EXHIBIT 2
__________________________________________
AGREEMENT AND PLAN OF MERGER
by and between
XXXXXXXX AMERICAN, INC.,
and
EAB LEASING CORP.
__________________________________________
January 2, 1996
__________________________________________
TABLE OF CONTENTS
Page
ARTICLE I
DEFINITIONS
1.1 Definitions............................................................................................ 2
ARTICLE II
THE MERGER
2.1 Merger of Merger Sub into HAI.......................................................................... 4
2.2 Effect of the Merger................................................................................... 4
2.3 Effective Time......................................................................................... 4
ARTICLE III
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES;
FINAL DETERMINATION OF MERGER CONSIDERATION
3.1 Conversion of HAI Common Stock......................................................................... 5
3.2 Dissenting Shareholders................................................................................ 7
3.3 Surrender of Certificates.............................................................................. 8
3.4 Final Determination of Merger Consideration............................................................ 8
ARTICLE IV
SURVIVING CORPORATION
4.1 Articles of Incorporation.............................................................................. 10
4.2 Bylaws................................................................................................. 10
4.3 Directors and Officers................................................................................. 10
ARTICLE V
MISCELLANEOUS
5.1 Shareholders' Representative........................................................................... 11
5.2 Consummation........................................................................................... 11
5.3 Amendment and Modification............................................................................. 11
5.4 Termination............................................................................................ 11
5.5 Counterparts........................................................................................... 11
5.6 Governing Law.......................................................................................... 11
i
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (the "Merger Agreement") dated as of
January 2, 1996, by and between EAB Leasing Corp., a Pennsylvania corporation
formed under the name EAB Brokerage Services, Inc. ("Merger Sub"), and Xxxxxxxx
American, Inc., a Pennsylvania corporation ("HAI"). Merger Sub and HAI are
hereinafter sometimes collectively referred to as the "Constituent
Corporations."
Background
Merger Sub is a corporation duly organized and validly existing under
the laws of the Commonwealth of Pennsylvania. The authorized capital stock of
Merger Sub consists of 100 shares of Common Stock, par value $1.00 per share
("Merger Sub Common Stock"), all of which shares are issued and outstanding as
of the date hereof and owned by European American Bank ("Parent").
HAI is a corporation duly organized and validly existing under the laws
of the Commonwealth of Pennsylvania. The authorized capital stock of HAI
consists of 10,000,000 shares of Common Stock, par value $1.00 per share ("HAI
Common Stock"), and 20,000 shares of preferred stock, par value $100 per share
("Preferred Stock"), of which, as of the date hereof, 3,126,171 shares of HAI
Common Stock are issued and outstanding, no shares are held in treasury and no
shares of Preferred Stock are outstanding.
The parties hereto are entering into this Agreement in order to set
forth the terms and conditions of the proposed merger of Merger Sub with and
into HAI (the "Merger"), the mode of carrying the same into effect, the manner
of converting the outstanding shares of HAI Common Stock and Merger Sub Common
Stock and related matters. The parties hereto have executed and delivered an
Acquisition Agreement dated as of the date hereof (the "Acquisition Agreement"),
setting forth certain representations, warranties, conditions, covenants and
agreements with respect to the Merger and related transactions.
The respective Boards of Directors of Merger Sub and HAI and the
respective holders of Merger Sub Common Stock and HAI Common Stock (such holders
being the holders of the only class of stock of Merger Sub and HAI entitled to
vote), by resolutions duly adopted, have approved and adopted this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Acquisition Agreement and other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties, agree as follows
intending to be legally bound.
ARTICLE I
DEFINITIONS
1.1 Definitions. Capitalized terms not otherwise defined herein shall
have the meanings ascribed to them in the Acquisition Agreement. As used herein,
the following terms shall have the following meanings:
"Acquisition Agreement" has the meaning specified in the Background
section.
"Additional Contingent Merger Consideration" has the meaning set forth
in Section 3.1(a).
"Adjusted Closing Balance Sheet" has the meaning specified in Section
3.4(a).
