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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) April 23, 1999 (April 19,
---------------------------
1999)
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HEALTHCARE FINANCIAL PARTNERS, INC.
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(Exact Name of Registrant as Specified in
Charter)
Delaware 0-21425 58-1844418
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
2 Wisconsin Circle, Fourth Floor, Chevy Chase, Maryland 20815
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (301) 961-1640
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Not Applicable
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(Former Name or Former Address, if Changed Since Last Report)
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Item 5. Other Events.
On April 19, 1999, HealthCare Financial Partners, Inc. ("HFP") entered into an
Agreement and Plan of Merger (the "Merger Agreement") with Heller Financial,
Inc. ("Heller") and its wholly-owned subsidiary, HF5, Inc. ("Subsidiary"). The
Merger Agreement provides for the acquisition of HFP by Heller pursuant to the
merger (the "Merger") of HFP with and into Subsidiary.
The Merger Agreement provides for consideration with a value of $35 (subject
to adjustment as provided below) for each share of common stock, $.01 par value
per share, of HFP ("HFP Common Stock") issued and outstanding immediately prior
to the effective time of the Merger (other than treasury shares and shares of
dissenting stockholders) to be paid to the holders of HFP Common Stock. The per
share consideration value of $35 is subject to adjustment based upon an average
of the closing prices of the common stock, Class A, $.25 par value per share, of
Heller ("Heller Common Stock") for a ten-day trading period prior to the closing
of the Merger.
Holders of HFP Common Stock may elect to receive their consideration in the
form of cash or Heller Common Stock as provided in the Merger Agreement;
provided, however, that adjustments to such elections will be made so that the
amount of cash to be paid to HFP stockholders at the closing of the Merger is as
close as practicable to, but not in excess of, 59% of the aggregate
consideration value to be paid to the HFP stockholders, and the value of the
number of shares of Heller Common Stock to be paid to the HFP stockholders at
the closing of the Merger is as close as practicable to, but in no event less
than, 41% of the aggregate consideration value to be paid to the HFP
stockholders. The number of shares of HFP Common Stock to be converted into the
right to receive Heller Common Stock shall be determined in accordance with a
formula set forth in the Merger Agreement.
In addition, pursuant to the Stock Option Agreement, dated April 19, 1999 (the
"Option Agreement"), between HFP and Heller, HFP has granted Heller an option
(the "Option") to acquire upon the occurrence of certain events, up to 2,670,786
shares of HFP Common Stock (but in no event more than 19.9% of the HFP Common
Stock issued and outstanding, without giving effect to any shares subject to or
issued pursuant to the Option) at a price of $28.50 per share. The Option
Agreement provides for a mechanism by which the "total profit" (as defined in
the Option Agreement) received by Heller as a result of the sale or exercise of
the Option may not exceed $24,150,000 or be less than $14,490,000. The Option
becomes exercisable upon the occurrence of certain events set forth in the
Option Agreement, including the agreement by HFP, without the consent of Heller,
to engage in a merger or acquisition transaction with another party or the
acquisition by another party of 20% or more of the outstanding shares of HFP
Common Stock.
The consummation of the transactions contemplated by the Merger Agreement is
subject to the approval of the stockholders of HFP, receipt of appropriate
regulatory approvals, including
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approvals under the Federal Bank Holding Company Act of 1956, as amended, and
the satisfaction of certain other conditions contained in the Merger Agreement.
Copies of the Merger Agreement and the Option Agreement are attached hereto as
Exhibit 99.1 and Exhibit 99.2, respectively, and are incorporated by reference
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herein. The foregoing discussion does not purport to be complete and is
qualified in its entirety by reference to the Merger Agreement and the Option
Agreement, respectively.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
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(c) Exhibits
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99.1 Agreement and Plan of Merger, dated as of April 19, 1999, among
Heller Financial, Inc., HealthCare Financial Partners, Inc. and
HF5, Inc. Exhibit 99.1 contains a list briefly identifying the
contents of Schedules and Exhibits, all of which have been
omitted. The Registrant agrees to furnish supplementally a copy
of any omitted Schedule or Exhibit to the Securities and
Exchange Commission upon request.
99.2 Stock Option Agreement, dated as of April 19, 1999, between
Heller Financial, Inc. and HealthCare Financial Partners, Inc.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
HEALTHCARE FINANCIAL PARTNERS, INC.
Date: April 21, 1999 By: /s/ Edward P. Nordberg, Jr.
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Edward P. Nordberg, Jr.
Chief Financial Officer
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EXHIBIT INDEX
Exhibit
Number Description
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99.1 Agreement and Plan of Merger, dated as of April 19, 1999, among Heller
Financial, Inc., HealthCare Financial Partners, Inc. and HF5, Inc.
Exhibit 99.1 contains a list briefly identifying the contents of
Schedules and Exhibits, all of which have been omitted. The Registrant
agrees to furnish supplementally a copy of any omitted Schedule or
Exhibit to the Securities and Exchange Commission upon request.
99.2 Stock Option Agreement, dated as of April 19, 1999, between Heller
Financial, Inc. and HealthCare Financial Partners, Inc.
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EXHIBIT 99.1
AGREEMENT AND PLAN OF MERGER
among
HELLER FINANCIAL, INC.,
HEALTHCARE FINANCIAL PARTNERS, INC.
and
HF5, INC.
Dated as of April 19, 1999
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TABLE OF CONTENTS
Page
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ARTICLE I
THE MERGER
1.1 The Merger......................................................... 1
1.2 Closing............................................................ 2
1.3 Effective Time..................................................... 2
1.4 Effects of the Merger.............................................. 2
1.5 Certificate of Incorporation....................................... 2
1.6 Bylaws............................................................. 2
1.7 Directors and Officers............................................. 2
1.8 Tax Consequences................................................... 2
ARTICLE II
MERGER CONSIDERATION; EXCHANGE PROCEDURES
2.1 Merger Consideration............................................... 2
2.2 Election Procedures................................................ 3
2.3 Rights as Stockholders; Stock Transfers............................ 6
2.4 Fractional Shares.................................................. 6
2.5 Exchange Procedures................................................ 7
2.6 Dissenting Stockholders............................................ 8
2.7 Anti-Dilution Provisions........................................... 8
2.8 Treasury Shares.................................................... 8
2.9 Options............................................................ 8
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF HFP
3.1 [Reserved]......................................................... 9
3.2 HFP Material Adverse Effect........................................ 9
3.3 Representations and Warranties of HFP.............................. 9
3.4 Organization, Powers and Qualifications............................ 9
3.5 Subsidiaries....................................................... 10
3.6 Capital Stock...................................................... 11
3.7 Certificate, Bylaws, Minute Books and Records...................... 11
3.8 Authority; Binding Effect.......................................... 12
3.9 No Conflict; Approvals............................................. 12
3.10 Governmental Consents and Approvals................................ 12
3.11 SEC Reports........................................................ 13
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3.12 Financial Statements............................................... 13
3.13 Absence of Certain Changes......................................... 14
3.14 Indebtedness; Absence of Undisclosed Liabilities................... 15
3.15 Assets............................................................. 15
3.16 Contracts.......................................................... 15
3.17 Financing Transactions............................................. 16
3.18 Securitization and Other Debt Facilities........................... 18
3.19 Authorizations; Compliance with Law................................ 18
3.20 Taxes.............................................................. 19
3.21 Absence of Litigation; Claims...................................... 21
3.22 Employee Benefit Plans; Employment Agreements...................... 21
3.23 Labor Matters...................................................... 23
3.24 Environmental Liability............................................ 24
3.25 No Default......................................................... 26
3.26 Intellectual Property.............................................. 26
3.27 Regulatory Matters................................................. 27
3.28 Registration Statement; Proxy Statement/Prospectus................. 27
3.29 Board Action; Vote Required........................................ 28
3.30 Year 2000.......................................................... 28
3.31 Affiliates......................................................... 28
3.32 Opinion of Financial Advisor....................................... 29
3.33 Brokers and Finders................................................ 29
3.34 Investment Company Act............................................. 29
3.35 HealthCare Financial Partners REIT................................. 29
3.36 Tax and Regulatory Matters......................................... 30
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF HELLER AND MERGER CO.
4.1 [Reserved]......................................................... 30
4.2 Heller Material Adverse Effect..................................... 30
4.3 Representations and Warranties of Heller and Merger Co............. 30
4.4 Organization and Powers............................................ 30
4.5 Authority; Binding Effect.......................................... 30
4.6 No Conflict; Approvals............................................. 31
4.7 Governmental Consents and Approvals................................ 31
4.8 Capital Stock...................................................... 31
4.9 Registration Statement; Proxy Statement/Prospectus................. 32
4.10 SEC Reports........................................................ 32
4.11 Financial Statements............................................... 33
4.12 Absence of Certain Changes......................................... 33
4.13 Absence of Litigation; Claims...................................... 33
4.14 Compliance with Law................................................ 33
4.15 Brokers and Finders................................................ 33
4.17 Accounting, Tax and Regulatory Matters............................. 33
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4.17 Financing.......................................................... 34
ARTICLE V
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
5.1 Conduct of Business Prior to the Effective Time.................... 34
5.2 Forbearances....................................................... 34
ARTICLE VI
ADDITIONAL AGREEMENTS
6.1 Access and Information............................................. 37
6.2 Registration Statement; Regulatory Matters......................... 37
6.3 Stockholder Approval............................................... 39
6.4 Current Information................................................ 39
6.5 Agreements of Affiliates........................................... 39
6.6 Expenses........................................................... 40
6.7 Miscellaneous Agreements and Consents.............................. 40
6.8 Employee Matters................................................... 40
6.9 D&O Indemnification................................................ 40
6.10 Press Releases..................................................... 42
6.11 Insurance.......................................................... 43
6.12 Additional Actions................................................. 43
6.13 No Solicitation.................................................... 43
6.14 Year 200 Compliance................................................ 44
6.15 Continuation of Management......................................... 44
ARTICLE VII
CONDITIONS
7.1 Conditions to Each Party's Obligation to Effect the Merger......... 44
7.2 Conditions to Obligations of HFP to Effect the Merger.............. 45
7.3 Conditions to Obligations of Heller to Effect the Merger........... 45
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.1 Termination........................................................ 46
8.2 Effect of Termination and Abandonment.............................. 47
8.3 Amendment.......................................................... 47
8.4 Severability....................................................... 48
8.5 Waiver............................................................. 48
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ARTICLE IX
GENERAL PROVISIONS
9.1 Non-Survival of Representations, Warranties and Agreements......... 48
9.2 Notices............................................................ 48
9.3 Interpretation..................................................... 49
9.4 Miscellaneous...................................................... 50
9.5 Legal Fees and Costs............................................... 50
EXHIBITS
Exhibit A Form of Option Agreement
Exhibit B Form of HFP Affiliate Letter
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AGREEMENT AND PLAN OF MERGER
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This AGREEMENT AND PLAN OF MERGER (this "Agreement") is made and
entered into as of April 19, 1999 by and among Heller Financial Inc., a Delaware
corporation ("Heller"), HealthCare Financial Partners, Inc., a Delaware
corporation ("HFP"), and HF5, Inc. ("Merger Co."), a Delaware corporation and a
wholly-owned subsidiary of Heller.
W I T N E S S E T H:
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WHEREAS, the Boards of Directors of Heller, HFP and Merger Co. have
determined that it is in the best interests of their respective companies and
their stockholders to consummate the business combination transaction provided
for herein in which HFP will, subject to the terms and conditions set forth
herein, merge with and into Merger Co. (the "Merger") so that Merger Co. is the
surviving corporation in the Merger; and
WHEREAS, in connection with and immediately prior to the execution and
delivery of this Agreement, and as a condition to Heller's willingness to enter
into this Agreement, HFP and Heller are entering into a Stock Option Agreement
(the "Option Agreement"); and
WHEREAS, the parties desire to provide for certain conditions,
representations, warranties and covenants in connection with the transactions
contemplated by this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants,
representations, warranties and agreements herein contained, and intending to be
legally bound thereby, the parties agree as follows:
ARTICLE I
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THE MERGER
Section 1.1. The Merger. Subject to the terms and conditions of this
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Agreement and in accordance with the Delaware General Corporation Law (the
"DGCL"), at the Effective Time (as defined in Section 1.3 of this Agreement) HFP
shall merge with and into Merger Co. Merger Co. shall be the surviving
corporation in the Merger, and shall be governed by the laws of the State of
Delaware. Upon consummation of the Merger, the separate corporate existence of
HFP shall terminate. Merger Co., in its capacity as the corporation surviving
the Merger, is hereinafter sometimes referred to as the "Surviving Corporation."
Merger Co. will own all rights to the name "HealthCare Financial Partners" after
the Closing (as defined in Section 1.2), and reserves the right to change the
name of the Surviving Corporation at the Closing or immediately thereafter.
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Section 1.2. Closing. The closing of the Merger (the "Closing") will
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take place two business days after the satisfaction or waiver (subject to
applicable law) of the conditions (excluding conditions that, by their terms,
cannot be satisfied until the Closing) set forth in Article VII (the "Closing
Date") or at such other time and date as the parties may agree. The Closing
shall be held at 10:00 a.m. at the offices of Wachtell, Lipton, Rosen & Katz or
such other place as the parties may agree.
Section 1.3. Effective Time. The Merger shall become effective as set
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forth in the certificate of merger (the "Certificate of Merger") which shall be
filed with the Secretary of State of the State of Delaware on the Closing Date.
The term "Effective Time" shall be the date and time when the Merger becomes
effective, as agreed by the parties and set forth in the Certificate of Merger.
Section 1.4. Effects of the Merger. At and after the Effective Time,
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the Merger shall have the effects set forth in Sections 259 and 261 of the DGCL.
Section 1.5. Certificate of Incorporation. The Certificate of
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Incorporation of Merger Co. as in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation, until
amended in accordance thereto and with applicable law.
Section 1.6. Bylaws. The bylaws of Merger Co. as in effect immediately
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prior to the Effective Time shall be the bylaws of the Surviving Corporation
until amended thereto, in accordance with the Certificate of Incorporation of
the Surviving Corporation and with applicable law.
Section 1.7. Directors and Officers. From and after the Effective Time,
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the directors of Merger Co. shall be the directors of the Surviving Corporation
and the officers of HFP shall be the officers of the Surviving Corporation, in
each case until their respective successors are duly elected and qualified.
Prior to the Effective Time, HFP shall deliver to Heller evidence satisfactory
to Heller of the resignations of each of the directors of HFP, such resignations
to be effective as of the Effective Time.
Section 1.8. Tax Consequences. It is intended that the Merger shall
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constitute a "reorganization" within the meaning of Section 368(a) of the Code.
ARTICLE II
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MERGER CONSIDERATION; EXCHANGE PROCEDURES
Section 2.1. Merger Consideration. Subject to the provisions of this
--------------------
Agreement, at the Effective Time, automatically by virtue of the Merger and
without any action on the part of any party or stockholder:
(a) Outstanding HFP Company Stock. (i) Each share (excluding (i)
shares held by HFP or any of its Subsidiaries or by Heller or any of its
Subsidiaries, in each case other than shares held in a fiduciary capacity that
are beneficially owned by third parties, shares held as a
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result of debts previously contracted, or treasury shares (collectively,
"Treasury Shares") and (ii) Dissenting Shares (as defined herein)) of the common
stock, par value $.01 per share, of HFP ("HFP Common Stock"), issued and
outstanding immediately prior to the Effective Time shall become and be
converted into the right to receive, at the election of the holder thereof as
provided in Section 2.2 (and subject to the provisions thereof), either:
(A) the Per Share Consideration Value payable in cash (the "Per Share
Cash Consideration"), or
(B) that number of shares of common stock, Class A, par value $0.25
per share ("Heller Common Stock"), of Heller equal to the Exchange Ratio (the
"Per Share Stock Consideration").
(ii) "Exchange Ratio" shall, subject to Section 2.7, equal the Per
Share Consideration Value divided by the Average NYSE Closing Price.
(iii) "Average NYSE Closing Price" shall mean the arithmetic mean
(carried to four decimal places) of the closing prices per share of Heller
Common Stock as reported on the NYSE Common Tape (as reported in The Wall Street
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Journal or, if not reported therein, in another mutually agreed upon
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authoritative source) for the ten NYSE trading days ending on (and including)
the fifth trading day immediately preceding the Election Deadline.
(iv) "Per Share Consideration Value" shall be equal to:
(A) if the Average NYSE Closing Price is $31.12 or more,
$36.19;
(B) if the Average NYSE Closing Price is at least $28.73 but
less than $31.12:
$35
(0.59 * 35) + (0.41 * Average NYSE Closing Price * ------ );
$28.73
(C) if the Average NYSE Closing Price is less than $28.73 but
greater than $21.54, $35; or
(D) if the Average NYSE Closing Price is $21.54 or less:
$35
(0.59 * 35) + (0.41 * Average NYSE Closing Price * ------ ).
$21.54
(b) Outstanding Merger Co. Common Stock. Each share of the common
stock of Merger Co. ("Merger Co. Common Stock") issued and outstanding
immediately prior to the Effective Time shall be unchanged and shall remain
issued and outstanding as common stock of the Surviving Corporation.
Section 2.2. Election Procedures. (a) Holders of the HFP Common Stock
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shall be provided with an opportunity to elect to receive, in respect of each
issued and outstanding share of
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HFP Common Stock held by such holder immediately prior to the Effective Time
other than Dissenting Shares, either the Per Share Cash Consideration or the Per
Share Stock Consideration, in accordance with and subject to the election and
proration procedures set forth below in this Section 2.2.
(b) Such number of election forms as the parties hereto may mutually
agree prior to the Mailing Date (as defined herein) and other appropriate and
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing HFP Common Stock ("Old Certificates") shall pass, only upon proper
delivery of such Old Certificates to an exchange agent designated by Heller and
reasonably acceptable to HFP (the "Exchange Agent")) in such form as Heller and
HFP shall mutually agree ("Election Form") shall be mailed 25 days prior to the
anticipated Effective Time (the "Mailing Date") to each holder of record of HFP
Common Stock as of five business days prior to the Mailing Date ("Election Form
Record Date"). Each Election Form shall permit a holder (or the beneficial owner
through appropriate and customary documentation and instructions) of HFP Common
Stock to elect to receive the Per Share Stock Consideration with respect to all
of such holder's HFP Common Stock ("Stock Election Shares") listed on such
Election Form, to elect to receive the Per Share Cash Consideration with respect
to all of such holder's HFP Common Stock ("Cash Election Shares") listed on such
Election Form or to indicate that such holder makes no election ("No Election
Shares").
(c) Any shares of HFP Common Stock with respect to which the holder
(or the beneficial owner, as the case may be) shall not have submitted to the
Exchange Agent an effective, properly completed Election Form on or before 5:00
p.m. on the 20th day following the Mailing Date (or such other time and date as
Heller and HFP may mutually agree) (the "Election Deadline") shall be deemed to
be No Election Shares.
(d) Heller shall make available one or more Election Forms as may be
reasonably requested by all persons who become holders (or beneficial owners) of
HFP Common Stock between the Election Form Record Date and the close of business
on the business day prior to the Election Deadline, and HFP shall provide to the
Exchange Agent all information reasonably necessary for it to perform as
specified herein.
(e) Any election contemplated by Section 2.2(a) shall have been
properly made only if the Exchange Agent shall have actually received a properly
completed Election Form by the Election Deadline. An Election Form shall be
deemed properly completed only if accompanied by one or more certificates (or
customary affidavits and indemnification regarding the loss or destruction of
such certificates or the guaranteed delivery of such certificates) representing
all shares of the HFP Common Stock covered by such Election Form, together with
duly executed transmittal materials included in the Election Form. Any Election
Form may be revoked or changed by the person submitting such Election Form at or
prior to the Election Deadline. In the event an Election Form is revoked prior
to the Election Deadline, the shares of HFP Common Stock represented by such
Election Form shall become No Election Shares and Heller shall cause the
certificates representing HFP Common Stock to be promptly returned without
charge to the person submitting the Election Form upon written request to that
effect from the person who submitted the Election Form. Subject to the terms of
this Agreement and of the Election Form,
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the Exchange Agent shall have reasonable discretion to determine whether any
election, revocation or change has been properly or timely made and to disregard
immaterial defects in the Election Forms, and any good faith decisions of the
Exchange Agent regarding such matters shall be binding and conclusive. Neither
HFP nor the Exchange Agent shall be under any obligation to notify any person of
any defect in an Election Form.
(f) Within five business days after the Election Deadline, unless the
Effective Time has not yet occurred, in which case as soon thereafter as
practicable, Heller shall cause the Exchange Agent to effect the allocation
among the holders of HFP Common Stock in accordance with the Election Forms as
follows:
(i) Stock Elections Less Than the Stock Amount. If the number of
shares of Heller Common Stock that would be issued, upon conversion in the
Merger of the Stock Election Shares is less than the product of (A) 0.41,
(B) the Exchange Ratio as determined according to Section 2.1 and (C) the
number of shares of HFP Common Stock issued and outstanding, on a fully
diluted basis, as of the trading day immediately preceding the Closing Date
(the "Target Share Number"), then:
1. all Stock Election Shares shall be converted into the right to
receive the Per Share Stock Consideration,
2. the Exchange Agent shall allocate pro rata first from among
the holders of No Election Shares and then (if necessary) pro
rata from among the Cash Election Shares (such No Election
Shares and Cash Election Shares, if any, the "Stock Designated
Shares") a sufficient number of shares of Heller Common Stock
such that the number of shares of Heller Common Stock that
will be issued in the Merger equals as closely as practicable,
but in no event less than the Target Share Number, and all
Stock Designated Shares shall be converted into the right to
receive the Per Share Stock Consideration pursuant to the
procedures applicable to Stock Election Shares, and
3. the Cash Election Shares and the No Election Shares which are
not Stock Designated Shares shall be converted into the right
to receive the Per Share Cash Consideration.
(ii) Stock Elections More Than the Stock Amount. If the number of
shares of Heller Common Stock that would be issued upon the conversion in
the Merger of the Stock Election Shares is greater than the Target Share
Number, then:
1. all Cash Election Shares shall be converted into the right to
receive the Per Share Cash Consideration,
2. the Exchange Agent shall allocate pro rata first from among
the holders of No Election Shares and then (if necessary) pro
rata from among the Stock Election Shares a sufficient number
of shares (such No
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Election Shares and Stock Election Shares, if any, the "Cash
Designated Shares") such that the number of shares of Heller
Common Stock that will be issued in the Merger shall be
reduced to the Target Share Number, and all Cash Designated
Shares shall be converted into the right to receive the Per
Share Cash Consideration pursuant to the procedures applicable
to Cash Election Shares, and
3. the Stock Election Shares which are not Cash Designated Shares
shall be converted into the right to receive the Per Share
Stock Consideration.
(iii) Stock Elections Equal to the Stock Amount. If the number of
shares of Heller Common Stock that would be issued upon conversion in the Merger
of the Stock Election Shares equals the Target Share Number, all Stock Election
Shares shall be converted into the right to receive the Per Share Stock
Consideration and all Cash Election Shares and No Election Shares shall be
converted into the right to receive the Per Share Cash Consideration.
(g) Notwithstanding anything in this Article II to the contrary, the
number of shares of HFP Common Stock to be converted into the right to receive
the Per Share Stock Consideration in the Merger shall be that which is
sufficient in order for the ratio of (i) the closing price per share of Heller
Common Stock on the Closing Date times the aggregate number of shares of Heller
Common Stock to be issued as Per Share Stock Consideration pursuant to Section
2.2(f) , to (ii) the sum of (x) the amount set forth in the preceding clause (i)
plus (y) the aggregate Per Share Cash Consideration to be issued pursuant to
Section 2.2(f) plus (z) the number of Dissenting Shares times the Per Share Cash
Consideration, to be not less than 41%; provided, however, that to the extent
any additional shares of Heller Common Stock are required to be issued pursuant
to this Section 2.2(g), such shares shall be issued (A) as Per Share Stock
Consideration in respect of shares that would otherwise be Cash Designated
Shares (x) first, pro rata in respect of Stock Election Shares and (y) second,
to the extent necessary, pro rata in respect of No Election Shares, and (B) to
the extent necessary, as Per Share Stock Consideration pro rata in respect of
Cash Election Shares. Any such Stock Election Shares, No Election Shares and
Cash Election Shares shall henceforth be deemed to be Stock Designated Shares.
