<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED
PURSUANT TO 13d-1(a) AND AMENDMENTS THERETO
FILED PURSUANT TO 13d-2(a)
(AMENDMENT NO. __)
ROCKFORD INDUSTRIES, INC.
(Name of Issuer)
COMMON STOCK, NO PAR VALUE PER SHARE
(Title of Class of Securities)
773259 10 6
(CUSIP Number)
CAROL V. SCHWARTZ, ESQ.
AMERICAN EXPRESS COMPANY
WORLD FINANCIAL CENTER
200 VESEY STREET
NEW YORK, NEW YORK 10285
(212) 640-5714
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
With a copy to:
BRUCE N. HAWTHORNE
KING & SPALDING
191 PEACHTREE STREET
ATLANTA, GEORGIA 30303
(404) 572-4600
NOVEMBER 9, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Sections 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g) check
the following box [ ].
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
Page 1 of 13
<PAGE> 2
SCHEDULE 13D
CUSIP No. - 773259 10 6
<TABLE>
<S> <C> <C> <C> <C>
1. NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
American Express Company
13-4922250
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) [ ]
(b) [X]
3. SEC USE ONLY
4. SOURCE OF FUNDS*
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) or 2(e) [ ]
6. CITIZENSHIP OR PLACE OF ORGANIZATION
State of New York
NUMBER OF SHARES 7. SOLE VOTING POWER 2,204,000*
BENEFICIALLY OWNED 8. SHARED VOTING POWER None*
BY EACH REPORTING 9. SOLE DISPOSITIVE POWER None
PERSON WITH 10. SHARED DISPOSITIVE POWER None
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
2,204,000*
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES
CERTAIN SHARES |X|
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
53.6%
14. TYPE OF REPORTING PERSON
CO
*SEE ITEM 5 OF TEXT BELOW
</TABLE>
Page 2 of 13
<PAGE> 3
STATEMENT PURSUANT TO RULE 13d-1 AND RULE 13d-2
OF THE
GENERAL RULES AND REGULATIONS
UNDER THE
SECURITIES EXCHANGE ACT OF 1934
This Schedule 13D relates to the proposed acquisition by American Express
Company, a New York corporation ("AXP"), of all the outstanding stock of
Rockford Industries, Inc., a California corporation ("Rockford"), pursuant to a
Plan and Agreement of Merger (the "Merger Agreement"), dated as of November 9,
1998, among AXP, Rockford and RXP Acquisition Corporation, a Delaware
corporation and a wholly-owned subsidiary of AXP ("Sub"), pursuant to which Sub
is to be merged with and into Rockford (the "Merger"), with the result that
Rockford will become a wholly-owned subsidiary of AXP and each outstanding share
of common stock of Rockford, no par value per share (the "Common Stock"), will
be entitled to the right to receive that number of shares of AXP common stock,
par value $.60 per share ("AXP Common Stock"), that could be purchased for
$11.88 based on the average of the closing price per share of the AXP Common
Stock on the New York Stock Exchange, Inc. during the ten consecutive trading
days ending on the third full trading day immediately preceding the effective
date of the Merger (the "Exchange Ratio"). A copy of the Merger Agreement is
listed herein as Exhibit 1 and incorporated herein by reference.
ITEM 1. SECURITY AND ISSUER
This statement relates to the Common Stock, no par value per share, of
Rockford. The principal executive offices of Rockford are located at
1851 East First Street, Santa Ana, California 92705.
ITEM 2. IDENTITY AND BACKGROUND
(a), (b), (c) and (f). This statement is being filed by American
Express Company, a New York corporation having its principal executive
offices at World Financial Center, 200 Vesey Street, New York, New York
10285. The principal business of American Express Company is providing
travel related services, financial advisory services and international
banking services throughout the world. The name, resident or business
address, present principal occupation for employment, and the name,
principal business and address of any corporation or other organization
in which such employment is conducted, of each director and executive
officer of AXP are set forth at Appendix A which is attached hereto and
incorporated herein by reference. Except for F. Ross Johnson who is a
Canadian citizen, all of the directors and executive officers of AXP
are citizens of the United States.
(d) During the last five years, neither AXP nor, to the best of
AXP's knowledge, any of its directors or executive officers listed on
Appendix A has been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) During the last five years, neither AXP nor, to the best of
AXP's knowledge, any of its directors or executive officers listed on
Appendix A has been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction which resulted in a
judgment, decree or final order (i) enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state
securities laws or (ii) finding any violation with respect to such
laws.
Page 3 of 13
<PAGE> 4
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION
In the event AXP exercises the Irrevocable Option (as defined below) to
purchase the Shares (as defined below) under the Shareholders' Option
Agreement (as defined below), AXP expects that the funds used to
purchase the Shares would be provided from the working capital of AXP.
ITEM 4. PURPOSE OF TRANSACTION
On November 9, 1998, AXP, Rockford and Sub entered into the Merger
Agreement pursuant to which Sub is to be merged into Rockford and
Rockford will become a wholly owned subsidiary of AXP. On the effective
date of the Merger, all of the issued and outstanding shares of Common
Stock of Rockford (other than shares owned by AXP, if any) shall be
converted into the right to receive AXP Common Stock based on the
Exchange Ratio. The purpose of the Merger is to enable AXP to acquire
the entire equity interest in Rockford as contemplated by the Merger
Agreement.
As an inducement to AXP to enter into the Merger Agreement, each of
Gerry J. Ricco, Larry Hartmann and Brian Seigel (the "Identified
Shareholders") entered into the Shareholders' Option Agreement (the
"Shareholders' Option Agreement"), pursuant to which each of the
Identified Shareholders granted to AXP: (i) an irrevocable proxy to
vote all of the Common Stock owned of record by such Identified
Shareholder (the "Shares") with respect to any matter brought before
the shareholders of Rockford, including the Merger; (ii) an irrevocable
and continuing option (the "Irrevocable Option") following the
occurrence of the First Date for Exercise (as defined below) to
purchase all of the Shares owned by him for a per share price equal to
$11.88 (subject to adjustment in certain events); and (iii) in the
event AXP does not exercise it rights under the irrevocable proxy, the
right to direct the voting by the Identified Shareholder of the Shares
with respect to any matter brought before the shareholders of Rockford,
including the Merger. As used in the Shareholders' Option Agreement,
the term "First Date for Exercise" means the earliest to occur of any
of the following events: (i) any person shall have commenced (as such
term is defined in Rule 14d-2 under the Securities Exchange Act of
1934, as amended (the "Exchange Act")), or shall have filed a
registration statement under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to, a tender offer or exchange
offer to purchase any shares of Common Stock such that, upon
consummation of such offer, such person would own or control 10% or
more of the then outstanding Common Stock; (ii) Rockford, without
having received AXP's prior written consent, shall (A) have authorized,
recommended, proposed or publicly announced an intention to authorize,
recommend or propose, or shall have entered into or publicly announced
an intention to enter into, an agreement with any person (other than
AXP, Sub or any other subsidiary of AXP) to (1) effect a merger,
consolidation, combination, reorganization, share exchange, joint
venture involving an equity control event (as defined below) or similar
transaction involving Rockford or any subsidiary of Rockford, (2)
directly or indirectly sell, lease or otherwise transfer or dispose of,
or agree to sell, lease or otherwise transfer or dispose of, assets of
Rockford or its subsidiaries representing 10% or more of the
consolidated assets of Rockford and its subsidiaries or (3) directly or
indirectly issue, sell or otherwise transfer or dispose of or agree to
issue, sell or otherwise transfer or dispose of (including, without
limitation, by way of merger, consolidation, reorganization, share
exchange, dividend, distribution or any similar transaction) securities
representing 10% or more of the voting power of Rockford (any of the
foregoing an "Acquisition Transaction"), or (B) directly or indirectly
have otherwise taken any action including, without limitation,
responding to, or entering into discussions or negotiations, in respect
of an Acquisition Transaction or an Acquisition Proposal (as defined in
the Merger Agreement) made by any party other than AXP; (iii) any
person or group (as such term is defined under the Exchange Act) shall
have acquired beneficial ownership (as such term is defined in Rule
13d-3 under the Exchange Act) or the right to acquire beneficial
ownership of, or any group shall have been formed which beneficially
owns or has the right to acquire beneficial ownership of, 10% or more
of the then outstanding Common Stock (other than any person or group
that, at the date of the Shareholders' Option Agreement, beneficially
owns or has the right to acquire beneficial ownership of 10% or more of
the outstanding shares of Common Stock) (an "equity control event"); or
(iv) any person other than AXP shall have made an Acquisition Proposal
to Rockford or its shareholders and such proposal shall have been
publicly announced (the events described in the preceding clauses (i),
(ii), (iii)
Page 4 of 13
<PAGE> 5
and (iv) are collectively and individually referred to as an
"Acquisition Event"). The Shareholders' Option Agreement terminates on
the earlier of: (i) the termination of the Merger Agreement in
accordance with its terms; or (ii) the delivery by AXP to the
Identified Shareholders of written notice to terminate the
Shareholders' Option Agreement. If during the term of the Shareholders'
Option Agreement an Acquisition Event occurs, or if the Merger
Agreement is terminated by Rockford in accordance with Section
7.1(b)(v) of the Merger Agreement (the date of the earlier of the
occurrence or termination being the "Trigger Event"), the Shareholders'
Option Agreement and the option granted to AXP thereunder will remain
in full force and effect and the termination date of the Shareholders'
Option Agreement will automatically extend to the date which occurs 12
months from the Trigger Date.
The Merger Agreement provides for restrictions on Rockford's (and its
subsidiaries', officers', directors', employees', representatives' and
agents') ability, among other things, to solicit, initiate, encourage,
participate in or encourage discussions or negotiations relating to an
Acquisition Proposal. For purposes of the Merger Agreement, an
Acquisition Proposal is defined as any bona fide proposal with respect
to a merger, consolidation, share exchange, joint venture, business
combination, reorganization or similar transaction involving Rockford
or any Rockford subsidiary, or any purchase of all or any significant
portion of the assets of Rockford or any Rockford subsidiary. The
Merger Agreement also provides for the payment to AXP of (i) a fee in
the event the Board of Directors of Rockford takes certain actions and
the Merger is not consummated ("Termination Events") and (ii) an
additional fee in the event Rockford consummates an alternate
transaction that is the subject of an Acquisition Proposal by a party
other than AXP within one year of a Termination Event. The Merger
Agreement provides for the exercise by the Identified Shareholders
prior to consummation of the Merger of all outstanding options (the
"Shareholder Options") to acquire Common Stock of Rockford held by the
Identified Shareholders. Based on representations made by Rockford in
the Disclosure Letter to the Merger Agreement, the Shareholder Options
relate to, in the aggregate, 120,000 shares of Common Stock of
Rockford. Pursuant to the terms of the Shareholders' Option Agreement,
all shares of Rockford Common Stock received by the Identified
Shareholders upon any exercise of the Shareholder Options will become
subject to the terms of the Shareholders' Option Agreement.
A copy of each of the Shareholders' Option Agreement and the Merger
Agreement is filed as an exhibit hereto and the discussion of each of
these agreements is qualified in its entirety by the complete text of
such exhibits.
As an inducement to AXP to enter into the Merger Agreement, Anchor
National Life Insurance Company, an Arizona corporation ("Anchor"), and
Rockford entered into a Voting and Conversion Agreement, dated November
9, 1998 (the "Voting Agreement"), pursuant to which Anchor, the record
owner of 70,000 shares of Series A Preferred Stock of Rockford (the
"Preferred Stock"), agrees to: (i) vote all of the Preferred Stock in
favor of approval of the Merger; and (ii) convert all of the Preferred
Stock into Common Stock immediately prior to the closing of the Merger.
The Voting Agreement terminates on the earliest to occur of: (i) the
date on which the Merger Agreement is terminated in accordance with its
terms; (ii) the date following the meeting of the holders of the Common
Stock to approve the Merger, in the event the holders of the Common
Stock do not approve the Merger; and (iii) September 30, 1999. A copy
of the Voting Agreement is filed as an exhibit hereto and the
discussion of the Voting Agreement set forth above is qualified in is
entirety by the complete text of such exhibit.
Following completion of the Merger, AXP will be the sole shareholder of
all the issued and outstanding shares of capital stock of Rockford. If
the Merger is completed on the terms set forth in the Merger Agreement,
it is expected that the current directors of Rockford will resign and
AXP will appoint the new Board of Directors of Rockford. After the
Merger, AXP expects to cause Rockford's Common Stock to cease to be
listed on the NASDAQ National Market System and will seek to terminate
the registration of the Common Stock under Section 12(g)(4) of the
Exchange Act.
Other than as described above, AXP has no plans or proposals which
relate to, or may result in, the matters listed on Items 4(a)-(j) of
Schedule 13D (although it reserves the right to develop such).
Page 5 of 13
<PAGE> 6
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER
(a) AXP may be deemed to be the beneficial owner of the Shares of
Common Stock which it has the right to vote pursuant to the
irrevocable proxy or with respect to which it has the right to
direct the vote of the Identified Shareholders pursuant to the
Shareholders' Option Agreement. Based on the number of shares
outstanding as of November 9, 1998 (as represented by Rockford
in the Merger Agreement), the aggregate of 2,204,000 shares of
Common Stock attributable to AXP pursuant to the Shareholders'
Option Agreement would constitute approximately 53.6% of the
issued and outstanding shares of Common Stock of Rockford. AXP
disclaims beneficial ownership of all of the Shares of Common
Stock which are the subject of the Shareholders' Option
Agreement.
According to Rockford's Form 10-K for the fiscal year ended
December 31, 1997 and Rockford's 1998 Proxy Statement, the
Preferred Stock, which AXP has the right to require Anchor to
vote in favor of the Merger and convert pursuant to the Voting
Agreement, is convertible into 275,373 shares of Common Stock.
AXP disclaims beneficial ownership of all the Common Stock
into which the Preferred Stock may be converted.
Except as set forth above, neither AXP nor, to the best of
AXP's knowledge, any director or executive officer of AXP
listed on Appendix A hereto beneficially own any Common Stock.
(b) By virtue of the Shareholders' Option Agreement, AXP has sole
power to vote or to direct the voting of 2,204,000 shares of
Common Stock with respect to any issue brought before the
shareholders of Rockford. Until such time as the option
granted to AXP pursuant to the Shareholders' Option Agreement
is exercised, AXP does not have the sole or shared power to
dispose of any shares of Common Stock.
(c) Neither AXP nor, to the best of AXP's knowledge, any of its
directors or executive officers, has effected a transaction in
the Common Stock during the sixty days preceding the date of
this Statement.
(d) Not applicable.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER
See Item 4 for a description of the Merger Agreement, the Shareholders'
Option Agreement and the Voting Agreement, which are incorporated
herein by reference. See also the introductory language of this
Schedule 13D further describing the Merger Agreement. In connection
with the Shareholders' Option Agreement, the Identified Shareholders
and AXP entered into an Escrow Agreement with U.S. Trust Company,
National Association ("US Trust") pursuant to which the Shares of the
Identified Shareholders were placed in escrow with US Trust for the
term of the Shareholders' Option Agreement. The Shareholders' Option
Agreement also prohibits the Identified Shareholders' from selling,
transferring, pledging, assigning, conveying or otherwise disposing of
the Shares which are subject thereto. In addition, the respective
spouses of the Identified Shareholders executed a Spousal Consent
consenting to the transactions contemplated by the Shareholders' Option
Agreement.
Except as set forth above, to the best of AXP's knowledge, no
contracts, arrangements, understandings or relationships (legal or
otherwise) exist among the persons named in Item 2 or among such
persons and any other person with respect to any securities of
Rockford, including but not limited to, transfer or voting of any such
securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guarantees of profits, division of profits or loss, or
the giving or withholding of proxies.
Page 6 of 13
<PAGE> 7
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS
The following exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
1 Plan and Agreement of Merger among American Express
Company, RXP Acquisition Corporation and Rockford
Industries, Inc. dated as of November 9, 1998.
2 Shareholders' Option Agreement between American
Express Company, Gerry J. Ricco, Larry Hartmann and
Brian Seigel dated as of November 9, 1998.
3 Voting and Conversion Agreement between American
Express Company, Anchor National Life Insurance
Company and Rockford Industries, Inc. dated November
9, 1998.
</TABLE>
Page 7 of 13
<PAGE> 8
SIGNATURES
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
American Express Company
By: /s/ STEPHEN P. NORMAN
----------------------------------------
Stephen P. Norman
Secretary
Date: November 18, 1998
Page 8 of 13
<PAGE> 9
APPENDIX A
The following individuals are executive officers or directors of AXP.
Except for F. Ross Johnson who is a citizen of Canada, each individual is a
citizen of the United States.
<TABLE>
<CAPTION>
Reporting Title of
Person Reporting Person Address
------ ---------------- -------
<S> <C> <C>
Daniel F. Akerson Director Chairman and Chief
Executive Officer
Nextel Communications, Inc.
1505 Farm Credit Drive
McLean, Virginia 22102
Steven W. Alesio President, Consumer Travel,
Small Business Services and
Government Card, TRS
Anne L. Armstrong Director Chairman of the Board of Trustees
Center for Strategic
and International Studies
P.O. Box 1358
Kingsville, Texas 78364
Edwin L. Artzt Director Chairman of the
Executive Committee
The Procter & Gamble Company
One Procter & Gamble Plaza
Cincinnati, Ohio 45202-3315
William G. Bowen Director President
The Andrew W. Mellon Foundation
140 East 62nd Street
New York, New York 10021
Anne M. Busquet President,
American Express
Relationship Services, TRS
Kenneth I. Chenault President,
Chief Operating Officer and Director
James M. Cracchiolo President,
TRS International
</TABLE>
Page 9 of 13
<PAGE> 10
<TABLE>
<S> <C> <C>
Charles W. Duncan, Jr. Director Chairman
Duncan Interests
600 Travis
Suite 6100
Houston, Texas 77002-3007
Ursula F. Fairbairn Executive Vice President
Edward P. Gilligan President,
Corporate Services, TRS
Richard K. Goeltz Vice Chairman and Chief
Financial Officer
Harvey Golub Chairman, Chief Executive
Officer and Director
Beverly Sills Greenough Director Chairman
Lincoln Center for
the Performing Arts
165 West 65th Street
9th Floor
New York, New York 10023
John D. Hayes Executive Vice President
David C. House President,
Establishment Services
Worldwide, TRS
David R. Hubers President and Chief American Express Financial
Executive Officer, Corporation
American Express IDS Tower 10
Financial Corporation Minneapolis, Minnesota 55440
</TABLE>
Page 10 of 13
<PAGE> 11
<TABLE>
<S> <C> <C>
F. Ross Johnson Director Chairman and Chief
Executive Officer
RJM Group
200 Galleria Parkway, N.W.
Suite 970
Atlanta, Georgia 30339
Vernon E. Jordan, Jr. Director Senior Partner
Akin, Gump, Strauss,
Hauer & Field, L.L.P.
1333 New Hampshire Avenue, N.W.
Suite 400
Washington, D.C. 20036
Alfred F. Kelly, Jr. President, Consumer Card
Services Group, TRS
Jan Leschly Director Chief Executive
SmithKline Beecham
1 Franklin Plaza
P.O. Box 7929
Philadelphia, Pennsylvania 19101
Drew Lewis Director 737 Camp Wawa Road
Schwenksville, Pennsylvania 19473
Jonathan S. Linen Vice Chairman
Allan Z. Loren Executive Vice President and
Chief Information Officer
Richard A. McGinn Director Chairman and CEO
Lucent Technologies
600 Mountain Avenue
Murray Hill, New Jersey 07974
Louise M. Parent Executive Vice President and
General Counsel
</TABLE>
Page 11 of 13
<PAGE> 12
<TABLE>
<S> <C> <C>
Frank P. Popoff Director Chairman of the Board
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674
Thomas Schick Executive Vice President
John A. Ward, III Chairman and American Express Bank, Ltd.
Chief Executive Officer, World Financial Center
American Express Bank Ltd. 200 Vesey Street
New York, New York 10285
</TABLE>
Page 12 of 13
<PAGE> 13
EXHIBIT INDEX
<TABLE>
EXHIBIT DESCRIPTION
<S> <C>
1 Plan and Agreement of Merger among American Express Company,
RXP Acquisition Corporation and Rockford, Inc. dated as of
November 9, 1998.
2 Shareholders' Option Agreement between American Express
Company, Gerry J. Ricco, Larry Hartmann and Brian Seigel dated
as of November 9, 1998.
3 Voting and Conversion Agreement between American Express
Company, Anchor National Life Insurance Company and Rockford
Industries, Inc. dated November 9, 1998.
</TABLE>
Page 13 of 13
<PAGE> 1
EXHIBIT 1
- --------------------------------------------------------------------------------
PLAN AND AGREEMENT OF MERGER
AMONG
AMERICAN EXPRESS COMPANY,
RXP ACQUISITION CORPORATION
AND
ROCKFORD INDUSTRIES, INC.
- --------------------------------------------------------------------------------
------------------------
NOVEMBER 9, 1998
------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 PLAN OF MERGER
1.1 The Merger...........................................................................2
1.2 Conversion of Shares.................................................................2
1.3 Exchange of Certificates.............................................................3
1.4 Dividends............................................................................4
1.5 Escheat Laws.........................................................................5
1.6 Closing of Company Transfer Books....................................................5
1.7 Dissenting Shares....................................................................5
ARTICLE 2 CLOSING.......................................................................................6
2.1 Time and Place of Closing............................................................6
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF COMPANY AND
IDENTIFIED SHAREHOLDERS.......................................................................6
3.1 Disclosure Letter; Material Adverse Effect on Company................................6
3.2 Organization, Good Standing and Power................................................7
3.3 Capitalization.......................................................................7
3.4 Company Subsidiaries; Voting Trusts..................................................8
3.5 Authority; Enforceability............................................................9
3.6 Non-Contravention; Consents..........................................................9
3.7 SEC Reports; Company Financial Statements...........................................10
3.8 Absence of Certain Changes..........................................................11
3.9 Tax Matters.........................................................................12
3.10 Litigation..........................................................................15
3.11 Material Contracts..................................................................15
3.12 Securitization Facilities...........................................................17
3.13 Registration Statement, Etc.........................................................17
3.14 Employee Benefit Plans..............................................................18
3.15 Property............................................................................21
3.16 Intellectual Property; Year 2000....................................................22
3.17 Labor Relations.....................................................................24
3.18 No Violation of Law.................................................................26
3.19 Environmental Matters...............................................................26
3.20 Insurance Policies..................................................................29
3.21 Absence of Certain Business Practices...............................................29
3.22 Accounts Receivable and Net Investment in Direct Finance Leases
and Loans: Restricted Cash.........................................................29
3.23 Transactions with Affiliates........................................................30
</TABLE>
i
<PAGE> 3
<TABLE>
<S> <C> <C>
3.24 Fairness Opinion....................................................................30
3.25 Antitakeover Statutes; Shareholders' Rights Plan....................................30
3.26 Board Recommendations...............................................................30
3.27 Brokers and Finders.................................................................31
3.28 Merger..............................................................................31
3.29 Voting Requirements.................................................................31
3.30 No Existing Discussions.............................................................31
3.31 Representations and Warranties of Identified Shareholders...........................31
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF PARENT.....................................................32
4.1 Organization, Good Standing and Power...............................................32
4.2 Capitalization......................................................................33
4.3 Authority; Enforceability...........................................................33
4.4 Non-Contravention; Consents.........................................................33
4.5 SEC Reports.........................................................................34
4.6 Registration Statement, Etc.........................................................35
4.7 Litigation..........................................................................35
4.8 No Violation of Law.................................................................35
4.9 Brokers and Finders.................................................................35
4.10 Merger..............................................................................36
ARTICLE 5 CONDUCT AND TRANSACTIONS PRIOR TO EFFECTIVE TIME;
CERTAIN COVENANTS............................................................................36
5.1 Access and Information..............................................................36
5.2 Conduct of Business Pending Merger..................................................36
5.3 Fiduciary Duties....................................................................42
5.4 Certain Fees........................................................................42
5.5 Takeover Statutes; Inconsistent Actions.............................................43
5.6 Consents............................................................................43
5.7 Reasonable Efforts; Further Assurances; Cooperation.................................44
5.8 NYSE Listing........................................................................45
5.9 Notice..............................................................................45
5.10 Registration Statement; Shareholder Approvals.......................................45
5.11 Expenses............................................................................46
5.12 Press Releases; Filings.............................................................46
5.13 Tax Treatment.......................................................................46
5.14 Employee Benefits...................................................................47
5.15 Stock Options and Warrants..........................................................47
5.16 Company Affiliates..................................................................48
5.17 Supplements to Disclosure Letter....................................................48
5.18 Post-Closing Cooperation by Identified Shareholders.................................48
</TABLE>
ii
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<TABLE>
<S> <C> <C>
5.19 Indemnification of Directors and Officers and
Identified Shareholders.............................................................48
5.20 Certain Consents....................................................................49
ARTICLE 6 CONDITIONS PRECEDENT TO MERGER...............................................................50
6.1 Conditions to Each Party's Obligations..............................................50
6.2 Conditions to Obligations of Company................................................51
6.3 Conditions to Obligations of Parent.................................................52
ARTICLE 7 TERMINATION AND ABANDONMENT OF THE MERGER....................................................55
7.1 Termination.........................................................................55
7.2 Specific Performance and Other Remedies.............................................57
7.3 Effect of Termination and Abandonment...............................................57
7.4 Termination Date Extension..........................................................57
ARTICLE 8 MISCELLANEOUS................................................................................58
8.1 Waiver and Amendment................................................................58
8.2 Non-Survival of Representations, Warranties and Agreements..........................58
8.3 Notices.............................................................................58
8.4 Descriptive Headings; Interpretation................................................59
8.5 Counterparts........................................................................60
8.6 Entire Agreement....................................................................60
8.7 GOVERNING LAW.......................................................................60
8.8 Severability........................................................................60
8.9 Enforcement of Agreement............................................................60
8.10 Assignment..........................................................................60
8.11 Liability of Identified Shareholders................................................61
8.12 Definition of Company's Knowledge...................................................61
8.13 Disclosure Letter ..................................................................61
EXHIBIT 1.1 SHAREHOLDERS' OPTION AGREEMENT
EXHIBIT 5.16 AFFILIATES LETTER
</TABLE>
iii
<PAGE> 5
PLAN AND AGREEMENT OF MERGER
PLAN AND AGREEMENT OF MERGER (this "Agreement"), dated as of November
9, 1998, among AMERICAN EXPRESS COMPANY, a New York corporation ("Parent"), RXP
ACQUISITION CORPORATION, a Delaware corporation and wholly owned subsidiary of
Parent ("Sub"), and ROCKFORD INDUSTRIES, INC. , a California corporation
("Company").
