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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
October 8, 1996
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(Date of earliest event reported)
Progress Financial Corporation
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(Exact name of registrant as specified in its charter)
Delaware 0-14815 25-2413363
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
4 Sentry Parkway, Suite 230, Blue Bell, Pennsylvania 19422-0764
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(Address of principal executive offices) (Zip Code)
(610) 825-8800
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(Registrant's telephone number, including area code)
Not Applicable
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(Former name, former address and former fiscal year, if changed since last
report)
Exhibit Index appears on page 4.
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 8, 1996, Progress Financial Corporation ("PFC"), a unitary
thrift holding company headquartered in Blue Bell, Pennsylvania, announced that
it had completed its previously announced acquisition of The Equipment Leasing
Company, Timonium, Maryland ("ELC"), for a cash purchase price of $6.6 million.
The source of funds for the cash purchase price consisted of general operating
funds. Under the terms of the purchase agreement, The Equipment Leasing Company
became a wholly-owned subsidiary of Progress Bank, a Federally chartered stock
savings bank and wholly-owned subsidiary of PFC.
The press release is attached as an exhibit to this report and is
incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of ELC are not available as of the date of this
report on Form 8-K. Financial statements with respect to ELC will be filed by
amendment as soon as practicable, but in no event later than 60 days after this
report on Form 8-K must be filed.
(b) Pro forma financial information is not available as of the date of
this report on Form 8-K. Pro forma financial information will be filed by
amendment as soon as practicable, but in no event later than 60 days after this
report on Form 8-K must be filed.
(c) The following exhibits are filed with this report:
Exhibit Number Description
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2(a) Stock Purchase Agreement, dated as of
September 30, 1996, as amended
99(a) Press Release issued on October 8, 1996
2
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PROGRESS FINANCIAL CORPORATION
Date: October 23, 1996 By: /s/ Frederick E. Schea
-------------------------------
Frederick E. Schea
Senior Vice President and
Chief Financial Officer
3
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EXHIBIT INDEX
Exhibit Number Description
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2(a) Stock Purchase Agreement, dated as of
September 30, 1996, as amended
99(a) Press Release issued on October 8, 1996
4
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STOCK PURCHASE AGREEMENT
AMONG
PROGRESS BANK
("Buyer"),
THE EQUIPMENT LEASING COMPANY
(the "Company")
and
AMERICAN MANUFACTURING CO., INC.
("Seller")
DATED: September 30, 1996
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TABLE OF CONTENTS
Page
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BACKGROUND . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 1 - STOCK PURCHASE . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1. Sale and Purchase . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. Purchase Price. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3. Books and Records . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.4. Resignations. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2 - DIVISION TRANSFER. . . . . . . . . . . . . . . . . . . . . . . . 2
2.1. Contribution of Properties and Assets . . . . . . . . . . . . . . . 2
2.2. Consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3. Documentation . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.4. Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5. Transition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6. Certain Intercompany Obligations. . . . . . . . . . . . . . . . . . 4
ARTICLE 3 - REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE COMPANY AND SELLER. . . . . . . . . . . . . . . 4
3.1. Organization, Power, Standing and Qualification . . . . . . . . . . 5
3.2. Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . 5
3.3. Validity of Contemplated Transactions . . . . . . . . . . . . . . . 5
3.4. Capitalization of Company . . . . . . . . . . . . . . . . . . . . . 6
3.5. Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . 6
3.6. Title to Properties . . . . . . . . . . . . . . . . . . . . . . . . 6
3.7. Real Property . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.8. Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . 7
3.9. Absence of Undisclosed Liabilities. . . . . . . . . . . . . . . . . 7
3.10. Certain Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . 7
3.11. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.12. Compliance with Laws.. . . . . . . . . . . . . . . . . . . . . . . 9
3.13. Employee Benefits. . . . . . . . . . . . . . . . . . . . . . . . . 9
3.14. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.15. Proprietary Rights . . . . . . . . . . . . . . . . . . . . . . . . 12
3.16. Labor Disputes . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.17. Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
3.18. Other Transactions . . . . . . . . . . . . . . . . . . . . . . . . 13
3.19. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
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Page
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3.20. Bank Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.21. No Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.22. Compensation Arrangements. . . . . . . . . . . . . . . . . . . . . 14
3.23. Copies of Articles and Bylaws. . . . . . . . . . . . . . . . . . . 14
3.24. Condition of Tangible Assets . . . . . . . . . . . . . . . . . . . 15
3.25. Lease Portfolio. . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.26. Hazardous Substances . . . . . . . . . . . . . . . . . . . . . . . 17
3.27. Relationship With Vendors. . . . . . . . . . . . . . . . . . . . . 18
3.28. Transactions with Affiliates . . . . . . . . . . . . . . . . . . . 18
3.29. Veracity of Statements . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 4 - REPRESENTATIONS AND WARRANTIES OF BUYER. . . . . . . . . . . . . 19
4.1. Organization and Power. . . . . . . . . . . . . . . . . . . . . . . 19
4.2. Power and Authority . . . . . . . . . . . . . . . . . . . . . . . . 19
4.3. Conflict With Authority, Bylaws, Etc. . . . . . . . . . . . . . . . 19
4.4. Acquisition of Shares for Investment. . . . . . . . . . . . . . . . 19
ARTICLE 5 - ACTIVITIES PRIOR TO CLOSING. . . . . . . . . . . . . . . . . . . 20
5.1. Operation of Business . . . . . . . . . . . . . . . . . . . . . . . 20
5.2. Access to Information . . . . . . . . . . . . . . . . . . . . . . . 21
5.3. Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.4. Notice of Change. . . . . . . . . . . . . . . . . . . . . . . . . . 22
5.5. No Discussions. . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 6 - ACTIVITIES PRIOR TO CLOSING BY BUYER . . . . . . . . . . . . . . 22
6.1. Best Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
6.2. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 7 - CONDITIONS PRECEDENT TO CLOSING. . . . . . . . . . . . . . . . . 23
7.1. Conditions to Obligation of Buyer to Close. . . . . . . . . . . . . 23
7.2. Conditions to Obligation of Seller to Close . . . . . . . . . . . . 25
ARTICLE 8 - INDEMNIFICATION. . . . . . . . . . . . . . . . . . . . . . . . . 27
8.1. By Seller . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
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8.2. By Buyer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.3. Limitations . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
8.4. Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 9 - SURVIVAL OF REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . 29
ARTICLE 10 - THE CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . 29
10.1. Time and Place of Closing; Effective Time. . . . . . . . . . . . . 29
10.2. Conduct of Closing . . . . . . . . . . . . . . . . . . . . . . . . 29
ARTICLE 11 - ADDITIONAL COVENANTS OF SELLER AND BUYER. . . . . . . . . . . . 30
11.1. Employees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
11.2. Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.3. Cooperation. . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
11.4. Non-Competition. . . . . . . . . . . . . . . . . . . . . . . . . . 32
11.5. Refinancing of Intercompany Indebtedness . . . . . . . . . . . . . 32
11.6. Post-Closing Audit, Adjustments. . . . . . . . . . . . . . . . . . 32
ARTICLE 12 - BROKERAGE; EXPENSES . . . . . . . . . . . . . . . . . . . . . . 33
ARTICLE 13 - TAXES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
13.1. Company's Tax Liabilities. . . . . . . . . . . . . . . . . . . . . 34
13.2. Tax Returns and Payments . . . . . . . . . . . . . . . . . . . . . 35
13.3. Administration . . . . . . . . . . . . . . . . . . . . . . . . . . 35
13.4. Tax Contests . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.5. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
13.6. AMT Credits. . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
13.7. Transfer Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . 37
ARTICLE 14 - TERMINATION . . . . . . . . . . . . . . . . . . . . . . . . . . 37
14.1. Events of Termination. . . . . . . . . . . . . . . . . . . . . . . 37
14.2. Consequences of Termination. . . . . . . . . . . . . . . . . . . . 38
ARTICLE 15 - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 38
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15.1. Entire Agreement; Amendments . . . . . . . . . . . . . . . . . . . 38
15.2. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.3. Gender; Number . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.4. Exhibits and Schedules . . . . . . . . . . . . . . . . . . . . . . 38
15.5. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.6. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
15.7. Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.8. Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
15.9. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . 40
15.10. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . 40
15.11. No Benefit to Others. . . . . . . . . . . . . . . . . . . . . . . 40
15.12. Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . 40
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STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made this 30th day
of September, 1996, by and among PROGRESS BANK, a federal savings bank
("Buyer"), THE EQUIPMENT LEASING COMPANY, a Maryland corporation (the
"Company"), and AMERICAN MANUFACTURING CO., INC., a Pennsylvania corporation
("Seller").
BACKGROUND
The Company is engaged in the equipment leasing business (the
"Business").
Seller owns all of the issued and outstanding shares of capital stock
of the Company, consisting of 52,000 shares of the common stock of the Company,
par value $1.00 per share (the "Shares"). Buyer desires to purchase the Shares
from Seller and Seller desires to sell the Shares to Buyer, all upon the terms
and subject to the conditions set forth herein.
A division of the Seller is also engaged in the equipment leasing
business (the "Division", and together with the Company, the "Equipment Leasing
Group"), and prior to the purchase and sale of the Shares of the Company all of
the assets and liabilities of such Division will be contributed to the paid-in
capital of the Company (the "Division Transfer").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants herein contained, and intending to be legally bound,
Buyer, Seller and the Company hereby agree as follows:
ARTICLE 1
STOCK PURCHASE
1.1. SALE AND PURCHASE. Subject to the terms and conditions contained in
this Agreement, and conditioned upon the contribution by the Seller of the
Division to the paid-in capital of the Company as provided in Article 2 hereof,
effective as of the opening of business on the business day following the Cut-
Off Date, as defined in Section 2.1 hereof (the "Effective Time"), Seller shall
sell to Buyer and Buyer shall purchase from Seller all of the Shares for the
consideration set forth in Section 1.2 below.
1.2. PURCHASE PRICE. Subject to the terms and conditions contained in this
Agreement, as full payment for the Shares, on the Closing Date (as defined in
Section 10.1 hereof) Buyer shall pay to Seller, by wire transfer of immediately
available funds to an account designated by Seller, the sum of (a) Six Million
Six Hundred Thousand Dollars
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($6,600,000), plus (b) interest thereon at a rate of six percent (6%) per annum
from the Cut-Off Date (as defined in Section 2.1 hereof) to the Closing Date
(the "Purchase Price").
1.3. BOOKS AND RECORDS. On the Closing Date, Seller shall deliver or cause
the Company to deliver to Buyer, or turn over to Buyer's representatives, all
minute books, stock record books, corporate seals, and certificates representing
all of the issued and outstanding stock of the Company, and the original copies
of all books of account, leases, other agreements, securities, customer lists,
files and other documents, instruments and papers of all kind and nature
belonging to or relating to the business of the Company and necessary or
desirable in Buyer's judgment for the on-going conduct of the Company and its
business, whether in the possession of Seller or the Company. Seller shall be
entitled to make and retain copies of any of the documents, instruments and
other papers referred to in this Section 1.3., and Buyer will, from time to
time, upon Seller's reasonable request and at Seller's expense, provide Seller
with copies of any such documents, instruments and papers that Seller may
reasonably request in connection with the preparation of Seller's tax returns,
financial statements, or for other proper purposes. Except as otherwise
required by law, Seller shall retain in confidence, and shall cause its advisors
to retain in confidence, all information in its possession regarding the
business of the Company.
1.4. RESIGNATIONS. On the Closing Date, Seller will make available to
Buyer the written resignations of all the directors and officers of the Company
effective as of the Closing Date, except for such officers and directors as
Buyer shall designate in writing.
ARTICLE 2
DIVISION TRANSFER
2.1. CONTRIBUTION OF PROPERTIES AND ASSETS. As of September 30, 1996 or
such other date as the parties may mutually agree (the "Cut-Off Date"), Seller
shall cause to be contributed to the paid-in capital of the Company all right,
title and interest in and to the properties and assets relating to or used in
the equipment leasing Division of Seller, including without limitation (i) all
inventory and equipment, (ii) all lease contracts and related agreements,
whether Seller is lessee or lessor, (iii) all office equipment, desks, chairs,
supplies and related items, (iv) all computer systems, software, files, records,
computer disks, tapes or other storage media, manuals, and related items, (v)
all books, records, files and related items, (vi) all intellectual property or
proprietary rights, intangible assets, contract rights, licenses, permits,
franchises, trademarks, service marks, patents, trade names, copyrights or other
intangible rights, whether registered or otherwise, and including any
applications for any of the foregoing, (vii) all bank accounts, deposits,
investments, items awaiting collection and related assets, (viii) all
receivables, rights to payment, documents, chattel paper, and related assets,
(ix) prepaid personal property taxes and (x) all other assets of any nature
reflected on the balance sheet of the Equipment Leasing Group and not an asset
of the Company. The properties and assets contributed shall include, without
2
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limitation, those set forth on SCHEDULE 2.1 attached hereto, subject to
adjustment for assets acquired or disposed of in the ordinary course of business
prior to the effective date of the Division Transfer. Notwithstanding the
foregoing, the following assets shall be retained by Seller: (x) all rights of
Seller with respect to leases of equipment to Handy Andy as lessee; (y) tax
credits, prepaid taxes (other than prepaid personal property taxes) and refunds
to which Seller is entitled with respect to the operations of the Division; and
(z) prepaid pension and prepaid general insurance.
