<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
MTL, INC.
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(Name of Issuer)
COMMON STOCK, PAR VALUE $.01
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(Title of Class of Securities)
624903100
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(CUSIP Number)
Mr. Joshua J. Harris
Sombrero Acquisition Corp.
c/o Apollo Management, L.P.
1301 Avenue of the Americas, 38th Floor
New York, New York 10019
(212) 261-4000
with copies to:
Michael D. Weiner, Esq. Morton A. Pierce, Esq.
Apollo Management, L.P. Dewey Ballantine LLP
1999 Avenue of the Stars, Suite 1900 1301 Avenue of the Americas
Los Angeles, California 90067 New York, New York 10019
(310) 201-4100 (212) 259-8000
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
February 10, 1998
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(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to report
the acquisition which is the subject of this Schedule 13D, and is filing this
schedule because of Rule 13d-1(e), (f) or (g) check the following box [ ].
NOTE: Schedules filed in paper format shall include a singed original and five
copies of the schedule, including all exhibits. See Rule 13d-7(b) for other
parties to whom copies are to be sent.
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities, and
for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed
to be "filed" for the purpose of Section 18 of the Securities Exchange Act of
1934 ("Act") or otherwise subject to the liabilities of that section of the Act
but shall be subject to all other provisions of the Act (however, see the
Notes).
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SCHEDULE 13D
CUSIP NO. 624903100 PAGE 2 OF 14 PAGES
- ------------------------ --------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
SOMBRERO ACQUISITION CORP.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[x]
(b)[ ]
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3 SEC USE ONLY (a)[ ]
(b)[ ]
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e). [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------
OWNED BY EACH 8 SHARED VOTING POWER
REPORTING PERSON 1,125,197
WITH ------------------------------------------------------
9 SOLE DISPOSITIVE POWER
0
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,125,197
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12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
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13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.7%
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14 TYPE OF REPORTING PERSON
CO
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Page 2 of 14 Pages
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SCHEDULE 13D
CUSIP NO. 624903100 PAGE 3 OF 14 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
APOLLO INVESTMENT FUND III, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[x]
(b)[ ]
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3 SEC USE ONLY (a)[ ]
(b)[ ]
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e). [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------
OWNED BY EACH 8 SHARED VOTING POWER
REPORTING PERSON 1,125,197
WITH ------------------------------------------------------
9 SOLE DISPOSITIVE POWER
0
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,125,197
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.7%
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14 TYPE OF REPORTING PERSON
CO
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Page 3 of 14 Pages
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SCHEDULE 13D
CUSIP NO. 624903100 PAGE 4 OF 14 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
APOLLO OVERSEAS PARTNERS III, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[x]
(b)[ ]
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3 SEC USE ONLY (a)[ ]
(b)[ ]
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e). [ ]
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6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
NUMBER OF 7 SOLE VOTING POWER
SHARES 0
BENEFICIALLY ------------------------------------------------------
OWNED BY EACH 8 SHARED VOTING POWER
REPORTING PERSON 1,125,197
WITH ------------------------------------------------------
9 SOLE DISPOSITIVE POWER
0
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,125,197
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.7%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
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Page 4 of 14 Pages
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SCHEDULE 13D
CUSIP NO. 624903100 PAGE 5 OF 14 PAGES
- ------------------------ --------------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
APOLLO (U.K.) PARTNERS III, L.P.
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2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[x]
(b)[ ]
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3 SEC USE ONLY (a)[ ]
(b)[ ]
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e). [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
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7 SOLE VOTING POWER
0
NUMBER OF ------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 1,125,197
OWNED BY EACH ------------------------------------------------------
REPORTING PERSON 9 SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,125,197
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN
SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.7%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
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Page 5 of 14 Pages
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SCHEDULE 13D
CUSIP NO. 624903100 PAGE 6 OF 14 PAGES
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
APOLLO ADVISORS II, L.P.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a)[x]
(b)[ ]
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3 SEC USE ONLY (a)[ ]
(b)[ ]
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4 SOURCE OF FUNDS
OO
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5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(d) OR 2(e). [ ]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DELAWARE
- --------------------------------------------------------------------------------
7 SOLE VOTING POWER
0
NUMBER OF ------------------------------------------------------
SHARES 8 SHARED VOTING POWER
BENEFICIALLY 1,125,197
OWNED BY EACH ------------------------------------------------------
REPORTING PERSON 9 SOLE DISPOSITIVE POWER
WITH 0
------------------------------------------------------
10 SHARED DISPOSITIVE POWER
0
- --------------------------------------------------------------------------------
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
1,125,197
- --------------------------------------------------------------------------------
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDESCERTAIN SHARES [ ]
- --------------------------------------------------------------------------------
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
24.7%
- --------------------------------------------------------------------------------
14 TYPE OF REPORTING PERSON
CO
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Page 6 of 14 Pages
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Item 1. SECURITY AND ISSUER.
