UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
July 3, 2006
Date of Report (Date of earliest event reported)
CD&L, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 0-26954 22-3350958
(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation or Identification No.)
organization)
80 WESLEY STREET, SOUTH HACKENSACK, NEW JERSEY 07606
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code) 201.487.7740
Not Applicable
(Former name or former address, if changed since last report.)
Check the appropriate box below if the Form 8-K is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (see General Instruction A.2 below):
[ ] Written communications pursuant to Rule 425 under the Securities Act
(17 CFR 230.425)
[x] Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the
Exchange Act (17 CFR 240.13e-4(c))
ITEM 1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
On July 3, 2006, CD&L, Inc. ("CD&L") and Velocity Express Corporation
("Velocity") signed a definitive merger agreement for Velocity to acquire CD&L,
Inc. in a fully-financed, two-step, all cash transaction for $3.00 per share.
The merger agreement provides that, upon the terms and subject to the
conditions contained in it, a wholly-owned subsidiary of Velocity ("Sub") will
be merged with CD&L, the separate corporate existence of Sub will cease, CD&L
will be the surviving corporation and continue to be governed by the laws of the
State of Delaware, and the corporate existence of CD&L with all its rights,
privileges, immunities, powers, and franchises shall continue unaffected by the
merger. Sub is also a party to the merger agreement.
At the effective time of the merger, each share of CD&L's common stock
issued and outstanding immediately before the merger, other than dissenting
shares, will be canceled and converted into the right to receive $3.00 in cash,
without interest. The $3.00 amount is subject to proportionate adjustment so as
to maintain an aggregate merger consideration of approximately $33 million in
the event that the total number of shares of common stock outstanding, or
issuable (net of any exercise or conversion price) upon exercise or conversion
of CD&L stock options outstanding, at the effective time of the merger is more
or less than 11,039,238 shares. No adjustment of the per-share purchase price
need be made as a result of any change in the number of shares unless such
adjustment would exceed $0.01. After the merger is effective, each holder of a
certificate representing shares of our common stock, other than dissenting
shares, will no longer have any rights with respect to those shares, except for
the right to receive the cash merger consideration. Each share of CD&L's common
stock held by CD&L, Velocity or its subsidiaries at the time of the merger will
be canceled without any payment.
At the signing of the merger agreement, Velocity deposited for the
benefit of the CD&L stockholders an amount of cash equal to the aggregate merger
consideration with American Stock Transfer & Trust Company, as paying agent.
Velocity and its subsidiaries are engaged in the business of providing
same-day transportation and distribution/logistics services to individual
consumers and businesses. Velocity operates primarily in the United States, with
limited operations in Canada.
Velocity has one of the largest nationwide networks of time-critical
logistics solutions in the United States and is a leading provider of scheduled,
distribution and expedited logistics services. Velocity's customers are
comprised of multi-location, blue chip customers with operations in the
commercial and office products, financial, healthcare, transportation and
logistics, technology, and energy sectors.
CD&L will be calling a special meeting to seek shareholder approval of
the merger agreement. If the merger agreement is approved at the special meeting
and there is no litigation with respect thereto, it is anticipated that the
merger will be completed immediately after the special meeting. Velocity,
through its ownership of common stock acquired under the securities purchase
agreements described below and through its rights under the voting agreement
described below, has or controls the vote of a majority of the shares of CD&L's
common stock, and has indicated that it will vote to approve the merger
agreement.
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CD&L has agreed that it will cease any existing activities, discussions
or negotiations with any third party with respect to any competing transactions,
and has agreed that neither it nor its representatives will solicit, initiate,
knowingly encourage or facilitate any third-party acquisition proposals.
If CD&L receives a competing offer or inquiry from a third-party, it
must advise Velocity of (i) the receipt of such offer or an inquiry which could
reasonably be expected to lead to a competing offer; (ii) the identity of the
party submitting such offer or inquiry; and (iii) the material terms and
conditions of such offer. CD&L's board of directors may withhold, withdraw or
materially modify its recommendation to its stockholders of the merger in
response to a competing offer that it believes will result in a superior
competing transaction (defined below). CD&L must provide prior written notice to
Velocity of any such action and give Velocity the opportunity to discuss the
superior competing transaction for a period of seven business days after such
notice, and after seven business days CD&L's board must determine in good faith
that the competing offer is reasonably likely to result in a superior competing
transaction.
