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SUNSOURCE INC.
AND ITS SUBSIDIARIES SET FORTH
ON SCHEDULE 1 HERETO, AS OBLIGORS,
AND ITS SUBSIDIARIES SET FORTH
ON SCHEDULE 2 HERETO, AS GUARANTORS
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AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
Dated as of December 31, 1998
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7.66% Senior Notes due 2002
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TABLE OF CONTENTS
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BACKGROUND........................................................................................................1
SECTION 1. ISSUANCE OF NOTES.....................................................................................2
1.1. Authorization...................................................................2
1.2. Issuance of Note; the Closing...................................................2
1.3. Representations of the Purchaser................................................2
1.4. Surcharge Rate..................................................................3
SECTION 2. REPRESENTATIONS OF THE COMPANY AND SUBSIDIARIES.......................................................3
2.1. Organization and Good Standing..................................................3
2.2. Power and Authority; Validity of Agreement......................................3
2.3. No Violation of Laws or Agreements..............................................4
2.4. Material Contracts..............................................................4
2.5. Compliance......................................................................4
2.6. Litigation......................................................................4
2.7. Title to Assets.................................................................4
2.8. Capital Stock...................................................................5
2.9. Accuracy of Information; Full Disclosure........................................5
2.10. Taxes and Assessments...........................................................5
2.11. Indebtedness....................................................................6
2.12. Management Agreements...........................................................6
2.13. Subsidiaries and Investments....................................................6
2.14. ERISA...........................................................................6
2.15. Fees and Commissions............................................................7
2.16. No Extension of Credit for Securities...........................................7
2.17. Hazardous Wastes, Substances and Petroleum Products.............................8
2.18. Solvency........................................................................8
2.19. Investment Company Act..........................................................9
2.20. Private Offering by the Company.................................................9
2.21. Solvency........................................................................9
2.22. Foreign Assets Control Regulations..............................................9
2.23. Year 2000 Compliance............................................................9
SECTION 3. CONDITIONS OF CLOSING.................................................................................9
3.1. Proceedings Satisfactory.........................................................9
3.2. Intentionally Omitted...........................................................10
3.3. Opinion of Counsel for the Company..............................................10
3.4. Authorization Documents; Officer's Certificate..................................10
3.5. Legality........................................................................10
3.6. Financial Information...........................................................10
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3.7. Private Placement Number........................................................10
3.8. Credit Agreement................................................................10
3.9. Intentionally Omitted...........................................................10
3.10. Insurance.......................................................................10
3.11. Junior Subordinated Debentures..................................................11
SECTION 4. PREPAYMENT OF THE NOTES..............................................................................11
4.1. Mandatory Repayments of the Notes...............................................11
4.2. Optional Prepayment of the Notes................................................11
4.3. Notice of Prepayment; Make-Whole Computations...................................11
4.4. Allocation of Prepayments.......................................................12
4.5. Surrender of Notes; Notation Thereon............................................12
4.6. Purchase of Notes...............................................................12
4.7. Special Prepayment for Change of Control........................................12
4.8. Prepayment in Connection with a Sale of Material Assets.........................13
SECTION 5. AFFIRMATIVE COVENANTS................................................................................13
5.1. Existence and Good Standing.....................................................13
5.2. Quarterly Financial Statements..................................................14
5.3. Annual Financial Statements.....................................................14
5.4. Annual Budget...................................................................14
5.5. Public Information..............................................................14
5.6. Books and Records...............................................................15
5.7. Properties; Insurance...........................................................15
5.8. Notices.........................................................................15
5.9. Taxes...........................................................................15
5.10. Compliance; Notification........................................................15
5.11. ERISA...........................................................................16
5.12. Capitalization Ratio............................................................16
5.13. Fixed Charge Coverage Ratio.....................................................17
5.14. Leverage Ratio..................................................................17
5.15. Management Changes..............................................................17
5.16. Subsequent Credit Terms.........................................................17
5.17. Use of Proceeds.................................................................17
5.18. Transactions Among Affiliates...................................................18
5.19. Joinder of Subsidiaries.........................................................18
5.20. Year 2000 Compliance............................................................18
5.21. Supporting Information..........................................................18
5.22. Other Information...............................................................18
SECTION 6. NEGATIVE COVENANTS. ................................................................................18
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6.1. Indebtedness....................................................................18
6.2. Guaranties......................................................................19
6.3. Loans...........................................................................19
6.4. Liens and Encumbrances..........................................................19
6.5. Additional Negative Pledge......................................................20
6.6. Restricted Payments.............................................................20
6.7. Transfer of Assets..............................................................20
6.8. Acquisitions and Investments....................................................21
6.9. Use of Proceeds.................................................................21
6.10. Amendment of Documents..........................................................21
6.11. Payment of Loan. ..............................................................21
SECTION 7. DEFINITIONS..........................................................................................22
7.1. Definitions.....................................................................22
7.2. Rules of Construction...........................................................31
SECTION 8. EVENTS OF DEFAULT; REMEDIES..........................................................................32
8.1. Events of Default...............................................................32
8.2. Acceleration; Suits for Enforcement.............................................33
8.3. Remedies Cumulative.............................................................34
8.4. Remedies Not Waived.............................................................34
SECTION 9. GUARANTY.............................................................................................34
9.1. Guaranty........................................................................34
9.2. Bankruptcy......................................................................35
9.3. Nature and Term of Guaranty.....................................................35
9.4. Rights and Remedies.............................................................35
9.5. Actions by Holders of the Notes Not Affecting Guaranty..........................35
9.6. Payment in Accordance with Notes and this Agreement.............................36
9.7. Payments Under Guaranty.........................................................36
9.8. Waivers and Modifications.......................................................36
9.9. Waiver..........................................................................36
9.10. Subordination of Rights of Subrogation..........................................37
9.11. No Setoff by Guarantors.........................................................37
9.12. Continuing Guaranty; Transfer of Note...........................................37
9.13. Representations and Warranties; Covenants.......................................37
SECTION 10. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES........................................................38
SECTION 11. LOST, ETC., NOTES...................................................................................38
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SECTION 12. AMENDMENT AND WAIVER................................................................................39
SECTION 13. HOME OFFICE PAYMENT.................................................................................40
SECTION 14. LIABILITIES OF THE PURCHASER........................................................................40
SECTION 15. TAXES...............................................................................................40
SECTION 16. MISCELLANEOUS.......................................................................................41
16.1. Expenses.............................................................................41
16.2. Reliance on and Survival of Representations..........................................41
16.3. Successors and Assigns...............................................................41
16.4. Notices..............................................................................42
16.5. Reproduction of Documents............................................................42
16.6. Law Governing........................................................................42
16.7. Headings.............................................................................42
16.8. Counterparts.........................................................................42
SCHEDULE 1 - The Subsidiaries Party to this Agreement as Obligors
SCHEDULE 2 - The Subsidiaries Party to this Agreement as Guarantors
SCHEDULE 3 - Manner of Payment and Notice
EXHIBIT A - Form of Note
EXHIBIT B - Disclosures of the Company and its Subsidiaries
EXHIBIT C - Covenant Compliance Certificate
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SUNSOURCE INC.
AND ITS SUBSIDIARIES SET FORTH ON
SCHEDULE 1 HERETO, AS OBLIGORS, AND
ITS SUBSIDIARIES SET FORTH ON SCHEDULE 2
HERETO, AS GUARANTORS
Xxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxxxxxxx 00000
AMENDED AND RESTATED
NOTE PURCHASE AGREEMENT
Philadelphia, Pennsylvania
as of December 31, 1998
TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF AMERICA
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Ladies and Gentlemen:
SUNSOURCE INC., a Delaware corporation (the "Company"), and
the Subsidiaries of the Company set forth on Schedule 1 hereto (the
"Subsidiaries" and collectively with the Company, the "Obligors"), and certain
Subsidiaries of the Company set forth on Schedule 2 hereto (the "Guarantors"),
hereby agree with you as follows:
BACKGROUND.
The Company is a Delaware corporation, and each Obligor (other
than the Company) is either a direct or indirect subsidiary of the Company.
SDI Operating Partners, L.P., a Delaware limited partnership
("SDI"), issued Sixty Million Dollars ($60,000,000) in privately-placed notes
pursuant to the Existing Note Purchase Agreement, such notes having the benefit
of a guarantee from, among others, the Company.
SunSource Investment Company, Inc. ("SSICI") is a
newly-formed, wholly-owned holding company of the Company. SunSub A will become
a direct wholly-owned subsidiary of SSICI, which is a direct subsidiary of the
Company, in the 1998 Conversion. SunSub B has agreed to merge with and into
SunSub A, which will cause the existence of SDI
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and its general partner, SDI Partners I, L.P., a Delaware limited partnership
and a guarantor under the Existing Note Purchase Agreement ("SDIPI"), to cease
and the assets and liabilities of SDI to be owned by SunSub A. SunSub A is
forming four wholly-owned subsidiaries and will contribute the assets and
liabilities of SDI to them pursuant to the 1998 Conversion.
This Agreement amends and restates, replaces and supersedes
the Existing Note Purchase Agreement. All amounts outstanding under the Existing
Note Purchase Agreement are and shall be deemed to be outstanding under this
Agreement as of the Closing Date, and from and after the Closing Date, the
Obligors jointly and severally irrevocably and unconditionally assume the
obligations of SDI under the Existing Note Purchase Agreement and the notes
issued thereunder (in each case as amended and restated by this Agreement).
SECTION 1. ISSUANCE OF NOTES.
1.1. Authorization. The Company and the Obligors, on a joint
and several basis, have has duly authorized an issue of $60,000,000 aggregate
principal amount of their 7.66% Senior Notes due 2002 (the "Notes"). Each Note
shall be substantially in the form annexed hereto as Exhibit A. As used herein,
(i) the term "Notes" shall include all notes originally issued pursuant to this
Agreement and all notes delivered in substitution or exchange for any of said
notes pursuant to this Agreement and, where applicable, shall include the
singular number as well as the plural and (ii) the term "Note" shall mean one of
the Notes.
1.2. Issuance of Note; the Closing. The Obligors, on a joint
and several basis, shall issue to you and, subject to the terms and conditions
hereof, you shall acquire from the Obligors, Notes in the aggregate principal
amount of $60,000,000, at a price equal to 100% of such amount. The closing of
the issuance of Note by you hereunder shall be held at 10:00 a.m., Philadelphia
time, on December 31, 1998 (the "Closing Date") at the office of Xxxxxx Xxxxxxxx
LLP, 3000 Two Xxxxx Square, 00xx xxx Xxxx Xxxxxxx, Xxxxxxxxxxxx, XX 00000. On
the Closing Date, the Obligors will deliver to you one or more Notes, in any
denominations (multiples of $1,000), in the aggregate principal amount to be
acquired by you, all as you may specify by timely notice to the Company (or, in
the absence of such notice, one Note to be purchased by you registered in your
name), duly executed and dated the Closing Date, against your delivery to the
Obligors of such purchase price.
1.3. Representations of the Purchaser. You represent to the
Obligors as follows:
(a) You are acquiring the Notes to be acquired by you
on the Closing Date for investment and not with a view to the distribution or
sale of the Notes, subject, however, to any requirement of law that your
property be at all times within your control.
(b) The source of your funds to pay the purchase
price of the Notes is an "insurance company general account" (as the term is
defined in Prohibited Transaction Exemption 95-60 (issued by the Department of
Labor on July 12, 1995)) in respect of which the
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reserves and liabilities (as defined by the annual statement for life insurance
companies approved by the National Association of Insurance Commissioners (the
"NAIC Annual Statement")) for the general account contract(s) held by or on
behalf of any employee benefit plan together with the amount of the reserves and
liabilities for the general account contract(s) held by or on behalf of any
other employee benefit plans maintained by the same employer (or affiliate
thereof as defined in said Prohibited Transaction Exemption 95-60) or by the
same employee organization in the general account do not exceed 10% of the total
reserves and liabilities of the general account (exclusive of separate account
liabilities) plus surplus as set forth in the NAIC Annual Statement filed with
your state of domicile.
(c) You understand that the Notes have not been
registered under the Securities Act of 1933, as amended, and may be resold only
if registered pursuant to the provisions of the Securities Act of 1933, as
amended, or if an exemption from registration is available, except under
circumstances where neither such registration nor such an exemption is required
by law, and that the Company is not required to register the Notes.
1.4. Surcharge Rate. Notwithstanding the interest rate set
forth in Paragraph 1.1 hereof and in the Notes , the Company shall pay interest
on the Notes at the rate of 7.91% (the "Surcharge Rate") if for the Rolling
Period ended on or immediately prior to the date of the interest payment then
being made, the Leverage Ratio is equal to or greater than 2.75 to 1.
SECTION 2. REPRESENTATIONS OF THE COMPANY AND SUBSIDIARIES.
Each Obligor represents and warrants to you, as to itself and each Subsidiary
party hereto, and each Subsidiary party hereto represents and warrants to you as
to itself that:
2.1. Organization and Good Standing. Each Obligor and each
Subsidiary is a corporation duly formed and validly existing under the laws of
its state of formation, and has the power and authority to carry on its business
as now conducted. Each Obligor and each Subsidiary is qualified to do business
in all other states in which the failure to qualify would have a Material
Adverse Effect.
2.2. Power and Authority; Validity of Agreement. Each Obligor
and each Subsidiary has the power and authority under the law of its state of
formation and under its organizational documents to enter into and perform this
Agreement, the Notes and all other agreements, documents and actions required
hereunder, to the extent each is a party thereto; and all actions necessary or
appropriate for each Obligor's and each Subsidiary's execution and performance
of this Agreement, the Notes, and all other agreements, documents and actions
required hereunder, to the extent it is a party hereto, have been taken, and,
upon their execution, the same will constitute the valid and binding obligations
of each Obligor and each Subsidiary to the extent each is a party thereto,
enforceable in accordance with their terms.
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2.3. No Violation of Laws or Agreements. The making and
performance of this Agreement, the Notes, and the other documents, agreements
and actions required of each Obligor and each Subsidiary hereunder, to the
extent each is a party thereto, will not violate any provisions of any law or
regulation, federal, state or local, or the respective organizational documents
of any Obligor or Subsidiary or result in any breach or violation of, or
constitute a default under, any agreement or instrument by which any Obligor,
any Subsidiary or its respective property may be bound, including without
limitation the Credit Agreement and the Indenture.
2.4. Material Contracts. No Obligor or Subsidiary is a party
to or in any manner obligated under any contract material to its respective
business except this Agreement, the Notes, its organizational documents, the
Promissory Notes, the Credit Agreement, the Indenture, and the agreements
identified on Exhibit B hereto, and no material default exists under any of such
contracts.
2.5. Compliance. Each Obligor and each Subsidiary is in
compliance in all material respects with all applicable laws and regulations,
federal, state and local (including without limitation those administered by the
Local Authorities) material to the conduct of its business and operations; each
Obligor and each Subsidiary possesses all the material franchises,
authorizations, patents, copyrights, trademarks, permits and licenses necessary
or required in the conduct of its respective business, and, except as may be
described on Exhibit B, the same are valid, binding, enforceable and subsisting
without any material defaults thereunder; and, except as described on Exhibit B,
no authorization, consent, approval, waiver, license or exemption from, nor any
filing, declaration or registration with, any court, governmental agency or
regulatory authority (federal, state or local) or non-governmental entity, under
the terms of contracts or otherwise, is required by reason of or in connection
with any Obligor's or any Subsidiary's execution and performance of this
Agreement, the Notes and all other agreements, documents and actions required
hereunder to the extent each is a party hereto and thereto.
2.6. Litigation. Except as set forth on Exhibit B hereto,
there are no actions, suits, proceedings or claims which are pending or, to the
best of any Obligor's or any Subsidiary's knowledge or information, threatened
against any Obligor or any Subsidiary which, if adversely resolved, would be
reasonably likely to have a Material Adverse Effect.
2.7. Title to Assets. Except as set forth on Exhibit B hereto,
each Obligor and each Subsidiary has good and marketable title to substantially
all of its properties and assets as reflected in the financial statements of
SunSource Inc. and its Consolidated Subsidiaries most recently delivered to you
pursuant to Paragraphs 3.6, 5.2 and 5.3 hereof, free and clear of any liens and
encumbrances, except the security interests permitted pursuant to Paragraph 6.4
hereof, and all such assets are in good order and repair and fully covered by
the insurance required pursuant to Paragraph 5.7 hereof.
