UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|X| Preliminary Proxy Statement
|_| Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
|_| Definitive Proxy Statement
|_| Definitive Additional Materials
|_| Soliciting Material Pursuant to ss.240.14a-12
CD&L, INC.
--------------------------------------------------------------------------------
Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
|_| No fee required.
|X| Fee computed below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, par value $.001 per share
2) Aggregate number of securities to which transaction applies:
11,039,238
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
$3.00 per share of common stock outstanding
4) Proposed maximum aggregate value of transaction: $33,117,715
5) Total fee paid: $6,623.54
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
CD&L, INC.
80 WESLEY STREET
SOUTH HACKENSACK, NEW JERSEY 07606
AUGUST 17, 2006
Dear Stockholder:
On July 3, 2006, we entered into a merger agreement providing for the
acquisition of CD&L, Inc., by Velocity Express Corporation. If the merger is
completed, you will be entitled to receive $3.00 in cash for each share of our
common stock that you own at the effective time of the merger. A copy of the
merger agreement is attached as Appendix A to the proxy statement that
accompanies this letter.
You are invited to attend a special meeting of the stockholders of CD&L
to be held on August 17, 2006 at 10:00 a.m., local time, at the offices of
Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey 07068, at
which time you will be asked to adopt the merger agreement. The affirmative vote
of a majority of the shares of our common stock issued and outstanding as of
July 17, 2006 is required to adopt the merger agreement.
After careful consideration, our board of directors has approved and
adopted the merger agreement and the transactions it contemplates, including the
merger, and has determined that the merger agreement and the transactions it
contemplates, including the merger, are advisable and in the best interest of
CD&L and its stockholders. Accordingly, the board of directors recommends a vote
"FOR" adoption of the merger agreement.
The proxy statement includes detailed information about the merger
agreement. We urge you to carefully review the entire proxy statement, including
the merger agreement, and Scura, Rise & Partners LLC's written opinion letter.
IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED WHETHER OR
NOT YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON. YOU MAY CAUSE YOUR SHARES
TO BE VOTED BY COMPLETING AND MAILING THE ENCLOSED PROXY CARD. SUBMITTING A
WRITTEN PROXY WILL ENSURE YOUR SHARES ARE REPRESENTED AT THE MEETING.
Sincerely,
/s/ Albert W. Van Ness, Jr.
Albert W. Van Ness, Jr.
Chairman of the Board and
Chief Executive Officer
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT AND, IF GIVEN
OR MADE, THE INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY US OR ANY OTHER PERSON. YOU SHOULD NOT ASSUME THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER
THAN THE DATE OF THIS PROXY STATEMENT, AND THE MAILING OF THIS PROXY STATEMENT
TO STOCKHOLDERS SHALL NOT CREATE ANY IMPLICATION TO THE CONTRARY.
This letter and the accompanying materials, including the proxy
statement and form of proxy for the special meeting, are first being mailed to
stockholders on or about July ___, 2006.
CD&L, INC.
80 WESLEY STREET
SOUTH HACKENSACK, NEW JERSEY 07606
======================================
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS TO BE
HELD AUGUST 17, 2006
======================================
TO THE STOCKHOLDERS OF CD&L, INC.:
CD&L, Inc. ("CD&L") will hold a special meeting of its stockholders at
the offices of Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey
07068, on August 17, 2006, at 10:00 a.m., local time, for the following
purposes:
(1) to consider and vote upon a proposal to adopt the Agreement
and Plan of Merger, dated July 3, 2006, among Velocity Express Corporation
("Velocity"), CD&L Acquisition Corp., a newly-formed wholly-owned subsidiary of
Velocity ("NEWCO"), and CD&L, as such may be amended from time to time, and
approve the transactions contemplated thereby, including the merger of NEWCO
with and into CD&L and the conversion of each outstanding share of CD&L common
stock, other than shares held by CD&L or by Velocity or any of their
subsidiaries, into the right to receive $3.00 in cash, without interest, and
(2) to transact such other business as may properly come before
the special meeting and any adjournment or postponement of the special meeting.
Only holders of record of CD&L common stock at the close of business on
July 17, 2006 are entitled to receive this notice and to vote their shares at
the special meeting or any adjournment or postponement of the special meeting.
On the record date, there were ___________ holders of record of CD&L common
stock, and 18,397,572 shares of common stock were issued and outstanding.
Adoption of the merger agreement requires that the holders of a
majority of the shares of CD&L's common stock issued and outstanding on the
record date vote in favor of the same.
AFTER CAREFUL CONSIDERATION, THE CD&L BOARD OF DIRECTORS RECOMMENDS
THAT YOU VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND APPROVE THE
TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, INCLUDING THE MERGER, AT THE
SPECIAL MEETING, EACH OF WHICH ARE DESCRIBED IN DETAIL IN THE PROXY STATEMENT
ACCOMPANYING THIS NOTICE.
Please review the proxy statement accompanying this notice for more
complete information regarding the matters proposed for your consideration at
the special meeting.
By the Order of the CD&L, Inc. Board of Directors,
/s/ Mark T. Carlesimo
Mark T. Carlesimo
Secretary
South Hackensack, New Jersey
July __, 2006
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PROPOSED MERGER -- YOUR VOTE IS VERY IMPORTANT
PLEASE DO NOT SEND YOUR STOCK CERTIFICATES TO US AT THIS TIME. IF THE
MERGER IS COMPLETED, YOU WILL BE SENT INSTRUCTIONS REGARDING SURRENDER OF YOUR
CERTIFICATES.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING IN PERSON, PLEASE SIGN
AND DATE THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED POSTAGE
PAID ENVELOPE. EVEN IF YOU HAVE SUBMITTED A PROXY, YOU MAY STILL VOTE IN PERSON
IF YOU ATTEND THE MEETING. ANY PROXY MAY BE REVOKED AT ANY TIME BEFORE IT IS
EXERCISED BY FOLLOWING THE INSTRUCTIONS SET FORTH ON PAGE 11 OF THE ACCOMPANYING
PROXY STATEMENT. PLEASE NOTE, HOWEVER, THAT IF YOUR SHARES ARE HELD OF RECORD BY
A BROKER, BANK OR OTHER NOMINEE AND YOU WISH TO VOTE AT THE MEETING, YOU MUST
OBTAIN A PROXY ISSUED IN YOUR NAME FROM THAT RECORD HOLDER.
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2
TABLE OF CONTENTS
PAGE
QUESTIONS AND ANSWERS ABOUT THE MERGER AND THE SPECIAL MEETING...................................................ii
SUMMARY...........................................................................................................1
THE SPECIAL MEETING..............................................................................................10
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION......................................................13
MARKET PRICE AND DIVIDEND INFORMATION............................................................................14
THE PARTIES INVOLVED IN THE MERGER...............................................................................15
THE MERGER.......................................................................................................17
THE MERGER AGREEMENT.............................................................................................27
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...................................................35
STOCKHOLDER APPRAISAL RIGHTS.....................................................................................46
FUTURE STOCKHOLDER PROPOSALS.....................................................................................49
WHERE YOU CAN FIND MORE INFORMATION..............................................................................49
AGREEMENT AND PLAN OF MERGER.............................................................................APPENDIX A
OPINION OF SCURA, RISE & PARTNERS LLC....................................................................APPENDIX B
VOTING AGREEMENT.........................................................................................APPENDIX C
SECTION 262 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE......................................APPENDIX D
i
QUESTIONS AND ANSWERS ABOUT
THE MERGER AND THE SPECIAL MEETING
The following questions and answers briefly address some questions you may have
about the special meeting and the proposed merger. These questions and answers
may not address all questions that may be important to you as a stockholder of
CD&L. Please refer to the more detailed information contained elsewhere in this
proxy statement and the appendices to this proxy statement. In this proxy
statement, the terms "we," "us," "our" and "CD&L" refer to CD&L, Inc., the term
"Velocity" refers to Velocity Express Corporation, and the term "NEWCO" refers
to CD&L Acquisition Corp., a newly-formed wholly-owned subsidiary of Velocity.
THE MERGER
Q: WHY ARE WE HOLDING THE SPECIAL MEETING?
A: We are holding the special meeting for the following purposes:
(1) We are asking our holders of our common stock to vote
on a proposal to adopt the Agreement and Plan of Merger, dated as
of July 3, 2006 (the "merger agreement"), by and among CD&L,
Velocity and NEWCO, a wholly owned subsidiary of Velocity, and
approve the transactions contemplated by the merger agreement,
including the merger provided for therein (the "merger"). If the
merger agreement is adopted by the stockholders and the other
closing conditions contained in the merger agreement are satisfied
or waived, we will become a wholly-owned subsidiary of Velocity. A
copy of the merger agreement is attached as Appendix A to this
proxy statement and is incorporated by reference in this proxy
statement; and
(2) to transact such other business as may properly come
before the special meeting and any adjournment or postponement of
the special meeting.
Q: WHAT WILL I BE ENTITLED TO RECEIVE PURSUANT TO THE MERGER?
A: If the merger is completed, you will be entitled to receive $3.00
in cash, without interest, for each share of common stock that you
own at the effective time of the merger.
Q: WHY IS OUR BOARD OF DIRECTORS RECOMMENDING ADOPTION OF THE MERGER
AGREEMENT?
A: Our board of directors has approved and adopted the merger
agreement and the transactions it contemplates, including the
merger, and has determined that the merger agreement and the
transactions it contemplates, including the merger, are advisable
and in the best interests of CD&L and its stockholders. See "The
Merger--Recommendation of Our Board of Directors" for a more
complete discussion of why the board is recommending approval of
the merger agreement.
Q: IS THE MERGER SUBJECT TO THE SATISFACTION OF ANY CONDITIONS?
A: There are very limited conditions to consummation of the merger.
Before the merger can be completed, we must obtain stockholder
approval and there must not be an order of a court or other
governmental authority to restrain the merger. See "The Merger
Agreement--Conditions to the Merger" for a more complete discussion
of the conditions to the merger.
Simultaneous with its execution of the merger agreement, Velocity
acquired all of our outstanding 10% Series A convertible
subordinated debentures (the "Series A debentures"), Series A
preferred stock, common stock purchase warrants issued in 1999 and
certain shares of common stock from the holders thereof. See
"Summary--Series A Preferred Stock, Common Stock and Warrant
Purchase Agreements" and "Summary--Series A Convertible
Subordinated Debenture Purchase Agreement." Velocity then converted
the debentures and preferred stock and exercised the warrants. As a
result of those transactions, Velocity owns 9,036,261 shares of our
common stock, representing 49.1% of the outstanding shares of
common stock. Furthermore, certain individuals from whom Velocity
has purchased the Series A debentures agreed to vote 1,346,270
shares, or 7.3% of the outstanding shares of common stock, in favor
of the merger (the "voting agreement"). Velocity has also agreed to
limit its voting rights and terminate the voting agreement if there
is a Superior Competing Transaction (discussed below). However, if
there is no Superior Competing Transaction, Velocity has (in
combination with the individuals subject to the voting agreement)
voting authority or rights over sufficient shares of our common
stock to assure that the merger agreement receives stockholder
approval.
ii
Q: WHEN DO THE PARTIES EXPECT TO COMPLETE THE MERGER?
A: If the merger agreement is approved at the special meeting and the
conditions of the merger have been satisfied or waived, we expect
the merger to be completed promptly after the special meeting.
Nevertheless, we cannot assure you that this will occur.
Q: WHAT ARE THE U.S. FEDERAL TAX CONSEQUENCES OF THE MERGER TO CD&L'S
STOCKHOLDERS?
A: Generally, the merger will be taxable to our stockholders for U.S.
federal income tax purposes. A holder of our common stock receiving
cash pursuant to the merger will generally recognize gain or loss
for U.S. federal income tax purposes in an amount equal to the
difference between the amount of cash received and the holder's
adjusted tax basis in the common stock surrendered. See "The
Merger--Material U.S. Federal Income Tax Consequences" for a more
complete discussion of the U.S. federal income tax consequences of
the merger. THE TAX CONSEQUENCES OF THE MERGER TO YOU WILL DEPEND
UPON THE FACTS OF YOUR OWN SITUATION. WE URGE YOU TO CONSULT YOUR
OWN TAX ADVISOR FOR A FULL UNDERSTANDING OF THE TAX CONSEQUENCES OF
THE MERGER TO YOU.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. A description of how to surrender your shares for payment if
the merger is completed follows this question. DO NOT SEND ANY
STOCK CERTIFICATES WITH YOUR PROXY.
Q: IF THE MERGER IS COMPLETED, HOW WILL I RECEIVE PAYMENT FOR MY
SHARES?
A: If the merger is completed, you will receive a letter of
transmittal with instructions on how to send your stock
certificates to American Stock Transfer & Trust Company, which has
been selected to act as paying agent in connection with the merger.
You will receive payment for your shares from the paying agent
after you comply with these instructions. If your shares of common
stock are held for you in "street name" by your broker, you should
receive instructions from your broker as to how to surrender these
shares and receive payment for them.
Q: ARE APPRAISAL RIGHTS AVAILABLE?
A: Holders of our common stock are entitled to appraisal rights in
connection with the proposed merger.
THE SPECIAL MEETING
Q: WHY AM I RECEIVING THESE MATERIALS?
A: You are receiving this proxy statement and proxy card because our
records indicate that you own shares of our common stock. Our board
of directors is providing these proxy materials to give you
information for use in determining how to vote your shares of
common stock at the special meeting.
Q: WHEN AND WHERE IS THE SPECIAL MEETING?
A: The special meeting of stockholders will be held on August 17, 2006
at 10:00 a.m., local time, at the offices of Lowenstein Sandler PC,
65 Livingston Avenue, Roseland, New Jersey 07068.
iii
Q: ON WHAT AM I BEING ASKED TO VOTE?
A: You are being asked to vote on a proposal to adopt the merger
agreement, dated as of July 3, 2006, among CD&L, Velocity and
NEWCO, which provides for the merger of NEWCO with and into CD&L
and the conversion of each outstanding share of our common stock,
other than shares held by CD&L or by Velocity or any of their
subsidiaries, into the right to receive $3.00 in cash, without
interest.
Q: WHO IS ENTITLED TO VOTE?
A: Only holders of our common stock at the close of business on July
17, 2006 are entitled to vote at the special meeting. On the record
date, there were _________ holders of record of the common stock,
and 18,397,572 shares of common stock were issued and outstanding.
Stockholders will be entitled to one vote for each full share of
common stock held.
Q: WHAT VOTE IS REQUIRED TO ADOPT THE MERGER AGREEMENT?
A: The affirmative vote of a majority of the shares of our common
stock issued and outstanding on the record date is required to
adopt the merger agreement.
Q: ARE THERE ANY AGREEMENTS WITH VELOCITY WITH RESPECT TO VOTING?
A: Yes. Velocity has an agreement with several individuals from whom
it purchased our Series A Convertible Debentures to vote the
1,346,270 shares owned by them in favor of the merger agreement.
Further, Velocity owns 9,036,261 shares of our common stock as a
result of purchases of our common stock and convertible securities
it made on July 3, 2006. Velocity has agreed to vote in favor of
the merger agreement, so we expect that the proposal will be
approved.
Q: WHAT DO I NEED TO DO NOW?
A: Please submit a proxy for your shares as soon as possible, so that
your shares are represented at the special meeting.
PLEASE COMPLETE, SIGN AND DATE THE ENCLOSED PROXY CARD AND PROMPTLY
RETURN IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
If you attend the special meeting, you may vote in person if you
wish by completing a ballot at the special meeting, whether or not
you have already signed, dated and returned your proxy card.
Please review this proxy statement for more complete information
regarding the matters proposed for your consideration at the
special meeting.
Q: IF MY SHARES ARE HELD IN "STREET NAME" BY MY BROKER OR NOMINEE,
WILL MY BROKER OR NOMINEE VOTE MY SHARES FOR ME?
A: Your broker or nominee will vote your shares only if you provide
instructions on how you want your shares to be voted. You should
follow the directions provided by them regarding how to instruct
them to vote your shares. You may vote in person at the special
meeting if you obtain written authorization in your name from your
broker or other nominee and bring evidence of your stock ownership
from your broker or other nominee. Please contact your broker or
other nominee to determine how to vote by mail.
Q: WHAT HAPPENS IF I SIGN AND RETURN MY PROXY CARD, BUT I DO NOT
INDICATE HOW TO VOTE?
A: If you properly sign and return your proxy card, but do not include
instructions on how to vote, your shares of common stock will be
voted "FOR" adoption of the merger agreement. Our management does
not currently expect that any other proposal will be considered at
the special meeting. If other proposals requiring a vote of
stockholders are brought before the special meeting in a proper
manner, the persons named in the enclosed proxy card intend to vote
the shares they represent in accordance with their best judgment.
iv
Q: WHAT HAPPENS IF I ABSTAIN FROM VOTING ON THE PROPOSAL?
A: If you return your proxy card with instructions to abstain from
voting on the proposal to adopt the merger agreement, your shares
will be counted for determining whether a quorum is present at the
special meeting and will have the effect of a vote "AGAINST" the
proposal to adopt the merger agreement.
Q: WHAT HAPPENS IF I DO NOT RETURN A PROXY CARD OR OTHERWISE DO NOT
VOTE?
A: Your failure to return a proxy card or otherwise vote will mean
that your shares will not be counted toward determining whether a
quorum is present at the special meeting and will have the effect
of a vote "AGAINST" the proposal to adopt the merger agreement.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY PROXY CARD?
A: Yes. You may change your vote by revoking your proxy at any time
before the polls close at the applicable special meeting. If you
are a registered holder of our common stock, you can do this in any
of the following ways:
o by sending a written notice to us at the address specified
below stating that you would like to revoke your proxy;
o by completing and submitting a new, later-dated proxy card by
mail to the address specified below; or
o by attending the special meeting and voting in person. Your
attendance at the special meeting alone will not revoke your
proxy. You must also vote at the special meeting in order to
revoke your previously submitted proxy.
You should send any notice of revocation or your completed new,
later-dated proxy card, as the case may be, to CD&L, Inc., c/o
American Stock Transfer & Trust Company, 59 Maiden Lane, New York,
NY, 10038.
If your shares are held in "street name," you must contact your
broker or other nominee and follow the directions provided to you
in order to change your vote.
Q: WHAT DOES IT MEAN IF I RECEIVE MORE THAN ONE SET OF MATERIALS?
A: This means you own shares of our common stock that are registered
under different names. For example, you may own some shares
directly as a stockholder of record and other shares through a
broker or you may own shares through more than one broker. In these
situations, you will receive multiple sets of proxy materials. You
must complete, sign, date and return all of the proxy cards or
follow the instructions for any alternative voting procedure on
each of the proxy cards that you receive in order to cause all of
the shares you own to be voted. Each proxy card you receive comes
with its own prepaid return envelope; if you submit a proxy by
mail, make sure you return each proxy card in the return envelope
that accompanies that proxy card.
Q: WHO CAN HELP ANSWER MY QUESTIONS?
A: If you would like additional copies, without charge, of this proxy
statement, or if you have questions about the merger, including
procedures for voting your shares, you should contact:
Mark T. Carlesimo, Esq.
c/o CD&L, Inc.
80 Wesley Street
South Hackensack, NJ 07606
(201) 487-7740
v
MATTERS PERTAINING TO DIRECTORS, EXECUTIVE OFFICERS AND EMPLOYEES
Q: HOW WILL THE MERGER AFFECT OPTIONS TO ACQUIRE OUR COMMON STOCK?
A: If the merger is completed, each outstanding stock option granted
under a CD&L stock option or stock incentive plan will become
exercisable in full and then canceled, and the holder will be
entitled to receive a cash payment, net of applicable taxes, in an
amount equal to the product of:
o the excess, if any, of $3.00 (or, if higher and required
pursuant to the terms of the applicable plan, the highest
closing price of the common stock during the 5 business days
preceding the merger) over the exercise price of the option;
and
o the number of shares then subject to the option.
Q: WHAT ARE THE CONSEQUENCES OF THE MERGER TO THE MEMBERS OF OUR BOARD
OF DIRECTORS AND OUR OFFICERS?
A: Like all other stockholders, the members of our board of directors
and our executive officers will be entitled to receive $3.00 in
cash for each share of common stock that they own or are entitled
to receive on the exercise of stock options (net of the option
exercise price). In addition, certain of our officers and directors
owned CD&L 10% Series A debentures. Simultaneously with the
execution of the merger agreement, all of the holders of the Series
A debentures entered into a Series A Convertible Debenture Purchase
Agreement (the "debenture purchase agreement") with Velocity
pursuant to which they sold the Series A debentures for $3.25 per
share in cash for each of the shares of common stock that they were
entitled to receive upon conversion of the Series A debentures and
agreed to waive rights of first refusal which they had with respect
to the Series A preferred stock which Velocity purchased from the
holders thereof on July 3, 2006 simultaneously with its purchase of
the Series A debentures. The members of our board of directors and
our executive officers have received or will be entitled to receive
the payments described above with respect to any common stock,
stock options and Series A debentures that they held or hold and
certain officers will be entitled to receive change of control
payments under their employment agreements with CD&L. See "The
Merger--Interests of Our Directors and Executive Officers in the
Merger" for a more complete discussion of the payments that members
of our board of directors and our executive officers received for
their Series A debentures and will receive for their common stock
and stock options, as well as a discussion of other interests they
may have in the merger.
vi
SUMMARY
This summary highlights selected information from this proxy statement.
It does not contain all of the information that is important to you. We urge you
to read carefully the entire proxy statement and the other documents to which
this document refers to understand fully the proposed merger of NEWCO with and
into CD&L, resulting in CD&L becoming a wholly owned subsidiary of Velocity. See
"Where You Can Find More Information." A copy of the merger agreement dated July
3, 2006, by and among Velocity, CD&L and NEWCO is attached as Appendix A to this
proxy statement and is incorporated by reference in this proxy statement.
PARTIES TO THE MERGER (PAGE 15)
CD&L, INC.
We are a leading national, full-service provider of customized,
same-day, time-critical delivery services to a wide range of commercial,
industrial and retail customers. We provide our services throughout the United
States.
VELOCITY EXPRESS CORPORATION
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 ACQUISITION CORP.
NEWCO is a newly-formed Delaware corporation and wholly-owned
subsidiary of Velocity. NEWCO was organized for the purpose of entering into the
merger agreement and completing the merger and the other transactions it
contemplates. NEWCO has not conducted any activities to date other than
activities incidental to its formation and in connection with the transactions
contemplated by the merger agreement.
THE SPECIAL MEETING (PAGE 10)
The special meeting will be held on August 17, 2006, at 10:00 a.m.,
local time, at Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey
07068. A failure to vote your shares of common stock or an abstention will have
the same effect as a vote against adoption of the merger agreement.
RECORD DATE (PAGE 10)
You are entitled to vote at the special meeting if you owned shares of
our common stock at the close of business on July 17, 2006, the record date for
the CD&L special meeting. On the record date, there were 18,397,572 shares of
common stock issued and outstanding.
MEETING QUORUM; VOTE REQUIRED (PAGE 10)
A majority of the shares of our common stock issued and outstanding on
the record date must be present in person or represented by proxy to establish a
quorum for the transaction of business at the special meeting.
Adoption of the merger agreement and approval of the transactions
contemplated by the merger agreement by our stockholders requires that a
majority of the shares of common stock issued and outstanding on the record date
vote in favor thereof.
1
THE MERGER (PAGE 17)
At the effective time of the merger:
o NEWCO will merge with and into CD&L, with CD&L being the surviving
corporation and wholly owned subsidiary of Velocity;
o each issued and outstanding share of our common stock, other than
shares whose holders have asserted and perfected appraisal rights,
will be canceled and converted into the right to receive $3.00 per
share in cash; and
o all of the issued and outstanding shares of NEWCO common stock will
be converted into one share of common stock of CD&L, as the
surviving corporation.
The merger will become effective upon the filing of a certificate of merger with
the office of the Delaware Secretary of State. Assuming the adoption of the
merger agreement at the special meeting and no litigation with respect thereto,
we anticipate that the merger will be completed promptly after the special
meeting.
RECOMMENDATION OF THE BOARD OF DIRECTORS (PAGE 21)
On June 26, 2006, after careful consideration the CD&L board of
directors determined that the merger agreement and the transactions contemplated
by the merger agreement were advisable and in the best interests of CD&L and its
stockholders. Accordingly, the board of directors recommends that you vote "FOR"
the adoption of the merger agreement and approval of the transactions
contemplated by the merger agreement.