If CD&L receives a bona fide, unsolicited, written proposal or offer
for a competing transaction by a third party which:
o CD&L's board:
- determines in good faith, after consulting with its
financial advisor, will result in, or is reasonably likely
to lead to, a transaction more favorable to its
stockholders than the merger with Velocity, and
- after consulting with counsel, reasonably determines that
failure to entertain the third-party proposal may result
in a breach of its fiduciary duties;
o is reasonably capable of being consummated, and
o is subject to a confidentiality agreement with the third party
on terms no less favorable, in all material respects, than the
confidentiality agreement with Velocity,
which is referred to as a "superior competing transaction," it may furnish to
the third party information with respect to CD&L and participate in discussions
and negotiations with the third party provided that CD&L has delivered prior
written notice to Velocity that it intends to take such actions.
In order to permit a superior competing transaction to be approved by
CD&L's stockholders, Velocity has agreed not to vote any more than 25% of the
outstanding shares of CD&L common stock against a superior competing
transaction. Any shares that CD&L does not vote against a superior competing
transaction must be voted, abstained or not voted in the same proportion as all
other shares not held by the Company are voted, abstained or not voted
CD&L and Velocity can agree to terminate the merger agreement at any
time upon the approval of their respective boards of directors.
Either CD&L or Velocity can terminate the merger agreement if:
o any court of competent jurisdiction in the United States or other
governmental authority shall have issued a final, non-appealable
order, decree or ruling or taken any other action permanently
restraining, enjoining or otherwise prohibiting the merger;
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o holders of CD&L's common stock fail to approve the merger; or
o the merger has not occurred on or before the 180th day following the
signing date (July 3, 2006).
Velocity may terminate the merger agreement if:
o CD&L materially breaches its covenant not to solicit a business
combination transaction in competition with the merger, or if CD&L's
board of directors withholds, withdraws or materially modifies its
recommendation of the merger agreement or the merger in a manner
adverse to Velocity.
CD&L can terminate the merger agreement if:
o CD&L's board of directors withholds, withdraws or materially
modifies its recommendation of the merger agreement to its
stockholders in response to a superior competing transaction after
giving Velocity a reasonable opportunity to discuss the superior
competing transaction and any proposed amendments to the merger
agreement for a period of seven business days (during which Velocity
could increase the amount of the merger consideration payable to
CD&L's stockholders) and CD&L pays Velocity a termination fee of
$2.5 million in cash.
The Merger Agreement obligates both Velocity and CD&L to indemnify and
hold harmless, to the fullest extent of applicable law, any person who served
CD&L as an officer, director, or employee or in any other fiduciary capacity
during any period prior to the effective time of the merger agreement from and
against any losses, damages, claims, costs and expenses of any kind arising out
of the person's service to CD&L in such capacity. In addition, Velocity is
obligated to purchase for the benefit of such indemnified persons a six-year
insurance policy against officers' and directors' liability commensurate with
the terms and conditions of CD&L's existing policy.
On July 3, 2006, CD&L and American Stock Transfer & Trust Company
("AST") entered into amendment no. 2 to CD&L's stockholder protection rights
plan (the "plan") for which AST acts as rights agent. The amendment provides
that under the plan neither a Flip-in Date, Flip-over Transaction or Event,
Separation Time nor a Stock Acquisition Date (as such terms are defined in the
plan) shall be deemed to have occurred, none of Velocity, Sub or any of their
affiliates or associates shall be deemed to have become an Acquiring Person (as
defined in the plan), and no holder of any rights shall be entitled to exercise
such rights, or be entitled to any rights, in any such case by reason of (a) the
approval, execution or delivery of the merger agreement, the voting agreement
described below or the securities purchase agreements (as defined below) or (b)
the commencement or, prior to termination of the merger agreement, the
consummation of any of the transactions contemplated by the merger agreement,
including the merger, or by the voting agreement or the securities purchase
agreements.
ITEM 5.01. CHANGES IN CONTROL.
Simultaneously with the execution of the merger agreement with CD&L,
Velocity acquired in private transactions CD&L convertible securities that
account for 49% of CD&L's common shares on a fully diluted basis and promptly
converted or exercised such securities, so that as of July 11, 2006, Velocity
will own approximately 9,036,261 shares of CD&L's common stock. It also executed
voting agreements with seven of the individuals who sold Velocity CD&L's Series
A 10% convertible subordinated debentures, who also hold an additional 8% of the
outstanding shares of CD&L common stock, to vote their shares in favor of a
merger with Velocity. Velocity has agreed to certain restrictions on its ability
to exercise its voting rights to enable CD&L's Board to exercise its fiduciary
duties.