-------------------
This Statement relates to the common stock, par value $0.01
per share ("Common Stock"), of MTL, Inc., a Florida corporation
("Issuer"). The address of the principal executive office of the
Issuer is 3108 Central Drive, Plant City, Florida 33567.
ITEM 2. IDENTITY AND BACKGROUND.
-----------------------
(a)-(c)
and (f) This statement is filed jointly by Sombrero Acquisition Corp.
("Sombrero"), a Delaware Limited Liability Company, Apollo Investment
Fund III, L.P., a Delaware limited partnership ("AIF III"), Apollo
Overseas Partners III, L.P. ("Overseas Partners"), Apollo (U.K.)
Partners III, L.P., a limited partnership organized under the laws of
the United Kingdom ("U.K. Partners" and, together with AIF III and
Overseas Partners, the "Apollo Purchasers") and Apollo Advisors II,
L.P. ("Apollo Advisors"), a Delaware limited partnership and the
general partner of each of the Apollo Purchasers. The foregoing
entities are hereinafter referred to collectively as the "Reporting
Entities." The Reporting Entities are making this joint filing
because they may be deemed to constitute a "group" within the meaning
of Section 13(d)(3) of the Securities Exchange Act of 1934 (the
"Exchange Act").
Sombrero is a Florida corporation formed solely for the
purpose of consummating the transactions contemplated by the Merger
Agreement (as defined in Item 4). All of the interests in Sombrero
are owned by the Apollo Purchasers. However, Sombrero may issue
additional equity interests to third persons. It is not anticipated
that Sombrero will have any significant assets or liabilities other
than those arising under the Merger Agreement or in connection with
the Merger, or engage in any activities other than those incident to
its formation and capitalization and the Merger. The principal office
of Sombrero is c/o Apollo Advisors II, L.P., Two Manhattanville Road,
Purchase, New York, 10577.
Each of the Apollo Purchasers is principally engaged in the
business of investing in securities. The principal office of each of
the Apollo Purchasers is c/o Apollo Advisors II, L.P., Two
Manhattanville Road, Purchase, New York, 10577.
Apollo Advisors is the managing general partner of each of
the Apollo Purchasers. Apollo Advisors is principally engaged in the
business of serving as managing general partner of the Apollo
Purchasers.
Apollo Capital Management II, Inc., a Delaware corporation
("Apollo Capital"), is the general partner of Apollo Advisors. Apollo
Capital is principally engaged in the business of serving as general
partner to Apollo Advisors.
Page 7 of 14 Pages
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Apollo Management, L.P., a Delaware limited partnership
("Apollo Management"), serves as manager of the Apollo Purchasers and
manages their day-to-day operations.
AIF III Management, Inc., a Delaware corporation ("AIM"), is
the general partner of Apollo Management. AIM is principally engaged
in the business of serving as general partner to Apollo Management.
The respective addresses of the principal office of
Advisors, Apollo Capital, Apollo Management and AIM are c/o Apollo
Advisors II, L.P., Two Manhattanville Road, Purchase, New York 10577.
Apollo Fund Administration II LDC, a Cayman Islands LDC
("Apollo Administration"), is the administrative general partner of
each of Overseas Partners and U.K. Partners. Apollo Administration is
principally engaged in the business of serving as administrative
general partner of Overseas Partners and U.K. Partners. The principal
place of business of Apollo Administration is Apollo Fund
Administration II LDC, c/o CIBC Bank and Trust Company (Cayman)
Limited, Edward Street, Georgetown, Grand Cayman, Cayman Islands,
British West Indies.
Apollo Management (UK) Ltd., an English corporation
("Management UK"), is the resident general partner of UK Partners.
Management UK is principally engaged in the business of serving as the
resident general partner of UK Partners. The address of the principal
business of Management UK is Hill House, 1 Little New Street, London
EC4A 3TR, England.
Schedule I to this statement contains information concerning
the Reporting Entities and other persons and entities as to which such
information is required to be disclosed in response to Item 2 and
General Instruction C to Schedule 13D.
