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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: FEBRUARY 10, 1998
MTL INC.
(exact name of registrant as specified in its charter)
FLORIDA 0-24180 59-3239073
- ---------------------------- -------------------- ---------------
(State or other jurisdiction) (Commission File No.) (IRS Employer
Identification No.)
3108 CENTRAL DRIVE, PLANT CITY, FLORIDA 33567
- ---------------------------------------- -----
(Address of principal executive offices) (zip code)
Registrant's telephone number, including area code: 813-754-4725
------------
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ITEM 5. OTHER EVENTS
On February 10, 1998 MTL Inc. (the "Company") entered into an agreement with
Sombrero Acquisition Corporation ("Sombrero"), an affiliate of Apollo
Management LP ("Apollo") pursuant to which Sombrero will merge with the
Company. According to the terms of the merger agreement, shareholders of the
Company will receive $40.00 per share in cash. At the option of Apollo,
however, up to $1.60 of the purchase price can be in the form of common stock
of the Company. The total transaction value is approximately $250.0 million,
including outstanding stock options, fees and approximately $54.0 million of
net debt.
The transaction will be subject to the customary conditions including the
affirmative vote of the holders of a majority of the outstanding shares of MTL.
It is expected that a special meeting of shareholders will be held in May 1998.
Sombrero has signed agreements with certain existing shareholders of MTL
owning approximately 25% of the outstanding shares of common stock to vote for
the transaction.
The Company will be funded by an equity investment of approximately $70.0
million from Apollo and members of the Company's existing management.
Approximately $200.0 million of senior subordinated and bank debt will be used
to finance the acquisition. Additionally, a $100.0 million revolving credit
facility will be available to the Company for working capital and acquisition
purposes.
Following the merger transaction, members of MTL's senior management team will
continue to serve as management of the Company.
Apollo Management L.P is a private investment partnership that has invested in
excess of $7 billion since 1990 in a variety of corporate and real estate
transactions.
ITEM 7. EXHIBIT
Exhibit No. Item
----------- ----
10(a) Copy of Agreement and Plan of
Merger by and between
Sombrero Acquisition Corp.
and MTL Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
MTL INC.
(Registrant)
Date: February 25, 1998 By: /s/ Charles J. O'Brien Jr.
------------------------------------
Charles J. O'Brien Jr.
President and Chief Executive Officer
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EXHIBIT 10(a)
AGREEMENT AND PLAN OF MERGER
by and between
SOMBRERO ACQUISITION CORP.
and
MTL INC.
Dated as of February 10, 1998
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TABLE OF CONTENTS
<TABLE>
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ARTICLE 1
THE MERGER
1.1. The Merger . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2. The Closing. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.3. Effective Time . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 2
ARTICLES OF INCORPORATION AND
BYLAWS OF THE SURVIVING CORPORATION
2.1. Articles of Incorporation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.2. By-laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 3
DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION
3.1. Directors. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
3.2. Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES OF
SUB AND THE COMPANY
4.1. Sub Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.2. The Company Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
4.3. Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
4.4. Exchange Of Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
5.1. Existence; Good Standing; Corporate Authority. . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.2. Authorization, Validity and Effect of Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.3. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
5.4. Subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
5.5. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.6. SEC Documents; Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
5.7. Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.8. Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
5.9. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.10. Absence of Certain Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
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<TABLE>
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5.11. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
5.12. Employee Benefit Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.13. Labor Matters; Suppliers; Distributors and Customers. . . . . . . . . . . . . . . . . . . . . . 17
5.14. Absence of Undisclosed Liabilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.15. Title to Properties and Related Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
5.16. Material Contracts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.17. Compliance With Laws. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
5.18. Environmental, Health and Safety Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
5.19. Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
5.20. No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.21. Intellectual Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
5.22. State Takeover Statutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.23. Board Recommendation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.24. Related Party Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.25. Affiliate Programs, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
5.26. Opinion of Financial Advisor. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.27. Proxy Statement; Schedule 13E-3; Form S-4 . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
5.28. Alternative Proposal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SUB
6.1. Existence; Good Standing; Corporate Authority . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.2. Authorization, Validity and Effect of Agreements . . . . . . . . . . . . . . . . . . . . . . . . 27
6.3. Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
6.4. No Violation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.5. Interim Operations of Sub . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
6.6. Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 7
COVENANTS
7.1. Alternative Proposals. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
7.2. Interim Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
7.3. Meetings of Stockholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.4. Filings and Other Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
7.5. Access to Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.6. Publicity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.7. Proxy Statement; Form S-4. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.8. Further Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.9. Schedule 13E-3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.10. Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.11. Insurance; Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.12. Certain Tax Matters. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.13. Other Actions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.14. Advice of Changes; Filings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
7.15. Financial Information. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
</TABLE>
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<TABLE>
ARTICLE 8
CONDITIONS
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8.1. Conditions to Each Party's Obligation to Effect the Merger. . . . . . . . . . . . . . . . . 36
8.2. Conditions to Obligation of the Company to Effect the Merger. . . . . . . . . . . . . . . . 37
8.3. Conditions to Obligation of Sub to Effect the Merger. . . . . . . . . . . . . . . . . . . . 37
ARTICLE 9
TERMINATION
9.1. Termination by Mutual Written Consent . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.2. Termination by Either Sub or the Company. . . . . . . . . . . . . . . . . . . . . . . . . . 38
9.3. Termination by the Company. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.4. Termination by Sub. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.5. Effect of Termination and Abandonment . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
9.6. Extension; Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
ARTICLE 10
GENERAL PROVISIONS
10.1. Non-survival of Representations, Warranties. . . . . . . . . . . . . . . . . . . . . . . . 41
10.2. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
10.3. Assignment; Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.4. Entire Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.5. Amendment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.6. Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
10.8. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.9. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.10. Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.11. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.12. Enforcement of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
10.13. Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of February 10, 1998 by
and between Sombrero Acquisition Corp., a Florida corporation ("Sub"), and MTL
Inc., a Florida corporation (the "Company").
WHEREAS, the respective Boards of Directors of Sub and the
Company have approved, and deemed it advisable and in the best interests of
their respective companies and stockholders to consummate, the merger of Sub
with and into the Company (the "Merger"), upon the terms and subject to the
conditions set forth herein;
WHEREAS, simultaneously with the execution of this Agreement
and as an inducement to Sub to enter into this Agreement, Sub and certain
stockholders of the Company are entering into a Voting Agreement (the "Voting
Agreement") pursuant to which such stockholders have, among other things,
agreed, upon the terms and subject to the conditions set forth in the Voting
Agreement to vote their shares of Company Common Stock (as defined below) in
favor of the Merger;
WHEREAS, simultaneously with the execution of this Agreement,
certain employees of a Subsidiary (as defined in Section 10.13 below) of the
Company are entering into employment agreements with such Subsidiary, providing
for the terms of their employment following the Merger and certain stockholders
of the Company are entering into agreements restricting their ability to
compete with the Company and its Subsidiaries following the Merger;
WHEREAS, the parties desire to make certain representations,
warranties, covenants and agreements in connection with the Merger and also to
prescribe various conditions to the Merger; and
WHEREAS, it is intended that the Merger be recorded as a
recapitalization for financial reporting purposes.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
1.1. The Merger. Upon the terms and subject to the
conditions of this Agreement, at the Effective Time (as defined in Section
1.3), Sub shall be merged with and into the Company and the separate corporate
existence of Sub shall cease. The Company shall be the surviving corporation
in the Merger (sometimes hereinafter
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referred to as the "Surviving Corporation"). The Merger shall have the effects
specified in the Florida Business Corporation Act (the "FBCA").
1.2. The Closing. Upon the terms and subject to the
conditions of this Agreement, the closing of the Merger (the "Closing") shall
take place (a) at the offices of Dewey Ballantine LLP, 1301 Avenue of the
Americas, New York, New York, at 10:00 a.m., local time, on the first business
day immediately following the day on which the last to be satisfied or waived
of the conditions set forth in Article 8 (other than those conditions that by
their nature are to be satisfied at the Closing, but subject to the
satisfaction or waiver of those conditions) shall be satisfied or waived in
accordance herewith or (b) at such other time, date or place as Sub and the
Company may agree. The date on which the Closing occurs is hereinafter
referred to as the "Closing Date."
1.3. Effective Time. Upon the terms and subject to the
conditions of this Agreement, at the Closing the parties shall cause Articles
of Merger to be executed and filed in accordance with the requirements of the
FBCA. The Merger shall become effective upon the filing of the Articles of
Merger with the Florida Department of State in accordance with the FBCA or at
such later time which the parties hereto shall have agreed upon and designated
in such filing as the effective time of the Merger (the "Effective Time").
ARTICLE 2
ARTICLES OF INCORPORATION AND
BYLAWS OF THE SURVIVING CORPORATION
2.1. Articles of Incorporation. The Articles of
Incorporation of the Company in effect immediately prior to the Effective Time
shall be the Articles of Incorporation of the Surviving Corporation, until duly
changed or amended as provided therein or in accordance with applicable law.
2.2. By-laws. The by-laws of the Company in effect
immediately prior to the Effective Time shall be the by-laws of the Surviving
Corporation, until duly changed or amended as provided therein or in accordance
with applicable law.
ARTICLE 3
DIRECTORS AND OFFICERS OF THE
SURVIVING CORPORATION
3.1. Directors. The directors of Sub immediately prior to
the Effective Time shall be the directors of the Surviving Corporation as of
the Effective Time and until their successors are duly appointed or elected in
accordance with applicable law.
3.2. Officers. The officers of the Company immediately
prior to the Effective Time shall be the officers of the Surviving Corporation
as of the Effective Time
2
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and until their successors are duly appointed or elected in accordance with
applicable law.
ARTICLE 4
EFFECT OF THE MERGER ON SECURITIES OF
SUB AND THE COMPANY
4.1. Sub Common Stock. At the Effective Time, by virtue of
the Merger and without any action on the part of the holder thereof, the shares
of common stock, par value $.01 per share, of Sub ("Sub Common Stock")
outstanding immediately prior to the Effective Time shall be converted into
1,452,193 validly issued, fully paid and non-assessable shares of common stock,
par value $.01 per share, of the Surviving Corporation (the "Surviving
Corporation Common Stock"), which number shall be decreased by the number of
shares of Surviving Corporation Common Stock issued pursuant to the Stock
Election, as set forth in Section 4.2(a) hereof.
4.2. The Company Common Stock.
(a) At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, each share of common
stock, par value $.01 per share, of the Company (the "Company Common Stock"),
issued and outstanding immediately prior to the Effective Time, other than
Roll-Over Shares (as defined in Section 4.2(b) below) and Excluded Shares (as
defined in Section 4.2(c) below), shall be converted into the right to receive
$40.00 in cash (the "Cash Merger Price"); provided, that, at Sub's election
(the "Stock Election") made prior to the mailing of the Proxy Statement (as
defined below), Sub shall have the right to substitute, on a pro-rata basis for
each share of Company Common Stock issued and outstanding immediately prior to
the Effective Time (the "Stock Election Shares"), up to $1.60 (the "Stock
Election Consideration") of the Cash Merger Price in the form of Surviving
Corporation Common Stock, such Surviving Corporation Common Stock to be valued
at $40.00 per share.
(b) At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, each share of Company
Common Stock held by certain officers and key employees of the Company as set
forth on Schedule A hereto (each, a "Roll-Over Share") shall be converted into
one share of Surviving Corporation Common Stock (the "Roll-Over Share
Consideration").
(c) At the Effective Time, by virtue of the Merger and
without any action on the part of the holder thereof, each share of Company
Common Stock held in the Company's treasury (the "Excluded Shares") shall be
cancelled and retired without payment of any consideration therefor.
(d) Immediately prior to the Effective Time, at Sub's
election, the Company shall effect a recapitalization, to be effective as of
the Effective Time, of the securities of the Surviving Corporation, and the
number of outstanding shares and options of the Surviving Corporation shall be
appropriately adjusted.
3
<PAGE> 8
4.3. Options.
(a) Except as set forth in 4.3(b) below and except to the
extent that Sub and the holder of any option otherwise agree, the Company shall
cause each outstanding employee or director stock option (the "Options") to
purchase shares of Company Common Stock granted under the Company's 1994
Incentive and Non-Statutory Stock Option Plan (the "Company Stock Option Plan
whether or not then exercisable or vested, to be cancelled and in consideration
of such cancellation, cause the Company to pay to such holders of Options an
amount in respect thereof equal to the product of (x) the excess, if any, of
the Cash Merger Price over the exercise price of each such Option and (y) the
number of shares of Company Common Stock previously subject to the Option
immediately prior to its cancellation (such payment to be net of withholding
taxes).
(b) Prior to the Effective Time, the Company shall use
its best efforts to obtain any consents from holders of the Options and make
any amendments to the terms of the Company Stock Option Plan or arrangements
that are necessary to give effect to the transactions contemplated by this
Section 4.3. Notwithstanding the foregoing provisions of this Section 4.3,
payment may be withheld in respect of any Option until necessary consents are
obtained. The cancellation of an Option in exchange for the payment provided
by Section 4.3(a) shall be deemed a release of any and all rights the holder of
any such Option had or may have had in respect of such Option.
4.4. Exchange Of Certificates.
(a) As of or after the Effective Time of the Merger, Sub
shall deposit with the Paying Agent as necessary, for the benefit of the
holders of shares of Company Common Stock, for payment in accordance with this
Article 4, the funds necessary to pay the Cash Merger Price (less the Stock
Election Consideration if the Stock Election is exercised) for each share.