To finance the acquisitions under the securities purchase
agreements and to provide funds for the merger with CD&L, on July 3, 2006
Velocity sold 4 million shares of its Series Q Convertible Preferred Stock for a
total consideration of $40 million and 75,000 units of its 12% Senior Secured
Notes due 2010 for a total consideration of $70.7 million. The 12% Senior
Secured Notes consist of a Note with a face value of $1,000 and 345 Warrants to
purchase Velocity common shares at an exercise price of $1.45 per share. The
Senior Notes were sold at a discount of 6.56% of face value. Simultaneously with
this financing, Velocity paid off and terminated its revolving credit facility
and Senior Subordinated Note.
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SERIES A PREFERRED STOCK, COMMON STOCK AND WARRANT PURCHASE AGREEMENTS
On July 3, 2006, Velocity entered into a Series A Preferred Stock and
Warrant Purchase Agreement with BNP Paribas ("Paribas") and two Series A
Preferred Stock, Common Stock and Warrant Purchase Agreements with Exeter
Capital Partners IV, L.P. ("Exeter IV"), one of which related to securities
purchased on June 30, 2006, by Exeter IV from the United States Small Business
Administration as receiver for Exeter Venture Lenders, L.P. ("Exeter I") and one
relating to our securities held by Exeter IV prior to that date (collectively,
the "preferred purchase agreements"). Under the preferred purchase agreements,
Velocity purchased the following securities at the following prices:
SERIES A PREFERRED STOCK
------------------------
NUMBER OF AS CONVERTED TO PER COMMON AGGREGATE PURCHASE
PREFERRED SHARES COMMON SHARE PURCHASE PRICE PRICE
---------------- ------ -------------------- ------------------
Paribas 262,467 2,624,670 2.10 $5,511,807
Exeter IV 131,234 1,312,340 3.00 $3,937,020
COMMON STOCK PURCHASE WARRANTS (EXERCISABLE AT $.001 PER SHARE)
PER SHARE AGGREGATE
NUMBER OF WARRANTS PURCHASE PRICE PURCHASE PRICE
------------------ --------------- ---------------
Paribas 337,500 2.10 $708,750
Exeter IV 168,750 3.00 $506,250
COMMON STOCK
------------
PER SHARE AGGREGATE
NUMBER OF SHARES PURCHASE PRICE PURCHASE PRICE
---------------- --------------- ---------------
Exeter IV 656,168 3.00 $1,968,504
All payments to Paribas were made in cash. Payments to Exeter IV were
made as follows: (a) as to the securities it historically owned, Exeter IV
received 3,205 units, each consisting of a 12.0% senior secured promissory note
in the principal amount of $1,000 and warrants to purchase up to 345 shares of
Velocity common stock at a price of $1.20 per share. Velocity simultaneously
sold additional units to investors at a price of $1,000 per unit (i.e., so that
Velocity effectively paid Exeter IV $3.00 per CD&L common share based on such
value) and (b) as to the securities acquired on June 30, 2006 from Exeter I,
Exeter IV received 2,465,418 shares of Velocity common stock at an agreed-on
price of $1.30 per share (so that Velocity effectively paid Exeter IV $3.00 per
share for such CD&L securities on an as-converted basis, based on such value).
Shortly after consummation of such purchases, Velocity provided notice
of conversion of the Series A preferred stock, effective as of July 11, 2006,
into an aggregate of 3,937,010 shares of CD&L's common stock, and exercised the
506,250 warrants on a cashless basis for an aggregate exercise price of $506.25,
so that it received 506,075 shares. As a result, under the preferred purchase
agreements, Velocity acquired, in the aggregate, 5,099,253 shares of CD&L's
common stock.
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SERIES A CONVERTIBLE SUBORDINATED DEBENTURE PURCHASE AGREEMENT
On July 3, 2006, Velocity entered into a Series A Convertible
Subordinated Debenture Purchase Agreement (the "debenture purchase agreement")
with the 14 individuals who held all of the Company's Series A debentures in the
aggregate principal amount of $4 million, including Albert W. Van Ness, Jr.,
Chairman and Chief Executive Officer of CD&L, William T. Brannan, President and
a director of CD&L, Michael Brooks, Group Operations President and a director of
CD&L, Russell Reardon, Chief Financial Officer of CD&L, Mark Carlesimo, General
Counsel of CD&L, Matthew J. Morahan, a director of CD&L, Peter Young, a director
of CD&L, five other officers of subsidiaries of the Company, a consultant to the
Company, and one other individual (the "Series A debenture sellers"). Under the
debenture purchase agreement, Velocity purchased the Series A debentures as
follows:
PRINCIPAL AMOUNT AS CONVERTED PER COMMON
SELLER OF DEBENTURES COMMON SHARES SHARE PRICE AGGREGATE PRICE
------ ------------- ------------- ----------- ---------------
Albert W. VanNess, Jr. $ 600,000 590,551 $3.25 $1,919,291.34
William T. Brannan 600,000 590,551 3.25 1,919,291.34
Michael Brooks 600,000 590,551 3.25 1,919,291.34
Russell Reardon 600,000 590,551 3.25 1,919,291.34
Mark Caslesimo 100,000 98,425 3.25 319,881.89
Matthew Morahan 200,000 196,851 3.25 639,763.78
Peter Young 100,000 98,425 3.25 319,881.89
Other Series A 1,200,000 1,181,103 3.25 3,838,581.50
Debenture Sellers
(7 persons)
The Series A debenture sellers had been parties to a shareholders
agreement with CD&L and the holders of the Series A preferred stock under which
they had a right of first refusal to acquire the Series A preferred stock. As a
condition to Velocity's entry into the debenture purchase agreement, the Series
A debenture sellers also entered into an agreement whereby they waived those
rights of first refusal in connection with Velocity's purchase of the Series A
preferred stock.
