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1 Michael F. Bailey (#004528) Joel W. Nonakin (#011939) 2 Chad S. Campbell (#012080) BROWN & BAIN, P.A. 3 2901 North Central Avenue Post Ofce Box 400 4 Phoenix, Arizona 85001-0400 5 (602) 351-8000 Of Counsel 6 Laurence R. Hefter 7 Christopher P. Isaac FINNEGAN, HENDERSON, FARABOW, GARRETT & DUNNER, 8 1300 1 Street, N.W. 9 Washington, D.C. 20005-3315 (202) 408-4000 Phone 10 (202) 408-4400 Fax 11 Attorneys for Plaintiff 12 13 14 15 16 17 18 Robert E. and Yvonne Almblad, husband and wife; 19 and Laser Key II LP, an Illinois limited partnership, 20 21 22 23 24 25 David M. Richards declares: 1. I Defendant. Plaintiff,

FiL.ED L O D G E D RE'CEIVED C O P Y

8 25 2000
DISTRICTOFARIZONA B C 3 I t i o u 1 " e Y
CLERK U L O TI I I CT COURT

UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Axxess Technologies, Inc., a Delaware corporation, No. CIV-99-2251-PHX-RCB DECLARATION OF DAVID M. RICHARDS IN OPPOSITION TO DEFENDANTS' MOTION FOR LEAVE TO FILE COUNTERCLAIM

V.

am Vice President, Sales and Service, of Axxess Technologies, Inc., which is the

plaintiff in this action. I make this declaration in opposition to defendants' motion for leave to le counterclaim. I have personal knowledge of the matters stated in this declaration and would

26 be competent to testify to them at trial, i f called upon to do so.

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D e f e n d a n t Robert E. Ahablad was co-founder of a predecessor company of

2 Axxess, In 1990 he sold his interest in that predecessor. Since then, Mr. Altnblad repeatedly has 3 proposed business ideas and ventures to be funded by Axxess. On two occasions, Mr. Ahnblad 4 o r companies controlled by him have sued or threatened to sue Axxess Technologies seeking to 5 b e paid monies in connection with his version of sucharrangements. Among the agreements 6 resolving those matters are an "Addendum to Settlement and Compromise Agreement" dated 7 M a r c h 19, 1994 and a "Settlement and License Agreement" executed in October and November 8 1 9 9 7 . Excerpts from a paragraph of the 1994 addendum titled "21. Right of First Refusal.", 9 together with an excerpt of the 1997 agreement titled "Article 13Extension of Rights of First 10 Refusal and Non-Compete Provisions" are located under Tab A of the materials attached to this 11 declaration. 12 3 . O n October 28, 1999, Axxess and a publicly traded, NYSE-listed company,

13 SunSource, Inc., announced a denitive merger agreement between them. A copy of the press 14 release disclosing that transaction is located under Tab B of these materials. Alter that 15 announcement, Mr. Almblad sent me a video tape about a new key identication and cutting 16 machine. He described the new system to me as operator-assisted (as opposed to the fully 17 automated robot version we earlier had market-tested), but he said the new version was 18 substantially cheaper than the earlier one. Located under Tab C of these materials is an e-mail 19 received from Mr. Almblad on November 27, 1999 in which he proposed that Axxess should buy 20 r ights to the new machine. Located under Tab D of these materials is a copy of a letter dated 21 December 1, 1999 from Mr. Almblad to the chairman of SunSource. Located under Tab E of 22 these materials is an e-mail message I received from Mr. Almblad on December 8, 1999, 23 4 . i n response to Mr. Almblad's November 27, 1999 e-mail advising me that he

24 planned to send a video tape regarding the new key identication and cutting machine to "just 25 a bout everybody of any importance to the industry" on Monday, December 6, Axxess reminded 26 M r . Ahnblad of our belief that Axxess had paid him for a right of rst refusal and negotiation

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1 w i t h respect to such new products. We requested that he honor his agreement to negotiate with 2 Axxess and to refrain from attempting to market or license the technology elsewhere until he had 3 complied with his agreement. 4 5 . L o c a t e d under Tab F of these materials is a copy of a letter dated January 11,

5 2 0 0 0 from Mr. Almblad's attorney to Axxess' attorney, together with a copy of our response. 6 6 . 1 understand that in connection with our rst refusal rights, Mr. Almblad has the

7 r i g h t to propose condentiality terms satisfactory to him in connection with the required 8 disclosure of his technology. (See Tab A,1121(c)) Instead of proposing condentiality terms 9 immediately after the January 11, 2000 letter, Mr. Ahnblad and his attorneys made a series of 10 ot he r proposals. Located under Tab G of these materials is a copy of an e-mail I received from 11 h i m on January 16, 2000 asking for a written assurance by Axxess before proceeding further. 12 W e provided the requestedassurance, a copy of which also is located under Tab G. Located 13 unde r Tab H is a copy of a letter from Mr. Almblad dated January 24, 2000 proposing that 14 Axxess commit an advance to pay him his asking price as further proof of our "bona des" 15 be for e he made disclosure of the technology. Located under Tab 1 is a copy of a letter from Mr. 16 Almblad's attorney to Axxess' attorney stating that no further disclosures were required under 17 t h e rst refusal right. Located under Tab J is a copy of Axxess' response, exercising our sixty 1 . 19 7 . L o c a t e d under Tab K of these materials is a copy of a press release issued by 8 d 20 SunSource on February 10, 2000, announcing the status of the pending merger with Axxess, a 21 a m ong other things. I received a copy of the proposed counterclaim by e-mail from Mr. Alrnblad y e 22 t h e following Monday, February 14, 2000. A copy of Axxess' letter of February 18, 2000, sent x t 23 a f t e r the motion to add counterclaim was led and served is located under Tab L of these e 24 materials. n s 25 i 26 o n r i g h

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1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26

8. A c e Hardware is not a customer of Axxess, and to the best of my knowledge no one from Axxess has had any conversations with Ace Hardware within the past year about Laser Key, Mr. Almblad or any technology that either of them claims. Signed under penalty of perjury under the laws of the United States of America. Dated: February- l < 2000.

gv e
David M. Richards

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1 2 3 4 5 6 7 8 9 10 11 J2 13 14 15 16 17 18 19 20 21 22 23 24 25 26

Copy of the foregoing mailed February 25, 2000, to: Ray K. Harris FENNEMORE CRAIG 3003 North Central Avenue Suite 2600 Phoenix, Arizona 85012-2913 Michael R. McKenna, Esq. The Law Firm of Michael R. McKenna 500 West Madison Street, Suite 3800 Chicago, 11., 60661