"Adjusted Closing Statement" has the meaning specified in Section
3.4(a).
"Adjusted Price Adjustment Schedule" has the meaning specified in
Section 3.4.
"Agreed-Upon Procedures" has the meaning specified in Exhibit A.
"ARE" means American Real Estate Investment and Development
Co., a Pennsylvania corporation.
"Closing Date" means the date on which the Effective Time occurs.
"Closing Payment" means $45,604,287.
"Dissenting Shareholders" has the meaning specified in Section 3.2(a).
"Dissenting Shares" has the meaning specified in Section 3.2(a).
"Effective Time" has the meaning specified in Section 2.3.
"Final Closing Balance Sheet" has the meaning specified in Section
3.4(c).
"Final Closing Statement" has the meaning specified in Section 3.4(b).
"HAI Common Stock" has the meaning specified in the Background section.
2
"HAI's Auditors" has the meaning specified in Section 3.4(a).
"Holdback Amount" means $265,000.
"Merger" has the meaning specified in the Background section.
"Merger Consideration" means the consolidated shareholders' equity of
HAI as of December 31, 1995, adjusted in accordance with the Pro Forma
Adjustments and the Price Adjustments, all as reflected on the Final Closing
Statement.
"Merger Sub Common Stock" has the meaning specified in the Background
section.
"Missing Certificates" has the meaning specified in Section 3.3(a).
"Notice of Objection" has the meaning specified in Section 3.4(b).
"Parent" has the meaning specified in the Background section.
"Parent's Auditors" has the meaning specified in Section 3.4(b).
"Post-Closing Payment" means the amount by which the Merger
Consideration exceeds the Closing Payment (which amount shall not exceed the
Holdback Amount plus $700,000).
"Preferred Stock" has the meaning specified in the Background section.
"Prepayment Fees" has the meaning specified in Section 3.1(a).
"Price Adjustments" means the adjustments described under the heading
"Tentative Price Adjustment Schedule" in the Tentative Closing Statement.
"Pro Forma Adjustments" means the adjustments described under the
heading "Pro Forma Adjustments" in the Tentative Closing Statement, which give
effect to the Spin-Off.
"Shareholders" means the Persons holding shares of HAI Common Stock
immediately before the Effective Time.
"Shareholders' Representative" means the Person acting as such pursuant
to Section 5.1.
"Spin-Off" means the transactions described in Section 4.5 of the
Acquisition Agreement.
3
"Surviving Corporation" has the meaning specified in Section 2.1.
"Tentative Closing Balance Sheet" means the estimated balance sheet
included in the Tentative Closing Statement.
"Tentative Closing Statement" means the tentative closing statement
attached hereto as Exhibit B, which consists of (i) the Tentative Closing
Balance Sheet, (ii) the Pro Forma Adjustments, and (iii) the Tentative Price
Adjustment Schedule.
"Tentative Price Adjustment Schedule" means the schedule included in
the Tentative Closing Statement applying the Price Adjustments to the Tentative
Closing Balance Sheet, after application of the Pro Forma Adjustments, to arrive
at the estimated Merger Consideration.
ARTICLE II
THE MERGER
2.1 Merger of Merger Sub into HAI. In accordance with the provisions of
this Agreement, the Acquisition Agreement and the Pennsylvania Business
Corporation Law of 1988 ("PBCL") at the Effective Time, Merger Sub shall be
merged with and into HAI, which shall be the surviving corporation (hereinafter
sometimes referred to as the "Surviving Corporation"). After the Effective Time,
the Surviving Corporation shall continue its corporate existence as a
Pennsylvania corporation. At the Effective Time, the separate existence of
Merger Sub shall cease.
2.2 Effect of the Merger. At the Effective Time, the effect of the
Merger shall be as provided in the applicable provisions of the PBCL. Without
limiting the generality of the foregoing, and subject thereto and to the
Acquisition Agreement, at the Effective Time, except as may be otherwise
provided herein, the Surviving Corporation shall succeed, without other
transfer, to all property, rights, privileges, powers and franchises of Merger
Sub, and all debts, liabilities and duties of Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation as if the Surviving
Corporation had itself incurred them.