(b) As soon as practicable after the Effective Time of
the Merger, (i) each holder of an outstanding certificate or certificates which
pursuant to Section 4.2 represent the right to receive shares of the Surviving
Corporation, upon surrender to the Paying Agent of such certificate or
certificates and acceptance thereof by the paying agent selected by Sub (the
"Paying Agent"), shall be entitled to a certificate or certificates
representing the Roll-Over Share Consideration into which the number of
Roll-Over Shares previously represented by such certificate or certificates
surrendered shall have been converted pursuant to this Agreement and (ii) each
other holder of an outstanding certificate or certificates which prior hereto
represented shares of Company Common Stock (other than Roll-Over Shares), upon
surrender to a paying agent selected by Sub (the "Paying Agent") of such
certificate or certificates and acceptance thereof by the Paying Agent, shall
be entitled to receive in exchange therefor either (A) the Cash Merger Price
multiplied by the number of shares of Company Common Stock formerly represented
by such certificate or (B) if the Stock Election is exercised, (x) the Cash
Merger Price (less the Stock Election Consideration) multiplied by the number
of Stock Election Shares formerly represented by such certificate and (y) a
certificate or certificates representing the Stock Election Consideration
multiplied by the number of
4
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Stock Election Shares formerly represented by such certificate divided by the
Cash Merger Price, and the certificate shall forthwith be cancelled. No
interest will be paid on or accrue on the Cash Merger Price. The Paying Agent
shall accept such certificates upon compliance with such reasonable terms and
conditions as the Paying Agent may impose to effect an orderly exchange thereof
in accordance with normal exchange practices. After the Effective Time of the
Merger, there shall be no further transfer on the records of the Company or its
transfer agent of certificates representing shares of Company Common Stock
which have been converted, in whole or in part, pursuant to this Agreement,
into the right to receive cash, and if such certificates are presented to the
Company for transfer, they shall be canceled against delivery of such cash.
If any certificate or certificates for Roll-Over Share
Consideration or Stock Election Consideration, if applicable, is to be issued
in, or if cash is to be remitted to, a name other than that in which the
certificate for shares of Company Common Stock surrendered for exchange is
registered, it shall be a condition of such exchange that the certificate so
surrendered shall be properly endorsed, with signature guaranteed or otherwise
in proper form for transfer and that the person requesting such exchange shall
pay to the Company or its transfer agent any transfer or other taxes required
by reason of the issuance of certificates for such Roll-Over Share
Consideration or Stock Election Consideration, if applicable, in a name other
than that of the registered holder of the certificate surrendered, or establish
to the satisfaction of the Company or its transfer agent that such tax has been
paid or is not applicable. Until surrendered as contemplated by this Section
4.4(b), (i) each certificate for Roll-Over Shares shall be deemed at any time
after the Effective Time of the Merger to represent only the right to receive
upon such surrender a new certificate or certificates for each Roll-Over Share,
as contemplated by Section 4.2(b) and (ii) each certificate for shares of
Company Common Stock (other than the Roll-Over Shares) shall be deemed at any
time after the Effective Time of the Merger to represent (A) only the right to
receive upon such surrender the Cash Merger Price for each share of Company
Common Stock or (B) if the Stock Election is exercised, the right to receive
upon such surrender (x) the Cash Merger Price (less the Stock Election
Consideration) for each Stock Election Share and (y) a new certificate or
certificates for each Stock Election Share, as contemplated by Section 4.2(a).
(c) No dividends or other distributions with respect to
Roll-Over Shares or Stock Election Shares, if applicable, with a record date
after the Effective Time of the Merger shall be paid to the holder of any
certificate for shares of Company Common Stock not surrendered with respect to
the Roll-Over Shares or the Stock Election Shares, if applicable, represented
thereby and no cash payment in lieu of fractional shares of Company Common
Stock shall be paid to any such holder pursuant to Section 4.4(e) until the
surrender of such certificate in accordance with this Article 4. Subject to
applicable law, following surrender of any such certificate, there shall be
paid to the holder of the certificate or certificates representing whole shares
issued for the Roll-Over Share Consideration or Stock Election Consideration,
if applicable, without interest (i) at the time of such surrender, the amount
of any cash payable in lieu of a fractional share representing the Roll-Over
Share Consideration or the Stock Election Consideration, if applicable, to
which such holder is entitled pursuant to Section 4.4(e) and the proportionate
amount of dividends or other distributions with a record date after the
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Effective Time of the Merger therefor paid with respect to such shares
representing the Roll-Over Share Consideration or the Stock Election
Consideration, if applicable, and (ii) at the appropriate payment date, the
proportionate amount of dividends or other distributions with a record date
after the Effective Time of the Merger but prior to such surrender and a
payment date subsequent to such surrender payable with respect to such whole
shares representing the Roll-Over Share Consideration and the Stock Election
Consideration, if applicable.
(d) All cash paid upon the surrender for exchange of
certificates representing shares of Company Common Stock in accordance with the
terms of this Article 4 (including any cash paid pursuant to Section 4.4(e))
shall be deemed to have been paid in full satisfaction of all rights pertaining
to the shares exchanged for cash theretofore represented by such certificates.
(e) Notwithstanding any other provision of this
Agreement, each holder of Roll-Over Shares or Stock Election Shares who would
otherwise have been entitled to retain a fraction of a share representing the
Roll-Over Share Consideration or the Stock Election Consideration (after taking
into account all Roll-Over Shares and Stock Election Shares, as the case may
be, delivered by such holder) shall receive, in lieu thereof, a cash payment
(without interest) equal to such fraction multiplied by the Cash Merger Price.
(f) Any cash deposited with the Paying Agent pursuant to
this Section 4.4 (the "Exchange Fund") which remains undistributed to the
holders of the certificates representing shares of Company Common Stock 180
days after the Effective Time of the Merger shall be delivered to the Surviving
Corporation at such time and any holders of shares of Company Common Stock
(other than Roll-Over Shares) prior to the Merger who have not theretofore
complied with this Article 4 shall thereafter look only to the Surviving
Corporation and only as general unsecured creditors thereof for payment of
their claim for cash, if any.
(g) None of Sub, the Company or the Paying Agent shall be
liable to any person in respect of any cash from the Exchange Fund delivered to
a public office pursuant to any applicable abandoned property, escheat or
similar law. If any certificates representing shares of Company Common Stock
shall not have been surrendered prior to one year after the Effective Time of
the Merger (or immediately prior to such earlier date on which any cash in
respect of such certificate would otherwise escheat to or become the property
of any federal, state, local, or municipal, foreign or other government or
subdivision, branch, department or agency thereof and any governmental or
quasi-governmental authority of any nature, including any court or other
tribunal (each a "Governmental Entity")), any such cash in respect of such
certificate shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, free and clear of all claims or interest
of any person previously entitled thereto.
(h) In the event any certificate 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
Surviving Corporation, the posting by such person of a bond in such reasonable
amount as Surviving Corporation may direct as
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indemnity against any claim that may be made against it with respect to such
certificate, the Paying Agent will issue in exchange for such lost, stolen or
destroyed certificate the shares representing the Roll-Over Share Consideration
or the Stock Election Consideration, as the case may be (and cash in lieu of
fractional shares), and unpaid dividends and distributions on shares
representing the Roll-Over Share Consideration and the Stock Election
Consideration, if applicable, deliverable in respect thereof pursuant to this
Agreement, or cash, as the case may be.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Sub as follows:
5.1. Existence; Good Standing; Corporate Authority. The
Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. The Company is
duly licensed or qualified to do business as a foreign corporation and is in
good standing under the laws of any other state of the United States in which
the character of the properties owned or leased by it or in which the
transaction of its business makes such qualification necessary. The Company has
all requisite corporate power and authority to own, operate and lease its
properties and carry on its business as now conducted. Each of the Company's
Subsidiaries is a corporation or partnership duly organized, validly existing
and in good standing under the laws of its jurisdiction of incorporation or
organization, has the corporate or partnership power and authority to own its
properties and to carry on its business as it is now being conducted, and is
duly qualified to do business and is in good standing in each jurisdiction in
which the ownership of its property or the conduct of its business requires
such qualification, except where the failure to be so qualified or in good
standing, when taken with all other such failures, would not have a Company
Material Adverse Effect (as defined below). The copies of the Company's
Articles of Incorporation (the "Articles of Incorporation") and by-laws
previously delivered to Sub are complete and correct and in full force and
effect.
5.2. Authorization, Validity and Effect of Agreements. The
Company has the requisite corporate power and authority to execute and deliver
this Agreement and all agreements and documents contemplated hereby. Subject
only to the approval of this Agreement and the transactions contemplated hereby
by the majority of all the votes entitled to be cast on the Merger by the
holders of Company Common Stock, the consummation by the Company of the
transactions contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement constitutes a valid and legally binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
5.3. Capitalization. The authorized capital stock of the
Company consists of (x) 15,000,000 shares of Company Common Stock and (y)
5,000,000 shares of preferred stock, par value $.01 per share (the "Company
Preferred Stock"). As of January 31, 1998, there were 4,550,650 shares of
Company Common Stock and no shares
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of Company Preferred Stock issued and outstanding. Since such date, no
additional shares of capital stock of the Company have been issued, except
shares of Company Common Stock issued upon the exercise of options outstanding
under any Company Stock Option Plan. As of January 31, 1998, options to
acquire 536,352 shares of Company Common Stock pursuant to the Company Stock
Option Plan were outstanding. The company disclosure letter (which identifies
the Section or subsection of this Agreement to which each item on such company
disclosure letter relates) delivered by the Company to Sub on the date hereof
(the "Company Disclosure Letter"), includes a complete and correct list of
outstanding Options under such plan (including the number of Options and
exercise price of each such Option) held by each employee, participant in the
Affiliate Program (as defined in Section 5.25 below) or director. The Company
has no outstanding bonds, debentures, notes or other obligations the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with the stockholders of the Company on
any matter. All issued and outstanding shares of Company Common Stock are duly
authorized, validly issued, fully paid, nonassessable and free of preemptive
rights. Other than as set forth above, there are no outstanding shares of
capital stock of the Company or existing options, warrants, calls,
subscriptions, convertible securities, or other rights, agreements or
commitments which obligate the Company or any of its Subsidiaries to issue,
transfer or sell any shares of capital stock of the Company or any of its
Subsidiaries. After the Effective Time, other than those Options set forth on
Schedule B hereto and other than those Options for which the consents
contemplated by Section 4.3(b) shall not have been obtained, the Surviving
Corporation will have no obligation to issue, transfer or sell any shares of
capital stock or other securities of the Company or the Surviving Corporation.
The Company Disclosure Letter sets forth the total amount of indebtedness for
borrowed money and the total amount of cash on hand of the Company and its
Subsidiaries on a consolidated basis as of January 31, 1998. Except as provided
in the Company Disclosure Letter, all such indebtedness is prepayable without
more than two business days notice and without the payment of any penalty.
5.4. Subsidiaries. The Company owns directly or indirectly
each of the outstanding shares of capital stock (or other ownership interests)
of each of the Company's Subsidiaries. Each of the outstanding shares of
capital stock (or other ownership interests) of each of the Company's
Subsidiaries is duly authorized, validly issued, fully paid and nonassessable,
and is owned, directly or indirectly, by the Company free and clear of all
Encumbrances (as defined in Section 5.15), other than Encumbrances set forth in
the Company Disclosure Letter. The following information for each Subsidiary
of the Company is set forth in the Company Disclosure Letter: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital
stock (or other ownership interests); and (iii) the number of issued and
outstanding shares of capital stock (or other ownership interests). Except for
interests in the Company's Subsidiaries or as provided in the Company
Disclosure Letter, neither the Company nor any of the Company's Subsidiaries
owns directly or indirectly any interest or investment (whether equity or debt)
in any corporation, partnership, joint venture, business, trust or entity.
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5.5. No Violation. Neither the execution and delivery by
the Company of this Agreement nor the consummation by the Company of the
transactions contemplated hereby in accordance with the terms hereof, will: (i)
conflict with or result in a breach of any provision of the Articles of
Incorporation or by-laws of the Company or similar organizational document of
any Subsidiary of the Company; (ii) result in a breach or violation of, a
default under or the complete withdrawal from, or the triggering of any payment
or other obligations pursuant to, or, except as provided in the Company
Disclosure Letter, accelerate vesting under or require the consent of any
participant under, any Company Benefit Plan, including the Company Stock Option
Plan, or any grant or award made under the foregoing or in any benefit plan
contained in any collective bargaining agreement to which the Company or any of
its Subsidiaries is a party; (iii) violate, conflict with, result in a breach
of any provision of, constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, result in the
termination or in a right of termination or cancellation of, accelerate the
performance required by, result in the triggering of any payment or other
obligations pursuant to, result in the creation of any Encumbrance upon any of
the properties of the Company or its Subsidiaries under, or result in being
declared void, voidable or without further binding effect, any of the terms,
conditions or provisions of any note, bond, mortgage, indenture, deed of trust
or any license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which the Company or any of its
Subsidiaries is a party, or by which the Company or any of its Subsidiaries or
any of their respective properties is bound or affected, except for any of the
foregoing matters which would not, individually or in the aggregate, have a
Company Material Adverse Effect (as defined below); or (iv) other than the
filing of the Articles of Merger, filings required under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the "HSR Act"), the Securities Exchange Act
of 1934 (the "Exchange Act"), the Securities Act of 1933 (the "Securities Act")
or applicable state securities and "Blue Sky" laws (collectively, the
"Regulatory Filings"), require any consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority or other person or entity, the failure to obtain or make which would,
individually or in the aggregate, have a Company Material Adverse Effect. As
used herein, a "Company Material Adverse Effect" shall mean events, changes,
facts or effects which, individually or in the aggregate, have had or are
reasonably likely to have a material adverse effect on the business, prospects,
results of operations, assets or financial condition of the Company and its
Subsidiaries taken as a whole, or prevent the consummation of the transactions
contemplated hereby.