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13 2

3/ 18/ 94

ADDENDUM TO SETTLEMENT AND COMPROMISE AGREEMENT Thi s Adde nde m L e a n a dde ndum t o a S e t t l e m e n t a n d Compr omi ne Agr e e m e nt ( h e r e i n r e f e r r e d t ae " A g r e e m e n t " ) b e t w e e n a n d a m ong Ax x e s s , 3 4 7 , Y v o n n e , a n d R o b e r t . o The P a r t i e s . A x x e e s E n t r y T e c h n o l o g i e s a C a l i f o r n i a C o r p o r a t i o n , f o r m e r l y Ax x a s s E n t r y T e c h n o l o g i e s , I n c . a n A r i z o n a c o r p o r a t i o n , i s h e r e i n r e f e r r e d t o a s " Ax x e c a " . 3 4 7 Company, a n A r i z o n a c o r p o r a t i o n , i s h e r e i n r e f e r r e d t o a s " 3 4 7 " . Y v o n n e Al m bl e d i s he r e i n r e f e r r e d t o a s " Y v onne " , a n d a s " Y A " . R o b e r t A l m l a d i s h e r e i n r e f e r r e d t o a s "Robe r t ", a nd a s For p u r p o s e s o f t h i n Agr e e m e nt t h e t e r m mAxxese P a r t i e s " s h a l l m e a n i n d i v i d u a l l y a nd c o l l e c t i v e l y : Ax x e s e , a n y o f Ac c e s s ' s s ha r e hol de r s , a n d a ny o t h e r a f l l a t e s o f A x e . For P ur pos e s ' o f t h i s Agr e e m e nt t h e t e r m " A l m b l a d P a r t i e s s h a l l m e a n I n d i V i d u a l l y a n d c o l l e c t i v e l y : R o b e r t , Y v o n n e , 3 4 7 , a n d a n y o t h e r a f l i a t e s o f R o b e r t i n c l u d i n g a ny company o r c o r p o r a t i o n ( i n c l u d i n g a n y f o r e i g n e n t i t i e s s u c h a s j o i n t s t o c k c om pa ni e s w hi c h a r e s i m i l a r t o a c o r p o r a t i o n ) w h i c h a r e 29% o r m or e ow ne d o r c o n t r o l l e d b y Robe r t o r Yvonne ( e i t h e r s e p a r a t e l y o r c o l l e c t i v e l y ) . A n y g e n e r a l o r l i m i t e d p a r t n e r s h i p i n w hi c h Robe r t , Y v o n n e , o r a n y o f t h e A l m b i a d P a r t i e s i s a p a r t n e r s h a l l b e deemed t o a l s o b e one of t h e Al m hl a d P a r t i e s . " A l m b l a d P a r t y - s h a l l b e d e e m e d R e l a t i h n s h i pe t i e t w a gn A d d e n d u m " u u L j W i n m n a a t , A x x e s a , 3 4 7 , Y v o n n e , a n d R o b e r t e n t e r e d i n t o o t t he Agr e e m e nt o n u r c h 9 ,a 1 9 9 1 . A l l t h e t e r m s a n d c o n d i t i o n s s e t f o r t h i n t h e Agr eement Ma l s i n g r s h a l l r e m a i n i n f u l l f o r c e a n d e f f e c t a s o n t h e d a t e o f t h i s a dde ndum , e x c e p t t o t h e o f e x t e n t t h a t s u c h t e r m s a n d c o n d i t i o n s a r e m o d i e d b y o r i n c o n i c t w i t h t h e pr ov i s i ons A m a o f t h i sI Adde ndum , Ibn w h i l h c a s e t h i s Adde ndum s h a l l p r e v a i l . S u b j e c t t o t h e f o r e g o i n g , c d i s Adde ndum a n d t h e Agr e e m e nt s h a l l b e de e m e d o n e i n t h e same doc um e nt a n d a r e f e r e n c e th tP o n e a i l l b e de e mte d a r ie f e r e ne e t o t h e o t h e r u n l e s s t h e c o n t e x t c l e a r l y r e q u i r e s o w r c ot he r w i . e . . s s

20. W h e r e a s C l a u s e e . T h e f o l l o w i n g i s h e r e b y a dde d t o t h e pr e a m bl e c o n t a i n i n g t h e "w he r e a s " c l a u s e s a t t h e b e g i n n i n g o f t h e Agr e e m e nt .

21_h

c ons i de r a t i on o f t he f ol l ow i ng: T h WHEREAS, R o b e r t a n d Ax x e s s e n t e r e d i n t o a n o n - c o m p e t i t i o n a gr e e m e nt i d a t e d S e pt e m be r 7 , 1 9 9 0 , a n d c u r r e n t l y d i s a g r e e a s t o t h e w he t he r o r w t s t h a t a gr e e m e nt c o n t i n e e d i n e f f e c t p a s t Ma r c h 9 , 1 9 9 1 . A g WHeREAS, t h e p a r t i e d i n t e n d b y t h i s Agr e e m e nt t o e l i m i n a t e , e f f e c t i v e r Ma r c h 9 , 1 9 9 1 a n y o f R o b e r t ' s o b l i g a t i o n s u n d e r t h e s a i d non- c om pe t i t i on e a gr e e m e nt d a t e d S e pt e m be r 7 , 1 9 9 0 . " e m oe EL_c_.qet R e f u s a l . f

n S e c t i o nt 7 o f t h e Agr e e m e nt ( " R i g h t o f F i r s t R e f u s a l - K e y - I D T e c h " ) i s h e r e b y de l e t e d. - w (a) l ea) E l g r _ t _ t s a _ t i r a t t . I n t h e ei tetz t t h a t R o b e r t de v e l ops s t e c hnol ogy L n a ny e l d r e l a t i n g t o k e y s - i nc l udi ng, w i t h o u t l i m i t a t i o n , t h e i r d e s i g n , am a n u f a c t u r e , u s e , d u p l i c a t i o n o r o t h e r w i s e , b e t w e e n Ma r c h 9 , 1 9 9 1 a n d S e pt e m be r 7 , 1 9 9 7 , ( h e r e i n r e f e r r e d t o a s t h e "Ne w Ke y T e c h n o l o g y " ) R o b e r t w i l l m p e r m i t A x x e c s t o m a k e a n o f f e r t o p u r c h a s e o r l i c e n s e t h e Ne w K e y Te c hnol ogy f r om e

1 1 0 6 - 2 0 1 0 1 6 : 0 0

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( i ) s t a r t o t t h e P r oc e s s . W i t h r e s p e c t t o a - , p o r t i o n o f t h e New e Tev hnol ogy , R o b e r t w i l l m a k e a o n e t i m e r e q u e e t f o r a n o f f e r f r o m Ax x e . s o r L o r e c t o l i c e n s i n g o r s e l l i n g t h e s a i d p o r t i o n o f t h e Ne w Ke y T e c h n o l o g y t o ar e, o t h e r p a r t i e s o t h e r t h a n Al m bl a d P a r t i e s . (ii) I r e , , y _ y g _ 6 A c i RObeCt w i n m a k e t h e a p p l i c a b l e p o r t i o n o f t h e ew K e y T e c h n o l o g y a v a i l a b l e t o o Axxess e u b e eh n o ol ohv . t e r m s o f S e c t i o n 2 1 ( c ) h e r e i n . R o b e r t r e s e r v e s t h e t e s L l a s e j ct t rU g h t , p a t h i s e lne c t i o n , t o d e l a y m a k i ng t h e r e q u e s t f o r a n o f f e r , a n d w i t h h e l d i o i n f o r m a t i o n a b o u t t h e Ne w Ke y Te c hnol ogy , u n t i l p a t e n t a p p l i c a t i o n s o n t h e m a k i n a p p l i c a b l e Ne w Ke y T e c h n o l o g y h a v e be e n p r o p e r l y l e d . g e a c ( i i i ) N o t i c e b y R o b e r t t o_ Ax x e e e o f P e r c ha s e Te r m s . W i t h r e s p e c t t o a ny ph r t i o n o f t h e New Ke y T e c h n o l o g y s o o f f e r e d , t h e r e q u e e t f o r a n o f f e r s h a l l o s u be m a de i n t h e f o rc o f a n o n - b i n d i n g o u t l i n e o f h i s t h e n c u r r e n t o p i n i o n o f m what h i s n e e d s o r w a nt s a r e . I t s h a l l c o n t a i n s u c h d e t a i l a n d i n f o r m a t i o n a s h he m a y 2 l e c t qt o d i s c l o s e . O n c e t h a t r e q u e s t f o r a n o f f e r L e m a de t h e r e w i l l e r U be gin ag 3 0 daty p e r i o d ( t h e e , e ne i gl o dt i o p rioo on e o f f e r s t o pur c ha s e o r l i c e n s e t h e New Ke y Te c hnol ogy . N t t e t a t p s E i t h e r rp a i t yo may e'l e c t t o e x t e n d t h e N e g o t i a t i o n P e r i o d b y u p b e a n a d d i t i o n a l r P e d ) 60 d a y s .