2.3 Effective Time. The Merger shall become effective upon the filing
in the Department of State of the Commonwealth of Pennsylvania of properly
executed articles of merger as provided in Sections 1921 and 1927 of the PBCL,
substantially in the form set forth as Exhibit C attached hereto (the "Effective
Time").
4
ARTICLE III
CONVERSION OF SHARES; EXCHANGE OF CERTIFICATES;
FINAL DETERMINATION OF MERGER CONSIDERATION
3.1 Conversion of HAI Common Stock. At the Effective Time, by virtue of
the Merger and without further action on the part of Merger Sub, HAI or the
holders of shares of HAI Common Stock:
(a) Each share of HAI Common Stock outstanding immediately prior to the
Effective Time (other than those shares held in treasury) shall be converted
into the right to receive an amount equal to the Merger Consideration and the
Additional Contingent Merger Consideration (as defined below), in each case
divided by 3,126,171, which Merger Sub shall pay or cause to be paid as follows
(subject to Sections 3.2 and 3.3):
(i) $500,000 (the "Shareholders' Representative Reserve") shall be
paid on the Closing Date to the Shareholders' Representative, by wire
transfer of immediately available funds to the Shareholders'
Representative's account at a bank within the United States designated by
the Shareholders' Representative at least two business days before the
Closing Date, to be used (A) to pay any expenses that are not the
responsibility of Merger Sub, Parent or HAI under the Acquisition
Agreement or this Agreement incurred by him on behalf of the Shareholders
in connection with the Merger; provided, however, that to the extent such
expenses exceed $50,000 in the aggregate, the Shareholders' Representative
shall notify Merger Sub and Parent and prior to incurring any such
expenses shall provide Merger Sub and Parent with such information
regarding such expenses as Merger Sub or Parent may reasonably request and
to the extent such expenses exceed $100,000 in the aggregate, excluding
the expenses with respect to the matters set forth in Section 3.4(d)
hereof, the Shareholders' Representative will not incur any such expenses
as to which Merger Sub or Parent shall reasonably object, (B) to make any
payment required under paragraph (v), and (C) after such payments have
been made, to distribute any balance to the Shareholders, ratably
according to the number of shares of HAI Common Stock held by each
immediately before the Effective Time.
(ii) An amount equal to $545,000 shall be paid on the Closing Date
to the Shareholders' Representative (in the manner specified in paragraph
(i)) for distribution 45 percent to Xxxx X. Xxxxxxxx, Xx. and 55 percent
to Xxxxxx X. Xxxxxxxxxxx as compensation to them by the Shareholders for
services performed by them on behalf of the Shareholders in effecting the
Merger.
(iii) $50,000 shall be paid on the Closing Date to the Shareholders'
Representative (in the manner specified in paragraph (i)) for distribution
to such officers of the Acquired Companies and in such amounts as Xxxx X.
5
Xxxxxxxx, Jr. and Xxxxxx X. Xxxxxxxxxxx shall determine and notify the
Shareholders' Representative at least two business days before the Closing
Date as compensation to such officers by the Shareholders for services
performed by them on behalf of the Shareholders in effecting the Merger.
(iv) An amount equal to the Closing Payment less the amount of the
Shareholders' Representative Reserve and the amount of the payments to be
made pursuant to paragraphs (ii) and (iii) above shall be paid on the
Closing Date in cash (as more fully described in Section 3.1(b)), to be
divided among the Shareholders ratably according to the number of shares
of HAI Common Stock held by each immediately before the Effective Time.