2.2. CONSIDERATION. In connection with the contribution of properties and
assets as set forth in Section 2.1 above, the Company shall (a) assume the
liabilities and obligations of the Seller under all agreements and contracts
contributed by the Seller to the Company pursuant to Section 2.1 (the "Assumed
Liabilities"), and (b) assume the liabilities and obligations of the Seller
relating to the Division which are reflected on the Closing Balance Sheet
delivered pursuant to Section 7.1.2 hereof, and any other liabilities of the
Seller relating to the Division reflected on SCHEDULE 2.2 hereof, provided, that
the foregoing shall not include tax liabilities or tax obligations of any nature
with respect to the operations of the Division, other than personal property
taxes. From and after the Closing Date, Buyer shall cause the Company to
perform the Assumed Liabilities as performance falls due. Except as expressly
set forth herein, the Company shall not assume or be deemed to have assumed or
be responsible for any liability or obligation of the Seller whatsoever.
2.3. DOCUMENTATION. The Division Transfer shall be consummated pursuant to
documentation in form and substance satisfactory to Buyer, which shall include,
without limitation:
(a) a bill of sale transferring all of the assets of the Division
being contributed to the Company;
(b) an assignment and assumption agreement with respect to all
agreements and liabilities of the Division being transferred to the Company;
(c) UCC assignments in favor of the Company of all financing
statements which have been filed in favor of the Seller in connection with
leases by the Division, if any; and
(d) such other documentation as Buyer shall reasonably require.
2.4. EMPLOYEES. As of the Cut-Off Date, the employees of the Division
shall cease to be employees of the Seller and shall become at-will employees of
the Company. Seller shall notify each employee of such transfer and take all
steps in connection therewith as shall be required by law or reasonably
requested by Buyer. Nothing herein shall be construed as any commitment or
obligation for the continued employment of any employee, and no employee shall
be a third-party beneficiary of or otherwise have any rights under this
Agreement.
3
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2.5. TRANSITION. The Company shall be entitled to all payments received
with respect to the business of the Division from and after the Cut-Off Date,
whether with respect to amounts due prior to, on, or after the Cut-Off Date.
Seller shall take all steps necessary or reasonably requested by Buyer to
transfer title and control of all deposit, checking, lock-box and cash
management accounts to the Company as of the Cut-Off Date, and to ensure that
all payments with respect to the business of the Division are received directly
by or on behalf of the Company. Any such payments received by Seller shall be
held in trust for the benefit of the Company, and shall be delivered immediately
to the Company.
2.6. CERTAIN INTERCOMPANY OBLIGATIONS. As of the Cut-Off Date, Seller
shall cause all accrued and unpaid management fees and all accrued and unpaid
interest on the indebtedness of the Equipment Leasing Group to Seller to be paid
in full. Seller agrees that no management fees shall accrue or otherwise be
payable from and after the Cut-Off Date. From the Cut-Off Date through the
Closing Date, Seller agrees to advance funds to finance the operations of the
Company, and funds of the Company shall be used to repay such indebtedness of
the Company to Seller, in the ordinary course of business and in accordance with
past practice with respect to the Equipment Leasing Group.
ARTICLE 3
REPRESENTATIONS, WARRANTIES AND
COVENANTS OF THE COMPANY AND SELLER
The Company and Seller, jointly and severally, represent and warrant
and, where applicable, covenant as follows. As used herein, references to the
"Knowledge" of the Company or the Seller shall include all matters of which the
following officers of the Company or the Seller have actual knowledge: Charles
Slinghoff; John Yaglenski; John Lynch; Dennis Horner; Scott Wheeler and Paul
Brennan.
3.1. ORGANIZATION, POWER, STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Maryland, and Seller is a corporation duly organized, validly
existing and in good standing under the laws of the State of Pennsylvania.
Seller and the Company each have full corporate power and authority to carry on
their respective business as it is now being conducted and to own and operate
the properties and assets now owned and operated by them. The Company is duly
qualified to do business and is in good standing in all jurisdictions where the
failure to qualify or to be in good standing would have a material adverse
effect upon its financial condition, the conduct of its business or the
ownership of its property and assets, such jurisdictions being listed on
SCHEDULE 3.1 hereto.
3.2. POWER AND AUTHORITY. The Company and Seller each have full power and
authority to execute, deliver and perform this Agreement and the other
documents, instruments and agreements contemplated herein (the "Collateral
Documents") to which the
4
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Company or Seller (as the case may be) is a party. The execution, delivery and
performance of this Agreement and the Collateral Documents to which Seller or
the Company is a party have been duly authorized by all corporate action
required on the part of Seller and the Company respectively. Each of this
Agreement and the Collateral Documents to which the Company or Seller is a party
is a valid and binding obligation of such party, enforceable in accordance with
its terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, or similar laws affecting the enforcement of creditors'
rights generally.
3.3. VALIDITY OF CONTEMPLATED TRANSACTIONS. The execution, delivery and
performance of this Agreement and the Collateral Documents and the consummation
of the transactions contemplated hereby and thereby do not and will not
contravene any provision of the Articles (Certificate) of Incorporation or
Bylaws of Seller or the Company; nor, except as set forth in SCHEDULE 3.3,
violate, conflict with, require consent under or constitute a default under,
cause the acceleration of any payments pursuant to, or otherwise impair the good
standing, validity or effectiveness of any agreement, contract, indenture,
lease, or mortgage to which the Company or Seller is a party, or subject any
property or asset of Seller or the Company to any lien or encumbrance; or
violate any provision of law, rule, regulation, order, permit, or license to
which Seller or the Company is subject.
3.4. CAPITALIZATION OF COMPANY. The Company's total authorized capital
stock consists of 100,000 shares of common stock, $1.00 par value, of which
52,000 shares are currently outstanding. All of the outstanding shares of the
Company's capital stock are validly issued, fully paid and non-assessable.
There are no outstanding options, warrants, conversion privileges,
subscriptions, calls, commitments or rights of any character relating to the
Company's capital stock.
3.5. OWNERSHIP OF SHARES. On the date hereof, Seller is the record and
beneficial owner of the Shares, which constitute all of the issued and
outstanding shares of capital stock of the Company. Seller has good, marketable
and valid title to the Shares, free and clear of all liens, security interests,
pledges, negative pledges, encumbrances, restrictions or options (except for any
restrictions imposed by the Securities Act). Upon delivery of the certificates
representing the Shares to the Buyer, together with duly executed stock powers
pursuant to this Agreement, the Buyer shall acquire good title to the Shares,
free and clear of all liens, security interests, pledges, negative pledges,
encumbrances, restrictions or options (except for any created by Buyer or any
restrictions imposed by the Securities Act).
3.6. TITLE TO PROPERTIES. Except as set forth in SCHEDULE 3.6 hereto, the
Company or the Seller, as applicable, prior to the Division Transfer, and the
Company, upon consummation of the Division Transfer, has good title to all of
the properties and assets of the Equipment Leasing Group (including all of the
properties and assets reflected on the most recent balance sheet which is part
of the Interim Financial Statements (as defined in Section 3.8 hereof) and those
acquired since the Financial Statement Date (as defined in Section 3.9 hereof),
except in each case for properties and assets sold or otherwise disposed
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of in the ordinary course of business since the Financial Statement Date), free
and clear of all mortgages, liens, pledges, security interests and other
encumbrances (collectively "Liens") other than (a) rights of lessees under
leases of assets by the Company or the Seller in the ordinary course of the
business of the Equipment Leasing Group, (b) liens for current taxes not
delinquent or being contested in good faith by appropriate proceedings (which,
in the latter case, are disclosed on SCHEDULE 3.6 hereto), and (c) mechanics',
workmen's, materialmen's or other like liens arising in the ordinary course of
business with respect to obligations which are not due (collectively, "Permitted
Liens").
3.7. REAL PROPERTY. The Company does not, and following the Division
Transfer will not, have any ownership interest in any real property. A complete
and accurate description of all real property leased by the Company, and all
real property which will be leased by the Company following the Division
Transfer, is set forth on SCHEDULE 3.7 attached hereto.
3.8. FINANCIAL STATEMENTS. The Company has delivered to Buyer unaudited
financial statements consisting of a combined balance sheet for the Equipment
Leasing Group as of December 31, 1995, 1994, and 1993 and income statements and
statements of cash flows of the Equipment Leasing Group for the years then
ended, which financial statements were included in the audited consolidated
financial statements of American Manufacturing Corporation and its subsidiaries
as of and for the periods ended on such dates (such balance sheets, income
statements and statements of cash flows of the Equipment Leasing Group being
referred to herein collectively as the "Financial Statements"). In addition,
Seller has delivered to Buyer interim financial statements of the Equipment
Leasing Group as of and for the period ended August 31, 1996 (the "Interim
Financial Statements"). Except as disclosed on SCHEDULE 3.8, the Financial
Statements and the Interim Financial Statements have been prepared in conformity
with generally accepted accounting principles, consistently applied during the
related periods ("GAAP"), and present fairly in all material respects the
financial condition of the Equipment Leasing Group and the results of its
operations as of and for the respective periods ended on such dates, except, in
the case of the Interim Financial Statements, for the omission of footnotes
required by GAAP and for normal year-end adjustments.
3.9. ABSENCE OF UNDISCLOSED LIABILITIES. The Company does not have and
following the Division Transfer will not have any material liabilities or
obligations except for (i) those reflected or reserved against in the Interim
Financial Statements or on the Closing Balance Sheet, (ii) those incurred,
consistent with past business practices, in the ordinary course of its business,
since August 31, 1996 (the "Financial Statement Date"), (iii) those arising
under contracts, leases and agreements to which the Company is a party or which
it has assumed pursuant to Section 2.2, arising in the ordinary course of
business or disclosed in this Agreement or a Schedule hereto, and (iv) those
which are specifically disclosed in this Agreement or in a Schedule attached
hereto.
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3.10. CERTAIN TAX MATTERS.
(a) For any period ending on the date of or before the
Closing Date, the Company has, and the Seller, with respect to the Division, has
duly and timely filed or will file all federal, state, and local tax returns,
declarations, and reports, estimates, information returns and statements
(collectively, "Returns") required to be filed or sent by it or on its behalf
and all such Returns are or will be true, correct and complete in all material
respects. True, correct and complete copies of such Returns for the Company
have been delivered or made available to Buyer prior to the date hereof. Seller
and the Company have paid or accrued all taxes, levies, imposts, deductions,
charges, or withholdings imposed by any governmental unit, federal, state or
local with respect to the Equipment Leasing Group ("Taxes") and any penalties
entered with respect thereto, due and payable for any period ending on or before
the Closing Date.
(b) The Company's and the Seller's federal income tax
returns have been audited by the Internal Revenue Service for all taxable years
up to and including the taxable year ended December 31, 1992, and are currently
being audited for taxable years up to and including December 31, 1994.
(c) There are no Liens for Taxes upon any of the Company's
assets or the assets of the Division, except Permitted Liens (provided that
adequate reserves have been provided therefor and are reflected in the Financial
Statements) and no event has occurred which with the passage of time or the
giving of notice, or both, could result in a Lien (other than Permitted Liens)
for Taxes on any of the Company's assets or the assets of the Division.
(d) No deficiency for any Taxes has been proposed, asserted
or assessed against the Company or the Seller which has not been resolved and
paid in full.
(e) Except for the waiver with respect to Illinois state
sales taxes, no waiver or comparable consent given by the Company or the Seller
regarding the application of the statute of limitations with respect to any
Taxes or Returns is outstanding, nor is any request for any such waiver or
consent pending. No federal, state, local or foreign audit or other
administrative proceeding, inquiry or investigation or court proceeding is
presently pending or, to the best of the Company's or Seller's knowledge,
contemplated with regard to any Taxes or Returns of the Company or the Seller.
(f) The Company or the Seller has not requested any
extension of time within which to file any Return, which Return has not since
been filed.
(g) Except as provided in this Agreement, the Company is not
a party to any agreement providing for the allocation or sharing of Taxes.
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(h) The Seller and the Company have not agreed to make, nor
are they required to make, any adjustment under Section 481(a) of the Code for
any period ending after the Closing Date by reason of a change in its accounting
method or otherwise with respect to the Equipment Leasing Group.
(i) None of the assets of the Company is required to be
treated as owned by any other person pursuant to the "safe harbor lease"
provisions of former Section 168(f)(8) of the Code.
(j) The Company is not, and following the Division Transfer
will not be, a party to any venture, partnership, contract or arrangement under
which it could be treated as a partner, for federal income tax purposes.
(k) The Company does not have and following the Division
Transfer will not have any permanent establishment or place of business located
in any tax jurisdiction other than the United States and is not liable for the
payment of taxes levied by any jurisdiction located outside the United States.
3.11. LITIGATION. Except as set forth in SCHEDULE 3.11 attached hereto,
there is no suit, action, claim, arbitration, administrative or legal or other
proceeding, or governmental or other investigation pending or, to the Company's
or Seller's knowledge, threatened against or affecting the Equipment Leasing
Group, whether or not covered by insurance.