5.6. SEC Documents; Financial Statements. The Company has
filed all forms, reports and documents required to be filed by it with the
Securities and Exchange Commission ("SEC") since June 17, 1994 through the date
of this Agreement (collectively, the "Company Reports"). As of their respective
dates, the Company Reports (i) complied in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. The Company Disclosure Letter
includes the unaudited financial statements of the Company and its Subsidiaries
on
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a consolidated basis for the year ended December 31, 1997, including a balance
sheet as of such date and statements of income and cash flows for such period
(the "Company 1997 Financial Statements"). Each of the consolidated balance
sheets of the Company included in or incorporated by reference into the Company
Reports (including the related notes and schedules therein) and the Company
1997 Financial Statements fairly presents the consolidated financial position
of the Company and its Subsidiaries as of its date, and each of the
consolidated statements of income and cash flows of the Company included in or
incorporated by reference into the Company Reports (including the related notes
and schedules therein) and the Company 1997 Financial Statements fairly
presents the results of operations or cash flows, as the case may be, of the
Company and its Subsidiaries for the periods set forth therein (subject, in the
case of unaudited statements, to normal year-end audit adjustments which would
not be material in amount or effect), in each case in accordance with United
States generally accepted accounting principles ("GAAP") consistently applied
during the periods involved, except as may be noted therein.
5.7. Accounts Receivable. Except as provided in the Company
Disclosure Letter, all accounts receivable, notes receivable and other amounts
due and owing from any third or related party or other receivables of the
Company and its Subsidiaries (the "Accounts Receivable") represent sales
actually made or services actually delivered or loans or advances of cash in
the ordinary course of business consistent with past practice, and are
reflected on the books and records of the Company net of reserves, which are
adequate and are calculated in accordance with GAAP and consistent with past
practices of Company. Except as provided in the Company Disclosure Letter, all
Accounts Receivable are fully collectible through the use of ordinary
collection procedures in the full aggregate face amount thereof less any
allowance for bad debt loss set forth in the Company Reports, the Company 1997
Financial Statements or thereafter accrued on the books of the Company and its
Subsidiaries calculated in accordance with GAAP and consistent with past
practices of the Company. Except as provided in the Company Disclosure Letter,
there are no refunds, discounts or other adjustments payable in respect of any
of the Receivables or any defenses, rights of set-off, assignments,
restrictions or Encumbrances enforceable by third parties on or affecting the
Receivables.
5.8. Insurance. The Company Disclosure Letter contains a
complete and correct list of all effective insurance policies which cover the
business, properties and assets of the Company and its Subsidiaries and all
premiums due thereon have been paid. The insurance coverage provided by
insurance policies listed in the Company Disclosure Letter and, to the best
Knowledge of the Company, the insurance coverage maintained by each participant
in the Affiliate Program, is adequate and suitable for the business and
operations of the Company and its Subsidiaries or the participant in the
Affiliate Program, as the case may be, and, to the best knowledge of the
Company, is on such terms, covers such risks (including, to the best Knowledge
of the Company, those arising out of the activities of the participants in the
Affiliate Program), contains such deductibles and retentions, and is in such
amounts, as the insurance customarily carried by comparable companies of
established reputation similarly situated and carrying on the same or similar
business operations. Complete and correct copies of all such policies have
been provided to Sub prior to the date hereof. No notice of cancellation or
non-
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renewal has been received by the Company or its Subsidiaries and neither the
Company nor any of its Subsidiaries is in default under any such policy. The
financial statements included in the Company Reports and the Company 1997
Financial Statements reflect adequate reserves for any insurance programs which
require (or have required) the Company or its Subsidiaries to retain a portion
of each loss, including, but not limited to, deductible and self-insurance
programs, except to the extent the amount of any failures to reflect adequate
reserves for any insurance programs would not, individually or in the
aggregate, have a Company Material Adverse Effect.
5.9. Litigation. Except as provided in the Company
Disclosure Letter, there are no actions, suits, arbitrations, charges or
proceedings pending or, to the best knowledge of the Company, threatened, at
law or in equity, or before or by any court, agency or other governmental or
regulatory authority or entity, that would, if adversely determined, have,
individually or in the aggregate, a Company Material Adverse Effect.
5.10. Absence of Certain Changes. Except as set forth in
the Company Disclosure Letter, since December 31, 1996, the Company and its
Subsidiaries have conducted their respective businesses only in the usual,
regular and ordinary course, consistent with past practice, and there has not
been any Company Material Adverse Effect or any non-recurring event in the
absence of which there would have been a Company Material Adverse Effect; and
since September 30, 1997, there has not been (i) any delivery of a notice of
non-renewal or any other failure to renew contracts or agreements which are
material to the Company and its Subsidiaries taken as a whole, (ii) through the
date hereof any loss of any employee who earned more than $100,000 in the most
recent fiscal year (in salary, bonus and other cash compensation), (iii) any
acquisition or disposition of assets in a transaction or series of related
transactions in excess of $250,000, other than in the ordinary course, (iv) any
action taken by the Company or any of its Subsidiaries of the type contemplated
by Section 7.2(iii) and (vi)-(xvi) hereof or (vi) any failure to take any
action by the Company or any of its Subsidiaries of the type contemplated by
Section 7.2(i) and (ii) hereof.
5.11. Tax Matters. Except for such matter that (i) would
not, individually or in the aggregate, have a Company Material Adverse Effect;
(ii) is disclosed in the Company Disclosure Letter or (iii) is contained in the
Company Reports:
(a) Definitions:
"Code" means the Internal Revenue Code of 1986, as amended.
All citations to provisions of the Code, or to the Treasury Regulations
promulgated thereunder, shall include any amendments thereto and any substitute
or successor provisions thereto.
"Taxes" means any and all federal, state, local and foreign
taxes, assessments and other governmental charges, duties, impositions and
liabilities, including, without limitation, taxes based upon or measured by
gross receipts, income, profits, sales, use and occupation, and value added, ad
valorem, transfer, gains, franchise, withholding, payroll, recapture,
employment, excise, unemployment, insurance, social
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security, business license, occupation, business organization, stamp,
environmental and property taxes, together with all interest, penalties and
additions imposed with respect to such amounts. For purposes of this
Agreement, "Taxes" also includes any obligations under any agreements or
arrangements with any person with respect to the liability for or sharing of
Taxes (including pursuant to Treas. Reg. Section 1.1502-6 or comparable
provisions of state, local or foreign tax law) and including liability for
Taxes as a transferee or successor, by contract or otherwise.
"Taxable Period" means any taxable year or any other period
that is treated as a taxable year (or other period, or portion thereof, in the
case of a Tax imposed with respect to such period or portion thereof, e.g., a
quarter) with respect to which any Tax may be imposed under any applicable
statute, rule, or regulation.
"Tax Reserve" shall have the meaning set forth in Section
5.11.
"Tax Return" shall mean any report, return, election, notice,
estimate, declaration, information statement and other forms and documents
(including all schedules, exhibits and other attachments thereto) relating to
and filed or required to be filed with a taxing authority in connection with
any Taxes (including, without limitation, estimated Taxes).
(b) All Tax Returns required to be filed by or with
respect to the Company and/or any of its Subsidiaries have been timely filed.
All such Tax Returns (i) were prepared in the manner required by applicable
law, (ii) are true, correct and complete in all respects, and (iii) reflect the
liability for Taxes of the Company and each of its Subsidiaries. All Taxes
shown to be payable on such Tax Returns, and all assessments of Tax made
against the Company and/or any of its Subsidiaries with respect to such Tax
Returns, have been paid when due. No adjustment relating to any such Tax
Return has been proposed or threatened formally or informally by any Taxing
authority and no basis exists for any such adjustment.
(c) The Company and each of its Subsidiaries have made
(or there has been made on their behalf) all required current estimated Tax
payments sufficient to avoid any underpayment penalties.
(d) The Company and each of its Subsidiaries have (i)
timely paid or caused to be paid all Taxes that are or were due, whether or not
shown (or required to be shown) on a Tax Return and (ii) provided a sufficient
reserve for the payment of all Taxes not yet due and payable (the "Tax
Reserve") on the financial statements of the Company included in the Company
Reports. There are no Taxes that would be due if asserted by a Taxing
authority, except with respect to which the Company and each of its
Subsidiaries are maintaining adequate reserves on the financial statements of
the Company included in the Company Reports.
(e) The Company and each of its Subsidiaries have
complied (and until the Closing Date will comply) in all material respects with
the provisions of the Code relating to the withholding and payment of Taxes,
including, without limitation, the
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withholding and reporting requirements under Code sections 1441 through 1464,
3401 through 3406, and 6041 through 6049, as well as similar provisions under
any other laws, and have within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required.
(f) None of the Tax Returns have been or is currently
being examined by the Internal Revenue Service (the "IRS") or relevant state,
local or foreign Taxing authorities.
(g) No material claim has ever been made in writing by
any Taxing authority with respect to the Company or any of its Subsidiaries in
a jurisdiction where the Company and/or any of its Subsidiaries do not file Tax
Returns that the Company or any such Subsidiary is or may be subject to
Taxation by that jurisdiction. Except for liens for real and personal property
Taxes that are not yet due and payable, there are no liens for any Tax upon any
asset of the Company or any of its Subsidiaries.
(h) The Company and each of its Subsidiaries have made
available (or, in the case of Tax Returns filed after the date hereof, will
make available at such time and place as Sub may request) to Sub complete and
accurate copies of such Tax Returns, and amendments thereto, filed by the
Company and/or its Subsidiaries as Sub may request.
(i) Neither the Company nor any of its Subsidiaries is a
party to any agreement relating to allocating or sharing the payment of, or
liability for, Taxes for any Taxable Period.
(j) Neither the Company nor any of its Subsidiaries has
distributed the stock of any corporation in a transaction satisfying the
requirements of Section 355 of the Code since April 16, 1997.
(k) There is no contract, agreement, plan or arrangement
covering any person that, individually or collectively, could give rise to, nor
will the consummation of the transactions contemplated hereby obligate the
Company or Sub to make, the payment of any amount that would not be deductible
by the Company or any or its Subsidiaries by reason of Section 280G of the
Code.
(l) Neither the Company nor any of its Subsidiaries has
executed any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any Taxes or Tax
Returns.
(m) All Company Stock Options granted under any Stock
Option Plan qualify under Section 162(m)(4) of the Code as an exception from
"applicable employer remuneration," and as such, no deduction of the Company or
any of its Subsidiaries relating to the Company Stock Options would be
disallowed by reason of Section 162(m) of the Code.
(n) The Company is the common parent of an affiliated
group (within the meaning of Code section 1504(a)) that files a consolidated
U.S. federal income tax return and includes the corporations listed on the
Company Disclosure Letter.
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(o) Neither the Company nor any of its Subsidiaries owns
an interest in a partnership or could be treated as a partner in a partnership
for U.S. federal income tax purposes.
5.12. Employee Benefit Plans.
(a) The Company Disclosure Letter sets forth all pension,
retirement, savings, profit sharing, medical, dental, health, disability, life,
death benefit, group insurance, deferred compensation, stock option, stock
purchase, restricted stock, bonus or incentive, severance pay, employment or
termination agreement, and any other employee benefit or compensation plan,
trust, arrangement, contract, agreement, policy or commitment, including,
without limitation, any "employee benefit plan" as defined in Section 3(3) of
the Employee Retirement Income Security Act of 1974, as amended ("ERISA"),
whether formal or informal, written or oral, under which current or former
employees, directors or independent contractors of the Company or any of its
Subsidiaries are entitled to participate or have participated by reason of
their relationship with the Company or any of its Subsidiaries, and (i) to
which the Company or any of its Subsidiaries is a party or a sponsor or a
fiduciary thereof or by which the Company or any of its Subsidiaries (or any of
their rights, properties or assets) is currently bound or (ii) with respect to
which the Company or any of its Subsidiaries has any obligation to make
payments or contributions, or may otherwise have any current or future
liability (but excluding any such Plan covering solely employees of an
independent contractor of the Company or any "multiemployer plan" within the
meaning of Section 3(37) of ERISA) (collectively, the "Benefit Plans").
(b) Each Benefit Plan has at all times been operated and
administered in compliance in all material respects with its terms, the
applicable requirements of ERISA and the Code and all other applicable laws
(including regulations and rulings thereunder) of the United States or any
foreign jurisdiction, including their respective political subdivisions. Each
Benefit Plan that is intended to be tax qualified under Section 401(a) of the
Code has received a favorable determination letter from the Internal Revenue
Service stating that it is so qualified and that any trust associated with the
Plan is tax exempt under Section 501(a) of the Code, and there is no reason why
the qualified status of any such Plan or trust would be denied or revoked,
whether retroactively or prospectively. All amendments to the Benefit Plans
that were required to be made through the date hereof and the Effective Time to
maintain the continued qualified status of such Benefit Plans under Section
401(a) of the Code have been or will be made by the Effective Time.
(c) No actual or threatened disputes, lawsuits, claims
(other than routine claims for benefits), investigations, audits or complaints
to, or by, any person or Governmental Entity have been filed or are pending
with respect to the Benefit Plans or the Company or any of its Subsidiaries in
connection with any Benefit Plan or the fiduciaries or administrators thereof,
and no state of facts or conditions exist which, to the best knowledge of the
Company, could be reasonably expected to subject the Company or any of its
Subsidiaries to any liability (other than routine claims for benefits) under
the terms of the Benefit Plan or applicable law. With respect to each Benefit
Plan, there has
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not occurred, and no person or entity is contractually bound to enter into, any
nonexempt "prohibited transaction" within the meaning of Section 4975 of the
Code or Section 406 of ERISA, nor any transaction that would result in a civil
penalty being imposed under Section 409 or 502(i) of ERISA.
