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EXHIBIT 99.1
AGREEMENT
AND
PLAN OF REORGANIZATION
STERLING FINANCIAL CORPORATION,
STERLING EFI ACQUISITION CORPORATION,
AND
EQUIPMENT FINANCE, INC.
NOVEMBER 2, 2001
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TABLE OF CONTENTS
Page
SECTION 1 The Reorganization, The Merger, Closing, Effective Time............................................. 2
SECTION 2 Conversion and Exchange of Shares................................................................... 3
SECTION 3 Representations and Warranties of Sterling.......................................................... 11
SECTION 4 Representations and Warranties of EFI............................................................... 15
SECTION 5 Covenants of EFI.................................................................................... 29
SECTION 6 Covenants of Sterling............................................................................... 36
SECTION 7 Conditions to the Obligations of Sterling and EFI .................................................. 38
SECTION 8 Termination......................................................................................... 42
SECTION 9 Effect of Termination............................................................................... 43
SECTION 10. Expenses............................................................................................ 44
SECTION 11. Confidentiality..................................................................................... 44
SECTION 12. Intentionally Omitted............................................................................... 45
SECTION 13. Survival of Representations and Warranties, Etc .................................................... 45
SECTION 14. Employees .......................................................................................... 45
SECTION 15. Officer ............................................................................................ 46
SECTION 16. Board of Directors ................................................................................. 46
SECTION 17. Escrow Account ..................................................................................... 46
SECTION 18. Entire Agreement ................................................................................... 47
SECTION 19. Publicity .......................................................................................... 47
SECTION 20. Amendment and Waiver ............................................................................... 47
SECTION 21. Governing Law ...................................................................................... 48
SECTION 22. Communication ...................................................................................... 48
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SECTION 23. Successors and Assigns.............................................................................. 48
SECTION 24. Headings, Etc........................................................................................ 49
SECTION 25. Certain Definitions; Interpretation.................................................................. 49
SECTION 26. Severability......................................................................................... 49
SECTION 27. No Third Party Beneficiary.......................................................................... 49
SECTION 28. Counterparts......................................................................................... 49
SECTION 29. Further Assurances................................................................................... 50
EXHIBITS
EXHIBIT 1 Agreement and Plan of Merger
EXHIBIT 2 Xxxxxx X. Xxxxxx Employment Agreement
EXHIBIT 3 Xxxxxxx X. Xxxxxxxx Employment Agreement
EXHIBIT 4 Xxxxxx X. Xxxxx Employment Agreement
EXHIBIT 5 Support Agreement
EXHIBIT 6 Affiliates Agreement
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated as of
November 2, 2001, by and among STERLING FINANCIAL CORPORATION, a
Pennsylvania business corporation and registered financial holding company
having its principal office in Lancaster, Pennsylvania ("Sterling"), STERLING
EFI ACQUISITION CORPORATION (In Organization) ("Acquisition Corporation"), a
Pennsylvania business corporation and wholly-owned subsidiary of Sterling, and
EQUIPMENT FINANCE, INC., a Pennsylvania business corporation having its
principal office in Lancaster, Pennsylvania ("EFI") (collectively referred to as
the "Parties").
W I T N E S S E T H:
WHEREAS, the respective Boards of Directors of Sterling and EFI have
each determined that it is in the best interests of their respective companies
to consummate the transactions provided for in this Agreement and the exhibits
and schedules hereto in the manner provided herein and therein;
WHEREAS, Sterling shall incorporate and capitalize Acquisition
Corporation with sufficient funds as Sterling's direct, wholly-owned subsidiary
prior to the effectuation of the transactions contemplated by this Agreement and
the exhibits and schedules thereto;
WHEREAS, the respective Boards of Directors of Sterling and EFI have
approved, and deem it advisable and in the best interests of their respective
shareholders for EFI to statutorily merge with and into Acquisition Corporation
pursuant to the terms and subject to the conditions set forth in this Agreement
and the Agreement and Plan of Merger of EFI with and into Acquisition
Corporation in the form attached hereto as Exhibit 1 (the "Merger Agreement")
and to consummate such plan in accordance with the provisions of Section 368 of
the Internal Revenue Code of 1986, as amended (the "Code"). Such merger of EFI
with and into Acquisition Corporation on the terms and conditions provided in
this Agreement and the Merger Agreement shall be referred to herein and therein
as the "Merger";
WHEREAS, subsequent to and immediately after the effectiveness of the
Merger, Sterling shall make a capital contribution of the Acquisition
Corporation Common Stock (as defined herein) held by Sterling to Bank of
Lancaster County, N.A., a national banking association chartered under the laws
of the United States and a wholly-owned subsidiary of Sterling ("BLC"), as a
result of which Acquisition Corporation will become a wholly-owned subsidiary of
BLC, all upon the terms and subject to the conditions set forth herein;
WHEREAS, as a condition to Sterling's entry into this Agreement and to
induce such entry, Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx,
each adult individuals and officers and employees of EFI are entering into
Employment Agreements with Sterling (the "Employment Agreements") attached
hereto as Exhibits 2, 3, and 4, respectively;
WHEREAS, as a condition to Sterling's entry into this Agreement and to
induce such entry, Xxxxx X. Xxxxxxxx, Xxxx X. Xxxxxxxx, Xxxx X. Xxxxx, Xxxxxx X.
Xxxxxx, Xxxxxx X. Xxxxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxx
X. Xxxxx, each adult individuals and directors or officers of EFI are entering
into Support Agreements with Sterling (the "Support Agreements") in the form
attached hereto as Exhibit 5; and
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WHEREAS, the Parties desire to provide for certain undertakings,
conditions, representations, warranties and covenants in connection with the
transactions contemplated hereby and governing the transactions contemplated
herein.
NOW, THEREFORE, in consideration of the premises, mutual promises,
covenants, agreements, representations and warranties hereinafter set forth, and
of other good and valuable consideration the receipt and sufficiency of which
are hereby acknowledged, and intending to be legally bound hereby, the Parties
hereto agree as follows:
1. THE REORGANIZATION, THE MERGER, CLOSING, EFFECTIVE
TIME.
(a) Subject to the terms and conditions of this Agreement and in
accordance with the applicable laws of the Commonwealth of
Pennsylvania, at the Effective Time (as defined in Section
1(c)). EFI shall merge with and into Acquisition Corporation
and the separate corporate existence of EFI shall thereupon
cease (the "Merger"). Acquisition Corporation shall be the
surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and shall continue
to be governed by the laws of the Commonwealth of Pennsylvania
and the separate corporate existence of Acquisition
Corporation with all its rights, privileges, immunities,
powers and franchises shall continue unaffected by the Merger.
The name of the Surviving Corporation shall be "Equipment
Finance, Inc." The Merger shall have the effects specified in
Chapter 19 of the Pennsylvania Business Corporation Law of
1988, as amended (the "PBCL").
(b) Provided that all conditions precedent set forth in this
Agreement shall have been satisfied or shall have been waived
in accordance with Section 20 of this Agreement, the closing
of the Merger (the "Closing") shall take place at the offices
of Sterling at 000 Xxxxx Xxxxxx Xxxxxxxxx, Xxxxxxxxx,
Xxxxxxxxxxxx, or such other mutually agreed upon location, on
such date and at such time as shall be agreed upon by the
Parties, following three (3) business days' notice to EFI,
which date shall, unless otherwise agreed upon by the Parties,
be the last business day of a calendar month and not be later
than the 15th business day after the latest to occur of (i)
the last approval of required governmental authorities is
granted and any related waiting periods expire, (ii) the
lifting, discharge or dismissal of any stay of any such
governmental approval or of any injunction against the Merger
and (iii) all shareholder approvals required by the Parties
hereunder are received. At the Closing, the Parties shall
deliver the certificates required by Sections 7(b) and 7(c) of
this Agreement and such other documents and instruments as may
be necessary or appropriate to effectuate the purposes of this
Agreement. The "Closing Date" when used herein means the day
on which the Closing occurs.
(c) Immediately following the Closing, and provided that this
Agreement has not been terminated or abandoned pursuant to
Section 8 hereof, Acquisition Corporation and EFI will cause
articles of merger (the "Articles of Merger") to be delivered
and properly filed with the Department of State of the
Commonwealth of Pennsylvania (the "Department of State"). The
Merger of EFI with and into Acquisition Corporation shall
become effective on 11:59 p.m. on the day on which the Closing
occurs and the Articles of Merger are filed with the
Department
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of State or such later date and time as may be mutually agreed
upon by the Parties and specified in the Articles of Merger
(the "Effective Time"). The "Effective Date" when used herein
means the day on which the Effective Time for the Merger
occurs. At the Effective Date, EFI shall cease to exist as a
separate business corporation, and Acquisition Corporation
shall become the surviving corporation of the Merger.
2. CONVERSION AND EXCHANGE OF SHARES; FRACTIONAL SHARE
INTERESTS.
(a) MERGER CONSIDERATION. On the Effective Date, each share of the
common stock of EFI, par value $.01 per share, ("EFI Common
Stock") issued and outstanding immediately prior to the
Closing Date (except as provided in paragraph (b) of this
Section 2, and subject to paragraphs (e) and (f) of this
Section 2), shall, by virtue of the Merger, automatically and
without any action on the part of the holder thereof, become
and be converted into the right to receive (i) without
interest, $12.48 in cash (the "Cash Consideration"), (ii)
0.5869 shares (the "Exchange Ratio") of common stock of
Sterling, par value $5.00 per share ("Sterling Common Stock")
(the "Stock Consideration") or (iii) a combination of cash and
shares of Sterling Common Stock as provided in Sections
2(c)(5)(A), (B) and (C) below. In addition, each EFI
shareholder shall receive a pro rata share of the Escrow
Reserve Fund, as defined in Section 17 hereof (the "Reserve
Consideration"). Subject to paragraph (e) of this Section 2,
the Stock Consideration to be issued under this Agreement
shall not exceed 954,914 shares of Sterling Common Stock and
subject to paragraphs (f) and (i) of this Section 2, the
aggregate Cash Consideration shall be approximately
$8,000,000. The Cash Consideration, the Stock Consideration
and the Reserve Consideration are sometimes referred to herein
collectively as the "Merger Consideration".
(b) TREASURY STOCK, DISSENTING SHAREHOLDERS.
(1) On the Effective Date, all shares of EFI Common Stock
held in the treasury of EFI and all shares of EFI
Common Stock owned by Sterling or owned beneficially by
any subsidiary of Sterling shall be cancelled and no
cash, stock, debt or other property shall be delivered
in exchange therefore.
(2) Notwithstanding any other provision contained in this
Agreement, no shares of EFI Common Stock that are
issued and outstanding as of the Effective Date and
that are held by a shareholder who has properly
exercised his appraisal rights (any such shares being
referred to herein as "Dissenting Shares") under
applicable law shall be converted into the right to
receive the Merger Consideration as provided in
paragraph (a) of this Section 2 unless and until the
holder shall have failed to perfect, or shall have
effectively withdrawn or lost, his right to dissent
from the Merger under applicable law and to receive
such consideration as may be determined to be due with
respect to such Dissenting Shares pursuant to and
subject to the requirements of applicable law. If any
such holder shall have so failed to perfect or
effectively withdrawn or lost such right prior to the
Election Deadline (as defined herein), each of such
holder's shares of
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EFI Common Stock shall thereupon be deemed to be
Non-Election Shares (as defined herein) for all
purposes under this Section 2. If any holder of
Dissenting Shares shall have so failed to perfect or
effectively withdrawn or lost such holder's right to
dissent from the Merger after the Election Deadline,
each of such holder's shares of EFI Common Stock
shall thereupon be deemed to have been converted into
and to have become, as of the Effective Date, the
right to receive the Stock Consideration or the Cash
Consideration or a combination thereof as determined
by Sterling in its sole discretion.
(c) EXCHANGE OF STOCK CERTIFICATES, ELECTION.
(1) An election form (an "Election Form") and other
appropriate and customary transmittal materials, which
shall specify how delivery shall be effected, and risk
of loss and title to the certificates theretofore
representing EFI Common Stock ("Certificates") shall
pass, only upon proper delivery of such Certificates to
a bank or trust company designated by Sterling and
reasonably satisfactory to EFI (the "Exchange Agent")
in such form as EFI and Sterling shall mutually agree
shall be mailed on the Mailing Date (as defined below)
to each holder of record of shares of EFI Common Stock
(other than holders of Dissenting Shares or shares of
EFI Common Stock to be cancelled as provided in
paragraph (b)(1) of this Section 2) as of a record date
which shall be the same date as the record date for
eligibility to vote on the Merger. The "Mailing Date"
shall be the date on which proxy materials relating to
the Merger are mailed to holders of shares of EFI
Common Stock.
(2) Each Election Form shall entitle the holder of shares
of EFI Common Stock (or the beneficial owner through
appropriate and customary documentation and
instructions) to (i) elect to receive the Cash
Consideration for all of such holder's shares (a "Cash
Election") (subject to Section 2(c)(4), the aggregate
number of shares of EFI Common Stock that will be
converted into the right to receive cash in the Merger
(the "Cash Election Number") will be approximately
27.6% of the total number of shares of EFI Common Stock
issued and outstanding as of the Closing Date), (ii)
elect to receive the Stock Consideration for all of
such holder's shares (a "Stock Election") (subject to
Section 2(c)(4), the aggregate number of shares of EFI
Common Stock that will be converted into the right to
receive shares of Sterling Common Stock in the Merger
(the "Stock Election Number") shall be approximately
72.4% of the total number of shares of EFI Common Stock
issued and outstanding as of the Closing Date), (iii)
elect to receive the Cash Consideration with respect to
some of such holder's shares and elect to receive the
Stock Consideration with respect to such holder's
remaining shares (a "Mixed Election"), or (iv) make no
election or to indicate that such holder has no
preference as to the receipt of the Cash Consideration
or the Stock Consideration (a "Non- Election"). Holders
of record of shares of EFI Common Stock who hold such
shares as nominees, trustees or in other representative
capacities (a "Representative") may submit multiple
Election Forms, provided that such Representative
certifies that each such Election Form covers all the
shares of EFI Common Stock held by that Representative
for a particular
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beneficial owner. Shares of EFI Common Stock as to
which a Cash Election has been made are referred to
herein as "Cash Election Shares". Shares of EFI Common
Stock as to which a Stock Election has been made are
referred to herein as "Stock Election Shares". In the
case of a Mixed Election, the number of shares of EFI
Common Stock for which the holder making the Mixed
Election has indicated an election to receive Cash
Consideration will be treated as Cash Election Shares
and the number of shares of EFI Common Stock for which
the holder making the Mixed Election has indicated an
election to receive Stock Consideration will be treated
as Stock Election Shares. Shares of EFI Common Stock as
to which no election or a Non-Election has been made
are referred to as "Non-Election Shares".
(3) To be effective, a properly completed Election Form
shall be submitted to the Exchange Agent on or before
5:00 p.m. Eastern Standard Time on the 15th calendar
day following the Mailing Date (or such other time and
date as EFI and Sterling may mutually agree) (the
"Election Deadline"). An election shall have been
properly made only if the Exchange Agent shall have
actually received a properly completed Election Form by
the Election Deadline. An Election Form shall be deemed
properly completed only if accompanied by one or more
Certificates (or customary affidavits and, if required
by Sterling pursuant to paragraph (g) of this Section
2, indemnification regarding the loss or destruction of
such Certificates or the guaranteed delivery of such
Certificates) representing all shares of EFI Common
Stock covered by such Election Form, together with duly
executed transmittal materials included with the
Election Form. Any EFI shareholder may at any time
prior to the Election Deadline change his or her
election by written notice received by the Exchange
Agent prior to the Election Deadline accompanied by a
properly completed and signed revised Election Form.