a ny p o r t i o n o f t h e New K e y Te c hnol ogy f o r w hi c h R o b e r t makes a r e q u e s t f o r e o f , e r a s pr ov i de d a bov e , o n c e t h e N e g o t i a t i o n P e r i od i s n i s h e d , R o b e r t w i l l l f have gt h e r i g h t , s u b j e c t t o S e c t i o n 2 1 ( b ) b e l o w t o g a l l , t r a n s f e r a n d l i c e n s e 1 t h a t p o r t i o n o f t h e New Ke y Te c hnol ogy i n a s many w a y s ( i n c l u d i n g l i c e n s e s t w i t h d i f f e r e n t g e o g r a p h i c l i m i t s o r e l d o f u s e L i m i t s ) a n d a s many t i m e s a s e he c h o o s e s w i t h o u t t h e s a i d p o r t i o n o f t h e New Ke y T e c h n o l o g y a g a i n be i ng L : e s ubj L c t t o t h i s S e c t i on 2 1 ( a ) . e _ (a )r s t e m b e r 7 1 9 9 7 . R o b e r t ' s o b l i g a t i o n s u n d e r t h i s S e c t i o n 2 1 ( a ) v s h a l l t e r m i n a t e o n S e pt e m be r 7 , 1 9 9 7 . e t i c ( b) R i g e tr o f F i r s h t e o i I t (e ) l 1s 1 g L _ I t . . t t c h o z L _ I t t _ f _ L i f e O f e I g : . I f R o b e r t r e c e i v e s a b o n s d e o f f e r a 1 l4 fr om a t h i r d p a r t y t o p u r c h a s e t h e New Ke y Te c hnol ogy , o r a n y p a r t t h e r e o f , e RA b e r t . e h a l l n o t i f y Ax x e s s o f t h e s a i d b o n a t i d e o f f e r . S i m u l t a n e o u s l y , o t 2 e . r rt Robe t s h a l l f a x w r i t t e n n o t i c e t o C a h i l l , S u t t o n 4 Thomas P . L . C . ( h e r e i n r h f e r r e d t o a s " C S T " ) , i n t e l l e c t u a l p r o p e r t y c o u n s e l f o r Ax x e s s , s e t t i n g f o r t h e e t h e nna m e , a d d r e s s , a n d phone num be r o f t h e t h i r d p a r t y , a n d p r o v i d i n g a E wd i o t e n d e s c r i p t i o n o r c o p y o f t h e ter m!, o f t h a t o f f e r . C S T s h a l l n o t r t f d t sh le s e t o 'a ny one , i n c l u d i n g Ac c e s s , t h e i d e n t i t y o f t h e p a r t y s u b m i t t i n g t h e i c o a a f f 'e ro t o R o b e r t , b u t s h a l l h a v e t h e r i g h t t o c o n t a c t t h a t p a r t y a n d t o e ot he r w i s e i nde pe nde nt l y i n v e s t i g a t e t h e v a l i d i t y a nd t e r m s o f t h e o f f e r . d . AJocess s h a l l h a v e 6 0 d a y s a f t e r r e c e i v i n g t h e n o t i c a t i o n f r o m R o b e r t i n W w hi c h t o m a t c h ( i n e v e r y r e s p e c t ) t h e o f f e r made b y t h e t h i r d p a r t y a nd Robe r t i s h a l l b e r e q u i r e d t o a c c e p t s u c h o f f e r . I f Ax x e s s f a i l s t o m a t c h t h e t h i r d t p a r t y o f f e r w i t h i n t h e s i x t y d a y p e r i o d , A x x e e s ' s u p e r i o r r i g h t t o pur c ha s e h eai d t e c hnol ogy s ha l l e x pi r e . r ( Li ) R o b e r t ' s Fa i l ur e t o A c c e e t e Matchi ng_Eggi 2g. s. I f , u p o n t h e e x p i r a t i o n o f t h e s a i d 6 0 d a y o f f e r m a t c hi ng es pe rEodl de s c rd be dZ i ne S ee ti on v 1 ( b ) ( i ) a bov e , R o b e r t ha s f a i l e d t o a c c e pt the c t 2 th i e eti r i p o fef e rf o f f t h e e t h i r d p a r t y , , the n t h e s a i d r i g h t s o f exxess w i t h r e s pe c t t o t h a t o r por t i on o f f t h e o New r y T e c h n o l o g y i n q u e n c i o n , s h a l l . b e r e v i v e d a n d Robe r t Ke Bc e e E ) t Et c a . t - r - 2 Co 1 1 1 3 Lni t i a l - -

d u r i n g wu r i n g hh e N e i o t i a t co n P e r i o d n o o f f e r o r p r o p o s a l s m a de b y a n y p a r t y s h a l t b e D t g i bi ndi ng o n t h a t p a r t y unl e s s a nd u n t i l i t i s i nc or por a t e d i n t o a n a l be a de e g h e x e c ut e x a gr e ex e nt . e f a t t h e e n d ' o f t h e N e g o t i a t i o n P e r i ol l R o b e r t f a i l s t o d m I A e x e c ut e s u c h a gr e e m e nt , t h e n R o b e r t w i l l h a v e f u l l l e d a l l h i e o b l i g a t i o n s s s under t h i s S e c ti o n 1 2 ( a ) w i t h r e s pe c t t o t h e a p p l i c a b l e p o r t i o n o f t h e New Key w c hnol ogy ,i e v e n i f ln e g o t i a t i o n s v O l u n t a r i l y c o n t i n u e p a s t t h e e n d o f t h e Te l Ne got i a t i on P e r i od. b (e v ) B i

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' " 1 1 1 7 ..1 1 7 g 1 21- r 0 7 s h a l l b e r e q u i r e d t o p r e s e n t t h e o p p o r t u n i t y t o Ax x e s s t o m a t c h a n y s ubs e que nt 6 r s bona d e o f f e r t o pur c ha s e t h e a p p l i c a b l e p o r t i o n o f t h e Ne w Ke y T e c h n o l o gy th_gi_e__i_tc_l_!L_IaLLE_y_'Thirdart*. F o r pur pos e s o f S e c t i o n z 2 1 ( b ) ( 1 ) a n d . 7 , 21(b)(i i ) t h e . r s e a lm n o t i n c l u d e a s s i gne e s o r s u b s i d i a r i e s o f t h e p e r s o n o r e n t i t y . t hr l 7 u g - " t h i r d ( " r - q pi v )a A s u lt a t i s ! c _ n t A g i F i d e o f f r , F o r pur pos e s o f S e c t i o n s 2 1 ( b ) ( i ) a n d r 2 1 ( b ) ( i i ) t h e t e r m "bons d e o f f e r " s h a l l b e d e n e d a s o n i n w hi c h t h e y * pe r s on o r e n t i t y Ma k i ng u p t h e o f f e r ha s t h e n a n c i a l a b i l i t y t o c e r n ' o u t Z 3 T 9 h ts e t e r m s a f t h e o f f e r . h o l l m e K I Re be r t ' s obl i ga t i ons unde r t h i s S e c t i on 2 1 ( b) a n s h a l l t e r m i n a t e o n S e pt e m be r 7 , 1 9 9 7 . N L a I T ( c ) c s a s t i l e ni t l e = e , . N o t w i t h s t a n d i n g a n y t h i n g t o t h e c o n t r a r y R o b e r t s h a l l ha v e t h e a E . ftssseestssket-ed r i g h t t o c o n d i t i o n t h e d i s c l o s u r e o f a n y o f t h e New K e y Te c hnol ogy on n g L I t h e s i g l i n g o f c o n d e n t i a l i t y a gr e e m e nt s t h a t h e deems, 4. . 4-4-i -o-uar r e-r -tr l et-ed. n e S d.i.seesetekees, a c e e p t a b l e t o hi m . c p r s P R I n a n y e v e n t , a n y i n f o r m a t i o n a b o u t t he : Ne w Ke y Te c hnol ogy s h a l l b e de e m e d t o be n Al m bl a doC o n d e n t i a l I n f o r m a t i o n . E o ( d) E s 2rk e . e t f S S e x pe ns e a a r i s i n g o u t o f A x x e s s ' s r i g h t a o r R o b e r t ' s o b l i g a t i o n s u n d e r t h i s S e c t i o n e . 2 1 , L t e Ru d ie ,g , b y wa y o f example a nd n o t ' g _ i n c ln, g n e Ne got i a t i on P e r i od r e f e r r e d t o i n S e c t i on 2 1 ( a ) a bov e . t -y e lAi m x t a x i o n , i i t l e g a l (e) 2 . s fe a n se e rt sa n y o r s a l l o f h i s r i g h t t i t l e o r i n t e r e s t i n t h e Ne w Ke y T e c h n o l o g y t o a n y e - t4 r f i1t 1 r A m n r - os h e1 _hl y cb l a du P a r r y , p r o v ed e d d t i how e v e r s uc h t r a n s f e r m us t b e c o n d i t i o n e d o n s uc h a h d s A l ua i g - Al m bl al d P a r t y r a c c e p t i n g tn e same o b l i g a t i o n s o n i t s e l f a s S e c t i o n s 2 1 ( a ) , 2 1 ( b ) , 1 n d h t - 2l 1 ( f ) a nd 2 2 i m p o s e o neR o b e r t . I n t h e e v e n t o f s uc h a t r a n s f e r t h e s a i d Al m bl a d m Pp r t y s h a l l h a v e t h e same r i g h t s u n d e r t h i s Agr e e m e nt a s t h i s Agr e e m e nt c o n f e r s o n a - R o b e r t , i n c l u d i n g b y w a y o f e x a m pl e a n d n o t L i m i t a t i o n , ( i ) t h e s a m e r i g h t s unde r g a _e c _ - Sy t tai o n 2 5 , ( L i ) t h e s a m e r i g h t s u n d e r t h i s S e c t i o n 2 1 ( e ) , a n d ( S A L ) t h e same r i g h t s t u _ a v1 i t s c o n d e n t i a l o r p r o p r i e t a r y i n f o r m a t i o n t r e a t e d a s Al m bl a d C o n d e n t i a l o h4 e t I A d _ t t i on. . nf or m a w u t i s q o ( g) , T r a n s f e r s t o O t h e r P a r t i e s . s u b j e c t o n l y t o S e c t i o n s 2 1 ( a ) , 2 1 ( b ) a n d 2 2 f t hR r e i n , h h i s Agr e e m e nt s h a l l n o t r e s t r i c t R o b e r t f r om s e l l i n g , l i c e n s i n g , o r e t t ri a n s f e rrr i n g a n y o r a i l t h e New Ke y Te c hnol ogy t o a ny p a r t y h e c hoos e s p r o v i d e d t h a t
o d s uc h p a r s y a g r e e t h a t u n t i l S e pt e m be r 7 , 1 9 9 7 i t s h a l l b e s u b j e c t t o t h e same t b r e s t r i c t i o n s o f S e c t i o n 2 2 t h a t Robe r t i s boe nd by . o e f r 2n-12_11i 2MMELCI CE_Ar i d Ae s i ggE l l . T h e s e c ond s e n t e n c e o f S e c t i o n 1 3 R Secl i o t b e g i n n i n g w i t h " N o a s s i gnm e nt s h a l l b e m a d e . . . * a n d e n d i n g w i t h " . . . w r i t t e n n o t i c e b e t he r e of t o Ax x e s s . " i s he r e by de l e t e d. s r t h ' C o m p e t e . E x c e p t a s p r o v i d e d be l ow , u n t i l S e pt e m be r 7 , 1 9 9 7 , R o b e r t s h a l l n o t s 22. N o n a l illc e n s e o r t r a n s f e r a n y U n i t e d s t a t e s o r C a n a d i a n r i g h t s i n a n y k e y r e l a t e d t ele h n o l o g y i n v e n t e d o r de v e l ope d b y hi m t o a n y o f t h e S p e c i e d A x x e s s Com pe t i t or s . c g h For p u r p o s e s t h i s Agr e e m e nt , t h e * S p e c i e d A x x e s s C o m p e t i t o r s " s h a l l m e a n t h e a a f oll l o w i n g 7 e n t i t i e s a n d a n y S u b s i d i a r y t h a t i s 30% o r m or e ow ne d b y a n y o f t h e f ov l o w i n g e n t i t t e e t fl e 1. A m e r i c a n c ons um e r P r oduc t s e 2. M r . S t e v e n C o l e t e 3. e u r t i o I n d u s t r i e s h s 4. X L C O e a S. S i l c a u n 6. S t a r n 7. J e t d r 6. N o e l C r o u p e 9. C l a o s e n Br onz e L i m i t e d s t r 3