WHEREAS, Parent has formed Sub as a wholly owned subsidiary under the
Delaware General Corporation Law (the "DGCL") for the purpose of Sub merging
with Company pursuant to the applicable provisions of the DGCL and the
California General Corporation Law (the "CGCL") (the "Merger") so that Company
will continue as the surviving corporation of the Merger and Company will
become a wholly owned subsidiary of Parent;
WHEREAS, the respective Boards of Directors of Company, Parent and Sub
have approved and declared advisable the Merger, the terms and provisions of
this Agreement and the transactions contemplated hereby and the Board of
Directors of Company has recommended that the shareholders of Company approve
the Merger upon the terms of this Agreement;
WHEREAS, the respective Boards of Directors of Parent and Company have
determined that the Merger is in furtherance of and consistent with their
respective long-term business strategies and is fair to and in the best
interests of their respective shareholders;
WHEREAS, concurrently with the execution and delivery of this
Agreement, each of Gerry J. Ricco, Larry Hartmann and Brian Seigel
(collectively, the "Identified Shareholders") has duly executed and delivered
to Parent a Shareholders' Option Agreement pursuant to which, among other
things, each of the Identified Shareholders (x) has granted to Parent (i) an
irrevocable and continuing option to purchase all of the shares of capital
stock of Company owned by him, and (ii) an irrevocable proxy, and (y) has
agreed to vote all of the shares of capital stock of Company owned by him in
favor of the Merger, on the terms set forth in Exhibit 1.1 (the "Shareholders'
Option Agreement");
WHEREAS, for federal income tax purposes, it is intended that the
Merger shall qualify as a reorganization within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"), and this
Agreement is intended to be and is adopted as a plan of reorganization; and
WHEREAS, the Merger described herein is subject to the approval of the
shareholders of Company and satisfaction of certain other conditions described
in this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
representations, warranties, covenants and agreements herein contained, the
parties agree as follows:
<PAGE> 6
ARTICLE 1
PLAN OF MERGER
1.1 The Merger
(a) Upon the terms and subject to the conditions of this
Agreement, at the Effective Time (as defined below) and in accordance with the
provisions of this Agreement, the DGCL and the CGCL, Sub shall be merged with
and into Company, which shall be the surviving corporation (sometimes referred
to hereinafter as the "Surviving Corporation") in the Merger, and the separate
corporate existence of Sub shall cease. Subject to the provisions of this
Agreement, a certificate of merger (the "Certificate of Merger") shall be duly
prepared, executed and verified by each of Company and Sub, and thereafter
delivered, respectively, to the Secretary of State of California and the
Secretary of State of Delaware for filing as provided in the CGCL and the DGCL
on the Closing Date (as defined in Section 2.1). The Merger shall become
effective immediately upon the filing of the Certificate of Merger with the
Secretary of State of California and the Secretary of State of Delaware, or at
such time thereafter as is provided in the Certificate of Merger (the
"Effective Time").
(b) From and after the Effective Time, the Merger shall
have all the effects set forth in the CGCL and the DGCL. Without limiting the
generality of the foregoing, and subject thereto, by virtue of the Merger and
in accordance with the CGCL and the DGCL, all of the properties, rights,
privileges, powers and franchises of Company and Sub shall vest in the
Surviving Corporation and all of the debts, liabilities and duties of Company
and Sub shall become the debts, liabilities and duties of the Surviving
Corporation.
(c) The Articles of Incorporation of Company in effect
immediately prior to the Effective Time shall continue in full force and effect
as the Articles of Incorporation of the Surviving Corporation until thereafter
amended in accordance with the provisions thereof and the CGCL.
(d) The Bylaws of Company in effect immediately prior to
the Effective Time shall continue in full force and effect as the Bylaws of the
Surviving Corporation until altered, amended or repealed as provided therein,
in the Articles of Incorporation of the Surviving Corporation and the CGCL.
(e) The officers and directors of Sub immediately prior to
the Effective Time shall be the initial officers and directors of the Surviving
Corporation, in each case until their respective successors are duly elected
and qualified.
1.2 Conversion of Shares. As of the Effective Time, by virtue of
the Merger and without any action on the part of any holder thereof:
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(a) Each share of capital stock of Sub that is issued and
outstanding immediately prior to the Effective Time shall be converted into and
exchanged for one fully paid and non-assessable share of common stock of the
Surviving Corporation.
(b) All shares of common stock, no par value per share, of
Company ("Company Common Stock") or other capital stock of Company that are
owned by Parent shall be canceled and retired and shall cease to exist and no
stock of Parent or other consideration shall be delivered in exchange therefor.
(c) Subject to Section 1.3(c) and Section 1.7, each share
of Company Common Stock that is issued and outstanding immediately prior to the
Effective Time (other than shares to be canceled in accordance with Section
1.2(b)) shall be converted into a right to receive that number of shares of
Parent Common Stock, par value $.60 per share ("Parent Common Stock"), that
could be purchased for $11.88 based on the average of the closing price per
share of the Parent Common Stock on the New York Stock Exchange, Inc. ("NYSE")
during the ten (10) consecutive trading days ending on the third full trading
day immediately preceding the Effective Time (the "Exchange Ratio"). All such
shares of Company Common Stock, when so converted, shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously representing any such shares (a
"Certificate") shall thereafter represent the right to receive that number of
shares of Parent Common Stock into which such shares of Company Common Stock
have been converted. Certificates previously representing shares of Company
Common Stock shall be exchanged for certificates representing whole shares of
Parent Common Stock, and cash in lieu of any fractional share, issued in
consideration therefor upon the surrender of such Certificates in accordance
with Section 1.3, without interest.
1.3 Exchange of Certificates.
(a) As of the Effective Time, Parent shall deposit with a
bank or trust company reasonably designated by Parent (the "Exchange Agent"),
for the benefit of the holders of shares of Company Common Stock, for exchange
in accordance with this Article 1 through the Exchange Agent, certificates
representing the shares of Parent Common Stock (such shares of Parent Common
Stock, together with any dividends or distributions with respect thereto or
cash deposited by Parent in accordance with this Section 1.3, being hereinafter
referred to as the "Exchange Fund") issuable pursuant to Section 1.2 in
exchange for outstanding shares of Company Common Stock, together with cash to
be paid in lieu of fractional shares. The aggregate number of shares of Parent
Common Stock which shall be issuable shall be a number of such shares equal to
the Exchange Ratio multiplied by the total number of outstanding shares of
Company Common Stock as of the Effective Time, subject to adjustments for
non-issuance of fractional shares as provided herein.
(b) As soon as practicable after the Effective Time,
Parent and the Surviving Corporation shall cause the Exchange Agent to mail to
each holder of record of a Certificate or
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<PAGE> 8
Certificates (i) a letter of transmittal (which (x) shall specify that delivery
shall be effected, and risk of loss and title to the Certificates shall pass,
only upon delivery of the Certificates to the Exchange Agent accompanied by a
properly executed letter of transmittal and (y) shall be in such form and have
such other provisions as Parent may reasonably specify), and (ii) instructions
for use in effecting the surrender of the Certificates in exchange for
certificates representing shares of Parent Common Stock. Upon the surrender to
the Exchange Agent of one or more Certificates for cancellation, together with
such letter of transmittal, duly executed, the holder will be entitled to
receive certificates representing that number of whole shares of Parent Common
Stock to be issued in respect of the aggregate number of such shares of Company
Common Stock previously represented by the Certificates surrendered based upon
the Exchange Ratio and cash in lieu of fractional shares as provided in Section
1.3(c).
(c) No certificate or scrip representing fractional shares
of Parent Common Stock shall be issued upon the surrender for exchange of
Certificates, and such fractional share interests will not entitle the owner
thereof to vote or to any rights as a shareholder of Parent. All fractional
shares of Parent Common Stock that a holder of Company Common Stock would
otherwise be entitled to receive as a result of the Merger shall be aggregated
and if a fractional share results from such aggregation, such holder shall be
entitled to receive, in lieu thereof, an amount in cash determined by
multiplying (i) the Fair Market Value at the Effective Time (as defined below)
of one share of Parent Common Stock, by (ii) the fraction of a share of Parent
Common Stock to which such holder would otherwise have been entitled. Parent
shall timely make available to the Exchange Agent any cash necessary to make
payments in lieu of fractional shares as aforesaid. No such cash in lieu of
fractional shares of Parent Common Stock shall be paid to any holder of Company
Common Stock until Certificates are surrendered and exchanged in accordance
with Section 1.3(a). The term "Fair Market Value at the Effective Time" of one
share of Parent Common Stock shall be the average of the closing price per
share of Parent Common Stock on the NYSE during the ten (10) consecutive
trading days ending on the third full trading day immediately preceding the
Effective Time.
(d) If a certificate for Parent Common Stock is to be sent
to a person other than the person in whose name the Certificates for shares of
Company Common Stock surrendered for exchange are registered, it shall be a
condition of the exchange that the person requesting such exchange shall pay to
the Exchange Agent any transfer or other taxes required by reason of the
delivery of such Certificate to a person other than the registered holder of
the Certificate surrendered, or shall establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not applicable.
(e) The cash paid and shares of Parent Common Stock issued
upon the surrender of Certificates in accordance with the terms hereof shall be
deemed to have been paid and issued in full satisfaction of all rights
pertaining to such shares of Company Common Stock.
1.4 Dividends. No dividends or other distributions that are
declared or made after the Effective Time with respect to Parent Common Stock
payable to holders of record thereof after the
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<PAGE> 9
Effective Time shall be paid to a Company shareholder entitled to receive
certificates representing Parent Common Stock until such shareholder has
properly surrendered such shareholder's Certificates. Upon such surrender,
there shall be paid to the shareholder in whose name the certificates
representing such Parent Common Stock shall be issued any dividends which shall
have become payable with respect to such Parent Common Stock between the
Effective Time and the time of such surrender, without interest. After such
surrender, there shall also be paid to the shareholder in whose name the
certificates representing such Parent Common Stock shall be issued any dividend
on such Parent Common Stock that shall have a record date subsequent to the
Effective Time and prior to such surrender and a payment date after such
surrender; provided that such dividend payments shall be made on such payment
dates. In no event shall the shareholders entitled to receive such dividends be
entitled to receive interest on such dividends. Any portion of the Exchange
Fund which remains undistributed to the shareholders of Company for one year
after the Effective Time pursuant to this Section 1.4 shall be returned by the
Exchange Agent to Parent which shall thereafter act as Exchange Agent, subject
to the rights of holders of unsurrendered Certificates under this Article 1.
1.5 Escheat Laws. Notwithstanding any other provision of this
Article 1, none of Parent, Sub, Company, the Surviving Corporation, the
Exchange Agent or any other party hereto shall be liable to any holder of
Company Common Stock for any Parent Common Stock, or dividends or distributions
thereon or cash in lieu of fractional shares, delivered to a public official
pursuant to any applicable abandoned property, escheat or similar laws.
1.6 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of Company shall be closed and no transfer of Company
Common Stock shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall, when
accompanied by proper documentation, be exchanged for Parent Common Stock in
the manner provided in this Article 1.
1.7 Dissenting Shares. (a) If provided for under the CGCL,
notwithstanding any other provision of this Agreement to the contrary, shares
of Company Common Stock that are outstanding immediately prior to the Effective
Time and which are held by shareholders who shall not have voted in favor of
the Merger or consented thereto in writing and who shall have demanded properly
in writing appraisal for such shares in accordance with the CGCL and who shall
not have withdrawn such demand or otherwise have forfeited appraisal rights
(collectively, the "Dissenting Shares") shall not be converted into or
represent the right to receive Parent Common Stock. Such shareholders shall be
entitled to receive payment of the appraised value of such shares of Company
Common Stock held by them in accordance with the provisions of the CGCL, except
that all Dissenting Shares held by shareholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such shares of Company Common Stock under the CGCL shall thereupon
be deemed to have been converted into and to have become exchangeable, as of
the Effective Time, for the right to receive, without any interest
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<PAGE> 10
thereon, the Parent Common Stock, upon surrender, in the manner provided in
Section 1.3, of the Certificate or Certificates that formerly evidenced such
shares of Company Common Stock.
(b) Company shall give Parent (i) prompt notice of any demands for
appraisal received by Company, withdrawals of such demands, and any other
instruments served pursuant to the CGCL and received by Company and (ii) the
opportunity to direct all negotiations and proceedings with respect to demands
for appraisal under the CGCL. Company shall not, except with the prior written
consent of Parent, make any payment with respect to any demands for appraisal,
or offer to settle, or settle, any such demands.
ARTICLE 2
CLOSING
2.1 Time and Place of Closing. Unless otherwise mutually agreed
upon in writing by Parent and Company, the closing of the Merger (the
"Closing") will be held at 10:00 a.m., New York City time, on the second
business day following the date that all of the conditions precedent specified
in this Agreement have been (or can be at the Closing) satisfied or waived by
the party or parties permitted to do so (such date being referred to
hereinafter as the "Closing Date"). The place of Closing shall be at the
offices of King & Spalding, 1185 Avenue of the Americas, New York, New York
10036-4003, or at such other place as may be agreed between Parent and Company.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF COMPANY
AND IDENTIFIED SHAREHOLDERS
As an inducement to Parent and Sub to enter into this Agreement and to
consummate the transactions contemplated hereby, Company hereby represents and
warrants and, pursuant to Section 3.31 only the Identified Shareholders hereby
represent and warrant to Parent and Sub as follows:
3.1 Disclosure Letter; Material Adverse Effect on Company.
(a) Prior to the execution and delivery of this Agreement,
Company and Parent have delivered to each other a letter (the "Disclosure
Letter") setting forth items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained
in this Agreement or as an exception to one or more of such party's
representations, warranties or covenants contained in this Agreement.
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(b) As used in this Agreement, the phrase "Material
Adverse Effect on Company" means (i) as to matters which can reasonably be
quantified in economic terms, any effect which has resulted in or would
reasonably be expected to result in, with respect to Company and the Company
Subsidiaries (as defined in Section 3.4) taken as a whole, a diminution or
decrease in the value of properties or assets, an increase in liabilities or
obligations (whether accrued, contingent or otherwise), a diminution or
decrease in profits or cash flow, an increase in losses or expenses, an adverse
change in the business or financial condition, or any combination thereof
involving, individually or in the aggregate more than $1,000,000, (ii) as to
matters which cannot reasonably be quantified in economic terms, a material
adverse effect on the condition (financial or otherwise), business, assets,
liabilities, prospects or results of operations of Company and the Company
Subsidiaries taken as a whole, or (iii) a material adverse effect on the
ability of Company to consummate the transactions contemplated by this
Agreement.
(c) For purposes of determining whether or not the
representations and warranties set forth herein which are qualified by the
phrase "Material Adverse Effect on Company" are true and correct and have not
been breached, such representations and warranties shall be deemed to be true
and correct and not breached unless the failure or failures of such
representations and warranties to be so true and correct (without giving effect
to any exception or "Material Adverse Effect on Company" qualifier),
individually or in the aggregate, has or would reasonably be expected to have a
Material Adverse Effect on Company.
3.2 Organization, Good Standing and Power. Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of California and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as now being conducted. Company is duly qualified or licensed to do business
and is in good standing in each jurisdiction in which the nature of its
business or the ownership or leasing of its properties make such qualification
or licensing necessary, except where the failure to be so qualified or licensed
or to be in good standing does not have and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company.
Company has delivered to Parent complete and correct copies of its Articles of
Incorporation and all amendments thereto to the date hereof and its Bylaws as
amended to the date hereof.
3.3 Capitalization. The authorized capital stock of Company
consists of 10,000,000 shares of Common Stock, no par value per share, of
which, as of the date of this Agreement, 4,108,785 shares were issued and
outstanding, and 1,000,000 shares of Preferred Stock, no par value per share,
of which, as of the date hereof, 70,000 shares designated as Series A Preferred
Stock are issued and outstanding (the "Series A Shares"). The holder of the
Series A Shares has agreed to vote the Series A Shares in favor of the Merger
and to convert the Series A Shares into Company Common Stock immediately prior
to the Effective Time. All outstanding shares of Company Common Stock are, and
all shares which may be issued prior to the Effective Time pursuant to any
outstanding Company Stock Options (as hereinafter defined) will be, when
issued, duly authorized,
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<PAGE> 12
validly issued, fully paid and nonassessable and not subject to any preemptive
rights. Except as set forth above, as of the date of this Agreement, there were
no shares of capital stock or other equity securities of Company outstanding,
and, except as set forth in Section 3.3 of the Disclosure Letter, (x) there are
no outstanding options, warrants or rights to purchase or acquire from Company
any capital stock of Company, (y) there are no existing registration covenants
with Company with respect to outstanding shares of Company Common Stock or the
Series A Shares, and (z) there are no convertible securities or other
contracts, commitments, agreements, understandings, arrangements or
restrictions by which Company is bound to issue any additional shares of its
capital stock or other securities. All outstanding options with respect to
Company capital stock (the "Company Stock Options"), the identity of the holder
thereof, the vesting schedule applicable thereto, the exercise price thereof
and the change of control provisions applicable thereto are listed in Section
3.3 of the Disclosure Letter. Complete and accurate copies of the material
agreements relating to the Company Stock Options have been provided to Parent.
Except as set forth in Section 3.3 of the Disclosure Letter, there are no
shareholder agreements, voting trust agreements, or similar contracts,
agreements, arrangements, commitments, plans, or understandings restricting or
otherwise relating to voting, dividend, ownership or transfer rights with
respect to any share of Company capital stock to which Company is a party.
3.4 Company Subsidiaries; Voting Trusts. Section 3.4 of the
Disclosure Letter sets forth a correct and complete list of each corporation,
association, partnership, limited liability company or other entity of which
Company owns or controls, directly or indirectly, all of the outstanding equity
interests (such entities are hereinafter referred to as "Company
Subsidiaries"). Except as set forth in Section 3.4 of the Disclosure Letter,
there is no corporation, association, partnership, limited liability company or
other entity of which Company owns or controls, directly or indirectly, more
than 20% of the outstanding equity interests. Except as disclosed in Section
3.4 of the Disclosure Letter, Company owns, directly or indirectly, all of the
equity interests of each Company Subsidiary, free and clear of all liens,
charges, pledges, security interests or other encumbrances. All of the capital
stock of each Company Subsidiary has been duly authorized and is validly
issued, fully paid and nonassessable, and not subject to any preemptive rights.
There are no outstanding options or rights to subscribe to, or any contracts or
commitments to issue or sell any shares of the capital stock or other equity
interests or any securities or obligations convertible into or exchangeable
for, or giving any person any right to acquire, any shares of the capital stock
or other equity interests of any Company Subsidiary to which Company or any
Company Subsidiary is a party. There are no voting trusts or other agreements
or understandings with respect to the voting of capital stock or other equity
interests of any Company Subsidiary to which Company or any Company Subsidiary
is a party. Each Company Subsidiary is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation and has the requisite corporate power and authority necessary for
it to own or lease its properties and assets and to carry on its business as it
is now being conducted. Each Company Subsidiary is duly qualified or licensed
to do business and is in good standing in each jurisdiction in which the nature
of its business or the ownership or leasing of its properties makes such
qualification or licensing necessary, except where the failure to be so
qualified or licensed or to be in good standing does not have and would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Company.
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3.5 Authority; Enforceability. Company has the corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, subject to the approval of this Agreement by the
shareholders of Company. Subject to such approval, the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
have been duly authorized by all necessary corporate action on the part of
Company, and this Agreement has been duly executed and delivered by Company and
constitutes the valid and binding obligation of Company, enforceable against
Company in accordance with its terms, except as may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and subject to general principles of
equity.
3.6 Non-Contravention; Consents.
(a) Except as set forth in Section 3.6(a) of the
Disclosure Letter, neither the execution, delivery and performance by Company
of this Agreement, nor the consummation by Company of the transactions
contemplated hereby, nor compliance by Company with any of the provisions
hereof, will:
(i) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default) under, result in
the termination, cancellation or expiration of, accelerate the
performance required by, or result in a right of termination,
cancellation, expiration or acceleration, or the creation of any lien,
security interest, charge or encumbrance upon any of the properties or
assets of Company or any Company Subsidiary, under any of the terms,
conditions or provisions of, (x) its Articles of Incorporation, Bylaws
or other governing documents, or (y) any note, bond, mortgage,
indenture, deed of trust, securitization agreement, license, lease,
contract, agreement or other instrument or obligation to which Company
or any of the Company Subsidiaries is a party, or by which Company or
any of the Company Subsidiaries may be bound, or to which Company or
any of the Company Subsidiaries or the properties or assets of any of
them may be subject and that has or would reasonably be expected to
have, in any such event specified in this clause (y), individually or
in the aggregate, a Material Adverse Effect on Company; or
(ii) subject to compliance with the statutes and
regulations referred to in Section 3.6(b), violate any judgment,
award, ruling, order, writ, injunction or decree, or any statute, rule
or regulation applicable to, Company or any of the Company
Subsidiaries or any of their respective properties or assets where
such violation has or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on
Company.
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(b) Except as set forth in Section 3.6(b) of the
Disclosure Letter, no notice to, filing with, authorization of, exemption by,
or consent or approval of, any governmental authority or other regulatory body
is necessary to be obtained by Company or any Company Subsidiary for the
consummation by Company of the transactions contemplated by this Agreement.
3.7 SEC Reports; Company Financial Statements.
(a) Since January 1, 1996, Company has timely filed all
reports, registration statements, proxy statements or information statements
and all other documents, together with any amendments required to be made
thereto, required to be filed with the Securities and Exchange Commission
("SEC") under the Securities Act of 1933, as amended (the "Securities Act"), or
the Securities Exchange Act of 1934, as amended (the "Exchange Act")
(collectively, the "Company Reports"). Company has heretofore made available to
Parent true copies of all the Company Reports, together with all exhibits
thereto. Included in such Company Reports are (i) audited consolidated balance
sheets of Company and its subsidiaries at December 31, 1996 and 1997 and the
related consolidated results of operations, shareholders' equity and cash flows
for the years then ended, and the notes thereto, and (ii) the unaudited
consolidated balance sheet of Company and its subsidiaries at June 30, 1998
(the "Interim Balance Sheet") and the related unaudited consolidated results of
operations, shareholders' equity and cash flows for the periods then ended and
the notes thereto. Company has provided to Parent in Section 3.7 of the
Disclosure Letter an unaudited consolidated balance sheet of Company and its
subsidiaries at September 30, 1998 (the "September Balance Sheet") and the
related unaudited consolidated results of operations, shareholders' equity and
cashflows for the period then ended (the "September Income Statement" and,
together with the September Balance Sheet, the "September Financial
Statements").
(b) All of the financial statements included in the
Company Reports (which are collectively referred to herein as the "Company
Consolidated Financial Statements") and the September Financial Statements
fairly presented the consolidated financial position of Company and its
subsidiaries as of the dates mentioned and the consolidated results of
operations, changes in shareholders' equity and cash flows for the periods then
ended in conformity with generally accepted accounting principles ("GAAP")
applied on a consistent basis (subject to any exceptions as to consistency
specified therein or as may be indicated in the notes thereto or in the case of
the unaudited statements, as may be permitted by Form 10-Q of the SEC and
subject, in the case of unaudited statements, to normal, recurring audit
adjustments). As of their respective dates, the Company Reports complied in all
material respects with all applicable rules and regulations promulgated by the
SEC and did not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading. At September 30, 1998, neither Company nor any
Company Subsidiary has any liabilities or obligations of any nature (whether
accrued, absolute, contingent or otherwise), except (i) as set forth or
reflected in the September Balance Sheet, (ii) for such liabilities and
obligations which individually are less than $100,000 and in the aggregate are
less than $1,000,000 and were incurred in the ordinary course of business
consistent with past practice, or (iii) as set forth in Section 3.7(b) of the
Disclosure Letter.
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After September 30, 1998, neither Company nor any Company Subsidiary has any
liabilities or obligations of any nature (whether accrued, absolute, contingent
or otherwise), except (i) those liabilities and obligations set forth or
reflected on the September Balance Sheet, (ii) for such liabilities and
obligations which were incurred in the ordinary course of business consistent
with past practice, (iii) to the extent not covered by (i) or (ii), liabilities
and obligations which individually are less than $100,000 and which, in the
aggregate, do not have and would not reasonably be expected to have a Material
Adverse Effect on Company or (iv) as set forth in Section 3.7(b) of the
Disclosure Letter.
(c) From October 1, 1998 to the date of this Agreement,
neither Company nor any Company Subsidiary has taken or omitted to take any
action which would have required the consent of Parent if Section 5.2(b) and
(c) of this Agreement had been in effect during such period.