OUR REASONS FOR THE MERGER (PAGE 21)
Our board of directors consulted with senior management and our
financial and legal advisors and considered a number of factors that are
identified in further detail under "The Merger--Reasons For the Merger" in
reaching its decisions to approve and adopt the merger agreement and the
transactions contemplated by the merger agreement, and to recommend that our
stockholders vote "FOR" adoption of the merger agreement and approval of the
transactions contemplated by the merger agreement. Some of those factors
include:
o The relationship of the $3.00 per share cash merger consideration
to the then current trading price and historical trading prices of
our common stock, including the fact that the cash merger
consideration represents a premium of more than 33 percent over the
closing sale price of $2.24 per share of our common stock on the
American Stock Exchange on June 23, 2006, the trading day
immediately prior to the date on which our board and Velocity's
board approved the transaction;
o The fact that the merger consideration to be received by our
stockholders pursuant to the merger will consist entirely of cash,
which will provide liquidity and certainty of value to our
stockholders;
o The opinion of Scura, Rise & Partners LLC, or SRP, that, based upon
and subject to the assumptions made, matters considered and
limitations on the review undertaken in connection therewith, their
experience as investment bankers, their work as described in their
opinion, and other factors they deemed relevant, as of June 26,
2006, the merger consideration was fair, from a financial point of
view, to the holders of shares of our common stock (the full text
of the written opinion of SRP is attached as Appendix B to this
proxy statement, and you are urged to and should read that opinion
carefully and in its entirety);
o The experience of SRP in analyzing the financial terms of mergers,
including SRP's presentations to our board of directors and the
financial analyses contained therein;
2
o Our current and historical financial condition and results of
operations;
o Our strategic plans and current financial projections, including
the risks of failure to successfully implement those strategic
plans and achieve those projections, particularly compared to the
risks and benefits of the merger;
o The possible alternatives to the merger, including continuing to
operate CD&L on a stand-alone basis and the risks associated
therewith, including the risks identified in reports we have filed
with the Securities and Exchange Commission, or SEC; and
o The terms and conditions of the merger agreement, which our board
of directors believes will not preclude a superior competing
proposal, and the course of negotiations of the merger agreement.
The information and factors set forth above represent some of the factors
considered by our board included in the description of factors considered by our
board under "The Merger--The Reasons for the Merger." In view of the variety of
factors considered in connection with the evaluation of the merger, our board of
directors did not find it practicable to, and did not, quantify or otherwise
assign relative or specific weights or values to any of these factors, and
individual directors may have given different weights to different factors.
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 PREFERRED AS CONVERTED TO PER COMMON SHARE AGGREGATE
SHARES COMMON PURCHASE PRICE PURCHASE 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)
---------------------------------------------------------------
NUMBER OF WARRANTS PER SHARE PURCHASE PRICE AGGREGATE PURCHASE PRICE
------------------ ------------------------ ------------------------
Paribas 337,500 2.10 $708,750
Exeter IV 168,750 3.00 $506,250
COMMON STOCK
------------
NUMBER OF SHARES PER SHARE PURCHASE PRICE AGGREGATE 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
based on such unit price Velocity effectively paid Exeter IV $3.00 per share of
CD&L common stock and common stock equivalent) and (b) as to the securities that
Exeter IV acquired on June 30, 2006 from Exeter I, Exeter IV received 2,465,418
shares of Velocity common stock having an agreed upon value of $1.30 per share
(so that Velocity effectively paid Exeter IV $3.00 per share of CD&L common
stock and common stock equivalent 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 our 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 an aggregate of 5,099,253 shares of our common
stock.
3
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 our Series A debentures in the aggregate
principal amount of $4 million, including Albert W. Van Ness, Jr., our Chairman
and Chief Executive Officer, William T. Brannan, our President and a director,
Michael Brooks, our Group Operations President and a director, Russell Reardon,
our Chief Financial Officer, Mark T. Carlesimo, our General Counsel, Matthew J.
Morahan, one of our directors, Peter Young, one of our directors, five other
officers of subsidiaries of CD&L, a consultant to CD&L, and one other individual
(the "Series A debenture sellers"). Under the debenture purchase agreement,
Velocity purchased the Series A debentures as follows:
PRINCIPAL AMOUNT OF AS CONVERTED
SELLER DEBENTURES COMMON SHARES PER COMMON 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 T. Carlesimo 100,000 98,425 3.25 319,881.89
Matthew J. 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 stockholders
agreement with CD&L and the holders of the Series A preferred stock under which
the Series A debenture sellers had a right of first refusal to acquire the
Series A preferred stock. As a condition to the debenture purchase agreement,
the Series A debenture sellers waived those rights of first refusal so that
Velocity could purchase the Series A preferred stock from Paribas and Exeter IV.
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
agreements, as of July 17, 2006, Velocity owns 9,036,261 shares of our common
stock, representing 49.1% of our shares of common stock outstanding on the
record date. In this proxy statement we refer to the debenture purchase
agreement and the preferred purchase agreements collectively as the "securities
purchase agreements."
VOTING AGREEMENT (PAGE 34)
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 CD&L and a former officer of CD&L) 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 affect 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.
SHARE OWNERSHIP OF DIRECTORS AND EXECUTIVE OFFICERS (PAGE 45)
As of July 17, 2006, our directors and executive officers held and were
entitled to vote, in the aggregate, 1,010,349 shares of our common stock,
representing 5.5% of the then outstanding shares of our common stock. As stated
above, certain of our directors and executive officers have entered into a
voting agreement with Velocity pursuant to which they have agreed to vote all of
their shares of common stock "FOR" adoption of the merger agreement and approval
of the transactions contemplated by the merger agreement, provided that these
restrictions shall not apply to a vote in connection with a "superior competing
transaction" (as defined below), if such vote is made subsequent to our board's
withholding, withdrawal or modification of its recommendation to the holders of
our common stock as a result of such a transaction (See "The Merger -- Voting
Agreements").
4
OUR STOCKHOLDERS WILL BE ENTITLED TO RECEIVE $3.00 IN CASH PER SHARE, WITHOUT
INTEREST, FOR EACH SHARE OF COMMON STOCK THEY OWN (PAGE 35)
Upon completion of the merger, each issued and outstanding share of our
common stock, other than shares held by us or Velocity or its subsidiaries, will
be converted into the right to receive $3.00 per share in cash, without
interest.
TREATMENT OF OUTSTANDING STOCK OPTIONS (PAGE 36)
Velocity will not assume any options or warrants to purchase shares of
our common stock or any securities convertible into shares of our common stock.
If the merger is completed, each outstanding stock option granted under a CD&L
stock option or stock incentive plan will become exercisable in full and then
canceled, and the holder will be entitled to receive a cash payment, net of
applicable taxes, in an amount equal to the product of:
o the excess, if any, of $3.00 (or, if higher and required pursuant
to the terms of the applicable plan, the highest closing price of
the common stock during the 5 business days preceding the merger)
over the exercise price of the option; and
o the number of shares then subject to the option.
FAIRNESS OPINION OF SCURA, RISE & PARTNERS LLC (PAGE 23)
We engaged SRP to act as our financial advisor in connection with the
proposed merger and to render an opinion as to whether, as of the date of its
opinion, the consideration to be received by our common stockholders pursuant to
the merger agreement, taking into account the amount and form of consideration
and taking into account the consideration to be received by our securityholders
pursuant to the securities purchase agreements, was fair to our common
stockholders from a financial point of view. SRP provided its opinion to our
board of directors and our committee of independent directors in connection with
their consideration of the merger. SRP's written opinion letter dated June 26,
2006, which is attached as Appendix B to this proxy statement, describes the
matters that SRP considered and various assumptions, limitations and
qualifications to its opinion. SRP's opinion is not a recommendation as to how
any of our stockholders should vote or act with respect to the merger. We agreed
to pay SRP a fee for these services, the principal portion of which is payable
upon completion of the merger.
OUR DIRECTORS AND OFFICERS HAVE INTERESTS IN THE TRANSACTION THAT MAY BE
DIFFERENT FROM, OR IN ADDITION TO, INTERESTS OF OUR STOCKHOLDERS GENERALLY (PAGE
28)
Like all other stockholders, the members of our board of directors and
our executive officers will be entitled to receive $3.00 in cash for each of the
shares of common stock that they own or are entitled to receive on the exercise
of stock options (net of the exercise price). Certain officers and directors
also received $3.25 in cash for each of the shares of common stock that they
were entitled to receive upon conversion of the Series A debentures that they
owned plus their waiver of their rights of first refusal with respect to
Velocity's purchase of the Series A preferred stock.
The merger agreement provides for indemnification arrangements for each
of our current and former directors and officers that will continue following
the effective time of the merger as well as insurance for a period of six years
following the effective time of the merger covering the individual's service to
us as a director or officer.
5
We had entered into employment agreements containing a change in control
severance provision with Albert W. Van Ness, Jr., William T. Brannan, Michael
Brooks, Russell J. Reardon and Mark T. Carlesimo, each of whom is one of our
executive officers. Each of the agreements provides for specified payments and
benefits if the executive's employment is terminated within 180 days, following
a change in control of CD&L. Completion of the merger will constitute a change
in control of CD&L within the meaning of these agreements. We will be required
to make the required severance payments to any of these individuals upon the
closing of the merger if their employment with CD&L terminates prior to or upon
the effectiveness of the merger, and Velocity will fund these payments.
Simultaneous with the signing of the merger agreement, each of the executives
entered into a letter agreement with CD&L for the purposes of (i) amending such
employment agreement to change the period post-merger during which they are
protected from termination of employment from "180 days" to "one year from the
Effective Date of the Merger", (ii) clarifying that so long as notice of
termination is given within such one-year period, the executive shall be
entitled to receive change in control benefits even if he continues to be
employed after the effective date, and (iii) setting forth the lump sum amounts
that would be required to be paid under the employment agreements if termination
were effective immediately upon consummation of the merger transaction
(including two year executive life insurance premium and car allowance). The
letter agreement also stated that in the event of the death or disability of any
of the executives, such executive shall be entitled to the change of control
benefits described in the letter agreement rather than the payments he would
have received under the employment agreement for a termination upon death or
disability, and provided for a gross-up if certain tax liabilities were
incurred. The change of control benefits, before gross up payments if any, would
be as follows if such employees were terminated:
Albert W. Van Ness, Jr. $1,009,233
William T. Brannan $894,786
Michael Brooks $890,710
Russell J. Reardon $897,840
Mark T. Carlesimo $576,990
As of the date hereof, it is anticipated that the employment of Albert
W. Van Ness, Jr. will be terminated as of the effective date of the merger and
he will receive the above payment. Velocity is negotiating employment offer
letters with Michael Brooks, William T. Brannan, Russell J. Reardon, and Mark T.
Carlesimo, and it is anticipated that each individual will become an employee of
Velocity and not receive the payments above unless such employment is terminated
within one year after the effective date of the merger.
We have entered into a consulting agreement with Thomas E. Durkin III,
one of our directors, pursuant to which Mr. Durkin provides consulting services
to us with respect to business and financial matters. His focus is on merger and
acquisition activities, including developing strategies, evaluating, structuring
and negotiating potential transactions and otherwise assisting our chief
executive officer with respect to such matters. He has been our principal
negotiator with respect to the merger with Velocity. In consideration for his
services, we pay Mr. Durkin an hourly fee of $125, and if our chief executive
officer requests Mr. Durkin to work on a particular transaction, as he has with
respect to the Velocity transaction, we must pay Mr. Durkin a fee of at least
$300,000 upon consummation of such transaction, plus such other amounts, if any,
as the chief executive officer may authorize. The consulting agreement was
amended on July 3, 2006, to provide that, in addition to the $300,000 fee, Mr.
Durkin will receive from Velocity warrants to acquire 133,334 shares of Velocity
common stock at a price of $1.50 per share. It is anticipated that following
the effective date of the merger, Mr. Durkin will join the board of directors of
Velocity and become a consultant to Velocity, assisting in transition matters.
A NUMBER OF CONDITIONS MUST BE SATISFIED OR WAIVED TO COMPLETE THE MERGER
(PAGE 42)
Before the merger can be completed, a number of conditions must be
satisfied or waived. These conditions include:
o the requisite approval of the merger agreement by the holders of
our common stock. Unless there is a superior competing transaction
(as defined below), Velocity, through its ownership of common stock
acquired under the securities purchase agreements and its rights
under the voting agreement, has or controls the vote of a majority
of the outstanding shares of our common stock, and has indicated
that it will vote to adopt the merger agreement;
o there is no statute, rule, regulation, executive order, decree,
ruling or injunction or other order of a court or governmental
authority of competent jurisdiction directing that the merger
transaction not be consummated, provided that each party has used
all commercially reasonable efforts to have any such decree,
ruling, injunction or order vacated; and
6
o all governmental consents, orders and approvals legally required
for the consummation of the merger shall have been obtained and be
in effect at the effective time of the merger, and all waiting
periods imposed by applicable law shall have expired or been
terminated. We do not believe there are governmental consents
necessary to complete the merger transaction.
LIMITATIONS ON OUR SOLICITATION OF COMPETING PROPOSALS (PAGE 37)
We have agreed that we and our representatives will cease any existing
activities, discussions or negotiations with any third party with respect to any
competing transactions, and have agreed that neither we nor our representatives
will solicit, initiate, knowingly encourage or facilitate any third-party
acquisition proposals.
If we receive a competing offer or inquiry from a third party, we must
advise Velocity orally and in writing of:
o the receipt of such offer or an inquiry which could reasonably be
expected to lead to a competing offer;
o the identity of the party submitting such offer or inquiry; and
o the material terms and conditions of such offer.
We must keep Velocity reasonably informed on a current basis of the status and
details of any such offer (including amendments and proposed amendments),
proposal or inquiry in a timely manner. Our board of directors may withhold,
withdraw or materially modify its recommendation to our stockholders of the
merger agreement or the merger in response to a competing offer that our board
believes will result in a superior competing transaction (defined below). We
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
our board must determine in good faith that the competing offer is reasonably
likely to result in a superior competing transaction.
If we receive a bona fide, unsolicited, written proposal or offer for a
competing transaction by a third party which:
o our board:
- determines in good faith, after consulting with our
financial advisor, will result in, or is reasonably likely
to lead to, a transaction more favorable to our
stockholders than the merger with Velocity, and
- after consulting with counsel, reasonably determines that
failure to entertain the third-party proposal would 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 to us, in all material respects, than the
confidentiality agreement with Velocity,
which is referred to as a "superior competing transaction," we may furnish to
the third party information with respect to CD&L and participate in discussions
and negotiations with the third party provided that we have delivered prior
written notice to Velocity that we intend to take such actions.
7
HOW THE MERGER AGREEMENT MAY BE TERMINATED (PAGE 42)
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;
o holders of our common stock fail to adopt the merger agreement at
the special meeting; or
o the merger shall not have occurred on or before December 30, 2006.
Velocity may terminate the merger agreement if:
o we materially breach our covenant not to solicit a business
combination transaction in competition with the merger, or if our
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 our board of directors withholds, withdraws or materially modifies
its recommendation of the merger agreement or the merger to our
stockholders in response to an executed agreement constituting a
superior competing transaction after giving Velocity a reasonable
opportunity to discuss the superior competing transaction and any
proposed amendments to the merger agreement with us for a period of
seven business days (during which Velocity could increase the
amount of the merger consideration payable to our stockholders) and
we pay Velocity a termination fee of $2.5 million in cash.
WHEN WE ARE REQUIRED TO PAY A TERMINATION FEE TO VELOCITY (PAGE 43)
We are required to pay a termination fee of $2.5 million in cash to Velocity if:
o Velocity terminates the merger agreement because of our breach of
our covenant not to solicit a competing transaction; or
o Velocity terminates the merger agreement because our board of
directors withholds, withdraws or materially modifies or changes
its recommendation of the merger agreement or the merger to our
stockholders in a manner adverse to Velocity; or
o we terminate the merger agreement because of a superior competing
transaction.
FEDERAL INCOME TAX CONSIDERATIONS FOR OUR STOCKHOLDERS (PAGE 31)
Generally, the merger will be taxable to our stockholders for U.S.
federal income tax purposes. A holder of our common stock receiving cash
pursuant to the merger generally will recognize gain or loss for U.S. federal
income tax purposes in an amount equal to the difference between the amount of
cash received and the holder's adjusted tax basis in the common stock
surrendered.
OUR STOCKHOLDERS WILL HAVE APPRAISAL RIGHTS (PAGE 46)
Holders of shares of our common stock will be entitled to exercise
appraisal rights with respect to the merger under the General Corporation Law of
the State of Delaware.
8
EXPENSES (PAGE 43)
Each party will pay all of the fees and expenses that it incurs in
connection with the merger agreement and the merger. We will pay all of the fees
and expenses associated with the filing and printing of this proxy statement.
WHERE YOU CAN FIND MORE INFORMATION (PAGE 49)
If you would like additional copies, without charge, of this proxy
statement, or if you have questions about the merger, including procedures for
voting your shares, you should contact:
Mark Carlesimo, Esq.
c/o CD&L, Inc.
80 Wesley Street
South Hackensack, NJ 07606
(201) 487-7740
9
THE SPECIAL MEETING
GENERAL
The enclosed proxy is solicited on behalf of our board of directors for
use at a special meeting of stockholders to be held on August 17, 2006, at 10:00
a.m., local time, or at any adjournments or postponements of the special
meeting, for the purposes set forth in this proxy statement and in the
accompanying notice of special meeting. The special meeting will be held at the
offices of Lowenstein Sandler, P.C., 65 Livingston Avenue, Roseland, New Jersey
07068.
At the special meeting, holders of our common stock will be asked to:
o vote on the proposal to adopt the agreement and plan of merger,
dated July 3, 2006, among CD&L, Velocity and NEWCO, and approve the
transactions contemplated by the merger agreement; and
o transact such other business as may properly come before the
special meeting or any adjournments or postponements of the special
meeting.
We do not expect a vote to be taken on any other matters at the special
meeting. If any other matters are properly presented at the special meeting for
consideration, however, the holders of the proxies, if properly authorized, will
have discretion to vote on these matters in accordance with their best judgment.
RECORD DATE AND VOTING INFORMATION
Only holders of record of our common stock at the close of business on
July 17, 2006, the record date for the special meeting, are entitled to notice
of, and to vote at, the special meeting and any adjournments or postponements
thereof. At the close of business on the record date, 18,397,572 shares of our
common stock were outstanding and entitled to vote. A list of our stockholders
will be available for review at our executive offices during regular business
hours beginning two business days after the notice of the special meeting is
given and continuing to the date of the special meeting. The list of our
stockholders will be available at the special meeting or any adjournment
thereof. Each holder of record of shares of our common stock on the record date
will be entitled to one vote for each share held.
All votes will be tabulated by the inspectors appointed for the special
meeting, who will separately tabulate affirmative and negative votes,
abstentions and broker non-votes. Brokers who hold shares in "street name" for
clients typically have the authority to vote on "routine" proposals when they
have not received instructions from beneficial owners. Absent specific
instructions from the beneficial owner of the shares, however, brokers generally
are not allowed to exercise their voting discretion with respect to the approval
of non-routine matters, such as the adoption of the merger agreement. Proxies
submitted without a vote by brokers on these matters are referred to as "broker
non-votes."
QUORUM
A majority of the votes entitled to be cast on the proposal to adopt
the merger agreement will constitute a quorum for action on that matter.
Accordingly, a majority of the shares of our common stock outstanding on the
record date must be present in person or represented by proxy to establish a
quorum for the transaction of business at the special meeting. If a share is
represented for any matter at the special meeting, other than for the purpose of
objecting to the special meeting or the transacting of business at the special
meeting, it will be deemed present for purposes of determining whether a quorum
exists for the remainder of the meeting and for any adjournment of that meeting
unless a new record date is or must be set for that adjourned meeting.
Any shares of our common stock held in treasury by us are not
considered to be outstanding on the record date or otherwise entitled to vote at
the special meeting for purposes of determining a quorum.
10
Shares represented by proxies reflecting abstentions and properly
executed broker non-votes are counted for purposes of determining whether a
quorum exists.
REQUIRED VOTE
In order to approve the merger agreement, the holders of a majority of
the shares of common stock issued and outstanding on the record date must vote
"FOR" adoption of the merger agreement and approval of the transactions
contemplated by the merger agreement. Absent a superior competing transaction,
Velocity controls a sufficient number of votes, through ownership of common
stock or through the voting agreement, to adopt the merger agreement.
Proxies that reflect abstentions and broker non-votes, as well as
proxies that are not returned, will have the same effect as votes against
adoption of the merger agreement.
If the special meeting is adjourned or postponed for any reason, at any
subsequent reconvening of the special meeting, all proxies will be voted in the
same manner as they would have been voted at the original convening of the
meeting, except for any proxies that have been revoked or withdrawn.
PROXIES AND REVOCATION OF PROXIES
We urge you to carefully read and consider the information contained in
this proxy statement and then complete, date and sign your proxy card and mail
the proxy card in the enclosed postage pre-paid return envelope as soon as
possible. Submitting a proxy now will not limit your right to vote at the
special meeting if you decide to attend in person. If your shares are held of
record in "street name" by a broker or other nominee and you wish to vote in
person at the special meeting, you must obtain from the record holder a proxy
issued in your name.
Proxies received at any time before the special meeting and not revoked
or superseded before being voted will be voted at the special meeting. If the
proxy specifies how it is to be voted, it will be voted accordingly. If no such
specification is indicated, the proxy will be voted "FOR" adoption of the merger
agreement and approval of the transactions contemplated by the merger agreement.
A properly executed proxy gives the persons named as proxies on the proxy card
authority to vote in their discretion with respect to any other business that
may properly come before the meeting or any adjournment of the meeting.
PLEASE DO NOT SEND IN STOCK CERTIFICATES AT THIS TIME. IF THE MERGER IS
COMPLETED, YOU WILL RECEIVE INSTRUCTIONS REGARDING THE PROCEDURES FOR EXCHANGING
YOUR EXISTING CD&L STOCK CERTIFICATES FOR THE CASH MERGER CONSIDERATION.
Any person giving a proxy pursuant to this solicitation has the power
to revoke and change it at any time before it is voted. If you are a registered
holder of our common stock, your proxy may be revoked and changed:
o by sending a written notice to CD&L, Inc., c/o American Stock
Transfer & Trust Company, 59 Maiden Lane, New York, NY, 10038,
stating that you would like to revoke your proxy,
o completing and submitting in writing, a proxy bearing a later date,
or
o by attending the special meeting and voting in person. Attendance
at the special meeting will not, by itself, revoke a proxy.
If you have given voting instructions to a broker or other nominee that holds
your shares in "street name," you may revoke those instructions by following the
directions given by the broker or other nominee.
EXPENSES OF PROXY SOLICITATION
This proxy statement is being furnished in connection with the
solicitation of proxies by our board of directors. We will bear the entire cost
of solicitation of proxies, including preparation, assembly, printing and
mailing of this proxy statement, the notice of the special meeting of
stockholders, the enclosed proxy and any additional information furnished to
stockholders. Copies of solicitation materials will also be furnished to banks,
brokerage houses, fiduciaries and custodians holding in their names shares of
common stock beneficially owned by others to forward to these beneficial owners.
We may reimburse persons representing beneficial owners of common stock for
their costs of forwarding solicitation materials to the beneficial owners.
Original solicitation of proxies by mail may be supplemented by telephone or
personal solicitation by our directors, officers or other regular employees. No
additional compensation will be paid to our directors, officers or other regular
employees for their services.
11
HOUSEHOLDING
Some banks, brokers and other nominee record holders may participate in
the practice of "householding" proxy statements and annual reports. This means
that only one copy of this proxy statement or annual report may have been sent
to multiple stockholders in your household. We will promptly deliver a separate
copy of this proxy statement, including the attached appendices, to you if you
write or call Mark T. Carlesimo, Esq. at the following address or phone number:
CD&L, Inc., 80 Wesley Street, South Hackensack, NJ, 07606, (201) 487-7740.
ADJOURNMENTS
If the special meeting is adjourned to a different place, date or time,
we need not give notice of the new place, date or time if the new place, date or
time is announced at the meeting before adjournment, unless a new record date is
or must be set for the adjourned meeting or if the adjournment is for more than
30 days. Our board of directors must fix a new record date if the meeting is
adjourned to a date more than 120 days after the date fixed for the original
meeting.
ATTENDING THE SPECIAL MEETING
In order to attend the special meeting in person, you must have been a
holder of record of the common stock on July 17, 2006, the record date, hold a
valid proxy from a record holder or be our invited guest. You will be asked to
provide proper identification at the registration desk on the day of the meeting
or any adjournment of the meeting.
12
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement contains forward-looking statements intended to be
covered by the safe harbor for forward-looking statements contained in the
Private Securities Litigation Reform Act of 1995. There are forward-looking
statements throughout this proxy statement, including, among others, under the
headings "Summary," "The Merger," "The Merger--Opinion of Our Financial Advisor"
and in statements containing the words "believe," "plan," "expect,"
"anticipate," "intend," "estimate," "objective," "goal," "aim," "project" or
other similar words or expressions, as well as statements about financial
projections and their underlying assumptions, other information concerning
possible or assumed future results of our operations, the expected completion
and timing of the merger and other information relating to the merger. You
should be aware that forward-looking statements involve known and unknown risks
and uncertainties. These forward-looking statements reflect management's current
expectations and forecasts, and actual results or developments may differ from
these expectations and forecasts. In addition to other factors and matters
discussed in this document or discussed and identified in other public filings
we make with the SEC, we believe that the following risks could cause actual
results to differ materially from those discussed in the forward-looking
statements:
o risks associated with uncertainties related to the approval of the
transaction by our stockholders;
o diversion of management time to address merger-related issues;
o our ability to offer our products and services in new territories
and markets;
o our loss of customers or employees as a result of the announcement
of the merger;
o a material adverse change in our financial condition;
o the impact of competitive services and pricing;
o difficulties related to the completion of the merger;
o other economic, competitive, governmental regulatory, geopolitical,
and technological factors affecting operations, pricing and
services; and
o additional risk factors, as discussed in the "Risk Factors" section
of our Annual Report on Form 10-K, for the year ended December 31,
2005 filed on April 4, 2006 and our quarterly reports filed from
time to time with the SEC.