(d) and
(e) None of the Reporting Entities, Apollo Capital, Apollo Management,
AIM, Apollo Administration, Management UK nor any of the persons or
entities referred to in Schedule I has, during the last five years,
been convicted in a criminal proceeding (excluding traffic violations
and similar misdemeanors) or been a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a
result of such proceeding was or is subject to a judgment, decree, or
final order enjoining future violations of, or prohibiting or
mandating activities subject to, federal or state securities laws or
finding any violation with respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
-------------------------------------------------
The Reporting Persons acquired beneficial ownership of
1,125,197 shares of the Common Stock pursuant to the Voting Agreement
(as defined and described in Item 6) representing approximately 24.7%
of the issued and outstanding shares of Common Stock. Sombrero
requested that certain
Page 8 of 14 Pages
<PAGE>
stockholders of the Issuer ("Principal Stockholders) enter into the
Voting Agreement as a condition to Sombrero's willingness to enter
into the Merger Agreement (as defined and described in Item 4). The
Voting Agreement will apply to shares of Common Stock that may be
acquired after the date of the agreement by such Principal
Stockholders, including shares of Common Stock issuable upon exercise
of options to purchase Common Stock. No additional consideration was
given in exchange for the Voting Agreement.
ITEM 4. PURPOSE OF TRANSACTION.
----------------------
On February 10, 1998, Sombrero entered into an Agreement and
Plan of Merger (the "Merger Agreement") with the Issuer. Subject to
the satisfaction or waiver of certain terms and conditions of the
Merger Agreement, Sombrero will merge (the "Merger") with and into the
Issuer and, as a result of the Merger, Sombrero will own approximately
90% of the issued and outstanding Shares. In connection with the
Merger Agreement, Sombrero entered into a Voting Agreement dated as of
February 10, 1998 (the "Voting Agreement") with the Principal
Stockholders who own approximately 24.7% of the issued and outstanding
Shares (as defined therein). The purpose of the Voting Agreement and
the transactions contemplated thereby is to ensure approval of the
Merger.
At the Effective Time (as defined in the Merger Agreement),
Sombrero will be merged with and into the Issuer, with the Issuer
continuing as the Surviving Corporation (as defined in the Merger
Agreement) and the directors of Sombrero continuing as the directors
of the Surviving Corporation. All members of the Issuer's current
management will continue as such after the Effective Time.
At the Effective Time, each share of Common Stock held by
the Issuer's stockholders (other than the MTL Common Stock held by
certain officers and directors of the Issuer representing
approximately 10% of the total outstanding shares of Surviving
Corporation Common Stock) will be converted into the right to receive
$40.00 in cash (the "Cash Merger Price"), subject an option by the
Issuer to substitute $1.60 of the Cash Merger Price in the form of
shares in the Surviving Corporation.
Upon the consummation of the Merger, the issued and
outstanding shares of Sombrero will be converted into approximately
90% of the total outstanding shares of Surviving Corporation Common
Stock.
The transactions contemplated in the Merger Agreement will
result in the Common Stock ceasing to be quoted on the Nasdaq Stock
Market and becoming eligible for termination of registration pursuant
to Section 12(g)(4) of the Act.
The foregoing description of the Merger Agreement is
qualified in its entirety by reference to the text of such agreement,
which is filed as an exhibit to this Schedule 13D and is incorporated
by reference herein.
Page 9 of 14 Pages
<PAGE>
ITEM 5. INTEREST IN SECURITIES OF THE ISSUER.
------------------------------------
(a) and
(b) Pursuant to the Voting Agreement, the Reporting Entities have the
shared power to vote, or to direct the vote of, an aggregate of
1,125,197 shares of Common Stock, representing approximately 24.7% of
the issued and outstanding shares of Common Stock. The Voting
Agreement will apply to shares of Common Stock that may be acquired
after the date of the agreement by the Principal Stockholders,
including shares of Common Stock issuable upon exercise of options to
purchase Common Stock.
(c) The responses set forth in Item 4 are incorporated herein.
(d) The Principal Stockholders shall have the right to receive, pro rata,
based on their percentage ownership of the Shares subject, dividends,
if any, and the proceeds from any sale of the Common Stock. The
identity of the Principal Stockholders is set forth in Schedule A to
the Voting Agreement, a copy of which is filed as an exhibit to this
Schedule 13D and is incorporated herein by reference.
(e) Not applicable.
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
---------------------------------------------------------------------
TO SECURITIES OF THE ISSUER.
---------------------------
The responses set forth in Item 4 and Item 5 are incorporated herein.
