxx is the sole
shareholder of SunSource. The Board of Directors and Xxxxxx, as sole shareholder
of SunSource, have authorized and approved the execution, delivery and
performance of this Agreement and the transactions contemplated hereby. This
Agreement and all other documents hereby contemplated to be executed by Xxxxxx
and/or SunSource constitute the legal, valid and binding obligations of Xxxxxx
and/or SunSource, as applicable, enforceable against Xxxxxx and/or SunSource, as
applicable, in accordance with their respective terms, except as such
enforceability may be limited by bankruptcy, moratorium, insolvency, fraudulent
conveyance, reorganization or other similar laws affecting the enforcement of
creditor's rights.
Section 3.04 Corporate Instruments. Xxxxxx has heretofore made
available to XxxXxxx.xxx true and complete copies of the existing Certificate of
Incorporation, the By-laws and the stock transfer books of SunSource.
Section 3.05 Capitalization; Options; Common Stock. (a) SunSource is
authorized to issue only 1,500 shares of SunSource Common Stock, par value
$25.00 per share,
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50 of which shares of SunSource Common Stock are, and at the Closing shall be,
issued and outstanding and owned by Xxxxxx. There are no other, and at the
Closing there will not be any other, shares of SunSource Common Stock issued or
outstanding or owned by Xxxxxx. There are no other series or classes of capital
stock of SunSource authorized or issued.
(b) There are no, and at the Closing Date there shall not be any,
outstanding warrants, options, contracts, rights (pre-emptive or otherwise),
calls, commitments or demands of any character relating to any authorized and
issued or unissued shares of the capital stock of SunSource or other instruments
convertible into or exchangeable for such stock, or which obligate SunSource to
seek authorization to issue additional shares of any class of stock, nor will
any be created by virtue of this Agreement or the transactions hereby
contemplated.
(c) The SunSource Common Stock owned by Xxxxxx has been duly
authorized and legally and validly issued, is fully paid and nonassessable and
represents all of the issued and outstanding shares of capital stock of
SunSource. None of the SunSource Common Stock has been issued in violation of
the securities or blue sky laws of the U.S. or any state or territory thereof.
Section 3.06 No Violation of Other Instruments or Obligations. The
execution and delivery by Xxxxxx and SunSource of this Agreement or any other
documents hereby contemplated and the consummation of the transactions hereby
and thereby contemplated by Xxxxxx and SunSource shall not (a) constitute any
violation or breach of the Certificate of Incorporation or the By-laws of
SunSource, (b) constitute a default under or a violation or breach of, or result
in the acceleration of any obligation under, any provision of any contract,
mortgage or other instrument to which Xxxxxx or SunSource is a party or by which
any of SunSource's assets may be affected or secured, (c) violate any
Governmental Rule affecting SunSource or any of its assets, (d) result in the
creation of any Lien on any of the assets or properties of SunSource or (e)
result in the termination of any license, contract, franchise, lease or permit
to which SunSource is a party or by which it is bound.
Section 3.07 Compliance with Law; Consents and Approvals. SunSource
has, and at the Closing Date will have, complied in all material respects with
all Governmental Rules (including, without limitation, any federal, state or
local laws, rules or regulations regulating the safety of the workplace and/or
the discharge of materials into the Environment or otherwise relating to the
protection of the Environment) applicable to the business of SunSource as
conducted on and prior to the date hereof. SunSource has, and at the Closing
Date will have, maintained in full force and effect all licenses, approvals,
permits and consents for the lawful conduct of its business. Neither Xxxxxx nor
SunSource is in violation of any Governmental Rule applicable to Xxxxxx or
SunSource, and neither of Xxxxxx nor SunSource has received any notice of any
such violation. Except as set forth on Schedule 3.07 hereof, no authorization,
approval, order, license, permit, franchise or consent, and no registration,
declaration, notice or filing by or with any domestic or foreign Governmental
Body (including, without limitation, any filing or registration pursuant to the
securities or blue sky laws of the U.S. or any state or territory thereof) by
Xxxxxx or SunSource is required in connection with the execution and delivery by
Xxxxxx and SunSource of this Agreement and the consummation of the transactions
hereby contemplated.
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Section 3.08 Financial Statements. Schedule 3.08 hereto contains (a)
the unaudited balance sheet of SunSource as of December 31, 1998 (the "December
Balance Sheet"), and the related statements of operations and shareholders'
equity, including the notes thereto, for the year then ended and (b) the
unaudited balance sheet of SunSource as of March 31, 1999 (the "March Balance
Sheet") and the related statements of operations and shareholders' equity,
including the notes thereto, for the three-month period then ended, all of which
have been delivered to XxxXxxx.xxx. Such financial statements accurately reflect
the current status of the financial position of SunSource as of December 31,
1998 and March 31, 1999, respectively, and accurately reflect the results of
SunSource's operations and shareholders' equity for the year ended December 31,
1998 and the three month period ended March 31, 1999, respectively.
Section 3.09 Accounts Receivable. Except to the extent of the amount
of the reserve for doubtful accounts reflected on the December Balance Sheet,
the March Balance Sheet or Schedule 3.09, respectively, all the accounts
receivable of SunSource reflected in the December Balance Sheet, the March
Balance Sheet or Schedule 3.09, respectively, and all accounts receivable that
have arisen since the December Balance Sheet and March Balance Sheet (except
accounts receivable that have been collected since such date) are valid and
enforceable claims and constitute bona fide accounts receivable resulting from
the sale of goods and services in the ordinary course of SunSource's business.
The accounts receivable are subject to no valid defense, offsets, returns,
allowances or credits of any kind and are fully collectible within 90 days from
their due date, except to the extent of the amount of the reserve, if any, for
doubtful accounts reflected on the December Balance Sheet, the March Balance
Sheet or Schedule 3.09, respectively. Except for accounts receivable, SunSource
has not made any loan or advance to any person.
Section 3.10 Liabilities, Borrowings and Guarantees. SunSource has
no, and at the Closing Date will not have any, debts, liabilities or other
obligations, accrued, absolute, contingent or otherwise, due or to become due,
other than liabilities incurred since March 31, 1999 in the ordinary and usual
course of its business consistent with past practice but in no event aggregating
more than $5,000 collectively.
Section 3.11 Title to Assets; Inventories. (a) Except for Liens (i)
for any current taxes or assessments not yet delinquent or (ii) created by
statute of carriers, warehousemen, mechanics, laborers and materialmen incurred
in the ordinary course of business for sums not yet due, SunSource has, and at
the Closing Date will have, good and marketable title, free and clear of all
Liens, to all of its assets and personal property.
(b) All inventories reflected on Schedule 3.11 are, and all
inventories owned by SunSource as of the Closing Time shall be, (i) valued at
the lower of cost or market value on a first-in, first-out basis in accordance
with GAAP and (ii) current and readily merchantable, containing no material
amount of obsolete or damaged goods which have not been written down or reserved
in conformity with GAAP. No inventory is held on consignment by SunSource, as
consignee or consignor. To Xxxxxx'x knowledge, all inventory included in
SunSource's assets is free of any material defect or other deficiency.
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(c) Neither Xxxxxx nor any affiliate of Xxxxxx (other than
SunSource) owns, uses or has possession of any asset used or useable by
SunSource in the conduct of its business.
(d) Except as set forth on Schedule 3.11, by reason of the Merger
and without any further action by any party hereto or any non-party, the
Subsidiary will, upon the Closing, obtain all title to and right to use all
multimedia, interactive computer programs or groups of programs designed to run
on the world wide web protocol of the internet owned or operated by SunSource
and/or Xxxxxx, including, without limitation, the web site currently accessible
at url:xxxx://xxx.xxxxxxxxxxxx.xxx, the web site currently accessible at
url:xxxx://xxx.xxxxx.xxx and the web site currently accessible at
url:xxxx://xxx.xxxxxxxxxxx.xxx and all elements thereof (including, without
limitation, all Content, information, hypertext links, source code, html code,
object code contained thereon and all so-called "engines" and "templates" used
therein, any and all rights therein and under any copyright, patent, trademark,
trade secret or other laws affecting intellectual property, any associated
computer programs or computer hardware, including any servers and server
applications, and any proprietary information contained thereon) and any and all
other web sites owned or operated by SunSource and/or Xxxxxx or any of its or
his affiliates and/or subsidiaries. For purposes of this Section 3.11, the term
"Content" shall include, but not necessarily be limited to, any graphical,
audio, visual, audiovisual, textual or multimedia materials displayed or
displayable on and over the internet and/or distributed by e-mails.
(e) Except as set forth on Schedule 3.11, neither of SunSource nor
Xxxxxx own, lease, operate or in any manner assist in the operation of any web
site, and at the Closing, neither SunSource nor Xxxxxx will own, lease, operate
or in any manner assist in the operation of, any web site.
Section 3.12 Real Property; Leases. Except as set forth on Schedule
3.12, SunSource does not own or lease any real property.
Section 3.13 Litigation. There are no, and at the Closing there will
not be any, claims, actions, suits, litigations, proceedings, audits,
controversies or investigations, pending or, to the knowledge of Xxxxxx,
threatened against or affecting SunSource or any of its assets, and SunSource
has not been, and at the Closing will not have been, charged with or, to the
knowledge of Xxxxxx, threatened with a charge of any violation of, and is not,
and at the Closing will not have been, under investigation with respect to a
possible violation of, any provision of any federal, state or local law or
administrative ruling or regulation relating to its business.
Section 3.14 Taxes. (a) SunSource has timely and duly filed (giving
effect to extensions duly taken) all federal, state, local or foreign tax
returns or reports required to be filed by or with respect to SunSource on or
prior to the Closing Date.