Section 2.3. Rights as Stockholders; Stock Transfers. At the Effective
---------------------------------------
Time, holders of HFP Common Stock shall cease to be, and shall have no rights
as, stockholders of HFP, other than to receive any dividend or other
distribution with respect to such HFP Common Stock with a record date occurring
prior to the Effective Time and the consideration provided under this Article
II. After the Effective Time, there shall be no transfers on the stock transfer
books of HFP or the Surviving Corporation of shares of HFP Common Stock.
Section 2.4. Fractional Shares. Notwithstanding any other provision
-----------------
hereof, no fractional shares of Heller Common Stock and no certificates or scrip
therefor, or other evidence of ownership thereof, will be issued in the Merger;
instead, Heller shall pay to each holder of Company Common Stock who would
otherwise be entitled to a fractional share of Heller Common Stock (after taking
into account all Old Certificates delivered by such holder) an amount in cash
(with-
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<PAGE>
out interest) determined by multiplying such fraction by the average of the
last sale prices of Heller Common Stock, as reported by the NYSE Composite
Transactions reporting system (as reported in The Wall Street Journal or, if not
-----------------------
reported therein, in another authoritative source), for the five NYSE trading
days immediately preceding the date on which the Effective Time occurs the
("Effective Date").
Section 2.5. Exchange Procedures. (a) At or prior to the Effective
-------------------
Time, Heller shall deposit, or shall cause to be deposited, with the Exchange
Agent, for the benefit of the holders of Old Certificates, for exchange in
accordance with this Article II, certificates representing the shares of Heller
Common Stock ("New Certificates") and an estimated amount of cash (such cash and
New Certificates, together with any dividends or distributions with respect
thereto (without any interest thereon), being hereinafter referred to as the
"Exchange Fund") to be paid pursuant to this Article II in exchange for
outstanding shares of HFP Common Stock.
(b) As promptly as practicable after the Effective Date, Heller shall
send or cause to be sent to each former holder of record of shares (other than
Cash Designated Shares or Dissenting Shares) of HFP Common Stock immediately
prior to the Effective Time transmittal materials for use in exchanging such
stockholder's Old Certificates for the consideration set forth in this Article
II. Heller shall cause the New Certificates into which shares of a stockholder's
HFP Common Stock are converted on the Effective Date and/or any check in respect
of the Per Share Cash Consideration and any fractional share interests or
dividends or distributions which such person shall be entitled to receive to be
delivered to such stockholder upon delivery to the Exchange Agent of Old
Certificates representing such shares of HFP Common Stock (or indemnity
reasonably satisfactory to Heller and the Exchange Agent, if any of such
certificates are lost, stolen or destroyed) owned by such stockholder. No
interest will be paid on any such cash to be paid pursuant to this Article II
upon such delivery.
(c) Notwithstanding the foregoing, neither the Exchange Agent nor any
party hereto shall be liable to any former holder of HFP Common Stock for any
amount properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
(d) No dividends or other distributions with respect to Heller Common
Stock with a record date occurring after the Effective Time shall be paid to the
holder of any unsurrendered Old Certificate representing shares of HFP Common
Stock converted in the Merger into Cash Designated Shares or Stock Designated
Shares until the holder thereof shall surrender such Old Certificate in
accordance with this Article II. After the surrender of an Old Certificate in
accordance with this Article II, the record holder thereof shall be entitled to
receive any such dividends or other distributions, without any interest thereon,
which theretofore had become payable with respect to shares of Heller Common
Stock represented by such Old Certificate.
(e) Any portion of the Exchange Fund that remains unclaimed by the
stockholders of HFP for twelve months after the Effective Time shall be paid to
Heller. Any stockholders of HFP who have not theretofore complied with this
Article II shall thereafter look only to Heller for payment of the shares of
Heller Common Stock, cash in lieu of any fractional shares and unpaid dividends
and distributions on the Heller Common Stock deliverable in respect of
-7-
<PAGE>
each share of HFP Common Stock such stockholder holds as determined pursuant to
this Agreement, in each case, without any interest thereon.
Section 2.6. Dissenting Stockholders. (a) "Dissenting Shares" means
-----------------------
any shares held by any holder of HFP Common Stock who becomes entitled to
payment of the fair value of such shares under the DGCL. Any holders of
Dissenting Shares shall be entitled to payment for such shares only to the
extent permitted by and in accordance with the provisions of the DGCL; provided,
however, that if, in accordance with the DGCL, any holder of Dissenting Shares
shall forfeit such right to payment of the fair value of such shares, such
shares shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the
consideration provided in this Article II (as No Election Shares).
(b) HFP shall give Heller (i) prompt notice of any written objections
to the Merger and any written demands for the payment of the fair value of any
shares, withdrawals of such demands, and any other instruments served pursuant
to the DGCL received by HFP and (ii) the opportunity to direct all negotiations
and proceedings with respect to such demands under the DGCL. HFP shall not
voluntarily make any payment with respect to any demands for payment of fair
value and shall not, except with the prior written consent of Heller, settle or
offer to settle any such demands.
Section 2.7. Anti-Dilution Provisions. In the event Heller changes (or
------------------------
establishes a record date for changing) the number of shares of Heller Common
Stock issued and outstanding prior to the Effective Date as a result of a stock
split, stock dividend, recapitalization or similar transaction with respect to
the outstanding Heller Common Stock and the record date therefor shall be prior
to the Effective Date, the Exchange Ratio shall be proportionately adjusted.
Section 2.8. Treasury Shares. Each of the shares of HFP Common Stock
---------------
held as Treasury Shares immediately prior to the Effective Time shall be
canceled and retired at the Effective Time and no consideration shall be issued
in exchange therefor.
Section 2.9. Options. Except with respect to those HFP Options (as
-------
defined herein) in Section A of the schedule attached hereto (the "HFP
Schedule"), at the Effective Time, all employee stock options to purchase shares
of HFP Common Stock (each, a "HFP Option"), which are then outstanding and
unexercised, shall cease to represent a right to acquire shares of HFP Common
Stock and shall be converted automatically into options to purchase shares of
Heller Common Stock, and Heller shall assume each such HFP Option subject to the
terms of any of the stock option plans listed under Section 3.6 of the HFP
Schedule (collectively, the "HFP Stock Plans"), and the agreements evidencing
grants thereunder, including but not limited to the accelerated vesting of such
options which shall occur in connection with and by virtue of the Merger as and
to the extent required by such plans and agreements; provided, however, that
from and after the Effective Time, (i) the number of shares of Heller Common
Stock purchasable upon exercise of such HFP Option shall be equal to the number
of shares of HFP Common Stock that were purchasable under such HFP Option
immediately prior to the Effective Time, (ii) the per share exercise price under
each such HFP Option shall be adjusted by dividing the per share exercise price
of each such HFP Option by the Exchange Ratio, and rounding down to the nearest
cent, and (iii) each HFP Option that is so assumed by Heller shall be converted
automatically into non-incentive options to purchase
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<PAGE>
shares of Heller Common Stock, from options that are intended to be "incentive
stock options" (as defined in Section 422 of the Code). The terms of each HFP
Option shall, in accordance with its terms, be subject to further adjustment as
appropriate to reflect any stock split, stock dividend, recapitalization or
other similar transaction with respect to Heller Common Stock on or subsequent
to the Effective Date. Notwithstanding the foregoing, each HFP Option which is
intended to be an "incentive stock option" (as defined in Section 422 of the
Code) shall be adjusted in accordance with the requirements of Section 424 of
the Code. Accordingly, with respect to any incentive stock options, fractional
shares shall be rounded down to the nearest whole number of shares and where
necessary the per share exercise price shall be rounded down to the nearest
cent. All options to purchase shares of HFP Common Stock, which are then
outstanding under the 1996 Director Stock Option Plan and unexercised (each a
"HFP Director Option"), shall be canceled and each holder of a canceled HFP
Director Option shall be entitled to receive, in consideration for the
cancellation of such HFP Director Option, an amount in cash equal to the product
of (x) the number of shares of HFP Common Stock previously subject to such
Option and (y) the excess, if any, of the Per Share Consideration Value over the
exercise price per share previously subject to such HFP Director Option.
ARTICLE III
-----------
REPRESENTATIONS AND WARRANTIES OF HFP
Section 3.1. [Reserved]
Section 3.2. HFP Material Adverse Effect. As used in this Agreement,
---------------------------
"HFP Material Adverse Effect" shall mean, with respect to HFP, any change or
effect that (x) is, or is reasonably likely to be, materially adverse to the
business, results of operations, or financial condition of HFP and its
Subsidiaries, taken as a whole or (y) would, or is reasonably likely to,
materially impair the ability of HFP to perform its obligations under this
Agreement or otherwise materially threaten or impede the consummation of the
Merger and the other transactions contemplated by this Agreement, in either case
other than any change, event or occurrence (to the extent that they do not, in
any case, disproportionately affect HFP) relating to (i) the United States or
global economic or financial services industry conditions generally, (ii) the
United States or global securities markets in general, (iii) this Agreement or
the transactions contemplated hereby or the announcement thereof, (iv) changes
in legal or regulatory conditions that affect generally the businesses in which
HFP and its Subsidiaries are engaged, (v) the general level of interest rates,
or (vi) financial institutions or the credit market generally.
Section 3.3. Representations and Warranties of HFP. Subject to the
-------------------------------------
foregoing and except as set forth in the HFP Schedule, HFP hereby represents and
warrants to Heller and Merger Co. as of the date of this Agreement and as of the
Closing Date as set forth in Section 3.4 through 3.36 inclusive:
Section 3.4. Organization, Powers and Qualifications. HFP is a
---------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware. HFP has all requisite corporate power and authority
to carry on its business as it has been and is now being
-9-
<PAGE>
conducted and to own, lease and operate the properties and assets used in
connection therewith, except where any failure to have such power and authority
would not, individually or in the aggregate, have a HFP Material Adverse Effect.
HFP is duly qualified as a foreign corporation authorized to do business and is
in good standing in every jurisdiction in which such qualification is required,
all of which jurisdictions are listed in Section 3.4 of the HFP Schedule, except
when any failure to be so qualified or in good standing would not, individually
or in the aggregate, have a HFP Material Adverse Effect.
Section 3.5. Subsidiaries.
------------
(a) "Subsidiary" means, with respect to any party, any corporation,
limited liability company, partnership, joint venture, or other business
association or entity, at least a majority of the voting securities or economic
interests of which is directly or indirectly owned or controlled by such party
or by any one or more of its Subsidiaries, except where such ownership or
control results solely from such party's ownership or control of unexercised
warrants or convertible debt instruments issued by such entity. As used in this
Agreement, "Joint Venture" means, with respect to any party, any corporation,
limited liability company, partnership, joint venture or other business
association or entity in which either (i) such party or any one or more of its
Subsidiaries, directly or indirectly, owns or controls more than ten percent
(10%) and less than a majority of any class of the outstanding voting securities
or economic interests and such securities or interests have a value of more than
$1 million individually, or (ii) such party or a Subsidiary of such party is a
general partner or manager.
(b) Section 3.5 of the HFP Schedule lists each Subsidiary and each
Joint Venture of HFP, the jurisdiction of its organization and the amount of its
equity securities outstanding and the owners thereof. Each Subsidiary is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. Each such Subsidiary has all requisite power
and authority to carry on its business as it has been and is now being conducted
and to own, lease and operate the assets and properties used in connection
therewith except as would not have, individually or in the aggregate, a HFP
Material Adverse Effect. Each such Subsidiary is duly qualified as a foreign
corporation authorized to do business and is in good standing in every
jurisdiction in which such qualification is required, all of which jurisdictions
are disclosed in the Section 3.5 of the HFP Schedule except as would not have,
individually or in the aggregate, a HFP Material Adverse Effect. All issued and
outstanding shares of capital stock or other equity instruments of each such
Subsidiary have been duly authorized, are validly issued and outstanding, are
fully paid and nonassessable and were issued in compliance with all applicable
federal and state securities laws, and, except as set forth in Section 3.5 of
the HFP Schedule, are lawfully owned of record and beneficially by HFP or
another Subsidiary free and clear of all pledges, liens, claims, security
interests and other charges or defects in title of any nature whatsoever
("Liens").
(c) Every "company" under the "control" of HFP, as such quoted terms
are defined for purposes of 12 U.S.C. (S)(S) 1841(a)(2)(A) and 1841(a)(2)(B) and
the rules and regulations of the Board of Governors of the Federal Reserve
System thereunder, all as amended and heretofore judicially and administratively
interpreted, other than Subsidiaries and Joint Ventures of HFP, is listed in
Section 3.5 of the HFP Schedule. HFP has previously furnished to Heller a
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<PAGE>
written description of the activities of each such company that is true and
correct in all material respects. The aggregate value of all securities and
interests in such companies (other than Subsidiaries or Joint Ventures) owned by
HFP or any of its Subsidiaries as of March 31, 1999 does not exceed $2,000,000.
Section 3.6. Capital Stock. HFP has authorized capital stock consisting
-------------
of 60,000,000 shares of HFP Common Stock and 10,000,000 shares of preferred
stock, par value $.01 per share ("HFP Preferred Stock"). As of April 14, 1999:
(i) 13,421,039 shares of HFP Common Stock were issued and outstanding, (ii) no
shares of HFP Common Stock were held as treasury shares, (iii) 1,746,152 shares
of HFP Common Stock were reserved for issuance under the HFP Stock Plans, and
(iv) no shares of HFP Preferred Stock were issued and outstanding. Section 3.6
of the HFP Schedule lists all holders of HFP Options, the date each HFP Option
was granted, the HFP Stock Plan under which such HFP Options were granted, the
number of shares of HFP Common Stock subject to each such HFP Option, the
expiration date of each such HFP Option and the price at which such HFP Option
may be exercised under the applicable HFP Stock Plan. Since April 14, 1999, (i)
no additional shares of capital stock have been reserved for issuance by HFP,
(ii) except for issuances of HFP Common Stock upon the exercise of outstanding
HFP Options listed in Section 3.6 of the HFP Schedule, there are no other shares
of capital stock of HFP authorized, issued or outstanding, and (iii) no shares
of HFP Common Stock came to be held by HFP as treasury shares. All of the issued
and outstanding shares of HFP Common Stock have been duly authorized and are
validly issued and outstanding, fully paid and nonassessable, and were issued in
compliance with all applicable Federal and state securities laws. No shares of
capital stock issued by HFP are or were at the time of their issuance subject to
preemptive rights. There are no existing subscriptions, options, warrants,
convertible securities, calls, commitments, agreements, conversion rights or
other rights of any character (contingent or otherwise) calling for or requiring
the issuance, transfer, sale or other disposition of any shares of the capital
stock of HFP ("HFP Capital Stock") or of any Subsidiary of HFP, or calling for
or requiring the issuance of any securities or rights convertible into or
exchangeable for shares of HFP Capital Stock or the capital stock of any
Subsidiary of HFP, nor is HFP or any Subsidiary of HFP subject to any obligation
(contingent or otherwise) to repurchase, redeem or otherwise acquire shares of
capital stock of HFP or any such Subsidiary, in any case except as set forth in
Section 3.6 of the HFP Schedule. There are no voting trusts or other agreements
or understandings to which HFP is a party, nor, to the Knowledge (as hereinafter
defined) of HFP, to which any stockholder of HFP is a party, with respect to the
voting of HFP Capital Stock, other than this Agreement. The term "Knowledge"
with respect to HFP or Heller means the actual knowledge of any executive
officer of HFP or its Subsidiaries or of Heller or its Subsidiaries, as the case
may be.
Section 3.7. Certificate, Bylaws, Minute Books and Records. The copies
---------------------------------------------
of the amended and restated Certificate of Incorporation, as amended to date, of
HFP (the "HFP Charter") and the bylaws of HFP (the "HFP Bylaws") as in effect on
the date hereof, and the articles of incorporation and bylaws of its
Subsidiaries, which have been made available to Heller, are true, correct and
complete copies thereof as in effect on the date hereof. The minute books of
HFP and its Subsidiaries, which have been made available for inspection by
Heller are accurate and complete in all material respects and contain minutes of
all meetings and consents in lieu of meetings of the Board of Directors (the
"HFP Board") of HFP (and any committee thereof) and of the holders ("HFP
Stockholders") of HFP Common Stock and the stockholders or other equity holders
of the Subsidiaries of HFP since the respective dates of formation of HFP
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<PAGE>
and such Subsidiaries. The books and records of HFP and each such Subsidiary,
which have been made available by HFP to Heller, accurately reflect the
transactions to which HFP or such Subsidiary is a party or by which their
properties are subject or bound.
Section 3.8. Authority; Binding Effect. HFP has all requisite corporate
-------------------------
power and authority to execute and deliver this Agreement and the Option
Agreement and to consummate the transactions contemplated hereby and thereby.
All necessary action, corporate or otherwise, required to have been taken by or
on behalf of it by applicable law, the HFP Charter or otherwise to authorize (i)
the approval, execution and delivery on its behalf of this Agreement and the
Option Agreement and (ii) its performance of its obligations under this
Agreement and the Option Agreement and the consummation of the transactions
contemplated hereby and thereby, has been taken, including the receipt of the
unanimous approval by the HFP Board, except that the adoption of this Agreement
must be approved by the affirmative vote of a majority of the votes of all
outstanding shares of HFP Common Stock of record on the record date for the
Stockholders Meeting. Each of this Agreement and the Option Agreement
constitutes HFP's valid and binding agreement, enforceable against it in
accordance with its terms, except (A) as the same may be limited by applicable
bankruptcy, insolvency, moratorium or similar laws of general application
relating to or affecting creditors' rights, including without limitation, the
effect of statutory or other laws regarding fraudulent conveyances and
preferential transfers, and (B) for the limitations imposed by general
principles of equity.
Section 3.9. No Conflict; Approvals. Except as set forth in Section 3.9
----------------------
of the HFP Schedule, the execution and delivery of this Agreement and the Option
Agreement does not, and the consummation of the transactions contemplated hereby
and thereby will not, (i) violate or conflict with the HFP Charter or HFP Bylaws
or the comparable organizational documents of any of its Subsidiaries, or (ii)
constitute a breach or default (or an event that, with notice or lapse of time
or both, would become a breach or default), require any filing, waiver, permit,
approval or consent under, or give rise to any Lien, third party right of
termination, cancellation, material modification or acceleration, or loss of any
benefit, under any Contract (as defined in Section 3.16) to which HFP or any
Subsidiary of HFP is a party or by which it or any such Subsidiary is bound or
(iii) subject to the consents, approvals, orders, authorizations, filings,
declarations and registrations specified in Section 3.10 or in Section 3.10 of
the HFP Schedule, conflict with or result in a violation of any permit,
concession, franchise or license or any law, statute, rule or regulation
applicable to HFP or any of its Subsidiaries or any of their properties or
assets, except, in the case of clauses (ii) and (iii), as would not,
individually or in the aggregate, have a HFP Material Adverse Effect.
Section 3.10. Governmental Consents and Approvals. Except as set forth
-----------------------------------
in Section 3.10 of the HFP Schedule, neither the execution and delivery of this
Agreement and the Option Agreement nor the consummation of the transactions
contemplated hereby and thereby will require any consent, approval, order,
authorization, or permit of, or filing with or notification to, any local
state, federal or foreign court, administrative agency, commission or other
governmental or regulatory authority, agency or instrumentality ("Governmental
Entity"), except as contemplated by the Option Agreement and except for (i) the
filing of the registration statement (the "Registration Statement") of Heller on
Form S-4 pursuant to which shares of Heller Common Stock to be issued in the
Merger will be registered with the Securities and Exchange Com-
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<PAGE>
mission (the "SEC") in accordance with the Securities Act of 1933, as amended,
and the rules and regulations thereunder (the "Securities Act"), the entry of an
order by the SEC permitting such Registration Statement to become effective, and
compliance with applicable state securities laws, (ii) the filing of the proxy
statement or any supplement thereto (the "Proxy Statement") and related proxy
materials with the SEC in accordance with the Securities Exchange Act of 1934,
as amended, and the rules and regulations thereunder (the "Exchange Act"), (iii)
notification pursuant to, and expiration or termination of the waiting period
under, the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations thereunder (the "HSR Act"), (iv) the filing and
recording of the Certificate of Merger in accordance with the DGCL and (v)
consents, approvals, orders, authorizations or permits the failure to obtain, or
filings or notifications the failure to make, will not, individually or in the
aggregate, have a HFP Material Adverse Effect.
Section 3.11. SEC Reports. HFP has filed all required forms, reports
-----------
and documents with the SEC since January 1, 1997 (collectively, "HFP's SEC
Reports"), including, without limitation, HFP's Annual Report on Form 10-K for
the year ended December 31, 1998, (the "HFP 1998 Form 10-K"). HFP's SEC Reports
have complied in all material respects with all applicable requirements of the
Securities Act and the Exchange Act. As of their respective dates, none of
HFP's SEC Reports, including, without limitation, any financial statements or
schedules included or incorporated by reference therein, contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated or incorporated by reference therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. There have been filed as exhibits to, or incorporated by reference
in, the HFP 1998 Form 10-K all contracts which, as of the date thereof, were
material as described in Item 601(b) (10) of Regulation S-K, except as set forth
in Section 3.11 of the HFP Schedule. HFP has heretofore delivered to Heller, in
the form filed with the SEC, all of HFP's SEC Reports filed prior to the date of
this Agreement. Each of the financial statements (including the related notes)
included in HFP's SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of operations and cash
flows of HFP and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with generally accepted
accounting principles ("GAAP") consistently applied during the periods involved
except as otherwise noted therein, and subject, in the case of the unaudited
interim financial statements, to normal and recurring adjustments that have not
been and are not expected to be material in amount.
Section 3.12. Financial Statements.
--------------------
(a) HFP has delivered to Heller true and complete copies of
consolidated balance sheets of HFP and its Subsidiaries at December 31, 1998
(the "Audit Date") and at December 31, 1997 and the related consolidated
statements of income changes in shareholders' equity and statements of cash flow
for the years then ended, together with the notes thereto, audited by Ernst &
Young LLP, which have been prepared in accordance with GAAP consistently applied
throughout the periods involved. Such balance sheets, including the related
notes, fairly present the consolidated financial position, assets and
liabilities (whether accrued, absolute, contingent or otherwise) of HFP and its
Subsidiaries at the dates indicated and such consolidated statements of income,
changes in shareholders' equity and statements of cash flow
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<PAGE>
fairly present the consolidated results of operations, changes in shareholders'
equity and cash flow of HFP and its Subsidiaries for the periods indicated.
(b) HFP has delivered to Heller true and complete copies of
consolidated balance sheets of HFP and its Subsidiaries at March 31, 1999 and
the related consolidated statements of income, changes in shareholders' equity
and statements of cash flow for the three months then ended, which have been
prepared in accordance with GAAP consistently applied throughout the periods
involved. Such balance sheets, including the related notes, fairly present the
consolidated financial position, assets and liabilities (whether accrued,
absolute, contingent or otherwise) of HFP and its Subsidiaries at the dates
indicated and such consolidated statements of income, changes in shareholders'
equity and statements of cash flow fairly present the consolidated results of
operations, changes in shareholders' equity and cash flow of HFP and its
Subsidiaries for the period indicated, subject to normal and recurring
adjustments that have not been and are not expected to be material in amount.
