GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of ___________, 1997, is executed
and delivered by SunSource Inc., a Delaware corporation (the "Guarantor"), for
the benefit of the Holders (as defined herein) from time to time of the
Preferred Securities (as defined herein) of SunSource Capital Trust, a Delaware
statutory business trust (the "Trust").
WHEREAS, pursuant to an Amended and Restated Declaration of Trust (the
"Declaration"), dated as of __________, 1997, among the Trustees of the Trust
named therein, SunSource Inc., as Sponsor, and the Holders from time to time of
undivided beneficial interests in the assets of the Trust, the Trust is issuing
as of the date hereof in accordance with the Conversion (as defined in the
Declaration) $____ aggregate liquidation amount of its 11.6% Trust Preferred
Securities (the "Preferred Securities") representing preferred undivided
beneficial interests in the assets of the Trust and having the terms set forth
in Exhibit B to the Declaration;
WHEREAS, the Preferred Securities will be issued by the Trust upon
deposit of the Guarantor's Debentures (as defined in the Declaration) with the
Trust as trust assets; and
WHEREAS, the Guarantor desires to irrevocably and unconditionally
agree, to the extent set forth herein, to pay to the Holders of the Preferred
Securities the Guarantee Payments (as defined herein) and to make certain other
payments on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the benefits to be received by the
Guarantor in the Conversion, the Guarantor executes and delivers this Guarantee
Agreement for the benefit of the Holders from time to time of the Preferred
Securities.
ARTICLE I
SECTION 1.01. As used in this Guarantee Agreement, the terms set forth
below shall, unless the context otherwise requires, have the following meanings.
Capitalized or otherwise defined terms used but not otherwise defined herein
shall have the meanings assigned to such terms in the Declaration as in effect
on the date hereof.
"Guarantee Payments" shall mean the following payments or
distributions, without duplication, with respect to the Preferred Securities, to
the extent not paid or made by the Trust: (i) any accrued and unpaid
Distributions and the redemption price, including all accrued and unpaid
Distributions to the date of redemption (the "Redemption Price"), with respect
to the Preferred Securities called for redemption by the Trust but if and only
to the extent that in each case the Guarantor has made a payment to the Property
Trustee or, if no Property Trustee is required pursuant to the Declaration, the
Trust, of interest or principal on the Debentures and (ii) upon a voluntary or
involuntary dissolution, winding-up or termination of the Trust (other than in
connection with the distribution of Preferred Securities to the holders of
Debentures as provided
in the Declaration or the redemption of all of the Preferred Securities upon the
maturity or redemption of the Debentures), the lesser of (a) the aggregate of
the stated liquidation amount of $25 (or, in the case of dissolution prior to
September 30, 2002, $25.25) per Preferred Security and Common Security plus all
accrued and unpaid Distributions thereon to the date of payment, to the extent
the Trust has funds available therefor, and (b) the amount of assets of the
Trust remaining available for distribution to Holders in liquidation of the
Trust (in either case, the "Liquidation Distribution").
"Holder" shall mean any holder, as registered on the books and records
of the Trust, of any Preferred Securities; provided, however, that in
determining whether the holders of the requisite percentage of Preferred
Securities have given any request, notice, consent or waiver hereunder, "Holder"
shall not include the Guarantor or any entity directly or indirectly controlling
or controlled by or under direct or indirect common control with the Guarantor.
ARTICLE II
SECTION 2.01. The Guarantor irrevocably and unconditionally agrees to
pay in full to the Holders the Guarantee Payments (without duplication of
amounts theretofore paid by the Trust) regardless of any defense, right of
set-off or counterclaim which the Trust may have or assert. The Guarantor's
obligation to make a Guarantee Payment may be satisfied by direct payment of the
required amounts by the Guarantor to the Holders or by causing the Trust to pay
such amounts to the Holders.
SECTION 2.02. The Guarantor hereby waives notice of acceptance of this
Guarantee Agreement and of any liability to which it applies or may apply,
presentment, demand for payment, any right to require a proceeding first against
the Trust or any other Person before proceeding against the Guarantor, protest,
notice of nonpayment, notice of dishonor, notice of redemption and all other
notices and demands.