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2.8. Capital Stock. The number of shares and classes of the
capital stock of each Obligor and each Subsidiary and the ownership thereof,
effective upon the 1998 Conversion, are accurately set forth on Exhibit B
attached hereto; all such shares are validly existing, fully paid and
non-assessable, and the issuance and sale thereof are in compliance with all
applicable federal and state securities and other applicable laws; and the
shareholders' ownership thereof is free and clear of any liens or encumbrances
or other contractual restrictions.
2.9. Accuracy of Information; Full Disclosure.
(a) All information furnished to you concerning the
financial condition of SunSource Inc. and its Consolidated Subsidiaries,
including their annual audited financial statements for the period ending
December 31, 1997, and their unaudited financial statements for the period
ending September 30, 1998, copies of which have been furnished to you, have been
prepared in accordance with GAAP and fairly present the financial condition of
SunSource Inc. and its Consolidated Subsidiaries as of the dates and for the
periods covered and discloses liabilities of SunSource Inc. and its Consolidated
Subsidiaries required to be disclosed under GAAP and, except for the effect of
the 1998 Conversion, there has been no Material Adverse Change from the date of
such statements to the date hereof; and
(b) All financial statements and other documents
furnished by SunSource Inc. and its Consolidated Subsidiaries to you in
connection with this Agreement and the Notes do not and will not contain any
untrue statement of material fact or omit to state a material fact necessary in
order to make the statements contained therein not misleading. Each Obligor and
each Subsidiary has disclosed to you in writing any and all facts which
materially and adversely affect the business, properties, operations or
condition, financial or otherwise, of any Obligor or any Subsidiary or any
Obligor's or any Subsidiary's ability to perform its respective obligations
under this Agreement and the Notes.
2.10. Taxes and Assessments.
(a) Each Obligor and each Subsidiary has duly and
timely filed all information and tax returns and reports with all federal,
state, local or foreign governmental taxing authorities, bodies or agencies; and
all taxes, including without limitation income, gross receipt, sales, use,
excise and any other taxes, and any governmental charges, penalties, interest or
fines with respect thereto, due and payable by each Obligor and each Subsidiary
have been paid, withheld or reserved for in accordance with GAAP or, to the
extent they relate to periods on or prior to the date of the financial
statements delivered from time to time pursuant to Paragraphs 3.6, 5.2 and 5.3
hereof (the "Financial Statements"), are reflected as a liability on the
Financial Statements in accordance with GAAP.
(b) Each Obligor and each Subsidiary has properly
withheld all amounts determined by them to be required by law to be withheld for
income taxes and unemployment taxes including without limitation, all amounts
required with respect to social security and
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unemployment compensation, relating to its employees, and has remitted such
withheld amounts in a timely manner to the appropriate taxing authority, agency
or body.
(c) As of the date of this Agreement, none of the
federal income tax information returns of SDI Operating Partners, L.P. or SDIPI
have been audited. Except as set forth on Exhibit B hereto, no Obligor or
Subsidiary has entered into any agreement for the extension of time for the
assessment of any tax or tax delinquency, nor has any of them received
outstanding and unresolved notices from the Internal Revenue Service or any
other state, local or foreign taxing authority, agency or body of any proposed
examination or of any proposed change in reported information which may result
in a deficiency or assessment against an Obligor or a Subsidiary, and there are
no suits, actions, claims, investigations, inquiries or proceedings now pending
against any Obligor or any Subsidiary in respect of taxes, governmental charges
or assessments.
2.11. Indebtedness. No Obligor or Subsidiary has any presently
outstanding Indebtedness or obligations including contingent obligations and
obligations under leases of property from others, except the Loan, the Junior
Subordinated Debentures, the Indebtedness and obligations described either on
Exhibit B hereto or in the financial statements of SunSource Inc. and its
Consolidated Subsidiaries which have been furnished to you and Indebtedness
permitted to be incurred pursuant to Paragraph 6.1 hereof. There exists no
default with respect to the payment of principal or interest under any such
outstanding Indebtedness. The Indebtedness under the Loan ranks pari passu and
equal to the Indebtedness evidenced by the Notes, without any priority. The
Junior Subordinated Debentures rank junior and are subordinated to the
Indebtedness evidenced by the Notes, and all other Indebtedness of the Obligors
and Subsidiaries ranks either pari passu or junior to the Indebtedness evidenced
by the Notes.
2.12. Management Agreements. No Obligor or Subsidiary is a
party to any other material management or consulting agreements for the
provision of services to the Company, except as described in Exhibit B hereto.
2.13. Subsidiaries and Investments. No Obligor or Subsidiary
has any investments in or loans to any other individuals or business entities,
except as described in Exhibit B hereto and except as are permitted to be
acquired or created pursuant to Paragraph 6.8 hereof.
2.14. ERISA. Each Plan maintained by any Obligor, Subsidiary
or ERISA Affiliate is, as of its most recently completed annual report, in
compliance in all material respects with all applicable provisions of ERISA and
the regulations promulgated thereunder; and, except as set forth in Exhibit B
hereto:
(a) No Obligor, Subsidiary or ERISA Affiliate
maintains or contributes to or has maintained or contributed to any
multiemployer plan (as defined in Section 4001 of
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ERISA) under which any Obligor, Subsidiary or ERISA Affiliate could have any
withdrawal liability;
(b) No Obligor, Subsidiary or ERISA Affiliate
sponsors or maintains any Plan under which there is an Accumulated Funding
Deficiency, whether or not waived;
(c) The aggregate liability for accrued benefits and
other ancillary benefits under each Plan that is or will be sponsored or
maintained by any Obligor, Subsidiary or ERISA Affiliate (determined on the
basis of the actuarial assumptions prescribed for valuing benefits under
terminating single-employer defined benefit plans under Title IV of ERISA) does
not exceed the aggregate fair market value of the assets under each such defined
benefit pension Plan;
(d) No Obligor, Subsidiary or ERISA Affiliate has
liability arising out of or relating to a failure of any Plan to comply with the
provisions of ERISA or the Code;
(e) There does not exist any unfunded liability
(determined on the basis of actuarial assumptions utilized by the actuary for
the Plan in preparing the most recent Annual Report) of any Obligor, Subsidiary
or ERISA Affiliate under any plan, program or arrangement providing
post-retirement life or health benefits; and
(f) The matters described on Exhibit B attached
hereto referencing clauses (a) through (e) of this Paragraph 2.14 would not,
either singly or in the aggregate, have a Material Adverse Effect.
The execution, sale and delivery of the Notes hereunder will
not involve any prohibited transaction within the meaning of ERISA or Section
4975 of the Code. The representation by the Obligors and Subsidiaries in the
preceding sentence is made in reliance upon and subject to the accuracy of your
representation in Paragraph 1.3(b) of this Agreement.
2.15. Fees and Commissions. The Obligors and Subsidiaries owe
no fees or commissions of any kind, and know of no claim for any fees or
commissions, in connection with the Obligors' issuing the Notes.
2.16. No Extension of Credit for Securities. No Obligor or
Subsidiary is now, nor at any time has it been, engaged principally, or as one
of its important activities, in the business of extending or arranging for the
extension of credit, or for the purpose of purchasing or carrying any margin
stock or margin securities; nor will the proceeds of the Notes be used by any
Obligor or Subsidiary directly or indirectly, for such purposes.
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2.17. Hazardous Wastes, Substances and Petroleum Products.
Except as set forth in Exhibit B hereto:
(a) Each Obligor and each Subsidiary: (i) has
received all permits and filed all notifications necessary to carry on its
respective business(es); and (ii) is in compliance in all respects with all
Environmental Control Statutes, except with respect to immaterial instances of
noncompliance of which it has no knowledge.
(b) No Obligor or Subsidiary has given any written or
oral notice, nor has it failed to give required notice, to the Environmental
Protection Agency ("EPA") or any state or local agency with regard to any actual
or imminently threatened removal, spill, release or discharge of Hazardous
Substances on properties owned, leased or operated by any Obligor or Subsidiary
or used in connection with the conduct of its business and operations.
(c) No Obligor or Subsidiary has received notice that
it is potentially responsible for the performance of or payment of costs
relating to clean-up or remediation of any actual or imminently threatened
spill, release or discharge of Hazardous Substances pursuant to any
Environmental Control Statute.
2.18. Solvency. SunSource Inc. and its Consolidated
Subsidiaries are, on a consolidated basis, upon the 1998 Conversion and after
receipt and application of the proceeds of the sale of the Notes will be,
solvent such that (i) the fair value of their assets (including without
limitation the fair salable value of the goodwill and other intangible property
of SunSource Inc. and its Consolidated Subsidiaries) is greater than the total
amount of their liabilities, including without limitation, contingent
liabilities, (ii) the present fair salable value of their assets (including
without limitation the fair salable value of the goodwill and other intangible
property of SunSource Inc. and its Consolidated Subsidiaries) is not less than
the amount that will be required to pay the probable liability on their debts as
they become absolute and matured, and (iii) they are able to realize upon their
assets and pay their debts and other liabilities, contingent obligations and
other commitments as they mature in the normal course of business. SunSource
Inc. and its Consolidated Subsidiaries (i) do not intend to, and do not believe
that they will, incur debts or liabilities beyond their ability to pay as such
debts and liabilities mature, or (ii) are not engaged in a business or
transaction, or about to engage in a business or transaction, for which their
property would constitute unreasonably small capital after giving due
consideration to the prevailing practice and industry in which they are engaged.
No creditor of the Company, any Subsidiary, SDI, SDIPI, SunSub A or SunSub B
would have a reasonable likelihood of prevailing with respect to any claim to
set aside payments to the holders of the Notes based on applicable fraudulent
conveyance principles. For purposes of this Paragraph 2.18, in computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the facts and
circumstances existing at such time, represents the amount that reasonably can
be expected to become an actual matured liability.
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2.19. Investment Company Act. No Obligor or Subsidiary is
directly or indirectly controlled by or acting on behalf of any person which is
an "investment company" within the meaning of the Investment Company Act of
1940, as amended.
2.20. Private Offering by the Company. No Obligor or
Subsidiary, nor anyone acting on behalf of any Obligor or Subsidiary, has
offered the Notes or any similar securities for sale to, or solicited any offer
to buy any of the same from, or otherwise approached or negotiated in respect
thereof with, any person other than you. No Obligor or Subsidiary, nor anyone
acting on behalf of any Obligor or Subsidiary has taken, or will take, any
action which would subject the issuance or sale of the Notes to Section 5 of the
Securities Act of 1933, as amended.
2.21. Solvency. Each Obligor is, and upon giving effect to the
issuance of the Notes will be, a "solvent institution", as said term is used in
Section 1405(c) of the New York Insurance Law, whose "obligations are not in
default as to principal or interest," as said terms are used in said Section
1405(c).
2.22. Foreign Assets Control Regulations. Neither the
execution, sale nor delivery by the Company of the Notes nor its use of the
proceeds thereof will violate the Foreign Assets Regulations, the Foreign Funds
Control Regulations, the Transaction Control Regulations, the Cuban Assets
Control Regulations, the Iranian Transaction Regulations, or the Iraqi Sanctions
Regulations of the United States Treasury Department (31 C.F.R. Subtitle B,
Chapter V, as amended).
2.23. Year 2000 Compliance. Obligors and Subsidiaries have
conducted a comprehensive review and assessment of their computer systems and
applications, microprocessor based goods and equipment owned or used by them in
their business and are making inquiry of their material suppliers, vendors and
customers, with respect to functionality before, during and after the year 2000
(the "Year 2000 Problem"). Obligors and Subsidiaries have prepared a plan
designed to ensure that all such systems, goods, equipment and products owned or
used by them and material to the conduct of their business will be Year 2000
Compliant in a timely manner. The Company's report on Form 10-Q for the quarter
ended September 30, 1998 describes such plan in all material respects. Obligors
reasonably believe, based on the foregoing review, assessment and inquiry that
the Year 2000 Problem will not result in a Material Adverse Effect.
SECTION 3. CONDITIONS OF CLOSING. Your obligation to purchase and pay
for the Notes to be purchased by you hereunder shall be subject to the
conditions hereinafter set forth:
3.1. Proceedings Satisfactory. All proceedings taken in
connection with the issue of the Notes and the consummation of the transactions
contemplated hereby and all documents and papers relating thereto shall be
satisfactory to you and your special counsel, and you shall have received copies
of such documents and papers, all in form and substance satisfactory to you and
your special counsel, as you or they may reasonably request in connection
therewith.
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3.2. Intentionally Omitted.
3.3. Opinion of Counsel for the Company. You shall have
received an opinion dated the Closing Date from Xxxxxx, Xxxxx & Xxxxxxx LLP,
counsel for the Obligors and Subsidiaries, in form and substance satisfactory to
you.
3.4. Authorization Documents; Officer's Certificate. The
Company shall deliver to you those documents it is required to deliver to Banks
pursuant to Paragraphs 5.1(b) and 5.1(h) of the Credit Agreement.
3.5. Legality. On the Closing Date, the Notes to be purchased
by you hereunder shall be a legal investment for you under the laws of each
jurisdiction to which you may be subject (without resort to any basket provision
of said laws such as New York Insurance Law Section 1405(a)(8)) (unless you have
waived such requirement), and you shall have received such certificates or other
evidence as you may reasonably request demonstrating the legality of such
purchase under such laws.
3.6. Financial Information. The Company shall have furnished
to you: (i) cash flow projections for SunSource Inc. and its Consolidated
Subsidiaries on a consolidated basis, for the two (2) year period immediately
following the date hereof, satisfactory to you and certified as reasonable by
the chief financial officer or controller of the Company (such cash flow
projections shall take into account the transactions contemplated by this
Agreement and shall identify the sources of cash the Company intends to use to
meet its needs during such two year period); (ii) financial projections for
SunSource Inc. and its Consolidated Subsidiaries for the period from the Closing
Date through December 31, 2001 on a consolidated basis satisfactory to you and
(iii) a certificate with respect to the matters set forth in Paragraph 2.19
hereof.
3.7. Private Placement Number. The Company shall have
delivered to you a certificate or other satisfactory evidence that Standard &
Poor's CUSIP Service Bureau has assigned a private placement number with respect
to the Notes.
3.8. Credit Agreement. The Company shall, simultaneously with
the execution hereof, have entered into the Credit Agreement in the form
theretofore provided to you which shall be in full force and effect.
3.9. Intentionally Omitted.
3.10. Insurance. The Company shall have provided you with
certificates of insurance with respect to all of the Obligors' fire, casualty,
liability and other insurance covering its respective property and business.
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3.11. Junior Subordinated Debentures. The Company shall
provide you with (i) evidence satisfactory to you that: (a) the Junior
Subordinated Debentures shall, after the Closing Date, remain outstanding under
terms of subordination satisfactory to you; and (b) all required consents under
the Indenture or otherwise in connection with the Junior Subordinated Debentures
have been obtained and delivered and (ii) a duly executed copy of the
Reassignment and Reassumption Agreement in connection with the 1998 Conversion.
3.12. Other Documents. The Company shall provide you with such
additional documents as you reasonably may request.
SECTION 4. PREPAYMENT OF THE NOTES.
4.1. Mandatory Repayments of the Notes. As provided therein,
the entire unpaid principal amount of the Notes shall be due and payable on
September 30, 2002.
4.2. Optional Prepayment of the Notes.
(a) Upon notice given as provided in Paragraph 4.3,
the Company, on behalf of the Obligors, at their option, may at any time prepay
the Notes as a whole or from time to time in part (in multiples of $100,000), in
each case at the principal amount so to be prepaid, together with interest
accrued thereon to the date fixed for such prepayment, plus (subject to
Paragraph 4.2(b) below) an amount equal to the Make-Whole Amount for each such
Note. Each prepayment pursuant to this Paragraph 4.2 shall be allocated as
provided in Paragraph 4.4.
(b) Notwithstanding anything to the contrary in
Paragraph 4.2(a) above, the Company, on behalf of the Obligors, may apply
Designated Disposition Proceeds in an amount not to exceed $15,000,000 to the
prepayment of the Notes pursuant to Paragraph 4.2(a) without payment of any
Make-Whole Amount.
4.3. Notice of Prepayment; Make-Whole Computations.
(a) The Company, on behalf of the Obligors, shall
call the Notes for prepayment pursuant to Paragraph 4.2 by giving written notice
thereof to each holder of any Note, which notice shall be given not less than 30
nor more than 60 days prior to the date fixed for such prepayment in such notice
and shall specify the amount so to be prepaid and the date fixed for such
prepayment. Upon the giving of notice of any prepayment as provided in this
Paragraph, the Company, on behalf of the Obligors, will prepay on the date
therein fixed for prepayment the principal amount of the Notes so to be prepaid
as specified in such notice, together with interest accrued thereon to such date
fixed for prepayment, plus (subject to Paragraph 4.2(b)) the applicable
Make-Whole Amount (if any).