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ARTICLE 13 - EXTENSION OF RIGHTS OF FIRST REFUSAL AND NON-COMPETE PROVISIONS 13,1 Robert Almblad grants to Axxess a three (3) year extension on the Rights of First Refusal and a six (6) year extension on the Non-Compete provisions set forth in paragraphs 21 and 22, respectively, of the March 18, 1994 Addendum, attachedheretoas Exhibit 5. Whereas Robert Almblad's obligations under paragraphs 21 and 22 recently expired on September 7, 1997,these obligations and rights set forth in paragraphs 21 and 22 of the March 18, 1994 Addendum are hereby re-instated and binding upon the Parties for an additional three year term for paragraph21 and an additional six year term for paragraph 22, As such, the Rights of First Refusal and Non-Compete provisions of paragraphs 21 and 22, respectively, of the March 18, 1994 Addendum will extend to September 7, 2000 andSeptember 7, 2003, respectively. This reinstatement shall take effect retroactively as if the provisions of the March 18, 1994 Addendum never expired and apply without interruption from the execution of the March 18, 1994 Addendum through September 7, 2000 for paragraph21 and September 7, 2003 for paragraph 22. Robert Almblad represents and warrants that he has not taken and will not take any action inconsistent with the retroactive application of this extension such that the Rights of First Refusal and Non-Compete provisions apply without interruption from the March 18, 1994 Addendum through September 7, 2000 andSeptember 7, 2003, respectively. 13.2 Paragraph 21 of the March 18, 1994 Addendum is hereby modied to recite that, in lieu of sending notice to Cahill, Sutton, & Thomas, PLC., the required notice must be sent to Judy Weiss at Brown & Bain, 2901 North Central Avenue, P.O. Box 400, Phoenix, Arizona 85001-0400. Paragraph 22 of the March 18, 1994 Addendum is hereby modied to include - 19 -

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Hillman Fastener as a "SpeciedAxxess Competitor" in place of Curtis Industries. Paragraph 22 of the March 18, 1994 Addendum is further modied to include the successors in interest of the SpeciedAxxess Competitors, including the successors in interest of American Consumer Products, Mr. Steven Cole, Curtis Industries (Hillman Fastener), ILCO, Silca, Star, Noel Group, andClassenBronze Limited, in the event of a sale or transfer of the business of these identied competitors. 133 La s e r Key hereby represents and warrants that it will abide by the terms of the Rights of First Refusal and Non-Compete provisions set forth in paragraphs 21 and 22, respectively, of the March 18, 1994 Addendum through September 7, 2000 and September 7, 2003, respectively. By its execution of this Agreement, Laser Key agrees to be bound by paragraph21 of the March 18, 1994 Addendum through September 7, 2000 and paragraph 22 of the March 18, 1994 Addendum through September 7, 2003, as if it were an original signatory to that Addendum. The provisions of paragraphs 21 and 22 of the March 18, 1994 Addendum are applicable to Laser Key with respect to any and all technology developed by its owners, ofcers, directors,employees, independent contractors, and any other person/entity that develops technology in which Laser Key has rights. Laser Key represents and warrants that it has taken no action before execution of this Agreement that would be inconsistent with a retroactive application of paragraphs 21 and 22 of the March 18, 1994 Addendum as if it applied to Laser Key since March 18, 1994. 13.4 I n all respects other than those set forth in this Article 13, Paragraphs 21 and 22 of the March 18, 1994 Addendum remain unchanged and in full effect.

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11-06-2010 1 5 : 0 2 Yahoo Sun Source to Acquire Mims Opportunities for The Hillman Group

PAGE13 http;//biz,yahoo.comipmews/991025/pa_5unscur 1.html

Home P - Yahoo! - Help 5 NEWSWIRE 1 1 1 Meet your mate. Click Here. 0 [ Business I US Market1By Industry I rIPO A P I 132 International I PRNews I BizWire I CCN 3 0 Thursday October 28, 9;46 am EasternTime 1 . 5/16 -1/8 R Company Press Release . ;:clia0ainva e SOURCE: SunSource Inc. F l a I SunSource to Acquire Axxess Technologies, t Inc.; Strategic Acquisition Will Broaden Opportunities for The N e d Hillman Group A : PHILADELPHIA, Oct, 28 /PRNewswirei SunSource Inc. (NYSE: SDP - news, HIRER - news) today N a announced it had entered into a denitive merger agreement to acquire Axxess Technologies, Inc. of n C Tempe, Arizona. t Etransaction is being structured as a purchase of 100% of the stock of the privately-held company and i The
E MLR . r d r AT I l di a

repayment of outstanding A.)ocess debt in exchange for $80 million in cash and at$45 million note of The Hillman Group, Inc., a subsidiary of SunSource, The transaction is expected to close in December, subject e to certain closing conditions, including regulatory approval and nancing.

Axxess is a manufacturer and marketer of key duplication and identication systems. These include the patented Axxess Precision Key Duplication System(TM), the Quick-Tag(TM) engraving vending systems for pet, luggage and identication tags and the Cole brand letters, numbers and signs (INS) program. Its current customers include mass market retailers such as Wal-Mart, Lowe's, and PETsMART which t well with StmSource's Hillman Group whose hardware, keys and LNS product lines sell principally into hardware stores in addition to other national retailers. Maurice P. Andrien, Jr., SunSource President and Chief Executive Ofcer, said that he currently expects A I O S will operate within The Hillman Group with Axxess' current CEO, Stephen Miller, along with XC S other key management, remaining in their current positions. "The combined companies' revenues currently are estimated to be about $240 million in 1999 which represents a compound annual growth rate of over 25% since 1994. Moreover, the two businesses are expected to complement each other in key duplication, identication systems, fasteners and related
hardware items," Andricn noted.