(b) The tax returns and reports described in paragraph (a) above
reflect accurately all liability for taxes, charges, fees, levies or other
assessments of any nature whatsoever (including, without limitation, all
federal, state, local and foreign income taxes, estimated taxes, excise taxes,
sales taxes, use taxes, transfer taxes, gross receipts taxes, franchise taxes,
employment, withholding, social security and other payroll related taxes,
property taxes and import duties, whether or not measured in whole or in part by
net income), together with any related penalties, interest and additions to
taxes (any of the foregoing being referred to herein as a "Tax" or collectively
"Taxes"), for the periods covered thereby. SunSource has paid all Taxes
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required to be paid by it with respect to the periods covered by the returns and
reports described in subparagraph (a) above. SunSource has fully collected,
withheld and/or paid over all Taxes required to be collected, withheld and/or
paid over to any taxing authority.
(c) SunSource is not currently being audited by any taxing authority
with respect to the returns and reports described in subparagraph (a) above, and
there are no claims or assessments pending against SunSource. SunSource has not
agreed to waive or extend the statute of limitations with respect to any Taxes
or tax returns and has not filed any consent under Section 341(f) of the Code
(or any corresponding provision of state, local or foreign tax law). No written
claim has ever been made by any taxing authority in a jurisdiction where
SunSource does not presently file Tax returns that SunSource is or may be
subject to taxation by that jurisdiction. Accurate, correct and complete copies
of all tax returns and reports filed by SunSource during the five-year period
preceding the Closing Date have been made available to XxxXxxx.xxx. Accurate,
correct and complete copies of any closing agreements with respect to SunSource
which were entered into with the Internal Revenue Service or any other taxing
authority have heretofore been furnished to XxxXxxx.xxx.
Section 3.15 Insurance. SunSource does not maintain insurance of any
kind relating to its assets and operations.
Section 3.16 Labor Disputes. SunSource is not party to a union
agreement and there are no labor unions or other organizations representing or
attempting to represent any employee of SunSource. There are no work stoppages
or other labor disputes, disturbances, grievances or claims pending or, to the
knowledge of Xxxxxx, threatened in connection with the employees of SunSource.
There is no unfair labor practice charge or complaint pending or, to the
knowledge of Xxxxxx, threatened against SunSource before the National Labor
Relations Board or any state labor relations board. There are no claims of
discrimination of any kind pending or, to the knowledge of Xxxxxx, threatened
against SunSource before any Governmental Body.
Section 3.17 Contracts. Schedule 3.17 contains a complete and
correct list of all contracts, arrangements and agreements in effect on the date
hereof (the "Contracts") to which SunSource is a party, whether written or oral,
including, but not limited to, agency or advertising contracts, agreements with
employees, sales representatives, suppliers, wholesalers, manufacturers and
distributors, arrangements with web hosting service providers, website
designers, software vendors or licensors, computer or technical service
providers and agreements with factors, banks or other lending institutions. A
true and complete copy of each written Contract, and a complete and correct
summary of each oral Contract, has heretofore been made available to
XxxXxxx.xxx. SunSource has performed all of its obligations required to be
performed by it, has paid all amounts required to be paid by it and is not in
default in any material respect under any Contract, and no event has occurred
which, with the lapse of time or the giving of notice or both, would constitute
such a default, and, to Xxxxxx'x knowledge, no other party to any Contract is in
default in any material respect thereunder. Each of the Contracts constitutes a
legal, valid and binding obligation of SunSource and the other parties thereto,
enforceable in accordance with its terms. Neither Xxxxxx nor SunSource has
received notice that any other party to any of the Contracts is in default
thereunder. Except as set forth on
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Schedule 3.17, none of the Contracts requires the consent of a third party in
connection with the transactions contemplated hereby.
Section 3.18 Intellectual Property. (a) Except as set forth on
Schedule 3.18, SunSource owns, and at the Closing Date will own, free and clear
of all Liens, and possesses and has the exclusive right to use, all patents,
patent applications, patent rights, trademarks, trademark applications, URL's,
trade names, service marks, service xxxx applications, domain names, domain name
applications, copyrights, copyright registrations, know-how, trade secrets,
proprietary processes, computer programs and other computer software, technology
and formulae, (the "Proprietary Rights") necessary, required or desirable for
the conduct of its business as presently conducted or as proposed to be
conducted. All Proprietary Rights are identified on Schedule 3.18 hereto. Except
as set forth on Schedule 3.18, SunSource owns and has the sole and exclusive
right to use each of the Proprietary Rights for the categories of goods and
services with respect to which such Proprietary Rights are registered to the
extent that such goods and services are currently being used. SunSource (i) is
not bound by or a party to any options, licenses or agreements of any kind with
respect to the Proprietary Rights and (ii) has not assigned, licensed or in any
manner encumbered or impaired any rights in the Proprietary Rights. To the best
of SunSource's and Xxxxxx'x knowledge, no Proprietary Right infringes or
violates, and no Proprietary Right is infringed upon or violated by, any
personal, property, statutory or common law or any other rights of any third
parties (including, without limitation, copyright, trademark and the rights of
privacy and publicity), and no claim alleging any such infringement or violation
by (x) SunSource or its Proprietary Rights has been received by Xxxxxx or
SunSource and (y) no claim alleging any such violation or infringement of
SunSource Proprietary Rights has been sent to any third party by Xxxxxx or
SunSource.
(b) Except as set forth on Schedule 3.18, no royalties, honoraria or
fees are payable to, and no consents or approvals are needed from, any third
persons or entities in connection with the ownership, use or exploitation of the
Proprietary Rights in SunSource business.
Section 3.19 Software. (a) Schedule 3.19 sets forth a complete and
accurate list of all software programs, systems and applications (i) designed or
developed (or in the process of being designed or developed) by employees of
SunSource or by consultants on SunSource's behalf (the "SunSource Owned
Software") or (ii) licensed by SunSource from any third party (other than
"off-the-shelf" software) (the "Licensed Software") pursuant to the License
Agreements specified on Schedule 3.18, in each case that is manufactured,
developed or used by SunSource in the operation of SunSource business or
integrated into SunSource Owned Software or marketed, licensed or sold by
SunSource to third parties (collectively, the "Software").
(b) All of the SunSource Owned Software are original works of
authorship and are protected by the copyright laws of the U.S. SunSource owns
all right, title and interest in and to all of the SunSource Owned Software free
and clear of any Liens, and SunSource has not sold, assigned, licensed,
distributed or in any other way disposed of any of the SunSource Owned Software
or subjected any of the SunSource Owned Software to any Lien, and none of the
employees or consultants referenced in Section 3.19(a) has any interest or claim
whatsoever to any of the SunSource Owned Software or any component or
constituent part thereof.
11
(c) The Licensed Software is validly held and used by SunSource and
is fully and freely utilizable by SunSource pursuant to the license agreement
with respect thereto without the consent of or notice to any third party.
SunSource is in compliance with all material terms and conditions of each
license with respect to the Licensed Software, and neither Xxxxxx nor SunSource
has received any notice that Xxxxxx or SunSource is in breach of any such
license.
(d) To the best of Xxxxxx'x knowledge, the Software does not contain
any copy protection, computer virus, malicious code or destructive feature.
Section 3.20 Year 2000. All Software is designed to be used prior
to, during and after calendar year 2000, and the Software will operate during
each such time period without error relating to date data, specifically
including any error relating to, or the conduct of, date data which represents
or references different centuries or more than one century. Without limiting the
generality of the foregoing, (a) the Software will not abnormally end or provide
invalid or incorrect results as a result of date data, (b) the Software will be
capable of accurately processing, providing and/or receiving date data from,
into, and between the twentieth and twenty-first centuries, including the years
1999 and 2000, and leap year calculations, (c) the Software will lose no
functionality with respect to the introduction of records containing dates
falling before, on or after January 1, 2000 and (d) the Software will be
interoperable with other software and systems that may deliver records to,
receive records from or otherwise interact with the Software, including but not
limited to, back-up and archived data, date data, century recognition
calculations that accommodate same century and multi-century formulas and date
values and date data interface values that reflect the century.
Section 3.21 Licenses and Permits. SunSource has all licenses,
permits, consents and approvals necessary for SunSource to conduct its business
as required by any Governmental Body, and all such licenses, permits, consents
and approvals are set forth in Schedule 3.21 hereto.
Section 3.22 ERISA. (a) SunSource does not maintain, administer or
contribute to, nor has it maintained, administered or contributed to, nor do the
employees of SunSource receive or expect to receive as a condition of
employment, benefits pursuant to any: employee pension benefit plan (as defined
in Section 3(2) of ERISA (a "Plan"), including, without limitation, any
multiemployer plan as defined in Section 3(37) of ERISA (a "Multiemployer
Plan"); employee welfare benefit plan (as defined in Section 3(1) of ERISA) (a
"Welfare Plan"); or bonus, deferred compensation, stock purchase, stock option,
severance plan, salary continuation, vacation, sick leave, fringe benefit,
incentive, insurance, welfare or similar arrangement (an "Employee Benefit
Plan"). Neither SunSource nor any affiliate of SunSource as determined under
Code Section 414(b), (c), (m) or (o) (an "ERISA Affiliate") maintains,
administers or contributes to, nor have any of them maintained, administered or
contributed to, nor do the employees of SunSource or any ERISA Affiliate receive
or expect to receive as a condition of employment, benefits pursuant to any Plan
which is subject to Section 412 of the Code or Title IV of ERISA. All Plans,
Welfare Plans and Employee Benefit Plans and any related trust agreements or
annuity contracts comply in all material respects with and are and have at all
times been operated in accordance with each applicable provision of ERISA and
the Code (including, without limitation, requirements of Section 401(a) of the
Code to the extent any Plan is intended to conform to that section), other
federal statutes, state law (including, without
12
limitation, state insurance law) and the regulations and rules promulgated
pursuant thereto or in connection therewith. Neither Xxxxxx, SunSource nor any
ERISA Affiliate has any notice or knowledge of any violation of any of the
foregoing by any Plan, Welfare Plan or Employee Benefit Plan.
