Exhibit 10.5
AGREEMENT, dated as of May 30, 2002
(this "Agreement"), among APOLLO
INVESTMENT PARTNERS III, L.P. ("Apollo
Investment"), APOLLO OVERSEAS PARTNERS
III, L.P. ("Apollo Overseas"), and APOLLO
(U.K.) PARTNERS III, L.P. ("Apollo U.K.",
and together with Apollo Investment and
Apollo Overseas, the "Apollo Entities"),
those parties listed on Schedule I
attached hereto (each, a "Management
Person," and collectively, the "Management
Persons") and QUALITY DISTRIBUTION, INC.
(the "Company").
RECITALS
WHEREAS, the Apollo Entities currently own shares of common stock,
$0.01 par value (the "Common Stock"), and 13.75% Preferred Stock, $0.01 par
value (the "13.75% Preferred Stock"), of the Company;
WHEREAS, pursuant to the terms of a Lock-Up Agreement, dated as of
April 10, 2002, as amended by the Waiver thereto dated as of May 10, 2002, among
the Apollo Entities and the Company, the Apollo Entities are acquiring
additional shares of 13.75% Preferred Stock;
WHEREAS, pursuant to the terms of a Lock-Up Agreement, dated as of
April 10, 2002, among the Management Persons and the Company, each Management
Person is acquiring shares of 13.75% Preferred Stock;
WHEREAS, the Apollo Entities, the Management Persons and the Company
desire to subject the shares of Common Stock and 13.75% Preferred Stock held by
the Management Persons (including shares of Common Stock and 13.75% Preferred
Stock subsequently acquired by the Management Persons, the "Management Group
Shares") to certain conditions, all as more fully set forth herein.
NOW, THEREFORE, in consideration of the promises contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
Section 1. Defined Terms. For the purposes of this Agreement, the following
terms shall have the meanings indicated below:
"Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under common control with,
such Person; for purposes of this definition, "control" shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities or otherwise. The term "Affiliate" shall not
include at any time any portfolio company of Apollo Management IV, L.P. or its
Affiliates.
"Person" means any individual, corporation, limited liability company,
partnership, trust, incorporated or unincorporated association, joint venture,
joint stock company, government (or an agency or political subdivision thereof)
or other entity of any kind.
Section 2. Drag Along.
(a) If any Apollo Entity transfers to any Person (other than an
Affiliate of such Apollo Entity), pursuant to a stock sale, merger or otherwise,
shares of Common Stock or 13.75% Preferred Stock then held by such Apollo
Entity, each Apollo Entity shall be entitled, at its option, to require each
Management Person to sell a Drag-Along Equivalent Portion (as defined below) of
all Common Stock (in the event such Apollo Entity proposes to transfer Common
Stock) and/or 13.75% Preferred Stock (in the event such Apollo Entity proposes
to transfer 13.75% Preferred Stock) held by such Management Person, by providing
each Management Person with written notice (a "Drag-Along Notice") at least
fifteen days prior to consummation of the proposed transaction, setting forth in
reasonable detail the material terms and conditions of the proposed transaction
or offering, and the price per share at which each Management Person shall be
required to sell his shares of Common Stock and/or 13.75% Preferred Stock, as
the case may be (which price per share shall be equal to the same price per
share that the Apollo Entities shall receive pursuant to the proposed
transaction). A "Drag-Along Equivalent Portion" shall mean with respect to each
Management Person (i) in the case of Common Stock, that portion of all shares of
Common Stock then held by such Management Person expressed as a fraction where
the numerator equals the number of shares of Common Stock proposed to be sold by
the Apollo Entities pursuant to the Drag-Along Notice and the denominator equals
all shares of Common Stock held by the Apollo Entities and (ii) in the case of
13.75% Preferred Stock, that portion of shares of 13.75% Preferred Stock then
held by such Management Person expressed as a fraction where the numerator
equals the number of shares of 13.75% Preferred Stock proposed to be sold by the
Apollo Entities pursuant to the Drag-Along Notice and the denominator equals all
shares of 13.75% Preferred Stock held by the Apollo Entities.
(b) At the closing of the proposed transaction (notice of the date,
place and time of which shall be designated by the Apollo Entities and provided
to each Management Person in writing at least five business days prior thereto),
each Management Person shall deliver certificates evidencing the Management
Group Shares to be sold by such Management Person, duly endorsed for transfer to
the proposed transferee, against the purchase price therefor. Such Management
Group Shares shall be delivered free and clear of all liens, charges,
encumbrances and other security interests. The Apollo Entities shall have no
liability or obligation to deliver the purchase price payable pursuant to this
Section 2, except to the extent that the Apollo Entities receive the
consideration thereof from the proposed purchaser.