3.8 Absence of Certain Changes.
(a) Except as set forth in Section 3.8(a) of the
Disclosure Letter, since January 1, 1998, there has not been (i) any change in
the assets, liabilities, results of operations, financial condition or business
of Company or any Company Subsidiary which has or would reasonably be expected
to have, individually or in the aggregate, a Material Adverse Effect on
Company, (ii) any damage, destruction, loss or casualty to property or assets
of Company or any Company Subsidiary involving amounts in excess of $100,000
individually or in excess of $250,000 in the aggregate, whether or not covered
by insurance, which property or assets are material to the operations or
business of Company or any Company Subsidiary, (iii) any declaration, setting
aside or payment of any dividend or distribution (whether in cash, stock or
property) in respect of the capital stock or other equity interests of Company,
any redemption or other acquisition by Company of any of the capital stock or
other equity interests of Company or any split, combination or reclassification
of shares of capital stock or other equity interests declared or made by
Company or (iv) any agreement to do any of the foregoing.
(b) Except as set forth in Section 3.8(b) of the
Disclosure Letter or as consented to in writing by Parent, since January 1,
1998, there have not been in respect of Company or any Company Subsidiary (i)
any extraordinary losses suffered involving amounts in excess of $100,000
individually or in excess of $250,000 in the aggregate, (ii) any assets with a
value in excess of $100,000 individually or in excess of $250,000 in the
aggregate which have been mortgaged, pledged or made subject to any lien,
charge or other encumbrance, (iii) any material liability or obligation
(absolute, accrued, contingent or otherwise) incurred or any material bad debt,
contingency or other reserve increase suffered, except, in each such case, in
the ordinary course of business and consistent with past practice, (iv) any
claims, liabilities or obligations (absolute, accrued, contingent or otherwise)
paid, discharged or satisfied, other than the payment, discharge or
satisfaction, in the ordinary course of business and consistent with past
practice, of claims, liabilities and obligations reflected or reserved against
in the Company Consolidated Financial
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Statements or incurred in the ordinary course of business and consistent with
past practice, (v) any material guaranteed checks, notes or loan or lease
accounts receivable or contract balances written off as uncollectible, except
write-offs in the ordinary course of business and consistent with past
practice, (vi) any write down or write-off (under Statement of Financial
Accounting Standards No. 121 or otherwise) of the value of any asset or
investment on Company's books or records or any credit loss involving amounts
in excess of $100,000 individually or in excess of $250,000 in the aggregate,
except for depreciation and amortization taken in the ordinary course of
business and consistent with past practice, (vii) any cancellation of any
material debts or waiver of any material claims or rights of substantial value,
or sale, transfer or other disposition of any material properties or assets
(real, personal or mixed, tangible or intangible) of substantial value, except,
in each such case, in transactions in the ordinary course of business and
consistent with past practice, (viii) any single capital expenditure or
commitment in excess of $100,000 for additions to property or equipment, or
aggregate capital expenditures and commitments in excess of $250,000 (on a
consolidated basis) for additions to property or equipment, (ix) any
transactions entered into other than in the ordinary course of business
consistent with past practices, (x) any material change in or modification to
Company's credit approval/declination criteria and practices or (xi) any
agreements to do any of the foregoing.
(c) Section 3.8(c) of the Disclosure Letter sets forth a
true and complete list of the officers of Company or any Company Subsidiary as
of the date of this Agreement and the salary of each such officer on the date
of this Agreement and as of January 1, 1998.
(d) During the period from January 1, 1998 through October
31, 1998, Company has originated in the aggregate $181.9 million of new leases
and loans in the ordinary course of business consistent with past practice.
Information relating to the leases and loans originated during the period from
January 1, 1998 to September 30, 1998, is set forth in Section 3.8(d) of the
Disclosure Letter.
(e) Section 3.8(e) of the Disclosure Letter identifies all
leases and loans of Company and the Company Subsidiaries (whether held directly
by Company and the Company Subsidiaries or conveyed to the Securitization
Facilities (as defined below)) the scheduled payments under which are 30 days
or more overdue as of September 30, 1998.
3.9 Tax Matters.
(a) For purposes of this Agreement, "Taxes" shall mean all
taxes (including any tax attributable to Company or any Company Subsidiary
ceasing to be a member of an affiliated group as defined in Section 1504(a) of
the Code), assessments, charges, duties, fees, levies or other governmental
charges (including interest, penalties or additions associated therewith)
including federal, state, city, county, foreign or other income, franchise,
capital stock, real property, personal property, tangible, withholding, FICA,
unemployment compensation, disability, transfer, sales, use, excise, gross
receipts and all other taxes of any kind for which Company or any Company
Subsidiary
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may have any liability imposed by the United States or any state, county, city,
country or foreign government or subdivision or agency thereof, whether
disputed or not.
(b) Except as otherwise disclosed in Section 3.9(b) of the
Disclosure Letter: (i) all returns, including estimated returns and reports of
every kind with respect to Taxes, which are due to have been filed in
accordance with any applicable law, have been duly filed, except where the
failure to file does not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company, (ii)
all Taxes, deposits or other payments for which Company or any Company
Subsidiary may have any liability through the date hereof have been paid in
full or are accrued as liabilities for Taxes on the books and records of
Company or the Company Subsidiaries, as applicable, except for such Taxes as
are not required by GAAP to be accrued or are immaterial in amount, (iii) there
are not now any extensions of time in effect with respect to the dates on which
any returns or reports of Taxes were or are due to be filed, (iv) all
deficiencies asserted as a result of any examination of any return or report of
Taxes have been paid in full or accrued on the books of each of Company and the
Company Subsidiaries, (v) no claims have been asserted and no proposals or
deficiencies for any Taxes are being asserted, proposed or, to the knowledge of
Company, threatened, and no audit or investigation of any return or report of
Taxes is currently underway, pending or, to the knowledge of Company,
threatened, (vi) there are no outstanding waivers or agreements by Company or
any Company Subsidiary for the extension of time for the assessment of any
Taxes or deficiency thereof, nor are there any requests for rulings,
outstanding subpoenas or requests for information, notices of proposed
reassessment of any property owned or leased by Company or any Company
Subsidiary or any other matter pending between Company or any Company
Subsidiary and any taxing authority, and (vii) there are no liens for Taxes
upon any property or assets of Company or any Company Subsidiary except liens
for current Taxes not yet due, nor are there any liens which, to the knowledge
of Company, are pending or threatened.
(c) In each case, adequate provision, including provision
in the deferred tax account, has been made in the audited consolidated balance
sheets of Company and its subsidiaries that are part of the Company
Consolidated Financial Statements for all deferred and accrued Tax liabilities
of Company and the Company Subsidiaries as of their respective dates with
respect to operations for periods ending on such dates.
(d) Company has delivered to Parent true and complete
copies of all federal and state income tax returns (together with any Revenue
Agent's Reports) relating to the operations of Company and the Company
Subsidiaries for the taxable years ended since December 31, 1994.
(e) None of Company or the Company Subsidiaries has filed
a consent pursuant to Section 341(f) of the Code. None of Company, the Company
Subsidiaries or any predecessor in interest of such party, has filed, or may be
deemed to have filed, any election under Section 338 of the Code.
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(f) Except as set forth in Section 3.9(f) of the
Disclosure Letter, neither Company nor any Company Subsidiary has made any
payment which constitutes an "excess parachute payment" within the meaning of
Section 280G of the Code, and no payment by Company or any Company Subsidiary
required to be made under any contract will, if made, constitute an "excess
parachute payment" within the meaning of Section 280G of the Code.
(g) None of Company and the Company Subsidiaries is a
party to any tax allocation or tax sharing agreement.
(h) None of Company and the Company Subsidiaries has been
a member of an affiliated group (within the meaning of Section 1504(a) of the
Code) filing a consolidated federal income tax return (other than a group the
common parent of which was Company).
(i) Company and the Company Subsidiaries have withheld and
paid all Taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party, except where the failure to withhold or pay
such Taxes would not have a Material Adverse Effect on Company.
(j) Except as set forth in Section 3.9(j) of the
Disclosure Letter and to Company's knowledge: (i) none of Company or the
Company Subsidiaries is a partner or a member of any entity treated as a
partnership for federal or state income tax purposes; (ii) none of Company or
the Company Subsidiaries has any deferred items (or items not yet taken into
account) under Treasury Regulations ss.ss. 1.1502-13 or 14; (iii) none of
Company or the Company Subsidiaries has an "excess loss account" as defined in
Treasury Regulations ss. 1.1502-19 with respect to the stock of any corporation
included as a member of the consolidated group of which Company is the common
parent; (iv) none of Company or the Company Subsidiaries owns or leases any
real property not disclosed in Section 3.11 of the Disclosure Letter; (v) none
of Company or the Company Subsidiaries is required to include any material
amount in income or make any material adjustment under Section 481 or 482 of
the Code for any taxable period ended after December 31, 1997; (vi) none of
Company or the Company Subsidiaries has disposed of any property in a
transaction being accounted for under the installment method pursuant to
Section 453 of the Code; (vii) since April 16, 1997, none of Company or the
Company Subsidiaries has distributed the stock of any corporation in a
transaction satisfying the requirements of Section 355 of the Code; (viii) none
of Company or the Company Subsidiaries has entered into a closing agreement
with any taxing authority that has effect after December 31, 1997; and (ix)
none of Company or the Company Subsidiaries has granted a power of attorney to
any person that concurrently is in effect with respect to any taxable period
that remains open under the applicable statute of limitations.
(k) Company maintained a valid election as an S
corporation for federal income tax purposes and, except as set forth in Section
3.9(k) of the Disclosure Letter, all applicable state income tax purposes for
all taxable periods from January 1, 1987 through December 31, 1994.
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3.10 Litigation.
(a) Section 3.10(a) of the Disclosure Letter (i) sets
forth all litigation, claims, suits, actions, investigations, indictments or
informations, or administrative, arbitration or other proceedings pending, or,
to the knowledge of Company, threatened (including, without limitation, grand
jury investigations, actions or proceedings and workers' compensation suits,
actions or proceedings) against Company or any Company Subsidiary and (ii)
indicates which of such matters are being defended by an insurance carrier, and
which of the matters being so defended are being defended under a reservation
of rights.
(b) Except as set forth in Section 3.10(b) of the
Disclosure Letter, there are no judgments or awards for which amounts payable
in respect thereof have not been fully satisfied or orders, injunctions,
decrees or stipulations (whether rendered by a court, administrative agency,
governmental entity or regulatory body or by arbitration, pursuant to a
grievance or other procedure) currently in effect against or relating to
Company or any Company Subsidiary. To Company's knowledge, there are no events,
facts or circumstances giving rise to any claim for indemnification from
Company or any Company Subsidiary by any present or former officer or director
of Company or any Company Subsidiary related to any act or omission prior to
the Closing by such present or former officer or director.
3.11 Material Contracts. As of the date of this Agreement, Section
3.11 of the Disclosure Letter contains a correct and complete list of the
following (the "Material Contracts"):
(a) all bonds, debentures, notes, loans, credit, loan or
securitization agreements or commitments, mortgages, indentures or guarantees
to which Company or any Company Subsidiary is a party or by which any of its
properties or assets (real, personal or mixed, tangible or intangible) is bound
involving amounts in excess of $50,000 individually or $1,000,000 in the
aggregate (other than leases to which Company or any Company Subsidiary is the
lessor);
(b) (i) all leases to which Company or any Company
Subsidiary is a lessee or by which any of its properties or assets (real,
personal or mixed, tangible or intangible) is bound involving an annual
commitment rental or other payment in excess of $100,000 individually (the
"Disclosed Leases") and (ii) all leases and loan/financing agreements and
instruments to which Company or any Company Subsidiary is a lessor or lender as
of October 29, 1998 which have not been sold, transferred or conveyed to a
non-recourse lender and which involve original equipment costs in excess of
$50,000 individually;
(c) all contracts or agreements which limit or restrict
Company, any Company Subsidiary or, to Company's knowledge, any of the
officers, key employees or business partners of Company from engaging in any
business in any jurisdiction and all contracts or agreements that limit or
restrict others from competing with Company or any Company Subsidiary in any
jurisdiction;
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(d) all contracts or agreements requiring Company or any
Company Subsidiary to register the resale of its capital stock or securities
under federal or state securities law;
(e) all agreements with non-recourse lenders to which
Company or any Company Subsidiary is a party;
(f) all contracts, agreements or arrangements (whether
written or oral) between Company or any Company Subsidiary and a business
partner or sales representative;
(g) representative samples of each type of lease,
promissory note, security agreement and related financing agreements and
instruments used by Company or any Company Subsidiary in the conduct of its
business;
(h) all agreements with vendors, manufacturers and
distributors to which Company or any Company Subsidiary is a party involving an
annual commitment or annual payment by any party to such contract or commitment
of more than $100,000 individually;
(i) all partnership, joint venture, or similar contracts
or agreements and all contracts or agreements relating to the future
disposition or acquisition of any assets or properties to which Company or any
Company Subsidiary is a party, other than dispositions or acquisitions in the
ordinary course of business consistent with past practices;
(j) all powers of attorney or comparable delegations of
authority granted by Company or any Company Subsidiary; and
(k) all existing contracts and commitments (other than
those described in subparagraphs (a), (b), (c), (d), (e), (f), (g), (h), (i)
and (j) of this Section 3.11 and the Company Benefit Plans) to which Company or
any Company Subsidiary is a party or by which its properties or assets may be
bound involving an annual commitment or annual payment by any party to such
contract or commitment of more than $100,000 individually.
True and complete copies of all Material Contracts, including all
amendments, have been made available to Parent. The Material Contracts are
valid and enforceable in accordance with their respective terms with respect to
Company and any Company Subsidiary and valid and, to the knowledge of Company,
enforceable in accordance with their respective terms with respect to any other
party to a Material Contract, in each case to the extent material to the
business and operations of Company and subject to applicable bankruptcy,
insolvency and other similar laws affecting the enforceability of creditors'
rights generally, general equitable principles and the discretion of courts in
granting equitable remedies. Except for events or occurrences, the consequences
of which, individually or in the aggregate, do not have and would not be
reasonably expected to have, individually or in the aggregate, a Material
Adverse Effect on Company, there is not under any of the Material Contracts any
existing breach, default or event of default by Company or any Company
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Subsidiary or event that with notice or lapse of time or both would constitute
a breach, default or event of default by Company or any Company Subsidiary, nor
has Company received notice of, or made a claim with respect to, any breach or
default by any other party to a Material Contract.
3.12 Securitization Facilities. Schedule 3.12 identifies each of
the principal agreements evidencing the two securitization facilities pursuant
to which Company has caused certain of its equipment leases and other chattel
paper to be conveyed to trusts for purposes of selling interests in such
chattel paper to Centre Square Funding Corporation and SunAmerica Life
Insurance Company, respectively (such agreements being collectively referred to
herein as the "Securitization Agreements" and being individually referred to
herein by the terms specified for the respective agreements in Schedule 3.12).
All representations and warranties made at any time and from time to time by
Company or any Company Subsidiary in the Securitization Agreements were true
and correct in all material respects when made or deemed to have been made
thereunder. All "Lease Contracts" and "Equipment" (as such terms are defined in
the Securitization Agreements) conveyed by Company to Company Subsidiaries
pursuant to the Equipment Purchase Agreements, and all "Lease Contracts" and
related properties and interests conveyed to the trusts under the Pooling and
Servicing Agreements, satisfy in all material respects the applicable
eligibility criteria and conditions set forth in the Securitization Agreements,
including without limitation, Section 3.02 of each Equipment Purchase Agreement
and Section 3.02 of each Certificate Purchase Agreement. Each of Company and
Company Subsidiaries that are parties to the Securitization Agreements has
performed in all material respects its obligations and observed and complied in
all material respects with those conditions and requirements applicable to it
or its properties under the Securitization Agreements. No "Trigger Event",
"Funding Period Trigger Event" or "Servicer Default" under the Pooling and
Servicing Agreements, or any other default or breach by Company or any Company
Subsidiary under the Securitization Agreements, has occurred, and neither
Company nor any Company Subsidiary has received notice from any other party to
the Security Agreements asserting or otherwise indicating that any such
"Trigger Event", "Funding Period Trigger Event", "Servicer Default" or other
default or breach has occurred. Neither Company nor any Company Subsidiary that
is a party to the Securitization Agreements has been required to repurchase any
"Lease Contracts" under the terms of the Securitization Agreements.
3.13 Registration Statement, Etc. None of the information supplied
or to be supplied by Company for inclusion or incorporation by reference in (a)
the Registration Statement to be filed by Parent with the SEC in connection
with the Parent Common Stock to be issued in the Merger (the "Registration
Statement"), and (b) the Proxy Statement (the "Proxy Statement") to be mailed
to Company's shareholders in connection with the meeting (the "Shareholders'
Meeting") to be called to consider the Merger, will, at the respective times
such documents are filed with the SEC and, in the case of the Registration
Statement, when it becomes effective, or at the time any amendment or
supplement thereto becomes effective, cause such documents to contain any
untrue statement of a material fact, or omit to state any material fact
required or necessary in order to make the statements therein not misleading;
and, in the case of the Proxy Statement, when first mailed to the shareholders
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of Company or at the time of the Shareholders' Meeting, cause the Proxy
Statement or any amendment thereof or supplement thereto to contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading. All documents
that Company is responsible for filing with the SEC and any other regulatory
agency in connection with the Merger will comply as to form in all material
respects with the provisions of applicable law and any applicable rules or
regulations thereunder, except that no representation is made by Company with
respect to statements made therein based on information supplied by Parent or
with respect to information concerning Parent or Sub which is incorporated by
reference in the Registration Statement or the Proxy Statement.
3.14 Employee Benefit Plans.
(a) For purposes of this Section 3.14, the term "Company
Benefit Plan" means any plan, program, fund, policy or contract which, through
which or under which Company or any Company ERISA Affiliate (as defined in
Section 3.14(b)) provides or has an obligation to provide benefits or
compensation to or on behalf of employees or former employees of Company or any
Company ERISA Affiliate whether or not written, including but not limited to
the following:
(i) any bonus, incentive compensation, stock option,
deferred compensation, commission, severance pay, golden parachute or other
compensation plan or rabbi trust;
(ii) any "employee benefit plan" (as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), including, but not limited to, any
multi-employer plan (as defined in Section 3(37) and Section
4001(a)(3) of ERISA), defined benefit plan, profit sharing plan, money
purchase pension plan, 401(k) plan, savings or thrift plan, or any
plan, fund or program providing for medical (including post-retirement
medical), hospitalization, accident, sickness, disability, or life
insurance benefits; and
(iii) any stock purchase, vacation, scholarship, sick days,
day care, prepaid legal services, dependent care or other fringe
benefits plans, programs or contracts.
Each Company Benefit Plan is identified in Section 3.14 of the Disclosure
Letter.
(b) For purposes of this Section 3.14 the term "Company
ERISA Affiliate" means each trade or business (whether or not incorporated)
which together with Company is treated as a single employer under Section
414(b), (c), (m) or (o) of the Code.
(c) Company and each Company ERISA Affiliate is in
compliance with the requirements prescribed by all statutes, orders and
governmental rules and regulations applicable to Company Benefit Plans. All
reports and disclosures relating to Company Benefit Plans required to be filed
with or furnished to any governmental entity, participants or beneficiaries
prior to the Closing Date have been or will be properly completed and filed or
furnished in a timely manner and
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in accordance with applicable laws, including, without limitation, Internal
Revenue Service (the "IRS"), Department of Labor (the "DOL") and Pension
Benefit Guaranty Corporation ("PBGC") Form 5500. Each Company Benefit Plan has
been administered according to its terms (except for those terms which are
inconsistent with the changes required by statutes, regulations, and rulings
for which changes are not yet required to be made, in which case the plan has
been administered in accordance with the provisions of those statutes,
regulations and rulings) and applicable law.
(d) Neither Company nor any Company ERISA Affiliate
maintains, or has at any time established or maintained, or has at any time
been obligated to make, or made, either directly or indirectly (whether by
reimbursing another employer or otherwise) contributions to or under any plan,
program or arrangement that is subject to Section 412 of the Code, Section 302
of ERISA or Title IV of ERISA, including any multi-employer plan (as defined in
Section 3(37) and Section 4001(a)(3) of ERISA). Company does not maintain, nor
has at any time established or maintained, nor has at any time been obligated
to make, or made, contributions to or under any plan which provides
post-retirement medical or health benefits with respect to former employees of
Company. There is no lien upon any property of Company or any Company ERISA
Affiliate outstanding except as required by Part 6 of Title I of ERISA pursuant
to Section 412(n) of the Code or Section 302(f) of ERISA in favor of any
Company Benefit Plan. No assets of Company or any Company ERISA Affiliate have
been provided as security for any Company Benefit Plan pursuant to Section
401(a)(29) of the Code.
(e) Company has provided to Parent a true and complete
copy of the following documents, if applicable, with respect to each Company
Benefit Plan identified in Section 3.14 of the Disclosure Letter: (1) the most
recent documents, including any insurance contracts and trust agreements,
setting forth the terms of each Company Benefit Plan, or if there are no such
documents evidencing a Company Benefit Plan, a full description of such Company
Benefit Plan, (2) the most recent ERISA summary plan description and the most
recent version of other summary of plan provisions provided to participants or
beneficiaries for each such Company Benefit Plan, (3) the annual reports filed
for the most recent three plan years and most recent financial statements or
periodic accounting or related plan assets with respect to each Company Benefit
Plan, (4) each favorable determination letter, opinion or ruling from the IRS
for each Company Benefit Plan, the assets of which are held in trust, to the
effect that such trust is exempt from federal income tax, including any
outstanding request for a determination letter and (5) each opinion or ruling
from the DOL or the PBGC with respect to any such Company Benefit Plan.
(f) Each Company Benefit Plan identified in Section 3.14
of the Disclosure Letter that is funded through a trust or insurance contract
has at all times satisfied in all material respects, by its terms and in its
operation, all applicable requirements for an exemption from federal income
taxation under Section 501(a) of the Code. Except for Company's 401(k) Plan
(the "Company 401(k) Plan"), neither Company nor any Company ERISA Affiliate
maintains or previously maintained a Company Benefit Plan which meets or was
intended to meet the requirements of Section 401(a) of
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the Code. Except as set forth in Section 3.14(f) of the Disclosure Letter, a
determination letter has been issued by the IRS to the effect that the Company
401(k) Plan qualifies under Section 401(a) of the Code and that the related
trust is exempt from taxation under Section 501(a) of the Code and such
determination letter remains in effect and has not been revoked. The Company
401(k) Plan has been tested for compliance with, and has satisfied the
requirements of, Section 401(k)(3), 401(m)(2) and 415 of the Code for each plan
year ending prior to the Closing Date.
(g) There are no actions, audits, suits or claims which
are pending or threatened against any Company Benefit Plan, any fiduciary of
any of the Company Benefit Plans with respect to the Company Benefit Plans or
against the assets of any of the Company Benefit Plans, except claims for
benefits made in the ordinary course of the operation of such plans and except
for routine actions to join a Company Benefit Plan in a divorce proceeding in
order to effect a "qualified domestic relations order" (as defined in Section
414(p) of the Code) as required under the California Family Code or other
similar state law.
(h) Company and each Company ERISA Affiliate has made full
and timely payment of all amounts required to be contributed under the terms of
each Company Benefit Plan and applicable law or required to be paid as expenses
under such Company Benefit Plan and no excise taxes are assessable as a result
of any nondeductible or other contributions made or not made to a Company
Benefit Plan. The assets of all the Company Benefit Plans which are required
under applicable laws to be held in trust are in fact held in trust and shown
on the books and records of each such trust at their fair market value, and the
assets of each such Company Benefit Plan shown at such fair market value equal
or exceed the liabilities of each such plan. The liabilities of each other
Company Benefit Plan are properly and accurately reported on the financial
statements and records of Company to the extent such reporting is required. The
assets of each Company Benefit Plan are reported at their fair market value on
the books and records of each plan.
(i) Neither Company nor any Company ERISA Affiliate is
subject to any liability, tax or penalty whatsoever to any person whomsoever as
a result of Company's or any Company ERISA Affiliate's engaging in a breach of
fiduciary duty or a prohibited transaction under ERISA or the Code, and Company
has no knowledge of any circumstances which might result in any such liability,
tax or penalty as a result of any breach of fiduciary duty under ERISA or in
any duty to indemnify any other person for any such liability.
(j) No payment required to be made to any employee
associated with Company or any Company Subsidiary as a result of the
transactions contemplated hereby under any contract or otherwise will, if made,
constitute an "excess parachute payment" within the meaning of Section 280G of
the Code.
(k) Company and each Company ERISA Affiliate have complied
with the continuation coverage requirements of Section 4980B of the Code and
ERISA Sections 601 through 608.
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(l) The consummation of the transactions contemplated
hereby will not accelerate or increase any liability under any Company Benefit
Plan or any employment agreement or contract or otherwise because of an
acceleration or increase of any of the rights or benefits to which employees of
Company or any Company ERISA Affiliate may be entitled thereunder except for
stock options granted by Company and certain employment agreements disclosed
under Section 3.17.
(m) Company has made no representations or warranties
contractually or otherwise to any client or customer of Company that Company
employees rendering services to such client or customer cannot be treated as
"leased employees" (within the meaning of Section 414(n) of the Code) of such
client or customer or that such employees would not be required to participate
under any pension benefit plan (within the meaning of Section 3(2) of ERISA) (a
"Pension Benefit Plan") of such client or customer of Company.
