OPTION AGREEMENT
OPTION AGREEMENT, dated as of February 25, 1998, among Apollo Management,
L.P. ("Apollo"), Merger Co. (as defined below) and Rollins Properties, Inc.
("Stockholder").
WHEREAS, Apollo and Matlack Systems, Inc., a Delaware corporation (the
"Company") have, on the date hereof, entered into a letter of intent (the "LOI")
with respect to the acquisition of the Company by Palestra Acquisition Corp., a
Delaware corporation formed by Apollo ("Merger Co.");
WHEREAS, Apollo, Merger Co. and the Company, propose to enter into an
Agreement and Plan of Merger (as the same may be amended or supplemented, the
"Merger Agreement") providing for the merger of Merger Co. with the Company (the
"Merger");
WHEREAS, Stockholder is the record and beneficial owner of the number of
shares of Common Stock, par value $1.00 per share, of the Company (the "Company
Common Stock") set forth below such Stockholder's name on the signature page
hereto; such shares of the 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 the Company Common Stock that may be
acquired after the date hereof by such Stockholder, including shares of the
Company Common Stock issuable upon the exercise of options to purchase the
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 LOI and the
Merger Agreement, Apollo and Merger Co. have requested that the Stockholder
enter into this Agreement;
NOW, THEREFORE, to induce Apollo and Merger Co. to enter into, and in
consideration of it entering into, the LOI and the Merger Agreement (as
applicable), and in consideration of the premises and the representations,
warranties and agreements contained herein, the parties agree as follows:
1. Purchase and Sale of Shares.
(a) Sale. The Stockholder hereby agrees to sell to Merger Co., upon
written notice from Merger Co. (the "Notice"), all such Stockholder's Shares at
a price per Share equal to $12.00; provided, that (i) one of the following shall
have occurred (A) a third party shall have
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made an Alternative Proposal (as defined in the LOI), (B) the Company materially
breaches its obligations under the LOI or the Merger Agreement or (C) the
approval of the Merger by the Company's stockholders shall not have been
obtained at a meeting duly convened therefor or at any adjournment thereof and
(ii) any applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 (the "HSR Act") shall have expired or been terminated.
(b) Closing. Subject to Section 1(a) hereof, the closing of the
purchase and sale of the Stockholder's Shares shall take place at the place,
time and date for the closing of the purchase by Merger Co. specified in the
Notice. At the closing, Stockholder shall deliver certificates representing such
Stockholder's Shares, in proper form for transfer, accompanied by stock powers
duly executed in blank against delivery of the Purchase Price of $12.00 per
share. Such delivery shall vest in Merger Co., and Stockholder will take any
additional actions reasonably requested by Merger Co. to perfect in Merger Co.,
good and marketable title to the Shares, free and clear of any lien, encumbrance
or voting agreement of any kind other than as may be created by this Agreement.
(c) Subsequent Sale. (i) In the event Merger Co. purchases the
Stockholder's Shares as contemplated by Section 1(b) above and subsequently
consummates the sale of such Shares pursuant to (i) an Alternative Proposal or
(ii) the Merger Agreement, in the event the transactions contemplated by the
Merger Agreement are consummated and the consideration per Share paid by Merger
Co. is increased to in excess of $12.00 per Share (a "Merger Co. Increase"),
then Merger Co. agrees to pay to Stockholder, on demand, an amount equal to all
Excess Consideration (determined in accordance with paragraphs (ii) and (iii)
below) of Merger Co. from the consummation of any Alternative Proposal for which
a definitive agreement is entered into within the time periods contemplated by
Section 7 below or a Merger Co. Increase.
(ii) For purposes of this Section 1(c), the "Excess Consideration" of
any Stockholder from any Alternative Proposal or Merger Co. Increase shall equal
the sum of (A)(1) the aggregate consideration received by such Stockholder
pursuant to such (x) Alternative Proposal or (y) Merger Co. Increase, valuing
any non-cash consideration (including any residual interest in the Company) at
its fair market value on the date of such consummation plus (2) the fair market
value (which shall not be less than the purchase price per share of Company
Common Stock set forth in the Alternative Proposal or a Merger Co. Increase) of
all Shares of such Stockholder disposed of after the termination of the LOI or
the Merger Agreement and prior to the date of such consummation, less (B) the
product of (x) the number of Shares held by such Stockholder on the date of
termination of the LOI or the Merger Agreement and (y) $12.00. An equivalent
calculation shall be made with respect to any options sold and included as part
of the calculation of Excess Consideration.