Any EFI shareholder may, at any time prior to the
Election Deadline, revoke his or her election by
written notice received by the Exchange Agent prior to
the Election Deadline or by withdrawal prior to the
Election Deadline of his or her Certificates, or of the
guarantee of delivery of such Certificates, previously
deposited with the Exchange Agent. All elections shall
be revoked automatically if the Exchange Agent is
notified in writing by Sterling and EFI that this
Agreement has been terminated. If a shareholder either
(i) does not submit a properly completed Election Form
by the Election Deadline, or (ii) revokes its Election
Form and does not thereafter duly deliver a properly
completed Election Form to the Exchange Agent prior to
the Election Deadline, the shares of EFI Common Stock
held by such shareholder shall be designated
"Non-Election Shares". Sterling shall cause the
Certificates representing EFI Common Stock described in
clause (ii) of this paragraph (c)(3) to be promptly
returned without charge to the person submitting the
Election Form upon written request to that effect from
the person who submitted the Election Form. Subject to
the terms of this Agreement and of the Election Form,
the Exchange Agent shall have reasonable discretion to
determine whether any election, revocation or change
has been properly or timely made and to disregard
immaterial defects in any Election Form, and any good
faith decisions of the Exchange Agent regarding such
matters shall be binding and conclusive.
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(4) Notwithstanding any other provision contained in this
Section 2 to the contrary (other than Sections 2(e),
(f) and (i)), a minimum of 72.4% of the Merger
Consideration shall be in the form of the Stock
Consideration and a maximum of 27.6% of the Merger
Consideration shall be in the form of the Cash
Consideration; provided, however, that for federal
income tax purposes, it is intended that the Merger
will qualify as a reorganization under the provisions
of Sections 368(a)(1)(A) and 368(a)(2)(D) of the Code
and, notwithstanding anything to the contrary contained
herein, in order that the Merger will not fail to
satisfy requirements under applicable federal income
tax principles relating to reorganizations under
Section 368(a) of the Code, as reasonably determined by
Ernst & Young LLP ("E&Y"), after consultation with KPMG
LLP ("KPMG"), Sterling shall increase the number of
outstanding EFI shares that will be converted into the
Stock Consideration and reduce the number of
outstanding EFI shares that will be converted into the
right to receive the Cash Consideration.
(5) Within fifteen (15) days after the Election Deadline,
Sterling shall cause the Exchange Agent to effect the
allocation among the holders of EFI Common Stock of
rights to receive the Cash Consideration and the Stock
Consideration as follows:
(A) Oversubscribed Cash Election. If the aggregate
number of Cash Election Shares (including the shares
for which a Cash Election was deemed to be made
pursuant to a Mixed Election) exceeds the Cash Election
Number, (1) each Cash Election Share shall be converted
into (i) the right to receive an amount of cash,
without interest, equal to the product of (a) the Cash
Consideration and (b) a fraction (the "Cash Fraction"),
the numerator of which shall be the Cash Election
Number and the denominator of which shall be the total
number of Cash Election Shares, and (ii) a number of
shares of Sterling Common Stock equal to the product of
(a) the Exchange Ratio and (b) a fraction equal to one
minus the Cash Fraction and (2) each Stock Election
Share and each Non Election Share (each as defined
below) shall be converted into the right to receive a
number of shares of Sterling Common Stock equal to the
Exchange Ratio.
(B) Oversubscribed Stock Election. If the aggregate
number of Stock Election Shares (including the shares
for which a Stock Election was deemed to be made
pursuant to a Mixed Election) exceeds the Stock
Election Number, (1) each Stock Election Share shall be
converted into (i) the right to receive a number of
shares of Sterling Common Stock, equal to the product
of (a) the Exchange Ratio and (b) a fraction (the
"Stock Fraction"), the numerator of which shall be the
Stock Election Number and the denominator of which
shall be the total number of Stock Election Shares, and
(ii) an amount of cash, without interest, equal to the
product of (a) the Cash Consideration and (b) a
fraction equal to one minus the Stock Fraction and (2)
each Cash Election Share and each Non Election Share
shall be converted into the right to receive an amount
of cash, without interest, equal to the Cash
Consideration.
(C) Undersubscribed Cash Election and Stock Election.
If (x) the aggregate number of Cash Election Shares is
equal to or less than the Cash
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Election Number and (y) the aggregate number of Stock
Election Shares is equal to or less than the Stock
Election Number, (1) each Cash Election Share shall
be converted into the right to receive an amount of
cash, without interest, equal to the Cash
Consideration, (2) each Stock Election Share shall be
converted into the right to receive a number of
shares of Sterling Common Stock equal to the Exchange
Ratio and (3) each Non Election Share shall be
converted into the right to receive (A) an amount of
cash, without interest, equal to the product of (i)
the Cash Consideration and (ii) a fraction (x) the
numerator of which shall be the Cash Election Number
less the number of Cash Election Shares and (y) the
denominator of which shall be the aggregate number of
Non Election Shares and (B) a number of shares of
Sterling Common Stock equal to the product of (i) the
Exchange Ratio and (ii) a fraction (x) the numerator
of which shall be the Stock Election Number less the
number of Stock Election Shares and (y) the
denominator of which shall be the aggregate number of
Non Election Shares.
(6) All of the shares of EFI Common Stock converted into
and exchangeable for the Merger Consideration
pursuant to this Section 2 shall no longer be
outstanding and shall automatically be cancelled and
cease to exist as of the Effective Date. Each
Certificate previously representing any such shares
of EFI Common Stock shall thereafter represent the
right to receive the Merger Consideration pursuant to
this Section 2, as allocated among the holders of EFI
Common Stock in accordance with this paragraph 2(c).
(7) At the Effective Date, Sterling shall deposit, or
shall cause to be deposited, with the Exchange Agent,
for exchange in accordance with this paragraph 2(c),
(i) certificates representing the aggregate number of
shares of Sterling Common Stock into which the
outstanding shares of EFI Common Stock shall be
converted pursuant to this Section 2, and (ii) cash
in the amount of the aggregate Cash Consideration,
and the aggregate amount of cash to be paid in lieu
of fractional shares. As soon as practicable after
the Effective Date, the Exchange Agent shall mail to
all holders of record of EFI Common Stock who did not
previously submit completed Election Forms letters of
transmittal specifying the procedures for the
delivery of such holders' certificates to the
Exchange Agent and describing the Merger
Consideration such holders will receive therefor.
Also as soon as practicable after the Effective Date
(with allowance for the mailing of the letters of
transmittal described in the preceding sentence), the
Exchange Agent shall distribute to holders of shares
of EFI Common Stock, upon surrender to the Exchange
Agent (to the extent not previously surrendered with
an Election Form) of one or more Certificates for
cancellation, (i) a certificate representing that
number of whole shares of Sterling Common Stock, if
any, that such holder has the right to receive
pursuant to this Agreement and (ii) a check for an
amount equal to the cash, if any, which such holder
has the right to receive pursuant to this Agreement
(including any cash in lieu of any fractional shares
of Sterling Common Stock to which such holder is
entitled pursuant to paragraph (f) hereof and any
dividends or other distributions to which such holder
is entitled pursuant to the provisions set forth
below). In no event shall the holder of any such
surrendered Certificates be entitled to receive
interest
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on any of the Cash Consideration or cash in lieu of
fractional share interests to be received in the
Merger. If a check is to be issued in the name of a
person other than the person in whose name the
Certificates surrendered for exchange therefor are
registered, it shall be a condition of the exchange
that the person requesting such exchange shall pay to
the Exchange Agent any transfer taxes required by
reason of issuance of such check to a person other
than the registered holder of the Certificates
surrendered, or shall establish to the reasonable
satisfaction of the Exchange Agent that such tax has
been paid or is not applicable. No dividends or other
distributions declared after the Effective Date with
respect to Sterling Common Stock shall be paid to the
holder of any unsurrendered Certificate until the
holder thereof shall surrender such Certificate in
accordance with this Section 2; after the surrender
of such Certificate in accordance with this Section
2, the record holder thereof shall be entitled to
receive any such dividends or other distributions,
without any interest thereon, which theretofore had
become payable with respect to shares of Sterling
Common Stock, if any, represented by such
Certificate. Certificates surrendered for exchange by
any person who is an "affiliate" of EFI for purposes
of Rule 145(c) under the Securities Act of 1933, as
amended, (the "1933 Act") shall not be exchanged for
certificates representing shares of Sterling Common
Stock until Sterling has received the written
agreement of such person in the form attached hereto
as Exhibit 6. If any certificate for shares of
Sterling Common Stock is to be issued in a name other
than that in which a Certificate surrendered for
exchange is issued, the Certificate so surrendered
shall be properly endorsed and otherwise in proper
form for transfer and the person requesting such
exchange shall affix any requisite stock transfer tax
stamps to the Certificate surrendered or provide
funds for their purchase or establish to the
reasonable satisfaction of Sterling or its agent that
such taxes have been paid or are not payable.
(d) CLOSING OF STOCK TRANSFER BOOKS; CANCELLATION OF EFI
CERTIFICATES. At the Effective Date, the stock transfer books
of EFI shall be closed and no transfer of EFI Common Stock
shall thereafter be made or recognized. If, after the
Effective Date, Certificates representing such shares are
presented for transfer to the Exchange Agent, they shall be
cancelled and exchanged for the Merger Consideration as
provided in this Section 2. Any other provision of this
Agreement notwithstanding, neither Sterling or its agent nor
any party to the Merger shall be liable to a holder of EFI
Common Stock for any amount paid or properly delivered in good
faith to a public official pursuant to any applicable
abandoned property, escheat or similar law.
(e) ANTIDILUTION PROVISION. In the event that prior to the
Effective Date, the outstanding shares of Sterling Common
Stock shall have been increased, decreased or changed into or
exchanged for a different number or kind of shares or
securities by reorganization, recapitalization,
reclassification, stock dividend, stock split or other like
changes in Sterling's capitalization, then an appropriate and
proportionate adjustment shall be made to the Stock
Consideration (including the Exchange Ratio).
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(f) NO FRACTIONAL SHARES. Notwithstanding any other provision
hereof, each holder of shares of EFI Common Stock who would
otherwise have been entitled to receive pursuant to this
Section 2 a fraction of a share of Sterling Common Stock
(after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash in an amount
equal to the pro-rata cash consideration value for each share
as established in paragraph 2(a) of this Agreement. No such
holder shall be entitled to dividends, voting rights or any
other shareholder right in respect of such fractional share.
(g) LOST OR DESTROYED CERTIFICATES. In the event any Certificate,
as of the Closing Date, shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or
destroyed and, if required by Sterling, the posting by such
person of a bond in such amount as Sterling may reasonably
direct as indemnity against any claim that may be made against
it with respect to such Certificate, the Exchange Agent will
issue in exchange for such lost, stolen or destroyed
Certificate the shares of Sterling Common Stock constituting
the Stock Consideration and cash in lieu of fractional shares.
(h) OTHER MATTERS.
(1) Notwithstanding any term of this Agreement to the
contrary, Sterling may, in its discretion at any time
prior to the Effective Date, designate a direct or
indirect wholly-owned subsidiary to substitute for
Acquisition Corporation as the constituent
corporation in the Merger by written notice to EFI so
long as the exercise of this right does not cause a
material delay in the consummation of the
transactions contemplated herein or otherwise
adversely affect the consummation or the tax
consequences of the transactions contemplated herein.
Sterling shall also have the right to cause EFI or
such substitute to be the Surviving Corporation of
the Merger described at Section 1(a), so long as the
exercise of such right does not have a Material
Adverse Effect on the interests of the EFI
shareholders or cause a material delay in, or
otherwise adversely affect, consummation or the tax
consequences of the transactions contemplated herein;
if such right is exercised, this Agreement shall be
deemed to be modified to accord such change.
(2) Nothing set forth in this Agreement or any exhibit or
schedule hereto shall be construed:
(i) to preclude Sterling or any Sterling
affiliate from acquiring or assuming, or to
limit in any way the right of Sterling or
any Sterling affiliate to acquire or assume,
prior to or following the Effective Date,
the stock, or assets or liabilities of any
other financial services institution or
other corporation or entity, whether by
issuance or exchange of Sterling Common
Stock, or otherwise;
(ii) to preclude Sterling from issuing, or to
limit in any way the right of Sterling to
issue, prior to or following the Effective
Date, Sterling Common Stock or other
securities;
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(iii) to preclude Sterling from granting employee,
director or compensatory options at any time
with respect to Sterling Common Stock or
other securities;
(iv) to preclude option holders of Sterling from
exercising options at any time with respect
to Sterling Common Stock or other
securities; or
(v) to preclude Sterling or any Sterling
affiliate from taking, or to limit in any
way the right of either of them to take, any
other action not expressly and specifically
prohibited by the terms of this Agreement.
(i) POST CLOSING ADJUSTMENTS.
(1) As soon as practicable, but in no event more than one
hundred twenty (120) days after Closing, KPMG shall deliver to
Sterling and E&Y a balance sheet of EFI as of the Closing Date
(the "EFI Closing Balance Sheet"), prepared by KPMG, after
consultation with E&Y, in accordance with generally accepted
accounting principles ("GAAP") consistently applied.
(2) Within ten (10) business days after the receipt of the EFI
Closing Balance Sheet (the "Settlement Date"), (i) if the
equity capital account of EFI on the Closing Date as shown on
the EFI Closing Balance Sheet exceeds Twelve Million, Seven
Hundred Ninety-five Thousand Dollars ($12,795,000), then the
aggregate Cash Consideration to be paid to EFI shareholders
will be increased, dollar-for-dollar by the amount by which
the equity capital account on the EFI Closing Balance Sheet
exceeds Twelve Million, Seven Hundred Ninety-five Thousand
Dollars ($12,795,000) or (ii) if the equity capital account of
EFI on the Closing Date as shown on the EFI Closing Balance
Sheet is less than Twelve Million, Seven Hundred Ninety-five
Thousand Dollars ($12,795,000), then Sterling shall receive
from the Escrow Account (as defined in Section 17), an amount
equal to the difference between Twelve Million, Seven Hundred
Ninety- five Thousand Dollars ($12,795,000) and the equity
capital account of EFI on the Closing Date as shown on the EFI
Closing Balance Sheet. The increased Cash Consideration, if
any, will be distributed as a cash payment to all holders of
shares of EFI Common Stock on a pro rata basis in the same
manner as described in paragraph (c)(7) of this Section 2
within 25 days after the Settlement Date.
(3) The EFI Closing Balance Sheet shall be final and binding
for all purposes unless, within five (5) days after delivery
of the EFI Closing Balance Sheet by KPMG, E&Y shall notify
Sterling and KPMG in writing of its disagreement with any item
or amount included therein or omitted therefrom, in which
case, if E&Y and KPMG are unable to resolve the disputed
issues within five (5) days after the receipt by Sterling and
E&Y of notice of such disagreement, such objection(s) shall be
resolved by an independent accounting firm selected by mutual
agreement between E&Y and KPMG, provided that any accounting
firm which shall have provided services to Sterling or EFI or
any of their respective affiliates during the twelve month
period ending on the Closing Date shall be disqualified. The
determination of such accounting firm shall be final and
binding for all purposes. The difference between E&Y's and
KPMG's determination and the
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arbitrating accounting firm's determination of any adjustments
shall be calculated and the fees of such firm shall be paid by
the party whose calculation of the equity capital account
differs by the greater amount from the amount determined by
the arbitrating accounting firm.
(4) The Reserve Consideration shall be paid in the manner
described in Section 17 hereof and the Escrow
Agreement as defined therein.