3.15 Property.
(a) Company and the Company Subsidiaries have good and
valid title to or valid leasehold interests in its properties reflected in the
Company Reports and the Interim Balance Sheet or acquired after July 1, 1998
(other than properties sold or otherwise disposed of in the ordinary course of
business), and all of such properties are held free and clear of all liens,
encumbrances and restrictions, except, with respect to all such properties, (a)
mortgages and liens securing debt reflected as liabilities on the Interim
Balance Sheet and (b) (i) liens for current taxes and assessments not in
default, (ii) mechanics', carriers', workmen's, repairmen's, statutory or
common law liens either not delinquent or being contested in good faith, and
(iii) liens, mortgages, encumbrances, covenants, rights of way, building or use
restrictions, easements, exceptions, variances, reservations and other matters
or limitations of any kind, if any, which either individually or in the
aggregate do not have a material adverse effect on Company's or any of the
Company Subsidiaries' use of the property affected.
(b) Company or one of the Company Subsidiaries has
physical possession of all real property, equipment and other assets which are
covered by Disclosed Leases.
(c) The structures and equipment owned or leased by each
of Company and the Company Subsidiaries are, to Company's knowledge,
structurally sound with no defects, are in good and safe operating condition
and repair and are adequate for the uses to which they are being put, except
for any such circumstances which, individually or in the aggregate, do not have
or would not reasonably be expected to have, individually or in the aggregate,
Material Adverse Effect on Company.
(d) The rights, properties and other assets presently
owned, leased or licensed by each of Company and the Company Subsidiaries and
reflected on the Interim Balance Sheet and the
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September Balance Sheet include all rights, properties and other assets
necessary to permit Company and the Company Subsidiaries to conduct their
businesses in the same manner as such businesses are currently conducted and as
they have been conducted since December 31, 1995, without any need for
replacement, refurbishment or extraordinary repair except in the ordinary
course of business consistent with past practice.
3.16 Intellectual Property; Year 2000
(a) Section 3.16(a) of the Disclosure Letter sets forth a
complete and accurate list and description of (i) all United States federal,
state and foreign patents, registered trademarks, trade names, registered
service marks, copyrights (including any registrations and applications
therefor) and all trade secrets, technology, processes, inventions and other
intellectual property owned by Company or any Company Subsidiary that are
material to the business of each of Company and the Company Subsidiaries as
conducted as of the date hereof (hereinafter the "Intellectual Property
Rights") and (ii) all United States federal, state and foreign patents,
registered trademarks, trade names, registered service marks, copyrights
(including any registrations and applications therefor) and all technology,
processes, inventions and other intellectual property licensed to Company or
any Company Subsidiary that are material to the business of each of Company and
the Company Subsidiaries as conducted as of the date hereof (hereinafter the
"Licensed Rights"). Except as specifically set forth in Section 3.16(a) of the
Disclosure Letter, (i) Company and the Company Subsidiaries own and have the
full and exclusive right to use the Intellectual Property Rights and the
Intellectual Property Rights are free of any liens, claims or encumbrances, are
not subject to any royalty bearing license, and are not subject to any other
arrangement requiring any material payment to any person or the obligation to
grant material rights to any person in exchange, (ii) the Licensed Rights are
free and clear of any material royalties or obligations of Company or the
Company Subsidiaries in excess of $50,000 per annum, and (iii) the Intellectual
Property Rights and the Licensed Rights are all those rights necessary and
material to the conduct of the business of each of Company and the Company
Subsidiaries as currently being conducted or currently proposed to be
conducted. The validity of the Intellectual Property Rights and title thereto,
and the validity of the Licensed Rights, (i) have not been questioned in any
prior litigation, (ii) are not being questioned in any pending litigation, and
(iii) to the best knowledge of Company, are not the subject(s) of any
threatened or proposed litigation. Except as specifically set forth in Section
3.16(a) of the Disclosure Letter, the business of each of Company and the
Company Subsidiaries, as now conducted, does not conflict with, nor has Company
or any Company Subsidiary received notice of any claim that such business
conflicts with, any patents, trademarks, trade names, service marks or
copyrights of any third party. The consummation of the transactions
contemplated hereby will not result in the loss or impairment of any of the
Intellectual Property Rights or any of the Licensed Rights. Each of Company and
the Company Subsidiaries does not know of any infringing use by any third party
of the Intellectual Property Rights or the Licensed Rights.
(b) Each of Company and the Company Subsidiaries owns, or
possesses valid license rights to, all computer software programs that are
material to the conduct of the business of Company and the Company
Subsidiaries. Except as listed in Section 3.16(b) of the Disclosure
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Letter, there are no infringement suits, actions or proceedings pending or, to
the best knowledge of Company, threatened against Company or any Company
Subsidiary with respect to any software owned or licensed by Company or any
Company Subsidiary, and the transactions contemplated hereby will not result in
the loss or impairment of any such ownership or license rights.
(c) (i) Neither Company nor any Company Subsidiary is
subject to any pending or threatened regulatory action, proceeding or, to the
knowledge of Company, any pending or threatened investigation concerning Year
2000 Compliance with respect to all of the services offered by Company and the
Company Subsidiaries ("Services") or the operations of Company and the Company
Subsidiaries, and, to the knowledge of Company, there is no basis for any such
regulatory action, proceeding or investigation the result of which would
reasonably be expected to have a Material Adverse Effect on Company. Company
and the Company Subsidiaries are in material compliance with all applicable
regulatory rules, regulations and requirements in regards to the Year 2000
Compliance of Company's and the Company Subsidiaries' Services and operations,
except to the extent that such non-compliance would not have a Material Adverse
Effect on Company. Except as specifically set forth in Section 3.16(c) of the
Disclosure Letter, neither Company nor any Company Subsidiary has received
notice of a claim against Company or any Company Subsidiary that any of
Company's or the Company Subsidiaries' Services are not Year 2000 Compliant
exists and, to the knowledge of Company, there is no basis for any such claim
or action. Company has furnished or made available to Parent true, correct and
complete copies of any material customer agreements or other materials in which
Company has furnished assurances as to the Year 2000 Compliance of Company's or
the Company Subsidiaries' Services, including any responses to surveys or
requests for certification of Year 2000 Compliance and letters of assurance to
customers.
(ii) All of the internal MIS systems (including hardware,
firmware, operating system software, utilities, and applications software) and
all systems used in the ordinary course of Company's and the Company
Subsidiaries' business by or on behalf of Company or the Company Subsidiaries,
including Company's and the Company Subsidiaries' payroll, accounting,
billing/receivables, customer service, human resources and e-mail systems, are
Year 2000 Compliant except to the extent any non-compliance would not have a
Material Adverse Effect on Company.
(iii) Except as specifically set forth in Section 3.16(c) of
the Disclosure Letter, either Company or the Company Subsidiaries have
contacted each material vendor of products or services and each lessor of
facilities that are material to Company or the Company Subsidiaries, and their
respective Services and operations, to request information from such vendor or
lessor as to whether it will be able to continue to furnish its products,
services or facilities to Company on and after January 1, 2000 to the extent
such vendor or lessor is obligated to do so pursuant to existing agreements.
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(iv) Except as specifically set forth in Section 3.16(c) of
the Disclosure Letter, all of Company's owned facilities in all locations
(including HVAC systems, mechanical systems, elevators, security systems, fire
suppression systems, telecommunications systems, fax machines, copy machines
and equipment) are Year 2000 Compliant.
(v) For purposes of this Agreement, Year 2000 Compliant
means that the relevant information technology is designed to be used prior to,
during and after the calendar year 2000 A.D. and the information technology
used during such time period will accurately receive, provide and process
date/time data (including, but not limited to, calculating, comparing and
sequencing) from, into and between the twentieth and twenty-first centuries
(including the years 1999, 2000 and leap year calculations), and will not
malfunction, cease to function or provide invalid or incorrect results as a
result of date/time data.
(vi) Company has furnished or made available to Parent with
a true, correct and complete copy of any internal memoranda, budget plans,
forecasts or reports concerning the Year 2000 Compliance of the Services,
operations, systems, supplies, and facilities of Company, the Company
Subsidiaries and Company's vendors of which Company has knowledge.
3.17 Labor Relations. Except to the extent set forth in Section
3.17 of the Disclosure Letter:
(a) There are no agreements or arrangements on behalf of
any officer, director or employee providing for payment or other benefits to
such person contingent upon the execution of this Agreement, the Closing or a
transaction involving a change of control of Company. There are no collective
bargaining agreements to which Company or any Company Subsidiary is a party.
(b) During the five years immediately preceding the date
hereof, none of Company or the Company Subsidiaries has experienced any
organized slow down, work interruption, strike or work stoppage. There are no
existing or, to Company's knowledge, threatened labor disputes. None of Company
or the Company Subsidiaries has failed to pay when due any wages, bonuses,
commissions, benefits, taxes, penalties or assessments or other monies, owed
to, or arising out of the employment of or any relationship or arrangement
with, any officer, director, employee, sales representative, business partner,
contractor or other consultant or agent. Neither Company nor any Company
Subsidiary has taken any action that would constitute a "Mass Layoff" or "Plant
Closing" within the meaning of the Worker Adjustment and Retraining
Notification ("WARN") Act or would otherwise trigger notice requirements or
liability under any state or local plant closing notice law, and to the extent
any liability arises between the date of this Agreement and the Closing Date as
a result of employment actions of Company or the Company Subsidiaries, Company
and the Company Subsidiaries will be solely responsible therefor.
(c) Each of Company and the Company Subsidiaries is in
compliance in all material respects with all applicable laws respecting
employment and employment practices, terms
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and conditions of employment, wages and hours, occupational safety and health,
and is not engaged in any unfair labor or unfair employment practices.
(d) There is no unfair labor practice charge or complaint
or any other matter against (or to the knowledge of Company, involving) Company
or any Company Subsidiary pending or, to the knowledge of Company, threatened
before the National Labor Relations Board or any other governmental authority
and none of Company's or the Company Subsidiaries' employees as employees of
Company or the Company Subsidiaries are or have been represented by a labor
organization that was NLRB certified.
(e) No certification or decertification question relating
to collective bargaining units at the premises of Company or any of the Company
Subsidiaries exists or has existed within the past five years.
(f) There are no investigations, administrative
proceedings or formal complaints of discrimination (including discrimination
based upon sex, age, marital status, race, national origin, sexual preference,
disability, handicap or veteran status) pending, or to the knowledge of
Company, threatened before the Equal Employment Opportunity Commission or any
federal, state or local agency or court against or involving Company or any
Company Subsidiary. No discrimination and/or retaliation claim is pending or,
to the knowledge of Company, threatened against Company or the Company
Subsidiaries under the 1866, 1877, 1964 or 1991 Civil Rights Acts, the Equal
Pay Act, the Age Discrimination in Employment Act, as amended, the Americans
with Disabilities Act, the Family and Medical Leave Act, the Fair Labor
Standards Act, ERISA, or any other Federal Law or any comparable state or local
fair employment practices act regulating discrimination in the workplace, and
no wrongful discharge, libel, slander or other claim under any state law is
pending or, to the knowledge of Company, threatened against Company or any
Company Subsidiary that rises out of the employment or contractor relationship
with respect to any employee or contractor or the termination of any such
relationship.
(g) There are no citations, investigations, administrative
proceedings or formal complaints of violations of local, state or federal
occupational safety and health laws pending, or to the knowledge of Company,
threatened before the Occupational Safety and Health Review Commission or any
federal, state or local agency or court against or involving Company or any
Company Subsidiary.
(h) Section 3.17(h) of the Disclosure Letter sets forth a
true and correct list of all employees employed by each of Company and the
Company Subsidiaries at the date of this Agreement, together with their
respective job titles, dates of hire and compensation.
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(i) No agreement, arbitration or court decision or
governmental order in any way limits or restricts any of Company, any Company
Subsidiary or Parent from relocating or closing any of the operations of
Company or any of the Company Subsidiaries.
(j) If Company or any of the Company Subsidiaries is a
Federal, State or local contractor obligated to develop and maintain an
affirmative action plan, no discrimination claim, show-cause notice,
conciliation proceeding, sanctions or debarment proceedings is pending or has,
to the knowledge of Company, been threatened against Company or the Company
Subsidiaries with the Office of Federal Contract Compliance Programs ("OFCCP")
or any other Federal agency or any comparable state or local agency or court
and no desk audit or on-site review is in progress.
(k) No workers' compensation or retaliation claim is
pending against Company or the Company Subsidiaries in excess of $250,000 in
the aggregate and Company maintains adequate insurance with respect to workers'
compensation claims pursuant to insurance policies that are currently in force,
or has accrued an adequate liability for such obligations, including, without
limitation, adequate accruals with respect to accrued but unreported claims and
retroactive insurance premiums.
3.18 No Violation of Law. The business and operations of Company
and the Company Subsidiaries have been conducted in compliance in all material
respects with all applicable laws, ordinances, regulations and orders of all
governmental entities and other regulatory bodies (including, without
limitation, laws, ordinances, regulations and orders relating to fair credit
practices, commercial finance companies, zoning, environmental matters,
employment law and the safety and health of employees), except where
noncompliance does not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company. Except
as set forth in Section 3.18 of the Disclosure Letter, (i) neither Company nor
any Company Subsidiary has been charged with or, to the knowledge of Company,
is now under investigation with respect to, a violation in any material respect
of any applicable law, regulation, ordinance, order or other requirement of a
governmental entity or other regulatory body, and (ii) Company and the Company
Subsidiaries have filed all reports required to be filed with any governmental
entity or other regulatory body on or before the date hereof except for reports
the failure to file which does not have and would not reasonably be expected to
have, individually or in the aggregate, a Material Adverse Effect on Company.
Company and the Company Subsidiaries have all permits, certificates, licenses,
approvals and other governmental authorizations required in connection with the
operation of the business of Company and the Company Subsidiaries, except for
permits, certificates, licenses, approvals and other governmental
authorizations the failure of which to have does not and would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect on Company.
3.19 Environmental Matters. Except as set forth in Section 3.19 of
the Disclosure Letter and except for those matters which would not reasonably
be expected, individually or in the aggregate, to have a Material Adverse
Effect on Company:
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(a) Each of Company and the Company Subsidiaries
possesses, and is in compliance with, all permits, licenses and government
authorizations and has filed all notices and registrations that are required
under local, state and federal laws and regulations relating to protection of
the environment, natural resources, health, safety, waste management, pollution
control, product registration and/or Hazardous Materials (as defined below in
this Section 3.19) ("Environmental Laws") and is in compliance with all
applicable limitations, restrictions, conditions, standards, prohibitions,
requirements, obligations, schedules and timetables contained in those
Environmental Laws or contained in any law, regulation, code, plan, order,
decree, judgment, notice, permit or demand letter issued, entered, promulgated
or approved thereunder.
(b) Neither Company nor any Company Subsidiary has
received written notice of any actual or threatened liability under the Federal
Comprehensive Environmental Response, Compensation and Liability Act ("CERCLA")
or any similar state or local statute or ordinance or any other Environmental
Law from any governmental agency or any third party relating to the release or
threatened release of any Hazardous Material to any environmental medium or the
cleanup or investigation of any Hazardous Material found in any environmental
medium.
(c) Neither Company nor any Company Subsidiary has entered
into or agreed to enter into or is in negotiations with respect to any consent
decree or order, and neither Company nor any Company Subsidiary is subject to
any judgment, decree or judicial or administrative order relating to compliance
with, or the investigation or cleanup of Hazardous Materials under, any
Environmental Laws.
(d) Neither Company nor any Company Subsidiary has
received within the past five years any notice of violation or been subject to
any administrative or judicial proceeding alleging violation of applicable
Environmental Laws.
(e) Neither Company nor any Company Subsidiary is subject
to any claim, obligation, liability (whether based on strict liability or
otherwise), loss, damage or expense of any kind or nature, contingent or
otherwise, incurred or imposed or based upon any provision of any Environmental
Law and arising out of any act or omission of Company or any Company
Subsidiary, or any of their employees, agents or representatives or arising out
of the ownership, use, control or operation by Company or any Company
Subsidiary of any plant, facility, site, area or property (including, without
limitation, any plant, facility, site, area or property currently or previously
owned or leased or used by or on behalf of Company or any Company Subsidiary)
from which any Hazardous Materials were or are being released into the
environment (the term "release" meaning any actual or threatened spilling,
leaking, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping or disposing into the environment (including the
abandonment of any barrels, containers, tanks or other closed receptacles
containing any Hazardous Material), and the term "environment" meaning any
surface or ground water, drinking water supply, soil, surface or subsurface
strata or medium, or the ambient air).
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(f) Company has provided Parent with true, correct and
complete copies of all documents of Company and the Company Subsidiaries
relating to environmental matters or matters otherwise regulated under any
applicable Environmental Law. Neither Company nor any Company Subsidiary has
paid any fines, penalties or assessments for violations of Environmental Laws
within the past five years.
(g) None of the real property leased or occupied by
Company or any Company Subsidiary or any other assets, improvements or
equipment of Company or any Company Subsidiary contains any asbestos-containing
material (other than non-friable floor tile, roofing material and drywall
material), polychlorinated biphenyls ("PCBs") or underground storage tanks and
to the knowledge of Company and any Company Subsidiary, never contained any
PCBs or underground storage tanks.
(h) Company has provided Parent with copies of all work
place or worker exposure measurements made by or on behalf of Company or any
Company Subsidiary, including, without limitation, all work place or worker
exposure measurements for particulates, Occupational Safety and Health
Administration ("OSHA") hazardous chemicals and Hazardous Materials. At no time
since December 31, 1992, have conditions in the work place resulted in an
exceedance or a violation of any OSHA permissible exposure level for workers of
Company or any Company Subsidiary or of any similar state or local statute,
ordinance or regulation intended to protect workers. Company has established
and is in full compliance with its OSHA Hazard Communication Program and is in
full compliance with all other applicable OSHA standards, including, without
limitation, the blood borne pathogens standard.
(i) There is no radon or regulated radioactive materials
present on any real property leased or occupied by Company or any Company
Subsidiary or any other assets, improvements, or equipment of Company or any
Company Subsidiary.
(j) There is not now and, to the knowledge of Company and
any Company Subsidiary, never has been, in or at any real property leased or
occupied by Company or any Company Subsidiary, or any portion thereof any: (1)
surface impoundment, lagoon, containment facility or other unit regulated under
any applicable Environmental Law, for the temporary or permanent storage,
treatment or disposal of Hazardous Materials or (2) landfill or solid waste
disposal area.
As used in this Section 3.19, the term "Hazardous Materials" means any waste,
pollutant, hazardous substance, toxic, ignitable, reactive or corrosive
substance, hazardous waste, special waste, industrial substance, by-product,
process intermediate product or waste, petroleum or petroleum-derived substance
or waste, chemical liquids or solids, liquid or gaseous products, or any
constituent of any such substance, chemical or waste, the generation, use,
handling, recycling, reclamation, transportation, release, treatment, storage
or disposal of which by Company or any Company Subsidiary is or has been in any
way governed by or subject to any applicable Environmental Law.
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3.20 Insurance Policies. Section 3.20 of the Disclosure Letter sets
forth a complete and accurate list and description (including the amount of
coverage provided thereunder) of all insurance policies in force naming
Company, any Company Subsidiary or employees thereof as an insured or
beneficiary or as a loss payable payee and for which Company or any Company
Subsidiary has paid or is obligated to pay all or part of the premiums. Neither
Company nor any Company Subsidiary has received notice of any pending or
threatened cancellation or premium increase (retroactive or otherwise) with
respect thereto, and each of Company and the Company Subsidiaries is in
compliance in all material respects with all conditions contained therein
including, without limitation, the timely payment of all premiums due and
payable thereunder. There are no pending claims against such insurance by
Company or any Company Subsidiary as to which insurers are defending under
reservation of rights or have denied liability, and there exists no claim under
such insurance that has not been properly filed by Company or any Company
Subsidiary.
3.21 Absence of Certain Business Practices. None of Company, the
Company Subsidiaries or, to Company's knowledge, any officer, employee or agent
of Company or any of the Company Subsidiaries or any other person acting on its
behalf, has, directly or indirectly, given or agreed to give any gift or
similar benefit (other than with respect to bona fide payments for which
adequate consideration has been given) to any customer, vendor, governmental
employee or other person who is or may be in a position to help or hinder the
business of Company or any of the Company Subsidiaries (or assist Company or
any of the Company Subsidiaries in connection with any actual or proposed
transaction) (a) which might subject Company or any of the Company Subsidiaries
to any damage or penalty in any civil, criminal or governmental litigation or
proceeding, (b) which, if not continued in the future, would have or would
reasonably be expected to have a Material Adverse Effect on Company or which
would or would reasonably be expected to subject Company or any of the Company
Subsidiaries to suit or penalty in any private or governmental litigation or
proceeding, (c) for any of the purposes described in Section 162(c) of the
Code, or (d) for establishment or maintenance of any concealed fund or
concealed bank account.
3.22 Accounts Receivable and Net Investment in Direct Finance
Leases and Loans: Restricted Cash.
(a) All accounts receivable and net investment in direct
finance leases and loans of Company and the Company Subsidiaries which are
reflected in the September Balance Sheet (i) are valid, existing and
collectible in a manner consistent with Company's (or the Company
Subsidiaries') past practice without resort to legal proceedings or collection
agencies, except where the failure to be so valid, existing and collectible
does not have and would not reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company, (ii) represent monies due
in the ordinary course of business and (iii) are not subject to any refunds or
adjustments or any defenses, rights of set-off, assignment, restrictions,
security interests or other encumbrances. Section 3.22(a) of the Disclosure
Letter sets forth all accounts receivable and net investment in direct finance
leases and loans, the scheduled payments under which were more than
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60 days past due at September 30, 1998. Neither Company nor any Company
Subsidiary has ever factored any of its accounts receivable, excluding direct
finance lease and loan receivables.
(b) Since the date of the Interim Balance Sheet, the
amount of cash or cash equivalents of Company and the Company Subsidiaries
classified on the Interim Balance Sheet as "restricted cash" has not decreased
and such restricted cash equals or exceeds the amount required to be reserved
by Company and the Company Subsidiaries under the Securitization Agreements.
3.23 Transactions with Affiliates. Except as set forth in Section
3.23 of the Disclosure Letter, no director, officer or other "affiliate" or
"associate" (as such terms are defined in Rule 12b-2 under the Exchange Act) of
Company or any Company Subsidiary or, to Company's knowledge, any person with
whom any such director, officer or other affiliate or associate has any direct
or indirect relation by blood, marriage or adoption, or any entity in which any
such director, officer or other affiliate or associate, owns any beneficial
interest (other than a publicly held corporation whose stock is traded on a
national securities exchange or in the over-the-counter market and less than 1%
of the stock of which is beneficially owned by all such persons) has any
interest in (i) any contract, arrangement or understanding with Company or any
Company Subsidiary, or relating to the business or operations of Company or any
Company Subsidiary, (ii) any loan, arrangement, understanding, agreement or
contract for or relating to indebtedness of Company or any Company Subsidiary,
or (iii) any property (real, personal or mixed), tangible, or intangible, used
or currently intended to be used in, the business or operations of Company or
any Company Subsidiary.
3.24 Fairness Opinion. The Board of Directors of Company has
received an opinion dated the date hereof from Piper Jaffray Inc. to the effect
that as of such date the consideration to be received by the holders of Company
Common Stock in the Merger is fair, from a financial point of view, to such
shareholders.
3.25 Antitakeover Statutes; Shareholders' Rights Plan. Each of
Company and the Board of Directors of Company has taken all action required to
be taken by it in order to exempt this Agreement and the Shareholders' Option
Agreement and the transactions contemplated hereby and thereby from, and this
Agreement and the Shareholders' Option Agreement and the transactions
contemplated hereby and thereby are exempt from the requirements of, any
"moratorium", "control share", "fair price", "affiliate transaction", "business
combination" or similar or other antitakeover laws and regulations of any
state. Company does not have a "shareholders' rights plan", "poison pill" or
similar plan or arrangement.
3.26 Board Recommendations. The Board of Directors of Company, at a
meeting duly called and held, has (i) determined that this Agreement and the
transactions contemplated hereby (including the Merger) are fair to and in the
best interests of the shareholders of Company, and (ii) resolved to recommend
that the holders of the shares of capital stock of Company entitled to vote
thereon approve this Agreement and the transactions contemplated hereby
(including the Merger).
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3.27 Brokers and Finders. Neither Company nor any of the Company
Subsidiaries, nor any of their respective officers, directors or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for Company or any of the Company
Subsidiaries in connection with this Agreement, the Shareholders' Option
Agreement or any of the transactions contemplated hereby or thereby, except
that Company has retained Credit Suisse First Boston Corporation and Piper
Jaffray Inc. as its financial advisors, whose fees and expenses will be paid by
Company. Company has previously delivered to Parent complete copies of the
engagement letters and all other agreements entered into by Company with each
of Credit Suisse First Boston Corporation and Piper Jaffray Inc.
3.28 Merger. Neither Company nor any Company Subsidiary has taken
any action or failed to take any action which action or failure to take action
would jeopardize the Merger as a reorganization within the meaning of Section
368(a) of the Code (including, without limitation, any distribution of property
or other transaction that would cause Company not to hold "substantially all of
its properties", within the meaning of Section 368(a)(2)(E)(i) of the Code,
after the Merger).
3.29 Voting Requirements. The affirmative vote of the holders of a
majority of the outstanding shares of Company Common Stock and the affirmative
vote of the holders of two-thirds (2/3) of the outstanding shares of the Series
A Shares, voting as a class with respect to this Agreement and the Merger, are
the only vote of the holders of any class or series of Company's capital stock
necessary to approve this Agreement, the Merger and the transactions
contemplated by this Agreement and the Merger.