(iii) For purposes of this Section 1(c), the fair market value of any
non-cash consideration consisting of:
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(A) securities listed on a national securities exchange or
traded on the New York Stock Exchange shall be equal to the average closing
price per share of such security as reported on such exchange or New York Stock
Exchange for the five trading days after the date of determination; and
(B) consideration which is other than securities of the form
specified in clause (A) of this Section 1(c)(iii) shall be determined by a
nationally recognized independent investment banking firm mutually agreed upon
by the parties within 10 business days of the event requiring selection of such
banking firm; provided, however, that if the parties are unable to agree within
10 business days after the date of such event as to the investment banking firm,
then the parties shall each select one firm, and those firms shall select a
third investment banking firm, which third firm shall make such determination;
provided further, that the fees and expenses of such investment banking firm
shall be borne equally by Merger Co., on the one hand, and the Stockholder, on
the other hand. The determination of the investment banking firm shall be
binding upon the parties.
(d) Dividends and Split-Ups. In event of any change in the number of
issued and outstanding Shares by reason of any stock dividend, split-up,
recapitalization, merger, combination, conversion, exchange of shares, rights
plan or other change in the corporate or capital structure of the Company which
would have the effect of diluting the rights of Merger Co. hereunder or of
reducing the aggregate Purchase Price (as defined in the LOI) payable with
respect to the Shares hereunder, the number and kind of Shares subject to this
Agreement and the Purchase Price shall be appropriately adjusted.
2. Representations and Warranties of the Stockholder. The Stockholder
hereby represents and warrants to Merger Co. 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 Merger Co., 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 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,
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amendment, cancellation or acceleration under, or result in the creation of any
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, 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 the
Company Common Stock other than such Stockholder's Shares, as set forth on the
signature page of Stockholder hereto.
(c) Brokers. No broker, investment banker, financial advisor or other
person is entitled to any broker's, finder's, financial advisor's or other
similar fee or commission in connection with the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of such Stockholder.
(d) Merger Agreement. The Stockholder understands and acknowledges that
Merger Co.is entering into the LOI and the Merger Agreement in reliance upon the
Stockholder's execution and delivery of this Agreement.
3. Representations and Warranties of Merger Co. Merger Co. hereby
represents and warrants to the Stockholder as follows:
(a) Authority. Merger Co. has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby. The execution, delivery and performance of
this Agreement by Merger Co. and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary corporate action
on the part of Merger Co. This Agreement has been duly executed and delivered by
Merger Co. and, assuming this Agreement constitutes a valid and binding
obligation of the Stockholder, constitutes a valid and binding obligation of
Merger Co. enforceable in accordance with its terms.
(b) Securities Act. The Shares will be acquired in compliance with, and
Merger Co. will not offer to sell or otherwise dispose of any Shares so acquired
by it in violation of the registration requirements of the Securities Act of
1933, as amended.
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(c) Financing. Merger Co. has, or will have at the time that any
payment is required to be made to the Stockholder hereunder, the funds necessary
to make such payment to the Stockholder.
4. Covenants of the Stockholder. Unless and until the occurrence of a
public announcement of an Alternative Proposal or a Merger Co. Increase in which
case the covenants set forth in this Section 4 shall terminate, the Stockholder
agrees as follows:
(a) 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 Merger Co. or Merger Co.'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,
the Stockholder shall, including by initiating a written consent solicitation if
requested by Merger Co., vote (or cause to be voted) the 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. 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, the Stockholder shall vote (or cause to be voted) the 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 (collectively,
"Alternative Transactions") or (ii) any amendment of the Company's 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").
5. Further Assurances. The 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 Merger
Co. may reasonably request for the purpose of effectively carrying out the
transactions contemplated by this Agreement and to vest the power to vote the
Stockholder's Shares as contemplated by Section 4. Merger Co. agrees to use
reasonable efforts to take, or cause to be taken, all actions necessary to
comply promptly with all legal requirements that may be imposed with respect to
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the transactions contemplated by this Agreement (including legal requirements of
the HSR Act).
6. 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, inure to the benefit of, and be enforceable by,
the parties hereto and their respective successors and assigns. Notwithstanding
the foregoing, each of Apollo and Merger Co. shall have the right to assign its
rights, interests and obligations hereunder to Apollo Investment Fund III,
Apollo Investment Fund IV (or any funds under direct or indirect common control)
or MTL Inc. and any of their respective affiliates at its sole option and
without the prior written consent of the other parties hereto; provided that no
such assignment shall relieve Apollo of its obligations hereunder.