Pursuant to a Voting Agreement dated February 10, 1998
between the Issuer and the Principal Stockholders (the "Voting
Agreement"), each Principal Stockholder has agreed (and the Voting
Agreement includes an irrevocable proxy provision for the benefit of
Sombrero with respect to the Shares owned by each Principal
Stockholder), (1) to vote all Shares (as defined in the Voting
Agreement) owned by such persons at any meeting of the Issuer's
stockholders or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval with
respect to the Merger and the Merger Agreement is sought, in favor of
the Merger, the adoption by the Company of the Merger Agreement and
the approval of the other transactions contemplated by the Merger
Agreement and (2) to vote such Shares at any meeting of stockholders
of the Issuer or at any adjournment thereof or in any other
circumstances upon which a stockholder's vote, consent or other
approval is sought, against (x) any merger agreement or merger (other
than the Merger Agreement and the Merger), consolidation, combination,
sale of substantial assets, reorganization, recapitalization,
dissolution, liquidation or winding up of or by the Company and/or any
Alternative Proposal (as defined in Voting Agreement), (y) any
amendment of the Issuer's Articles of Incorporation or by-laws or
other proposal or transaction involving the Issuer or any
Subsidiaries, which amendment or other proposal or transaction would
in any manner impede, frustrate, prevent or nullify the Merger
Agreement,
Page 10 of 14 Pages
<PAGE>
the Merger or any of the transactions contemplated by the Merger
Agreement.
Each Principal Stockholder has also agreed, until the Merger
is consummated or the Merger Agreement is consummated in accordance
with its terms, among other things, not to: (1) sell, transfer,
pledge, assign or otherwise dispose of, or enter into any contract,
option or other arrangement (including any profit sharing arrangement)
or understanding with respect to the sale, transfer, pledge,
assignment or other disposition of, the Shares owned by such Principal
Stockholder to any person; (2) enter into any voting arrangement,
whether by proxy, voting agreement, voting trust, power of attorney or
otherwise; (3) take any other action that would in any way restrict,
limit or interfere with the performance of its obligations hereunder
or the transactions contemplated hereby
The foregoing description of the Voting Agreement is
qualified in its entirety by reference to the text of such agreement,
which is filed as an exhibit to this Schedule 13D and is incorporated
by reference herein.
ITEM 7. MATERIAL TO BE FILED AS EXHIBIT.
-------------------------------
(a) Voting Agreement dated as of February 10, 1998, among Sombrero and the
Principal Stockholders.
(b) Agreement and Plan of Merger dated as of February 10, 1998, between
Sombrero and the Issuer.
Page 11 of 14 Pages
<PAGE>
SIGNATURE
---------
After reasonable inquiry and to the best of his knowledge and belief,
each of the undersigned certifies that the information set forth in this
statement is true, complete and correct. In addition, by signing below, each of
the undersigned agrees that this Schedule 13D may be filed jointly on behalf of
each of Sombrero Acquisition Corp., Apollo Investment Fund III, L.P., Apollo
Overseas Partners III, L.P., Apollo (U.K.) Partners III, L.P. and Apollo
Advisors II, L.P.
Dated as of the 20th day of February, 1998.
SOMBRERO ACQUISITION CORP.
By: /s/ Michael D. Weiner
--------------------------
Name: Michael D. Weiner
Title: Vice President
APOLLO INVESTMENT FUND III, L.P.
By: Apollo Advisors II, L.P.,
its General Partner
By: Apollo Capital Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
--------------------------
Name: Michael D. Weiner
Title: Vice President
APOLLO OVERSEAS PARTNERS III, L.P.
By: Apollo Advisors II, L.P.,
its General Partner
By: Apollo Capital Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
--------------------------
Name: Michael D. Weiner
Title: Vice President
APOLLO (U.K.) PARTNERS III, L.P.
By: Apollo Advisors II, L.P.,
its General Partner
By: Apollo Capital Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
---------------------------
Page 12 of 14 Pages
<PAGE>
Name: Michael D. Weiner
Title: Vice President
APOLLO ADVISORS II, L.P.
By: Apollo Capital Management II, Inc.,
its General Partner
By: /s/ Michael D. Weiner
----------------------
Name: Michael D. Weiner
Title: Vice President
Page 13 of 14 Pages
<PAGE>
SCHEDULE I
The following sets forth information with respect to the general
partners, executive officers, directors and principal shareholders of the Apollo
Purchasers and certain related persons. Except as otherwise indicated in this
Schedule I or in the Schedule 13D in to which this Schedule I relates, the
principal business address of each person or entity set forth below is c/o
Apollo Advisors II, L.P., Two Manhattanville Road, Purchase, New York 10577, and
each such person or entity is a citizen of the United States of America.
The directors of Apollo Capital are Messrs. Leon D. Black and John J.
Hannan. The principal occupation of each of Messrs. Black and Hannan is to act
as an executive officer and director of Apollo Capital and AIM. Messrs. Black
and Hannan are also limited partners of Advisors and Apollo Management.