SECTION 2.03. The obligations, covenants, agreements and duties of the
Guarantor under this Guarantee Agreement shall in no way be affected or impaired
by reason of the happening from time to time of any of the following:
(a) the release or waiver, by operation of law or otherwise,
of the performance or observance by the Trust of any express or implied
agreement, covenant, term or condition relating to the Preferred Securities to
be performed or observed by the Trust;
(b) the extension of time for the payment by the Trust of all
or any portion of the Distributions (other than an extension of time for payment
of Distributions that results from the extension of any interest payment period
on the Debentures), Redemption Price, Liquidation Distribution or any other sums
payable under the terms of the Preferred Securities or the extension of time for
the performance of any other obligation under, arising out of, or in connection
with, the Preferred Securities;
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(c) any failure, omission, delay or lack of diligence on the
part of the Holders to enforce, assert or exercise any right, privilege, power
or remedy conferred on the Holders pursuant to the terms of the Preferred
Securities, or any action on the part of the Trust granting indulgence or
extension of any kind;
(d) the voluntary or involuntary liquidation, dissolution,
sale of any collateral, receivership, insolvency, bankruptcy, assignment for the
benefit of creditors, reorganization, arrangement, composition or readjustment
of debt of, or other similar proceedings affecting, the Trust or any of the
assets of the Trust;
(e) any invalidity of, or defect or deficiency in, the
Preferred Securities;
(f) the settlement or compromise of any obligation guaranteed
hereby or hereby incurred; or
(g) any other circumstance whatsoever that might otherwise
constitute a legal or equitable discharge or defense of a guarantor, it being
the intent of this Section 2.03 that the obligations of the Guarantor hereunder
shall be absolute and unconditional under any and all circumstances. There shall
be no obligation of the Holders to give notice to, or obtain consent of, the
Guarantor with respect to the happening of any of the foregoing.
SECTION 2.04. The Guarantor expressly acknowledges that (i) this
Guarantee Agreement is subject to the provisions of the Trust Indenture Act that
are required to be part of this Guarantee Agreement and shall, to the extent
applicable, be governed by such provisions; (ii) this Guarantee Agreement will
be deposited with the Property Trustee to be held for the benefit of the Holders
of the Preferred Securities; (iii) the Property Trustee has the right to enforce
this Guarantee Agreement on behalf of the Holders of the Preferred Securities;
(iv) the Holders of Preferred Securities representing not less than a majority
in aggregate liquidation amount of the Preferred Securities have the right to
direct the time, method and place of conducting any proceeding for any remedy
available in respect of this Guarantee Agreement including the giving of
directions to the Property Trustee; and (v) any Holder of the Preferred
Securities may enforce this Guarantee Agreement, institute a legal proceeding
directly against the Guarantor to enforce its rights under this Guarantee
Agreement, without first instituting a legal proceeding against the Trust or any
other person or entity; provided, that any Holder may institute direct action
without prior request to the Property Trustee to enforce the Sponsor's payment
obligations on the Debentures.
SECTION 2.05. This Guarantee Agreement creates a guarantee of payment
and not merely of collection. This Guarantee Agreement will not be discharged
except by payment of the Guarantee Payments in full (without duplication of
amounts theretofore paid by the Trust).
SECTION 2.06. The Guarantor shall be subrogated to all (if any) rights
of the Holders of Preferred Securities against the Trust in respect of any
amounts paid to the Holders by the Guarantor under this Guarantee Agreement;
provided, however, that the Guarantor shall not
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(except to the extent required by mandatory provisions of law) be entitled to
enforce or exercise any rights which it may acquire by way of subrogation or any
indemnity, reimbursement or other agreement, in all cases as a result of payment
under this Guarantee Agreement, if, at the time of any such payment, any amounts
are due and unpaid under this Guarantee Agreement. If any amount shall be paid
to the Guarantor in violation of the preceding sentence, the Guarantor agrees to
hold such amount in trust for the Holders and to pay over such amount to the
Holders.
SECTION 2.07. The Guarantor acknowledges that its obligations hereunder
are independent of the obligations of the Trust with respect to the Preferred
Securities and that the Guarantor shall be liable as principal and as debtor
hereunder to make Guarantee Payments pursuant to the terms of this Guarantee
Agreement notwithstanding the occurrence of any event referred to in subsections
(a) through (g), inclusive, of Section 2.03 hereof.