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.
7. Termination. This Agreement, and all rights and obligations of the
parties hereunder, shall terminate upon the date that is 10 business days after
the later of (i) the date which is (x) six months from the date hereof or (y) if
the Merger Agreement is executed, nine months from the date of the Merger
Agreement, (ii) the consummation of an Alternative Proposal as contemplated by
Section 1(c)(i) above if a definitive agreement is in place on or before the
expiration of the time period contemplated by clause (i) immediately above and
(iii) the date on which all waiting periods under the HSR Act applicable to the
purchase of Shares pursuant to Section 1 shall have expired or been terminated.
Nothing in this Section 7 shall relieve any party from liability for willful
breach of this Agreement. Notwithstanding the foregoing, if Merger Co. shall
purchases Shares pursuant to Section 1 hereof, Sections 2, 3 and 6-10 shall
survive any termination of this Agreement.
8. General Provisions.
(a) Payments. All payments required to be made to any party to this
Agreement shall be made by Wire Transfer to an account designated by such party
at least one trading day prior to such payment.
(b) Expenses. Subject to the terms of the Merger Agreement, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expense.
(c) Amendments. This Agreement may not be amended except by an
instrument in writing signed by each of the parties hereto.
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(d) Notice. All notices and other communications hereunder shall be in
writing and shall be deemed given upon receipt to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
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(i) if to Merger Co., to
Joshua Harris
c/o Apollo Management, L.P.
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 261-4102
with a copy to:
Morton A. Pierce, Esq.
Douglas L. Getter, Esq.
Dewey Ballantine LLP
1301 Avenue of the Americas
New York, New York 10019
Facsimile: (212) 259-6333
and
(ii) if to the Stockholder, to the address set forth under the name of the
Stockholder on the signature page hereto.
with a copy to:
Michael B. Kinnard, Esq.
Vice President, General Counsel and Secretary
Rollins Truck Leasing, Inc.
2200 Concord Pike
Wilmington, DE 19803
Facsimile: (302) 426-3555
(e) Interpretation. When a reference is made in this Agreement to a
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Wherever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
(f) 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.
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(g) 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.
(h) Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware without regard to any
applicable conflicts of law.
(i) Publicity. Except as otherwise required by law, court process or
the rules of a national securities exchange or the Nasdaq National Market or as
contemplated or provided in the Merger Agreement, for so long as this Agreement
is in effect, neither the Stockholder nor Merger Co. shall issue or cause the
publication of any press release or other public announcement with respect to
the transactions contemplated by this Agreement or the Merger Agreement without
the consent of the other parties, which consent shall not be unreasonably
withheld; provided, that in any case, the Stockholder will not use the name of
Apollo or any affiliate thereof without Apollo's written permission and will
discuss the term and contents of any such release with Apollo prior to
dissemination.
9. 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. The 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, the Stockholder's Shares and nothing herein shall
limit or affect any actions taken by the Stockholder in its capacity as an
officer or director of the Company to the extent specifically permitted by the
Merger Agreement.
10. 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.
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11. Apollo Agreements.
(a) Further Action. Apollo, on behalf of Merger Co., covenants and
agrees for the benefit of the Stockholders that, in the event the Merger
Agreement is executed, it shall use reasonable efforts, subject to the
fulfillment of each of the conditions of performance set forth therein, to
perform such acts and execute such documents as may be reasonably required to
effect the Merger. Further in the event the Merger Agreement is consummated, the
parties acknowledge that the Shareholders will be entitled to the consideration
payable thereunder.
(b) Guarantee. Apollo, on behalf of certain investment funds under
management, hereby guaranties the obligations created by the covenants of Merger
Co. set forth in Sections 1(c)(v) and 3(c) above, it being understood that any
such guaranties and related obligations shall be non-recourse to the partners,
whether past, present or future, of Apollo and/or its investment funds under
management.
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IN WITNESS WHEREOF, each of Apollo and Merger Co. has caused this
Agreement to be signed by its officer thereunto duly authorized and the
appropriate officer of the Stockholder has signed this Agreement, all as of the
date first written above.
APOLLO MANAGEMENT, L.P.
By:
Joshua Harris
Title:
PALESTRA ACQUISITION CORP.
By:
Joshua Harris
President
ROLLINS PROPERTIES, INC.
By:
Name:
Title:
Address:
Number of shares of
Company Common Stock: 600,000
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