3.12. COMPLIANCE WITH LAWS. There does not exist any failure to comply
with, nor any default under, any law, ordinance, requirement, regulation, or
order applicable to the Equipment Leasing Group, nor any violation of or default
with respect to any order, writ, injunction, judgment, or decree of any court or
federal, state or local department, official, commission, authority, board,
bureau, agency, or other instrumentality issued or pending against the Equipment
Leasing Group which would have a material adverse effect on the financial
condition, business, results of operations, properties, or assets of the
Equipment Leasing Group, or Buyer's purchase or ownership of the Shares. The
laws, ordinances, requirements, regulations and orders (collectively "Laws")
referred to in this Section 3.12 shall not include any Laws encompassed by the
representations and warranties set forth in Section 3.10, 3.13, 3.15 or 3.26.
The Equipment Leasing Group has obtained all material permits, licenses, zoning
variances, approvals, and other authorization (collectively "Permits") necessary
for the complete operation of its business as presently operated, a complete and
accurate list of which is set forth on SCHEDULE 3.12 hereof. There have been no
illegal kickbacks, bribes or political contributions made by the Equipment
Leasing Group.
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3.13. EMPLOYEE BENEFITS.
(a) BENEFIT PLANS. SCHEDULE 3.13(A) attached hereto accurately
lists all deferred compensation, pension, profit sharing, stock option, stock
purchase, savings, group insurance and retirement plans, and all vacation pay,
severance pay, incentive compensation, consulting, bonus and other employee
benefit or fringe benefit plans or arrangements maintained by the Company or by
the Seller with respect to the Equipment Leasing Group (including health, life
insurance and other benefit plans maintained for retirees). Said plans,
including but not limited to all plans or programs that constitute "employee
benefit plans" as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), are each referred to herein as a
"Benefit Plan" and are collectively referred to herein as "Benefit Plans." True
and complete copies of all Benefit Plans, including any insurance contracts
under which benefits are provided, as currently in effect, have been provided or
made available to Buyer. Buyer has also been provided with access to a true and
complete copy of the summary plan description, if any was required by ERISA to
be or otherwise has been prepared and distributed to participants, for each
Benefit Plan, and all actuarial valuations, determination letters, statements of
assets and annual reports and returns.
(b) NO OTHER COMMITMENTS. There have been no statements or
communications made or materials provided to any employee or former employee of
the Equipment Leasing Group by any person (including any affiliate or any
employee, officer or director of any affiliate) which constitute a contract or
legally enforceable promise by the Company or Seller or any affiliate to provide
for any pension, welfare, or other insurance-type benefits to any such employee
or former employee, whether before or after retirement, other than benefits
under Benefit Plans set forth on SCHEDULE 3.13(A).
(c) MULTIEMPLOYER PLANS. Except as disclosed in SCHEDULE 3.13(C)
attached hereto, neither the Company nor any of its Affiliates (defined as any
member of any controlled group (within the meaning of Section 414(b) of the
Code) of which the Company is a member, all trades or businesses, whether or not
incorporated, under common control (within the meaning of Section 414(c) of the
Code) and of which the Company is a member, and all affiliated service groups
(within the meaning of Section 414(m) of the Code) of which the Company is a
member), is a party to any pension plan or welfare benefit plan that is a
"multiemployer plan" (within the meaning of Section 3(37) of ERISA). Neither
the Company nor any of its Affiliates has any liability to make any partial or
complete withdrawal liability payment to any multiemployer plan.
(d) PENSION AND BENEFIT FUNDING. No pension plan maintained by
Seller, the Company or any of their Affiliates ("Pension Plan") has incurred a
funding deficiency, whether or not waived, under section 302 of ERISA or section
412 of the Code. Seller has made timely all payments and contributions to all
Benefit Plans as required by the terms of each such plan and any applicable law,
any applicable collective bargaining agreements and, if applicable, in
accordance with the actuarial and funding assumptions of such plans in
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effect from time to time. Seller has funded or will fund each Benefit Plan in
accordance with the terms of each such plan through the date hereof, including
the payment of applicable premiums on any insurance contract funding a Benefit
Plan for coverage provided through the date hereof. Seller has made at least
the minimum contribution to each Benefit Plan with respect to the 1995 plan year
and for the portion of the 1996 plan year prior to the date hereof which are due
and payable under applicable law as of the date hereof. Except as set forth in
SCHEDULE 3.13(D), the assets of each Pension Plan, as of its most recent
valuation date, are sufficient to pay all "benefit liabilities" as defined in
Section 4001(a)(16) of ERISA, and Seller, the Company, or their Affiliates will
make timely all payments and contributions to all such Pension Plans as required
by the terms of each such Plan and any applicable law, as required by any
applicable collective bargaining agreements, and in accordance with the
actuarial and funding assumptions of each such Plan through the end of each
Plan's current plan year.
(e) FIDUCIARY COMPLIANCE. To the Knowledge of the Company and
Seller, no "prohibited transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any employee benefit plan
maintained by Seller or any Affiliate. For purposes of this Section 3.13, a
prohibited transaction shall exist without regard to any individual exemption.
No civil or criminal action brought pursuant to part 5 of Title I of ERISA is
pending or threatened in writing or orally against any fiduciary of any Benefit
Plan maintained by Seller or any Affiliate. To the Knowledge of the Company and
Seller, no fiduciary violations, as defined in Section 404 of ERISA, have
occurred with respect to which Buyer or the Company could have any present or
future material liability or material obligation. To the Knowledge of the
Company and Seller, each Benefit Plan is, and always has been, operated and
administered in accordance with the appropriate written Plan documents in all
material respects.
3.14. INSURANCE. All inventories, machinery, equipment, buildings,
improvements, and other tangible assets owned or leased by the Equipment Leasing
Group are, and between the date hereof and the Closing Date will be, insured
against fire and casualty under the policies and in the amounts and types of
coverage set forth in SCHEDULE 3.14 attached hereto and such policies are, and
between the date hereof and the Closing Date will be, outstanding and duly in
force and the premiums thereon fully paid when and as the same are due and
payable. SCHEDULE 3.14 attached hereto is a true and correct schedule of all
policies of fire, liability, and other forms of insurance, excluding the Benefit
Plans listed in SCHEDULE 3.13 attached hereto, pursuant to which the Equipment
Leasing Group or any of their assets are insured or with respect to which the
Equipment Leasing Group directly or indirectly pays all or part of the premium.
3.15. PROPRIETARY RIGHTS. The Company or the Seller, as applicable, prior
to the Division Transfer, and the Company, following the Division Transfer,
owns, possesses, or lawfully uses all patents, patent applications, trademarks,
trade applications, service marks, trade names, franchises, permits, copyrights,
and similar intangible rights used in the business of the Equipment Leasing
Group (collectively, the "Intellectual Property"), each of
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which is listed in SCHEDULE 3.15 attached hereto. The Intellectual Property
designated on SCHEDULE 3.15 is owned exclusively by the Company or the Seller,
as applicable, prior to the Division Transfer, and by the Company, following the
Division Transfer, it is valid and enforceable, and none infringes (nor has any
claim been made that any infringes) the patents, trademarks, service marks,
trade names, copyrights or similar intangible rights of others. The
Intellectual Property will not be materially adversely affected by the
transaction contemplated by this Agreement. Except as set forth on
SCHEDULE 3.15, the Company and the Seller are not obligated or under any
liability whatever to make any payments by way of royalties, fees, or otherwise
to any owner or licensee of, or other claimant to, any patent, trademark, trade
name, copyright, or other intangible asset with respect to the use thereof, in
connection with the conduct of the business of the Company or the Division, or
otherwise.
3.16. LABOR DISPUTES. Neither the Company nor the Seller is a party to any
contract or other agreement with any labor union affecting employees of the
Equipment Leasing Group, and neither the Company or the Seller is experiencing
or the subject of or threatened by, any union organization campaign or any
strike, slowdown, picketing, work stoppage, or other labor disturbance by any
labor union or group of employees, affecting employees of the Equipment Leasing
Group.
3.17. CONTRACTS. Except for the Agreements described in SCHEDULE 3.17
hereto or in another Schedule to this Agreement (the "Material Agreements"), the
Company is not party to and upon consummation of the Division Transfer will not
be party to (a) any Agreement (as defined below) not made in the ordinary course
of business; (b) any Agreement that cannot be terminated within 30 days after
giving notice of termination without resulting in any material cost or penalty
to the Company; (c) any (i) Agreement with any labor union, (ii) Agreement for
the employment of any officer or individual employee, or (iii) profit sharing,
bonus, commission, stock option, pension, vacation pay, employee's insurance,
retirement plan or Agreement, or other welfare plans or Agreements, (d) any
Agreement relating to the borrowing of money or to the mortgaging, pledging or
otherwise placing of a lien on its assets, (e) any Agreement under which it is
lessee of or holds or operates any material property, real or personal, owned by
any other party, (f) any Agreement containing any provision or covenant
prohibiting or limiting the ability of the Company, Seller or Buyer to operate
the business in the manner currently operated by the Company and Seller, (g) any
Agreement with any person or entity regarding the provision of any management or
consulting services to the Company, (h) any Agreement providing for cost-sharing
or over-head or expense allocation, (i) any Agreement requiring payments by the
Company in excess of $25,000, (j) any Agreement governing vendor relationships
or providing for the referral of leasing business to the Company, (k) any other
Agreement the termination of which would have a material adverse effect on the
business or operations of the Company or the Division. The Company has
delivered or made available to Buyer prior to the execution of this Agreement,
true and complete copies of the Material Agreements, if in writing. The Company
has in all material respects performed all the material obligations required to
be performed by it to date and is not in default under any such Material
Agreements. To the Seller's Knowledge, all Material Agreements are legal, valid
and binding and in full force
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and effect, and no other party thereto is in default thereunder. The Company is
not a party to and upon consummation of the Division Transfer will not be party
to any Agreements, including agreements not to compete, which could restrict or
prohibit Buyer's operations or Buyer's ability to expand its business in any
manner. Subject to receipt of any required consents of third parties as set
forth in SCHEDULE 3.3 hereto, the consummation of the transactions contemplated
hereby will not affect the validity or enforceability of any of the Material
Agreements, will not constitute a default or require any consent under any of
the Material Agreements and will not give rise to any right to terminate such
Material Agreements under any provisions thereof. As used herein, the term
"Agreement" shall mean any contract, agreement or understanding, whether or not
in writing.
3.18. OTHER TRANSACTIONS. Except as disclosed on SCHEDULE 3.18 hereto, the
Equipment Leasing Group has not, since the Financial Statement Date, except for
the Division Transfer, (a) operated its business except in the ordinary course
of business, (b) incurred any debts, liabilities or obligations except in the
ordinary course, (c) discharged or satisfied any liens or encumbrances, or paid
any liens or encumbrances, or paid any debts, liabilities or obligations, except
in the ordinary course of business, (d) mortgaged, pledged or subjected to lien
or other encumbrance any of its assets, tangible or intangible, except in the
ordinary course of business, (e) sold or transferred any of its assets, or
canceled any debts or claims, except, in each case, in the ordinary course of
business, or (f) suffered any extraordinary losses or waived any rights of
substantial value.
3.19. SUBSIDIARIES. The Company has, and following the Division Transfer
will have, no subsidiaries or interests in other entities.
3.20. BANK ACCOUNTS. SCHEDULE 3.20 hereto lists the names and addresses of
every bank and other financial institution in which the Equipment Leasing Group
maintains an account (whether checking, savings or otherwise), lock box or safe
deposit box, and the account numbers and names of persons having signing
authority or other access thereto.
3.21. NO CHANGES. Since the Financial Statement Date, there has not been:
(a) Any material adverse change in the financial or other
condition, assets, liabilities or business of the Equipment Leasing Group,
except changes described in SCHEDULE 3.21 hereto;
(b) Any damage, destruction or loss (whether or not covered
by insurance) or any condemnation by governmental authorities which has or may
adversely affect the business, prospects or any property of the Equipment
Leasing Group;
(c) Any strike, lockout, labor trouble or any event or
condition of similar character adversely affecting the business or prospects of
the Equipment Leasing Group;
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(d) Any declaration, setting aside or payment of any
dividend or other distribution in respect of any of the Company's shares of
stock, or any direct or indirect redemption, purchase or other acquisition of
any such shares; or
(e) Any increase in the compensation payable or to become
payable by the Equipment Leasing Group to any of its officers, employees or
agents, except as provided in the Employment Agreements referenced in Section
7.1.4 hereof.
3.22. COMPENSATION ARRANGEMENTS. The Company and the Seller have delivered
to Buyer a correct list showing the names and the employment commencement date
of all officers, employees and agents performing services for the Equipment
Leasing Group in connection with its business and the rate of hourly, monthly or
annual compensation (as the case may be). Buyer has been provided access to
records reflecting amounts paid or to be paid to each such person in 1993, 1994,
1995 and 1996, any accrued sick leave or vacation and any bonus or similar
arrangement with any of them.
3.23. COPIES OF ARTICLES AND BYLAWS. Buyer has been provided true and
correct copies of the Company's Articles (Certificate) of Incorporation
(certified by the Secretary of State of the jurisdiction of incorporation) and
Bylaws (certified by the Secretary of the Company), which remain in full force
and effect in the form delivered to Buyer.
3.24. CONDITION OF TANGIBLE ASSETS. Except as set forth in SCHEDULE 3.24,
the computer system used in the business of the Equipment Leasing Group,
including all hardware and software related thereto, is in good operating
condition as necessary for the operation of the business of the Equipment
Leasing Group, and the operation and use of such assets of the Equipment Leasing
Group conform in all material respects to all applicable laws, ordinances,
regulations, permits, licenses and certificates.