(v) The Holdback Amount shall, to the extent required, be used to
pay the Shareholders the Post-Closing Payment, if any; any such payment
made to the Shareholders will be divided among the Shareholders ratably
according to the number of shares of HAI Common Stock held by each
immediately before the Effective Time. If the Post-Closing Payment is less
than the Holdback Amount, Parent shall retain the remainder of the
Holdback Amount after distributing the Post-Closing Payment. If the
Post-Closing Payment is more than the Holdback Amount, the Surviving
Corporation will pay, or cause Parent to pay, the difference to the
Shareholders, which will be divided among them ratably according to the
number of shares of HAI Common Stock held by each immediately before the
Effective Time; provided, however, that the amount in excess of the
Holdback Amount payable to the Shareholders pursuant to this sentence
shall not be more than $700,000 in the aggregate. If the Merger
Consideration as finally determined is less than the Closing Payment,
Parent will retain the Holdback Amount, and the Shareholders'
Representative will pay the amount of the difference to Parent, solely out
of any funds remaining in the Shareholders' Representative Reserve after
payment of or provision for expenses described in subclause (A) of
paragraph (i). All payments under this paragraph shall be made within five
business days after the final determination of the Merger Consideration
pursuant to Section 3.4.
(vi) To the extent that prepayment penalties, fees and premiums
(collectively "Prepayment Fees") that relate to prepayment of indebtedness
and interest rate hedging obligations of HAI are less than $1,300,000 in
the aggregate, holders of shares of HAI Common Stock immediately prior to
the Effective Time shall be entitled to receive an amount (the "Additional
Contingent Merger Consideration") equal to the product of (A) 0.42 and (B)
the difference between (x) $1,300,000 and (y) the aggregate amount of
Prepayment Fees, such Additional Contingent Merger Consideration to be
6
divided among the Shareholders ratably according to the number of shares
of HAI Common Stock held by each immediately before the Effective Time.
(b) Merger Sub shall cause each cash payment under Section 3.1(a)(iv),
(v) or (vi) to be made by Parent's cashier's checks payable to each Shareholder,
delivered to the Shareholders' Representative for distribution to the
Shareholders or, in the case of payments under Section 3.1(a)(iv), at the
request of any Shareholder who is to receive $100,000 or more, made in writing
at least two business days before the Closing Date, by wire transfer of
immediately available funds to such Shareholder's account at a bank within the
United States as designated in the written request. At least two business days
prior to the Closing Date the Shareholders' Representative shall provide Merger
Sub with the names of all Shareholders receiving payment by cashier's checks and
the names and wire transfer instructions of all Shareholders receiving payment
by wire transfer, in each case together with the number of shares of HAI Common
Stock held by each Shareholder.
(c) Each certificate previously representing any outstanding share of
HAI Common Stock that is converted into the right to receive the consideration
described in Section 3.1(a) shall represent only the right to the consideration
into which such share of HAI Common Stock is converted, and each certificate
previously representing any outstanding share of HAI Common Stock that is not so
converted as a result of the operation of Section 3.2(a) shall represent only
the right to receive any amounts to which such holder may be entitled under
subchapter D of chapter 15 of the PBCL or, under the circumstances specified in
Section 3.2(a) hereof, the consideration described in Section 3.1(a).
(d) Each issued and outstanding share of the Merger Sub Common Stock
shall be converted into one share of HAI Common Stock.
3.2 Dissenting Shareholders.
(a) Any shares of HAI Common Stock the holder of which has, as of the
Effective Time, asserted and preserved, and not effectively withdrawn or
otherwise lost, his dissenters' rights pursuant to the PBCL (all such holders,
collectively, the "Dissenting Shareholders" and all such shares, the "Dissenting
Shares") shall not be converted into the right to receive the consideration
described in Section 3.1(a), and the Dissenting Shareholders shall be entitled
to payment of the value of the Dissenting Shares in accordance with the
provisions of the PBCL; but if, after the Effective Time, any Dissenting
Shareholder fails to perfect or otherwise loses any such dissenters' rights
pursuant to the PBCL, any such Dissenting Shareholder shall forfeit the right to
appraisal of such Dissenting Shares, and to the extent that the PBCL requires
such treatment, such Dissenting Shares shall thereupon be deemed to have been
converted as of the Effective Time into the right to receive the consideration
described in Section 3.1(a), without any interest unless otherwise required by
law.