(b) Three business days prior to any prepayment
pursuant to Paragraph 4.2, the Company, on behalf of the Obligors, will furnish
to each holder of a Note an Officer's
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Certificate setting forth in reasonable detail the calculation of the Make-Whole
Amount (if any) in connection with such prepayment and attaching a copy of the
source of the market data by reference to which the applicable Treasury Yields
were determined in connection with such computations.
4.4. Allocation of Prepayments. In the event of any prepayment
of less than all of the outstanding Notes pursuant to Paragraph 4.2, the
Company, on behalf of the Obligors, will allocate the principal amount so to be
prepaid (but only in units of $1,000) among all outstanding Notes pro rata
according to the respective principal amounts thereof.
4.5. Surrender of Notes; Notation Thereon. Subject to the
provisions of Section 13, the Company, on behalf of the Obligors, may, as a
condition of payment of all or any part of the principal of, premium, if any,
and interest on, any Note, require the holder to present such Note for notation
of such payment and, if such Note be paid in full, require the surrender
thereof.
4.6. Purchase of Notes. The Company, on behalf of the
Obligors, will not, and will not permit any other Obligor or any Subsidiary to
acquire, directly or indirectly, by purchase or prepayment or otherwise, any of
the outstanding Notes, except by way of payment or prepayment in accordance with
the provisions of the Notes and of this Agreement.
4.7. Special Prepayment for Change of Control. Promptly and in
any event within five days after a Change of Control, the Company, on behalf of
the Obligors, will give notice thereof to the holders of all outstanding Notes,
which notice shall (i) refer specifically to this Paragraph 4.7, (ii) specify
the Change of Control Prepayment Date and the Response Date (each as defined
below) in respect thereof and (iii) offer to prepay all Notes at the unpaid
principal amount of such Notes, together with interest accrued thereon to the
Change of Control Prepayment Date on the date specified in such notice (the
"Change of Control Prepayment Date"), which date shall be not less than 30 nor
more than 60 days after the date of such notice. Each holder of a Note shall
notify the Company of such holder's acceptance or rejection of such offer by
giving notice of such acceptance or rejection to the Company on a date (the
"Change of Control Response Date") not more than 20 days after the date of the
notice required to be given by the Company pursuant to the first sentence of
this Paragraph 4.7 (which notice given by such holder shall be binding upon such
holder and the Company). The failure by the holder of a Note to respond to such
offer on or before the Change of Control Response Date shall be deemed to be a
rejection of such offer. On the Change of Control Prepayment Date, the Company
shall prepay, and there shall become due and payable, all of the Notes held by
the holders by whom such offer has been accepted in accordance with this
Paragraph 4.7 at a price in respect of each Note held by each such holder equal
to the unpaid principal amount of such Note, together with interest accrued
thereon to the Change of Control Prepayment Date.
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4.8. Prepayment in Connection with a Sale of Material Assets.
If at any time the Company, on behalf of the Obligors, is required to offer to
apply any Net Cash Proceeds of any asset disposition to the prepayment of the
Notes as contemplated by Paragraph 6.7 (including any Designated Disposition
Proceeds not applied by the Company to the prepayment of the Notes pursuant to
Paragraph 4.2), the Company will give written notice thereof to the holders of
all outstanding Notes, which notice shall (i) refer specifically to this
Paragraph 4.8, (ii) specify the Asset Disposition Prepayment Date and the
Response Date (each as defined below) in respect thereof, (iii) set forth (x)
the aggregate Net Cash Proceeds to be applied to the retirement of the
Indebtedness, (y) the Noteholders' Applicable Share and (z) the amount of such
Noteholders' Applicable Share allocable to each Note, determined by allocating
such Noteholders' Applicable Share pro rata among all outstanding Notes
according to the respective unpaid principal amounts thereof, and (iv) offer to
prepay a principal amount of each Note equal to such Noteholders' Applicable
Share so allocable to such Note, on the date therein specified (the "Asset
Disposition Prepayment Date"), which shall be not less than 30 nor more than 60
days after the date of the giving of such notice. Any such prepayment shall be
at the principal amount so to be prepaid, together with interest accrued thereon
to the date fixed for such prepayment. Each holder of a Note shall notify the
Company of such holder's acceptance or rejection of such offer by giving written
notice of such acceptance or rejection to the Company on a date (the "Asset
Disposition Response Date") not more than 20 days after the date of the notice
required to be given by the Company pursuant to the first sentence of this
Paragraph 4.8 (which notice given by such holder shall be binding upon such
holder and the Company). The failure by the holder of a Note to respond to such
offer on or before the Asset Disposition Response Date shall be deemed to be a
rejection of such offer. On the Asset Disposition Prepayment Date, the Company
shall prepay, and there shall become due and payable, the applicable portion of
the Notes held by the holders by whom such offer has been accepted in accordance
with this Paragraph 4.8 at a price in respect of each Note held by each such
holder equal to the principal amount of such Note so to be prepaid, together
with interest accrued thereon to the Asset Disposition Prepayment Date. Any such
Net Cash Proceeds which are not applied to the prepayment of the Notes pursuant
to the foregoing provisions of this Paragraph 4.8 due to a rejection of the
Company's offer shall be applied by the Company to the prepayment of the debt
outstanding under the Credit Agreement and the permanent reduction of the
commitment thereunder as set forth in the Credit Agreement.
SECTION 5. AFFIRMATIVE COVENANTS. Each Obligor and each Subsidiary
covenants and agrees that so long as any Note shall be outstanding hereunder,
each Obligor and each Subsidiary will (and with respect to Paragraph 5.11, the
Obligors will cause each ERISA Affiliate) to:
5.1. Existence and Good Standing. Preserve and maintain its
existence as a corporation and its good standing in all states in which it
conducts business and the validity of all its material franchises, licenses and
permits required in the conduct of its business.
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5.2. Quarterly Financial Statements. Furnish each holder of a
Note within forty-five (45) days of the end of each quarterly fiscal period
hereafter, other than the last quarterly fiscal period in the fiscal year, with
unaudited quarterly consolidated financial statements of SunSource Inc. and its
Consolidated Subsidiaries, in form and substance as required by GAAP, including
for each such quarter (i) a consolidated balance sheet; (ii) a consolidated
statement of income; (iii) a consolidated statement of cash flows; and (iv) a
certificate in the form of Exhibit C attached hereto executed by the chief
financial officer or controller of the Company showing the calculation of the
covenants set forth in Paragraphs 5.12 through 5.14 and Section Six hereof
prepared in accordance with GAAP consistently applied and stating that the
financial statements fairly present the financial condition of SunSource Inc.
and its Consolidated Subsidiaries as of the date and for the periods covered and
that as of the date of such certificate there exists no violation of any
provision of this Agreement or the happening of any Event of Default or Default.
5.3. Annual Financial Statements. Furnish each holder of a
Note within ninety (90) days after the close of each fiscal year commencing with
fiscal 1998 with audited consolidated annual financial statements of SunSource
Inc. and its Consolidated Subsidiaries, including the financial statements,
certificate in the form of Exhibit C attached hereto and information required
under Paragraph 5.2 hereof, which consolidated financial statements shall be
prepared in accordance with GAAP. The financial statements delivered pursuant to
(i) above shall be certified without qualification (except with respect to
changes in GAAP as to which the Company's independent certified public
accountants have concurred) by an independent certified public accounting firm
satisfactory to the Required Holders; and the Company shall cause each holder of
a note to be furnished, at the time of the completion of the annual audit, with
a certificate signed by such accountants showing the calculation of the
covenants set forth in Paragraphs 5.12 through 5.14 hereof and stating that to
the best of their knowledge there exists no violations of any provisions of this
Agreement or the happening of any Event of Default or Default hereunder.
5.4. Annual Budget. Furnish to each holder of a Note, on or
before March 31 of each year, commencing with fiscal year 1999, an annual budget
of SunSource Inc. and its Consolidated Subsidiaries, showing net income and cash
flows of SunSource Inc. and its Consolidated Subsidiaries on a consolidated
basis for the twelve (12) month period ending on December 31 of each year.
5.5. Public Information. Deliver to each holder of a Note,
promptly upon transmission thereof, copies of all such financial statements,
proxy statements, notices and reports as the Company shall send to its
shareholders or to the Banks or to the holders of the Junior Subordinated
Debentures, copies of all registration statements (without exhibits), and all
annual, quarterly or other reports which the Company files with the Securities
and Exchange Commission (or any governmental body or agency succeeding to the
functions of the Securities and Exchange Commission) including without
limitation, Form 10Q and Form 10K, and copies of all auditors' annual management
letters delivered to the Company.
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5.6. Books and Records. Keep and maintain satisfactory and
adequate books and records of account in accordance with GAAP and make or cause
the same to be made available to each holder of a Note or their agents or
nominees at any reasonable time during normal business hours upon reasonable
notice for inspection and to make extracts thereof and permit any holder of the
Notes to discuss contents of same with senior officers of any Obligor or any
Subsidiary and also with outside auditors and accountants of any Obligor or any
Subsidiary.
5.7. Properties; Insurance. Keep and maintain all of its
property and assets in good order and repair and materially covered by insurance
with reputable and financially sound insurance companies against such hazards
and in such amounts as is customary in the industry, under policies requiring
the insurer to furnish reasonable notice to you and opportunity to cure any
non-payment of premiums prior to termination of coverage; and, as required
above, furnish each holder of a Note with certificates of such insurance.
5.8. Notices. Notify each holder of a Note in writing
immediately of (i) the institution of any litigation, the commencement of any
administrative proceedings, the happening of any event or the assertion or
threat of any claim which might reasonably be expected to have a Material
Adverse Effect, (ii) the occurrence of any Event of Default or Default hereunder
or (iii) any notice delivered to the Trustee from the Company or the holder of
any Senior Indebtedness (as defined in the Indenture) in respect of Section
14.06 of the Indenture.
5.9. Taxes. Pay and discharge all taxes, assessments or other
governmental charges or levies imposed on it or any of its property or assets
prior to the date on which any penalty for non-payment or late payment is
incurred, unless the same are (a) being contested in good faith by appropriate
proceedings and (b) are covered by appropriate reserves maintained in cash or
cash equivalents in accordance with GAAP.
5.10. Compliance; Notification.
(a) Except to the extent that noncompliance would not
have a Material Adverse Effect, comply in all respects with all local, state and
federal laws and regulations applicable to its business, including without
limitation the Environmental Control Statutes, the Securities Act of 1933, as
amended, and all laws and regulations of the Local Authorities, and the
provisions and requirements of all franchises, permits, licenses and other like
grants of authority held by any Obligor or any Subsidiary; and notify each
holder of a Note immediately in detail of any actual or alleged failure to
comply with, failure to perform, breach, violation or default under any such
laws or regulations or under the terms of any of such franchises, permits,
certificates, licenses or grants of authority, or of the occurrence or existence
of any facts or circumstances which with the passage of time, the giving of
notice or otherwise could create such a failure, breach, violation or default or
could occasion the termination of any of such franchises, permits, certificates,
licenses or grants of authority, except to the extent that such matter would not
have a Material Adverse Effect.
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(b) With respect to the Environmental Control
Statutes, promptly notify each holder of a Note when, in connection with the
conduct of any Obligor's or Subsidiary's business(es) or operation(s), any
person (including, without limitation, EPA or any state or local agency)
provides oral or written notification to any Obligor or Subsidiary or any
Obligor or Subsidiary otherwise become aware of a condition with regard to an
actual or imminently threatened removal, spill, release or discharge of
hazardous or toxic wastes, substances or petroleum products that requires
notification to the applicable governmental authority under an Environmental
Control Statute and would have an Environmental Material Adverse Effect; and
notify each holder of a Note in detail promptly upon the receipt by any Obligor
or Subsidiary of an assertion of liability under the Environmental Control
Statutes, of any actual or alleged failure to comply with or perform, breach,
violation or default under any such statutes or regulations or of the occurrence
or existence of any facts, events or circumstances which with the passage of
time, the giving of notice, or both, could create such a breach, violation or
default and would have an Environmental Material Adverse Effect.
(c) With respect to each disclosure previously made
to each holder of a Note pursuant to Exhibit B attached hereto or Paragraph
5.10(b) hereof regarding alleged or actual liability under Environmental Control
Statutes, not later than twenty (20) days after the last day of each fiscal
quarter, deliver to each holder of a Note a report describing (i) the estimated
dollar amount, when initially determined, of any such liability (including costs
of investigation and remediation) and if any such initial estimate with respect
to a disclosed matter shall be modified thereafter by more than $1,000,000, the
modified dollar amount; and (ii) any information or change in circumstances
regarding actual or alleged liability under Environmental Control Statutes of
any Obligor or Subsidiary, if the effect thereof would be to increase liability
in connection with the investigation or remediation with respect thereto by more
than $1,000,000.
5.11. ERISA. (a) Comply, and cause any Plan maintained for the
employees of any Obligor or Subsidiary to comply, in all material respects with
the provisions of ERISA; (b) not incur any material Accumulated Funding
Deficiency or any material liability to the PBGC (as established by ERISA); (c)
permit any event to occur (i) as described in Section 4042 of ERISA or (ii)
which may result in the imposition of a lien on its properties or assets; and
(d) notify you in writing promptly after it has come to the attention of senior
management of any Obligor or Subsidiary of the assertion or threat of any
"reportable event" or other event described in Section 4042 of ERISA (relating
to the soundness of a Plan), except those with respect to which the PBGC has
waived the 30 day notice rule, or the PBGC's ability to assert a material
liability against it) or impose a lien on any Obligor's or Subsidiary's
properties or assets.
5.12. Capitalization Ratio. Maintain a Capitalization Ratio
not to exceed: (i) with respect to the last day of each of the first two fiscal
quarters in each fiscal year, sixty-two percent (62%) and (ii) with respect to
the last day of each of the last two fiscal quarters of each fiscal year, sixty
percent (60%).
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5.13. Fixed Charge Coverage Ratio. Maintain as of the last day
of each fiscal quarter set forth in the left hand column, for the Rolling Period
ending on such date, a Fixed Charge Coverage Ratio for SunSource Inc. and its
Consolidated Subsidiaries of not less than the amount set forth in the right
hand column:
Period Minimum Ratio
------ -------------
Date of Agreement through 12/31/98 1.25
3/31/99 through 9/30/99 1.40
12/31/99 and the last day of each fiscal quarter thereafter 1.50
5.14. Leverage Ratio. Maintain on the last day of each fiscal
quarter a Leverage Ratio of not greater than 3.25:1.
5.15. Management Changes. Notify each holder of a Note in
writing within thirty (30) days after any change of its management group as
described in the "Change of Control" definition.
5.16. Subsequent Credit Terms.
(a) Notify each holder of a Note in writing not less
than five (5) Business Days prior to its entering into any amendment or
modification of any credit arrangement, whether now in effect or hereafter
incurred, pursuant to which any Obligor or Subsidiary agrees to financial
covenants which are more restrictive to such Obligor or Subsidiary than those
contained in Sections Five and Six hereof. Upon entering into any such amendment
or modification, and with respect to the covenants in the Credit Agreement, the
corresponding covenants, terms and conditions of this Agreement are and shall be
deemed to be automatically and immediately amended to conform with and to
include the applicable covenants, terms and/or conditions of such other
agreement; provided, however, that the foregoing shall not be applicable to or
be deemed to affect any provision of this Agreement to the extent that any
amendment or modification is less restrictive than the corresponding provisions
of this Agreement.
(b) Each Obligor and each Subsidiary hereby agrees
promptly to execute and deliver any and all such documents and instruments and
to take all such further actions as you may, in your sole discretion, deem
necessary or appropriate to effectuate the provisions of this Paragraph 5.16.
5.17. Use of Proceeds. Use the proceeds of the Notes solely
for general corporate purposes, including working capital, acquisition
financing, and related reasonable transaction expenses.
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5.18. Transactions Among Affiliates. Cause all transactions
between and among Affiliates to be on an arms-length basis and on such terms and
conditions as are customary in the applicable industry between and among
unrelated entities.