3. REPRESENTATIONS AND WARRANTIES OF STERLING. Sterling
represents and warrants to EFI as follows:
(a) AUTHORITY. Sterling has all requisite corporate power and
authority to enter into and perform all of its obligations
under this Agreement and the Merger Agreement. The execution
and delivery of this Agreement, the Merger Agreement and the
Employment Agreements and the consummation of the transactions
contemplated herein and therein, respectively, have been duly
and validly authorized by the Board of Directors of Sterling,
and except for the approval of this Agreement and the Merger
Agreement, as the sole shareholder of Acquisition Corporation,
Sterling has taken all corporate action necessary on its part
to authorize this Agreement, the Merger Agreement and the
Employment Agreements and the performance of the transactions
contemplated herein and therein, respectively. This Agreement,
the Merger Agreement and the Employment Agreements have been
duly executed and delivered by Sterling and, assuming due
authorization, execution and delivery by EFI, and receipt of
required regulatory and shareholder approvals, constitute
valid and binding obligations of Sterling in each case
enforceable against Sterling in accordance with their
respective terms, subject to bankruptcy, insolvency, and other
laws of general applicability relating to or affecting
creditors' rights and general equity principles. Subject to
regulatory approval, the execution, delivery and consummation
of this Agreement, the Merger Agreement and the Employment
Agreements will not constitute a violation or breach of or
default under the Articles of Incorporation or the Bylaws of
Sterling or any statute, rule, regulation, order, decree,
directive, agreement, indenture or other instrument to which
Sterling is a party or by which Sterling or any of its
properties are bound, nor constitute a material default under
or give rise to any right of termination, cancellation or
acceleration with respect to, or result in the creation of any
lien, charge or encumbrance upon any property or asset of
Sterling pursuant to any note, bond, mortgage, indenture,
license, agreement or other instrument or obligation.
(b) ORGANIZATION AND STANDING. Sterling is a business corporation
that is duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania. Sterling
is a registered financial holding company under the Bank
Holding Company Act of 1956, as amended, and has full power
and lawful authority to own and hold its properties and to
carry on its present business. Sterling is in good standing as
a foreign corporation in each jurisdiction where the
properties owned, leased or operated, or the business
conducted, by Sterling requires such qualification, except for
such failure to qualify or be in such good standing which,
when taken together with all other such failures, would not
have a Material Adverse Effect on Sterling and its
subsidiaries, taken as a whole. Sterling owns, directly or
indirectly all of the
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issued and outstanding shares of capital stock of BLC, Bank of
Hanover and Trust Company ("Hanover") and The First National
Bank of North East. BLC and The First National Bank of North
East are national banking associations duly organized, validly
existing and in good standing under the laws of the United
States. Hanover is a Pennsylvania chartered bank and trust
company, duly organized, validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania. BLC,
Hanover and The First National Bank of North East are duly
authorized to engage in the banking business as an insured
bank under the Federal Deposit Insurance Act, as amended.
(c) CAPITALIZATION. The authorized capital stock of Sterling, as
of the date of this Agreement, consists solely of 35,000,000
shares of common stock, par value $5.00 per share of which, as
of September 30, 2001, 12,516,307 shares were issued and
outstanding. Sterling maintains a Stock Incentive Plan of
which 323,849 shares, subject to antidilution provisions, were
reserved for issuance at December 31, 2000. All outstanding
shares of Sterling Common Stock have been duly issued and are
validly outstanding, fully paid and nonassessable. The shares
of Sterling Common Stock to be issued in connection with this
Agreement and the Merger Agreement have been duly authorized
and, when issued in accordance with the terms of this
Agreement and the Merger Agreement will be validly issued,
fully paid and nonassessable.
(d) ARTICLES OF INCORPORATION AND BYLAWS. The copies of the
Articles of Incorporation, as amended, of the Bylaws, as
amended, which have been delivered to EFI are true, correct,
and complete.
(e) FINANCIAL STATEMENTS. Sterling has delivered to EFI the
following financial statements: (i) Consolidated Balance
Sheets, Consolidated Statements of Income, Consolidated
Statements of Shareholders' Equity, and Consolidated
Statements of Cash Flows as of and for the years ended
December 31, 2000 and December 31, 1999, certified by
independent public accountants and set forth in the Annual
Report to the shareholders of Sterling for the year ended
December 31, 2000; and (ii) a Consolidated Statement of
Condition and a Consolidated Statement of Income for the
six-month period ended June 30, 2001, set forth in a
"Quarterly Report" to the shareholders of Sterling (the
foregoing Consolidated Statement of Condition being
hereinafter referred to as the "Sterling Financial
Statements"). Each of the foregoing financial statements
fairly presents the consolidated financial position, assets,
liabilities and results of operations of Sterling at their
respective dates and for the respective periods then ended and
has been prepared in accordance with GAAP consistently
applied, except as otherwise noted in a footnote thereto and
subject in the case of the interim financial statements
contained in the aforesaid Quarterly Report to normal
recurring year-end adjustments, which are not Material
individually or in the aggregate.
(f) ABSENCE OF UNDISCLOSED LIABILITIES. Except as disclosed in
Schedule 3(f) or as reflected, noted or adequately reserved
against in the Sterling Financial Statements, at December 31,
2000, Sterling had no Material liabilities (whether accrued,
absolute, contingent or otherwise) which are required to be
reflected, noted or reserved against therein under GAAP or
which are in any case or in the aggregate Material. Except as
described in Schedule 3(f), since December 31, 2000, Sterling
has not incurred any such liability other than liabilities of
the same
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nature as those set forth in the Sterling Financial
Statements, all of which have been reasonably incurred in the
Ordinary Course of Business (as defined in Section 5(a)(1) of
this Agreement.)
(g) ABSENCE OF CHANGES. Since December 31, 2000, there has not
been any change in the condition (financial or otherwise),
assets, liabilities, business, operations or future prospects
of Sterling that would have a Material Adverse Effect on it.
(h) LITIGATION. Except as disclosed in Schedule 3(h): (i) there is
no litigation, investigation or proceeding pending, or to the
knowledge of Sterling threatened, that involves Sterling or
its properties and that, if determined adversely to Sterling,
would have a Material Adverse Effect on the condition
(financial or otherwise), assets, liabilities, business,
operations or future prospects of Sterling; (ii) there are no
outstanding orders, writs, injunctions, judgments, decrees,
regulations, consent agreements, memoranda of understanding or
other directives of any federal, state or local court or
governmental authority or of any arbitration tribunal against
Sterling which would have a Material Adverse Effect on the
condition (financial or otherwise), assets, liabilities,
business, operations or future prospects of Sterling or
restrict in any manner the right of Sterling to conduct its
business as presently conducted; and (iii) Sterling is not
aware of any fact or condition presently existing that might
give rise to any litigation, investigation or proceeding
which, if determined adversely to Sterling, would have a
Material Adverse Effect on the condition (financial or
otherwise), assets, liabilities, business, operations or
future prospects of Sterling. All litigation in which Sterling
is involved as a plaintiff (other than routine collection and
foreclosure suits initiated in the Ordinary Course of Business
in which the amount sought to be recovered is less than
$25,000) is identified in Schedule 3(h).
(i) COMPLIANCE WITH LAWS; GOVERNMENTAL AUTHORIZATIONS. Except as
disclosed in Schedule 3(i) or where noncompliance would not
have a Material Adverse Effect upon the condition (financial
or otherwise), assets, liabilities, business, operations or
future prospects of Sterling: (i) Sterling is in compliance
with all statutes, laws, ordinances, rules, regulations,
judgments, orders, decrees, directives, consent agreements,
memoranda of understanding, permits, concessions, grants,
franchises, licenses, and other governmental authorizations or
approvals applicable to Sterling or to any of its properties;
and (ii) all permits, concessions, grants, franchises,
licenses and other governmental authorizations and approvals
necessary for the conduct of the business of Sterling as
presently conducted have been duly obtained and are in full
force and effect and there are no proceedings pending, or to
the knowledge of Sterling threatened, which may result in the
revocation, cancellation, suspension or Material adverse
modification of any thereof.
(j) COMPLETE AND ACCURATE DISCLOSURE. Neither this Agreement
(insofar as it relates to Sterling, Sterling Common Stock and
Sterling's involvement in the transactions contemplated
hereby) nor any financial statement, schedule (including,
without limitation, Schedule 3(j)), certificate, or other
statement or document delivered by Sterling to EFI in
connection herewith contains any statement which, at the time
and in light of the circumstances under which it is made, is
false or misleading with respect to any Material fact or omits
to state any Material fact necessary to
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make the statements contained herein or therein not Materially
false or misleading.
(k) REGISTRATION UNDER THE SECURITIES EXCHANGE ACT OF 1934.
Sterling Common Stock is registered under Section 12 of the
Securities Exchange Act of 1934 (the "1934 Act"), and is
subject to the periodic reporting requirements imposed by
Section 13 of the 1934 Act.
(l) PROXY STATEMENT/PROSPECTUS. At the time the Proxy
Statement/Prospectus (as defined in Section 6(a)(2) of this
Agreement) is mailed to the shareholders of EFI and at all
times subsequent to such mailing, up to and including the
Effective Date, the Proxy Statement/Prospectus (including any
pre- and post-effective amendments and supplements thereto),
with respect to all information relating to Sterling, Sterling
Common Stock, and actions taken and statements made by
Sterling in connection with the transactions contemplated
herein (other than information provided by EFI to Sterling),
will: (i) comply in all Material respects with applicable
provisions of the 1933 Act and the 1934 Act and the pertinent
rules and regulations thereunder; and (ii) not contain any
statement which, at the time and in light of the circumstances
under which it is made, is false or misleading with respect to
any Material fact, or omits to state any Material fact that is
necessary to be stated therein in order (A) to make the
statements therein not false or misleading, or (B) to correct
any statement in an earlier communication with respect to the
Proxy Statement/Prospectus which has become false or
misleading.
(m) ACCURACY OF REPRESENTATIONS. Until Closing, Sterling will
promptly notify EFI if any of the representations contained in
this Section 3 cease to be true and correct subsequent to the
date hereof.
(n) REPORTS. Sterling has delivered to EFI complete copies of (i)
the Annual Report on Form 10-K for the fiscal year ended
December 31, 2000, (ii) Quarterly Reports on Form 10-Q for the
periods ended March 31, 2001, and June 30, 2001 and (iii) the
proxy statement relating to the 2001 Annual Meeting of
Shareholders.
(o) BROKERS. Neither Sterling nor any of its officers, directors,
employees or agents have employed any broker or finder or
incurred any liability for any investment banking fees,
brokerage fees, commissions, or finder's fees, and no broker
or finder has acted directly or indirectly for it in
connection with this Agreement or the transactions
contemplated hereby.
(p) NATIONAL MARKET SYSTEM. Sterling Common Stock is traded on the
NASDAQ/NMS.
(q) REPRESENTATIONS AND WARRANTIES AS TO ACQUISITION CORPORATION.
(1) Organization. Acquisition Corporation is a
corporation duly organized, validly existing and duly
subsisting under the laws of the Commonwealth of
Pennsylvania. All of the outstanding shares of
capital stock of Acquisition Corporation have been
validly issued, are fully paid and nonassessable and
are owned directly by Sterling free and clear of any
lien, charge or other encumbrance. Acquisition
Corporation has acquired
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no assets and has conducted no business except in
furtherance of the transactions contemplated by this
Agreement.
(2) Authority. Acquisition Corporation has the corporate
power and authority to enter into this Agreement and
to carry out its obligations hereunder. The
execution, delivery and performance of this Agreement
by Acquisition Corporation and the consummation of
the transactions described herein have been duly and
validly authorized by all necessary corporate actions
(including without limitation shareholder action) in
respect thereof on the part of Acquisition
Corporation. This Agreement is a valid and binding
obligation of Acquisition Corporation, enforceable
against Acquisition Corporation in accordance with
its terms, except to the extent enforcement is
limited by bankruptcy, insolvency and other similar
laws affecting creditor's rights or general
principles of equity.
(3) Capitalization. The authorized capital stock of
Acquisition Corporation consists of one thousand
(1,000) shares of common stock, par value $1.00 per
share ("Acquisition Corporation Common Stock"). All
outstanding shares of Acquisition Corporation Common
Stock have been duly issued and are validly
outstanding, fully paid and nonassessable and are
owned by Sterling as sole shareholder.
4. REPRESENTATIONS AND WARRANTIES OF EFI. EFI represents and
warrants to Sterling as follows:
(a) CORPORATE ORGANIZATION AND QUALIFICATION. EFI is a corporation
duly incorporated, validly existing and in good standing under
the laws of the Commonwealth of Pennsylvania and is in good
standing as a foreign corporation in each jurisdiction where
the properties owned, leased or operated, or the business
conducted, by EFI requires such qualification, except for such
failure to qualify or be in such good standing which, when
taken together with all other such failures, would not have a
Material Adverse Effect on EFI and its subsidiary, taken as a
whole. EFI owns, directly or indirectly all of the issued and
outstanding shares of capital stock of E.F.I. Holdings, Inc.
("EFI Holdings"). EFI Holdings is a Delaware holding company,
duly organized, validly existing and in good standing under
the laws of the State of Delaware. EFI and EFI Holdings, each
have the requisite corporate and other power and authority
(including all federal, state, local and foreign governmental
authorizations) to carry on their respective businesses as now
being conducted and to own its properties and assets. EFI has
made available to Sterling a complete and correct copy of the
articles of incorporation and bylaws of EFI, and EFI Holdings
has made available to Sterling a complete and correct copy of
the charter and bylaws of EFI Holdings and such charter or
articles, as applicable, and such bylaws are in full force and
effect as of the date hereof.
(b) AUTHORIZED CAPITAL. The authorized capital stock of EFI
consists of 10,000,000 shares of EFI Common Stock, $.01 par
value per share, of which 2,540,000 shares of EFI Common Stock
were issued, 216,608 shares of EFI Common Stock were held in
the treasury of EFI and 2,323,392 shares of EFI Common Stock
were issued and outstanding as of the date of this Agreement.
The stock of EFI Holdings consists of 1,000 shares of common
stock, $1.00 par value per share, of
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which 100 shares of common stock were issued and outstanding
as of the date of this Agreement; all of these shares are
owned by EFI. All of the outstanding shares of capital stock
of EFI have been duly authorized and are validly issued, fully
paid and nonassessable. No shares of EFI are held in
connection with a debt previously contracted. Neither EFI nor
EFI Holdings has any shares of capital stock reserved for
issuance. Neither EFI nor EFI Holdings has any outstanding
bonds, debentures, notes or other obligations the holders of
which have the right to vote (or convertible into or
exercisable for securities having the right to vote) with
shareholders on any matter. Except as disclosed on Schedule
4(b) hereto, the shares of EFI Holdings common stock owned by
EFI are owned free and clear of all liens, pledges, security
interests, claims or other encumbrances. The outstanding
shares of capital stock of EFI have not been issued in
violation of any preemptive rights. There are no outstanding
subscriptions, options, warrants, rights, convertible
securities or other agreements or commitments of any character
relating to the issued or unissued capital stock or other
securities of EFI. After the Effective Time, EFI will have no
obligation which is being assumed by Sterling which will
result in any obligation to issue, transfer or sell any shares
of capital stock pursuant to any EFI/EFI Holdings Employee
Plan (as defined in Section 4 (m)).
(c) INTENTIONALLY OMITTED
(d) CORPORATE AUTHORITY. Subject only to approval of this
Agreement by the holders of the number of votes required by
EFI's articles of incorporation or bylaws cast by all holders
of EFI Common Stock (without any minority, class or series
voting requirement), EFI has the requisite corporate power and
authority, and legal right, and has taken all corporate action
necessary in order to execute and deliver this Agreement and
to consummate the transactions applicable to EFI contemplated
hereby. This Agreement has been duly and validly executed and
delivered by EFI and constitutes the valid and binding
obligations of EFI enforceable against it, in accordance with
its terms, except to the extent enforcement is limited by
bankruptcy, insolvency and other similar laws affecting
creditors' rights or the application by a court of equitable
principles.