(b) Each Welfare Plan which is a group health plan (within the
meaning of Section 5000(b)(1) of the Code) complies with and has been maintained
and operated in all material respects in accordance with the requirements of
Section 4980B of the Code and Part 6 of Subtitle B of Title I of ERISA. There
are no pending or, to Xxxxxx'x or SunSource's knowledge, threatened claims
against any of the Plans, Welfare Plans or Employee Benefit Plans by any
employee or beneficiary covered under any Plans, Welfare Plans or Employee
Benefit Plans or otherwise involving any Plan, Welfare Plan or Employee Benefit
Plan (other than routine claims for benefits).
Section 3.23 Employees and Other Matters. Schedule 3.23 hereto is a
correct and complete list of (i) the directors and officers of SunSource and all
of the present employees, sales personnel and independent contractors regularly
employed by or in connection with the business of SunSource, either as employees
or independent contractors, together with a statement of the full amount payable
by way of salary, bonuses, perquisites, fringe benefits and any other direct or
indirect compensation to each such person and (ii) the names of all persons, if
any, holding powers of attorney from SunSource and a summary statement of the
terms thereof.
Section 3.24 Environmental Matters. (a) SunSource has obtained and
continues to maintain all permits, licenses, consents and approvals (the
"Environmental Approvals"), if any, necessary for conducting the business of
SunSource which are required under Environmental Laws, and SunSource has not
operated in violation of any Environmental Law or the terms of any Environmental
Approval.
(b) (i) SunSource has not used, stored, generated, discharged,
emitted, transported, disposed of or treated Hazardous Substances except in a
manner which complies with Environmental Laws, (ii) to the best knowledge of
Xxxxxx, no prior owner, occupant, tenant or user of any Facility has ever used,
stored, generated, discharged, emitted, transported, disposed of or treated
Hazardous Substances, at, on or from any Facility except in compliance with all
Environmental Laws, and (iii) to the best knowledge of Xxxxxx, there is not, and
there has not been, any Environmental Condition or release or threat of release
(as those terms are defined in Section 101 of CERCLA) of Hazardous Substances
at, on or from any Facility.
(c) Neither Xxxxxx nor SunSource has received written notice of any
pending or threatened investigation, claims, enforcement proceedings, cleanup
orders, citizen suits or other actions instituted by any private party, employee
or Governmental Body arising out of the conduct or the operations of SunSource,
in connection with any Environmental Laws, or as a result of any Environmental
Condition at any Facility.
Section 3.25 Sales Target. The Net Sales generated by the Business
were, for the twelve months ended December 31, 1998, at least $199,716, and for
the five months ended May 30, 1999, at least $215,642.55.
13
Section 3.26 Ordinary Course; No Material Adverse Change. Since
March 31, 1999, SunSource has conducted its business in the ordinary and regular
course thereof and there has not been, and at the Closing there shall not have
been, (i) any material adverse change in the assets, business, prospects,
financial condition or results of operations of SunSource, (ii) any damage,
destruction or loss, whether or not covered by insurance, which has materially
adversely affected assets or the business of SunSource or (iii) any event or
condition of any character whatsoever the occurrence of which affects or
threatens to materially adversely affect the assets, business, prospects,
financial condition or results of operations of SunSource.
Section 3.27 Finder's Fees. Neither Xxxxxx nor SunSource has
incurred any liability for finder's or brokerage fees or agent's commissions in
connection with this Agreement or the transactions hereby contemplated.
Section 3.28 Full Disclosure. No representation or warranty of
Xxxxxx or SunSource in this Agreement or in any other certificate, schedule or
other document delivered to XxxXxxx.xxx pursuant to this Agreement contains any
untrue statement of a material fact or omits to state a material fact necessary
in order to make the statements herein and therein not misleading in light of
the circumstances in which they are being or were made.
Article IV.
REPRESENTATIONS AND WARRANTIES OF XXXXXXX.XXX AND SUBSIDIARY
XxxXxxx.xxx and Subsidiary, jointly and severally, represent and
warrant to Xxxxxx and SunSource that:
Section 4.01 Organization and Good Standing. XxxXxxx.xxx is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and has the corporate power and authority to own or
lease all of its properties and assets and carry on its business as it is now
being conducted, except for such power and authority the lack of which would not
have a materially adverse effect on XxxXxxx.xxx. Subsidiary is a corporation
duly organized, validly existing and in good standing under the laws of the
State of Delaware, is a wholly owned subsidiary of XxxXxxx.xxx and is organized
solely for the purpose of consummating the transactions contemplated hereby.
Section 4.02 Authority Relative to Agreement. XxxXxxx.xxx and
Subsidiary each have the corporate power and authority to execute and deliver
this Agreement and all other documents hereby contemplated, to consummate the
transactions hereby and thereby contemplated and to take all other actions
required to be taken by each of them pursuant to the provisions hereof and
thereof. The execution, delivery and performance of this Agreement and all other
documents hereby contemplated to be executed by XxxXxxx.xxx and Subsidiary has
been, and the consummation by XxxXxxx.xxx and Subsidiary of the transactions
hereby and thereby contemplated has been, duly authorized by any and all
necessary corporate action of XxxXxxx.xxx and Subsidiary, respectively. The
respective Boards of Directors of XxxXxxx.xxx and Subsidiary have authorized and
approved the execution, delivery and performance of this Agreement and the
transactions contemplated hereby. This Agreement and all other documents
14
hereby contemplated to be executed by XxxXxxx.xxx and Subsidiary constitute the
legal, valid and binding obligations of XxxXxxx.xxx and Subsidiary,
respectively, enforceable against XxxXxxx.xxx and Subsidiary in accordance with
their respective terms, except as such enforceability may be limited by
bankruptcy, moratorium, insolvency, fraudulent conveyance, reorganization or
other similar laws affecting the enforcement of creditor's rights.
Section 4.03 No Violation of Other Instruments or Obligations.
Neither the execution and delivery of this Agreement or any other documents
hereby contemplated nor the consummation of the transactions hereby and thereby
contemplated shall (a) constitute any violation or breach of the Certificate of
Incorporation or By-laws of XxxXxxx.xxx or Subsidiary, (b) constitute a default
under or a violation or breach of, or result in acceleration of any obligation
under, any provision of any contract, lease, mortgage or other instrument to
which either of them is a party or (c) violate any judgment, order, writ,
injunction, decree, statute, rule or regulation affecting XxxXxxx.xxx,
Subsidiary or any of their respective assets, which violation, breach or
default, in the case of (b) or (c), would have a materially adverse effect on
XxxXxxx.xxx or Subsidiary.
Section 4.04 Consents and Approvals. No authorization, approval,
order, license, permit, franchise or consent, and no registration, declaration,
notice or filing by or with any domestic or foreign Governmental Body by
XxxXxxx.xxx or Subsidiary is required in connection with the execution and
delivery of this Agreement and the consummation of the transactions hereby
contemplated.
Section 4.05 Capitalization; Common Stock. (a) The capitalization of
XxxXxxx.xxx as of May 30, 1999, including all outstanding stock options, is
accurately and fully set forth on Schedule 4.05 hereto. Subsidiary is authorized
to issue only 100 shares of common stock, .01 par value per share, all of which
shares of common stock are issued and outstanding and owned by XxxXxxx.xxx.
There are no other series or classes of capital stock of Subsidiary authorized
or issued.
(b) The XxxXxxx.xxx Stock to be issued to Xxxxxx pursuant to the
provisions of this Agreement will, upon such issuance, be duly authorized,
legally and validly issued and fully paid and nonassessable.
Section 4.06 Financial Statements. Schedule 4.06 hereto contains (a)
the unaudited balance sheet of XxxXxxx.xxx as of December 31, 1998 and the
related statements of operations, cash flows and shareholders' equity, including
the notes thereto, for the year then ended and (b) the unaudited balance sheet
of XxxXxxx.xxx as of February 28, 1999 and the related statements of operations,
cash flows and shareholders' equity, including the notes thereto, for the
two-month period then ended, all of which have been compiled by XxxXxxx.xxx's
certified public accountant and delivered to Xxxxxx and SunSource. Such
financial statements present fairly, in all material respects, the financial
position of XxxXxxx.xxx as of December 31, 1998 and February 28, 1999,
respectively, and the results of XxxXxxx.xxx's operations, cash flows and
shareholders' equity for the year ended December 31, 1998 and the two-month
period ended February 28, 1999, all in conformity with GAAP applied on a
consistent basis, except as otherwise stated in such financial statements or the
accountants' report thereon.
15
Section 4.07 Title to Assets. Except for Liens (a) for any current
taxes or assessments not yet delinquent or (b) created by statute of carriers,
warehousemen, mechanics, laborers and materialmen incurred in the ordinary
course of business for sums not yet due, XxxXxxx.xxx has good and marketable
title, free and clear of all Liens, to all of its assets and personal property.
Section 4.08 Litigation. To the best of XxxXxxx.xxx's knowledge,
there are no claims, actions, suits, litigations, proceedings, audits,
controversies or investigations, pending or, to the knowledge of XxxXxxx.xxx,
threatened against Subsidiary, XxxXxxx.xxx or any of its assets, and neither
XxxXxxx.xxx nor Subsidiary has been charged with or, to the knowledge of
XxxXxxx.xxx, threatened with a charge of any violation of, and is not under
investigation with respect to a possible violation of, any provision of any
federal, state or local law or administrative ruling or regulation relating to
its business, the adverse outcome of which, in any such case, would have a
materially adverse effect on XxxXxxx.xxx or Subsidiary.
Section 4.09 Licenses and Permits. Schedule 4.09 sets forth all
licenses, permits, consents and approvals necessary for XxxXxxx.xxx to conduct
its business as required by any Governmental Body, other than any such licenses,
permits, consents and approvals the absence of which would not have a materially
adverse effect on XxxXxxx.xxx.
Section 4.10 Ordinary Course; No Material Adverse Change. Since
March 31, 1999, XxxXxxx.xxx has conducted its business in the ordinary and
regular course thereof and there has not been (a) any material adverse change in
the assets, business, financial condition or results of operations of
XxxXxxx.xxx, (b) any damage, destruction or loss, whether or not covered by
insurance, which has materially adversely affected the assets or the business of
XxxXxxx.xxx or (c) any event or condition of any character whatsoever the
occurrence of which materially adversely affects the assets, business,
prospects, financial condition or results of operations of XxxXxxx.xxx.