13
MARKET PRICE AND DIVIDEND INFORMATION
Our common stock is traded on the American Stock Exchange under the
symbol "CDV." On July 17, 2006, there were 18,397,572 shares of common stock
outstanding, held by approximately ________ stockholders of record. The
following table sets forth the range of high and low sales prices per share of
the common stock as reported on the American Stock Exchange for the periods
indicated:
Period High Low
----------------------------------------------------------------------------------------------------
2004:
First Quarter...................................................... $ 1.95 $ 0.76
Second Quarter..................................................... 2.16 0.90
Third Quarter...................................................... 2.35 1.10
Fourth Quarter..................................................... 2.00 1.25
2005:
First Quarter...................................................... $ 2.37 $ 1.36
Second Quarter..................................................... 2.19 1.67
Third Quarter...................................................... 1.84 1.37
Fourth Quarter..................................................... 3.48 1.30
2006:
First Quarter...................................................... $ 3.24 $ 2.10
Second Quarter..................................................... $ 2.75 $ 1.59
Third Quarter (through July 10, 2006) ............................. $ 2.93 $ 2.20
On June 23, 2006, the last trading day before our board of directors
approved the merger agreement, the closing price of our common stock on the
American Stock Exchange was $2.24 per share. On July 3, 2006, the last trading
day before our announcement of the execution of the merger agreement, the
closing price of the common stock on the American Stock Exchange was $2.21 per
share. On July 10, 2006, the last trading day before the date of this proxy
statement, the closing price for the common stock on the American Stock Exchange
was $2.90 per share. We encourage you to obtain current market quotations for
the common stock before voting your shares.
We have never declared or paid any cash dividends on our common stock,
and we do not plan on paying any in the near future. Any future determination as
to the declaration and payment of dividends will be at the discretion of our
board of directors and will depend on then existing conditions, including our
financial condition, results of operations, contractual restrictions, capital
requirements, business prospects and other factors our board of directors then
deems relevant. Our ability to pay cash dividends on the common stock is limited
by the terms of our revolving credit facility. The merger agreement provides,
among other things, that we may not pay any dividends on our common stock
without Velocity's consent.
If the merger is completed, the common stock will be delisted from the
American Stock Exchange, and there will be no further public market for the
common stock. In the merger, each share of common stock will be canceled and
converted into the right to receive $3.00 in cash, without interest, except as
discussed below under "The Merger--Appraisal Rights."
14
THE PARTIES INVOLVED IN THE MERGER
CD&L, INC.
We are a leading national, full-service provider of customized,
same-day, time-critical delivery services to a wide range of commercial,
industrial and retail customers. We provide our services throughout the United
States.
We offer the following delivery services:
o rush delivery service, typically consisting of delivering
time-sensitive packages, such as critical parts, emergency medical
devices and legal and financial documents from point-to-point on an
as-needed basis;
o distribution services, providing same-day delivery for many
pharmaceutical and office supply wholesalers, for manufacturers to
retailers and inter-branch distribution of financial documents in a
commingled system;
o facilities management, including providing and supervising mailroom
personnel, mail and package sorting, internal delivery and outside
local messenger services; and
o dedicated contract logistics, providing a comprehensive solution to
major corporations that want the control, flexibility and image of
an in-house fleet with the economic benefits of outsourcing.
We provide our customers with a broad range of customized, same-day,
time-critical, delivery service options.
We were incorporated in Delaware in June 1994. Our principal executive
offices are located at 80 Wesley Street, South Hackensack, New Jersey 07606, and
our telephone number is (201) 487-7740. Our website can be accessed at
www.cdl.net; however, the contents of our website are not intended to be a part
of this proxy statement.
For more information on us, see "Where You Can Find Additional
Information" on page 49.
VELOCITY EXPRESS CORPORATION
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 nation-wide
networks of time-critical logistics solutions in the United States and is a
leading provider of scheduled, distribution and expedited logistic services.
Velocity's customers are comprised of multi-location, national customers with
operations in the commercial and office products, financial, healthcare,
transportation and logistics, technology and energy sectors. Customers also
include individual consumers.
Velocity's service offerings are divided into the following categories:
o scheduled logistics consisting of the daily pickup and delivery of
parcels with narrowly defined time schedules predetermined by the
customer.
o distribution logistics consisting of the receipt of customer bulk
shipments that are divided and sorted at major metropolitan
locations and delivered into multiple routes with defined endpoints
and more broadly defined time schedules.
o expedited logistics consisting of unique and expedited
point-to-point service for customers with extremely time sensitive
delivery requirements.
15
Previously known as United Shipping & Technology, Velocity
reincorporated in Delaware in January 2002, at which time its name was changed
to Velocity Express Corporation. Velocity's principle executive offices are
located at One Morningside Drive North, Building B, Suite 300, Westport,
Connecticut 06880, and its telephone number is (203) 349-4160. Velocity's
website can be accessed at www.velocityexp.com; however, the contents of
Velocity's website are not intended to be a part of this proxy statement.
CD&L ACQUISITION CORP.
NEWCO is a newly-formed Delaware corporation and a wholly-owned
subsidiary of Velocity. NEWCO's principal executive offices are located at: One
Morningside Drive North, Building B, Suite 300, Westport, Connecticut 06880, and
its telephone number is 203-349-4160. NEWCO was incorporated solely for the
purpose of entering into the merger agreement and completing the transactions
contemplated by the merger agreement. It has not conducted any activities to
date other than the activities incidental to its formation and in connection
with the transactions contemplated by the merger agreement. Under the terms of
the merger agreement, NEWCO will merge with and into CD&L, which will survive
the merger as a wholly-owned subsidiary of Velocity, and NEWCO will cease to
exist at the effective time of the merger.
16
THE MERGER
BACKGROUND OF THE MERGER
The possible synergistic benefits of a merger involving CD&L and
Velocity were recognized by both companies for some time. Between September 2002
and September 2004, Albert W. Van Ness, Jr., CD&L's Chairman of the Board and
Chief Executive Officer, met with Vincent Wasik, the Chief Executive Officer of
Velocity, and representatives of TH Lee Putnam Ventures ("THLP"), one of
Velocity's major stockholders, on a number of occasions to discuss the potential
opportunity to merge CD&L and Velocity. The companies engaged in tentative
conversations about various possible transactions, including ways in which the
businesses of the two companies could be combined. In February 2004, Velocity
even submitted a preliminary expression of interest with respect to a potential
acquisition proposal to CD&L, which CD&L later declined.
In October 2004, CD&L and Velocity restarted substantive discussions
about a possible business combination. On October 19, 2004, Mr. Van Ness and
Thomas E. Durkin III, a member of CD&L's board of directors, and representatives
of Scura Rise and Partners, LLC, CD&L's financial advisor ("SRP") met with Jim
Brown of THLP to discuss preliminary matters concerning a possible merger. On
October 22, 2004, CD&L and Velocity entered into a confidentiality agreement to
facilitate due diligence matters. Since October 2004, CD&L's interests were
largely represented and communicated to Velocity by Messrs. Van Ness and Durkin.
On February 8, 2005, Mr. Durkin and representatives of SRP met with Mr.
Brown, Sasha Grutman and Fred Coulson of THLP to discuss a potential deal
structure and price. Mr. Durkin reported on these preliminary discussions at
CD&L's regularly scheduled board of directors meeting on February 23, 2005.
On March 19, 2005, Velocity and CD&L executed a second confidentiality
agreement to cover their exchange of confidential information as part of their
respective due diligence investigations.
On April 27, 2005, Mr. Durkin and representatives of SRP again met with
Messrs. Brown, Grutman and Coulson of THLP to discuss a potential deal structure
and price. Mr. Durkin summarized these negotiations for CD&L's board of
directors at a regularly scheduled board meeting on June 1, 2005.
Mr. Durkin subsequently held additional informal discussions with
representatives of Velocity about the possibility of an all-cash offer and
possible per share valuations. Velocity's representatives indicated that the
proposed per share purchase price discussed would require the inclusion of
Velocity stock as part of the merger consideration. Mr. Durkin reported on these
discussions at a special meeting of the CD&L board of directors on July 13,
2005.
Subsequently, Mr. Durkin continued his discussions with representatives
of Velocity and its investment bankers with respect to a possible acquisition of
CD&L by Velocity. At the CD&L board of directors' regularly scheduled meeting on
August 3, 2005, Mr. Durkin reviewed Velocity's then current expression of
interest whereby CD&L stockholders would have the choice of receiving either (a)
$3.50 in cash per share of common stock of CD&L or (b) $3.15 in cash plus
Velocity common stock valued at $0.85, or an aggregate value of $4.00, per share
of CD&L common stock. Holders of no more than 50% of CD&L's common stock could
elect the option to receive cash and stock. The proposal was contingent on
Velocity's ability to secure third-party commitments to finance the transaction
through a combination of senior and subordinated debt plus equity.
On September 14, 2005, Mr. Durkin and representatives of SRP met with
representatives of Velocity and THLP at the offices of THLP to discuss the
financing of the potential merger and conduct preliminary due diligence.
On October 18, 2005, Messrs. Durkin, Van Ness, Brown and Grutman met to
discuss due diligence matters and Velocity's plan for obtaining financing for
the potential merger.
17
At the November 3, 2005, regularly scheduled meeting of CD&L's board of
directors, Mr. Durkin reported on Velocity's efforts to raise the required
financing for the potential merger. The Board agreed to give Velocity more time
to arrange its required financing and make a formal offer to CD&L.
On November 11, 2005, Messrs. Brown, Grutman and Coulson of THLP and
representatives of Velocity's financial advisor held a due diligence meeting
with Messrs. Van Ness and Durkin and Russell Reardon, the Chief Financial
Officer of CD&L, and representatives of SRP to discuss CD&L's business and
financial statements.
On December 16, 2005, Velocity's counsel distributed an initial draft
of a proposed merger agreement to CD&L and its counsel.
On December 21, 2005, Messrs. Van Ness and Durkin and a representative
of SRP met with Messrs. Brown and Grutman to discuss Velocity's proposed merger
financing and post-merger capital structure.
On January 10, 2006, CD&L's board of directors held a special meeting
to discuss the status of the merger agreement negotiations with Velocity and
Velocity's efforts to secure the necessary financing. Representatives of SRP
reported on the status of the financing. The board also considered the steps
needed to complete such a transaction. The potential merger consideration at
this time consisted of a mixture of cash and Velocity common stock.
On February 9, 2006, CD&L's board of directors held a special meeting
to discuss the status of the merger agreement negotiations with Velocity and
Velocity's efforts to secure the necessary financing. Mr. Scura of SRP reported
on Velocity's difficulties in obtaining the necessary financing, and the
parties' efforts to negotiate an all-cash deal at a potential price of $3.75 per
share of CD&L common stock to provide greater certainty pending any closing of a
merger transaction. The board also discussed the potential terms a break-up fee
to be paid by CD&L if it accepted a better offer, or to be paid by Velocity if
it failed to obtain financing under certain circumstances.
At a regularly scheduled meeting of CD&L's board of directors on
February 22, 2006, Mr. Durkin noted that follow-up due diligence was proceeding
and that discussion regarding transition issues had begun. Representatives of
SRP summarized the recent efforts by Velocity to obtain the required financing.
Certain of CD&L's directors expressed concern with the progress of the
transaction and the delays in finalizing the deal and its financing.
On March 7, 2006, Messrs. Van Ness, Durkin and Reardon and
representatives of SRP attended a meeting with representatives of THLP and
various third-parties from whom Velocity potentially sought to obtain financing
for the potential merger in order for these third-parties to conduct their
financial due diligence regarding CD&L.
On March 16, 2006, CD&L's board of directors held a special meeting to
review the status of negotiations regarding the merger agreement and various
unresolved transaction issues. Counsel to CD&L presented a current summary of
the terms of the potential merger agreement being negotiated. Representatives of
SRP made a presentation regarding possible market values of CD&L using various
financial analyses. Concern was again expressed with respect to finalizing
Velocity's financing. Based on the current status of the merger agreement and
the merger price being discussed, the board of directors agreed to continue
negotiating the merger agreement with Velocity, and set a 3-week deadline to
reach an agreement.
On March 30, 2006, Messrs. Van Ness and Durkin and John Wehrle, a
director and chairman of the audit committee of CD&L, met with representatives
of THLP and were informed that Velocity had not been able to reach agreement
with its prospective senior lender to finance the potential merger. Although
Velocity indicated that it was in the process of seeking a new senior lender,
the parties discussed possibly restructuring the transaction to include Velocity
stock. On April 3, 2006, Mr. Van Ness met separately with a representative of
THLP to discuss Velocity's inability to obtain the necessary financing at the
then current purchase price being discussed of $3.75 in cash per share of CD&L
common stock. Mr. Van Ness was informed that the transaction as then
contemplated could not be financed.
18
CD&L's board of directors held a special meeting on April 7, 2006 to
discuss the status of the potential transaction with Velocity. The board
determined that since Velocity was at such time unable to finance the
transaction, it was necessary to terminate further discussions with Velocity.
On May 26, 2006, Mr. Brown met with Messrs. Van Ness, Durkin and
Coulson to discuss a new potential deal structure from Velocity. The proposed
structure provided for $3.25 for each as-converted share of common stock
issuable pursuant to the Series A debentures, $2.00 for each share of common
stock issuable pursuant to the Series A preferred stock, and $3.25 for each
share of CD&L common stock. The proposed acquisition price was a blend of cash
and stock, with holders of the Series A debentures receiving $3.25 in cash, the
Series A preferred stock holders receiving $2.00 in cash, and common
stockholders receiving $1.50 in cash and $1.75 in Velocity common stock. Mr. Van
Ness also discussed having CD&L potentially purchase Velocity using CD&L common
stock, which offer was rejected.
On May 31, 2006, representatives of Velocity and THLP met with certain
CD&L board members to present their views on financing status, rationale and
financial forecast for the merger, and potential synergies to arise from the
merger.
On June 5, 2006, Velocity delivered a non-binding term sheet to CD&L
containing new terms of a possible acquisition. The proposal was for $1.75 in
cash and .8571 shares of Velocity common stock for each share of CD&L common
stock. Messrs. Van Ness and Durkin met with Messrs. Brown and Coulson to discuss
the proposal.
On June 7, 2006 Messrs. Van Ness and Durkin met with Mr. Brown and
discussed the proposal. Mr. Van Ness again explored CD&L potentially making an
offer to purchase Velocity for $15 million of CD&L common stock. Mr. Brown
rejected this possibility.
On June 7, 2006, at a regularly scheduled meeting of the CD&L board of
directors, the board considered Velocity's June 5 proposal and voted to reject
it.
Each of Messrs. Durkin and Wehrle separately informed Velocity of the
CD&L board's decision. Whereupon Velocity's representatives informed Messrs.
Durkin and Wehrle of Velocity's intention to proceed with a hostile tender offer
for CD&L's common stock at a price of $2.50 per share.
On June 8, 2006, Mr. Van Ness and CD&L's outside counsel met with
representatives of Anderson and Co. to discuss actions to be taken to address a
potential hostile takeover by Velocity.
On June 9, 2006, Messrs. Van Ness and Durkin met with representatives
of THLP to negotiate merger consideration. Negotiations resulted in cash
consideration of $3.25 for each share of common stock issuable upon conversion
of the Series A debentures and $3.00 for each outstanding share of common stock.
Mr. Van Ness and Mr. Durkin were also informed that THLP was conducting separate
negotiations for the purchase of the Series A preferred stock, and that the
holders of the Series A debentures would be asked to provide a waiver of their
rights of first refusal of such sale.
On June 13, 2006, representatives of Velocity's financial advisors
presented to Messrs. Wehrle, Durkin, Carlesimo, Brannan, Brooks and Reardon the
status of the final financing that would support the terms of the proposed
transaction discussed on June 9, 2006.
On June 21, 2006, Messrs. Van Ness, Brannan and Brooks participated in
a conference call with Mark Miller of Alvarez & Marsal to discuss customer,
employee and independent contractor communications upon the consummation of the
merger.
Mr. Brown and Mr. Van Ness met on June 23, 2006 to develop a tentative
plan for integrating the two companies following the proposed merger.
19
On June 26, 2006 the board of directors of CD&L met to review the
merger agreement and other material agreements related to the merger, including
the voting agreement, among Velocity and certain of the Series A debenture
sellers. Representatives of SRP delivered its written opinion to CD&L that,
based upon and subject to the assumptions made, matters considered and
limitations on the review undertaken in connection therewith, their experience
as investment bankers, their work as described in their opinion, and other
factors they deemed relevant, as of June 26, 2006, the merger consideration was
fair, from a financial point of view, to the holders of shares of CD&L common
stock. At the meeting, the independent directors met separately with CD&L's
counsel and SRP to discuss the relative consideration being given to common
stockholders as compared to that being given to CD&L's other securityholders.
Directors who held Series A debentures were not present. The committee reported
that they were satisfied that the consideration being allocated to common
stockholders was a fair portion of the total consideration being paid by
Velocity for CD&L as a whole. The board of directors approved and adopted the
merger agreement and determined that the merger agreement and the transactions
it contemplates are advisable to and in the best interests of, CD&L and its
stockholders. CD&L's board of directors also recommended that CD&L's
stockholders vote for the adoption of the merger agreement and approval of the
transactions contemplated thereby.
On July 3, 2006, CD&L, Velocity and NEWCO executed the merger
agreement. The proposed merger was publicly announced prior to the opening of
trading on July 5, 2006.
REASONS FOR THE MERGER
In reaching its determination to approve and adopt the merger agreement
and the transactions it contemplates, including the merger, and to recommend
that our stockholders vote to adopt the merger agreement, the board of directors
consulted with management and its financial and legal advisors. In reaching its
determination, the board of directors considered the following material factors,
among others:
o The relationship of the $3.00 per share cash merger consideration
to the then current trading price and historical trading prices of
our common stock, including the fact that the cash merger
consideration represents a premium of more than 33 percent over the
closing sale price of $2.24 per share of our common stock on the
American Stock Exchange on June 23, 2006, the trading day
immediately prior to the date on which the boards of directors of
CD&L and Velocity approved the transaction;
o The fact that the merger consideration to be received by our
stockholders in the merger will consist entirely of cash, which
will provide liquidity and certainty of value to our stockholders;
o The opinion of SRP that, based upon and subject to the assumptions
made, matters considered and limitations on the review undertaken
in connection therewith, as of June 26, 2006, the merger
consideration to be received by our stockholders pursuant to the
merger agreement, taking into account the amount and form of
consideration and taking into account the consideration to be
received by our stockholders pursuant to the securities purchase
agreements, was fair, from a financial point of view, to the
holders of shares of our common stock (the full text of the written
opinion of SRP is attached as Appendix B to this proxy statement,
and you are urged to and should read that opinion carefully and in
its entirety);
o The experience of SRP in analyzing the financial terms of mergers,
including SRP's presentations to our board of directors and the
financial analyses contained in these presentations;
o Our current and historical financial condition and results of
operations;
o Our strategic plans and current financial projections, including
the risks of failure to successfully implement those strategic
plans and achieve those projections, particularly compared to the
risks and benefits of the merger;
o The possible alternatives to the merger, including continuing to
operate CD&L on a stand-alone basis and the risks associated
therewith, including the risks identified in reports we have filed
with the SEC;
20
o The terms and conditions of the merger agreement, which our board
of directors believed would not preclude a superior competing
proposal, and the course of negotiations of the merger agreement.
Our board of directors considered in particular:
- the closing conditions to the merger, including the
fact that the merger consideration has been delivered
to the paying agent on the signing date so that there
is no financing condition to Velocity's obligation to
consummate the merger and virtually no other
conditions except approval by our stockholders;
- the structure of the transaction as a merger, which
would result in detailed public disclosure and a
period of time prior to the consummation of the
merger during which an unsolicited superior
third-party proposal could be brought forth;
- our right to furnish information to, and participate
in discussions and negotiations with, a third party
that makes an unsolicited, written competing
acquisition proposal if our board of directors
determines in good faith, after consultation with our
outside legal counsel and financial advisor, that
such proposal will result in, or is reasonably likely
to lead to, a transaction that is more favorable from
a financial point of view to our stockholders than
the merger, that failure to entertain the third-party
proposal may result in a breach of the board's
fiduciary duties and that is reasonably capable of
being consummated;
- our right to terminate the merger in order to accept
a superior competing transaction, subject to certain
conditions and payment of a termination fee to
Velocity; and
- the termination fee provisions of the merger
agreement, and a comparison of those provisions to
similar transactions;
o The fact that the merger agreement would be available promptly
following public disclosure of the execution of the merger
agreement through the SEC's EDGAR database as a part of a current
report on Form 8-K to be filed by us, which report was filed by
CD&L with the SEC on July 10, 2006;
o The careful review of the representations and warranties in the
merger agreement, and the preparation of our disclosure memorandum
by our management;
o The active and direct role of members of our board of directors in
the negotiations with respect to the proposed merger, the
considerations of the transaction by our board in multiple board
meetings, the experience with CD&L of the members of our board of
directors and the general business experience of such members; and
o the entitlement of holders of common stock to appraisal rights in
connection with the merger.
Our board of directors also considered and balanced against the
potential benefits of the merger a variety of risks and other potentially
negative factors concerning the merger. These factors included the following:
o the fact that, following the merger, our public stockholders will
cease to participate in any future earnings growth of CD&L or
benefit from any future increase in its value;
o the fact that, for U.S. federal income tax purposes, the cash
merger consideration will be taxable to our stockholders entitled
to receive the merger consideration;
o the possible disruption to our business that may result from the
announcement of the merger and the resulting distractions,
including diverting management focus and resources from other
strategic opportunities;
21
o the interests of our directors and executive officers in the merger
(see "--Interests of Our Directors and Executive Officers in the
Merger"); and
o the fact that our board of directors did not authorize SRP to
contact other potential buyers; however, our board based its
decision not to contact other strategic buyers on the risks
associated with contacting other potential buyers with respect to a
potential transaction involving CD&L.
The foregoing discussion of the information and factors considered by
our board of directors is not intended to be exhaustive but, we believe,
includes all material factors considered by our board of directors. In view of
the wide variety of factors considered by it in evaluating the merger and the
complexity of these matters, our board of directors did not find it practicable,
and did not attempt, to quantify or otherwise assign relative weight to the
specific factors considered in reaching its determinations. Rather, our board of
directors made its judgment based on the total mix of information available to
it of the overall effect of the merger compared to any alternative transaction
or remaining an independent company. Furthermore, individual members of our
board of directors may have given different weight to different factors.
Based on the factors outlined above and the opinion of SRP as to the
fairness, from a financial point of view, of the cash merger consideration to be
received by the holders of our common stock in the merger, our board of
directors determined that the merger agreement and the transactions it
contemplates, including the merger, are advisable to and in the best interests
of CD&L and its stockholders.
RECOMMENDATION OF OUR BOARD OF DIRECTORS
OUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER AGREEMENT AND THE
TRANSACTIONS IT CONTEMPLATES, INCLUDING THE MERGER, ARE ADVISABLE TO AND IN THE
BEST INTEREST OF, CD&L AND ITS STOCKHOLDERS. ACCORDINGLY, OUR BOARD OR DIRECTORS
RECOMMENDS THAT YOU VOTE "FOR" ADOPTION OF THE MERGER AGREEMENT AND APPROVAL OF
THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT.
OPINION OF OUR FINANCIAL ADVISOR
Our board of directors engaged SRP to act as its sole financial advisor
in connection with the proposed merger and to render an opinion as to the
fairness, from a financial point of view, of the merger consideration to be
received by the holders of shares of our common stock, other than holders of
dissenting shares and shares held by CD&L or Velocity or their respective
wholly-owned subsidiaries.
OPINION
On June 26, 2006, SRP provided its opinion to our board of directors
that, based upon and subject to the assumptions made, matters considered and
limitations on the review undertaken in connection therewith, their experience
as investment bankers, as of such date, the merger consideration to be received
by our stockholders pursuant to the merger agreement, taking into account the
amount and form of consideration and taking into account the consideration to be
received by our securityholders pursuant to the securities purchase agreements,
was fair, from a financial point of view, to the holders of shares of our common
stock. The full text of SRP's opinion, which sets forth assumptions made,
procedures followed, matters considered and limitations on the review undertaken
in connection with the opinion, is attached as Appendix B to this proxy
statement and is incorporated by reference into this proxy statement.
THE OPINION OF SRP DOES NOT CONSTITUTE A RECOMMENDATION AS TO HOW YOU
SHOULD VOTE YOUR SHARES WITH RESPECT TO THE MERGER. WE URGE YOU TO READ THE
OPINION IN ITS ENTIRETY.