(e) NO VIOLATIONS. Except as disclosed on Schedule 4(e) hereto,
the execution, delivery and performance of this Agreement by
EFI does not, and the consummation of the transactions
contemplated hereby by it will not, constitute (i) subject to
receipt of any required regulatory approvals, a breach or
violation of, or a default under, any law, rule or regulation
or any judgment, decree, order, governmental permit or
license, to which EFI (or any of its properties) is subject,
which breach, violation or default would have a Material
Adverse Effect on it, or enable any person to enjoin the
Merger, (ii) a breach or violation of, or a default under
EFI's Articles of Incorporation, or bylaws, or (iii) a breach
or violation of, or a default under (or an event which with
due notice or lapse of time or both would constitute a default
under), or result in the termination of, accelerate the
performance required by, or result in the creation of any
lien, pledge, security interest, charge or other encumbrance
upon any of the properties or assets of EFI under any of the
terms, conditions or provisions of any note, bond, indenture,
deed of trust, capital lease, security agreement, loan
agreement, or commitment for the borrowing of money, or the
deferred purchase price of assets, or other agreement,
instrument or obligation to which EFI is a party, or to which
any of
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EFI's properties or assets may be bound, or affected, except
for any of the foregoing that, individually or in the
aggregate, would not have a Material Adverse Effect on EFI or
enable any person to enjoin the Merger; and, except as
disclosed on Schedule 4(e) hereto, the consummation of the
transactions contemplated hereby will not require any
approval, consent or waiver under any such law, rule,
regulation, judgment, decree, order, governmental permit or
license or the approval, consent or waiver of any other party
to any such agreement, indenture or instrument, other than (x)
all required approvals, consents and waivers of governmental
authorities, (y) any such approval, consent or waiver that
already has been obtained, and (z) any other approvals,
consents or waivers, the absence of which, individually or in
the aggregate, would not result in a Material Adverse Effect
on EFI or enable any person to enjoin the Merger.
(f) REPORTS AND FINANCIAL STATEMENTS.
(1) EFI has delivered to Sterling the following financial
statements and reports: (i) Consolidated Balance
Sheets, Consolidated Statements of Earnings,
Consolidated Statements of Changes in Shareholder's
Equity, and Consolidated Statements of Cash Flows as
of and for the years ended December 31, 2000,
December 31, 1999, and December 31, 1998, certified
by independent public accountants, and (ii) a
Consolidated Balance Sheet and a Consolidated
Statement of Income for the six-month period ended
June 30, 2001 (the foregoing consolidated financial
statements being hereinafter referred to as the "EFI
Financial Statements"). Each of the EFI Financial
Statements fairly presents the consolidated financial
position, assets, liabilities and results of
operations of EFI at their respective dates and for
the respective periods then ended and has been
prepared in accordance with GAAP consistently
applied, except as otherwise noted in a footnote
thereto and subject in the case of the interim
financial statements: (A) to normal recurring
year-end adjustments, which are not Material
individually or in the aggregate, and (B) the
application of FAS 133. No documents to be filed by
EFI with any regulatory agency in connection with
this Agreement or the transactions contemplated
hereby will contain any untrue statement of a
Material fact or omit to state any Material fact
required to be stated therein or necessary to make
the statements therein, in light of the circumstances
under which they are made, not misleading. All
documents that EFI is responsible for filing with any
regulatory agency in connection with the Merger will
comply as to form in all Material respects with the
requirements of applicable law.
(2) Since January 1, 2000, EFI has not been required to
file any Material report, registration or statement
with any state, federal or local regulatory authority
and any other regulatory authority, including,
without limitation, any report or statement required
to be filed pursuant to the laws, rules or
regulations of the United States or any state or
municipality where EFI conducts business, and has no
fees and assessments required to be paid in
connection therewith.
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(g) ABSENCE OF CERTAIN CHANGES OR EVENTS. Since December 31, 2000,
EFI has not incurred any Material liability, except in the
ordinary course of its business consistent with past practice,
nor has there been any change in the financial condition,
properties, assets, business, results of operations or
prospects of it which, individually or in the aggregate, has
had, or might reasonably be expected to result in, a Material
Adverse Effect on it.
(h) TAXES. EFI's federal income tax returns have been examined and
closed or otherwise closed by operation of law through 1998.
All federal, state, local and foreign tax returns, including,
but not limited to, any and all Pennsylvania and Delaware tax
filings and all sales and use and payroll tax returns required
to be filed by it or on its behalf, have been timely filed, or
requests for extensions have been timely filed and any such
extension shall have been granted and not have expired, and,
to the knowledge of management, all such filed returns are
complete and accurate in all Material respects. All taxes
shown on such returns, and all taxes required to be shown on
returns for which extensions have been granted, have been paid
in full or adequate provision has been made for any such taxes
on its balance sheet (in accordance with GAAP) other than
those taxes which are being contested in appropriate forums in
proceedings which are being diligently pursued. Adequate
provision has been made on its balance sheet (in accordance
with GAAP) for all federal, state, local and foreign tax
liabilities for periods subsequent to those for which returns
have been filed. There is no audit examination, deficiency, or
refund litigation pending or, to the knowledge of EFI's
management, threatened, with respect to any taxes that could
result in a determination that would have a Material Adverse
Effect on it. All taxes, interest, additions and penalties due
with respect to completed and settled examinations or
concluded litigation relating to it have been paid in full or
adequate provision has been made for any such taxes on its
balance sheet (in accordance with GAAP). It has not executed
an extension or waiver of any statute of limitations on the
assessment or collection of any tax due that is currently in
effect.
(i) LITIGATION AND LIABILITIES. Except as disclosed on Schedule
4(i) hereto, there are no (i) civil, criminal or
administrative actions, suits, claims, hearings,
investigations or proceedings before any court, governmental
agency or otherwise pending or, to the knowledge of
management, threatened against EFI or (ii) obligations or
liabilities, whether or not accrued (contingent or otherwise,
including, without limitation, those relating to environmental
and occupational safety and health matters, or any other facts
or circumstances of which its management is aware that could
reasonably be expected to result in any claims against or
obligations or liabilities of it), that, individually or in
the aggregate, are reasonably likely to have a Material
Adverse Effect on it or to hinder or delay, in any Material
respect, consummation of the transactions contemplated by this
Agreement.
(j) ABSENCE OF REGULATORY ACTIONS. EFI is not subject to any
federal or state governmental authority charged with the
supervision or regulation of commercial finance companies.
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(k) AGREEMENTS.
(l) Except as disclosed on Schedule 4(k) hereto, EFI is
not a party to, or bound by, any oral or written:
(A) "Material contract" as such term is defined
in Item 601(b)(10) of Regulation S-K
promulgated by the Securities and Exchange
Commission ("SEC");
(B) consulting agreement not terminable on
thirty (30) days or less notice involving
the payment of more than $10,000 per annum,
in the case of any such agreement;
(C) agreement with any officer or other key
employee the benefits of which are
contingent, or the terms of which are
Materially altered, upon the occurrence of a
transaction of the nature contemplated by
this Agreement;
(D) agreement with respect to any officer
providing any term of employment or
compensation guarantee extending for a
period longer than one year or for a
payment in excess of $10,000;
(E) agreement or plan, including any stock
option plan, stock appreciation rights
plan, employee stock ownership plan,
restricted stock plan or stock purchase
plan, any of the benefits of which will be
increased, or the vesting of the benefits
of which will be accelerated, by the
occurrence of any of the transactions
contemplated by this Agreement or the value
of any of the benefits of which will be
calculated on the basis of any of the
transactions contemplated by this
Agreement;
(F) agreement containing covenants that limit
its ability to compete in any line of
business or with any person, or that involve
any restriction on the geographic area in
which, or method by which, it may carry on
its business (other than as may be required
by law or any regulatory agency);
(G) agreement, contract or understanding, other
than this Agreement, regarding the capital
stock of EFI or committing to dispose of
some or all of the capital stock or
substantially all of the assets of EFI; or
(H) collective bargaining agreement, contract,
or other agreement or understanding with a
labor union or labor organization.
(2) EFI is not in default under or in violation of any
provision of any note, bond, indenture, deed of
trust, capital lease, security agreement, loan
agreement, or commitment for the borrowing of money,
or the deferred purchase price of assets, lease or
other agreement to which it is a party or to which
any of its properties or assets is subject, other
than such defaults
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or violations as could not reasonably be expected,
individually or in the aggregate, to have a Material
Adverse Effect on it.
(l) LABOR MATTERS. EFI is not the subject of any proceeding
asserting that it has committed an unfair labor practice or
seeking to compel it to bargain with any labor organization as
to wages and conditions of employment, nor is there any
strike, other labor dispute or organizational effort involving
it pending or threatened.
(m) EMPLOYEE BENEFIT PLANS. Schedule 4(m) contains a complete list
of all pension, retirement, stock option, stock purchase,
stock ownership, savings, stock appreciation right, profit
sharing, deferred compensation, consulting, bonus, group
insurance, severance and other employee benefits, incentive
and welfare policies, contracts, plans and arrangements, and
all trust agreements related thereto, in respect to any of
EFI's present or former directors, officers or other employees
(hereinafter referred to collectively as the "Employee
Plans").
(1) All of the Employee Plans comply in all Material
respects with all applicable requirements of the
Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), the Code and other applicable
laws; it has not engaged in a "prohibited
transaction" (as defined in Section 406 of ERISA or
Section 4975 of the Code) with respect to any
Employee Plan which is likely to result in any
Material penalties, taxes or other events under
Section 502(i) of ERISA or Section 4975 of the Code
which would have a Material Adverse Effect on it.
(2) No liability to the Pension Benefit Guaranty
Corporation has been or is expected by it to be
incurred with respect to any Employee Plan which is
subject to Title IV of ERISA ("Pension Plan"), or
with respect to any "single-employer plan" (as
defined in Section 4001 (a)(15) of ERISA) currently
or formerly maintained by it or any entity which is
considered one employer with EFI under Section 4001
of ERISA or Section 414 of the Code (an "ERISA
Affiliate").
(3) No Pension Plan or single-employer plan of an ERISA
Affiliate had an "accumulated funding deficiency" (as
defined in Section 302 of ERISA (whether or not
waived)) as of the last day of the end of the most
recent plan year ending prior to the date hereof; all
contributions to any Pension Plan or single-employer
plan of an ERISA Affiliate that were required by
Section 302 of ERISA and were due prior to the date
hereof have been made on or before the respective
dates on which such contributions were due; the fair
market value of the assets of each Pension Plan or
single-employer plan of an ERISA Affiliate exceeds
the present value of the "benefit liabilities" (as
defined in Section 4001(a)(16) of ERISA) under such
Pension Plan or single employer plan of an ERISA
Affiliate as of the end of the most recent plan year
with respect to the respective Pension Plan or
single-employer plan of an ERISA Affiliate ending
prior to the date hereof, calculated on the basis of
the actuarial assumptions used in the most recent
actuarial valuation for such Pension Plan or
single-employer plan of an ERISA Affiliate as of the
date hereof; and no notice of a "reportable event"
(as defined in Section 4043 of ERISA) for which the
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30-day reporting requirement has not been waived has
been required to be filed for any Pension Plan or
single-employer plan of an ERISA Affiliate within the
12-month period ending on the date hereof.
(4) Neither has it provided, nor is it required to
provide, security to any Pension Plan or to any
single-employer plan of an ERISA Affiliate pursuant
to Section 401(a)(29) of the Code.
(5) Neither it nor any ERISA Affiliate has contributed to
any "multi-employer plan," as defined in Section
3(37) of ERISA, on or after September 26, 1980.
(6) Each Employee Plan of it which is an "employee
pension benefit plan" (as defined in Section 3(2) of
ERISA) and which is intended to be qualified under
Section 401(a) of the Code (a "Qualified Plan") has
received a favorable determination letter from the
Internal Revenue Service ("IRS") covering the
requirements of the Tax Equity and Fiscal
Responsibility Act of 1982, the Retirement Equity Act
of 1984 and the Deficit Reduction Act of 1984 and the
Tax Reform Act of 1986; it is not aware of any
circumstances likely to result in revocation of any
such favorable determination letter; each such
Employee Plan has been amended to reflect the
requirements of subsequent legislation applicable to
such plans; and each Qualified Plan has complied at
all relevant times in all Material respects with all
applicable requirements of Section 401(a) of the
Code.
(7) Each Qualified Plan which is an "employee stock
ownership plan" (as defined in Section 4975(e)(7) of
the Code) has at all relevant times satisfied all of
the applicable requirements of Sections 409 and
4975(e)(7) of the Code and the regulations
thereunder.
(8) Neither it nor any ERISA Affiliate has committed any
act or omission or engaged in any transaction that
has caused it to incur, or created a Material risk
that it may incur, liability for any excise tax under
Sections 4971 through 4980B of the Code, other than
excise taxes which heretofore have been paid and
fully reflected in its financial statements.
(9) There is no pending or threatened litigation,
administrative action or proceeding relating to any
Employee Plan, other than routine claims for
benefits.
(10) There has been no announcement or legally binding
commitment by it to create an additional Employee
Plan, or to amend an Employee Plan, except for
amendments required by applicable law which do not
Materially increase the cost of such Employee Plan,
and, except as disclosed on Schedule 4(m) hereto, it
does not have any obligations for retiree health and
life benefits under any Employee Plan that cannot be
terminated without incurring any liability
thereunder.
(11) The execution and delivery of this Agreement and the
consummation of the transactions contemplated hereby
will not result in any payment or series of payments
by EFI to any person which is an "excess parachute
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payment" (as defined in Section 280G of the Code)
under any Employee Plan, increase any benefits
payable under any Employee Plan, or accelerate the
time of payment or vesting of any such benefit.
(12) All annual reports have been filed timely with
respect to each Employee Plan, it has made available
to Sterling a true and correct copy of (A) reports on
the applicable form of the Form 5500 series filed
with the IRS for plan years beginning after 1996, (B)
such Employee Plan, including amendments thereto, (C)
each trust agreement and insurance contract relating
to such Employee Plan, including amendments thereto,
(D) the most recent summary plan description for such
Employee Plan, including amendments thereto, if the
Employee Plan is subject to Title I of ERISA, (E) the
most recent actuarial report or valuation if such
Employee Plan is a Pension Plan and (F) the most
recent determination letter issued by the IRS if such
Employee Plan is a Qualified Plan.
(13) Except as disclosed on Schedule 4(m) hereto, there
are no retiree health benefit plans except as
required to be maintained by COBRA.
(n) TITLE TO ASSETS. EFI has good and marketable title to its
properties and assets (other than property as to which it is
lessee), except for (i) such items shown in the EFI financial
statements or notes thereto; (ii) liens on real property for
current real estate taxes not yet delinquent, or (iii) such
defects in title which would not, individually or in the
aggregate, have a Material Adverse Effect on it. With respect
to any property leased by it, there are no defaults by it, or
any of the other parties thereto, or any events which, with
the giving of notice or lapse of time or both, would become
defaults by it or any of the other parties thereto, under any
of such leases, except for such defaults or events which would
not, individually or in the aggregate, have a Material Adverse
Effect on it; and all such leases are in full force and effect
and are enforceable against it, as the case may be, and there
is no circumstance existing as of the date of this Agreement
which causes or would cause such leases to be unenforceable
against any of the other parties thereto except as the same
may be limited by bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting the rights of creditors
generally as well as principles of equity to the extent
enforcement by a court of equity is required.
(o) COMPLIANCE WITH LAWS. EFI has all permits, licenses,
certificates of authority, orders and approvals of, and has
made all filings, applications and registrations with,
federal, state, local and foreign governmental or regulatory
bodies that are required in order to permit it to carry on its
business as it is presently conducted and the absence of which
could, individually or in the aggregate, have a Material
Adverse Effect on it; all such permits, licenses, certificates
of authority, orders and approvals are in full force and
effect, and no suspension or cancellation of any of them is
threatened.
(p) BROKERS. Except as set forth in Schedule 4(p), neither EFI nor
any of its officers, directors, employees or agents have
employed any broker or finder or incurred any liability for
any financial advisory fees, brokerage fees, commissions, or
finder's fees, and no broker or finder has acted directly or
indirectly for it in connection with this Agreement or the
transactions contemplated hereby.