Section 4.11 Finder's Fees. XxxXxxx.xxx has not incurred any
liability for finder's or brokerage fees or agent's commissions in connection
with this Agreement or the transactions hereby contemplated.
Section 4.12 Full Disclosure. No representation or warranty of
XxxXxxx.xxx or Subsidiary in this Agreement or in any other certificate,
schedule or other document delivered to Xxxxxx or SunSource pursuant to this
Agreement contains any untrue statement of a material fact or omits to state a
material fact necessary in order to make the statements herein and therein not
misleading in light of the circumstances in which they were made.
Article V.
CONDITIONS TO XXXXXXX.XXX'S AND SUBSIDIARY'S OBLIGATIONS
All obligations of XxxXxxx.xxx and Subsidiary under this Agreement
are subject to the fulfillment of each of the following conditions:
16
Section 5.01 Representations and Warranties. The representations and
warranties of Xxxxxx and SunSource contained in Article III hereof shall be true
and correct at and as of the Closing Date as though such representations and
warranties were made at and as of such date.
Section 5.02 Consulting Agreement. Xxxxxx shall have entered into a
consulting agreement substantially in the form of Exhibit B hereto.
Section 5.03 Powers of Attorney. There shall have been terminated or
revoked all powers of attorney of SunSource.
Section 5.04 Opinion of Counsel. SunSource shall cause to be
delivered to XxxXxxx.xxx an opinion of counsel for SunSource, in form and
substance satisfactory to XxxXxxx.xxx and its counsel.
Section 5.05 Releases. Xxxxxx and each other director and officer of
SunSource shall have executed and delivered the Release.
Section 5.06 Noncompetition and Nondisclosure Agreement. Xxxxxx
shall have entered into a noncompetition and nondisclosure agreement
substantially in the form of Exhibit E hereto.
Section 5.07 Resignations. SunSource shall have caused to be
delivered to XxxXxxx.xxx written resignations, effective as of the Closing, of
each of the directors and officers of SunSource from all offices and
directorships of SunSource held.
Section 5.08 Governmental Permits and Approvals; Consents. SunSource
shall have obtained (a) all permits and approvals from any Governmental Body
required to be obtained by SunSource for the lawful consummation of the Closing
and (b) the consents set forth or required to be set forth on Schedule 3.07.
Section 5.09 Merger. The Certificate of Merger and the Florida
Certificate shall each have been executed and delivered by SunSource to
XxxXxxx.xxx.
Section 5.10 Assignment of Contracts. SunSource shall have obtained
the consent of all other parties to an assignment of any Contract in all cases
in which such consent is required thereunder.
Section 5.11 Officer's Certificate. SunSource shall have caused to
be delivered to XxxXxxx.xxx a certificate signed by the Chief Executive Officer
and/or the Secretary of SunSource stating that (a) the representations and
warranties of SunSource as set forth in Article III hereof are true and accurate
on and as of the Closing Date as if made on and as of such date and (b) all
conditions of XxxXxxx.xxx's obligations as set forth in Article V hereof have
been entirely fulfilled by SunSource.
Section 5.12 Due Diligence. XxxXxxx.xxx shall have completed its
business, financial and legal due diligence review of SunSource to XxxXxxx.xxx's
reasonable satisfaction.
17
Section 5.13 Monthly Sales Reports. SunSource shall have delivered
to XxxXxxx.xxx monthly sales updates within five business days of the end of
each calendar month between the date hereof and the Closing Date.
Section 5.14 Additional Documents. Xxxxxx and/or SunSource shall
have executed and delivered such additional closing documents, certificates and
agreements as XxxXxxx.xxx may reasonably request.
Article VI.
CONDITIONS TO SUNSOURCE'S AND XXXXXX'X OBLIGATIONS
All obligations of Xxxxxx and SunSource under this Agreement are
subject to the fulfillment of each of the following conditions:
Section 6.01 Representations and Warranties. The representations and
warranties of XxxXxxx.xxx and Subsidiary contained in Article IV hereof shall be
true and correct in all material respects at and as of the Closing Date as
though such representations and warranties were made at and as of such date.
Section 6.02 Consulting Agreement. XxxXxxx.xxx shall have entered
into a consulting agreement with Xxxxxx substantially in the form of Exhibit B
hereto.
Section 6.03 Opinion of Counsel. XxxXxxx.xxx shall cause to be
delivered to Xxxxxx and SunSource an opinion of counsel for XxxXxxx.xxx and
Subsidiary, in form and substance satisfactory to Xxxxxx, SunSource and their
counsel, opining, inter alia, that on the basis of certain facts,
representations and assumptions set forth in such opinions which are consistent
with the state of facts existing at the Closing Date, that the Merger qualifies
in relevant part as a tax-free reorganization for U.S. federal income tax
purposes within the meaning of Section 368(a) of the Code. In rendering the
opinions described in the preceding sentence, such counsel may require and rely
upon representations contained in certificates of officers of XxxXxxx.xxx and
Subsidiary.
Section 6.04 Governmental Permits and Approvals; Consents.
XxxXxxx.xxx shall have obtained (a) all permits and approvals from any
Governmental Body required to be obtained by XxxXxxx.xxx for the lawful
consummation of the Closing and (b) approval of this Agreement and the
transactions contemplated hereby by Subsidiary's shareholder. Notwithstanding
the foregoing, XxxXxxx.xxx shall not be required to pay any consideration to any
third party in order to obtain any such permit, approval, consent or estoppel
representation letter.
Section 6.05 Officer's Certificate. XxxXxxx.xxx shall have caused to
be delivered to SunSource a certificate signed by the Chief Executive Officer
and/or the Secretary of XxxXxxx.xxx stating that (a) the representations and
warranties of XxxXxxx.xxx and Subsidiary as set forth in Article IV hereof are
true and accurate on and as of the Closing Date as if made on and as of such
date and (b) all conditions of Xxxxxx'x and SunSource's
18
obligations as set forth in Article VI hereof have been entirely fulfilled by
XxxXxxx.xxx and Subsidiary, respectively.
Section 6.06 Additional Documents. XxxXxxx.xxx and/or Subsidiary
shall have executed and delivered such additional closing documents,
certificates and agreements as SunSource or Xxxxxx may reasonably request.
Section 6.07 Exchange Listing. The XxxXxxx.xxx Stock shall continue
to be listed on the NASDAQ over-the-counter bulletin board on the Closing Date.
Article VII.
COVENANTS
Section 7.01 Further Assurances. From and after the date hereof,
Xxxxxx and SunSource shall, at any time and from time to time, at their sole
cost and expense, make, execute and deliver, or cause to be made, executed and
delivered, such assignments, deeds, drafts, checks, stock certificates, returns,
filings and other instruments, agreements, consents and assurances and take or
cause to be taken all such actions as XxxXxxx.xxx, Subsidiary or either of their
respective counsel may reasonably request for the effectual consummation,
confirmation and particularization of this Agreement and the transactions hereby
contemplated.
Section 7.02 Collection of Receivables. In the event that Xxxxxx
receives any amounts after the Closing Date in respect of SunSource accounts
receivable that existed prior to the Closing Date, Xxxxxx agrees to promptly
forward all such amounts to XxxXxxx.xxx.
Section 7.03 Income and Franchise Taxes.
(a) Returns and Payments.
(i) Xxxxxx shall cause to be prepared, consistent with past
practice, and shall file or submit to XxxXxxx.xxx for filing, all
required income and franchise Tax Returns of SunSource for any
period which ends on or before the Closing Date, for which Tax
Returns are not required to be have been filed as of the Closing
Date. Xxxxxx shall pay or shall pay to XxxXxxx.xxx and upon receipt
XxxXxxx.xxx shall cause to be timely paid in each instance to the
appropriate Taxing authorities all Taxes to which such Tax Returns
relate for all periods covered by such Tax Returns; provided,
however, that Xxxxxx shall have no obligation pursuant to this
Section 7.03(a)(i) for Taxes for which provision has been made on
the Last Balance Sheet.
(ii) XxxXxxx.xxx shall cause to be prepared, consistent with
past practice, and timely file all required income and franchise Tax
Returns of either Subsidiary or SunSource for Taxable periods
beginning before and ending after the Closing Date (the "Straddle
Returns"). At least 15 days prior to the filing of any Straddle
Return required to be filed by XxxXxxx.xxx pursuant to the preceding
sentence, XxxXxxx.xxx shall submit copies of such Returns to Xxxxxx
19
for his approval, which shall not be unreasonably withheld.
XxxXxxx.xxx shall cause all such Straddle Returns to be timely filed
and cause all Taxes shown as due on such Straddle Returns to be
timely paid. Such Taxes, to the extent attributable to any period or
portion of a period on or before the Closing shall be referred to
herein as "Pre-Closing Taxes." Pre-Closing Taxes shall be calculated
on the basis of the income of SunSource as though the Taxable year
of SunSource terminated at the close of business on the day
immediately preceding the Closing Date; provided, however, that in
the case of Taxes not based on income, Pre-Closing Taxes shall be
equal to the Tax imposed with respect to the entire Taxable year
multiplied by a fraction, the numerator of which shall be the number
of days preceding the Closing Date, and the denominator of which is
the number of days in the Taxable year. Xxxxxx shall reimburse
XxxXxxx.xxx for Pre-Closing Taxes at such time as the Straddle
Return is filed with the appropriate Taxing Authority; provided,
however, that Xxxxxx shall have no obligation pursuant to this
Section 7.03(a)(ii) for Taxes for which provision has been made on
the Last Balance Sheet.