7
(b) HAI shall give prompt notice to Parent with respect to any
preservation or assertion of rights under subchapter D of chapter 15 of the PBCL
by any holder of HAI Common Stock. HAI shall not, except with the prior written
consent of Parent, voluntarily make any payment with respect to, or settle or
offer to settle, any rights of any Dissenting Shareholder.
3.3 Surrender of Certificates.
(a) At the Effective Time, the Shareholders' Representative shall
surrender to Parent certificates that immediately prior to the Effective Time
represented the then outstanding shares of HAI Common Stock (other than any
share certificates not furnished to the Shareholders' Representative by
Shareholders ("Missing Certificates") and other than Dissenting Shares). Merger
Sub shall, or shall cause Parent, to xxxx all certificates delivered pursuant to
this Section to indicate their cancellation and shall promptly thereafter
deliver the same to the Surviving Corporation for disposal.
(b) Whether or not a certificate that represented an outstanding share
of HAI Common Stock immediately prior to the Effective Time shall have been
surrendered to Parent pursuant to this Section, the holder thereof shall have no
rights after the Effective Time with respect to such shares of HAI Common Stock,
except to (i) receive the consideration provided for in Section 3.1(a) in
exchange therefor, or (ii) to perfect the rights to appraisal for such shares
which are Dissenting Shares. Notwithstanding Section 3.1(a), Parent shall have
the right to withhold the portion of the Closing Payment and the Post-Closing
Payment attributable to Dissenting Shares and shares of HAI Common Stock
evidenced by Missing Certificates until (i) in the case of Dissenting Shares,
payment to a Dissenting Shareholder is required to be made under the PBCL and
all conditions to the Dissenting Shareholder's right to receive such payment are
satisfied, and (ii) in the case of any Missing Certificate, the Missing
Certificate is surrendered to the Surviving Corporation for cancellation.
(c) The Board of Directors of the Surviving Corporation is empowered to
adopt further rules and regulations, not inconsistent with the provisions of
this Agreement, regarding the surrender and exchange of certificates
representing the issued and outstanding shares of HAI Common Stock immediately
prior to the Effective Time.
3.4 Final Determination of Merger Consideration.
(a) Promptly, and in any event within 60 days, after the Closing Date,
the Surviving Corporation, in conjunction with the Shareholders' Representative,
will:
(i) prepare and deliver to Parent an adjusted closing statement (the
"Adjusted Closing Statement"), in substantially the form of the Tentative
Closing Statement, consisting of (A) a consolidated balance sheet of HAI
8
as of December 31, 1995 (the "Adjusted Closing Balance Sheet"), (B) the
Pro Forma Adjustments, and (C) a schedule (the "Adjusted Price Adjustment
Schedule") applying the Price Adjustments to (A) and (B) above to arrive
at the adjusted Merger Consideration; and
(ii) cause KPMG Peat Marwick LLP ("HAI's Auditors") to deliver to
Parent and the Shareholders' Representative:
(A) an opinion of HAI's Auditors, based on an audit conducted in
accordance with generally accepted auditing standards, to the effect
that the Adjusted Closing Balance Sheet presents fairly, in all
material respects, the consolidated financial position of HAI as of
December 31, 1995 in accordance with generally accepted accounting
principles consistent with the principles applied in connection with
the 1994 audited financial statements of HAI, except for the absence
of certain notes; and
(B) a report, prepared in accordance with the American Institute
of Certified Public Accountants' Standards for Attestation
Engagements Nos. 3 and 4, on the Agreed-Upon Procedures performed by
HAI's Auditors on the Pro Forma Adjustments and the Adjusted Price
Adjustment Schedule.
(b) Parent, in consultation with Ernst & Young LLP ("Parent's
Auditors") shall review the materials furnished by HAI's Auditors under Section
3.4(a), and in that connection Parent and Parent's Auditors shall have complete
access to the work papers of HAI's Auditors supporting the audit performed under
Section 3.4(a) and the Agreed-Upon Procedures, subject to their execution of a
letter in form customary for allowing access to such records. Parent shall have
ten business days after receipt of the materials described in Section 3.4(a) to
give written notice (a "Notice of Objection") to the Shareholder's
Representative describing in reasonable detail any objection to the Adjusted
Closing Statement. If Parent does not give a Notice of Objection within such
period, the Adjusted Closing Statement shall become the "Final Closing
Statement" and shall be conclusive for all purposes.