Shortly after consummation of the debenture purchase, Velocity
converted the Series A debentures into an aggregate of 3,937,008 shares of our
common stock. As a result of this conversion and the preferred purchase
agreement, Velocity will own as of July 11, 2006 9,036,261 shares of CD&L's
common stock, representing 49.1% of the outstanding shares of common stock. The
debenture purchase agreement and the preferred purchase agreements are
collectively referred to as the "securities purchase agreements."
VOTING AGREEMENT
As a condition to entering into the merger agreement and the debenture
purchase agreement, Velocity required that each of Albert Van Ness, Jr., William
T. Brannan, Michael Brooks, Russell J. Reardon, Matthew J. Morahan, Vincent P.
Brana (a consultant to the Company and a former officer) and Jack McCorkell (an
officer of one of our subsidiaries) enter into a voting agreement. Under the
voting agreement each such stockholder agreed to vote in favor of the merger and
the merger agreement and against any action which would result in a breach of
the merger agreement or voting agreement. The voting agreement also provides
that such stockholders will vote against any extraordinary corporate
transaction, sale or transfer of assets, change to the Board of Directors,
change in capitalization, charter or bylaws, change to the structure or business
of CD&L, or any other action which would potentially interfere, delay or
adversely effect the merger or transactions contemplated thereby. The
prohibition does not apply to a vote for a competing merger offer that the Board
determines to be on more favorable terms than the Velocity merger agreement,
provided that the Board recommends the stockholders do not approve the merger
transaction with Velocity. The voting agreement will terminate upon the earlier
of the termination of the merger agreement, in accordance with its terms, or the
effective date of the merger.
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ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(d) Exhibits
4.1 Amendment No. 2 to Stockholder Protection Rights Agreement by and
between CD&L, Inc. and American Stock Transfer & Trust Company.
10.1. Agreement and Plan of Merger dated July 3, 2006 between CD&L, Inc.,
CD&L Acquisition Corp. and Velocity Express Corporation.
99.1. Press Release dated July 5, 2006 announcing the merger agreement
with Velocity Express Corporation.
NOTE: IN CONNECTION WITH THE PROPOSED MERGER, CD&L INTENDS TO FILE A PROXY
STATEMENT AND OTHER RELEVANT MATERIALS WITH THE SECURITIES AND EXCHANGE
COMMISSION (THE "SEC"). CD&L'S STOCKHOLDERS ARE URGED TO READ THE PROXY
STATEMENT (AND ALL AMENDMENTS AND SUPPLEMENTS TO IT) AND OTHER MATERIALS WHEN
THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. CD&L's
stockholders will be able to obtain free copies of the proxy statement, when it
becomes available, as well as the other relevant materials, without charge, at
the SEC's Web site (http://www.sec.gov). Copies of CD&L's filings may also be
obtained without charge from CD&L at CD&L's Web site (www.cdl.net) or by
directing a request to CD&L, Inc., Secretary, 80 Wesley Street, South
Hackensack, New Jersey 07606.
CD&L and its directors and executive officers and other members of management
and employees are potential participants in the solicitation of proxies in
respect of the proposed merger. Information regarding CD&L's directors and
executive officers is available in CD&L's 2005 Annual Report on Form 10-K filed
with the SEC on April 4, 2006 and CD&L's proxy statement for its 2006 annual
meeting of stockholders, filed with the SEC on April 28, 2006. Additional
information regarding the interests of such potential participants will be
included in the proxy statement, and the other relevant documents filed with the
SEC when they become available.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: July 10, 2006 CD&L, INC.
By: /s/ Russell J. Reardon
----------------------------------
Russell J. Reardon
Vice President and Chief Financial Officer
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