ARTICLE III
SECTION 3.01. So long as any Preferred Securities remain outstanding,
the Guarantor will not declare or pay any dividend on, or redeem, purchase,
acquire or make a distribution or liquidation payment with respect to, any of
its common stock or preferred stock, or make any guarantee payment with respect
thereto, if at such time (i) the Guarantor shall be in default with respect to
its Guarantee Payments or other payment obligations hereunder, (ii) there shall
have occurred any Event of Default under the Indenture or (iii) the Guarantor
shall have given notice of its selection of an Extension Period (as defined in
the Indenture) and such period, or any extension thereof, is continuing. In
addition, so long as any Preferred Securities remain outstanding, the Guarantor
(i) will remain the sole direct or indirect owner of all of the outstanding
Common Securities and shall not cause or permit the Common Securities to be
transferred except to the extent such transfer is permitted under Section 8.1(c)
of the Declaration, provided that any permitted successor of the Guarantor under
the Indenture may succeed to the Guarantor's ownership of the Common Securities;
and (ii) will use its reasonable efforts to cause the Trust to continue to be
treated as a grantor trust for United States federal income tax purposes except
in connection with a distribution of Debentures as provided in the Declaration.
SECTION 3.02. This Guarantee Agreement will constitute an unsecured
obligation of the Guarantor and will rank (i) subordinate and junior in right of
payment to all other liabilities of the Guarantor, including the Debentures,
except those made pari passu or subordinate by their terms, and (ii) senior to
all capital stock now or hereafter issued by the Guarantor and to any guarantee
now or hereafter entered into by the Guarantor in respect of any of its capital
stock.
ARTICLE IV
SECTION 4.01. This Guarantee Agreement shall terminate and be of no
further force
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and effect upon full payment of the Redemption Price of all Preferred
Securities, upon the distribution of Debentures to Holders of Preferred
Securities in exchange for all of the Preferred Securities or upon full payment
of the amounts payable in accordance with the Declaration upon liquidation of
the Trust. Notwithstanding the foregoing, this Guarantee Agreement will continue
to be effective or will be reinstated, as the case may be, if at any time any
Holder must restore payment of any sums paid with respect to Preferred
Securities or this Guarantee Agreement.
ARTICLE V
SECTION 5.01. All guarantees and agreements contained in this Guarantee
Agreement shall bind the successors, assigns, receivers, trustees and
representatives of the Guarantor and shall inure to the benefit of the Holders
of the Preferred Securities then outstanding. Except in connection with a
consolidation, merger or sale involving the Guarantor that is permitted under
Article Ten of the Indenture, the Guarantor shall not assign its obligations
hereunder.
SECTION 5.02. Except with respect to any changes which do not
materially adversely affect the material rights of Holders (in which case no
consent of Holders will be required), this Guarantee Agreement may only be
amended with the prior approval of the Holders of not less than 66-2/3% in
liquidation amount of all the outstanding Preferred Securities. The provisions
of Section 11.2 of the Declaration concerning meetings of Holders shall apply to
the giving of such approval.
SECTION 5.03. Any notice, request or other communication required or
permitted to be given hereunder shall be in writing, duly signed by the party
giving such notice, and delivered, telecopied or mailed by first class mail as
follows:
(a) if given to the Guarantor, to the address set forth below
or such other address as the Guarantor may give notice of to the Holders of the
Preferred Securities:
SunSource Inc.
2600 One Logan Square
Philadelphia, PA 19103
Facsimile No.: (215) 665-3662
Attention: Joseph M. Corvino
(b) if given to the Trust, in care of the Regular Trustees
(with copy to the Property Trustee), at the Trust's (and the Property Trustee's)
address set forth below or such other address as the Regular Trustees on behalf
of the Trust (or the Property Trustee) may give notice to the Holders of the
Preferred Securities:
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SunSource Capital Trust
501 Silverside Road
Suite 17
Wilmington, DE 19809
Facsimile No.: (302) 792-0777
Attention: Joseph M. Corvino
with copy to:
The Bank of New York
101 Barclay Street
Floor 21 West
New York, New York 10286
Facsimile No.: 212-815-5915
Attention: Corporate Trust Administration
(c) if given to any Holder of Preferred Securities, at the
address set forth on the books and records of the Trust.
All notices hereunder shall be deemed to have been given when received
in person, telecopied with receipt confirmed, or mailed by first class mail,
postage prepaid except that if a notice or other document is refused delivery or
cannot be delivered because of a changed address of which no notice was given,
such notice or other document shall be deemed to have been delivered on the date
of such refusal or inability to deliver.
SECTION 5.04. The masculine, feminine and neuter genders used herein
shall include the masculine, feminine and neuter genders.
SECTION 5.05. This Guarantee Agreement is solely for the benefit of the
Holders and is not separately transferable from the Preferred Securities.
SECTION 5.06. THIS GUARANTEE AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
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THIS GUARANTEE AGREEMENT is executed as of the day and year first above
written.
SUNSOURCE INC.
By: ___________________________
Name:
Title:
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