5.19. Joinder of Subsidiaries. If any Subsidiary or any newly
created or acquired Subsidiary (i) is or becomes a Material Subsidiary and (ii)
is not at such time of determination an Obligor or Guarantor, promptly notify
you of the same and cause such Material Subsidiary to execute joinder documents
in form and substance satisfactory to you, joining such Subsidiary under this
Agreement as either an Obligor or a Guarantor, which determination shall be made
in your discretion, and cause to be delivered such opinions and certificates as
you shall reasonably request.
5.20. Year 2000 Compliance. Take all action necessary to
assure that a Material Adverse Effect shall not result from any failure of
Obligors' computer systems and applications, micro-processor based goods and
equipment owned or used by them in their business to be Year 2000 Compliant; and
use reasonable best efforts to assure the Year 2000 Compliance of their material
vendors and suppliers or to assure that failures to be Year 2000 Compliant by
such vendors and suppliers will not have a Material Adverse Effect to the extent
that any such information shall not be included in the Company's periodic
reports filed with the Securities and Exchange Commission from time to time.
Obligors shall provide each holder of a Note any material updates or revisions
to its plan for Year 2000 Compliance referred to in Paragraph 2.23 and notice of
any material increase in the estimated costs to Obligors of achieving Year 2000
Compliance in accordance with such plan; and, at the request of any such holder,
Obligors shall provide such holder assurances acceptable to such holder
regarding the Year 2000 Compliance and/or contingency plans related thereto, of
Obligors and their material vendors and suppliers.
5.21. Supporting Information. Use reasonable efforts to obtain
from the Company's accountants such supporting opinions or information with
respect to the matters set forth in Paragraph 2.18 hereof as the holders of the
Notes shall reasonably request.
5.22. Other Information. Provide you with any other documents
and information, financial or otherwise, reasonably requested by you from time
to time.
SECTION 6. NEGATIVE COVENANTS. So long as any Note shall be outstanding
hereunder, each Obligor and each Subsidiary covenants and agrees that it will
not:
6.1. Indebtedness. Borrow any monies or create any
Indebtedness except: (i) borrowings from you hereunder; (ii) Indebtedness
evidenced by the Credit Agreement not to exceed Ninety Million Dollars
($90,000,000) aggregate principal amount outstanding at any time, which shall
rank equally and are pari passu with the obligations to holders of the Notes
hereunder; (iii) Indebtedness under the Junior Subordinated Debentures, not to
exceed One Hundred Five Million Five Hundred Thousand Dollars ($105,500,000)
principal amount
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outstanding at any time (but not including any amounts which constitute
Compounded Interest, as defined in the Indenture), which shall be subordinate
and junior to the obligations to holders of the Notes hereunder; (iv) trade
Indebtedness in the normal and ordinary course of business for value received,
of which no more than Five Million Dollars ($5,000,000) shall be outstanding at
any time under Trade Notes; (v) Indebtedness and obligations incurred or assumed
to purchase or lease fixed or capital assets, provided, however, that the total
principal amount of such Indebtedness and obligations incurred in any calendar
year shall not exceed in the aggregate Seven Million Five Hundred Thousand
Dollars ($7,500,000); (vi) borrowings from any Obligor by any Obligor; (vii)
borrowings from any Obligor by any Subsidiary which is not an Obligor, to the
extent the Obligors are permitted to make such loans pursuant to Paragraph
6.3(ii) or (iii) hereof; (viii) Indebtedness outstanding on the date hereof and
disclosed on Exhibit B hereto, but without any increase in the outstanding
principal amount thereof; (ix) Indebtedness of non- Obligor, non-Guarantor
Subsidiaries incorporated in a jurisdiction in the United States, up to Ten
Million Dollars ($10,000,000) principal amount outstanding at any time; (x)
Indebtedness of non-Obligor, non-Guarantor Subsidiaries incorporated in a
jurisdiction outside of the United States, up to Ten Million Dollars
($10,000,000) aggregate principal amount outstanding at any time (which shall
include the revolving credit facility with the Bank of Nova Scotia); and (xi)
unsecured promissory notes in favor of sellers of assets or stock in
acquisitions otherwise permitted pursuant to Paragraph 6.8 hereof not to exceed
Ten Million Dollars ($10,000,000); provided, however, that Indebtedness of
non-Obligor, non-Guarantor Subsidiaries under clauses (v), (ix) and (x) hereof
shall in no event exceed in the aggregate outstanding at any time Ten Million
Dollars ($10,000,000).
6.2. Guaranties. Guarantee or assume or agree to become liable
in any way, either directly or indirectly, for any additional Indebtedness or
liability of others (except hereunder and under the Notes and with respect to
the Promissory Notes and to endorse checks or drafts in the ordinary course of
business), except that (i) the Obligors may guarantee Indebtedness which in the
aggregate shall not exceed Five Million Dollars ($5,000,000) outstanding at any
time and (ii) any entity may guarantee debt of another entity otherwise
permitted hereunder.
6.3. Loans. Make any loans or advances to others, provided
that any Obligor may make loans and advances to (i) any other Obligor; (ii)
non-Obligor, non-Guarantor Subsidiaries incorporated in a jurisdiction in the
United States; (iii) non-Obligor, non-Guarantor Subsidiaries incorporated in a
jurisdiction outside of the United States, such that loans and advances from all
Obligors to all such non-Obligor, non-Guarantor Subsidiaries shall not exceed
Ten Million Dollars ($10,000,000) in aggregate outstanding principal amount at
any time, and (iv) its sales personnel in the ordinary course of business.
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6.4. Liens and Encumbrances. Create, permit or suffer the
creation of any liens, security interests, or any other encumbrances on any of
its property, real or personal, except (i) liens arising in favor of sellers or
lessors for indebtedness and obligations incurred to purchase or lease fixed or
capital assets permitted under Paragraph 6.1(v) hereof, provided, however, that
such liens secure only the indebtedness and obligations created thereunder and
are limited to the assets purchased or leased pursuant thereto; (ii) liens for
taxes, assessments or other governmental charges, federal, state or local, which
are then being currently contested in good faith by appropriate proceedings and
are covered by appropriate reserves maintained in cash or cash equivalents and
in accordance with GAAP; (iii) pledges or deposits to secure obligations under
workmen's compensation, unemployment insurance or social security laws or
similar legislation; (iv) deposits to secure performance or payment bonds, bids,
tenders, contracts, leases, franchises or public and statutory obligations
required in the ordinary course of business; (v) deposits to secure surety,
appeal or custom bonds required in the ordinary course of business and (vi)
liens and security interests securing up to Five Million Dollars ($5,000,000) of
Indebtedness outstanding under Trade Notes.
6.5. Additional Negative Pledge. Agree or covenant with or
promise any person or entity other than you and the Banks that it will not
pledge its assets or properties or otherwise grant any liens, security interests
or encumbrances on its property on terms similar to those set forth in Paragraph
6.4 hereof.
6.6. Restricted Payments. Make any Restricted Payments;
provided, however that so long as there exists no Event of Default or Default
under this Agreement and no Event of Default or Default will result therefrom:
(i) the Company may pay dividends on its common stock; and (ii) the Company may
make regularly scheduled interest payments on the Junior Subordinated Debentures
as in effect on the date hereof; provided further that if the Leverage Ratio
immediately prior to and after giving effect to such purchase is less than 2.25
to 1, as set forth in a certificate of the chief financial officer or controller
of the Company and delivered to each holder of a Note, then the Company may
purchase or redeem its common stock or purchase Trust Preferred Securities,
provided a like amount of the Junior Subordinated Debentures are simultaneously
purchased.
6.7. Transfer of Assets. Sell, lease, transfer or otherwise
dispose of all or any portion of its assets, real or personal, other than such
transactions made on an arm's length basis in the normal and ordinary course of
business for value received; provided, however, that in the absence of a Default
or an Event of Default, and, if a Default or Event of Default would not result
therefrom, the Obligors may (i) sell assets other than in transactions made on
an arm's length basis in the normal and ordinary course of business for value
received in the aggregate after the date hereof for all such transactions up to
Fifteen Million Dollars ($15,000,000); (ii) consummate a Sale of Material
Assets, provided that the Notes shall be repaid in connection therewith pursuant
to Paragraph 4.8 hereof by an amount equal to the Noteholders' Applicable Share
received by the Obligors on account of such sale(s), to the extent such sale(s),
in the
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aggregate, exceed Fifteen Million Dollars ($15,000,000) and (iii) consummate the
1998 Conversion.
6.8. Acquisitions and Investments. (a) Purchase or otherwise
acquire any part or amount of the capital stock or assets of, or make any
investments in any other entity or corporation, except Permitted Investments;
(b) create, acquire or maintain any Material Subsidiary not listed on Schedule 1
or 2 hereto, except if the Subsidiary executes a joinder to this Agreement and
the Notes to become a joint and several Obligor hereunder or a Guarantor
hereunder, in each case pursuant to Paragraph 5.19 hereof; (c) enter into any
new business activities or ventures not directly related to its present
business; or (d) merge or consolidate with or into any other entity or
corporation, except that any Subsidiary may be merged into the Company if the
Company is the surviving entity and any Subsidiary may merge into any other
Subsidiary; provided, however, that in the absence of a Default or an Event of
Default hereunder, and if a Default or Event of Default would not result
therefrom, Obligors may make acquisitions (by merger or purchase) of
substantially all but not less than substantially all of other entities or
corporations in the same or substantially the same business as Obligors.
Obligors shall provide to you a financial projection, including an income
statement and cash flow, from the date of any proposed acquisition with a
purchase price exceeding Ten Million Dollars ($10,000,000), showing prospective
compliance with Paragraphs 5.12 through 5.14 and Section Six of this Agreement
through the Maturity Date and a pro forma combined historical balance sheet as
of the end of the most recent fiscal quarter for the Company and the target.
6.9. Use of Proceeds. Use any of the proceeds of the Notes,
directly or indirectly, to purchase or carry margin securities within the
meaning of Regulation G of the Board of Governors of the Federal Reserve System;
or engage as its principal business in the extension of credit for purchasing or
carrying such securities.
6.10. Amendment of Documents. (a) Without the consent of the
Required Holders, which consent shall not be withheld unreasonably, amend or
permit any amendments to: any Obligor's or Subsidiary's organizational
documents; the Declaration of Trust of the Trust; the Indenture; the Terms of
Common Securities of the Trust; the Terms of Preferred Securities of the Trust;
the Preferred Securities Guaranty; and (b) with respect to those provisions of
the Credit Agreement relating to financial covenants (Paragraphs 6.13 through
6.15), Events of Default (Section 9), mandatory or voluntary prepayments
(Paragraphs 2.8 and 2.9) and all definitions related thereto, any amendment,
waiver or consent thereto shall require the simultaneous amendment, waiver or
consent, as applicable, to the corresponding provision in this Agreement
pursuant to Section 12.
6.11. Payment of Loan. Make any payment of principal on the
Loan except if simultaneously with such payment a prepayment to the extent of
the Noteholders' Applicable Share of such payment is made pursuant to Section 4
hereof.
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SECTION 7. DEFINITIONS.
7.1. Definitions. When used in this Agreement, the following
terms shall have the respective meanings set forth below.
"1997 Conversion" means the conversion of SunSource L.P., a
Delaware limited partnership, to the corporate form of SunSource Inc., a
Delaware corporation as set forth in SunSource Inc.'s Registration Statement on
Form S-4, filed with the Securities and Exchange Commission on December 31,
1996, as amended.
"1998 Conversion" means: (i) the creation of SunSource
Investment Company, Inc. ("SSICI"), a wholly-owned holding company of the
Company, of which SunSub A will become a direct, wholly-owned subsidiary; (ii)
the merger of SunSub B with and into SunSub A, causing the existence of SDI
Operating Partners, L.P. and its general partner, SDIPI, to cease and the assets
and liabilities of both partnerships to be owned by SunSub A and (iii) the
formation by SunSub A of four wholly-owned subsidiaries to which it will
contribute the assets and liabilities of SDI Operating Partners, L.P.
"Accumulated Funding Deficiency" has the meaning ascribed to
that term in Section 302 of ERISA.
"Adjusted EBITDAR" means, for any fiscal period of SunSource
Inc. and its Consolidated Subsidiaries, EBITDA plus rent expense (as determined
in accordance with GAAP) minus Capital Expenditures.
"Affiliate" means: (i) any person who or entity which directly
or indirectly owns, controls or holds ten percent (10%) or more of the
outstanding common stock in the Company; (ii) any entity of which ten percent
(10%) or more of the outstanding common stock or beneficial interest is directly
or indirectly owned, controlled, or held by the Company or an Affiliate; (iii)
any entity which directly or indirectly is under common control with the
Company; (iv) any officer, director or partner of the Company or any Affiliate;
or (v) any immediate family member of any person who is an Affiliate. For
purposes of this definition, the term "control" means the possession, directly
or indirectly of the power to direct or cause the direction of the management
and policies of an entity, whether through the ownership of voting securities,
by contract, or otherwise.
"Agent" means First Union National Bank, successor by merger
to CoreStates Bank, N.A., in its capacity as administrative agent for the Banks
pursuant to the Credit Agreement, and its successors and assigns in such
capacity.
"Agreement" means this Amended and Restated Note Purchase
Agreement and all exhibits and schedules hereto, as each may be amended,
modified or supplemented from time to time.
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"Bank" means individually and "Banks" means collectively, the
banks identified on Schedule 3 attached to the Credit Agreement as such Schedule
may be amended from time to time, their respective successors and assigns and
any additional banks which become parties to the Credit Agreement after the date
thereof in accordance with Paragraph 12.2 of the Credit Agreement, but shall not
include any such Bank which is replaced pursuant to the terms thereof after the
date thereof.
"Business Day" means any day not a Saturday, Sunday or a day
on which banks are required or permitted to be closed under the laws of the
Commonwealth of Pennsylvania.
"Capital Expenditures" means, for any period, amounts accrued
or incurred for fixed assets or improvements, replacements, substitutions or
additions thereto, which have a useful life of more than one (1) year, including
direct or indirect acquisition costs of such assets.
"Capital Leases" means capital leases and subleases, as
defined in Statement 13 of the Financial Accounting Standards Board dated
November 1976, as amended and updated from time to time.
"Capitalization Ratio" means, as of any date of determination,
the ratio of Funded Debt to Total Capital.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended by the Superfund Amendment
and Reauthorization Act of 1986, as amended from time to time.
"Change of Control" means if at any time after the date of
this Agreement: (i) any person or group within the meaning of Section 13(d)(3)
of the Securities Exchange Act of 1934, as amended (the "1934 Act") and the
rules and regulations promulgated thereunder shall have beneficial ownership
(within the meaning of Rule 13d-3 of the 1934 Act), directly or indirectly, of
securities of the Company (or other securities convertible into such securities)
representing twenty percent (20%) or more of the combined voting power of all
securities of the Company entitled to vote in the election of directors other
than the management group of Xxxxxx X. Xxxxxxx, Xxx X. Xxxxxxx, Xxxxxx X.
Xxxxxxxxx, Xxxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxxx and Xxxx X. XxXxxxxxx
(hereinafter called a "Controlling Person"); or (ii) a majority of the Board of
Directors of the Company shall cease for any reason to consist of (1)
individuals who on the date hereof are serving as directors of the Company or
(2) individuals who subsequently become members of the Board if such
individuals' nomination for election or election to the board is recommended or
approved by a majority of the Board of Directors of the Company. For purposes of
clause (i) above, a person or group shall not be a Controlling Person if such
person or group holds voting power in good faith and not for the purpose of
circumventing Paragraph 8.1(f) as an agent, bank, broker, nominee, trustee, or
holder of revocable proxies given in response to a
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solicitation pursuant to the 1934 Act, for one or more beneficial owners who do
not individually, or, if they are a group acting in concert, as a group, have
the voting power specified in clause (i) above.
"Closing Date" means 11:59 p.m. on December 31, 1998.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time and regulations in effect from time to time.
"Credit Agreement" means the Second Amended and Restated
Credit Agreement dated December 31, 1998 among the Company and its Subsidiaries
set forth on Schedule 1 thereto as Borrowers, the Company's Subsidiaries set
forth on Schedule 2 thereto, as Guarantors, Agent, for itself and as Agent, the
Bank of Nova Scotia, Agent, for itself and as Documentation Agent, and the Banks
set forth on Schedule 3 thereto, as amended, modified or supplemented from time
to time pursuant to the terms thereof and hereof.
"Default" means an event or circumstance which, with the
giving of notice or the passage of time or both, would constitute an Event of
Default.