3.30 No Existing Discussions. Prior to the date hereof, Company has
engaged in an auction process pursuant to which it, directly and through its
financial advisors, has discussed with other parties the possibility of
consummating a transaction which was the subject of an Acquisition Proposal
from such parties. As of the date hereof, Company has terminated all such
discussions and is not engaged, directly or indirectly, in any negotiations or
discussions with any other party with respect to an Acquisition Proposal.
3.31 Representations and Warranties of Identified Shareholders. As
an inducement to Parent and Sub to enter into this Agreement and consummate the
transactions contemplated hereby, and subject to Section 8.11 hereof, each
Identified Shareholder hereby severally, and not jointly, represents and
warrants to Parent and Sub as follows:
(a) This Agreement has been duly executed and delivered by
him, and the provisions of Sections 3.31, 5.15, 5.18, 6.3(c)(ii), and Article 8
hereof including, without limitation, Section 8.11 constitute his valid and
binding obligations, enforceable against him in accordance with their terms,
except as may be limited by bankruptcy, insolvency, moratorium or other similar
laws
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affecting or relating to the enforcement of creditors' rights generally and
subject to general principles of equity.
(b) The execution and delivery of this Agreement and the
fulfillment of his obligations under the provisions of Section 3.31, the last
sentence of 5.15, 5.18, 6.3(c)(ii), and Article 8 hereof including, without
limitation, Section 8.11 do not and will not (i) violate, conflict with, result
in a breach of any provision of, constitute a default (or an event that, with
notice or lapse of time or both, would constitute a default) under any of the
terms, conditions or provisions of any note, bond, mortgage, indenture, deed of
trust, license, lease, agreement or other instrument or obligation to which he
is a party, or by which he may be bound, or to which he or any of his
properties or assets may be subject or (ii) violate or conflict with any
judgment, ruling, order, writ, injunction or decree, or any statute, rule or
regulation applicable to him or any of his properties or assets.
(c) He has reviewed the representations and warranties of
Company set forth herein and, to his knowledge, such representations and
warranties are accurate and correct in all material respects.
(d) The representations and warranties of such Identified
Shareholder set forth in the Shareholders' Option Agreement are accurate and
correct.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF PARENT
As an inducement to Company to enter into this Agreement and
consummate the transactions contemplated hereby, Parent hereby represents and
warrants to Company as follows:
4.1 Organization, Good Standing and Power.
(a) Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of New York and has
all requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Parent is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties make such qualification or licensing necessary, except where the
failure to be so qualified or licensed or to be in good standing does not have
or would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent (as defined below). Parent has delivered to
Company complete and correct copies of its articles of incorporation and bylaws
and all amendments thereto to the date hereof that have been requested by
Company. As used in this Agreement, the phrase "Material Adverse Effect on
Parent" means a material adverse effect on (a) the condition (financial or
otherwise), business, assets, liabilities or results of operations of Parent
and its subsidiaries taken as a whole or (b) a
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material adverse effect on the ability of Parent or Sub to consummate the
transactions contemplated by this Agreement.
(b) Sub is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and has all
requisite corporate power and authority to own, lease and operate its
properties and to carry on its business as now being conducted. Sub is duly
qualified or licensed to do business and is in good standing in each
jurisdiction in which the nature of its business or the ownership or leasing of
its properties make such qualification or licensing necessary, except where the
failure to be so qualified or licensed or to be in good standing does not have
or would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Parent. Sub has delivered to Company complete and
correct copies of its certificate of incorporation and bylaws and all
amendments thereto to the date hereof that have been requested by Company.
4.2 Capitalization. The authorized capital stock of Parent
consists of 1.2 billion shares of Common Stock, par value $.60 per share, of
which, as of October 30, 1998, 454,435,465 shares were issued and outstanding.
All of the shares of Parent Common Stock to be issued in exchange for Company
Common Stock at the Effective Time in accordance with this Agreement will be,
when so issued, duly authorized, validly issued, fully paid and nonassessable
and, except as set forth in Section 4.2 of the Disclosure Letter, free of
preemptive rights. Parent owns all of the outstanding capital stock of Sub.
4.3 Authority; Enforceability. Each of Parent and Sub has the
corporate power and authority to enter into this Agreement and to consummate
the transactions contemplated hereby. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of each of
Parent and Sub, and this Agreement has been duly executed and delivered by
Parent and Sub and constitutes the valid and binding obligation of each such
party, enforceable against it in accordance with its terms, except as may be
limited by bankruptcy, insolvency, moratorium or other similar laws affecting
or relating to the enforcement of creditors' rights generally and subject to
general principles of equity.
4.4 Non-Contravention; Consents.
(a) Except as set forth in Section 4.4(a) of the
Disclosure Letter, neither the execution, delivery and performance by Parent or
Sub of this Agreement, nor the consummation by Parent or Sub of the
transactions contemplated hereby, nor compliance by Parent or Sub with any of
the provisions hereof, will:
(i) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event that, with notice or
lapse of time or both, would constitute a default)
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under, result in the termination, cancellation or expiration of,
accelerate the performance required by, or result in a right of
termination or acceleration, or the creation of any lien, security
interest, charge or encumbrance upon any of the properties or assets
of Parent or Sub, under any of the terms, conditions or provisions of,
(x) its respective organizational documents, or (y) any note, bond,
mortgage, indenture, deed of trust, license, lease, agreement or other
instrument or obligation to which Parent or any of its subsidiaries is
a party, or by which Parent or any of its subsidiaries may be bound,
or to which Parent or any of its subsidiaries or the properties or
assets of any of them may be subject, and that has or would reasonably
be expected to have, in any such event specified in this clause (y),
individually or in the aggregate, a Material Adverse Effect on Parent;
or
(ii) subject to compliance with the statutes and
regulations referred to in Section 4.4(b), violate any judgment,
award, ruling, order, writ, injunction, decree, or any statute, rule
or regulation applicable to Parent or any of its subsidiaries or any
of their respective properties or assets where such violation has or
would reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Parent.
(b) Except as set forth in Section 4.4(b) of the
Disclosure Letter and other than notices, filings, authorizations, exemptions,
consents or approvals, the failure of which to give or obtain does not have and
would not reasonably be expected to have, individually or in the aggregate, a
Material Adverse Effect on Parent, no notice to, filing with, authorization of,
exemption by, or consent or approval of, any governmental authority or other
regulatory body is necessary for the consummation by Parent or Sub of the
transactions contemplated by this Agreement.
4.5 SEC Reports.
(a) Parent has heretofore made available to Company true
copies of all reports, proxy statements or information statements and all other
documents, together with any amendments required to be made thereto, required
to be filed with the SEC under the Exchange Act (collectively, the "Parent
Reports"), together with all exhibits thereto, that Company has requested.
(b) All of the financial statements included in the Parent
Reports (which are collectively referred to herein as the "Parent Consolidated
Financial Statements") fairly presented the consolidated financial position of
Parent and its subsidiaries as of the dates mentioned and the consolidated
results of operations, changes in shareholders' equity and cash flows for the
periods then ended in conformity with GAAP applied on a consistent basis
(subject to any exceptions as to consistency specified therein or as may be
indicated in the notes thereto or in the case of the unaudited statements, as
may be permitted by Form 10-Q of the SEC and subject, in the case of unaudited
statements, to normal, recurring audit adjustments).
(c) As of their respective dates, the Parent Reports
complied in all material respects with all applicable rules and regulations
promulgated by the SEC and did not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
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necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.6 Registration Statement, Etc. None of the information supplied
or to be supplied by Parent for inclusion or incorporation by reference in (a)
the Registration Statement and (b) the Proxy Statement will, at the respective
times such documents are filed with the SEC, and, in the case of the
Registration Statement, when it becomes effective, or at the time any amendment
or supplement thereto becomes effective, cause such documents to contain any
untrue statement of a material fact, or omit to state any material fact
necessary in order to make the statements therein not misleading, and, in the
case of the Proxy Statement, when first mailed to the shareholders of Company,
or at the time of the Shareholders' Meeting, cause the Proxy Statement or any
amendment thereof or supplement thereto to contain any untrue statement of a
material fact, or omit to state any material fact necessary in order to make
the statements therein, in light of the circumstances under which they were
made, not misleading. All documents that Parent is responsible for filing with
the SEC and any other regulatory agency in connection with the Merger will
comply as to form in all material respects with the provisions of applicable
law, except that no representation is made by Parent with respect to statements
made therein based on information supplied by Company or with respect to
information concerning Company which is incorporated by reference in the
Registration Statement or the Proxy Statement.
4.7 Litigation. Except as set forth in the Parent Reports, there
are no litigation, claims, suits, actions, investigations, indictments or
informations, or administrative, arbitration or other proceedings pending, or,
to the knowledge of Parent, threatened, against Parent or any subsidiary of
Parent which has or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Parent.
4.8 No Violation of Law. Except as set forth in the Parent
Reports, the business and operations of Parent and its subsidiaries have been
conducted in compliance with all applicable laws, ordinances, regulations and
orders of all governmental entities and other regulatory bodies (including,
without limitation, laws, ordinances, regulations and orders relating to
zoning, environmental matters and the safety and health of employees), except
where the failure to be in compliance does not have and would not reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect
on Parent.
4.9 Brokers and Finders. Neither Parent nor any of its
subsidiaries, nor any of their respective officers, directors or employees, has
employed any broker or finder or incurred any liability for any financial
advisory fees, brokerage fees, commissions, or finder's fees, and no broker or
finder has acted directly or indirectly for Parent or any of its subsidiaries,
in connection with this Agreement, the Shareholder's Option Agreement or any of
the transactions contemplated hereby or thereby.
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4.10 Merger. Neither Parent nor any of its subsidiaries has taken
any action or failed to take any action which action or failure to take action
would jeopardize the Merger as a reorganization within the meaning of Section
368(a) of the Code.
ARTICLE 5
CONDUCT AND TRANSACTIONS PRIOR TO
EFFECTIVE TIME; CERTAIN COVENANTS
5.1 Access and Information. Upon reasonable notice, each of
Company and Parent shall (and Company shall cause the Company Subsidiaries to)
give to the other and to the respective accountants, counsel and other
representatives of such other party reasonable access during normal business
hours throughout the period prior to the Effective Time to all of its and the
Company Subsidiaries' properties, books, contracts, commitments and records
(including tax returns and insurance policies) and shall permit them to consult
with its and the Company Subsidiaries' respective officers, employees,
auditors, attorneys and agents; provided, however, that any such investigation
shall be conducted in such a manner as not to interfere unreasonably with the
business or operations of the other party or the Company Subsidiaries. All
confidential information provided pursuant to this Section 5.1 will be subject
to the Confidentiality Agreements, dated, respectively, as of August 12, 1998
and November 9, 1998 (the "Confidentiality Agreements"), between Company and
Parent.
5.2 Conduct of Business Pending Merger.
(a) Company agrees that from the date hereof to the
Effective Time, except as contemplated by this Agreement or to the extent that
Parent shall otherwise consent in writing, Company and the Company Subsidiaries
will operate their businesses only in the ordinary course in the same manner as
previously conducted and not engage in any new line of business or enter into
any agreement, transaction or activity or make any commitment except in the
ordinary course of business consistent with past practices or as expressly
permitted by this Section 5.2; and, consistent with such operation, will use
all commercially reasonable efforts consistent with past practices to preserve
their business organizations intact, to keep available to them the goodwill of
their customers, vendors, business partners and others with whom business
relationships exist to the end that their goodwill and ongoing business shall
not be impaired at the Effective Time, and will further exercise all
commercially reasonable efforts to maintain their existing relationships with
their employees in general.
(b) Company agrees that from the date hereof to the
Effective Time, except as otherwise consented to by Parent in writing, (i)
neither it nor any Company Subsidiary will change any provision of its Articles
of Incorporation or Bylaws or similar governing documents, (ii) neither it nor
any Company Subsidiary will make, declare or pay any dividend or other
distribution, and (iii) neither it nor any Company Subsidiary will make any
distribution or directly or indirectly sell,
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issue, redeem, purchase or otherwise acquire, any shares of its outstanding
capital stock, change the number of shares of its authorized or issued capital
stock or issue, grant any option, warrant, call, commitment, subscription,
right to purchase or agreement of any character relating to its authorized or
issued capital stock or any securities convertible into shares of such stock or
otherwise make any change in its capital structure; provided, however, that
nothing set forth in this Section 5.2(b) shall be deemed to restrict the
issuance by Company of Company Common Stock pursuant to the exercise of any of
the Company Options or warrants disclosed in Section 3.3 of the Disclosure
Letter in accordance with the terms thereof as in effect on the date hereof or
upon conversion of the Series A Shares in accordance with the terms of the
Certificate of Determination and Subscription Agreement relating thereto as in
effect on the date hereof.
(c) Without limiting the undertakings of Company pursuant
to Section 5.2(a) and 5.2(b), Company agrees that from the date hereof to the
Effective Time it will not take, or permit any Company Subsidiary to take, any
of the following actions, except to the extent consented to by Parent in
writing:
(i) (A) create, incur or assume any long-term debt
(including obligations in respect of capital leases which individually
involve annual payments in excess of $100,000) or, except in the
ordinary course of business under existing lines of credit or existing
Securitization Facilities, create, incur or assume any short-term debt
for borrowed money, (B) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person or entity, except in the
ordinary course of business and consistent with past practice, (C)
make any loans or advances to any other person, except in the ordinary
course of business and consistent with past practice provided,
however, that in no event shall Company or any Company Subsidiary make
any loan or advance to any person in an amount in excess of $500,000
that is not committed by a third-party to be purchased by such party
on a non-recourse basis, (D) make any capital contributions to, or
investments in, any person, or (E) make any capital expenditure
involving in excess of $100,000 in the case of any single expenditure
or $300,000 in the case of all capital expenditures;
(ii) sell, transfer, convey, assign, mortgage or pledge any
of its properties or assets involving amounts individually in excess
of $100,000 or in the aggregate in excess of $250,000, except in the
ordinary course of business consistent with past practice;
(iii) take any action to (x) amend or terminate any Company
Benefit Plan, (y) implement a general increase in the compensation or
benefits of its employees or to increase the compensation payable to
its directors, officers or key employees involving in the aggregate in
excess of $30,000, adopt any other plan, program, arrangement or
practice providing new or increased benefits or compensation to its
employees including, without
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limitation, severance benefits or benefits payable in connection with
a change of control transaction involving Company;
(iv) amend, cancel, terminate or renew or agree to the
amendment, cancellation, termination or renewal of any Material
Contract or enter into any new Material Contract other than (x) the
amendment of any Material Contract with a Business Partner identified
pursuant to Section 3.11(f) to effect the terms set forth in the form
of amendment previously agreed to by Company and Parent and (y) such
actions taken with respect to a Material Contract with a non-recourse
lender that do not involve, provide for or relate to a funding
commitment or obligation on the part of Company;
(v) enter into any negotiation with respect to any
collective bargaining agreement;
(vi) make any change in any accounting methods or any
material change in any systems of internal accounting controls or
lease portfolio servicing practices, except as may be appropriate to
conform to changes in generally accepted accounting principles;
(vii) pay, loan or advance (other than the payment of
compensation, directors' fees or reimbursements of expenses in the
ordinary course of business and under any existing agreements
identified in Section 3.23 of the Disclosure Letter) any amount to, or
sell, transfer or lease any properties or assets (real, personal or
mixed, tangible or intangible) to, or enter into any agreement or
arrangement with, any of its officers or directors or any "affiliate"
or "associate" of any of its officers or directors (as such terms are
defined in Rule 405 promulgated under the Securities Act) or any
employee, consultant or contractor;
(viii) acquire any interest in or form or commence the
operations of any business or any corporation, partnership, joint
venture, marketing arrangement, association or other business
organization or division thereof;
(ix) make any Tax election, or settle or compromise any Tax
liability that Company has contested upon audit;
(x) pay, discharge, settle or satisfy any claims,
litigation, liabilities or obligations (whether absolute, accrued,
asserted or unasserted, contingent or otherwise) involving amounts
individually in excess of $100,000 or in the aggregate in excess of
$250,000, other than the payment, discharge or satisfaction of
liabilities when due (i) reflected or reserved against in, or
contemplated by, the financial statements (or the notes thereto) of
Company included in the Company Reports or (ii) incurred since June
30, 1998 in the ordinary course of business consistent with past
practice and in accordance herewith;
(xi) modify its credit approval/declination criteria and
practices in any material respect;
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(xii) fail to perform in any material respect its
obligations under any Material Contract (except those being contested
in good faith through appropriate proceedings or procedures);
(xiii) fail to use all commercially reasonable efforts to
maintain in full force and effect and in the same amounts policies of
insurance comparable in amount and scope of coverage to that now
maintained by Company and the Company Subsidiaries;
(xiv) fail to service, in its capacity as servicer under the
Securitization Facilities, the lease portfolios subject to such
Securitization Facilities in the ordinary course of business
consistent with past practice;
(xv) fail to use all commercially reasonable efforts to
continue to collect its accounts receivable and lease and loan
payments due under the leases and loans subject to the Securitization
Facilities or held by Company in the ordinary course of business
consistent with past practice;
(xvi) fail to prepare and file all federal, state, local and
foreign returns for Taxes and other Tax reports, filings and
amendments thereto required to be filed by it, fail to provide to
Parent, copies of all federal income tax returns for Parent's review
and approval prior to the filing thereof, which review and approval
shall not interfere with the timely filing of such returns, as well as
a copy of the calendar setting forth the filing deadlines of all other
tax returns, or fail to allow Parent, at its request, to review all
tax returns at Company's office prior to the filing thereof, which
review and approval shall not interfere with the timely filing of such
returns;
(xvii) fail to use all commercially reasonable efforts to
maintain any federal, state, local or foreign license required to
conduct its operations;
(xviii) hire any (x) additional employees, other than such
new employees whose annual compensation and benefits to not,
collectively, involve payments by Company or any Company Subsidiary in
excess of $300,000 or (y) additional business partners, other than
business partners who enter into with Company a business partner
agreement in the form previously agreed to by Parent and Company; or
(xix) enter into any agreement to take any of the actions
described in Section 5.2(b) or elsewhere in this Section 5.2(c).
If Parent requests that Company or any Company Subsidiary take any action or
refrain from taking action between the date of this Agreement and the Closing
Date, other than (x) taking actions which Company has agreed (for itself and
for the Company Subsidiaries) to take pursuant to the terms of
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this Agreement or (y) refraining from taking any action which may not be taken
by Company or any Company Subsidiary without the prior written consent of
Parent pursuant to the terms of this Agreement, Company shall take or refrain,
or cause any Company Subsidiary to take or refrain, from taking such requested
action only if prior thereto Parent and Company agree in writing (A) on the
estimated effect of taking such action or refraining from taking such action
and (B) the manner in which such effect will be considered (i) for purposes of
Sections 6.3(a), as to any failure of the representations and warranties of
Company set forth in this Agreement to be true and correct at and as of the
Closing Date, (ii) for purposes of Section 6.3(i), as to any reduction in cash
and cash equivalents, or (iii) for purposes of Section 6.3(k), with respect to
any Material Adverse Change.
(d) In connection with the continued operation of the
business of Company and the Company Subsidiaries between the date of this
Agreement and the Effective Time, Company shall communicate in good faith on a
regular and reasonably frequent basis with one or more representatives of
Parent designated in writing with respect to the ongoing operations of Company
and the Company Subsidiaries. Company acknowledges that Parent does not and
will not waive any rights it may have under this Agreement as a result of such
communications.
(e) Parent agrees that from the date hereof to the
Effective Time, except as contemplated by this Agreement or to the extent that
Company shall otherwise consent in writing, it will not take, and will cause
each of its subsidiaries not to take, any action which would materially and
adversely affect the ability of Parent to perform its covenants and agreements
under this Agreement.
(f) Company shall not, nor shall it permit any Company
Subsidiary to, nor shall it authorize or permit any officer, director or
employee of, or any investment banker, attorney or other advisor or
representative or agent of, Company or any Company Subsidiary to, directly or
indirectly, (i) solicit, initiate or encourage the submission of any
Acquisition Proposal (as hereinafter defined) or (ii) participate in or
encourage any discussions or negotiations regarding, or furnish to any person
any information with respect to, or take any other action to encourage or
facilitate any inquiries or the making of any proposal that constitutes, or may
reasonably be expected to lead to, any Acquisition Proposal; provided, however,
that, prior to the approval of the Merger and the transactions contemplated by
this Agreement at the Shareholders' Meeting, nothing contained in this Section
5.2(f) shall prohibit the Board of Directors of Company from furnishing
information to, or entering into discussions or negotiations with, any person
or entity that makes an unsolicited Acquisition Proposal if, and only to the
extent that (A) the Board of Directors of Company after consultation with and
based on the written advice of outside counsel, determines in good faith that
in order for the Board of Directors of Company to comply with its fiduciary
duties to shareholders under applicable law it is required to take such action,
(B) prior to providing information in any form (whether orally or in writing)
to any person or entity, Company receives from such person or entity an
executed agreement in reasonably customary form relating to the confidentiality
of information to be provided to such person or entity, and (C) the Acquisition
Proposal contains an offer of consideration that is materially superior to the
consideration set forth herein. Notwithstanding anything in this Agreement to
the contrary, Company shall (i) promptly advise Parent orally and in
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writing of (A) the receipt by it (or any of the other entities or persons
referred to above) after the date hereof of any Acquisition Proposal, or any
inquiry which could reasonably be expected to lead to any Acquisition Proposal,
(B) the material terms and conditions of such Acquisition Proposal or inquiry,
and (C) the identity of the person making any such Acquisition Proposal or
inquiry, (ii) keep Parent reasonably informed of the status and details of any
such Acquisition Proposal or inquiry and (iii) negotiate with Parent to make
such adjustments in the terms and conditions of this Agreement as would enable
Company to proceed with the transactions contemplated herein. Without limiting
the foregoing, it is understood that any violation of the restrictions set
forth in the first sentence of this Section 5.2(f) by any officer, director or
employee of Company or any Company Subsidiary or any investment banker,
attorney or other advisor, representative or agent of Company or any Company
Subsidiary, whether or not such person is purporting to act on behalf of
Company or any Company Subsidiary or otherwise, shall be deemed to be a breach
of this Section 5.2(f) by Company. For purposes of this Agreement, "Acquisition
Proposal" means any bona fide proposal with respect to a merger, consolidation,
share exchange, joint venture, business combination, reorganization or similar
transaction involving Company or any Company Subsidiary, or any purchase of all
or any significant portion of the assets of Company or any Company Subsidiary.
For purposes of this Section 5.2, the term "materially superior" shall mean
consideration which, if the transaction subject to such Acquisition Proposal
were consummated, would result in the Alternative Transaction Value of the
transaction which is the subject of such Acquisition Proposal exceeding the
Merger Transaction Value (as such terms are defined in Section 5.4 herein) by
5% or more.
(g) Company agrees to take the following actions with
respect to Tax matters prior to the Closing:
(i) Company and the Company Subsidiaries will prepare and
file an amended federal income tax return for the taxable year ended
December 31, 1997, if Company and Parent, in consultation with Ernst &
Young LLP and Deloitte & Touche LLP, determine that such amendment is
appropriate;
(ii) Company will use its commercially reasonable efforts
to notify Parent promptly concerning all material discussions,
meetings and other significant contacts with the Internal Revenue
Service relating to the examination of the federal income tax returns
of Company, and will provide Parent with a reasonable opportunity to
attend and participate in all significant meetings with Internal
Revenue Service personnel relating to issues arising in connection
with such examination;
(iii) Company will prepare and submit to Parent a schedule
or memorandum setting forth such information as may reasonably and
practicably be requested by Parent relating to all taxing
jurisdictions in which Company or any Company Subsidiary has employees
or independent contractors, owns property or engages in business
activities; and
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(iv) Company will prepare and submit to Parent a schedule
or memorandum setting forth such information as may reasonably and
practicably be requested by Parent relating to existing equipment
lease transactions in which Company or any Company Subsidiary is the
lessor.
5.3 Fiduciary Duties. Except as set forth below, the Board of
Directors of Company shall not (i) withdraw or modify in a manner adverse to
Parent, the approval or recommendation by such Board of Directors of this
Agreement or the Merger, or (ii) approve, recommend or cause Company to enter
into any agreement with respect to any Acquisition Proposal (an "Alternative
Transaction"). Notwithstanding the foregoing, if prior to the approval of the
Merger and the transactions contemplated by this Agreement at the Shareholders'
Meeting Company receives an unsolicited Acquisition Proposal and the Board of
Directors of Company determines in good faith, following consultation with and
based on the written advice of outside counsel, that it is required to do so in
order to comply with its fiduciary duties to shareholders under applicable law,
the Board of Directors may (w) withdraw or modify its approval or
recommendation of this Agreement and the Merger, (x) approve or recommend such
Acquisition Proposal, (y) cause Company to enter into an agreement with respect
to such Acquisition Proposal or (z) terminate this Agreement pursuant to
Section 7.1(b)(v). If (i) the Board of Directors of Company takes any action
described in clause (y) or (z) of the preceding sentence, (ii) Parent exercises
its right to terminate this Agreement under Section 7.1(c) based on the Board
of Directors of Company having taken any action described in clause (w) or (x)
of the preceding sentence or (iii) the Agreement is terminated as a result of
the failure to receive the requisite vote for approval of this Agreement and
the Merger at the Shareholders' Meeting and at the time of such meeting an
Acquisition Proposal involving Company shall have been announced, Company
shall, concurrently with the taking of such action or such termination (a "Fee
Payment Event"), as applicable, pay to Parent the Section 5.4 Fee (as
hereinafter defined).