(c) HFP's reserves for possible loan losses, including its allowances
for losses on receivables and its specific loss reserves, shown on the audited
consolidated balance sheets of HFP and its Subsidiaries at December 31, 1998,
filed as part of HFP's annual report to the SEC on Form 10-K for its fiscal year
ended December 31, 1998 (the "HFP 1998 Balance Sheet"), and on the consolidated
balance sheet of HFP and its Subsidiaries as at March 31, 1999 (the "HFP Interim
1999 Balance Sheet") were adequate in all material respects under the
requirements of GAAP to provide at such dates for possible losses, net of
recoveries relating to loans previously charged off, on loans outstanding at
such dates, and, to HFP's Knowledge at such dates, HFP's loan portfolio as at
each of the date of the HFP 1998 Balance Sheet and the date of the HFP Interim
1999 Balance Sheet were collectible in excess of the allowances for loan losses
shown thereon. To HFP's Knowledge, the reserves shown on the HFP Interim 1999
Balance Sheet, expressed as a percent of loans, neither have been nor, applying
the same criteria used to determine the adequacy of the reserves shown on the
HFP 1998 Balance Sheet, should be or have been materially increased since March
31, 1999, and the loans outstanding as of March 31, 1999 were, and to the extent
still outstanding or added to, are, collectible in excess of the allowances for
loan losses, except where the failure to collect any such loans, individually or
in the aggregate, would not have a HFP Material Adverse Effect.
Section 3.13. Absence of Certain Changes. Since December 31, 1998, HFP
--------------------------
and its Subsidiaries have conducted their business solely in the ordinary course
consistent with past practice and policies and procedures. Since December 31,
1998, (i) HFP has not made any change to its or any of its Subsidiaries'
accounting methods, principles or practices other than as required by GAAP nor
suffered any material deterioration in the quality of its loan portfolio
measured in terms of the likelihood of full and timely repayment of the loans
that comprise such portfolio; and (ii) except in the ordinary course of
business, consistent with past practice, neither HFP nor any of its Subsidiaries
has (a) authorized, declared, set aside or paid any dividend or distribution or
capital return in respect of any stock of, or other equity interest in HFP or
any of its Subsidiaries; (b) increased or established any bonus, insurance,
deferred compensation, severance, pension, profit sharing, stock option
(including, without limitation, the granting of stock options, stock
appreciation rights, performance awards or restricted stock awards), stock
purchase or other employee benefit plan or increased any other compensation
payable or to become payable to any
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employees, officers, directors or consultants of HFP or any of its Subsidiaries,
which increase or establishment will result in a material liability; or (c)
taken or agreed to take any other action or been subject to any other event that
would, if taken after the date of this Agreement, require the prior written
consent of Heller pursuant to Section 5.2 of this Agreement. Since December 31,
1998, HFP and its Subsidiaries have not been subject to any events or conditions
of any character that would have a HFP Material Adverse Effect or impair the
ability of HFP to perform its obligations under this Agreement or the Option
Agreement or prevent or delay the consummation of any of the transactions
contemplated hereby or thereby.
Section 3.14. Indebtedness; Absence of Undisclosed Liabilities. Section
------------------------------------------------
3.14 of the HFP Schedule discloses all material indebtedness for money borrowed
by HFP or any Subsidiary thereof as of the date hereof, accurately disclosing
for each such indebtedness the payee, the original principal amount of the loan,
the current unpaid balance of the loan, the interest rate, the maturity date and
amount of any prepayment, early termination or similar penalties that would be
incurred if the loan were repaid on the date hereof. Except as set forth in
Section 3.14 of the HFP Schedule, neither HFP nor its Subsidiaries has any
material indebtedness, liability or obligation of any kind (whether known or
unknown, accrued, absolute, asserted or unasserted, contingent or otherwise)
except (i) as and to the extent reflected, reserved against or otherwise
disclosed in Section 3.14 of the HFP 1998 Balance Sheet, or (ii) for
liabilities and obligations incurred subsequent to the Audit Date in the
ordinary course of business consistent with past practice and policies and
procedures.
Section 3.15. Assets. Except as described in Section 3.15 of the HFP
------
Schedule, HFP and its Subsidiaries have good and marketable title to all of
their real and personal properties and assets, including, without limitation,
those assets and properties reflected in the HFP 1998 Balance Sheet in the
amounts and categories reflected therein, free and clear of all Liens, except
(i) the lien of current taxes not yet due and payable, (ii) properties,
interests, and assets disposed of by HFP or any Subsidiary since the Audit Date
solely in the ordinary course of business consistent with past practice and
policies and procedures, (iii) such secured indebtedness as is disclosed in the
HFP 1998 Balance Sheet covering the properties referred to therein, (iv) such
imperfections of title, easements and encumbrances, if any, as are not
substantial in character, amount or extent and do not materially detract from
the value, or interfere with the present or proposed use, of the properties
subject thereto; or (v) where any failure to have such title, individually or in
the aggregate, would not have a HFP Material Adverse Effect.
Section 3.16. Contracts.
---------
(a) Section 3.16 of the HFP Schedule lists each contract, agreement,
arrangement, lease, instrument, mortgage or commitment to which HFP or any of
its Subsidiaries is a party or may be bound or to which their respective
properties or assets may be subject, excluding Financing Documents (as
hereinafter defined) entered into in the ordinary course of business
("Contract"), (i) which is with any present or former employee or for the
employment of any person or consultant or which is a non-compete arrangement
with any employee of HFP or any of its Subsidiaries; (ii) which is a severance
agreement, program or policy of HFP or any such Subsidiary with or relating to
its employees; (iii) under the terms of which any of the rights or obligations
of a party thereto will be accelerated as a result of the transactions
contemplated hereby or
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<PAGE>
which contain change in control provisions; (iv) which involves a material
license, or other material arrangement which relates in whole or in part to any
material software, patent, trademark, trade name, service mark or copyright used
by HFP or any of its Subsidiaries in the conduct of its business; (v) which is
an arrangement limiting or restraining HFP or any of its Subsidiaries or any
successor thereto from engaging or competing in any manner or in any business;
or (vi) under which HFP or any of its Subsidiaries guarantees the payment or
performance by others or in any way is or will be liable with respect to
material obligations of any other person. Except for this Agreement and the
Option Agreement and as listed in the HFP 1998 Form 10-K, there are no contracts
or agreements other than the Contracts and the Financing Documents that are
material to the business properties, assets, financial condition or results of
operations of HFP, taken as a whole.
(b) All Contracts are valid and binding and in full force and effect
as to HFP on the date of this Agreement except to the extent they have
previously expired in accordance with their terms. None of HFP, any of its
Subsidiaries or, to HFP's Knowledge, any other parties, have violated any
provision of, or committed or failed to perform any act which with notice, lapse
of time or both would constitute a default under the provisions of, any
Contract, except as would not have, individually or in the aggregate, a HFP
Material Adverse Effect. True and complete copies of all Contracts listed in
Section 3.16 of the HFP Schedule or listed in the HFP 1998 Form 10-K, together
with all amendments thereto through the date hereof, have been delivered or made
available to Heller.
Section 3.17. Financing Transactions.
----------------------
(a) The written list of counterparties to Financing Documents
("Borrowers") of HFP and its Subsidiaries as of April 16, 1999, previously
furnished by HFP to Heller is a complete and accurate list of Borrowers of HFP
and its Subsidiaries as of such date. Said list correctly and accurately sets
forth as of such date the respective total lines and outstanding extensions of
credit available to and made by HFP and its Subsidiaries to such Borrowers and
the dates upon which HFP's and its Subsidiaries' financing contracts with such
Borrowers expire.
(b) Except as previously disclosed by HFP to Heller, HFP, directly or
indirectly through its Subsidiaries, has neither extended credit nor committed
to extend credit to any person which extension of credit or commitment to extend
credit, together with any and all extensions of credit and commitments to extend
credit by HFP and its Subsidiaries to persons related to such person, exceed $30
million. A person shall be considered related to another person if he controls,
is controlled by, or is under common control with such other person, control
meaning for this purpose the power to direct the management or policies of such
other person, whether through the exercise of voting rights, by management
contract, or otherwise.
(c) Accurate and complete copies of the agreements, contracts, and
other instruments including all modifications, waivers and amendments thereto
(the "Financing Documents") entered into by HFP or any of its Subsidiaries, as
the case may be, with respect to financing transactions entered into by HFP or
any of its Subsidiaries with its or their clients (the "Financing
Transactions"), are in the files of HFP located in its Chevy Chase, Maryland
headquarters, and have been made available to Heller. Except in respect of the
Financing Transac-
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tions described in Section 3.17 of the HFP Schedule, no Financing Documents
deviate in any material respect from the standard forms of such Financing
Documents previously furnished by HFP to Heller, and lockbox account agreements
that conform in all material respects to the forms of the lockbox account
agreements previously furnished by HFP to Heller are, to HFP's Knowledge, after
due periodic investigation by HFP and its Subsidiaries consistent with their
past practices, in full force and effect in respect of all outstanding Financing
Transactions secured by, in whole or in part, items or services reimbursable by
Medicare and/or Medicaid. The original execution copy of the Financing Documents
are in the possession of HFP, a trustee under a securitization transaction, or a
secured lender to HFP. HFP has caused to be filed UCC-1 financing statements or
real property mortgages with respect to all or substantially all of the property
pledged to HFP.
(d) Each of the Financing Documents is valid and enforceable in
accordance with its terms except as may be limited by bankruptcy laws or other
similar laws affecting rights of creditors generally or general principles of
commercial reasonableness; HFP and its Subsidiaries which are parties thereto
are in compliance in all material respects with the provisions thereof; neither
HFP nor any such Subsidiary is in default in the performance, observance or
fulfillment of any material obligation, covenant or condition contained therein,
except as disclosed in Section 3.17 of the HFP Schedule; and, to HFP's
Knowledge, no event has occurred which with or without the giving of notice or
lapse of time, or both, would constitute a default by HFP or any such Subsidiary
thereunder except as would not have, individually or in the aggregate, a HFP
Material Adverse Effect. Each of the Financing Documents accurately and
completely describes the terms of such Financing Transaction and there have been
no amendments, modifications or waivers that are not reflected therein.
(e) With respect to each Financing Transaction in which HFP or any of
its Subsidiaries has been issued securities or warrants to acquire securities,
to HFP's Knowledge, each such security was issued in compliance with the
requirements of the Securities Act and neither HFP nor any Subsidiary of HFP has
taken any actions which would violate the restrictions imposed upon HFP or any
Subsidiary of HFP in connection with such securities under the applicable
securities laws, pursuant to contract or otherwise.
(f) Each of the loans included in the Financing Transactions has been
assigned a rating in accordance with HFP's internal loan rating system, which
system has been made available to Heller. The weighted average loan rating under
such system of all of the loans included in the Financing Transactions is 3.18
as of April 16, 1999.
(g) Except as previously disclosed by HFP to Heller in writing, to
HFP's Knowledge, (i) no Borrower (A) has petitioned or applied for, otherwise
sought, consented in writing to, or filed an answer seeking the appointment of a
receiver, trustee, or liquidator for itself or any substantial part of its
property, or relief, including liquidation, under the Bankruptcy Code or any
other insolvency law or law affecting the rights of creditors generally, (B) is
unable or has admitted in writing its inability to pay its debts as they become
due, (C) has made a general assignment for the benefit or creditors or offered
or sought from its creditors a composition or extension, or (D) has failed to
obtain within 60 days of the commencement thereof against the Borrower discharge
of a petition or proceeding in bankruptcy or under any other insolvency law
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or law affecting the rights of creditors generally, and (ii) except as would
not, individually or in the aggregate, have a HFP Material Adverse Effect, no
claim, action, suit or proceeding concluded or pending against any Borrower has
resulted, or, upon the written advice of counsel, is likely to result, in the
invalidation, in whole or in part, of the Borrower's obligations to HFP or its
Subsidiaries or the security therefor.
Section 3.18. Securitization and Other Debt Facilities. Section 3.18 of
----------------------------------------
the HFP Schedule identifies each of the principal agreements evidencing the
arrangements pursuant to which HFP has caused certain of its loans to be
conveyed to trusts for purposes of selling securities issued by such trusts
(collectively, the "Securitization Agreements") and all agreements with respect
to all other debt facilities and commitments used by or available to HFP or any
of its Subsidiaries for the financing of HFP's or any of its Subsidiaries'
operations (collectively, the "Other Debt Agreements"). Each of the
representations and warranties made at any time and from time to time by HFP or
any Subsidiary of HFP in the Securitization Agreements and Other Debt Agreements
was true and correct when made or deemed to have been made thereunder. All
loans and other assets conveyed by HFP or any of its Subsidiaries to the trusts
under applicable agreements satisfy the applicable eligibility criteria and
conditions set forth in the Securitization Agreements. Each of HFP and its
Subsidiaries that are parties to the Securitization Agreements and Other Debt
Agreements has performed its obligations and has observed and complied with
those conditions and requirements applicable to it or its properties under the
Securitization Agreements. No default or breach by HFP or any such Subsidiary
under the Securitization Agreements and Other Debt Agreements has occurred and
neither HFP nor any such Subsidiary has received notice from any party to the
Securitization Agreements or Other Debt Agreements asserting or otherwise
indicating that such default or breach has occurred except in each case as would
not have, individually or in the aggregate, a HFP Material Adverse Effect.
Neither HFP nor any Subsidiary of HFP has been required to repurchase any loans
or other assets under the terms of the Securitization Agreements.
Section 3.19. Authorizations; Compliance with Law.
-----------------------------------
(a) Except as would not have, individually or in the aggregate, a HFP
Material Adverse Effect, HFP, its Subsidiaries, and all their employees, and, to
HFP's Knowledge, Health Charge Corporation and its employees, in respect of
services furnished by such employees for HFP, its Subsidiaries or Health Charge
Corporation hold all licenses, franchises, certificates, consents, permits,
approvals, certificates of public convenience and necessity, and authorizations
("Authorizations") from all Governmental Entities and other persons which are
necessary for the lawful conduct in respect of HFP, its Subsidiaries and Health
Charge Corporation and their respective businesses and their use and occupancy
of their assets and properties in the manner heretofore and currently conducted,
used and occupied and, in the case of their respective employees, such
employees' services for HFP, its Subsidiaries or Health Charge Corporation. All
of such Authorizations possessed by HFP, its Subsidiaries and, to the Knowledge
of HFP, Health Charge Corporation are listed in Section 3.19 of the HFP Schedule
and, except as would not have, individually or in the aggregate, a HFP Material
Adverse Effect, are valid, in good standing and in full force and effect and
HFP, its Subsidiaries and, to the Knowledge of HFP, Health Charge Corporation
have duly performed all of their respective obligations under such
Authorizations. Except as would not have, individually or in the aggregate, a
HFP Material Adverse Ef-
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<PAGE>
fect, no event has occurred with respect to any Authorization which permits, or
after notice or lapse of time or both would permit, revocation or termination
thereof or would result in any other impairment of the rights of the holder of
such Authorization, and no termination thereof has been, to the Knowledge of
HFP, threatened; provided that with respect to Health Charge Corporation, the
representation in this sentence is made to HFP's Knowledge.
(b) Except as would not have, individually or in the aggregate, a HFP
Material Adverse Effect, each of HFP, its Subsidiaries and, to the Knowledge of
HFP, Health Charge Corporation is in compliance with all applicable laws,
statutes, ordinances, codes, rules, regulations, orders or directives of all
Governmental Entities (collectively, "Laws"), and HFP has not received any
notice from any Governmental Entity within three years of the date hereof of any
violation of any Law except as would not have, individually or in the aggregate,
a HFP Material Adverse Effect. To HFP's Knowledge, the entities identified in
Section 3.19(b) of the HFP Schedule have not been compensated for reimbursement
consulting services in a manner that varies with the volume or dollar value of
reimbursement in respect of such consulting services.
Section 3.20. Taxes.
-----
(a) All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by HFP or its
Subsidiaries (the "Tax Returns") on or prior to the date hereof or with respect
to taxable periods ending on or prior to the date hereof with respect to any
federal, state, local or foreign taxes, assessments, deficiencies, fees and
other governmental charges or impositions (including, without limitation, all
net or gross income tax, unemployment compensation, social security, payroll,
sales and use, excise, privilege, property, ad valorem, transfer, franchise,
license, school, capital gains, gross receipts, withholding, property, premium,
stamp, occupation, severance and any other tax or similar governmental charge or
imposition (including interest, penalties or additions with respect thereto)
under the laws of the United States or any state or municipal or political
subdivision thereof or any foreign country or political subdivision thereof
("Taxes")) have been timely filed with the appropriate Governmental Entities in
all jurisdictions in which such Tax Returns are required to be filed except as
would not have, individually or in the aggregate, a HFP Material Adverse Effect;
all such Tax Returns are true, correct and complete except as would not have,
individually or in the aggregate, a HFP Material Adverse Effect; and HFP or its
Subsidiaries have paid all amounts shown as due on such Tax Returns except as
would not have, individually or in the aggregate, a HFP Material Adverse Effect.
(b) The HFP 1998 Balance Sheet contains adequate accruals in
accordance with GAAP for all unpaid tax liabilities of HFP and its Subsidiaries
as of its Audit Date and include provision in accordance with GAAP for all
deferred taxes as of such date, except as would not have, individually or in the
aggregate, a HFP Material Adverse Effect.
(c) Neither HFP nor any of its Subsidiaries has received any written
notice of assessment in connection with any Taxes or Tax Returns and there are
no pending Tax examinations of or Tax claims asserted against HFP or any of its
Subsidiaries or any of their respective assets or properties.
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<PAGE>
(d) Neither HFP nor any of its Subsidiaries has been a member of an
affiliated group of corporations, within the meaning of Section 1504 of the Code
(other than the group the common parent of which is HFP), or a member of a
combined, consolidated or unitary group for state, local or foreign tax purposes
(other than a group the common parent of which is HFP or any of its
Subsidiaries) and neither HFP nor any of its Subsidiaries has any liability for
Taxes of any person (other than HFP and its Subsidiaries), whether under
Treasury Regulations Section 1.1502-6 (or any corresponding provision of state,
local or foreign law), as transferee or successor, or by reason of any tax
sharing or tax allocation agreement, except in each case as would not have,
individually or in the aggregate, a HFP Material Adverse Effect.
(e) The United States federal income Tax Returns which include HFP and
its Subsidiaries have been examined, and such examinations have been completed,
by the Internal Revenue Service (or the applicable statutes of limitation for
the assessment of federal income Taxes for such periods have expired) for all
periods through and including 1996.
(f) Neither HFP nor any of its Subsidiaries is a party to any
agreement, contract or arrangement that would result, on account of the
transactions contemplated hereby, separately or in the aggregate, in the payment
of any "excess parachute payments" within the meaning of Section 280G of the
Code or any payment that would be nondeductible under Section 162(m) of the
Code, except as would not have, individually or in the aggregate, a HFP Material
Adverse Effect.
(g) HFP and each of its Subsidiaries has (i) withheld all required
amounts from its employees, agents, contractors and nonresidents and remitted
such amounts to the proper agencies; (ii) paid all employer contributions and
premiums; and (iii) filed all federal, state, local and foreign returns and
reports with respect to employee income Tax withholding, social security
unemployment Taxes and premiums, all in compliance with the withholding Tax
provisions of the Code as in effect for the applicable year and other applicable
federal, state, local or foreign laws, and, in the case of clauses (i) through
(iii), except as would not have, individually or in the aggregate, a HFP
Material Adverse Effect.
(h) None of HFP and its Subsidiaries has executed or filed with any
taxing authority (whether federal, state, local or foreign) any agreement or
other document extending or having the effect of extending the period for
assessment, reassessment or collection of any Taxes, except as would not have,
individually or in the aggregate, a HFP Material Adverse Effect.
(i) None of HFP and its Subsidiaries has agreed to make any adjustment
by reason of a change in accounting methods that affects any taxable year ending
after the Effective Time, except as would not have, individually or in the
aggregate, a HFP Material Adverse Effect. Neither the Internal Revenue Service
(the "IRS") nor any other agency has proposed in writing any such adjustment or
change in accounting methods that affects any taxable year ending after the
Effective Time. None of HFP and its Subsidiaries has any application pending
with any taxing authority requesting permission for any changes in accounting
methods that related to its business or operations and that affects any taxable
year ending after the Effective Time.
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(j) None of HFP and its Subsidiaries has consented to the application
of Code Section 341(f).
(k) In the past five years, none of HFP and its Subsidiaries has been
a party to a transaction that has been reported as a reorganization within the
meaning of Section 368, distributed a corporation in a transaction that is
reported to qualify under Code Section 355 or been distributed in a transaction
that is reported to qualify under Code Section 355.
(l) None of HFP and its Subsidiaries is or ever has been a party to
any tax sharing agreement or similar agreement for the sharing of tax
liabilities or benefits.
(m) None of HFP and its Subsidiaries currently has or has ever had a
permanent establishment in a foreign country.
(n) HFP is not, and during the preceding 5-year period has not been, a
"United States real property holding corporation" within the meaning of Section
897(c)(2) of the Code, and at or prior to the Effective Time HFP will provide
Heller a certificate to that effect meeting the requirements of Treasury
Regulations Sections 1.897-2(h) and 1.4445-2(c)(3).
(o) HFP agrees to provide Heller in writing, within seven days of the
date hereof, such information with respect to tax matters as is set forth on
Section 3.20 of the HFP Schedule.
Section 3.21. Absence of Litigation; Claims. Except as set forth in
-----------------------------
Section 3.21 of the HFP Schedule or as would not have, individually and in the
aggregate, a HFP Material Adverse Effect, there are no claims, actions, suits,
proceedings or investigations pending or, to the Knowledge of HFP, threatened
against HFP, any of its Subsidiaries or, to HFP's Knowledge, Health Charge
Corporation, or any properties or rights of HFP, its Subsidiaries or, to HFP's
Knowledge, Health Charge Corporation, or with respect to which any director,
officer, employee or agent of HFP or any of its Subsidiaries is or may be
entitled to claim indemnification from HFP, any of its Subsidiaries or, to HFP's
Knowledge, Health Charge Corporation, before any Governmental Entity or
arbitrator which could materially impair the ability of HFP to perform its
obligations under this Agreement or prevent or materially delay the consummation
of any of the transactions contemplated hereby, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against HFP or any of its Subsidiaries having or which, insofar as
reasonably can be foreseen, in the future would have such effect, nor, to the
Knowledge of HFP, are there any state of facts which could give rise to such a
claim.
Section 3.22. Employee Benefit Plans; Employment Agreements.
---------------------------------------------
(a) Section 3.22 of the HFP Schedule sets forth a true and complete
list of each employee or director benefit plan, arrangement or agreement,
whether or not written, including, without limitation, any employee welfare
benefit plan within the meaning of Section 3(1) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), any employee pension benefit
plan within the meaning of Section 3(2) of ERISA (whether or not such plan is
subject to ERISA) and any bonus, incentive, deferred compensation, vacation,
stock purchase, stock
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option, severance, retiree medical, employment, change of control or fringe
benefit plan, program or agreement (the "HFP Benefit Plans") that is or has been
sponsored, maintained or contributed to by HFP or any of its Subsidiaries or by
any trade or business, whether or not incorporated (a "HFP ERISA Affiliate"),
all of which together with HFP would be deemed a "single employer" within the
meaning of Section 4001 of ERISA.
(b) HFP has heretofore made available to Heller true and complete
copies of each of the HFP Benefit Plans and all material related documents,
including, but not limited to, (i) each writing constituting a part of such HFP
Benefit Plan, including all amendments thereto; (ii) the three most recent
Annual Reports (Form 5500 Series) and accompanying schedules, if any; and (iii)
the most recent determination letter from the Internal Revenue Service (if
applicable) for such HFP Benefit Plan.