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(q) ENVIRONMENTAL MATTERS. For purposes of this Section 4(q), the
following terms shall have the indicated meaning:
"Environmental Law" means any federal, state or local law,
statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, order, judgment, decree,
injunction or agreement with any governmental entity relating
to: the protection, preservation or restoration of the
environment (including, without limitation, air, water vapor,
surface water, groundwater, drinking water supply, surface
soil, subsurface soil, plant and animal life or any other
natural resource); and the use, storage, recycling, treatment,
generation, transportation, processing, handling, labeling,
production, release or disposal of Hazardous Substances. The
term Environmental Law includes, without limitation: the
Comprehensive Environmental Response, Compensation and
Liability Act, as amended, 42 U.S.C. Section 9601, et seq.,
the Resource Conservation and Recovery Act, as amended, 42
U.S.C. Section 6901, et seq., the Clean Air Act, as amended,
42 U.S.C. Section 7401, et seq., the Federal Water Pollution
Control Act, as amended, 33 U.S.C. Section 1251, et seq., the
Endangered Species Act of 1973, as amended, 16 U.S.C. Section
1531, et seq., the Toxic Substances Control Act, as amended,
15 U.S.C. Section 9601, et seq., the Emergency Planning and
Community Right to Know Act, 42 U.S.C. Section 11001, et seq.,
the Safe Drinking Water Act, 42 U.S.C. Section 300f, et seq.,
and all comparable state and local laws; and any common law
(including, without limitation, common law that may impose
strict liability) that may impose liability or obligation for
injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently listed,
defined, designated or classified as hazardous, toxic,
radioactive or dangerous or otherwise regulated under any
Environmental Law, whether by type or by quantity, including
any Material containing any such substance as a component.
Hazardous Substances include, without limitation, petroleum or
any derivative or by-product thereof, asbestos, radiologically
contaminated Material, and polychlorinated biphenyls (PCBs).
Except as set forth in Schedule 4(q) hereto, to the knowledge
of EFI's management:
(1) EFI has not been, nor is, in violation of or liable
under any Environmental Law.
(2) EFI has no knowledge that any environmental
contaminant, pollutant, toxic or hazardous waste or
other similar substance has been generated, used,
stored, processed, disposed of or discharged onto any
of the real estate now or previously owned or acquired
(including, without limitation, any real estate
acquired by means of foreclosure or exercise of any
other creditor's right) or leased by EFI. In
particular, without limiting the generality of the
foregoing sentence, EFI has no knowledge that: (i) any
Materials containing asbestos have been used or
incorporated in any building or other structure or
improvement located on any of the real estate now or
previously owned or acquired (including, without
limitation, any real estate acquired by means of
foreclosure or exercise of any
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other creditor's right) or leased by EFI; (ii) any
electrical transformers, fluorescent light fixtures
with ballasts or other equipment containing PCB's are
or have been located on any of the real estate now or
previously owned or acquired (including, without
limitation, any real estate acquired by means of
foreclosure or exercise of any other creditor's
right) or leased by EFI; (iii) any underground
storage tanks for the storage of gasoline, petroleum
products or other toxic or hazardous substances are
or have ever been located on any of the real estate
now or previously owned or acquired (including,
without limitation, any real estate acquired by means
of foreclosure or exercise of any other creditor's
right) or leased by EFI.
(3) There is no legal, administrative, arbitration or
other proceeding, claim, action, cause of action or
governmental investigation of any nature seeking to
impose, or that, to the knowledge of EFI, could
result in the imposition on EFI of any liability
arising under any local, state or federal
environmental statute, regulation or ordinance
including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability
Act of 1980, as amended, pending or threatened
against EFI; to the knowledge of EFI, there is no
reasonable basis for any such proceeding, claim,
action or governmental investigation; and EFI is not
subject to any agreement, order, judgment, decree or
memorandum by or with any court, governmental
authority, regulatory agency or third party imposing
any such liability.
(r) ALLOWANCE. The allowance for loan losses shown on EFI's
Financial Statements as of December 31, 2000, was, and the
allowance for loan losses shown on EFI's Financial Statements
for periods ending after the date of this Agreement and up to
the date of Closing will be, in the opinion of EFI's
management, adequate, as of the date thereof, under GAAP
applicable to commercial finance companies and all other
applicable regulatory requirements for all losses reasonably
anticipated in the Ordinary Course of Business as of the date
thereof based on information available as of such date. EFI
has disclosed to Sterling in writing prior to the date hereof
the amounts of all loans, advances, credit enhancements, other
extensions of credit, commitments and interest-bearing assets
of it that it has classified internally as "Delinquent",
Recovery/Workout", "Repossession" or words of similar import,
and it shall disclose promptly to Sterling after the end of
each quarter after the date hereof and on the Effective Date
the amount of each such classification.
(s) ADDITIONAL TAX MATTERS. EFI is, and has been at all times
since January 1, 1999, an "S" corporation within the meaning
of Code Section 1361(a). A valid election under Code Section
1362 (and a comparable election under state or local law in
each jurisdiction where EFI is required to file tax returns
and reports that provides for such an election) has been in
effect with respect to EFI at all times since January 1, 1999.
Each shareholder of EFI has filed, in a timely fashion, with
each of the IRS and any other applicable state taxing
authority a consent to such "S" corporation election with
respect to EFI. EFI has not been, and will not be, subject to
tax under Code Section 1374 or 1375 (or any comparable
provision of state or local law) for any period prior to
Closing. Further, except to the extent
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provided and accrued in the provision for taxes reflected on
EFI's Financial Statements, no additional federal, state or
local tax liability will accrue to Sterling for that portion
of tax year 2002 occurring prior to the Effective Date. The
federal, state and local allocable share of income of each
shareholder of EFI has been or will be accurately and
completely stated on the Forms K-1 issued by EFI to each of
its shareholders for the tax years 1999 through 2002.
(t) MATERIAL INTERESTS OF CERTAIN PERSONS. None of EFI's officers
or directors, or any "associate" (as such term is defined in
Rule 12b-2 under the 0000 Xxx) of any such officer or
director, has any Material interest in any Material contract
or property (real or personal), tangible or intangible, used
in or pertaining to its business.
(u) INSURANCE. EFI is presently insured, and has been insured, in
the amounts, with the companies and since the periods set
forth in Schedule 4(u). All of the insurance policies and
bonds maintained by it are in full force and effect, it is not
in default thereunder and all Material claims thereunder have
been filed in due and timely fashion. In the judgment of its
management, such insurance coverage is adequate.
(v) DIVIDENDS AND DISTRIBUTIONS. The only dividends or other
distributions which it has made on its capital stock since
January 1, 1999, are set forth in Schedule 4(v).
(w) BOOKS AND RECORDS. EFI's books and records have been, and are
being, maintained in accordance with applicable legal and
accounting requirements and reflect in all Material respects
the substance of events and transactions that should be
included therein.
(x) BOARD ACTION. EFI's Board of Directors (at a meeting duly
called and held) has been duly convened and by the requisite
vote of the directors (a) determined that the Merger is
advisable and in the best interests of it and its
shareholders, (b) approved this Agreement and the transactions
contemplated hereby and (c) directed that the Agreement be
submitted for consideration by its shareholders at a Special
Shareholders' Meeting with the recommendation of the Board of
Directors that the shareholders approve the Merger and the
transactions contemplated thereby.
(y) INTENTIONALLY OMITTED
(z) EQUIPMENT FINANCING CONTRACTS BY EFI.
(1) Since December 31, 1996, in the aggregate, the
equipment financing contracts entered into by EFI (i)
are in compliance in all Material respects with all
applicable federal and state statutes and regulations
and with the underwriting and servicing guidelines of
the various state and federal credit and collection
and bankruptcy laws and the Uniform Commercial Code,
including but not limited to those statutes,
regulations and guidelines governing the origination,
recordation or servicing of financing contracts
entered into, originated or serviced by EFI
("Financing Contracts") and the obtaining of
appropriate documentation and insurance policies,
(ii) have been lawfully made (iii) constitute valid
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debts of the obligors, (iv) have been incurred in the
Ordinary Course of Business, (v) are subject to the
terms of payment as shall have been agreed upon
between EFI and each customer, and (vi) EFI does not
know of any applicable set-off or counterclaim which
in the aggregate would have a Material Adverse Effect
on it.
(2) To the knowledge of EFI's management, there exists no
physical damage to any collateral for a Financing
Contract, which physical damage is not insured
against in compliance with EFI's internal policies
and which would have a Material Adverse Effect on the
value or marketability of any Financing Contract, or
on the underlying collateral.
(3) Neither the execution and delivery of this Agreement
nor the consummation of the transactions contemplated
hereby will affect the validity of any license
currently possessed by EFI, constitute a default (or
an event which with the passage of xxx or the giving
of notice or both would constitute a default) under
any servicing agreement to which EFI is currently a
party, or result in any such servicing agreement
being terminable by any party thereto, in each case
except where such invalidity, default or termination
would not have Material Adverse Effect on the
business, financial condition or results of
operations of EFI and EFI's subsidiary taken as a
whole.
(4) As of the date of this Agreement, EFI has recorded
and filed all financing statements (and continuation
statement with respect to such financing statements
when applicable) meeting the requirements of
applicable state law in such manner and in such
jurisdictions as are necessary to perfect and
maintain the perfection of a valid first priority
Purchase Money Security Interest or first lien
security interest in the collateral related to each
of its Financing Contracts, which is enforceable in
accordance with the applicable state Uniform
Commercial Code, free and clear of any lien, except
as disclosed on Schedule 4(z) hereto.
(5) EFI has no Financing Contracts containing terms
providing for interest rate adjustments.
(6) A list of all EFI Financing Contracts in aging report
format is attached hereto as Schedule 4(z).
(7) EFI is not a party to any loan participation,
pooling, servicing or other agreements which obligate
it to make advances with respect to a defaulted or
delinquent Financing Contract.
(8) There are no pending, or, to the knowledge of EFI's
management, threatened or expected actions in
connection with any Financing Contract or credit
commitments presently or previously made by EFI
relating to claims based on theories of "lenders'
liability" or any other basis.
(aa) INTENTIONALLY OMITTED
(bb) INTENTIONALLY OMITTED
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(cc) INTENTIONALLY OMITTED
(dd) PROXY STATEMENT/PROSPECTUS, ETC. At the time the
Proxy Statement/Prospectus (as defined in Section
6(a)(2) of this Agreement) is mailed to the
shareholders of EFI and at all times subsequent to
such mailing, up to and including the Effective Date,
the Proxy Statement/Prospectus (including any pre-
and post-effective amendments and supplements
thereto), with respect to all information relating to
EFI, EFI Common Stock, and actions taken an
statements made by EFI in connection with the
transactions contemplated herein (except for
information relating to Sterling and its subsidiaries
and pro forma financial information reflecting the
combined operations of Sterling and EFI,), will (i)
comply in all material respects with applicable
provisions of the 1933 Act and the 1934 Act and the
pertinent rules and regulations thereunder; and (ii)
not contain any statement which, at the time and in
light of the circumstances under which it is made, is
false or misleading with respect to any material
fact, or omits to stat any material fact that is
necessary to be stated therein in order (A) to make
the statements therein not false or misleading, or
(B) to correct any statement in an earlier
communication with respect to the Proxy
Statement/Prospectus which has become false or
misleading.
(ee) COMPLETE AND ACCURATE DISCLOSURE. Neither this
Agreement (insofar as it relates to EFI, EFI Common
Stock an EFI's involvement in the transactions
contemplated hereby) nor EFI's representations,
warranties or covenants, nor any financial statement
schedule (including, without limitation, the
Schedules attached hereto), certificate, or other
statement or document delivered by EFI to Sterling in
connection herewith contains any statement which, at
the time and i light of the circumstances under which
it is made, is incorrect, false or misleading with
respect to any Material fact or omits to state any
Material fact necessary to make the statements
contained herein or therein not false or misleading.
(ff) NON-REGISTRATION UNDER THE 1934 ACT. EFI Common Stock
is neither registered nor required to be registered
under Section 12 of the 193 Act and is not subject to
the periodic reporting requirements imposed by
Section 13 or 15(d) of the 1934 Act.
(gg) INTENTIONALLY OMITTED
(hh) ABSENCE OF QUESTIONABLE PAYMENTS. Fro and after
December 31, 1994, EFI has not, nor has any director,
officer, agent, employee, consultant o other person
associated with or acting on behalf of EFI (i) used
any EFI or EFI subsidiary corporate funds for
unlawful contributions, gifts, entertainment or
unlawful expenses relating to political activity; or
(ii made any direct or indirect unlawful payments to
governmental officials from any EFI corporate funds,
or established or maintained any unlawful or
unrecorded accounts with funds received from EFI or
any EFI subsidiary.
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(ii) POWERS OF ATTORNEY; GUARANTEES. EFI does not have any
power of attorney outstanding, or any obligation or
liability either actual, constructive or contingent,
as guarantor, surety, cosigner, endorser, co- maker
or indemnitor in respect of the obligation of any
person, corporation, partnership, joint venture,
association, organization or other entity.
(jj) OWNED SOFTWARE. The current software applications
used by EFI in the operation of its business are set
fort and described in Schedule 4(jj) (the "Software).
To the extent that any of the Software has been
designed or developed by EFI's management information
or development staff or by consultants on EFI's
behalf, EFI has complete rights to and ownership of
such Software, including possession of or ready
access to, the source code for such Software in its
most recent version. No part of any such Software
infringes upon the software of any other person or
entity, or violates or infringes upon any common law
or statutory rights of any other person o entity,
including, without limitation, rights relating to
defamation, contractual rights, copyrights, trade
secrets, and rights of privacy or publicity. EFI has
not sold, assigned licensed, distributed or in any
other way disposed of or encumbered any of the
Software.
(kk) LICENSED SOFTWARE. The Software, to the extent it is
licensed from any third party licensor or constitutes
"off-the-shelf" software, is held by EFI legitimately
and is fully transferable hereunder without any third
party consent. All of EFI's computer hardware has
legitimately licensed software installed therein.
(ll) NO ERRORS; NONCONFORMITY. To the knowledge of EFI's
management, the Software is free from any significant
defect or programming or documentation error,
operates and runs in a reasonable and efficient
business manner, conforms to the state specifications
thereof, and, with respect to owned Software, the
applications can be recreated from their associated
source codes.
(mm) NO BUGS OR VIRUSES. EFI has not knowingly altered its
data, or any Software or supporting software which
may, in turn, damage the integrity of the data,
stored in electronic, optical, or magnetic or other
form. EFI has no knowledge of the existence of any
bugs or viruses with respect to the Software.
(nn) DOCUMENTATION. EFI has furnished Sterling with true
and accurate copies of all documentation (end user or
otherwise) relating to the use, maintenance and
operation of the Software and as to the Software
owned by EFI, the source code.
(oo) BULK SALES. The execution, delivery and performance
of this Agreement do not require compliance with any
"bu sales" law by EFI.
(pp) OTHER NAMES. Except as disclosed on Schedule 4(pp)
hereto, the legal name of EFI is as set forth in this
Agreement and within the preceding
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three years EFI has not used, and EFI currently does
not use, any trade names, fictitious names, assumed
names or "doing business as" names.
(qq) PLACE OF BUSINESS. The principal executive offices of
EFI are in Lancaster, Pennsylvania and the office
where EFI keeps its records are in Lancaster,
Pennsylvania.
(rr) INTENTIONALLY OMITTED
(ss) NO GUARANTEES. Except as disclosed on Schedule 4(ss),
neither EFI nor its subsidiary, officers, directors,
shareholders or affiliates is obligate as guarantor,
co-xxxxxx or surety (or otherwise in a secondary
liability capacity) for any obligation of any kind of
any other person or entity wit respect to EFI or EFI
Holdings.
(tt) TRADEMARKS, TRADE NAMES. EFI does not own or use any
trademarks, trade names or copyrights in the Ordinary
Course of Business. EFI has no claims against it
pending for the use of any trademarks, trade names or
copyrights or challenging or questioning the validity
or effectiveness of any license or agreement relating
to the same.
(uu) INTENTIONALLY OMITTED
(vv) REPURCHASE AGREEMENTS. EFI is not a - party to any
agreement pursuant to which EFI has purchased
securities subject to an agreement to resell.
(ww) ANTI-TAKEOVER PROVISIONS NOT APPLICABLE The
provisions of Chapter 25 of the PBCL relating to
protection of shareholders do not apply to EFI, this
Agreement, the Merger and the transactions
contemplated hereby.
(xx) DIRECTORS FIDUCIARY DUTIES. The directors of EFI have
taken all action required by them to fulfill their
fiduciary duties to the EFI shareholders under
Pennsylvania law.