3.25. LEASE PORTFOLIO.
(a) Each lease by the Company or the Division, other than
the Handy Andy lease retained by Seller in accordance with Section 2.1 hereof,
is referred to in this Section 3.25 and elsewhere in this Agreement as a
"Contract", and the equipment leased pursuant thereto is referred to as the
"Leased Equipment".
(b) Set forth on SCHEDULE 3.25(B) hereto is a list of each
Contract which, individually or together with all other Contracts to the same or
affiliated obligors, under which the outstanding gross receivable balance
together with the aggregate amount of any commitment to extend additional leases
is in excess of $100,000 the ("Material Contracts") as of August 31, 1996.
(c) Attached hereto as SCHEDULE 3.25(C) are the forms of
lease agreement used with respect to each Contract. Except as listed on
SCHEDULE 3.25(C), all of the Contracts are governed by these forms of agreement,
with only such changes, deletions
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or additions as do not materially affect the Company's rights, remedies or
obligations thereunder, or its ability to realize the intended benefits thereof.
(d) UCC-1 financing statements have been filed in the proper
filing offices with respect to each Contract in excess of $10,000 which identify
"The Equipment Leasing Company" at 16 Green Meadow Drive, Timonium, Maryland
21093 as the lessor, correctly identify the lessee and its address and the
equipment leased to such lessee, and are in all other material respects in
proper form and substance in accordance with the laws of the jurisdiction in
which the Leased Equipment is located.
(e) None of the Leased Equipment is subject to documents of
title.
(f) Each Contract complies in all material respects with all
applicable laws and regulations; all actions taken in connection therewith by
the Company or Seller, including with respect to the origination and servicing
thereof, have been in accordance with all applicable laws and regulations in all
material respects; and each Contract is not subject to any valid material
defense, counterclaim, set-off or other claim of liability against the Company
or the Seller.
(g) Each Contract: (1) has been originated in the United
States of America and is payable in United States dollars; and (2) has been
fully and properly executed by the parties thereto, and is the valid, binding
and enforceable obligation of the obligor(s) thereunder, subject only to
bankruptcy and similar laws and to equitable principles regarding the
enforcement of creditors rights generally.
(h) All of the Leased Equipment is located within the United
States.
(i) Except as set forth on SCHEDULE 3.25(I), none of the
Contracts is due from the United States of America or any State or from any
agency, department, or instrumentality of the United States of America or any
State. All of the Contracts are due from obligors that are corporations,
partnerships or other legal entities formed under the laws of a State in the
United States, or are due from individual obligors leasing the Leased Equipment
for business or commercial purposes and not for personal or household use.
(j) No Leased Equipment has been released from the lien
granted or ownership rights retained by the lessor under the related Contract in
whole or in part.
(k) To the knowledge of Seller or the Company, no liens or
claims have been filed for work, labor, or materials relating to any Leased
Equipment that constitute liens prior to, or equal or coordinate with, the
interests of the lessor in the Leased Equipment pursuant to the Contract.
(l) Except as set forth on SCHEDULE 3.25(L): (i) to the
Knowledge of the Company and the Seller, there is no payment default in excess
of 15 days under any
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Contract nor any other default, breach, violation, or event which would permit
acceleration under the terms of any Contract, no continuing condition that with
notice or the lapse of time would constitute such a non-payment default, breach,
violation, or event permitting acceleration under the terms of any Contract has
arisen, and the lessor has not waived any of the foregoing; (ii) no Contract has
been charged off; (iii) no voluntary or involuntary bankruptcy proceeding has
been commenced and is continuing by or against any obligor under any Contract;
(iv) and no Leased Equipment with respect to any Contract has been repossessed.
(m) Each Contract is a noncancelable "net" transaction under
which the obligor must make all scheduled payments, maintain the equipment,
insure the equipment against casualty loss and pay all equipment related taxes.
The lessor has no continuing obligation under the Contract with respect to (i)
servicing, repair or maintenance of the Leased Equipment during the term of the
Contract; (ii) the purchasing of parts and accessories for the leased property;
(iii) the loan of replacement or substitute property while the leased property
is being serviced; (iv) the purchasing of insurance for the lessee; or (v) the
renewal of any license, registration or filing for the property (other than
continuation statements required under the Uniform Commercial Code of the
applicable jurisdictions).
(n) At the inception of each Contract, the lessor under the
Contract reasonably expected to realize a return of its full investment in the
leased property, plus the estimated cost of its financing the property over the
term of the lease, from lease payments, estimated tax benefits, and the
estimated residual value of the Leased Equipment at the expiration of the
Contract, provided, that not more than fifteen percent (15%) of such return was
expected at the inception of the Contract to be realized from the residual value
of the Leased Equipment, and provided further that any Contract with respect to
which more than ten (10%) of such return was expected at the inception of the
Contract to be realized from the residual value of the Leased Equipment includes
Addendum A as attached hereto pursuant to Schedule 3.25(c).
(o) The residual interest of the Company or the Seller, as
applicable, prior to the Division Transfer, and the residual interest of the
Company, following the Division Transfer, in the Leased Equipment under each
Contract, if any, is recorded on such company's books in an amount that
represents an estimate of the projected value of the Leased Equipment at the end
of the Contract term, which estimate has been determined in good faith and is
reasonable in light of the nature of the leased property and all relevant
circumstances.
(p) The Company or the Seller, as applicable, prior to the
Division Transfer, and the Company, following the Division Transfer, has good
title to each Contract free and clear of all liens, encumbrances, security
interests, and rights of others.
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It is agreed that Buyer is accepting the "credit risk" inherent in
the lease portfolio, "credit risk" being the risk that a lessee is unable to
make payment in accordance with the terms of a Contract.
3.26. HAZARDOUS SUBSTANCES. To the Knowledge of Seller and the Company
except as listed on SCHEDULE 3.26: (i) none of the assets of the Company has
been used for the manufacture, storage, transportation, deposit, disposal,
treatment, handling, production, processing or recycling of toxic, dangerous or
hazardous substances nor is there any tank or facility for the storage of
hazardous substances located on or in the assets of the Company, except in
material compliance with Environmental Laws; (ii) there are no friable asbestos
materials on or in the assets of the Company creating, or reasonably likely to
create, a hazardous condition; (iii) there is not now nor has there been any
activity on or in the assets of the Company which would subject the Company or
the Buyer to liens, damages, penalties, injunctive relief or cleanup costs under
any federal, state or local law, or under any civil action respecting hazardous
substances; (iv) the Company has complied in all material respects with each,
and is not in violation in any material respect of any, federal, state or local
law, statute, regulation, permit provision or ordinance, relating to the
generation, handling, storage, transportation, treatment or disposal of
chemicals, substances (the "Environmental Laws"); and (v) the Company has
obtained and complied with all necessary permits and other approvals under
applicable Environmental Laws. A "hazardous substance" shall mean that term as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. Section 9601, ET SEQ., as amended, and dangerous, regulated toxic
or hazardous substances or similar terms under any other applicable state,
federal or local law and any regulations thereunder.
3.27. RELATIONSHIP WITH VENDORS. None of the Company's vendors or referral
sources for the past two fiscal years has given the Company notice terminating,
canceling or threatening to terminate or cancel any contract or relationship
with the Company, and the Company and Seller are not aware of any material
deterioration of any such relationship.
3.28. TRANSACTIONS WITH AFFILIATES. Neither Seller nor any Subsidiary of
Seller, nor any officer or employee thereof or of the Company, (i) owns or has a
material interest in any asset used by the Company in the operation of the
business of the Company, except for the Division, (ii) has any direct or
indirect interest of any nature whatsoever in any person which markets or
provides the same type of services as those which the Company provides, except
for the Division, or (iii) provides or causes to be provided any assets,
services or facilities used or held for use in connection with the business of
the Company, except for the Division.
3.29. VERACITY OF STATEMENTS. No representation or warranty by Seller or
the Company contained in this Agreement and no statement contained in any
certificate, schedule or other instrument furnished to Buyer pursuant hereto
contains any untrue
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statement of a material fact or omits to state a material fact necessary to make
the statements made therein not misleading.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer hereby represents and warrants to Seller as follows:
4.1. ORGANIZATION AND POWER. Buyer is a federal savings bank duly
organized, validly existing and in good standing under the laws of the United
States, and has full corporate power and authority to carry on its business as
it is now being conducted and to own and operate the properties and assets now
owned and operated by it.
4.2. POWER AND AUTHORITY. Buyer has full power and
authority to execute, deliver and perform this Agreement and the Collateral
Documents to which Buyer is a party. The execution, delivery and performance of
this Agreement and the Collateral Documents to which Buyer is a party, and the
consummation of the transactions contemplated hereby and thereby have been duly
authorized by all necessary action on the part of Buyer. Each of this Agreement
and the Collateral Documents to which Buyer is a party is a valid and binding
obligation of Buyer, enforceable in accordance with their terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws affecting the rights of creditors generally.
4.3. CONFLICT WITH AUTHORITY, BYLAWS, ETC. Neither the execution and
delivery of this Agreement and the Collateral Documents to which Buyer is a
party, nor the consummation of the transactions contemplated hereby and thereby
in the manner herein provided will violate, be in conflict with, require any
consent under, constitute a default under, cause the acceleration of any
payments pursuant to, or otherwise impair the good standing, validity, and
effectiveness of any contract, lease, license, permit, authorization, or
approval applicable to Buyer; or, subject to requirements of the Office of
Thrift Supervision ("OTS") regarding notice of, and opportunity of the OTS to
object to, the proposed transaction, violate any provision of law, rule,
regulation, order, or permit to which Buyer is subject.
4.4. ACQUISITION OF SHARES FOR INVESTMENT. The Buyer or its permitted
assignees are and will be acquiring ownership of the Shares of the Company for
investment for its own account and not with a view to the resale or distribution
thereof in violation of any federal or state securities laws. Buyer or such
assignees will not offer, sell, transfer, assign, pledge or hypothecate any
portion of the Shares in the absence of registration under, or pursuant to an
applicable exemption from all applicable federal and state securities laws.
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ARTICLE 5
ACTIVITIES PRIOR TO CLOSING
5.1. OPERATION OF BUSINESS. Prior to the Closing Date, the Company shall,
and Seller will cause the Company and the Division to, conduct its business only
in the ordinary course consistent with prior practice, and in connection
therewith, except for the Division Transfer, the Company shall and Seller shall
cause the Company and, where applicable, the Division to:
5.1.1. ORGANIZATIONAL DOCUMENTS. Not amend the Company's Articles
(Certificate) of Incorporation or Bylaws, except as may be necessary to carry
out this Agreement or as required by law;
5.1.2. CORPORATE NAME. Not change the Company's corporate name or
permit the use thereof by any other person or entity;
5.1.3. COMPENSATION, BONUSES. Not pay or agree to pay to any
employee, officer, or director of the Company, without the consent of Buyer,
compensation that is in excess of the current compensation level of such
employee, officer, or director, except as provided in the Employment Agreements
referenced in Section 7.1.4 hereof;
5.1.4. MANAGEMENT. Not make any changes in the Company's or the
Division's management without the consent of Buyer;
5.1.5. MERGERS, ETC. Not merge or consolidate the Company or the
Division with any other corporation or permit the Company or the Division to be
acquired by any corporation, association, partnership, joint venture, or other
entity;
5.1.6. DISPOSITION OF ASSETS. Not sell, transfer, or otherwise
dispose of any assets of the Company or the Division without the prior written
consent of Buyer, except in the ordinary course of business;
5.1.7. INDEBTEDNESS. With respect to the Company, not (a) create,
incur, assume, or guarantee any indebtedness for borrowed money except in the
ordinary course of business consistent with prior practice; (b) create or suffer
to exist any lien or encumbrance on any assets, except those in existence on the
date hereof; or (c) increase the amount of any indebtedness outstanding under
any loan agreement, mortgage, or other borrowing arrangement in existence on the
date hereof except in the ordinary course of business consistent with prior
practice;
5.1.8. PAYABLES. Pay when due, in accordance with past practices,
all of its accounts payable and trade obligations of the Company and the
Division;
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5.1.9. MAINTENANCE OF ASSETS. Maintain the computer systems of the
Company and the Division in the operating repair, order, and condition
contemplated by Section 3.24 hereof and notify Buyer immediately upon any loss
of, damage to, or destruction of any such assets;
5.1.10. INSURANCE. Maintain in full force and effect insurance
coverage of the types and in the amounts set forth in SCHEDULE 3.13 and SCHEDULE
3.14 attached hereto and apply the proceeds received under any insurance policy
or as a result of any loss or destruction of or damage to any assets to the
repair or replacement of such assets;
5.1.11. CONTRACTS AND PERMITS. Maintain in full force and effect all
Agreements and Permits necessary for or related to the operation of the
Company's or the Division's business in all respects and in all places as such
business is now conducted and renew or revalidate any Permits which may become
void, expired, terminated, canceled or withdrawn between the date hereof and the
Closing Date;
5.1.12. GOODWILL. Use best efforts to preserve the business
organization of the Company and the Division intact, keep available the services
of their present employees and preserve the good will of their customers and
others having business relations with them;
5.1.13. LITIGATION, ETC. Promptly advise Buyer in writing of the
commencement of, and of any known threat to commence any, suit, claim, action,
arbitration, legal or administrative proceeding, governmental investigation, or
tax audit against the Company or the Division; and
5.1.14. DIVIDENDS OR OTHER DISTRIBUTIONS. Not declare, set aside or
pay any dividend or other distribution in respect of its shares of capital stock
of the Company, or redeem, purchase or otherwise acquire any such shares of
capital stock.