SRP's advisory services and opinion were provided for the information
of our board of directors in their evaluation of the proposed merger, and SRP
did not address the relative merits of the transactions contemplated by the
merger agreement as compared to any alternative transactions that might be
available to CD&L, nor did it address the board's underlying decision to effect
the merger. SRP expressed no opinion or recommendation as to how our
stockholders should vote at the special stockholders' meeting to be held to vote
on the adoption of the merger agreement. SRP was not asked to pass upon, and
expressed no opinion with respect to, any matter other than the fairness, from a
financial point of view, of the merger consideration to be received by the
holders of shares of the common and preferred stock, other than holders of
dissenting shares, in the merger.
22
The following summary of SRP's written opinion is qualified in its
entirety by reference to the full text of the opinion.
In connection with rendering its opinion, SRP, among other things:
o reviewed the draft merger agreement and the draft securities
purchase agreements (including certain of the schedules and
exhibits thereto);
o reviewed certain publicly available business and financial
statements, including publicly available financial projections and
other information about CD&L;
o reviewed certain internal financial statements and other financial
and operating data concerning CD&L prepared by and furnished to SRP
by the management of CD&L;
o held discussions with various members of senior management of CD&L
and Velocity concerning historical and current operations,
financial conditions and prospects, including recent financial
performance;
o reviewed the reported prices and trading activity of the common
stock of CD&L;
o reviewed the financial performance of CD&L and the prices and
valuation of its common stock with valuations of certain
publicly-traded companies and their securities that SRP deemed
comparable in certain respects to CD&L;
o reviewed the financial terms, to the extent publicly available, of
selected acquisition transactions involving the companies in lines
of business that SRP deemed comparable in certain respects to the
business of CD&L; and
o participated in discussions and negotiations among representatives
of CD&L, Velocity and their respective advisors.
In addition to the foregoing, SRP conducted such other analyses and examinations
and considered such other information and financial, economic and market
criteria as SRP deemed appropriate in arriving at its opinion.
For the purposes of its analysis and opinion, SRP has not assumed any
responsibility for independently investigating or verifying the accuracy,
completeness and fair presentation of all financial and other information
reviewed by or for SRP.
SRP has assumed, with the consent of our board of directors, that the
merger will be consummated in accordance with its terms, without waiver,
modification or amendment of any material term, condition or agreement and that,
in the course of obtaining the necessary regulatory or third-party approvals,
consents and releases for the merger, no delay, limitation, restriction or
condition will be imposed that would have an adverse effect on CD&L or the
merger.
23
SRP has not made or assumed any responsibility for making any
independent valuation or appraisal of the assets or liabilities of CD&L, nor did
SRP conduct a comprehensive physical inspection of any of the assets of CD&L,
nor was SRP furnished with any such evaluations or appraisals. SRP was not
requested to, and it did not, solicit third-party indications of interest in the
possible acquisition of all or part of CD&L, nor was it requested to consider,
and SRP's opinion does not address, the relative merits of the merger as
compared to any alternative business strategies that might exist for us or the
effect of any other transaction in which we might engage. In addition, SRP did
not evaluate the solvency or fair value of CD&L under any state or federal laws
relating to bankruptcy, insolvency or similar matters, nor did SRP make any
independent investigation of any legal or accounting matters affecting CD&L. SRP
assumed the correctness of all legal and accounting advice given to CD&L and its
board of directors, including, without limitation, any advice as to the legal,
accounting and tax consequences of the terms of, and the transactions
contemplated by, the merger agreement, to CD&L or any of its stockholders. SRP
did not attempt to independently determine the value of the outstanding Series A
preferred stock, Series A debentures, warrants or acquired shares or the
appropriateness of the amounts to be received by the holders thereof pursuant to
the securities purchase agreements on either an absolute or relative basis and
SRP is not rendering any opinion as to the fairness of the consideration to be
received by any party to any of the securities purchase agreements. SRP's
opinion is necessarily based on economic, market and other conditions as in
effect on, and the information contained in the merger agreement and the
exhibits to the merger agreement made available to SRP as of June 26, 2006. It
should be understood that subsequent developments may affect SRP's opinion and
that SRP does not have any obligation to update, revise or reaffirm its opinion.
In receiving SRP's opinion on June 26, 2006, and reviewing with SRP the
written materials prepared by SRP in support of its opinion, the board of
directors of CD&L was aware of and consented to the assumptions and other
matters discussed above.
In rendering its opinion, SRP made a presentation to our board of
directors with respect to the material financial analyses performed by SRP in
evaluating the fairness of the merger consideration to the holders of our common
stock as of the date of SRP's opinion. The following is a summary of that
presentation. The summary includes information presented in tabular format. In
order to understand fully the financial analyses used by SRP, these tables must
be read together with the text of each summary. The tables alone do not
constitute a complete description of the financial analyses. Considering the
data set forth in the tables without considering the full narrative description
of the financial analyses, including the methodologies and assumptions
underlying the analyses, could create a misleading or incomplete view of the
financial analyses performed by SRP. The following quantitative information, to
the extent it is based on market data, is, except as otherwise indicated, based
on market data as it existed at or prior to June 26, 2006, and is not
necessarily indicative of current or future market conditions.
SUMMARY OF ANALYSES
Analysis of Selected Publicly Traded Companies. To provide contextual
data and comparative market information, SRP compared selected historical
operating and financial data and ratios for CD&L with the corresponding
financial data and ratios of certain other publicly traded companies. SRP
selected these companies because each company is a courier services company
whose securities are publicly traded and because SRP believes they have
operating, market valuation and trading valuations similar to CD&L. These
companies, referred to as the selected companies, were: AirNet Systems Inc.,
Dynamex, Inc., FedEx Corporation, United Parcel Service Inc. and Velocity
Express, Inc.
The data and ratios included the market capitalization of common stock plus
total debt less cash and equivalents ("enterprise value") of the selected
companies as multiples of latest reported twelve-month earnings before interest,
taxes, depreciation and amortization ("LTM EBITDA").
The following table presents, for the periods indicated, the multiples implied
by the ratio of enterprise value to LTM EBITDA. The information in the table is
based on the closing prices on June 23, 2006.
MULTIPLE IMPLIED BY
CONSIDERATION TO BE
SELECTED COMPANY MULTIPLES RECEIVED IN THE
------------------------------ CD&L/VELOCITY
LOW MEAN MEDIAN HIGH TRANSACTION
--- ---- ------ ---- -----------
Enterprise value
as a ratio of:
LTM EBITDA 2.8x 8.0x 9.1x 10.9x 11.4x
24
As the table above demonstrates, an enterprise value of 11.4x LTM EBITDA is
above the range of enterprise value EBITDA multiples of the selected companies.
Although the selected companies were used for comparison purposes, none of those
companies is directly comparable to CD&L. Accordingly, an evaluation of the
results of this analysis is not purely mathematical, but instead involves
complex considerations and judgments concerning differences in historical and
projected financial and operating characteristics of the selected companies and
other factors that could affect the public trading value of the selected
companies or CD&L to which they were compared.
Analysis of Selected Precedent Transactions. SRP reviewed the
financial terms, to the extent publicly available, of eight transactions (the
"precedent transactions"), involving the acquisition of courier services
businesses which were announced or completed since January 1, 2000. These
transactions were:
ACQUIROR TARGET ANNOUNCEMENT DATE
-------- ------ -----------------
CityMail Sweden AB OptiMail AB 11/22/2005
DHL Express (Singapore) Pte. Ltd. Blue Dart Express Ltd. 11/8/2004
Segmentz, Inc. Express-1, Inc. 8/13/2004
Arizona Diversified Equity LLC Cannon Express Inc. 5/27/2003
DHL Worldwide Express Airborne, Inc. 3/25/2003
Araaj Capital Aramex International Ltd. 1/4/2002
Roadway Corp. Roadway Next Day Corporation 8/22/2001
FedEx Corporation American Freightways Corp 11/13/2000
SRP reviewed the enterprise value paid in the precedent transactions as a
multiple of LTM EBITDA.
The following table presents the multiples implied by the ratio of enterprise
value to LTM EBITDA.
MULTIPLE IMPLIED BY
CONSIDERATION TO BE
MULTIPLES FOR PRECEDENT TRANSACTIONS RECEIVED IN THE
---------------------------------------- CD&L/VELOCITY
LOW MEAN MEDIAN HIGH TRANSACTION
--- ---- ------ ---- -----------
Enterprise value as a ratio of:
LTM EBITDA 4.3x 6.0x 5.9x 7.3x 11.4x
---- ---- ---- ---- -----
As the table above demonstrates, an enterprise value of 11.4x LTM EBITDA is
higher than the range of enterprise value EBITDA multiples of the precedent
transactions.
Although the precedent transactions were used for comparison purposes, none of
those transactions is directly comparable to the CD&L/Velocity transaction, and
none of the companies in those transactions is directly comparable to CD&L.
Accordingly, an evaluation of the results of this analysis is not purely
mathematical, but instead involves complex considerations and judgments
concerning differences in historical and projected financial and operating
characteristics of the companies involved and other factors that could affect
the acquisition value of such companies or CD&L.
Historical Stock Trading Analysis. SRP analyzed the closing
prices of CD&L common stock over various periods beginning June 24, 2005 and
ending June 23, 2006. The table below illustrates the historical closing stock
prices for those periods, and the premium or discount implied by the offer price
in the CD&L/Velocity transaction.
25
PREMIUM
STOCK PRICE IMPLIED BY CONSIDERATION
----------- ------------------------
Stock Price One Trading Day Prior $2.24 33.9%
----- -----
Stock Price Five Trading Days Prior $2.15 39.5%
----- -----
Stock Price Twenty Trading Days Prior $1.86 61.3%
----- -----
Low (latest twelve months) $1.37 119.0%
----- ------
High (latest twelve months) $3.36 (10.7%)
----- -------
Analysis of Premiums Paid in Selected Precedent Transactions.
SRP reviewed the premiums of the transaction prices over the trading prices
prior to the announcement date of 148 transactions announced in the last two
years involving U.S. targets where total consideration to stockholders was
between $30 and $100 million.
The following table presents the premiums of the transaction prices over the
trading prices one, five and twenty trading days prior to the announcement date,
and the premiums implied for CD&L, based on the consideration provided for in
the merger agreement. The information in the table is based on the closing price
of CD&L common stock on June 23, 2006.
MEDIAN PREMIUMS PAID
PREMIUM IN COMPARABLE
STOCK PRICE IMPLIED BY CONSIDERATION TRANSACTIONS
----------- ------------------------ ------------
Stock Price One Trading Day Prior $2.24 33.9% 20.6%
----- ----- -----
Stock Price Five Trading Days Prior $2.15 39.5% 22.2%
----- ----- -----
Stock Price Twenty Trading Days Prior $1.86 61.3% 27.0%
----- ----- -----
As the table above demonstrates, the premiums implied by the offer price are
above the median premiums paid in comparable transactions.
Portion of Consideration to Common Stockholders. SRP compared (i) the
consideration to be received by the common stockholders (other than those common
shares to be purchased by Velocity prior to the transaction) as a percentage of
the total consideration to be received by all holders of common shares and
instruments convertible into common shares with (ii) the number of common shares
(other than those common shares to be purchased by Velocity prior to the
transaction) as a portion of the fully diluted shares outstanding.
COMMON
STOCK
EQUIVALENTS PROCEEDS
----------- --------
Common Stockholders 46.5% 48.7%
----- -----
Others 53.5% 51.3%
----- -----
As the table above demonstrates, the percentage of the proceeds to be received
by the common stockholders exceeds the portion of the fully diluted common stock
equivalents held by them.
Discounted Cash Flow Analysis. SRP prepared a discounted cash
flow analysis of projections provided by the management of CD&L. SRP did not,
however, use this analysis in forming its opinion. The utility of a discounted
cash flow analysis depends on the reliability of projected financial
performance. Because CD&L has historically failed to perform in accordance with
its projections, SRP believes that a discounted cash flow analysis based on
CD&L's projections would have relatively low utility for purposes of valuation
of CD&L. Additionally, SRP believes that its other financial analyses included
in this proxy statement, including its analyses of multiples for selected
companies, multiples for precedent transactions, premiums paid in precedent
transactions, historical stock trading and consideration to common stockholders,
are more appropriate valuation methodologies for CD&L.
The preceding discussion is a summary of the material financial
analyses furnished by SRP to our board of directors, but it does not purport to
be a complete description of the analyses performed by SRP or of its
presentation to our board of directors.
26
The preparation of financial analyses and fairness opinions is a
complex process involving subjective judgments and is not necessarily
susceptible to partial analysis or summary description. SRP made no attempt to
assign specific weights to particular analyses or factors considered, but rather
made qualitative judgments as to the significance and relevance of all the
analyses and factors considered and determined to give its fairness opinion as
described above. Accordingly, SRP believes that its analyses, and the summary
set forth above, must be considered as a whole, and that selecting portions of
the analyses and of the factors considered by SRP, without considering all of
the analyses and factors, could create a misleading or incomplete view of the
processes underlying the analyses conducted by SRP and its opinion. With regard
to the selected companies and precedent transactions analyses summarized above,
SRP selected comparable public companies and precedent transactions on the basis
of various factors, including size and similarity of the line of business of the
relevant entities; however, no company used in these analyses is identical to
us, and no precedent transaction is identical to the merger. As a result, these
analyses are not purely mathematical, but also take into account differences in
financial and operating characteristics of the subject companies and other
factors that could affect the merger or public trading value of the subject
companies to which we are being compared.
In its analyses, SRP made numerous assumptions with respect to our
industry performance, general business, economic, market and financial
conditions and other matters, many of which are beyond our control. Any
estimates contained in SRP's analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than those suggested by these analyses. Estimates of
values of companies do not purport to be appraisals or necessarily to reflect
the prices at which companies may actually be sold. Because these estimates are
inherently subject to uncertainty, none of CD&L, Velocity, our board of
directors, the Velocity board of directors, SRP or any other person assumes
responsibility if future results or actual values differ materially from the
estimates.
SRP's analyses were prepared solely as part of SRP's analysis of the
fairness of the merger consideration in the merger and were provided to our
board of directors in that connection. The opinion of SRP was only one of the
factors taken into consideration by our board of directors in making its
determination to approve and adopt the merger agreement and the transactions
contemplated by the merger agreement. See "The Merger -- Background of the
Merger" and "-- Reasons for the Merger."
SRP's opinion was based on the draft terms of the Merger as of June 26,
2006. SRP subsequently confirmed its opinion based upon the final terms of the
transactions.
SRP is a nationally recognized investment banking firm engaged in,
among other things, the valuation of businesses and their securities in
connection with mergers and acquisitions, competitive biddings, secondary
distributions of unlisted securities, private placements, financial
restructurings and other financial services. We selected SRP to act as our
financial advisor on the basis of SRP's reputation and SRP's familiarity with
us.
Pursuant to our engagement agreement with SRP, as amended we have
agreed to pay SRP a transaction fee equal to $300,000, payable at closing in
shares of common stock of Velocity valued at the average closing price for the
10 trading days prior to the announcement of the transaction, and warrants to
acquire up to 266,666 shares of common stock of Velocity at an exercise price of
$1.50 per share. In addition, we have paid SRP a fee of $150,000 for a fairness
opinion with respect to the merger. We have agreed to indemnify SRP against
certain liabilities, including certain liabilities under the federal securities
laws.
INTERESTS OF OUR DIRECTORS AND EXECUTIVE OFFICERS IN THE MERGER
In considering the recommendation of our board of directors with
respect to the merger agreement, you should be aware that some of our directors
and executive officers have interests in the merger that may be different from,
or in addition to, the interests of our stockholders generally. These interests
may create potential conflicts of interests and, to the extent material, are
described below. Our board of directors was aware of these interests and
considered them, among other matters, in approving and adopting the merger
agreement and the transactions contemplated by merger agreement.
Like all other stockholders, the members of our board of directors and
our executive officers will be entitled to receive $3.00 in cash for each of the
shares of common stock that they own or are entitled to receive on the exercise
of stock options (net of the exercise price). Certain officers and directors
also received $3.25 in cash for each of the shares of common stock that they
were entitled to receive upon conversion of the Series A debentures that they
owned plus their waiver of their rights of first refusal with respect to
Velocity's purchase of the Series A preferred stock from Paribas and Exeter IV.
27
CONSIDERATION RECEIVED OR TO BE RECEIVED AS A RESULT OF
-------------------------------------------------------
SERIES A CHANGE OF CONTROL
COMMON STOCK STOCK OPTIONS (1) DEBENTURES (2) PAYMENTS (3)
------------ ----------------- -------------- ------------
Albert W. Van Ness, Jr. $408,480 $875,629.40 $1,919,291.34 $1,009,233
William T. Brannan 341,388 899,694.00 1,919,291.34 894,786
Michael Brooks 755,865 890,170.00 1,919,291.34 890,710
Russell J. Reardon 222,714 880,836.39 1,919,291.34 897,840
Mark T. Carlesimo 0 736,108.75 319,881.89 576,990
All executive officers and $3,031,047 $4,659,102.29 $8,636,811.02 $4,269,559
directors as a group (11
persons) (4)
-----------
(1) Amounts are net of exercise price. The number of options and weighted
average exercise price of the options held by the individuals in the
table are as follows:
Name Number of Options Weighted Average Exercise Price
---- ----------------- -------------------------------
Albert W. Van Ness, Jr. 778,085 $1.875
William T. Brannan 657,000 $1.631
Michael Brooks 635,000 $1.598
Russell J. Reardon 644,777 $1.634
Mark T. Carlesimo 506,250 $1.546
All executive officers and 3,431,612 $1.642
directors as a group (11 persons)
(2) Received on July 3, 2006.
(3) Change of control payments will not be received if an officer remains
as an employee of Velocity for at least one year after the effective
date of the merger. All of the named executive officers other than Mr.
Van Ness are negotiating employment relationships with Velocity.
(4) Does not include a consulting fee of $300,000 payable to Thomas E.
Durkin III under our consulting agreement with him for his services in
negotiating the merger agreement with Velocity as described below.
CHANGE OF CONTROL AND SEVERANCE AGREEMENTS; COVENANTS NOT TO COMPETE
Effective as of April 14, 2004, we entered into amended employment
agreements with each of Albert W. Van Ness, Jr., our chairman, chief executive
officer and director, William T. Brannan, our president and chief operating
officer, Michael Brooks, our group president, ground operations, Russell
Reardon, our vice president and chief financial officer, and Mark T. Carlesimo,
our vice president, general counsel and secretary. Under the agreements, Mr. Van
Ness is entitled to an annual salary of $300,000, each of Messrs. Brannan,
Brooks and Reardon currently is entitled to an annual salary of $300,000, and
Mr. Carlesimo is entitled to an annual salary of $225,000. Each agreement
contains identical terms and conditions (other than salary) including change in
control provisions. If the executive's employment is terminated for any reason
other than for cause, death or disability, the executive will receive liquidated
damages in the amount of his base salary for the remainder of the agreement
term, which expires December 31, 2008, plus any bonuses he would have received,
as well as all benefits and perquisites. If the executive's employment is
terminated by either party for any reason within 180 days of a change in
control, the executive shall receive a lump sum of two times the executive's
base salary plus the highest annual bonus earned by the executive, plus benefits
and perquisites until the end of the term of the agreement. Completion of the
merger will constitute a change in control of CD&L within the meaning of these
agreements. Therefore, we will be required to make the required severance
payments to each of these individuals upon the closing of the merger, if their
employment with CD&L terminates upon the effectiveness of the merger. If their
employment terminates within 12 months following the merger Velocity will fund
these payments. Each agreement also contains noncompetition covenants that will
continue for two years following termination of employment unless we terminated
the agreement without cause or the employee terminated the agreement as a result
of our breach of the agreement, in which event the covenants against competition
will cease upon the termination of employment. As of the date hereof, it is
anticipated that the employment of Albert W. Van Ness, Jr. will be terminated as
of the effective date of the merger and he will receive the above payment. The
other individuals are negotiating employment arrangements with Velocity as
described below under "--Velocity Employment Offer Letters."
28
Simultaneous with the signing of the merger agreement, each of the
executives entered into a letter agreement with CD&L and Velocity for the
purposes of (i) amending such employment agreement to change the period
post-merger during which they are protected from termination of employment from
"180 days" to "one year from the Effective Date of the Merger", (ii) clarifying
that so long as notice of termination is given within such one-year period, the
executive shall be entitled to receive change in control benefits even if he
continues to be employed after the effective date, and (iii) setting forth the
lump sum amounts that would be required to be paid the employment agreements if
termination were effective immediately upon consummation of the merger
transaction (including two year executive life insurance premium and car
allowance). The letter agreement also stated that in the event of the death or
disability of any of the executives, such executive shall be entitled to the
change of control benefits described in the letter agreement rather than the
payments he would have received under the employment agreement for a termination
upon death or disability, and provided for a gross-up if certain tax liabilities
were incurred.
ACCELERATED VESTING OF OPTIONS.
Velocity will not assume any options or warrants to purchase shares of
our common stock or any securities convertible into shares of our common stock.
If the merger is completed, each outstanding stock option granted under a CD&L
stock option or stock incentive plan will become exercisable in full and then
canceled, and the holder will be entitled to receive a cash payment, net of
applicable taxes, in an amount equal to the product of:
o the excess, if any, of $3.00 (or, if higher and required pursuant
to the terms of the applicable plan, the highest closing price of
the common stock during the 5 business days preceding the merger)
over the exercise price of the option; and
o the number of shares then subject to the option.
INDEMNIFICATION AND INSURANCE
The merger agreement requires:
o CD&L and Velocity to defend any person who served CD&L or any of
its subsidiaries as an officer, director, employee, fiduciary or
agent during any period prior to the merger against any threatened
or actual claim, action, suit, demand, proceeding or investigation
to which the person is, or is threatened to be made, a party as a
result of the person's service in such capacity or the negotiation,
execution or performance of the merger agreement or any of the
transactions contemplated by the merger agreement;
o CD&L and, following the merger, also Velocity to indemnify and hold
such persons harmless, to the fullest extent permitted by law
against any losses, claims, damages, liabilities, costs, expenses,
including reasonable attorneys' fees and expenses, judgments, fines
and amounts paid in settlement of any kind arising out of the
person's service to CD&L as an officer, director, employee,
fiduciary or agent; and
o CD&L and, following the merger, also Velocity to promptly pay to
the fullest extent permitted by law the person's expenses in
advance of the final disposition of the claim, action, suit,
demand, proceeding or investigation, subject to the person's
undertaking to reimburse CD&L and Velocity for any amounts advanced
in the event that it is finally determined that the person was not
entitled to the amounts.
29
Velocity and NEWCO have agreed that all rights to indemnification
existing in favor of, and all exculpations and limitations on the personal
liability of, the directors, officers, employees and agents of us and our
subsidiaries in our certificate of incorporation and bylaws shall continue for
at least six years following the merger. Velocity and NEWCO have agreed to
purchase for the benefit of the indemnified persons a six-year, prepaid
insurance policy against officers' and directors' liability commensurate with
the terms and conditions of our existing policy.
SPECIAL PAYMENTS TO A DIRECTOR
We have entered into a consulting agreement with Thomas E. Durkin III,
one of our directors, pursuant to which Mr. Durkin provides consulting services
to us with respect to business and financial matters. His focus is on merger and
acquisition activities, including, developing strategies, evaluating,
structuring and negotiating potential transactions and otherwise assisting our
chief executive officer with respect to such matters. In consideration for his
services, we paid Mr. Durkin an hourly fee of $125 per hour, and if our chief
executive officer requests Mr. Durkin to work on a particular transaction, we
must pay him a fee of at least $300,000 upon consummation of such transaction,
plus such other amounts, if any, as the chief executive officer may authorize.
The consulting agreement was amended on July 3, 2006, to provide in addition to
the $300,000 fee, Mr. Durkin will receive from Velocity warrants to acquire
133,334 shares of Velocity common stock at a price of $1.50 per share upon a
consummation of the merger.
VELOCITY EMPLOYMENT OFFER LETTERS
Velocity is negotiating employment offer letters with Michael Brooks,
William T. Brannan, Russell J. Reardon, and Mark T. Carlesimo, each of whom is
one of our executive officers, as well as certain other executives of CD&L. It
is anticipated that the offer letters will become effective upon consummation of
the merger and that each individual will become an employee of Velocity and not
receive the payments described under "--Change of Control and Severance
Agreements; Covenants Not to Compete" unless such employment is terminated by
either party within one year after the effective date of the merger.
The interests described above may influence CD&L's directors and
executive officers in making their recommendation that you vote in favor of the
adoption of the merger agreement and approval of the transactions contemplated
by the merger agreement. You should be aware of these interests when you
consider the CD&L board's recommendation that you vote in favor of adoption of
the merger agreement and approval of the transactions contemplated by the merger
agreement.
MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES
The following is a general discussion of certain material U.S. federal
income tax consequences of the merger to holders of our common stock. We base
this summary on the provisions of the Internal Revenue Code (which we refer to
in this proxy statement as the "Code"), applicable current and proposed U.S.
Treasury regulations, judicial authority, and administrative rulings and
practice, all of which are subject to change, possibly on a retroactive basis.