(d) No liability under Title IV of ERISA has been or is
expected to be incurred by the Company or any Subsidiary with respect to any
ongoing, frozen or terminated Benefit Plan which is a "single-employer plan"
within the meaning of Section 4001(a)(15) of ERISA (a "Pension Plan"), or any
single-employer plan of any entity (an "ERISA Affiliate") that is considered
one employer with the Company under Section 4001 of ERISA or Section 414 of the
Code (an "ERISA Affiliate Plan"). With respect to each Pension Plan and each
ERISA Affiliate Plan, as of the last day of the most recent plan year ended
prior to the date hereof, the actuarially determined present value of all
"benefit liabilities" within the meaning of Section 4001(a)(16) of ERISA (as
determined on the basis of the actuarial assumptions contained in the Plans'
most recent actuarial valuation) did not exceed the then current value of the
assets of such Plans, and there has not been an adverse change in the financial
condition of such Plans which would have caused a material change in the funded
status of such Plans. No notice of a "reportable event", within the meaning of
Section 4043 of ERISA for which the 30-day reporting requirement has not been
waived has been required to be filed for any Pension Plan or by any ERISA
Affiliate Plan within the three-year period ending on the date hereof. The
Pension Benefit Guaranty Corporation has not instituted proceedings to
terminate any Pension Plan or ERISA Affiliate Plan and no condition exists that
presents a material risk that such proceedings will be instituted. Neither the
Company, its Subsidiaries nor any ERISA Affiliate has incurred, nor does the
Company expect that any such entity will incur, any withdrawal liability with
respect to a "multiemployer plan" (within the meaning of Section 3(37) of
ERISA) under Title IV of ERISA or any material liability in connection with the
reorganization or termination of any multiemployer plan.
(e) All contributions or payments made or deemed to have
been made with respect to each Benefit Plan that is a deferred compensation
plan, including any Pension Plan, are presently, and have been during the years
to which they relate, fully deductible pursuant to Section 404 of the Code and
are not presently, and have never been during the years to which they relate,
subject to any excise tax under Section 4972 of the Code. The Company has not
requested, nor has pending as of the date hereof or the Effective Time, a
minimum funding variance or waiver within the meaning of Section 412(d) of the
Code. As of the Effective Time, all payments of outstanding contributions, due
on or prior to that date, including minimum contributions, premiums, and
funding obligations imposed by the terms of an Benefit Plan or by any law or
government agency (including under Part 3 of ERISA and Section 412 of the Code)
shall have been made with respect to each Benefit Plan. All contributions to
and payments with respect to or under the Benefit Plans that are required to be
made with respect to periods ending on or before the Effective Time have been
made or accrued before the Effective Time by the Company in accordance with the
appropriate plan documents, financial statement, actuarial report, collective
bargaining agreements or insurance contracts or arrangements. With respect to
each Benefit Plan that is an "employee welfare benefit plan" under Section 3(1)
of ERISA (a "Welfare Plan") that is partially or fully funded through a trust,
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all tax deductions claimed by the Company or any of its Subsidiaries relating
to any such trust are allowable, and all tax returns and other governmental
filings required to be filed with respect to any such trust, whether by the
Company or any of its Subsidiaries or the trust, have been made in a timely
manner.
(f) Except as specifically set forth in the Company
Disclosure Letter, no Plan providing medical or death benefits (whether or not
insured) with respect to current or former employees of the Company continues
such coverage or provides such benefits beyond their date of retirement or
other termination of service (other than coverage mandated by section 601 of
ERISA, the cost of which is fully paid by the former employee or his or her
dependents).
(g) Each trust fund associated with a Welfare Plan that
is established under Section 501(c)(9) of the Code and is intended to be
tax-exempt under Section 501(a) of the Code (a "VEBA") has received a favorable
determination letter from the IRS stating that the trust fund is so exempt, and
there is no reason why the tax-exempt status under Section 501(a) of the Code
of any such VEBA would be denied or revoked, whether retroactively or
prospectively, by any governmental agency, including, without limitation, the
IRS and the United States Department of Labor. Each VEBA has satisfied all
applicable requirements of Section 419, 419A and 505 of the Code, and neither
the Company nor any Subsidiary has become subject to any excise tax under
Section 4976 of the Code.
(h) With respect to each Benefit Plan, the Company has
made available to Sub complete and correct copies of the following documents,
to the extent in each case that such documents exist or are required by law:
(1) current plan documents, subsequent plan amendments, or any and all other
documents that establish or describe the existence of the plan, trust,
arrangement, contract, policy or commitment; (2) current summary plan
descriptions and summaries of material modifications; (3) the most recent tax
qualified determination letters, if any, received from or applications pending
with the IRS; (4) the three most recent Form 5500 Annual Reports, including
related schedules and audited financial statements and opinions of independent
certified public accountants; (5) with respect to each defined contribution
plan, the most recent annual and quarterly or monthly valuations; (6) with
respect to each Pension Plan, a copy of the most recent actuarial valuation
report; and (7) the most recent nondiscrimination testing results under
Sections 401(a)(4), 401(k) and 410(b) of the Code.
(i) The execution of, and performance of the transactions
contemplated in, this Agreement will not (either alone or upon the occurrence
of any additional or subsequent events) constitute an event under any plan,
policy, arrangement or agreement or any trust or loan that will or may result
in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligation to fund benefits with respect to any current or former employee,
director or consultant of the Company.
(j) Except as set forth in the Company Disclosure Letter,
to the best Knowledge of the Company, neither the Company nor any of its
Subsidiaries has any
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liability, contingent or otherwise, with respect to any employee benefit or
compensation plan, program, arrangement or agreement that is sponsored,
maintained or contributed to by any participant in the Affiliate Program or any
other independent owner/operator with whom the Company or any of its
Subsidiaries has a contractual relationship including, without limitation, with
respect to any such "multiemployer plan" (within the meaning of Section 3(37)
of ERISA) or other such "employee benefit plan" (within the meaning of Section
3(3) of ERISA).
5.13. Labor Matters; Suppliers; Distributors and Customers.
(a) The Company Disclosure Letter lists all collective
bargaining or other labor union contracts to which the Company or any of its
Subsidiaries is a party and which is applicable to persons employed by the
Company or any of its Subsidiaries. There is no pending or, to the best
knowledge of the Company, threatened union organizational effort, material
labor dispute, strike or work stoppage against the Company or any of its
Subsidiaries. Neither the Company nor any of its Subsidiaries, nor their
respective representatives or employees, has committed any material unfair
labor practices in connection with the operation of the respective businesses
of the Company or any of its Subsidiaries, and there is no pending or, to the
best knowledge of the Company, threatened charge or complaint against the
Company or any of its Subsidiaries by the National Labor Relations Board or any
similar governmental agency. The Company and all of its Subsidiaries, and to
the best knowledge of the Company, Jefferies Transportation and Lloyd
Transportation and, to the best Knowledge of the Company, each participant in
the Affiliate Program, have in the past been and are in compliance in all
respects with all applicable collective bargaining agreements and laws
respecting employment, employment practices, labor relations, safety and
health, wages, hours and terms and conditions of employment, except for such
failures to be in compliance as have not had, individually or in the aggregate,
a Company Material Adverse Effect that has not been cured and would not have,
individually or in the aggregate, a Company Material Adverse Effect. Neither
the Company nor any of its Subsidiaries has experienced within the past 12
months a "plant closing" or "mass layoff" within the meaning of the Worker
Adjustment and Retraining Notification Act, 29 U.S.C. Section 2101 et
seq. The Company Disclosure Letter also sets forth the aggregate number of
drivers that work for any of the Company, its Subsidiaries, any participant in
the Affiliate Program and any other independent owner/operator with whom the
Company has a contractual relationship, specifying, in the case of the Company
and its Subsidiaries, the number of such drivers who belong to a union or are
otherwise covered by an employment agreement or a collective bargaining
agreement.
(b) The relationships with the suppliers and distributors
for and customers of, including, without limitation, all contractors under the
Affiliate Program, the Company and its Subsidiaries are satisfactory working
commercial relationships and, during the twelve-month period ended on the date
of Closing, no such supplier, distributor or customer has cancelled or
otherwise terminated its relationship with or decreased its services, supplies
or materials to or its usage or purchase of the services or products of the
Company or any of its Subsidiaries in a manner which has had or would have a
Company Material Adverse Effect. Neither the Company nor any of its
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Subsidiaries is aware of any intention of any such supplier, distributor or
customer to take any such action.
5.14. Absence of Undisclosed Liabilities. Neither the
Company nor any of its Subsidiaries has any liabilities or obligations of any
nature, whether or not accrued, contingent or otherwise, whether due or to
become due, except (a) liabilities or obligations reflected or reserved against
in the financial statements of the Company included in the Company Reports or
the Company 1997 Financial Statements and (b) liabilities or obligations which
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
5.15. Title to Properties and Related Matters.
(a) Each of the Company and its Subsidiaries has good and
marketable title (and with respect to all owned real property (the "Owned Real
Property"), fee simple title) to all of the properties and assets which it
purports to own, real, personal, tangible and intangible (including those
reflected in the financial statements included in the Company Reports and in
the Company 1997 Financial Statements, except as since sold or otherwise
disposed of in the ordinary course), free of any mortgage, claim, lien, pledge,
option, charge, security, security interest or other similar interest,
encumbrance, easement, judgment or imperfection of title of any nature
whatsoever (each, an "Encumbrance") except (i) those reflected or reserved
against in the latest financial statements of the Company included in the
Company Reports or the Company 1997 Financial Statements, (ii) Taxes and
general and special assessments not in default and payable without penalty and
interest, and (iii) Encumbrances which would (x) not materially detract from
the value, or interfere with the present use, of the properties of the Company
and its Subsidiaries, and (y) would not otherwise materially impair the
business operations of the Company and its Subsidiaries (collectively,
"Permitted Encumbrances").
(b) Set forth in the Company Disclosure Letter is a list
of all leases, subleases and other agreements (the "Real Property Leases")
under which the Company or any of its Subsidiaries uses or occupies or has the
right to use or occupy, now or in the future, any real property or facility
(the "Leased Real Property") (including all modifications, amendments and
supplements thereto) and a summary of the material terms and amounts of
payments due under such Real Property Leases. The Company has heretofore
provided to Sub complete and correct copies (or accurate summaries or
abstracts) of all Real Property Leases. Each Real Property Lease and each other
lease with respect to any personal property leased by the Company or any of its
Subsidiaries is valid and binding on the Company or its Subsidiary, as the case
may be, and in full force and effect, and no termination event or condition or
uncured default on the part of the Company or any such Subsidiary or, to the
best knowledge of the Company, the landlord or lessor, as the case may be,
exists under any Real Property Lease or any such other lease. Each of the
Company and its Subsidiaries has a good and valid leasehold interest in each
parcel of Leased Real Property and possesses and quietly enjoys the Leased Real
Property under the Real Property Leases free and clear of all Encumbrances,
except for Permitted Encumbrances.
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5.16. Material Contracts. There have been made available to
Sub or its designees complete and correct copies of all of the following
contracts to which the Company or any of its Subsidiaries is a party or by
which any of them is bound (collectively, the "Material Contracts"): (i)
contracts with any current officer, director, "affiliate" or "associate" (as
such terms are defined in Rule 12b-2 under the Exchange Act) of the Company or
any of its Subsidiaries; (ii) contracts for the sale of any of the assets of
the Company or any of its Subsidiaries other than in the ordinary course of
business or for the grant to any person of any preferential rights to purchase
any of its assets; (iii) contracts containing covenants of the Company or any
of its Subsidiaries not to compete in any line of business or with any person
in any geographical area or, other than forms of contracts with independent
contractors in connection with the Affiliate Program, covenants of any other
person not to compete with the Company or any of its Subsidiaries in any line
of business or in any geographical area; (iv) indentures, credit agreements,
mortgages, promissory notes, and other contracts relating to the borrowing of
money which are in excess of $1,000,000 in the aggregate, (v) contracts or
obligations with all employees, consultants and agents providing for annual
payments in excess of $150,000, (vi) contracts which contain change of control
provisions or whose severance provisions will be accelerated upon consummation
of the transactions contemplated hereby; (vii) forms of contracts with
independent contractors in connection with the Affiliate Program which are
substantially the same as all such contracts; and (viii) all other agreements
contracts or instruments which are material to the Company. All of the
Material Contracts are in full force and effect and are the legal, valid and
binding obligation of the Company or its Subsidiaries, enforceable against them
in accordance with their respective terms. Neither the Company nor any
Subsidiary is in default under any Material Contract nor, to the best knowledge
of the Company, is any other party to any Material Contract in default
thereunder.
5.17. Compliance With Laws. The Company and each of its
Subsidiaries, and to the best Knowledge of the Company, each participant in the
Affiliate Program have been in the past and are in compliance with all
applicable statutes, laws, codes, ordinances, regulations, rules, Permits (as
defined below), judgments, decrees and orders of any Governmental Entity,
except for such failures to be in compliance as have not had, individually or
in the aggregate, a Company Material Adverse Effect that has not been cured and
would not have, individually or in the aggregate, a Company Material Adverse
Effect. The Company and each of its Subsidiaries and, to the best Knowledge of
the Company, each participant in the Affiliate Program has in effect (and the
Company and/or each Subsidiary and, to the best Knowledge of the Company, each
participant in the Affiliate Program has timely made appropriate filings for
issuance or renewal thereof) all Federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses,
notices, permits and rights, including all authorizations under Environmental
Laws (as defined below) and exemptions from any of the foregoing (collectively,
"Permits") necessary for it to own, lease or operate its properties and assets
and to carry on its business as now conducted, except for the failure to have
such Permits that, individually or in the aggregate, has not had and would not
have a Company Material Adverse Effect. The Company Disclosure Letter contains
a list of all of the type of Permits which are material to the Company and its
Subsidiaries and the Company or a Subsidiary of the Company has all such
Permits and all such Permits are in full force and
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<PAGE> 24
effect, except as set forth in the Company Disclosure Letter. Copies of such
Permits have been provided to Sub or its counsel or will be so provided upon
request. No default under any Permit has occurred, except for defaults under
Permits that, individually or in the aggregate, would have a Company Material
Adverse Effect. Except as set forth in the Company Disclosure Letter, neither
the Company nor any of its Subsidiaries, nor to the best Knowledge of the
Company, any participant in the Affiliate Program has received notice of any
pending investigation or review by any Governmental Entity with respect to the
Company or any of its Subsidiaries or any participant in the Affiliate Program.