5.4 Certain Fees. Company shall pay to Parent upon demand $2.0
million upon the occurrence of a Fee Payment Event (the "Section 5.4 Fee"),
payable in same-day funds, as liquidated damages and not as a penalty, if the
Section 5.4 Fee is payable pursuant to Section 5.3 to reimburse and compensate
Parent for its time, expenses and lost opportunity costs of pursuing the
Merger. In addition, if Company enters into an agreement with respect to, or
consummates, an Alternative Transaction within one year of the payment by
Company of the Section 5.4 Fee and Parent has not exercised the Option to
purchase and purchased shares of Company Common Stock under the Shareholder's
Option Agreement and agrees not to do so, Company shall pay to Parent an
additional fee (the "Topping Fee"), payable in same-day funds, as liquidated
damages and not as a penalty, within two days of the earlier of Company
entering into such agreement or the consummation of such transaction. The
Topping Fee shall be equal to the product obtained by multiplying (a) 25% by
(b) the Incremental Value (as hereinafter defined). The "Incremental Value"
shall be equal to the amount by which the "Alternative Transaction Value" shall
exceed the "Merger Transaction Value" (each as hereinafter defined). The
"Alternative Transaction Value" shall mean the aggregate value of the
Alternative Transaction to the shareholders of Company, valued as of the date
of the agreement relating to such Alternative Transaction and calculated in
accordance with generally
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recognized and accepted valuation methodologies employed by nationally
recognized investment banking firms for valuing comparable transactions. The
"Merger Transaction Value" shall mean the aggregate value of the Merger to the
shareholders of Company, valued on the basis of Company having outstanding
4,108,785 shares of Common Stock and merger consideration of $11.88 per share
of such Common Stock and calculated in accordance with generally recognized and
accepted valuation methodologies employed by nationally recognized investment
banking firms for valuing comparable transactions. If the parties do not agree
as to the Alternative Transaction Value or the Merger Transaction Value,
Company and Parent shall negotiate with one another in good faith for a period
of ten days to resolve such dispute. If, after the expiration of such ten-day
period, the parties do not agree as to the Alternative Transaction Value or the
Merger Transaction Value, Company and Parent shall each engage a nationally
recognized investment banking firm to calculate the Alternative Transaction
Value or the Merger Transaction Value, or both, as the case may be. If such
investment banking firms do not agree as to such disputed valuation(s) after 30
days, such firms shall together appoint a third nationally recognized
investment banking firm to resolve such dispute by calculating the disputed
valuation(s). The calculation of such third investment banking firm shall be
conclusive as to the disputed valuation(s). Each party shall bear the costs and
expenses of the investment banking firm engaged by it pursuant to this Section
5.4, and the costs and expenses of a third investment banking firm, if
necessary, shall be borne equally by Company and Parent.
5.5 Takeover Statutes; Inconsistent Actions. If any "fair price,"
"moratorium," "control share," "business combination," "fair price,"
"shareholder protection" or similar or other antitakeover statute or regulation
enacted under state or Federal law shall become applicable to the Merger, the
Shareholders' Option Agreement or any of the other transactions contemplated
hereby or thereby, Company and the Board of Directors of Company shall grant
such approvals and take all such actions as are within its authority so that
the Shareholders' Option Agreement shall be in full force and effect and so
that the Merger and the other transactions contemplated hereby and thereby may
be consummated as promptly as practicable on the terms contemplated hereby and
thereby and otherwise use all commercially reasonable efforts to eliminate or
minimize the effects of such statute or regulation on the Merger, the
Shareholders' Option Agreement and the transactions contemplated hereby and
thereby. During the term of this Agreement and the Shareholders' Option
Agreement, Company shall not adopt, effect or implement any "shareholders'
rights plan," "poison pill" or similar arrangement.
5.6 Consents. Company and Parent will use all commercially
reasonable efforts to obtain the written consent or approval of each and every
governmental authority and other regulatory body, the consent or approval of
which shall be required in order to permit Parent, Sub and Company to
consummate the transactions contemplated by this Agreement. Company will use
all commercially reasonable efforts to obtain the written consent or approval,
in form and substance reasonably satisfactory to Parent, of each person whose
consent or approval shall be required in order to permit Parent, Sub and
Company to consummate the transactions contemplated by this Agreement, or whose
consent or approval is required pursuant to the terms of any contract,
agreement, license or
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instrument, including without limitation any Material Contract, to which
Company or any Company Subsidiary is a party in order to transfer, convey and
vest in Surviving Corporation all of the rights and benefits of Company or any
Company Subsidiary under such contract, agreement, license or instrument,
except for any contracts, agreements, licenses or instruments of Company as to
which the failure to obtain any required written consent or approval thereunder
would not individually or in the aggregate result in, or be reasonably likely
to result in, a Material Adverse Effect on Company with respect to the
Surviving Corporation. Parent will use all commercially reasonable efforts to
obtain the written consent or approval, in form and substance reasonably
satisfactory to Company, of each person whose consent or approval shall be
required in order to permit Parent, Sub and Company to consummate the
transactions contemplated by this Agreement, as to which the failure to obtain
any required written consent or approval thereunder would not individually or
in the aggregate result in, or be reasonably likely to result in, a Material
Adverse Effect on Parent.
5.7 Reasonable Efforts; Further Assurances; Cooperation. Subject
to the other provisions of this Agreement, the parties hereto shall each use
all commercially reasonable efforts to perform their obligations herein and to
take, or cause to be taken or do, or cause to be done, all things necessary,
proper or advisable under applicable law to obtain all regulatory approvals,
including notices and approvals under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), and satisfy all
conditions to the obligations of the parties under this Agreement and to cause
the Merger and the other transactions contemplated by this Agreement and the
Shareholders' Option Agreement to be effected as soon as reasonably practicable
in accordance with the terms of this Agreement and shall cooperate fully with
each other and their respective officers, directors, employees, agents,
counsel, accountants and other designees in connection with any steps required
to be taken as a part of their respective obligations under this Agreement,
including without limitation:
(a) Company and Parent shall promptly make their
respective filings and submissions and shall take, or cause to be taken, all
actions and do, or cause to be done, all things necessary, proper or advisable
under applicable laws and regulations to obtain any required approval of any
other federal, state or local governmental agency or regulatory body with
jurisdiction over the transactions contemplated by this Agreement.
(b) If any claim, action, suit, investigation or other
proceeding by any governmental body or other person is commenced which
questions the validity or legality of the Merger, the Shareholders' Option
Agreement or any of the other transactions contemplated by this Agreement or
the Shareholders' Option Agreement or seeks damages in connection with this
Agreement or the Shareholders' Option Agreement, the parties agree to cooperate
and use all commercially reasonable efforts to defend against such claim,
action, suit, investigation or other proceeding and, if an injunction or other
order is issued in any such action, suit or other proceeding, to use all
commercially reasonable efforts to have such injunction or other order lifted,
and to cooperate reasonably regarding any other impediment to the consummation
of the transactions contemplated by this Agreement or the Shareholders' Option
Agreement.
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(c) Each party shall give prompt written notice to the
other of (i) the occurrence, or failure to occur, of any event which occurrence
or failure would be likely to cause any of such party's representations or
warranties contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date of this Agreement to the Effective
Time and (ii) any failure of such party to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it under this
Agreement.
(d) Without the prior written consent of Parent, Company
will not terminate any employee if such termination would result in the payment
of any amounts pursuant to "change in control" provisions of any employment
agreement or arrangement.
5.8 NYSE Listing. Parent will use all commercially reasonable
efforts to cause to be approved for listing on the NYSE, subject to official
notice of issuance, a sufficient number of shares of Parent Common Stock to be
issued in the Merger.
5.9 Notice. Company shall promptly notify Parent of any material
change in the normal course of its or the Company Subsidiaries' business or in
the operation of its or the Company Subsidiaries' properties and of the receipt
by it or any of the Company Subsidiaries of notice of any governmental
complaints, investigations, hearings or inquiries (or communications indicating
that the same may be contemplated) or the receipt by it or any of the Company
Subsidiaries of a notice of the institution or the threat of litigation
involving it or any of the Company Subsidiaries which in any such case,
individually or in the aggregate, has or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on Company, and
will keep Parent fully informed with respect to such events.
5.10 Registration Statement; Shareholder Approvals.
(a) As soon as is reasonably practicable after the
execution of this Agreement, Parent shall prepare and file with the SEC the
Registration Statement (in which the Proxy Statement will be included) and
Company shall prepare and file with the SEC the Proxy Statement. Parent shall
use all commercially reasonable efforts to cause the Registration Statement to
become effective under the Securities Act as promptly as practicable after such
filing and shall take all commercially reasonable actions required to be taken
under any applicable state blue sky or securities laws in connection with the
issuance of the shares of Parent Common Stock pursuant to this Agreement;
provided that Parent shall be permitted to delay the filing of the Registration
Statement and shall have the right to cause Company to extend the date of the
Shareholders' Meeting upon a good faith determination by Parent that the filing
or use of the Registration Statement would require the disclosure of material
information concerning Parent or any subsidiary of Parent which Parent has a
bona fide business purpose for preserving as confidential or Parent is unable
to comply with SEC requirements (such events are hereinafter referred to as a
"Blackout" or as "Blackouts"). In no event shall the length of any Blackout or
Blackouts exceed in the aggregate seventy-five (75) days. In the
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event Parent exercises its right to effect a Blackout or Blackouts, the dates
set forth in Section 7.1 shall be extended on a day for day basis by the number
of days of such Blackout or Blackouts. Each party hereto shall furnish all
information concerning it and the holders of its capital stock as the other
party hereto may reasonably request in connection with such actions.
(b) Company shall call a Shareholders' Meeting to be held
as soon as practicable after the date hereof for the purpose of voting upon the
Merger and this Agreement. In connection with the Shareholders' Meeting,
Company and Parent shall prepare and file the Proxy Statement with the SEC.
Company shall mail the Proxy Statement to its shareholders, the Board of
Directors of Company, subject to Section 5.3, shall recommend to its
shareholders the approval of the Merger and this Agreement, and Company shall
use commercially reasonable efforts to obtain such shareholder approval.
Without limiting the generality of the foregoing, Company agrees that, subject
to its right to terminate this Agreement pursuant to Section 7.1(b)(v), its
obligations pursuant to this Section 5.10(b) shall not be affected by the
commencement, public proposal, public disclosure or communication to Company of
any Acquisition Proposal.
5.11 Expenses. Subject to Sections 5.3 and 5.4, if this Agreement
is terminated for any reason without breach by any party, each party hereto
shall pay its own expenses incident to preparing for, entering into, and
carrying out this Agreement and to consummating the Merger, except that Company
and Parent shall divide equally the following expenses: (a) the costs incurred
in connection with the printing and mailing of the Registration Statement, the
Proxy Statement and related documents, and (b) all filing or registration fees
paid by Company or Parent, including state securities laws filing or
registration fees, if any.
5.12 Press Releases; Filings. Without the consent of the other
parties, none of the parties shall issue any press release or make any public
announcement with regard to this Agreement or the Merger or any of the
transactions contemplated hereby or thereby; provided, however, that nothing in
this Section 5.12 shall be deemed to prohibit any party hereto from making any
disclosure which its counsel deems necessary or advisable in order to fulfill
such party's disclosure obligations imposed by law or the rules of any national
securities exchange or automated quotation system so long as such party
consults with the other parties prior to such disclosure. Each of Company and
Parent shall promptly notify the other of each report, schedule and other
document filed by it or any of its respective subsidiaries with the SEC and of
any other document pertaining to the transactions contemplated hereby filed
with any other governmental authorities.
5.13 Tax Treatment. Parent and Company agree to treat the Merger as
a reorganization within the meaning of Section 368(a) of the Code. During the
period from the date of this Agreement through the Effective Time, unless the
parties shall otherwise agree in writing, none of Parent, Company or any of
their respective subsidiaries shall knowingly take or fail to take any action
which action or failure to act would jeopardize qualification of the Merger as
a reorganization within the meaning of Section 368(a) of the Code. Parent and
Company shall use their best efforts to cause one or more of their responsible
officers to execute and deliver certificates to confirm the
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accuracy of certain relevant facts as may be reasonably requested by counsel in
connection with the preparation and delivery of the Tax Opinion described in
Section 6.1(f).
5.14 Employee Benefits. Prior to the Effective Time, Company
shall:
(a) take all actions necessary to correct any failure to
timely file any IRS/DOL/PBGC Form 5500 required to be filed for any Company
Benefit Plan pursuant to the Code or ERISA;
(b) take all commercially reasonable actions necessary to
request an initial favorable determination letter from the Internal Revenue
Service on the current form of any Company Benefit Plan which is intended to
qualify under Section 401(a) of the Code and has not requested and received
such a favorable determination letter; and
(c) receive from the Identified Shareholders a written
waiver of any benefit or compensation of any kind each such individual would
receive under his employment agreement due to a termination of employment after
the consummation of the change of control transaction contemplated hereby.
5.15 Stock Options and Warrants. At the Effective Time, Company's
obligations with respect to each outstanding Company Stock Option (as disclosed
in Section 3.3 of the Disclosure Letter), as amended in the manner described in
the following sentence, shall be assumed by Parent. The Company Stock Options
so assumed by Parent shall continue to have, and be subject to, the same terms
and conditions as set forth in the stock option plans and agreements pursuant
to which such Company Stock Options were issued as in effect immediately prior
to the Effective Time, except that each such Company Stock Option shall be
exercisable (subject to applicable vesting schedules) for that number of whole
shares of Parent Common Stock equal to the product of the number of shares of
Company Common Stock covered by such Company Stock Option immediately prior to
the Effective Time multiplied by the Exchange Ratio and rounded up to the
nearest whole number of shares of Parent Common Stock and the exercise price
per share shall be appropriately adjusted. Each warrant disclosed in Section
3.3 of the Disclosure Letter shall be converted into a Parent warrant on the
same terms and conditions except that each such warrant shall be exercisable
for that number of whole shares of Parent Common Stock equal to the product of
the number of shares of Company Common Stock covered by such warrant
immediately prior to the Effective Time multiplied by the Exchange Ratio and
rounded up to the nearest whole number of shares of Parent Common Stock and the
exercise price per share shall be appropriately adjusted. Parent shall (i)
reserve for issuance the number of shares of Parent Common Stock that will
become issuable upon the exercise of such Company Stock Options and warrants
pursuant to this Section 5.15 and (ii) promptly after the Effective Time issue
to each holder of an outstanding Company Stock Option or warrant a document
evidencing the assumption by Parent of Company's obligations with respect
thereto under this Section 5.15. Nothing in this Section 5.15 shall affect the
schedule of vesting with
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respect to the Company Stock Options to be assumed by Parent as provided in
this Section 5.15. Notwithstanding anything to the contrary set forth herein,
each Identified Shareholder agrees (i) to exercise or cause to be exercised all
Company Stock Options directly or indirectly beneficially owned by him (the
"Identified Shareholder Options") prior to the Effective Time and (ii) that to
the extent not exercised in accordance herewith, all Identified Shareholder
Options owned by such Identified Shareholder shall automatically terminate at
the Effective Time.
5.16 Company Affiliates. Company shall deliver to Parent a letter
identifying all persons who are, at the time the Merger is submitted to a vote
of the shareholders of Company, possible "affiliates" of Company for purposes
of Rule 145 under the Securities Act. Company shall cause each person who is
identified as a possible "affiliate" in such letter to deliver to Parent on or
prior to the Effective Time a written statement in the form of Exhibit 5.16
(the "Affiliates Letter"). Parent shall be entitled to place legends on any
certificates of Parent Common Stock issued to such possible affiliates to
restrict transfer of such shares as set forth above.
5.17 Supplements to Disclosure Letter. From time to time prior to
the Effective Time, Company and Parent will each promptly supplement or amend
the respective Disclosure Letters which they have delivered pursuant to this
Agreement with respect to any matter arising after the date of this Agreement
which, if existing or occurring at the date of this Agreement, would have been
required to be set forth or described in any such Disclosure Letters or which
is necessary to correct any information in any such Disclosure Letters which
has been rendered inaccurate by such matter. No supplement or amendment to any
such Disclosure Letters shall have any effect for the purpose of determining
satisfaction of the conditions set forth in Sections 6.2(a) or 6.3(a).
5.18 Post-Closing Cooperation by Identified Shareholders. After the
Closing, the Identified Shareholders shall reasonably cooperate with Parent in
the conduct of any audit, litigation or other proceeding with respect to any
Tax matter involving Company or any Company Subsidiary and shall deliver
promptly to Parent any Tax refund received by such Identified Shareholder of
Taxes previously paid by Company or any Company Subsidiary.
5.19 Indemnification of Directors and Officers and Identified
Shareholders
(a) The Articles of Incorporation and By-Laws of the Surviving
Corporation shall contain the provisions or substantially similar provisions
with respect to indemnification set forth in the Articles of Incorporation and
By-Laws of Company on the date of this Agreement, which provisions shall not be
amended, repealed or otherwise modified for a period of six years after the
Effective Time in any manner that would adversely affect the rights thereunder
of individuals who at any time prior to the Effective Time were directors or
officers of Company in respect of actions or omissions occurring at or prior to
the Effective Time (including, without limitation, the transactions
contemplated by this Agreement), unless such modification is required by law.
(b) In the event that (i) Parent exercises the Option granted to
it pursuant to the Shareholders' Option Agreement and purchases from the
Identified Shareholders the shares of
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Company capital stock subject to such Option, (ii) Parent shall require Company
to close the Merger notwithstanding the existence of pending litigation against
the Identified Shareholders with respect to the exercise by the Parent of the
Option, and (iii) the Identified Shareholders shall not have failed to satisfy
their obligations under Section 21(b) of the Shareholders' Option Agreement,
Parent shall indemnify, defend and hold harmless the Identified Shareholders
(collectively, the "Indemnified Parties") against all losses, liabilities,
expenses and costs, including, in settlement of, with the approval of the
Surviving Corporation, or otherwise in connection with any claim, action, suit,
proceeding or investigation (a "Claim"), to the extent such liabilities,
expenses or costs arise from or occur by reason of the fact that Parent
exercised the Option and acquired the shares of capital stock subject thereto.
(c) For six years from the Effective Time, the Surviving
Corporation shall maintain in effect directors' and officers' liability
insurance covering those persons who are currently covered by Company's
directors' and officers' liability insurance policy on terms no less favorable
than the terms of such current insurance coverage; provided, however, that (i)
in lieu of the purchase of such insurance by the Surviving Corporation or
Parent, the Company, with Parent's written consent, may purchase a six-year
extended reporting period endorsement under its existing directors' and
officers' liability coverage and (ii) if the cost of such insurance in any year
during such six-year period shall exceed 150% of the premium cost for such
policy during the year ended December 31, 1998, then Parent shall cause the
Surviving Corporation to, and the Surviving Corporation shall, provide coverage
affording the same protection as maintained by Parent as of such date for its
officers and directors.
(d) If Parent, the Surviving Corporation or any of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provisions shall be made so that the successors and assigns of Parent or the
Surviving Corporation, as the case may be, shall assume the obligations set
forth in this Section 5.19.
5.20 Certain Consents. Company shall use all commercially
reasonable efforts to provide to Parent prior to the Effective Time the written
consent to the Merger and the transactions contemplated hereby of each of (i)
First Union and SunAmerica as providers of Company's Securitization Facilities,
MBIA Insurance Corporation as bond insurer of such Securitization Facilities
and the trustee and purchasers of certificates under such Securitization
Facilities (x) indicating that at the Effective Time there exists no default on
the part of Company or any Company Subsidiary under the Securitization
Agreements between such parties and Company or any Company Subsidiary and
Company and the Company Subsidiaries have performed in all material respects
their obligations under the Securitization Agreements and (y) First Union's and
SunAmerica's willingness to enter into certain specified amendments to the
Securitization Facilities previously approved by Company, (ii) First Union as
lender to Company under the $30 million
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Warehouse Facility and $7 million Working Capital Line provided to Company by
First Union indicating that at the Effective Time there exists no default,
event of default or facts or circumstances that with notice, the passage of
time or both would constitute an Event of Default under either the Warehouse
Facility oro the Working Capital Line and (iii) Xerox Centre Partners as
landlord ("Landlord") with respect to Company's Santa Ana headquarters
indicating that the Surviving Corporation will have the right to exercise
Company's renewal option under the Lease dated August 18, 1994 between Landlord
and Company on the terms set forth in such Lease.
ARTICLE 6
CONDITIONS PRECEDENT TO MERGER
6.1 Conditions to Each Party's Obligations. The respective
obligations of each party to effect the Merger shall be subject to the
satisfaction on or prior to the Closing Date of each of the following
conditions:
(a) This Agreement and the Merger shall have been approved
and adopted by the affirmative vote or consent of the holders of at least a
majority of the outstanding shares of Company Common Stock and the affirmative
vote or consent of the holders of at least two-thirds (2/3) of the outstanding
of Series A Shares.
(b) All consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental authority or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement, the failure to obtain which would prevent the
consummation of the Merger or have a Material Adverse Effect on Company or a
Material Adverse Effect on Parent, shall have been obtained without the
imposition of any condition having a Material Adverse Effect on Company or a
Material Adverse Effect on Parent.
(c) Early termination shall have been granted or
applicable waiting periods shall have expired under the HSR Act.
(d) No governmental authority or other regulatory body
(including any court of competent jurisdiction) shall have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or permanent)
which is then in effect and has the effect of making illegal, materially
restricting or in any way preventing or prohibiting the Merger or the
transactions contemplated by this Agreement.
(e) The Registration Statement shall have become effective
under the Securities Act and no stop order suspending the effectiveness of the
Registration Statement shall be in effect and no proceedings for such purpose,
or under the proxy rules of the SEC pursuant to the Exchange Act and with
respect to the transactions contemplated hereby, shall be pending before or
threatened by the SEC.
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(f) Parent and Company each shall have obtained a written
opinion of King & Spalding, counsel to Parent, reasonably acceptable to Parent
and Company (the "Tax Opinion"), to the effect that the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code and that the
exchange in the Merger of Parent Common Stock for Company Common Stock will not
give rise to gain or loss to the shareholders of Company with respect to such
exchange (except to the extent of any cash paid in lieu of fractional shares or
Dissenting Shares). The Tax Opinion will be addressed to each of Parent and
Company. In rendering the Tax Opinion, such counsel shall be entitled to rely
on the accuracy of facts set forth in the officers' certificates described in
Section 5.13.
(g) The shares of Parent Common Stock to be issued
pursuant to this Agreement and pursuant to the Company Stock Options shall have
been authorized for listing on the NYSE, subject to official notice of
issuance.
(h) The sale of Parent Common Stock resulting from the
Merger shall have been qualified or registered with the appropriate state
securities law or "blue sky" regulatory authorities of all States in which
qualification or registration is required under State securities laws and such
qualifications or registrations shall not have been suspended or revoked.
6.2 Conditions to Obligations of Company. The obligations of
Company to effect the Merger shall be subject to the satisfaction on or prior
to the Closing Date of each of the following conditions unless waived by
Company:
(a) (i) the representations and warranties of Parent set
forth in this Agreement which are not qualified by the phrase "Material Adverse
Effect on Parent" or otherwise qualified by materiality shall have been true
and correct in all respects at and as of the date of this Agreement and shall
be true and correct in all material respects at and as of the Closing Date as
though made at and as of the Closing Date, except to the extent such
representations and warranties speak as of a specified date (which
representations and warranties shall be true and correct as of such date) and
except to the extent contemplated by this Agreement, (ii) the representations
and warranties of Parent set forth in this Agreement which are not qualified by
the phrase "Material Adverse Effect on Parent" but are otherwise qualified by
materiality shall be true and correct in all respects at and as of the date of
this Agreement and at and as of the Closing Date as though made at and as of
the Closing Date, and (iii) the representations and warranties of Parent set
forth in this Agreement which are qualified by the phrase "Material Adverse
Effect on Parent" shall be true and correct in all respects at and as of the
date of this Agreement and at and as of the Closing Date as though made at and
as of the Closing Date, provided, however, that for purposes of determining the
satisfaction of the condition contained in this clause (iii), such
representations and warranties shall be deemed to be true and correct in all
respects unless the failure or failures of such representations and warranties
to be so true and correct (without giving effect to any exception or "Material
Adverse Effect on Parent"
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qualifier), individually or in the aggregate, results or would reasonably be
expected to result in a Material Adverse Effect on Parent.
(b) Parent and Sub each shall have performed in all
material respects all covenants and agreements required to be performed by them
under this Agreement at or prior to the Closing Date.
(c) Parent shall furnish Company with a certificate of its
appropriate officers as to compliance with the conditions set forth in Sections
6.2(a) and (b).
(d) Company shall have received from Ernst & Young LLP
letters dated (i) the effective date of the Registration Statement and (ii) the
Closing Date, with respect to certain financial information regarding Parent
included in the Registration Statement, in each case in form and substance
reasonably satisfactory to Company and customary in scope and substance for
letters delivered by independent public accountants in connection with
registration statements similar to the Registration Statement.
(e) Company shall have received an opinion, dated the
Closing Date, of the General Counsel of Parent, in the form previously agreed
to by Company and Parent.
(f) No suit, investigation, action or other proceeding
shall be pending against Parent before any court or governmental agency which
would result in the restraint or prohibition of Parent, or the obtaining of
damages or other relief from Parent, in connection with this Agreement or the
consummation of the transactions contemplated hereby which would in any such
case, individually or in the aggregate, have a Material Adverse Effect on
Parent.