For purposes of this discussion, we use the term "U.S. holder" to mean:
o a citizen or individual resident of the United States for U.S.
federal income tax purposes or an individual treated as a U.S.
citizen or resident for U.S. federal income tax purposes;
o a corporation, or other entity taxable as a corporation for U.S.
federal income tax purposes, created or organized in or under the
laws of the United States or any political subdivision of the
United States;
30
o a trust if it:
- is subject to the primary supervision of a court
within the United States and one or more U.S. persons
have the authority to control all substantial
decisions of the trust or
- has a valid election in effect under applicable U.S.
Treasury regulations to be treated as a United States
person; or
o an estate the income of which is subject to U.S. federal income tax
regardless of its source.
A "non-U.S. holder" is a person, other than a partnership, that is not
a U.S. holder.
This discussion is directed solely to a holder that holds the shares of
our common stock as a capital asset within the meaning of Section 1221 of the
Code, which generally means property held for investment. This discussion does
not address all aspects of U.S. federal income tax that may be relevant to you
as a holder in light of your particular circumstances, or that may apply to a
holder that is subject to special treatment under the U.S. federal income tax
laws, including, for example, insurance companies, dealers in securities or
foreign currencies, traders in securities who elect the mark-to-market method of
accounting for their securities, stockholders subject to the alternative minimum
tax, real estate investment trusts, regulated investment companies, persons who
have a functional currency other than the U.S. dollar, tax-exempt organizations,
financial institutions, mutual funds, partnerships or other pass through
entities for U.S. federal income tax purposes, controlled foreign corporations,
passive foreign investment companies, certain expatriates, corporations that
accumulate earnings to avoid U.S. federal income tax, persons who hold shares of
our common stock as part of a straddle, hedge, conversion transaction, or other
integrated investment, and persons who hold shares of our common stock through
the exercise of employee stock options or other compensation arrangements. In
addition, the discussion does not address any tax considerations under state,
local or foreign laws or U.S. federal laws other than those pertaining to the
U.S. federal income tax that may apply to holders. We urge you to consult your
own tax advisors to determine the particular tax consequences, including the
application and effect of any state, local or foreign income and other tax laws,
of the receipt of cash in exchange for our common stock pursuant to the merger.
If a partnership holds our common stock, the tax treatment of a partner
will generally depend on the status of the partners and the activities of the
partnership. If you are a partner of a partnership holding our common stock, you
are urged to consult your tax advisors.
U.S. HOLDERS
The receipt of cash pursuant to the merger by U.S. holders of our
common stock will be a taxable transaction for U.S. federal income tax purposes.
In general, for U.S. federal income tax purposes, a U.S. holder of our common
stock will recognize gain or loss equal to the difference between:
o the amount of cash received in exchange for the common stock; and
o the U.S. holder's adjusted tax basis in the common stock.
If the holding period in our common stock surrendered in the merger is
greater than one year as of the date of the merger, the gain or loss will be
long-term capital gain or loss. Otherwise, the gain or loss will be short-term
capital gain or loss. The deductibility of a capital loss recognized on the
exchange is subject to limitations under the Code. If a U.S. holder acquired
different blocks of our common stock at different times and different prices,
that holder must determine its adjusted tax basis and holding period separately
with respect to each block of our common stock.
Under the Code, a U.S. holder of our common stock may be subject, under
certain circumstances, to information reporting on the cash received in the
merger unless that U.S. holder is a corporation or other exempt recipient.
Backup withholding will also apply with respect to the amount of cash received,
unless a U.S. holder provides proof of an applicable exemption or a correct
taxpayer identification number, and otherwise complies with the applicable
requirements of the backup withholding rules. Backup withholding is not an
additional tax and any amounts withheld under the backup withholding rules may
be refunded or credited against a U.S. holder's U.S. federal income tax
liability, if any, provided that the U.S. holder furnishes the required
information to the Internal Revenue Service in a timely manner.
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NON-U.S. HOLDERS
Any gain realized on the receipt of cash pursuant to the merger by a
non-U.S. holder generally will not be subject to U.S. federal income tax
unless:
o the gain is effectively connected with a trade or business of the
non-U.S. holder in the United States (and, if required by an
applicable income tax treaty, is attributable to a United States
permanent establishment of the non-U.S. holder);
o the non-U.S. holder is an individual who is present in the United
States for 183 days or more in the taxable year of that
disposition, and certain other conditions are met; or
o we are or have been a "United States real property holding
corporation" for U.S. federal income tax purposes and the non-U.S.
holder owned more than 5% of our common stock at any time during
the five years preceding the merger.
An individual non-U.S. holder described in the first bullet point
immediately above will be subject to tax on the net gain derived from the merger
under regular graduated U.S. federal income tax rates. An individual non-U.S.
holder described in the second bullet point immediately above will be subject to
a flat 30% tax on the gain derived from the merger, which may be offset by U.S.
source capital losses, even though the individual is not considered a resident
of the United States. If a non-U.S. holder that is a foreign corporation falls
under the first bullet point immediately above, it will be subject to tax on its
net gain in the same manner as if it were a United States person as defined
under the Code and, in addition, may be subject to the branch profits tax equal
to 30% of its effectively connected earnings and profits or at the lower rate as
may be specified by an applicable income tax treaty.
We believe we are not, have not been and do not anticipate becoming a
"United States real property holding corporation" for U.S. federal income tax
purposes.
Information reporting and, depending on the circumstances, backup
withholding will apply to the cash received pursuant to the merger, unless the
beneficial owner certifies under penalties of perjury that it is a non-U.S.
holder (and the payor does not have actual knowledge or reason to know that the
beneficial owner is a United States person as defined under the Code) or the
owner otherwise establishes an exemption. Backup withholding is not an
additional tax and any amounts withheld under the backup withholding rules may
be refunded or credited against a non-U.S. holder's U.S. federal income tax
liability, if any, provided that the non-U.S. holder furnishes the required
information to the Internal Revenue Service in a timely manner.
REGULATORY MATTER
At any time before or after the completion of the merger, the
Department of Justice, the Federal Trade Commission or others could take action
under the antitrust laws, including seeking to prevent the merger or to rescind
the merger. In addition a competitor, customer or other third party could
initiate a private action under the antitrust or other laws challenging or
seeking to enjoin the merger, before or after it is completed.
VOTING AGREEMENTS
Pursuant to the terms of the merger agreement, the following seven
holders of an aggregate of 1,346,270 shares, or 7.3% of the issued and
outstanding shares of our common stock, have entered into a voting agreement
with Velocity: Albert W. Van Ness, William T. Brannan, Michael Brooks, Russell
J. Reardon, Michael J. Morahan, Vincent Brana, and Jack McCorkell. Each of the
holders were holders of our Series A debentures and entered into the voting
agreement pursuant to the debenture purchase agreement. The voting agreement:
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o restricts the transfer of the stockholder's shares;
o imposes on the stockholder an obligation to vote in favor of the
merger in connection with any stockholder action taken with respect
to the merger, and against any extraordinary corporate transaction,
sale or transfer of asset change to the Board of Directors, change
in capitalization, charter or bylaws, change to the structure or
business of the CD&L, or any other action which would potentially
interfere, delay or adversely effect the merger or transactions
contemplated thereby;
o grants to Velocity an irrevocable proxy to vote the stockholder's
shares in the manner specified in the voting agreement;
provided that these restrictions shall not apply to a vote in
connection with a superior competing transaction, if such vote is made
subsequent to our board's withholding, withdrawal or modification of
its recommendation to the holders of our common stock as a result of
such superior competing transaction.
VELOCITY FINANCING ARRANGEMENTS
Velocity has consummated the following financing agreements as of July
3, 2006 to enable it to have sufficient capital resources to pay the aggregate
cash consideration in the merger and under the securities purchase agreements:
On July 3, 2006, Velocity entered into a purchase agreement and
indenture pursuant to which it sold $75.0 million aggregate principal amount of
12% senior secured notes due 2010 (the "Velocity senior notes") to the
purchasers named therein (the "unit purchasers") in a private placement
transaction. The Velocity senior notes were sold at a discount of 5.66% of face
value. The net proceeds from the sale of the Velocity senior notes, after
deducting the unit purchasers' discount and estimated offering expenses payable
by Velocity, were approximately $65.2 million. The Velocity senior notes were
issued in units comprised of (a) $1,000 aggregate principal amount at maturity
of Velocity senior notes and (b) a warrant to purchase 345 shares of Velocity's
common stock exercisable at $1.45 per share.
On July 3, 2006, Velocity entered into a stock purchase agreement by
and among Velocity and certain investors named therein, pursuant to which
Velocity sold for cash an aggregate of 4,000,000 shares of its Series Q
convertible preferred stock for a total purchase price of $40,000,000.
OPERATIONS FOLLOWING THE MERGER
Upon the closing of the merger, CD&L will be operated as a wholly owned
subsidiary of Velocity, maintaining its offices in South Hackensack, New Jersey.
Velocity's management may merge the subsidiary into the parent corporation after
a transition period of an indeterminate length. The officers and directors of
CD&L Acquisition Corp. immediately before the merger will serve as the officers
and directors of CD&L after the merger.
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THE MERGER AGREEMENT
The following is a summary of the material terms of the merger
agreement. This summary does not purport to describe all the terms of the merger
agreement and is qualified by reference to the complete merger agreement which
is attached as Appendix A to this proxy statement and incorporated herein by
reference. We urge you to read the merger agreement carefully and in its
entirety because it, and not this proxy statement, is the legal document that
governs the merger.
The summary of the terms of the merger agreement provided below is
intended to provide information about the terms of the merger. The terms and
information in the merger agreement should not be relied on as disclosures about
us or Velocity without consideration of all of the public disclosure by CD&L and
Velocity as set forth in their respective public reports filed with the SEC. The
merger agreement, although included as Appendix A to this proxy statement, is
not intended to change or supplement the disclosures in the public reports filed
with the SEC. This is particularly so because the terms of the merger agreement,
such as the representations and warranties, are intended to govern the
contractual rights and relationships, and allocate risks, between the parties in
relation to the merger. Matters may change from the state of affairs
contemplated by the representations and warranties. CD&L and Velocity have
provided additional disclosure in their public reports to the extent that they
are aware of the existence of any material facts that are required to be
disclosed under federal securities law and that might otherwise contradict the
representations and warranties contained in the merger agreement and will update
such disclosure as required by law.
STRUCTURE OF THE MERGER
The merger agreement provides that, upon the terms and subject to the
conditions contained in it, NEWCO will be merged with CD&L, the separate
corporate existence of NEWCO 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.
EFFECTIVE TIME
The merger will become effective upon the filing of a certificate of
merger with the Delaware Secretary of State in accordance with Delaware law. We
anticipate the certificate of merger will be filed soon after our special
meeting of stockholders, provided that our stockholders adopt the merger
agreement. A delay in fulfilling any condition of the merger could delay, or
terminate, the merger.
MERGER CONSIDERATION
At the effective time of the merger, each share of our 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 our common
stock held by CD&L, Velocity or its subsidiaries at the time of the merger will
be cancelled without any payment.
EXCHANGE OF OUR SHARE CERTIFICATES
At the signing of the merger agreement, Velocity deposited for the
benefit of our stockholders and all other holders of our securities who are
entitled to the merger consideration an amount of cash equal to the aggregate
merger consideration with American Stock Transfer & Trust Company, as paying
agent. At the effective time of the merger, shares of our common stock:
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o will no longer be outstanding;
o will automatically be cancelled; and
o will cease to exist.
From and after the effective time of the merger, each certificate
formerly representing any shares of our common stock, other than dissenting
shares, will represent only the right to receive the $3.00 per share merger
consideration.
No interest will accrue or be paid with respect to the merger
consideration. Until holders of certificates previously representing shares of
our common stock have surrendered those certificates to the payment agreement
for exchange, holders will not receive the merger consideration due in respect
of the shares formerly represented by those certificates.
Promptly after the effective time of the merger, the paying agent will
mail to each holder of record of a certificate or certificates, which
immediately prior to the effective time of the merger represented outstanding
shares of our common stock, a letter of transmittal and instructions for its use
in delivering certificates to the paying agent in exchange for the merger
consideration due in respect of the shares formerly represented by those
certificates. After receipt of a stockholder's certificates by the paying agent,
together with a properly executed letter of transmittal, the paying agent will
promptly deliver to the stockholder the $3.00 per share merger consideration
multiplied by the number of shares of common stock formerly represented by the
common stock certificate or certificates surrendered by the stockholder. In the
event of a transfer of ownership of our common stock which is not registered in
the transfer records of our transfer agent, payment of the merger consideration
may be made to a person other than the person in whose name the surrendered
certificate is registered if:
o the certificate is properly endorsed or otherwise in proper form
for transfer; and
o the person requesting the merger consideration pays any transfer or
other taxes required by reason of the payment of the merger
consideration due in respect of the shares formerly represented by
the certificate to a person other than the registered holder of the
surrendered certificate or establishes to Velocity's satisfaction
that such tax has been paid or is not applicable.
MISSING CERTIFICATES
If any certificate representing shares of common stock is lost, stolen
or destroyed, the paying agent will deliver the applicable merger consideration
due in respect of the shares formerly represented by the certificate if:
o the stockholder asserting the claim of a lost, stolen or destroyed
certificate provides evidence reasonably satisfactory to Velocity
that the certificate has been so lost, stolen or destroyed;
o the stockholder agrees to indemnify Velocity, and upon request of
Velocity, the stockholder posts a bond in a reasonable amount
designated by Velocity as indemnity, against any claim that may be
made with respect to that certificate against Velocity or the
paying agent, and
o the stockholder provides evidence reasonably satisfactory to
Velocity that the stockholder is the owner of the missing
certificate and entitled to receive the merger consideration.
TREATMENT OF OUR STOCK OPTIONS
If the merger is completed, each outstanding stock option granted under
a CD&L stock option or stock incentive plan will become exercisable in full and
then canceled, and the holder will be entitled to receive a cash payment, net of
applicable taxes, in an amount equal to the product of:
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o the excess, if any, of $3.00 (or, if higher and required pursuant
to the terms of the applicable plan, the highest closing price of
the common stock during the 5 business days preceding the merger)
over the exercise price of the option; and
o the number of shares then subject to the option.
TREATMENT OF OUR BENEFITS AND OTHER EMPLOYEE MATTERS
Velocity has agreed that each Velocity employee benefit plan in which
any of our employees or former employees participate or will participate will:
o recognize all service of the affected employee with us or our
subsidiaries and any predecessor entities for purposes of vesting,
eligibility, participation and coverage (but excluding, for the
avoidance of doubt, accrual and level of benefits) to the extent
such service would be recognized under the analogous Velocity
employee benefit plan;
o honor or provide appropriate credit for co-payments, deductibles
and other expenses incurred by the affected employee or his or her
beneficiaries under the analogous CD&L employee benefit plans; and
o if applicable, waive any waiting periods or other eligibility
limitations and exclusions for preexisting conditions.
SIGNIFICANT COVENANTS UNDER THE MERGER AGREEMENT
NO SOLICITATION OF COMPETING TRANSACTIONS BY CD&L
The merger agreement contains provisions prohibiting us from seeking an
alternative transaction. Under these "no solicitation" provisions, we have
agreed that we will not take any of the following actions:
o solicit or initiate or knowingly encourage or facilitate, directly
or indirectly, any inquiries relating to, or the submission of, any
proposal or offer, from a third party to acquire beneficial
ownership of more than 10 percent of the assets of CD&L and its
subsidiaries or any class of equity securities of CD&L, which is
referred to as a "competing transaction";
o participate in any discussions or negotiations regarding, or
furnish to any person any information or data with respect to or
access to the properties of, or take any other action to knowingly
facilitate the making of any proposal that constitutes, or may
reasonably be expected to lead to, any competing transaction; or
waive the provisions of any "standstill" or similar agreement; or
o enter into any agreement with respect to a competing transaction,
approve or recommend or resolve to approve or recommend any
competing transaction or enter into any agreement requiring us to
abandon, terminate or fail to consummate the merger with Velocity.
Notwithstanding the provisions of the merger agreement described above,
if we receive a bona fide, unsolicited, written proposal or offer for a
competing transaction by a third party which:
o our board:
- determines in good faith, after consulting with our
financial advisor, will result in, or is reasonably likely
to lead to, a transaction more favorable from a financial
point of view to our stockholders than the merger with
Velocity, and
- after consulting with counsel, reasonably determines that
failure to entertain the third-party proposal would result
in a breach of its fiduciary duties;
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o is reasonably capable of being consummated, and
o is subject to a confidentiality agreement with the third party on
terms no less favorable to us, in all material respects, than the
confidentiality agreement with Velocity,
which is referred to as a "superior competing transaction," we may furnish to
the third party information with respect to CD&L and participate in discussions
and negotiations with the third party provided that we have delivered prior
written notice to Velocity that we intend to take such actions. We have agreed
to provide Velocity with information about any proposal for a competing
transaction that we receive and to keep Velocity informed on a prompt basis of
the status of any such proposals.
RECOMMENDATIONS OF OUR BOARD OF DIRECTORS
Our board of directors has given its unqualified recommendation that
our stockholders adopt the merger agreement, and we have agreed to use
commercially reasonable efforts to solicit stockholder adoption of the merger
agreement and take all other action necessary or advisable to secure the
approval of our stockholders. However, our board of directors may:
o withhold, withdraw or modify its recommendation in a manner adverse
to Velocity as a result of a competing transaction;
o adopt or recommend a competing transaction; or
o terminate the merger agreement and enter into a competing
transaction,
but only if:
o a third party submits an unsolicited competing transaction that the
board of directors believes, in its good faith judgment, is
reasonably likely to result in a superior competing transaction and
after consultation with our outside legal counsel, determines that
the failure to take such action would result in a breach of the
board's fiduciary duties;
o we have delivered to Velocity seven business days' prior written
notice that the board of directors intends to withhold, withdraw or
modify its recommendation of the merger agreement or recommend or
enter into a superior competing transaction;
o our board determines that the competing transaction remains a
superior competing transaction after any modifications to the terms
of the merger agreement that Velocity proposes during the 7-day
period; and
o we pay Velocity a termination fee of $2.5 million in cash;
Our directors may also take such action if our board of directors determines, in
good faith, that failure to take such action would result in a breach of its
fiduciary duties.
Velocity has agreed that, in the event that a vote or consent of CD&L's
stockholders is required in connection with the approval of any superior
competing transaction, then:
o the total number of shares of CD&L common stock owned by Velocity
which is voted against any superior competing transaction shall not exceed
twenty five percent (25%) of the issued and outstanding stock of CD&L; and
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o all shares of common stock of CD&L owned by Velocity which are not
voted against such a superior competing transaction shall be voted or abstained
in a manner which emulates the percentages of votes, abstentions and failures to
vote by all of the other stockholders of CD&L.
Velocity has granted CD&L an irrevocable proxy to vote its shares of
CD&L common stock in the manner described above. Velocity has also agreed to
waive any appraisal rights it may have under Delaware law in connection with a
superior competing transaction, provided that if the consideration offered in
such superior competing transaction is to be paid in cash and stock, that
Velocity receives an amount in cash equal to the aggregate price Velocity paid
in cash pursuant to the securities purchase agreements.
INDEMNIFICATION AND INSURANCE FOR OUR OFFICERS AND DIRECTORS
The merger agreement requires:
o CD&L and Velocity to defend any person who served CD&L or any of
its subsidiaries as an officer, director, employee, fiduciary or
agent during any period prior to the merger against any threatened
or actual claim, action, suit, demand, proceeding or investigation
to which the person is, or is threatened to be made, a party as a
result of the person's service in such capacity or the negotiation,
execution or performance of the merger agreement or any of the
transactions contemplated by the merger agreement;
o CD&L and, following the merger, also Velocity to indemnify and hold
such persons harmless, to the fullest extent permitted by law
against any losses, claims, damages, liabilities, costs, expenses,
including reasonable attorneys' fees and expenses, judgments, fines
and amounts paid in settlement of any kind arising out of the
person's service to CD&L as an officer, director, employee,
fiduciary or agent; and
o CD&L and, following the merger, also Velocity to promptly pay to
the fullest extent permitted by law the person's expenses in
advance of the final disposition of the claim, action, suit,
demand, proceeding or investigation, subject to the person's
undertaking to reimburse CD&L and Velocity for any amounts advanced
in the event that it is finally determined that the person was not
entitled to the amounts.
Velocity and NEWCO have agreed that all rights to indemnification
existing in favor of, and all exculpations and limitations on the personal
liability of, the directors, officers, employees and agents of us and our
subsidiaries in our certificate of incorporation and bylaws shall continue for
at least six years following the merger. Velocity and NEWCO have agreed to
purchase for the benefit of the indemnified persons a six-year, prepaid
insurance policy against officers' and directors' liability commensurate with
the terms and conditions of our existing policy.
OTHER COVENANTS
Each of CD&L and Velocity:
o has agreed to use reasonable efforts to take all actions necessary
to cause the conditions to closing of the merger to be satisfied as
promptly as practicable, and to obtain all necessary waivers,
consents and approvals, effect all necessary registrations, filings
and submissions, and lift any injunction or other legal bar to the
merger;
o has agreed to provide the other with reasonable access to its
properties, books and records and furnish or make available all
information concerning its business; and
o are prohibited from soliciting each other's employees until the
earlier of the consummation of the merger or the one-year
anniversary of the termination of the merger agreement.
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REPRESENTATIONS AND WARRANTIES
Each of Velocity and CD&L has made representations and warranties to
the other in the merger agreement regarding, among other things:
o organization and similar corporate matters:
o the authorization, execution, delivery, performance and
enforceability of the merger agreement;
o consents and approvals in connection with performance of the merger
agreement;
o the absence of material litigation or other legal proceedings;
o the absence of breaches, violations or defaults under its
organizational documents, applicable laws and other agreements and
documents; and
o the accuracy of the information supplied by it for inclusion in
this proxy statement.
Velocity has made additional representations and warranties to us
stating that, after its payment to the paying agent on July 3, 2006, it will
have sufficient funds to make all required payments at closing, operate its
business as currently contemplated after giving effect to the merger and to pay
its debts as they become due.
We have made additional representations and warranties to Velocity
regarding, among other things:
o our capital structure;
o reports and financial statements filed with the SEC and the
accuracy of the information contained in those documents;
o the sufficiency of our disclosure controls and procedures;
o the absence of undisclosed liabilities;
o the absence of certain changes or events since March 31, 2006;
o insurance coverage;
o the filing of tax returns, payment of taxes and other tax matters;
o employee benefits plans;
o compliance with environmental laws and regulations;
o ownership, use and non-infringement of intellectual property
rights;
o compliance with laws, governmental regulations and orders;
o absence of certain agreements triggering rights upon a change of
control of CD&L;
o use of brokers and finders;
o receipt of SRP's fairness opinion;
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o customers and suppliers;
o material contracts;
o actions taken under state anti-takeover laws;
o transactions with affiliates;
o licenses;
o assets and properties;
o real property interests; and
o independent contractors.
CONDUCT OF OUR BUSINESS PRIOR TO THE MERGER
Under the merger agreement, we have agreed, during the period from the
date of the merger agreement and continuing until the earlier of the termination
of the merger agreement pursuant to its terms or the consummation of the merger,
except as otherwise contemplated by the merger agreement or our disclosure
memorandum or as Velocity otherwise consents in writing, that we will conduct
our operations according to our ordinary and usual course of business consistent
with past practice and, to the extent consistent therewith, with no less
diligence and effort than would be applied in the absence of the merger
agreement, seek to preserve intact our current business organizations, keep
available the service of our current officers, employees and independent
contractors and preserve our relationships with customers, suppliers and others
having business dealings with us to the end that a CD&L material adverse effect
shall not have occurred prior to the merger. We are prohibited from taking
certain actions without Velocity's prior consent, including without limitation:
o issuing, delivering, selling, pledging, disposing or otherwise
encumbering of additional shares of our capital stock (except upon
exercise or conversion of currently outstanding securities) or
issuing securities convertible into, or exchangeable or exercisable
for, shares of our capital stock;
o redeeming, purchasing or otherwise acquiring any issued and
outstanding shares of our capital stock or other securities
provided that we may repurchase outstanding securities in
accordance with the terms of our stock option plans;
o splitting, combining, subdividing or reclassifying any shares of
our capital stock;
o declaring, setting aside, for payment or paying of any dividend or
distribution with respect to our common stock;
o adopting a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of us or any of our subsidiaries not constituting an
inactive subsidiary;
o amending our certificate of incorporation or bylaws,
o making any material divestiture or acquisition, by means of merger,
consolidation or otherwise, or material disposition, of assets or
securities;
o incurring or assuming any indebtedness for money borrowed except in
the ordinary course of business, to replace current debt, or to
guarantee debt of a subsidiary incurred in the ordinary course of
business;
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o making any loans, advances or capital contributions to, or
investments in, any other person, other than to us or any of our
wholly owned subsidiaries in excess of $250,000 in the aggregate;
o increasing the compensation of any of our directors, officers or
employees, except in the ordinary course of business and in
accordance with past practice or as required under any of our
employee benefit plans or any written severance, termination or
employment agreement in effect on the date of the merger agreement
and as set forth in our disclosure memorandum;
o paying or agreeing to pay any pension, retirement allowance or
other employee benefit not required or contemplated by any of our
existing benefit, severance, termination, pension or employment
plans, agreements or arrangements as in effect on the date of the
merger agreement;
o entering into any new, or materially amending any existing,
employment, severance or termination agreement with any director,
officer or employee;
o except as may be required to comply with applicable law, become
obligated under any new pension plan, welfare plan, multi-employer
plan, employee benefit plan, severance plan, benefit arrangement,
or similar plan or arrangement, which was not in existence on the
date of the merger, or amend any such plan or arrangement in
existence on the date of the merger if such amendment would have
the effect of materially enhancing any benefits under the plan or
arrangement;
o making any capital expenditures or other material commitments not
in the ordinary course of business;
o taking any action or failing to take any action which could
reasonably be expected to result in any of the conditions to the
merger not being satisfied; and
o entering into any contract, agreement, commitment or arrangement to
do any action prohibited by the foregoing clauses.
