PLAN AND AGREEMENT OF MERGER
AMONG
AMERICAN EXPRESS COMPANY,
RXP ACQUISITION CORPORATION
AND
ROCKFORD INDUSTRIES, INC.
________________________
November 9, 1998
________________________
Table of Contents
Page
ARTICLE 1 PLAN OF MERGER
1.1 The Merger 2
1.2 Conversion of Shares 2
1.3 Exchange of Certificates 3
1.4 Dividends 4
1.5 Escheat Laws 5
1.6 Closing of Company Transfer Books 5
1.7 Dissenting Shares 5
ARTICLE 2 CLOSING 6
2.1 Time and Place of Closing 6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF
COMPANY AND IDENTIFIED SHAREHOLDERS 6
3.1 Disclosure Letter; Material Adverse Effect
on Company 6
3.2 Organization, Good Standing and Power 7
3.3 Capitalization 7
3.4 Company Subsidiaries; Voting Trusts 8
3.5 Authority; Enforceability 9
3.6 Non-Contravention; Consents 9
3.7 SEC Reports; Company Financial Statements 10
3.8 Absence of Certain Changes 11
3.9 Tax Matters 12
3.10 Litigation 15
3.11 Material Contracts 15
3.12 Securitization Facilities 17
3.13 Registration Statement, Etc. 17
3.14 Employee Benefit Plans 18
3.15 Property 21
3.16 Intellectual Property; Year 2000 22
3.17 Labor Relations 24
3.18 No Violation of Law 26
3.19 Environmental Matters 26
3.20 Insurance Policies 29
3.21 Absence of Certain Business Practices 29
3.22 Accounts Receivable and Net
Investment in Direct Finance Leases
and Loans: Restricted Cash 29
3.23 Transactions with Affiliates 30
3.24 Fairness Opinion 30
3.25 Antitakeover Statutes; Shareholders' Rights
Plan 30
3.26 Board Recommendations 30
3.27 Brokers and Finders 31
3.28 Merger 31
3.29 Voting Requirements 31
3.30 No Existing Discussions 31
3.31 Representations and Warranties of
Identified Shareholders 31
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF
PARENT 32
4.1 Organization, Good Standing and Power 32
4.2 Capitalization 33
4.3 Authority; Enforceability 33
4.4 Non-Contravention; Consents 33
4.5 SEC Reports 34
4.6 Registration Statement, Etc. 35
4.7 Litigation 35
4.8 No Violation of Law 35
4.9 Brokers and Finders 35
4.10 Merger 36
ARTICLE 5 CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; CERTAIN COVENANTS 36
5.1 Access and Information 36
5.2 Conduct of Business Pending Merger 36
5.3 Fiduciary Duties 42
5.4 Certain Fees 42
5.5 Takeover Statutes; Inconsistent Actions 43
5.6 Consents 43
5.7 Reasonable Efforts; Further Assurances;
Cooperation 44
5.8 NYSE Listing 45
5.9 Notice 45
5.10 Registration Statement; Shareholder
Approvals 45
5.11 Expenses 46
5.12 Press Releases; Filings 46
5.13 Tax Treatment 46
5.14 Employee Benefits 47
5.15 Stock Options and Warrants 47
5.16 Company Affiliates 48
5.17 Supplements to Disclosure Letter 48
5.18 Post-Closing Cooperation by Identified
Shareholders 48
5.19 Indemnification of Directors and
Officers and Identified Shareholders 48
5.20 Certain Consents 49
ARTICLE 6 CONDITIONS PRECEDENT TO MERGER 50
6.1 Conditions to Each Party's Obligations 50
6.2 Conditions to Obligations of Company 51
6.3 Conditions to Obligations of Parent 52
ARTICLE 7 TERMINATION AND ABANDONMENT OF THE
MERGER 55
7.1 Termination 55
7.2 Specific Performance and Other Remedies 57
7.3 Effect of Termination and Abandonment 57
7.4 Termination Date Extension 57
ARTICLE 8 MISCELLANEOUS 58
8.1 Waiver and Amendment 58
8.2 Non-Survival of Representations, Warranties
and Agreements 58
8.3 Notices 58
8.4 Descriptive Headings; Interpretation 59
8.5 Counterparts 60
8.6 Entire Agreement 60
8.7 GOVERNING LAW 60
8.8 Severability 60
8.9 Enforcement of Agreement 60
8.10 Assignment 60
8.11 Liability of Identified Shareholders 61
8.12 Definition of Company's Knowledge 61
8.13 Disclosure Letter 61
EXHIBIT 1.1 SHAREHOLDERS' OPTION AGREEMENT
EXHIBIT 5.16 AFFILIATES LETTER
PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER (this "Agreement"),
dated as of November 9, 1998, among AMERICAN EXPRESS
COMPANY, a New York corporation ("Parent"), RXP ACQUISITION
CORPORATION, a Delaware corporation and wholly owned
subsidiary of Parent ("Sub"), and ROCKFORD INDUSTRIES,
INC., a California corporation ("Company").
WHEREAS, Parent has formed Sub as a wholly owned
subsidiary under the Delaware General Corporation Law (the
"DGCL") for the purpose of Sub merging with Company pursuant
to the applicable provisions of the DGCL and the California
General Corporation Law (the "CGCL") (the "Merger") so that
Company will continue as the surviving corporation of the
Merger and Company will become a wholly owned subsidiary of
Parent;
WHEREAS, the respective Boards of Directors of
Company, Parent and Sub have approved and declared advisable
the Merger, the terms and provisions of this Agreement and
the transactions contemplated hereby and the Board of
Directors of Company has recommended that the shareholders
of Company approve the Merger upon the terms of this
Agreement;
WHEREAS, the respective Boards of Directors of
Parent and Company have determined that the Merger is in
furtherance of and consistent with their respective long-
term business strategies and is fair to and in the best
interests of their respective shareholders;
WHEREAS, concurrently with the execution and
delivery of this Agreement, each of Gerry J. Ricco, Larry
Hartmann and Brian Seigel (collectively, the "Identified
Shareholders") has duly executed and delivered to Parent a
Shareholders' Option Agreement pursuant to which, among
other things, each of the Identified Shareholders (x) has
granted to Parent (i) an irrevocable and continuing option
to purchase all of the shares of capital stock of Company
owned by him, and (ii) an irrevocable proxy, and (y) has
agreed to vote all of the shares of capital stock of Company
owned by him in favor of the Merger, on the terms set forth
in Exhibit 1.1 (the "Shareholders' Option Agreement");
WHEREAS, for federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization
within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and this Agreement is
intended to be and is adopted as a plan of reorganization;
and
WHEREAS, the Merger described herein is subject to
the approval of the shareholders of Company and satisfaction
of certain other conditions described in this Agreement.
NOW, THEREFORE, in consideration of the premises
and of the mutual representations, warranties, covenants and
agreements herein contained, the parties agree as follows:
ARTICLE 1
PLAN OF MERGER
1.1 The Merger
(a) Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as
defined below) and in accordance with the provisions of this
Agreement, the DGCL and the CGCL, Sub shall be merged with
and into Company, which shall be the surviving corporation
(sometimes referred to hereinafter as the "Surviving
Corporation") in the Merger, and the separate corporate
existence of Sub shall cease. Subject to the provisions of
this Agreement, a certificate of merger (the "Certificate of
Merger") shall be duly prepared, executed and verified by
each of Company and Sub, and thereafter delivered,
respectively, to the Secretary of State of California and
the Secretary of State of Delaware for filing as provided in
the CGCL and the DGCL on the Closing Date (as defined in
Section 2.1). The Merger shall become effective immediately
upon the filing of the Certificate of Merger with the
Secretary of State of California and the Secretary of State
of Delaware, or at such time thereafter as is provided in
the Certificate of Merger (the "Effective Time").
(b) From and after the Effective Time, the
Merger shall have all the effects set forth in the CGCL and
the DGCL. Without limiting the generality of the foregoing,
and subject thereto, by virtue of the Merger and in
accordance with the CGCL and the DGCL, all of the
properties, rights, privileges, powers and franchises of
Company and Sub shall vest in the Surviving Corporation and
all of the debts, liabilities and duties of Company and Sub
shall become the debts, liabilities and duties of the
Surviving Corporation.
(c) The Articles of Incorporation of Company
in effect immediately prior to the Effective Time shall
continue in full force and effect as the Articles of
Incorporation of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof and the
CGCL.
(d) The Bylaws of Company in effect
immediately prior to the Effective Time shall continue in
full force and effect as the Bylaws of the Surviving
Corporation until altered, amended or repealed as provided
therein, in the Articles of Incorporation of the Surviving
Corporation and the CGCL.
(e) The officers and directors of Sub
immediately prior to the Effective Time shall be the initial
officers and directors of the Surviving Corporation, in each
case until their respective successors are duly elected and
qualified.
1.2 Conversion of Shares. As of the Effective
Time, by virtue of the Merger and without any action on the
part of any holder thereof:
(a) Each share of capital stock of Sub that
is issued and outstanding immediately prior to the Effective
Time shall be converted into and exchanged for one fully
paid and non-assessable share of common stock of the
Surviving Corporation.
(b) All shares of common stock, no par value
per share, of Company ("Company Common Stock") or other
capital stock of Company that are owned by Parent shall be
canceled and retired and shall cease to exist and no stock
of Parent or other consideration shall be delivered in
exchange therefor.
(c) Subject to Section 1.3(c) and Section
1.7, each share of Company Common Stock that is issued and
outstanding immediately prior to the Effective Time (other
than shares to be canceled in accordance with
Section 1.2(b)) shall be converted into a right to receive
that number of shares of Parent Common Stock, par value $.60
per share ("Parent Common Stock"), that could be purchased
for $11.88 based on the average of the closing price per
share of the Parent Common Stock on the New York Stock
Exchange, Inc. ("NYSE") during the ten (10) consecutive
trading days ending on the third full trading day
immediately preceding the Effective Time (the "Exchange
Ratio"). All such shares of Company Common Stock, when so
converted, shall no longer be outstanding and shall
automatically be canceled and retired and shall cease to
exist, and each certificate previously representing any such
shares (a "Certificate") shall thereafter represent the
right to receive that number of shares of Parent Common
Stock into which such shares of Company Common Stock have
been converted. Certificates previously representing shares
of Company Common Stock shall be exchanged for certificates
representing whole shares of Parent Common Stock, and cash
in lieu of any fractional share, issued in consideration
therefor upon the surrender of such Certificates in
accordance with Section 1.3, without interest.
1.3 Exchange of Certificates.
(a) As of the Effective Time, Parent shall
deposit with a bank or trust company reasonably designated
by Parent (the "Exchange Agent"), for the benefit of the
holders of shares of Company Common Stock, for exchange in
accordance with this Article 1 through the Exchange Agent,
certificates representing the shares of Parent Common Stock
(such shares of Parent Common Stock, together with any
dividends or distributions with respect thereto or cash
deposited by Parent in accordance with this Section 1.3,
being hereinafter referred to as the "Exchange Fund")
issuable pursuant to Section 1.2 in exchange for outstanding
shares of Company Common Stock, together with cash to be
paid in lieu of fractional shares. The aggregate number of
shares of Parent Common Stock which shall be issuable shall
be a number of such shares equal to the Exchange Ratio
multiplied by the total number of outstanding shares of
Company Common Stock as of the Effective Time, subject to
adjustments for non-issuance of fractional shares as
provided herein.
(b) As soon as practicable after the
Effective Time, Parent and the Surviving Corporation shall
cause the Exchange Agent to mail to each holder of record of
a Certificate or Certificates (i) a letter of transmittal
(which (x) shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent
accompanied by a properly executed letter of transmittal and
(y) shall be in such form and have such other provisions as
Parent may reasonably specify), and (ii) instructions for
use in effecting the surrender of the Certificates in
exchange for certificates representing shares of Parent
Common Stock. Upon the surrender to the Exchange Agent of
one or more Certificates for cancellation, together with
such letter of transmittal, duly executed, the holder will
be entitled to receive certificates representing that number
of whole shares of Parent Common Stock to be issued in
respect of the aggregate number of such shares of Company
Common Stock previously represented by the Certificates
surrendered based upon the Exchange Ratio and cash in lieu
of fractional shares as provided in Section 1.3(c).
(c) No certificate or scrip representing
fractional shares of Parent Common Stock shall be issued
upon the surrender for exchange of Certificates, and such
fractional share interests will not entitle the owner
thereof to vote or to any rights as a shareholder of Parent.
All fractional shares of Parent Common Stock that a holder
of Company Common Stock would otherwise be entitled to
receive as a result of the Merger shall be aggregated and if
a fractional share results from such aggregation, such
holder shall be entitled to receive, in lieu thereof, an
amount in cash determined by multiplying (i) the Fair Market
Value at the Effective Time (as defined below) of one share
of Parent Common Stock, by (ii) the fraction of a share of
Parent Common Stock to which such holder would otherwise
have been entitled. Parent shall timely make available to
the Exchange Agent any cash necessary to make payments in
lieu of fractional shares as aforesaid. No such cash in
lieu of fractional shares of Parent Common Stock shall be
paid to any holder of Company Common Stock until
Certificates are surrendered and exchanged in accordance
with Section 1.3(a). The term "Fair Market Value at the
Effective Time" of one share of Parent Common Stock shall be
the average of the closing price per share of Parent Common
Stock on the NYSE during the ten (10) consecutive trading
days ending on the third full trading day immediately
preceding the Effective Time.
(d) If a certificate for Parent Common Stock
is to be sent to a person other than the person in whose
name the Certificates for shares of Company Common Stock
surrendered for exchange are registered, it shall be a
condition of the exchange that the person requesting such
exchange shall pay to the Exchange Agent any transfer or
other taxes required by reason of the delivery of such
Certificate to a person other than the registered holder of
the Certificate surrendered, or shall establish to the
satisfaction of the Exchange Agent that such tax has been
paid or is not applicable.
(e) The cash paid and shares of Parent
Common Stock issued upon the surrender of Certificates in
accordance with the terms hereof shall be deemed to have
been paid and issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock.
1.4 Dividends. No dividends or other
distributions that are declared or made after the Effective
Time with respect to Parent Common Stock payable to holders
of record thereof after the Effective Time shall be paid to
a Company shareholder entitled to receive certificates
representing Parent Common Stock until such shareholder has
properly surrendered such shareholder's Certificates. Upon
such surrender, there shall be paid to the shareholder in
whose name the certificates representing such Parent Common
Stock shall be issued any dividends which shall have become
payable with respect to such Parent Common Stock between the
Effective Time and the time of such surrender, without
interest. After such surrender, there shall also be paid to
the shareholder in whose name the certificates representing
such Parent Common Stock shall be issued any dividend on
such Parent Common Stock that shall have a record date
subsequent to the Effective Time and prior to such surrender
and a payment date after such surrender; provided that such
dividend payments shall be made on such payment dates. In
no event shall the shareholders entitled to receive such
dividends be entitled to receive interest on such dividends.
Any portion of the Exchange Fund which remains undistributed
to the shareholders of Company for one year after the
Effective Time pursuant to this Section 1.4 shall be
returned by the Exchange Agent to Parent which shall
thereafter act as Exchange Agent, subject to the rights of
holders of unsurrendered Certificates under this Article 1.
1.5 Escheat Laws. Notwithstanding any other
provision of this Article 1, none of Parent, Sub, Company,
the Surviving Corporation, the Exchange Agent or any other
party hereto shall be liable to any holder of Company Common
Stock for any Parent Common Stock, or dividends or
distributions thereon or cash in lieu of fractional shares,
delivered to a public official pursuant to any applicable
abandoned property, escheat or similar laws.
1.6 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of Company shall be
closed and no transfer of Company Common Stock shall
thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation,
they shall, when accompanied by proper documentation, be
exchanged for Parent Common Stock in the manner provided in
this Article 1.
1.7 Dissenting Shares. (a) If provided for under
the CGCL, notwithstanding any other provision of this
Agreement to the contrary, shares of Company Common Stock
that are outstanding immediately prior to the Effective Time
and which are held by shareholders who shall not have voted
in favor of the Merger or consented thereto in writing and
who shall have demanded properly in writing appraisal for
such shares in accordance with the CGCL and who shall not
have withdrawn such demand or otherwise have forfeited
appraisal rights (collectively, the "Dissenting Shares")
shall not be converted into or represent the right to
receive Parent Common Stock. Such shareholders shall be
entitled to receive payment of the appraised value of such
shares of Company Common Stock held by them in accordance
with the provisions of the CGCL, except that all Dissenting
Shares held by shareholders who shall have failed to perfect
or who effectively shall have withdrawn or lost their rights
to appraisal of such shares of Company Common Stock under
the CGCL shall thereupon be deemed to have been converted
into and to have become exchangeable, as of the Effective
Time, for the right to receive, without any interest
thereon, the Parent Common Stock, upon surrender, in the
manner provided in Section 1.3, of the Certificate or
Certificates that formerly evidenced such shares of Company
Common Stock.
(b) Company shall give Parent (i) prompt notice of any
demands for appraisal received by Company, withdrawals of
such demands, and any other instruments served pursuant to
the CGCL and received by Company and (ii) the opportunity to
direct all negotiations and proceedings with respect to
demands for appraisal under the CGCL. Company shall not,
except with the prior written consent of Parent, make any
payment with respect to any demands for appraisal, or offer
to settle, or settle, any such demands.
ARTICLE 2
CLOSING
2.1 Time and Place of Closing. Unless otherwise
mutually agreed upon in writing by Parent and Company, the
closing of the Merger (the "Closing") will be held at
10:00 a.m., New York City time, on the second business day
following the date that all of the conditions precedent
specified in this Agreement have been (or can be at the
Closing) satisfied or waived by the party or parties
permitted to do so (such date being referred to hereinafter
as the "Closing Date"). The place of Closing shall be at
the offices of King & Spalding, 1185 Avenue of the Americas,
New York, New York 10036-4003, or at such other place as may
be agreed between Parent and Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
AND IDENTIFIED SHAREHOLDERS
As an inducement to Parent and Sub to enter into this
Agreement and to consummate the transactions contemplated
hereby, Company hereby represents and warrants and, pursuant
to Section 3.31 only the Identified Shareholders hereby
represent and warrant to Parent and Sub as follows:
3.1 Disclosure Letter; Material Adverse Effect on
Company.
(a) Prior to the execution and delivery of
this Agreement, Company and Parent have delivered to each
other a letter (the "Disclosure Letter") setting forth items
the disclosure of which is necessary or appropriate either
in response to an express disclosure requirement contained
in this Agreement or as an exception to one or more of such
party's representations, warranties or covenants contained
in this Agreement.
(b) As used in this Agreement, the phrase
"Material Adverse Effect on Company" means (i) as to matters
which can reasonably be quantified in economic terms, any
effect which has resulted in or would reasonably be expected
to result in, with respect to Company and the Company
Subsidiaries (as defined in Section 3.4) taken as a whole, a
diminution or decrease in the value of properties or assets,
an increase in liabilities or obligations (whether accrued,
contingent or otherwise), a diminution or decrease in
profits or cash flow, an increase in losses or expenses, an
adverse change in the business or financial condition, or
any combination thereof involving, individually or in the
aggregate more than $1,000,000, (ii) as to matters which
cannot reasonably be quantified in economic terms, a
material adverse effect on the condition (financial or
otherwise), business, assets, liabilities, prospects or
results of operations of Company and the Company
Subsidiaries taken as a whole, or (iii) a material adverse
effect on the ability of Company to consummate the
transactions contemplated by this Agreement.