(c) If Parent gives a Notice of Objection to the Shareholders'
Representative within the period specified in Section 3.4(b), Parent and the
Shareholders' Representative will cause HAI's Auditors and Parent's Auditors to
confer and attempt to resolve any such objections. If any objections stated in a
Notice of Objection are not resolved within ten business days after the Notice
of Objection is timely given, all unresolved objections shall be submitted to
and resolved by a "Big Six" accounting firm (other than HAI's Auditors and
Parent's Auditors) reasonably satisfactory to Parent and the Shareholders'
Representative. The resolution of all objections (by the parties or by such
accounting firm) shall be reflected in a "Final Closing Statement," in
substantially the form of the Tentative Closing Statement, consisting of (i) a
consolidated balance sheet of HAI as of December 31, 1995 (the "Final Closing
9
Balance Sheet"), (ii) the Pro Forma Adjustments, and (iii) a schedule applying
the Price Adjustments to the Final Closing Balance Sheet, as adjusted by the Pro
Forma Adjustments, to arrive at the final Merger Consideration. The Final
Closing Statement and the Merger Consideration stated therein shall be
conclusive for all purposes.
(d) The fees and expenses of HAI's Auditors shall be paid by the
shareholders of HAI, and the fees and expenses of Parent's Auditors shall be
paid by Parent. The fees and expenses of any accounting firm engaged pursuant to
Section 3.4(c) shall be borne equally by Parent and HAI.
ARTICLE IV
SURVIVING CORPORATION
4.1 Articles of Incorporation. The Articles of Incorporation of HAI as
in effect immediately prior to the Effective Time shall become the Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law.
4.2 Bylaws. From and after the Effective Time and until amended in the
manner provided in the Bylaws of HAI and the PBCL, the Bylaws of HAI in effect
immediately prior to the Effective Time shall continue to be the Bylaws of the
Surviving Corporation.
4.3 Directors and Officers.
(a) The directors of Merger Sub at the Effective Time shall be the
initial directors of the Surviving Corporation after the Effective Time and
shall hold office from the Effective Time until their respective successors are
duly elected or appointed and qualify in the manner provided in the Articles of
Incorporation and Bylaws of the Surviving Corporation or as otherwise provided
by law. Immediately after the Effective Time the Board of Directors of the
Surviving Corporation shall take all necessary action to appoint Xxxx X.
Xxxxxxxx, Xx. and Xxxxxx X. Xxxxxxxxxxx to the Board of Directors of the
Surviving Corporation, each to hold office until his successor is duly elected
or appointed and qualify in the manner provided in the Articles of Incorporation
and Bylaws of the Surviving Corporation or as otherwise provided by law.
(b) The officers of Merger Sub at the Effective Time shall be the
initial officers of the Surviving Corporation after the Effective Time and shall
hold office from the Effective time until their respective successors are duly
elected or appointed and qualify in the manner provided in the Certificate of
Incorporation and Bylaws of the Surviving Corporation or as otherwise provided
by law.
10
ARTICLE V
MISCELLANEOUS
5.1 Shareholders' Representative. Xxxx X. Xxxxxxxx, Xx., or in the
event of his unavailability to serve, Xxxxxx X. Xxxxxxxxxxx, or, in the event of
the unavailability of both Xxxx X. Xxxxxxxx, Xx. and Xxxxxx X. Xxxxxxxxxxx to
serve, Xxxxx X. Xxxxxxxxxx, or in the event of the unavailability of all such
individuals to serve, a Person selected by the Shareholders who held a majority
of the outstanding shares of HAI Common Stock immediately before the Effective
Time (the "Shareholders' Representative"), shall as provided herein, act as
agent and representative of the Shareholders in connection with (i) the final
determination of the Merger Consideration pursuant to Section 3.4, (ii)
distributing the Merger Consideration as provided in Article III, and (iii) such
other matters as are provided for herein or in the Acquisition Agreement.