(c) (i) Each of the HFP Benefit Plans has been operated and
administered in all material respects with applicable laws, including, but not
limited to, ERISA, the Code and, in each case, the regulations thereunder; (ii)
each of the HFP Benefit Plans intended to be "qualified" within the meaning of
Section 401(a) of the Code has received a favorable determination letter from
the IRS and is so qualified, and there are no existing circumstances or any
events that have occurred that could reasonably be expected to adversely affect
the qualified status of any such plan; (iii) no HFP Benefit Plan is subject to
Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code; (iv) no HFP
Benefit Plan provides benefits, including, without limitation, death or medical
benefits (whether or not insured), with respect to current or former employees
or directors of HFP or its Subsidiaries beyond their retirement or other
termination of service, other than (A) coverage mandated by applicable law or
(B) death benefits or retirement benefits under any "employee pension plan" (as
such term is defined in Section 3(2) of ERISA); (v) no liability under Title IV
of ERISA has been incurred by HFP, its Subsidiaries or any HFP ERISA Affiliate
that has not been satisfied in full, and no condition exists that presents a
risk to HFP, its Subsidiaries or any HFP ERISA Affiliate of incurring a
liability thereunder except as would not have, individually or in the aggregate,
a HFP Material Adverse Effect; (vi) no HFP Benefit Plan is a "multiemployer
pension plan" (as such term is defined in Section 3(37) of ERISA) or a plan that
has two or more contributing sponsors at least two of whom are not under common
control, within the meaning of Section 4063 of ERISA; (vii) all contributions or
other amounts payable by HFP or its Subsidiaries as of the Effective Time with
respect to each HFP Benefit Plan in respect of current or prior plan years have
been timely paid, or accrued in accordance with GAAP except as would not have,
individually or in the aggregate, a HFP Material Adverse Effect; (viii) neither
HFP nor its Subsidiaries has engaged in a transaction in connection with which
HFP or its Subsidiaries reasonably could be subject to either a civil penalty
assessed pursuant to Section 409, 502(i) or 502(l) of ERISA or a material tax
imposed pursuant to Section 4975 or 4976 of the Code; (ix) there are no pending,
threatened or anticipated claims (other than routine claims for benefits) by, on
behalf of or against any of the HFP Benefit Plans or any trusts related thereto
which could reasonably be expected to result in any liability of HFP or any of
its Subsidiaries except as would not have, individually or in the aggregate, a
HFP Material Adverse Effect; (x) no HFP Benefit Plan impairs the sponsoring
employer from amending or modifying such HFP Benefit Plan except as constrained
by ERISA, the Code, the terms of such plan or the need to obtain any required
participant consent; and (xi) no HFP Benefit Plan provides for the
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reimbursement of any excise taxes under Section 4999 of the Code or any income
taxes under the Code.
(d) There does not now exist, nor do any circumstances exist that
would reasonably be expected to result in, any Controlled Group Liability that
would be a material liability to HFP following the Effective Date. "Controlled
Group Liability" means any and all liabilities under (A) Title IV of ERISA, (B)
section 302 of ERISA, (C) sections 412 and 4971 of the Code, (D) the
continuation coverage requirements of section 601 et seq. of ERISA and section
4980B of the Code, and (E) corresponding or similar provisions of foreign laws
or regulations, other than such liabilities that arise solely out of, or relate
solely to, the HFP Benefit Plans.
(e) Except as set forth in Section 3.22 of the HFP Schedule, all
employment and consulting agreements to which HFP is a party as of the date
hereof have been made available to Heller, and as of the date hereof there are
no other written agreements obligating HFP to employee any individual.
Section 3.23. Labor Matters. The written lists of employees of HFP and
-------------
its Subsidiaries as of December 31, 1998, and as of April 16, 1999, previously
furnished by HFP to Heller are each complete and accurate lists of employees of
HFP and its Subsidiaries as of such dates for purposes of the Code and ERISA.
Said lists correctly and accurately set forth the respective hire dates and, as
of December 31, 1998, and April 16, 1999, respectively, salaries of the
employees of HFP and its Subsidiaries listed thereon. Except as disclosed in
Section 3.23 of the HFP Schedule or as would not have, individually or in the
aggregate, a HFP Material Adverse Effect, there are no controversies pending or,
to the Knowledge of HFP, threatened, between HFP or any of its Subsidiaries and
any of their respective current or former employees. Neither HFP nor any of its
Subsidiaries is party to any collective bargaining agreement or other labor
agreement with any union or labor organization and no union or labor
organization has been recognized by HFP or any of its Subsidiaries as an
exclusive bargaining representative for employees of HFP or any of its
Subsidiaries. There is no current union representation question involving
employees of HFP or any of its Subsidiaries, nor does HFP have Knowledge of any
significant activity or proceeding of any labor organization (or representative
thereof) or employee group to organize any such employees. Except as would not
have, individually or in the aggregate, a HFP Material Adverse Effect ,there is
(i) no unfair labor practice, grievance, employment discrimination or other
labor or employment related charge, complaint or claim against HFP or any of its
Subsidiaries pending before any court, arbitrator, mediator or governmental
agency or tribunal, or, to HFP's Knowledge, threatened, (ii) no strike,
picketing or work stoppage by, or any lockout of, employees of HFP or any of its
Subsidiaries pending, or to HFP's Knowledge, threatened, against or involving
HFP or any of its Subsidiaries, and (iii) no active arbitration involving HFP or
any of its Subsidiaries regarding the employer's right to move work from one
location or entity to another, or to consolidate work locations, or involving
other similar restrictions on business operations. Except as disclosed in
Section 3.23 of the HFP Schedule, there is no proceeding, claim, suit, action or
governmental investigation pending or, to the Knowledge of HFP, threatened,
relating to labor matters in respect of which any director, officer, employee or
agent of HFP or any of its Subsidiaries is or may be entitled to claim
indemnification from HFP or a Subsidiary pursuant to their respective charters
or bylaws or under any indemnification agreements.
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Section 3.24. Environmental Liability.
-----------------------
(a) HFP and each of its Subsidiaries are in material compliance with
all Environmental Laws (as hereinafter defined) and neither HFP nor any of its
Subsidiaries has received any written or, to HFP's Knowledge, oral,
communication from any person or Governmental Entity that alleges that HFP or
any of its Subsidiaries is not in compliance with Environmental Laws. HFP has no
Knowledge of any past or present events, conditions, circumstances, activities,
practices, incidents, actions or plans that may interfere with, or prevent,
future continued material compliance on the part of HFP or any of the
Subsidiaries with Environmental Laws.
(b) HFP and each of its Subsidiaries have obtained or applied for all
material environmental permits necessary for the construction of their
facilities or the conduct of their operations, and all such environmental
permits are effective or, where applicable, a renewal application has been
timely filed and is pending agency approval, and HFP and its Subsidiaries are in
material compliance with all terms and conditions of such environmental permits.
HFP has no Knowledge of any past or present events, conditions, circumstances,
activities, practices, incidents, actions or plans that may interfere with, or
prevent, future continued compliance on the part of HFP or any of the
Subsidiaries with the environmental permits. HFP has no Knowledge of matters or
conditions that would preclude reissuance or transfer of any environmental
permit, including amendment of such instrument, to Heller or one of its
Subsidiaries where such action is necessary to maintain compliance with
Environmental Laws in all material respects.
(c) HFP has no Knowledge of any current Environmental Law or
environmental permit imposing any future requirement which could reasonably be
expected to result in the accrual of a material cost.
(d) Except as would not have, individually or in the aggregate, a HFP
Material Adverse Effect, there is no Environmental Claim (as hereinafter
defined) pending or, to the Knowledge of HFP, threatened (i) against HFP or any
of its Subsidiaries, (ii) against any person or entity whose liability for any
Environmental Claim HFP or any of its Subsidiaries has or may have retained or
assumed either contractually or by operation of law, or (iii) against any real
or personal property or operations which HFP or any of its Subsidiaries owns,
leases or manages, in whole or in part.
(e) HFP has no Knowledge of any Release (as hereinafter defined) of
any Hazardous Material (as hereinafter defined) that would be reasonably likely
to form the basis of any Environmental Claim against HFP or any of its
Subsidiaries, against any person or entity whose liability for any Environmental
Claim HFP or any of its Subsidiaries has or may have retained or assumed either
contractually or by operation of law, against any person or entity that has
executed a guarantee in favor of HFP or in which HFP has an equity interest or
affecting any assets that are pledged as collateral to HFP.
(f) HFP has no Knowledge, with respect to any predecessor of HFP or
any of its Subsidiaries, of any Environmental Claim pending or threatened, or of
any Release of Hazardous Materials that would be reasonably likely to form the
basis of any Environmental Claim against HFP or any of its Subsidiaries.
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(g) HFP has disclosed to Heller all facts which HFP reasonably
believes form the basis of a material current or future cost relating to any
environmental matter affecting HFP and the Subsidiaries.
(h) Neither HFP nor any of its Subsidiaries, nor, to the Knowledge of
HFP, any owner of premises leased or operated by HFP or any of its Subsidiaries
has received any notice with respect to such premises under federal, state,
local or foreign law indicating past or present treatment, storage or disposal
of Hazardous Materials or is engaging or has engaged in business operations
involving the generation, transportation, treatment, recycling or disposal of
any waste regulated under the Environmental Laws including radioactive materials
or the nuclear power industry.
(i) None of the properties owned, leased or operated by HFP, any of
its Subsidiaries or, to the Knowledge of HFP, any predecessor thereof (i) is now
or was in the past, listed on the National Priorities list of Superfund Sites,
the CERCLIS Information System, or any other comparable state or local
environmental database or (ii) contains any above ground or underground storage
tanks.
(j) The Merger will not require any governmental approvals under the
Environmental Laws, including those that are triggered by sales or transfers of
businesses or real property.
(k) As used in this Section 3.24:
(i) "Environmental Claim" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims,
liens, investigations, proceedings or notices of noncompliance or violation
(written or oral) by any person or entity (including any federal, state,
local or foreign Governmental Entity having jurisdiction over HFP or any of
its Subsidiaries) alleging potential liability of HFP or its Subsidiaries
(including, without limitation, potential responsibility for or liability
for enforcement, investigatory costs, cleanup costs, governmental response
costs, removal costs, remedial costs, natural resources damages, property
damages, personal injuries or penalties) arising out of, based on or
resulting from (A) the presence, or Release or threatened Release into the
environment, of any Hazardous Materials at any location, whether or not
owned, operated, leased or managed by HFP or any of its Subsidiaries
(including but not limited to obligations to clean up contamination
resulting from leaking underground storage tanks); or (B) circumstances
forming the basis of any violation or alleged violation by HFP or any of its
Subsidiaries of any Environmental Law or any environmental permit; or (C)
any and all claims by any third party against HFP or any of its Subsidiaries
seeking damages, contribution, indemnification, cost recovery, compensation
or injunctive relief resulting from the presence or Release of any Hazardous
Materials.
(ii) "Environmental Law" means all applicable foreign, federal, state
and local laws (including the common law), rules, requirements and
regulations relating to (A) pollution, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health as it relates
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to the environment including, without limitation, laws and regulations
relating to Release of Hazardous Materials, or otherwise relating to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials and (B) ownership or operation
of facilities.
(iii) "Hazardous Materials" means (A) any petroleum or any by products
or fractions thereof, asbestos in any form that is or could become friable,
urea formaldehyde foam insulation, any form of natural gas, explosives, and
polychlorinated biphenyls; (B) any chemicals, materials or substances,
whether waste materials, raw materials or finished products, which are now
defined as or included in the definition of "hazardous substances",
"hazardous wastes", "hazardous materials", "extremely hazardous substances",
"restricted hazardous wastes", "toxic substances", "toxic pollutants",
"pollutants", "contaminants", or words of similar import under any
Environmental Law; and (C) any other chemical, material or substance,
whether waste materials, raw materials or finished products, by-products or
other materials, regulated or forming the basis of liability under any
Environmental Law in a jurisdiction in which HFP or any of its Subsidiaries
operates or with the potential to cause harm to human health or the
environment.
(iv) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
environment (including without limitation ambient air, atmosphere, soil,
surface water, groundwater or property).
Section 3.25. No Default. Except as set forth in Section 3.25 of the
----------
HFP Schedule, neither HFP nor any of its Subsidiaries is in breach, default or
violation (and no event has occurred through the action or inaction of HFP or
any of its Subsidiaries which with notice or the lapse of time or both would
constitute a breach, default or violation) of any term, condition or provision
of (i) the HFP Charter, HFP Bylaws or the charter and bylaws of the
Subsidiaries, (ii) any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation (including, without
limitation, any Contract or Financing Document) to which HFP or any of its
Subsidiaries is a party or by which any of them or any of their respective
properties or assets may be bound, (iii) any order, writ, injunction or decree
applicable to HFP or any of its Subsidiaries or any of their respective
properties or assets, or (iv) any law, statute, rule or regulation applicable to
HFP or any of its Subsidiaries or any of their respective properties or assets
except, with respect to clauses (ii) through (iv), as would not have,
individually or in the aggregate, a HFP Material Adverse Effect.
Section 3.26. Intellectual Property. HFP and each of its Subsidiaries
---------------------
owns, or is licensed or otherwise possesses legally enforceable rights to use,
all patents, trademarks, trade names, service marks, copyrights and any
applications therefor, technology, know-how, computer software programs or
applications (including, without limitation, the receivables tracking system
used in monitoring Financing Transactions and software used in the business of
Health Charge Corporation), and tangible or intangible proprietary information
or materials that are used in HFP's or any of its Subsidiaries' business as
currently conducted, and to the Knowledge of HFP all patents, trademarks, trade
names, service marks and copyrights held by HFP and its Subsidiaries are valid
and subsisting.
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Section 3.27. Regulatory Matters.
------------------
(a) Except as disclosed in Section 3.27 of the HFP Schedule or as
would not have, individually or in the aggregate, a HFP Material Adverse Effect,
there are no proceedings or investigations pending or, to HFP's Knowledge,
threatened, by or before any domestic or foreign court, administrative,
governmental, quasi-governmental or regulatory body against or affecting HFP,
and of its Subsidiaries or, to the Knowledge of HFP, Health Charge Corporation
nor has HFP or any of its Subsidiaries received written notice or inquiry from
any such body, indicating that any such proceeding or investigation is being
considered or that it may become the object of consideration.
(b) Except as disclosed in Section 3.27 of the HFP Schedule or as
would not have, individually or in the aggregate, a HFP Material Adverse Effect,
none of HFP, any of its Subsidiaries or, to HFP's Knowledge, Health Charge
Corporation has any outstanding regulatory commitments to or is the subject of
any order or directive by any domestic or foreign court, administrative,
governmental, quasi-governmental or regulatory body, government official, or
similar organization.
(c) As of the date hereof and to the Knowledge of HFP, there are no
proposed or pending changes in any laws or regulations related to the businesses
in which HFP and its Subsidiaries are engaged which, if adopted, would have,
individually or in the aggregate, a HFP Material Adverse Effect.
Section 3.28. Registration Statement; Proxy Statement/Prospectus. The
--------------------------------------------------
information supplied or to be supplied by HFP for inclusion in the Registration
Statement does not and will not contain, at the time the information is supplied
and when the Registration Statement is declared effective by the SEC or at the
time any amendment thereto becomes effective, any untrue statement of a material
fact nor does or will it omit to state any material fact required to be stated
in the Registration Statement or necessary in order to make the statements in
the Registration Statement not misleading. The information supplied by HFP for
inclusion in the Proxy Statement to be sent to the shareholders of HFP in
connection with the special meeting of HFP's shareholders to consider this
Agreement and the Merger (the "Stockholders Meeting") does not and will not, at
the time the Proxy Statement or any amendment or supplement thereto is mailed to
shareholders, at the time of the Stockholders Meeting, or at the Effective Time,
contain any statement which, at such time and in light of the circumstances
under which it was made, is false or misleading with respect to any material
fact, or omit to state any material fact necessary in order to make the
statements made in the Proxy Statement not false or misleading or omit to state
any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the Stockholders
Meeting which has become false or misleading; provided, however, that no
representation or warranty is made by HFP with respect to information related
to, or supplied by, Heller, of any of its affiliates or advisors. If at any
time prior to the Effective Time any event relating to HFP or any of its
affiliates which should be set forth in an amendment to the Registration
Statement or a supplement to the Proxy Statement should be discovered by HFP,
HFP shall promptly inform Heller. The Proxy Statement will comply as to form in
all material respects with the provisions of the Securities Exchange Act of
1934.
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Section 3.29. Board Action; Vote Required. The HFP Board has
---------------------------
determined that the transactions contemplated by this Agreement are in the best
interests of HFP and its stockholders and has approved such transactions and
resolved to recommend to such stockholders that they vote in favor thereof and
such approval constitutes approval of the transactions contemplated by this
Agreement by the HFP Board under the provisions of Section 203 of the DGCL and
Article V of the HFP Charter such that Section 203 of the DGCL and Article V of
the HFP Charter do not apply to this Agreement or the Option Agreement or the
transactions contemplated hereby or thereby. No other "fair price,"
"moratorium," "control share acquisition" or other form of antitakeover statute
or regulation as in effect on the date hereof or any antitakeover provision in
the HFP Charter or HFP Bylaws is applicable to HFP, the shares of HFP Common
Stock, the Merger or the other transactions contemplated by this Agreement or
the Option Agreement.
Section 3.30. Year 2000. HFP and each of its Subsidiaries has taken
---------
steps described in Section 3.30 of the HFP Schedule that are reasonably designed
to identify and analyze both internally developed and acquired software which is
material to its operations and utilizes date embedded codes that may experience
operations problems when or before the year 2000 is reached and, where problems
have arisen, HFP and its Subsidiaries have made, or have coordinated with
customers, suppliers, financial institutions and others with which it has
business relationships that are material to HFP's business to make, all
necessary modifications to the identified software to make such software Year
2000 Compliant (as defined herein). To HFP's Knowledge, there is as of the date
hereof no fact that would reasonably be expected to render HFP unable to resolve
any such software problems on the timetable described in Section 3.30 of the HFP
Schedule (and in any event on a timely basis in order to be resolved before the
year 2000). Except as disclosed in HFP's SEC Reports, HFP and its Subsidiaries
have not incurred, and do not expect to incur, significant operating expenses to
be Year 2000 Compliant, and their business operations have not been disrupted
and, to HFP's Knowledge, its customers have not experienced any material
interruption of service as a result of making such software Year 2000 Compliant
except as would not have, individually or in the aggregate, a HFP Material
Adverse Effect. "Year 2000 Compliant" means, with respect to HFP's and each of
its Subsidiaries' information technology, the information technology designed to
be used prior to, during and after the calendar Year 2000 A.D., and the
information technology used during each such time period will accurately
receive, provide and process date/time data (including, without limitation,
calculating, comparing and sequencing) from, into and between the 20th and 21st
centuries, including the years 1999 and 2000 and leap-year calculations, and
will not materially malfunction, cease to function, or provide invalid or
incorrect results as a result of date/time data, to the extent that other
information technology, used in combination with the Information Technology
being acquired, properly exchanges date/time data with it (and the term "Year
2000 Compliance" shall have a correlative meaning). "Information Technology,"
means computer software, computer firmware, computer hardware (whether general
or specific purpose), and other similar or related items of automated,
computerized, or software system(s) that are used or relied on by HFP or any of
its Subsidiaries in the conduct of their business.
Section 3.31. Affiliates. Except for the persons listed in Section 3.31
----------
of the HFP Schedule, there are no persons who, to the Knowledge of HFP, may be
deemed to be affiliates of HFP under Rule 145 under the Securities Act.
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Section 3.32. Opinion of Financial Advisor. HFP has received the
----------------------------
opinion of Goldman Sachs & Co. ("Goldman Sachs"), as of the date hereof, to the
effect that, as of such date, the Per Share Consideration Value is fair from a
financial point of view to the holders of HFP Common Stock and a copy of such
opinion has been made available to Heller.
Section 3.33. Brokers and Finders. Section 3.33 of the HFP Schedule
-------------------
lists all those financial advisors employed or retained by HFP and the amounts
that are due such persons in connection with this Agreement and the transactions
contemplated hereby. Neither HFP 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 brokerage fees, commissions or finder's fees in
connection with the transactions contemplated by this Agreement, except that HFP
has employed those financial advisors listed in Section 3.33 of the HFP
Schedule.
Section 3.34. Investment Company Act. HFP is not an "Investment
----------------------
Company" within the meaning of the Investment Company Act of 1940.
Section 3.35. HealthCare Financial Partners REIT. (a) HFP and
----------------------------------
HealthCare Financial Partners REIT, Inc. ("HFP REIT") have terminated the
Management Agreement, dated as of May 5, 1998, between HFP REIT and HCFP REIT
Origination, Inc. (the "Manager"). All amounts payable to HFP as a result of
termination of the Management Agreement have been fully paid. HFP has no
outstanding liability to HFP REIT or any other party (including the Manager) in
connection with termination of the Management Agreement. The Origination
Agreement, dated as of December 11, 1998, between HFP and HFP REIT (the
"Origination Agreement"), is in full force and effect, and neither HFP, nor to
the Knowledge of HFP, HFP REIT has violated any provision of the Origination
Agreement, or committed or failed to perform any act that with notice, lapse of
time or both, would constitute a default thereunder. Except as set forth in
Section 3.35 of the HFP Schedule, neither HFP nor any of its Subsidiaries is
subject to any restrictions or limitations on its business operations (including
the types of assets in which it may invest and the types of loans it may extend)
under the Origination Agreement.
(b) To the Knowledge of HFP, HFP REIT is duly organized, validly
existing and in good standing under the laws of the State of Maryland and has
all requisite power to carry on its business as it has been and is now being
conducted and to own, lease and operate the assets and property used in
connection therewith.
(c) To the Knowledge of HFP, all issued and outstanding shares of
capital stock or other equity instruments of HFP REIT have been duly authorized,
are validly issued and outstanding, are fully paid and nonassessable and were
issued in compliance with all applicable federal and state securities laws.
(d) Section 3.35 of the HFP Schedule sets forth a list of (a) all
contracts, arrangements, agreements or understandings between or among
directors, officers and employees of HFP and its Subsidiaries, on the one hand,
and HFP REIT on the other hand, and (b) all other contracts, arrangements,
agreements or understandings that would be required to be described pursuant to
Item 404 of Regulation S-K of the Securities Act of 1993, as amended, except for
those contracts, arrangements, agreements or understandings disclosed in HFP's
1998 10-K.
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Section 3.36. Tax and Regulatory Matters. Neither HFP nor any of its
--------------------------
Subsidiaries has taken or agreed to take any action nor has HFP any Knowledge of
any fact or circumstance that would (i) prevent the Merger from qualifying as a
"reorganization" within the meaning of Section 368(a) of the Code or (ii)
materially impede or delay receipt of any approval referred to in Section 7.1(b)
or the consummation of the transactions contemplated by this Agreement.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF HELLER AND MERGER CO.
Section 4.1. [Reserved]
Section 4.2. Heller Material Adverse Effect. As used in this Agreement,
------------------------------
"Heller Material Adverse Effect" shall mean, with respect to Heller, any change
or effect that (x) is, or is reasonably likely to be, materially adverse to the
business, results of operations, or financial condition of Heller and its
Subsidiaries, taken as a whole or (y) would, or is reasonably likely to,
materially impair the ability of Heller to perform its obligations under this
Agreement or otherwise materially threaten or impede the consummation of the
Merger and the other transactions contemplated by this Agreement, in either case
other than any change, event or occurrence (to the extent that they do not, in
any case, disproportionately affect Heller) relating to (i) the United States or
global economic or industry conditions generally, (ii) the United States or
global securities markets in general, (iii) this Agreement or the transactions
contemplated hereby or the announcement thereof, (iv) changes in legal or
regulatory conditions that affect generally the businesses in which Heller and
its Subsidiaries are engaged, (v) the general level of interest rates, or (vi)
financial institutions or the credit market generally.