5.2. ACCESS TO INFORMATION. Prior to Closing, Seller and the Company will
cooperate fully with Buyer and shall provide Buyer and its accountants, counsel,
and other representatives, during normal business hours, full access to the
books, records, equipment, real estate, contracts, and other assets of the
Company and the Division, and full opportunity to discuss the business, affairs,
and assets of the Company and the Division with its officers, employees,
customers, suppliers and independent accountants, and furnish to Buyer and its
representatives copies of such documents, records, and information with respect
to the affairs of the Company and the Division as Buyer or its representatives
may reasonably request. In addition to the foregoing right of access and
information, Buyer may designate on-site observers of the business and
operations of the Company and the Division, which observers shall be permitted
such access to the Company's and the Division's business and operations as Buyer
may reasonably request and shall be fully informed by it concerning all of its
assets, operation, and business affairs.
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5.3. BEST EFFORTS. Seller will use its best efforts to cause the
conditions listed in Section 7.1 hereof to be satisfied on the Closing Date.
5.4. NOTICE OF CHANGE. The Company and Seller will promptly notify Buyer
of the existence or happening of any fact, event or occurrence prior to the
Closing Date and of which the Company or the Seller or any of their employees,
officers, directors, stockholders, or other representatives has knowledge which
alters the accuracy of completeness of any representation or warranty contained
in Article 3 of this Agreement in any material respect.
5.5. NO DISCUSSIONS. Seller and the Company will not, and will not
authorize or permit any of their employees, officers, directors, or other
representatives to, enter into, participate in, request, solicit or engage in
any discussions, negotiations, understandings, agreements or other
communications with any person or entity other than Buyer relating to offers,
inquiries, negotiations or proposals with respect to the sale of the assets or
any capital stock of the Company or the Division, or any type of business
combination transaction involving the Company or the Division. Seller and the
Company will promptly notify Buyer of any such offer, inquiry, negotiation or
proposal which either Seller or the Company may receive.
ARTICLE 6
ACTIVITIES PRIOR TO CLOSING BY BUYER
6.1. BEST EFFORTS. Buyer will use its best efforts to cause the conditions
listed in Section 7.2 hereof to be satisfied on the Closing Date.
6.2. CONFIDENTIALITY. Except as otherwise required by law, or as may be
necessary or appropriate to enforce Buyer's rights hereunder, Buyer shall retain
in confidence, and shall cause its advisors to retain in confidence, and not use
for any purpose other than to evaluate the equipment leasing business to be
acquired by Buyer under this Agreement, all information obtained by it pursuant
to investigations made by Buyer or its advisors pursuant to Section 5.2 hereof
(the "Confidential Information"). The parties agree that the Confidential
Information shall not include information which (i) was or becomes generally
available to the public other than as a result of a disclosure by Buyer or its
advisors, (ii) was or becomes available to Buyer or its advisors on a non-
confidential basis from a source other than Seller or the Company or their
representatives, provided that such source is not bound by a confidentiality
agreement or (iii) was, or in the future is, developed independently by Buyer or
its advisors without reference to the information furnished by Seller or the
Company or their representatives. The parties understand and agree that all of
the Confidential Information supplied to Buyer or its advisors is provided on
the understanding that such Confidential Information remains the property of
Seller or the Company, as applicable, and that all copies and originals will be
returned to Seller or the Company, as applicable, promptly upon its request
after termination of this Agreement
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pursuant to Article 14 hereof. This Section 6.2 shall terminate upon
consummation of the transaction contemplated hereby.
ARTICLE 7
CONDITIONS PRECEDENT TO CLOSING
7.1. CONDITIONS TO OBLIGATION OF BUYER TO CLOSE. The obligation of Buyer
to consummate the transaction contemplated under this Agreement on the Closing
Date (effective as of the Effective Time) shall be subject to the satisfaction
or the waiver by Buyer of the following conditions on or prior to the Closing
Date:
7.1.1. REPRESENTATIONS AND WARRANTIES; COMPLIANCE WITH AGREEMENT.
The representations and warranties of the Company and Seller set forth in this
Agreement shall be true and correct as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date, Seller and the
Company shall have performed in all material respects all covenants and
agreements to be performed by them under this Agreement on or prior to the
Closing Date, and Seller and the Company shall have delivered to the Buyer a
certificate to such effect, dated the Closing Date, which certificate shall be
in form and substance satisfactory to Buyer and its counsel;
7.1.2. DIVISION TRANSFER; CLOSING BALANCE SHEET.
(a) The Division Transfer shall have been consummated in
accordance with Article 2 hereof;
(b) Buyer shall have received a balance sheet for the
Company prepared by Seller as of the Cut-Off Date (the "Closing Balance Sheet"),
reasonably satisfactory to Buyer, prepared in accordance with GAAP, utilizing
the GAAP principles followed in preparing the Financial Statements and Interim
Financial Statements, reflecting the Division Transfer, all charge-off
experience through the Cut-Off Date, lease loss reserves of not less than
$850,000, estimated earnings, estimated new leases and lease payments, accruals
of all salaries, bonuses (including special bonuses as provided in the
Employment Agreements referenced in Section 7.1.4 hereof), sales commissions,
taxes under Separate Returns (as defined in Section 13.5 hereof) and other
charges and expenses through the Cut-Off Date; and
(c) Tangible net worth of the Company as of the Cut-Off
Date, as reflected in the Closing Balance Sheet, shall be not less than $3.5
million.
7.1.3. SCHEDULE OF LEASES. Buyer shall have received a schedule
reasonably satisfactory to Buyer setting forth a complete and correct list of
all outstanding Contracts as of the Cut-Off Date, and, with respect to each
Contract, (i) the name of the obligor(s)
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with respect to the Contract, (ii) the original and outstanding gross receivable
balance and amount of finance charge under the Contract, (iii) the amount of
each monthly payment under the Contract, (iv) the original term and commencement
date of the Contract, and (v) the projected residual value of the Leased
Equipment.
7.1.4. EMPLOYMENT CONTRACTS. Dennis M. Horner and Scott A. Wheeler
shall each have entered into three-year employment contracts with the Company in
form and substance satisfactory to Buyer, including provisions allowing for
termination by the Company for cause.
7.1.5. OPINION OF COUNSEL FOR THE COMPANY. Drinker, Biddle & Reath,
counsel for the Seller and the Company, shall have delivered to Buyer their
opinion, dated the Closing Date and in form and substance reasonably
satisfactory to Buyer and its counsel.
7.1.6. LITIGATION AFFECTING CLOSING. On the Closing Date, no
proceeding shall be pending or threatened before any court or governmental
agency in which it is sought to restrain or prohibit or to obtain damages or
other relief in connection with this Agreement or the consummation of the
transactions contemplated hereby, and no investigation that might result in any
such suit, action or proceeding shall be pending or threatened.
7.1.7. REQUIRED CONSENTS. The parties (other than the Company) to
any other contract, commitment or agreement to which the Company or Seller is a
party, any governmental agency or body or any other person, firm or corporation
which owns or has authority to grant any franchise, license, permit, easement,
right or other authorization necessary for the business or operations of the
Company or Seller, and any governmental body or regulatory agency having
jurisdiction over Buyer, Seller or the Company, to the extent that their consent
or approval is required under the pertinent debt, lease, contract, commitment or
agreement or other document or instrument or under applicable laws, rules or
regulations for the consummation of the transaction contemplated hereby in the
manner herein provided, shall have granted such consent or approval.
7.1.8. NO MATERIAL DAMAGE TO BUSINESS. The assets, properties and
business of the Company shall not have been and shall not be threatened to be
materially adversely affected in any way as a result of fire, explosion,
earthquake, disaster, accident, labor dispute, any action by any governmental
authority, flood, drought, embargo, riot, civil disturbance, uprising, activity
of armed forces or act of God.
7.1.9. APPROVAL OF BUYER; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved by Buyer, in the exercise of its reasonable judgment, and Buyer or
its counsel shall have been furnished with certified copies, satisfactory in
form and substance to Buyer in the exercise of its reasonable judgment, of all
such corporate records of the Company and the Seller, and of the
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proceedings of such persons authorizing the execution, delivery and performance
of this Agreement as Buyer shall reasonably require.
7.1.10. RESIGNATIONS. Buyer shall have received the resignations of
the officers and directors of the Company as required in accordance with Section
1.4 hereof.
7.1.11. OTS APPROVAL. The period of time for objection by the OTS to
the proposed transaction under applicable regulations of the OTS shall have
expired and the OTS shall not have objected to the proposed transactions, or the
OTS shall have approved the proposed transactions, without the imposition of any
material conditions.
7.2. CONDITIONS TO OBLIGATION OF SELLER TO CLOSE. The obligation of Seller
to consummate the transfer of the Shares on the Closing Date (effective as of
the Effective Time) shall be subject to the satisfaction of the following
conditions on or prior to the Closing Date:
7.2.1. REPRESENTATIONS AND WARRANTIES. The representations and
warranties of Buyer set forth in this Agreement shall be true and correct as of
the date of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, Buyer shall have performed in all material respects all
covenants and agreements to be performed by it under this Agreement on or prior
to the Closing Date, and Buyer shall have delivered to Seller a certificate to
such effect, dated the Closing Date, which certificate shall be in form and
substance satisfactory to Seller and its counsel.
7.2.2. REQUIRED CONSENTS. The parties (other than the Company) to
any other contract, commitment or agreement to which the Company or Seller is a
party, any governmental agency or body or any other person, firm or corporation
which owns or has authority to grant any franchise, license, permit, easement,
right or other authorization necessary for the business or operations of the
Company or Seller, and any governmental body or regulatory agency having
jurisdiction over Buyer, Seller or the Company, to the extent that their consent
or approval is required under the pertinent debt, lease, contract, commitment or
agreement or other document or instrument or under applicable laws, rules or
regulations for the consummation of the transaction contemplated hereby in the
manner herein provided, shall have granted such consent or approval.
7.2.3. OPINION OF COUNSEL OF BUYER. Pepper, Hamilton & Scheetz,
counsel for Buyer, shall have delivered to Seller their opinion, dated the
Closing Date and in form and substance reasonably satisfactory to Seller and its
counsel.
7.2.4. LITIGATION AFFECTING CLOSING. On the
Closing Date, no proceeding shall be pending or threatened before any court or
governmental agency in which it is sought to restrain or prohibit or to obtain
damages or other relief in connection with this Agreement or the consummation of
the transaction
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contemplated hereby, and no investigation that might eventuate in any such suit,
action or proceeding shall be pending or threatened.
7.2.5. APPROVAL OF SELLER; CORPORATE MATTERS. All actions,
proceedings, resolutions, instruments and documents required to carry out this
Agreement or incidental hereto and all other related legal matters shall have
been approved on the Closing Date by Seller, in the exercise of their reasonable
judgment, and Seller shall have been furnished with certified copies,
satisfactory in form and substance to Seller in the exercise of their reasonable
judgment, of all such records of Buyer and the Company and of the proceedings of
Buyer and the Company authorizing their execution, delivery and performance of
this Agreement as Seller shall reasonably require.
ARTICLE 8
INDEMNIFICATION
8.1. BY SELLER. To the extent and in the manner herein provided, Seller
shall indemnify and hold harmless Buyer from and against any and all damages,
losses, obligations, deficiencies, liabilities, claims, encumbrances, penalties,
costs, and expenses, including reasonable attorneys' fees (collectively,
"Losses"), which Buyer or the Company may suffer or incur, resulting from,
related to, or arising out of (i) any breach of any representation or warranty
of the Company or Seller herein or in any certificate or document furnished to
Buyer hereunder, (ii) any breach or nonfulfillment of any covenant or agreement
of the Company or Seller in this Agreement; (iii) any claims for the payment of
taxes under Consolidated Returns which are payable for or in respect of tax
periods which ended prior to or which include the Cut-Off Date but only for the
portion of such tax period ending on the Closing Date; (iv) any claims for the
payment of taxes under Separate Returns (as defined in Section 13.5 hereof)
which are payable for or in respect of tax periods which ended prior to January
1, 1996, (v) any liabilities or obligations of the Seller not expressly assumed
by the Company pursuant to Article 2 hereof; (vi) any claims by third parties
based upon acts, omissions, facts, events or circumstances of the Company or
Seller occurring or in existence prior to the Closing Date; and (vii) any and
all actions, suits, investigations, proceedings, demands, assessments, audits,
or claims made or asserted by third parties ("Third Party Proceedings") arising
out of any of the foregoing.
8.2. BY BUYER. From and after the Closing Date, Buyer agrees to indemnify
and hold harmless Seller from and against any and all Losses which Seller may
suffer or incur, resulting from, related to, or arising out of (i) any breach of
any representation or warranty of Buyer herein or in any certificate or document
furnished to Seller hereunder, (ii) any breach or nonfulfillment of any covenant
or agreement of Buyer in this Agreement, (iii) non-payment or non-performance of
any of the Assumed Liabilities, or any other liabilities of the Company due
after the Closing Date and not subject to indemnification by Seller
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pursuant to Section 8.1 hereof, and (iv) any and all Third Party Proceedings
arising out of any of the foregoing.