"This acquisition should be viewed as conrming SunSource's intention to build its core businesses to strengthen shareholder value while carefully monitoring our overall nancial leverage," Mr. Mdrien said.

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The CEO also noted that in conjunction with the Axxess transaction, SunSource expects to renance its existing senior credit facilities and currently has nancing arrangements aggregating $300 million from major nancial institutions to consummate these events. customer base," said Mr. Miller, CEO of Axxess W e Max W. Hillman, Chief Executive Ofcer of The Hillman Group, said that "Axxess is well known for its b innovative, consumer-oriented technologies which are patent-protected." e l While citing the expected substantial cost savings associated with the integration of the two companies, i Mr. Andrien noted he believes there will be minimal operating and personnel disruptions given both e companies' historical growth records. v e The Company also announced it will hold an investor conference call at 11:30 a.m. ET today to review its H third quarter results released yesterday and the intended acquisition of Axxess Technologies, Inc. described i herein. For those interested in participating in the call, please call the following teleconference number l approximately 5 minutes before the scheduled hour: 1-888-942-8395. When asked for a code word for the l conference call, please reply "SunSourcc". m SunSource Inc. is one of the nation's leading providers of value-added services and products to retail and a industrial markets in North America. Its Industrial Services businesses provide parts supply, engineering n and repair services throughout the U.S., Canada and Mexico, Its Hillman Group subsidiary is a leading w provider to hardware outlets of merchandising systems, in-store service work and small parts such as i fasteners, letters, signs and keys. Its Harding Glass subsidiary operates the largest chain of full service l glass shops in the U.S. l b This press release contains statements by the Company that involve risks and uncertainties and may e constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act n of 1995. Such statements reect management's current views and are based upon certain assumptions e relating to the success of the acquisition, cost reductions related to integration of the two companies, f strategic growth plans and overall economic conditions. Actual results could differ materially from those i currently anticipated as a result of a number of factors, including the risks and uncertainties discussed under the captions "Risk Factors" -- Risks Associated with Acquisitions set forth in Item 1 of the t Company's Annual Report on Form 10-K for the year ended December 31, 1998, as led with the f Securities and Exchange Commission. Given these uncertainties, current or prospective investors are r cautioned not to place undue reliance on any such forward-looking statements. Furthemiore, the Company o disclaims any obligation or intent to update any such forward-looking statement to reect future events or m developments. t h For more information on the Company, please visit vww.prnewswire.com/comp/115271.htm1. e s SOURCE: SunSource Inc. y n More Quotes and News: Sunsource Inc (NYSE:SDP - m 0 e Related News Categories: household/consumer r g i e s r e 2/21/004:07 PN

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(shoo - Su4ource to Acquire AxxessOpportunities for The Hillman Group h t t p ; / / b i z y s h o o . c o r t i p m e w s / 9 9 1 0 2 8 1 p s sunsour_ I ,html

Copyright 1994-1999 Yahoo! All RightsReserved. Copyright C 1999 PRNewswire. All rights reserved. Republication or redistribution of PRNewswirecontent is expressly prohibited without the prior written consent of PRNewswire. PRNewswire shall not be liable for any errors or delays in thecontent, or for anyactionstaken in reliance thereon, See I m p Questions _o Conw 2 = 2 r n t a r u l L e g a l t m l a t i c .

2/21/00 4:07 PM

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PAGE17 a002

-gx-y- ist

Laser Key 1840 Industrial Drive - Unit 110 Libertydlies Wines 80048 847-815-7786 FAX: 847-81e-058g

1December 1999

Mr. Maurice Andrieu Chairman and CEO SunSource, Inc. 011eLogan Sguare, Suite 3000 Philadelphia, PA 19103 (215) 282-1290 Dear Maurice, At a cost of aboutS6 million we have comeup with a revolutionary new way of cutting a key! It'snat'a vpnding machine and it's not just an improved way of cutting a key! Its a revolution! A revolution that will change the key cutting industry! If you have just 8 minutes, please look at the enclosed video and I am sure you will agree. The rst 1.5 minutes is a commercial advertisement for distributors like Wal-Mart, WEdgraenaand other chain stores. The last 6.5 minutes is an in-depth demonstration of the product. Naturally we are interested in selling or licensing our technologyand possibly this would ti into your plans? Please let me know. I hope thi s l i t t i r . 3 n d i f 1 6 u . i p n A g

ow

Kindest personal regards, ( 2 / 7 Robert E. Almblad / A 0 1

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Dave Richards
From: R o b e r t Almblad [almblad@yahoo.coml 'Sent: W e d n e s d a y , December 08, 1999 7:40 PM Dave" Richards Subject: L a s e r Key Co-operation 8 December 1999 Dear Dave, Just a quick note. I don't think there is anything I can say that will change the course of action that Axxess will take, so I shouldn't try to convince you otherwise. However, hope springs eternal, so I will just pass on a couple words. First, I have worked, at some risk to myself, to try to keep this technology out of your way until after your closing and would have been successful if I had gotten co-operation from Axxess. (I am referring to my attempt to sell key ID tech and get you on a separate non disclosure agreement) I knew that once I disclosed our machine to you and others, there would be lots of people around you that advise that not:isness is a good solution. Le. a law suit to force this "out of existence" or an engineering department that will ignore the technical issues and try to catch up. However, the "isness" of the situation is that we just repackaged our rst class, but very uneconomical, technology and are now trying to make the best of what we have. Axxess should acquire us, or our machine, before we gain any more momentum, Le, nancing, distribution agreements, and so on. Warburg can take less than they planned and make a deal with us. Sooner or later this will become clear to all parties. presently you have my co-operation and good intentions. But this co-operation can fade away because people like Chris Isaac get in v o l are people who make e living because of other people's v conict, and therefore have a vested interest in e d . people s e getting T h e ghting. I know I am preaching to the choir, but I just wanted to point this out, Well, that's my few words on the subject. Hope all is well & my best wishes, honestly. Kindest personal regards, Robert

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PAGE21

LAW OFFICES

FENNEMORECRAIG
A PROFESSIONAL CORPORATION

Ray K. Harris
Direct Phone! (6 0 2 ) 818441 4 Direct Fax: (802) 916-581 4 rharris(gfclow.com

OFFICES IN: PHOENIX, TUCSON 4 NOGALES 3003 NORTH CENTRAL AVENUE SUITE 2900 PH OENM, ARIzONA 65012-2913 PHONE! (602) 916-5000 FAX (602) 916-5999

January 11, 2000 VIA FACSIMILE Michael F. Bailey Brown B a i n 2901 North Central Avenue
P os t O fE Ce B ox 4 0 0

Phoenix, AZ 85001-0400 Re: Ax.-xess Technologies, Inc. v. Robert E. and Yvonne Almblad Dear Michael: As we discussed in our meeting of counsel, my client will preserve any electronic records (including e-mail and any drafts o f the disputed press release on word processing software) pending the resolution of the litigation. I n an effort to settle this matter my client is willing to make the new compact machines technology available to Axxess, subject to an acceptable condentiality agreement under paragraph 21(a) and (c) o f the Addendum to Settlement and Compromise Agreement dated March 18, 1994. You indicated that a condentiality agreement was previously utilized by the parties in May 1999 with regard to the vending machine technology. Please send me a copy o f the Condentiality Agreement so that we can conrm it is appropriate for the new technology as well. You indicated your client wants to see the compact machine, operate it to duplicate a range of keys and examine related drawings and specications. As I indicated, my client is willing to make the prototype available at my client's ofces in Illinois. In ght of the fact that no patent protection has been secured for proprietary aspects of the new technology, my client is reluctant to ship the technology. In addition, my client is engaged in related ongoing product development using the prototype. M y client cannot surrender possession of the prototype and your client cannot effectively evaluate the technology without access to the appropriate engineers in Illinois. You indicated that my client may have made a "request for an offer" and I understand you to have been referring to a letter dated October 27 to Mr. Dave Richards (copy enclosed). The contract refers specically to "a non-binding outline of his then current opinion of what his needs or wants are." T o avoid any confusion my client's needs or wants are. t o commence the negotiations period immediately; and to either arrive at acceptable terms with your client or make

P1aIREARRE/1026642.1./99030.080

1 1 - fynnemore cra a g 0 b E 0 1 0 Michael F. Bailey 1 6 January 11, 2000 : Page 2 0 5

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FENNEMORECRAIG

alternative arrangements to commercialize the new compact machine technology. M r . Almblad will sell exclusive rights for the new compact machine technology for North America fo r $25,000,000 plus a 5.25% royalty on sales,less returns. In addition to rights under any applicable patents (including any not yet led) pertaining to the new compact machine technology the license will include know-how and software related to this new technology and future technical improvements to this new technology made by our client in connection with rights retained.