(c) For purposes of determining whether or not
the representations and warranties set forth herein which
are qualified by the phrase "Material Adverse Effect on
Company" are true and correct and have not been breached,
such representations and warranties shall be deemed to be
true and correct and not breached unless the failure or
failures of such representations and warranties to be so
true and correct (without giving effect to any exception or
"Material Adverse Effect on Company" qualifier),
individually or in the aggregate, has or would reasonably be
expected to have a Material Adverse Effect on Company.
3.2 Organization, Good Standing and Power.
Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of
California and has all requisite corporate power and
authority to own, lease and operate its properties and to
carry on its business as now being conducted. Company is
duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties make
such qualification or licensing necessary, except where the
failure to be so qualified or licensed or to be in good
standing does not have and would not reasonably be expected
to have, individually or in the aggregate, a Material
Adverse Effect on Company. Company has delivered to Parent
complete and correct copies of its Articles of Incorporation
and all amendments thereto to the date hereof and its Bylaws
as amended to the date hereof.
3.3 Capitalization. The authorized capital stock
of Company consists of 10,000,000 shares of Common Stock, no
par value per share, of which, as of the date of this
Agreement, 4,108,785 shares were issued and outstanding, and
1,000,000 shares of Preferred Stock, no par value per share,
of which, as of the date hereof, 70,000 shares designated as
Series A Preferred Stock are issued and outstanding (the
"Series A Shares"). The holder of the Series A Shares has
agreed to vote the Series A Shares in favor of the Merger
and to convert the Series A Shares into Company Common Stock
immediately prior to the Effective Time. All outstanding
shares of Company Common Stock are, and all shares which may
be issued prior to the Effective Time pursuant to any
outstanding Company Stock Options (as hereinafter defined)
will be, when issued, duly authorized, validly issued, fully
paid and nonassessable and not subject to any preemptive
rights. Except as set forth above, as of the date of this
Agreement, there were no shares of capital stock or other
equity securities of Company outstanding, and, except as set
forth in Section 3.3 of the Disclosure Letter, (x) there are
no outstanding options, warrants or rights to purchase or
acquire from Company any capital stock of Company, (y) there
are no existing registration covenants with Company with
respect to outstanding shares of Company Common Stock or the
Series A Shares, and (z) there are no convertible securities
or other contracts, commitments, agreements, understandings,
arrangements or restrictions by which Company is bound to
issue any additional shares of its capital stock or other
securities. All outstanding options with respect to Company
capital stock (the "Company Stock Options"), the identity of
the holder thereof, the vesting schedule applicable thereto,
the exercise price thereof and the change of control
provisions applicable thereto are listed in Section 3.3 of
the Disclosure Letter. Complete and accurate copies of the
material agreements relating to the Company Stock Options
have been provided to Parent. Except as set forth in
Section 3.3 of the Disclosure Letter, there are no
shareholder agreements, voting trust agreements, or similar
contracts, agreements, arrangements, commitments, plans, or
understandings restricting or otherwise relating to voting,
dividend, ownership or transfer rights with respect to any
share of Company capital stock to which Company is a party.
3.4 Company Subsidiaries; Voting Trusts.
Section 3.4 of the Disclosure Letter sets forth a correct
and complete list of each corporation, association,
partnership, limited liability company or other entity of
which Company owns or controls, directly or indirectly, all
of the outstanding equity interests (such entities are
hereinafter referred to as "Company Subsidiaries"). Except
as set forth in Section 3.4 of the Disclosure Letter, there
is no corporation, association, partnership, limited
liability company or other entity of which Company owns or
controls, directly or indirectly, more than 20% of the
outstanding equity interests. Except as disclosed in
Section 3.4 of the Disclosure Letter, Company owns, directly
or indirectly, all of the equity interests of each Company
Subsidiary, free and clear of all liens, charges, pledges,
security interests or other encumbrances. All of the
capital stock of each Company Subsidiary has been duly
authorized and is validly issued, fully paid and
nonassessable, and not subject to any preemptive rights.
There are no outstanding options or rights to subscribe to,
or any contracts or commitments to issue or sell any shares
of the capital stock or other equity interests or any
securities or obligations convertible into or exchangeable
for, or giving any person any right to acquire, any shares
of the capital stock or other equity interests of any
Company Subsidiary to which Company or any Company
Subsidiary is a party. There are no voting trusts or other
agreements or understandings with respect to the voting of
capital stock or other equity interests of any Company
Subsidiary to which Company or any Company Subsidiary is a
party. Each Company Subsidiary is a corporation duly
organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has the
requisite corporate power and authority necessary for it to
own or lease its properties and assets and to carry on its
business as it is now being conducted. Each Company
Subsidiary is duly qualified or licensed to do business and
is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its
properties makes such qualification or licensing necessary,
except where the failure to be so qualified or licensed or
to be in good standing does not have and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company.
3.5 Authority; Enforceability. Company has the
corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby,
subject to the approval of this Agreement by the
shareholders of Company. Subject to such approval, the
execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on
the part of Company, and this Agreement has been duly
executed and delivered by Company and constitutes the valid
and binding obligation of Company, enforceable against
Company in accordance with its terms, except as may be
limited by bankruptcy, insolvency, moratorium or other
similar laws affecting or relating to the enforcement of
creditors' rights generally and subject to general
principles of equity.
3.6 Non-Contravention; Consents.
(a) Except as set forth in Section 3.6(a) of
the Disclosure Letter, neither the execution, delivery and
performance by Company of this Agreement, nor the
consummation by Company of the transactions contemplated
hereby, nor compliance by Company with any of the provisions
hereof, will:
(i) violate, conflict with, result in a breach of
any provision of, constitute a default (or an event
that, with notice or lapse of time or both, would
constitute a default) under, result in the termination,
cancellation or expiration of, accelerate the
performance required by, or result in a right of
termination, cancellation, expiration or acceleration,
or the creation of any lien, security interest, charge
or encumbrance upon any of the properties or assets of
Company or any Company Subsidiary, under any of the
terms, conditions or provisions of, (x) its Articles of
Incorporation, Bylaws or other governing documents, or
(y) any note, bond, mortgage, indenture, deed of trust,
securitization agreement, license, lease, contract,
agreement or other instrument or obligation to which
Company or any of the Company Subsidiaries is a party,
or by which Company or any of the Company Subsidiaries
may be bound, or to which Company or any of the Company
Subsidiaries or the properties or assets of any of them
may be subject and that has or would reasonably be
expected to have, in any such event specified in this
clause (y), individually or in the aggregate, a
Material Adverse Effect on Company; or
(ii) subject to compliance with the statutes and
regulations referred to in Section 3.6(b), violate any
judgment, award, ruling, order, writ, injunction or
decree, or any statute, rule or regulation applicable
to, Company or any of the Company Subsidiaries or any
of their respective properties or assets where such
violation has or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse
Effect on Company.
(b) Except as set forth in Section 3.6(b) of
the Disclosure Letter, no notice to, filing with,
authorization of, exemption by, or consent or approval of,
any governmental authority or other regulatory body is
necessary to be obtained by Company or any Company
Subsidiary for the consummation by Company of the
transactions contemplated by this Agreement.
3.7 SEC Reports; Company Financial Statements.
(a) Since January 1, 1996, Company has
timely filed all reports, registration statements, proxy
statements or information statements and all other
documents, together with any amendments required to be made
thereto, required to be filed with the Securities and
Exchange Commission ("SEC") under the Securities Act of
1933, as amended (the "Securities Act"), or the Securities
Exchange Act of 1934, as amended (the "Exchange Act")
(collectively, the "Company Reports"). Company has
heretofore made available to Parent true copies of all the
Company Reports, together with all exhibits thereto.
Included in such Company Reports are (i) audited
consolidated balance sheets of Company and its subsidiaries
at December 31, 1996 and 1997 and the related consolidated
results of operations, shareholders' equity and cash flows
for the years then ended, and the notes thereto, and
(ii) the unaudited consolidated balance sheet of Company and
its subsidiaries at June 30, 1998 (the "Interim Balance
Sheet") and the related unaudited consolidated results of
operations, shareholders' equity and cash flows for the
periods then ended and the notes thereto. Company has
provided to Parent in Section 3.7 of the Disclosure Letter
an unaudited consolidated balance sheet of Company and its
subsidiaries at September 30, 1998 (the "September Balance
Sheet") and the related unaudited consolidated results of
operations, shareholders' equity and cashflows for the
period then ended (the "September Income Statement" and,
together with the September Balance Sheet, the "September
Financial Statements").
(b) All of the financial statements included
in the Company Reports (which are collectively referred to
herein as the "Company Consolidated Financial Statements")
and the September Financial Statements fairly presented the
consolidated financial position of Company and its
subsidiaries as of the dates mentioned and the consolidated
results of operations, changes in shareholders' equity and
cash flows for the periods then ended in conformity with
generally accepted accounting principles ("GAAP") applied on
a consistent basis (subject to any exceptions as to
consistency specified therein or as may be indicated in the
notes thereto or in the case of the unaudited statements, as
may be permitted by Form 10-Q of the SEC and subject, in the
case of unaudited statements, to normal, recurring audit
adjustments). As of their respective dates, the Company
Reports complied in all material respects with all
applicable rules and regulations promulgated by the SEC and
did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading. At September 30, 1998, neither Company nor any
Company Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise),
except (i) as set forth or reflected in the September
Balance Sheet, (ii) for such liabilities and obligations
which individually are less than $100,000 and in the
aggregate are less than $1,000,000 and were incurred in the
ordinary course of business consistent with past practice,
or (iii) as set forth in Section 3.7(b) of the Disclosure
Letter. After September 30, 1998, neither Company nor any
Company Subsidiary has any liabilities or obligations of any
nature (whether accrued, absolute, contingent or otherwise),
except (i) those liabilities and obligations set forth or
reflected on the September Balance Sheet, (ii) for such
liabilities and obligations which were incurred in the
ordinary course of business consistent with past practice,
(iii) to the extent not covered by (i) or (ii), liabilities
and obligations which individually are less than $100,000
and which, in the aggregate, do not have and would not
reasonably be expected to have a Material Adverse Effect on
Company or (iv) as set forth in Section 3.7(b) of the
Disclosure Letter.
(c) From October 1, 1998 to the date of this
Agreement, neither Company nor any Company Subsidiary has
taken or omitted to take any action which would have
required the consent of Parent if Section 5.2(b) and (c) of
this Agreement had been in effect during such period.
3.8 Absence of Certain Changes.
(a) Except as set forth in Section 3.8(a) of
the Disclosure Letter, since January 1, 1998, there has not
been (i) any change in the assets, liabilities, results of
operations, financial condition or business of Company or
any Company Subsidiary which has or would reasonably be
expected to have, individually or in the aggregate, a
Material Adverse Effect on Company, (ii) any damage,
destruction, loss or casualty to property or assets of
Company or any Company Subsidiary involving amounts in
excess of $100,000 individually or in excess of $250,000 in
the aggregate, whether or not covered by insurance, which
property or assets are material to the operations or
business of Company or any Company Subsidiary, (iii) any
declaration, setting aside or payment of any dividend or
distribution (whether in cash, stock or property) in respect
of the capital stock or other equity interests of Company,
any redemption or other acquisition by Company of any of the
capital stock or other equity interests of Company or any
split, combination or reclassification of shares of capital
stock or other equity interests declared or made by Company
or (iv) any agreement to do any of the foregoing.
(b) Except as set forth in Section 3.8(b) of
the Disclosure Letter or as consented to in writing by
Parent, since January 1, 1998, there have not been in
respect of Company or any Company Subsidiary (i) any
extraordinary losses suffered involving amounts in excess of
$100,000 individually or in excess of $250,000 in the
aggregate, (ii) any assets with a value in excess of
$100,000 individually or in excess of $250,000 in the
aggregate which have been mortgaged, pledged or made subject
to any lien, charge or other encumbrance, (iii) any material
liability or obligation (absolute, accrued, contingent or
otherwise) incurred or any material bad debt, contingency or
other reserve increase suffered, except, in each such case,
in the ordinary course of business and consistent with past
practice, (iv) any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) paid,
discharged or satisfied, other than the payment, discharge
or satisfaction, in the ordinary course of business and
consistent with past practice, of claims, liabilities and
obligations reflected or reserved against in the Company
Consolidated Financial Statements or incurred in the
ordinary course of business and consistent with past
practice, (v) any material guaranteed checks, notes or loan
or lease accounts receivable or contract balances written
off as uncollectible, except write-offs in the ordinary
course of business and consistent with past practice,
(vi) any write down or write-off (under Statement of
Financial Accounting Standards No. 121 or otherwise) of the
value of any asset or investment on Company's books or
records or any credit loss involving amounts in excess of
$100,000 individually or in excess of $250,000 in the
aggregate, except for depreciation and amortization taken in
the ordinary course of business and consistent with past
practice, (vii) any cancellation of any material debts or
waiver of any material claims or rights of substantial
value, or sale, transfer or other disposition of any
material properties or assets (real, personal or mixed,
tangible or intangible) of substantial value, except, in
each such case, in transactions in the ordinary course of
business and consistent with past practice, (viii) any
single capital expenditure or commitment in excess of
$100,000 for additions to property or equipment, or
aggregate capital expenditures and commitments in excess of
$250,000 (on a consolidated basis) for additions to property
or equipment, (ix) any transactions entered into other than
in the ordinary course of business consistent with past
practices, (x) any material change in or modification to
Company's credit approval/declination criteria and practices
or (xi) any agreements to do any of the foregoing.
(c) Section 3.8(c) of the Disclosure Letter
sets forth a true and complete list of the officers of
Company or any Company Subsidiary as of the date of this
Agreement and the salary of each such officer on the date of
this Agreement and as of January 1, 1998.
(d) During the period from January 1, 1998
through October 31, 1998, Company has originated in the
aggregate $181.9 million of new leases and loans in the
ordinary course of business consistent with past practice.
Information relating to the leases and loans originated
during the period from January 1, 1998 to September 30,
1998, is set forth in Section 3.8(d) of the Disclosure
Letter.
(e) Section 3.8(e) of the Disclosure Letter
identifies all leases and loans of Company and the Company
Subsidiaries (whether held directly by Company and the
Company Subsidiaries or conveyed to the Securitization
Facilities (as defined below)) the scheduled payments under
which are 30 days or more overdue as of September 30, 1998.
3.9 Tax Matters.
(a) For purposes of this Agreement, "Taxes"
shall mean all taxes (including any tax attributable to
Company or any Company Subsidiary ceasing to be a member of
an affiliated group as defined in Section 1504(a) of the
Code), assessments, charges, duties, fees, levies or other
governmental charges (including interest, penalties or
additions associated therewith) including federal, state,
city, county, foreign or other income, franchise, capital
stock, real property, personal property, tangible,
withholding, FICA, unemployment compensation, disability,
transfer, sales, use, excise, gross receipts and all other
taxes of any kind for which Company or any Company
Subsidiary may have any liability imposed by the United
States or any state, county, city, country or foreign
government or subdivision or agency thereof, whether
disputed or not.
(b) Except as otherwise disclosed in
Section 3.9(b) of the Disclosure Letter: (i) all returns,
including estimated returns and reports of every kind with
respect to Taxes, which are due to have been filed in
accordance with any applicable law, have been duly filed,
except where the failure to file does not have and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company, (ii) all
Taxes, deposits or other payments for which Company or any
Company Subsidiary may have any liability through the date
hereof have been paid in full or are accrued as liabilities
for Taxes on the books and records of Company or the Company
Subsidiaries, as applicable, except for such Taxes as are
not required by GAAP to be accrued or are immaterial in
amount, (iii) there are not now any extensions of time in
effect with respect to the dates on which any returns or
reports of Taxes were or are due to be filed, (iv) all
deficiencies asserted as a result of any examination of any
return or report of Taxes have been paid in full or accrued
on the books of each of Company and the Company
Subsidiaries, (v) no claims have been asserted and no
proposals or deficiencies for any Taxes are being asserted,
proposed or, to the knowledge of Company, threatened, and no
audit or investigation of any return or report of Taxes is
currently underway, pending or, to the knowledge of Company,
threatened, (vi) there are no outstanding waivers or
agreements by Company or any Company Subsidiary for the
extension of time for the assessment of any Taxes or
deficiency thereof, nor are there any requests for rulings,
outstanding subpoenas or requests for information, notices
of proposed reassessment of any property owned or leased by
Company or any Company Subsidiary or any other matter
pending between Company or any Company Subsidiary and any
taxing authority, and (vii) there are no liens for Taxes
upon any property or assets of Company or any Company
Subsidiary except liens for current Taxes not yet due, nor
are there any liens which, to the knowledge of Company, are
pending or threatened.
(c) In each case, adequate provision,
including provision in the deferred tax account, has been
made in the audited consolidated balance sheets of Company
and its subsidiaries that are part of the Company
Consolidated Financial Statements for all deferred and
accrued Tax liabilities of Company and the Company
Subsidiaries as of their respective dates with respect to
operations for periods ending on such dates.
(d) Company has delivered to Parent true and
complete copies of all federal and state income tax returns
(together with any Revenue Agent's Reports) relating to the
operations of Company and the Company Subsidiaries for the
taxable years ended since December 31, 1994.
(e) None of Company or the Company
Subsidiaries has filed a consent pursuant to Section 341(f)
of the Code. None of Company, the Company Subsidiaries or
any predecessor in interest of such party, has filed, or may
be deemed to have filed, any election under Section 338 of
the Code.
(f) Except as set forth in Section 3.9(f) of
the Disclosure Letter, neither Company nor any Company
Subsidiary has made any payment which constitutes an "excess
parachute payment" within the meaning of Section 280G of the
Code, and no payment by Company or any Company Subsidiary
required to be made under any contract will, if made,
constitute an "excess parachute payment" within the meaning
of Section 280G of the Code.
(g) None of Company and the Company
Subsidiaries is a party to any tax allocation or tax sharing
agreement.
(h) None of Company and the Company
Subsidiaries has been a member of an affiliated group
(within the meaning of Section 1504(a) of the Code) filing a
consolidated federal income tax return (other than a group
the common parent of which was Company).
(i) Company and the Company Subsidiaries
have withheld and paid all Taxes required to have been
withheld and paid in connection with amounts paid or owing
to any employee, independent contractor, creditor,
stockholder, or other third party, except where the failure
to withhold or pay such Taxes would not have a Material
Adverse Effect on Company.
(j) Except as set forth in Section 3.9(j) of
the Disclosure Letter and to Company's knowledge: (i) none
of Company or the Company Subsidiaries is a partner or a
member of any entity treated as a partnership for federal or
state income tax purposes; (ii) none of Company or the
Company Subsidiaries has any deferred items (or items not
yet taken into account) under Treasury Regulations Sections
1.1502-13 or 14; (iii) none of Company or the Company
Subsidiaries has an "excess loss account" as defined in
Treasury Regulations Sections 1.1502-19 with respect to the stock
of any corporation included as a member of the consolidated
group of which Company is the common parent; (iv) none of
Company or the Company Subsidiaries owns or leases any real
property not disclosed in Section 3.11 of the Disclosure
Letter; (v) none of Company or the Company Subsidiaries is
required to include any material amount in income or make
any material adjustment under Section 481 or 482 of the Code
for any taxable period ended after December 31, 1997;
(vi) none of Company or the Company Subsidiaries has
disposed of any property in a transaction being accounted
for under the installment method pursuant to Section 453 of
the Code; (vii) since April 16, 1997, none of Company or the
Company Subsidiaries has distributed the stock of any
corporation in a transaction satisfying the requirements of
Section 355 of the Code; (viii) none of Company or the
Company Subsidiaries has entered into a closing agreement
with any taxing authority that has effect after December 31,
1997; and (ix) none of Company or the Company Subsidiaries
has granted a power of attorney to any person that
concurrently is in effect with respect to any taxable period
that remains open under the applicable statute of
limitations.