8.3. LIMITATIONS. With respect to clauses (i) and (vi) of Section 8.1
hereof (including any indemnification obligation under clause (vii) of Section
8.1 with respect thereto), and with respect to clause (i) of Section 8.2 hereof
(including any indemnification obligation under clause (iv) of Section 8.2 with
respect thereto):
(a) Neither Buyer nor Seller shall be entitled to indemnification
hereunder with respect to any Losses unless the aggregate amount of all Losses
incurred by the party seeking indemnification exceeds Seventy-Five Thousand
Dollars ($75,000) (the "Threshold Amount"), whereupon Buyer or Seller, as
applicable, shall be entitled to indemnification, to the extent provided in
Sections 8.1 and 8.2 hereof, for all Losses, including amounts under the
Threshold; provided, however, that an indemnifying party shall have a duty to
defend, as provided in Section 8.4 hereof, with respect to any Proceeding which,
if adversely decided, would result in a Loss subject to indemnification in
excess of the Threshold Amount.
(b) Notwithstanding any other provision of this Article 8, neither
Seller nor Buyer shall have any indemnification obligation hereunder in excess
of Five Million Dollars ($5,000,000) (the "Cap"); provided, however, that the
Cap shall not apply with respect to liability of an indemnifying party with
respect to fraud, knowing misrepresentation or wilful misconduct by such party.
8.4. PROCEDURES. Promptly after acquiring knowledge of any Loss or
Proceeding against which Seller has indemnified Buyer or against which Buyer has
indemnified Seller, or as to which either Buyer or Seller may be liable, the
Seller or Buyer (herein, a "Party"), as the case may be, shall give to the other
Party written notice thereof. The indemnifying Party shall at its own expense,
promptly defend, contest or otherwise protect against any Proceeding against
which it has indemnified an indemnified Party, and each indemnifying Party shall
receive from the other Party all necessary and reasonable cooperation in said
defense including, but not limited to, the services of employees of the other
Party who are familiar with the transactions out of which any such Proceeding
may have arisen. The indemnifying Party shall have the right to control the
defense of any Proceeding unless it is relieved of its liability hereunder with
respect to such defense by the indemnified Party. The indemnifying Party shall
have the right, at its option, and, unless so relieved, to compromise or defend,
at its own expense by its own counsel, any such Proceeding involving the
asserted liability to a third party of the indemnified Party, provided, that the
indemnifying party may not without the consent of the indemnified party agree to
any settlement requiring payments in excess of amounts indemnified by the
indemnifying party. In the event that the indemnifying Party shall undertake to
compromise or defend any such asserted liability, it shall promptly notify the
indemnified Party of its intention to do so. In the event that an indemnifying
Party, after written notice from an indemnified Party, fails to take timely
action to defend the same, the indemnified Party shall have the right to
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defend the same by counsel of its own choosing, but at the cost and expense of
the indemnifying Party to the extent provided in this Article 8.
ARTICLE 9
SURVIVAL OF REPRESENTATIONS AND WARRANTIES
All representations and warranties made by Seller and Buyer in this
Agreement or pursuant hereto shall survive the Closing hereunder until May 15,
1998, notwithstanding any investigation made by or on behalf of Seller or Buyer
prior to or after the Closing Date.
ARTICLE 10
THE CLOSING
10.1. TIME AND PLACE OF CLOSING; EFFECTIVE TIME. The closing (the
"Closing") of the transactions contemplated hereby shall be held on October 8,
1996 at 9:00 a.m., at the offices of Pepper, Hamilton & Scheetz, counsel to the
Buyer, 3000 Two Logan Square, 18th and Arch Streets, Philadelphia, PA 19103, or
at such other time and at such other place, as shall be mutually agreeable to
the Buyer and the Seller (the "Closing Date"). Upon completion of the Closing,
Buyer and Seller agree that the purchase and sale of the Shares hereunder shall
be effective as of the Effective Time specified in Section 1.1 hereof.
10.2. CONDUCT OF CLOSING.
10.2.1. DELIVERIES BY BUYER. Subject to the fulfillment of all of
the conditions set forth in Section 7.1 and the delivery of all certificates and
opinions required thereby, except such conditions as may be waived by Buyer in
writing, on the Closing Date Buyer shall deliver to Seller:
(a) the Purchase Price as provided in Section 1.2 hereof;
(b) the certificate required by Section 7.2.1 hereof; and
(c) a certificate dated the Closing Date and signed on
behalf of Buyer by its Secretary (i) attaching resolutions by the Board of
Directors of Buyer authorizing the actions taken and authorizing the officers of
Buyer to execute all documents and instruments to be executed and delivered in
connection with this Agreement; and (ii) certifying as to incumbency and true
and correct signatures of the officers of Buyer executing this Agreement and the
documents executed and delivered by Buyer pursuant to or in connection with this
Agreement.
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10.2.2. DELIVERIES BY SELLER. Subject to the fulfillment of all of
the conditions set forth in Section 7.2 and the delivery of all certificates and
opinions required thereby, except such conditions, certificates, and opinions as
may be waived by Seller in writing, Seller shall deliver to Buyer:
(a) the stock certificates evidencing Seller's ownership of
the Shares, together with stock powers duly executed in blank, and all other
good and sufficient instruments of transfer and conveyance as may be necessary
in Buyer's opinion to vest in Buyer good, absolute, and marketable title to the
Shares;
(b) the certificate required by Section 7.1.1 hereof;
(c) a certificate dated the Closing Date and signed on
behalf of the Company by its Secretary (i) attaching (A) resolutions by the
Board of Directors of the Company authorizing the actions taken and authorizing
the officers of the Company to execute all documents and instruments to be
executed and delivered by the Company in connection with this Agreement and (B)
certificates of good standing certified by the Secretaries of State or other
appropriate officials of those states in which the Company does business; and
(ii) certifying as to incumbency and true and correct signatures of the officers
of the Company executing this Agreement and the documents executed and delivered
by the Company pursuant to or in connection with this Agreement.
(d) a certificate dated the Closing Date and signed on
behalf of the Seller by its Secretary (i) attaching the resolutions by the Board
of Directors and the stockholders of the Seller authorizing the actions taken
and authorizing the officers of the Seller to execute all documents and
instruments to be executed and delivered by the Seller in connection with this
Agreement; and (ii) certifying as to incumbency and true and correct signatures
of the officers of the Seller executing this Agreement and the documents
executed and delivered pursuant to or in connection with this Agreement.
ARTICLE 11
ADDITIONAL COVENANTS OF SELLER AND BUYER
11.1. EMPLOYEES. From and after the Closing Date, the employees of the
Company shall continue as at-will employees of the Company, provided, that
nothing herein shall be construed as any commitment or obligation for the
continued employment of any employee, and no employee shall be a third-party
beneficiary of or otherwise have any rights under this Agreement.
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11.2. BENEFIT PLANS.
11.2.1. MAINTENANCE OF PLANS PENDING CLOSING. Between the date
hereof and the Closing Date, the Company shall maintain in full force and effect
the Benefit Plans as they pertain to the Company's employees or former employees
and, in connection therewith:
(a) PLAN CHANGES. Except as may be required by law or as may
be necessary to continue the qualified status under Section 401 of the Code, and
except for amendments to the 40l(k) plan applicable to the employees of the
Equipment Leasing Group to provide for full vesting of all such employees, the
Company shall not adopt, terminate, amend, extend, or otherwise change any
Benefit Plan without the prior written consent of Buyer, and the Company shall
give Buyer prior written notice of the Company's intention to take any such
action required by law or necessary to continue the qualified status of any
Benefit Plans as they pertain to the Company's employees or its former
employees; and
(b) CONTRIBUTIONS AND PAYMENTS. The Company shall not make,
cause to be made, or agree to make any contribution, award, or payment under any
Benefit Plans as they pertain to the Company's employees or former employees,
except at the time and to the extent required by the written terms thereof,
without the prior written consent of Buyer.
11.2.2. 401(K) PLAN. Seller's 401(k) plan shall provide that each
employee of the Company shall have a fully nonforfeitable interest in his or her
account under the 401(k) plan irrespective of whether that participant was
otherwise fully vested at the time of closing. Seller shall contribute to its
401(k) plan on behalf of such participants all contributions due for the portion
of the year during which employees of the Company were active participants in
Seller's 401(k) plan irrespective of whether such participants would have been
ineligible for such contributions by reason of their termination of employment
with the Seller prior to the close of Seller's 401(k) plan year.
11.3. COOPERATION. Buyer and Seller will cooperate upon and after the
Closing Date in effecting the orderly transfer of the operations of the Company
to Buyer. In addition, after the Closing Date, at the request of either Party
and at the requesting Party's expense, but without additional consideration, the
other Party shall execute and deliver from time to time such further instruments
of assignment, conveyance and transfer, shall cooperate in the conduct of
litigation and the processing and collection of insurance claims, and shall take
such other actions as may reasonably be required to convey and deliver more
effectively to Buyer the Shares or to confirm and perfect the Buyer's title to
the Shares, and otherwise to accomplish the orderly transfer of ownership of the
Company to Buyer and the business assets and operations of the Company as
contemplated by this Agreement. Buyer and Company shall cooperate with Seller,
and provide Seller with such information about the Company as Seller may
reasonably request, in connection with the preparation of Seller's
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<PAGE>
financial statements and tax returns for periods ending December 31, 2000 and in
connection with any audit of Seller's tax returns for any period.
11.4. NON-COMPETITION. For a period of three (3) years following the
Closing, Seller agrees that it will not, directly or indirectly, engage in the
equipment leasing business east of the Mississippi River or otherwise compete
with the equipment leasing business of the Company as it is conducted as of the
Closing Date in such territory.
11.5. REFINANCING OF INTERCOMPANY INDEBTEDNESS.
(a) At the time of the Closing, the Seller shall provide to
Buyer a statement of (i) the outstanding principal balance of the indebtedness
of the Company to the Seller at September 30, 1996 described in Section 2.2(b),
(ii) an amount representing interest accrued on the sum of the amounts specified
in clause (i) from the Cut-Off Date through the Closing Date at an annual rate
of 7%, and (iii) the outstanding principal balance of the indebtedness of the
Company to the Seller on the Closing Date, all as certified by a Vice President
of Seller. At the time of Closing, Buyer will advance funds to the Company
sufficient to, and will cause the Company to, repay in full the then outstanding
principal balance of such indebtedness plus the amounts specified in clauses
(ii) above, as set forth in such statement.
(b) At the time of Closing, Seller shall also provide Buyer
with a statement showing for each day after the Cut-Off Date and ending on the
Closing Date, the principal amount of the Company's indebtedness to Seller. If
on any such date, such indebtedness exceeds the amount outstanding at the Cut-
Off Date, Buyer shall pay Seller an amount representing one day's interest on
such overage calculated at an annual rate of 7%; if on any such date, such
indebtedness is less than the amount outstanding at the Cut-Off Date, Seller
shall pay Buyer an amount representing one day's interest on such underage
calculated at an annual rate of 7%.
11.6. POST-CLOSING AUDIT, ADJUSTMENTS.
(a) Within sixty (60) days after the Closing Date, the balance
sheet of the Company as of the Cut-Off Date, utilizing generally accepted
accounting principles and reflecting the charges and accruals specified in
Section 7.1.2 hereof, shall be audited by Coopers & Lybrand LLP. The cost of
such audit shall be shared equally between Buyer and Seller. In the event that
either party is not satisfied with the results of the audit by Coopers & Lybrand
LLP, such party may, upon notice to the other party given within ten (10) days
after receipt of the balance sheet audited by Coopers & Lybrand LLP, have such
balance sheet audited by another "Big 6" accounting firm of national reputation,
such audit to be completed within forty-five (45) days after such notice and the
costs of such audit to be borne by the party requesting it. If within such
forty-five (45) day period Coopers & Lybrand LLP and such other accounting firm
cannot reach agreement regarding the audited balance sheet as of the Cut-Off
Date, then the net worth of the Company and the amount
29
<PAGE>
of indebtedness of the Company to the Seller shall, for purposes of Sections
11.6(b) and (c) below, be the average of such figures as audited by Coopers &
Lybrand LLP and such other accounting firm.
(b) In the event that the audited net worth of the Company as of the
Cut-Off Date, determined as provided in paragraph (a) above, shall be less than
$3.5 million, the Seller shall promptly upon demand by Buyer pay to Buyer an
amount equal to the amount of such short-fall, and in the event that the audited
net worth of the Company as of the Cut-Off Date is in excess of $3.5 million,
Buyer shall promptly upon demand by Seller pay to Seller an amount equal to the
amount of such excess, in either case together with interest as provided in
Section 11.6(d) below.
(c) In the event that the balance of the Company's indebtedness to
the Seller as of the Cut-Off Date is determined in accordance with paragraph (a)
above to have been different than the amount set forth in the statement
delivered pursuant to Section 11.4 hereof, then the Seller shall pay to the
Company, or the Buyer shall cause the Company to pay to the Seller, as
applicable, the amount of such difference together with interest as provided in
Section 11.6(d) hereof.
(d) Amounts due pursuant to the foregoing Sections 11.6(b) or (c)
shall include interest thereon from the Closing Date to the date of payment, at
a rate of six percent (6%) per annum in the case of amounts due pursuant to
paragraph (b) above and at rate of seven percent (7%) per annum in the case of
amounts due pursuant to paragraph (c) above.