6.3 Conditions to Obligations of Parent. The obligations of Parent
to effect the Merger shall be subject to the satisfaction on or prior to the
Closing Date of each of the following conditions unless waived by Parent:
(a) (i) the representations and warranties of Company set
forth in this Agreement which are not qualified by the phrase "Material Adverse
Effect on Company" or otherwise qualified by materiality shall have been true
and correct in all respects at and as of the date of this Agreement and shall
be true and correct in all material respects at and as of the Closing Date as
though made at and as of the Closing Date, except to the extent such
representations and warranties speak as of a specified date (which
representations and warranties shall be true and correct as of such date) and
except to the extent contemplated by this Agreement, (ii) the representations
and warranties of Company set forth in this Agreement which are not qualified
by the phrase "Material Adverse Effect on Company" but are otherwise qualified
by materiality shall be true and correct in all respects at and as of the date
of this Agreement and at and as of the Closing Date as though made at and as of
the Closing Date, (iii) the representations and warranties of Company set forth
in this Agreement which are qualified by the phrase "Material Adverse Effect on
Company" shall be true and correct in all respects at and as of the date of
this Agreement and at and as of the Closing Date as though
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made at and as of the Closing Date, provided, however, that for purposes of
determining the satisfaction of the condition contained in this clause (iii)
such representations and warranties shall be deemed to be true and correct in
all respects unless the failure or failures of such representations and
warranties to be so true and correct (without giving effect to any exception or
"Material Adverse Effect on Company" qualifier), individually or in the
aggregate, results or would reasonably be expected to result in a Material
Adverse Effect on Company, and (iv) the representations and warranties of the
Identified Shareholders shall have been true and correct in all respects at and
as of the date of this Agreement and shall be true and correct at and as of the
Closing Date as if made at and as of the Closing Date.
(b) Company shall have performed in all material respects
all covenants and agreements required to be performed by it under this
Agreement at or prior to the Closing Date.
(c) Company shall furnish Parent with a certificate of (i)
its appropriate officers as to compliance with the conditions set forth in
Sections 6.3(a)(i), (ii) and (iii) and Section 6.3(b) and (ii) the Identified
Shareholders as to compliance with the conditions set forth in Section
6.3(a)(iv).
(d) Parent shall have received from Deloitte & Touche LLP
(A) letters dated (i) the date of the Proxy Statement and (ii) the Closing
Date, with respect to certain financial information regarding Company included
in the Proxy Statement, in each case in form and substance reasonably
satisfactory to Parent and customary in scope and substance for letters
delivered by independent public accountants in connection with proxy statements
similar to the Proxy Statement and (B) an agreed upon procedures report dated
the Closing Date with respect to the unaudited consolidated balance sheet and
related unaudited consolidated results of operations, shareholders' equity and
cash flow of Company for the quarter ended December 31, 1998 and each month
ended during the period between January 1, 1999 and the Closing Date (the
"Bring-Down Financial Statements").
(e) Parent shall have received an Affiliates Letter from
each possible "affiliate" described in Section 5.16.
(f) Parent shall have received an opinion, dated the
Closing Date, of O'Melveny & Myers LLP, counsel to Company, in the form
previously agreed to by Parent and Company.
(g) No suit, investigation, action or other proceeding (i)
shall be pending or overtly threatened against Parent, Company or any of the
Company Subsidiaries by any governmental agency which seeks to restrain or
prohibit the consummation of the Merger, (ii) shall be pending against Parent,
Company or any of the Company Subsidiaries that seeks damages or other relief
in connection with this Agreement or the consummation of the transactions
contemplated
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hereby which would, if successful, result in a Material Adverse Effect on
Parent, (iii) shall be pending against Parent, Company or any of the Company
Subsidiaries that seeks damages or other relief which would reasonably be
expected to exceed, individually or in the aggregate, $1 million, if pending
against Parent, or result, individually or in the aggregate, in a Material
Adverse Effect on Company if pending against Company or any Company Subsidiary,
or (iv) shall be pending against Parent, Company or any of the Company
Subsidiaries that would reasonably be expected to result in any orders
restricting Company or any Company Subsidiary from conducting its business as
now being conducted which, individually or in the aggregate, would have a
Material Adverse Effect on Company.
(h) Each of the directors of Company requested by Parent
to do so shall have tendered to Parent resignation letters on or prior to the
Closing Date, such resignations to be effective at the Effective Time.
(i) Company shall have (i) at least $21 million in cash
and cash equivalents, including cash and cash equivalents classified as
restricted cash on its balance sheet and such amount of restricted cash equals
or exceeds the amount of restricted cash required to be reserved by Company and
the Company Subsidiaries under the Securitization Agreements and (ii) retained
all cash proceeds obtained in connection with the exercise of Common Stock
Options and shall deliver to Parent a certificate to such effect signed by
Company's Chief Financial Officer.
(j) [intentionally omitted].
(k) Between the date of this Agreement and the Closing
Date, no event or events shall have occurred which constitutes or constitute or
would reasonably be expected, individually or in the aggregate to result in, a
Material Adverse Change. For purposes of this Section 6.3(k), a "Material
Adverse Change" shall mean the existence of any of the following conditions,
the existence of any of which conditions is attributable to facts,
circumstances or events specific to or relating to Company and/or the Company
Subsidiaries and their business and operations and which condition is not
primarily the result of facts, circumstances or events affecting the commercial
equipment leasing industry generally (a "Commercial Equipment Leasing Industry
Event"), (i) Company shall have originated, in the ordinary course of business
consistent with past practices, leases for the year ended December 31, 1998
having an aggregate value of less than $215,000,000, (ii) the leases and loans
in Company's and the Company Subsidiaries' portfolio (whether owned directly or
conveyed under the Securitization Facilities) (the "Leases and Loans"), the
scheduled payments in respect of which are 30 days or more past due at the end
of the calendar month immediately preceding the Closing Date, exceed in
aggregate dollar value more than 10% of the aggregate dollar value of all
outstanding Leases and Loans as of that date, or (iii) at the end of the
calendar month immediately preceding the Closing Date (the "calculation date")
the ratio of the gross unpaid contract balance of Lease and Loan account, the
scheduled payments in respect of which are 180 days past due, to the gross
unpaid contract balance of all Lease and Loan accounts exceeds the same ratio
computed as of September 30, 1998, by (x) 100 basis points, in the event the
Closing Date occurs on or prior to March 31, 1999 and (y) 125 basis points, in
the event the Closing
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Date occurs on or after April 1, 1999. For purposes of this Section 6.3 (k),
the ratio at September 30, 1998 and the ratio at the calculation date will be
computed without giving effect to (a) any Lease and Loan account written off
during the three-month period immediately preceding September 30, 1998 and
during the three-month period immediately preceding the end of the month
immediately preceding the Closing Date, respectively, and (b) any extension of
payments, grace periods, rollovers, Lease and Loan amendments or modifications
or similar practices granted to or with respect to any Lease or Loan account
since September 30, 1998 unless they are consistent with past practices and in
the ordinary course of business. Notwithstanding anything to the contrary set
forth herein, any Lease and Loan account write-off made between September 30,
1998 and the Closing Date shall be made in the ordinary course of business
consistent with the Company's past practices. In making a determination as to
whether a Material Adverse Change is primarily the result of facts,
circumstances or events which constitute a Commercial Equipment Leasing
Industry Event, the parties shall compare the results of operations and
portfolio performance of Company and the Company Subsidiaries to the results of
operations and portfolio performances of other companies in the commercial
equipment leasing industry.
(l) All authorizations, consents, waivers and approvals
from parties to contracts or other agreements to which any of Company or Parent
(or their respective subsidiaries) is a party, or by which either is bound, as
may be required to be obtained by them in connection with the performance of
this Agreement, the failure to obtain which would prevent the consummation of
the Merger or have or would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect on Company or, individually or in the
aggregate, a Material Adverse Effect on Parent, shall have been obtained.
ARTICLE 7
TERMINATION AND ABANDONMENT OF THE MERGER
7.1 Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after the approval by the
shareholders of Company:
(a) by the mutual written consent of Parent and Company;
(b) by Company if:
(i) subject to any applicable extension pursuant to
Section 5.10(a) or Section 7.4, the Merger is not consummated on or
before June 30, 1999, unless the failure of such occurrence shall be
due to the failure of Company to perform, satisfy or observe the
covenants, agreements and conditions hereof to be performed or
observed by it at or before the Effective Time;
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<PAGE> 60
(ii) events occur which render impossible the satisfaction
of one or more of the conditions set forth in Sections 6.1 and 6.2 by
the Effective Time and such conditions are not waived by Company,
unless the failure of such occurrence shall be due to the failure of
Company to perform or observe the covenants, agreements and conditions
hereof to be performed or observed by it at or before the Effective
Time;
(iii) Company is enjoined or restrained by any governmental
authority or other regulatory body (including any court), such
injunction or restraining order prevents the performance by Company of
its obligations hereunder and such injunction shall not have been
withdrawn by June 30, 1999, subject to any applicable extension
pursuant to Section 5.10(a) or Section 7.4;
(iv) the holders of Company Common Stock do not approve
this Agreement and the Merger at the Shareholders' Meeting or the
holder of the Series A Shares does not approve this Agreement and the
Merger; or
(v) the Board of Directors of Company, subject to and in
compliance with Section 5.3, shall have withdrawn or materially
modified in a manner adverse to Parent its recommendation of this
Agreement and the Merger or the Board of Directors shall have approved
or recommended another Acquisition Proposal.
(c) by Parent if:
(i) subject to any applicable extension pursuant to
Section 5.10(a) or Section 7.4, the Merger is not consummated on or
before June 30, 1999, unless the failure of such occurrence shall be
due to the failure of Parent or Sub to perform, satisfy or observe the
covenants, agreements and conditions hereof to be performed or
observed by them at or before the Effective Time;
(ii) events occur which render impossible the satisfaction
of one or more of the conditions set forth in Sections 6.1 and 6.3 by
the Effective Time and such conditions are not waived by Parent,
unless the failure of such occurrence shall be due to the failure of
Parent or Sub to perform or observe the covenants, agreements and
conditions hereof to be performed or observed by them at or before the
Effective Time;
(iii) Parent is enjoined or restrained by any governmental
authority or other regulatory body (including any court), such
injunction or restraining order prevents the performance by Parent of
its obligations hereunder and such injunction shall not have been
withdrawn by June 30, 1999, subject to any applicable extension
pursuant to Section 5.10(a) or Section 7.4;
(iv) the holders of Company Common Stock do not approve
this Agreement and the Merger at the Shareholders' Meeting or the
holder of the Series A Shares does not
56
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approve this Agreement and the Merger and convert the Series A Shares
into Company Common Stock;
(v) the Board of Directors of Company shall have withdrawn
or materially modified in a manner adverse to Parent its
recommendation of this Agreement and the Merger or the Board of
Directors shall have approved or recommended another Acquisition
Proposal; or
(vi) holders of shares of Company Common Stock representing
5% or more of the outstanding shares of Company Common Stock shall
have exercised their appraisal/dissenters rights in accordance with
the CGCL.
7.2 Specific Performance and Other Remedies. The parties each
acknowledge that the rights of each party to consummate the transactions
contemplated by this Agreement are special, unique and of extraordinary
character, and that, if any party violates or fails or refuses to perform any
covenant or agreement made by it in this Agreement, the non-breaching party may
be without an adequate remedy at law. The parties each agree, therefore, that
if either party violates or fails or refuses to perform any covenant or
agreement made by such party in this Agreement, the non- breaching party or
parties may, subject to the terms of this Agreement and in addition to any
remedies at law for damages or other relief, institute and prosecute an action
in any court of competent jurisdiction to enforce specific performance of such
covenant or agreement or seek any other equitable relief.
7.3 Effect of Termination and Abandonment. In the event of the
termination and abandonment of this Agreement under Section 7.1, this Agreement
shall become void and have no effect, without any liability on the part of any
party or its directors, officers or shareholders (other than the Identified
Shareholders as set forth herein) and except (i) as provided in the second
sentence of Section 5.1, and in Sections 5.3, 5.4, 5.5, 5.11 and 8.11 and (ii)
to the extent that such termination results from the breach in any material
respect by any party hereto of any representation, warranty or covenant
hereunder.
7.4 Termination Date Extension. Notwithstanding anything to the
contrary set forth herein, Parent shall have the unilateral right to extend the
dates set forth in Section 7.1 from June 30, 1999 to September 30, 1999 in the
event that the Merger has not been consummated by June 30, 1999 (subject to any
applicable extension pursuant to Section 5.10) as a result of any condition set
forth in Section 6.3 (other than the condition set forth in Section 6.3(k))
having not been satisfied.
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ARTICLE 8
MISCELLANEOUS
8.1 Waiver and Amendment. Any term or provision of this Agreement
may be waived in writing at any time by the party which is, or whose
shareholders are, entitled to the benefits thereof, and any term or provision
of this Agreement may be amended or supplemented at any time by action of the
respective Boards of Directors (or its authorized representative) of Parent or
Company without action of the shareholders, whether before or after the
Shareholders' Meeting; provided, however, that after approval of the
shareholders of Company no such amendment shall reduce the amount or change the
form of the consideration to be delivered to Company's shareholders as
contemplated by this Agreement or otherwise materially adversely affect the
interests of such shareholders unless such amendment is approved by Company's
shareholders. No amendment to this Agreement shall be effective unless it has
been executed by Company, Parent and Sub.
8.2 Non-Survival of Representations, Warranties and Agreements.
Except for the agreements contained in Sections 1.2, 1.3, 1.4, 1.5, 1.6, 1.7,
3.31, 5.5, 5.11, 5.15, 5.18, 5.19 and Article 8 and the representations and
warranties of the Identified Shareholders in the certificate to be delivered
pursuant to Section 6.3(c)(ii), none of the representations, warranties and
agreements of Company, Parent, Sub or the Identified Shareholders in this
Agreement, or in any instrument or certificate delivered pursuant to this
Agreement, shall survive the Merger nor shall their respective shareholders
(other than the Identified Shareholders on the terms specifically set forth in
Sections 3.31, 5.15, 5.18, 6.3(c)(ii), 8.2 and 8.11), directors or officers
have any liability to the other parties hereto after the Effective Time on
account of any breach of warranty or failure or the incorrectness of any of the
representations or warranties contained herein or in any certificate or other
instrument delivered pursuant to this Agreement. Subject to the foregoing, the
sole right and remedy arising from a misrepresentation or breach of warranty,
from the failure of any of the conditions of the Merger to be met, or from the
failure to perform any promise or discharge any obligation in this Agreement
shall be termination of this Agreement by the aggrieved party and the rights
and remedies provided in Sections 5.1, 5.3, 5.4, 5.11, 7.2, 7.3 and 7.4.
8.3 Notices. All notices or other communications which are
required or permitted hereunder shall be in writing and sufficient if delivered
personally, telecopied (if confirmed) or sent by registered or certified mail,
postage prepaid, return receipt requested, addressed as follows:
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If to Company:
Rockford Industries, Inc.
1851 East First Street, Suite 600
Santa Ana, California 92705
Facsimile: (714) 547-5091
Attn: President
With a copy to:
O'Melveny & Myers LLP
Suite 1700
610 Newport Center Drive
Newport Beach, California 92660
Facsimile: (714) 669-6994
Attn: J. Jay Herron, Esq.
If to Parent or Sub:
American Express Company
200 Vesey Street, 49th Floor
New York, New York 10285
Facsimile: (212) 619-7099
Attn: Carol V. Schwartz, Esq.
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303
Facsimile: (404) 572-5146
Attn: Bruce N. Hawthorne, Esq.
8.4 Descriptive Headings; Interpretation. The descriptive headings
are for convenience of reference only and shall not control or affect the
meaning or construction of any provision of this Agreement. When a reference is
made in this Agreement to Sections, such reference shall be to a Section of
this Agreement unless otherwise indicated. The phrase "made available" in this
Agreement shall mean that the information referred to has been made available
if requested by the party to whom such information is to be made available.
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8.5 Counterparts. This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement. This Agreement shall become effective when one or more counterparts
have been signed by each of the parties and delivered to the other parties, it
being understood that the parties need not sign the same counterpart.
8.6 Entire Agreement. This Agreement (including the Disclosure
Letter) and the Confidentiality Agreements contain the entire agreement between
Parent, Sub and Company with respect to the Merger and the matters contemplated
hereby, and supersede all prior arrangements or understandings between Parent,
Sub and Company with respect to the subject matter hereof, including the Letter
of Intent dated October 16, 1998. This Agreement and the Shareholders' Option
Agreement contain the entire agreement between Parent and the Identified
Shareholders with respect to the matters addressed herein and therein and
supersede all prior agreements or understandings with respect to the subject
matter hereof or thereof. This Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
8.7 GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT REGARD
TO ANY APPLICABLE CONFLICTS OF LAW PROVISIONS THEREOF).
8.8 Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law or public
policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby are not affected in any
manner materially adverse to any party. Upon such determination that any term
or other provision is invalid, illegal or incapable of being enforced, the
parties shall negotiate in good faith to modify this Agreement so as to effect
the original intent of the parties as closely as possible in a mutually
acceptable manner in order that the transactions be consummated as originally
contemplated to the fullest extent possible.
8.9 Enforcement of Agreement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions hereof in any court of the United States
or any state having jurisdiction, this being in addition to any other remedy to
which they are entitled at law or in equity.
8.10 Assignment. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties, and any attempt to make any such assignment
without such consent shall be null and void. Subject to the preceding sentence,
this Agreement will
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<PAGE> 65
be binding upon, inure to the benefit of and be enforceable by the parties
hereto and their respective successors and assigns.
8.11 Liability of Identified Shareholders. Notwithstanding anything
to the contrary set forth in this Agreement, the representations and warranties
of the Identified Shareholders set forth in Section 3.31 hereof (and in the
Closing Certificate to be delivered by the Identified Shareholders pursuant to
Section 6.3(c)(ii) hereof) and the covenants of the Identified Shareholders in
Sections 5.15 and 5.18 shall survive the Merger indefinitely. The Identified
Shareholders shall have liability with respect to any breach of the
representations and warranties to Parent set forth in Section 3.31(c) on a
several basis based on their pro rata Company Common Stock ownership prior to
the Merger only in the event that in making such representations and warranties
an Identified Shareholder is determined to have acted with actual and
intentional fraud.
8.12 Definition of Company's Knowledge. For purposes of this
Agreement, the term Company's knowledge shall mean the actual knowledge of any
of Gerry Ricco, Larry Hartmann, Brian Seigel, Kevin McDonnell, Tom Ware, Robert
Sweeney and Linda Fulton.
8.13 Disclosure Letter.
The disclosures in the Disclosure Letter, and those in any
supplement thereto, relate only to the representations and warranties in the
Section and Subsection of this Agreement to which they expressly relate and not
to any other representation or warranty in this Agreement.
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IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered by its respective duly authorized
officers, all as of the date first above written.
AMERICAN EXPRESS COMPANY
By: /s/ STEVE ALESIO
-------------------------------------
Name: Steve Alesio
Title: Authorized Signatory
By: /s/ STEPHEN P. NORMAN
-------------------------------------
Name: Stephen P. Norman
Title: Secretary
RXP ACQUISITION CORPORATION
By: /s/ DANNY LAM
-------------------------------------
Name: Danny Lam
Title: President
By: /s/ STEPHEN P. NORMAN
-------------------------------------
Name: Stephen P. Norman
Title: Vice-President and Secretary
ROCKFORD INDUSTRIES, INC.
By: /s/ GERRY J. RICCO
-------------------------------------
Name: Gerry J. Ricco
Title: President
By: /s/ BRIAN A. SEIGEL
-------------------------------------
Name: Brian A. Seigel
Title: Secretary
IDENTIFIED SHAREHOLDERS ONLY WITH
RESPECT TO SECTIONS 3.31, 5.15, 5.18,
6.3(C)(II), ARTICLE 8 INCLUDING, WITHOUT
LIMITATION, SECTION 8.11 HEREOF.
/s/ GERRY J. RICCO
----------------------------------------
Gerry J. Ricco
/s/ BRIAN A. SEIGEL
----------------------------------------
Brian A. Seigel
/s/ LARRY HARTMANN
----------------------------------------
Larry Hartmann
62
<PAGE> 1
EXHIBIT 2
SHAREHOLDERS OPTION AGREEMENT
This SHAREHOLDERS OPTION AGREEMENT (this "Agreement"), dated
November 9, 1998, by and among American Express Company, a New York corporation
("Holder"), and the shareholders of Rockford Industries, Inc., a California
corporation (the "Company"), listed on the signature page hereto (each a
"Shareholder" and collectively the "Shareholders").
WITNESSETH THAT:
WHEREAS, concurrently herewith Holder, RXP Acquisition
Corporation, a Delaware corporation and wholly owned subsidiary of Holder
("Newco"), and Company are entering into a Plan and Agreement of Merger (the
"Merger Agreement") pursuant to which Holder would, subject to the terms and
conditions set forth therein, acquire all of the capital stock of the Company
on a fully diluted basis for consideration of approximately $11.88 per share
(the "Merger"); and
WHEREAS, the transaction is expected to be structured as a
tax-free reorganization for shares of Holder capital stock; and
WHEREAS, each Shareholder owns of record the number of shares
of common stock, without par value, of the Company ("Common Stock") set forth
opposite such Shareholder's name on Schedule A hereto (all of such shares being
referred to herein, whether with respect to a particular Shareholder or
collectively with respect to all Shareholders, and giving effect to Section 15
hereof, as the "Shares"); and
WHEREAS, the Shareholders desire to induce Holder to proceed
with the Merger and enter into the Merger Agreement;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, Holder's willingness to enter into the Merger
Agreement and the sum of $100, and such other valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the parties hereto
agree as follows:
1. Grant of Option. Each of the Shareholders hereby grants to Holder an
irrevocable and continuing option (the "Option") to purchase all of the Shares
owned by him for a per share price
<PAGE> 2
equal to $11.88 (the "Purchase Price"); provided, however, if Holder, Newco and
the Company consummate the Merger after the purchase of the Shares upon
exercise of the Option and pursuant thereto Holder pays to the shareholders of
the Company as Merger consideration a per share price greater than $11.88 per
share (the "Holder Price"), on the Effective Date of the Merger Holder will pay
each of the Shareholders an additional amount equal to the product of (x) the
difference between the Holder Price and the Purchase Price multiplied by (y)
the number of such Shareholder's Shares purchased upon exercise of the Option.
2. Exercise of Option. Holder may exercise the Option, in whole, at any
time following the occurrence of a First Date for Exercise (as defined below).
Upon any exercise of the Option, Holder shall deliver a written notice to each
of the Shareholders and to U.S. Trust Company of California, as escrow agent
(the "Escrow Agent") under the Escrow Agreement, dated as of the date hereof,
among Holder, the Shareholders and the Escrow Agent (the "Escrow Agreement") of
its intention to exercise the Option (the "Notice"), specifying a time, place
and date for the closing (the "Closing"), which shall occur as soon as
practicable, but not later than three (3) business days from the date of the
Notice; provided, however, that (a) if any approvals under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") or
otherwise shall be required with respect to such exercise, then the Closing
shall be the later of the date specified in the Notice or the next business day
following the date on which such approvals shall have been obtained, and (b) if
any Shareholder shall fail to perform his obligations hereunder, Holder may (i)
exercise the Option only with respect to the Shares held by those Shareholders
who have performed their respective obligations hereunder or (ii) withdraw the
Notice and decline to exercise the Option with respect to the Shares without
prejudice to its right to exercise the Option at any time thereafter during the
term of this Agreement. As used herein, the "First Date for Exercise" shall
mean the earliest to occur of any of the following events:
(i) any person shall have commenced (as such term is defined in
Rule 14d-2 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), or shall have filed a
registration statement under the Securities Act of 1933, as
amended (the "Securities Act"), with respect to, a tender
offer or exchange offer to purchase any shares of Common
Stock such that, upon consummation of such offer, such person
would own or control 10% or more of the then outstanding
Common Stock;
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<PAGE> 3
(ii) the Company, without having received Holder's prior written
consent, shall (A) have authorized, recommended, proposed or
publicly announced an intention to authorize, recommend or
propose, or shall have entered into or publicly announced an
intention to enter into, an agreement with any person (other
than Holder, Newco or any other subsidiary of Holder) to (1)
effect a merger, consolidation, combination, reorganization,
share exchange, joint venture involving an equity control
event (as defined below) or similar transaction involving the
Company or any subsidiary of the Company, (2) directly or
indirectly sell, lease or otherwise transfer or dispose of,
or agree to sell, lease or otherwise transfer or dispose of,
assets of the Company or its subsidiaries representing 10% or
more of the consolidated assets of the Company and its
subsidiaries or (3) directly or indirectly issue, sell or
otherwise transfer or dispose of or agree to issue, sell or
otherwise transfer or dispose of (including, without
limitation, by way of merger, consolidation, reorganization,
share exchange, dividend, distribution or any similar
transaction) securities representing 10% or more of the
voting power of the Company (any of the foregoing an
"Acquisition Transaction"), or (B) directly or indirectly
have otherwise taken any action including, without
limitation, responding to, or entering into discussions or
negotiations, in respect of an Acquisition Transaction or an
Acquisition Proposal (as defined in the Merger Agreement)
made by any party other than Holder;
(iii) any person or group (as such term is defined under the
Exchange Act) shall have acquired beneficial ownership (as
such term is defined in Rule 13d-3 under the Exchange Act) or
the right to acquire beneficial ownership of, or any group
shall have been formed which beneficially owns or has the
right to acquire beneficial ownership of, 10% or more of the
then outstanding Common Stock (other than any person or group
that, at the date hereof, beneficially owns or has the right
to acquire beneficial ownership of 10% or more of the
outstanding shares of Common Stock) (an "equity control
event"); or
(iv) any person other than Holder shall have made an Acquisition
Proposal to the Company or its shareholders and such proposal
shall have been publicly announced
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<PAGE> 4
(the events described in the preceding clauses (i), (ii),
(iii) and (iv) are collectively and individually hereinafter
referred to as an "Acquisition Event").