(k) Company maintained a valid election as
an S corporation for federal income tax purposes and, except
as set forth in Section 3.9(k) of the Disclosure Letter, all
applicable state income tax purposes for all taxable periods
from January 1, 1987 through December 31, 1994.
3.10 Litigation.
(a) Section 3.10(a) of the Disclosure Letter
(i) sets forth all litigation, claims, suits, actions,
investigations, indictments or informations, or
administrative, arbitration or other proceedings pending,
or, to the knowledge of Company, threatened (including,
without limitation, grand jury investigations, actions or
proceedings and workers' compensation suits, actions or
proceedings) against Company or any Company Subsidiary and
(ii) indicates which of such matters are being defended by
an insurance carrier, and which of the matters being so
defended are being defended under a reservation of rights.
(b) Except as set forth in Section 3.10(b)
of the Disclosure Letter, there are no judgments or awards
for which amounts payable in respect thereof have not been
fully satisfied or orders, injunctions, decrees or
stipulations (whether rendered by a court, administrative
agency, governmental entity or regulatory body or by
arbitration, pursuant to a grievance or other procedure)
currently in effect against or relating to Company or any
Company Subsidiary. To Company's knowledge, there are no
events, facts or circumstances giving rise to any claim for
indemnification from Company or any Company Subsidiary by
any present or former officer or director of Company or any
Company Subsidiary related to any act or omission prior to
the Closing by such present or former officer or director.
3.11 Material Contracts. As of the date of this
Agreement, Section 3.11 of the Disclosure Letter contains a
correct and complete list of the following (the "Material
Contracts"):
(a) all bonds, debentures, notes, loans,
credit, loan or securitization agreements or commitments,
mortgages, indentures or guarantees to which Company or any
Company Subsidiary is a party or by which any of its
properties or assets (real, personal or mixed, tangible or
intangible) is bound involving amounts in excess of $50,000
individually or $1,000,000 in the aggregate (other than
leases to which Company or any Company Subsidiary is the
lessor);
(b) (i) all leases to which Company or any
Company Subsidiary is a lessee or by which any of its
properties or assets (real, personal or mixed, tangible or
intangible) is bound involving an annual commitment rental
or other payment in excess of $100,000 individually (the
"Disclosed Leases") and (ii) all leases and loan/financing
agreements and instruments to which Company or any Company
Subsidiary is a lessor or lender as of October 29, 1998
which have not been sold, transferred or conveyed to a non-
recourse lender and which involve original equipment costs
in excess of $50,000 individually;
(c) all contracts or agreements which limit
or restrict Company, any Company Subsidiary or, to Company's
knowledge, any of the officers, key employees or business
partners of Company from engaging in any business in any
jurisdiction and all contracts or agreements that limit or
restrict others from competing with Company or any Company
Subsidiary in any jurisdiction;
(d) all contracts or agreements requiring
Company or any Company Subsidiary to register the resale of
its capital stock or securities under federal or state
securities law;
(e) all agreements with non-recourse lenders
to which Company or any Company Subsidiary is a party;
(f) all contracts, agreements or
arrangements (whether written or oral) between Company or
any Company Subsidiary and a business partner or sales
representative;
(g) representative samples of each type of
lease, promissory note, security agreement and related
financing agreements and instruments used by Company or any
Company Subsidiary in the conduct of its business;
(h) all agreements with vendors,
manufacturers and distributors to which Company or any
Company Subsidiary is a party involving an annual commitment
or annual payment by any party to such contract or
commitment of more than $100,000 individually;
(i) all partnership, joint venture, or
similar contracts or agreements and all contracts or
agreements relating to the future disposition or acquisition
of any assets or properties to which Company or any Company
Subsidiary is a party, other than dispositions or
acquisitions in the ordinary course of business consistent
with past practices;
(j) all powers of attorney or comparable
delegations of authority granted by Company or any Company
Subsidiary; and
(k) all existing contracts and commitments
(other than those described in subparagraphs (a), (b), (c),
(d), (e), (f), (g), (h), (i) and (j) of this Section 3.11
and the Company Benefit Plans) to which Company or any
Company Subsidiary is a party or by which its properties or
assets may be bound involving an annual commitment or annual
payment by any party to such contract or commitment of more
than $100,000 individually.
True and complete copies of all Material Contracts,
including all amendments, have been made available to
Parent. The Material Contracts are valid and enforceable in
accordance with their respective terms with respect to
Company and any Company Subsidiary and valid and, to the
knowledge of Company, enforceable in accordance with their
respective terms with respect to any other party to a
Material Contract, in each case to the extent material to
the business and operations of Company and subject to
applicable bankruptcy, insolvency and other similar laws
affecting the enforceability of creditors' rights generally,
general equitable principles and the discretion of courts in
granting equitable remedies. Except for events or
occurrences, the consequences of which, individually or in
the aggregate, do not have and would not be reasonably
expected to have, individually or in the aggregate, a
Material Adverse Effect on Company, there is not under any
of the Material Contracts any existing breach, default or
event of default by Company or any Company Subsidiary or
event that with notice or lapse of time or both would
constitute a breach, default or event of default by Company
or any Company Subsidiary, nor has Company received notice
of, or made a claim with respect to, any breach or default
by any other party to a Material Contract.
3.12 Securitization Facilities. Schedule 3.12
identifies each of the principal agreements evidencing the
two securitization facilities pursuant to which Company has
caused certain of its equipment leases and other chattel
paper to be conveyed to trusts for purposes of selling
interests in such chattel paper to Centre Square Funding
Corporation and SunAmerica Life Insurance Company,
respectively (such agreements being collectively referred to
herein as the "Securitization Agreements" and being
individually referred to herein by the terms specified for
the respective agreements in Schedule 3.12). All
representations and warranties made at any time and from
time to time by Company or any Company Subsidiary in the
Securitization Agreements were true and correct in all
material respects when made or deemed to have been made
thereunder. All "Lease Contracts" and "Equipment" (as such
terms are defined in the Securitization Agreements) conveyed
by Company to Company Subsidiaries pursuant to the Equipment
Purchase Agreements, and all "Lease Contracts" and related
properties and interests conveyed to the trusts under the
Pooling and Servicing Agreements, satisfy in all material
respects the applicable eligibility criteria and conditions
set forth in the Securitization Agreements, including
without limitation, Section 3.02 of each Equipment Purchase
Agreement and Section 3.02 of each Certificate Purchase
Agreement. Each of Company and Company Subsidiaries that
are parties to the Securitization Agreements has performed
in all material respects its obligations and observed and
complied in all material respects with those conditions and
requirements applicable to it or its properties under the
Securitization Agreements. No "Trigger Event", "Funding
Period Trigger Event" or "Servicer Default" under the
Pooling and Servicing Agreements, or any other default or
breach by Company or any Company Subsidiary under the
Securitization Agreements, has occurred, and neither Company
nor any Company Subsidiary has received notice from any
other party to the Security Agreements asserting or
otherwise indicating that any such "Trigger Event", "Funding
Period Trigger Event", "Servicer Default" or other default
or breach has occurred. Neither Company nor any Company
Subsidiary that is a party to the Securitization Agreements
has been required to repurchase any "Lease Contracts" under
the terms of the Securitization Agreements.
3.13 Registration Statement, Etc. None of the
information supplied or to be supplied by Company for
inclusion or incorporation by reference in (a) the
Registration Statement to be filed by Parent with the SEC in
connection with the Parent Common Stock to be issued in the
Merger (the "Registration Statement"), and (b) the Proxy
Statement (the "Proxy Statement") to be mailed to Company's
shareholders in connection with the meeting (the
"Shareholders' Meeting") to be called to consider the
Merger, will, at the respective times such documents are
filed with the SEC and, in the case of the Registration
Statement, when it becomes effective, or at the time any
amendment or supplement thereto becomes effective, cause
such documents to contain any untrue statement of a material
fact, or omit to state any material fact required or
necessary in order to make the statements therein not
misleading; and, in the case of the Proxy Statement, when
first mailed to the shareholders of Company or at the time
of the Shareholders' Meeting, cause the Proxy Statement or
any amendment thereof or supplement thereto to contain any
untrue statement of a material fact, or omit to state any
material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
All documents that Company is responsible for filing with
the SEC and any other regulatory agency in connection with
the Merger will comply as to form in all material respects
with the provisions of applicable law and any applicable
rules or regulations thereunder, except that no
representation is made by Company with respect to statements
made therein based on information supplied by Parent or with
respect to information concerning Parent or Sub which is
incorporated by reference in the Registration Statement or
the Proxy Statement.
3.14 Employee Benefit Plans.
(a) For purposes of this Section 3.14, the
term "Company Benefit Plan" means any plan, program, fund,
policy or contract which, through which or under which
Company or any Company ERISA Affiliate (as defined in
Section 3.14(b)) provides or has an obligation to provide
benefits or compensation to or on behalf of employees or
former employees of Company or any Company ERISA Affiliate
whether or not written, including but not limited to the
following:
(i) any bonus, incentive compensation, stock
option, deferred compensation, commission, severance
pay, golden parachute or other compensation plan or
rabbi trust;
(ii) any "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security
Act of 1974, as amended ("ERISA")), including, but not
limited to, any multi-employer plan (as defined in
Section 3(37) and Section 4001(a)(3) of ERISA), defined
benefit plan, profit sharing plan, money purchase
pension plan, 401(k) plan, savings or thrift plan, or
any plan, fund or program providing for medical
(including post-retirement medical), hospitalization,
accident, sickness, disability, or life insurance
benefits; and
(iii) any stock purchase, vacation,
scholarship, sick days, day care, prepaid legal
services, dependent care or other fringe benefits
plans, programs or contracts.
Each Company Benefit Plan is identified in Section 3.14 of
the Disclosure Letter.
(b) For purposes of this Section 3.14 the
term "Company ERISA Affiliate" means each trade or business
(whether or not incorporated) which together with Company is
treated as a single employer under Section 414(b), (c), (m)
or (o) of the Code.
(c) Company and each Company ERISA Affiliate
is in compliance with the requirements prescribed by all
statutes, orders and governmental rules and regulations
applicable to Company Benefit Plans. All reports and
disclosures relating to Company Benefit Plans required to be
filed with or furnished to any governmental entity,
participants or beneficiaries prior to the Closing Date have
been or will be properly completed and filed or furnished in
a timely manner and in accordance with applicable laws,
including, without limitation, Internal Revenue Service (the
"IRS"), Department of Labor (the "DOL") and Pension Benefit
Guaranty Corporation ("PBGC") Form 5500. Each Company
Benefit Plan has been administered according to its terms
(except for those terms which are inconsistent with the
changes required by statutes, regulations, and rulings for
which changes are not yet required to be made, in which case
the plan has been administered in accordance with the
provisions of those statutes, regulations and rulings) and
applicable law.
(d) Neither Company nor any Company ERISA
Affiliate maintains, or has at any time established or
maintained, or has at any time been obligated to make, or
made, either directly or indirectly (whether by reimbursing
another employer or otherwise) contributions to or under any
plan, program or arrangement that is subject to Section 412
of the Code, Section 302 of ERISA or Title IV of ERISA,
including any multi-employer plan (as defined in
Section 3(37) and Section 4001(a)(3) of ERISA). Company
does not maintain, nor has at any time established or
maintained, nor has at any time been obligated to make, or
made, contributions to or under any plan which provides
post-retirement medical or health benefits with respect to
former employees of Company. There is no lien upon any
property of Company or any Company ERISA Affiliate
outstanding except as required by Part 6 of Title I of ERISA
pursuant to Section 412(n) of the Code or Section 302(f) of
ERISA in favor of any Company Benefit Plan. No assets of
Company or any Company ERISA Affiliate have been provided as
security for any Company Benefit Plan pursuant to
Section 401(a)(29) of the Code.
(e) Company has provided to Parent a true
and complete copy of the following documents, if applicable,
with respect to each Company Benefit Plan identified in
Section 3.14 of the Disclosure Letter: (1) the most recent
documents, including any insurance contracts and trust
agreements, setting forth the terms of each Company Benefit
Plan, or if there are no such documents evidencing a Company
Benefit Plan, a full description of such Company Benefit
Plan, (2) the most recent ERISA summary plan description and
the most recent version of other summary of plan provisions
provided to participants or beneficiaries for each such
Company Benefit Plan, (3) the annual reports filed for the
most recent three plan years and most recent financial
statements or periodic accounting or related plan assets
with respect to each Company Benefit Plan, (4) each
favorable determination letter, opinion or ruling from the
IRS for each Company Benefit Plan, the assets of which are
held in trust, to the effect that such trust is exempt from
federal income tax, including any outstanding request for a
determination letter and (5) each opinion or ruling from the
DOL or the PBGC with respect to any such Company Benefit
Plan.
(f) Each Company Benefit Plan identified in
Section 3.14 of the Disclosure Letter that is funded through
a trust or insurance contract has at all times satisfied in
all material respects, by its terms and in its operation,
all applicable requirements for an exemption from federal
income taxation under Section 501(a) of the Code. Except for
Company's 401(k) Plan (the "Company 401(k) Plan"), neither
Company nor any Company ERISA Affiliate maintains or
previously maintained a Company Benefit Plan which meets or
was intended to meet the requirements of Section 401(a) of
the Code. Except as set forth in Section 3.14(f) of the
Disclosure Letter, a determination letter has been issued by
the IRS to the effect that the Company 401(k) Plan qualifies
under Section 401(a) of the Code and that the related trust
is exempt from taxation under Section 501(a) of the Code and
such determination letter remains in effect and has not been
revoked. The Company 401(k) Plan has been tested for
compliance with, and has satisfied the requirements of,
Section 401(k)(3), 401(m)(2) and 415 of the Code for each
plan year ending prior to the Closing Date.
(g) There are no actions, audits, suits or
claims which are pending or threatened against any Company
Benefit Plan, any fiduciary of any of the Company Benefit
Plans with respect to the Company Benefit Plans or against
the assets of any of the Company Benefit Plans, except
claims for benefits made in the ordinary course of the
operation of such plans and except for routine actions to
join a Company Benefit Plan in a divorce proceeding in order
to effect a "qualified domestic relations order" (as defined
in Section 414(p) of the Code) as required under the
California Family Code or other similar state law.
(h) Company and each Company ERISA Affiliate
has made full and timely payment of all amounts required to
be contributed under the terms of each Company Benefit Plan
and applicable law or required to be paid as expenses under
such Company Benefit Plan and no excise taxes are assessable
as a result of any nondeductible or other contributions made
or not made to a Company Benefit Plan. The assets of all
the Company Benefit Plans which are required under
applicable laws to be held in trust are in fact held in
trust and shown on the books and records of each such trust
at their fair market value, and the assets of each such
Company Benefit Plan shown at such fair market value equal
or exceed the liabilities of each such plan. The
liabilities of each other Company Benefit Plan are properly
and accurately reported on the financial statements and
records of Company to the extent such reporting is required.
The assets of each Company Benefit Plan are reported at
their fair market value on the books and records of each
plan.
(i) Neither Company nor any Company ERISA
Affiliate is subject to any liability, tax or penalty
whatsoever to any person whomsoever as a result of Company's
or any Company ERISA Affiliate's engaging in a breach of
fiduciary duty or a prohibited transaction under ERISA or
the Code, and Company has no knowledge of any circumstances
which might result in any such liability, tax or penalty as
a result of any breach of fiduciary duty under ERISA or in
any duty to indemnify any other person for any such
liability.
(j) No payment required to be made to any
employee associated with Company or any Company Subsidiary
as a result of the transactions contemplated hereby under
any contract or otherwise will, if made, constitute an
"excess parachute payment" within the meaning of
Section 280G of the Code.
(k) Company and each Company ERISA Affiliate
have complied with the continuation coverage requirements of
Section 4980B of the Code and ERISA Sections 601 through
608.
(l) The consummation of the transactions
contemplated hereby will not accelerate or increase any
liability under any Company Benefit Plan or any employment
agreement or contract or otherwise because of an
acceleration or increase of any of the rights or benefits to
which employees of Company or any Company ERISA Affiliate
may be entitled thereunder except for stock options granted
by Company and certain employment agreements disclosed under
Section 3.17.
(m) Company has made no representations or
warranties contractually or otherwise to any client or
customer of Company that Company employees rendering
services to such client or customer cannot be treated as
"leased employees" (within the meaning of Section 414(n) of
the Code) of such client or customer or that such employees
would not be required to participate under any pension
benefit plan (within the meaning of Section 3(2) of ERISA)
(a "Pension Benefit Plan") of such client or customer of
Company.
3.15 Property.
(a) Company and the Company Subsidiaries
have good and valid title to or valid leasehold interests in
its properties reflected in the Company Reports and the
Interim Balance Sheet or acquired after July 1, 1998 (other
than properties sold or otherwise disposed of in the
ordinary course of business), and all of such properties are
held free and clear of all liens, encumbrances and
restrictions, except, with respect to all such properties,
(a) mortgages and liens securing debt reflected as
liabilities on the Interim Balance Sheet and (b) (i) liens
for current taxes and assessments not in default,
(ii) mechanics', carriers', workmen's, repairmen's,
statutory or common law liens either not delinquent or being
contested in good faith, and (iii) liens, mortgages,
encumbrances, covenants, rights of way, building or use
restrictions, easements, exceptions, variances, reservations
and other matters or limitations of any kind, if any, which
either individually or in the aggregate do not have a
material adverse effect on Company's or any of the Company
Subsidiaries' use of the property affected.
(b) Company or one of the Company
Subsidiaries has physical possession of all real property,
equipment and other assets which are covered by Disclosed
Leases.
(c) The structures and equipment owned or
leased by each of Company and the Company Subsidiaries are,
to Company's knowledge, structurally sound with no defects,
are in good and safe operating condition and repair and are
adequate for the uses to which they are being put, except
for any such circumstances which, individually or in the
aggregate, do not have or would not reasonably be expected
to have, individually or in the aggregate, Material Adverse
Effect on Company.
(d) The rights, properties and other assets
presently owned, leased or licensed by each of Company and
the Company Subsidiaries and reflected on the Interim
Balance Sheet and the September Balance Sheet include all
rights, properties and other assets necessary to permit
Company and the Company Subsidiaries to conduct their
businesses in the same manner as such businesses are
currently conducted and as they have been conducted since
December 31, 1995, without any need for replacement,
refurbishment or extraordinary repair except in the ordinary
course of business consistent with past practice.