(b) Audits. XxxXxxx.xxx shall promptly notify Xxxxxx in writing upon
receipt by XxxXxxx.xxx, or any affiliate of XxxXxxx.xxx (including Subsidiary),
of notice of any pending or threatened federal state, local or foreign Tax audit
or assessment for which XxxXxxx.xxx may seek indemnification pursuant to the
terms of this Agreement. Xxxxxx shall have the sole right to represent
Subsidiary's interests (as successor to SunSource) in any federal state, local
or foreign Tax matter, including any audit or administrative or judicial
proceeding or the filing of any amended return (a "Tax Matter"), involving a Tax
liability or potential Tax liability for which XxxXxxx.xxx may seek
indemnification, and to employ counsel of Xxxxxx'x choice and reasonably
acceptable to XxxXxxx.xxx at Xxxxxx'x expense. XxxXxxx.xxx agrees that it will
cooperate fully with Xxxxxx and his counsel (including, without limitation,
executing and delivering applicable powers of attorney) in connection with the
preparation or filing of any applicable Tax return or the defense or compromise
of any Tax Matter. Xxxxxx will not concede the correctness of any part of any
proposed adjustment pertaining to Taxes and will not enter into any closing or
compromise agreement with respect to any of the issues which form the basis for
such proposed adjustment without the consent of XxxXxxx.xxx; provided, however,
that if XxxXxxx.xxx fails to so consent, XxxXxxx.xxx may not thereafter seek
indemnification for an amount in excess of the amount it would have been
entitled to had it consented to such closing or compromise agreement.
(c) Cooperation. After the Closing Date, XxxXxxx.xxx and its
affiliates (including SunSource) and Xxxxxx shall make available to the other,
as reasonably requested, and to the extent appropriate Tax authorities, all
information, records and documents relating to the Tax liabilities or potential
Tax liabilities of SunSource or Subsidiary as successor to SunSource for all
periods prior to the Closing Date (Including Pre-Closing Taxes described in
Section 7.03(a)(ii)) and shall preserve all such information, records and
documents until 60 days after the expiration of any applicable statute of
limitations including any waiver or extension thereof.
Section 7.04 Standstill. In consideration of XxxXxxx.xxx's and
Subsidiary's execution and delivery of this Agreement, Xxxxxx and SunSource
agree to immediately cease
20
any existing discussions or negotiations with any third parties conducted prior
to the date hereof with respect to any merger, business combination, sale of a
material portion of SunSource assets outside of the ordinary course of business,
change of control or similar transaction involving the Company or any of its
subsidiaries or any division (each, an "Acquisition Transaction"). Xxxxxx and
SunSource shall not, and will cause their respective "affiliates" (as defined in
the Exchange Act) as well as SunSource's management, employees, agents,
representatives, officers and directors, not to:
(a) from the date hereof until the earlier of the Closing Date or
the termination of this agreement, directly or indirectly solicit, initiate,
encourage, accept, entertain, participate in or consult with respect to
(including by way of furnishing information) any inquiry, offer, discussion,
proposal, negotiation, arrangement or understanding in connection with any
proposed Acquisition Transaction with any person, firm or corporation other than
XxxXxxx.xxx or Subsidiary, or provide any information (public or non-public) or
otherwise cooperate in any way with anyone for any purpose inconsistent with the
terms of this Agreement (it being also agreed that Xxxxxx and SunSource shall
promptly notify XxxXxxx.xxx in writing of any such inquiries or proposals); and
(b) for a period commencing on the date hereof and ending on the
earlier of the Closing Date and 12 months following the date of the termination
of this Agreement, if applicable,
(i) become a "participant" in a "solicitation" of proxies, as
those terms are defined in Rule 14a-11 and Rule 14a-1, respectively,
of Regulation 14A under the Exchange Act, to vote, or seek to advise
or influence any person, in respect of any voting securities of
XxxXxxx.xxx that may be outstanding and entitled to vote at any time
during such period, except in respect of the transactions
contemplated hereby;
(ii) form, join or in any way participate in any "group" (as
such term is defined in Section 13(d)(3) of the Exchange Act) for
the purpose of voting, purchasing or disposing of any securities of
XxxXxxx.xxx;
(iii) deposit any securities of XxxXxxx.xxx in a voting trust
or subject them to a voting agreement or other arrangement or
similar effect;
(iv) in any manner acquire or agree, offer, seek or propose to
acquire or make any proposal to acquire ownership (including,
without limitation, "beneficial" ownership, as defined by Rule 13d-3
promulgated under the Exchange Act) of any of the assets or
businesses of, or any securities of, or any securities issued by,
XxxXxxx.xxx or any rights or options to acquire such ownership
(including from a third party), except through the transactions
contemplated hereby;
(v) seek or propose to influence or control the management,
Board of Directors or policies of XxxXxxx.xxx, except for the
transactions contemplated hereby; or
21
(vi) enter into any discussion, proposal, negotiation,
arrangement or understanding with any third party in respect of any
of the foregoing.
Section 7.05 Continuation of Business. From the date hereof until
the earlier of the Closing Date or the date of the termination of this
Agreement, except as Xxxxxx, SunSource and XxxXxxx.xxx may otherwise agree,
SunSource will, and Xxxxxx will cause SunSource to, preserve and continue to
operate its business diligently and in a proper and prudent manner and will not
enter into any transactions outside of the ordinary and usual course of its
business or enter into any transaction or make any commitment involving an
expense or capital expenditure by SunSource in excess of $5,000. Notwithstanding
the generality of the previous sentence, SunSource may employ up to two customer
service employees for a wage not to exceed $12.50 per hour, and SunSource may
conduct an advertising campaign having an aggregate cost, from April 30, 1999
through the Closing Date, of not more than $15,000. Except for those amounts set
forth on Schedule 7.05 hereto, from the date hereof until the earlier of the
Closing Date or the date of the termination of this Agreement, no bonuses or
compensation will be paid to the officers or employees of SunSource other than
salaries in effect on the date hereof and payments made in the form of bonuses
in the ordinary course of business consistent with past practice, and SunSource
will not declare any dividends, grant new stock options, accelerate any options
or issue new shares of stock or other securities (other than pursuant to
exercise of events of outstanding options, warrants or rights) or rights to
acquire any such options, shares or securities, or make any commitments with
respect to any of the foregoing, nor will distributions of any nature be made to
the shareholders of SunSource. From the date hereof until the earlier of the
Closing Date or the date of the termination of this Agreement, Xxxxxx and
SunSource will endeavor to maintain the goodwill of business relationships with
all of SunSource's existing customers and suppliers. Specifically, without
limitation of the foregoing, SunSource shall not, and Xxxxxx shall cause
SunSource not to, (i) place or permit any third party to place any Lien on any
of SunSource assets, (ii) commit any material breach of any Contract which
breach is not fully cured by the Closing Date, (iii) amend or waive any defaults
under any Contract or (iv) initiate or become a voluntary third party
participant in any litigation or arbitration proceeding.
Article VIII.
INVESTMENT INTENT;
RESTRICTIONS ON TRANSFER; REGISRATION RIGHTS
Section 8.01 Advice of Counsel. Xxxxxx represents and warrants that
he has reviewed with his tax advisor(s) the U.S. federal, state, local and
foreign tax consequences of an investment in the XxxXxxx.xxx Stock and the
consequences of the transactions contemplated by this Agreement. Xxxxxx
represents and warrants that he is relying solely on such advisor(s) and not on
any statements or representations of XxxXxxx.xxx or any of its agents (except
for the Opinion of Counsel provided for in Section 6.03 hereof) and understands
that he (and not XxxXxxx.xxx) shall be responsible for his own tax liability
that may arise as a result of this investment in XxxXxxx.xxx or as a result of
the transactions contemplated by this Agreement.
22
Section 8.02 Investment Representation. Xxxxxx (a) represents and
warrants to XxxXxxx.xxx that he is acquiring all of the shares of XxxXxxx.xxx
Stock to be issued to him pursuant to the provisions of this Agreement for his
own account and for the purposes of investment and not with a view to, or for
sale in connection with, any distribution thereof and (b) agrees that he will
not at anytime sell or otherwise transfer, or permit the sale or other transfer
of, such shares of XxxXxxx.xxx Stock other than in transactions that are not in
violation of the Securities Act or the provisions of any other applicable
securities laws, rules or regulations.
Section 8.03 Stock Legend. All certificates representing shares of
XxxXxxx.xxx Stock to be delivered to Xxxxxx under this Agreement shall bear the
following legend:
"The securities represented hereby have not been
registered under the Securities Act of 1933, as amended,
or under the securities laws of any state and may not be
sold, assigned, transferred, pledged or otherwise disposed
of except in compliance with, or pursuant to an exemption
from, the requirements of such Act or such laws."
Section 8.04 "Piggyback" Registration. (a) If at any time after the
one year anniversary from the date of Closing, XxxXxxx.xxx proposes to register
any shares of XxxXxxx.xxx Stock under the Securities Act (other than on a Form
S-4 or other applicable form in connection with a merger, or pursuant to a Form
S-8 or other comparable form), XxxXxxx.xxx shall request that the managing
underwriter (if any) of such underwritten offering include the Transferred
Shares in the offering covered by such registration statement. If such managing
underwriter agrees to include the Transferred Shares in the underwritten
offering, and in any event in a non-underwritten offering, XxxXxxx.xxx shall at
such time give prompt written notice to Xxxxxx of its intention to effect such
registration and of Xxxxxx'x rights under such proposed registration, and upon
the request of Xxxxxx delivered to XxxXxxx.xxx within 20 business days after
Xxxxxx'x receipt of such notice (which request shall specify the shares of
XxxXxxx.xxx intended to be disposed of by Xxxxxx and the intended method of
disposition thereof), XxxXxxx.xxx shall include such shares held by Xxxxxx and
requested to be included in such registration; provided, however, that:
(i) If, at any time after giving such written notice of
XxxXxxx.xxx's intention to register any of the Transferred Shares
and prior to the effective date of the registration statement filed
in connection with such registration, XxxXxxx.xxx shall determine
for any reason not to register or to delay the registration of the
offering which includes such shares, at its sole election,
XxxXxxx.xxx may give written notice of such determination to Xxxxxx
and thereupon shall be relieved of its obligation to register any of
the Transferred Shares issued or issuable in connection with that
particular registration (but not from its obligation to pay
registration expenses in connection therewith or to register the
Transferred Shares in a subsequent registration); and in the case of
a determination to delay a registration shall thereupon be permitted
to delay registering any of the Transferred Shares for the same
period as the delay in respect of securities being registered for
XxxXxxx.xxx's own account.