"Designated Disposition Proceeds" means the aggregate proceeds
of any one or more sales, divestitures or spin-offs of or any portion of either
the Xxxxxxx Fastener or Xxxxxxx Glass divisions of the Company up to Fifteen
Million Dollars ($15,000,000).
"Distributions Paid on Trust Securities" means all amounts
payable by the Trust to the holders of the Trust Preferred Securities and Trust
Common Securities.
"EBITDA" means, for any fiscal period of SunSource Inc. and
its Consolidated Subsidiaries, Net Income plus (i) Interest Expense (including
all interest paid on the Junior Subordinated Debentures (whether paid in cash or
in kind)), (ii) all provisions for income taxes, (iii) depreciation and
amortization expense, and (iv) extraordinary losses, minus extraordinary gains,
as each such item is determined in accordance with GAAP.
"Environmental Control Statutes" means any federal, state or
local laws governing control, storage, removal, spill, release or discharge of
Hazardous Substances including without limitation CERCLA, the Solid Waste
Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976
and the Hazardous and Solid Waste Amendments of 1984, the Federal Water
Pollution Control Act, as amended by the Clean Water Act of 1976, the Hazardous
Materials Transportation Act, the Emergency Planning and Community Right to Know
Act of 1986, the National Environmental Policy Act of 1975, the Oil Pollution
Act of 1990, any similar or implementing state law, in each case, including all
amendments thereto and all rules and regulations promulgated thereunder and
permits issued in connection therewith.
-24-
"Environmental Material Adverse Effect" means a material
adverse effect on the business, financial condition on prospects of Obligors and
Subsidiaries taken as a whole, greater than or equal to $1,000,000 per single
event of $5,000,000 in the aggregate for all such environmental events as a
result of any condition, circumstance or contingency.
"EPA" means the United States Environmental Protection Agency,
or any successor thereto.
"ERISA Affiliate" means, when used with respect to an Employee
Benefit Plan, ERISA, the PBGC or a provision of the Code pertaining to employee
benefit plans, any Person that is a member of any group of organization within
the meaning of Code Sections 414(b), (c), (m) or (o) of which any Obligor or any
Guarantor is a member.
"ERISA" means the Employee Retirement Income Security Act of
1974, all amendments thereto and all rules and regulations in effect at any
time.
"Event of Default" means an event described in Paragraph 8.1
hereof.
"Existing Credit Agreement" means that certain Amended and
Restated Credit Agreement among SDI Operating Partners L.P. and its Subsidiaries
as set forth on Schedule 1 attached thereto, as Borrowers, SDIPI, the Company,
SunSub A Inc. and SunSub B Inc., as Guarantors, Agent, for itself and as Agent,
The Bank of Nova Scotia, for itself and as Documentation Agent, and the Banks
set forth on Schedule 2 attached thereto dated as of September 30, 1997.
"Existing Note Purchase Agreement" means that Note Purchase
Agreement dated as of September 30, 1997, as amended, issued by SDI Operating
Partners, L.P. for Sixty Million Dollars ($60,000,000) in privately-placed
notes.
"Fixed Charges" means, at any date of determination for the
most recently ended Rolling Period of SunSource Inc. and its Consolidated
Subsidiaries, the sum of (i) Interest Expense (including interest paid on the
Junior Subordinated Debentures to the extent paid in cash); (ii) rent expense;
(iii) scheduled maturities paid on Funded Debt (excluding the Loan); and (iv)
cash dividends paid by the Company, all as determined in accordance with GAAP.
"Fixed Charge Coverage Ratio" means, at any date of
determination, the ratio of Adjusted EBITDAR to Fixed Charges for the most
recently ended Rolling Period.
"Funded Debt" means, at any date of determination of SunSource
Inc. and its Consolidated Subsidiaries, the sum of the following in such period,
without duplication: (i) Indebtedness for borrowed money; (ii) Indebtedness
evidenced by notes, debentures or similar instruments; (iii) Capital Leases;
(iv) guarantees of Indebtedness or Capital Leases; and (v) letters
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of credit and letter of credit reimbursement obligations. For purposes of this
definition, Funded Debt does not include the Junior Subordinated Debentures.
"GAAP" shall mean generally accepted accounting principles,
which shall be (i) applied in accordance with the Statement on Auditing
Standards No. 69 "The Meaning of Present Fairly in Conformity with Generally
Accepted Accounting Principles in the Independent Auditor's Report," (SAS 69) or
superseding pronouncements, issued by the Auditing Standards Board of the
American Institute of Certified Public Accountants and (ii) in the form and
content of any requirements for financial statements filed with the Securities
and Exchange Commission, in all cases applied on a consistent basis. The
requirement that such principles be applied on a consistent basis shall mean
that the accounting principles observed in a current period are comparable in
all material respects to those applied in a preceding period except such changes
in accounting principles approved by the Guarantor's outside auditors.
"Guarantors" means, individually and collectively, those
Subsidiaries set forth on Schedule 2 attached hereto and any future Subsidiary
executing a joinder to this Agreement to become a Guarantor.
"Hazardous Substance" means petroleum products and items
defined in the Environmental Control Statutes as "hazardous substances",
"hazardous wastes", "pollutants" or "contaminants" and any other toxic,
reactive, corrosive, carcinogenic, flammable or hazardous substance or other
pollutants.
"Indebtedness" of any person means and includes all
obligations of such person which, in accordance with GAAP, shall be classified
on a balance sheet of such person as liabilities of such person and in any event
shall include all (i) obligations of such person for borrowed money or which
have been incurred in connection with acquisition of property or assets, (ii)
obligations secured by any lien upon property or assets owned by such person,
notwithstanding that such person has not assumed or become liable for the
payment of such obligations, (iii) obligations created or arising under any
conditional sale or other title retention agreement with respect to property
acquired by such person, notwithstanding the fact that the rights and remedies
of the seller, lender or lessor under such agreement in the event of default are
limited to repossession or sale of property, (iv) Capital Leases, (v) guarantees
and (vi) letters of credit and letter of credit reimbursement obligations.
"Interest Expense" means for any fiscal period, the interest
expense of SunSource Inc. and its Consolidated Subsidiaries, as determined in
accordance with GAAP for such period.
"Indenture" means the Indenture dated as of September 5, 1997
between the Company and Bank of New York, as trustee, providing for the issuance
of the Junior Subordinated Debentures.
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"Junior Subordinated Debentures" means the unsecured
subordinated obligations of the Company which were deposited in the Trust as
trust assets upon the 1997 Conversion and the terms of which are included in the
Indenture.
"Leverage Ratio" means as of any date of determination of
SunSource Inc. and its Consolidated Subsidiaries the ratio of Funded Debt as of
such date to EBITDA for the most recently ended Rolling Period.
"Loan" or "Loans" means the outstanding principal balance of
Indebtedness for advances under the Credit Agreement, plus the outstanding
principal balance of Indebtedness for advances on swing line loans under
Paragraph 2.13 of the Credit Agreement, plus the unreimbursed amount of any
draws on letters of credit under the Credit Agreement, in each case, together
with interest accrued thereon and fees and expenses incurred in connection
therewith.
"Local Authorities" means individually and collectively the
state and local governmental authorities and administrative agencies which
govern the commercial or industrial facilities or businesses owned or operated
by the Obligors.
"Make-Whole Amount" shall mean, in connection with any
prepayment of a Note pursuant to Paragraph 4.2, the amount (but not less than
zero) equal to the excess, if any, of
(1) the sum of the Present Values (as hereinafter defined) of
(a) the principal amount of such Note being prepaid (assuming the principal
balance of such Note payable upon maturity is paid when due) and (b) the amount
of interest (other than accrued interest being paid concurrently with such
prepayment) that would have been payable on each interest payment date on the
amount of such principal being prepaid (assuming the principal balance of such
Note payable upon maturity and interest payments are paid when due), over
(2) the principal amount of such Note being prepaid.
For purposes of this definition, "Present Value" shall be determined in
accordance with generally accepted financial practice on a semiannual basis at a
discount rate equal to the sum of the applicable Treasury Yield plus 1/2 of 1%;
and the applicable "Treasury Yield" for such purpose shall be the yield on
actively traded United States Treasury securities having a maturity equal to the
then-remaining weighted average life to maturity (determined in accordance with
generally accepted financial practice) of the Note being prepaid as determined
by reference to the display designated as "Page 500" on the Dow Xxxxx Markets
Service (or, if such display is no longer published, any publicly available
source of similar market data, such as Federal Reserve Statistical Release
H.15(519), that became publicly available at least four Business Days prior to
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the date of such prepayment); provided that if such weighted average life to
maturity is not equal to the maturity of any actively traded United States
Treasury securities as set forth on said display (or said substitute source of
market data), such yield shall be obtained by linear interpolation (calculated
to the nearest one-twelfth of a year) from the yields of actively traded United
States Treasury securities set forth on said display (or said substitute source
of market data) having a maturity closest to such weighted average life to
maturity.
"Material Adverse Change" means a material adverse change in
the business, financial condition or prospects of the Obligors and Subsidiaries
taken as a whole as a result of any condition, circumstance or contingency,
either singly or in the aggregate.
"Material Adverse Effect" means a material adverse effect on
the business, financial condition or prospects of the Obligors and Subsidiaries
taken as a whole as a result of any condition, circumstance or contingency,
either singly or in the aggregate.
"Material Subsidiary" means any Subsidiary which either (i)
comprised five percent (5%) or more of the assets of SunSource Inc. and its
Consolidated Subsidiaries as of the most recent date for which a balance sheet
has been delivered (or is required to have been delivered) hereunder or (ii) was
responsible for five percent (5%) or more of EBITDA for the most recent Rolling
Period.
"Maturity Date" means September 30, 2002.
"Net Cash Proceeds" of (A) any sale of assets shall mean the
cash proceeds received by the seller in such a transaction less (i) the
reasonable costs of the transaction, and (ii) indebtedness secured by any lien
on such assets which is paid from such proceeds and (iii) any tax payment
required to be made as a result of the gain (if any) on such sale; and (B) any
other prepayment of the Loan and Notes shall mean the total amount of such
payment to the Banks and the holder of the Notes.
"Net Income" means, for any period, SunSource Inc. and its
Consolidated Subsidiaries' gross revenue for such period (excluding
extraordinary gains and losses) less all expenses and other proper charges
(including taxes on income) in each case as determined in accordance with GAAP.
"Net Worth" means, as of any date of determination, Total
Assets minus Total Liabilities in SunSource Inc. and its Consolidated
Subsidiaries, as stated on the financial statements most recently delivered to
you pursuant to Paragraphs 5.2 and 5.3 hereof, as applicable.
"Noteholders' Applicable Share" means, as of any date of
determination, with respect to any Net Cash Proceeds which are required or
permitted to be used by the Company to reduce the amount outstanding on the
Notes pursuant to this Agreement, the portion
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of such Net Cash Proceeds which bears the same relationship to the entire amount
of such Net Cash Proceeds as the amount outstanding on the Notes on the date of
determination bears to the sum of the outstanding principal amount of the Loan
plus the amount of the Notes on the date of determination.
"Notes" means the Company's 7.66% Notes due 2002 issued in an
original aggregate principal amount of Sixty Million Dollars ($60,000,000)
pursuant to this Agreement.
"Officer's Certificate" means a certificate signed on behalf
of the Company by the chief financial officer or controller of the Company.
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Permitted Investments" means (i) investments in commercial
paper maturing in 180 days or less from the date of issuance which is rated Al
or better by Standard & Poor's Corporation or Pl or better by Xxxxx'x Investors
Services, Inc.; (ii) investments in direct obligations of the United States of
America or obligations of any agency thereof which are guaranteed by the United
States of America, provided that such obligations mature within twelve (12)
months of the date of acquisition thereof; (iii) investments in certificates of
deposit maturing within one (1) year from the date of acquisition thereof issued
by a bank or trust company organized under the laws of the United States or any
state thereof, having capital, surplus and undivided profits aggregating at
least $1,000,000,000 and the long-term deposits of which are rated Al or better
by Xxxxx'x Investors Services, Inc. or equivalent by Standard & Poor's
Corporation; (iv) money market funds invested in vehicles of the types set forth
in subsections (i) through (iii); and (v) other investments not to exceed
$500,000 in the aggregate made from the date hereof to the Maturity Date.
"Plan" means any pension benefit or welfare benefit plan as
defined in Sections 3(1), (2) or (3) of ERISA covering employees of the Obligors
or any ERISA Affiliate.
"Promissory Notes" means collectively the Promissory Notes in
the form of Exhibit B attached to the Credit Agreement to be delivered by the
borrowers set forth in the Credit Agreement to Banks pursuant to Paragraph
5.1(a) thereof, as the same may be amended or modified or extended or restated
from time to time.
"Required Banks" means those Banks (which may include Agent)
holding sixty-six and two-thirds percent (66-2/3%) or more of the amount of the
commitment, as defined in the Credit Agreement, or, if indebtedness is
outstanding hereunder, sixty-six and two-thirds percent (66-2/3%) or more of the
Loan.
"Required Holders" means the holder or holders of at least
sixty-six and two-thirds percent (66-2/3%) of the outstanding principal amount
of the Notes.
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"Restricted Payments" means (i) any dividend or distribution
on, or the purchase, redemption, prepayment or other retirement of the common
securities of the Company and (ii) the payment of principal or interest on or
the purchase, redemption, prepayment or other retirement of the Junior
Subordinated Debentures.
"Rolling Period" means, as of any date, the most recent four
(4) consecutive fiscal quarters of SunSource Inc. and its Consolidated
Subsidiaries completed on or before such date.
"Sale of Material Assets" means any sale, transfer or other
disposition of any Obligor's or any Subsidiary's assets in transactions (not
related to the 1998 Conversion) in which the total consideration paid or payable
to any Obligor or Subsidiary (including without limitation all cash, liabilities
assumed and the fair market value of any stock provided in such transaction) is,
in the aggregate, as to all such transactions after the date of this Agreement,
greater than Fifteen Million Dollars ($15,000,000).
"SDI Operating Partners, L.P." means SDI Operating Partners,
L.P., a Delaware limited partnership.
"SDIPI" means SDI Partners I, L.P., a Delaware limited
partnership and the general partner of SDI Operating Partners, L.P.
"Subsidiary" or "Subsidiaries" means any corporation of which
the Company, directly or indirectly, owns more than fifty percent (50%) of any
class or classes of securities. The Subsidiaries of the Company set forth on
Schedule 1 attached hereto are, collectively with the Company, the Obligors, and
those Subsidiaries of the Company set forth on Schedule 2 attached hereto are
the Guarantors.
"SunSource Inc." means the Company, SunSource Inc., a Delaware
corporation.
"SunSource Inc. and its Consolidated Subsidiaries" means the
Company and its consolidated subsidiaries as defined in accordance with GAAP.
"SunSub A" means SunSub A Inc., a Delaware corporation.
"SunSub B" means SunSub B Inc., a Delaware corporation.
"Total Assets" means, as of any date of determination, all
assets of SunSource Inc. and its Consolidated Subsidiaries, as set forth on
SunSource Inc. and its Consolidated Subsidiaries' financial statements most
recently delivered to you pursuant to Paragraphs 3.6, 5.2 and 5.3 hereof, as
defined in accordance with GAAP.
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"Total Capital" means, at any date of determination of
SunSource Inc. and its Consolidated Subsidiaries, the sum of the following: (i)
Funded Debt; (ii) the outstanding principal amount of Junior Subordinated
Debentures; and (iii) Net Worth.
"Total Liabilities" means, as of any date of determination,
all liabilities and deferred items of SunSource Inc. and its Consolidated
Subsidiaries, as set forth on SunSource Inc. and its Consolidated Subsidiaries'
financial statements most recently delivered to you pursuant to Paragraphs 3.6,
5.2 and 5.3 hereof, as defined in accordance with GAAP.
"Trade Notes" means Indebtedness of the Company secured by the
Company's inventory of glass and window products pursuant to financing plans in
the normal course of business for value received.
"Trust" shall mean SunSource Capital Trust, a Delaware
statutory business trust, which is the issuer of the Trust Preferred Securities
to the former holders of the A interests in SunSource L.P. and the Trust Common
Securities to the Company.
"Trust Common Securities" means the common securities issued
by the Trust pursuant to the Conversion.
"Trust Preferred Securities" means the preferred securities
issued by the Trust pursuant to the Conversion.