3.16 Intellectual Property; Year 2000
(a) Section 3.16(a) of the Disclosure Letter
sets forth a complete and accurate list and description of
(i) all United States federal, state and foreign patents,
registered trademarks, trade names, registered service
marks, copyrights (including any registrations and
applications therefor) and all trade secrets, technology,
processes, inventions and other intellectual property owned
by Company or any Company Subsidiary that are material to
the business of each of Company and the Company Subsidiaries
as conducted as of the date hereof (hereinafter the
"Intellectual Property Rights") and (ii) all United States
federal, state and foreign patents, registered trademarks,
trade names, registered service marks, copyrights (including
any registrations and applications therefor) and all
technology, processes, inventions and other intellectual
property licensed to Company or any Company Subsidiary that
are material to the business of each of Company and the
Company Subsidiaries as conducted as of the date hereof
(hereinafter the "Licensed Rights"). Except as specifically
set forth in Section 3.16(a) of the Disclosure Letter,
(i) Company and the Company Subsidiaries own and have the
full and exclusive right to use the Intellectual Property
Rights and the Intellectual Property Rights are free of any
liens, claims or encumbrances, are not subject to any
royalty bearing license, and are not subject to any other
arrangement requiring any material payment to any person or
the obligation to grant material rights to any person in
exchange, (ii) the Licensed Rights are free and clear of any
material royalties or obligations of Company or the Company
Subsidiaries in excess of $50,000 per annum, and (iii) the
Intellectual Property Rights and the Licensed Rights are all
those rights necessary and material to the conduct of the
business of each of Company and the Company Subsidiaries as
currently being conducted or currently proposed to be
conducted. The validity of the Intellectual Property Rights
and title thereto, and the validity of the Licensed Rights,
(i) have not been questioned in any prior litigation,
(ii) are not being questioned in any pending litigation, and
(iii) to the best knowledge of Company, are not the
subject(s) of any threatened or proposed litigation. Except
as specifically set forth in Section 3.16(a) of the
Disclosure Letter, the business of each of Company and the
Company Subsidiaries, as now conducted, does not conflict
with, nor has Company or any Company Subsidiary received
notice of any claim that such business conflicts with, any
patents, trademarks, trade names, service marks or
copyrights of any third party. The consummation of the
transactions contemplated hereby will not result in the loss
or impairment of any of the Intellectual Property Rights or
any of the Licensed Rights. Each of Company and the Company
Subsidiaries does not know of any infringing use by any
third party of the Intellectual Property Rights or the
Licensed Rights.
(b) Each of Company and the Company
Subsidiaries owns, or possesses valid license rights to, all
computer software programs that are material to the conduct
of the business of Company and the Company Subsidiaries.
Except as listed in Section 3.16(b) of the Disclosure
Letter, there are no infringement suits, actions or
proceedings pending or, to the best knowledge of Company,
threatened against Company or any Company Subsidiary with
respect to any software owned or licensed by Company or any
Company Subsidiary, and the transactions contemplated hereby
will not result in the loss or impairment of any such
ownership or license rights.
(c) (i) Neither Company nor any Company
Subsidiary is subject to any pending or threatened
regulatory action, proceeding or, to the knowledge of
Company, any pending or threatened investigation concerning
Year 2000 Compliance with respect to all of the services
offered by Company and the Company Subsidiaries ("Services")
or the operations of Company and the Company Subsidiaries,
and, to the knowledge of Company, there is no basis for any
such regulatory action, proceeding or investigation the
result of which would reasonably be expected to have a
Material Adverse Effect on Company. Company and the Company
Subsidiaries are in material compliance with all applicable
regulatory rules, regulations and requirements in regards to
the Year 2000 Compliance of Company's and the Company
Subsidiaries' Services and operations, except to the extent
that such non-compliance would not have a Material Adverse
Effect on Company. Except as specifically set forth in
Section 3.16(c) of the Disclosure Letter, neither Company
nor any Company Subsidiary has received notice of a claim
against Company or any Company Subsidiary that any of
Company's or the Company Subsidiaries' Services are not
Year 2000 Compliant exists and, to the knowledge of Company,
there is no basis for any such claim or action. Company has
furnished or made available to Parent true, correct and
complete copies of any material customer agreements or other
materials in which Company has furnished assurances as to
the Year 2000 Compliance of Company's or the Company
Subsidiaries' Services, including any responses to surveys
or requests for certification of Year 2000 Compliance and
letters of assurance to customers.
(ii) All of the internal MIS systems (including
hardware, firmware, operating system software, utilities,
and applications software) and all systems used in the
ordinary course of Company's and the Company Subsidiaries'
business by or on behalf of Company or the Company
Subsidiaries, including Company's and the Company
Subsidiaries' payroll, accounting, billing/receivables,
customer service, human resources and e-mail systems, are
Year 2000 Compliant except to the extent any non-compliance
would not have a Material Adverse Effect on Company.
(iii) Except as specifically set forth in
Section 3.16(c) of the Disclosure Letter, either Company or
the Company Subsidiaries have contacted each material vendor
of products or services and each lessor of facilities that
are material to Company or the Company Subsidiaries, and
their respective Services and operations, to request
information from such vendor or lessor as to whether it will
be able to continue to furnish its products, services or
facilities to Company on and after January 1, 2000 to the
extent such vendor or lessor is obligated to do so pursuant
to existing agreements.
(iv) Except as specifically set forth in Section
3.16(c) of the Disclosure Letter, all of Company's owned
facilities in all locations (including HVAC systems,
mechanical systems, elevators, security systems, fire
suppression systems, telecommunications systems, fax
machines, copy machines and equipment) are Year 2000
Compliant.
(v) For purposes of this Agreement, Year 2000
Compliant means that the relevant information technology is
designed to be used prior to, during and after the calendar
year 2000 A.D. and the information technology used during
such time period will accurately receive, provide and
process date/time data (including, but not limited to,
calculating, comparing and sequencing) from, into and
between the twentieth and twenty-first centuries (including
the years 1999, 2000 and leap year calculations), and will
not malfunction, cease to function or provide invalid or
incorrect results as a result of date/time data.
(vi) Company has furnished or made available to
Parent with a true, correct and complete copy of any
internal memoranda, budget plans, forecasts or reports
concerning the Year 2000 Compliance of the Services,
operations, systems, supplies, and facilities of Company,
the Company Subsidiaries and Company's vendors of which
Company has knowledge.
3.17 Labor Relations. Except to the extent set
forth in Section 3.17 of the Disclosure Letter:
(a) There are no agreements or arrangements
on behalf of any officer, director or employee providing for
payment or other benefits to such person contingent upon the
execution of this Agreement, the Closing or a transaction
involving a change of control of Company. There are no
collective bargaining agreements to which Company or any
Company Subsidiary is a party.
(b) During the five years immediately
preceding the date hereof, none of Company or the Company
Subsidiaries has experienced any organized slow down, work
interruption, strike or work stoppage. There are no
existing or, to Company's knowledge, threatened labor
disputes. None of Company or the Company Subsidiaries has
failed to pay when due any wages, bonuses, commissions,
benefits, taxes, penalties or assessments or other monies,
owed to, or arising out of the employment of or any
relationship or arrangement with, any officer, director,
employee, sales representative, business partner, contractor
or other consultant or agent. Neither Company nor any
Company Subsidiary has taken any action that would
constitute a "Mass Layoff" or "Plant Closing" within the
meaning of the Worker Adjustment and Retraining Notification
("WARN") Act or would otherwise trigger notice requirements
or liability under any state or local plant closing notice
law, and to the extent any liability arises between the date
of this Agreement and the Closing Date as a result of
employment actions of Company or the Company Subsidiaries,
Company and the Company Subsidiaries will be solely
responsible therefor.
(c) Each of Company and the Company
Subsidiaries is in compliance in all material respects with
all applicable laws respecting employment and employment
practices, terms and conditions of employment, wages and
hours, occupational safety and health, and is not engaged in
any unfair labor or unfair employment practices.
(d) There is no unfair labor practice charge
or complaint or any other matter against (or to the
knowledge of Company, involving) Company or any Company
Subsidiary pending or, to the knowledge of Company,
threatened before the National Labor Relations Board or any
other governmental authority and none of Company's or the
Company Subsidiaries' employees as employees of Company or
the Company Subsidiaries are or have been represented by a
labor organization that was NLRB certified.
(e) No certification or decertification
question relating to collective bargaining units at the
premises of Company or any of the Company Subsidiaries
exists or has existed within the past five years.
(f) There are no investigations,
administrative proceedings or formal complaints of
discrimination (including discrimination based upon sex,
age, marital status, race, national origin, sexual
preference, disability, handicap or veteran status) pending,
or to the knowledge of Company, threatened before the Equal
Employment Opportunity Commission or any federal, state or
local agency or court against or involving Company or any
Company Subsidiary. No discrimination and/or retaliation
claim is pending or, to the knowledge of Company, threatened
against Company or the Company Subsidiaries under the 1866,
1877, 1964 or 1991 Civil Rights Acts, the Equal Pay Act, the
Age Discrimination in Employment Act, as amended, the
Americans with Disabilities Act, the Family and Medical
Leave Act, the Fair Labor Standards Act, ERISA, or any other
Federal Law or any comparable state or local fair employment
practices act regulating discrimination in the workplace,
and no wrongful discharge, libel, slander or other claim
under any state law is pending or, to the knowledge of
Company, threatened against Company or any Company
Subsidiary that rises out of the employment or contractor
relationship with respect to any employee or contractor or
the termination of any such relationship.
(g) There are no citations, investigations,
administrative proceedings or formal complaints of
violations of local, state or federal occupational safety
and health laws pending, or to the knowledge of Company,
threatened before the Occupational Safety and Health Review
Commission or any federal, state or local agency or court
against or involving Company or any Company Subsidiary.
(h) Section 3.17(h) of the Disclosure Letter
sets forth a true and correct list of all employees employed
by each of Company and the Company Subsidiaries at the date
of this Agreement, together with their respective job
titles, dates of hire and compensation.
(i) No agreement, arbitration or court
decision or governmental order in any way limits or
restricts any of Company, any Company Subsidiary or Parent
from relocating or closing any of the operations of Company
or any of the Company Subsidiaries.
(j) If Company or any of the Company
Subsidiaries is a Federal, State or local contractor
obligated to develop and maintain an affirmative action
plan, no discrimination claim, show-cause notice,
conciliation proceeding, sanctions or debarment proceedings
is pending or has, to the knowledge of Company, been
threatened against Company or the Company Subsidiaries with
the Office of Federal Contract Compliance Programs ("OFCCP")
or any other Federal agency or any comparable state or local
agency or court and no desk audit or on-site review is in
progress.
(k) No workers' compensation or retaliation
claim is pending against Company or the Company Subsidiaries
in excess of $250,000 in the aggregate and Company maintains
adequate insurance with respect to workers' compensation
claims pursuant to insurance policies that are currently in
force, or has accrued an adequate liability for such
obligations, including, without limitation, adequate
accruals with respect to accrued but unreported claims and
retroactive insurance premiums.
3.18 No Violation of Law. The business and
operations of Company and the Company Subsidiaries have been
conducted in compliance in all material respects with all
applicable laws, ordinances, regulations and orders of all
governmental entities and other regulatory bodies
(including, without limitation, laws, ordinances,
regulations and orders relating to fair credit practices,
commercial finance companies, zoning, environmental matters,
employment law and the safety and health of employees),
except where noncompliance does not have and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company. Except as
set forth in Section 3.18 of the Disclosure Letter,
(i) neither Company nor any Company Subsidiary has been
charged with or, to the knowledge of Company, is now under
investigation with respect to, a violation in any material
respect of any applicable law, regulation, ordinance, order
or other requirement of a governmental entity or other
regulatory body, and (ii) Company and the Company
Subsidiaries have filed all reports required to be filed
with any governmental entity or other regulatory body on or
before the date hereof except for reports the failure to
file which does not have and would not reasonably be
expected to have, individually or in the aggregate, a
Material Adverse Effect on Company. Company and the Company
Subsidiaries have all permits, certificates, licenses,
approvals and other governmental authorizations required in
connection with the operation of the business of Company and
the Company Subsidiaries, except for permits, certificates,
licenses, approvals and other governmental authorizations
the failure of which to have does not and would not
reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Company.
3.19 Environmental Matters. Except as set forth
in Section 3.19 of the Disclosure Letter and except for
those matters which would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse
Effect on Company:
(a) Each of Company and the Company
Subsidiaries possesses, and is in compliance with, all
permits, licenses and government authorizations and has
filed all notices and registrations that are required under
local, state and federal laws and regulations relating to
protection of the environment, natural resources, health,
safety, waste management, pollution control, product
registration and/or Hazardous Materials (as defined below in
this Section 3.19) ("Environmental Laws") and is in
compliance with all applicable limitations, restrictions,
conditions, standards, prohibitions, requirements,
obligations, schedules and timetables contained in those
Environmental Laws or contained in any law, regulation,
code, plan, order, decree, judgment, notice, permit or
demand letter issued, entered, promulgated or approved
thereunder.
(b) Neither Company nor any Company
Subsidiary has received written notice of any actual or
threatened liability under the Federal Comprehensive
Environmental Response, Compensation and Liability Act
("CERCLA") or any similar state or local statute or
ordinance or any other Environmental Law from any
governmental agency or any third party relating to the
release or threatened release of any Hazardous Material to
any environmental medium or the cleanup or investigation of
any Hazardous Material found in any environmental medium.
(c) Neither Company nor any Company
Subsidiary has entered into or agreed to enter into or is in
negotiations with respect to any consent decree or order,
and neither Company nor any Company Subsidiary is subject to
any judgment, decree or judicial or administrative order
relating to compliance with, or the investigation or cleanup
of Hazardous Materials under, any Environmental Laws.
(d) Neither Company nor any Company
Subsidiary has received within the past five years any
notice of violation or been subject to any administrative or
judicial proceeding alleging violation of applicable
Environmental Laws.
(e) Neither Company nor any Company
Subsidiary is subject to any claim, obligation, liability
(whether based on strict liability or otherwise), loss,
damage or expense of any kind or nature, contingent or
otherwise, incurred or imposed or based upon any provision
of any Environmental Law and arising out of any act or
omission of Company or any Company Subsidiary, or any of
their employees, agents or representatives or arising out of
the ownership, use, control or operation by Company or any
Company Subsidiary of any plant, facility, site, area or
property (including, without limitation, any plant,
facility, site, area or property currently or previously
owned or leased or used by or on behalf of Company or any
Company Subsidiary) from which any Hazardous Materials were
or are being released into the environment (the term
"release" meaning any actual or threatened spilling,
leaking, pumping, pouring, emitting, emptying, discharging,
injecting, escaping, leaching, dumping or disposing into the
environment (including the abandonment of any barrels,
containers, tanks or other closed receptacles containing any
Hazardous Material), and the term "environment" meaning any
surface or ground water, drinking water supply, soil,
surface or subsurface strata or medium, or the ambient air).
(f) Company has provided Parent with true,
correct and complete copies of all documents of Company and
the Company Subsidiaries relating to environmental matters
or matters otherwise regulated under any applicable
Environmental Law. Neither Company nor any Company
Subsidiary has paid any fines, penalties or assessments for
violations of Environmental Laws within the past five years.
(g) None of the real property leased or
occupied by Company or any Company Subsidiary or any other
assets, improvements or equipment of Company or any Company
Subsidiary contains any asbestos-containing material (other
than non-friable floor tile, roofing material and drywall
material), polychlorinated biphenyls ("PCBs") or underground
storage tanks and to the knowledge of Company and any
Company Subsidiary, never contained any PCBs or underground
storage tanks.
(h) Company has provided Parent with copies
of all work place or worker exposure measurements made by or
on behalf of Company or any Company Subsidiary, including,
without limitation, all work place or worker exposure
measurements for particulates, Occupational Safety and
Health Administration ("OSHA") hazardous chemicals and
Hazardous Materials. At no time since December 31, 1992,
have conditions in the work place resulted in an exceedance
or a violation of any OSHA permissible exposure level for
workers of Company or any Company Subsidiary or of any
similar state or local statute, ordinance or regulation
intended to protect workers. Company has established and is
in full compliance with its OSHA Hazard Communication
Program and is in full compliance with all other applicable
OSHA standards, including, without limitation, the blood
borne pathogens standard.
(i) There is no radon or regulated
radioactive materials present on any real property leased or
occupied by Company or any Company Subsidiary or any other
assets, improvements, or equipment of Company or any Company
Subsidiary.
(j) There is not now and, to the knowledge
of Company and any Company Subsidiary, never has been, in or
at any real property leased or occupied by Company or any
Company Subsidiary, or any portion thereof any: (1) surface
impoundment, lagoon, containment facility or other unit
regulated under any applicable Environmental Law, for the
temporary or permanent storage, treatment or disposal of
Hazardous Materials or (2) landfill or solid waste disposal
area.
As used in this Section 3.19, the term "Hazardous Materials"
means any waste, pollutant, hazardous substance, toxic,
ignitable, reactive or corrosive substance, hazardous waste,
special waste, industrial substance, by-product, process
intermediate product or waste, petroleum or
petroleum-derived substance or waste, chemical liquids or
solids, liquid or gaseous products, or any constituent of
any such substance, chemical or waste, the generation, use,
handling, recycling, reclamation, transportation, release,
treatment, storage or disposal of which by Company or any
Company Subsidiary is or has been in any way governed by or
subject to any applicable Environmental Law.
3.20 Insurance Policies. Section 3.20 of the
Disclosure Letter sets forth a complete and accurate list
and description (including the amount of coverage provided
thereunder) of all insurance policies in force naming
Company, any Company Subsidiary or employees thereof as an
insured or beneficiary or as a loss payable payee and for
which Company or any Company Subsidiary has paid or is
obligated to pay all or part of the premiums. Neither
Company nor any Company Subsidiary has received notice of
any pending or threatened cancellation or premium increase
(retroactive or otherwise) with respect thereto, and each of
Company and the Company Subsidiaries is in compliance in all
material respects with all conditions contained therein
including, without limitation, the timely payment of all
premiums due and payable thereunder. There are no pending
claims against such insurance by Company or any Company
Subsidiary as to which insurers are defending under
reservation of rights or have denied liability, and there
exists no claim under such insurance that has not been
properly filed by Company or any Company Subsidiary.
3.21 Absence of Certain Business Practices. None
of Company, the Company Subsidiaries or, to Company's
knowledge, any officer, employee or agent of Company or any
of the Company Subsidiaries or any other person acting on
its behalf, has, directly or indirectly, given or agreed to
give any gift or similar benefit (other than with respect to
bona fide payments for which adequate consideration has been
given) to any customer, vendor, governmental employee or
other person who is or may be in a position to help or
hinder the business of Company or any of the Company
Subsidiaries (or assist Company or any of the Company
Subsidiaries in connection with any actual or proposed
transaction) (a) which might subject Company or any of the
Company Subsidiaries to any damage or penalty in any civil,
criminal or governmental litigation or proceeding,
(b) which, if not continued in the future, would have or
would reasonably be expected to have a Material Adverse
Effect on Company or which would or would reasonably be
expected to subject Company or any of the Company
Subsidiaries to suit or penalty in any private or
governmental litigation or proceeding, (c) for any of the
purposes described in Section 162(c) of the Code, or (d) for
establishment or maintenance of any concealed fund or
concealed bank account.
3.22 Accounts Receivable and Net Investment in
Direct Finance Leases and Loans: Restricted Cash.