To the best knowledge of the Company, no such investigation or review is
threatened.
5.18. Environmental, Health and Safety Matters. Except for
such matter that (i) would not, individually or in the aggregate, have a
Company Material Adverse Effect; (ii) is disclosed in the Company Disclosure
Letter or (iii) is contained in the Company Reports:
(a) The Company and each of its Subsidiaries comply, and
the Company and each of its Subsidiaries at all times have complied, with all
EHS Requirements of Law (as defined below) applicable to their operations or
the Properties (as defined below), including, without limitation, the use,
maintenance and operation of the Properties, and all activities and conduct of
business by them related thereto, including, without limitation, the treatment,
remediation, removal, transport, storage and/or disposal of any Contaminant (as
defined below);
(b) The Company and each of its Subsidiaries have
obtained or have taken appropriate steps, as required by EHS Requirements of
Law, to obtain all EHS Permits necessary for their operations and the ownership
and operation of the Properties, all such EHS Permits (as defined below) are in
good standing, and the Company and each of its Subsidiaries are currently in
compliance with all terms and conditions of such EHS Permits. No material
change in the facts or circumstances reported or assumed in the applications
for or the granting of such EHS Permits exists. There are not any proceedings
threatened which would jeopardize the validity of any such EHS Permits;
(c) All of the third parties with which the Company or
any of its Subsidiaries have arranged, engaged or contracted to accept, treat,
transport, store, dispose or remove any Contaminant generated or present at any
of the Properties, or which otherwise participate or have participated in
activities or conduct related to the operations of the Company or any of its
Subsidiaries or the Properties, were, to the knowledge of the Company, properly
permitted at the relevant time to perform the foregoing activities or conduct;
(d) Neither the Company nor any of its Subsidiaries is
subject to any investigation, or any judicial or administrative proceeding,
notice, order, judgment, decree or settlement, alleging or addressing in
connection with the operations or the Properties (i) any violation of any EHS
Requirements of Law, or (ii) any Remedial Action (as defined below), or (iii)
any claims or liabilities and costs arising from the Release (as defined below)
or threatened Release of any Contaminant;
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(e) No Environmental Lien (as defined below) has attached
to any of the Properties;
(f) Neither the Company nor any of its Subsidiaries has
received or is otherwise aware of any notice, claim or other communication
concerning (i) any alleged violation of any EHS Requirements of Law at any of
the Properties, whether or not corrected to the satisfaction of the appropriate
authority, (ii) alleged liability of the Company or any Subsidiary for EHS
Damages (as defined below) arising out of or related to the operations or any
of the Properties, or (iii) any alleged liability of the Company or any of its
Subsidiaries arising out of or related to the operations or the Properties for
the Release or threatened Release of a Contaminant at any location, and there
exists no writ, injunction, decree, order or judgment outstanding, nor any
lawsuit, claim, proceeding, citation, directive, summons or investigation,
pending or threatened, relating to the condition, ownership, use, maintenance
or operation of any of the Properties, or the suspected presence of
Contaminants thereon or therefrom, nor does there exist any basis for such
lawsuit, claim, proceeding, citation, directive, summons or investigation being
instituted or filed;
(g) There has been no Release of any Contaminants in
reportable quantities at, to or from any of the Properties;
(h) None of the Properties is listed or proposed for
listing on the National Priorities List ("NPL") pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act, as amended ("CERCLA"),
or listed on the Comprehensive Environmental Response Compensation Liability
Information System List ("CERCLIS") or any similar state list of sites, and
neither the Company nor any of its Subsidiaries is aware of any conditions at
any of such Properties which, if known to a Governmental Entity, would qualify
such Properties for inclusion on any such list;
(i) Neither the Company nor any of its Subsidiaries has
any contingent liability in connection with its operations or the ownership or
operation of any of the Properties for the Release or threatened Release of any
Contaminant at any location;
(j) Neither the Company nor any of its Subsidiaries has
disposed (as such term is defined in the Federal Resource Conservation and
Recovery Act) of any Contaminant at any of the Properties;
(k) Neither the Company nor any of its Subsidiaries has
transported or arranged for the transport of any Contaminant to any facility or
site for the purpose of treatment or disposal which (i) is included on the NPL
or CERCLIS, (ii) is or was, at the time of disposal, subject to a Remedial
Action requirement (other than routine, anticipated, closure-related corrective
action obligations affecting closed solid waste management units at such
facility) issued under the federal Resource Conservation and Recovery Act or
any state, local or foreign solid or hazardous waste regulatory law, or (iii)
at the time of the disposal had received a notice of violation or was otherwise
subject to a governmental enforcement action with respect to alleged violations
of any EHS Requirements of Law;
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(l) No Contaminant has migrated from any of the
Properties onto or underneath other properties, nor has any Contaminant
migrated or threatened to migrate from other properties upon, about or beneath
any of the Properties;
(m) No underground improvements, including but not
limited to treatment or storage tanks, sumps, or water, gas or oil wells, or
associated piping, are or have ever been located on any of the Properties;
(n) There is not constructed, placed, deposited,
released, stored, disposed, leaching nor located on any of the Properties any
polychlorinated biphenyls ("PCBs") or transformers, capacitors, ballasts, or
other equipment which contain dielectric fluid containing PCBs; and
(o) Neither the Company nor any of its Subsidiaries has
any liability, or has received or is otherwise aware of any notice, claim or
other communication alleging liability on the part of the Company or any of its
Subsidiaries, for the violation of any EHS Requirements of Law, for EHS
Damages, or for the Release or threatened Release of any Contaminant in
connection with any businesses or properties previously owned or operated by
the Company or any of its Subsidiaries or any former subsidiary.
For purposes hereof, the following terms shall have the following meanings:
"Contaminant" means any pollutant, chemical substances,
hazardous substance, radioactive substance, toxic substance, hazardous waste,
medical waste, radioactive waste, special waste, petroleum or petroleum-derived
substance or waste, asbestos, PCBs, or any hazardous or toxic constituent
thereof and includes, but is not limited to, any substance regulated,
restricted or addressed by or under EHS Requirements of Law.
"EHS Damages" means all claims, judgments, damages (including
punitive damages), losses, penalties, fines, interest, fees, liabilities
(including strict liability), encumbrances, liens, costs, and expenses of
investigation and defense of any claim, whether or not such claim is ultimately
defeated, and of any good faith settlement of judgment, of whatever kind or
nature, contingent or otherwise, matured or unmatured, foreseeable or
unforeseeable, including, without limitation, reasonable attorneys' fees and
disbursements and consultants' fees, any of which are incurred at any time as a
result of the existence of Contaminants at any location or noncompliance with
EHS Requirements of Law, including without limitation:
(i) Damages for personal injury or threatened personal
injury (including sickness, disease or death), or injury or threatened
injury to property or natural resources, foreseeable or unforeseeable,
including, without limitation, the cost of demolition and rebuilding
of any improvements on real property;
(ii) Reasonable fees incurred for the services of
attorneys, consultants, contractors, doctors, experts, laboratories
and all other reasonable costs incurred in connection with any damages
as described in subparagraph (i) of this definition, and the
investigation or remediation of Contaminants or the suspected
22
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presence of Contaminants or the violation or threatened violation of
EHS Requirements of Law including, but not limited to, the preparation
of any feasibility studies or reports or the performance of any
investigations, cleanup, treatment, remediation, removal, response,
abatement, containment, closure, storage, disposal, transport,
restoration or monitoring work required by any federal, state, local
or foreign governmental agency or political subdivision, or otherwise
expended in connection with such conditions, and including, without
limitation, any reasonable attorneys' fees, costs and expenses
incurred in enforcing this Agreement or collecting any sums due
hereunder; and
(iii) Liability to any third person or Governmental Entity
to indemnify such person or Governmental Entity for costs expended in
connection with the items referenced in subparagraphs (i) and (ii) of
this definition.
"EHS Permits" means all permits, consents, licenses, and other
approvals or authorizations required under EHS Requirements of Law.
"EHS Requirements of Law" means all federal, state, local and
foreign laws, statutes, codes, ordinances, rules, regulations, directives,
binding policies, EHS Permits, or orders relating to or addressing the
environment, health or safety, including, but not limited to, any law, statute,
code, ordinance, rule, regulation, directive, binding policy, EHS Permit or
order relating to (x) the use, handling or disposal of any Contaminant or (y)
workplace or worker safety and health, as such requirements are promulgated by
the specifically authorized Governmental Entity responsible for administering
such requirements.
"Environmental Lien" means a lien in favor of any Governmental
Entity for any (a) liability under any EHS Requirement of Law, or (b) damages
arising from, or costs incurred by, such Governmental Entity in response to a
Release or threatened Release of a Contaminant into the environment.
"Properties" means all real or personal property of any kind
or description presently owned, leased, operated, or otherwise under the
control of the Company or any Subsidiary.
"Release" means the presence, release, spill, emission,
leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching
or migrating into the indoor or outdoor environment of any Contaminant through
or in the air, soil, subsurface, surface water, groundwater or Properties.
"Remedial Action" means actions required to (i) clean up,
remove, treat or in any other way address Contaminants in the indoor or outdoor
environment; (ii) prevent the Release or threat of Release or minimize the
further Release of Contaminants; or (iii) investigate and determine if a
remedial response is needed, to design such a response and post-remedial
investigation, monitoring, operation, maintenance and care.
5.19. Assets. The Company Disclosure Letter sets forth a
complete and correct list of all fixed assets, including the net book value of
such assets, of the
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Company and its Subsidiaries. At the Effective Time, the assets of the
Company, its Subsidiaries and, to the best Knowledge of the Company, the
participants in the Affiliate Program will constitute all the equipment and
other assets presently used in the conduct of (except as sold or retired in the
ordinary course of business) or necessary to operate the businesses of the
Company and its Subsidiaries in accordance with past practice. All assets of
the Company, its Subsidiaries and, to the best Knowledge of the Company, the
participants in the Affiliate Program, including those assets set forth on the
Company Disclosure Letter, including those reflected in the financial
statements included in the Company Reports, the Company 1997 Financial
Statements or otherwise, are, in the aggregate, well maintained and in good
operating condition, and, with respect to the tank trailers, facilities and
tractors, are free from all structural flaws and design and engineering
deficiencies which would materially reduce the useful life of such assets,
except for reasonable wear and tear and except for items which have been
written down in the financial statements included in the Company Reports or the
Company 1997 Financial Statements to a realizable market value or for which
adequate reserves have been provided in the financial statements included in
the Company Reports or the Company 1997 Financial Statements. The present
quantity of all such equipment of the Company, its Subsidiaries and the
participants in the Affiliate Program is reasonably necessary, in the
aggregate, in the present course of the business conducted by the Company and
its Subsidiaries. All of such equipment (except for leased equipment for which
the lessors have valid security interest) is free and clear of any Encumbrance
other than Permitted Encumbrances.
5.20. No Brokers. Neither the Company nor any of its
Subsidiaries has entered into any contract, arrangement or understanding with
any person or firm which may result in the obligation of the Company or any of
its Subsidiaries or the Surviving Corporation to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, except that the Company has retained BT Alex. Brown
Incorporated as its financial advisor, the arrangements with which have been
disclosed in writing to Sub prior to the date hereof. Other than the foregoing
arrangements, the Company is not aware of any claim for payment of any finder's
fees, brokerage or agent's commissions or other like payments in connection
with the negotiations leading to this Agreement or the consummation of the
transactions contemplated hereby.
5.21. Intellectual Property. The Company and each
Subsidiary owns, or is validly licensed or otherwise has the right to use,
without any obligation to make any fixed or contingent payments, including any
royalty payments, as applicable, all patents, patent rights, trademarks,
trademark rights, trade names, trade name rights, service marks, service mark
rights, copyrights and other proprietary intellectual property rights and
computer programs that are used in the conduct of the business of the Company
as now operated (collectively, "Intellectual Property Rights"). The Company
Disclosure Letter sets forth a description of all patents, trademarks and
copyrights and applications therefor owned by or licensed to the Company and
its Subsidiaries that are used in the conduct of the business of the Company
and its Subsidiaries as now operated (excluding customary commercial software
licenses). No claims are pending or, to the best
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knowledge of the Company, threatened that the Company is, and to the best
knowledge of the Company, neither the Company nor any Subsidiary is, infringing
or otherwise adversely affecting the rights of any person with regard to any
Intellectual Property Right. To the best knowledge of the Company, no person is
infringing the rights of the Company or any Subsidiary with respect to any
Intellectual Property Right. Neither the Company nor any Subsidiary has
licensed, or otherwise granted, to any third party, any rights in or to any
Intellectual Property.
5.22. State Takeover Statutes. The Board of Directors of
the Company has approved this Agreement and the Voting Agreement and the
transactions contemplated hereby and thereby (including the Merger) and such
approval is sufficient to render inapplicable to such agreements and
transactions the provisions of any "fair price," "moratorium," "control share,"
"interested shareholder," "affiliated transaction" or other anti-takeover
statute or regulation (including Sections 607.0901 and 607.0902 of the FBCA)
and any applicable anti-takeover or other restrictive provision of the Articles
of Incorporation, by-laws or other governing instruments. The Company does not
have a "shareholder rights plan" or other arrangement of similar effect.
5.23. Board Recommendation. The Board of Directors of
the Company, at a meeting duly called and held, has (a) determined that this
Agreement and the transactions contemplated hereby are advisable and in the
best interests of the Company and its stockholders and (b) resolved to
recommend that the holders of Company Common Stock approve this Agreement and
the transactions contemplated hereby, including the Merger.