Finally, you have asked for a moratorium on any further discussion of the technology with third parties. While we do not believe the contract obligations preclude discussion with (or even disclosure of the technology to) third parties, we are willing to voluntarily agree to a moratorium for purposes of settlement during the 30 day negotiation period. You have asked who my client has contacted with regard to the technology. You would, of course, obtain that information in litigation in any event, and we are willing to provide - it voluntarily to avoid incurring unnecessary attorneys fees for either party. With regard to attorneys fees, we note that the agreement provides "Axxess shall provide 2/3 o f Robert's legal fees and expenses arising out o f Axxess's rights or Robert's obligations under this Section 21 .." Addendum to Settlement and Compromise Agreement, paragraph 21(d). This provision further reinforces our view that it is in the interest of both parties to resolve this dispute amicably and avoid unnecessary attorneys fees. My client looks forward to the receipt of an offer from kocess during the next 30 days and reiterates his willingness to make the technology. available in Illinois during the 30 day negotiation period. Yours tmly,

RICH/mt cc: R o b e r t Almblad

PIE dILHARYJNA 026642. 1t99030.O 0 N" R

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B R OWN 8: B A IN , RA.
Attorneyt L a w

M ICHAEL F. BAIL5v
(602)361-8350 bailey(abrownbein.com

January 12, 2000 Axxess Technologies v. Almb ad and

Dear Ray: Thanks for your letter ofJanuary 11, 2000. Enclosed is a copy of a condentiality agreement that I believe was previously used by the parties. I have just recently received it, and have done only a cursory review. Please let me know i f you think this makes a good starting point for additional disclosures. As Mr. Almblad already is aware, Axxess has its own development efforts under way. After our meeting, we had some internal discussions about the need to insulate our own research from any disclosures that may be made by Mr. Almblad, while at the same time securing enough information to make an intelligent decision about his solicitation of an offer for the technology. We accept your proposal to test Mr. Almblad's new machine in Illinois. Our desire is to use the initial 30 days of the negotiation period to determine whether the new machine works well enough with a broad variety of key blanks and keys to make it immediately promising from a commercial standpoint. We would like to avoid, to the extent practical, receipt of information that Laser Key regards as proprietary until we have made that initial determination. I f the test goes well, we anticipate exercising the 60 day extension, at which time we can create a structure for disclosure that will protect everybody's development efforts i f no deal should be struck. We also appreciate your agreement to a moratorium on further discussions of the technology with third parties. Obviously, we do not agree with your description of what the contract permits in that regard, but a moratorium makes it unnecessary to press the Court for a resolution of that point. We also appreciate your willingness to provide voluntarily the information that otherwise would be provided in discovery about who already has been contacted with regard to the technology, including what was disclosed to them. We should make arrangements to do that soon. Finally, you should be aware that we do not agree that the "legal fees and expenses" agreement in "Section 21" applies to the parties' litigation expenses in the present circumstances. We do agree, however, that it is in the interest of both parties to resolve this dispute amicably and avoid unnecessary attorneys fees.
mmLINa ADDRESS
RO, B OX 0 0 P HOE NIX , A R IZON A OS 0 0 1 4 4 0 0 S T R U T ADORE RS 2901 N OR TH CE NTRAL AV E NUE P HOE NIX , A R IZON A 1 5 0 1 2 TIEOZ1 ni 1 9 0 0 0 FIR02) 3g1-95115 www,bravembalei.com

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TUCSON PAL O ALTO

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Ray K. Harris, Esq.

-2-

12, 2000

Unless you think we should follow some other procedure, Axxess representatives will contact Mr. Almblad directly to make arrangements to test the new machine in Illinois. Very truly yours,

Michael F. Bailey Ray K. Harris, Esq. Fennemore Craig 3003 N. Central Avenue Phoenix, AZ 85012-2913 MFB/if Enclosure

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Dave Richards
From: Robert AlmblaO [elmt)led(Myanoocon Sant: Sunday, January 15, 2000 I:43 PM
To: D a v e Richards; Dave " Richards

Cc: R a y Harris;Michaei R. Mo) nrm <e

FACSIMILE MESSAGE page o f

January 2000

Mr. Stephen W. Miller and Mr. Dave Richards Axxess Entry Technologies Inc, 9185 South Farmer Avenue Tempe, AZ 85284

Dear Stephen and Dave. I assume that A.,Netess has a genuine interest in purchasing our technology, or otherwise you would not want this 30 day period and possibly an additional 60 days to negotiate. If this is not the case, please let me know so that we can just let our lawyers talk with each other during this time. In the same spirit that I was informed by your lawyer that Axxess "has its own development efforts underway," I would like to inform kaess that in anticipation of this, several months ago I took the precautionary action of making a condential disclosure to a 3rd party to establish myself as the rst inventor. I am now in the process of delineating each new inventive aspect of this new compact key machine and once I have completed this process, I plan to le several patent machine. c a t i o n s a p p l i These applications will not claim priority to my earlier led patents or pending patent applications. After they issue, I believe Amass will have to 'obtain a new license from me. o t p r o t e c t As an expert and the main inventor in this eld, I am certain that Poocesj will not be able to t h e circumvent my yet to be led patents simply because I have taken care lo cover the entire p r a area. This i become clear when you read my patent applications, which will be led less will m than 1 year from now. r y e l e m The rst order of business is to create an acceptable condentiality agreement. This will e n t s take some effort on the part of our lawyers and I would like to get a conrmation that you intend to honor, in a timely fashion, the payment of 2/3rds of my legal eigpenses. This of O course would not include the handling of the press release TRO or othei inapplicable f expenses. However, before going any further, I would like to get this point conrmed. t h Regards, s i c o m p a c 01/17/2000 t

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Robert Almialad Copy: to Lawyers Harris, McKenna & Bailey

Do o u ahool? Talk to your friends online with YihRgl i,,LIeglEgi er,

o1/17/2000

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C A X X E S S

I E CtI NDLO G I E S

STEPHENW. MILLER Creirman of zh Board andC o EO

VIA F A CSIM Jetnuary 20, 2000 ILE Mr. Robert Almblad Laser Key II L.P. 1840 Industrial Drive, Unit 110 Libertyville, IL 60048 Dear Robert: In response to your facsimile message o f January 16, we are genuinely interested in going forward with a review of the technology you have described for us. We understand your lawyer has solicited an offer. Whether we can come to an agreement depends on our respective valuations of the technology and the price, vythien will be determined based upon review of the machine and related technical materials. It is my understanding that our attorneys sent a copy of our present condentiality agreement to Ray Harris last week. Yo u r letter seems to say that this agreement is no longer acceptable to you. In regards to reimbursement of legal fees under Section 21, please be assured that we will make required payments in a timely manner. We are not interested in using our 30 day review negotiating "the shape of the table," discussing the form o f the condentiality agreement or repeating assurances that we have already given. Paragraph 21(a)(ii) of our Agreement, as amended, requires you to make the applicable portion of the "New Key Technology" available to Axxess upon makine your renumix_m_siat. Although your attorney now has made a request for an offer, there has been no disclosure. I hope this letter clears up any confusion, and trust that it puts us on the right track to comply meaningfully with our agreements. We would appreciate hearing back from you or Mr. Harris as quickly as possible concerning the condentiality agreement, i n order to begin the review process contemplated by our agreement.

s . Stephen W. Miller . Chairman and C.E.O. cc: D a v e Richards 5 s Ray K. Harris Michael F. Bailey z Laurence R. Hefter e AXXESS IECHNOLOGiESp INC11 l F a x (6021 731-6974 11 (602) 731-6694 ' y S
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i t LAW FIRM OF

MICHAEL R. NIcKENNA
soo WEST mAnisON STREET - SUITE 3800 CHICACIO, ILLNOIS 60661 E (312) 321-0123 1VOICE) (312) 876-2020 mem M A I PATENT, TRADEMARK ANT) COPYRIORT LAW J a n u a r y L : BY FACSIMILE 602-351-8516 H Michael F. Bailey I Brown & Bain, P.A. P A P.O. Box 400 2901 North Central Avenue T E Phoenix, Arizona 85001-0400 N T Re: Axxess and Laser Key II, L.P. U A O Dear Mr. Bailey: L C In responding to Steven W. Miller's letter of January 20, 2000, Robert O Almblad wrote in his letter of January 24 that he had asked his lawyer to make M

3t, 2090

sure that he had honored Millers request for "appropriate disclosures," Mr. Miller's letter, which references paragraph21 (a)(ii) of the Agreement, states that there has been no disclosure. Mr . Miller should be advised that he is wrong. The applicable portion of the offered technology was disclosed to Axxess in a video tape sent to Axxess on November 26, 1999 and referred to in Mr. Almblad's letter of November 27 to Dave Richards of Axxess This new compact key making machine is what is being offered to Axxess. The video tape showed both the outside and inside of the machine and the operational technology was substantially from Laser Key's key vending machine which Axxess tested for four months in its facilities arid at commercialstores last summer. Obviously, further detail and renements will arise,as production

development continues. We do not envision that a rst refusal right is applicable to each minute improvement, but to the new key technology as a whole which is
described in the current request for an offer. The request is clearly conditioned on the new compact key making machine operating at least as well as a tested standard - Laser Key's key vending machine which was tested by Axxess. The request also entails that the new compact kcy making machine can be mass produced for a certain limited cost.