(a) All accounts receivable and net
investment in direct finance leases and loans of Company and
the Company Subsidiaries which are reflected in the
September Balance Sheet (i) are valid, existing and
collectible in a manner consistent with Company's (or the
Company Subsidiaries') past practice without resort to legal
proceedings or collection agencies, except where the failure
to be so valid, existing and collectible does not have and
would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company,
(ii) represent monies due in the ordinary course of business
and (iii) are not subject to any refunds or adjustments or
any defenses, rights of set-off, assignment, restrictions,
security interests or other encumbrances. Section 3.22(a)
of the Disclosure Letter sets forth all accounts receivable
and net investment in direct finance leases and loans, the
scheduled payments under which were more than 60 days past
due at September 30, 1998. Neither Company nor any Company
Subsidiary has ever factored any of its accounts receivable,
excluding direct finance lease and loan receivables.
(b) Since the date of the Interim Balance
Sheet, the amount of cash or cash equivalents of Company and
the Company Subsidiaries classified on the Interim Balance
Sheet as "restricted cash" has not decreased and such
restricted cash equals or exceeds the amount required to be
reserved by Company and the Company Subsidiaries under the
Securitization Agreements.
3.23 Transactions with Affiliates. Except as set
forth in Section 3.23 of the Disclosure Letter, no director,
officer or other "affiliate" or "associate" (as such terms
are defined in Rule 12b-2 under the Exchange Act) of Company
or any Company Subsidiary or, to Company's knowledge, any
person with whom any such director, officer or other
affiliate or associate has any direct or indirect relation
by blood, marriage or adoption, or any entity in which any
such director, officer or other affiliate or associate, owns
any beneficial interest (other than a publicly held
corporation whose stock is traded on a national securities
exchange or in the over-the-counter market and less than 1%
of the stock of which is beneficially owned by all such
persons) has any interest in (i) any contract, arrangement
or understanding with Company or any Company Subsidiary, or
relating to the business or operations of Company or any
Company Subsidiary, (ii) any loan, arrangement,
understanding, agreement or contract for or relating to
indebtedness of Company or any Company Subsidiary, or
(iii) any property (real, personal or mixed), tangible, or
intangible, used or currently intended to be used in, the
business or operations of Company or any Company Subsidiary.
3.24 Fairness Opinion. The Board of Directors of
Company has received an opinion dated the date hereof from
Piper Jaffray Inc. to the effect that as of such date the
consideration to be received by the holders of Company
Common Stock in the Merger is fair, from a financial point
of view, to such shareholders.
3.25 Antitakeover Statutes; Shareholders' Rights
Plan. Each of Company and the Board of Directors of Company
has taken all action required to be taken by it in order to
exempt this Agreement and the Shareholders' Option Agreement
and the transactions contemplated hereby and thereby from,
and this Agreement and the Shareholders' Option Agreement
and the transactions contemplated hereby and thereby are
exempt from the requirements of, any "moratorium", "control
share", "fair price", "affiliate transaction", "business
combination" or similar or other antitakeover laws and
regulations of any state. Company does not have a
"shareholders' rights plan", "poison pill" or similar plan
or arrangement.
3.26 Board Recommendations. The Board of
Directors of Company, at a meeting duly called and held, has
(i) determined that this Agreement and the transactions
contemplated hereby (including the Merger) are fair to and
in the best interests of the shareholders of Company, and
(ii) resolved to recommend that the holders of the shares of
capital stock of Company entitled to vote thereon approve
this Agreement and the transactions contemplated hereby
(including the Merger).
3.27 Brokers and Finders. Neither Company nor any
of the Company Subsidiaries, nor any of their respective
officers, directors or employees, has employed any broker or
finder or incurred any liability for any financial advisory
fees, brokerage fees, commissions, or finder's fees, and no
broker or finder has acted directly or indirectly for
Company or any of the Company Subsidiaries in connection
with this Agreement, the Shareholders' Option Agreement or
any of the transactions contemplated hereby or thereby,
except that Company has retained Credit Suisse First Boston
Corporation and Piper Jaffray Inc. as its financial
advisors, whose fees and expenses will be paid by Company.
Company has previously delivered to Parent complete copies
of the engagement letters and all other agreements entered
into by Company with each of Credit Suisse First Boston
Corporation and Piper Jaffray Inc.
3.28 Merger. Neither Company nor any Company
Subsidiary has taken any action or failed to take any action
which action or failure to take action would jeopardize the
Merger as a reorganization within the meaning of
Section 368(a) of the Code (including, without limitation,
any distribution of property or other transaction that would
cause Company not to hold "substantially all of its
properties", within the meaning of Section 368(a)(2)(E)(i)
of the Code, after the Merger).
3.29 Voting Requirements. The affirmative vote of
the holders of a majority of the outstanding shares of
Company Common Stock and the affirmative vote of the holders
of two-thirds (2/3) of the outstanding shares of the Series A
Shares, voting as a class with respect to this Agreement and
the Merger, are the only vote of the holders of any class or
series of Company's capital stock necessary to approve this
Agreement, the Merger and the transactions contemplated by
this Agreement and the Merger.
3.30 No Existing Discussions. Prior to the date
hereof, Company has engaged in an auction process pursuant
to which it, directly and through its financial advisors,
has discussed with other parties the possibility of
consummating a transaction which was the subject of an
Acquisition Proposal from such parties. As of the date
hereof, Company has terminated all such discussions and is
not engaged, directly or indirectly, in any negotiations or
discussions with any other party with respect to an
Acquisition Proposal.
3.31 Representations and Warranties of Identified
Shareholders. As an inducement to Parent and Sub to enter
into this Agreement and consummate the transactions
contemplated hereby, and subject to Section 8.11 hereof,
each Identified Shareholder hereby severally, and not
jointly, represents and warrants to Parent and Sub as
follows:
(a) This Agreement has been duly executed
and delivered by him, and the provisions of Sections 3.31,
5.15, 5.18, 6.3(c)(ii), and Article 8 hereof including,
without limitation, Section 8.11 constitute his valid and
binding obligations, enforceable against him in accordance
with their terms, except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or
relating to the enforcement of creditors' rights generally
and subject to general principles of equity.
(b) The execution and delivery of this
Agreement and the fulfillment of his obligations under the
provisions of Section 3.31, the last sentence of 5.15, 5.18,
6.3(c)(ii), and Article 8 hereof including, without
limitation, Section 8.11 do not and will not (i) violate,
conflict with, result in a breach of any provision of,
constitute a default (or an event that, with notice or lapse
of time or both, would constitute a default) under any of
the terms, conditions or provisions of any note, bond,
mortgage, indenture, deed of trust, license, lease,
agreement or other instrument or obligation to which he is a
party, or by which he may be bound, or to which he or any of
his properties or assets may be subject or (ii) violate or
conflict with any judgment, ruling, order, writ, injunction
or decree, or any statute, rule or regulation applicable to
him or any of his properties or assets.
(c) He has reviewed the representations and
warranties of Company set forth herein and, to his
knowledge, such representations and warranties are accurate
and correct in all material respects.
(d) The representations and warranties of
such Identified Shareholder set forth in the Shareholders'
Option Agreement are accurate and correct.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
As an inducement to Company to enter into this
Agreement and consummate the transactions contemplated
hereby, Parent hereby represents and warrants to Company as
follows:
4.1 Organization, Good Standing and Power.
(a) Parent is a corporation duly organized,
validly existing and in good standing under the laws of the
State of New York and has all requisite corporate power and
authority to own, lease and operate its properties and to
carry on its business as now being conducted. Parent is
duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties make
such qualification or licensing necessary, except where the
failure to be so qualified or licensed or to be in good
standing does not have or would not reasonably be expected
to have, individually or in the aggregate, a Material
Adverse Effect on Parent (as defined below). Parent has
delivered to Company complete and correct copies of its
articles of incorporation and bylaws and all amendments
thereto to the date hereof that have been requested by
Company. As used in this Agreement, the phrase "Material
Adverse Effect on Parent" means a material adverse effect on
(a) the condition (financial or otherwise), business,
assets, liabilities or results of operations of Parent and
its subsidiaries taken as a whole or (b) a material adverse
effect on the ability of Parent or Sub to consummate the
transactions contemplated by this Agreement.
(b) Sub is a corporation duly organized,
validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and
authority to own, lease and operate its properties and to
carry on its business as now being conducted. Sub is duly
qualified or licensed to do business and is in good standing
in each jurisdiction in which the nature of its business or
the ownership or leasing of its properties make such
qualification or licensing necessary, except where the
failure to be so qualified or licensed or to be in good
standing does not have or would not reasonably be expected
to have, individually or in the aggregate, a Material
Adverse Effect on Parent. Sub has delivered to Company
complete and correct copies of its certificate of
incorporation and bylaws and all amendments thereto to the
date hereof that have been requested by Company.
4.2 Capitalization. The authorized capital stock
of Parent consists of 1.2 billion shares of Common Stock,
par value $.60 per share, of which, as of October 30, 1998,
454,435,465 shares were issued and outstanding. All of the
shares of Parent Common Stock to be issued in exchange for
Company Common Stock at the Effective Time in accordance
with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable
and, except as set forth in Section 4.2 of the Disclosure
Letter, free of preemptive rights. Parent owns all of the
outstanding capital stock of Sub.
4.3 Authority; Enforceability. Each of Parent
and Sub has the corporate power and authority to enter into
this Agreement and to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all
necessary corporate action on the part of each of Parent and
Sub, and this Agreement has been duly executed and delivered
by Parent and Sub and constitutes the valid and binding
obligation of each such party, enforceable against it in
accordance with its terms, except as may be limited by
bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors'
rights generally and subject to general principles of
equity.
4.4 Non-Contravention; Consents.
(a) Except as set forth in Section 4.4(a) of
the Disclosure Letter, neither the execution, delivery and
performance by Parent or Sub of this Agreement, nor the
consummation by Parent or Sub of the transactions
contemplated hereby, nor compliance by Parent or Sub with
any of the provisions hereof, will:
(i) violate, conflict with, result in a breach of
any provision of, constitute a default (or an event
that, with notice or lapse of time or both, would
constitute a default) under, result in the termination,
cancellation or expiration of, accelerate the
performance required by, or result in a right of
termination or acceleration, or the creation of any
lien, security interest, charge or encumbrance upon any
of the properties or assets of Parent or Sub, under any
of the terms, conditions or provisions of, (x) its
respective organizational documents, or (y) any note,
bond, mortgage, indenture, deed of trust, license,
lease, agreement or other instrument or obligation to
which Parent or any of its subsidiaries is a party, or
by which Parent or any of its subsidiaries may be
bound, or to which Parent or any of its subsidiaries or
the properties or assets of any of them may be subject,
and that has or would reasonably be expected to have,
in any such event specified in this clause (y),
individually or in the aggregate, a Material Adverse
Effect on Parent; or
(ii) subject to compliance with the statutes and
regulations referred to in Section 4.4(b), violate any
judgment, award, ruling, order, writ, injunction,
decree, or any statute, rule or regulation applicable
to Parent or any of its subsidiaries or any of their
respective properties or assets where such violation
has or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse
Effect on Parent.
(b) Except as set forth in Section 4.4(b) of
the Disclosure Letter and other than notices, filings,
authorizations, exemptions, consents or approvals, the
failure of which to give or obtain does not have and would
not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent, no notice
to, filing with, authorization of, exemption by, or consent
or approval of, any governmental authority or other
regulatory body is necessary for the consummation by Parent
or Sub of the transactions contemplated by this Agreement.
4.5 SEC Reports.
(a) Parent has heretofore made available to
Company true copies of all reports, proxy statements or
information statements and all other documents, together
with any amendments required to be made thereto, required to
be filed with the SEC under the Exchange Act (collectively,
the "Parent Reports"), together with all exhibits thereto,
that Company has requested.
(b) All of the financial statements included
in the Parent Reports (which are collectively referred to
herein as the "Parent Consolidated Financial Statements")
fairly presented the consolidated financial position of
Parent and its subsidiaries as of the dates mentioned and
the consolidated results of operations, changes in
shareholders' equity and cash flows for the periods then
ended in conformity with GAAP applied on a consistent basis
(subject to any exceptions as to consistency specified
therein or as may be indicated in the notes thereto or in
the case of the unaudited statements, as may be permitted by
Form 10-Q of the SEC and subject, in the case of unaudited
statements, to normal, recurring audit adjustments).
(c) As of their respective dates, the Parent
Reports complied in all material respects with all
applicable rules and regulations promulgated by the SEC and
did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein
or necessary in order to make the statements therein, in
light of the circumstances under which they were made, not
misleading.
4.6 Registration Statement, Etc. None of the
information supplied or to be supplied by Parent for
inclusion or incorporation by reference in (a) the
Registration Statement and (b) the Proxy Statement will, at
the respective times such documents are filed with the SEC,
and, in the case of the Registration Statement, when it
becomes effective, or at the time any amendment or
supplement thereto becomes effective, cause such documents
to contain any untrue statement of a material fact, or omit
to state any material fact necessary in order to make the
statements therein not misleading, and, in the case of the
Proxy Statement, when first mailed to the shareholders of
Company, or at the time of the Shareholders' Meeting, cause
the Proxy Statement or any amendment thereof or supplement
thereto to contain any untrue statement of a material fact,
or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances
under which they were made, not misleading. All documents
that Parent is responsible for filing with the SEC and any
other regulatory agency in connection with the Merger will
comply as to form in all material respects with the
provisions of applicable law, except that no representation
is made by Parent with respect to statements made therein
based on information supplied by Company or with respect to
information concerning Company which is incorporated by
reference in the Registration Statement or the Proxy
Statement.
4.7 Litigation. Except as set forth in the
Parent Reports, there are no litigation, claims, suits,
actions, investigations, indictments or informations, or
administrative, arbitration or other proceedings pending,
or, to the knowledge of Parent, threatened, against Parent
or any subsidiary of Parent which has or would reasonably be
expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent.
4.8 No Violation of Law. Except as set forth in
the Parent Reports, the business and operations of Parent
and its subsidiaries have been conducted in compliance with
all applicable laws, ordinances, regulations and orders of
all governmental entities and other regulatory bodies
(including, without limitation, laws, ordinances,
regulations and orders relating to zoning, environmental
matters and the safety and health of employees), except
where the failure to be in compliance does not have and
would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent.
4.9 Brokers and Finders. Neither Parent nor any
of its subsidiaries, nor any of their respective officers,
directors or employees, has employed any broker or finder or
incurred any liability for any financial advisory fees,
brokerage fees, commissions, or finder's fees, and no broker
or finder has acted directly or indirectly for Parent or any
of its subsidiaries, in connection with this Agreement, the
Shareholder's Option Agreement or any of the transactions
contemplated hereby or thereby.
4.10 Merger. Neither Parent nor any of its
subsidiaries has taken any action or failed to take any
action which action or failure to take action would
jeopardize the Merger as a reorganization within the meaning
of Section 368(a) of the Code.
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; CERTAIN COVENANTS
5.1 Access and Information. Upon reasonable
notice, each of Company and Parent shall (and Company shall
cause the Company Subsidiaries to) give to the other and to
the respective accountants, counsel and other
representatives of such other party reasonable access during
normal business hours throughout the period prior to the
Effective Time to all of its and the Company Subsidiaries'
properties, books, contracts, commitments and records
(including tax returns and insurance policies) and shall
permit them to consult with its and the Company
Subsidiaries' respective officers, employees, auditors,
attorneys and agents; provided, however, that any such
investigation shall be conducted in such a manner as not to
interfere unreasonably with the business or operations of
the other party or the Company Subsidiaries. All
confidential information provided pursuant to this
Section 5.1 will be subject to the Confidentiality
Agreements, dated, respectively, as of August 12, 1998 and
November 9, 1998 (the "Confidentiality Agreements"), between
Company and Parent.
5.2 Conduct of Business Pending Merger.
(a) Company agrees that from the date
hereof to the Effective Time, except as contemplated by this
Agreement or to the extent that Parent shall otherwise
consent in writing, Company and the Company Subsidiaries
will operate their businesses only in the ordinary course in
the same manner as previously conducted and not engage in
any new line of business or enter into any agreement,
transaction or activity or make any commitment except in the
ordinary course of business consistent with past practices
or as expressly permitted by this Section 5.2; and,
consistent with such operation, will use all commercially
reasonable efforts consistent with past practices to
preserve their business organizations intact, to keep
available to them the goodwill of their customers, vendors,
business partners and others with whom business
relationships exist to the end that their goodwill and
ongoing business shall not be impaired at the Effective
Time, and will further exercise all commercially reasonable
efforts to maintain their existing relationships with their
employees in general.
(b) Company agrees that from the date
hereof to the Effective Time, except as otherwise consented
to by Parent in writing, (i) neither it nor any Company
Subsidiary will change any provision of its Articles of
Incorporation or Bylaws or similar governing documents,
(ii) neither it nor any Company Subsidiary will make,
declare or pay any dividend or other distribution, and
(iii) neither it nor any Company Subsidiary will make any
distribution or directly or indirectly sell, issue, redeem,
purchase or otherwise acquire, any shares of its outstanding
capital stock, change the number of shares of its authorized
or issued capital stock or issue, grant any option, warrant,
call, commitment, subscription, right to purchase or
agreement of any character relating to its authorized or
issued capital stock or any securities convertible into
shares of such stock or otherwise make any change in its
capital structure; provided, however, that nothing set forth
in this Section 5.2(b) shall be deemed to restrict the
issuance by Company of Company Common Stock pursuant to the
exercise of any of the Company Options or warrants disclosed
in Section 3.3 of the Disclosure Letter in accordance with
the terms thereof as in effect on the date hereof or upon
conversion of the Series A Shares in accordance with the
terms of the Certificate of Determination and Subscription
Agreement relating thereto as in effect on the date hereof.