As referred to in this proxy statement, a "CD&L material adverse
effect" means any claim, change, effect, event, occurrence or development which
individually or in the aggregate would reasonably be expected to be materially
adverse to the business, financial condition or results of operations of us and
our subsidiaries, taken as a whole.
CONDITIONS TO THE MERGER
Before the merger can be completed, a number of conditions must be
satisfied or waived. These conditions include:
o the requisite adoption of the merger agreement by the holders of
our common stock, unless there is a superior competing transaction.
Velocity, through its ownership of common stock acquired under the
securities purchase agreements, and through its rights under the
voting agreement, has or controls the vote of a majority of the
outstanding shares of our common stock, and has indicated that it
will vote to adopt the merger agreement;
o there is no statute, rule, regulation, executive order, decree,
ruling or injunction or other order of a court or governmental
authority of competent jurisdiction directing that the merger
transaction not be consummated, provided that each party has used
all commercially reasonable efforts to have any such decree,
ruling, injunction or order vacated; and
o all governmental consents, orders and approvals legally required
for the consummation of the merger shall have been obtained and be
in effect at the effective time of the merger, and all waiting
periods imposed by applicable law shall have expired or been
terminated. We do not believe there are any governmental consents
necessary to complete the merger transaction.
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TERMINATION OF THE MERGER AGREEMENT
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;
o our stockholders fail to adopt the merger agreement at the special
meeting; or
o the merger shall not have occurred on or before December 30, 2006.
Velocity may terminate the merger agreement if:
o we materially breach our covenant not to solicit a business
combination transaction in competition with the merger, or
o if our 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 our board of directors withholds, withdraws or materially modifies
its recommendation of the merger agreement or the merger to our
stockholders in response to an executed agreement constituting a
superior competing transaction, after giving Velocity a reasonable
opportunity to discuss the superior competing transaction and any
proposed amendments to the merger agreement with us for a period of
seven business days (during which Velocity could increase the
amount of the merger consideration payable to our stockholders) and
we pay Velocity a termination fee of $2.5 million in cash.
TERMINATION FEES AND EXPENSES
We are required to pay a termination fee of $2.5 million in cash to
Velocity if:
o Velocity terminates the merger agreement because of our breach of
our covenant not to solicit a competing transaction;
o Velocity terminates the merger agreement because our board of
directors withholds, withdraws or materially modifies or changes
its recommendation of the merger agreement or the merger to our
stockholders in a manner adverse to Velocity; or
o we terminate the merger agreement because of a superior competing
transaction.
AMENDMENTS AND WAIVERS
Subject to applicable law, CD&L, Velocity and NEWCO may modify or amend
the merger agreement, by written agreement, provided that after the adoption of
the merger agreement by our stockholders, no amendment may be made which would
require the further approval of our stockholders, including but not limited to,
changes in the consideration payable in the merger or adverse effects on the
rights of our stockholders under the merger agreement, without obtaining their
further approval.
42
DELISTING OF OUR SHARES OF COMMON STOCK
If the merger is completed, our common stock will cease to be listed on
the American Stock Exchange.
43
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Beneficial ownership of our securities is determined in accordance with
the SEC's rules. Beneficial ownership generally includes having voting or
investment power with respect to securities. Common stock subject to an option,
warrant or convertible security that is exercisable or convertible within 60
days of July 17, 2006 (without regard to the merger), is deemed to be
beneficially owned by the person holding the option, warrant or convertible
security when computing ownership but is not treated as outstanding when
computing the ownership of any other person. We have determined each beneficial
owner's percentage ownership by assuming that stock options, warrants and
convertible securities held by that person which are exercisable or convertible
within 60 days of July 17, 2006 (without regard to the merger) have been
exercised or converted. Except as otherwise indicated by the footnotes to the
table below, we believe that that persons and entities named in the table below
have sole voting and investment power with respect to all shares of common stock
shown as beneficially owned by them.
BENEFICIAL OWNERSHIP OF MORE THAN 5% OF OUR COMMON STOCK
Based upon information available to us, the following persons
beneficially owned more than 5% of our common stock as of July 17, 2006.
NAME AND ADDRESS OF AMOUNT AND NATURE OF BENEFICIAL
BENEFICIAL OWNER OWNERSHIP PERCENT OF CLASS (2)
---------------- --------- ----------------
Velocity Express Corporation 9,036,261 49.1%
One Morningside Drive North
Building B, Suite 300
Westport, Connecticut 06880
Albert W. Van Ness, Jr. 1,174,141 (1) 6.0%
80 Wesley Street
South Hackensack, NJ 07606
(1) Includes 1,037,981 shares of common stock issuable upon the exercise of
options pursuant to our employee stock compensation program which are
exercisable within 60 days of July 17, 2006.
(2) The holders of employee stock options do not have voting rights as
holders of common stock until their options are exercised. The sum of
individual beneficial ownership percentages can exceed 100% due to the
nature of the calculation which, in accordance with SEC rules, assumes
for each individual that the denominator is equal to the total
outstanding shares of common stock and the shares of common stock which
would be outstanding upon the exercise of all options, warrants and
convertible instruments for that individual stockholder without regard
to exercise of similar instruments by any other stockholder.
STOCKHOLDERS AGREEMENT
Pursuant to a Stockholders Agreement, dated as of April 14, 2004 (the
"stockholders agreement"), executed in connection with the 2004 restructuring of
our 12% senior subordinated notes due January 2006 owned by BNP Paribas, Exeter
I and Exeter IV (collectively, the "Lenders"), among us, the Lenders and the
Series A debenture sellers (the Series A debentures and the Lenders referred to
collectively as the "Stockholders"), the Stockholders had agreed to vote all
shares of our voting capital stock owned by them in favor of the following
actions: (i) to fix and maintain the number of directors at 11 if the Lenders,
as holders of the Series A preferred stock, exercise their rights to elect two
directors to the board of directors (as of the date of this proxy statement, the
Lenders have not exercised that right) and (ii) to cause and maintain the
election to the board of directors of three representatives designated by the
Investors (initially Albert W. Van Ness, Jr., William T. Brannan and Michael
Brooks) and two representatives designated by the Lenders as per their rights as
holders of Series A preferred stock should the Lenders determine in their
discretion as holders of Series A preferred stock to so designate directors. In
addition, if (x) any principal payment is made with respect to the Series A
debentures held by the Investors and the Series A preferred stock has not been
converted or redeemed prior to April 14, 2011, or (y) any specified actions are
taken while the requisite number of shares of Series A preferred stock are
outstanding without any required prior written consent of the holders of the
majority of the outstanding shares of Series A preferred stock, then the
Investors shall nominate and vote all of their shares of voting stock for three
designees of the Lenders in lieu of the three Investor directors should the
Lenders choose to so designate.
44
The stockholders agreement also provides for preemptive rights so that
if we propose in the future to offer for cash any shares of our capital stock,
then we shall first make an offering of such shares of capital stock to each
Stockholder.
Pursuant to the securities purchase agreements, the rights and
obligations of the Series A debentures and the Series A preferred were
transferred to and assumed by Velocity.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth information as of July 17, 2006 with
respect to beneficial ownership of our common stock by each of our directors,
including our chairman and chief executive officer, our four most highly
compensated executive officers for the fiscal year ended December 31, 2005 and
for our directors and executive officers as a group.
SHARES ISSUABLE
UPON EXERCISE OF PERCENTAGE
SHARES STOCK OPTIONS (1) TOTAL SHARES OWNED (3)
------ ----------------- ------------ ---------
Albert W. Van Ness, Jr. (4) 136,160 1,037,981 1,174,141 6.0%
William T. Brannan (4) 113,796 720,782 834,578 4.4%
Michael Brooks (4) 251,955 665,000 916,955 4.8%
Thomas E. Durkin III - 38,000 38,000 *
Jon F. Hanson 73,688 (2) 46,750 120,438 *
Marilu Marshall - 46,750 46,750 *
Matthew J. Morahan (4) 360,512 33,000 393,512 2.1%
John A. Simourian - 38,000 38,000 *
John S. Wehrle - 45,500 45,500 *
Russell J. Reardon (4) 74,238 647,277 721,515 3.8%
Mark T. Carlesimo (4) - 511,250 511,250 2.7%
All directors and executive officers 1,010,349 3,830,290 4,840,639 21.8%
as a group (11 persons)
-----------------------------------
* Less than 1%
(1) Includes options granted pursuant to the Employee Stock Compensation
Program and the Director Plan, which are exercisable within 60 days of
July 17, 2006.
(2) Includes 64,000 shares held by Ledgewood Employees Retirement Plan, of
which Mr. Hanson is a beneficiary.
(3) The sum of individual beneficial ownership percentages can exceed 100%
due to the nature of the calculation which in accordance with SEC rules
assumes for each individual that the denominator is equal to total
outstanding shares and shares which would be outstanding upon the
exercise of all options and convertible instruments owned by that
individual stockholder without regard to exercise of similar
instruments by any other stockholder.
(4) See also "--Stockholders Agreement" above.
45
STOCKHOLDER APPRAISAL RIGHTS
If the merger is completed, holders of our capital stock who follow the
procedures summarized below will be entitled to appraisal rights under Section
262 of the General Corporation Law of the State of Delaware.
Delaware law entitles the holders of record of shares of our common
stock who follow the procedures specified in Section 262 of the General
Corporation Law of the State of Delaware to have their shares appraised by the
Delaware Court of Chancery and to receive the "fair value" of those shares,
without taking into account any element of value arising from the accomplishment
or expectation of the merger, together with a fair rate of interest, if any, as
determined by the court. The "fair value" could be greater than, less than or
the same as the merger consideration.
In order to exercise these rights, a CD&L stockholder must demand and
perfect the rights in accordance with Section 262. Under Section 262, where a
merger is to be submitted for approval at a meeting of stockholders, as in the
case of the adoption of the merger agreement by our stockholders, the
corporation, not less than 20 days prior to the meeting, must notify each of its
stockholders entitled to appraisal rights that such appraisal rights are
available and include in such notice a copy of Section 262. This proxy statement
serves as such statutory notice.
THE FOLLOWING DISCUSSION IS NOT A COMPLETE STATEMENT OF THE LAW
PERTAINING TO APPRAISAL RIGHTS UNDER THE GENERAL CORPORATION LAW OF THE STATE OF
DELAWARE AND IS QUALIFIED IN ITS ENTIRETY BY THE FULL TEXT OF SECTION 262 WHICH
IS ATTACHED HERETO AS APPENDIX D. ALL REFERENCES IN SECTION 262 AND IN THIS
SUMMARY TO A "STOCKHOLDER" ARE TO THE RECORD HOLDER OF THE SHARES OF OUR COMMON
STOCK IMMEDIATELY PRIOR TO THE EFFECTIVE TIME OF THE MERGER AS TO WHICH
APPRAISAL RIGHTS ARE ASSERTED. A PERSON HAVING A BENEFICIAL INTEREST IN SHARES
OF OUR COMMON STOCK HELD OF RECORD IN THE NAME OF ANOTHER PERSON, SUCH AS A
BROKER OR A NOMINEE, MUST ACT PROMPTLY TO CAUSE THE RECORD HOLDER TO FOLLOW THE
STEPS SUMMARIZED BELOW TO PROPERLY AND IN A TIMELY MANNER PERFECT APPRAISAL
RIGHTS. YOU SHOULD CAREFULLY REVIEW SECTION 262 AS WELL AS THE INFORMATION
DISCUSSED BELOW.
FILING WRITTEN DEMAND
If a CD&L stockholder elects to exercise the right to an appraisal
under Section 262, that stockholder must do all of the following:
The stockholder must deliver to us a written demand for appraisal of
the shares of common stock held, which demand must reasonably inform us of the
identity of the stockholder and that the demanding stockholder is demanding
appraisal, before the vote is taken on the merger agreement at the special
meeting. This written demand for appraisal must be delivered to us before our
stockholders vote on the merger and must be in addition to and separate from any
proxy or vote against the merger agreement. Neither voting against, abstaining
from voting nor failing to vote on the merger agreement will constitute a valid
demand for appraisal within the meaning of Section 262.
The stockholder must not vote in favor of adopting the merger
agreement. Failing to vote or abstaining from voting will satisfy this
requirement, but a vote in favor of the merger agreement, by proxy or in person,
or the return of a signed proxy that does not specify an abstention or a vote
against adoption of the merger agreement, will constitute a vote in favor of the
merger agreement, a waiver of the stockholder's right of appraisal and will
nullify any previously delivered written demand for appraisal.
The stockholder must continuously hold the shares of record from the
date of the written demand for appraisal until the effective time of the merger.
All written demands for appraisal should be addressed to CD&L, Inc., 80
Wesley Street, South Hackensack, New Jersey 07606, Attention: Secretary, and
received before the vote is taken on the merger agreement at the special
meeting. The demand must reasonably inform us of the identity of the stockholder
and that the stockholder is demanding appraisal of the shares of common stock
that the stockholder holds.
46
The written demand for appraisal must be executed by or for the record
holder of the shares of common stock, fully and correctly, as the holder's name
appears on the certificate(s) for their shares. If the shares of common stock
are owned of record in a fiduciary capacity, such as by a trustee, guardian or
custodian, execution of the demand must be made in that capacity, and if the
shares are owned of record by more than one person, such as in a joint tenancy
or tenancy in common, the demand must be executed by or for all joint owners. An
authorized agent, including one of two or more joint owners, may execute the
demand for appraisal for a holder of record; however, the agent must identify
the record owner(s) and expressly disclose the fact that, in executing the
demand, the agent is acting as agent for the record owner(s).
A beneficial owner of shares of common stock held in "street name" who
desires appraisal should take such actions as may be necessary to ensure that a
timely and proper demand for appraisal is made by the record holder of the
shares. Shares of common stock held through brokerage firms, banks and other
nominee holders are frequently deposited with and held of record in the name of
a nominee of a central security depository. Any beneficial owner desiring
appraisal who holds shares of common stock through a nominee holder is
responsible for ensuring that the demand for appraisal is timely made by the
record holder. The beneficial holder of the shares should instruct the nominee
holder that the demand for appraisal should be made by the record holder of the
shares which may be the nominee of a central security depository if the shares
have been so deposited.
A record holder, such as a bank, broker, fiduciary, depository or other
nominee, who holds shares of our common stock as a nominee for others, may
exercise appraisal rights with respect to the shares held for all or less than
all beneficial owners of the shares as to which the person is the record owner.
In that case, the written demand must set forth the number of shares of our
common stock covered by the demand. Where the number of shares is not expressly
stated, the demand will be presumed to cover all shares of our common stock
outstanding in the name of the record owner.
Any stockholder may withdraw its demand for appraisal and accept $3.00
in cash per share by delivering to us a written withdrawal of the demand for
appraisal. However, any such attempt to withdraw made more than 60 days after
the effective date of the merger will require written approval of the surviving
corporation. In addition, no appraisal proceeding in the Delaware Court of
Chancery will be dismissed without the approval of the Court, and the approval
may be conditioned upon such terms as the Court deems just. If the surviving
corporation does not approve a request to withdraw a demand for appraisal when
that approval is required, or if the Delaware Court of Chancery does not approve
the dismissal of an appraisal proceeding, the CD&L stockholder will be entitled
to receive only the appraised value determined in any such appraisal proceeding,
which value could be less than, equal to or more than $3.00 per share.
NOTICE BY CD&L
Within 10 days after the effective time of the merger, we will give
written notice of the date of the completion of the merger to each CD&L
stockholder who has not voted in favor of the merger and who has properly
demanded appraisal and satisfied the requirements of Section 262, referred to as
a dissenting stockholder. Within 120 days after the effective date of the
merger, any former CD&L stockholder who has complied with the provisions of
Section 262 up to that point in time will be entitled to receive from the
surviving corporation, upon written request, a statement setting forth the
aggregate number of shares not voted in favor of the merger agreement and the
merger and with respect to which demands for appraisal have been received and
the aggregate number of holders of such shares. The surviving corporation must
mail that statement to the former stockholder within 10 days of receipt of the
request or within 10 days after expiration of the period for delivery of demands
for appraisals under Section 262, whichever is later.
FILING A PETITION FOR APPRAISAL
Within 120 days after the completion of the merger, we or any
dissenting stockholder may file a petition in the Delaware Court of Chancery
demanding a determination of the fair value of the shares of common stock that
are held by all dissenting stockholders. We are under no obligation, and have no
present intention, to file such a petition. Accordingly, it is the obligation of
the stockholders seeking appraisal rights to initiate all necessary actions to
perfect appraisal rights within the time prescribed by Section 262. A
stockholder timely filing a petition for appraisal with the Delaware Court of
Chancery must deliver a copy to the surviving corporation, which will then be
obligated within 20 days to provide the Register in Chancery with a duly
verified list containing the names and addresses of all of our stockholders who
have demanded payment for their shares and with whom agreements as to the value
of their shares have not been reached by the surviving corporation. After notice
to those stockholders, the Delaware Court of Chancery may conduct a hearing on
the petition to determine which stockholders have become entitled to appraisal
rights. The Delaware Court of Chancery may require stockholders who have
demanded an appraisal of their shares and who hold stock represented by
certificates to submit their certificates to the Register in Chancery for
notation thereon of the fact that appraisal proceedings are pending. If any
stockholder fails to comply with the requirement, the Delaware Court of Chancery
may dismiss the proceedings as to that stockholder.
47
DETERMINATION OF FAIR VALUE
If a petition for appraisal is timely filed, the Delaware Court of
Chancery will determine the fair value of the shares of common stock held by
dissenting stockholders, exclusive of any element of value arising from the
accomplishment or expectation of the merger, together with a fair rate of
interest, if any, to be paid on the amount determined to be fair value. In
determining fair value, the court will take into account all relevant factors.
Holders of common stock considering seeking appraisal should be aware that the
fair value of their shares of common stock as so determined could be more than,
the same as or less than the consideration they would receive pursuant to the
merger if they did not seek appraisal of their shares of common stock and that
investment banking opinions as to fairness from a financial point of view are
not necessarily opinions as to fair value under Section 262. The Delaware
Supreme Court stated in Weinberger v. UOP, Inc., among other things, that "proof
of value by any techniques or methods which are generally acceptable in the
financial community and otherwise admissible in court" should be considered in
an appraisal proceeding.
In addition, Delaware courts have decided that the statutory appraisal
remedy may or may not be, depending on the factual circumstances, a
stockholder's exclusive remedy in connection with transactions such as the
merger. If a petition for appraisal is not timely filed, then the right to an
appraisal will cease.
The costs of the appraisal proceeding (which do not include attorney's
fees or the fees or expenses of experts) shall be determined by the Delaware
Court of Chancery and taxed against the parties as the court determines to be
equitable under the circumstances. The Delaware Court of Chancery will also
determine the amount of interest, if any, to be paid upon the amounts to be
received by persons whose shares of common stock have been appraised. Upon
application of any dissenting stockholder, the court may order all or a portion
of the expenses incurred by any dissenting stockholder in connection with the
appraisal proceeding, including reasonable attorneys' fees and the fees and
expenses of experts, to be charged pro rata against the value of all shares of
common stock entitled to appraisal.
From and after the completion of the merger, no dissenting stockholder
shall have any rights of a CD&L stockholder with respect to that holder's shares
for any purpose, except to receive payment of the fair value of the shares and
to receive payment of dividends or other distributions, on the holder's shares
of our common stock, if any, payable to our stockholders of record as of a time
prior to the completion of the merger. If a dissenting stockholder delivers to
the surviving company a written withdrawal of the demand for an appraisal within
60 days after the completion of the merger or subsequently with the written
approval of the surviving company, or, if no petition for appraisal is filed
within 120 days after the completion of the merger, then the right of that
dissenting stockholder to an appraisal will cease and the dissenting stockholder
will be entitled to receive only the merger consideration. Once a petition for
appraisal is filed with the Delaware court, the appraisal proceeding may not be
dismissed as to any stockholder without the approval of the court.
ANY CD&L STOCKHOLDER WISHING TO EXERCISE APPRAISAL RIGHTS IS URGED TO
CONSULT LEGAL COUNSEL BEFORE ATTEMPTING TO EXERCISE APPRAISAL RIGHTS. FAILURE TO
COMPLY STRICTLY WITH ALL OF THE PROCEDURES SET FORTH IN SECTION 262 MAY RESULT
IN THE LOSS OF THE STOCKHOLDER'S STATUTORY APPRAISAL RIGHTS.
48
FUTURE STOCKHOLDER PROPOSALS
If the merger is not completed, you will continue to be entitled to
attend and participate in our stockholder meetings and we will hold a 2007
annual meeting of stockholders, in which case stockholder proposals will be
eligible for consideration for inclusion in the proxy statement and form of
proxy for our 2007 annual meeting of stockholders in accordance with Rule 14a-8
under the Securities Exchange Act of 1934, as amended. To be eligible for
inclusion in the proxy statement and form of proxy for the 2007 annual meeting
pursuant to Rule 14a-8, written notice of any stockholder proposal has to be
delivered or mailed to and received at the address specified below by the close
of business on December 31, 2006. For a proposal to be considered timely for
consideration at our 2007 annual meeting, but not included in the proxy
statement or form of proxy for such meeting, written notice of the proposal has
to be delivered or mailed to and received at the address specified below by the
close of business on March 16, 2007. Any proposal should be addressed to Mark T.
Carlesimo, Secretary, CD&L, Inc., 80 Wesley Street, South Hackensack, New Jersey
07606 and should be sent by certified mail, return receipt requested.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and
other information with the SEC. You may read and copy any reports, proxy
statements or other information that we file with the SEC at the following
address:
Securities and Exchange Commission
Public Reference Room
Station Place
100 F Street, N.E.
Washington, D.C. 20549
Please call the SEC at 1-800-SEC-0330 for further information on its
public reference room. You may also obtain copies of this information by mail
from the Public Reference section of the of the SEC by writing to the Securities
and Exchange Commission, Station Place, 100 F Street, N.E., Washington, D.C.
20549, at prescribed rates. Our public filings are also available to the public
from document retrieval services, such as Hoovers which is accessible through
our website at www.cdl.net, and the Internet website maintained by the SEC at
www.sec.gov.
Any person, including any beneficial owner, to whom this proxy
statement is delivered may request copies of reports, proxy statements or other
information concerning us, without charge, by written or telephonic request
directed to CD&L at 80 Wesley Street, South Hackensack, New Jersey 07606, Attn:
General Counsel, or at 201-487-7740.
A list of stockholders will be available for review at our executive
offices during regular business hours beginning at least ten days before the
special meeting and continuing to the date of the special meeting. The list of
stockholders will be available at the special meeting or any adjournment
thereof.
THIS PROXY STATEMENT DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES, OR THE SOLICITATION OF A PROXY,
IN ANY JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY
OFFER OR SOLICITATION IN THAT JURISDICTION.
STOCKHOLDERS SHOULD NOT RELY ON INFORMATION OTHER THAN THAT CONTAINED
IN THIS PROXY STATEMENT. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE INFORMATION
THAT IS DIFFERENT FROM THAT CONTAINED IN THIS PROXY STATEMENT. THIS PROXY
STATEMENT IS DATED JULY ___, 2006. NO ASSUMPTION SHOULD BE MADE THAT THE
INFORMATION CONTAINED IN THIS PROXY STATEMENT IS ACCURATE AS OF ANY DATE OTHER
THAN THAT DATE, AND THE MAILING OF THIS PROXY STATEMENT WILL NOT CREATE ANY
IMPLICATION TO THE CONTRARY.
A COPY OF OUR ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED DECEMBER
31, 2005 AND QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2006
ACCOMPANIES THIS PROXY STATEMENT. THE ANNUAL REPORT AND QUARTERLY REPORT ARE NOT
TO BE REGARDED AS PROXY SOLICITING MATERIAL NOR AS A COMMUNICATION BY MEANS OF
WHICH ANY SOLICITATION IS TO BE MADE.
49
We will provide without charge to each person being solicited by this
proxy statement, on the written request of any such person, a copy of the annual
report of CD&L on Form 10-K for the fiscal year ended December 31, 2005 (as
filed with the SEC), including the financial statements thereto. All such
requests should be directed to Mark T. Carlesimo, Secretary, CD&L, Inc., 80
Wesley Street, South Hackensack, New Jersey 07606.