"Year 2000 Compliant" means, as to any computer system or
application or micro-processor dependent good or equipment, that it is designed
and intended to be used prior to, during and after the calendar year 2000 AD and
that it will operate as designed and intended during each such time period
without error relating to date data or date information, specifically including
any error relating to, or the product of, date data or date information that
represents or references different centuries or more than one century.
7.2. Rules of Construction.
(a) GAAP. Except as otherwise provided herein,
financial and accounting terms used in the foregoing definitions or elsewhere in
this Agreement shall be defined in accordance with GAAP. If the Company or you
determine that a change in GAAP from that in effect on the date hereof has
altered the treatment of certain financial data to their detriment under this
Agreement, such party may, by written notice to the other within thirty (30)
days after the effective date of such change in GAAP, request renegotiation and
the parties agree to negotiate in good faith to modify such financial covenants
affected by such change to reflect equitably such change. If the Company and the
holders of the Notes have not agreed on revised covenants within thirty (30)
days after the delivery of such notice, then, for purposes of this Agreement,
GAAP will mean generally
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accepted accounting principles on the date just prior to the date on which the
change occurred that gave rise to the notice.
(b) Use of Term "Consolidated". Any term defined in
this Section 7, when modified by the word "Consolidated" shall have the meaning
given to such term herein as to the Company on a consolidated basis with its
Subsidiaries and all other entities whose accounts, financial results or
position, for either federal income tax or financial accounting purposes, are
consolidated with those of the Company in accordance with GAAP.
SECTION 8. EVENTS OF DEFAULT; REMEDIES.
8.1. Events of Default. Each of the following events shall be
an Event of Default hereunder:
(a) If any Obligor or Guarantor shall fail to pay
when due (i) any installment of principal or interest when due or (ii) fees,
costs, expenses or any other sum payable to you hereunder or otherwise within 5
days after notice from you that it is due;
(b) If any representation or warranty made herein or
in connection herewith or in any statement, certificate or other document
furnished hereunder is incorrect, false or misleading in any material respect
when made;
(c) If any Obligor or Guarantor shall default in the
payment or performance of any obligation or Indebtedness to another, either
singly or in the aggregate in excess of $1,000,000, whether now or hereafter
incurred;
(d) If there shall be a default in or failure to
observe at any test date the covenants set forth in Paragraphs 5.12 through 5.14
or Section Six hereof;
(e) If any Obligor or Guarantor shall default in the
performance of any other agreement or covenant contained herein (other than as
provided in subparagraphs (a), (b) or (d) above) or in any document executed or
delivered in connection herewith, and such default shall continue uncured for
twenty (20) days after the earlier of (i) any Obligor having actual knowledge of
such default, and (ii) notice thereof to the Company given by any holder of a
Note;
(f) [Intentionally omitted];
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(g) If custody or control of any substantial part of
the property of any of the Obligor or Guarantor shall be assumed by any
governmental agency or any court of competent jurisdiction at the instance of
any governmental agency; if any material license or franchise shall be
suspended, revoked or otherwise terminated; if any governmental regulatory
authority or judicial body shall make any other final non-appealable
determination the effect of which would be to affect materially and adversely
the operations of any Obligor or Guarantor as now conducted;
(h) If any Obligor or Guarantor: becomes insolvent,
bankrupt or generally fails to pay its debts as such debts become due; is
adjudicated insolvent or bankrupt; admits in writing its inability to pay its
debts; or shall suffer a custodian, receiver or trustee for it or substantially
all of its property to be appointed and if appointed without its consent, not be
discharged within thirty (30) days; makes an assignment for the benefit of
creditors; or suffers proceedings under any law related to bankruptcy,
insolvency, liquidation or the reorganization, readjustment or the release of
debtors to be instituted against it and if contested by it not dismissed or
stayed within thirty (30) days; if proceedings under any law related to
bankruptcy, insolvency, liquidation, or the reorganization, readjustment or the
release of debtors is instituted or commenced by any Obligor; if any order for
relief is entered relating to any of the foregoing proceedings; if any Obligor
or Guarantor shall call a meeting of its creditors with a view to arranging a
composition or adjustment of its debts; or if any Obligor or Guarantor shall by
any act or failure to act indicate its consent to, approval of or acquiescence
in any of the foregoing;
(i) If any event or condition shall occur or exist
with respect to any activity or substance regulated under the Environmental
Control Statutes and as a result of such event or condition, any Obligor or
Guarantor has incurred or in the opinion of the Company are reasonably likely to
incur a liability in excess of $1,000,000 during any consecutive twelve (12)
month period;
(j) If any judgment, writ, warrant or attachment or
execution or similar process which calls for payment or presents liability in
excess of $1,000,000 shall be rendered, issued or levied against any Obligor or
Guarantor or its respective property and such process shall not be paid, waived,
stayed, vacated, discharged, settled, satisfied or fully bonded within sixty
(60) days after its issuance or levy; provided, however, that if a judgment,
writ, warrant or attachment or execution or similar process relates to federal
or state taxation, then an Event of Default shall occur if the same shall not be
paid, waived, stayed, vacated, discharged, settled, satisfied or fully bonded
within one hundred twenty (120) days after its issuance or levy; or
(k) If the Company makes a payment of principal or
interest on or purchases or redeems the Junior Subordinated Debentures and the
Trust does not immediately use such funds to make Distributions Paid on Trust
Securities.
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8.2. Acceleration; Suits for Enforcement. (i) Upon the
occurrence of an Event of Default under Paragraph 8.1(h), the unpaid principal
amount of all Notes, together with the interest accrued thereon and, to the
extent permitted by law, an amount equal to the Additional Amount specified
below shall automatically become immediately due and payable, without
presentment, demand, protest or other requirements of any kind, all of which are
hereby expressly waived by the Company and (ii) if any other Event of Default
shall have occurred and be continuing, the holders of at least 51% in aggregate
principal amount of the Notes may elect to declare the entire unpaid principal
amount of all Notes to be, and the same shall forthwith become, due and payable,
together with the interest accrued thereon and, to the extent permitted by law,
an amount equal to the Additional Amount specified below, provided that, during
the existence of an Event of Default described in Paragraph 8.1(a) with respect
to any Note, the holder of such Note may, by written notice to the Company,
declare such Note to be, and the same shall forthwith become, due and payable,
together with the interest accrued thereon and, to the extent permitted by law,
an amount equal to the Additional Amount specified below. If any holder of any
Note shall exercise the option specified in the proviso to the preceding
sentence, the Company will forthwith give written notice thereof to the holders
of all other outstanding Notes and each such holder may (whether or not such
notice is given or received), by written notice to the Company, declare the
principal of all Notes held by it to be, and the same shall forthwith become,
due and payable, together with the interest accrued thereon and, to the extent
permitted by law, an amount equal to the Additional Amount specified below. For
purposes of this Paragraph 8.2 the term "Additional Amount" means, with respect
to any Note, an amount equal to the Make-Whole Amount that would be payable with
respect to such Note if the Company had elected to prepay the Notes pursuant to
Paragraph 4.2. In addition, the holder of any Note may proceed to protect and
enforce its rights, either by suit in equity or by action at law, or both,
whether for the specific performance of any covenant or agreement contained in
this Agreement or in aid of the exercise of any power granted in this Agreement,
or the holder of any Note may proceed to enforce the payment of all sums due
upon such Note whether by acceleration or otherwise or to enforce any other
legal or equitable right of the holder of such Note.
The Company covenants that, if it shall default in the making
of any payment due under any Note or in the performance or observance of any
agreement contained in this Agreement, it will pay to the holder thereof such
further amounts, to the extent lawful, as shall be sufficient to pay the costs
and expenses of collection or of otherwise enforcing such holder's rights,
including reasonable counsel fees.
8.3. Remedies Cumulative. No remedy herein conferred upon you
or the holder of any Note is intended to be exclusive of any other remedy and
each and every such remedy shall be cumulative and shall be in addition to every
other remedy given hereunder or now or hereafter existing at law or in equity or
by statute or otherwise.
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8.4. Remedies Not Waived. No course of dealing between the
Company and you or the holder of any Note and no delay or failure in exercising
any rights hereunder or under any Note in respect thereof shall operate as a
waiver of any of your rights or the rights of any holder of such Note.
SECTION 9. GUARANTY.
9.1. Guaranty. Each Guarantor hereby irrevocably, absolutely
and unconditionally guarantees and becomes surety for the full, prompt and
punctual payment to you and the other holders of the Notes, as and when due,
whether at maturity, by acceleration or otherwise, of any and all Indebtedness,
liabilities and obligations of the Company to you and the other holders of the
Notes created at any time under, or pursuant to the terms of, this Agreement and
of the Notes, whether for principal, interest, premiums, fees, expenses or
otherwise (all such indebtedness, liabilities and obligations being called in
this Section Nine collectively the "Obligations"), together with any and all
reasonable expenses, including attorneys' fees and disbursements, which may be
incurred by you or the other holders of the Notes in enforcing any and all
rights against Guarantors under this Agreement (herein the "Expenses").
9.2. Bankruptcy. Without limiting Guarantors' obligations
hereunder and notwithstanding any purported termination of this Section Nine or
this Agreement, if any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation, dissolution, assignment for the benefit
of creditors, or similar event with respect to any of the Obligors or any
additional guarantor or endorser of all or any of the Obligations and Expenses
shall occur, and such occurrence shall result in the return of (or if in such
event you or another holder of the Notes shall be requested to return) any
payment or performance of any of the Obligations or Expenses, then the
obligations of each Guarantor hereunder shall be reinstated with respect to such
payment or performance returned or requested to be returned and with respect to
all further obligations arising as a result of such return or request, and each
Guarantor shall thereupon be liable therefor, without any obligation on the part
of you or another holder of the Notes to contest or resist any such return.
9.3. Nature and Term of Guaranty. The obligations of each
Guarantor under this Section Nine shall be independent, absolute, irrevocable
and unconditional and shall remain in full force and effect until the
Obligations and all other amounts payable hereunder shall have been paid in full
(subject, however, to reinstatement under Paragraph 9.2 hereof).
9.4. Rights and Remedies. You or any other holder of the Notes
may proceed to exercise any right or remedy which you or it may have under this
Section Nine against Guarantors without first pursuing or exhausting any rights
or remedies which it may have against any of the Obligors, any additional
guarantor or against any other person or entity or any collateral security, and
may proceed to exercise any right or remedy which it may have under this Section
Nine without regard to any actions or omissions of any other person or entity,
in any manner or order, without any obligation to marshal in favor of Guarantors
or other persons or
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entities and without releasing any of Guarantors' obligations hereunder with
respect to any unpaid Obligations and Expenses. No remedy herein conferred upon
or reserved to you and the other holders of the Notes is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy given
under this Section Nine or now or hereafter existing at law or in equity.
9.5. Actions by Holders of the Notes Not Affecting Guaranty.
The Required Holders may, at any time or from time to time, in such manner and
upon such terms as they may deem proper, extend or change the time of payment or
the manner or place of payment of, or otherwise modify or waive any of the terms
of, or release, exchange, settle or compromise any or all of the Obligations and
Expenses or any collateral security therefor, or subordinate payment of the
same, or any part thereof, to the payment of any other indebtedness, liabilities
or obligations of any of the Obligors which may at any time be due or owing to
themselves or anyone, or elect not to enforce any of their rights with respect
to any or all of the Obligations and Expenses or any collateral security
therefor, all without notice to, or further assent of, Guarantors and without
releasing or affecting Guarantors' obligations under this Section Nine.
9.6. Payment in Accordance with Notes and this Agreement. This
Section Nine shall be construed as guaranteeing that the Obligations and
Expenses shall be paid strictly in accordance with the terms of the Notes and
this Agreement, regardless of any non-perfection of any collateral security for
the Obligations; any invalidity or unenforceability of this Agreement, the Notes
or any of the Obligations; the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all, or substantially all of the
assets, marshaling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment of, or other similar
proceedings affecting any of the Obligors, Guarantors or any additional
guarantor or endorser of any or all of the Obligations and Expenses or any of
the assets of any of them, or any contest of the validity of this Section Nine
in any such proceeding; or any law, regulation or decree now or hereafter in
effect in any jurisdiction which might in any manner affect any of such terms or
provisions or any rights of the holder or holders of the Notes with respect
thereto or which might cause or permit any of the Obligors or any additional
guarantor or endorser of the Obligations and Expenses to invoke any defense to,
or any alteration in the time, amount or manner of payment of any or all of the
Obligations and Expenses or performance of this Section Nine.
9.7. Payments Under Guaranty. All payments by Guarantors
hereunder shall be made in the manner set forth on Schedule 3 hereto.
9.8. Waivers and Modifications. No failure or delay on the
part of any holder of the Notes in exercising any power or right under this
Section Nine against Guarantors shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right or power preclude any other or
further exercise thereof or the exercise of any other right or power under this
Section Nine. No modification or waiver of any provision of this Section Nine,
nor consent to any departure therefrom, shall, in any event, be effective unless
the same is in writing
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signed by the Required Holders and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given. No
notice to, or demand on Guarantors, in any case, shall entitle the Guarantors to
any other or further notice or demand in similar or other circumstances.
9.9. Waiver. Each Guarantor hereby waives promptness,
diligence, presentment, demand, notice of acceptance and any other notice with
respect to any of the Obligations and this Section Nine, except notice of demand
for payment hereunder.
9.10. Subordination of Rights of Subrogation. Guarantors shall
not exercise any rights which Guarantors may acquire by way of subrogation under
this Section Nine, applicable law or otherwise, by any payment made hereunder or
otherwise, until all of the Obligations and Expenses and all other amounts
payable hereunder (including amounts which may become due following a
reinstatement hereof under Paragraph 9.2 hereof) shall have been paid in full in
cash. If any amount shall be paid to any Guarantor on account of such rights at
any time when all the Obligations and Expenses shall not have been paid in full
(including amounts which may become due following a reinstatement hereof under
Paragraph 9.2 hereof), such amount paid to such Guarantor shall be held in trust
for the benefit of the holders of the Notes and shall forthwith be credited and
applied against the Obligations and Expenses, whether matured or unmatured, in
accordance with the terms of the Notes and this Agreement; provided, however,
that to the extent not prohibited by applicable law or affecting the Banks' or
holders of the Notes right to retain such funds, the holders of the Notes shall
retain Noteholders' Applicable Share of the Net Cash Proceeds of any amount so
recovered and the remainder shall be shared with the Banks. If any Guarantor
shall make payment to the holders of the Notes of all or any part of the
Obligations and Expenses and all of the Obligations and Expenses shall be paid
in full, the holders of the Notes, shall, at such Guarantor's request, execute
and deliver to such Guarantor appropriate documents, without recourse and
without representation or warranty, necessary to evidence the transfer, by
subrogation, to Guarantor of an interest in the Obligations resulting from such
payment by Guarantor.
9.11. No Setoff by Guarantors. No setoff, counterclaim,
reduction, or diminution of any obligation, or any defense of any kind or nature
which Guarantors have or may have against any of the Obligors or any holder of
the Notes shall be available hereunder to Guarantors.
9.12. Continuing Guaranty; Transfer of Note. Except as
provided in Paragraph 9.2 hereof, this Section Nine is a continuing guaranty and
shall (i) remain in full force and effect until the Obligations and Expenses and
all other amounts payable under this Section Nine shall have been paid in full
(subject, however, to reinstatement under Paragraph 9.2 hereof), (ii) be binding
upon Guarantors and the successors and assigns of Guarantors, and (iii) inure to
the benefit of the holders of the Notes, and be enforceable by them and their
successors, transferees and assigns. Without limiting the generality of the
foregoing clause (iii), any holder of the Notes may, to the extent permitted in
this Agreement endorse, assign or otherwise transfer
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its Notes to any other person or entity, and such other person or entity shall
thereupon become vested with all the rights in respect thereof granted to any
holder of the Notes herein or otherwise.
9.13. Representations and Warranties; Covenants. By signing in
the place provided below, each Guarantor hereby makes the representations and
warranties set forth in this Agreement and hereby agrees to the covenants and
other agreements of the Guarantors to the extent set forth in this Agreement.
SECTION 10. REGISTRATION, TRANSFER AND EXCHANGE OF NOTES. The Company
will keep at its principal executive office a note register (herein sometimes
referred to as the "Note Register"), in which, subject to such reasonable
regulations as it may prescribe, but at its expense (other than transfer taxes,
if any), it will provide for the registration and transfer of Notes.
Whenever any Note or Notes shall be surrendered either at the
principal executive office of the Company or at the place of payment named in
the Notes, for transfer or exchange, the Company will execute and deliver in
exchange therefor a new Note or Notes, as may be requested by such holder, in
the same aggregate unpaid principal amount of the Note or Notes so surrendered.