(c) Without limiting the undertakings of
Company pursuant to Section 5.2(a) and 5.2(b), Company
agrees that from the date hereof to the Effective Time it
will not take, or permit any Company Subsidiary to take, any
of the following actions, except to the extent consented to
by Parent in writing:
(i) (A) create, incur or assume any long-term
debt (including obligations in respect of capital
leases which individually involve annual payments in
excess of $100,000) or, except in the ordinary course
of business under existing lines of credit or existing
Securitization Facilities, create, incur or assume any
short-term debt for borrowed money, (B) assume,
guarantee, endorse or otherwise become liable or
responsible (whether directly, contingently or
otherwise) for the obligations of any other person or
entity, except in the ordinary course of business and
consistent with past practice, (C) make any loans or
advances to any other person, except in the ordinary
course of business and consistent with past practice
provided, however, that in no event shall Company or
any Company Subsidiary make any loan or advance to any
person in an amount in excess of $500,000 that is not
committed by a third-party to be purchased by such
party on a non-recourse basis, (D) make any capital
contributions to, or investments in, any person, or
(E) make any capital expenditure involving in excess of
$100,000 in the case of any single expenditure or
$300,000 in the case of all capital expenditures;
(ii) sell, transfer, convey, assign, mortgage or
pledge any of its properties or assets involving
amounts individually in excess of $100,000 or in the
aggregate in excess of $250,000, except in the ordinary
course of business consistent with past practice;
(iii) take any action to (x) amend or
terminate any Company Benefit Plan, (y) implement a
general increase in the compensation or benefits of its
employees or to increase the compensation payable to
its directors, officers or key employees involving in
the aggregate in excess of $30,000, adopt any other
plan, program, arrangement or practice providing new or
increased benefits or compensation to its employees
including, without limitation, severance benefits or
benefits payable in connection with a change of control
transaction involving Company;
(iv) amend, cancel, terminate or renew or agree to
the amendment, cancellation, termination or renewal of
any Material Contract or enter into any new Material
Contract other than (x) the amendment of any Material
Contract with a Business Partner identified pursuant to
Section 3.11(f) to effect the terms set forth in the
form of amendment previously agreed to by Company and
Parent and (y) such actions taken with respect to a
Material Contract with a non-recourse lender that do
not involve, provide for or relate to a funding
commitment or obligation on the part of Company;
(v) enter into any negotiation with respect to
any collective bargaining agreement;
(vi) make any change in any accounting methods or
any material change in any systems of internal
accounting controls or lease portfolio servicing
practices, except as may be appropriate to conform to
changes in generally accepted accounting principles;
(vii) pay, loan or advance (other than the
payment of compensation, directors' fees or
reimbursements of expenses in the ordinary course of
business and under any existing agreements identified
in Section 3.23 of the Disclosure Letter) any amount
to, or sell, transfer or lease any properties or assets
(real, personal or mixed, tangible or intangible) to,
or enter into any agreement or arrangement with, any of
its officers or directors or any "affiliate" or
"associate" of any of its officers or directors (as
such terms are defined in Rule 405 promulgated under
the Securities Act) or any employee, consultant or
contractor;
(viii) acquire any interest in or form or
commence the operations of any business or any
corporation, partnership, joint venture, marketing
arrangement, association or other business organization
or division thereof;
(ix) make any Tax election, or settle or
compromise any Tax liability that Company has contested
upon audit;
(x) pay, discharge, settle or satisfy any claims,
litigation, liabilities or obligations (whether
absolute, accrued, asserted or unasserted, contingent
or otherwise) involving amounts individually in excess
of $100,000 or in the aggregate in excess of $250,000,
other than the payment, discharge or satisfaction of
liabilities when due (i) reflected or reserved against
in, or contemplated by, the financial statements (or
the notes thereto) of Company included in the Company
Reports or (ii) incurred since June 30, 1998 in the
ordinary course of business consistent with past
practice and in accordance herewith;
(xi) modify its credit approval/declination
criteria and practices in any material respect;
(xii) fail to perform in any material
respect its obligations under any Material Contract
(except those being contested in good faith through
appropriate proceedings or procedures);
(xiii) fail to use all commercially
reasonable efforts to maintain in full force and effect
and in the same amounts policies of insurance
comparable in amount and scope of coverage to that now
maintained by Company and the Company Subsidiaries;
(xiv) fail to service, in its capacity as
servicer under the Securitization Facilities, the lease
portfolios subject to such Securitization Facilities in
the ordinary course of business consistent with past
practice;
(xv) fail to use all commercially reasonable
efforts to continue to collect its accounts receivable
and lease and loan payments due under the leases and
loans subject to the Securitization Facilities or held
by Company in the ordinary course of business
consistent with past practice;
(xvi) fail to prepare and file all federal,
state, local and foreign returns for Taxes and other
Tax reports, filings and amendments thereto required to
be filed by it, fail to provide to Parent, copies of
all federal income tax returns for Parent's review and
approval prior to the filing thereof, which review and
approval shall not interfere with the timely filing of
such returns, as well as a copy of the calendar setting
forth the filing deadlines of all other tax returns, or
fail to allow Parent, at its request, to review all tax
returns at Company's office prior to the filing
thereof, which review and approval shall not interfere
with the timely filing of such returns;
(xvii) fail to use all commercially
reasonable efforts to maintain any federal, state,
local or foreign license required to conduct its
operations;
(xviii) hire any (x) additional employees,
other than such new employees whose annual compensation
and benefits to not, collectively, involve payments by
Company or any Company Subsidiary in excess of $300,000
or (y) additional business partners, other than
business partners who enter into with Company a
business partner agreement in the form previously
agreed to by Parent and Company; or
(xix) enter into any agreement to take any
of the actions described in Section 5.2(b) or elsewhere
in this Section 5.2(c).
If Parent requests that Company or any Company Subsidiary
take any action or refrain from taking action between the
date of this Agreement and the Closing Date, other than (x)
taking actions which Company has agreed (for itself and for
the Company Subsidiaries) to take pursuant to the terms of
this Agreement or (y) refraining from taking any action
which may not be taken by Company or any Company Subsidiary
without the prior written consent of Parent pursuant to the
terms of this Agreement, Company shall take or refrain, or
cause any Company Subsidiary to take or refrain, from taking
such requested action only if prior thereto Parent and
Company agree in writing (A) on the estimated effect of
taking such action or refraining from taking such action and
(B) the manner in which such effect will be considered
(i) for purposes of Sections 6.3(a), as to any failure of
the representations and warranties of Company set forth in
this Agreement to be true and correct at and as of the
Closing Date, (ii) for purposes of Section 6.3(i), as to any
reduction in cash and cash equivalents, or (iii) for
purposes of Section 6.3(k), with respect to any Material
Adverse Change.
(d) In connection with the continued
operation of the business of Company and the Company
Subsidiaries between the date of this Agreement and the
Effective Time, Company shall communicate in good faith on a
regular and reasonably frequent basis with one or more
representatives of Parent designated in writing with respect
to the ongoing operations of Company and the Company
Subsidiaries. Company acknowledges that Parent does not and
will not waive any rights it may have under this Agreement
as a result of such communications.
(e) Parent agrees that from the date
hereof to the Effective Time, except as contemplated by this
Agreement or to the extent that Company shall otherwise
consent in writing, it will not take, and will cause each of
its subsidiaries not to take, any action which would
materially and adversely affect the ability of Parent to
perform its covenants and agreements under this Agreement.
(f) Company shall not, nor shall it permit
any Company Subsidiary to, nor shall it authorize or permit
any officer, director or employee of, or any investment
banker, attorney or other advisor or representative or agent
of, Company or any Company Subsidiary to, directly or
indirectly, (i) solicit, initiate or encourage the
submission of any Acquisition Proposal (as hereinafter
defined) or (ii) participate in or encourage any discussions
or negotiations regarding, or furnish to any person any
information with respect to, or take any other action to
encourage or facilitate any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to
lead to, any Acquisition Proposal; provided, however, that,
prior to the approval of the Merger and the transactions
contemplated by this Agreement at the Shareholders' Meeting,
nothing contained in this Section 5.2(f) shall prohibit the
Board of Directors of Company from furnishing information
to, or entering into discussions or negotiations with, any
person or entity that makes an unsolicited Acquisition
Proposal if, and only to the extent that (A) the Board of
Directors of Company after consultation with and based on
the written advice of outside counsel, determines in good
faith that in order for the Board of Directors of Company to
comply with its fiduciary duties to shareholders under
applicable law it is required to take such action, (B) prior
to providing information in any form (whether orally or in
writing) to any person or entity, Company receives from such
person or entity an executed agreement in reasonably
customary form relating to the confidentiality of
information to be provided to such person or entity, and
(C) the Acquisition Proposal contains an offer of
consideration that is materially superior to the
consideration set forth herein. Notwithstanding anything in
this Agreement to the contrary, Company shall (i) promptly
advise Parent orally and in writing of (A) the receipt by it
(or any of the other entities or persons referred to above)
after the date hereof of any Acquisition Proposal, or any
inquiry which could reasonably be expected to lead to any
Acquisition Proposal, (B) the material terms and conditions
of such Acquisition Proposal or inquiry, and (C) the
identity of the person making any such Acquisition Proposal
or inquiry, (ii) keep Parent reasonably informed of the
status and details of any such Acquisition Proposal or
inquiry and (iii) negotiate with Parent to make such
adjustments in the terms and conditions of this Agreement as
would enable Company to proceed with the transactions
contemplated herein. Without limiting the foregoing, it is
understood that any violation of the restrictions set forth
in the first sentence of this Section 5.2(f) by any officer,
director or employee of Company or any Company Subsidiary or
any investment banker, attorney or other advisor,
representative or agent of Company or any Company
Subsidiary, whether or not such person is purporting to act
on behalf of Company or any Company Subsidiary or otherwise,
shall be deemed to be a breach of this Section 5.2(f) by
Company. For purposes of this Agreement, "Acquisition
Proposal" means any bona fide proposal with respect to a
merger, consolidation, share exchange, joint venture,
business combination, reorganization or similar transaction
involving Company or any Company Subsidiary, or any purchase
of all or any significant portion of the assets of Company
or any Company Subsidiary. For purposes of this
Section 5.2, the term "materially superior" shall mean
consideration which, if the transaction subject to such
Acquisition Proposal were consummated, would result in the
Alternative Transaction Value of the transaction which is
the subject of such Acquisition Proposal exceeding the
Merger Transaction Value (as such terms are defined in
Section 5.4 herein) by 5% or more.
(g) Company agrees to take the following
actions with respect to Tax matters prior to the Closing:
(i) Company and the Company Subsidiaries will
prepare and file an amended federal income tax return
for the taxable year ended December 31, 1997, if
Company and Parent, in consultation with Ernst & Young
LLP and Deloitte & Touche LLP, determine that such
amendment is appropriate;
(ii) Company will use its commercially reasonable
efforts to notify Parent promptly concerning all
material discussions, meetings and other significant
contacts with the Internal Revenue Service relating to
the examination of the federal income tax returns of
Company, and will provide Parent with a reasonable
opportunity to attend and participate in all
significant meetings with Internal Revenue Service
personnel relating to issues arising in connection with
such examination;
(iii) Company will prepare and submit to
Parent a schedule or memorandum setting forth such
information as may reasonably and practicably be
requested by Parent relating to all taxing
jurisdictions in which Company or any Company
Subsidiary has employees or independent contractors,
owns property or engages in business activities; and
(iv) Company will prepare and submit to Parent a
schedule or memorandum setting forth such information
as may reasonably and practicably be requested by
Parent relating to existing equipment lease
transactions in which Company or any Company Subsidiary
is the lessor.
5.3 Fiduciary Duties. Except as set forth below,
the Board of Directors of Company shall not (i) withdraw or
modify in a manner adverse to Parent, the approval or
recommendation by such Board of Directors of this Agreement
or the Merger, or (ii) approve, recommend or cause Company
to enter into any agreement with respect to any Acquisition
Proposal (an "Alternative Transaction"). Notwithstanding
the foregoing, if prior to the approval of the Merger and
the transactions contemplated by this Agreement at the
Shareholders' Meeting Company receives an unsolicited
Acquisition Proposal and the Board of Directors of Company
determines in good faith, following consultation with and
based on the written advice of outside counsel, that it is
required to do so in order to comply with its fiduciary
duties to shareholders under applicable law, the Board of
Directors may (w) withdraw or modify its approval or
recommendation of this Agreement and the Merger, (x) approve
or recommend such Acquisition Proposal, (y) cause Company to
enter into an agreement with respect to such Acquisition
Proposal or (z) terminate this Agreement pursuant to
Section 7.1(b)(v). If (i) the Board of Directors of Company
takes any action described in clause (y) or (z) of the
preceding sentence, (ii) Parent exercises its right to
terminate this Agreement under Section 7.1(c) based on the
Board of Directors of Company having taken any action
described in clause (w) or (x) of the preceding sentence or
(iii) the Agreement is terminated as a result of the failure
to receive the requisite vote for approval of this Agreement
and the Merger at the Shareholders' Meeting and at the time
of such meeting an Acquisition Proposal involving Company
shall have been announced, Company shall, concurrently with
the taking of such action or such termination (a "Fee
Payment Event"), as applicable, pay to Parent the
Section 5.4 Fee (as hereinafter defined).
5.4 Certain Fees. Company shall pay to Parent
upon demand $2.0 million upon the occurrence of a Fee
Payment Event (the "Section 5.4 Fee"), payable in same-day
funds, as liquidated damages and not as a penalty, if the
Section 5.4 Fee is payable pursuant to Section 5.3 to
reimburse and compensate Parent for its time, expenses and
lost opportunity costs of pursuing the Merger. In addition,
if Company enters into an agreement with respect to, or
consummates, an Alternative Transaction within one year of
the payment by Company of the Section 5.4 Fee and Parent has
not exercised the Option to purchase and purchased shares of
Company Common Stock under the Shareholder's Option
Agreement and agrees not to do so, Company shall pay to
Parent an additional fee (the "Topping Fee"), payable in
same-day funds, as liquidated damages and not as a penalty,
within two days of the earlier of Company entering into such
agreement or the consummation of such transaction. The
Topping Fee shall be equal to the product obtained by
multiplying (a) 25% by (b) the Incremental Value (as
hereinafter defined). The "Incremental Value" shall be
equal to the amount by which the "Alternative Transaction
Value" shall exceed the "Merger Transaction Value" (each as
hereinafter defined). The "Alternative Transaction Value"
shall mean the aggregate value of the Alternative
Transaction to the shareholders of Company, valued as of the
date of the agreement relating to such Alternative
Transaction and calculated in accordance with generally
recognized and accepted valuation methodologies employed by
nationally recognized investment banking firms for valuing
comparable transactions. The "Merger Transaction Value"
shall mean the aggregate value of the Merger to the
shareholders of Company, valued on the basis of Company
having outstanding 4,108,785 shares of Common Stock and
merger consideration of $11.88 per share of such Common
Stock and calculated in accordance with generally recognized
and accepted valuation methodologies employed by nationally
recognized investment banking firms for valuing comparable
transactions. If the parties do not agree as to the
Alternative Transaction Value or the Merger Transaction
Value, Company and Parent shall negotiate with one another
in good faith for a period of ten days to resolve such
dispute. If, after the expiration of such ten-day period,
the parties do not agree as to the Alternative Transaction
Value or the Merger Transaction Value, Company and Parent
shall each engage a nationally recognized investment banking
firm to calculate the Alternative Transaction Value or the
Merger Transaction Value, or both, as the case may be. If
such investment banking firms do not agree as to such
disputed valuation(s) after 30 days, such firms shall
together appoint a third nationally recognized investment
banking firm to resolve such dispute by calculating the
disputed valuation(s). The calculation of such third
investment banking firm shall be conclusive as to the
disputed valuation(s). Each party shall bear the costs and
expenses of the investment banking firm engaged by it
pursuant to this Section 5.4, and the costs and expenses of
a third investment banking firm, if necessary, shall be
borne equally by Company and Parent.
5.5 Takeover Statutes; Inconsistent Actions. If
any "fair price," "moratorium," "control share," "business
combination," "fair price," "shareholder protection" or
similar or other antitakeover statute or regulation enacted
under state or Federal law shall become applicable to the
Merger, the Shareholders' Option Agreement or any of the
other transactions contemplated hereby or thereby, Company
and the Board of Directors of Company shall grant such
approvals and take all such actions as are within its
authority so that the Shareholders' Option Agreement shall
be in full force and effect and so that the Merger and the
other transactions contemplated hereby and thereby may be
consummated as promptly as practicable on the terms
contemplated hereby and thereby and otherwise use all
commercially reasonable efforts to eliminate or minimize the
effects of such statute or regulation on the Merger, the
Shareholders' Option Agreement and the transactions
contemplated hereby and thereby. During the term of this
Agreement and the Shareholders' Option Agreement, Company
shall not adopt, effect or implement any "shareholders'
rights plan," "poison pill" or similar arrangement.
5.6 Consents. Company and Parent will use all
commercially reasonable efforts to obtain the written
consent or approval of each and every governmental authority
and other regulatory body, the consent or approval of which
shall be required in order to permit Parent, Sub and Company
to consummate the transactions contemplated by this
Agreement. Company will use all commercially reasonable
efforts to obtain the written consent or approval, in form
and substance reasonably satisfactory to Parent, of each
person whose consent or approval shall be required in order
to permit Parent, Sub and Company to consummate the
transactions contemplated by this Agreement, or whose
consent or approval is required pursuant to the terms of any
contract, agreement, license or instrument, including
without limitation any Material Contract, to which Company
or any Company Subsidiary is a party in order to transfer,
convey and vest in Surviving Corporation all of the rights
and benefits of Company or any Company Subsidiary under such
contract, agreement, license or instrument, except for any
contracts, agreements, licenses or instruments of Company as
to which the failure to obtain any required written consent
or approval thereunder would not individually or in the
aggregate result in, or be reasonably likely to result in, a
Material Adverse Effect on Company with respect to the
Surviving Corporation. Parent will use all commercially
reasonable efforts to obtain the written consent or
approval, in form and substance reasonably satisfactory to
Company, of each person whose consent or approval shall be
required in order to permit Parent, Sub and Company to
consummate the transactions contemplated by this Agreement,
as to which the failure to obtain any required written
consent or approval thereunder would not individually or in
the aggregate result in, or be reasonably likely to result
in, a Material Adverse Effect on Parent.
5.7 Reasonable Efforts; Further Assurances;
Cooperation. Subject to the other provisions of this
Agreement, the parties hereto shall each use all
commercially reasonable efforts to perform their obligations
herein and to take, or cause to be taken or do, or cause to
be done, all things necessary, proper or advisable under
applicable law to obtain all regulatory approvals, including
notices and approvals under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and
satisfy all conditions to the obligations of the parties
under this Agreement and to cause the Merger and the other
transactions contemplated by this Agreement and the
Shareholders' Option Agreement to be effected as soon as
reasonably practicable in accordance with the terms of this
Agreement and shall cooperate fully with each other and
their respective officers, directors, employees, agents,
counsel, accountants and other designees in connection with
any steps required to be taken as a part of their respective
obligations under this Agreement, including without
limitation:
(a) Company and Parent shall promptly make
their respective filings and submissions and shall take, or
cause to be taken, all actions and do, or cause to be done,
all things necessary, proper or advisable under applicable
laws and regulations to obtain any required approval of any
other federal, state or local governmental agency or
regulatory body with jurisdiction over the transactions
contemplated by this Agreement.
(b) If any claim, action, suit,
investigation or other proceeding by any governmental body
or other person is commenced which questions the validity or
legality of the Merger, the Shareholders' Option Agreement
or any of the other transactions contemplated by this
Agreement or the Shareholders' Option Agreement or seeks
damages in connection with this Agreement or the
Shareholders' Option Agreement, the parties agree to
cooperate and use all commercially reasonable efforts to
defend against such claim, action, suit, investigation or
other proceeding and, if an injunction or other order is
issued in any such action, suit or other proceeding, to use
all commercially reasonable efforts to have such injunction
or other order lifted, and to cooperate reasonably regarding
any other impediment to the consummation of the transactions
contemplated by this Agreement or the Shareholders' Option
Agreement.
(c) Each party shall give prompt written
notice to the other of (i) the occurrence, or failure to
occur, of any event which occurrence or failure would be
likely to cause any of such party's representations or
warranties contained in this Agreement to be untrue or
inaccurate in any material respect at any time from the date
of this Agreement to the Effective Time and (ii) any failure
of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by
it under this Agreement.
(d) Without the prior written consent of
Parent, Company will not terminate any employee if such
termination would result in the payment of any amounts
pursuant to "change in control" provisions of any employment
agreement or arrangement.
5.8 NYSE Listing. Parent will use all
commercially reasonable efforts to cause to be approved for
listing on the NYSE, subject to official notice of issuance,
a sufficient number of shares of Parent Common Stock to be
issued in the Merger.