ARTICLE 12
BROKERAGE; EXPENSES
Neither of Buyer or Seller, nor, where applicable, any of their
respective shareholders, officers, directors, or employees, has employed or will
employ any broker, agent, finder, or consultant or has incurred or will incur
any liability for any brokerage fees, commissions, finders' fees, or other fees,
in connection with the negotiation or consummation of the transactions
contemplated by this Agreement.
Except as otherwise expressly provided in this Agreement, Buyer, on
the one hand, and Seller on the other, each agree to bear all the respective
expenses of any character incurred by such party including all attorneys' fees
and expenses, in connection with this Agreement or the transactions contemplated
hereby. For purposes hereof, any such expenses borne by the Company in
connection with the transaction contemplated herein shall be borne by Seller or
reimbursed by Seller at Closing.
30
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ARTICLE 13
TAXES
13.1. COMPANY'S TAX LIABILITIES.
13.1.1. SEPARATE RETURNS. The Company shall file all federal and
state Separate Returns for all periods ending after the Cut-Off Date, and pay
all tax liabilities due with respect thereto. If required such return
information shall be included with the consolidated return group of the Buyer.
13.1.2. CONSOLIDATED RETURNS. The Seller shall be responsible for
the preparation of the federal tax return of the Company for the short taxable
period ending on the Cut-Off Date under consolidated returns of the Seller Group
in a manner consistent with prior tax returns and shall include the taxable
income or loss reflected in such return in the Consolidated Return. The Seller
shall pay all taxes for such period.
13.1.3. LIABILITY FOR TAXABLE YEARS PRIOR TO TAXABLE YEAR INCLUDING
CLOSING DATE. The Seller shall pay all taxes under Separate Returns for any
period ending before January 1, 1996. The Seller shall pay all Seller Group
federal income taxes, and shall pay all state and local taxes of the Seller
Group excluding the Company (except for personal property taxes) for any period
ending before or including the Cut-Off Date. For any period ending before or
including the Cut-Off Date, Company shall have no, and Seller shall hold Company
harmless for and indemnify Company against all, tax liabilities attributable to
Company and any joint and several liability, for any consolidated tax liability
of Seller Group. Seller will cooperate with Company in causing the District
Director to exercise its authority to eliminate Company's several liability for
any such consolidated tax.
13.2. TAX RETURNS AND PAYMENTS
13.2.1. REVIEW OF CONSOLIDATED FEDERAL RETURNS FOR TAXABLE YEAR
INCLUDING CLOSING PERIOD. At least fifteen (15) days prior to Seller filing any
consolidated return for its taxable year including the Current Period, Seller
shall submit that portion of its consolidated return pertaining to the Company
for review. The Company shall notify Seller of any disagreement regarding items
which would affect the tax liability or position of Company for periods ending
after the Closing Date within seven (7) days after receiving such return from
Seller. Should the Company disagree, the Company and Seller shall consult in
good faith to attempt to resolve such disagreement. If the Company and Seller
cannot reach a resolution by the extended due date of the return, Seller shall
file its consolidated return as it deems appropriate.
13.2.2. AMENDED RETURNS. If Seller determines to file any amended
consolidated return and such return would affect the tax liability or position
of the Company
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for periods ending after the Closing Date, Seller shall submit such return to
the Company at least thirty (30) days before the filing of such amended return.
The Company shall provide comments on such return to Seller, if any, including
notice of disagreement, within fifteen (15) days after receiving such return
from Seller. Should the Company disagree, the Company and Seller shall consult
in good faith to attempt to resolve such disagreement. If the Company and
Seller cannot reach a resolution in a reasonably timely fashion, then Seller
shall file amended returns as it deems appropriate.
13.2.3. EXTENSION OF STATUTE OF LIMITATIONS. If Seller determines to
extend the statute of limitations for a consolidated return, Seller shall give
notice to the Company within thirty (30) days after entering into such
agreement.
13.2.4. CONSISTENCY. In preparing any return for its taxable year
including the Current Period, Seller shall not change, revoke, or otherwise
affect any previously filed elections, consents or other similar documents, or
any accounting method, which could affect the position of the Company with
respect thereto after the Closing Date, and which has been in effect with
respect to taxable years prior to the Current Period, without the prior written
consent of the Company, which consent shall not be unreasonably withheld.
13.3. ADMINISTRATION.
13.3.1. COOPERATION. The parties agree to provide each other with
such cooperation and information as may be reasonably requested in connection
with (i) the preparation or filing of any tax return, report, amended return or
claim for refund with respect to taxes; (ii) the conduct of any audit; or (iii)
making any other computation or determination required hereunder.
13.3.2. RETENTION OF BOOKS AND RECORDS. Until the expiration of the
statute of limitations for all years in which the Company was included in the
Seller Group, Seller and the Company shall retain all Books and Records. All
computer data for such years will be maintained by Buyer and be retrievable for
Seller if needed.
13.4. TAX CONTESTS.
13.4.1. NOTICE. Seller shall promptly provide notice to the Company
in writing (but not later than ten (10) days after its receipt or fifteen (15)
days after the date of mailing from the relevant taxing authority designated
thereon, whichever comes first) of any notice of any pending or threatened tax
contest or other action involving a consolidated return of Seller for a period
during which the Company was a member of Seller Group. Seller shall furnish the
Company with copies of all correspondence received from any taxing authority in
connection with any such contest or action.
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<PAGE>
13.4.2. SETTLEMENT. Seller shall not settle any tax contest or
action which would affect the tax liability or position of the Company for
periods ending after the Closing Date without the Company's consent, which
consent shall not be withheld unreasonably.
13.5. DEFINITIONS. For purposes of this Article 13, the following terms
shall have the meanings set forth below:
13.5.1. BOOKS AND RECORDS shall mean the books and records of Seller
or the Company, as applicable, in any way related to tax matters concerning
their businesses.
13.5.2. CURRENT PERIOD shall mean the period beginning January 1,
1996 and ending on and including the Closing Date.
13.5.3. SELLER GROUP shall mean a group of corporations included in
the federal, state or local (as applicable) consolidated income tax returns in
which the income of the Company is reported for a taxable period.
13.5.4. SEPARATE RETURNS shall mean those returns which are required
or allowed by applicable law to be, or are, prepared and filed by the Company on
a separate company basis such that its income is not consolidated with the
income of any other member of the Seller Group on such returns.
13.6. AMT CREDITS. A separate return limitation year ("SRLY") alternative
minimum tax credit will pass with the sale of the Company to Buyer (the
"Inherited AMT Credit"). Such credit is estimated to approximate $425,000 as of
December 31, 1995. Calculation of the exact credit will be given to Buyer by
Seller within thirty (30) days of the filing of the stub period tax return of
Seller. To the extent the Company or any member of Buyer's consolidated group
uses such credit in any tax year ending on or before December 31, 2006, which
use shall be in Buyer's sole discretion, Buyer shall reimburse Seller for
seventy-five percent (75%) of the amount of Buyer's consolidated group's actual
tax savings computed by comparing the difference between Buyer's consolidated
tax liability with and without the credit. Within forty-five (45) days after
the filing by the Buyer's consolidated group of a federal consolidated income
tax return that includes the Company, Buyer shall furnish to Seller a detailed
computation showing the calculation of the amount due, if any, for such taxable
year under this Section 13.6 and shall make payment of such amount. Within
forty-five (45) days after December 31, 2001, Buyer may terminate its
obligations under this Section 13.6 by paying to Seller an amount equal to fifty
percent (50%) of the unused balance of such Inherited AMT Credit.
13.7. TRANSFER TAXES. Seller and Buyer shall share equally in the costs of
any applicable sales, documentary, use, filing, transfer and other taxes payable
as a result of the transfer of the Shares.
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<PAGE>
ARTICLE 14
TERMINATION
14.1. EVENTS OF TERMINATION. Anything herein or elsewhere to the
contrary notwithstanding, this Agreement may be terminated by written notice of
termination at any time before the Closing Date only as follows:
(a) By mutual consent of Seller and the Buyer;
(b) By Seller or Buyer if the other shall have (a) misstated
any representation or been in breach of any warranty contained herein or (b)
been in breach of any covenant, undertaking or restriction contained herein and
such misstatement or breach has not been cured by the earlier of (i) thirty (30)
days after the giving of notice to such party of such misstatement or breach or
(ii) the Closing Date, and in any event such other party shall not be in breach
of such other party's obligations hereunder;
(c) By either party provided that such party is not in
material default hereunder, if the Closing does not occur on or before
October 31, 1996.
14.2. CONSEQUENCES OF TERMINATION. In the event of the termination
and abandonment hereof pursuant to the provisions of Section 14.1 hereof, this
Agreement shall become void and have no effect, without any liability on the
part of any of the parties or their directors or officers or stockholders in
respect of this Agreement except for the provisions of Section 6.2 hereof.
ARTICLE 15
MISCELLANEOUS
15.1. ENTIRE AGREEMENT; AMENDMENTS. This Agreement constitutes the entire
understanding among the parties hereto with respect to the subject matter
contained herein and supersedes any prior understandings and agreements among
them respecting such subject matter. This Agreement may be amended,
supplemented, and terminated only by a written instrument duly executed by the
Company, the Buyer and the Seller.
15.2. HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not affect its interpretation.
15.3. GENDER; NUMBER. Words of gender may be read as masculine, feminine,
or neuter, as required by context. Words of number may be read as singular or
plural, as required by context.
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<PAGE>
15.4. EXHIBITS AND SCHEDULES. Each Exhibit and
Schedule referred to herein is incorporated into this Agreement by such
reference.
15.5. SEVERABILITY. If any provision of this Agreement is held illegal,
invalid, or unenforceable, such illegality, invalidity, or unenforceability will
not affect any other provision hereof. This Agreement shall, in such
circumstances, be deemed modified to the extent necessary to render enforceable
the provisions hereof.
15.6. NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given to the person if delivered personally or upon
sending a copy thereof by first class or express mail, postage prepaid, or by
telegram (with messenger service specified), or reputable courier services,
charges prepaid, or by telecopier, to such party's address (or to such party's
telecopier or telephone number).
If to Buyer, to:
Progress Bank
4 Sentry Parkway
Suite 200
P.O. Box 3036
Blue Bell, PA 19422-0764
Attention: Frederick E. Schea,
Chief Financial Officer
Telecopy No.: (610) 825-4460
With a copy to:
Pepper, Hamilton & Scheetz
3000 Two Logan Square
Philadelphia, PA 19103
Attention: L. Garrett Dutton, Jr., Esq.
Telecopy No.: (215) 981-4750
35
<PAGE>
If to Seller to:
American Manufacturing Co., Inc.
181 S. Gulph Road
King of Prussia, PA 19406
Attention: Charles M. Slinghoff, Jr.,
Vice President
Telecopy No.: (610) 337-5611
With a copy to:
Drinker, Biddle & Reath
1000 Westlakes Drive, Suite 300
Berwyn, PA 19312
Attention: Robert H. Strouse, Esq.
Telecopy No.: (610) 993-8585
Notice of any change in any such address shall also be given in the manner set
forth above. Whenever the giving of notice is required, the giving of such
notice may be waived by the party hereto entitled to receive such notice.
15.7. WAIVER. The failure of any party hereto to insist upon strict
performance of any of the terms or conditions of this Agreement will not
constitute a waiver of any of its rights hereunder.
15.8. ASSIGNMENT. No party hereto may assign any of its rights or delegate
any of its obligations hereunder without the prior written consent of the other
parties hereto; provided, however, that Buyer may assign its rights under this
Agreement to any subsidiary or affiliate of Buyer, provided that such assignment
shall not relieve Buyer of its liabilities and obligations hereunder.
15.9. SUCCESSORS AND ASSIGNS. This Agreement binds, inures to the benefit
of, and is enforceable by the successors and permitted assigns of the parties
hereto, and does not confer any rights on any other persons or entities.
15.10. GOVERNING LAW. This Agreement shall be construed and enforced in
accordance with the law of the Commonwealth of Pennsylvania.
15.11. NO BENEFIT TO OTHERS. The representations, warranties, covenants
and agreements contained in this Agreement are for the sole benefit of the
parties hereto and their successors and assigns, and they shall not be construed
as conferring and are not intended to confer any rights on any other persons.
36
<PAGE>
15.12. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. The execution of this Agreement by any party hereto will not become
effective until counterparts hereof have been executed by all the parties
hereto. It shall not be necessary in making proof of this Agreement or any
counterpart hereof to produce or account for any of the other counterparts.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date first above written.
ATTEST PROGRESS BANK
By: /S/ Steven D. Hobman By:/s/ Frederick E. Schea
------------------------------ ----------------------------------------
Name: Steven D. Hobman Name: Frederick E. Schea
Title: Senior Vice President Title: Senior Vice President and
Chief Financial Officer
[EXECUTIONS CONTINUED]
37
<PAGE>
ATTEST AMERICAN MANUFACTURING CO., INC.
By:/s/ Paul F. Brennan By:/s/ John F. Yaglenski, Jr.
------------------------------ ----------------------------------------
Name: Paul F. Brennan Name: John F. Yaglenski, Jr.
Title: Asst. Secretary Title: Vice President
ATTEST THE EQUIPMENT LEASING COMPANY
By:/s/ John E. Lynch By:/s/ John F. Yaglenski, Jr.