5.2 Consummation. The obligation of each of the parties hereto to
effect the Merger shall be subject to all of the terms and conditions to such
party's obligations under the Acquisition Agreement.
5.3 Amendment and Modification. The parties hereto may amend or modify
this Agreement in any respect, by action taken or authorized by their respective
Boards of Directors, at any time before or after approval hereof by the
shareholders of HAI but prior to the Effective Time, but after such approval, no
amendment shall be made which by law requires further approval by such
shareholders without such further approval. This Agreement may not be amended or
modified except in a writing signed on behalf of each party hereto.
5.4 Termination. This Agreement shall automatically be terminated and
the transactions contemplated herein shall automatically be abandoned upon a
termination of the Acquisition Agreement.
5.5 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but which
together shall constitute a single agreement.
5.6 Governing Law. This Agreement shall be governed in all respects,
including validity, interpretation and effect, by the laws of the Commonwealth
of Pennsylvania, without regard to internal conflict of law principles.
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IN WITNESS WHEREOF, each of the Constituent Corporations have caused
this Agreement to be executed by their respective officers hereunto duly
authorized, all as of the date first above written.
EAB LEASING CORP.
By: __________________________________
Name: Xxx X. Xxxxxx
Title:Senior Vice President
XXXXXXXX AMERICAN, INC.
By: __________________________________
Name:
Title:
12
EXHIBIT A
to Agreement and
Plan of Merger
AGREED UPON PROCEDURES
[omitted]
13
EXHIBIT B
to Agreement and
Plan of Merger
TENTATIVE CLOSING STATEMENT
TENTATIVE CLOSING BALANCE SHEET
Estimated consolidated balance sheet of HAI and
subsidiaries as of December 31, 1995, prepared in
accordance with GAAP consistent with the principles
applied in connection with the 1994 audited financial
statements of HAI, before giving effect to the Spin-Off
XXXXXXXX AMERICAN, INC., AND SUBSIDIARIES
ESTIMATED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
(unaudited)
($ In Thousands)
----------------
ASSETS CONSOL
------
Cash ............................................................. 4,181
Due from subsidiaries/parent ..................................... 0
Net investment in finance receivables ............................ 167,000
Equity investment in real estate partnerships .................... 281
Equity investment in subsidiary companies ........................ 0
Equity investment in Xxxxxx ...................................... 341
Property under operating leases, net ............................. 27,570
Property and equipment, net ...................................... 1,446
Other assets ..................................................... 2,596
Deferred income taxes ............................................ 1,435
--------
Total Assets ................................................ 204,850
========
LIABILITIES AND STOCKHOLDERS' EQUITY
Due to parent/subsidiaries ....................................... 0
Short-term borrowings ............................................ 30,570
Accounts payable and accrued expenses ............................ 8,758
Customer deposits ................................................ 1,830
Long-term debt ................................................... 0
Recourse .................................................... 116,335
Nonrecourse ................................................. 13,051
--------
Total Liabilities ...................................... 170,544
--------
Minority interest ................................................ 322
Stockholders' equity ............................................. 0
Partnership capital ......................................... 0
Common stock ................................................ 3,127
Capital in excess of par value .............................. 141
Retained earnings ........................................... 30,716
Less treasury stock ......................................... 0
--------
Total Stockholders' Equity ............................. 33,984
--------
Total Liabilities and Stockholders' Equity ............. 204,850
========
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Consolidated shareholders' equity $33,984,000