Section 4.3. Representations and Warranties of Heller and Merger Co.
------------------------------------------------------
Heller and Merger Co. represent and warrant to HFP as of the date of this
Agreement and as of the Closing Date as set forth in Sections 4.4 through 4.17,
inclusive.
Section 4.4. Organization and Powers. Heller is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. Merger Co. is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Each of Heller and the
Merger Co. has all requisite corporate power and authority to carry on its
business as it has been and is now being conducted and to own, lease and operate
the properties and assets used in connection therewith, except when any failure
to be so qualified or in good standing would not, individually or in the
aggregate, have a Heller Material Adverse Effect.
Section 4.5. Authority; Binding Effect. Each of Heller and Merger Co.
-------------------------
has all requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. All necessary
action, corporate or otherwise, required to have been taken by or on behalf of
each of Heller and Merger Co. by applicable law (but subject to Section 4.7
hereof), each of their respective charter document(s) or otherwise (other than
approval by Heller's Board of Directors) to authorize (i) the approval,
execution and delivery on
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their behalf of this Agreement and (ii) their performance of their obligations
under this Agreement and the consummation of the transactions contemplated
hereby has been taken. This Agreement constitutes a valid and binding agreement
of each of Heller and Merger Co., enforceable against each of Heller and Merger
Co. in accordance with its terms, except (A) as the same may be limited by
applicable bankruptcy, insolvency, moratorium or similar laws of general
application relating to or affecting creditors' rights, including, without
limitation, the effect of statutory or other laws regarding fraudulent
conveyances and preferential transfers, and (B) for the limitations imposed by
general principles of equity and commercial reasonableness. Heller reasonably
anticipates that this Agreement and the transactions contemplated hereby will be
approved by its Board of Directors on or before April 22, 1999.
Section 4.6. No Conflict; Approvals. The execution and delivery of this
----------------------
Agreement do not, and the consummation of the transactions contemplated hereby
will not, (i) violate or conflict with Heller's or Merger Co.'s charter or
bylaws, or (ii) constitute a breach or default (or an event that with notice or
lapse of time or both would become a breach or default) or give rise to any
lien, third party right of termination, cancellation, material modification or
acceleration, or loss of any benefit, under any contract to which Heller or any
subsidiary is a party or by which it is bound, or (iii) conflict with or result
in a violation of any permit, concession, franchise or license or any law, rule
or regulation applicable to Heller or any of its Subsidiaries or any of their
properties or assets except, in the case of clauses (ii) and (iii), as would
not, individually or in the aggregate, have a Heller Material Adverse Effect.
Section 4.7. Governmental Consents and Approvals. Neither the execution
------------------------------------
and delivery of this Agreement nor the consummation of the transactions
contemplated hereby will require any consent, approval, order, authorization, or
permit of, or filing with or notification to, any Governmental Entity, except
(i) the filing of the Registration Statement with the SEC in accordance with the
Securities Act and the entry of an order by the SEC permitting such Registration
Statement to become effective, and compliance with applicable state securities
laws, (ii) the filing of a registration statement with the SEC in an appropriate
form with respect to the shares of Heller Common Stock subject to options to
acquire Heller Common Stock pursuant to the exercise of options assumed by
Heller under Section 1.6 hereof, (iii) notification pursuant to, and expiration
or termination of the waiting period under the HSR Act, (iv) the filing of a
supplemental listing application with, and approval for listing of all shares of
Heller Common Stock to be issued in the Merger and upon the exercise of options
assumed by Heller under Section 1.6 of this Agreement by, the NYSE, (v) all
requisite regulatory approvals under the Federal Bank Holding Company Act of
1956, as amended (the "Bank Holding Company Act") and (vi) the filing and
recording of the Certificate of Merger in accordance with the DGCL.
Section 4.8. Capital Stock.
-------------
(a) Heller has authorized capital stock consisting of (i) 800,000,000
shares of Heller Common Stock, of which 500,000,000 are designated Class A
Common Stock and 300,000,000 shares are designated Class B Common Stock, and
(ii) 52,000,000 shares of pre-
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ferred stock of which 2,000,000 shares, no par value per share, are designated
Preferred Stock (the "Junior Preferred Stock") and (ii) 50,000,000 shares, $.01
par value per share, are designated Senior Preferred Stock (the "Senior
Preferred Stock" and together with the Junior Preferred Stock, the "Heller
Preferred Stock"). As of March 1, 1999: (i) 39,009,606 shares of Heller Common
Stock were issued and outstanding, (ii) 12,500 shares of Heller Common Stock
were held as treasury shares and 7,750,000 shares of Heller Preferred Stock were
issued and outstanding. All of the issued and outstanding shares of Heller
Common Stock and Heller Preferred Stock have been duly authorized and are
validly issued and outstanding, fully paid and nonassessable, and were issued in
compliance with all applicable Federal and state securities laws. No shares of
capital stock issued by Heller are or were, at the time of their issuance,
subject to preemptive rights. The shares of Heller Common Stock to be issued to
HFP Stockholders in the Merger, when delivered in accordance with the terms of
this Agreement, will be valid and legally issued shares of Heller capital stock,
fully paid and nonassessable.
(b) The authorized capital stock of Merger Co. consists of 1,000
shares of common stock, of which 1,000 shares are outstanding. All of the issued
and outstanding shares of Merger Co. are owned beneficially, and of record by
Heller. Merger Co. does not have any subsidiaries or material investments of any
kind in any entity. Merger Co. has not engaged in any business activity other
than, and has conducted its operations only as, contemplated hereby.
Section 4.9. Registration Statement; Proxy Statement/Prospectus. The
--------------------------------------------------
information supplied or to be supplied by Heller for inclusion in the
Registration Statement shall not contain, at the time the Registration Statement
is declared effective by the SEC or at the time any amendment thereto becomes
effective, any untrue statement of a material fact or omit to state any material
fact required to be stated in the Registration Statement or necessary in order
to make the statements in the Registration Statement not misleading. The
information supplied by Heller for inclusion in the Proxy Statement or any
amendment or supplement thereto shall not, at the time the Proxy Statement or
any amendment or supplement thereto is first mailed to HFP Stockholders, at the
time of the Stockholders Meeting, or at the Effective Time, contain any
statement which, at such time and in light of the circumstances under which it
was made, is false or misleading with respect to any material fact, or omit to
state any material fact necessary in order to make the statements made in the
Proxy Statement not false or misleading or omit to state any material fact
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders Meeting which has become false
or misleading; provided, however, that no representation or warranty is made by
Heller with respect to information related to, or supplied by, HFP, its
affiliates or advisors. If at any time prior to the Effective Time any event
relating to Heller or any of its affiliates which should be set forth in an
amendment to the Registration Statement or a supplement to the Proxy Statement
should be discovered by Heller, Heller shall promptly inform HFP.
Section 4.10. SEC Reports. Heller has filed all required forms, reports
-----------
and documents with the SEC since January 1, 1997 (collectively, "Heller's SEC
Reports"), including without limitation Heller's Annual Report on Form 10-K for
the year ended December 31, 1998. Heller's SEC Reports have complied in all
material respects with all applicable requirements of the Securities Act and the
Exchange Act. As of their respective dates, none of Heller's SEC Reports,
including, without limitation, any financial statements or schedules included or
incorporated by
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reference therein, contained any untrue statement of a material fact or omitted
to state a material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Section 4.11. Financial Statements. Heller has delivered to HFP true
--------------------
and complete copies of consolidated balance sheets of Heller and its
subsidiaries at December 31, 1998 and 1997 and the related consolidated
statements of income, changes in stockholders' equity and cash flows for the
years then ended, together with the notes thereto, audited by Arthur Andersen
LLP ("Arthur Andersen"). Such balance sheets, including the related notes,
fairly present the consolidated financial position, assets and liabilities
(whether accrued, absolute, contingent or otherwise) of Heller and its
Subsidiaries at the dates indicated and such consolidated statements of income,
changes in stockholders' equity and cash flows fairly present the consolidated
results of operations, changes in stockholders' equity and cash flows of Heller
and its Subsidiaries for the periods indicated. The audited consolidated
balance sheet of Heller and its subsidiaries at December 31, 1998 described
above is referred to herein as the "Heller 1998 Balance Sheet."
Section 4.12. Absence of Certain Changes. Since December 31, 1998,
--------------------------
Heller and its Subsidiaries have not been subject to any events or conditions of
any character that would have a Heller Material Adverse Effect or impair the
ability of Heller to perform its obligations under this Agreement or prevent or
delay the consummation of any of the transactions contemplated by this
Agreement.
Section 4.13. Absence of Litigation; Claims. There are no claims,
-----------------------------
actions, suits, proceedings or investigations pending or, to the Knowledge of
Heller, threatened against Heller or any of its Subsidiaries, or any properties
or rights of Heller or any of its Subsidiaries, before any Governmental Entity
or arbitrator which would impair the ability of Heller to perform its
obligations under this Agreement or prevent or delay the consummation of any of
the transactions contemplated by this Agreement, nor is there any judgment,
decree, injunction, rule or order of any Governmental Entity or arbitrator
outstanding against Heller or any of its Subsidiaries having or which, insofar
as reasonably can be foreseen, in the future would have such effect. The term
"Knowledge" with respect to Heller means the actual Knowledge of any executive
officer of Heller.
Section 4.14. Compliance with Law. Except as would not have,
-------------------
individually or in the aggregate, a Heller Material Adverse Effect, Heller and
each of its Subsidiaries is in compliance with all applicable Laws.
Section 4.15. Brokers and Finders. Neither Heller nor any of its
-------------------
respective officers, directors or employees has employed any broker or finder or
incurred any liability for any brokerage fees, commissions or finder's fees in
connection with the transactions contemplated herein.
Section 4.16. Accounting, Tax and Regulatory Matters. Neither Heller
--------------------------------------
nor any of its Subsidiaries has taken or agreed to take any action or has any
Knowledge of any fact or circumstance that would (i) prevent the Merger from
qualifying as a "reorganization" within the meaning of Section 368(a) of the
Code, or (ii) materially impede or delay receipt of any approval re-
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ferred to in Section 7.1(b) or the consummation of the transactions contemplated
by this Agreement.
Section 4.17. Financing. Heller has no reason to believe that at the
---------
Effective Time it will not have available all the funds necessary to perform its
obligations under this Agreement, including consummating the transactions
contemplated by this Agreement on the terms contemplated hereby and the payment
of all fees and expenses relating to such transactions.
ARTICLE V
---------
CONDUCT OF BUSINESS PRIOR TO THE EFFECTIVE TIME
Section 5.1. Conduct of Businesses Prior to the Effective Time.
-------------------------------------------------
Except as provided for in Section 5.2 of this Agreement, during the period from
the date of this Agreement to the Effective Time, each of Heller and HFP shall,
and shall cause each of their respective Subsidiaries to, (i) conduct its
business according to the ordinary and usual course consistent with past
practices, (ii) use its reasonable best efforts to maintain and preserve its
business organization, employees and advantageous business relationships and
retain the services of its officers and key employees, and (iii) take no action
which would adversely affect or delay the ability of either HFP or Heller to
obtain any necessary approvals of Regulatory Authorities (as defined in Section
5.2) required for the transactions contemplated hereby or to perform its
covenants and agreements under this Agreement or the Option Agreement or to
consummate the transactions contemplated hereby or thereby.
Section 5.2. Forbearances. Except as set forth in this Section 5.2 or
------------
in Section 5.2 of the HFP Schedule, or as otherwise expressly contemplated or
permitted by this Agreement or the Option Agreement, during the period from the
date of this Agreement to the Effective Time, HFP shall not and shall not permit
any of its Subsidiaries to, without the prior written consent of Heller (which
consent shall not be unreasonably withheld):
(a) declare, set aside or pay any dividends or other distributions,
directly or indirectly, in respect of its capital stock (other than dividends
from a wholly-owned Subsidiary of HFP to HFP or another wholly-owned Subsidiary
of HFP);
(b) enter into or amend any collective bargaining agreement or
employment, severance or similar agreement or arrangement with any director or
officer or employee or modify any of the HFP Benefit Plans or institute any new
HFP Benefit Plans or grant any salary or wage increase or increase any employee
benefit (including incentive or bonus payments), except (i) normal individual
increases in compensation or bonuses to employees consistent with past practice
and timing or (ii) as required by law or contract;
(c) authorize, recommend, propose, or announce an intention to
authorize, recommend or propose, or enter into an agreement in principle with
respect to, any merger, consolidation or business combination, any acquisition
or disposition of a business that would be material to HFP or a material amount
of assets, including loan servicing rights, loans or securities as well as any
release or relinquishment of any material contract rights provided, however,
that the
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foregoing shall not prohibit internal reorganizations or consolidations
involving existing Subsidiaries;
(d) other than for transactions in the ordinary course of business
consistent with past practice, enter into any material contract or agreement, or
modify any Contract or Financing Document in a manner adverse to HFP or any its
Subsidiaries;
(e) sell, transfer, convey, assign, mortgage or pledge any of its
properties or assets involving amounts in excess of $100,000, except in the
ordinary course of business consistent with past practice;
(f) settle any material claim, action or proceeding against HFP or any
of its Subsidiaries involving money damages in excess of $100,000, except in the
ordinary course of business consistent with past practice;
(g) initiate any litigation or arbitration proceeding, except in the
ordinary course of business;
(h) propose or adopt any amendments to the HFP Charter or HFP Bylaws,
or the charter or bylaws of any Subsidiary;
(i) issue, sell, grant, confer or award any of its capital securities
or any debt securities having the right to vote on matters on which stockholders
may vote, or rights to acquire such securities, or purchase, redeem, retire,
repurchase, or exchange, or otherwise acquire or dispose of, directly or
indirectly, any of its capital securities, whether pursuant to the terms of such
capital securities or otherwise (except for (i) shares of HFP Common Stock
issued upon exercise of options outstanding on the date of this Agreement or
issued in accordance with this paragraph (i), (ii) pursuant to the Option
Agreement, (iii) any transactions between HFP and a Subsidiary, (iv) in
accordance with the HFP Stock Plans consistent with past practice, or (v) as
grants of options to purchase HFP Common Stock to new employees, consistent with
past hiring practices, provided that the number of shares subject to such
options shall not exceed 20,000 for any individual or 100,000 in the aggregate)
or effect any stock split or adjust, combine, reclassify or otherwise change its
equity capitalization as it exists on the date of this Agreement;
(j) other than for transactions in the ordinary course of business and
transactions with HFP REIT on arms-length terms, pay, loan or advance (other
than the payment of compensation) any amount to, or sell or transfer any
properties or assets to, or enter into any agreement or arrangement with any
officer, director or any affiliate or any employee or consultant;
(k) except as permitted by Section 6.13 hereof, directly or indirectly
initiate, solicit, encourage or otherwise facilitate (including by way of
furnishing non-public information) any inquiries or the making of any proposal
or offer with respect to a tender offer, merger, reorganization, share exchange,
consolidation or similar transaction involving, or any purchase of a significant
portion of the assets or voting securities of, HFP and its Subsidiaries;
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(l) take any action that would (i) adversely affect, impede or delay
in any material respect the consummation of the transactions contemplated by
this Agreement and the Option Agreement or the ability of Heller or HFP to
obtain any approval of any Federal, state, municipal, local or foreign
government, securities, banking, savings and loan, insurance and other
governmental or regulatory authority (each a "Regulatory Authority" and
collectively, "Regulatory Authorities") required for the transactions
contemplated by this Agreement and the Option Agreement or to perform its
covenants and agreements under this Agreement and the Option Agreement, or (ii)
prevent the Merger from qualifying as a "reorganization" within the meaning of
Section 368(a) of the Code;
(m) other than indebtedness of up to $1,000,000 and use of credit
available under existing lines of credit (as set forth in Section 3.14 of the
HFP Schedule), incur any indebtedness for borrowed money (other than short-term
indebtedness incurred to refinance short-term indebtedness and indebtedness of
HFP or any of its wholly-owned Subsidiaries to HFP or any of its wholly-owned
Subsidiaries), assume, guarantee, endorse or otherwise as an accommodation
become responsible or liable for the obligations of any other individual,
corporation or other entity;
(n) except in the ordinary course of business through the exercise of
remedies available under applicable Financing Documents and upon consultation
with Heller, acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership, limited liability company or other
business organization or division thereof or enter into or acquire any interest
in any Joint Venture;
(o) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by GAAP or regulatory
guidelines;
(p) other than in the ordinary course of business, consistent with
past practice, modify its credit criteria and practices in any material respect;
(q) fail to use commercially reasonable efforts to maintain any
license required for the conduct of its business;
(r) fail to use commercially reasonable efforts to continue to collect
its accounts receivable and loan payments consistent with past practices;
(s) make any commitments or agreements for capital expenditures or
capital additions or betterments exceeding in the aggregate $250,000, except
such as may be involved in ordinary repair, maintenance or replacement of its
assets;
(t) settle or compromise any material liability for Taxes, or file any
material Tax Return;
(u) take or omit to take any action that is reasonably likely to
result in a breach of any contract, commitment or obligation if the result
would, individually or in the aggregate, have a HFP Material Adverse Effect;
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(v) acquire, or agree to acquire, in a single transaction or in a
series of related transactions, any business or assets (other than materials and
supplies purchased in the ordinary course, consistent with past practice or in
connection with a foreclosure); or
(w) agree in writing or otherwise to take any of the foregoing
actions.
ARTICLE VI
----------
ADDITIONAL AGREEMENTS
Section 6.1. Access and Information. Subject to the confidentiality
----------------------
agreement between the parties dated December 23, 1998 (the "Confidentiality
Agreement") and upon reasonable notice and subject to applicable laws relating
to the exchange of information, HFP and its Subsidiaries shall afford to Heller
and to Heller's accountants, counsel and other representatives, access during
normal business hours, during the period prior to the Effective Time, to all of
their respective employees, properties, books, contracts, commitments and
records and, during such period, shall furnish reasonably promptly to Heller (i)
a copy of each report, schedule and other document filed or received by it
during such period pursuant to the requirements of federal and state securities
and other laws (other than any such documents which such party is not permitted
to disclose under applicable laws), (ii) all other existing or regularly
produced information concerning its business, properties and personnel and (iii)
such other information as Heller may reasonably request. Neither HFP nor any of
its Subsidiaries shall be required to provide access to or to disclose
information where such access or disclosure would, in the opinion of counsel to
HFP, violate the rights of HFP's clients, jeopardize the attorney-client
privilege of the entity in possession or control of such information or
contravene any law, rule, regulation, order, judgment, decree, fiduciary duty or
binding agreement entered into prior to the date of this Agreement. The parties
hereto will make appropriate substitute disclosure arrangements under
circumstances in which the restrictions of the preceding sentence apply.
Section 6.2. Registration Statement; Regulatory Matters.
--------------------------------------------
(a) The parties and their respective counsel shall prepare and file
with the SEC as soon as is reasonably practicable preliminary proxy materials of
HFP under the Exchange Act with respect to the Merger and a preliminary
prospectus of Heller with respect to the Heller Common Stock to be issued in the
Merger, and will thereafter use their respective best efforts to respond to any
comments of the SEC with respect thereto and to cause the Registration Statement
to become effective and the Proxy Statement and proxy to be mailed to HFP's
stockholders as promptly as practicable. Subject to Section 6.13, the Proxy
Statement shall include the unqualified recommendation of the HFP Board that the
HFP Stockholders vote in favor of the approval and adoption of this Agreement
and the transactions contemplated by this Agreement. Heller shall apply to the
NYSE to list the shares of Heller Common Stock to be issued in connection with
the transactions contemplated by this Agreement as soon as reasonably
practicable. Heller shall also take any action required to be taken under any
applicable state blue sky or securities laws in connection with the issuance of
the shares of Heller Common Stock to be issued in the
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Merger and HFP and Heller shall furnish all information concerning their
respective Subsidiaries and the stockholders thereof as may reasonably be
requested in connection with any such action.
(b) The parties hereto shall cooperate with each other and use their
reasonable best efforts to promptly prepare and file all necessary
documentation, to effect all applications, notices, petitions and filings, to
obtain as promptly as practicable all permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities which are
necessary or advisable to consummate the transactions contemplated by this
Agreement, and to comply with the terms and conditions of all such permits,
consents, approvals and authorizations of all such Regulatory Authorities.
Heller and HFP shall, to the extent practicable, consult with the other on, in
each case subject to applicable laws relating to the exchange of information,
all the information relating to Heller or HFP, as the case may be, and any of
their respective Subsidiaries, which appear in any filing made with, or written
materials submitted to, any third party or any Regulatory Authority in
connection with the transactions contemplated by this Agreement. In exercising
the foregoing right, each of the parties hereto shall act reasonably and as
promptly as practicable. The parties hereto agree that they will consult with
each other with respect to the obtaining of all permits, consents, approvals and
authorizations of all third parties and Regulatory Authorities necessary or
advisable to consummate the transactions contemplated by this Agreement and each
party will keep the other apprised of the status of matters relating to the
completion of the transactions contemplated herein.
(c) Heller and HFP shall, upon request, furnish each other with all
information concerning themselves, their Subsidiaries, directors, officers and
stockholders and such other matters as may be reasonably necessary or advisable
in connection with the Proxy Statement, the Registration Statement or any other
statement, filing, notice or application made by or on behalf of Heller, HFP or
any of their respective Subsidiaries to any Regulatory Authority in connection
with the Merger and the other transactions contemplated by this Agreement.
(d) Heller and HFP shall use commercially reasonable efforts to inform
each other and their respective counsel of any communication from any Regulatory
Authority whose consent or approval is required for the consummation of the
transactions contemplated by this Agreement, including any requests by any
Regulatory Authority for additional information, or with respect to any filing
made with any Regulatory Authority, will consult with such party and their
counsel before submitting any response to the Regulatory Authority with respect
thereto.
(e) Heller and HFP shall each use its best efforts to cause to be
delivered to the other party and its directors a letter of its independent
auditors, dated the date on which the S-4 Registration Statement shall become
effective, and addressed to the other party and its directors, in form and
substance customary for "comfort" letters delivered by independent public
accountants in connection with registration statements similar to the S-4
Registration Statement.
(f) Notwithstanding anything to the contrary contained herein, none of
Heller or any of its Subsidiaries shall be required to share with HFP any
information furnished or to be furnished by or on behalf of Heller, as part of
or in connection with any application, notice or related correspondence to or
received from the Board of Governors of the Federal Reserve System
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on a confidential basis or concerning or related to or that would effectively
disclose any information so furnished or received.
Section 6.3. Stockholder Approval. In accordance with applicable law,
--------------------
the rules of the NYSE, the HFP Charter and the HFP Bylaws, HFP shall call the
Stockholders Meeting to be held as soon as practicable after the Registration
Statement is declared effective for the purpose of voting upon the Merger and to
take any other action for HFP Stockholders to authorize the transactions
contemplated by this Agreement. In connection therewith, HFP shall prepare the
Proxy Statement and the Proxy Statement shall be filed with the SEC and mailed
to the HFP Stockholders. The HFP Board shall submit for approval of the HFP
Stockholders the matters to be voted upon in order to authorize the Merger.
Subject to Section 6.13 hereof, the HFP Board shall use its reasonable best
efforts to obtain any vote of the HFP Stockholders that is necessary for the
approval and adoption of this Agreement and consummation of the transactions
contemplated hereby.
Section 6.4. Current Information. During the period from the date of
-------------------
this Agreement to the Effective Time, HFP shall promptly furnish Heller with
copies of all monthly and quarterly financial statements and all monthly and
quarterly management reports showing, among other things, portfolio changes,
including, but not limited to, the unaudited consolidated balance sheet of HFP
and its Subsidiaries at March 31, 1999 and the related consolidated statement of
income, equity and cash flow for the period ended March 31, 1999 as the same
become available and shall cause one or more of its designated representatives
to confer on a regular and frequent basis with representatives of Heller. HFP
shall promptly notify Heller of any material change in its business or
operations and of any governmental complaints, investigations or hearings (or
communications indicating that the same may be contemplated), or the institution
or, to HFP's Knowledge, the threat of material litigation involving HFP, and
shall keep Heller fully informed of such events.