------------------------------ ----------------------------------------
Name: John E. Lynch Name: John F. Yaglenski, Jr.
Title: Treasurer Title: Vice President
38
<PAGE>
AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT
THIS AMENDMENT NO. 1 TO STOCK PURCHASE AGREEMENT (this "Amendment") is made
as of this 8th day of October, 1996, by and among PROGRESS BANK, a federal
savings bank ("Buyer"), THE EQUIPMENT LEASING COMPANY, a Maryland corporation
(the "Company") and AMERICAN MANUFACTURING COMPANY, INC., a Pennsylvania
corporation ("Seller").
WITNESSETH:
WHEREAS, the parties hereto are parties to a certain Stock Purchase
Agreement dated September 30, 1996 (the "Agreement"); and
WHEREAS, the parties hereto wish to amend certain provisions of the
Agreement.
NOW THEREFORE, in consideration of the mutual covenants contained herein
and intending to be legally bound hereby, the parties hereto agree as follows:
1. SECTION 3.10(A) of the Agreement is hereby amended and restated to
read in its entirety as follows:
" (a) For any period ending on the date of or before the Cut-Off
Date, the Company has, and Seller, with respect to the Division, has duly
and timely filed or will file all federal, state, and local tax returns,
declarations, and reports, estimates, information returns and statements
(collectively, "Returns") required to be filed or sent by it or on its
behalf and all such Returns are or will be true, correct and complete in
all material respects. True, correct and complete copies of such Returns
for the Company have been delivered or made available to Buyer prior to the
date hereof. Seller and the Company have paid or accrued all taxes,
levies, imposts, deductions, charges, or withholdings imposed by any
governmental unit, federal, state or local with respect to the Equipment
Leasing Group ("Taxes") and any penalties entered with respect thereto due
and payable for any period ending on or before the Cut-Off Date."
2. SECTION 3.10(H) of the Agreement is hereby amended and restated to
read in its entirety as follows:
" (h) The Company has not agreed to make, nor is it required to
make, any adjustment under Section 481(a) of the Code for any period ending
after the Closing Date by reason of a change in its accounting method or
otherwise with respect to the Equipment Leasing Group."
3. SECTION 8.1 of the Agreement is hereby amended and restated to read
in its entirety as follows:
<PAGE>
" 8.1. BY SELLER. To the extent and in the manner herein provided,
Seller shall indemnify and hold harmless Buyer from and against any and all
damages, losses, obligations, deficiencies, liabilities, claims,
encumbrances, penalties, costs, and expenses, including reasonable
attorneys' fees (collectively, "Losses"), which Buyer or the Company may
suffer or incur, resulting from, related to, or arising out of (i) any
breach of any representation or warranty of the Company or Seller herein or
in any certificate or document furnished to Buyer hereunder; (ii) any
breach or nonfulfillment of any covenant or agreement of the Company or
Seller in this Agreement; (iii) any claims for the payment of taxes under
consolidated Returns which are payable for or in respect of tax periods
which ended prior to or which include the Cut-Off Date but only for the
portion of such tax period ending on the Cut-Off Date; (iv) any claims for
the payment of taxes under Separate Returns (as defined in Section 13.5
hereof) which are payable for or in respect of tax periods which ended
prior to or which include the Cut-Off Date; (v) any liabilities or
obligations of Seller not expressly assumed by the Company pursuant to
Article 2 hereof; (vi) any claims by third parties based upon acts,
omissions, facts, events or circumstances of the Company or Seller
occurring or in existence prior to the Closing Date; and (vii) any and all
actions, suits, investigations, proceedings, demands assessments, audits,
or claims made or asserted by third parties ("Third Party Proceedings")
arising out of any of the foregoing."
4. SECTION 11.6(D) of the Agreement is hereby amended and restated to
read in its entirety as follows:
" (d) Amounts due pursuant to the foregoing Sections 11.6(b) or (c)
shall include interest thereon from the Cut-Off Date to the date of
payment, at a rate of six percent (6%) per annum in the case of amounts due
pursuant to SECTION 11.6(B) above, and at a rate of seven percent (7%) per
annum in the case of amounts due pursuant to SECTION 11.6(C) above."
5. SECTION 13.1.3 of the Agreement is hereby amended and restated to
read in its entirety as follows:
" 13.1.3. LIABILITY FOR TAXABLE YEARS PRIOR TO TAXABLE YEAR INCLUDING
CLOSING DATE. Seller shall pay all taxes under Separate Returns for any
period ending before January 1, 1996. Seller shall pay all Seller Group
federal income taxes, and shall pay all state and local taxes of the Seller
Group excluding the Company (except for personal property taxes) for any
period ending before or including the Cut-Off Date. For any period ending
before or including the Cut-Off Date, Company shall have no, and Seller
shall hold Company harmless for and indemnify Company against all, tax
liabilities attributable to Company in excess of any accruals for such tax
liabilities on the Closing Balance Sheet, and any joint and several
liability for any consolidated tax liability of Seller Group. Seller will
2
<PAGE>
cooperate with Company in causing the District Director to exercise its
authority to eliminate Company's several liability for any such
consolidated tax."
6. A new SECTION 13.2.5 is hereby added to the Agreement to read in its
entirety as follows:
" 13.2.5 POST-CLOSING FILING OF SEPARATE RETURNS FOR TAXABLE YEARS
ENDING ON OR BEFORE THE CUT-OFF DATE. Seller shall cause to be prepared,
and shall deliver to the Company for signing and filing, any Separate
Returns for periods ending before or including the Cut-Off Date, which are
to be filed after the Closing Date. Seller shall deliver each such return
to the Company at least thirteen (13) calendar days before the date such
return is due to be filed (taking into account any applicable extensions).
Such returns shall reflect, to the extent permitted under applicable law,
positions consistent with analogous tax returns filed with respect to prior
taxable periods. The Company shall notify Seller of any disagreement
regarding items which would affect the tax liability or position of the
Company for periods ending after the Cut-Off Date within ten (10) calendar
days of receiving each such return from Seller. Should the Company
disagree, the Company and Seller shall consult in good faith to attempt to
resolve such disagreement. If the Company and Seller cannot reach a
resolution by the extended due date of the return, the Company shall file
such return in the form deemed appropriate by Seller, provided that the
Company believes such return reflects a permissible return filing position.
At the time of the filing of any such return, Seller shall pay to the
Company any excess of the Company's tax liability as shown on the return
over the amount accrued therefor on the Closing Balance Sheet, or the
Company shall pay to Seller any excess of such accrued amount over such tax
liability, as the case may be."
7. SECTION 13.5.2 of the Agreement is hereby amended and restated to
read in its entirety as follows:
" 13.5.2 Current Period shall mean the period beginning January 1,
1996 and ending on and including the Cut-Off Date."
8. SCHEDULE 3.1 attached to the Agreement is hereby amended and replaced
by SCHEDULE 3.1 attached thereto.
9. Except as specifically amended hereby, all other provisions of the
Agreement shall remain in full force and effect.
3
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of
the day and year first written above.
PROGRESS BANK
By: /s/ Frederick E. Schea
--------------------------------------
Name: Frederick E. Schea
Title: Chief Financial Officer
THE EQUIPMENT LEASING COMPANY
By: /s/ John F. Yaglenski, Jr.
--------------------------------------
Name: John F. Yaglenski, Jr.
Title: Vice President
AMERICAN MANUFACTURING COMPANY, INC.
By: /s/ John F. Yaglenski, Jr.
--------------------------------------
Name: John F. Yaglenski, Jr.
Title: Vice President
4
<PAGE>
Schedule 3.1
QUALIFIED JURISDICTIONS
Registered as The Equipment Leasing Co.
1. Delaware
2. District of Columbia
3. Florida
4. Georgia
5. Maryland
6. North Carolina
7. Pennsylvania
8. Tennessee
9. Virginia
10. West Virginia
Additional states registered as a division of American Manufacturing Co.,
Inc. not listed above.
1. Alabama
2. Connecticut
3. Illinois
4. New Jersey
5. New York
6. South Carolina
<PAGE>
AMERICAN MANUFACTURING COMPANY, INC.
181 S. Gulph Road
King of Prussia, Pennsylvania 19406
October 8, 1996
Progress Bank
4 Sentry Parkway
Suite 200
P. O. Box 3036
Blue Bell, Pennsylvania 19422-0764
Re: Sale of Stock of The Equipment Leasing Company
Gentlemen:
This letter is in reference to that certain Stock Purchase Agreement dated
September 30, 1996, as amended (the "Agreement") by and among Progress Savings
Bank ("Buyer"), The Equipment Leasing Company (the "Company") and American
Manufacturing Company, Inc. ("Seller"). All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
1. Promptly after the closing today, Seller will take all action
required to cause the Company to be qualified and in good standing in the
Commonwealth of Massachusetts, at its sole expense.
2. We hereby disclose to you, and the Agreement is amended accordingly,
to reflect the existence of the financing statement in favor of The CIT
Group/Equipment Financing, Inc. ("CIT") described in the attached Financing
Statement. As has been discussed with you, this financing statement was filed
in connection with the sale of a lease with Mr. Tire to CIT.
<PAGE>
Kindly indicate your agreement to the terms of this letter by signing
below.
Very truly yours,
AMERICAN MANUFACTURING COMPANY, INC.
By: /s/ John F. Yaglenski, Jr.
--------------------------------------
John F. Yaglenski, Jr.
Vice President
THE EQUIPMENT LEASING COMPANY
By: /s/ John F. Yaglenski, Jr.
--------------------------------------
John F. Yaglenski, Jr.
Vice President
Acknowledged and Agreed this
8th day of October, 1996
PROGRESS BANK
By: /s/ Frederick E. Schea
----------------------------
Frederick E. Schea
Chief Financial Officer
2
<PAGE>
AMERICAN MANUFACTURING COMPANY, INC.
181 S. Gulph Road
King of Prussia, Pennsylvania 19406
October 8, 1996
Progress Bank
4 Sentry Parkway
Suite 200
P. O. Box 3036
Blue Bell, Pennsylvania 19422-0764
Re: Sale of Stock of The Equipment Leasing Company
Gentlemen:
This letter is in reference to that certain Stock Purchase Agreement dated
September 30, 1996, as amended (the "Agreement") by and among Progress Bank
("Buyer"), The Equipment Leasing Company (the "Company") and American
Manufacturing Company, Inc. ("Seller"). All capitalized terms used but not
otherwise defined herein shall have the meanings ascribed to them in the
Agreement.
1. Buyer and Seller agree that for purposes of determining the audited
net worth of the Company pursuant to Section 11.6 of the Agreement,
notwithstanding any requirements of generally accepted accounting principles to
the contrary:
a. interest shall be recognized on receivables in excess of 90
days past due in accordance with past practice of Seller and the
Company with respect to the Equipment Leasing Group (as defined in
the Agreement); and
b. initial direct leasing costs shall be expensed in accordance
with past practice of Seller or the Company with respect to the
Equipment Leasing Group.
<PAGE>
Kindly indicate your agreement to the terms of this letter by signing
below.
Very truly yours,
American Manufacturing Company, Inc.
By: /s/ John F. Yaglenski, Jr.
--------------------------------------
John F. Yaglenski, Jr.
Vice President
The Equipment Leasing Company
By: /s/ John F. Yaglenski, Jr.
--------------------------------------
John F. Yaglenski, Jr.
Vice President
Acknowledged and Agreed this
8th day of October, 1996
Progress Bank
By: /s/ Frederick E. Schea
----------------------------
Frederick E. Schea
Chief Financial Officer
2
<PAGE>
NEWS RELEASE
Contact: W. Kirk Wycoff -- (610) 825-8800
Progress Financial Corporation
4 Sentry Parkway - Suite 200
Blue Bell, PA 19422
FOR IMMEDIATE RELEASE:
PROGRESS COMPLETES ITS ACQUISITION OF THE EQUIPMENT LEASING COMPANY
Blue Bell, PA, October 8, 1996 -- Progress Financial Corporation announced
today that it has completed its previously announced acquisition of The
Equipment Leasing Company, Timonium, Maryland. The Equipment Leasing Company
primarily leases computer and telecommunications equipment on the East Coast of
the United States. The Equipment Leasing Company has specialized in serving the
small business market through direct sales contact and telemarketing for over 25
years. Management of the company will continue in their current positions after
the acquisition.
Progress Bank, a subsidiary of Progress Financial Corporation, acquired the
outstanding stock of The Equipment Leasing Company for a cash purchase price of
$6.6 million. The transaction will be accounted for as a purchase. The Equipment
Leasing Company has gross lease receivables outstanding as of September 30, 1996
of $24 million. It is expected that the purchase will be accretive to Progress
shareholders in the fourth quarter of 1996.
<PAGE>
Progress Financial Corporation
Progress Acquisition
Page Two
Progress Financial Corporation is a unitary thrift holding company
headquartered in Blue Bell, Pennsylvania. The business of the Company consists
primarily of the operation of Progress Bank, a Federally chartered stock savings
bank that conducts community banking business through ten full service offices.
The Company also provides commercial mortgage banking and brokerage services,
property management services, and equipment leasing through its other
subsidiaries, Progress Realty Advisors, L.P., Alliance Realty Services, L.L.C.
and Quaker State Financial Corporation, respectively. The Company's common
stock is traded on the NASDAQ Stock Market under the Symbol "PFNC".
####