23
(ii) If the managing underwriter in such underwritten offering
shall advise XxxXxxx.xxx that it declines to include a portion or
all of the Transferred Shares requested by Xxxxxx to be included in
the registration statement, then registration of all or a specified
portion of the Transferred Shares shall be excluded from such
registration statement (in case of an exclusion as to a portion of
the Transferred Shares, such portion to be excluded shall be
allocated among Xxxxxx and any affiliates and other selling
shareholders of XxxXxxx.xxx, including securities to be registered
in such underwritten offering in proportion to the respective number
of shares of XxxXxxx.xxx Stock and other securities requested to be
registered by each such affiliate or shareholder). In such event,
XxxXxxx.xxx shall give Xxxxxx prompt notice of the number of
Transferred Shares excluded from such registration at the request of
the managing underwriter. No such exclusion shall reduce the
securities being offered by XxxXxxx.xxx for its own account to be
included in such registration statement.
(iii) Xxxxxx, subject to the provision of Section 8.04(b)
hereof, shall have the option to include the Transferred Shares in
XxxXxxx.xxx's underwritten offering. XxxXxxx.xxx shall not be
required to include any of the Transferred Shares in an underwritten
offering of XxxXxxx.xxx's securities unless Xxxxxx (a) accepts the
terms of the underwriting as agreed upon between XxxXxxx.xxx and the
underwriters selected by it (provided such terms are usual and
customary for selling stockholders) and (b) agrees to execute such
documents in connection with such registration as XxxXxxx.xxx or the
managing underwriter may reasonably request.
(b) Cooperation with Company. Xxxxxx shall cooperate with
XxxXxxx.xxx in all respects in connection with this Agreement and/or in
connection with any underwritten offering of XxxXxxx.xxx Stock which XxxXxxx.xxx
initiates or which is initiated on XxxXxxx.xxx's behalf, including, supplying,
in a timely manner, all information reasonably requested by XxxXxxx.xxx or the
managing underwriter and executing and returning all documents reasonably
requested in connection with the registration and sale of the Transferred Shares
or any portion of the Transferred Shares.
(c) Termination of Rights. XxxXxxx.xxx's obligations under Section
8.04(a) hereof shall terminate upon the date upon which the Transferred Shares
are eligible for resale without registration pursuant to section (k) of Rule 144
("Rule 144") of the Securities Act and are accompanied by a suitable opinion
letter of counsel for the issuer directing removal of the restrictive legend.
(d) Registration Procedures. If and whenever XxxXxxx.xxx is required
by any of the provisions of this Agreement to effect the registration of any of
the Transferred Shares under the Securities Act, XxxXxxx.xxx shall (except as
otherwise provided in this Agreement), as expeditiously as possible:
(i) prepare and file with the Commission a registration
statement and shall use its best efforts to cause such registration
statement to become effective and remain effective until that
portion of the Transferred Shares which Xxxxxx has
24
requested be registered are sold or become capable of being publicly
sold without registration under the Securities Act pursuant to Rule
144(k);
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used
in connection therewith as may be necessary to keep such
registration statement effective and to comply with the provisions
of the Securities Act with respect to the sale or other disposition
of all securities covered by such registration statement whenever
Xxxxxx shall desire to sell or otherwise dispose of the same until
the earlier of (A) one year from the effectiveness of the
registration statement or (B) the date when all Transferred Shares
owned by Xxxxxx or his Permitted Transferees (as such term is
defined below) are eligible for sale under Rule 144(k);
(iii) furnish to Xxxxxx such copies of a summary prospectus or
other prospectus, including a preliminary prospectus or any
amendment or supplement to any prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as
Xxxxxx may reasonably request in order to facilitate the public sale
or other disposition of such securities;
(iv) register and qualify such securities under such other
securities or blue sky laws of such jurisdictions as Xxxxxx shall
reasonably request and do any and all other acts and things which
may be necessary or advisable to enable Xxxxxx to consummate the
public sale or other disposition in such jurisdictions of such
securities, except that XxxXxxx.xxx shall not for any such purpose
be required to qualify to do business as a foreign corporation in
any jurisdiction wherein it is not so qualified or to file therein
any general consent to service of process or to register the
Transferred Shares or any portion thereof under the blue sky laws of
any state where XxxXxxx.xxx does not have a "secondary trading"
exemption;
(v) use its best efforts to list such securities on any
securities exchange on which any securities of XxxXxxx.xxx is then
listed, if the listing of such securities is then permitted under
the rules of such exchange;
(vi) notify Xxxxxx at any time when a prospectus relating to
the Transferred Shares is required to be delivered under the
Securities Act, of the happening of any event as a result of which
such prospectus contains an untrue statement of a material fact or
omits any fact necessary to make the statements therein not
misleading, whereupon Xxxxxx shall not effect any further sales of
any of the Transferred Shares pursuant to such prospectus, and, at
the request of Xxxxxx, XxxXxxx.xxx will promptly prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of the Transferred Shares, such
prospectus will not contain an untrue statement of a material fact
or omit to state any fact necessary to make the statements therein
not misleading, whereupon Xxxxxx may then effect sales of the
Transferred Shares, or any portion thereof, pursuant to such
supplemented or amended prospectus.
25
(e) Black Out Periods.
(i) Xxxxxx shall not, directly or indirectly, effect any
public sale or distribution (including sales pursuant to Rule 144)
or any short sales of equity securities of XxxXxxx.xxx, or any
securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and the 90-day period
beginning on the effective date of any "Piggyback" registration
under Section 8.04 hereof for a public offering to be underwritten
on a firm commitment basis in which any of the Transferred Shares
are included (except as part of such underwritten registration),
unless the underwriters managing the registered public offering
otherwise agree.
(ii) XxxXxxx.xxx shall have the right to suspend use of any
registration statement and the related prospectus if its Board of
Directors determines in good faith that there is a valid purpose for
such suspension. For purposes of this Agreement, a valid purpose
shall include, but is not limited to, a good faith determination
that the registration statement may contain a material misstatement
or omission (including as a result of XxxXxxx.xxx having under
consideration a significant acquisition or disposition or other
material transaction that has not been publicly disclosed), in which
case XxxXxxx.xxx may cause the registration statement not to be used
by Xxxxxx until such time as the Commission has declared effective a
post-effective amendment to the registration statement filed by
XxxXxxx.xxx or if the misstatement or omission can be corrected by
incorporation by reference in the registration statement of another
Commission filing of XxxXxxx.xxx, XxxXxxx.xxx has made another
filing on Form 8-K or other appropriate form to correct such
misstatement or omission.
(iii) In connection with any public offering of XxxXxxx.xxx's
securities, Xxxxxx agrees, upon request of XxxXxxx.xxx or the
underwriters managing any underwritten offering of XxxXxxx.xxx's
securities, not to sell, make any short sale of, loan, grant any
option for the purchase of or otherwise dispose of any of the
Transferred Shares (other than those included in the registration)
without the prior written consent of XxxXxxx.xxx or such
underwriters, as the case may be, for such period of time (not to
exceed 180 days in the case of XxxXxxx.xxx's first underwritten
public offering the gross proceeds of which are at least
$10,000,000, and 90 days in the case of other public offerings of
XxxXxxx.xxx) from the effective date of such registration as may be
requested by the underwriters; provided, that the officers and
directors of XxxXxxx.xxx who own stock of XxxXxxx.xxx and the
holders, if any, of 5% or more of XxxXxxx.xxx's outstanding voting
securities also agree to such restrictions.
(iv) In order to enforce the foregoing clauses 8.04(e)(i),
(ii) and (iii), XxxXxxx.xxx may impose stop transfer instructions
with respect to the Transferred Shares or any portion thereof (and
the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
26
(f) Expenses. All expenses incurred in any registration of the
Transferred Shares under this Agreement shall be paid by XxxXxxx.xxx, including,
without limitation, printing expenses, fees and disbursements of counsel for
XxxXxxx.xxx, expenses of any audits to which XxxXxxx.xxx shall agree or which
shall be necessary to comply with governmental requirements in connection with
any such registration, all registration and filing fees for the Transferred
Shares under federal and state securities laws and expenses of complying with
the securities or blue sky laws of any jurisdictions pursuant to Section
8.04(d)(iv); provided, however, that XxxXxxx.xxx shall not be liable for (i) any
discounts or commissions to any underwriter, (ii) any stock transfer taxes
incurred with respect to the Transferred Shares sold in the offering or (iii)
the fees and expenses of counsel for Xxxxxx, provided that XxxXxxx.xxx will pay
the costs and expenses of XxxXxxx.xxx's counsel when XxxXxxx.xxx's counsel is
representing any or all selling security holders.
(g) Indemnification. In the event the Transferred Shares, or any
portion thereof, are included in a registration statement pursuant to this
Agreement:
(i) Indemnity by XxxXxxx.xxx. Without limitation of any other
indemnity provided to Xxxxxx, either in connection with the offering
or otherwise, to the extent permitted by law, XxxXxxx.xxx shall
indemnify and hold harmless Xxxxxx and his affiliates, any
underwriter (as defined in the Securities Act) for Xxxxxx and each
person, if any, who controls such underwriter (within the meaning of
the Securities Act or the Exchange Act) against any losses, claims,
damages or liabilities (joint or several) to which they may become
subject under the Securities Act, the Exchange Act or other federal
or state laws, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are
based upon any of the following statements, omissions or violations
(collectively a "Violation") by XxxXxxx.xxx: (A) any untrue
statement or alleged untrue statement of a material fact contained
in such registration statements including any preliminary prospectus
or final prospectus contained therein or any amendments or
supplements, thereto, (B) the omission or alleged omission to state
therein a material fact required to be stated therein, or necessary
to make the statements therein, in light of the circumstances under
which they were made, not misleading or (C) any violation or alleged
violation by XxxXxxx.xxx of the Securities Act, the Exchange Act,
any state securities law or any rule or regulation promulgated under
the Securities Act, the Exchange Act or any State securities law,
and, in each case, XxxXxxx.xxx shall reimburse Xxxxxx and his
affiliates or underwriter for any legal or other expenses incurred
by them connection with investigating or defending any such loss,
claim, damage, liability or action. Notwithstanding the foregoing,
XxxXxxx.xxx shall not be liable to Xxxxxx or his affiliates or
underwriter in any case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon (1) a
Violation which occurs in reliance upon and in conformity with
written information furnished by Xxxxxx, his affiliates or his
underwriter expressly for use in connection with such registration
or (2) by Xxxxxx'x failure to deliver to purchasers of the
Transferred Shares, or any portion thereof, a copy of the
registration statement or prospectus or any amendments or
supplements thereto pursuant to Section 8.04(d)(vii) after
27
XxxXxxx.xxx has furnished Xxxxxx with a sufficient number of copies
of the same.