(yy) DERIVATIVES. Except as disclosed on Schedule 4(yy)
hereto, EFI does not own or hold any derivatives,
including SWAPs, "caps", or "floors".
5. COVENANTS OF EFI. From the date of this Agreement until the
Effective Date, EFI covenants and agrees to do the following:
(a) CONDUCT OF BUSINESS. Except as otherwise consented to
by Sterling in writing and except as otherwise
permitted in this Agreement, EFI shall from the date of
this Agreement until the Effective Date:
(1) use all reasonable efforts to carry on its
business in, and only in, the ordinary course
of business consistent with its past customary
business practices (hereinafter referred to as
" Ordinary Course of Business");
(2) to the extent consistent with prudent business
judgment, us all reasonable efforts to
preserve its present business organization, to
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retain the services of its present officers and employees, to
maintain good relationships with its employees, and to
maintain its relationships with customers, suppliers and
others having business dealings with EFI;
(3) maintain all of EFI's structures, equipment and other real
property and tangible personal property in good repair, order
and condition, except for ordinary wear and tear and damage by
unavoidably casualty;
(4) use all reasonable efforts to preserve or collect all claim
and causes of action belonging to EFI;
(5) keep in full force and effect all insurance policies now
carried by EFI;
(6) perform in all Material respects EFI's obligations under all
agreements, contracts, instruments and other commitments to
which it is a party or by which it may be bound or which
relate to or affect its properties, assets and business;
(7) maintain its books of account financial statements and other
financial records in accordance with GAAP;
(8) comply in all Material respects with all statutes, laws,
ordinances, rules and regulations, decrees, orders, consent
agreements, examination reports, memoranda of understanding
and other federal, state, county, local and municipal
governmental directives applicable to EFI and to the conduct
of its business;
(9) not amend EFI's Articles of Incorporation or Bylaws;
(10) except as disclosed on Schedule 5(a)(10), not enter into or
assume any Material contract, incur any Material liability or
obligation, make any Material commitment, acquire or dispose
of any property or asset or engage in any transaction or
subject any of EFI's properties or assets to any Material
lien, claim, charge, or encumbrance of any kind whatsoever;
(11) not take or permit to be take any action which would
constitute a breach of any representation, warranty or
covenant set fort in this Agreement;
(12) not declare, set aside or pay any dividend or make any other
distribution in respect of EFI Common Stock, except as
provided in Section 5(j);
(13) not authorize, purchase, issue, transfer or sell (or
authorize, issue or grant options, warrants or rights to
purchase or sell) any shares of EFI Common Stock or any other
equity or debt securities of EFI or any securities convertible
into EFI Common Stock;
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(14) not increase the rate of compensation of, pay a bonus or
severance compensation to, or enter into any employment,
severance, deferred compensation or other agreement with any
officer, director, employee or consultant of EFI, except as
described on Schedule 5(a)(14) hereto;
(15) not enter into any related party transaction except such
related party transactions relating to extensions of credit
made in accordance with all applicable laws, regulations and
rules and in the Ordinary Course of Business on substantially
the same terms, including interest rates and collateral, as
those prevailing at the time for comparable arm's length
transactions with other persons that do not involve more than
the normal risk of collectability or present other unfavorable
features;
(16) not change the presently outstanding number of shares or
effect any capitalization, reclassification, stock dividends,
stock split or like change in capitalization
(17) not enter into or substantially modify (except as may be
required by applicable law) any pension, retirement, stock
option, stock warrant, stock purchase, stock appreciation
right, savings, profit sharing, deferred compensation,
severance, consulting, bonus, group insurance or other
employee benefit, incentive or welfare contract, or plan or
arrangement, or any trust agreement related thereto, in
respect to any of its directors, officers, or other employees;
(18) not merge with or into, or consolidate with, or be purchased
or acquired by, any other corporation, financial institution,
entity, or person (or agree to any such merger, consolidation,
affiliation, purchase or acquisition) or permit (or agree to
permit) any other corporation, financial institution, entity
or person to be merged with it or consolidate or affiliate
with any other corporation, financial institution, entity or
person; acquire control over any other firm, financial
institution, corporation or organization or create any
subsidiary; acquire, liquidate, lease, sell, convey, transfer
or dispose (or agree to acquire, liquidate, sell o dispose) in
any way of any assets or any rights thereof of EFI to any
party other than Sterling or an affiliate of Sterling, other
than in the Ordinary Course of Business and consistent with
prior practice unless the failure to do so shall constitute a
breach of fiduciary duty by EFI's directors under Pennsylvania
law;
(19) not, directly or indirectly, solicit or encourage inquiries or
proposals with respect to, furnish any information relating
to, initiate, engage in discussions or participate in any
negotiations concerning any acquisition or purchase of all or
a substantial equity interest or portion of the assets in or
of EFI or an business combination with EFI other than as
contemplated by this Agreement, or concerning the fact of, or
the terms and conditions
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of, this Agreement or authorize or permit any officer,
director, employee, agent, consultant, counsel, affiliate or
other representative of it to do an of the above (except that
EFI officers may respond to inquiries from regulatory
authorities and holders of EFI Common Stock in the Ordinary
Course of Business); or fail to notify Sterling immediately i
any such inquiries or proposals are received by, any such
information is requested from or any such negotiations are
sought to be initiated with EFI; provided, however, that EFI
may respond to an unsolicited, bona fide, written offer, if
the directors of EFI have determined in good faith based on
the written opinion of outside counsel that the failure to
respond shall constitute a breach of the EFI directors'
fiduciary duty under Pennsylvania law;
(20) not change any method, practice or principle of accounting
except as may be required by GAAP or any applicable
regulation;
(21) not make any loan or other credit facility commitment
(including, without limitation, lines of credit and letters of
credit) to any affiliate or compromise, expand, renew or
modify any such outstanding commitment;
(22) not enter into any SWAP or similar commitment, agreement or
arrangement which is not consistent with past practice and
which increases the credit risk or interest rate risk over the
levels existing at December 31, 2000;
(23) not enter into any derivative SWAP, cap or floor or similar
commitment, agreement or arrangement, except in the Ordinary
Course of Business and consistent with past practices;
(24) except as described in Schedule 5(a)(24) hereto, not enter
into any participation arrangements or approvals of extensions
of credit inconsistent with past practice, renew, expand or
modify any outstanding participation arrangements or
approvals;
(25) not waive, release, grant or transfer any rights of value or
modify or change in any Material respect any existing
agreement to which EFI is a party, other than in the Ordinary
Course of Business consistent with past practice
(26) not take any action that would, under any statute, regulation
or administrative practice of an regulatory agency, have a
Material Adverse Effect on the ability of any party to this
Agreement to obtain any required approvals for consummation of
the transaction;
(27) not take any action that would result in the failure of the
transactions contemplated in this Agreement to qualify as tax-
free reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code;
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(28) not agree to any of the foregoing items (9) through (27).
(b) BEST EFFORTS. EFI shall cooperate with Sterling and shall use its best
efforts to do or cause to be done all things necessary or appropriate
on its part in order to fulfill the condition precedent set forth in
Section 7 of this Agreement and to consummate this Agreement. In
particular, without limiting the generality of the foregoing sentence,
EFI shall:
(1) cooperate with Sterling in the preparation of all required
applications for regulatory approval of the transactions
contemplated by this Agreement and in the preparation of the
Registration Statement (as defined in Section 6(a)(2) of this
Agreement);
(2) call a special or annual meeting of its shareholders and take,
in good faith, all actions which are necessary or appropriate
on its part in order to secure the approval and adoption of
this Agreement and the Merger Agreement by its shareholders at
that meeting, including recommending the approval of such
agreements by the shareholders of EFI and EFI Holdings;
(3) cooperate with Sterling in making EFI's employees reasonably
available for training by Sterling prior to the Effective
Date, to the extent that such training is deemed reasonably
necessary by Sterling;
(4) terminate its Swap Agreements and pay any associated
breakfunding fees in connection with such terminations prior
to the Closing Date or such earlier date as shall be
determined by EFI;
(5) pay all of its merger-related expenses prior to the Closing
Date or such earlier date as shall be determined by EFI; and
(6) modify the Articles of Incorporation or Bylaws or any other
documents of EFI reasonably requested by Sterling necessary to
effectuate the transactions contemplated hereby.
(c) ACCESS TO PROPERTIES AND RECORDS. EFI shall afford to the officers and
authorized representatives of Sterling access to properties, books and
records pertaining to EFI in order that Sterling may have full
opportunity to make such reasonable investigations at such reasonable
times as it shall desire, of the properties, books, contracts,
documents and records of EFI, and the officers of EFI will furnish
Sterling with such additional financial and operating data, including
test tapes, and other information as to its business and properties as
Sterling shall from time to time reasonably request and as shall be
available, including, without limitation, information required for
inclusion in all governmental applications necessary to effect the
Merger. Nothing in this Section 5(c) shall be deemed to require EFI to
breach any obligation of confidentiality. Sterling shall maintain the
confidentiality of all information furnished to it by EFI pursuant to
this Section 5(c) and if the transactions contemplated by this
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Agreement are not consummated for any reason, Sterling agrees,
at the option of EFI, either to return all such information
and any copies thereof, including any extracts therefrom or
memoranda relating thereto prepared by Sterling, or to destroy
all such information.
(d) SUBSEQUENT FINANCIAL STATEMENTS. Between the date of execution
of this Agreement and the Effective Date, EFI shall promptly
prepare and deliver to Sterling as soon as practicable EFI's
Quarterly Report for the quarter ended September 30, 2001,
containing unaudited balance sheets of EFI as of such date,
and unaudited statements of earnings and cash flows of EFI for
the nine month period reflected therein, and all internal
monthly and quarterly financial statements, reports to
shareholders and reports to regulatory authorities prepared by
or for EFI, including all audit reports submitted to EFI by
independent auditors in connection with each annual, interim
or special audit of EFI's book made by such accountants. In
particular, without limiting the generality of the foregoing
sentence, EFI shall deliver to Sterling as soon as practicable
a balance sheet as of September 30, 2001, and a related
statement of income for the nine (9) months then ended (which
financial statements are hereinafter referred to as the
"September 30, 2001 Financial Statements"). EFI covenants to
Sterling that the September 30, 2001 Financial Statements are
true and correct and (i) comply in all Material respects with
the requirements of GAAP, (ii) do not contain any untrue
statement of a Material fact and (iii) do not omit to state a
Material fact required to be stated therein or necessary in
order to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(e) BOARD AND COMMITTEE MINUTES. EFI shall provide to Sterling
within 10 days after any meeting of the Board of Directors, or
any committee thereof, or any senior or executive management
committee, a copy of the minutes of such meeting.
(f) UPDATE SCHEDULE. EFI shall promptly disclose to Sterling in
writing any change, addition, deletion or other modification
to the information set forth in the schedules to this
Agreement. Notwithstanding the foregoing, disclosures made
subsequent to the date of this Agreement shall not relieve EFI
from any and all liabilities for prior statements and
disclosures to Sterling.
(g) NOTICE. EFI shall promptly notify Sterling in writing of any
actions, claims, investigations, proceedings or other
developments which, if pending or in existence on the date of
this Agreement, would have been required to be disclosed to
Sterling in order to ensure the accuracy of the represen-
tations and warranties set forth in this Agreement or
which otherwise could have a Material Adverse Effect on the
condition (financial or otherwise), assets, liabilities,
business operations or future prospects of EFI.
(h) AFFILIATE LETTERS. EFI shall deliver or cause to be delivered
to Sterling, at or before the Closing (as defined in Section
1(b) of this Agreement), a letter or agreement from each
officer, director and shareholder of EFI who
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may be deemed to be an "affiliate" (as that term is defined
for purposes of Rules 145 and 405 promulgated by the SEC under
the 0000 Xxx) of EFI, in form attached hereto as Exhibit 6,
under the terms of which each such officer, director or
shareholder acknowledges and agrees to abide by all
limitations imposed by the 1933 Act an by all rules,
regulations and releases promulgated thereunder with respect
to the sale or other disposition of the shares of Sterling
Common Stock to be received by such person pursuant to this
Agreement.
(i) INTENTIONALLY OMITTED
(j) DISTRIBUTIONS AND DIVIDENDS. Except as otherwise provided in
this Section 5(j), EFI shall not declare or pay any cash
dividend or make any distributions to shareholders without the
express, written approval of Sterling. Between the date of
this Agreement and the Effective Date, so long as EFI retains
its status as an "S" corporation for federal income tax
purposes, EFI may declare and pay normal and ordinary cash
dividends or make distributions to shareholders in amounts not
to exceed an amount that would result in (i) EFI's capital
account being less than $12,795,000 as of the Closing Date,
and (ii) the transactions contemplated in this Agreement and
the Merger Agreement to not qualify as a tax-free
reorganization within the meaning of Section 368 of the Code.
(k) PRESS RELEASES. EFI shall not issue any press release related
to this Agreement or the transactions contemplated hereby as
to which Sterling has not given its prior written consent, and
shall consult with Sterling as to the form and substance of
other public disclosures related thereto; provided, however,
that nothing contained herein shall prohibit EFI from making
any disclosure which its counsel deems reasonably necessary.
(l) INTENTIONALLY OMITTED
(m) PAYMENT OF TAXES. EFI, and to EFI's management's knowledge,
its shareholders shall have made payment in full of all taxes,
penalties and interest assessed by the Internal Revenue
Service associated with its examination of returns filed for
tax years 1999 and 2000. EFI shall accrue and reserve amounts
necessary for tax liabilities for tax year 2001 and the short
tax year 2002.
(n) GOOD FAITH COOPERATIVE EFFORT TO REVISE STRUCTURE. EFI hereby
agrees to cooperate with Sterling to approve any revision to
this Agreement, or to the attached schedules and exhibits,
involving a structural change to the Merger and the ransac-
tions contemplated thereunder as contemplated by Section
2(h)(1) hereof.
(o) INTENTIONALLY OMITTED
(p) ACCOUNTING TREATMENT. EFI acknowledges that Sterling presently
intends to treat the business combination contemplated by this
Agreement as purchase method accounting for financial
reporting purposes. EFI shall not take (and shall use its best
efforts not to permit any of its directors,
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officers, employees, shareholders, agents, consultants or
other representatives to take) any action which would preclude
Sterling from treating such business combination as a purchase
for financial reporting purposes.
6. COVENANTS OF STERLING.
From the date of this Agreement until the Effective Date,
Sterling covenants and agrees to do the following:
(a) BEST EFFORTS. Sterling shall cooperate with EFI shall
use its best efforts to do or cause to be done all
things necessary or appropriate on its part in order
to fulfill the conditions precedent set forth in
Section 7 of this Agreement and to consummate this
Agreement and the Merger Agreement. In particular,
without limiting the generality of the foregoing
sentence, Sterling agrees to do the following:
(1) Applications for Regulatory Approval.
Sterling shall promptly prepare and file,
with the cooperation and assistance of EFI,
all required applications for regulatory
approval of the transactions contemplated by
this Agreement and the Merger Agreement.
Sterling shall not take any action that
would, under any statute, regulation or
administrative practice of any regulatory
agency, have a Material Adverse Effect on
the ability of any party to this Agreement
to obtain any required approvals for
consummation of the transaction.
(2) Registration Statement. Sterling shall
promptly prepare, with the cooperation and
assistance of EFI, and file with the SEC, a
registration statement under the 1933 Act
(the "Registration Statement") for the
purpose of registering the shares of
Sterling Common Stock to be issued under the
provisions of this Agreement. Sterling may
rely upon all information provided to it by
EFI in this connection and Sterling shall
not be liable for any untrue statement of a
Material fact or any omission to state a
Material fact in the Registration Statement
or in the proxy statement and prospectus
(the "Proxy Statement/Prospectus") which is
prepared as a part thereof, if such
statement is made by Sterling in reliance
upon any information provided to Sterling by
EFI or by its agents and representatives.
Sterling will advise EFI, after it receives
notice thereof, of the time when the
Registration Statement or any Pre- or Post-
Effective Amendment thereto has become
effective or any supplement or amendment has
been filed.