3. Payment and Delivery of Certificates. Concurrent with the execution of
this Agreement, the Shareholders shall deliver to the Escrow Agent the
certificates representing the Shares, duly endorsed in blank for transfer, or
accompanied by duly executed stock powers in blank, in each case with
signatures guaranteed by a national bank or trust company or a member firm of
the New York Stock Exchange, Inc. At any Closing hereunder, the Escrow Agent
shall promptly deliver to Holder the Shares with respect to which the Option
has been exercised and, simultaneously with the proper surrender by Escrow
Agent to Holder of the Shares to be purchased by Holder, Holder shall deliver
to the Escrow Agent a wire transfer of immediately available funds equal to the
aggregate Purchase Price.
4. Sharing of Gain. If (i) Holder exercises the Option and the Merger is
not consummated, and (ii) within one year from the date Holder exercised the
Option Holder sells all or substantially all of the Shares to another Person in
connection with an Acquisition Event involving the Company and any party other
than a wholly owned subsidiary of Holder at a price per share above $13.38 (the
"Measuring Price"), Holder will pay each of the Shareholders an amount equal to
fifty percent (50%) of the product of (x) the difference between the sales
price per share paid to Holder for the shares of Common Stock of the Company
sold by Holder in such Acquisition Event and the Measuring Price multiplied by
(y) the number of Shares sold by such Shareholder to Holder pursuant to the
exercise of the Option.
5. Representations and Warranties of the Shareholders. Each Shareholder
represents and warrants (such representations and warranties being deemed
repeated at any Closing at which Shares of such Shareholder are purchased)
that:
5.1 Ownership of Shares. Such Shareholder is the record owner of the
number of Shares listed opposite his name on Schedule A hereto; except as set
forth on Schedule B hereto, such Shareholder does not own beneficially or of
record any other capital stock of the Company; such Shares are validly issued,
fully paid and nonassessable, with no personal liability attaching to the
ownership thereof; and such Shares are owned by such Shareholder free and clear
of any pledges, liens, security interests, adverse claims, assessments, options,
equities, charges or encumbrances with respect to the ownership of or right to
vote or dispose of such Shares.
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<PAGE> 5
5.2 Transfer of Title. The sale by such Shareholder of his Shares
and the delivery by Escrow Agent of the certificates representing such Shares
to Holder pursuant hereto will transfer to Holder good and valid title to such
Shares free and clear of all pledges, liens, security interests, adverse
claims, assessments, options, equities, charges and encumbrances whatsoever,
and with no proxies or restrictions on the voting rights or other incident of
record or beneficial ownership pertaining thereto (other than the proxy being
granted pursuant to Section 7 of this Agreement).
5.3 Authority; Due Execution; Enforceability. Such Shareholder has
the full right, power, capacity and authority to enter into this Agreement; and
this Agreement has been duly and validly executed and delivered by such
Shareholder and constitutes a legal, valid and binding obligation of such
Shareholder enforceable against him in accordance with its terms.
5.4 No Conflicts. The execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby will not,
with or without giving of notice or the passage of time, (a) violate any
judgment, award, decree, injunction or order of any court, arbitrator or
governmental agency applicable to such Shareholder or such Shareholder's
property or assets or any federal or state law, statute or regulation, or (b)
conflict with, result in the breach of any provision of or constitute a
violation of or default under any agreement or instrument to which such
Shareholder is a party or by which such Shareholder or such Shareholder's
property or assets may be bound.
6. Covenants of the Shareholders. Each Shareholder hereby covenants and
agrees that:
6.1 Bring-Down of Representations. During the term hereof such
Shareholder will not enter into any transaction, take any action or by inaction
permit any event to occur that would result in any of the representations or
warranties of such Shareholder herein contained not being true and correct at
and as of (a) the time immediately after the occurrence of such transaction,
action or event or (b) the date of any Closing of the purchase of Shares.
Without limiting the generality of the foregoing, each Shareholder covenants
and agrees that such Shareholder will not sell, transfer, pledge, assign or
otherwise convey or dispose of, or enter into any contract, option, agreement
or other arrangement or understanding with respect to the sale, transfer,
pledge, assignment, conveyance or other disposition of, any Shares, other than
to or in favor of Holder or Holder's assignee, or in connection with the Merger
or an Acquisition Transaction between the Company and Holder, Newco or another
subsidiary of Holder (a "Holder Acquisition Transaction").
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<PAGE> 6
6.2 Surrender of Shares. Concurrent with the execution of this
Agreement, each Shareholder will execute an Escrow Agreement authorizing the
Escrow Agent to take the actions contemplated by this Agreement on behalf of
the Shareholders and will surrender the certificates representing his Shares to
the Escrow Agent to be held pursuant to the Escrow Agreement. Each Shareholder
agrees that the Company may instruct the transfer agent for the Common Stock to
place a stop transfer order against any attempt to transfer the Shares except
in accordance with the Escrow Agreement and this Agreement.
7. Irrevocable Proxy and Release; Agreement to Vote Shares.
(a) Each Shareholder has revoked or terminated any proxies, voting
agreements or similar arrangements previously given or entered into with
respect to the Shares and hereby irrevocably appoints Holder, during the term
of this Agreement, as proxy for such Shareholder to vote (or refrain from
voting) in any manner as Holder, in its sole discretion, may see fit, all of
the Shares of such Shareholder for such Shareholder and in such Shareholder's
name, place and stead, at any annual, special or other meeting or action of the
shareholders of the Company or at any adjournment thereof or pursuant to any
consent of shareholders of the Company in lieu of a meeting or otherwise, with
respect to any issue brought before shareholders of the Company. The parties
acknowledge and agree that, except as specifically provided for in Section 7(c)
hereof, neither Holder, nor Holder's successors, assigns, subsidiaries,
divisions, employees, officers, directors, shareholders, agents and affiliates
shall owe any duty to, whether in law or otherwise, or incur any liability of
any kind whatsoever, including without limitation, with respect to any and all
claims, losses, demands, causes of action, costs, expenses (including
reasonable attorney's fees) and compensation of any kind or nature whatsoever
to any Shareholder in connection with, as a result of or otherwise relating to
any vote (or refrain from voting) by Holder of the Shares subject to the
irrevocable proxy hereby granted to Holder at any annual, special or other
meeting or action or the execution of any consent of the shareholders of the
Company. If the issue on which Holder is voting pursuant to the irrevocable
proxy is the proposal to approve the Merger and the Merger Agreement, Holder
shall vote for such proposal or give its consent, as applicable.
(b) Notwithstanding the foregoing grant to Holder of the
irrevocable proxy, in the event Holder elects not to exercise its rights to
vote the Shares pursuant to the irrevocable proxy, upon the request of Holder
each Shareholder agrees to vote all of his Shares during the term of this
Agreement
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<PAGE> 7
(i) if the issue on which the Shareholder is requested to vote is a proposal to
approve the Merger and the Merger Agreement, each Shareholder agrees to vote in
favor of or give its consent to, as applicable, the Merger and the Merger
Agreement or (ii) otherwise in the manner directed by Holder at any annual,
special or other meeting or action of shareholders of the Company in lieu of a
meeting or otherwise with respect to any issue brought before the shareholders
of the Company.
(c) If Holder (i) exercises its right to vote the Shares pursuant
to the irrevocable proxy as provided in Section 7(a) other than with respect to
the approval of the Merger, or (ii) instructs a Shareholder how to vote
pursuant to Section 7(b)(ii), other than with respect to the approval of the
Merger, and such Shareholder votes his Shares in accordance with such
instruction, Holder agrees to indemnify and hold harmless such Shareholder from
any and all claims, liabilities, losses, demands, causes of action, expenses
(including reasonable attorneys' fees) that arise from or occur by reason of
such actions.
8. Survival. All rights and authority granted herein by each Shareholder
shall survive the death or incapacity of such Shareholder. This Agreement shall
inure to the benefit of and be binding upon the parties hereto and their
respective spouses, heirs, personal representatives, successors and assigns.
Holder may, without the consent of any of the Shareholders, assign its rights
hereunder to any wholly owned subsidiary of Holder, but otherwise the consent
of each Shareholder shall be required to assign the rights of Holder hereunder.
9. Further Assurances. Each Shareholder shall cooperate with Holder and
execute and deliver any additional documents necessary or desirable, in the
opinion of Holder or its counsel, to (i) obtain any third party approvals
necessary or advisable to consummation of the exercise of the Option,
including, without limitation, approvals under the HSR Act, if applicable, (ii)
complete the sale and transfer of the Shares with respect to which the Option
is exercised and the vesting of title to such Shares in Holder and (iii)
evidence the irrevocable proxy granted herein with respect to the Shares.
10. Notices. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally or
sent by registered or certified mail, postage prepaid, addressed to the
respective party at the following addresses:
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<PAGE> 8
To Holder: American Express Company
American Express Tower
World Financial Center
New York, New York 10285-4900
Attn: Carol V. Schwartz, Esq.
with a copy to: King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attn: Bruce N. Hawthorne, Esq.
To each Shareholder: At the address set forth opposite the Shareholder's
name on Schedule A.
11. Termination. Except as provided in the following sentence, this
Agreement and the Option, other than the provisions of Section 7(c) and as
provided in Section 14 below, shall terminate on the earlier of: (i) the
delivery by Holder to the Shareholders of written notice of Holder's
determination to terminate this Agreement and (ii) the termination of the
Merger Agreement in accordance with the terms thereof (the "Termination Date").
Notwithstanding anything to the contrary in this Agreement or any other
agreement, if during the term of this Agreement an Acquisition Event shall
occur or if the Merger Agreement shall have been terminated by the Company in
accordance with Section 7.1(b)(v) of the Merger Agreement (the date of the
earlier of the occurrence or termination being the "Trigger Date"), this
Agreement and the Option shall remain in full force and effect and the
Termination Date of this Agreement shall automatically extend to the date which
occurs 12 months from the Trigger Date.
12. Remedies. The Shareholders each acknowledge that Holder will be
irreparably harmed and that there will be no adequate remedy at law for a
violation of any of the covenants or agreements of the several Shareholders
which are contained in this Agreement. It is accordingly agreed that, in
addition to any other remedies which may be available to Holder upon the breach
by any of the
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<PAGE> 9
Shareholders of such covenants and agreements, Holder shall have the right to
obtain injunctive relief to restrain any breach or threatened breach of such
covenants or agreements or otherwise to obtain specific performance of any of
such covenants or agreements.
13. Commissions. Each of the parties hereto represents and warrants that
there are no agreements or claims for brokerage commissions or finders' fees in
connection with the transactions contemplated by this Agreement, and the
Shareholders and Holder will respectively pay or discharge and will indemnify
each other for brokerage commissions or finders' fees incurred by reason of any
action taken by such indemnifying party.
14. Survival of Representations. Notwithstanding any provision of this
Agreement to the contrary, all representations and warranties made by the
Shareholders in this Agreement and the covenants of the Shareholders set forth
in Sections 20 and 21 below shall survive (i) any exercise of the Option by
Holder, (ii) any vote by Holder of the Shares pursuant to the irrevocable proxy
or (iii) any vote by any Shareholder in accordance with Section 7(b).
15. Changes in Capitalization. For all purposes of this Agreement, the
Shares shall include any securities for cash or other property issued or
exchanged with respect to such Shares upon any recapitalization,
reclassification, merger, consolidation, spin-off, partial or complete
liquidation, dividend in cash or stock or other property, split-up or
combination of the securities of the Company, or any other change in its
capital structure and shall also include all Shares of Common Stock issued to
any Shareholder after the date hereof pursuant to the exercise by any
Shareholder of stock options.
16. Compliance with Securities Laws. The parties agree that any transfer of
the Shares effected hereunder shall be effected so as to comply with all
applicable federal and state securities laws.
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<PAGE> 10
17. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without regard to the
conflicts of laws principles thereof.
18. Counterparts. This Agreement may be executed in one or more
counterparts, all of which together shall constitute a single agreement.
19. Severability. If any provision of this Agreement is held to be illegal,
invalid or unenforceable under any current or future law, and if the rights or
obligations of the parties under this Agreement would not be materially and
adversely affected thereby, such provision shall be fully separable, and this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, the remaining
provisions of this Agreement shall remain in full force and effect and shall
not be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom. In lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement, a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible, and the parties hereto
request the court or any arbitrator to whom disputes relating to this Agreement
are submitted to reform the otherwise illegal, invalid or unenforceable
provision in accordance with this Section 19.
20. Waiver of Rights Under Shareholders' Agreement. Each Shareholder hereby
waives any and all rights of purchase, first refusal or similar rights or
prohibitions or restrictions on transfers of the Shares that he, his spouse or
his estate may have with respect to the Shares of any other Shareholder under
that certain Shareholders' Agreement, dated May 1, 1995, among Gerry Ricco,
Larry Hartmann and Brian Seigel (the "Shareholders' Agreement) with respect to
the transactions contemplated by this Agreement and the Merger Agreement
including, without limitation, the rights
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<PAGE> 11
and restrictions set forth in Section 1.1, 1.2, 2.1, 2.2, 3.1 and 3.2 of the
Shareholders' Agreement. Each Shareholder acknowledges that concurrently
herewith he is delivering to Holder a spousal consent duly signed by his spouse
acknowledging, agreeing and consenting to the transactions contemplated by this
Agreement and the Merger Agreement.
21. Agreements to Notify.
(a) Each Shareholder and Holder agree to notify promptly the
Escrow Agent of the termination of this Agreement and agree to deliver to the
Escrow Agent any written instructions that may reasonably be requested by the
Escrow Agent relating to the release of the Shares upon the termination of this
Agreement.
(b) Each Shareholder agrees to notify Holder promptly, and in any
event, without limiting the foregoing undertaking, prior to any exercise of the
Option by Holder, of any commencement or threatened commencement known to such
Shareholder by any person, entity or governmental authority or agency of any
suit, action or legal proceedings with respect to the Option.
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<PAGE> 12
IN WITNESS WHEREOF, each of the parties hereto has caused
this Agreement to be signed as of the date first above written.
SHAREHOLDERS:
/s/ Gerry J. Ricco
----------------------------------------
Gerry J. Ricco
/s/ Larry Hartmann
----------------------------------------
Larry Hartmann
/s/ Brian Seigel
----------------------------------------
Brian Seigel
HOLDER:
AMERICAN EXPRESS COMPANY
By: /s/ Steve Alesio
-------------------------------------
Title: Authorized Signatory
----------------------------------
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<PAGE> 13
Schedule A
<TABLE>
<CAPTION>
Name of Number of Address for
Shareholder Shares Owned of Record Notice Purposes
----------- ---------------------- ---------------
<S> <C> <C>
Gerry J. Ricco 734,666 45 Fortuna
Irvine, California 92720
Larry Hartmann 734,667 507 Old Post Road
Wyckoff, New Jersey 07481
Brian Seigel 734,667 19691 Vista del Valle
Santa Ana, California 92705
</TABLE>
<PAGE> 14
Schedule B
<TABLE>
<CAPTION>
Stock Options 401(K) Plan
------------- -----------
<S> <C> <C>
Gerry J. Ricco 40,000 1,336.7659
Larry Hartmann 40,000 1,201.7736
Brian Seigel 40,000 1,308.6629
</TABLE>
<PAGE> 1
EXHIBIT 3
VOTING AND CONVERSION AGREEMENT
This VOTING AND CONVERSION AGREEMENT (this "Agreement"),
dated November 9, 1998, by and among Anchor National Life Insurance Company,
an Arizona corporation ("Anchor"), Rockford Industries, Inc., a California
corporation (the "Company"), and American Express Company, a New York
corporation ("AMEX").
WITNESSETH THAT:
WHEREAS, the Company, AMEX and RXP Acquisition Corporation, a
Delaware corporation and wholly owned subsidiary of AMEX ("Newco"), have
entered into a letter of intent relating to a proposed merger transaction
whereby AMEX would acquire all of the capital stock of the Company on a fully
diluted basis for consideration of approximately $11.88 per share (the
"Merger"); and
WHEREAS, Anchor previously subscribed for and is the record
and beneficial owner of 70,000 shares of Series A Preferred Stock of the
Company (the "Preferred Shares") pursuant to a Subscription Agreement dated May
25, 1995 between the Company and Anchor (the "Subscription Agreement")
representing all of the issued and outstanding shares of Preferred Stock of the
Company; and
WHEREAS, pursuant to the Subscription Agreement, the Preferred
Shares are convertible into a specified number of shares of Common Stock, no
par value, of the Company (the "Common Shares");and
WHEREAS, Anchor believes the consummation of the Merger is
beneficial to Anchor and the other shareholders of the Company; and
WHEREAS, Anchor desires to induce AMEX to enter into a Plan
and Agreement of Merger among AMEX, Newco and the Company (the "Merger
Agreement") and to proceed with the Merger; and
WHEREAS, to facilitate the ability of AMEX, Newco and the
Company to consummate the Merger, Anchor desires to covenant and agree, upon
the terms and subject to the conditions set forth herein, to: (i) vote all of
the Preferred Shares in favor of approval of the Merger,
<PAGE> 2
and (ii) convert all of the Preferred Shares into Common Shares immediately
prior to the closing of the Merger;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, AMEX's willingness to enter into the Merger
Agreement and for other good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Agreement to Vote Preferred Shares. Anchor agrees, during the term of
this Agreement, to vote all of its Preferred Shares (i) in person or
by proxy in favor of approval of the Merger at every meeting of the
shareholders of the Company at which such matters are considered and
at every adjournment thereof (each, a "Shareholders' Meeting") or (ii)
at the request of the Company, by written consent in favor of approval
of the Merger.
2. Representations of Anchor. Anchor is the beneficial and record owner
of 70,000 Preferred Shares. Such shares are all of the Preferred
Shares owned beneficially or of record by Anchor. Such Preferred
Shares are owned by Anchor free and clear of any pledges, liens,
security interests, adverse claims, assessments, options, equities,
charges or encumbrances with respect to the ownership of or right to
vote or dispose of such Shares.
3. No Voting Trusts or Transfers or Pledges. Anchor agrees that it will
not, nor will Anchor permit any entity under its control to, (i)
deposit any of the Preferred Shares in a voting trust or subject any
of the Preferred Shares to any agreement or arrangement with respect
to the voting thereof, (ii) pledge, grant a security interest in,
hypothecate, sell, assign, transfer or otherwise dispose of or convey
any of its Preferred Shares, or (iii) convert the Preferred Shares
other than in accordance with this Agreement or take any other action
with respect to the Preferred Shares which is inconsistent with
Anchor's agreements under this Agreement. Without limiting the
generality of the foregoing, Anchor shall not grant to any party any
option or right to purchase the Preferred Shares or any interest
therein. Anchor acknowledges and agrees that the transfer agent with
respect to the Preferred Shares shall be
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<PAGE> 3
given notice that the Preferred Shares are subject to the terms of
this Agreement and such Preferred Shares shall not be transferred
except in accordance with the terms of this Agreement.
4. Agreement to Convert Preferred Shares. Anchor agrees during the term
of this Agreement, if AMEX, the Company and Newco (or any other
wholly-owned subsidiary of AMEX) enter into a Merger Agreement,
immediately prior to the closing of the Merger on the Closing Date for
the Merger, Anchor will convert all of its Preferred Shares into
Common Shares pursuant to and on the terms set forth in the
Subscription Agreement and the Certificate of Determination relating
to the Preferred Shares. Until such time as Anchor converts the
Preferred Shares into Common Shares in accordance with this Agreement,
the Company acknowledges and agrees that such Preferred Shares will
continue to accrue dividends, and such dividends shall be payable upon
the conversion of the Preferred Shares in accordance with this
Agreement.
5. Nondisclosure. Anchor understands, acknowledges and agrees that it
must maintain the highest degree of confidentiality, shall not make
any public announcement and shall only disclose to employees when
disclosure is imperative with regard to this Agreement or the Merger
or any of the transactions contemplated hereby or thereby; provided,
however, that nothing in this Section 5 shall be deemed to prohibit
Anchor from making any disclosure which its counsel deems necessary or
advisable in order to fulfill such party's disclosure obligations
imposed by law or the rules of any national securities exchange or
automated quotation system so long as Anchor consults with the Company
and AMEX prior to such disclosure.
6. Specific Performance. Each party hereto acknowledges that it will be
impossible to measure in money the damage to the other party if a
party hereto fails to comply with the obligations imposed by this
Agreement, and that, in the event of any such failure, the other party
will not have an adequate remedy at law or in damages. Accordingly,
each party hereto agrees that
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<PAGE> 4
injunctive relief or other equitable remedy, in addition to remedies
at law or damages, is the appropriate remedy for any such failure and
will not oppose the granting of such relief on the basis that the
other party has an adequate remedy at law. Each party hereto agrees
that it will not seek, and agrees to waive any requirement for, the
securing or posting of a bond in connection with any other party's
seeking or obtaining such equitable relief.
7. Term of Agreement. The term of this Agreement shall commence on the
execution and delivery of the Merger Agreement, and such term and this
Agreement shall terminate upon the earliest to occur of (i) the date
on which the Merger Agreement is terminated in accordance with its
terms, (ii) the date following the meeting of the holders of the
Common Stock to approve the Merger, in the event the holders of the
Common Stock do not approve the Merger and (iii) September 30, 1999.
Upon such termination, no party shall have any further obligations or
liabilities hereunder; provided, however, that such termination shall
not relieve any party from liability for any breach of this Agreement
prior to such termination.
8. Entire Agreement. This Agreement supersedes all prior agreements,
written or oral, among the parties hereto with respect to the subject
matter hereof and contains the entire agreement among the parties with
respect to the subject matter hereof. This Agreement may not be
amended, supplemented or modified, and no provisions hereof may be
modified or waived, except by an instrument in writing signed by all
parties hereto. No waiver of any provisions hereof by any party shall
be deemed a waiver of any other provisions hereof by any such party,
nor shall any such waiver be deemed a continuing waiver of any
provision hereof by such party.
9. Notices. All notices, consents, requests, instructions, approvals and
other communications provided for herein shall be in writing and shall
be deemed to have been duly given if mailed, by first class or
registered mail, five (5) business days after deposit in the United
States Mail, or if telexed or telecopied, sent by telegram, or
delivered by hand or reputable overnight courier, when confirmation is
received, in each case as follows:
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<PAGE> 5
If to Anchor:
Anchor National Life Insurance Company
c/o SunAmerica Corporate Finance
700 Louisiana Street, Suite 3905
Houston, TX 77002
Attention: Thomas Denkler
Telecopy: (713) 222-1402
If to Rockford:
Rockford Industries, Inc.
1851 East First Street, 6th Floor
Santa, Ana, California 92705
Attention: Kevin McDonnell
Telecopy: (714) 547-7166
-5-
<PAGE> 6
With a copy to:
O'Melveny & Myers LLP
610 Newport Center Drive
Newport Beach, California 92660
Attention: J. Jay Herron, Esq.
Telecopy: (714) 669-6994
If to AMEX:
American Express Company
American Express Tower
World Financial Center
New York, New York 10285-4900
Attention: Carol V. Schwartz, Esq.
Telecopy: (212) 619-7099
With a copy to:
King & Spalding
191 Peachtree Street
Atlanta, Georgia 30303-1763
Attention: Bruce N. Hawthorne, Esq.
Telecopy: (404) 572-5146
or to such other persons or addresses as may be designated in writing
by the party to receive such notice. Nothing in this Section 9 shall
be deemed to constitute consent to the manner and address for service
of process in connection with any legal proceeding (including
litigation arising out of or in connection with this Agreement), which
service shall be effected as required by applicable law.
-6-
<PAGE> 7
10. Amendment and Waiver. No modification, amendment or waiver of any
provision of this Agreement will be effective unless such
modification, amendment or waiver is approved in writing by all of the
parties hereto. The failure of any party to enforce any of the
provisions of this Agreement will in no way be construed as a waiver
of such provisions of this Agreement and will not affect the right of
such party thereafter to enforce each and every provision of this
Agreement in accordance with its terms.
11. Miscellaneous.
(a) Nothing contained in this Agreement shall be construed as
creating any liability on the part of Anchor under the Merger
Agreement.
(b) This Agreement shall be deemed a contract made under, and for
all purposes shall be construed in accordance with, the laws
of the State of California, without reference to its
conflicts of law principles.
(c) Whenever possible, each provision of this Agreement will be
interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is
held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such
invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this
Agreement will be reformed, construed and enforced in such
jurisdiction as if such invalid, illegal or unenforceable
provision had never been contained herein.
(d) This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original but all of
which together shall constitute one and the same instrument.
-7-
<PAGE> 8
(e) All Section headings herein are for convenience of reference
only and are not part of this Agreement, and no construction
or reference shall be derived therefrom.
-8-
<PAGE> 9
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement as of the date first written above.
ANCHOR NATIONAL LIFE INSURANCE
COMPANY
By: /s/ Thomas N. Denkler
-------------------------------------
Name: Thomas N. Denkler
-----------------------------------
Title: Authorized Agent
----------------------------------
ROCKFORD INDUSTRIES, INC.
By: /s/ Kevin McDonnell
-------------------------------------
Name: Kevin McDonnell
-----------------------------------
Title: CFO
----------------------------------
AMERICAN EXPRESS COMPANY
By: /s/ Steve Alesio
-------------------------------------
Name: Steve Alesio
-----------------------------------
Title: Authorized Signatory
----------------------------------
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