(ii) Indemnity by Xxxxxx. Xxxxxx shall indemnify and hold
harmless XxxXxxx.xxx and/or its affiliates, counsel, officers,
directors, and representatives, any underwriter (as defined in the
Securities Act) and each person, if any, who controls XxxXxxx.xxx or
the underwriter (within the meaning of the Securities Act or the
Exchange Act), against any losses, claims, damages or liabilities
(joint or several) to which they may become subject under the
Securities Act, the Exchange Act or any state securities law, and
Xxxxxx shall reimburse XxxXxxx.xxx and/or its affiliate, officer,
director or partner, underwriter or controlling person for any legal
or other expenses liability incurred by them in connection with
investigating or defending any such loss, claim, damage, liability
or action insofar as such losses, claims, damages or liabilities (or
actions and respect thereof) arise out of or are based upon a
Violation which occurs in reliance upon and in conformity with
written information furnished by Xxxxxx, his affiliates or his
underwriter expressly for use in connection with such registration.
(iii) Notice: Right to Defend. Promptly after receipt by an
indemnified party under this Section 8.04(g) of notice of the
commencement of any action (including any government action) such
indemnified party shall, if a claim in respect thereof made against
an indemnifying party under this Section 8.04(g), deliver to the
indemnifying party a written notice of the commencement thereof, and
the indemnifying party shall have the right to participate in and if
the indemnifying party agrees in writing that it will be responsible
for any costs, expenses, judgments, damages and losses incurred by
the indemnified party with respect to such claim, jointly with any
other indemnifying party similarly noticed, to assume the defense
thereof with counsel mutually satisfactory to the parties; provided,
however, that an indemnified party shall have the right to retain
its own counsel with the fees and expenses to be paid by the
indemnifying party, if the indemnified party reasonably believes
that representation of such indemnified party by the counsel
retained by the indemnifying party would be inappropriate due to the
availability of separate defenses or actual or potential conflicts
of interests between such indemnified party and any other party or
parties represented by such counsel in such proceeding. The failure
to deliver written notice to the indemnifying party within
reasonable time of the commencement of an such action shall relieve
such indemnifying party of any liability to the indemnified party
under this Agreement only if and to the extent that such failure is
prejudicial to its ability to defend such action; provided, that any
such omission to deliver written notice to the indemnifying party
will not relieve the indemnifying party of any liability that it may
have to any indemnified party otherwise than under this Agreement.
(iv) Contribution. If the indemnification provided for in this
Agreement is held by a court of competent jurisdiction to be
unavailable to an indemnified party with respect to any loss,
liability, claim, damage or expense referred to therein, then the
indemnifying party, in lieu of indemnifying such
28
indemnified party thereunder, shall contribute to the amount paid or
payable by such indemnified party as a result of such loss,
liability, claim, damage or expense in such proportion as is
appropriate to reflect the relative fault of the indemnifying party
on the one hand and of the indemnified party on the other hand in
connection with the statements or omissions which resulted in such
loss, claim, damage or expense as well as any other relevant
equitable considerations. The relevant fault of the indemnifying
party and the indemnified party shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact
information supplied by the indemnifying party or by the indemnified
party and the parties' relative intent, access to information and
opportunity to correct or prevent such statement or omission. 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 or entity who was not guilty of such
fraudulent misrepresentation.
(v) Survival of Indemnity. The indemnification provided for by
this Agreement shall be a continuing right to indemnification and
shall survive (A) the registration and sale of any Transferred
Shares by any person entitled to indemnification hereunder and (B)
the expiration or termination of this Agreement.
Section 8.05 Transfer of Registration. Xxxxxx'x rights under Article
VIII of this Agreement, including, without limitation, the rights to cause
XxxXxxx.xxx to register Transferred Shares, or any portion thereof, under
Section 8.04(a) are personal to Xxxxxx and shall not survive any transfer(s) of
the Transferred Shares, or any portion thereof, whatsoever, and may not be
assigned or transferred in any way, provided, however, that the restrictions
contained in this Section 8.05 shall not apply with respect to any Transfer of
the Transferred Shares, or any portion thereof, by Xxxxxx, pursuant to
applicable laws of descent and distribution or otherwise to such person's
spouse, former spouse and descendants (whether natural or adopted), parents and
their descendants, descendants of such brothers and sisters and any spouse of
the foregoing individuals or any trust solely for the benefit of any of the
foregoing; provided, however, that if any of the foregoing is less than 21 years
of age at the time of such proposed Transfer, then such Transfer may only be
made to a trustee of a valid trust for the benefit of the foregoing, which trust
shall not terminate prior to the beneficiary (or beneficiaries) thereof
attaining the age of 21 (collectively, "Permitted Transferees"). Except as
permitted herein, any attempted Transfer or assignment of the rights set forth
in this Article VIII shall be void ab initio.
Article IX.
INDEMNIFICATION
Section 9.01 By Xxxxxx. Xxxxxx agrees to indemnify and hold harmless
XxxXxxx.xxx, Subsidiary and their respective directors, officers, employees and
agents (the "Purchaser Parties") against, and to reimburse Purchaser Parties on
demand with respect to, any and all losses, liabilities, obligations, suits,
proceedings, demands, judgments, damages,
29
claims, expenses and costs (including, without limitation, reasonable fees,
expenses and disbursements of counsel) (collectively, "Losses") which each may
suffer, incur or pay by reason of (a) the breach by Xxxxxx or SunSource of any
representation or warranty made by either of them in this Agreement or in any
agreement, certificate or other document executed by Xxxxxx or SunSource and
delivered to XxxXxxx.xxx or Subsidiary pursuant to the provisions of this
Agreement; (b) the failure of Xxxxxx or SunSource to perform any agreement
required by this Agreement or any agreement executed pursuant to the provisions
of this Agreement; and (c) the allegation by any third party of the existence of
any liability, obligation, lease, agreement, contract, other commitment or state
of facts which, if such allegation were true, would constitute a breach by
Xxxxxx or SunSource of any representation or warranty made by either of them in
this Agreement or in any agreement, certificate or other document delivered by
or on behalf of Xxxxxx and SunSource to XxxXxxx.xxx or Subsidiary pursuant to
the provisions of this Agreement or of any covenant made by Xxxxxx or SunSource
herein or therein.
Section 9.02 By XxxXxxx.xxx. XxxXxxx.xxx agrees to indemnify and
hold harmless Xxxxxx against, and to reimburse Xxxxxx on demand with respect to,
any and all Losses which Xxxxxx may suffer, incur or pay by reason of (a) the
breach by XxxXxxx.xxx or Subsidiary of any representation or warranty made by
either of them in this Agreement or in any agreement, certificate or other
document executed by XxxXxxx.xxx or Subsidiary and delivered to Xxxxxx pursuant
to the provisions of this Agreement; (b) the failure of XxxXxxx.xxx or
Subsidiary to perform any agreement required by this Agreement or any agreement
executed pursuant to the provisions of this Agreement; and (c) the allegation by
any third party of the existence of any liability, obligation, lease, agreement,
contract, other commitment or state of facts which, if such allegation were
true, would constitute a breach by XxxXxxx.xxx or Subsidiary of any
representation or warranty made by either of them in this Agreement or in any
agreement, certificate or other document delivered by or on behalf of
XxxXxxx.xxx or Subsidiary to Xxxxxx pursuant to the provisions of this Agreement
or of any covenant made by XxxXxxx.xxx or Subsidiary herein or therein.
Section 9.03 Indemnification Procedure. The Purchaser Parties, in
the case of Section 9.01 hereof, and Xxxxxx, in the case of Section 9.02 hereof
(hereinafter, the applicable party or parties providing indemnity, the
"Indemnifying Party" and the party or parties being indemnified, the
"Indemnified Party") agree to give the Indemnifying Party prompt written notice
of the allegation by any third party of the existence of any liability,
obligation, lease, agreement, contract, other commitment or state of facts
referred to in clause (c) of Sections 9.01 and 9.02 hereof, as applicable. The
Indemnifying Party shall be entitled, at his or its sole cost and expense, to
participate in and to control the contest, defense, settlement or compromise of
any claim if the Indemnifying Party shall agree in writing within 15 days after
the receipt of notice of such claim that it is required, pursuant to this
Article IX, to indemnify the Indemnified Party for the full amount of such claim
(the "Claim Acknowledgement Procedure"). If the Indemnifying Party shall assume
the defense of a claim hereunder, the Indemnified Party shall be kept informed
with respect to, and shall have the right to participate in, the contest,
defense, settlement or compromise of any such claim. If the Indemnifying Party
does not assume the defense of a claim within a reasonable time after notice
thereof or, after assumption, does not thereafter diligently pursue such defense
or does not comply with the Claim Acknowledgement Procedure, the Indemnified
Party shall be entitled to defend, settle or compromise such matter for the
account and at the expense of the Indemnifying Party. Notwithstanding the
foregoing
30
provisions of this Section 9.03, the Indemnified Party shall have the sole right
to control the contest, defense, settlement or compromise of any claim if such
claim is not a claim solely for monetary damages. Notwithstanding anything to
the contrary set forth in this Article IX, no Indemnified Party shall be
entitled to indemnification until the aggregate amount of Losses payable to such
Indemnified Party (without giving effect to this limitation) exceeds $10,000;
provided, that, if the aggregate amount of such Losses exceeds $10,000,
indemnification shall be made to the full extent of any such Losses, including
any such Losses that arose prior to the time that the aggregate of such Losses
exceeded $10,000.