5.9 Notice. Company shall promptly notify Parent
of any material change in the normal course of its or the
Company Subsidiaries' business or in the operation of its or
the Company Subsidiaries' properties and of the receipt by
it or any of the Company Subsidiaries of notice of any
governmental complaints, investigations, hearings or
inquiries (or communications indicating that the same may be
contemplated) or the receipt by it or any of the Company
Subsidiaries of a notice of the institution or the threat of
litigation involving it or any of the Company Subsidiaries
which in any such case, individually or in the aggregate,
has or would reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Company, and
will keep Parent fully informed with respect to such events.
5.10 Registration Statement; Shareholder
Approvals.
(a) As soon as is reasonably practicable after
the execution of this Agreement, Parent shall prepare and
file with the SEC the Registration Statement (in which the
Proxy Statement will be included) and Company shall prepare
and file with the SEC the Proxy Statement. Parent shall use
all commercially reasonable efforts to cause the
Registration Statement to become effective under the
Securities Act as promptly as practicable after such filing
and shall take all commercially reasonable actions required
to be taken under any applicable state blue sky or
securities laws in connection with the issuance of the
shares of Parent Common Stock pursuant to this Agreement;
provided that Parent shall be permitted to delay the filing
of the Registration Statement and shall have the right to
cause Company to extend the date of the Shareholders'
Meeting upon a good faith determination by Parent that the
filing or use of the Registration Statement would require
the disclosure of material information concerning Parent or
any subsidiary of Parent which Parent has a bona fide
business purpose for preserving as confidential or Parent is
unable to comply with SEC requirements (such events are
hereinafter referred to as a "Blackout" or as "Blackouts").
In no event shall the length of any Blackout or Blackouts
exceed in the aggregate seventy-five (75) days. In the
event Parent exercises its right to effect a Blackout or
Blackouts, the dates set forth in Section 7.1 shall be
extended on a day for day basis by the number of days of
such Blackout or Blackouts. Each party hereto shall furnish
all information concerning it and the holders of its capital
stock as the other party hereto may reasonably request in
connection with such actions.
(b) Company shall call a Shareholders' Meeting to
be held as soon as practicable after the date hereof for the
purpose of voting upon the Merger and this Agreement. In
connection with the Shareholders' Meeting, Company and
Parent shall prepare and file the Proxy Statement with the
SEC. Company shall mail the Proxy Statement to its
shareholders, the Board of Directors of Company, subject to
Section 5.3, shall recommend to its shareholders the
approval of the Merger and this Agreement, and Company shall
use commercially reasonable efforts to obtain such
shareholder approval. Without limiting the generality of
the foregoing, Company agrees that, subject to its right to
terminate this Agreement pursuant to Section 7.1(b)(v), its
obligations pursuant to this Section 5.10(b) shall not be
affected by the commencement, public proposal, public
disclosure or communication to Company of any Acquisition
Proposal.
5.11 Expenses. Subject to Sections 5.3 and 5.4,
if this Agreement is terminated for any reason without
breach by any party, each party hereto shall pay its own
expenses incident to preparing for, entering into, and
carrying out this Agreement and to consummating the Merger,
except that Company and Parent shall divide equally the
following expenses: (a) the costs incurred in connection
with the printing and mailing of the Registration Statement,
the Proxy Statement and related documents, and (b) all
filing or registration fees paid by Company or Parent,
including state securities laws filing or registration fees,
if any.
5.12 Press Releases; Filings. Without the consent
of the other parties, none of the parties shall issue any
press release or make any public announcement with regard to
this Agreement or the Merger or any of the transactions
contemplated hereby or thereby; provided, however, that
nothing in this Section 5.12 shall be deemed to prohibit any
party hereto from making any disclosure which its counsel
deems necessary or advisable in order to fulfill such
party's disclosure obligations imposed by law or the rules
of any national securities exchange or automated quotation
system so long as such party consults with the other parties
prior to such disclosure. Each of Company and Parent shall
promptly notify the other of each report, schedule and other
document filed by it or any of its respective subsidiaries
with the SEC and of any other document pertaining to the
transactions contemplated hereby filed with any other
governmental authorities.
5.13 Tax Treatment. Parent and Company agree to
treat the Merger as a reorganization within the meaning of
Section 368(a) of the Code. During the period from the date
of this Agreement through the Effective Time, unless the
parties shall otherwise agree in writing, none of Parent,
Company or any of their respective subsidiaries shall
knowingly take or fail to take any action which action or
failure to act would jeopardize qualification of the Merger
as a reorganization within the meaning of Section 368(a) of
the Code. Parent and Company shall use their best efforts
to cause one or more of their responsible officers to
execute and deliver certificates to confirm the accuracy of
certain relevant facts as may be reasonably requested by
counsel in connection with the preparation and delivery of
the Tax Opinion described in Section 6.1(f).
5.14 Employee Benefits. Prior to the Effective
Time, Company shall:
(a) take all actions necessary to correct any
failure to timely file any IRS/DOL/PBGC Form 5500 required
to be filed for any Company Benefit Plan pursuant to the
Code or ERISA;
(b) take all commercially reasonable actions
necessary to request an initial favorable determination
letter from the Internal Revenue Service on the current form
of any Company Benefit Plan which is intended to qualify
under Section 401(a) of the Code and has not requested and
received such a favorable determination letter; and
(c) receive from the Identified Shareholders a
written waiver of any benefit or compensation of any kind
each such individual would receive under his employment
agreement due to a termination of employment after the
consummation of the change of control transaction
contemplated hereby.
5.15 Stock Options and Warrants. At the Effective
Time, Company's obligations with respect to each outstanding
Company Stock Option (as disclosed in Section 3.3 of the
Disclosure Letter), as amended in the manner described in
the following sentence, shall be assumed by Parent. The
Company Stock Options so assumed by Parent shall continue to
have, and be subject to, the same terms and conditions as
set forth in the stock option plans and agreements pursuant
to which such Company Stock Options were issued as in effect
immediately prior to the Effective Time, except that each
such Company Stock Option shall be exercisable (subject to
applicable vesting schedules) for that number of whole
shares of Parent Common Stock equal to the product of the
number of shares of Company Common Stock covered by such
Company Stock Option immediately prior to the Effective Time
multiplied by the Exchange Ratio and rounded up to the
nearest whole number of shares of Parent Common Stock and
the exercise price per share shall be appropriately
adjusted. Each warrant disclosed in Section 3.3 of the
Disclosure Letter shall be converted into a Parent warrant
on the same terms and conditions except that each such
warrant shall be exercisable for that number of whole shares
of Parent Common Stock equal to the product of the number of
shares of Company Common Stock covered by such warrant
immediately prior to the Effective Time multiplied by the
Exchange Ratio and rounded up to the nearest whole number of
shares of Parent Common Stock and the exercise price per
share shall be appropriately adjusted. Parent shall
(i) reserve for issuance the number of shares of Parent
Common Stock that will become issuable upon the exercise of
such Company Stock Options and warrants pursuant to this
Section 5.15 and (ii) promptly after the Effective Time
issue to each holder of an outstanding Company Stock Option
or warrant a document evidencing the assumption by Parent of
Company's obligations with respect thereto under this
Section 5.15. Nothing in this Section 5.15 shall affect the
schedule of vesting with respect to the Company Stock
Options to be assumed by Parent as provided in this
Section 5.15. Notwithstanding anything to the contrary set
forth herein, each Identified Shareholder agrees (i) to
exercise or cause to be exercised all Company Stock Options
directly or indirectly beneficially owned by him (the
"Identified Shareholder Options") prior to the Effective
Time and (ii) that to the extent not exercised in accordance
herewith, all Identified Shareholder Options owned by such
Identified Shareholder shall automatically terminate at the
Effective Time.
5.16 Company Affiliates. Company shall deliver to
Parent a letter identifying all persons who are, at the time
the Merger is submitted to a vote of the shareholders of
Company, possible "affiliates" of Company for purposes of
Rule 145 under the Securities Act. Company shall cause each
person who is identified as a possible "affiliate" in such
letter to deliver to Parent on or prior to the Effective
Time a written statement in the form of Exhibit 5.16 (the
"Affiliates Letter"). Parent shall be entitled to place
legends on any certificates of Parent Common Stock issued to
such possible affiliates to restrict transfer of such shares
as set forth above.
5.17 Supplements to Disclosure Letter. From time
to time prior to the Effective Time, Company and Parent will
each promptly supplement or amend the respective Disclosure
Letters which they have delivered pursuant to this Agreement
with respect to any matter arising after the date of this
Agreement which, if existing or occurring at the date of
this Agreement, would have been required to be set forth or
described in any such Disclosure Letters or which is
necessary to correct any information in any such Disclosure
Letters which has been rendered inaccurate by such matter.
No supplement or amendment to any such Disclosure Letters
shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Sections 6.2(a)
or 6.3(a).
5.18 Post-Closing Cooperation by Identified
Shareholders. After the Closing, the Identified
Shareholders shall reasonably cooperate with Parent in the
conduct of any audit, litigation or other proceeding with
respect to any Tax matter involving Company or any Company
Subsidiary and shall deliver promptly to Parent any Tax
refund received by such Identified Shareholder of Taxes
previously paid by Company or any Company Subsidiary.
5.19 Indemnification of Directors and Officers and
Identified Shareholders
(a) The Articles of Incorporation and By-Laws of the
Surviving Corporation shall contain the provisions or
substantially similar provisions with respect to
indemnification set forth in the Articles of Incorporation
and By-Laws of Company on the date of this Agreement, which
provisions shall not be amended, repealed or otherwise
modified for a period of six years after the Effective Time
in any manner that would adversely affect the rights
thereunder of individuals who at any time prior to the
Effective Time were directors or officers of Company in
respect of actions or omissions occurring at or prior to the
Effective Time (including, without limitation, the
transactions contemplated by this Agreement), unless such
modification is required by law.
(b) In the event that (i) Parent exercises the Option
granted to it pursuant to the Shareholders' Option Agreement
and purchases from the Identified Shareholders the shares of
Company capital stock subject to such Option, (ii) Parent
shall require Company to close the Merger notwithstanding
the existence of pending litigation against the Identified
Shareholders with respect to the exercise by the Parent of
the Option, and (iii) the Identified Shareholders shall not
have failed to satisfy their obligations under Section 21(b)
of the Shareholders' Option Agreement, Parent shall
indemnify, defend and hold harmless the Identified
Shareholders (collectively, the "Indemnified Parties")
against all losses, liabilities, expenses and costs,
including, in settlement of, with the approval of the
Surviving Corporation, or otherwise in connection with any
claim, action, suit, proceeding or investigation (a
"Claim"), to the extent such liabilities, expenses or costs
arise from or occur by reason of the fact that Parent
exercised the Option and acquired the shares of capital
stock subject thereto.
(c) For six years from the Effective Time, the
Surviving Corporation shall maintain in effect directors'
and officers' liability insurance covering those persons who
are currently covered by Company's directors' and officers'
liability insurance policy on terms no less favorable than
the terms of such current insurance coverage; provided,
however, that (i) in lieu of the purchase of such insurance
by the Surviving Corporation or Parent, the Company, with
Parent's written consent, may purchase a six-year extended
reporting period endorsement under its existing directors'
and officers' liability coverage and (ii) if the cost of
such insurance in any year during such six-year period shall
exceed 150% of the premium cost for such policy during the
year ended December 31, 1998, then Parent shall cause the
Surviving Corporation to, and the Surviving Corporation
shall, provide coverage affording the same protection as
maintained by Parent as of such date for its officers and
directors.
(d) If Parent, the Surviving Corporation or any of
their successors or assigns (i) consolidates with or merges
into any other person and shall not be the continuing or
surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such
case, proper provisions shall be made so that the successors
and assigns of Parent or the Surviving Corporation, as the
case may be, shall assume the obligations set forth in this
Section 5.19.
5.20 Certain Consents. Company shall use all
commercially reasonable efforts to provide to Parent prior
to the Effective Time the written consent to the Merger and
the transactions contemplated hereby of each of (i) First
Union and SunAmerica as providers of Company's
Securitization Facilities, MBIA Insurance Corporation as
bond insurer of such Securitization Facilities and the
trustee and purchasers of certificates under such
Securitization Facilities (x) indicating that at the
Effective Time there exists no default on the part of
Company or any Company Subsidiary under the Securitization
Agreements between such parties and Company or any Company
Subsidiary and Company and the Company Subsidiaries have
performed in all material respects their obligations under
the Securitization Agreements and (y) First Union's and
SunAmerica's willingness to enter into certain specified
amendments to the Securitization Facilities previously
approved by Company, (ii) First Union as lender to Company
under the $30 million Warehouse Facility and $7 million
Working Capital Line provided to Company by First Union
indicating that at the Effective Time there exists no
default, event of default or facts or circumstances that
with notice, the passage of time or both would constitute an
Event of Default under either the Warehouse Facility or the
Working Capital Line and (iii) Xerox Centre Partners as
landlord ("Landlord") with respect to Company's Santa Ana
headquarters indicating that the Surviving Corporation will
have the right to exercise Company's renewal option under
the Lease dated August 18, 1994 between Landlord and Company
on the terms set forth in such Lease.
ARTICLE 6
CONDITIONS PRECEDENT TO MERGER
6.1 Conditions to Each Party's Obligations. The
respective obligations of each party to effect the Merger
shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions:
(a) This Agreement and the Merger shall
have been approved and adopted by the affirmative vote or
consent of the holders of at least a majority of the
outstanding shares of Company Common Stock and the
affirmative vote or consent of the holders of at least
two-thirds ( ) of the outstanding of Series A Shares.
(b) All consents, authorizations, orders
and approvals of (or filings or registrations with) any
governmental authority or other regulatory body required in
connection with the execution, delivery and performance of
this Agreement, the failure to obtain which would prevent
the consummation of the Merger or have a Material Adverse
Effect on Company or a Material Adverse Effect on Parent,
shall have been obtained without the imposition of any
condition having a Material Adverse Effect on Company or a
Material Adverse Effect on Parent.
(c) Early termination shall have been
granted or applicable waiting periods shall have expired
under the HSR Act.
(d) No governmental authority or other
regulatory body (including any court of competent
jurisdiction) shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive
order, decree, injunction or other order (whether temporary,
preliminary or permanent) which is then in effect and has
the effect of making illegal, materially restricting or in
any way preventing or prohibiting the Merger or the
transactions contemplated by this Agreement.
(e) The Registration Statement shall have
become effective under the Securities Act and no stop order
suspending the effectiveness of the Registration Statement
shall be in effect and no proceedings for such purpose, or
under the proxy rules of the SEC pursuant to the Exchange
Act and with respect to the transactions contemplated
hereby, shall be pending before or threatened by the SEC.
(f) Parent and Company each shall have
obtained a written opinion of King & Spalding, counsel to
Parent, reasonably acceptable to Parent and Company (the
"Tax Opinion"), to the effect that the Merger will
constitute a reorganization within the meaning of
Section 368(a) of the Code and that the exchange in the
Merger of Parent Common Stock for Company Common Stock will
not give rise to gain or loss to the shareholders of Company
with respect to such exchange (except to the extent of any
cash paid in lieu of fractional shares or Dissenting
Shares). The Tax Opinion will be addressed to each of
Parent and Company. In rendering the Tax Opinion, such
counsel shall be entitled to rely on the accuracy of facts
set forth in the officers' certificates described in
Section 5.13.
(g) The shares of Parent Common Stock to
be issued pursuant to this Agreement and pursuant to the
Company Stock Options shall have been authorized for listing
on the NYSE, subject to official notice of issuance.
(h) The sale of Parent Common Stock
resulting from the Merger shall have been qualified or
registered with the appropriate state securities law or
"blue sky" regulatory authorities of all States in which
qualification or registration is required under State
securities laws and such qualifications or registrations
shall not have been suspended or revoked.
6.2 Conditions to Obligations of Company. The
obligations of Company to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of each
of the following conditions unless waived by Company:
(a) (i) the representations and
warranties of Parent set forth in this Agreement which are
not qualified by the phrase "Material Adverse Effect on
Parent" or otherwise qualified by materiality shall have
been true and correct in all respects at and as of the date
of this Agreement and shall be true and correct in all
material respects at and as of the Closing Date as though
made at and as of the Closing Date, except to the extent
such representations and warranties speak as of a specified
date (which representations and warranties shall be true and
correct as of such date) and except to the extent
contemplated by this Agreement, (ii) the representations and
warranties of Parent set forth in this Agreement which are
not qualified by the phrase "Material Adverse Effect on
Parent" but are otherwise qualified by materiality shall be
true and correct in all respects at and as of the date of
this Agreement and at and as of the Closing Date as though
made at and as of the Closing Date, and (iii) the
representations and warranties of Parent set forth in this
Agreement which are qualified by the phrase "Material
Adverse Effect on Parent" shall be true and correct in all
respects at and as of the date of this Agreement and at and
as of the Closing Date as though made at and as of the
Closing Date, provided, however, that for purposes of
determining the satisfaction of the condition contained in
this clause (iii), such representations and warranties shall
be deemed to be true and correct in all respects unless the
failure or failures of such representations and warranties
to be so true and correct (without giving effect to any
exception or "Material Adverse Effect on Parent" qualifier),
individually or in the aggregate, results or would
reasonably be expected to result in a Material Adverse
Effect on Parent.
(b) Parent and Sub each shall have
performed in all material respects all covenants and
agreements required to be performed by them under this
Agreement at or prior to the Closing Date.
(c) Parent shall furnish Company with a
certificate of its appropriate officers as to compliance
with the conditions set forth in Sections 6.2(a) and (b).
(d) Company shall have received from Ernst
& Young LLP letters dated (i) the effective date of the
Registration Statement and (ii) the Closing Date, with
respect to certain financial information regarding Parent
included in the Registration Statement, in each case in form
and substance reasonably satisfactory to Company and
customary in scope and substance for letters delivered by
independent public accountants in connection with
registration statements similar to the Registration
Statement.
(e) Company shall have received an
opinion, dated the Closing Date, of the General Counsel of
Parent, in the form previously agreed to by Company and
Parent.
(f) No suit, investigation, action or
other proceeding shall be pending against Parent before any
court or governmental agency which would result in the
restraint or prohibition of Parent, or the obtaining of
damages or other relief from Parent, in connection with this
Agreement or the consummation of the transactions
contemplated hereby which would in any such case,
individually or in the aggregate, have a Material Adverse
Effect on Parent.
6.3 Conditions to Obligations of Parent. The
obligations of Parent to effect the Merger shall be subject
to the satisfaction on or prior to the Closing Date of each
of the following conditions unless waived by Parent:
(a) (i) the representations and warranties
of Company set forth in this Agreement which are not
qualified by the phrase "Material Adverse Effect on Company"
or otherwise qualified by materiality shall have been true
and correct in all respects at and as of the date of this
Agreement and shall be true and correct in all material
respects at and as of the Closing Date as though made at and
as of the Closing Date, except to the extent such
representations and warranties speak as of a specified date
(which representations and warranties shall be true and
correct as of such date) and except to the extent
contemplated by this Agreement, (ii) the representations and
warranties of Company set forth in this Agreement which are
not qualified by the phrase "Material Adverse Effect on
Company" but are otherwise qualified by materiality shall be
true and correct in all respects at and as of the date of
this Agreement and at and as of the Closing Date as though
made at and as of the Closing Date, (iii) the
representations and warranties of Company set forth in this
Agreement which are qualified by the phrase "Material
Adverse Effect on Company" shall be true and correct in all
respects at and as of the date of this Agreement and at and
as of the Closing Date as though made at and as of the
Closing Date, provided, however, that for purposes of
determining the satisfaction of the condition contained in
this clause (iii) such representations and warranties shall
be deemed to be true and correct in all respects unless the
failure or failures of such representations and warranties
to be so true and correct (without giving effect to any
exception or "Material Adverse Effect on Company"
qualifier), individually or in the aggregate, results or
would reasonably be expected to result in a Material Adverse
Effect on Company, and (iv) the representations and
warranties of the Identified Shareholders shall have been
true and correct in all respects at and as of the date of
this Agreement and shall be true and correct at and as of
the Closing Date as if made at and as of the Closing Date.