Section 6.5. Agreements of Affiliates.
------------------------
(a) Set forth in Section 3.31 of the HFP Schedule are the names of
each person that, to the Knowledge of HFP, is or is reasonably likely to be, as
of the date of the Effective Time, deemed to be an "affiliate" of HFP (each, an
"Affiliate") as that term is used in Rule 145 under the Securities Act.
(b) HFP shall use its reasonable best efforts to cause each person who
may be deemed to be an Affiliate of HFP to execute and deliver to HFP and Heller
on or before the date of the Stockholders Meeting an agreement to comply with
Rule 145 under the Securities Act. Such agreements shall be substantially in the
form set forth in Exhibit C hereto.
(c) Heller shall not be required to maintain the effectiveness of the
S-4 Registration Statement or any other registration statement under the
Securities Act for the purposes of resale of Heller Common Stock by such
affiliates received in the Merger and the certificates representing Heller
Common Stock received by such affiliates shall bear a customary legend regarding
applicable Securities Act restrictions and the provisions of this Section.
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Section 6.6. Expenses. Each party hereto shall bear its own expenses
--------
incident to preparing, entering into and carrying out this Agreement and to
consummating the Merger, provided that the registration fee with respect to the
Registration Statement and expenses related to the printing and mailing of the
Proxy Statement and the Registration Statement and all SEC filing fees relating
the Registration Statement shall be shared equally by Heller and HFP.
Section 6.7. Miscellaneous Agreements and Consents. Subject to the
-------------------------------------
terms and conditions herein provided, each of the parties hereto agrees to use
its respective reasonable best efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement as expeditiously as possible,
including, without limitation, using its respective reasonable best efforts to
lift or rescind any injunction or restraining order or other order adversely
affecting the ability of the parties to consummate the transactions contemplated
hereby. Each party shall, and shall cause each of its respective Subsidiaries
to, use its reasonable best efforts to obtain consents of all third parties
necessary or, as agreed by the parties, desirable for the consummation of the
transactions contemplated by this Agreement.
Section 6.8. Employee Matters. (a) From and after the Effective Time,
----------------
the employee benefit plans and programs to be provided to employees of HFP as of
the Effective Time ("HFP Employees") shall be the benefit plans and programs
provided to similarly situated employees of Heller. For purposes of all
employee benefit plans, programs or arrangements maintained, sponsored or
contributed to by Heller or its affiliates, in which HFP Employees shall be
eligible to participate, Heller shall cause each such plan, program or
arrangement to treat the prior service of each HFP Employee with HFP or its
affiliates as service rendered to Heller or its affiliates for purposes of
eligibility, vesting and benefits accruals (but not for purposes of benefit
accruals under any defined benefit pension plan). From and after the Effective
Time, Heller shall (i) cause any pre-existing conditions or limitations and
eligibility waiting periods under any group health plans of Heller or its
affiliates to be waived with respect to HFP Employees and their eligible
dependents and (ii) give each HFP Employee credit for the plan year in which the
Effective Time (or the transition from HFP Benefit Plans to the Plans of Heller
or its affiliates) occurs towards applicable deductibles and annual out-of-
pocket limits for expenses incurred prior to the Effective Time (or such other
transition date). From and after the Effective Time, Heller shall, or shall
cause the Surviving Corporation, to honor, pursuant to the terms of the HFP
Benefit Plans, all accrued or vested benefit obligations to current and former
employees of HFP or its affiliates under the HFP Benefit Plans. From and after
the Effective Time, Heller will or will cause the Surviving Corporation to
retain those existing employees reasonably required by management of HFP for the
conduct of the business of the Surviving Corporation after the Effective Time.
Notwithstanding anything contained in this Agreement to the contrary, Heller or
the Surviving Corporation, as the case may be, shall take or cause to be taken
all actions necessary to effectuate the items set forth in Schedule A of the HFP
Schedule.
Section 6.9. D&O Indemnification.
-------------------
(a) In the event of any threatened or actual claim, action, suit,
proceeding or investigation, whether civil, criminal or administrative,
including, without limitation, any such claim, action, suit, proceeding or
investigation in which any individual who is now, or has been
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at any time prior to the date of this Agreement, or who becomes prior to the
Effective Time, a director or officer of HFP or any of its Subsidiaries (the
"Indemnified Parties"), is, or is threatened to be, made a party based in whole
or in part on, or arising in whole or in part out of, or pertaining to (i) the
fact that he is or was a director or officer of HFP or any of its Subsidiaries
or (ii) this Agreement, the Option Agreement or any of the transactions
contemplated hereby or thereby, whether in any case asserted or arising before
or after the Effective Time, the parties hereto agree to cooperate and use their
best efforts to defend against and respond thereto. It is understood and agreed
that after the Effective Time, the Surviving Corporation shall, and Heller shall
cause the Surviving Corporation to, indemnify and hold harmless, as and to the
extent presently provided in the HFP Charter, the HFP Bylaws and the
indemnification agreements entered into by HFP as of the date hereof, each such
Indemnified Party against any losses, claims, damages, liabilities, costs,
expenses (including reasonable attorney's fees and expenses), judgments, fines
and amounts paid in settlement in connection with any such threatened or actual
claims, action, suit, proceeding or investigation, and in the event of any such
threatened or actual claim, action, suit, proceeding or investigation (whether
asserted or arising before or after the Effective Time); and Heller, after
consultation with an Indemnified Party, shall retain counsel and direct the
defense thereof, provided, however, that by virtue of the obligations herein set
forth, (A) neither Heller nor the Surviving Corporation shall be liable to any
Indemnified Party for any legal expenses of other counsel or any other expenses
incurred by any Indemnified Party in connection with the defense thereof, except
that if Heller fails or elects not to assume such defense, or counsel for the
Indemnified Parties reasonably advises the Indemnified Parties that there are
issues which raise conflicts of interest between Heller and the Indemnified
Parties, the Indemnified Parties may retain counsel reasonably satisfactory to
them and Heller after consultation with Heller, and Heller shall pay the
reasonable fees and expenses of such counsel for the Indemnified Parties
promptly as statements therefor are received, (B) Heller shall be obligated
pursuant to this paragraph to pay for only one firm of counsel (in addition to a
single firm of local counsel in each applicable jurisdiction) for all
Indemnified Parties, unless an Indemnified Party shall have reasonably
concluded, based on the advice of counsel and after consultation with Heller,
that in order to be adequately represented, separate counsel is necessary for
such Indemnified Party, in which case, Heller shall be obligated to pay for such
separate counsel reasonably satisfactory to the Indemnified Parties, (C) neither
Heller nor the Surviving Corporation shall be liable for any settlement effected
without its prior written consent (which consent shall not be unreasonably
withheld) and (D) neither Heller nor the Surviving Corporation shall have any
obligation hereunder to any Indemnified Party when and if a court of competent
jurisdiction shall ultimately determine, and such determination shall have
become final and nonappealable, that indemnification of such Indemnified Party
in the manner contemplated hereby is prohibited by applicable law. Heller shall,
to the fullest extent permitted by law, advance expenses to such Indemnified
Parties prior to final disposition of any claim, suit, proceeding, or
investigation upon receipt of an undertaking to repay any such advances of fees
and expenses if such person is ultimately found not to be entitled to
indemnification therefor. Any Indemnified Party wishing to claim Indemnification
under this Section 6.9, upon learning of any such claim, action, suit,
proceeding or investigation, shall promptly notify Heller thereof, in writing,
provided that the failure to so notify shall not affect the obligations of
Heller under this Section 6.9 except to the extent such failure to notify
materially prejudices Heller. Heller's obligations under this Section 6.9 shall
continue in full force and effect for a period of six years from the Effective
Time; provided, however, that all
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rights to indemnification in respect of any claim (a "Claim") asserted or made
within such period shall continue until the final disposition of such Claim.
(b) From and after the Effective Time, Heller or the Surviving
Corporation shall cause the individuals serving as officers and directors of
HFP, its Subsidiaries or any entity specified in Section 3.5 of the HFP Schedule
immediately prior to the Effective Time to be covered for a period of six (6)
years from the Effective Time (or the period of the applicable statute of
limitations, if longer) by a directors' and officers' liability insurance policy
maintained or purchased by Heller (provided that Heller may substitute therefor
policies of at least the same coverage and amounts containing terms and
conditions which are not less advantageous than either of such policies) with
respect to acts or omissions occurring prior to the Effective Time which were
committed by such officers and directors in their capacity as such; provided,
however, that in no event shall Heller be required to expend more than 250% of
the current amount expended by HFP (the "Insurance Amount") to maintain or
procure insurance coverage pursuant hereto and provided further that if Heller
is unable to maintain or obtain the insurance called for in this Section 6.9(b),
Heller shall use its reasonable best efforts to obtain as much comparable
insurance as available for the Insurance Amount.
(c) In the event Heller or any of its 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 or conveys all or substantially all of its properties and
assets to any person, then, and in each such case, to the extent necessary,
proper provision shall be made so that the successors and assigns of Heller
assume the obligations set forth in this section.
(d) The provisions of this Section 6.9 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Party and his or her
heirs and representatives.
Section 6.10. Press Releases. HFP and Heller shall consult with each
--------------
other before issuing any press release or otherwise making any public statements
with any news media with respect to this Agreement or any of the transactions
contemplated hereby and shall not issue any such press release or make any such
public statement without the prior consent of the other party, which consent
shall not be unreasonably withheld; provided, however, that a party may, without
the prior consent of the other party, issue such press release or make such
public statement as may be required by law or the applicable rules of any stock
exchange, including the NYSE, if it has used its commercially reasonable efforts
to consult wit the other party and to obtain such party's consent but has been
unable to do so in a timely manner; provided further, that nothing contained
herein shall prevent any party from promptly making all filings with Regulatory
Authorities and all disclosure as may in its good faith judgment, but required
or advisable in connection with the execution and delivery of this Agreement or
the consummation of the transactions contemplated hereby (in which case this
disclosing party shall advise the other parties and provide them with a copy of
the proposed disclosure or filing prior to making the disclosure or filing). In
this regard, the parties shall make a joint public announcement of the proposed
Merger and the transactions contemplated by this Agreement immediately upon the
signing of this Agreement.
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Section 6.11. Insurance. Each of Heller and HFP shall, and shall cause
---------
its respective Subsidiaries to, use its reasonably best efforts to maintain its
existing insurance.
Section 6.12. Additional Actions. In case at any time after the
------------------
Effective Time any further action is necessary or desirable to carry out the
purposes of this Agreement or to vest the Surviving Corporation with full title
to all properties, assets, rights, approvals, immunities and franchises of any
of the parties to the Merger, as the case may be, the proper officers and
directors of each party to this Agreement and their respective Subsidiaries
shall take all such action as may be reasonably necessary.
Section 6.13. No Solicitation. HFP will not, and will not permit or
---------------
cause any of its Subsidiaries or any of the officers and directors of it or its
Subsidiaries to, and shall direct and cause its and its Subsidiaries' employees,
agents and representatives (including any advisor, investment banker, attorney
or accountant retained by it or any of its Subsidiaries) ("Representatives") not
to, directly or indirectly, initiate, solicit, encourage or otherwise facilitate
(including by way of furnishing non-public information), any inquiries or the
making of any proposal or offer with respect to a tender offer, merger,
reorganization, share exchange, consolidation or similar transaction involving,
or any purchase of any substantial assets or voting securities of, HFP and its
Subsidiaries taken as a whole (any such proposal or offer being hereinafter
referred to as an "Acquisition Proposal")). HFP will not, and will not permit
or cause any of its Subsidiaries or any of the officers and directors of it or
its Subsidiaries to and shall direct and cause its and its Subsidiaries'
employees, agents and Representatives not to, directly or indirectly, engage in
any negotiations concerning, or provide any confidential information or data to,
or have any discussions with, any person relating to an Acquisition Proposal,
whether made before or after the date of this Agreement, or otherwise facilitate
any effort or attempt to make or implement an Acquisition Proposal; provided,
however, that prior to the approval of the Merger by the HFP Stockholders HFP
may, and may authorize and permit its employees, agents and Representatives to,
furnish or cause to be furnished confidential information and may participate in
unsolicited negotiations and discussions if the HFP Board (a) determines in good
faith (after consultation with and based upon the advice of outside legal
counsel) that such action is necessary in order for its directors to comply with
their respective fiduciary duties under applicable law, and (b) determines in
good faith, after consultation with its financial advisor, that such Acquisition
Proposal is reasonably likely to be consummated, taking into account all legal,
financial and regulatory aspects of the proposal and the person making the
proposal, and would, if consummated, result in a transaction more favorable to
HFP's shareholders from a financial point of view than the transaction
contemplated by this Agreement, but only if (i) prior to furnishing such
information to, or entering into discussions or negotiations with such person or
entity, HFP receives from such person or entity an executed confidentiality
agreement in substantially the same form as the Confidentiality Agreement and
(ii) HFP is not then in breach of its obligations under this Section such that
Heller would have the right to terminate the Merger Agreement pursuant to
Section 8.1(b) hereof. HFP will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing. HFP will notify Heller
immediately if any such inquiries, proposals or offers are received by, any such
information is requested from, or any such discussions or negotiations are
sought to be initiated or continued with, any of its officers, directors or its
Representatives indicating, in connection with such no-
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tice, the name of such person and the material terms and conditions of any
proposals or offers. During the period from the date of this Agreement through
the Effective Time, HFP shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill agreement to which it or any of
its Subsidiaries is a party.
Section 6.14. Year 2000 Compliance. As promptly as reasonably
--------------------
practicable after the date hereof and in any event before the Effective Time,
HFP shall furnish Heller written evidence that HFP and its Subsidiaries are Year
2000 Compliant, describing in detail reasonably satisfactory to Heller the
testing and remedial process undertaken to determine that HFP and its
Subsidiaries are Year 2000 Compliant.
Section 6.15. Continuation of Management. HFP agrees to cause (other
--------------------------
than terminations for cause or as a result of such individual's death or
disability) Mr. John K. Delaney, Mr. Ethan D. Leder, and Mr. Edward P. Nordberg,
Jr. to remain as directors and officers of HFP at least through the Effective
Time.
ARTICLE VII
-----------
CONDITIONS
Section 7.1. Conditions to Each Party's Obligation to Effect the Merger.
----------------------------------------------------------
The respective obligations of each party to effect the Merger shall be subject
to the fulfillment at or prior to the Effective Time of the following
conditions:
(a) This Agreement and the transactions contemplated hereby shall have
been approved by the requisite affirmative vote of the holders of HFP Common
Stock entitled to vote thereon in accordance with the HFP Charter and applicable
law.
(b) All requisite approvals of this Agreement and the transactions
contemplated hereby shall have been received from all Regulatory Authorities,
and all applicable waiting periods shall have expired under applicable law
(other than any such approvals or the expiration of any such waiting periods
which the failure to obtain or satisfy, individually or in the aggregate, would
not reasonably be expected to have a material adverse effect on the consummation
of the Merger, a HFP Material Adverse Effect or a Heller Material Adverse Effect
upon completion of the Merger).
(c) The Registration Statement shall have been declared effective and
shall not be subject to a stop order or any threatened stop order.
(d) None of HFP, Heller nor Merger Co. shall be subject to any order,
decree or injunction of a court or agency of competent jurisdiction which
enjoins or prohibits the consummation of the Merger or any of the other
transactions contemplated by this Agreement. No statute, rule, regulation,
order, injunction or decree shall have been enacted, entered, promulgated or
enforced by any Regulatory Authority which prohibits, materially restricts or
makes illegal the consummation of the Merger.
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<PAGE>
(e) Heller shall have received an opinion of Winston & Strawn, and HFP
shall have received an opinion of Powell, Goldstein, Frazer & Murphy, LLP, in
form and substance reasonably satisfactory to Heller and HFP, respectively,
dated the Closing Date, substantially to the effect that, on the basis of facts,
representations and assumptions set forth in such opinion which are consistent
with the state of facts existing at the Effective Time:
(i) The Merger will constitute a reorganization under Section 368(a)
of the Code; HFP, Merger Co. and Heller will each be a party to the
reorganization;
(ii) No gain or loss will be recognized by HFP, Merger Co. or Heller
as a result of the Merger; and
(iii) No gain or loss will be recognized by HFP stockholders who
exchange all of their HFP Common Stock solely for Heller Common Stock pursuant
to the Merger (except with respect to cash received in lieu of a fractional
share interest in Heller Common Stock).
In rendering such opinion, counsel may require and rely upon customary
representations contained in certificates of officers of HFP, Merger Co., Heller
and others.
(f) The shares of Heller Common Stock which shall be issued to the
holders of HFP Common Stock (and, where applicable, shares subject to options to
purchase Heller Common Stock) upon consummation of the Merger shall have been
authorized for listing on the NYSE, subject to official notice of issuance.
Section 7.2. Conditions to Obligations of HFP to Effect the Merger. The
-----------------------------------------------------
obligations of HFP to effect the Merger shall be subject to the fulfillment or
waiver by HFP at or prior to the Effective Time of the following additional
conditions:
(a) Representations and Warranties. The representations and warranties
of Heller set forth in Article IV of this Agreement shall be true and correct as
of the date of this Agreement and as of the Closing Date (as though made on and
as of the Closing Date except to the extent such representations and warranties
are by their express provisions made as of a specified date or period) and HFP
shall have received a certificate of the chairman, president, executive vice
president, or senior vice president of Heller, on behalf of Heller, to that
effect.
(b) Performance of Obligations. Heller shall have performed, in all
material respects, all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and HFP shall have received a
certificate of the chairman, president, executive vice president or senior vice
president of Heller, on behalf of Heller, to that effect.
Section 7.3. Conditions to Obligations of Heller to Effect the Merger.
--------------------------------------------------------
The obligations of Heller to effect the Merger shall be subject to the
fulfillment or waiver by Heller at or prior to the Effective Time of the
following additional conditions:
(a) Representations and Warranties. The representations and warranties
of HFP set forth in Article III of this Agreement shall be true and correct as
of the date of this
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<PAGE>
Agreement and as of the Closing Date (as though made on and as of the Closing
Date except to the extent such representations and warranties are by their
express provisions made as of a specific date or period) and Heller shall have
received a certificate of the chairman, president, executive vice president, or
senior vice president of HFP, on behalf of HFP, to that effect.
(b) Performance of Obligations. HFP shall have performed, in all
material respects, all obligations required to be performed by it under this
Agreement at or prior to the Closing Date, and Heller shall have received a
certificate of the chairman, president, executive vice president, or senior vice
president of HFP, on behalf of HFP, to that effect.
(c) Dissenters. Holders of no more than 5% of the outstanding shares
----------
of HFP Common Stock shall have asserted the right to seek relief as a dissenting
shareholder under Section 262 and other applicable provisions of the DGCL.
(d) Board Approval. The Board of Directors of Heller shall have
--------------
approved and adopted the Agreement and the transactions contemplated hereby.
ARTICLE VIII
------------
TERMINATION, AMENDMENT AND WAIVER
Section 8.1. Termination. This Agreement may be terminated, and the
-----------
Merger may be abandoned by:
(a) Mutual Consent. At any time prior to the Effective Time, by the
--------------
mutual consent of Heller and HFP in a written instrument, if the Board of
Directors of each so determines by vote of a majority of the members of its
entire Board.
(b) Breach. At any time prior to the Effective Time, by Heller or HFP
------
(provided that the terminating party is not then in material breach of any
representation, warranty, covenant or other agreement contained herein), if its
Board of Directors so determines, in the event of either: (i) a breach by the
other party of any representation or warranty contained herein, which breach
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach; or (ii) a material breach by the
other party of any of the covenants or agreements contained herein, which breach
cannot be or has not been cured within 30 days after the giving of written
notice to the breaching party of such breach.
(c) Delay. At any time prior to the Effective Time, by Heller or HFP,
-----
in the event that the Merger is not consummated by September 30, 1999, except to
the extent that the failure of the Merger then to be consummated arises out of
or results from the failure of the party seeking to terminate this Agreement to
perform or observe the covenants and agreements of such party set forth herein.
(d) No Approval. By HFP or Heller, in the event (i) the approval of
-----------
any Regulatory Authority required for consummation of the Merger and the other
transactions contemplated by the Merger shall have been denied by final
nonappealable action of such Regulatory
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<PAGE>
Authority; or (ii) the approval of the HFP Stockholders of the Merger and the
transactions contemplated hereby is not obtained at the Stockholders Meeting.
(e) HFP Option. By the Board of Directors of HFP, upon written notice
----------
to Heller at any time during the four-day period commencing on the date
immediately following the last day of the period during which the Average NYSE
Closing Price is to be determined pursuant to Section 2(b)(iii), if the Average
NYSE Closing Price shall be less than $20.35; subject, however, to the following
provisions.
If HFP elects to exercise its termination right pursuant to the
immediately preceding sentence, it shall give prompt written notice to Heller;
provided, however, that such notice of election to terminate may be withdrawn at
any time within the aforementioned four-day period. During the four-day period
commencing with its receipt of such notice, Heller shall have the option to
elect to increase the Per Share Consideration Value to equal $34.21. If Heller
makes such an election within such four-day period, it shall give prompt written
notice to HFP of such election and the revised Per Share Consideration Value,
whereupon no termination shall have occurred pursuant to this Section 8.1(e) and
this Agreement shall remain in effect in accordance with its terms (except as
the Per Share Consideration Value shall have been so modified, and any
references in this Agreement to "Per Share Consideration Value" shall thereafter
be deemed to refer to the Per Share Consideration Value as adjusted pursuant to
this Section 8.1(e)).
If Heller declares or effects a stock dividend, reclassification,
recapitalization, split-up, combination, exchange of shares or similar
transaction between the last NYSE trading date prior to the execution and
delivery of this Agreement and the date which is the last day in the period with
respect to which the Average NYSE Closing Price is determined pursuant to
Section 2.1(a)(iii), the price of Heller Common Stock shall be appropriately
adjusted for the purposes of applying this Section 8.1(e).
(f) Board Approval. By the Board of Directors of HFP, if the Board of
--------------
Directors of Heller shall not have approved and adopted the Agreement and the
transactions contemplated hereby on or before April 26, 1999.
Section 8.2. Effect of Termination and Abandonment. In the event of
-------------------------------------
termination of this Agreement and the abandonment of the Merger pursuant to this
Article VIII, no party to this Agreement shall have any liability or further
obligation to any other party hereunder except (i) as set forth in Section 9.1
and (ii) that termination will not relieve a breaching party from liability for
any willful breach of this Agreement giving rise to such termination.
Section 8.3. Amendment. This Agreement may be amended by the parties
---------
hereto, by action taken by or on behalf of their respective Boards of Directors,
at any time before or after approval of this Agreement and the transactions
contemplated hereby by the HFP Stockholders; provided, however, that after any
-------- -------
such approval no such amendment which under applicable law requires further
stockholder approval may be made without such stockholder approval.
Notwithstanding the foregoing, this agreement may be terminated in accordance
with Section 8.1 after approval by the HFP Stockholders of this Agreement and
the transactions contemplated hereby.
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<PAGE>
This Agreement may not be amended except by an instrument in writing signed on
behalf of each of Heller, HFP and Merger Co.
Section 8.4. Severability. Any term, provision, covenant or restriction
------------
contained in this Agreement held by a court or a Regulatory Authority of
competent jurisdiction or the Board to be invalid, void or unenforceable shall
be ineffective to the extent of such invalidity, voidness or unenforceability,
but neither the remaining terms, provisions, covenants or restrictions contained
in this Agreement nor the validity or enforceability thereof in any other
jurisdiction shall be affected or impaired thereby. Any term, provision,
covenant or restriction contained in this Agreement that is so found to be so
broad as to be unenforceable shall be interpreted to be as broad as is
enforceable.