Messrs. Black and Hannan are also founding principals of Apollo
Advisors, L.P. ("Advisors"), Lion Advisors, L.P. ("Lion") and Apollo Real Estate
Advisors, L.P. ("AREA"). The principal business of Apollo Advisors and Lion is
to provide advice regarding investments in securities and the principal business
of AREA is to provide advice regarding investments in real estate and real
estate-related investments. The business address of each of Messrs. Black and
Hannan is c/o Apollo Management, L.P., 1301 Avenue of the Americas, New York,
New York 10019.
Peter Henry Larder, Michael Francis Benedict Gillooly, Ian Thomas
Patrick and Martin William Laidlaw, each of whom is a British citizen, serve as
directors of Administration. Each of the above four individuals is principally-
employed by CIBC Bank and Trust Company (Cayman) Limited ("CIBC") in the
following politicians: Mr. Larder, Managing Director, Mr. Gillooly, Deputy
Managing Director, Mr. Patrick, Manager-Accounting Services; and Mr. Laidlaw,
Senior Fund Accountant. CIBC is a Cayman Islands corporation which is
principally engaged in the provision of trust, banking and corporate
administration services, the principal address of which is Edward Street Grand
Cayman, Cayman Islands, British West Indies. It provides accounting,
administrative and other services to Apollo Administration. Leon D. Black is
the beneficial owner of the stock of Apollo Administration.
Joshua Harris is a director and president of Sombrero. Mr. Harris has
served as an officer of certain affiliates of Apollo Purchasers, having been
associated with them since 1990. Mr. Harris is a director of Converse Inc.,
Florsheim Group Inc., NRT, Inc. and Alliance Imaging Inc.
Michael D. Weiner is a director and vice president and secretary of
Sombrero. Mr. Weiner has been an officer of certain affiliates of Apollo
Purchasers since 1992. Prior to 1992, Mr. Weiner was a partner in the law firm
of Morgan, Lewis & Bockius LLP. Mr. Weiner is a director of Converse Inc.,
Alliance Imaging, Inc., NRT, Inc., Continental Graphics Holdings, Inc. and
Florsheim Group Inc.
Page 14 of 14 Pages
<PAGE>
EXHIBIT A
VOTING AGREEMENT
VOTING AGREEMENT, dated as of February 10, 1998, between Sombrero
Acquisition Corp., a Florida corporation ("Sub"), and the persons listed on
Schedule A hereto (each a "Stockholder", and, collectively, the "Stockholders").
WHEREAS, Sub and MTL Inc., a Florida corporation (the "Company"),
propose to enter into an Agreement and Plan of Merger of even date herewith (as
the same may be amended or supplemented, the "Merger Agreement") providing for
the merger of Sub with the Company (the "Merger");
WHEREAS, each Stockholder is the record and beneficial owner of, or
the trustee of a trust whose beneficiaries are the beneficial owners, such
number of shares of Common Stock, par value $.01 per share, of the Company (the
"Company Common Stock") set forth opposite such Stockholder's name on Schedule A
----------
hereto; such shares of Company Common Stock, as such shares may be adjusted by
stock dividend, stock split, recapitalization, combination or exchange of
shares, merger, consolidation, reorganization or other change or transaction of
or by the Company, together with shares of Company Common Stock that may be
acquired after the date hereof by such Stockholder, including shares of Company
Common Stock issuable upon the exercise of options to purchase Company Common
Stock (as the same may be adjusted as aforesaid), being collectively referred to
herein as the "Shares"; and
WHEREAS, as a condition to their willingness to enter into the Merger
Agreement, Sub has requested that the Stockholders enter into this Agreement.
NOW, THEREFORE, to induce Sub to enter into, and in consideration of
it entering into, the Merger Agreement, and in consideration of the premises and
the representations, warranties and agreements contained herein, the parties
agree as follows:
1. Representations and Warranties of the Stockholders. Each
--------------------------------------------------
Stockholder hereby, severally and not jointly, represents and warrants to Sub as
follows:
(a) Authority. The Stockholder has all requisite power and authority
---------
to execute and deliver this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by the Stockholder. This Agreement has been duly executed and
delivered by the Stockholder and, assuming this Agreement constitutes a valid
and binding obligation of Sub, constitutes a valid and binding obligation of the
Stockholder enforceable against the Stockholder in accordance with its terms.