(3) State Securities Laws. Sterling, with the
cooperation of EFI, shall promptly take all
such actions as may be necessary or
appropriate in order to comply with all
applicable securities laws of any state
having jurisdiction over the transactions
contemplated by this Agreement.
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(b) SUBSEQUENT FINANCIAL STATEMENTS. Between the date of
signing this Agreement and the Effective Date,
Sterling shall promptly prepare and deliver to EFI, as
soon as practicable, each report prepared and filed by
Sterling with the SEC. The representations and
warranties set forth in Section 3(e) of this Agreement
shall apply to the financial statements set forth in
the foregoing Quarterly Reports and any Annual Report
to Sterling's shareholders.
(c) UPDATE SCHEDULE. Sterling shall promptly disclose to
EFI in writing any change, addition, deletion or other
modification to the information set forth in the
schedules to this Agreement. Notwithstanding the
foregoing, disclosures made subsequent to the date of
this Agreement shall not relieve Sterling from any and
all liabilities for prior statements and disclosures
to EFI.
(d) NOTICE. Sterling shall promptly notify EFI in writing
of any actions, claims, investigations or other
developments which, if pending or in existence on the
date of this Agreement, would have been required to be
disclosed to EFI in order to ensure the accuracy of
the representations and warranties set forth in this
Agreement or which otherwise could have a Material
Adverse Effect on the condition (financial or
otherwise), assets, liabilities, business, operations
or future prospects of Sterling.
(e) LAWS, RULES, ETC. Sterling shall comply with and
perform all Material obligations and duties imposed
upon it by all federal and state laws and all rules,
regulations and orders imposed by federal or state
governmental authorities, except in respects not
Materially adverse to the business, operations, assets
or financial condition of Sterling or which would not
Materially impair the ability of Sterling to
consummate the transaction contemplated hereby.
(f) APPROVAL. As the sole shareholder of Acquisition
Corporation, Sterling will vote to approve this
Agreement and the Merger.
(g) TAX MATTERS. Sterling shall not take any action that
would result in the failure of the transactions
contemplated in this Agreement to qualify as a
tax-free reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code.
(h) TAX RETURNS AND TAX AUDITS. Sterling shall prepare or
cause to be prepared and file or cause to be filed all
tax returns for EFI for all periods ending on or prior
to the Closing Date which are filed after the Closing
Date. Such returns shall be prepared by KPMG (or
another tax preparer acceptable to the EFI
Representatives as defined in Section 17(d) hereof, on
behalf of the EFI shareholders), with the consultation
and concurrence of E&Y. Sterling shall permit the EFI
Representatives, on behalf of the shareholders of EFI,
to review and comment on such tax returns described in
the preceding sentences and shall, if required by law,
obtain the consent of the EFI Representatives, on
behalf of the shareholders of EFI, prior to filing
such tax returns. Sterling shall not amend, refile or
otherwise modify any tax return for any period ending
on or before the Closing Date
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without the prior consent of the EFI Representatives,
on behalf of the shareholders of EFI, unless such
amendment or modification is necessary to comply with
law or to prevent termination of EFI's pre-Closing
Date status as an "S" corporation. Sterling and the
EFI Representatives, on behalf of the shareholders of
EFI, shall cooperate fully to the extent reasonably
requested by the other parties in connection with the
filing of tax returns pursuant to this Section 6(h),
and any audit, litigation or other proceeding with
respect to such taxes. Such cooperation shall include
the retention and (upon any party's request) the
provision of records and information which are
reasonably relevant to any such audit, litigation or
other proceeding and the making available of
employees on a mutually convenient basis to provide
additional information and explanation of any records
or information provided hereunder.
Sterling agrees to provide notice to the EFI
Representatives, on behalf of the shareholders of
EFI, if Sterling receives a tax audit notice (within
25 days of receipt of such tax audit notice) with
respect to a tax period ending on or before the
Closing Date. In the case of an audit or
administrative or judicial proceeding involving any
asserted liability or adjustment for taxes relating
to any taxable years or periods ending on or before
the Closing Date, the EFI Representatives, on behalf
of the shareholders of EFI, shall have the right (but
not the obligation), at their expense, to participate
with Sterling in the conduct of such audit or
proceeding. Sterling shall not settle any audit or
proceeding relating to any tax period ending on or
before the Closing Date that could have a Material
Adverse Effect on the shareholders of EFI without the
consent of the EFI Representatives, on behalf of the
shareholders of EFI, whose consent shall not be
unreasonably withheld or delayed unless such
settlement is necessary to comply with law or to
prevent termination of EFI's pre-Closing Date status
as an "S" corporation. Sterling will also jointly
participate in the conduct of such audit or
proceeding at its own expense and if such audit or
proceeding would be reasonably expected to result in
an increase in tax liability of the shareholders of
EFI for which Sterling or one of its affiliates would
be liable, the EFI Representatives, on behalf of the
shareholders of EFI shall not settle any such audit
or proceeding without the consent of Sterling, whose
consent shall not be unreasonably withheld or
delayed.
7. CONDITIONS TO THE OBLIGATIONS OF STERLING AND EFI.
(a) COMMON CONDITIONS. The obligations of the parties to
consummate this Agreement shall be subject to the
satisfaction of each of the following common
conditions prior to or as of the Closing, except to
the extent that any such condition shall have been
waived in accordance with the provisions of Section
20 of this Agreement:
(1) This Agreement shall have been duly
authorized, approved and adopted by the
shareholders of EFI, as required by
applicable provisions of the PBCL, and the
required provisions of EFI's Articles of
Incorporation. This Agreement shall have
been duly authorized, approved and adopted
by Sterling, as required by the applicable
provisions of the PBCL and the applicable
provisions of
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Sterling's Articles of Incorporation and the
applicable provisions of the rules and
requirements of the NASD. This Agreement
shall have been duly authorized, approved
and adopted by Sterling as the sole
shareholder of Acquisition Corporation.
(2) The Parties hereto shall have received all
regulatory approvals required in connection
with the transactions contemplated by this
Agreement and the Merger Agreement and all
notice periods and waiting periods required
after the granting of such approval shall
have passed; provided, however, that no such
approval shall have imposed any condition or
requirement which in the opinion of the
Board of Directors of Sterling renders
consummation of the Merger inadvisable.
(3) No action, suit or proceeding shall be
pending or threatened before any federal,
state or local court or governmental
authority or before any arbitration tribunal
which seeks to modify, enjoin or prohibit or
otherwise have a Material Adverse Effect on
the transactions contemplated by this
Agreement.
(4) No statute, rule, regulation, order,
injunction or decree shall have been
enacted, entered, promulgated or enforced by
any governmental authority which prohibits,
restricts or makes illegal the consummation
of the transactions contemplated by this
Agreement.
(5) All applicable notifications, statutory and
regulatory antitrust law requirements have
been met.
(6) The Registration Statement shall have been
filed (the date of which is referred to
herein as the "Filing Date") by Sterling
with the SEC under the 1933 Act, and shall
have been declared effective prior to the
time the Proxy Statement/Prospectus is first
mailed to the shareholders of EFI, and no
stop order with respect to the effectiveness
of the registration statement shall have
been issued; the Sterling Common Stock to be
issued pursuant to this Agreement shall be
duly registered or qualified under the
securities or "blue sky" laws of all states
in which such action is required for
purposes of the initial issuance of such
shares and the distribution thereof to the
shareholders of EFI entitled to receive such
shares.
(7) All other requirements prescribed by law
which are necessary to the consummation of
the transactions contemplated by this
Agreement shall have been satisfied.
(8) An Escrow Agreement (as defined in Section
17 hereof) which is mutually acceptable to
Sterling and EFI shall have been executed by
Sterling and EFI prior to Closing.
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(b) CONDITIONS TO OBLIGATIONS OF STERLING. The obligations of
Sterling to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Date of the
following additional conditions:
(1) Each of the representations and warranties of EFI
contained in this Agreement shall be true and correct
in all Material respects as of the Effective Date as
if made on such date (or on the date when made in the
case of any representation or warranty which
specifically relates to an earlier date); EFI shall
have performed each of its respective covenants and
agreements contained in this Agreement; and Sterling
shall have received certificates signed by the
President and Secretary of EFI, dated as of the date
of the Closing, to the foregoing effect.
(2) Holders of no more than five percent (5%) of the
issued and outstanding shares of EFI (116,170 shares)
shall have exercised their statutory appraisal or
Dissenters' Rights.
(3) As of the Closing Date, EFI's capital account, as
determined in accordance with GAAP, must equal or
exceed $12,795,000.
(4) There shall not have occurred any change in the
financial condition, properties, assets, business,
results of operation or future prospects of EFI
which, individually or in the aggregate, has had or
might reasonably be expected to result in a Material
Adverse Effect on EFI.
(5) No environmental problem of a kind contemplated in
Section 4(q) of this Agreement and not previously
disclosed in Schedule 4(q) shall have been discovered
which would, or which potentially could, have a
Material Adverse Effect on the condition (financial
or otherwise), assets, liabilities, business,
operations or future prospects of EFI; provided, that
for purposes of determining the Materiality of an
undisclosed environmental problem or problems, the
definition of "Material" shall be governed by the
proviso to Section 25 of this Agreement.
(6) Except as disclosed on Schedule 7(b), all litigation
pending against EFI which, individually or in the
aggregate, would have a Material Adverse Effect on
EFI's operations, business or future prospects, shall
have been settled or otherwise resolved on terms
satisfactory to Sterling.
(7) EFI shall have performed and complied in all Material
respects with all obligations and agreements required
by this Agreement to be performed or complied with by
it prior to or at the Closing.
(8) Sterling shall have received an opinion from E&Y
reasonably satisfactory in form and substance to
Sterling as to the tax matters relating to this
Agreement and the transactions contemplated
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thereby to the effect that:
(i) The transactions contemplated by this
Agreement and by the Merger Agreement
will constitute a reorganization
within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the
Code;
(ii) The Merger will constitute a
reorganization within the meaning of
Section 368(a) of the Code and
Sterling and Acquisition Corporation
will each be a "party to a
reorganization" within the meaning of
Section 368(b) of the Code;
(iii) No gain or loss will be recognized by
Sterling or Acquisition Corporation
as a result of the reorganization;
and
(iv) Subject to any limitations imposed
under Sections 381 and 382 of the
Code, Acquisition Corporation, as the
survivor to the Merger, will
carry-over and take into account all
accounting items and tax attributes
of EFI including but not limited to
earning and profits, methods of
accounting, and tax basis and holding
periods of EFI.
(9) All applicable securities law of the federal
government and of any state government
having jurisdiction over the transactions
contemplated by this Agreement shall have
been complied with to the reasonable
satisfaction of Sterling or Sterling's
counsel.
(10) Sterling shall have received from each of
the persons identified by EFI pursuant to
Section 5(h) hereof an executed counterpart
of an affiliate's agreement in the form
attached hereto as Exhibit 6.
(11) Sterling shall have received from EFI a
balance sheet as of December 31, 2001, and a
related statement of income for the twelve
(12) months then ended (which financial
statements are hereinafter referred to as
the "December 31, 2001 Financial
Statements"). The representations and
warranties set forth in Section 4(f) of this
Agreement shall apply to the December 31,
2001 Financial Statements.
(c) CONDITIONS TO THE OBLIGATIONS OF EFI. The obligations
of EFI to effect the Merger shall be subject to the
satisfaction or waiver prior to the Effective Date of
the following additional conditions:
(1) Each of the representations, warranties and
covenants of Sterling contained in this
Agreement shall be true and correct in all
Material respects on the Effective Date as
if made on such date (or on the date when
made in the case of any representation or
warranty which specifically relates to an
earlier date); Sterling shall have performed
each of its covenants and agreements, which
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are Material to its operation and prospects,
contained in this Agreement; and EFI shall
have received certificates signed by the
President or Vice President and Secretary or
Assistant Secretary of Sterling dated as of
the date of the Closing, to the foregoing
effect.
(2) EFI shall have received an opinion from KPMG
reasonably satisfactory in form and
substance to EFI to the effect that:
(i) The Merger will constitute a
reorganization within the meaning of Section
368(a) of the Code and EFI, Sterling an
Acquisition Corporation will each be a
"party to a reorganization" within the
meaning of Section 368(b) of the Code;
(ii) No gain or loss will be recognized by
EFI by reason of the Merger;
(iii) Except for cash received in lieu of
fractional shares, cash received by EFI
shareholders who exercise their dissenter'
rights or cash received by EFI shareholders
pursuant to the Cash Election, no gain or
loss will be recognized by the shareholders
of EFI who receive Sterling Common Stock
upon the exchange of their shares of EFI
Common Stock for shares of Sterling Common
Stock;
(iv) The tax basis of the Sterling Common
Stock to be received by the EFI shareholders
will be, in each instance, the same as the
basis of the EFI Common Stock surrendered in
exchange therefor;
(v) The holding period of the Sterling
Common Stock received by a EFI shareholder
receiving Sterling Common Stock will include
the period during which the EFI Common Stock
surrendered in exchange therefor was held;
and
(vi) Cash received by an EFI shareholder in
lieu of a fractional share interest of
Sterling Common Stock, upon exercise of
dissenter's rights, or cash received
pursuant to the Cash Election, will be
treated as having been received as a
distribution in full payment in exchange for
the fractional share interest of Sterling
Common Stock, or the tax basis in the shares
surrendered, as the case may be, which he
would otherwise be entitled to receive and
will qualify as capital gain or loss.
(3) Sterling shall have performed and complied
in all Material respects with all
obligations and agreements required by this
Agreement to be performed or complied with
by it prior to or at the Closing.
8. TERMINATION. This Agreement and the Merger Agreement may be terminated,
and the Merger abandoned, at any time prior to the Effective Date,
whether before or after the receipt of required approvals only if one
or more of the following events shall occur:
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(a) by the mutual written consent of the parties hereto;
(b) by EFI, if (i) by written notice to Sterling that there has
been a Material breach of any obligation of Sterling contained
herein and such breach has not been remedied within 20 days
after receipt by Sterling of written notice specifying the
nature of such breach and requesting that it be remedied or
(ii) by written notice to Sterling that any condition in
Section 7(a) and 7(c) to EFI's obligations hereunder has not
been satisfied prior to Closing or such earlier date as may be
specified herein;
(c) by Sterling, if (i) by written notice to EFI that there has
been a Material breach of any obligation of EFI contained
herein and such breach has not been remedied within 20 days
after receipt by EFI of written notice specifying the nature
of such breach and requesting that it be remedied or (ii) by
written notice to EFI that any condition in Section 7(a) and
7(b) to Sterling's obligations hereunder has not been
satisfied prior to Closing or such earlier date as may be
specified herein;
(d) by Sterling or EFI, if the Closing shall not have occurred on
or prior to April 1, 2002, unless the failure of such
occurrence shall be due to the failure of the party seeking to
terminate this Agreement to perform or observe its agreements
as set forth in this Agreement required to be performed or
observed by such party on or before the Closing; provided,
however, that such date may be extended by the written
agreement of the parties; or
(e) by Sterling, if the conditions set forth in Section 7(a)(2)
are unable to be fulfilled as a result of Sterling's inability
to obtain necessary regulatory approvals and consents by April
1, 2002.
9. EFFECT OF TERMINATION.
(a) EFFECT. In the event of termination this Agreement and the
Merger Agreement as provided above, this Agreement and the
Merger Agreement shall immediately become null and void and
the transactions contemplated herein shall thereupon be
abandoned, except that the provisions relating to brokers
(Sections 3(o) and 4(p)), limited liability (Section 9(b)),
confidentiality (Section 9(c) and Section 11), publicity
(Section 19), and expenses (Section 10) of this Agreement
shall survive.