My understanding is we are awaiting acceptanceOra counteroffer from

Axxess including a nancial commitment that will reduce the risk of Axxess using the right of rst refusal to gain proprietary technical information which

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could easily be used to obstruct Laser Key's business, When such an agreement is executed, I will prepare a new condentiality agreement that takes into account both Axxessi current development activities for a competing compact key making machine and its nancial commitment to Laser Key's new technology. On the other hand, i l agreement that will be necessary will include, among other things, a third party . escrow deposit of each p a rts current developments, including documented nO s u c h histories, togberpreserved as self-authenticating evidence of inventorship and prior a e e m art, and e avoid the inevitable conict between the obligation of Axxess' to n t technical development team to create a competing compact key making machine i s and the obligation t maintain the integrity of Almblad's condential information,' f o r to h the designation by Axxess' of a distinct individual or limited group for c o m i n exclusively evaluating Almbladts additional disclosure. Th i s additional g , disclosure will be h voluntary on the part of my client, whom I have advised is not t obligated to make any additional disclosure under the terms ofthe right of rst refusal, e c o n d e n t i a l i t Very truly yours, y ,

Michael R. McKenna MR M/rzl cc: Laser Key Ray Harris

January 31, 2000

Michael R. McKenna

312 876 2020

-TOTAL P . 0 3 PAGE.03

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BROWN 8c BAIN, RA.

Attornays at Law

MiCHAEL F. BAILEY (802)381-8350

thaileyabrownbain_com

February 8, 2000 &l e ss V. ,Laser Kev

Dear Mr. McKenna: Thank you for your letter of January 31, 2000. We share Mr. Almblad's desire to-keep separate (1) whatever new technology he may have developed, and (2) the results of ongoing work by Axxess engineers. Until we know what Mr. Almblad's new technology is, however, Axxess is not prepared to make any kind of nancial commitment for a "pig in a poke," even on the assumptions you suggest. A n edited videotape of Mn Almblad talking about and performing a marketing demonstration of his prototype is not a reasonable disclosure of technology thit he apparently believes is worth $25 million and a 5.25% running royalty. We propose that an independent third party be commissioned, at the expense of Axxess and under an appropriate non-disclosure agreement, to examine and test the prototype at your client's ofce in Illinois, as offered in Mr. Harris' letter of January 11. We would expect to agree in advance on the form and substance of the information to be provided to Axxess and the tests to be performed by the consultant in connection with that review. Obviously, Axxess is interested in the number, range and accuracy of keys identied and cut, as well as long-term reliability, cost and manufacturability. AneSS also needs to understand clearly what aspects of the new system are "new technology" and what already is licensed to Axxess. Our impression is that your client's answers to that question have not been entirely consistent, and we are not interested in paying for the same technology twice. We appear to disagree about the level of disclosure that is required to trigger the initial thirty day review and negotiation period under Paragraph 21. Our disagreement need not preclude cooperation, so long as Mr. Almblad is willing to make (on what you perceive to be a voluntary basis), the disclosures that we believe are required under the agreement and to refrain from "shopping" elsewhere the technology that is subject to Paragraph 21, pending our right of rst negotiation (as offered in Mr. Harris' letter of January 11). I f we cannot cooperate informally to that extent, however, the alternative is judicial resolution of the level of cooperation that is required. The rst steps would be production of documents and a deposition of Mr. Almblad. I f c a n n o t cooperate about disclosures and review, please let me know some convenient dates in March for a deposition, and we will get our written discovery requests to you and Mr. Harris promptly. Although we do not believe the initial thirty day review period has even begun to run, we recognize that Mr. Harris' letter of January 11 was an attempt to trigger it, So there is no mistake about it, we hereby exercise our right to extend that period for an additional sixty days,
PHOENIX TocsoN PALE ALTO MAILING ADDRESS P.O. OOX 40S PHOENIX. ARIZONA 250Q104CLO..... STREET ACEIRESS 2901 NORTH CENTRAL vEN L IE

Tram 351,8GDO
p p m ) 3 51-5515 www13 rown be tn.p er

PHOENIX. ARIZoNA i0012

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Michael R. McKenna, Esq.

-2-

8, 2000

i f in fact the Court should conclude that a sufcient disclosure was made to start the clock ticking. Finally, Mr. Almblad agreed in Ray Harris' letter of January 11, 2000 to disclose the names of persons Mr. Almblad has contacted with regard to the technology. We have not yet received that information, and would appreciate it i f you would send it to my attention at your earliest convenience. Very truly yours,

Michael F. Bailey Michael R. McKenna, Esq. The Law Firm of Michael R. McKenna 500 West Madison Street, Suite 3800 Chicago, IL 60661 FACSIMILE and US MAIL MFB/if Copy to: Ray K. Harris, Esq. Fennemore Craig 3003 N. Central Avenue Phoenix, AZ 85012-2913 FACSIMILE and US MAIL

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SearchResults List

Sunsource to Form Partnership with Glencoe Capital

PHELADELPRIA, Feb. 10 /PRNewswire/ SunSource Inc. (NYSE: SDP, SDP.PR) (the ,"Company" or "SunSource") announced today that it hadsigned an agreement with a newly-formed partnership afliated with Glencoe Capital, L.L.C. ("Glencoe") of Chicago, a private equity. investment rm. The new partnership will be jointly owned by SunSourceand Glencoe. SunSource will contribute its expediter businesses comprising Kar Products, Inc. and A & H Bolt & Nut Company Limited (collectively, "Kar") and Glencoe will contribute cash equity to the new partnership, GC Sun Holdings, L.P. Maurice P. Andrien, Jr., SunSourcePresident and Chief Executive Ofcer, said that the Company will receive about $105 million in cashproceeds from the transaction and hold a 49% interest in the partnership. Afliates of Glencoe will hold a 51% controlling interest in and will managethe partnership. He noted that this transaction enhancesStmSource's ability to pursuestrategic initiatives centered around its corebusinesses. Andrien further said that the transaction provides SunSource with most of the capital to complete its acquisition of Axxess Technologies, Inc. ("Axxess"), a manufacturer and marketer of key duplication and identication systemslocated in Tempe, Arizona. Andrien said, "The Axxess acquisition announced in October 1999, will now bepurchased for $110 million in cashas a result of theCompany's improved nancial position." Both the Kar and . ?omen transactions are expected to close in February. Andrien further commented that the businessventure with . growth opportunity for the v i business while enabling SunSourceto enhance its G l e n c o e p r o gar d e s a investment in The Hillman Group, Inc., through its purchase of Axxess. The gar transaction with:Glencoe, along with the December 1999 debt renancing and recently announced plan to sell theCompany'sHarding Glass subsidiary, continues management'sfocus to streamline its operations." David S, Evans', President and Chief Executive Ofcer of Glencoe, said "Kar with its Canadian operation represents a powerful company with a strong, experienced management team that is capable of signiAcant growththrough acquisitions and internal growth initiatives." The Kar management team led by Robert M. Julian, President and CEO, will continue to manage the operations of the expediter businesses. gar had earnings before interest taxes, depreciation and amortization of almost $20 million in 1999, adjusted for nonrecurring items, on revenues of about $125 million. SunSource will account for its investment in thePartnership on a de-consolidated basis and expects to record a pre-tax gain on the gar transaction of about $55 million or $8.15 per commonshare. The transaction will also restoreStmSouroe's stockholders equity to a signicant positive position upon its consummation. The Company also announced it will hold an investor conference call at 2:00 p.m. EST on February 10, 2000, to review the Kar andAxxesstransactions. For those .../G o?templateqmStoryttsummarri