Except for the expiration or termination of the waiting periods under the HSR
Act and informational filings with the Securities and Exchange Commission,
neither the execution, delivery or performance of this Agreement by the
Stockholder nor the consummation by the Stockholder of the transactions
contemplated hereby will (i) require
<PAGE>
any filing with, or permit, authorization, consent or approval of, any federal,
state, local or municipal foreign or other government or subdivision, branch,
department or agency thereof or any governmental or quasi-governmental authority
of any nature, including any court or other tribunal, (a "Governmental Entity"),
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default under, or give rise to any right of
termination, amendment, cancellation or acceleration under, or result in the
creation of any pledge, claim, lien, option, charge, encumbrance or security
interest of any kind or nature whatsoever (a "Lien") upon any of the properties
or assets of the Stockholder under, any of the terms, conditions or provisions
of any note, bond, mortgage, indenture, lease, license, permit, concession,
franchise, contract, agreement or other instrument or obligation (a "Contract")
to which the Stockholder is a party or by which the Stockholder or any of the
Stockholder's properties or assets, including the Stockholder's Shares, may be
bound or (iii) violate any judgment, order, writ, preliminary or permanent
injunction or decree (an "Order") or any statute, law, ordinance, rule or
regulation of any Governmental Entity (a "Law") applicable to the Stockholder or
any of the Stockholder's properties or assets, including the Stockholder's
Shares.
(b) The Shares. The Stockholder's Shares and the certificates representing
----------
such Shares are now, and at all times during the term hereof will be, held by
such Stockholder, or by a nominee or custodian for the benefit of such
Stockholder, and the Stockholder has good and marketable title to such Shares,
free and clear of any Liens (except as provided on Schedule B), proxies, voting
----------
trusts or agreements, understandings or arrangements, except for any such Liens
or proxies arising hereunder. The Stockholder owns of record or beneficially no
shares of Company Common Stock other than such Stockholder's Shares and shares
of Company Common Stock issuable upon the exercise of Company Stock Options (as
defined in the Merger Agreement), in each case as set forth on Schedule A
hereto.
(c) Merger Agreement. The Stockholder understands and acknowledges that Sub
----------------
is entering into the Merger Agreement in reliance upon the Stockholder's
execution and delivery of this Agreement.
2. Board Approval. The Board of Directors of the Company has, to the extent
--------------
required by applicable law, duly and validly authorized and approved by all
necessary corporate action, this Agreement, the Merger Agreement and the
transactions contemplated hereby and thereby, so that by the execution and
delivery hereof no restrictive provision of any "fair price," "moratorium,"
"control-share acquisition," "interested shareholders" or other similar anti-
takeover statute or regulation (including, without limitation, Sections 607.0901
and 607.0902 of the Florida Business Corporation Act) or restrictive provision
of any applicable anti-takeover provision in the Articles of Incorporation or
by-laws of the Company is, or will be, applicable to the Company, Sub the
Shares, the Merger or any other transaction contemplated by this Agreement.
3. Agreements of All Stockholders. Each Stockholder, severally and not
------------------------------
jointly, agrees as follows:
2
<PAGE>
(a) Until the Merger is consummated or the Merger Agreement is terminated in
accordance with its terms, the Stockholder shall not, (i) sell, transfer,
pledge, assign or otherwise dispose of, or enter into any Contract, option or
other arrangement (including any profit sharing arrangement) or understanding
with respect to the sale, transfer, pledge, assignment or other disposition of,
the Shares to any person other than Sub or Sub's designee, (ii) enter into any
voting arrangement, whether by proxy, voting agreement, voting trust, power-of-
attorney or otherwise, with respect to the Shares or (iii) take any other action
that would in any way restrict, limit or interfere with the performance of its
obligations hereunder or the transactions contemplated hereby.
(b) At any meeting of Stockholders of the Company called to vote upon the
Merger and the Merger Agreement or at any adjournment thereof or in any other
circumstances upon which a vote, consent or other approval (including by written
consent) with respect to the Merger and the Merger Agreement is sought, each
Stockholder shall, including by initiating a written consent solicitation if
requested by Sub, vote (or cause to be voted) such Stockholder's Shares in favor
of the Merger, the adoption by the Company of the Merger Agreement and the
approval of the other transactions contemplated by the Merger Agreement.
(c) Unless the Merger Agreement shall have been earlier terminated in
accordance with its terms, at any meeting of Stockholders of the Company or at
any adjournment thereof or in any other circumstances upon which the
Stockholder's vote, consent or other approval is sought, such Stockholder shall
vote (or cause to be voted) such Stockholder's Shares against (i) any merger
agreement or merger (other than the Merger Agreement and the Merger),
consolidation, combination, sale of substantial assets, reorganization,
recapitalization, dissolution, liquidation or winding up of or by the Company or
any other Alternative Proposal (as defined in the Merger Agreement)
(collectively, "Alternative Transactions") or (ii) any amendment of the
Company's Amended and Restated Articles of Incorporation or by-laws or other
proposal or transaction involving the Company or any of its subsidiaries, which
amendment or other proposal or transaction would in any manner impede,
frustrate, prevent or nullify, the Merger, the Merger Agreement or any of the
other transactions contemplated by the Merger Agreement (collectively,
"Frustrating Transactions").