Section 8.5. Waiver. Any term, condition or provision of this Agreement
------
may be waived in writing at any time by the party which is, or whose
stockholders are, entitled to the benefits thereof.
ARTICLE IX
----------
GENERAL PROVISIONS
Section 9.1. Non-Survival of Representations, Warranties and Agreements.
----------------------------------------------------------
No investigation by the parties hereto made heretofore or hereafter shall affect
the representations and warranties of the parties which are contained herein and
each such representation and warranty shall survive such investigation. Except
as set forth below in this Section 9.1, all representations, warranties and
agreements in this Agreement of Heller and HFP or in any instrument delivered by
Heller or HFP pursuant to or in connection with this Agreement shall expire at
the Effective Time or upon termination of this Agreement in accordance with its
terms or, in the case of any other such instrument, in accordance with the terms
of such instrument; provided that, in the event of consummation of the Merger,
the covenants and agreements contained in or referred to in Sections 6.1, 6.6,
6.8 and 6.9 and those covenants and agreements contained herein which by their
terms apply in whole or in part after the Effective Time shall survive the
Effective Time.
Section 9.2. Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed to be duly received (i) on the date
given if delivered personally, (ii) upon confirmation of receipt, if by
facsimile transmission, (iii) on the date received if mailed by registered or
certified mail (return receipt requested), or (iv) on the business date after
being delivered to a reputable overnight delivery service, if by such service,
to the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(i) if to Heller:
Debra H. Snider
Heller Financial, Inc.
500 West Monroe Street
Chicago, Illinois 60661
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<PAGE>
Telecopier: (312) 441-7456
Copies to:
Terrence R. Brady
Winston & Strawn
35 West Wacker Drive
Chicago, Illinois 60601
Telecopier: (312) 558-5700
(ii) if to HFP:
Edward P. Nordberg, Jr.
HealthCare Financial Partners, Inc.
2 Wisconsin Circle, 4th Floor
Chevy Chase, Maryland 20815
Telecopier: (301) 664-9880
Copies to:
Edward D. Herlihy
Wachtell, Lipton, Rosen & Katz
51 W. 52nd Street
New York, New York 10019
Telecopier: (212) 403-1000
and
G. William Speer
Powell, Goldstein, Frazer & Murphy LLP
191 Peachtree Street, N.E.
16th Floor
Atlanta, Georgia 30303
Telecopier: (404) 572-6999
Section 9.3. Interpretation. When a reference is made in this Agreement
--------------
to Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement, unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation." No provision of this Agreement shall be construed to require HFP,
Heller, Merger Co. or any of their respective Subsidiaries or affiliates to take
or fail to take any action, including, without limitation, the disclosure or
non-disclosure by either party of any information to its stockholders, which
-49-
<PAGE>
would (or its failure to have been taken would) reasonably be expected to
violate any applicable law, legal duty, rule or regulation.
Section 9.4. Miscellaneous. This Agreement (including the Schedules and
-------------
other written documents referred to herein or provided hereunder) (i)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any of them, with
respect to the subject matter hereof, other than any confidentiality agreement
between the parties hereto, (ii) except with respect to Section 6.9 and the last
sentence of Section 6.8 (which shall be for the benefit of and enforceable by
the persons listed in Schedule A of the HFP Schedule) is not intended to confer
upon any person not a party hereto any rights or remedies hereunder, (iii) shall
not be assigned by operation of law or otherwise, except as contemplated by
Section 6.9, (iv) may be executed in counterparts, all of which shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each of the parties and delivered to the other
parties, it being understood that all parties need not sign the same
counterparts, and (v) shall be governed in all respects by the laws of the State
of Delaware, except as otherwise specifically provided herein or required by the
DGCL. This Agreement may be delivered by facsimile. Subject to the preceding
clause (iii), this Agreement will be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and assigns. HFP
shall not be deemed to have breached a representation or warranty, as a
consequence of the existence of any fact, event or circumstance, which is
disclosed in the HFP Schedule and of which breach Heller has Knowledge as of the
date hereof, by reason of the failure of HFP to describe such fact, event or
circumstance in a particular Section of the HFP Schedule.
Section 9.5. Legal Fees and Costs. If any party hereto institutes any
--------------------
action or proceeding, whether before a court or arbitrator, to enforce any
provisions of this Agreement, the prevailing party therein shall be entitled to
receive from the losing party reasonable attorneys' fees and costs incurred in
such action or proceeding, whether or not such action or proceeding is
prosecuted to judgment.
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<PAGE>
IN WITNESS WHEREOF, Heller, HFP and Merger Co. have caused this
Agreement to be signed as of the date first written above.
HEALTHCARE FINANCIAL PARTNERS, INC.
By: /s/ John K. Delaney
----------------------
Name: John K. Delaney
Title: Chairman and Chief Executive Officer
HELLER FINANCIAL, INC.
By: /s/ Robert E. Radway
-----------------------
Name: Robert E. Radway
Title: Executive Vice President
HF5, INC.
By: /s/ Robert E. Radway
------------------------
Name: Robert E. Radway
Title: Executive Vice President
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<PAGE>
EXHIBIT 99.2
THE TRANSFER OF THIS AGREEMENT IS SUBJECT TO
CERTAIN PROVISIONS CONTAINED HEREIN AND TO
RESALE RESTRICTIONS UNDER THE
SECURITIES ACT OF 1933, AS AMENDED
STOCK OPTION AGREEMENT, dated April 19, 1999, between HealthCare
Financial Partners, Inc., a Delaware corporation ("Issuer"), and Heller
Financial, Inc., a Delaware corporation ("Grantee").
W I T N E S S E T H:
-------------------
WHEREAS, Grantee and Issuer have entered into an Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), which agreement has been
executed by the parties hereto immediately prior to this Stock Option Agreement
(the "Agreement"); and
WHEREAS, as a condition to Grantee's entering into the Merger
Agreement, Issuer has agreed to grant Grantee the Option (as hereinafter
defined);
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. (a) Issuer hereby grants to Grantee an unconditional, irrevocable
option (the "Option") to purchase, subject to the terms hereof, up to 2,670,786
fully paid and nonassessable shares of Issuer's Common Stock, par value $0.01
per share ("Common Stock"), at a price of $28.50 per share (the "Option Price");
rovided, however, that in no event shall the number of shares of Common Stock
- -------- --------
for which this Option is exercisable exceed 19.9% of the Issuer's issued and
outstanding shares of Common Stock without giving effect to any shares subject
to or issued pursuant to the Option. The number of shares of Common Stock that
may be received upon the exercise of the Option and the Option Price are subject
to adjustment as herein set forth.
(b) In the event that any additional shares of Common Stock are either (i)
issued or otherwise become outstanding after the date of this Agreement (other
than pursuant to this Agreement) or (ii) redeemed, repurchased, retired or
otherwise cease to be outstanding after the date of this Agreement, the number
of shares of Common Stock subject to the Option shall be increased or decreased,
as appropriate, so that, after such issuance, such number equals 19.9% of the
number of shares of Common Stock then issued and outstanding without giving
effect to any shares subject or issued pursuant to the Option. Nothing contained
in this Section 1(b) or elsewhere in this Agreement shall be deemed to authorize
Issuer or Grantee to breach any provision of the Merger Agreement.
2. (a) The Holder (as hereinafter defined) may exercise the Option, in
whole or part, and from time to time, if, but only if, both an Initial
Triggering Event (as hereinafter de-
<PAGE>
fined) and a Subsequent Triggering Event (as hereinafter defined) shall have
occurred prior to the occurrence of an Exercise Termination Event (as
hereinafter defined), provided that the Holder shall have sent the
--------
written notice of such exercise (as provided in subsection (e) of this Section
2) within 90 days following such Subsequent Triggering Event. Each of the
following shall be an "Exercise Termination Event": (i) the Effective Time (as
defined in the Merger Agreement) of the Merger; (ii) termination of the Merger
Agreement in accordance with the provisions thereof if such termination occurs
prior to the occurrence of an Initial Triggering Event, except a termination by
Grantee pursuant to Section 8.1(b) of the Merger Agreement based on a willful
breach by Issuer of the Merger Agreement; or (iii) the passage of 12 months
after termination of the Merger Agreement if such termination follows the
occurrence of an Initial Triggering Event or is a termination by Grantee
pursuant to Section 8.1(b) of the Merger Agreement (unless the breach by Issuer
giving rise to such right of termination is non-volitional) (provided that if an
--------
Initial Triggering Event continues or occurs beyond such termination and prior
to the passage of such 12-month period, the Exercise Termination Event shall be
12 months from the expiration of the Last Triggering Event but in no event more
than 18 months after such termination). The "Last Triggering Event" shall mean
the last Initial Triggering Event to expire. The term "Holder" shall mean the
holder or holders of the Option.
(b) The term "Initial Triggering Event" shall mean any of the following
events or transactions occurring after the date hereof:
(i) Issuer or any of its Subsidiaries (each an "Issuer Subsidiary"),
without having received Grantee's prior written consent, shall have entered
into an agreement to engage in an Acquisition Transaction (as hereinafter
defined) with any person (the term "person" for purposes of this Agreement
having the meaning assigned thereto in Sections 3(a)(9) and 13(d)(3) of the
Securities Exchange Act of 1934, as amended (the "1934 Act"), and the rules
and regulations thereunder) other than Grantee or any of its Subsidiaries
(each a "Grantee Subsidiary") or the Board of Directors of Issuer shall
have recommended that the stockholders of Issuer approve or accept any
Acquisition Transaction. For purposes of this Agreement, "Acquisition
Transaction" shall mean (w) a merger or consolidation, or any similar
transaction, involving Issuer or any Issuer Subsidiary, (x) a purchase,
lease or other acquisition or assumption of all or a substantial portion of
the assets or deposits of Issuer or any Issuer Subsidiary, (y) a purchase
or other acquisition (including by way of merger, consolidation, share
exchange or otherwise) of securities representing 10% or more of the voting
power of Issuer, or (z) any substantially similar transaction; provided,
--------
however, that in no event shall any merger, consolidation, purchase or
-------
similar transaction involving only the Issuer and one or more Issuer
Subsidiaries or involving only any two or more Issuer Subsidiaries,
provided that any such transaction is not entered into in violation of the
Merger Agreement, be deemed to be an Acquisition Transaction;
(ii) Issuer or any Issuer Subsidiary, without having received
Grantee's prior written consent, shall have authorized, recommended,
proposed or publicly announced its intention to authorize, recommend or
propose, to engage in an Acquisition Transaction with any person other than
Grantee or a Grantee Subsidiary, or the Board of Directors of Issuer shall
have publicly withdrawn or modified, or publicly an-
2
<PAGE>
nounced its intention to withdraw or modify, in any manner adverse to
Grantee, its recommendation that the stockholders of Issuer approve the
transactions contemplated by the Merger Agreement in anticipation of
engaging in an Acquisition Transaction;
(iii) Any person other than Grantee, any Grantee Subsidiary or any
Issuer Subsidiary acting in a fiduciary capacity in the ordinary course of
its business shall have acquired beneficial ownership or the right to
acquire beneficial ownership of 10% or more of the outstanding shares of
Common Stock (the term "beneficial ownership" for purposes of this
Agreement having the meaning assigned thereto in Section 13(d) of the 1934
Act, and the rules and regulations thereunder) ;
(iv) Any person other than Grantee or any Grantee Subsidiary shall
have made a bona fide proposal to Issuer or its stockholders, by public
announcement or written communication that is or becomes the subject of
public disclosure, to engage in an Acquisition Transaction;
(v) After an overture is made by a third party to Issuer or its
stockholders to engage in an Acquisition Transaction, Issuer shall have
breached any covenant or obligation contained in the Merger Agreement and
such breach (x) would entitle Grantee to terminate the Merger Agreement and
(y) shall not have been cured prior to the Notice Date (as defined below);
or
(vi) Any person other than Grantee or any Grantee Subsidiary, other
than in connection with a transaction to which Grantee has given its prior
written consent, shall have filed an application or notice with the Federal
Reserve Board, or other federal or state bank regulatory authority, which
application or notice has been accepted for processing, for approval to
engage in an Acquisition Transaction.
(c) The term "Subsequent Triggering Event" shall mean either of the
following events or transactions occurring after the date hereof:
(i) The acquisition by any person of beneficial ownership of 20% or
more of the then outstanding Common Stock; or
(ii) The occurrence of the Initial Triggering Event described in
paragraph (i) of subsection (b) of this Section 2, except that the
percentage referred to in clause (y) shall be 20%.
(d) Issuer shall notify Grantee promptly in writing of the occurrence of
any Initial Triggering Event and/or Subsequent Triggering Event of which it has
notice (together, a "Triggering Event"), it being understood that the giving of
such notice by Issuer shall not be a condition to the right of the Holder to
exercise the Option.
(e) In the event the Holder is entitled to and wishes to exercise the
Option, it shall send to Issuer a written notice (the date of which being herein
referred to as the "Notice Date") specifying (i) the total number of shares it
will purchase pursuant to such exercise and (ii) a place and date not earlier
than three business days nor later than 60 business days from the No-
3
<PAGE>
tice Date for the closing of such purchase; provided that if prior notification
--------
to or approval of the Federal Reserve Board or any other regulatory agency is
required in connection with such purchase, the Holder shall promptly file the
required notice or application for approval and shall expeditiously process the
same and the period of time that otherwise would run pursuant to this sentence
shall run instead from the later of the date on which any required notification
periods have expired or been terminated or the date on which such approvals have
been obtained and any requisite waiting period or periods shall have passed. Any
exercise of the Option shall be deemed to occur on the Notice Date relating
thereto.
(f) At the closing referred to in subsection (e) of this Section 2, the
Holder shall pay to Issuer the aggregate purchase price for the shares of Common
Stock purchased pursuant to the exercise of the Option in immediately available
funds by wire transfer to a bank account designated by Issuer, provided that
--------
failure or refusal of Issuer to designate such a bank account shall not preclude
the Holder from exercising the Option.
(g) At such closing, simultaneously with the delivery of immediately
available funds as provided in subsection (f) of this Section 2, Issuer shall
deliver to the Holder a certificate or certificates representing the number of
shares of Common Stock purchased by the Holder and, if the Option should be
exercised in part only, a new Option evidencing the rights of the Holder thereof
to purchase the balance of the shares purchasable hereunder, and the Holder
shall deliver to Issuer a copy of this Agreement and a letter agreeing that the
Holder will not offer to sell or otherwise dispose of such shares in violation
of applicable law or the provisions of this Agreement.
(h) Certificates for Common Stock delivered at a closing hereunder may be
endorsed with a restrictive legend that shall read substantially as follows:
"The transfer of the shares represented by this certificate is subject to
certain provisions of an agreement between the registered holder hereof
and Issuer and to resale restrictions arising under the Securities Act of
1933, as amended. A copy of such agreement is on file at the principal
office of Issuer and will be provided to the holder hereof without charge
upon receipt by Issuer of a written request therefor."
It is understood and agreed that: (i) the reference to the resale restrictions
of the Securities Act of 1933, as amended (the "1933 Act"), in the above legend
shall be removed by delivery of substitute certificate(s) without such reference
if the Holder shall have delivered to Issuer a copy of a letter from the staff
of the SEC, or an opinion of counsel, in form and substance reasonably
satisfactory to Issuer, to the effect that such legend is not required for
purposes of the 1933 Act; (ii) the reference to the provisions to this Agreement
in the above legend shall be removed by delivery of substitute certificate(s)
without such reference if the shares have been sold or transferred in compliance
with the provisions of this Agreement and under circumstances that do not
require the retention of such reference; and (iii) the legend shall be removed
in its entirety if the conditions in the preceding clauses (i) and (ii) are both
satisfied. In addition, such certificates shall bear any other legend as may be
required by law.
4
<PAGE>
(i) Upon the giving by the Holder to Issuer of the written notice of
exercise of the Option provided for under subsection (e) of this Section 2 and
the tender of the applicable purchase price in immediately available funds, the
Holder shall be deemed, subject to the receipt of applicable regulatory
approvals, to be the holder of record of the shares of Common Stock issuable
upon such exercise, notwithstanding that the stock transfer books of Issuer
shall then be closed or that certificates representing such shares of Common
Stock shall not then be actually delivered to the Holder. Issuer shall pay all
expenses, and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue and
delivery of stock certificates under this Section 2 in the name of the Holder or
its assignee, transferee or designee.
3. Issuer agrees: (i) that it shall at all times maintain, free from
rights, sufficient authorized but unissued or treasury shares of Common Stock so
that the Option may be exercised without additional authorization of Common
Stock after giving effect to all other outstanding options, warrants,
convertible securities and other rights to purchase Common Stock; (ii) that it
will not, by charter amendment or through reorganization, consolidation, merger,
dissolution or sale of assets, or by any other voluntary act, avoid or seek to
avoid the observance or performance of any of the covenants, stipulations or
conditions to be observed or performed hereunder by Issuer; (iii) promptly to
take all action as may from time to time be required (including (x) complying
with all premerger notification, reporting and waiting period requirements
specified in 15 U.S.C. (S) 18a and regulations promulgated thereunder and (y) in
the event prior approval of or notice to the Federal Reserve Board or to any
federal or state regulatory authority is necessary before the Option may be
exercised, cooperating fully with the Holder in preparing such applications or
notices and providing such information to the Federal Reserve Board or such
federal or state regulatory authority as they may require) in order to permit
the Holder to exercise the Option and Issuer duly and effectively to issue
shares of Common Stock pursuant hereto; and (iv) promptly to take all action
provided herein to protect the rights of the Holder against dilution.
4. This Agreement (and the Option granted hereby) are exchangeable,
without expense, at the option of the Holder, upon presentation and surrender of
this Agreement at the principal office of Issuer, for other Agreements providing
for Options of different denominations entitling the holder thereof to purchase,
on the same terms and subject to the same conditions as are set forth herein, in
the aggregate the same number of shares of Common Stock purchasable hereunder.
The terms "Agreement" and "Option" as used herein include any Stock Option
Agreements and related Options for which this Agreement (and the Option granted
hereby) may be exchanged. Upon receipt by Issuer of evidence reasonably
satisfactory to it of the loss, theft, destruction or mutilation of this
Agreement, and (in the case of loss, theft or destruction) of reasonably
satisfactory indemnification, and upon surrender and cancellation of this
Agreement, if mutilated, Issuer will execute and deliver a new Agreement of like
tenor and date. Any such new Agreement executed and delivered shall constitute
an additional contractual obligation on the part of Issuer, whether or not the
Agreement so lost, stolen, destroyed or mutilated shall at any time be
enforceable by anyone.
5. In addition to the adjustment in the number of shares of Common Stock
that are purchasable upon exercise of the Option pursuant to Section 1 of this
Agreement, the
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<PAGE>
number of shares of Common Stock purchasable upon the exercise of the Option and
the Option Price shall be subject to adjustment from time to time as provided in
this Section 5. In the event of any change in, or distributions in respect of,
the Common Stock by reason of stock dividends, split-ups, mergers,
recapitalizations, combinations, subdivisions, conversions, exchanges of shares,
distributions on or in respect of the Common Stock, or the like, the type and
number of shares of Common Stock purchasable upon exercise hereof and the Option
Price shall be appropriately adjusted in such manner as shall fully preserve the
economic benefits provided hereunder (including, for example, whenever the
number of shares of Common Stock purchasable upon exercise of this Option is
adjusted as provided in this Section 5, adjusting the Option Price by
multiplying the Option Price by a fraction, the numerator of which shall be
equal to the number of shares of Common Stock purchasable immediately prior to
the adjustment and the denominator of which shall be equal to the number of
shares of Common Stock purchasable immediately after the adjustment) and proper
provision shall be made in any agreement governing any such transaction to
provide for such proper adjustment and the full satisfaction of the Issuer's
obligations hereunder.
6. Upon the occurrence of a Subsequent Triggering Event that occurs prior
to an Exercise Termination Event, Issuer shall, at the request of Grantee
delivered within 90 days of such Subsequent Triggering Event (whether on its own
behalf or on behalf of any subsequent holder of this Option (or part thereof) or
any of the shares of Common Stock issued pursuant hereto), promptly prepare,
file and keep current a shelf registration statement under the 1933 Act covering
this Option and any shares issued and issuable pursuant to this Option and shall
use its reasonable best efforts to cause such registration statement to become
effective and remain current in order to permit the sale or other disposition of
this Option and any shares of Common Stock issued upon total or partial exercise
of this Option ("Option Shares") in accordance with any plan of disposition
requested by Grantee. Issuer will use its reasonable best efforts to cause such
registration statement first to become effective and then to remain effective
for such period not in excess of 180 days from the day such registration
statement first becomes effective or such shorter time as may be reasonably
necessary to effect such sales or other dispositions. Grantee shall have the
right to demand two such registrations. The foregoing notwithstanding, if, at
the time of any request by Grantee for registration of the Option or Option
Shares as provided above, Issuer is in registration with respect to an
underwritten public offering of shares of Common Stock, and if in the good faith
judgment of the managing underwriter or managing underwriters, or, if none, the
sole underwriter or underwriters, of such offering the inclusion of the Holder's
Option or Option Shares would interfere with the successful marketing of the
shares of Common Stock offered by Issuer, the number of Option Shares otherwise
to be covered in the registration statement contemplated hereby may be reduced;
provided, however, that after any such required reduction the number of Option
- -------- -------
Shares to be included in such offering for the account of the Holder shall
constitute at least 25% of the total number of shares to be sold by the Holder
and Issuer in the aggregate; and provided further, however, that if such
-------- -------
reduction occurs, then the Issuer shall file a registration statement for the
balance as promptly as practicable and no reduction shall thereafter occur. Each
such Holder shall provide all information reasonably requested by Issuer for
inclusion in any registration statement to be filed hereunder. If requested by
any such Holder in connection with such registration, Issuer shall become a
party to any underwriting agreement relating to the sale of such shares, but
only to the extent of obligating itself in respect
6
<PAGE>
of representations, warranties, indemnities and other agreements customarily
included in secondary offering underwriting agreements for the Issuer. Upon
receiving any request under this Section 6 from any Holder, Issuer agrees to
send a copy thereof to any other person known to Issuer to be entitled to
registration rights under this Section 6, in each case by promptly mailing the
same, postage prepaid, to the address of record of the persons entitled to
receive such copies. Notwithstanding anything to the contrary contained herein,
in no event shall Issuer be obligated to effect more than two registrations
pursuant to this Section 6.
7. (a) Immediately prior to the occurrence of a Repurchase Event (as
defined below), (i) following a request of the Holder, delivered prior to an
Exercise Termination Event, Issuer (or any successor thereto) shall repurchase
the Option from the Holder at a price (the "Option Repurchase Price") equal to
(x) the amount by which (A) the Market/Offer Price (as defined below) exceeds
(B) the Option Price, multiplied by the number of shares for which this Option
may then be exercised plus (y) Grantee's Out-of-Pocket Expenses (as defined
herein) and (ii) at the request of the owner of Option Shares from time to time
(the "Owner"), delivered within 90 days of such occurrence (or such later period
as provided in Section 10), Issuer shall repurchase such number of the Option
Shares from the Owner as the Owner shall designate at a price (the "Option Share
Repurchase Price") equal to the Market/Offer Price multiplied by the number of
Option Shares so designated. The term "Market/Offer Price" shall mean the
highest of (i) the price per share of Common Stock at which a tender offer or
exchange offer therefor has been made, (ii) the price per share of Common Stock
to be paid by any third party pursuant to an agreement with Issuer, (iii) the
highest closing price for shares of Common Stock within the six-month period
immediately preceding the date the Holder gives notice of the required
repurchase of this Option or the Owner gives notice of the required repurchase
of Option Shares, as the case may be or (iv) in the event of a sale of all or a
substantial portion of Issuer's assets, the sum of the price paid in such sale
for such assets and the current market value of the remaining assets of Issuer
as determined by a nationally recognized investment banking firm selected by the
Holder or the Owner, as the case may be, and reasonably acceptable to the
Issuer, divided by the number of shares of Common Stock of Issuer outstanding at
the time of such sale. In determining the Market/Offer Price, the value of
consideration other than cash shall be determined by a nationally recognized
investment banking firm selected by the Holder or Owner, as the case may be, and
reasonably acceptable to the Issuer. The term "Out-of-Pocket Expenses" shall
mean Grantee's reasonably and reasonably documented out-of-pocket expenses, in
no event to exceed $750,000, incurred in connection with the transactions
contemplated by this Agreement and the Merger Agreement, including without
limitation legal, accounting and investment banking fees.