PRO FORMA ADJUSTMENTS
1. Spin off common stock of ARE $3,485,720
Less reversal of accumulated
minority interest losses
arising from consolidation
of ARE with HAI 321,720 3,164,000
---------- ----------
2. Spin off intercompany loans
of ARE owed to HAI
3. Recognize AEL's after-tax
gain on sale of equity
investments in ARE
Partnership interests 91,345
-----------
$24,411,345
TENTATIVE PRICE ADJUSTMENT SCHEDULE
Consolidated shareholders' equity after giving
effect to the Pro Forma Adjustments ("Pro Forma
Net Worth") $24,411,345
-----------
Adjustments
1. Add back any reduction in the Pro Forma Net
Worth resulting from any loss booked by HAI on
account of the distribution of all the
outstanding capital stock of ARE ("ARE Stock")
to the HAI shareholders pursuant to the Spin-
Off; provided, however, that the amount of the
add-back shall be reduced, but not below zero,
by the amount of any gain, plus any applicable
taxes (assuming a combined federal, state and
local tax rate of 40%) on such gain accrued by
HAI on account of the distribution of ARE
Stock to the HAI shareholders pursuant to the
Spin-Off for which the Surviving Corporation
is not indemnified by ARE -0-
------------
2. Add back any reduction in the Pro Forma Net
Worth resulting from the distribution of any
debt obligations of ARE ("ARE Debt") to the
shareholders of HAI pursuant to the Spin-Off;
provided, however, that the amount of the add-
back shall be reduced, but not below zero, by
the amount of any gain, plus any applicable
taxes (assuming a combined federal, state and
local tax rate of 40%) on such gain accrued by
15
HAI on account of the distribution of ARE Debt
to the HAI shareholders pursuant to the Spin-
Off for which the Surviving Corporation
is not indemnified by ARE 6,500,000
-----------
3. Add back any reduction in the Pro Forma Net
Worth resulting from HAI's incurrence of any
of the expenses (net of any tax benefit,
assuming a combined federal, state and local
tax rate of 40%) for legal, accounting and
other closing costs of HAI, the Rothschild
fees and the Rothschild out-of-pocket expenses -0-
-----------
4. Add back any reduction in the Pro Forma Net
Worth resulting from any federal, state and
local taxes (assuming a combined tax rate of
40%) for which the Surviving Corporation is
not indemnified by ARE, accrued by HAI on
account of the distribution of ARE Stock and
the ARE Debt to the shareholders of HAI -0-
-----------
Adjusted Pro Forma Net Worth $30,911,345
===========
Adjusted Pro Forma Net Worth multiplied by 1.7 $52,549,287
-----------
Subtract
1. The principal amount of ARE Debt and any
accrued interest thereon distributed to the
HAI shareholders as part of the Spin-Off 6,500,000
-----------
2. The amount of federal, state and local taxes
(assuming a combined tax rate of 40%) incurred
by HAI (but not indemnified by ARE) on account
of the distribution of the ARE Stock and the
ARE Debt to the HAI shareholders -0-
------------
3. 20% of (i) the legal, accounting and other
closing costs incurred by HAI, (ii) the
Rothschild fees and (iii) the Rothschild out-
of-pocket expenses accrued by HAI (such amount
not to exceed $180,000) 180,000
------------
4. Prepayment Fees that in the aggregate exceed
$1,300,000 relating to prepayment of HAI
debt and interest rate hedging obligations -0-
------------
5. The excess of (i) expenses accrued to reflect
repurchases of HAI stock options and of rights
under Phantom Stock Plan (in excess of
expenses previously accrued in respect thereof
in arriving at HAI's consolidated
shareholders' equity as of December 31, 1995),
16
net of tax benefit (assuming a combined
federal, state and local tax rate of 40%) over
(ii) $841,471 -0-
-----------
6. Expenses other than of the character described
in items 1 through 5 inclusive, accrued or
anticipated to be incurred by HAI (net of tax
benefit, assuming a combined tax rate of 40%)
in connection with the Merger -0-
-----------
Merger Consideration $45,869,287
===========
17
APPLICATION OF ESTIMATED MERGER CONSIDERATION PAYABLE AT CLOSING
Aggregate Estimated Merger Consideration
Payable at Closing $45,869,287
-----------
Subtract
1. Holdback 265,000
2. Shareholders' Representative Reserve 500,000
3. Bonuses paid to officers by Shareholders'
Representative 595,000
----------
Net payable to Shareholders at Closing $44,509,287
18
EXHIBIT C
to Agreement and
Plan of Merger
PENNSYLVANIA ARTICLES OF MERGER
[omitted]
19