(d) The Stockholders listed on Schedule A to the Merger Agreement understand
and acknowledge that Sub is entering into the Merger Agreement in reliance upon
the conversion of their shares into the Surviving Corporation Common Stock and
agree to such conversion pursuant to Section 4.2 of the Merger Agreement.
4. Grant of Irrevocable Proxy Coupled with an Interest; Appointment of
-------------------------------------------------------------------
Proxy.
(a) Each Stockholder hereby irrevocably grants to, and appoints Joshua Harris
and any other individual who shall hereafter be designated by Sub, and each of
them, such Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Stockholder, to vote
such Stockholder's Shares, or grant a consent or approval in respect of such
Shares, at any meeting of Stockholders of the Company or at any adjournment
thereof or in any other circumstances upon which
3
<PAGE>
their vote, consent or other approval is sought, (i) in favor of the Merger, the
adoption by the Company of the Merger Agreement and the approval of the other
transactions contemplated by the Merger Agreement and (ii) unless the Merger
Agreement shall have been earlier terminated in accordance with its terms,
against any Alternative Transaction or Frustrating Transaction.
(b) Each Stockholder represents that any proxies heretofore given in respect
of such Stockholder's Shares are not irrevocable, and that any such proxies are
hereby revoked.
(c) EACH STOCKHOLDER HEREBY AFFIRMS THAT THE PROXY SET FORTH IN THIS SECTION 4
IS COUPLED WITH AN INTEREST AND IS IRREVOCABLE UNTIL SUCH TIME AS THIS AGREEMENT
TERMINATES IN ACCORDANCE WITH ITS TERMS. Such Stockholder hereby further
affirms that the irrevocable proxy is given in connection with the execution of
the Merger Agreement, and that such irrevocable proxy is given to secure the
performance of the duties of such Stockholder under this Agreement. Such
Stockholder hereby ratifies and confirms all that such irrevocable proxy may
lawfully do or cause to be done by virtue hereof. Such irrevocable proxy is
executed and intended to be irrevocable in accordance with the provisions of
Section 607.0722 of the FBCA. Such irrevocable proxy shall be valid until the
later to occur of (i) one year from the date hereof or (ii) the termination of
this Agreement pursuant to Section 6.
5. Further Assurances. Each Stockholder will, from time to time, execute
------------------
and deliver, or cause to be executed and delivered, such additional or further
transfers, assignments, endorsements, consents and other instruments as Sub may
reasonably request for the purpose of effectively carrying out the transactions
contemplated by this Agreement and to vest the power to vote such Stockholder's
Shares as contemplated by Section 5.
6. Termination. This Agreement, and all rights and obligations of the
-----------
parties hereunder, shall terminate upon the consummation or termination of the
Merger Agreement in accordance with its terms. Nothing in this Section 6 shall
relieve any Stockholder from liability for willful breach of this Agreement.
7. General.
-------
(a) Counterparts. This Agreement may be executed in two or more counterparts,
------------
all of which shall be considered one and the same agreement and shall become
effective when two or more counterparts have been signed by each of the parties
and delivered to the other parties, it being understood that all parties need
not sign the same counterpart.
(b) Entire Agreement; No Third-Party Beneficiaries. This Agreement (including
----------------------------------------------
the documents and instruments referred to herein) (i) constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof and (ii)
is not intended to confer upon any person other than the parties hereto any
rights or remedies hereunder.
4
<PAGE>
(c) Governing Law. This Agreement shall be governed and construed in
-------------
accordance with the laws of the State of Florida without regard to any
applicable conflicts of law.
8. Stockholder Capacity. No person executing this Agreement who is or
--------------------
becomes during the term hereof a director or officer of the Company makes any
agreement or understanding herein in his or her capacity as such director or
officer. Each Stockholder signs solely in his or her capacity as the record
holder and beneficial owner of, or the trustee of a trust whose beneficiaries
are the beneficial owners of, such Stockholder's Shares and nothing herein shall
limit or affect any actions taken by a Stockholder in its capacity as an officer
or director of the Company to the extent specifically permitted by the Merger
Agreement or as otherwise required by law.
9. Enforcement. The parties agree that irreparable damage would occur in
-----------
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement in a court of the United States.