50
CD&L, INC.
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT THE OFFICES OF:
LOWENSTEIN SANDLER PC
65 LIVINGSTON AVENUE
ROSELAND, NEW JERSEY 07068
THURSDAY, AUGUST 17, 2006
10:00 A.M.
CD&L, INC.
80 WESLEY STREET
SOUTH HACKENSACK, NEW JERSEY 07606
--------------------------------------------------------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS.
The undersigned stockholder of CD&L, Inc. (the "Company"), hereby acknowledges
receipt of the Notice of the Special Meeting of Stockholders and Proxy Statement
of the Company, and hereby appoints Russell Reardon and Mark Carlesimo, and each
of them, as proxies, with full power of substitution, to vote on behalf of the
undersigned the number of shares which the undersigned is then entitled to vote,
at the Special Meeting of the Stockholders of the Company to be held at the
offices of Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New Jersey
07068, on Thursday, August 17, 2006 at 10:00 A.M., local time, and any
adjournments or postponements thereof, upon the matters set forth on the reverse
side, with all the powers which the undersigned would possess if personally
present.
The undersigned hereby revokes all previous proxies relating to the shares
covered hereby.
This proxy will be voted on the matters set forth on the reverse side of this
form as directed by the stockholder. If no direction is made in the space
provided, this proxy will be voted FOR proposal 1 and in the discretion of the
proxies on such other business that may properly come before the meeting, or any
adjournment or postponement thereof.
See reverse for voting instructions.
1
(a) SUBMIT A PROXY BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
provided or return it to CD&L, Inc., c/o American Stock Transfer & Trust
Company, 59 Maiden Lane, New York, New York, 10038.
Please detach here
--------------------------------------------------------------------------------
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A
VOTE FOR PROPOSAL 1.
PROPOSAL 1. Adoption of the Agreement and Plan of Merger, dated as of |_| For |_| Against |_| Abstain
July 3, 2006, among CD&L, Inc., Velocity Express Corporation and CD&L
Acquisition Corp, and approval of the transactions contemplated thereby,
including the merger of CD&L Acquisition Corp. with and into CD&L, Inc.
and the conversion of each outstanding share of CD&L, Inc. common stock,
other than shares held by CD&L, Inc. or by Velocity Express Corporation or
any of their subsidiaries, into the right to receive $3.00 in cash,
without interest.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION
IS GIVEN, WILL BE VOTED FOR PROPOSAL 1 AND IN THE DISCRETION OF THE PROXIES ON
SUCH OTHER BUSINESS THAT MAY PROPERLY COME BEFORE THE MEETING, OR ANY
ADJOURNMENT OF POSTPONEMENT THEREOF.
Address Change? Mark Box |_| Indicate changes below:
Date
-----------------------------------------
-----------------------------------------
Signature(s) in Box Please sign exactly as the
name appears at left. When signed as a
corporate officer, executor, administrator,
trustee, guardian, etc., please give full title
as such. Both joint tenants must sign.
2
APPENDIX A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "AGREEMENT"), dated as of
July 3, 2006 (the "SIGNING DATE"), by and among VELOCITY EXPRESS CORPORATION, a
Delaware corporation ("PURCHASER"), CD&L ACQUISITION CORP., a Delaware
corporation and wholly owned Subsidiary of Purchaser ("NEWCO"), and CD&L, INC.,
a Delaware corporation (the "COMPANY"). For a listing of where the definitions
of capitalized terms used in this Agreement can be found, see Section 9.11
below.
RECITALS
WHEREAS, the Board of Directors of the Company (the "BOARD OF
DIRECTORS") has, subject to the terms and conditions of this Agreement,
determined that this Agreement is advisable and in the best interests of the
stockholders of the Company and approved and adopted this Agreement and the
transactions contemplated hereby in accordance with the Delaware General
Corporation Law, as amended (the "DGCL"); and
WHEREAS, the Board of Directors has caused the Company Rights
Plan to be amended pursuant to an amendment in the form attached as Exhibit A
hereto (the "COMPANY RIGHTS PLAN AMENDMENT"), which shall prevent any Flip-in
Date, Flip-over Transaction or Event, Separation Time, or Stock Acquisition Date
(as each such term is defined in the Company Rights Plan) from occurring, and
shall prevent the Company Rights from becoming exercisable pursuant to the
Company Rights Plan, as a result of (i) approval, execution or delivery of this
Agreement, the Securities Purchase Agreements, the Voting Agreement or any
amendments thereof, provided that any such amendment is approved in advance by
the Board of Directors of the Company, (ii) the commencement or, prior to
termination of this Agreement, the consummation of the transactions contemplated
hereby (including the Merger), or by the Company Voting Agreements or the
Securities Purchase Agreements, (iii) any conversion, exercise or exchange of
any of the Company's securities acquired pursuant to the Securities Purchase
Agreements, or (iv) in the event of a termination of this Agreement, any
additional acquisitions of the Company's securities by any of the Purchaser
Companies (A) which are consummated after the termination of this Agreement at a
purchase price of not less than $3.00 per share of Company Common Stock (on an
as-converted basis, in the case of Convertible Securities), (B) which do not
cause any of Purchaser Companies to become the beneficial owner of more than 51%
of the shares of Company Common Stock outstanding at the time of such additional
acquisitions, and (C) which, in the event there is a Second Purchaser Restricted
Period, occur after the expiration of the Second Purchaser Restricted Period;
and
WHEREAS, the Board of Directors has approved the acquisition
by the Purchaser Companies of 15% or more of the Company's outstanding voting
stock for purposes of Section 203 of the DGCL so that the restrictions on
"business combinations" with "interested stockholders" (each as defined in
Section 203 of the DGCL) will not be applicable to the Purchaser Companies; and
WHEREAS, the board of directors of each of Purchaser and Newco
has, subject to the terms and conditions of this Agreement, determined that this
Agreement is advisable and in the best interests of its respective stockholders
and approved and adopted this Agreement and the transactions contemplated hereby
in accordance with the DGCL; and
WHEREAS, Purchaser, Newco and the Company desire to make
certain representations, warranties, covenants and agreements in connection with
the Merger; and
WHEREAS, the holders of all of the outstanding shares of
Company Series A Preferred have consented to the execution and delivery of this
Agreement and the consummation of transactions contemplated hereby; and
WHEREAS, pursuant to purchase agreements with certain
securityholders of the Company, copies of which were previously provided to the
Company (the "SECURITIES PURCHASE AGREEMENTS"), Purchaser has acquired the
following securities of the Company prior to the execution of this Agreement and
subsequent to the aforesaid amendments to the Company Rights Plan and approval
of the Board of Directors for purposes of Section 203 of the DGCL (the
"PURCHASER ACQUIRED SECURITIES"): (i) shares of Company Series A Preferred that
represent as of the Signing Date the right to acquire up to an aggregate of
3,937,010 shares of Company Common Stock (which represents all of the
outstanding shares of Company Series A Preferred as of the Signing Date), (ii)
Company Notes that represent as of the Signing Date the right to acquire up to
an aggregate of 3,937,008 shares of Company Common Stock (which represents all
of the outstanding Company Notes as of the Signing Date), (iii) Company Warrants
that represent as of the Signing Date the right to acquire up to an aggregate of
506,250 shares of Company Common Stock (which represents all of the outstanding
Company Warrants as of the Signing Date), and (iv) 656,000 shares of Company
Common Stock; and
WHEREAS, Purchaser has obtained a voting agreement, a copy of
which was previously provided to the Company, from the stockholders listed on
Exhibit B, which voting agreement provides, among other things, that until the
date of termination of this Agreement (whether as a result of a Superior
Competing Transaction or for any other reason), such stockholders shall vote the
shares of Company Common Stock owned by them in favor of this Agreement, the
Merger and, to the extent required, all transactions incident thereto (the
"COMPANY VOTING AGREEMENT") and irrevocable proxies from such stockholders
giving Purchaser the right to vote the shares of Company Common Stock owned by
them in accordance with the requirements of the Company Voting Agreement
(collectively, the "IRREVOCABLE PROXIES").
NOW, THEREFORE, in consideration of the foregoing and the
mutual representations, warranties, covenants and agreements set forth herein,
and intending to be legally bound, Purchaser, Newco and the Company hereby agree
as follows:
ARTICLE 1 --
THE MERGER; EFFECTIVE TIME; CLOSING
1.1 THE MERGER. Subject to the terms and conditions of this Agreement,
at the Effective Time, the Company and Newco shall, in accordance with Section
251 of the DGCL, consummate a merger (the "MERGER") in which Newco shall be
merged with and into the Company, with the Company being the surviving
corporation, and the separate corporate existence of Newco shall thereupon
cease. The corporation surviving the Merger shall be governed by the laws of the
state of Delaware and is sometimes hereinafter referred to as the "SURVIVING
CORPORATION." In accordance with Section 251 of the DGCL, all of the rights,
privileges, powers, immunities, purposes and franchises of Newco and the Company
shall vest in the Surviving Corporation and all of the debts, liabilities,
obligations and duties of Newco and the Company shall become the debts,
liabilities, obligations and duties of the Surviving Corporation.
-2-
1.2 EFFECTIVE TIME. As soon as practicable after the satisfaction or
waiver of the conditions set forth in Article VII hereof, the appropriate
parties hereto shall execute in the manner required by the DGCL and file with
the Delaware Secretary of State a certificate of merger relating to the Merger,
and the parties shall take such other and further actions as may be required by
Law to make the Merger effective. The time the Merger becomes effective in
accordance with applicable Law is hereinafter referred to as the "EFFECTIVE
TIME."
1.3 EFFECTS OF THE MERGER. The Merger shall have the effects set forth
in Section 251 of the DGCL.
1.4 CLOSING. The closing of the Merger (the "CLOSING") shall take place
(a) at the offices of Lowenstein Sandler PC, 65 Livingston Avenue, Roseland, New
Jersey, at 10:00 a.m. as promptly as practicable after the last of the
conditions set forth in Section 7.1 hereof shall be fulfilled or waived in
accordance with this Agreement, or (b) at such other place, time and date as
Purchaser and the Company may agree.
ARTICLE II --
SURVIVING CORPORATION
2.1 CERTIFICATE OF INCORPORATION. At the Effective Time, the
Certificate of Incorporation of the Company shall be amended in its entirety to
read as set forth in Exhibit C hereto and, as so amended, shall be the
Certificate of Incorporation of the Surviving Corporation until thereafter
changed or amended as provided therein or by the DGCL.
2.2 BYLAWS. From and after the Effective Time, the Bylaws of Newco in
effect immediately prior to the Effective Time shall be the Bylaws of the
Surviving Corporation until thereafter amended in accordance with DGCL.
2.3 DIRECTORS. The directors of Newco at the Effective Time shall, from
and after the Effective Time, be the initial directors of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and Bylaws.
2.4 OFFICERS. The officers of Newco at the Effective Time shall, from
and after the Effective Time, be the initial officers of the Surviving
Corporation until their successors have been duly elected or appointed and
qualified or until their earlier death, resignation or removal in accordance
with the Surviving Corporation's Certificate of Incorporation and Bylaws.
-3-
ARTICLE III --
MERGER CONSIDERATION; CONVERSION OR CANCELLATION
OF COMPANY SHARES IN THE MERGER
3.1 MERGER CONSIDERATION; CONVERSION OR CANCELLATION OF COMPANY SHARES
IN THE MERGER.
(a) At the Effective Time, by virtue of the Merger and without
any action on the part of Purchaser, Newco, the Company, the Surviving
Corporation or the holders of any outstanding shares of capital stock of the
Company (the "COMPANY SHARES") or capital stock of Newco, each share of the
Company's common stock, par value $.001 per share (the "COMPANY COMMON STOCK")
and each share of the Company's Series A Convertible Redeemable Preferred Stock,
par value $.001 per share (the "COMPANY SERIES A PREFERRED"), issued and
outstanding immediately prior to the Effective Time (other than (A) Company
Shares owned by Purchaser, Newco or any direct or indirect wholly owned
Subsidiary of Purchaser (collectively, "PURCHASER COMPANIES"), (B) Company
Shares owned by any of the Company's direct or indirect wholly owned
Subsidiaries or held in the treasury of the Company ("TREASURY SHARES") and (C)
Dissenting Shares) shall, by virtue of the Merger, be cancelled and extinguished
and converted into the right to receive per share of Company Common Stock (on an
as-converted to Company Common Stock basis in the case of the Company Series A
Preferred) an amount in cash equal to Three Dollars ($3.00) (as adjusted
pursuant to Section 3.10 below, the "MERGER CONSIDERATION").
(b) Any Company Shares owned by the Purchaser Companies and
all Treasury Shares shall be cancelled and retired at the Effective Time and
shall cease to exist, and no Merger Consideration shall be delivered in exchange
therefor.
(c) On or after the Effective Time, (i) holders of
certificates representing Company Shares (the "CERTIFICATES") immediately prior
to the Effective Time shall cease to have any rights as stockholders of the
Company, except the right to receive the Merger Consideration in accordance with
Section 3.4 hereof for each share of Company Common Stock (on an as-converted to
Company Common Stock basis in the case of the Company Series A Preferred) held
by them and (ii) holders of certificates, agreements or other instruments
representing Convertible Securities (the "CONVERTIBLE SECURITY INSTRUMENTS")
immediately prior to the Effective Time shall be treated in accordance with
Section 3.7 below.
3.2 CONVERSION OF NEWCO SHARES. Each share of common stock, par value
$.004, of Newco ("NEWCO COMMON STOCK") issued and outstanding immediately prior
to the Effective Time shall be converted into one duly issued, validly
authorized, fully paid and nonassessable share of common stock, par value $.004
per share, of the Surviving Corporation.
-4-
3.3 DISSENTING SHARES. Notwithstanding anything in this Agreement to
the contrary, (A) Company Shares held by holders thereof who are entitled to
vote on the Merger and who have not voted such Company Shares in favor of the
adoption of this Agreement and the Merger, and (B) shares of Series A Preferred,
even if their holders are not entitled to vote on the Merger, in each case with
respect to which appraisal rights shall have been properly exercised and
perfected in accordance with Section 262 of the DGCL (the "DISSENTING SHARES"),
shall not be converted into or represent the right to receive the Merger
Consideration which the holders of Company Shares are entitled to receive
pursuant to Section 3.1 above, and holders of such Dissenting Shares shall be
entitled to receive only the payment provided for by Section 262 of the DGCL
unless and until such holders fail to perfect or effectively withdraw or
otherwise lose their rights to demand payment under the DGCL. If, after the
Effective Time, any such holder fails to perfect or effectively withdraws or
loses such right, such Dissenting Shares shall thereupon be deemed to be
entitled to receive the Merger Consideration, without interest, per share of
Company Common Stock (on an as-converted to Company Common Stock basis in the
case of the Company Series A Preferred). The Company shall give Purchaser (i)
prompt notice of any demands for payment for Dissenting Shares pursuant to
Section 262 of the DGCL received by the Company, withdrawals of such demands,
and any other instruments served pursuant to the DGCL and received by the
Company and (ii) the opportunity to direct all negotiations and proceedings with
respect to demands for payment pursuant to Section 262 of the DGCL. The Company
shall not, except with the prior written consent of Purchaser or as otherwise
required by applicable Law, make any payment with respect to any such demands
for payment or offer to settle or settle any such demands.
3.4 EXCHANGE OF CERTIFICATES AND CONVERTIBLE SECURITY INSTRUMENTS;
PAYMENT.
(a) On or prior to the Signing Date, Purchaser shall appoint a
bank or trust company reasonably acceptable to the Company as the Person to
receive Letters of Transmittal and to act as paying agent under this Agreement
(the "PAYING AGENT'), pursuant to an agreement in form and substance reasonably
acceptable to Purchaser and the Company (the "PAYING AGENT AGREEMENT"). On the
Signing Date, Purchaser shall deposit with the Paying Agent, pursuant to the
Paying Agent Agreement, an amount of cash equal to the aggregate amount of
Merger Consideration payable under this Agreement to all holders of Company
Shares and Convertible Securities (other than Company Shares or Convertible
Securities owned by Purchaser Companies) (collectively, the "COMPANY EQUITY
HOLDERS").
(b) Purchaser shall use commercially reasonable efforts to
cause the Paying Agent to mail to each stockholder of record of the Company and
all other Company Equity Holders as of the Effective Time, (i) a letter of
transmittal (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates and Convertible Security Instruments shall
pass, only upon delivery of the Certificates and Convertible Security
Instruments to the Paying Agent) (a "LETTER OF TRANSMITTAL") and (ii)
instructions for effecting the surrender of the Certificates and Convertible
Security Instruments and receiving the Merger Consideration to which such holder
shall be entitled pursuant to Section 3.1.
(c) Upon surrender of a Certificate or Convertible Security
Instrument for cancellation to the Paying Agent, together with a duly executed
Letter of Transmittal, the holder of such Certificate or Convertible Security
Instruments shall be entitled to receive in exchange therefor, and shall
promptly receive, the Merger Consideration to which such holder is entitled in
accordance with Section 3.1 in the form of a bank check.
-5-
(d) In the event that the Merger Consideration is to be
delivered to any Person in whose name the Certificate or Convertible Security
Instrument surrendered in exchange therefor is registered in the transfer
records of the Company, the Merger Consideration may be delivered to a
transferee if the Certificate is presented to the Paying Agent, accompanied by
all documents reasonably required to evidence and effect such transfer.
(e) Until surrendered as contemplated by Section 3.4(c), each
Certificate (other than a Certificate to be canceled in accordance with Section
3.1(b)) shall be deemed at any time after the Effective Time to represent only
the right to receive upon such surrender the Merger Consideration contemplated
by this Section 3.4. No interest will be paid or will accrue on any cash payable
to holders of Certificates or Convertible Security Instruments pursuant to the
provisions of this Article III.
(f) Neither the Paying Agent nor any party hereto shall be
liable to a holder of Company Shares or Convertible Securities for any Merger
Consideration delivered to a public official pursuant to any applicable
abandoned property, escheat or similar Law.
(g) In the case of any Company Shares that are not represented
by Certificates but are included in the Company Shares disclosed in Sections
4.2(a) and (b) below, such Company Shares shall be treated identically to
Company Shares that are represented by Certificates for purposes of this
Agreement (subject to evidence of ownership thereof reasonably satisfactory to
Purchaser) and for purposes of the Paying Agent Agreement (subject to evidence
of ownership thereof reasonably satisfactory to the Paying Agent).
(h) Purchaser shall be entitled, in accordance with Section
3.4(i) below, to receive all interest earned in respect of the funds deposited
with the Paying Agent.
(i) Purchaser shall receive any remaining Merger Consideration
on deposit with the Paying Agent on the date which is one year after the
Effective Time, and any Company Equity Holder who has not surrendered his
Certificate(s) or Convertible Security Instrument(s) to the Paying Agent prior
to such time shall be entitled to receive the Merger Consideration without
interest upon the surrender of such Certificate(s) to Purchaser, subject to
applicable escheat or abandoned property laws.
3.5 MISSING CERTIFICATES. If any holder of Company Shares convertible
into the right to receive the Merger Consideration is unable to deliver the
Certificate which represents such Company Shares, or any Company Equity Holder
is unable to deliver the Convertible Security Instrument which represents such
Convertible Securities, the Paying Agent shall deliver to such holder the Merger
Consideration to which the holder is entitled for such shares upon presentation
of the following:
(i) evidence to the reasonable satisfaction of Purchaser that
any such Certificate or Convertible Security Instrument, as applicable,
has been lost, wrongfully taken or destroyed;
-6-
(ii) such security or indemnity as may be reasonably requested
by Purchaser to indemnify and hold harmless Purchaser and the Paying
Agent; and
(iii) evidence reasonably satisfactory to Purchaser that such
Person is the owner of the Company Shares theretofore represented by
each Certificate claimed to be lost, wrongfully taken or destroyed, or
the Convertible Securities theretofore represented by each Convertible
Security Instrument claimed to be lost, wrongfully taken or destroyed,
and that the holder is the Person who would be entitled to present such
Certificate or Convertible Security Instrument for payment pursuant to
this Agreement.
3.6 NO FURTHER RIGHTS OR TRANSFERS. At and after the Effective Time,
except for the surrender of the Certificate(s) in exchange for the right to
receive the Merger Consideration with respect thereto (or, in the case of
holders of Dissenting Shares, the right to receive the payment provided for by
Section 262 of the DGCL), (i) each holder of Company Shares shall cease to have
any rights as a stockholder of the Company, and (ii) no transfer of Company
Shares shall thereafter be made on the stock transfer books of the Surviving
Corporation.
3.7 CONVERTIBLE SECURITIES.
(a) The Company shall take all action necessary to ensure that
(i) each option or other right to purchase shares of Company Common Stock
pursuant to stock options (a "COMPANY OPTION") which is outstanding at the
Effective Time, whether granted by the Company under the Company's Amended and
Restated 2002 Stock Option Plan for Independent Directors, the Company's 1995
Stock Option Plan for Independent Directors, the Company's Year 2000 Stock
Incentive Plan or the Company's Employee Stock Compensation Program
(collectively, the "COMPANY OPTION PLANS") or any other plan or agreement, (ii)
each warrant to purchase shares of Company Common Stock (a "COMPANY WARRANT")
which is outstanding at the Effective Time, and (iii) each Performance Unit
granted by the Company under the Company's Year 2000 Stock Incentive Plan which
is outstanding at the Effective Time, in any such case, shall be fully vested
and exercisable in full immediately prior to the consummation of the Merger and
all Company Options, Company Warrants and Performance Units that are not
exercised prior to the consummation of the Merger will be cancelled as of the
Effective Time in exchange for the Merger Consideration described in Section
3.7(b) (other than Company Options, Company Warrants and Performance Units that
are owned by Purchaser Companies, which will be cancelled without
consideration); provided, however, that all Company Options, Company Warrants
and Performance Units that cannot be so cancelled by the Company ("REMAINING
EQUITY-BASED AWARDS") shall remain outstanding but, at all times after the
Effective Time, shall be deemed to refer to a cash payment to the holder thereof
in an amount equal to the product of (x) the number of shares of Company Common
Stock issuable upon exercise of such Remaining Equity-Based Awards immediately
prior to the Effective Time multiplied by (y) the Merger Consideration without
any interest thereon, less the applicable exercise price for the Company Option,
Company Warrant or Performance Unit, if any.
(b) Each Convertible Security that is outstanding immediately
prior to the Effective Time (other than Remaining Equity-Based Awards) shall be
cancelled as of the Effective Time and converted into the right to receive, for
each Company Share issuable upon exercise of such Convertible Security, the
Merger Consideration, without interest, less the applicable exercise price for
the Convertible Securities, if any (other than Convertible Securities that are
owned by Purchaser Companies, which will be cancelled without consideration).
Thereafter, without impairing the rights of the holders of the Convertible
Security to receive payments of Merger Consideration to the extent set forth
herein, the holders of Convertible Securities shall, as of the Effective Time,
cease to have any further right or entitlement to acquire any shares of capital
stock of the Company, Purchaser or the Surviving Corporation under the cancelled
Convertible Securities. Holders of Convertible Securities will be required to
deliver their Convertible Security Instruments in accordance with Section 3.4
above or, if unable to do so, otherwise meet the requirements set forth in
Section 3.5 above. The Seller Notes will not be cancelled in the Merger and will
remain outstanding at the Effective Time.
-7-
(c) The Company agrees to take all other actions necessary or
appropriate so that, as of the Effective Time and as a result of the Merger,
except as permitted above, (i) no Convertible Securities are outstanding, (ii)
no Person other than Purchaser shall have any right, title or interest in or to
the ownership of the Company or the Surviving Corporation or any securities
issued by the Company or the Surviving Corporation, (iii) the holders of
Convertible Securities prior to the Closing, shall, on and after the Closing,
have no right, title or interest in or to the Company or the Surviving
Corporation or any securities of the Company or the Surviving Corporation, other
than the rights to payment of Merger Consideration in the manner described in
this Section 3.7 or rights in respect of Dissenting Shares as described in
Section 3.3 above, and (iv) no Person holding Convertible Securities shall by
virtue of any such securities have any right to acquire any securities of
Purchaser.
3.8 EMPLOYEE STOCK PURCHASE PLAN. There are no active participants or
participant accumulated cash balances in the Company's Employee Stock Purchase
Plan (the "ESPP"), and, after the Signing Date, the Company will not permit any
participation in the ESPP or offer any plan, program or arrangement for the
purchase of shares of Company Common Stock.
3.9 WITHHOLDING. Notwithstanding anything in this Agreement to the
contrary, the Paying Agent or Purchaser shall be entitled to deduct and withhold
from the consideration otherwise payable pursuant to this Agreement to any
holder of Company Shares, Company Options, Company Warrants or Performance Units
such amounts as the Paying Agent, Purchaser or the Surviving Corporation, as the
case may be, is required to deduct and withhold with respect to such payment
under the Internal Revenue Code of 1986, as amended (the "CODE") or any
provisions of state, local or foreign tax Law. Any amounts so withheld shall be
treated for all purposes of this Agreement as having been paid to the holder of
the Company Shares, Company Options, Company Warrants or Performance Units in
respect of which such deduction and withholding was made. The Company agrees to
provide the Paying Agent and Purchaser with such information as they may
reasonably require in order to calculate such amounts required to be withheld.