5.24. Related Party Transactions. Except as set forth in
the Company Reports or in the Company Disclosure Letter, no director, officer,
partner, "affiliate" or "associate" (as such terms are defined in Rule 12b-2
under the Exchange Act) of the Company or any of its Subsidiaries owns any
direct or indirect interest of any kind in, or is a director, officer,
employee, partner, affiliate or associate of, or consultant or lender to, or
borrower from, or has the right to participate in the management, operations or
profits of, any person or entity which is (a) a competitor, supplier, customer,
distributor, lessor, tenant, creditor or debtor of the Company or any of its
Subsidiaries, (b) engaged in a business related to the business of the Company
or any of its Subsidiaries or (c) is otherwise participating in any transaction
to which the Company or any of its Subsidiaries is a party.
5.25. Affiliate Programs, Etc.
(a) The Company Disclosure Letter contains an accurate
summary of the arrangements of the Company and its Subsidiaries with the
affiliate partners, more commonly known as the "Affiliate Program." The
Company and its Subsidiaries have furnished to Sub copies of the standard form
of the contracts used by the Company and its Subsidiaries in connection with
the Affiliate Program (also known as the MTL Contractor Agreement), and the
actual terms and provisions of the arrangements (contractual or otherwise)
between the Company and/or any of its Subsidiaries, on the one hand, and the
participants in the Affiliate Program, on the other hand, (a) are not in
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any material respect (individually and/or taken as a whole) different from
those set forth in such standard contracts, (b) are on arms' length terms and
(c) do not contain any unusual or burdensome provision which, individually or
in the aggregate, has had, or would have, a Company Material Adverse Effect.
Neither the Company nor any of its Subsidiaries (x) owns or is obligated to
make any investment in any participant in the Affiliate Program or (y) has
consummated during the 12-month period ended on the date of the Closing or is
obligated to consummate at any time in the future, any transaction with any
participant in the Affiliate Program other than in the ordinary course of
business consistent with past practice or as otherwise provided in the Company
Disclosure Letter. Neither the Company nor any of its Subsidiaries has
outstanding any obligation or indebtedness owing to any participant in the
Affiliate Program other than in the ordinary course of business consistent with
past practice. All of the material agreements between the Company and/or any
of its Subsidiaries, on the one hand, and participants in the Affiliate
Program, on the other hand, are legal, valid and binding obligations of the
Company or its Subsidiaries and, to the best knowledge of the Company, of each
of the other parties thereto, enforceable against such parties in accordance
with their respective terms. Neither the Company nor any of its Subsidiaries
nor, to the best knowledge of the Company, any participant in the Affiliate
Program is in default under any term of any such agreement, which default,
individually or in the aggregate, would have a Company Material Adverse Effect.
(b) The Company and its Subsidiaries have furnished to Sub
copies of the standard form of the Master Trailer Lease Agreement, Agreement
for Transportation Services and Independent Contractor Agreement. The actual
terms and provisions of the arrangements (contractual or otherwise) between the
Company and/or any of its Subsidiaries, on the one hand, and the
owner/operators, drivers, independent contractors, trailer lessees, shippers
and customers, on the other hand, (a) are not in any material respect
(individually and/or taken as a whole) different in form from those set forth
in such standard contracts, (b) are on arms' length terms and (c) do not
contain any unusual or burdensome provision which, individually or in the
aggregate, has had, or would have, a Company Material Adverse Effect. All of
such agreements between the Company and/or any of its Subsidiaries, on the one
hand, and the owner/operators, drivers, independent contractors, trailer
lessees, shippers and customers, on the other hand, are legal, valid and
binding obligations of the Company or its Subsidiaries and, to the best
knowledge of the Company, of each of the other parties thereto, enforceable
against such parties in accordance with their respective terms. Neither the
Company nor any of its Subsidiaries nor, to the best knowledge of the Company,
the owner/operators, drivers, independent contractors, trailers lessees,
shippers or customers who are parties to such agreements is in default under
any term of any such agreement, which default, individually or in the
aggregate, would have a Company Material Adverse Effect.
5.26. Opinion of Financial Advisor. The Company has
received, and has furnished to Sub a copy of, the opinion of BT Alex. Brown
Incorporated to the effect that, as of the date hereof, the Merger
Consideration is fair to the holders of Company Common Stock from a financial
point of view.
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5.27. Proxy Statement; Schedule 13E-3; Form S-4. The Proxy
Statement (as defined below) to be mailed to the stockholders of the Company in
connection with the special meeting of the stockholders of the Company (the
"Special Meeting") and the Schedule 13E-3 (as defined below) and the Form S-4
(as defined below), if filed, and any amendment thereof or supplement thereto
(excluding any information supplied in writing by Sub specifically for
inclusion therein), when, in the case of the Proxy Statement, mailed and at the
time of the Special Meeting, and, in the case of the Schedule 13E-3 and the
Form S-4 when and if filed and, in the case of the Form S-4 and any amendment
or supplement thereto, when it becomes effective, shall not 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 were made, not false or misleading, and shall
comply with all requirements of the Securities Act and the Exchange Act.
5.28. Alternative Proposal. On or prior to the date hereof,
there has not been any bona fide publicly announced Alternative Proposal (as
defined in Section 7.1 hereof) with respect to the Company or any of its
Subsidiaries nor has there been made public an intention (whether or not
conditional) to make such an Alternative Proposal with respect to the Company
or any of its Subsidiaries.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF SUB
Sub represents and warrants to the Company as follows:
6.1. Existence; Good Standing; Corporate Authority. Sub is
a corporation duly incorporated, validly existing and in good standing under
the laws of its jurisdiction of incorporation. Sub is duly licensed or
qualified to do business as a foreign corporation and is in good standing under
the laws of any other state of the United States in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary. Sub has all requisite corporate power and
authority to own, operate and lease its properties and carry on its business as
now conducted. The copies of Sub's Articles of Incorporation and by-laws
previously delivered to the Company are complete and correct and in full force
and effect. Sub has no subsidiaries.
6.2. Authorization, Validity and Effect of Agreements.
Sub has the requisite corporate power and authority to execute and deliver
this Agreement and all agreements and documents contemplated hereby. The
consummation by Sub of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes a
valid and legally binding obligation of Sub, enforceable against Sub in
accordance with its terms.
6.3. Capitalization. The authorized capital stock of Sub
consists of 1,000,000 shares of Sub Common Stock and 250,000 shares of
preferred stock, par value $.01 per share, of Sub of which 100 shares are
issued and outstanding. Notwithstanding
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any provisions to the contrary, Sub may, in its sole discretion, increase the
number of shares of authorized Sub Common Stock and the number of shares of Sub
Common Stock issued and outstanding.
6.4. No Violation. Neither the execution and delivery by
Sub of this Agreement, nor the consummation by Sub of the transactions
contemplated hereby in accordance with the terms hereof, will: (i) conflict
with or result in a breach of any provision of the Articles of Incorporation or
by-laws of Sub; (ii) violate, conflict with, result in a breach of any
provision of, constitute a default (or an event which, with notice or lapse of
time or both, would constitute a default) under, result in the termination or
in a right of termination or cancellation of, accelerate the performance
required by, result in the triggering of any payment or other material
obligations pursuant to, result in the creation of any Encumbrance upon any of
the material properties of Sub under, or result in being declared void,
voidable or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any
material license, franchise, permit, lease, contract, agreement or other
instrument, commitment or obligation to which Sub is a party, or by which Sub
or any of its properties is bound or affected, except for any of the foregoing
matters which would not, individually or in the aggregate, prevent or delay the
consummation of the transactions contemplated hereby; or (iii) other than the
Regulatory Filings, require any consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, the failure to obtain or make which would, individually or in the
aggregate, prevent or delay the consummation of the transactions contemplated
hereby.
6.5. Interim Operations of Sub. Sub was formed solely for
the purpose of engaging in the transactions contemplated hereby, has engaged in
no other business activities and has conducted its operations only as
contemplated hereby.
6.6. Financing. Sub has sufficient sources of liquid
capital funds, and at the Effective Time will fund, in cash, to the Company
sufficient equity capital to pay all amounts required by Section 4.2 hereof and
to pay all other amounts required to be paid hereunder by Sub at the Effective
Time. Sub has delivered to the Company complete and correct executed copies of
letters with respect to the financing (the "Financing Letters") required for
the consummation of the transactions contemplated hereby. Assuming satisfaction
of all applicable conditions set forth in the Financing Letters and full
funding thereunder, such financing, together with the other funds available to
Sub as provided above, will provide sufficient funds to consummate the
transactions contemplated hereby.
ARTICLE 7
COVENANTS
7.1. Alternative Proposals.
(a) The Company agrees (x) that neither it nor any of its
Subsidiaries shall, and the Company shall cause its officers, directors,
employees, agents and
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representatives (including, without limitation, any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) not to, initiate,
solicit or encourage, directly or indirectly, any inquiries or the making or
implementation of any proposal or offer (including, without limitation, any
proposal or offer to its stockholders) with respect to a merger, acquisition,
consolidation, share exchange or similar transaction involving, or any purchase
of all or any significant portion of the assets or any securities of, the
Company or any of its Subsidiaries (any such proposal or offer being
hereinafter referred to as an "Alternative Proposal") or engage in any
negotiations concerning, or provide any confidential information or data to, or
have any discussions with, any person relating to an Alternative Proposal, or
otherwise facilitate (including by waiving the terms of any confidentiality or
standstill agreement) any effort or attempt to make or implement an Alternative
Proposal and (y) that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any of the foregoing, and it will take the necessary
steps to inform the individuals or entities referred to above of the
obligations undertaken in this Section 7.1.
(b) Notwithstanding the foregoing, nothing contained in
this Section 7.1 shall prohibit the Board of Directors of the Company or its
designees from furnishing information to or entering into discussions or
negotiations with any person or entity that makes an unsolicited bona fide
written Alternative Proposal, if, and only to the extent that, (w) the
furnishing of such information is pursuant to a reasonable and customary
confidentiality agreement, (which confidentiality agreement shall be on terms
no more favorable in the aggregate to such person or entity than those set
forth in the confidentiality agreement between the Company and Apollo
Management, L.P.), (x) the Board of Directors of the Company determines in good
faith after consultation with outside counsel that such action is required for
the Board of Directors to comply with its fiduciary duties to stockholders
imposed by law, (y) the Board of Directors of the Company determines in good
faith after consultation with its financial advisor that such Alternative
Proposal, if accepted, is reasonably likely to be consummated, taking into
account all legal, financial and regulatory aspects of the proposal and the
person or entity making the proposal and would, if consummated, result in a
more favorable transaction than the transaction contemplated by this Agreement
and (z) the Company is otherwise in compliance with this Section 7.1. Nothing
in this Section 7.1 shall prevent the Company from complying with Rule 14e-2
under the Exchange Act, to the extent applicable.
(c) The Company agrees that it will notify Sub
immediately if any such inquiries or proposals are received by (including the
identity of the party making the inquiry or proposal and the terms of the
proposal), any such information is requested from the Company, or any such
negotiations or discussions are sought to be initiated or continued with the
Company. The Company agrees that it will keep Sub informed, on an immediate
basis, of the status and the terms of any such discussions or negotiations,
including any amendments or modifications to the proposal.
(d) Nothing in this Section 7.1 shall (x) permit the
Company to terminate this Agreement (except as specifically provided in Article
9 hereof), (y) permit the Company to enter into any agreement (other than the
confidentiality agreement contemplated by Section 7.1(b)(w)) with respect to an
Alternative Proposal during the
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term of this Agreement, it being agreed that during the term of this Agreement,
the Company shall not enter into any agreement with any person that provides
for, or in any way facilitates, an Alternative Proposal, or (z) affect any
other obligation of the Company under this Agreement.