(c) Each Apollo Entity may assign its rights pursuant to this Section 2
to the Company or any Affiliate thereof.
Section 3. Tag Along.
(a) From and after the time the Threshold (as defined below) has been
reached, and to the extent in excess thereof, if any Apollo Entity transfers to
any Person (other than an
2
Affiliate of such Apollo Entity) shares of Common Stock or 13.75% Preferred
Stock, then (i) at least fifteen business days prior to the consummation of the
proposed transaction, such Apollo Entity shall give written notice (a "Tag-Along
Notice") setting forth in reasonable detail the material terms and conditions of
the proposed transfer, the number of shares of Common Stock and/or 13.75%
Preferred Stock to be sold and the price per share at which such Apollo Entity
is selling such shares of Common Stock and/or 13.75% Preferred Stock and (ii)
each Management Person shall have the right to include a Tag-Along Equivalent
Portion (as defined below) of all Common Stock (in the event such Apollo Entity
proposes to transfer Common Stock) and/or 13.75% Preferred Stock (in the event
such Apollo Entity proposes to transfer 13.75% Preferred Stock) held by such
Management Person in the proposed transaction by providing a written notice of
exercise to the Apollo Entities at any time on or before five business days
following delivery of the Tag-Along Notice to such Management Person. A
"Tag-Along Equivalent Portion" shall mean with respect to each Management Person
(i) in the case of Common Stock, that portion of all shares of Common Stock then
held by such Management Person expressed as a fraction where the numerator
equals the number of shares of Common Stock proposed to be sold by the Apollo
Entities pursuant to the Tag-Along Notice and the denominator equals all shares
of Common Stock then held by the Apollo Entities and (ii) in the case of 13.75%
Preferred Stock, that portion of shares of 13.75% Preferred Stock then held by
such Management Person expressed as a fraction where the numerator equals the
number of shares of 13.75% Preferred Stock proposed to be sold by the Apollo
Entities pursuant to the Tag-Along Notice and the denominator equals all shares
of 13.75 Preferred Stock then held by the Apollo Entities.
(b) At the closing of the proposed transaction (notice of the
date, place and time of which shall be designated by the Apollo Entities and
provided to each Management Person in writing at least five business days prior
thereto), each Management Person shall deliver certificates evidencing the
Management Group Shares owned by such Management Purchaser, duly endorsed for
transfer to the proposed purchaser, against delivery of the purchase price
therefor. Such Management Group Shares shall be delivered free and clear of all
liens, charges, encumbrances and other security interests. The Apollo Entities
shall have no liability or obligation to deliver the purchase price payable
pursuant to this Section 3, except to the extent that the Apollo Entities
receive the consideration thereof from the proposed purchaser.
(c) For the purposes of this Agreement, the "Threshold" means
the public or private sale by the Apollo Entities in any one or more
transactions of $10 million, in the aggregate, of Common Stock and/or 13.75%
Preferred Stock.
Section 4. Entire Agreement. This Agreement constitutes the entire
agreement of the parties and supersedes all prior written or oral agreements,
contemporaneous oral agreements, understandings and negotiations between the
parties with respect to the subject matter hereof.
Section 5. Expenses. Each of the Company, the Apollo Entities and
the Management Persons shall pay their own expenses incurred in connection with
the transactions contemplated hereby (including without limitation the
transactions contemplated by Sections 2 and 3 hereof).
Section 6. Choice of Law. THE INTERNAL LAWS OF THE STATE OF NEW
YORK SHALL GOVERN THE ENFORCEABILITY AND VALIDITY OF THIS AGREEMENT, THE
CONSTRUCTION OF ITS TERMS AND THE INTERPRETATION OF THE RIGHTS AND
3
DUTIES OF THE PARTIES HERETO WITHOUT GIVING EFFECT TO CONFLICTS OF LAWS, RULES
OR PRINCIPLES.
Section 7. Jurisdiction. Any suit, action or proceeding seeking to
enforce any provision of, or based on any matter arising out of or in connection
with, this Agreement or the transactions contemplated hereby may be brought in
any federal or state court located in the State of New York, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11 hereof shall be
deemed effective service of process on such party.
Section 8. Waiver of Jury Trial. EACH OF THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING
ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREBY.
Section 9. Amendments and Waivers. This Agreement may be amended or
waived from time to time by an instrument in writing signed by the parties
hereto.
Section 10. Headings. The headings included in this Agreement are for
convenience of the parties only and shall not affect the construction or
interpretation of this Agreement.
Section 11. Notices. All notices and other communications provided for
or permitted hereunder shall be made by hand-delivery, registered first-class
mail, next-day air courier, telex, facsimile, telecopier, or similar writing:
(i) If to an Apollo Entity, to such Apollo Entity at:
c/o Apollo Management, L.P.