Each such new Note shall be payable to such person as such holder may request.
Each Note presented or surrendered for registration of transfer or exchange
shall be duly endorsed, or shall be accompanied by a written instrument of
transfer duly executed, by the registered holder of such Note or its attorney
duly authorized in writing. Any Note issued in exchange for any other Note or
upon transfer thereof shall carry the rights to unpaid interest and interest to
accrue which were carried by the Note so exchanged or transferred, and neither
gain nor loss of interest shall result from any such transfer or exchange. Any
transfer tax relating to such transaction shall be paid by the holder requesting
the exchange.
The Company and any agent of the Company may treat the person
in whose name any Note is registered as the owner of such Note for the purpose
of receiving payment of the principal of and premium (if any) and interest on
such Note and for all other purposes whatsoever, whether or not such Note be
overdue.
SECTION 11. LOST, ETC., NOTES. Upon receipt by the Company of evidence
satisfactory to it of the loss, theft, destruction or mutilation of any Note,
and (in case of loss, theft or destruction) of indemnity satisfactory to it and
upon surrender and cancellation of such Note, if mutilated, the Company will
deliver in lieu of such Note a new Note in a like unpaid principal amount, dated
as of the date to which interest has been paid thereon.
Notwithstanding the foregoing provisions of this Section, if
any Note of which you or any other institutional holder is the owner is lost,
stolen or destroyed, then the affidavit of your or such holder's Treasurer or
Assistant Treasurer (or other responsible officials) shall be accepted as
satisfactory evidence thereof and no indemnity shall be required as a
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condition to the execution and delivery by the Company of a new Note in lieu of
such Note (or as a condition to the payment thereof, if due and payable) other
than your or such holder's written agreement to indemnify the Company.
The Company will keep at its principal executive offices a
true copy of this Agreement (as at the time in effect), and cause the same to be
available for inspection at said office during normal business hours by any
holder of a Note or any prospective purchaser of a Note designated by a holder
thereof.
SECTION 12. AMENDMENT AND WAIVER.
A. Any term, covenant, agreement or condition of this
Agreement or of the Notes may, with the consent of the Company, be amended, or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively) by one or more substantially
concurrent written instruments signed by the Required Holders, provided,
however, that no such amendment or waiver shall:
(1) (i) change the rate or the time of payment of interest
on any of the Notes, without the consent of the holder of each Note so affected,
(ii) modify any of the provisions of this Agreement or
of the Notes with respect to the payment or prepayment thereof, or change the
percentage of holders of Notes required to approve any such amendment or
effectuate any such waiver, without the consent of the holders of all the Notes
then outstanding, or
(iii) give to any Note any preference over any other
Note,
(2) extend to or affect any obligation not expressly waived
or impair any right consequent thereon, and
(3) amend, waive or modify the provisions of this Agreement
relating to (i) the covenants set forth in Paragraphs 5.12 through 5.14 and
Section Six hereof; (ii) any of the Events of Default set forth in Paragraph 8.1
hereof; (iii) the mandatory and voluntary prepayment provisions of Paragraphs
4.1, 4.2, 4.3, 4.4, 4.7 and 4.8 hereof; and (iv) any of the definitions relating
to the matters described in clauses (i) through (iii) above, without the
simultaneous amendment, waiver or modification of the corresponding provision of
the Credit Agreement by Banks or Required Banks, as applicable.
B. Any amendment or waiver pursuant to Subsection A of this
Section shall (except as provided in Clause A(1)(i)) apply equally to all the
holders of the Notes and shall
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be binding upon them, upon each future holder of any Note and upon the Company,
in each case whether or not a notation thereof shall have been placed on any
Note.
C. The Company will not solicit, request or negotiate for or
with respect to any proposed waiver or amendment of any of the provisions of
this Agreement or the Notes unless each holder of any Note (irrespective of the
amount of Notes then owned by it) shall be informed thereof by the Company and
shall be afforded the opportunity of considering the same and shall be supplied
by the Company with sufficient information to enable it to make an informed
decision with respect thereto. Executed or true and correct copies of any
amendment or waiver effected pursuant to the provisions of this Section 12 shall
be delivered by the Company to each holder of outstanding Notes forthwith
following the date on which the same shall have been executed and delivered by
the required percentage of the holders of the Notes. The Company will not,
directly or indirectly, pay or cause to be paid any remuneration, whether by way
of supplemental or additional interest, fee or otherwise, to any holder of any
Note as consideration for or as an inducement to the entering into by any holder
of any Note or any amendment or waiver of any of the terms and provisions of
this Agreement unless such remuneration is concurrently paid, on the same terms,
ratably to the holders of all of the Notes outstanding at the time such offer is
made.
SECTION 13. HOME OFFICE PAYMENT. Notwithstanding anything to the
contrary in this Agreement or the Notes, so long as you or any nominee
designated by you shall be the holder of any Note, the Company shall punctually
pay all amounts which become due and payable on such Note to you at your address
and in the manner set forth in Schedule 3 hereto, or at such other place and in
such other manner as you may designate by notice to the Company, without
presentation or surrender of such Note. You agree that prior to the sale,
transfer or other disposition of any such Note, you will make notation thereon
of the portion of the principal amount paid or prepaid and the date to which
interest has been paid thereon, or surrender the same in exchange for a Note or
Notes aggregating the same principal amount as the unpaid principal amount of
the Note so surrendered. The Company shall enter into an agreement similar to
that contained in this Section with any other institutional investor (or nominee
thereof) who shall hold any of the Notes.
SECTION 14. LIABILITIES OF THE PURCHASER. Neither this Agreement nor
any disposition of any of the Notes shall be deemed to create any liability or
obligation of you or any other holder of any Note to enforce any provision
hereof or of any of the Notes for the benefit or on behalf of any other person
who may be the holder of any Note.
SECTION 15. TAXES. The Company will pay all taxes (including interest
and penalties) which may be payable in respect of the execution and delivery of
this Agreement or of the execution and delivery (but not the transfer) of any of
the Notes or of any amendment of, or waiver or consent under or with respect to,
this Agreement or of any of the Notes and will save you and all subsequent
holders of the Notes harmless against any loss or liability resulting from
nonpayment or delay in payment of any such tax. In addition and not in
limitation of the
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foregoing, the Obligors jointly and severally agree to indemnify and hold each
holder of a Note free and harmless from and against any federal, state or local
income or franchise taxes or any interest, penalties, or additions to tax with
respect thereto, that are incurred by any holder of a Note in whole or in part
by reason of any assumption by the Obligors of the obligations under the
Existing Note Purchase Agreement and the Notes issued thereunder or the receipt
of any payment in respect of such taxes or other amounts. The obligations of the
Company under this Section shall survive the payment of the Notes.
SECTION 16. MISCELLANEOUS.
16.1. Expenses. The Company agrees, whether or not the
transactions contemplated by Paragraph 1.2 shall be consummated, to pay all
reasonable expenses incident to such transactions and also in connection with
any future amendment of, or waiver under or with respect to (whether or not the
same shall become effective), this Agreement or any of the Notes, including in
each case, without limitation, all document production and other expenses, the
reasonable fees and disbursements of your special and local counsel for their
services in connection with such transactions, the fees and expenses in
connection with the assignment of the private placement number referred to in
Paragraph 3.7 and all expenses in connection with the shipping to and from your
office or the office of your nominee or custodian bank of the Notes delivered to
you on the Closing Date and to reimburse you for any reasonable out-of-pocket
expenses in connection therewith. The Company also agrees to pay all reasonable
expenses following the occurrence and during the continuance of any Default or
Event of Default or incident to the negotiation of any restructuring, workout or
similar arrangement, whether or not consummated, relating to the Company. The
obligations of the Company under this Paragraph shall survive the payment of the
Notes.
In furtherance of the foregoing paragraph, on the Closing
Date, the Company will pay the fees and disbursements of Milbank, Tweed, Xxxxxx
& XxXxxx and Xxxxxx Xxxxxxxx LLP which are reflected in the statements of such
special counsel delivered to the Company on or prior to the Closing Date; and
thereafter the Company will pay, promptly upon receipt of supplemental
statements therefor from time to time, additional fees, if any, and
disbursements of such special counsel in connection with the transactions
contemplated by Paragraph 1.2 (including unposted disbursements as of the
Closing Date).
16.2. Reliance on and Survival of Representations. All
agreements, representations and warranties of the Company or any partner of the
Company herein and in any certificates or other instruments delivered pursuant
to this Agreement shall (A) be deemed to be material and to have been relied
upon by you, notwithstanding any investigation heretofore or hereafter made by
you or on your behalf, and (B) survive the execution and delivery of this
Agreement and the delivery of the Notes to you, and shall continue in effect so
long as any Note is outstanding and thereafter as provided in Section 15 and
Paragraph 16.1.
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16.3. Successors and Assigns. All covenants and agreements in
this Agreement by or on behalf of the respective parties hereto shall bind and
inure to the benefit of their respective successors and assigns, except that, in
the case of a successor to the Company by consolidation or merger or a
transferee of its assets, this Agreement shall inure to the benefit of such
successor or transferee only if it becomes such in accordance with Paragraph
6.8; provided, however, that you shall not be obligated to purchase any Notes on
the Closing Date from any person other than the Company. The provisions of this
Agreement are intended to be for the benefit of all holders, from time to time,
of the Notes, and shall be enforceable by any such holder, whether or not an
express assignment to such holder of rights under this Agreement has been made
by you or your successor or assign, provided, however, that the benefit of
Paragraphs 5.2, 5.3, 5.6, Section 11 (as to satisfactory indemnity) and Section
13 shall be limited as provided therein.
16.4. Notices. All notices, opinions and other communications
provided for in this Agreement shall be in writing and delivered or mailed,
first class postage prepaid, addressed (A) if to the Company, at the address set
forth at the head of this Agreement (marked for the attention of Vice
President-Finance), or at such other address as the Company may hereafter
designate by notice to you and to each other holder of any Note at the time
outstanding, (B) if to you, at your address as set forth in Schedule 3 hereto or
at such other address as you may hereafter designate by notice to the Company,
or (C) if to any other holder of any Note, at the address of such holder as it
appears on the Note Register or the records of the Company maintained pursuant
to Section 10.
16.5. Reproduction of Documents. This Agreement and all
related documents, including (a) consents, waivers and modifications which may
subsequently be executed, (b) documents received by you at the closing of your
purchase of the Notes (except the Notes themselves), and (c) financial
statements, certificates and other information previously or subsequently
furnished to you, may be reproduced by you by any photographic, photostatic,
microfilm, micro-card, miniature photographic or other similar process and you
may destroy any original document so reproduced. The Company agrees and
stipulates that any such reproduction shall, to the extent permitted by
applicable law, be admissible in evidence as the original itself in any judicial
or administrative proceeding (whether or not the original is in existence and
whether or not the reproduction was made by you in the regular course of
business) and that any enlargement, facsimile or further reproduction of the
reproduction shall likewise be admissible in evidence.
16.6. Law Governing. This Agreement and the Notes shall be
governed by and construed in accordance with the laws of the State of New York.
-42-
16.7. Headings. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect any of the
terms hereof.
16.8. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
-43-
If you are in agreement with the foregoing, please sign the
form of acceptance in the space provided below whereupon this Agreement shall
become a binding agreement between you and the Company and its Subsidiaries.
Very truly yours,
SUNSOURCE INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
SUNSOURCE INVESTMENT COMPANY, INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
SUNSUB A INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
THE XXXXXXX GROUP, INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
[EXECUTIONS CONTINUED]
-44-
XXXXXXX GLASS, INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
SUNSOURCE INDUSTRIAL SERVICES
COMPANY, INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
SUNSOURCE CORPORATE GROUP, INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
KAR PRODUCTS INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
SUNSOURCE INVENTORY MANAGEMENT
COMPANY, INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
[EXECUTIONS CONTINUED]
-45-
SUNSOURCE TECHNOLOGY SERVICES INC.
By:____________________________________
Name: Xxxxxx X. Xxxxxxx
Title: Vice President - Finance
The foregoing Agreement is
hereby accepted as of the date
first above written:
TEACHERS INSURANCE AND
ANNUITY ASSOCIATION OF
AMERICA
By: ___________________________
Name:
Title:
-46-
SCHEDULE I
SUBSIDIARIES OF SUNSOURCE INC.
THAT ARE OBLIGORS UNDER THE NOTE PURCHASE AGREEMENT
SunSource Investment Company, Inc.
SunSub A Inc.
The Xxxxxxx Group, Inc.
Xxxxxxx Glass, Inc.
SunSource Industrial Services Company, Inc.
SunSource Corporate Group, Inc.
SunSource Inventory Management Company, Inc.
SunSource Technology Services Inc.
Kar Products Inc.
SCHEDULE II
SUBSIDIARIES OF SUNSOURCE INC.
THAT ARE GUARANTORS UNDER THE NOTE PURCHASE AGREEMENT
None
SCHEDULE 3
MANNER OF PAYMENT AND NOTICE
Principal Amount of
Name and Address of Purchaser Notes to be Purchased
----------------------------- ---------------------
TEACHERS INSURANCE AND ANNUITY ASSOCIATION OF AMERICA $60,000,000
XVII. All payments on account of the Notes shall be made in immediately
available funds prior to 12:00 noon (New York time) on the due date by
electronic funds transfer through the Automated Clearing House System
identifying each payment as to:
The Chase Manhattan Bank
ABA No. 000-000-000
New York, New York
Account of: Teachers Insurance and Annuity
Association of America
Account Number: 000-0-000000
For Further Credit to Account Number G07040
XVIII. Contemporaneous with the above electronic funds transfer payment, written
confirmation of each such payment setting forth: (a) the full name, private
placement number, interest rate and maturity date of the Notes; (b) allocation
of payment between principal, interest and Make-Whole Amount; and (c) the name
and address of the bank from which such electronic funds transfer was sent shall
be delivered, mailed or faxed to:
Teachers Insurance and Annuity Association
of America
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Securities Accounting Division
Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
XIX. All other communications shall be delivered or mailed to:
Teachers Insurance and Annuity
Association of America
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Securities Division,
Private Placements
General Telephone Number: (000) 000-0000
Facsimile Number: (000) 000-0000
XX. Taxpayer I.D. Number: 00-0000000
EXHIBIT A
SUNSOURCE INC. AND ITS SUBSIDIARIES SET FORTH ON
SCHEDULE 1 TO THE NOTE PURCHASE AGREEMENT
SENIOR NOTE DUE 2002
PPN: ____________
Note No. [Date]
$
FOR VALUE RECEIVED, the undersigned, SUNSOURCE INC.,
a corporation organized and existing under the laws of Delaware (herein called
the "Company") and its subsidiaries set forth on Schedule 1 to the Note Purchase
Agreement referred to below (together with the Company, the "Obligors"), hereby
jointly and severally promise to pay to
or registered assigns, the principal sum of
DOLLARS
(or so much thereof as shall not have been prepaid) on September 30, 2002, with
interest (computed on the basis of a 360-day year of twelve 30-day months) on
the unpaid principal hereof at the rate of 7.66% per annum (subject to increase
as provided in Paragraph 1.4 of the Note Purchase Agreement referred to below)
from December 30, 1998, payable quarterly in arrears on March 30, June 30,
September 30 and December 30 in each year, commencing on December 30, 1997,
until said principal shall have become due and payable, and thereafter to pay
interest (so computed) at the rate per annum equal to the greater of (i) the
prime commercial lending rate of interest announced by The Chase Manhattan Bank
(National Association) at its principal office in New York, New York, as in
effect from time to time, plus 1% or (ii) 8.66%, on any overdue principal and
premium and, to the extent permitted by applicable law, on any overdue interest,
until the same shall be paid. Payments of principal, premium, if any, and
interest are to be made at the office of Xxxxxx Guaranty Trust Company of New
York, New York, in lawful money of the United States of America.
This Note is one of the 7.66% Senior Notes issued
pursuant to the Amended and Restated Note Purchase Agreement dated as of
December 31, 1998 between the Obligors, the Subsidiaries of the Company set
forth on Schedule 2 thereto, as Guarantors, and Teachers Insurance and Annuity
Association of America (the "Note Purchase Agreement"), and is entitled to the
benefits thereof. As provided in said Note Purchase Agreement, this Note is
subject to optional prepayments in whole or in part.