7.2. Interim Operations. Prior to the Effective Time,
except as set forth in the Company Disclosure Letter or as contemplated by any
other provision of this Agreement, unless Sub has consented in writing thereto,
the Company:
(i) shall, and shall cause each of its Subsidiaries to,
conduct its operations and business according to their usual, regular
and ordinary course consistent with past practice;
(ii) shall use its best efforts, and shall cause each of
its Subsidiaries to use its best efforts, to preserve intact their
business organizations and goodwill, keep available the services of
their respective officers and employees and maintain satisfactory
relationships with those persons having business relationships with
them;
(iii) shall not, and shall cause its Subsidiaries not to,
amend their respective Articles of Incorporation or by-laws or
comparable governing instruments;
(iv) shall promptly notify Sub of (x) any material change
in its condition (financial or otherwise), business, prospects,
properties, assets, liabilities or the normal course of its business
or of its properties, (y) any material litigation or material
governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or (z) the breach of
any representation or warranty contained herein;
(v) shall promptly deliver to Sub correct and complete
copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement;
(vi) shall not, and shall not permit any of its
Subsidiaries to, authorize, propose or announce an intention to
authorize or propose, or enter into an agreement with respect to, any
merger, consolidation or business combination (other than the Merger),
release or relinquishment of any material contract rights, or any
acquisition or disposition of assets or securities in excess of
$100,000 in the aggregate other than in the ordinary course of
business consistent with past practice;
(vii) shall not, and shall not permit any of its
Subsidiaries to, (x) grant, confer or award any options, warrants,
conversion rights or other rights, not existing on the date hereof, to
acquire any shares of its capital stock or other securities of the
Company or its Subsidiaries or (y) accelerate, amend or change the
period of exercisability of options or restricted stock granted under
any
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employee stock plan or, except as contemplated by Section 4.3(a)(i),
authorize cash payments in exchange for any options granted
under any of such plans;
(viii) shall not, and shall not permit any of its
Subsidiaries to, amend in any material respect the terms of the
Benefit Plans, including, without limitation, any employment,
severance or similar agreements or arrangements in existence on the
date hereof, or adopt any new employee benefit plans, programs or
arrangements or any employment, severance or similar agreements or
arrangements;
(ix) shall not, and shall not permit any of its
Subsidiaries to (x) increase or agree to increase the compensation
payable or to become payable to its officers or, other than increases
in accordance with past practice which are not material, to its
employees or (y) enter into any collective bargaining agreement;
(x) shall not, and shall not permit any of its
Subsidiaries to, (x) incur, create, assume or otherwise become liable
for borrowed money or assume, guarantee, endorse or otherwise become
responsible or liable for the obligations of any other individual,
corporation or other entity or (y) make any loans or advances to any
other person, except in the case of clause (x) for borrowings under
existing credit facilities in the ordinary course of business and,
except in the case of clause (y) for advances consistent with past
practice which are not material;
(xi) shall not, and shall not permit any of its
Subsidiaries to, (x) materially change any practice with respect to
Taxes, (y) make, change or revoke any material Tax election, or (z)
settle or compromise any material dispute involving a Tax liability;
(xii) shall not, and shall not permit any of its
Subsidiaries to, (x) declare, set aside or pay any dividend or make
any other distribution or payment with respect to any shares of its
capital stock or other ownership interests or (y) directly or
indirectly redeem, purchase or otherwise acquire any shares of its
capital stock or capital stock of any of its Subsidiaries, or make any
commitment for any such action or (z) split, combine or reclassify any
of its capital stock or issue or authorize the issuance of any other
securities in respect of, in lieu of or in substitution for shares of
its capital stock;
(xiii) shall not, and shall not permit any of its
Subsidiaries to, issue, deliver, sell, pledge or otherwise encumber
any shares of its capital stock, any other securities or any
securities convertible into, or any rights, warrants or options to
acquire, any such shares, securities or convertible securities (other
than the issuance of shares of Company Common Stock upon the exercise
of Company Stock Options outstanding on the date hereof in accordance
with their present terms);
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(xiv) shall not, and shall not permit any of its
Subsidiaries to, make or agree to make any capital expenditure or
expenditures with respect to property, plant or equipment which,
individually or in a series of related transactions, is in excess of
$100,000 or, in the aggregate, are in excess of $500,000 except as
otherwise in the ordinary course of business consistent with past
practice in order to satisfy actual or expected contractual
commitments to customers;
(xv) shall not, and shall not permit any of its
Subsidiaries to, change any accounting principles or practices;
(xvi) shall not, and shall not permit any of its
Subsidiaries to, pay, discharge, settle or satisfy any claims,
liabilities or obligations (absolute, accrued, asserted or unasserted,
contingent or otherwise), other than the payment, discharge or
satisfaction, in the ordinary course of business consistent with past
practice or in accordance with their terms, of liabilities reflected
or reserved against in the most recent consolidated financial
statements (or the notes thereto) of the Company included in the
Company Reports or incurred thereafter in the ordinary course of
business consistent with past practice, or waive any material benefits
of, or agree to modify in any material respect, any confidentiality,
standstill, non-solicitation or similar agreement to which the Company
or any Subsidiary is a party; and
(xvii) shall not, and shall not permit any of its
Subsidiaries to take, or agree (in writing or otherwise) or resolve to
take, any of the foregoing actions.
7.3. Meetings of Stockholders. The Company will take all
action necessary in accordance with applicable law and its Articles of
Incorporation and by-laws, including the timely mailing of the Proxy Statement,
to convene the Special Meeting of its stockholders as promptly as practicable
to consider and vote upon the approval of this Agreement and the transactions
contemplated hereby. Subject to fiduciary obligations under applicable law,
the Board of Directors of the Company shall recommend such approval, shall not
withdraw or modify such recommendation and shall take all lawful action to
solicit such approval. Without limiting the generality of the foregoing, in
the event that the Board of Directors of the Company withdraws or modifies its
recommendation, the Company nonetheless shall cause the meeting of the
stockholders to be convened and a vote taken with respect to the Merger and the
Board of Directors of the Company shall communicate to the Company's
stockholders its basis for such withdrawal or modification as contemplated by
Section 607.1103(2)(a) of the FBCA.
7.4. Filings and Other Action. Subject to the terms and
conditions herein provided, the Company and Sub shall: (a) promptly make their
respective filings and thereafter make any other required submissions under the
HSR Act with respect to the Merger; (b) use all reasonable efforts to cooperate
with one another in (i) determining which filings are required to be made prior
to the Effective Time with, and which consents, approvals, permits or
authorizations are required to be obtained prior to the Effective Time from,
governmental or regulatory authorities of the United States, the
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several states and foreign jurisdictions in connection with the execution and
delivery of this Agreement and the consummation of the transactions
contemplated hereby and (ii) promptly making all such filings and promptly
seeking all such consents, approvals, permits or authorizations; and (c) use
all reasonable efforts to take, or cause to be taken, all other action and do,
or cause to be done, all other things necessary, proper or appropriate,
including in connection with obtaining the funding contemplated by the
Financing Letters, to consummate and make effective the transactions
contemplated by this Agreement as promptly as practicable.
7.5. Access to Information. From the date hereof to the
Effective Time, the Company shall (i) allow all designated officers, attorneys,
accountants and other representatives of Sub reasonable access at all
reasonable times to the offices, records and files, correspondence, audits and
properties, including for the purpose of conducting such environmental
examinations and audits as Sub shall request, as well as to all information
relating to commitments, contracts, titles and financial position, or otherwise
pertaining to the business and affairs, of the Company and its Subsidiaries
(ii) furnish to Sub, Sub's counsel, financial advisors, auditors and other
authorized representatives such financial and operating data and other
information as such persons may reasonably request and (iii) instruct the
employees, counsel and financial advisors of the Company to cooperate with Sub
in Sub's investigation of the business of the Company and its Subsidiaries.
7.6. Publicity. The initial press release relating to this
Agreement shall be a joint press release and thereafter the Company and Sub
shall, subject to their respective legal obligations (including requirements of
stock exchanges and other similar regulatory bodies), consult with each other,
and use reasonable efforts to agree upon the text of any press release, before
issuing any such press release or otherwise making public statements with
respect to the transactions contemplated hereby and in making any filings with
any federal or state governmental or regulatory agency or with any national
securities exchange with respect thereto.
7.7. Proxy Statement; Form S-4.
(a) Sub and the Company shall cooperate and prepare, and
the Company shall file with the SEC as soon as practicable, a proxy statement
with respect to the Special Meeting of the stockholders of the Company in
connection with the Merger (the "Proxy Statement"), respond to comments of the
staff of the SEC, clear the Proxy Statement with the staff of the SEC and
promptly thereafter mail the Proxy Statement to all holders of record of
Company Common Stock. If the Stock Election is exercised, Sub and the Company
shall cooperate and prepare, and the Company shall file a Registration
Statement on Form S-4 (the "Form S-4") under the Securities Act with the SEC
promptly following receipt of final comments from the staff of the SEC on the
Proxy Statement (or advice that the staff will not review such filing) or such
other time as Sub may determine. The Company will comply in all respects with
the requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder applicable to the Proxy Statement, the Form
S-4 and the solicitation of proxies for the Special Meeting (including any
requirement to amend or supplement the Proxy Statement) and each party
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shall furnish to the other such information relating to it and its affiliates
and the transactions contemplated by this Agreement and such further and
supplemental information as may be reasonably requested by the other party.
The Proxy Statement shall include the recommendation of the Company's Board of
Directors in favor of the Merger, unless otherwise required by the fiduciary
duties of the directors under applicable law as contemplated hereby. The
Company shall use all reasonable efforts, and Sub will cooperate with the
Company, to have the Form S-4 declared effective by the SEC as promptly as
practicable. The Company shall use its best efforts to obtain prior to the
effective date of the Form S-4, all necessary state securities law or "Blue
Sky" permits or approvals required to carry out the transactions contemplated
by this Agreement and will pay all expenses incident thereto.
(b) The Company agrees that the Proxy Statement, and if
applicable the Form S-4, and each amendment or supplement thereto at the time
of mailing thereof and at the time of the meeting of stockholders of the
Company, or, in the case of the Form S-4 and each amendment or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not false or misleading;
provided, however, that the foregoing shall not apply to the extent that any
such untrue statement of a material fact or omission to state a material fact
was made by the Company in reliance upon and in conformity with written
information concerning Sub furnished to the Company by Sub specifically for use
in the Proxy Statement or the Form S-4. Sub agrees that the written
information concerning Sub provided by it for inclusion in the Proxy Statement
and each amendment or supplement thereto, at the time of mailing thereof and at
the time of the meeting of stockholders of the Company, or, in the case of the
Form S-4 or any amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not false or misleading.
(c) No amendment or supplement to the Proxy Statement or
the Form S-4 will be made by Sub or the Company without the approval of the
other party. The Company will advise Sub of any request by the SEC for
amendment of the Proxy Statement or the Form S-4 or comments thereon and
responses thereto or requests by the SEC for additional information.
7.8. Further Action. Each party hereto shall, subject to
the fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.
7.9. Schedule 13E-3.
(a) If, in the opinion of the Company's counsel after
consultation with counsel to Sub, the filing with the SEC of a Transaction
Statement on Schedule 13E-3 (the "Schedule 13E-3") in connection with the
Merger is required by Rule 13e-3 under
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the Exchange Act, the Company will file the Schedule 13E-3 with the SEC at the
time of filing of the Proxy Statement. If the Schedule 13E-3 is filed, at the
time of any amendment to the Proxy Statement, the parties will cause to be
filed with the SEC an appropriate amendment to the Schedule 13E-3.
7.10. Expenses. Except as set forth in Section 9.5, whether
or not the Merger is consummated, all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby shall be paid by
the party incurring such expenses except as expressly provided herein.
7.11. Insurance; Indemnity. (a) Sub agrees that all rights
to indemnification for acts or omissions occurring prior to the Effective Time
in favor of the current or former directors or officers of the Company as
provided in the Articles of Incorporation or by-laws of the Company shall
survive the Merger and shall continue in full force and effect in accordance
with their terms from the Effective Time of the Merger until the expiration of
the applicable statute of limitations with respect to any claims against the
current or former directors or officers of the Company arising out of such acts
or omissions. With respect to the officers and directors of the Company
immediately prior to the Closing, the Company shall purchase (and Sub shall not
object to such purchase) a run-off policy for current directors' and officers'
liability insurance maintained by the Company, such policy to become effective
at the Closing and remain in effect for a period of five years after the
Closing, at a premium not to exceed 200% of the annual premium of the Company's
director's and officer's insurance policy in effect on the date hereof.
(b) The Company agrees to use its best efforts to amend its
existing insurance policies or purchase a supplemental insurance policy which
provides pollution coverage at a level reasonably acceptable to Sub for
wrongful or negligent misdelivery of product transported by the Company, its
Subsidiaries and each participant in the Affiliate Program.
7.12. Certain Tax Matters. From the date hereof until the
Effective Time, (i) the Company and each Subsidiary will prepare and file, in
the manner required by applicable law, all Tax Returns and reports
("Post-Signing Returns") required to be filed; (ii) the Company and each
Subsidiary will timely pay all Taxes shown as due and payable on such
Post-Signing Returns that are so filed; (iii) the Company and each Subsidiary
will make provision for all Taxes payable by the Company and/or any such
Subsidiary for which no Post-Signing Return is due prior to the Effective Time;
and (iv) the Company will promptly notify Sub in writing of any action, suit,
proceeding, claim or audit pending against or with respect to the Company or
any Subsidiary in respect of any Tax.
7.13. Other Actions. The Company shall not, and shall cause
each of its Subsidiaries not to, take or omit to take any action, the taking
or omission of which would reasonably be expected to result in (a) any of the
representations and warranties of the Company set forth in this Agreement
becoming untrue or inaccurate or (b) any of the conditions set forth in Article
8 not being satisfied.
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7.14. Advice of Changes; Filings. The Company shall confer
with Sub on a regular and frequent basis as reasonably requested by Sub, report
on operational matters and promptly advise Sub orally and, if requested by Sub,
in writing, of any material change with respect to the Company or any of its
Subsidiaries. The Company shall promptly provide to Sub (or its counsel) copies
of all filings made by the Company or any of its Subsidiaries with any
Governmental Entity in connection with this Agreement and the transactions
contemplated hereby.
7.15. Financial Information. The Company shall furnish to
Sub as soon as available but in any event within 25 days of each calendar
month, the unaudited consolidated balance sheets and income statements of the
Company (to be prepared in accordance with GAAP consistently applied), showing
its financial condition as of the close of such month and the results of
operations during such month and for the then elapsed portion of the Company's
fiscal year, in each case, setting forth the comparative figures for the
corresponding month in the prior fiscal year and the corresponding elapsed
portion of the prior fiscal year.
ARTICLE 8
CONDITIONS
8.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligation of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Closing Date of the following
conditions:
(a) This Agreement and the transactions contemplated
hereby shall have been approved by a majority of the holders of the issued and
outstanding shares of the Company Common Stock in accordance with applicable
law.
(b) The waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated.
(c) No statute, rule, regulation, executive order, writ,
decree, ruling or injunction shall have been enacted, entered, promulgated or
enforced by any Governmental Entity which prohibits the consummation of the
Merger. In the event any such order or injunction shall have been issued, each
party agrees to use its reasonable efforts to have any such order or injunction
lifted.
(d) If filed, the Form S-4 shall have become effective
and shall be effective at the Effective Time, and no stop order suspending
effectiveness of the Form S-4 shall have been issued, no action, suit,
proceeding or investigation by the SEC to suspend the effectiveness thereof
shall have been initiated and be continuing, and all necessary approvals under
state securities laws relating to the issuance or trading of the Surviving
Corporation Common Stock to be issued to holders of Company Common Stock in
connection with the Merger shall have been received.
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(e) All consents, authorizations, orders and approvals of
(or filings or registrations with) any governmental commission, board or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement shall have been obtained or made, except for
filings in connection with the Merger and any other documents required to be
filed after the Effective Time and except where the failure to have obtained or
made any such consent, authorization, order, approval, filing or registration
would not have a material adverse effect on the business of the Company and its
Subsidiaries, taken as a whole, following the Effective Time.