1301 Avenue of the Americas
38th Floor
New York, New York 10019
Attention: Joshua J. Harris
Telephone: (212) 515-3200
Facsimile: (212) 515-3232
(ii) If to the Company, to:
Quality Distribution, Inc.
3802 Corporex Park Drive
Tampa, Florida 33619
Attention: Chief Executive Officer and President
Telephone: (800) 282-2031
4
Facsimile: (813) 630-9637
with a copy to:
O'Sullivan LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Stewart A. Kagan
Telephone: (212) 408-2442
Facsimile: (212) 408-2420
(iii) If to a Management Person, to the attention of
such Management Person at the Company's address set forth in (ii) above;
All such notices and communications shall be deemed to have been
duly given: (A) when delivered by hand, if personally delivered; (B) five (5)
business days after being deposited in the mail, postage prepaid, if mailed; (C)
one (1) business day after being timely dispatched postage prepaid, if by
same-day or next-day courier; (D) when answered back, if telexed; (E) when
receipt acknowledged, if sent by facsimile transmission and (F) if given by any
other means, when delivered at the addresses referred to in this Section 11. Any
of the above addresses may be changed by notice made in accordance with this
Section 11.
Section 12. Successors and Assigns. This Agreement shall be binding
upon the parties hereto and their respective successors and permitted assigns.
Section 13. No Third Party Beneficiaries. This Agreement shall not
confer any rights or remedies upon any Person other than the parties hereto and
their respective successors and assigns and other Persons expressly named
herein.
Section 14. Remedies; Waivers. No failure or delay on the part of any
party in the exercise of any power, right or privilege hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such power,
right or privilege preclude other or further exercise thereof or of any other
right, power or privilege. Any waiver or consent shall be effective only in the
specific instance and for the specific purpose for which it was given. The
parties to this Agreement acknowledge and agree that the breach of any of the
terms of this Agreement will cause irreparable injury for which an adequate
remedy at law is not available. Accordingly, it is agreed that either party
shall be entitled to an injunction, restraining order or other equitable relief
to prevent breaches of this Agreement and to enforce specifically the terms and
provisions hereof in any court of competent jurisdiction in the United States or
any state thereof without the requirement of posting any bond. All rights and
remedies existing under this Agreement are cumulative to, and not exclusive of,
any rights or remedies available under this Agreement or otherwise.
Section 15. Severability. In the event that any provision of this
Agreement or the application of any provision hereof is declared to be illegal,
invalid or otherwise unenforceable by a court of contempt jurisdiction, such
provision shall be reformed, if possible, to the extent necessary to render it
legal, valid and enforceable, or otherwise deleted, and the remainder of this
5
Agreement shall not be affected except to the extent necessary to reform or
delete such illegal, invalid or unenforceable provision.
Section 16. Termination. The provisions of this Agreement shall terminate
and be of no further effect upon the earlier of (a) mutual consent of the
parties hereto and (b) the Apollo Entities ceasing to own in the aggregate less
than 10% of the Common Stock on a fully diluted basis.
Section 17. Further Assurances. Each party shall cooperate and take such
action as may be reasonably requested by the other party in order to carry out
the provisions and purposes of this Agreement and the transactions contemplated
hereby.
Section 18. Headings. The headings used herein are for convenience of
reference only and shall not affect the construction of, nor shall they be taken
into consideration in interpreting, this Agreement.
Section 19. Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but which together shall constitute
one and the same instrument.
* * * * *
6
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.
QUALITY DISTRIBUTION, INC.
By: /s/ Thomas L. Finkbiner
------------------------------------------
Name: Thomas L. Finkbiner
Title: President and Chief Executive Officer
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/ Marc Becker
-------------------------------------
Name: Marc Becker
Title:
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/ Marc Becker
-------------------------------------
Name: Marc Becker
Title:
APOLLO (U.K.) PARTNERS, L.P.
By: Apollo Advisors II, L.P., its general partner
By: Apollo Capital Management II, Inc., its general
partner
By: /s/ Marc Becker
-------------------------------------
Name: Marc Becker
Title:
7
/s/ Thomas L. Finkbiner
-----------------------------
Thomas L. Finkbiner
/s/ Michael A. Grimm
-----------------------------
Michael A. Grimm
/s/ Dennis R. Farnsworth
-----------------------------
Dennis R. Farnsworth
/s/ Keith J. Margelowsky
-----------------------------
Keith J. Margelowsky
/s/ Denny R. Copeland
-----------------------------
Denny R. Copeland
/s/ Douglas B. Allen
-----------------------------
Douglas B. Allen
Schedule I
Management Persons
Thomas L. Finkbiner
Douglas B. Allen
Denny R. Copeland
Dennis R. Farnsworth
Michael A. Grimm
Keith J. Margelowsky