This being in addition to any other remedy to which they are entitled at law or
in equity. In addition, each of the parties hereto waives any right to trial by
jury with respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
5
<PAGE>
IN WITNESS WHEREOF, Sub has caused this Agreement to be signed by its
officer thereunto duly authorized and each Stockholder has signed this
Agreement, all as of the date first written above.
SOMBRERO ACQUISITION CORP.
By: ______________________________
Joshua Harris
President
__________________________________
Elton E. Babbitt
__________________________________
Gordon Babbitt
__________________________________
Richard J. Brandewie
__________________________________
Charles J. O'Brien, Jr.
__________________________________
Marvin Sexton
__________________________________
Gerald L. McCullough, as trustee
for Sean McAvoy Children's Trust
__________________________________
Gerald L. McCullough, as trustee
for Dale McAvoy Children's Trust
__________________________________
Gerald L. McCullough, as trustee
for Kyle McAvoy Children's Trust
6
<PAGE>
__________________________________
Gerald L. McCullough, as trustee
for Sara Malinowski Children's
Trust
__________________________________
Gerald L. McCullough, as trustee
for Lindsey Malinowski Children's
Trust
__________________________________
Gerald L. McCullough, as trustee
for Dana Malinowski Children's
Trust
7
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of shares of Number of options to purchase
Stockholder and Address Company Common Stock* Company Common Stock*
- ----------------------- --------------------- -----------------------------
<S> <C> <C>
Elton E. Babbitt 324,270
Gordon Babbitt 375,380
Richard J. Brandewie 49,248 164,365
Charles J. O'Brien, Jr. 30,239 28,740
Marvin Sexton 4,000 31,135
Sean McAvoy Children's Trust 56,580
Dale McAvoy Children's Trust 56,580
Kyle McAvoy Children's Trust 56,580
Sara Malinowski Children's Trust 57,440
Lindsey Malinowski Children's 57,440
Trust
Dana Malinowski Children's Trust 57,440
*or such greater amount as they
may otherwise own as of the
date hereof
</TABLE>
8
<PAGE>
SCHEDULE B
LIENS
- -----
Elton Babbitt -- All of his shares are held in an account at BT Alex. Brown,
which has given Elton Babbitt a margin loan of $750,000.
Gordon Babbitt -- 100,000 shares at Raymond James.
167,000 shares at Mercantile bank.
Gordon Babbitt has approximately $2,000,000 in outstanding
indebtedness on the basis of the deposit of such shares.
9
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF MERGER
by and between
SOMBRERO ACQUISITION CORP.
and
MTL INC.
Dated as of February 10, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE 1
THE MERGER
<TABLE>
<S> <C>
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
</TABLE>
<PAGE>
<TABLE>
<S> <C>
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>
ii
<PAGE>
<TABLE>
<S> <C>
ARTICLE 8
CONDITIONS
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>
iii
<PAGE>
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
<PAGE>
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
<PAGE>
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>
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
4
<PAGE>
Stock Election Shares formerly represented by such certificate and (y) a
certificate or certificates representing the Stock Election Consideration
multiplied by the number of 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 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 of Company Preferred Stock issued and outstanding. Since
such date, no additional shares
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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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<PAGE>
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 setoff, 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-
10
<PAGE>
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 selfinsurance
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
11
<PAGE>
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. (S) 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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<PAGE>
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 threeyear 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,
15
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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
16
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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.
(S)(S) 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 twelvemonth 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
17
<PAGE>
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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<PAGE>
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
19
<PAGE>
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;
20
<PAGE>
(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;
21
<PAGE>
(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
<PAGE>
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
23
<PAGE>
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
24
<PAGE>
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, bylaws 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
-
25
<PAGE>
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.
26
<PAGE>
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
27
<PAGE>
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 bylaws 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
28
<PAGE>
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 14e2 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
29
<PAGE>
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 bylaws 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
30
<PAGE>
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);
31
<PAGE>
(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, nonsolicitation 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 bylaws, 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
32
<PAGE>
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 S4-")
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
33
<PAGE>
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 S4, 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
34
<PAGE>
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 bylaws 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.
35
<PAGE>
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 S4 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 nonrecurring 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 noncompetition 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 Company 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. (a) 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
39
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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 a 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) 2614102
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) 2596333
If to the Company:
Richard J. Brandewie
MTL Inc.
3108 Central Drive
Plant City, Florida 33567
Facsimile: (813) 7543288
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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) 2233070
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:______________________________
Charles J. O'Brien, Jr.
President
SOMBRERO ACQUISITION CORP.
By:______________________________
Joshua Harris
President
44