8.2. Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be subject to
the satisfaction at or prior to the Closing Date of the following condition:
Sub shall have performed in all material respects its agreements contained in
this Agreement required to be performed on or prior to the Closing Date (other
than those agreements which are qualified by materiality which shall have been
performed in all respects), the representations and warranties of Sub contained
in this Agreement and in any document delivered in connection herewith shall be
true and correct in all respects (except for those representations and
warranties which are not qualified by materiality, which shall be true and
correct in all material respects) as of the date hereof and as of the Closing
Date (except for those representations and warranties which address matters
only as of a particular date, other than the date hereof, which shall be true
and correct as of such date), and the Company shall have received a certificate
of the President of Sub, dated the Closing Date, certifying to such effect.
8.3. Conditions to Obligation of Sub to Effect the Merger.
The obligations of Sub to effect the Merger shall be subject to the
satisfaction at or prior to the Closing Date of the following conditions:
(a) The Company shall have performed in all material
respects its agreements contained in this Agreement required to be performed on
or prior to the Closing Date (other than those agreements which are qualified
by materiality which shall have been performed in all respects), the
representations and warranties of the Company contained in this Agreement and
in any document delivered in connection herewith shall be true and correct in
all respects (except for those representations and warranties which are not
qualified by materiality, which shall be true and correct in all material
respects) as of the date hereof and as of the Closing Date (except for those
representations and warranties which address matters only as of a particular
date, other than the date hereof, which shall be true and correct as of such
date), and Sub shall have received a certificate of the President of the
Company, dated the Closing Date, certifying to such effect.
(b) The funding contemplated by the Financing Letters
shall have been obtained.
(c) All notices required to be given prior to the
Effective Time with, and all consents, approvals, authorizations, waivers and
amendments required to be obtained prior to the Effective Time from, any third
party in connection with the consummation of the Merger and the finances
thereof, have been made or obtained other than those the
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failure of which to be made or obtained would not have a Company Material
Adverse Effect.
(d) Arthur Andersen LLP shall have completed its audit,
in accordance with generally accepted auditing standards, of the Company 1997
Financial Statements and shall have issued an unqualified report with respect
thereto (including that such audited financial statements are in accordance
with GAAP) and there shall be no material difference between such audited
financial statements and the Company 1997 Financial Statements (except
reclassifications (other than extraordinary and non-recurring items) and normal
year-end adjustments). For purposes hereof, a material difference shall mean a
negative variance in Revenue and Net Income in excess of 5%.
(e) From the date of this Agreement through the Effective
Time, there shall not have occurred a Company Material Adverse Effect.
(f) Two of the three employment agreements between the
Company, on the one hand, and Charles J. O'Brien, Jr., Marvin E. Sexton, and
Richard Brandewie, on the other hand, which are attached hereto as Exhibits A,
B and C, respectively, and the non-competition agreements between the Company,
on the one hand, and each of Elton E. Babbitt and Gordon Babbitt, on the other
hand, which are attached hereto as Exhibits D and E, respectively, shall have
been executed and delivered and shall be in full force and effect.
ARTICLE 9
TERMINATION
9.1. Termination by Mutual Written Consent. This Agreement
may be terminated and the Merger may be abandoned at any time prior to the
Effective Time, before or after the approval of this Agreement by the
stockholders of the Company, by the mutual written consent of Sub and the
Company.
9.2. Termination by Either Sub or the Company. This
Agreement may be terminated and the Merger may be abandoned by action of the
Board of Directors of either Sub or the Comp any if:
(a) the Merger shall not have been consummated by the
date which is nine months from the date hereof; provided, that the terminating
party shall not have breached in any material respect its obligations under
this Agreement in any manner that shall have proximately contributed to the
failure to consummate the Merger by such date;
(b) the approval of the Company's stockholders required
by Section 8.1(a) shall not have been obtained at a meeting duly convened
therefor or at any adjournment thereof;
(c) a Governmental Entity shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining
or otherwise prohibiting the
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transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that, the
party seeking to terminate this Agreement pursuant to this clause (c) shall
have used all reasonable efforts to remove such injunction, order or decree; or
(d) there has been a breach by the other of any
representation, warranty or agreement contained in this Agreement (without
regard to the materiality qualifiers contained therein) which would result in a
condition set forth in Section 8.2(a) or 8.3(a) of this Agreement, as the case
may be, not being satisfied, which breach is not curable or, if curable, is not
cured within 20 days after written notice of such breach is given by the other
party.
9.3. Termination by the Company. This Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, prior to the approval by the stockholders of the Company referred to in
Section 8.1(a), by action of the Board of Directors of the Company, if in the
exercise of its good faith judgment as to fiduciary duties to its stockholders
imposed by law, after consultation with outside counsel, the Board of Directors
of the Company determines that such termination is required in order to execute
an agreement providing for the implementation of the transactions contemplated
by an Alternative Proposal, provided, however, that the Company shall have
complied with the provisions of Section 7.1 hereof, including providing notice
of the terms of the Alternative Proposal. No termination of this Agreement by
the Company shall be effective unless and until the Company has paid Sub any
amounts owed by it pursuant to Section 9.5(a).
9.4. Termination by Sub. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time by
action of the Board of Directors of Sub, if the Board of Directors of Company
shall have withdrawn or modified in a manner materially adverse to Sub its
approval or recommendation of this Agreement or the Merger or shall have
recommended an Alternative Proposal or shall have failed to reconfirm its
recommendation of this Agreement and the transactions contemplated hereby
within five business days of Sub's request, made with reasonable frequency,
that it do so.
9.5. Effect of Termination and Abandonment. In the event
that this Agreement is terminated by either party pursuant to:
(i) Section 9.2(b); then, if (A) (1) there shall not have
been a material breach of this Agreement by Sub and (2) subsequent to
the date hereof and prior to or at the time of the meeting referred to
in Section 7.3 hereof a person or entity shall have made a bona fide
publicly announced Alternative Proposal with respect to the Company or
any of its Subsidiaries or shall have made public an intention
(whether or not conditional) to make such an Alternative Proposal with
respect to the Company or any of its Subsidiaries, the Company shall
reimburse Sub for its expenses in an amount not to exceed $3.0
million; or (B) if the conditions set forth in clause (A)(2) above are
not met, the Company shall reimburse Sub for its expenses in an amount
not to exceed $1.5 million; provided that in the event
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within 12 months of such termination the Company enters into a
definitive agreement with respect to a transaction that constitutes an
Alternative Proposal, the Company shall, at the time of entering into
such agreement, pay Sub fee equal to $7.5 million less the amount
previously reimbursed to Sub pursuant to clause (A) or (B) above; or
(ii) Section 9.2(d) arising from (A) a willful breach of
any representation or warranty or the material breach of any agreement
by the Company, then the Company shall pay Sub a fee of $6.0 million
and shall reimburse Sub for its expenses in an amount not to exceed
$1.5 million, (B) a breach of any representation or warranty by the
Company which breach existed on or before the date hereof and does not
constitute a willful breach, then the Company shall reimburse Sub for
its expenses in an amount not to exceed $3.0 million, or (C) a breach
of any representation or warranty by the Company which arose after the
date hereof and does not constitute a willful breach, then the Company
shall reimburse Sub for its expenses in an amount not to exceed $1.5
million; provided, that in the event this Agreement shall have been
terminated pursuant to clause (B) or (C) above and within 12 months
of such termination the Company enters into a definitive agreement
with respect to a transaction that constitutes an Alternative
Proposal, the Company shall, at the time of entering into such
agreement, pay Sub a fee equal to $7.5 million less the amount
previously reimbursed to Sub pursuant to clause (B) or (C) above; or
(iii) Section 9.3 or Section 9.4, then the Company shall
pay Sub a fee of $6.0 million and shall reimburse Sub for its expenses
in an amount not to exceed $1.5 million.
Any monies owed by the Company to Sub in accordance with the
foregoing shall be payable by wire transfer of same day funds either on the
date specifically contemplated thereby or, otherwise, within two business days
after such amount becomes due. The Company acknowledges that the agreements
contained in this Section 9.5(a) are an integral part of the transactions
contemplated in this Agreement, and that, without these agreements, Sub would
not enter into this Agreement; accordingly, if the Company fails to promptly
pay the amount due pursuant to this Section 9.5(a), and, in order to obtain
such payment, Sub commences a suit which results in a judgment against the
Company for the fee set forth in this Section 9.5(a), the Company shall pay to
Sub its costs and expenses (including attorneys' fees) in connection with such
suit, together with interest on the amount of the fee at the rate of 12% per
annum from the date such fee was required to be paid.
(b) In the event of termination of this Agreement and the
abandonment of the Merger pursuant to this Article 9, all obligations of the
parties hereto shall terminate, except the obligations of the parties set forth
in this Section 9.5. Nothing in this Section 9.5(b) shall relieve any party
from liability for willful breach of this Agreement.
9.6. Extension; Waiver. At any time prior to the Effective
Time, any party hereto may, to the extent legally allowed, (a) extend the time
for the performance of
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any of the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such party contained
herein or in any document delivered pursuant hereto and (c) waive compliance
with any of the agreements or conditions for the benefit of such party
contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE 10
GENERAL PROVISIONS
10.1. Non-survival of Representations, Warranties. The
representations and warranties in this Agreement or in any instrument delivered
pursuant to this Agreement shall terminate at the Effective Time.
10.2. Notices. Any notice required to be given hereunder
shall be given in writing, addressed as follows:
If to Sub:
Joshua Harris
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 261-4102
With copies to:
Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 259-6333
If to the Company:
Richard J. Brandewie
MTL Inc.
3108 Central Drive
Plant City, Florida 33567
Facsimile: (813) 754-3288
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With copies to:
William J. Schifino, Esq.
Schifino & Fleischer, P.A.
Suite 2700
One Tampa City Center
Tampa, Florida 33602
Facsimile: (813) 223-3070
or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been given upon receipt of such notice.
10.3. Assignment; Binding Effect. Neither this Agreement
nor any of the rights, interests or obligations hereunder shall be assigned by
any of the parties hereto (whether by operation of law or otherwise) without
the prior written consent of the other parties. Subject to the preceding
sentence, this Agreement shall be binding upon and shall inure to the benefit
of the parties hereto and their respective successors and assigns.
Notwithstanding anything contained in this Agreement to the contrary, nothing
in this Agreement, expressed or implied, is intended to confer on any person
other than the parties hereto or their respective heirs, successors, executors,
administrators and assigns any rights, remedies, obligations or liabilities
under or by reason of this Agreement.
10.4. Entire Agreement. This Agreement, the Exhibits and
the Company Disclosure Letter and any documents delivered by the parties in
connection herewith constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings among the parties with respect thereto. No addition to or
modification of any provision of this Agreement shall be binding upon any party
hereto unless made in writing and signed by all parties hereto.
10.5. Amendment. This Agreement may be amended by the
parties hereto at any time before or after approval of matters presented in
connection with the Merger by the stockholders of the Company, but after any
such stockholder approval, no amendment shall be made which by law requires the
further approval of stockholders without obtaining such further approval. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
10.6. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of Florida without
regard to its rules of conflict of laws.
10.7. Counterparts. This Agreement may be executed by the
parties hereto in separate counterparts, each of which when so executed and
delivered shall be an original, but all such counterparts shall together
constitute one and the same instrument. Each counterpart may consist of a
number of copies hereof each signed by less than all, but together signed by
all of the parties hereto.
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10.8. Headings. Headings of the Articles and Sections of
this Agreement are for the convenience of the parties only, and shall be given
no substantive or interpretive effect whatsoever.
10.9. Interpretation. In this Agreement, unless the context
otherwise requires, words describing the singular number shall include the
plural and vice versa, and words denoting any gender shall include all genders
and words denoting natural persons shall include corporations and partnerships
and vice versa.
10.10. Waivers. Except as provided in this Agreement, no
action taken pursuant to this Agreement, including, without limitation, any
investigation by or on behalf of any party, shall be deemed to constitute a
waiver by the party taking such action of compliance with any representations,
warranties, covenants or agreements contained in this Agreement. The waiver by
any party hereto of a breach of any provision hereunder shall not operate or be
construed as a waiver of any prior or subsequent breach of the same or any
other provision hereunder.
10.11. Severability. Any term or provision of this
Agreement which is invalid or unenforceable in any jurisdiction shall, as to
that jurisdiction, be ineffective to the extent of such invalidity or
unenforceability without rendering invalid or unenforceable the remaining terms
and provisions of this Agreement or affecting the validity or enforceability of
any of the terms or provisions of this Agreement in any other jurisdiction. If
any provision of this Agreement is so broad as to be unenforceable, the
provision shall be interpreted to be only so broad as is enforceable.
10.12. Enforcement of Agreement. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions of
this Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
10.13. Interpretation. As used in this Agreement, the
word "Subsidiary" or "Subsidiaries" means any corporation or other
organization, whether incorporated or unincorporated, of which the Company
directly or indirectly owns or controls at least a majority of the securities
or other interests having by their terms ordinary voting power to elect a
majority of the board of directors or others performing similar functions with
respect to such corporation or other organization, or any organization of which
the Company is a general partner. As used in this Agreement, "includes,"
"including" or similar words shall be deemed to be followed by "without
limitation." As used in this Agreement, the word "Knowledge" (when so
capitalized) means the knowledge of the officers and directors of the Company
without independent investigation.
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IN WITNESS WHEREOF, the parties have executed this Agreement
and caused the same to be duly delivered on their behalf on the day and year
first written above.
MTL INC.
By: /s/ Charles J. O'Brien, Jr.
--------------------------------
Charles J. O'Brien, Jr.
President
SOMBRERO ACQUISITION CORP.
By: /s/ Joshua Harris
--------------------------------
Joshua Harris
President
44