(b) LIMITED LIABILITY. The termination of this Agreement in
accordance with the terms of Section 8 shall create no
liability on the part of any party, or on the part of any
party's directors, officers, shareholders, agents or
representatives, except that if this Agreement is terminated
by Sterling by reason of a Material breach by EFI, or if this
Agreement is terminated by EFI by reason of a Material breach
by Sterling, and such breach involves an intentional, willful
or grossly negligent misrepresentation or breach of covenant,
the breaching party shall be liable to the nonbreaching party
or parties for all costs or such liability as may be pursued
and found as a matter of law or in equity, including but not
limited to, reasonable out-of-pocket costs and expenses
reasonably incurred by the nonbreaching party
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or parties in connection with the
preparation, execution and consummation of
this Agreement, including the fees of its or
their counsel, accountants, consultants and
other representatives.
(c) CONFIDENTIALITY. In the event of the termination of this
Agreement, neither Sterling nor EFI shall use or disclose to
any other person any confidential information obtained by it
during the course of its investigation of the other party or
parties.
10. EXPENSES.
(a) Each party hereto will bear all expenses incurred by it in
connection with this Agreement and the transactions
contemplated hereby in the event of termination of this
Agreement pursuant to Section 8 and this Agreement shall
thereafter become void and there shall be no liability on the
part of any party hereto or their respective officers or
directors, except as provided in Section 9(b) and (c) hereof,
and except that any such termination shall be without
prejudice to the rights of any party hereto arising out of the
intentional or willful breach of any covenant or intentional
or willful misrepresentation contained in this Agreement by
any other party hereto.
(b) So long as Sterling shall not have breached its obligations
hereunder, if this Agreement is terminated by Sterling
pursuant to Section 8(c)(i) or if EFI exercised its rights
under Section 5(a)(18) hereof, EFI shall promptly, but in no
event later than two (2) business days after such termination,
pay Sterling a fee of $1,000,000, which amount shall be
payable by wire transfer of same day funds. If EFI fails to
promptly pay the amount due pursuant to this Section 10(b),
and, in order to obtain payment, Sterling commences a suit
which results in judgment against EFI for all or a substantial
portion of the fee set forth in this Section 10(b), EFI shall
pay to Sterling all costs and expenses (including reasonable
attorney's fees) incurred by Sterling in connection wit such
suit.
(c) So long as EFI shall not have breached its obligations
hereunder, if this Agreement is terminated by EFI pursuant to
Section 8(b)(i) hereof, Sterling shall promptly, but in no
event later than two (2) business days after such termination,
pay EFI a fee of $500,000, which amount shall be payable by
wire transfer of same day funds. If Sterling fails to promptly
pay the amount due pursuant to this Section 10(c), and, in
order to obtain payment, EFI commences a suit which results in
judgment against Sterling for all or a substantial portion of
the fee set forth in this Section 10(c), Sterling shall pay to
EFI all costs and expenses (including reasonable attorney's
fees) incurred by EFI in connection with such suit.
11. CONFIDENTIALITY. Any non-public or confidential information disclosed
by either EFI or by Sterling pursuant to this Agreement or as a result
of the discussions and negotiations leading to this Agreement, or
otherwise disclosed, or to which any other party has acquired or may
acquire access, and indicated (either expressly, in writing or orally,
or by the context of the disclosure or access) by the disclosing party
to be non-public or confidential, or which by the context thereof
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reasonably appears to be non-public or confidential, shall be kept strictly
confidential and shall not be used in any manner by the recipient except in
connection with the transactions contemplated by this Agreement. To that end,
the parties hereto will each, to the maximum extent practicable, restrict
knowledge of and access to non-public or confidential information of the other
party to its officers, directors, employees and professional advisors who are
directly involved in the transactions contemplated hereby and reasonably need to
know such information. Further to that end, all non-public or confidential
documents (including all copies thereof) obtained or created hereunder by any
party shall be returned as soon as practicable after any termination of this
Agreement.
12. INTENTIONALLY OMITTED
13. SURVIVAL OF REPRESENTATIONS AND WARRANTIES, ETC Except as otherwise
provided in this Section 13, the representations and warranties set
forth in Sections 3 and 4 hereof shall be deemed to have been relied
upon by the party to whom they are made and shall only survive Closing
in the event of a breach thereof resulting from fraud, willful or
reckless misrepresentation, in which case they shall survive until the
expiration of the applicable statute of limitations. The
representations and warranties contained in Sections 4(h) and 4(s)
hereof shall survive until the third anniversary of the Effective Date
except in the case of a breach thereof resulting from fraud, willful or
reckless misrepresentation, in which case they shall survive until the
expiration of the applicable statute of limitations. All covenants and
duties which relate to a time after Closing, including but not limited
to those contained in Sections 2(i), 6(h), 13, 14, 15, 16, and 17 shall
survive Closing an all other covenants and duties which do not relate
to a time after Closing shall not survive Closing. No investigation
made by or on behalf of either party shall affect the representations
and warranties made pursuant to this Agreement.
14. EMPLOYEES.
(a) Except as may be otherwise specifically agreed to in writing
by the Parties and subject to Sterling's satisfactory review
of personnel records, Sterling and any of its affiliates
(collectively, the "Sterling Affiliate ) shall employ all
persons who are officers an employees of EFI immediately
before the Effective Date as officers and employees of
Sterling or the Sterling Affiliates immediately following the
Effective Date. Except for Xxxxxx X. Xxxxxx, Xxxxxxx X.
Xxxxxxxx and Xxxxxx X. Xxxxx, the hired officers and employees
will be employees at-will with no express or implied right to
continued employment. It shall be a condition to employment by
Sterling or any Sterling Affiliate that any former officer or
employee of EFI agree to cancel any existing employment
contract, agreement or understanding between him or herself
and EFI, including, without limitation, all benefits related
to severance arrangements, upon a change of control or
otherwise and release Sterling, Sterling Affiliates and EFI
from all contractual obligations under such agreements, prior
to accepting such new employment and without accepting any of
the severance benefits or other benefits or payments
associated with such contract, agreement or understanding.
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(b) Immediately following the Effective Date, former EFI
employees who are employed by Sterling or a Sterling
Affiliate as provided in Section 14(a) as "continuing
employees" shall continue to participate in EFI's
health, welfare and benefit plans in effect at the
Effective Time for employees of EFI in accordance
with the terms of such plans at the Effective Time.
(c) Sterling reserves any and all rights it may have
regarding modification, amendment or termination of
EFI's present health, welfare, benefit, pension and
profit sharing plans. Any rights that Sterling has to
modify, amend or terminate such plans are
unconditional if they are done to alleviate or
correct any problems or deficiencies in the structure
or administration of the plans. All other
modifications, amendments or terminations of the
plans are subject to the plans remaining, in the
aggregate, at least equal to or better than EFI's
existing plans.
15. OFFICERS. Xx. Xxxxxx X. Xxxxxx shall be employed as Chief
Executive Officer and President of the Surviving Corporation.
Xx. Xxxxxxx X. Xxxxxxxx shall be employed as Senior Vice
President of the Surviving Corporation and Xx. Xxxxxx X. Xxxxx
shall be employed as Senior Vice President of the Surviving
Corporation, each pursuant to the terms and conditions of
their respective Employment Agreements.
16. BOARD OF DIRECTORS. On the Effective Date, J. Xxxxx Xxxxx,
Xx., Xxxxxx Xxxxxxxx, Xxxxxx X. Xxxxxx and other individuals
mutually agreed upon by EFI and Sterling shall be appointed to
the board of directors of EFI and shall serve until such time
as their successors have been duly elected, qualified, or
appointed.
17. ESCROW ACCOUNT. On or prior to the Closing Date, Sterling and
EFI shall enter into an Escrow Agreement appointing and
designating a bank and trust company mutually agreed upon by
Sterling and EFI as escrow agent to hold and disperse sums
deposited with the escrow agent (the "Escrow Reserve Fund") in
accordance with the terms and conditions thereof, which terms
and conditions shall not contradict the following:
(a) On the Closing Date, Sterling shall deliver to the escrow
agent the sum of One Million Sixty-five Thousand Dollars
($1,065,000) representing the Reserve Consideration. The
escrow agent will hold the Escrow Reserve Fund in an
interest-bearing account. All interest earned on the Escrow
Reserve Fund shall accrue to and be disbursed to Sterling.
(b) The escrow agent shall distribute sums from the Escrow
Reserve Fund as follows:
(i) a distribution shall be made if post-closing
adjustment payment to Sterling is due as described in
Section 2(i) hereof;
(ii) distributions shall be made if losses, liabilities,
expenses and cost are incurred by Sterling relating to an
investigation, audit or examination by the IRS or any
other applicable state taxing authority or an assessment
or other imposition of additional tax liability to
Sterling resulting from a
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determination by the IRS or any other applicable state
taxing authority that any of the representations made in
Sections 4(h) or 4(s) hereof are untrue, incorrect or
incomplete or have been otherwise breached. The Escrow
Reserve Fund is the exclusive remedy to Sterling for a
breach of Sections 4(h) and 4(s) hereof, except in cases
of fraud or intentional or reckless misrepresentation.
(iii) a distribution shall be made on the second
anniversary of the Closing Date of fifty percent (50%) of
the amount remaining in the Escrow Reserve Fund, minus
accrued interest, on such date if and only if there is no
investigation, audit, examination or litigation pending
on that date with respect to the representations made in
Sections 4(h) or 4(s) hereof.
(iv) a distribution shall be made on the third
anniversary of the Closing Date of the entire amount,
minus accrued interest, remaining in the Escrow Reserve
Fund on such date if and only if there is no
investigation, audit, examination or litigation pending
on that date with respect to the representations made in
Sections 4(h) or 4(s) hereof.
(v) in the event that the distribution described in
subsection (b)(iv) of this Section 17 is not made, the
final distribution shall be made upon the final
disposition of any investigation, audit, examination or
litigation in connection with a breach of Section 4(h) or
4(s) hereof.
(c) All distributions to the former shareholders of EFI shall
be on a pro rata basis.
(d) All former shareholders of EFI shall be represented by
three former directors of EFI to be named in the Escrow
Agreement (the "EFI Representatives") who shall serve in
such capacity without compensation.
18. ENTIRE AGREEMENT. This Agreement, and all exhibits and schedules
attached hereto, embody the entire agreement among the parties
hereto with respect to the matters agreed to herein. All prior
negotiations, discussions and agreements by and among the Parties
hereto with respect to matters agreed to in this Agreement, or
the exhibits or schedules hereto, are hereby superseded and shall
have no force or effect.
19. PUBLICITY. The content and timing of all publicity and
announcements concerning this Agreement, and all transactions
contemplated by this Agreement, shall be subject to joint
consultation and approval of the Parties hereto, subject,
however, to the legal obligations applicable to public companies.
20. AMENDMENT AND WAIVER. Neither this Agreement, nor any term,
covenant, condition or other provision hereof, may be amended,
modified, supplemented, waived, discharged or terminated except
by a document in writing signed by responsible officers and duly
authorized by the respective boards of directors of the Parties
hereto.
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21. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of
Pennsylvania except to the extent that federal law is
controlling.
22. COMMUNICATIONS. All notices, claims, requests, demands,
consents and other communications which are required or
permitted to be given hereunder shall be in writing and shall
be deemed to have been duly given if hand delivered, sent by
recognized overnight delivery service, sent by certified or
registered mail, postage prepaid, return receipt requested, or
by confirmed telecopy as follows:
(a) IF TO STERLING, to:
STERLING FINANCIAL CORPORATION
000 Xxxxx Xxxxxx Xxxxxxxxx
Xxxxxxxxx, XX 00000
Attn: J. Xxxxx Xxxxx, Xx., Senior
Executive Vice President and Chief
Operating Officer
or to such other person or place as shall be
designated to EFI in writing, and with a copy to:
Xxxxxxxx Xxxxx, Xx., Esquire
XXXXXXXX XXXXXXXX, P.C.
0000 Xxxxxxx Xxxxx Xxxx
Xxxx Xxxx, XX 00000
(b) IF TO EFI, to:
EQUIPMENT FINANCE, INC.
X.X. Xxx 0000
Xxxxxxxxx, XX 00000
Attn: Xxxxxx X. Xxxxxx, President
or to such other person or place as shall be
designated to Sterling in writing, and with a copy
to:
Xxxxx X. Xxxxxxxx, Esquire
BARLEY, SNYDER, XXXXX & XXXXX, LLC
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxx, XX 00000
Any such notice or other communication so addressed shall
be deemed to have been received by the addressee (i) if
hand-delivered or sent by overnight delivery, on the next
business day following the date so delivered or sent, (ii)
if sent by registered or certified mail, five (5) business
days following the date sent, or (iii) if sent by
telecopy, upon verbal telephone confirmation of receipt
thereof by an individual authorized to accept telecopy
communications at the above-specified telecopy number as
of the date of such receipt or confirmation.
23. SUCCESSORS AND ASSIGNS. The rights and obligations of
the Parties hereto shall inure to the benefit of and
shall be binding upon the successors and assigns
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of each of them; provided, however, that neither this
Agreement nor any of the rights, interest or obligations
hereunder shall be assigned by any Party hereto without
the prior written consent of the other Party.
24. HEADINGS, ETC. The headings of the Sections and
Subsections of this Agreement have been inserted for
convenience only and shall not be deemed to be a part of
this Agreement.
25. CERTAIN DEFINITIONS; INTERPRETATION. As used in this
Agreement, the following terms shall have the meanings
indicated:
"Material" means Material to the party in question (as the
case may be) and its respective subsidiaries, taken as a
whole.
"Material Adverse Effect," with respect to a Person, means
any condition, event, change or occurrence that has or
results in an effect which is Material and adverse to (A)
the financial condition, properties, assets, business or
results of operations and future prospects of such Person
and its subsidiaries, taken as a whole, or (B) the ability
of such Person to perform its obligations under, and to
consummate the transactions contemplated by, this
Agreement.
"Person" includes an individual, corporation, partnership,
association, trust or unincorporated organization.
"Subsidiary," with respect to a Person, means any other
Person controlled by such Person.
26. SEVERABILITY. In the event that any one or more provisions
of this Agreement shall for any reason be held invalid,
illegal or unenforceable in any respect, by any court of
competent jurisdiction such invalidity, illegality or
unenforceability shall not affect any other provisions of
this Agreement and the Parties shall use their best
efforts to substitute a valid, legal and enforceable
provision which, insofar as practicable, implements the
purposes and intents of this Agreement.
27. NO THIRD PARTY BENEFICIARY. Except as expressly provided
for herein, nothing in this Agreement is intended to
confer upon any person who is not a Party hereto any
rights or remedies of any nature whatsoever under or by
reason of this Agreement.
28. COUNTERPARTS. To facilitate execution, this Agreement may
be executed in as many counterparts as may be required;
and it shall not be necessary that the signatures of, or
on behalf of, each Party, or that the signatures of all
Persons required to bind any Party, appear on each
counterpart; but it shall be sufficient that the signature
of, or on behalf of, each Party, or that the signatures of
the Persons required to bind any Party, appear on one or
more of the counterparts. All counterparts shall
collectively constitute a single agreement. It shall not
be necessary in making proof of this Agreement to produce
or account for more than a number of counterparts
containing the respective signatures of, or on behalf of,
all of the Parties hereto.
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29. FURTHER ASSURANCES. Each Party will execute and deliver
such instruments and take such other actions as the other
Party hereto may reasonably request in order to carry out
the intent and purposes of this Agreement.
IN WITNESS WHEREOF, the Parties hereto, intending to be legally bound hereby,
have caused this Agreement to be duly executed, as of the date set forth above.
ATTEST: STERLING FINANCIAL
CORPORATION
By: /s/ Xxxxxx X. Xxxxxx By: /s/ J. Xxxxx Xxxxx, Xx.
------------------------------- ---------------------------
J. Xxxxx Xxxxx, Xx.,
Senior Executive Vice
President and Chief Operating
Officer
ATTEST: STERLING EFI
ACQUISITION CORPORATION
By: By: /s/ J. Xxxxx Xxxxx, Xx.
------------------------------- ---------------------------
ATTEST: EQUIPMENT FINANCE, INC.
By: /s/ Xxxxxxx X. Xxxxxxxx By: /s/ Xxxxxx X. Xxxxxx
------------------------------- ---------------------------
Xxxxxx X. Xxxxxx, President
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