(b) Company shall have performed in all
material respects all covenants and agreements required to
be performed by it under this Agreement at or prior to the
Closing Date.
(c) Company shall furnish Parent with a
certificate of (i) its appropriate officers as to compliance
with the conditions set forth in Sections 6.3(a)(i), (ii)
and (iii) and Section 6.3(b) and (ii) the Identified
Shareholders as to compliance with the conditions set forth
in Section 6.3(a)(iv).
(d) Parent shall have received from
Deloitte & Touche LLP (A) letters dated (i) the date of the
Proxy Statement and (ii) the Closing Date, with respect to
certain financial information regarding Company included in
the Proxy Statement, in each case in form and substance
reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public
accountants in connection with proxy statements similar to
the Proxy Statement and (B) an agreed upon procedures report
dated the Closing Date with respect to the unaudited
consolidated balance sheet and related unaudited
consolidated results of operations, shareholders' equity and
cash flow of Company for the quarter ended December 31, 1998
and each month ended during the period between January 1,
1999 and the Closing Date (the "Bring-Down Financial
Statements").
(e) Parent shall have received an
Affiliates Letter from each possible "affiliate" described
in Section 5.16.
(f) Parent shall have received an opinion,
dated the Closing Date, of O'Melveny & Myers LLP, counsel to
Company, in the form previously agreed to by Parent and
Company.
(g) No suit, investigation, action or
other proceeding (i) shall be pending or overtly threatened
against Parent, Company or any of the Company Subsidiaries
by any governmental agency which seeks to restrain or
prohibit the consummation of the Merger, (ii) shall be
pending against Parent, Company or any of the Company
Subsidiaries that seeks damages or other relief in
connection with this Agreement or the consummation of the
transactions contemplated hereby which would, if successful,
result in a Material Adverse Effect on Parent, (iii) shall
be pending against Parent, Company or any of the Company
Subsidiaries that seeks damages or other relief which would
reasonably be expected to exceed, individually or in the
aggregate, $1 million, if pending against Parent, or result,
individually or in the aggregate, in a Material Adverse
Effect on Company if pending against Company or any Company
Subsidiary, or (iv) shall be pending against Parent, Company
or any of the Company Subsidiaries that would reasonably be
expected to result in any orders restricting Company or any
Company Subsidiary from conducting its business as now being
conducted which, individually or in the aggregate, would
have a Material Adverse Effect on Company.
(h) Each of the directors of Company
requested by Parent to do so shall have tendered to Parent
resignation letters on or prior to the Closing Date, such
resignations to be effective at the Effective Time.
(i) Company shall have (i) at least $21
million in cash and cash equivalents, including cash and
cash equivalents classified as restricted cash on its
balance sheet and such amount of restricted cash equals or
exceeds the amount of restricted cash required to be
reserved by Company and the Company Subsidiaries under the
Securitization Agreements and (ii) retained all cash
proceeds obtained in connection with the exercise of Common
Stock Options and shall deliver to Parent a certificate to
such effect signed by Company's Chief Financial Officer.
(j) [intentionally omitted].
(k) Between the date of this Agreement and
the Closing Date, no event or events shall have occurred
which constitutes or constitute or would reasonably be
expected, individually or in the aggregate to result in, a
Material Adverse Change. For purposes of this
Section 6.3(k), a "Material Adverse Change" shall mean the
existence of any of the following conditions, the existence
of any of which conditions is attributable to facts,
circumstances or events specific to or relating to Company
and/or the Company Subsidiaries and their business and
operations and which condition is not primarily the result
of facts, circumstances or events affecting the commercial
equipment leasing industry generally (a "Commercial
Equipment Leasing Industry Event"), (i) Company shall have
originated, in the ordinary course of business consistent
with past practices, leases for the year ended December 31,
1998 having an aggregate value of less than $215,000,000,
(ii) the leases and loans in Company's and the Company
Subsidiaries' portfolio (whether owned directly or conveyed
under the Securitization Facilities) (the "Leases and
Loans"), the scheduled payments in respect of which are 30
days or more past due at the end of the calendar month
immediately preceding the Closing Date, exceed in aggregate
dollar value more than 10% of the aggregate dollar value of
all outstanding Leases and Loans as of that date, or (iii)
at the end of the calendar month immediately preceding the
Closing Date (the "calculation date") the ratio of the gross
unpaid contract balance of Lease and Loan account, the
scheduled payments in respect of which are 180 days past
due, to the gross unpaid contract balance of all Lease and
Loan accounts exceeds the same ratio computed as of
September 30, 1998, by (x) 100 basis points, in the event
the Closing Date occurs on or prior to March 31, 1999 and
(y) 125 basis points, in the event the Closing Date occurs
on or after April 1, 1999. For purposes of this Section 6.3
(k), the ratio at September 30, 1998 and the ratio at the
calculation date will be computed without giving effect to
(a) any Lease and Loan account written off during the
three-month period immediately preceding September 30, 1998
and during the three-month period immediately preceding the
end of the month immediately preceding the Closing Date,
respectively, and (b) any extension of payments, grace
periods, rollovers, Lease and Loan amendments or
modifications or similar practices granted to or with
respect to any Lease or Loan account since September 30,
1998 unless they are consistent with past practices and in
the ordinary course of business. Notwithstanding anything
to the contrary set forth herein, any Lease and Loan account
write-off made between September 30, 1998 and the Closing
Date shall be made in the ordinary course of business
consistent with the Company's past practices. In making a
determination as to whether a Material Adverse Change is
primarily the result of facts, circumstances or events which
constitute a Commercial Equipment Leasing Industry Event,
the parties shall compare the results of operations and
portfolio performance of Company and the Company
Subsidiaries to the results of operations and portfolio
performances of other companies in the commercial equipment
leasing industry.
(l) All authorizations, consents, waivers
and approvals from parties to contracts or other agreements
to which any of Company or Parent (or their respective
subsidiaries) is a party, or by which either is bound, as
may be required to be obtained by them in connection with
the performance of this Agreement, the failure to obtain
which would prevent the consummation of the Merger or have
or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company or,
individually or in the aggregate, a Material Adverse Effect
on Parent, shall have been obtained.
ARTICLE 7
TERMINATION AND ABANDONMENT OF THE MERGER
7.1 Termination. This Agreement may be
terminated at any time prior to the Effective Time, whether
before or after the approval by the shareholders of Company:
(a) by the mutual written consent of
Parent and Company;
(b) by Company if:
(i) subject to any applicable extension pursuant
to Section 5.10(a) or Section 7.4, the Merger is not
consummated on or before June 30, 1999, unless the
failure of such occurrence shall be due to the failure
of Company to perform, satisfy or observe the
covenants, agreements and conditions hereof to be
performed or observed by it at or before the Effective
Time;
(ii) events occur which render impossible the
satisfaction of one or more of the conditions set forth
in Sections 6.1 and 6.2 by the Effective Time and such
conditions are not waived by Company, unless the
failure of such occurrence shall be due to the failure
of Company to perform or observe the covenants,
agreements and conditions hereof to be performed or
observed by it at or before the Effective Time;
(iii) Company is enjoined or restrained by
any governmental authority or other regulatory body
(including any court), such injunction or restraining
order prevents the performance by Company of its
obligations hereunder and such injunction shall not
have been withdrawn by June 30, 1999, subject to any
applicable extension pursuant to Section 5.10(a) or
Section 7.4;
(iv) the holders of Company Common Stock do not
approve this Agreement and the Merger at the
Shareholders' Meeting or the holder of the Series A
Shares does not approve this Agreement and the Merger;
or
(v) the Board of Directors of Company, subject to
and in compliance with Section 5.3, shall have
withdrawn or materially modified in a manner adverse to
Parent its recommendation of this Agreement and the
Merger or the Board of Directors shall have approved or
recommended another Acquisition Proposal.
(c) by Parent if:
(i) subject to any applicable extension pursuant
to Section 5.10(a) or Section 7.4, the Merger is not
consummated on or before June 30, 1999, unless the
failure of such occurrence shall be due to the failure
of Parent or Sub to perform, satisfy or observe the
covenants, agreements and conditions hereof to be
performed or observed by them at or before the
Effective Time;
(ii) events occur which render impossible the
satisfaction of one or more of the conditions set forth
in Sections 6.1 and 6.3 by the Effective Time and such
conditions are not waived by Parent, unless the failure
of such occurrence shall be due to the failure of
Parent or Sub to perform or observe the covenants,
agreements and conditions hereof to be performed or
observed by them at or before the Effective Time;
(iii) Parent is enjoined or restrained by
any governmental authority or other regulatory body
(including any court), such injunction or restraining
order prevents the performance by Parent of its
obligations hereunder and such injunction shall not
have been withdrawn by June 30, 1999, subject to any
applicable extension pursuant to Section 5.10(a) or
Section 7.4;
(iv) the holders of Company Common Stock do not
approve this Agreement and the Merger at the
Shareholders' Meeting or the holder of the Series A
Shares does not approve this Agreement and the Merger
and convert the Series A Shares into Company Common
Stock;
(v) the Board of Directors of Company shall have
withdrawn or materially modified in a manner adverse to
Parent its recommendation of this Agreement and the
Merger or the Board of Directors shall have approved or
recommended another Acquisition Proposal; or
(vi) holders of shares of Company Common Stock
representing 5% or more of the outstanding shares of
Company Common Stock shall have exercised their
appraisal/dissenters rights in accordance with the
CGCL.
7.2 Specific Performance and Other Remedies. The
parties each acknowledge that the rights of each party to
consummate the transactions contemplated by this Agreement
are special, unique and of extraordinary character, and
that, if any party violates or fails or refuses to perform
any covenant or agreement made by it in this Agreement, the
non-breaching party may be without an adequate remedy at
law. The parties each agree, therefore, that if either
party violates or fails or refuses to perform any covenant
or agreement made by such party in this Agreement, the non-
breaching party or parties may, subject to the terms of this
Agreement and in addition to any remedies at law for damages
or other relief, institute and prosecute an action in any
court of competent jurisdiction to enforce specific
performance of such covenant or agreement or seek any other
equitable relief.
7.3 Effect of Termination and Abandonment. In
the event of the termination and abandonment of this
Agreement under Section 7.1, this Agreement shall become
void and have no effect, without any liability on the part
of any party or its directors, officers or shareholders
(other than the Identified Shareholders as set forth herein)
and except (i) as provided in the second sentence of
Section 5.1, and in Sections 5.3, 5.4, 5.5, 5.11 and 8.11
and (ii) to the extent that such termination results from
the breach in any material respect by any party hereto of
any representation, warranty or covenant hereunder.
7.4 Termination Date Extension. Notwithstanding
anything to the contrary set forth herein, Parent shall have
the unilateral right to extend the dates set forth in
Section 7.1 from June 30, 1999 to September 30, 1999 in the
event that the Merger has not been consummated by June 30,
1999 (subject to any applicable extension pursuant to
Section 5.10) as a result of any condition set forth in
Section 6.3 (other than the condition set forth in
Section 6.3(k)) having not been satisfied.
ARTICLE 8
MISCELLANEOUS
8.1 Waiver and Amendment. Any term or provision
of this Agreement may be waived in writing at any time by
the party which is, or whose shareholders are, entitled to
the benefits thereof, and any term or provision of this
Agreement may be amended or supplemented at any time by
action of the respective Boards of Directors (or its
authorized representative) of Parent or Company without
action of the shareholders, whether before or after the
Shareholders' Meeting; provided, however, that after
approval of the shareholders of Company no such amendment
shall reduce the amount or change the form of the
consideration to be delivered to Company's shareholders as
contemplated by this Agreement or otherwise materially
adversely affect the interests of such shareholders unless
such amendment is approved by Company's shareholders. No
amendment to this Agreement shall be effective unless it has
been executed by Company, Parent and Sub.
8.2 Non-Survival of Representations, Warranties
and Agreements. Except for the agreements contained in
Sections 1.2, 1.3, 1.4, 1.5, 1.6, 1.7, 3.31, 5.5, 5.11,
5.15, 5.18, 5.19 and Article 8 and the representations and
warranties of the Identified Shareholders in the certificate
to be delivered pursuant to Section 6.3(c)(ii), none of the
representations, warranties and agreements of Company,
Parent, Sub or the Identified Shareholders in this
Agreement, or in any instrument or certificate delivered
pursuant to this Agreement, shall survive the Merger nor
shall their respective shareholders (other than the
Identified Shareholders on the terms specifically set forth
in Sections 3.31, 5.15, 5.18, 6.3(c)(ii), 8.2 and 8.11),
directors or officers have any liability to the other
parties hereto after the Effective Time on account of any
breach of warranty or failure or the incorrectness of any of
the representations or warranties contained herein or in any
certificate or other instrument delivered pursuant to this
Agreement. Subject to the foregoing, the sole right and
remedy arising from a misrepresentation or breach of
warranty, from the failure of any of the conditions of the
Merger to be met, or from the failure to perform any promise
or discharge any obligation in this Agreement shall be
termination of this Agreement by the aggrieved party and the
rights and remedies provided in Sections 5.1, 5.3, 5.4,
5.11, 7.2, 7.3 and 7.4.
8.3 Notices. All notices or other communications
which are required or permitted hereunder shall be in
writing and sufficient if delivered personally, telecopied
(if confirmed) or sent by registered or certified mail,
postage prepaid, return receipt requested, addressed as
follows:
If to Company:
Rockford Industries, Inc.
1851 East First Street, Suite 600
Santa Ana, California 92705
Facsimile: (714) 547-5091
Attn: President
With a copy to:
O'Melveny & Myers LLP
Suite 1700
610 Newport Center Drive
Newport Beach, California 92660
Facsimile: (714) 669-6994
Attn: J. Jay Herron, Esq.
If to Parent or Sub:
American Express Company
200 Vesey Street, 49th Floor
New York, New York 10285
Facsimile: (212) 619-7099
Attn: Carol V. Schwartz, Esq.
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Facsimile: (404) 572-5146
Attn: Bruce N. Hawthorne, Esq.
8.4 Descriptive Headings; Interpretation. The
descriptive headings are for convenience of reference only
and shall not control or affect the meaning or construction
of any provision of this Agreement. When a reference is made
in this Agreement to Sections, such reference shall be to a
Section of this Agreement unless otherwise indicated. The
phrase "made available" in this Agreement shall mean that the
information referred to has been made available if requested
by the party to whom such information is to be made
available.
8.5 Counterparts. This Agreement may be executed
in any number of counterparts, and each such counterpart
shall be deemed to be an original instrument, but all such
counterparts together shall constitute but one agreement.
This Agreement shall become effective when one or more
counterparts have been signed by each of the parties and
delivered to the other parties, it being understood that the
parties need not sign the same counterpart.
8.6 Entire Agreement. This Agreement (including
the Disclosure Letter) and the Confidentiality Agreements
contain the entire agreement between Parent, Sub and Company
with respect to the Merger and the matters contemplated
hereby, and supersede all prior arrangements or
understandings between Parent, Sub and Company with respect
to the subject matter hereof, including the Letter of Intent
dated October 16, 1998. This Agreement and the Shareholders'
Option Agreement contain the entire agreement between Parent
and the Identified Shareholders with respect to the matters
addressed herein and therein and supersede all prior
agreements or understandings with respect to the subject
matter hereof or thereof. This Agreement is not intended to
confer upon any person other than the parties hereto any
rights or remedies hereunder.
8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK (WITHOUT REGARD TO ANY APPLICABLE CONFLICTS
OF LAW PROVISIONS THEREOF).
8.8 Severability. If any term or other provision
of this Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other
conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated
hereby are not affected in any manner materially adverse to
any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced,
the parties shall negotiate in good faith to modify this
Agreement so as to effect the original intent of the parties
as closely as possible in a mutually acceptable manner in
order that the transactions be consummated as originally
contemplated to the fullest extent possible.
8.9 Enforcement of Agreement. The parties agree
that irreparable damage would occur in the event that any of
the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and
provisions hereof in any court of the United States or any
state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
8.10 Assignment. Neither this Agreement nor any of
the rights, interests or obligations hereunder shall be
assigned by any of the parties hereto (whether by operation
of law or otherwise) without the prior written consent of the
other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the
preceding sentence, this Agreement will be binding upon,
inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns.
8.11 Liability of Identified Shareholders.
Notwithstanding anything to the contrary set forth in this
Agreement, the representations and warranties of the
Identified Shareholders set forth in Section 3.31 hereof (and
in the Closing Certificate to be delivered by the Identified
Shareholders pursuant to Section 6.3(c)(ii) hereof) and the
covenants of the Identified Shareholders in Sections 5.15 and
5.18 shall survive the Merger indefinitely. The Identified
Shareholders shall have liability with respect to any breach
of the representations and warranties to Parent set forth in
Section 3.31(c) on a several basis based on their pro rata
Company Common Stock ownership prior to the Merger only in
the event that in making such representations and warranties
an Identified Shareholder is determined to have acted with
actual and intentional fraud.
8.12 Definition of Company's Knowledge. For
purposes of this Agreement, the term Company's knowledge
shall mean the actual knowledge of any of Gerry Ricco, Larry
Hartmann, Brian Seigel, Kevin McDonnell, Tom Ware, Robert
Sweeney and Linda Fulton.
8.13 Disclosure Letter.
The disclosures in the Disclosure Letter, and those
in any supplement thereto, relate only to the representations
and warranties in the Section and Subsection of this
Agreement to which they expressly relate and not to any other
representation or warranty in this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has
caused this Agreement to be executed and delivered by its
respective duly authorized officers, all as of the date first
above written.
AMERICAN EXPRESS COMPANY
By: /s/ Steven A. Alesio
-------------------------------
Name: Steven A. Alesio
Title: Authorized Signatory
By: /s/ Stephen P. Norman
-------------------------------
Name: Stephen P. Norman
Title: Secretary
RXP ACQUISITION CORPORATION
By: /s/ Stephen P. Norman
-------------------------------
Name: Stephen P. Norman
Title: Vice President & Secretary
By: /s/ Danny Lam
-------------------------------
Name: Danny Lam
Title: President
ROCKFORD INDUSTRIES, INC.
By: /s/ Gerry J. Ricco
-------------------------------
Name: Gerry J. Ricco
Title: President/CEO
By: /s/ Brian Seigel
-------------------------------
Name: Brian Seigel
Title: Secretary
Identified Shareholders only with
respect to
Sections 3.31, 5.15, 5.18,
6.3(c)(ii), Article 8 including,
without limitation, Section 8.11
hereof.
/s/ Gerry J. Ricco
----------------------------------
Gerry J. Ricco
/s/ Brian A. Seigel
----------------------------------
Brian A. Seigel
/s/ Larry Hartmann
----------------------------------
Larry Hartmann