(b) The Holder and the Owner, as the case may be, may exercise its right
to require Issuer to repurchase the Option and any Option Shares pursuant to
this Section 7 by surrendering for such purpose to Issuer, at its principal
office, a copy of this Agreement or certificates for Option Shares, as
applicable, accompanied by a written notice or notices stating that the Holder
or the Owner, as the case may be, elects to require Issuer to repurchase this
Option and/or the Option Shares in accordance with the provisions of this
Section 7. Within the latter to occur of (x) five business days after the
surrender of the Option and/or certificates representing Option Shares and the
receipt of such notice or notices relating thereto and (y) the time that is
immediately prior to the occurrence of a Repurchase Event, Issuer shall deliver
or cause to be delivered to the Holder the Option Repurchase Price and/or to the
Owner the Option Share Repurchase Price
7
<PAGE>
therefor or the portion thereof, if any, that Issuer is not then prohibited
under applicable law and regulation from so delivering.
(c) To the extent that Issuer is prohibited under applicable law or
regulation from repurchasing the Option and/or the Option Shares in full, Issuer
shall immediately so notify the Holder and/or the Owner and thereafter deliver
or cause to be delivered, from time to time, to the Holder and/or the Owner, as
appropriate, the portion of the Option Repurchase Price and the Option Share
Repurchase Price, respectively, that it is no longer prohibited from delivering,
within five business days after the date on which Issuer is no longer so
prohibited; provided, however, that if Issuer at any time after delivery of a
-------- -------
notice of repurchase pursuant to paragraph (b) of this Section 7 is prohibited
under applicable law or regulation from delivering to the Holder and/or the
Owner, as appropriate, the Option Repurchase Price and the Option Share
Repurchase Price, respectively, in full (and Issuer hereby undertakes to use its
best efforts to obtain all required regulatory and legal approvals and to file
any required notices, in each case as promptly as practicable in order to
accomplish such repurchase), the Holder or Owner may revoke its notice of
repurchase of the Option or the Option Shares either in whole or to the extent
of the prohibition, whereupon, in the latter case, Issuer shall promptly (i)
deliver to the Holder and/or the Owner, as appropriate, (x) that portion of the
Option Repurchase Price or the Option Share Repurchase Price that Issuer is not
prohibited from delivering, plus (y) an amount in cash equal to the Out-of-
Pocket Expenses; and (ii) deliver, as appropriate, either (A) to the Holder, a
new Stock Option Agreement evidencing the right of the Holder to purchase that
number of shares of Common Stock obtained by multiplying the number of shares of
Common Stock for which the surrendered Stock Option Agreement was exercisable at
the time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Option Repurchase Price less the portion thereof theretofore
delivered to the Holder and the denominator of which is the Option Repurchase
Price, or (B) to the Owner, a certificate for the Option Shares it is then so
prohibited from repurchasing.
(d) For purposes of this Section 7, a "Repurchase Event" shall be deemed
to have occurred (i) upon the consummation of any merger, consolidation or
similar transaction involving Issuer or any purchase, lease or other acquisition
of all or a substantial portion of the assets of Issuer, other than any such
transaction which would not constitute an Acquisition Transaction pursuant to
the proviso to Section 2(b)(i) hereof or (ii) upon the acquisition by any person
of beneficial ownership of 50% or more of the then outstanding shares of Common
Stock, provided that no such event shall constitute a Repurchase Event unless a
Subsequent Triggering Event shall have occurred prior to an Exercise Termination
Event. The parties hereto agree that Issuer's obligations to repurchase the
Option or Option Shares under this Section 7 shall not terminate upon the
occurrence of an Exercise Termination Event unless no Subsequent Triggering
Event shall have occurred prior to the occurrence of an Exercise Termination
Event.
8. (a) In the event that prior to an Exercise Termination Event, Issuer
shall enter into an agreement (i) to consolidate with or merge into any person,
other than Grantee or one of its Subsidiaries, and shall not be the continuing
or surviving corporation of such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its Subsidiaries, to merge into Issuer and
Issuer shall be the continuing or surviving corporation, but, in connection with
such merger, the then outstanding shares of Common Stock shall be changed into
or exchanged
8
<PAGE>
for stock or other securities of any other person or cash or any other property
or the then outstanding shares of Common Stock shall after such merger represent
less than 50% of the outstanding voting shares and voting share equivalents of
the merged company, or (iii) to sell or otherwise transfer all or substantially
all of its assets to any person, other than Grantee or one of its Subsidiaries,
then, and in each such case, the agreement governing such transaction shall make
proper provision so that the Option shall, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option (the "Substitute Option"), at the election of
the Holder, of either (x) the Acquiring Corporation (as hereinafter defined) or
(y) any person that controls the Acquiring Corporation.
(b) The following terms have the meanings indicated:
(i) "Acquiring Corporation" shall mean (A) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than
Issuer), (B) Issuer in a merger in which Issuer is the continuing or
surviving person, and (C) the transferee of all or substantially all of
Issuer's assets.
(ii) "Substitute Common Stock" shall mean the common stock issued by
the issuer of the Substitute Option upon exercise of the Substitute Option.
(iii) "Assigned Value" shall mean the Market/Offer Price, as defined
in Section 7.
(iv) "Average Price" shall mean the average closing price of a share
of the Substitute Common Stock for the one year immediately preceding the
consolidation, merger or sale in question, but in no event higher than the
closing price of the shares of Substitute Common Stock on the day preceding
such consolidation, merger or sale; provided that if Issuer is the issuer
--------
of the Substitute Option, the Average Price shall be computed with respect
to a share of common stock issued by the person merging into Issuer or by
any company which controls or is controlled by such person, as the Holder
may elect.
(c) The Substitute Option shall have the same terms as the Option,
provided, that if the terms of the Substitute Option cannot, for legal reasons,
- --------
be the same as the Option, such terms shall be as similar as possible and in no
event less advantageous to the Holder. The issuer of the Substitute Option shall
also enter into an agreement with the then Holder or Holders of the Substitute
Option in substantially the same form as this Agreement, which shall be
applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock as is equal to the Assigned Value multiplied by the
number of shares of Common Stock for which the Option is then exercisable,
divided by the Average Price. The exercise price of the Substitute Option per
share of Substitute Common Stock shall then be equal to the Option Price
multiplied by a fraction, the numerator of which shall be the number of shares
of Common Stock for which the Option is then exercisable and the denominator of
which shall be the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
9
<PAGE>
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the shares of Substitute
Common Stock outstanding prior to exercise of the Substitute Option. In the
event that the Substitute Option would be exercisable for more than 19.9% of the
shares of Substitute Common Stock outstanding prior to exercise but for this
clause (e), the issuer of the Substitute Option (the "Substitute Option Issuer")
shall make a cash payment to Holder equal to the excess of (i) the value of the
Substitute Option without giving effect to the limitation in this clause (e)
over (ii) the value of the Substitute Option after giving effect to the
limitation in this clause (e). This difference in value shall be determined by a
nationally recognized investment banking firm selected by the Holder or the
Owner, as the case may be.
(f) Issuer shall not enter into any transaction described in subsection (a)
of this Section 8 unless the Acquiring Corporation and any person that controls
the Acquiring Corporation assume in writing all the obligations of Issuer
hereunder.
9. (a) At the request of the holder of the Substitute Option (the
"Substitute Option Holder"), the Substitute Option Issuer shall repurchase the
Substitute Option from the Substitute Option Holder at a price (the "Substitute
Option Repurchase Price") equal to (x) the amount by which (i) the Highest
Closing Price (as hereinafter defined) exceeds (ii) the exercise price of the
Substitute Option, multiplied by the number of shares of Substitute Common Stock
for which the Substitute Option may then be exercised plus (y) an amount in cash
equal to the Out-of-Pocket Expenses, and at the request of the owner (the
"Substitute Share Owner") of shares of Substitute Common Stock (the "Substitute
Shares"), the Substitute Option Issuer shall repurchase the Substitute Shares at
a price (the "Substitute Share Repurchase Price") equal to the Highest Closing
Price multiplied by the number of Substitute Shares so designated. The term
"Highest Closing Price" shall mean the highest closing price for shares of
Substitute Common Stock within the six-month period immediately preceding the
date the Substitute Option Holder gives notice of the required repurchase of the
Substitute Option or the Substitute Share Owner gives notice of the required
repurchase of the Substitute Shares, as applicable.
(b) The Substitute Option Holder and the Substitute Share Owner, as the
case may be, may exercise its respective right to require the Substitute Option
Issuer to repurchase the Substitute Option and the Substitute Shares pursuant to
this Section 9 by surrendering for such purpose to the Substitute Option Issuer,
at its principal office, the agreement for such Substitute Option (or, in the
absence of such an agreement, a copy of this Agreement) and certificates for
Substitute Shares accompanied by a written notice or notices stating that the
Substitute Option Holder or the Substitute Share Owner, as the case may be,
elects to require the Substitute Option Issuer to repurchase the Substitute
Option and/or the Substitute Shares in accordance with the provisions of this
Section 9. As promptly as practicable, and in any event within five business
days after the surrender of the Substitute Option and/or certificates
representing Substitute Shares and the receipt of such notice or notices
relating thereto, the Substitute Option Issuer shall deliver or cause to be
delivered to the Substitute Option Holder the Substitute Option Repurchase Price
and/or to the Substitute Share Owner the Substitute Share Repurchase Price
therefor or, in either case, the portion thereof which the Substitute Option
Issuer is not then prohibited under applicable law and regulation from so
delivering.
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<PAGE>
(c) To the extent that the Substitute Option Issuer is prohibited under
applicable law or regulation from repurchasing the Substitute Option and/or the
Substitute Shares in part or in full, the Substitute Option Issuer following a
request for repurchase pursuant to this Section 9 shall immediately so notify
the Substitute Option Holder and/or the Substitute Share Owner and thereafter
deliver or cause to be delivered, from time to time, to the Substitute Option
Holder and/or the Substitute Share Owner, as appropriate, the portion of the
Substitute Share Repurchase Price, respectively, which it is no longer
prohibited from delivering, within five business days after the date on which
the Substitute Option Issuer is no longer so prohibited; provided, however, that
-------- -------
if the Substitute Option Issuer is at any time after delivery of a notice of
repurchase pursuant to subsection (b) of this Section 9 prohibited under
applicable law or regulation from delivering to the Substitute Option Holder
and/or the Substitute Share Owner, as appropriate, the Substitute Option
Repurchase Price and the Substitute Share Repurchase Price, respectively, in
full (and the Substitute Option Issuer shall use its best efforts to obtain all
required regulatory and legal approvals, in each case as promptly as
practicable, in order to accomplish such repurchase), the Substitute Option
Holder or Substitute Share Owner may revoke its notice of repurchase of the
Substitute Option or the Substitute Shares either in whole or to the extent of
the prohibition, whereupon, in the latter case, the Substitute Option Issuer
shall promptly (i) deliver to the Substitute Option Holder or Substitute Share
Owner, as appropriate, (x) that portion of the Substitute Option Repurchase
Price or the Substitute Share Repurchase Price that the Substitute Option Issuer
is not prohibited from delivering, plus (y) an amount in cash equal to the Out-
of-Pocket Expenses; and (ii) deliver, as appropriate, either (A) to the
Substitute Option Holder, a new Substitute Option evidencing the right of the
Substitute Option Holder to purchase that number of shares of the Substitute
Common Stock obtained by multiplying the number of shares of the Substitute
Common Stock for which the surrendered Substitute Option was exercisable at the
time of delivery of the notice of repurchase by a fraction, the numerator of
which is the Substitute Option Repurchase Price less the portion thereof
theretofore delivered to the Substitute Option Holder and the denominator of
which is the Substitute Option Repurchase Price, or (B) to the Substitute Share
Owner, a certificate for the Substitute Common Shares it is then so prohibited
from repurchasing.
10. The 90-day or 6-month periods for exercise of certain rights under
Sections 2, 6, 7, and 13 shall be extended: (i) to the extent necessary to
obtain all regulatory approvals for the exercise of such rights, and for the
expiration of all statutory waiting periods; (ii) to the extent necessary to
avoid liability under Section 16(b) of the 1934 Act by reason of such exercise
and (iii) during any period in which Grantee or the Holder, as the case may be,
is precluded from exercising such rights due to an injunction or other legal
restriction, plus in each case such additional period as is reasonably necessary
for the exercise of such rights promptly following the obtaining of such
approvals or the expiration of such periods.
11. Issuer hereby represents and warrants to Grantee as follows:
(a) Issuer has full corporate power and authority to execute and deliver
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 and validly authorized by the
Board of Directors of Issuer and no other corporate proceedings on the part of
Issuer are necessary to authorize this Agreement or to consummate the
trans-
11
<PAGE>
actions so contemplated. This Agreement has been duly and validly executed
and delivered by Issuer.
(b) Issuer has taken all necessary corporate action to authorize and
reserve and to permit it to issue, and at all times from the date hereof through
the termination of this Agreement in accordance with its terms will have
reserved for issuance upon the exercise of the Option, that number of shares of
Common Stock equal to the maximum number of shares of Common Stock at any time
and from time to time issuable hereunder, and all such shares, upon issuance
pursuant hereto, will be duly authorized, validly issued, fully paid,
nonassessable, and will be delivered free and clear of all claims, liens,
encumbrance and security interests and not subject to any preemptive rights.
12. Grantee hereby represents and warrants to Issuer that:
(a) Grantee has all requisite corporate power and authority to enter into
this Agreement and, subject to any approvals or consents referred to herein, 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 Grantee.
This Agreement has been duly executed and delivered by Grantee.
(b) The Option is not being, and any shares of Common Stock or other
securities acquired by Grantee upon exercise of the Option will not be, acquired
with a view to the public distribution thereof and will not be transferred or
otherwise disposed of except in a transaction registered or exempt from
registration under the 1933 Act.
13. Neither of the parties hereto may assign any of its rights or
obligations under this Agreement or the Option created hereunder to any other
person, without the express written consent of the other party, except that in
the event a Subsequent Triggering Event shall have occurred prior to an Exercise
Termination Event, Grantee, subject to the express provisions hereof, may assign
in whole or in part its rights and obligations hereunder within 90 days
following such Subsequent Triggering Event (or such later period as provided in
Section 10); provided, however, that until the date 15 days following the date
-------- -------
on which the Federal Reserve Board approves an application under the Bank
Holding Company Act of 1956, as amended (the "BHCA") relating to the acquisition
by Grantee of the shares of Common Stock subject to the Option, Grantee may not
assign its rights under the Option except in (i) a widely dispersed public
distribution, (ii) a private placement in which no one party acquires the right
to purchase in excess of 2% of the voting shares of Issuer, (iii) an assignment
to a single party (e.g., a broker or investment banker) for the purpose of
----
conducting a widely dispersed public distribution on Grantee's behalf, or (iv)
any other manner approved by the Federal Reserve Board.
14. Each of Grantee and Issuer will use its best efforts to make all
filings with, and to obtain consents of, all third parties and governmental
authorities necessary to the consummation of the transactions contemplated by
this Agreement, including without limitation making application to list the
shares of Common Stock issuable hereunder on the New York Stock Exchange upon
official notice of issuance and applying to the Federal Reserve Board under the
BHCA for approval to acquire the shares issuable hereunder.
12
<PAGE>
15. (a) Notwithstanding anything to the contrary contained herein, in no
event shall Grantee's Total Profit (as defined below in Section 15(c) hereof)
exceed $24,150,000.
(b) Notwithstanding anything to the contrary contained herein, the
Option may not be exercised for a number of shares as would, as of the date of
exercise, result in a Notional Total Profit (as defined below in Section 15(d)
hereof) of more than $24,150,000; provided, that nothing in this sentence shall
restrict any exercise of the Option permitted hereby on any subsequent date.
(c) As used herein, the term "Total Profit" shall mean the aggregate
amount (before taxes) of the following: (i) the amount received by Grantee
pursuant to Issuer's repurchase of the Option (or any portion thereof) pursuant
to Section 7 hereof, (ii) (x) the amount received by Grantee pursuant to
Issuer's repurchase of Option Shares pursuant to Section 7 hereof, less (y)
Grantee's purchase price for such Option Shares, (iii) (x) the net cash amounts
received by Grantee pursuant to the sale of Option Shares (or any other
securities into which such Option Shares shall be converted or exchanged) to any
unaffiliated party, less (y) Grantee's purchase price of such Option Shares,
(iv) any amounts received by Grantee on the transfer of the Option (or any
portion thereof) to any unaffiliated party, and (v) any equivalent amount with
respect to the Substitute Option.
(d) As used herein, the term "Notional Total Profit" with respect to
any number of shares as to which Grantee may propose to exercise the Option
shall be the Total Profit determined as of the date of such proposed exercise
assuming that the Option were exercised on such date for such number of shares
and assuming that such shares, together with all other Option Shares held by
Grantee and its affiliates as of such date, were sold for cash at the closing
market price for the Issuer Common Stock as of the close of business on the
preceding trading day (less customary brokerage commissions).
16. (a) Grantee may in its sole discretion, at any time during which
Issuer would be required to repurchase the Option or any Option Shares pursuant
to Section 7, surrender the Option (together with any Option Shares issued to
and then owned by the Holder) to Issuer in exchange for a cash payment equal to
the Surrender Price (as defined herein); provided, however, the Grantee may not
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exercise its rights pursuant to this Section 16 if Issuer has previously
repurchased the Option (or any portion thereof) or any Option Shares pursuant to
Section 7. The "Surrender Price" shall be equal to (i) $14,490,000, plus (ii) if
applicable, the aggregate purchase price previously paid pursuant hereto to
Issuer by Grantee with respect to any Option Shares, minus (iii) if applicable,
the excess of (A) the net cash, if any, received by Grantee pursuant to the
arm's-length sale of Option Shares (or any other securities into which such
Option Shares were converted or exchanged) to any party not affiliated with
Grantee, over (B) the purchase price paid to Issuer by Grantee with respect to
such Option Shares.
(b) Grantee may exercise its right to surrender the Option and any
Option Shares pursuant to this Section 16 by surrendering for such purpose to
Issuer, at its principal office, a copy of this Agreement, together with
certificates for Option Shares, if any, accompanied by a written notice stating
(i) that Grantee elects to surrender the Option and Option Shares, if any, in
accordance with the provisions of this Section 16 and (ii) the Surrender Price.
Within
13
<PAGE>
three business days after the surrender of the Option and the Option Shares, if
applicable, Issuer shall deliver or cause to be delivered to Grantee the
Surrender Price in immediately available funds.
(c) To the extent that the Issuer is prohibited under applicable
law or regulation from paying the Surrender Price to Grantee in full, Issuer
shall immediately so notify Grantee and thereafter deliver, or cause to be
delivered, from time to time, to Grantee, that portion of the Surrender Price
that Issuer is not or no longer prohibited from paying, within three business
days after the date on which Issuer is no longer so prohibited; provided,
--------
however, that if Issuer at any time after delivery of a notice of surrender
- -------
pursuant to Section 16(b) is prohibited under applicable law or regulation from
paying to Grantee the Surrender Price in full, (i) Issuer shall (A) use its best
efforts to obtain all required regulatory and legal approvals and to file any
required notices as promptly as practicable in order to make such payments, (B)
within two business days of the submission or receipt of any documents relating
to any such regulatory and legal approvals, provide Grantee with copies of the
same, and (C) keep Grantee advised of both the status of any such request for
regulatory and legal approvals and any discussions with any relevant regulatory
or other third party reasonably related to the same, and (ii) Grantee may revoke
such notice or surrender by delivery of a notice of revocation to Issuer and,
upon delivery of such notice of revocation, the date on which the Exercise
Termination Event shall occur shall be extended to a date six months from the
date on which the Exercise Termination Event would have occurred if not for the
provisions of this Section 16(c) (during which period Grantee may exercise any
of its rights hereunder, including any and all rights pursuant to this Section
16).
(d) Grantee shall have rights substantially identical to those set
forth in paragraphs (a), (b) and (c) of this Section 16 with respect to the
Substitute Option and the Substitute Option Issuer during any period in which
the Substitute Option Issuer would be required to repurchase the Substitute
Option pursuant to Section 9.
17. The parties hereto acknowledge that damages would be an
inadequate remedy for a breach of this Agreement by either party hereto and that
the obligations of the parties hereto shall be enforceable by either party
hereto through injunctive or other equitable relief.
18. If any term, provision, covenant or restriction contained in
this Agreement is held by a court or a federal or state regulatory agency of
competent jurisdiction to be invalid, void or unenforceable, the remainder of
the terms, provisions and covenants and restrictions contained in this Agreement
shall remain in full force and effect, and shall in no way be affected, impaired
or invalidated. If for any reason such court or regulatory agency determines
that the Holder is not permitted to acquire, or Issuer or Substitute Option
Issuer, as the case may be, is not permitted to repurchase pursuant to Section 7
or Section 9, as the case may be, the full number of shares of Common Stock
provided in Section 1(a) hereof (as adjusted pursuant to Section 1(b) or 5
hereof) it is the express intention of Issuer (which shall be binding on the
Substitute Option Issuer) to allow the Holder to acquire or to require Issuer or
Substitute Option Issuer to repurchase such lesser number of shares as may be
permissible, without any amendment or modification hereof.
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19. All notices, requests, claims, demands and other communications
hereunder shall be deemed to have been duly given when delivered in person, by
cable, telegram, telecopy or telex, or by registered or certified mail (postage
prepaid, return receipt requested) at the respective addresses of the parties
set forth in the Merger Agreement.
20. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, regardless of the laws that might
otherwise govern under applicable principles of conflicts of laws thereof
(except to the extent that mandatory provisions of federal law apply).
21. This Agreement may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all of which shall constitute
one and the same agreement.
22. Except as otherwise expressly provided herein, each of the
parties hereto shall bear and pay all costs and expenses incurred by it or on
its behalf in connection with the transactions contemplated hereunder, including
fees and expenses of its own financial consultants, investment bankers,
accountants and counsel.
23. Except as otherwise expressly provided herein or in the Merger
Agreement, this Agreement contains the entire agreement between the parties with
respect to the transactions contemplated hereunder and supersedes all prior
arrangements or understandings with respect thereof, written or oral. The terms
and conditions of this Agreement shall inure to the benefit of and be binding
upon the parties hereto and their respective successors and permitted assigns.
Nothing in this Agreement, expressed or implied, is intended to confer upon any
party, other than the parties hereto, and their respective successors and
permitted assigns, any rights, remedies, obligations or liabilities under or by
reason of this Agreement, except as expressly provided herein.
24. Capitalized terms used in this Agreement and not defined herein
shall have the meanings assigned thereto in the Merger Agreement.
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IN WITNESS WHEREOF, each of the parties has caused this Agreement to
be executed on its behalf by its officers thereunto duly authorized, all as of
the date first above written.
HEALTHCARE FINANCIAL PARTNERS, INC.
By: /s/ John K. Delaney
-------------------
Name: John K. Delaney
Title: Chairman and Chief Executive Officer
HELLER FINANCIAL, INC.
By: /s/ Robert E. Radway
--------------------
Name: Robert E. Radway
Title: Executive Vice President
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