Section 9.04 Knowledge of Parties. Notwithstanding the generality of
Sections 9.01 and 9.02 hereof, conditions or circumstances that would otherwise
constitute exceptions to any representations or warranties of XxxXxxx.xxx or
Subsidiary, on the one hand, or Xxxxxx or SunSource, on the other hand, but of
which the other party has actual knowledge on the date hereof shall not cause
any liability of such representing or warranting party under this Agreement.
Section 9.05 Survival of Indemnifications. All indemnifications made
by the parties to this Agreement pursuant to the terms hereof shall survive the
Closing of the transactions hereby contemplated, and in the event the Closing
does not occur, all such indemnifications shall survive the termination of this
Agreement.
Article X.
TERMINATION
(a) This Agreement may be terminated at any time prior to the
Closing Date:
(i) by mutual consent of the parties;
(ii) by XxxXxxx.xxx and Subsidiary, if there has been a
material violation or breach by Xxxxxx or SunSource of any
agreement, representation, warranty or condition contained in this
Agreement and not cured to the reasonable satisfaction of
XxxXxxx.xxx and Subsidiary prior to the Closing Date; or
(iii) by Xxxxxx and SunSource, if there has been a material
violation or breach by XxxXxxx.xxx or Subsidiary of any agreement,
representation, warranty, or condition contained in this Agreement
not cured to the reasonable satisfaction of Xxxxxx and SunSource
prior to the Closing Date.
(b) This Agreement shall automatically terminate, without any action
of any of the parties hereto, if the Closing has not been completed by June 30,
1999, unless this provision is expressly waived in writing by the parties
hereto.
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Article XI.
MISCELLANEOUS
Section 11.01 Survival of Representations and Warranties. All
statements, certifications, indemnification's, representations and warranties
made hereby by the parties to this Agreement and their respective covenants,
agreements and obligations to be performed pursuant to the terms hereof shall,
unless waived in writing and notwithstanding any examination by or on behalf of
any party hereto and notwithstanding the consummation of the transactions hereby
contemplated, survive the closing of the transactions hereby contemplated for a
period of 24 months; provided, however, that the representations and warranties
set forth in Section 3.19 and Section 3.20 shall survive the closing of the
transactions hereby contemplated for a period of five years.
Section 11.02 Merger Provision. All prior or contemporaneous
agreements, contracts, promises, representations and statements, if any, among
the parties hereto (including, without limitation, those included in any letter
of intent entered into between the parties hereto) as to the subject matter
hereof, other than the Confidentiality Agreement, are merged into this
Agreement. This Agreement, together with the Confidentiality Agreement, all
agreements, schedules, exhibits, documents and other instruments to be attached
hereto or delivered herewith, sets forth the entire understanding between the
parties, and there are no terms, conditions, representations, warranties or
covenants other than those contained herein and in the Confidentiality Agreement
and in such agreements, schedules, exhibits, documents and other instruments to
be attached hereto or delivered herewith.
Section 11.03 Amendment and Modification. No term or provision of
this Agreement may be amended, released, discharged or modified in any respect
except in a writing signed by the party to be charged and only to the extent
therein set forth.
Section 11.04 Waiver. (a) No waiver shall be deemed to be made by
any of the parties to any of its rights hereunder unless such waiver shall be in
a writing signed by the waiving party and only to the extent therein set forth.
(b) No failure of any of the parties to exercise any power given
such party hereunder or to insist upon strict compliance by any other party with
its obligations hereunder and no custom or practice of the parties at variance
with the terms hereof shall constitute a waiver of the right of any party to
demand precise compliance with the terms of this Agreement.
Section 11.05 Notices. (a) All notices, consents, demands or other
communications required or permitted to be given pursuant to this Agreement
shall be in writing and shall be deemed sufficiently given on (i) the day on
which delivered personally or by telecopy (with prompt confirmation by mail)
during a business day to the appropriate location listed at the appropriate
address below, (ii) three business days after the posting thereof by U.S.
registered or certified first class mail, return receipt requested with postage
and fees prepaid or (iii) one business day after deposit thereof for overnight
delivery. Such notices, consents, demands or other communications shall be
addressed respectively:
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As to Xxxxxx: G. Xxxxxx Xxxxxx
0000 Xxxxxxx Xxxxx
Xxxx Xxxxxx, Xxxxxxx 00000
Telephone: (___ )____ - ____
with a copy to: Xxxxx, Xxxxx & Xxxxxxx, P.A.
Fourth Floor, North Tower
000 Xxxxxx Xxxxxx Xxxxx
Xx. Xxxxxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxxxx Xxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
As to XxxXxxx.xxx
or the Subsidiary: XxxXxxx.xxx, Inc.
Xxx Xxxxxxxxx Xxxxx
Xxxxxxxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to: Rosenman & Colin LLP
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attn: Xxxx X. Xxxxxx, Esq.
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
or to any other address or telecopy number which such party may have
subsequently communicated to the other parties in writing.
(b) Except as otherwise provided in this Agreement, any notice,
consent, demand or other communication given hereunder may be signed on behalf
of a party by any duly authorized representative of that party.
Section 11.06 Governing Law; Service of Process. This Agreement and
any other agreement entered into in connection herewith except for the
Promissory Note shall be governed by, and construed under and in accordance
with, the laws of the State of New York applicable to contracts made and wholly
to be performed therein by residents thereof, without giving effect to the
conflict of laws principles thereof. All actions or proceedings seeking the
interpretation and/or enforcement of this agreement, except actions or
proceedings seeking the interpretation and/or enforcement of the Promissory
Note, shall be brought only in the state or federal courts located in New York
County, all parties hereby submitting themselves to the jurisdiction of such
courts for such purpose. Any process in any action or proceeding commenced in
the courts of the State of New York arising out of any claim, dispute or
disagreement, other than claims, disputes or disagreements arising under the
Promissory Note, may, among other methods, be served upon any party by
delivering or mailing the same, via
33
registered or certified mail, addressed to such party pursuant to Section 11.05
hereof. Any such delivery or mail service shall be deemed to have the same force
and effect as personal service within the State of New York, New York County.
With respect to the Promissory Note, all actions or proceedings seeking the
interpretation and/or enforcement of said Promissory Note shall be brought only
in the federal courts located in the Middle District of Florida, Tampa Division,
if and to the extent such courts may exercise jurisdiction in respect of such
matter, pursuant to 28 USCA 1332, provided that, in the event such courts do not
have jurisdiction, such actions or proceedings shall be brought only in the
state courts located in Pinellas County, Florida. All parties are hereby
submitting themselves to the jurisdiction of such federal and/or state courts
for such purposes. Any process in any action or proceeding involving the
Promissory Note commenced in the federal courts located in the Middle District
of Florida or the state courts located in Pinellas County, Florida may, among
other methods, be served upon any party by delivering or mailing the same, via
registered or certified mail, addressed to such party pursuant to Section 11.05
hereof. Any such delivery or mail service shall be deemed to have the same force
and effect as personal service within the State of Florida.
Section 11.07 Headings; Captions. The headings and captions
appearing in this Agreement, are inserted only as a matter of convenience and
for reference and in no way define, limit or describe the scope or intent of
this Agreement or any of the provisions hereof.
Section 11.08 Severability. If any term or provision of this
Agreement or the application thereof to any person or circumstance shall, to any
extent, be invalid or unenforceable, the remainder of this Agreement or the
application of such term or provision to persons or circumstances other than
those as to which it is held void or unenforceable shall not be affected
thereby, and each term and provision of this Agreement shall be valid and
enforced to the fullest extent permitted by law.
Section 11.09 Publicity. Any communications and notices to third
parties and all other publicity concerning the transactions contemplated by the
Agreement (other than governmental or regulatory filings) shall be planned and
coordinated by and among the parties. Unless required by applicable law, none of
the parties shall disseminate or make public or cause to be disseminated or made
public any information regarding the transactions contemplated hereunder without
the prior written approval of the other parties, which approval shall not be
unreasonably withheld.
Section 11.10 Cumulative Rights and Remedies. The rights and
remedies provided for in this Agreement are cumulative and in addition to, and
shall not restrict or limit, any other rights and remedies available at law or
in equity.
Section 11.11 Expenses. Each of the parties hereto shall bear its
own expenses associated with the negotiation and execution of the Agreement and
the consummation of the transactions contemplated hereby including, without
limitation, legal and accounting fees and expenses.
Section 11.12 Costs of Enforcement. The prevailing party in any
proceeding brought to enforce any provision of the Agreement shall be entitled
to recover the reasonable fees and costs of its counsel, plus all other costs of
such proceeding.
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Section 11.13 Third Parties. Other than the parties hereto, no
person shall have any rights under or to enforce any provision of this
Agreement.
Section 11.14 Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the parties hereto, their respective
heirs, administrators, executors, successors and assigns; provided, however,
that this Agreement may not be assigned by any of the parties hereto other than
by and among XxxXxxx.xxx and its subsidiaries.
Section 11.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original and all of which
taken together shall constitute a single agreement.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as
of the date first above written.
XXXXXXX.XXX, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------
Name: Xxxx X. Xxxxx
Title: President
SUNGLASSSITE, INC.
By: /s/ Xxxx X. Xxxxx
--------------------------------
Name: Xxxx X. Xxxxx
Title: President
SUNSOURCE TECHNOLOGY, INC.
By: /s/ G. Xxxxxx Xxxxxx
--------------------------------
Name: G. Xxxxxx Xxxxxx
Title: President
/s/ G. Xxxxxx Xxxxxx
------------------------------------
G. XXXXXX XXXXXX
36