This Note is transferable on the note register of the
Company upon presentment at the principal executive office of the Company or the
place of payment named herein, duly endorsed, or accompanied by a written
instrument of transfer duly executed, by the registered holder hereof or such
holder's attorney duly authorized in writing. As provided in said Note Purchase
Agreement, Notes may also be exchanged at such office or place of payment for a
like aggregate principal amount of Notes, as requested by the holder presenting
the same. The Company may deem and treat the person in whose name this Note is
registered as the holder and owner hereof for the purpose of receiving payments
and for all other purposes whatsoever, and the Company shall not be affected by
any notice to the contrary.
In case an Event of Default (as defined in said Note
Purchase Agreement) shall occur and be continuing, the principal of this Note
may become or be declared due and payable in the manner and with the effect
provided in said Note Purchase Agreement.
SUNSOURCE, INC.
By:______________________________
Name:
Title:
SUNSOURCE INVESTMENT COMPANY, INC.
By:______________________________
Name:
Title:
SUNSUB A INC.
By:______________________________
Name:
Title:
THE XXXXXXX GROUP, INC.
By:______________________________
Name:
Title:
[EXECUTIONS CONTINUED]
XXXXXXX GLASS INC.
By:______________________________
Name:
Title:
SUNSOURCE INDUSTRIAL SERVICES
COMPANY, INC.
By:______________________________
Name:
Title:
SUNSOURCE CORPORATE GROUP, INC.
By:______________________________
Name:
Title:
KAR PRODUCTS INC.
By:______________________________
Name:
Title:
SUNSOURCE INVENTORY MANAGEMENT
COMPANY, INC.
By:______________________________
Name:
Title:
SUNSOURCE TECHNOLOGY SERVICES INC.
By:_______________________________
Name:
Title:
EXHIBIT B Page 1 of 4
DISCLOSURE PURSUANT TO REPRESENTATIONS AND WARRANTIES
2.4 Material Contracts
None
2.5 Compliance
None
2.6 Litigation
On February 27, 1996, a lawsuit was filed against the Company by
the buyer of its Xxxxxx Products division, R&B, Inc. ("R&B") for
alleged misrepresentation of certain facts by the Company upon
which R&B allegedly based its offer to purchase Xxxxxx. The
complaint seeks damages of approximately $21,000,000, although
the Company believes that any recovery by R&B will be
substantially lower. In 1998, the Company and R&B agreed to an
arbitration process with respect to certain unresolved
post-closing adjustments. In the third quarter the Company
recorded a pre-tax charge of $1,300,000 which management
estimates is the Company's maximum exposure related to these
post-closing issues. On December 4, 1998 a hearing was held by
the arbitrator on these matters and his decision is expected by
January 7, 1998. It is unclear what impact the arbitration
decision will have on the ultimate resolution of this
litigation. R&B has offered to settle the arbitration and
litigation for the amount of $10,000,000. The Company is in the
process of determining its response to this settlement offer but
would not expect to exceed the amount of the reserve indicated
above.
2.7 Title to Assets
See the Attached Schedule of Indebtedness and Obligations for
Secured Assets and Lease Obligations as of November 30, 1998
also as described in Notes 9, 10 and 11 to Consolidated
Financial Statements of the Company and Subsidiaries as of and
for the period ended December 31, 1997, previously furnished to
the holder of the Note.
2.8 Capital Stock Page 2 of 4
The number of shares and classes of capital stock of each
Borrower and each Subsidiary and the ownership thereof effective
upon the 1998 Conversion are as follows:
Ownership of the Company
Authorized Shares: 1,000 shares of Preferred Stock, $.01 par
value per share 20,000,000 shares of Common Stock , $.01 par
vaule per share
Outstanding: Preferred stock: none
Common stock: 6,756,129 shares (directors and executive officers
ownership is approximately 21% of shares outstanding).
Treasury: 461,100 common shares.
Ownership of SunSource Investment Company, Inc.
Authorized Shares: 100 shares of Common Stock, $.01 par value
per share Outstanding: 100 shares issued to SunSource, Inc.
Ownership of SunSub A Inc.
Authorized Shares: 100 shares of Common Stock, $.01 par value
per share Outstanding: 100 shares issued to SunSource Investment
Company, Inc.
Ownership of The Xxxxxxx Group, Inc.
Authorized Shares: 100 shares of Common Stock, $.01 par value
per share Outstanding: 100 shares issued to SunSub A Inc.
Ownership of Xxxxxxx Glass, Inc.
Authorized Shares: 100 shares of Common Stock, $.01 par value
per share Outstanding: 100 shares issued to SunSub A Inc.
Ownership of SunSource Industrial Services Company, Inc.
Authorized Shares: 100 shares of Common Stock, $.01 par value
per share Outstanding: 100 shares issued to SunSub A Inc.
Ownership of SunSource Corporate Group, Inc.
Authorized Shares: 100 shares of Common Stock, $.01 par value
per share Outstanding: 100 shares issued to SunSub A Inc.
Ownership of SunSource Inventory Management Company, Inc.
Authorized Shares: 100 shares of Common Stock, $.01 par value
per share Outstanding: 100 shares issued to SunSource Industrial
Services Company, Inc.
2.8 Capital Stock, continued Page 3 of 4
Ownership of SunSource Technology Services Inc.
Authorized Shares: 100 shares of Common Stock, $.01 par value
per share Outstanding: 100 shares issued to SunSource Industrial
Services Company, Inc.
Ownership of Kar Products, Inc.
Authorized Shares: 100 shares of Common Stock, $.01 par value
per share Outstanding: 100 shares issued to SunSource Industrial
Services Company, Inc.
Ownership of A & H Holding Co., Inc.
Outstanding: 100 shares issued to Kar Products Inc.
Ownership of Hydra Power de Mexico
Outstanding: 49,998 shares of Common Stock issued to A&H Holding
Co., Inc.
Ownership of SIMCO de Mexico
Outstanding: 98 shares of Common Stock issued to A&H Holding
Co., Inc.
Ownership of SunSource Canada Investment company LLC
Outstanding:100 shares of Common Stock issued to A&H Holding
Co., Inc.
Ownership of X. X. Xxxxxx (Canada), Ltd.
Outstanding: 5 shares of Common Stock issued to SunSource Canada
Investment Company LLC.
Ownership of A & H Bolt & Nut Company, Ltd.
Outstanding: 306 Class B special shares issued to SunSource
Canada Investment Company LLC
2.10 (c) Taxes and Assessments
The Internal Revenue Service and/or various State Taxing
Authorities have in progress income tax audits of records for
the years 1982 through 1984. The Company has assumed the
agreements of Sun Distributors, Inc., to extend the time for
assessment of tax for tax periods 1985, 1986 and January 1, 1987
through February 11, 1987. There have been no tax audits by the
Internal Revenue Service of records of the Company, SDI, SDIPI,
SunSub A and SunSub B to date nor have agreements to extend the
time for assessment been executed to date. Various State taxing
authorities have in progress tax audits of records of the
Company.
2.11 Indebtedness Page 4 of 4
- See the Attached Schedule of Indebtedness and Obligations
- Lease Obligations as described in Note 11 to Consolidated
Financial Statements of SunSource Inc. and Subsidiaries as of
and for the period ended December 31, 1997, furnished to the
Banks.
2.12 Management Agreements
Xxxxxx Xxxxxxxx -- Restructuring Consulting
PricewaterhouseCoopers -- Annual Audit and Tax Compliance
Registrar & Transfer Co. -- Transfer Agent
Xxxxx Xxxxxxx Trust Co. -- Investment Manager, Retirement Plans
2.13 Subsidiaries and Investments
Employee advances aggregating $ 20,000 as of September 30, 1998.
2.14 ERISA
Unfunded liabilities for post-retirement life or health benefits
are estimated for the following Operating Division: X. X. Xxxxxx
Company $452,000
The Company is a party to multi-employer pension plans of which
there was no withdrawal liability as of December 31, 1997, but
which could have withdrawal liability in the future. The
multi-employer pension plans are as follows:
Xxxxxxx Glass Industries - International Brotherhood of Painters
and Allied Trades Pension Trust--Glaziers, Architectural Metal
and Glass-workers Local #930 and Glaziers Local #911
- Glaziers Local #930 Pension Trust
- Western Conference of Teamsters Pension Trust
2.17 Hazardous Wastes, Substances and Petroleum Products
Philips & Company
Mid-MO Superfund Site --Limited Liability Expected
Xxxxxx Glass Company
Operating Industries, Inc. Landfill Superfund Site
Liability not expected to exceed $300,000 recorded on the books
of SunSource Inc. as of September 30, 1998.
SDI OPERATING PARTNERS, L.P.
EXISTING LETTERS OF CREDIT
AS OF 11/30/98
(in thousands)
DIVISION ISSUING BANK BENEFICIARY AMOUNT
-------- ------------ ----------- ------
Stand-By Letters of Credit:
Business Insurance - Loss Casualty Program:
SunSource Headquarters First Union Legion Ins. Co. - 5th/6th Policy Years $1,750
SunSource Headquarters First Union Mutual Indemnity - 1st - 4th Policy Years(1) 1,300
------
Total Stand-By Letters of Credit $3,050
======
----------------------------------------------------------------------------------------------------------------------
Documentary or Trade Letters of Credit:
Xxxxxxx Fastener First Union 467
Kar Products First Union 23
------
Total Documentary Letters of Credit $ 490
======
Grand Total - All LOC's $3,540
======
(1) Issued on December 15, 1998
SDI OPERATING PARTNERS, L.P.
SCHEDULE OF INDEBTEDNESS
AS OF 11/30/98
(in thousands)
TOTAL
OUTSTANDING
PRINCIPAL
OBLIGOR HOLDER BALANCE SECURITY
------- ------ ------- -----------
SDI Operating Partners, L.P. Teachers Insurance Co. $ 60,000 Unsecured Senior Debt
SDI Operating Partners, L.P. Cananwell Finance Co. 884 Unsecured Debt
SDI Operating Partners, L.P. First Union National Bank - Revolving Credit 11,440 Unsecured Senior Debt
The Bank of Nova Scotia - Revolving Credit 11,440 Unsecured Senior Debt
Fifth Third Bank - Revolving Credit 6,160 Unsecured Senior Debt
SunTrust Banks, Inc. - Revolving Credit 6,160 Unsecured Senior Debt
The Fuji Bank, Limited - Revolving Credit 8,800 Unsecured Senior Debt
--------
Total Revolving Credit 44,000
--------
A&H Bolt - A division of SDI
Operating Partners, L.P. Bank of Nova Scotia - Unsecured line of
credit
arding Glass - A division of SDI
Operating Partners, L.P. L.O.F. Trade Notes 974 Glass Inventory
Xxxxxxx Fastener - A division of SDI
Operating Partners, L.P. Fifth Third 862 Capital Leases - Packaging
-------- Equipment
Total $106,720
========
EXHIBIT C
Form of Compliance Certificate
To: Each holder of a Note under the Amended and Restated
Note Purchase Agreement dated as of December 31, 1998
among SunSource Inc. (the "Company"), its Subsidiaries as
set forth on Schedule 1 thereto (together with the
Company, the "Obligors"), its Subsidiaries as set forth
on Schedule 2 thereto, as Guarantors, and Teachers
Insurance and Annuity Association of America (as may be
further amended, the "Agreement")
Attached hereto are the financial statements and other items
required to be delivered to you pursuant to Paragraph 5.2 or 5.3 of the
Agreement. All capitalized terms used but not defined in this certificate shall
have the meanings set forth in the Agreement.
The undersigned hereby certify that:
1. The attached financial statements were prepared in
accordance with GAAP consistently applied and fairly present the financial
condition of SunSource Inc. and its Consolidated Subsidiaries as of the date
made and for the period covered.
2. As of the date of such financial statements, there exists
no violation of any provision of the Agreement and there has not been an Event
of Default or a Default, except as described in Item 3 below.
3. The following event or circumstance, is, or with the
passage of time or giving of notice will be, an Event of
Default:________________________________________
----------------------------------------------------------------------------
----------------------------------------------------------------------------.
4. The following actions are being taken with respect to the
matter(s) identified in Item 3 above:___________________________________________
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------.
5. Attached hereto as Schedule 1 are the calculations of the
covenants set forth in Paragraphs 5.12 through 5.14 and certain paragraphs in
Section Six of the Agreement.
IN WITNESS WHEREOF, the undersigned, being the chief financial
officer or controller of SunSource Inc., has executed and delivered this
certificate this ____ day of _______________, ____.
SUNSOURCE INC., for itself and on behalf
of the other Obligors
By:_____________________________________
Name:
Title:
SCHEDULE 1
I. CAPITALIZATION RATIO (Paragraph 5.12 of the Note Purchase Agreement)
A. Funded Debt
Indebtedness for borrowed money $__________
Indebtedness evidenced by notes, debentures $__________
or similar instruments
Capital Leases $__________
Guarantees of Indebtedness or Capital Leases $__________
Letters of Credit and letter of credit $__________
reimbursement obligations
(A) $__________
B. Net Worth
Total Assets $__________
Minus Total Liabilities $__________
(B) $__________
C. Total Capital
Funded Debt (Line A above) $__________
Outstanding principal amount of Junior $__________
Subordinated Debentures
Net Worth (Line B Above) $__________
(C) $__________
Capitalization Ratio (ratio of (A) to (C)): ________
Covenant:
(i) last day of each of the first two fiscal quarters of each
fiscal year: 62%
(ii) last day of each of the last two fiscal quarters of each
fiscal year: 60%
Compliance: ____YES ____NO
II. FIXED CHARGE COVERAGE RATIO (Paragraph 5.13 of the Note Purchase
Agreement)
A. Adjusted EBITDAR for the most recent Rolling
Period
1. EBITDA
a. Net Income
Gross revenue (excluding $__________
extraordinary gains and
losses)
minus all expenses and other proper $__________
charges (including taxes on
income)
$__________
b. Interest Expense (including all $__________
interest paid on the Junior
Subordinated Debentures
(whether paid in cash or in
kind))
c. All provisions for income taxes $__________
d. Depreciation and amortization $__________
expense
e. Extraordinary losses minus $__________
extraordinary gains
(A) $__________
2. Adjusted EBITDAR
a. EBITDA (Total (A) above) $__________
b. Rent expense $__________
c. minus Capital Expenditures $__________
(B) $__________
3. Fixed Charges
a. Interest Expense (including $__________
interest paid on the
Junior Subordinated
Debentures to the extent
paid in cash)
b. Rent expense $__________
c. Scheduled maturities paid on $__________
Funded Debt (excluding
the Loan)
d. Cash dividends paid by $__________
SunSource Inc.
(C) $__________
Fixed Charge Coverage Ratio (ratio of (B) to (C)): __________
Covenant: As of the last day of each fiscal quarter set forth
in the left hand column, for the Rolling Period ending on such
date, the ratio must not be less than the amount set forth in
the right hand column:
Period Minimum Ratio
------ -------------
Date of Agreement through 12/31/98 1.25
3/31/99 through 9/30/99 1.40
12/31/99 and the last day of each fiscal 1.50
quarter thereafter
Compliance: ____YES ____NO
III. LEVERAGE RATIO (Paragraph 5.14 of the Note Purchase Agreement)
A. Funded Debt (as calculated above) (A) $__________
B. EBITDA (as calculated above) (B) $__________
Leverage Ratio (ratio of (A) to (B)): __________
Covenant: ratio must not be greater than 3.25:1.
Compliance: ____YES ____NO
IV. INDEBTEDNESS (Paragraph 6.1 of the Note Purchase Agreement)
A. Trade Indebtedness (6.1(iv)) $__________
B. Indebtedness for purchase or lease of fixed
assets (6.1(v)) $__________
C. Additional principal amounts outstanding of domestic
non-Obligor, non-Guarantor Subsidiaries (6.1(ix)) $__________
D. Additional principal amounts outstanding of foreign
non-Obligor, non-Guarantor Subsidiaries (6.1(x)) $__________
E. Purchase money indebtedness (6.1(xi)) $__________
Compliance ____ YES ____ NO
V. GUARANTIES (Paragraph 6.2 of the Note Purchase Agreement)
A. Guaranties (6.2(i)) $__________
Compliance ____ YES ____ NO
VI. LOANS (Paragraph 6.3 of the Note Purchase Agreement)
A. Loans to domestic non-Obligor, non-Guarantor
Subsidiaries (6.3(ii)) $__________
B. Loans to foreign non-Obligor, non-Guarantor
Subsidiaries (6.3(iii)) $__________
Compliance ____ YES ____ NO