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interested in participating in the call, please call the following teleconference number approximately 5 minutes before thescheduledhour: 1-888-889-5011. When asked for acode word for the conference call, please reply "StmSource." SunSource Inc, is one of thenation's leading providers of value-added services and products to retail and industrial markets in North America. The Company's Industrial Servicesbusinesses provide parts supply, engineering and repair services throughout the U.S., Canada and Mwdeo. Its Kar Productssubsidiary offers distribution of maintenance and repair partsand personalized inventory management services. Its Hillman Group subsidiary is a leading provider to hardware outlets of merchandising systems, in-store service work and small partssuchasfasteners, letters, signs and keys. Glencoe Capital L,L.C. invests capital on behalf of private investors, pension funds and insurancecompanies. Glencoe is supported by its proprietary Executive Network which consists of over forty Fortune 1000 CEOs and CO0s, successful entrepreneurs and executives with highly specialized skills. The Executive Network is divided into six specialty groups,each led by a chairman with 25 plus years of businessleadership experience. Axxess Technologies, Inc. is a manufacturer and marketer of key duplication and identication systemslocated in Tempe, Arizona. These include the patented Axxess Precision Key Duplication System(TM), the Quick-Tag(TM) engraving vending syqempsfor pet luggage and identication tagsand the Cole(R) brand letters, numbersand signs (LNS) program. Its current customers includemassmarket retailers suchas Wal-Mart, Lowe's, and PETsMART. This press release containsstatements by the Company that involve risks and uncertainties and may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Such statements reect management'scurrent views and arebasedupon certain assumptions relating to the success of acquisitions, integration plans, strategic growth plans and overall economic conditions. Actual results could differ materially from those currently anticipated as a result of anumber of factors, including the risks and uncertaintiesdiscussed under the
captions "Risk Factors" -- Risks Associated with Acquisitions set forth in Item I of the Company's Annual Report on Form 1 0 as led with the Securities and ExchangeCommission. Given these uncertainties, current or prospective investors are cautioned not to place undue reliance on any such K f o r t statements. Furthermore, the Company disclaims any obligation or y e a r forward-lookingh e e n d e d intent to update any such forward-looking statement to reect future events or developments.e m b e r D e c 3 1 , -For more information on the Company, please visit their website at 1 9 9 8 , www.pmewswire.com/comp/115271.html. SOURCE SunSource Inc.

-0- 02/10/2000 /CONTACT: Joseph M. Corvino of SunSource, 215-282-1290/ /CompanyNews On-Call: http://www.pmewswire.com/comp/11527 . 1.html o r f a x , .../Go?template=qmStory&sununaryofkart_id-

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BROWN B A I N , PA.
Attprneys at Law

M H F. DAILEY IC AEL
(602)3514350 balley@brownbaintom

February 18, 2000 loiggiely,AkAri ladr i d L a e r K e yI

Dear Ray:

As I am sure you anticipated, we were not happy to receive your motion to amend in the above matter by adding a series of supposed $100,000,000 counterclaims against Axxess Technologies. Once again, Mr. Almblad's maneuver appears to have been a timed attempt (presumably based on the recent press release) to interfere with the closing of the pending acquisition of Axxess. The purpose of this letter is to resolve the dispute about the negotiation period regarding Mr. Almblad's "new technology." As we have assured Mr_ Almblad in the past, it was possible that he had some new technology that Axxess might have been interested in acquiring at a fair price. To be blunt, however, we have lost condence in Mr. Almblad's good faith and trustworthiness. Accordingly, Axxess has no further interest in negotiating with him for whatever technology he now claims to have Aness has repeatedly tried to evaluate his claims, including with an offer to employ an independent expert to protect the condentiality of the technology, but Mr. Almblad has thwarted every attempt. He would like Axxess to invest heavily and blindly in supposedly "revolutionary" technology. Axxess will not do that. Although we rmly believe that Mr. Almblad has never acted fairly with respect to his obligations, you, Mr. McKenna, Mr. Almblad and Laser Key may consider the negotiation period under the Settlement Agreement to have ended. On the merits of the proposed counterclaims, it is baseless for Laser Key to sue Axxess for accepting a "moratorium" that Laser Key proposed as an alternative to the judicial resolution of the parties' disagreements that Axxess originally sought. It is Laser Key that has delayed the negotiation process by refusing to proceed with a condentiality agreement, by failing to keep its agreement to disclose the system in Illinois and by stonewalling Axxess' repeated attempts to stop talking about "the shape of the table" and start talking about the technology. Moreover, the immediate termination of the negotiation period eliminates any possibility of redressable injury to Laser Key. Axxess does not waive its right of rst refusal or any other right under the Settlement Agreement, except the end of the negotiation period in light of Mr. Almblad's recent conduct. But Axxess is nished negotiating, or "getting ready to negotiate," or "xing to get ready to negotiate," or whatever it is that Mr. Almblad has been doing since he made his initial approach. So, Mr. Almblad and his company may do whatever it is they think is worth $100,000,000 to

PHOENIX

MAILING ADDRESS PO. BOX 400 .

STREET ADDRESS T ( 2001 NORTH CENTRAL AVENUE PHOENIX, ARIZONA 55012 w

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Ray K. Harris, Esq.

18, 2000

them that they say they might be prevented from doing because we disagree about their negotiating obligation. We expect the motion to add counterclaims to be dropped immediately. Please remember that there is still a preliminary injunction that restrains Mr. Almblad from the conduct described in that order. Additional attempts by Mr. Almblad to interfere with Axxess' transaction with SunSource, to assert more claims that Mr. Almblad must know are completely baseless or to divert money to himself from the proposed transaction will not be tolerated. Please let me know your client's intention with respect to the counterclaims, as we shall be approaching the court soon on that subject. Moreover, although the negotiating period is at an end (and Mr. Almblad and Laser Key are free to act accordingly), we believe this latest outrage is a material breach of their obligations. A little leverage may be a useful thing, but Mr. Almblad had better be sure he has an appropriate fulcrum before he attempts to interfere again with Axxess' business opportunities. Sincerely,

1 1 \

Michael F. Bailey Ray K. Harris, Esq. Fetuiemore Craig 3003 N. Central Avenue Phoenix, AZ 85012-2913 FACSrMILE and US MAIL

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1840 Industrial Drive U T * 110 Libenyville.1 1 1 0 280048 1111 84T-816-7785 r FAX1' 847-818-0589

Lagar Key

1 1 . 4 1 / 4 e S FACSIMME MESliXOE page o f I E S I Mr, Stephen W. Miller R ielotess Entry Technologies Inc. 9185 South Fanner Avenue Tempe, AZ 85284 Dear Stephen,

2 4 January 2000

Thank you for your letter of . 19 J a n u a r y I have askedmylawyer to make sure that we havehonored your requeet for" appropriate disclosures" 2 0 to 0 . andalso0 create a condentiality agreerpat that will make sure all our interests are protected. And, sinceyou referred to a specic provision inmycontract. I asked him to answer your interpretation by writing to your lawyer, who can in turn adviseyou on this. However, I am sure you understand that the condentiality aweement we sigeed back in May 1999 was before J knew we were in direct competition. At least I was not informed that Avsess "has its Own development teffons under way" until a few daysago. So, a new condentiality agreement will be necessary, complex and could take sometime to complete. To avoid this delay, I suggest we begin our negotiationsbased oi the video tape disclosure, (which other viewers found, both informativeand, detailed), and theseassumptions; I) that our compact machineworks "at lean Lswell'? as Laser Key's tested vending machine, and 2) that it costs about $1,500 for parts and direct labor (not overhead) to produce in quantity. Given these assumptions, and generally spealdng, is Axxess prepared to accept 'our 825 million proposal? I want to establish your bonaEdesbecauseAxxess may just want to get asmuch technical information as possible and then extend the 60 days to interrupt our business, My $25 million offer is valid now, but this price will necessarily increase as we continue our development efforts. To freeze my offer and to establish your bona des. I suggest we make a "nal binding executed agreement" within the 30 day period that is subject to our machine's performance, This will obligate both sidesand eliminate the delaycaused by the complexity of the condentiality ageetnent. A demonstration of the"minimum performance" can be completed right after signing while the claim of a81,500 cost of goods will take longer to demonstrate but can be assured with a negotiated money escrow out of the 825 million sale price. Kindest ptTsona)regArds. 6 Robert E. Almblad 5 , R