After the Effective Time, Purchaser will timely remit, or cause the timely
remission of, these withheld amounts to the taxing authorities entitled to
receive the same.
-8-
3.10 ADJUSTMENTS TO MERGER CONSIDERATION.
(a) In the event of any change for any reason (including
without limitation as a result of a forward or reverse stock split, stock
dividend or distribution, reclassification, recapitalization, merger,
subdivision, issuer tender or exchange offer or other similar transaction) in
the number of Company Shares or Convertible Securities (other than Company
Shares or Convertible Securities owned by Purchaser Companies, and other than
any matter set forth on Part 4.2(b) of the Company Disclosure Memorandum) issued
and outstanding at any time after the Signing Date and prior to the Effective
Time (excluding changes resulting from any repurchase, redemption or repayment
by the Company or its Subsidiaries of any shares of Company Shares or
Convertible Securities), the Merger Consideration shall be appropriately
adjusted to provide to the holders of Company Shares and Convertible Securities
the same aggregate amount of consideration (i.e., Three Dollars ($3.00)
multiplied by the number of As Converted Total Company Shares as in effect at
the Signing Date, as appropriately adjusted to reflect any changes resulting
from any repurchase, redemption or repayment by the Company or its Subsidiaries
of any shares of Company Common Stock or Company Options after the Signing Date)
(the "TOTAL MERGER CONSIDERATION") (for the avoidance of doubt, Total Merger
Consideration excludes any Merger Consideration payable in respect of Company
Shares or Convertible Securities owned by Purchaser Companies) which they would
have received had such change not occurred; and as so adjusted shall thereafter
be the Merger Consideration, subject to further adjustment in accordance with
this Section 3.10.
(b) In the event that Section 4.2(c) below as in effect at the
Signing Date misstates the As Converted Company Total Shares, then the Merger
Consideration shall be appropriately reduced or increased as appropriate to
provide to the holders of Company Common Stock and Convertible Securities the
aggregate amount of Total Merger Consideration which they would have received if
Section 4.2(c) as in effect at the Signing Date had been accurate; and as so
adjusted shall thereafter be the Merger Consideration, subject to further
adjustment in accordance with this Section 3.10; provided, however, that no
adjustment pursuant to this paragraph shall be made for any matter set forth on
Part 4.2(b) of the Company Disclosure Memorandum.
(c) Notwithstanding anything herein to the contrary, no
adjustment shall be made pursuant to this Section 3.10 unless all of the
adjustments to be made pursuant to this Section 3.10 would in the aggregate
cause an adjustment in the Merger Consideration of more than $.01 per share
(i.e., if the adjustment would result in Merger Consideration of $2.99 per share
or $3.01 per share, the Merger Consideration shall remain at $3.00 per share).
(d) Notwithstanding any adjustment to the per share Merger
Consideration made pursuant to this Section 3.10, the aggregate Merger
Consideration to be received by any holder of Company Shares or Convertible
Securities in the Merger will be rounded up or down to the nearest one cent
($.01).
-9-
ARTICLE IV --
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Contemporaneously with the execution and delivery of this
Agreement, the Company has delivered to Purchaser and Newco a Company Disclosure
Memorandum dated as of the date of this Agreement and signed by the Company (the
"COMPANY DISCLOSURE MEMORANDUM") setting forth certain information regarding the
Company and its business. To induce Purchaser and Newco to enter into and
perform this Agreement, the Company hereby represents and warrants to Purchaser
and Newco that, except (i) as set forth in the Company Disclosure Memorandum
(with specific reference to the particular Section or subsection of this
Agreement to which the information set forth in the Company Disclosure
Memorandum relates; provided, however, that any information set forth in one
Section or subsection of the Company Disclosure Memorandum shall be deemed to
apply to each other Section or subsection thereof to which its relevance is
readily apparent on its face) or (ii) as set forth in the Company SEC Reports,
each of the representations and warranties in the following paragraphs of this
Article IV is true and correct as of the Signing Date:
4.1 CORPORATE ORGANIZATION AND QUALIFICATION. Each of the Company and
its Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation. Each of
the Company and its Subsidiaries is qualified and in good standing as a foreign
corporation in each jurisdiction where the properties owned, leased or operated
or the business conducted by it require such qualification, except where failure
to so qualify or be in good standing would not have a Company Material
Occurrence or materially adversely affect the consummation of the transactions
contemplated hereby. Each of the Company and its Subsidiaries has all requisite
power and authority (corporate or otherwise) to own its properties and to carry
on its business as it is now being conducted, except where failure to have such
power and authority would not reasonably be expected to result in a Company
Material Occurrence or to materially adversely affect the consummation of the
transactions contemplated hereby. Set forth as exhibits to the Company SEC
Reports are complete and correct copies of the Company's Certificate of
Incorporation and Bylaws, each as amended to date.
4.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of
30,000,000 shares of Company Common Stock, of which, as of the Signing Date,
10,017,479 shares were issued and outstanding, and 2,000,000 shares of Preferred
Stock, par value $.001 per share, of which, as of the Signing Date, 393,701
shares were designated as Company Series A Preferred, and 393,701 shares of
Company Series A Preferred were issued and outstanding. All of the outstanding
shares of capital stock of the Company have been duly authorized and validly
issued and are fully paid and nonassessable.
-10-
(b) Set forth on Part 4.2(b) of the Company Disclosure
Memorandum is a list of all Company Options issued and outstanding as of the
Signing Date, together with a description of (i) the number of shares of Company
Common Stock issuable upon exercise or conversion thereof, (ii) the applicable
exercise or conversion price therefor, and (iii) the expiration date thereof.
The Company does not have any Performance Shares or Shares of Restricted Stock
issued or outstanding. All outstanding shares of capital stock of the
Subsidiaries are owned by the Company or a direct or indirect wholly owned
Subsidiary of the Company, free and clear of all liens, pledges, security
interests, charges, claims, options, rights of third parties and other
encumbrances of any kind or nature ("LIENS"). Except for (i) this Agreement and
as permitted or contemplated hereby, (ii) the Company Notes that represent as of
the Signing Date the right to acquire up to an aggregate of 3,937,008 shares of
Company Common Stock, (iii) the Company Options that represented as of the
Signing Date the right to acquire up to an aggregate of 4,244,223 shares of
Company Common Stock, (iv) the Company Warrants that represent as of the Signing
Date the right to acquire up to an aggregate of 506,250 shares of Company Common
Stock, (v) the Company Series A Preferred that represent as of the Signing Date
the right to acquire up to an aggregate of 3,937,010 shares of Company Common
Stock, (vi) the Seller Notes, and (vii) the Company Rights, there are not, as of
the Signing Date, any outstanding or authorized options, warrants, calls,
Performance Units, rights (including preemptive rights), commitments or any
other agreements of any character to which the Company or any of its
Subsidiaries is a party, or by which they may be bound, requiring it to issue,
transfer, sell, purchase, redeem or acquire any shares of capital stock or any
securities or rights convertible into, exercisable or exchangeable for, or
evidencing the right to subscribe for or otherwise acquire, any shares of
capital stock or other securities of the Company or any of its Subsidiaries.
(c) The aggregate number of shares of Company Common Stock (i)
which are issued and outstanding as of the Signing Date, and (ii) which would be
issued and outstanding as of the Signing Date assuming a cashless exercise or
cashless conversion of all Convertible Securities, using the actual exercise
price of such Convertible Securities (in each case excluding shares of Company
Common Stock and Convertible Securities that are owned by Purchaser Companies)
(the sum of (i) and (ii) are hereinafter collectively referred to as the "AS
CONVERTED TOTAL COMPANY SHARES") is 11,039,238. For purposes of calculating said
cashless exercise, the value of each share of Company Common Stock shall be
equal to the Merger Consideration. In addition, for purposes of calculating the
As Converted Total Company Shares, it shall be deemed that all Convertible
Securities which have an exercise or conversion price in excess of the Merger
Consideration would not be converted into any Company Common Stock.
(d) Except for the Company Voting Agreement, the Irrevocable
Proxies, the Company Stockholders Agreement and the Company Registration Rights
Agreement, there are not as of the Signing Date and there will not be at the
Effective Time any registration rights agreements, stockholder agreements,
voting trusts or other agreements or understandings to which the Company is a
party or by which it is bound (or, to the Company's Knowledge, to which any of
its stockholders are a party or by which they are bound) relating to the voting
of any Company Shares. There are no restrictions on the Company with respect to
voting the stock of any of its Subsidiaries.
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4.3 AUTHORITY RELATIVE TO THIS AGREEMENT.
(a) The Company has the requisite corporate power and
authority to execute and deliver this Agreement and to consummate the
transactions contemplated hereby, subject to the approval and adoption of the
Merger and this Agreement by holders of the Company Shares in accordance with
the DGCL and the Company Stockholders Agreement. This Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors, and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
or to consummate the transactions contemplated hereby (other than, with respect
to the Merger, the adoption of this Agreement by holders of the Company Shares
in accordance with the DGCL and by the holders of the Company Series A Preferred
in accordance with the Company Stockholders Agreement). This Agreement has been
duly and validly executed and delivered by the Company and, assuming this
Agreement constitutes the valid and binding agreement of Purchaser and Newco,
constitutes the valid and binding agreement of the Company, enforceable against
the Company in accordance with its terms, except that such enforceability may be
limited by (i) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect relating to creditors' rights generally
and (ii) general principles of equity (regardless of whether enforceability is
considered in a proceeding in equity or at law).
(b) The Board of Directors has caused the Company Rights Plan
to be amended pursuant to the Company Rights Plan Amendment, which shall prevent
any Flip-in Date, Flip-over Transaction or Event, Separation Time, or Stock
Acquisition Date (as each such term is defined in the Company Rights Plan) from
occurring, and shall prevent the Company Rights from becoming exercisable
pursuant to the Company Rights Plan, as a result of (i) the approval, execution
or delivery of this Agreement, the Securities Purchase Agreements, the Voting
Agreement or any amendments thereof, provided that any such amendment is
approved in advance by the Board of Directors of the Company, (ii) the
commencement or, prior to termination of this Agreement, the consummation of the
transactions contemplated hereby (including the Merger) or by the Company Voting
Agreements or the Securities Purchase Agreements, (iii) any conversion, exercise
or exchange of any of the Company's securities acquired pursuant to the
Securities Purchase Agreements, or (iv) in the event of a termination of this
Agreement, any additional acquisitions of the Company's securities by any of the
Purchaser Companies (A) which are consummated after the termination of this
Agreement at a purchase price of not less than $3.00 per share of Company Common
Stock (on an as-converted basis, in the case of Convertible Securities), (B)
which do not cause any of Purchaser Companies to become the beneficial owner of
more than 51% of the shares of Company Common Stock outstanding at the time of
such additional acquisitions, and (C) which, in the event there is a Second
Purchaser Restricted Period, occur after the expiration of the Second Purchaser
Restricted Period. The Board of Directors has approved the acquisition by the
Purchaser Companies of 15% or more of the Company's outstanding voting stock for
purposes of Section 203 of the DGCL so that the restrictions on "business
combinations" with "interested stockholders" (each as defined in Section 203 of
the DGCL) will not be applicable to the Purchaser Companies.
4.4 CONSENTS AND APPROVALS; NO VIOLATION.
(a) Neither the execution and delivery of this Agreement nor
the consummation by the Company of the transactions contemplated hereby will:
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(i) conflict with or result in any breach of any
provision of the respective Certificate of Incorporation or Bylaws,
each as amended, of the Company or any of its Subsidiaries;
(ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental
Authority, except (A) pursuant to the applicable requirements of the
Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT") and
the Securities Act of 1933, as amended (the "SECURITIES ACT"), (B) the
filing of the certificate of merger pursuant to the DGCL and
appropriate documents with the relevant authorities of other states in
which the Company or any of its Subsidiaries is authorized to do
business, (C) as may be required by any applicable state securities or
"blue sky" laws or state takeover laws, (D) such filings and consents
as may be required under any environmental, health or safety Law or
regulation pertaining to any notification, disclosure or required
approval triggered by the Merger or the transactions contemplated by
this Agreement, (E) where the failure to obtain such consent, approval,
authorization or permit, or to make such filing or notification, would
not individually or in the aggregate reasonably be expected to
materially adversely affect the consummation of the transactions
contemplated hereby, or (F) such filings, consents, approvals, orders,
registrations and declarations as may be required as a result of the
status or identity of Purchaser and/or Newco;
(iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a
default (or give rise to any right of termination, cancellation or
acceleration or lien or other charge or encumbrance) under any of the
terms, conditions or provisions of any Contracts to which the Company
or any of its Subsidiaries or any of their assets may be bound, except
for such violations, breaches and defaults (or rights of termination,
cancellation or acceleration or lien or other charge or encumbrance) as
to which requisite waivers or consents have been obtained or will be
obtained prior to the Effective Time; provided, however, that the
Company makes no representation as to the effect on the consummation of
the Merger and the other transactions contemplated by this Agreement on
any real estate lease or equipment lease; or
(iv) assuming the consents, approvals, authorizations
or permits and filings or notifications referred to in this Section 4.4
are duly and timely obtained or made and, with respect to the Merger,
this Agreement is adopted by the Company's stockholders, violate any
material order, writ, injunction, decree, statute, rule or regulation
applicable to the Company or any of its Subsidiaries or to any of their
respective assets.
(b) The affirmative vote of (i) a majority of the outstanding
shares of Company Common Stock in favor of the adoption of this Agreement at a
meeting at which a quorum is present (the "COMPANY STOCKHOLDER APPROVAL") and
(ii) a majority of the outstanding shares of Company Series A Preferred in favor
of the approval and adoption of this Agreement (the "COMPANY SERIES A APPROVAL")
in accordance with the terms of the Stockholders Agreement dated as of April 14,
2004 by and among the Company and the stockholders of the Company listed as
"Stockholders" therein (the "COMPANY STOCKHOLDERS AGREEMENT") are the only votes
of the holders of any class or series of the Company's or its Subsidiaries'
securities necessary to approve this Agreement, the Merger and the other
transactions contemplated hereby.
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4.5 SEC REPORTS; FINANCIAL STATEMENTS; UNDISCLOSED LIABILITIES;
DISCLOSURE CONTROLS AND PROCEDURES.
(a) SEC Reports. The Company has filed all forms, reports and
documents required to be filed by it with the Securities and Exchange Commission
("SEC") since December 31, 2004 (including, without limitation, the Company's
Annual Reports on Form 10-K for the year ended December 31, 2004 and Form 10-K/A
for the year ended December 31, 2005 (the "COMPANY 2005 AUDIT DATE"), the
Company's Quarterly Reports on Form 10-Q for the quarters ended March 31, June
30 and September 30, 2005 and for the quarter ended March 31, 2006, and the
Company's proxy statement for its 2005 and 2006 Annual Meetings of Stockholders
and all certifications and statements required by Rule 13a-14 or 15d-14 under
the Exchange Act or 18 U.S.C. ss.1350 (Section 906 of the Sarbanes-Oxley Act of
2002 ("SOX")) with respect to any Annual Reports), pursuant to the federal
securities laws and the SEC's rules and regulations thereunder, and SOX and all
rules and regulations thereunder (collectively, and together with all forms,
reports and documents filed by the Company with the SEC after the date of this
Agreement, including any amendments thereto, the "COMPANY SEC REPORTS"). The
Company SEC Reports were or will, as applicable, be prepared in accordance with
the requirements of the Securities Act and the Exchange Act, as the case may be,
and the rules and regulations thereunder. As of their respective dates, none of
the Company SEC Reports, including, without limitation, any financial statements
or schedules included therein, contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. No Subsidiary of the Company is or has
been required to file any form, report, registration statement or other document
with the SEC.
(b) Disclosure Controls and Procedures. The Company maintains
disclosure controls and procedures required by Rule 13a-15 or 15d-15 under the
Exchange Act. Such controls and procedures are effective to ensure that all
material information concerning the Company and its Subsidiaries is made known
on a timely basis to the individuals responsible for the preparation of the
Company's filings with the SEC and other public disclosure documents. As used in
this Section 4.5, the term "file" shall be broadly construed to include any
manner in which a document or information is furnished, supplied otherwise made
available to the SEC.
(c) Financial Statements. The consolidated balance sheets and
the related consolidated statements of income and cash flows (including the
related notes thereto) of the Company included in the Company SEC Reports, as of
their respective dates, complied, or in the case of the Company SEC Reports
filed after the date hereof, will comply, in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto, were prepared, or in the case of the Company SEC
Reports filed after the date hereof, will be prepared, in accordance with U.S.
generally accepted accounting principles ("GAAP") applied on a basis consistent
with prior periods (except as otherwise noted therein), and present fairly, or
in the case of the Company SEC Reports filed after the date hereof, will present
fairly, in all material respects, the consolidated financial position of the
Company and its consolidated Subsidiaries as of their respective dates, and the
consolidated results of their operations and their cash flows for the periods
presented therein (subject, in the case of the unaudited interim financial
statements, to notes and normal year-end adjustments that were not, or with
respect to any such financial statements contained in any of the Company SEC
Reports to be filed subsequent to the Signing Date are not reasonably expected
to be, material in amount or effect).
-14-
(d) SOX Certifications. The Chief Executive Officer and the
Chief Financial Officer of the Company have signed, and the Company has
furnished to the SEC, all certifications required by Sections 302 and 906 of
SOX. Such certifications contain no qualifications or exceptions to the matters
certified therein and have not been modified or withdrawn. Neither the Company
nor any of it officers has received notice from any Governmental Authority
questioning or challenging the accuracy, completeness, form or manner of filing
or submission of such certifications.
(e) Undisclosed Liabilities. Except (i) as reflected in the
Company's unaudited consolidated balance sheet at March 31, 2006 or liabilities
described in any notes thereto (or liabilities for which neither accrual nor
footnote disclosure is required pursuant to GAAP), (ii) for liabilities incurred
in the ordinary course of business since March 31, 2006 consistent with past
practice or in connection with this Agreement or the transactions contemplated
hereby, or (iii) performance obligations under contracts required in accordance
with their terms, or performance obligations, to the extent required under
applicable laws, in each case to the extent arising after the date hereof, to
the Knowledge of the Company, neither the Company nor any of its Subsidiaries
has any material liabilities or obligations of any nature (whether accrued,
absolute, contingent or otherwise) required by GAAP to be set forth on a
financial statement or in the notes thereto.
(f) Off-Balance Sheet Arrangements. The Company and its
Subsidiaries have not effected any securitization transactions or "off-balance
sheet arrangements" (as defined in Item 303(c) of Regulation S-K of the SEC)
since the Company 2005 Audit Date. The Company has delivered or made available
to Purchaser copies of the documentation creating or governing all such all
securitization transactions and off-balance sheet arrangements.
(g) Loans to Executives and Directors. The Company has not,
since the effective date of SOX, extended or maintained credit, arranged for the
extension of credit, or renewed an extension of credit, in the form of a
personal loan to or for any director or executive officer (or equivalent
thereof) of the Company in violation of SOX. The Company has not made any loan
or extension of credit to which the second sentence of Section 13(k)(I) of the
Exchange Act applies.
(h) Auditors. J.H. Cohn LLP has not performed any non-audit
services for the Company and its Subsidiaries since the Company 2005 Audit Date.
There has been no change in the Company's accountants since the Company 2005
Audit Date. The Company has not been in any material disputes with J.H. Cohn LLP
since the Company 2005 Audit Date, which, in any such case, were required to be
disclosed in the Company SEC Reports and were not so disclosed.
-15-
4.6 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as expressly required
or permitted by this Agreement or as set forth on Part 4.6 of the Company
Disclosure Memorandum, since March 31, 2006, there has not been:
(i) through the Signing Date, any Company Material
Occurrence;
(ii) any declaration, setting aside or payment of any
dividend (whether in cash, stock or property) with respect to any
Company Shares;
(iii) any (A) granting by the Company or any of its
Subsidiaries to any officer, employee or independent contractor of the
Company or any of its Subsidiaries of any increase in compensation or
payments, except in the ordinary course of business consistent with
prior practice, (B) granting by the Company or any of its Subsidiaries
to any such officer, employee or independent contractor of any increase
in severance or termination pay, (C) entry by the Company or any of its
Subsidiaries into any severance or termination agreement with any
director or officer or employee of the Company or any of its
Subsidiaries, or (D) entry by the Company or any of its Subsidiaries
into any employment, independent contractor or consulting agreement
with any director or officer or employee of the Company or any of its
Subsidiaries, except in the ordinary course of business consistent with
prior practice, subject to the following exceptions:
(x) except, in the case of any of such
clauses (A), (B), (C) or (D) above, as was required
under employment agreements with Key Officers
previously provided or made available to Purchaser,
and
(y) except, in the case of any of clauses
(B) and (C) above, for severance or termination
payments made in the ordinary course of business
consistent with past practice that did not or do not
exceed $10,000 for any individual or $200,000 in the
aggregate;
(iv) any amendment of any material term of any
outstanding equity security of the Company or any Subsidiary;
(v) any repurchase, redemption or other acquisition
by the Company or any Subsidiary of any outstanding shares of capital
stock or other equity securities of, or other ownership interests in,
the Company or any Subsidiary, except as contemplated by Company
Benefit Plans;
(vi) any material damage, destruction or other
property loss, whether or not covered by insurance;
(vii) any change in accounting methods, principles or
practices by the Company materially affecting its assets, liabilities
or business, except insofar as may have been required by a change in
GAAP or by applicable Laws;
(viii) any entry by either the Company or any
Subsidiary thereof into any transaction which was not in the ordinary
course of business;
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(ix) any mortgage, pledge, sale, assignment or
transfer of any material tangible or intangible assets of the Company
or any Subsidiary thereof, except for obsolete assets or in the
ordinary course of business consistent with past practices;
(x) any resignation or termination of employment of
any Key Officer of the Company or any Subsidiary thereof and, to the
Company's Knowledge, there is not any impending resignation or
termination of employment of any such Key Officers;
(xi) any material change, except in the ordinary
course of business, in the contingent obligations of the Company or any
Subsidiary thereof (nor in any contingent obligation of the Company or
any Subsidiary thereof regarding any of its respective officers,
directors, employees, independent contractors or stockholders) by way
of guaranty, endorsement, indemnity, or warranty;
(xii) except for the expiration of any right or
Contract in accordance with its terms, any waiver or loss of any
material right of the Company or any Subsidiary thereof, or the
cancellation of any material debt, claim or Contract held by the
Company or any Subsidiary thereof (which for purposes of this Section
4.6 does not include any debt, claim or Contract with any holder of
Company Shares or Convertible Securities in their capacity as such, or
any Affiliate of the Company or Affiliate of any holder of Company
Shares or Convertible Securities in their capacity as such);
(xiii) any satisfaction or discharge of any Lien or
any payment of any obligation by the Company or any Subsidiary thereof,
except in the ordinary course of business and consistent with past
practices and which is not material to the Business, assets,
properties, operations or condition (financial or otherwise), or
results of operations of the Company or any Subsidiary thereof;
(xiv) any material reduction in the form or amount of
insurance coverage maintained by the Company or any Subsidiary;
(xv) any incurrence by either the Company or any
Subsidiary of any material liability or other material obligation,
except in the ordinary course of business;
(xvi) any material capital expenditures made by
either the Company or any Subsidiary, other than in the ordinary course
of business, and any commitments made by the Company or any Subsidiary
for any future material capital expenditure; or
(xvii) any agreements or commitments entered into by
the Company or any Subsidiary to take any actions identified under this
Section 4.6.
4.7 LITIGATION. Except as set forth on Part 4.7 of the Company
Disclosure Memorandum, there are no material actions, claims, suits, proceedings
or governmental investigations pending or, to the Knowledge of the Company,
threatened against the Company or any Subsidiary which could reasonably be
expected to result in a Company Material Occurrence or to materially adversely
affect the consummation of the transactions contemplated hereby. Neither the
Company nor any Subsidiary thereof is a party to or subject to the provisions of
any order, writ, injunction, judgment or decree of any court or other
Governmental Authority which could reasonably be expected to result in a Company
Material Occurrence or to materially adversely affect the consummation of the
transactions contemplated hereby.
-17-
4.8 INSURANCE.
(a) The Company has previously provided or made available to
Purchaser true and complete copies of all insurance policies maintained by the
Company and its Subsidiaries as of the Signing Date (including any exhibits,
schedules, riders or amendments thereof) (the "COMPANY INSURANCE POLICIES").
Each of the Company Insurance Policies is currently in full force and effect and
shall remain in full force and effect through the Effective Time. All premiums
on such Company Insurance Policies which are due have been paid through the
Signing Date. The Company has delivered to Purchaser copies of all reservation
of rights letters issued by any insurers of the Company and its Subsidiaries.
(b) The Company requires insurance coverage of each of the
Company Independent Contractors pursuant to the individual agreements with the
individual independent contractor drivers, specimens of which have been provided
to Purchaser.
4.9 TAXES.
(a) The Company and its Subsidiaries are members of an
affiliated group, within the meaning of Section 1504(a) of the Code, of which
the Company is the common parent; such affiliated group files a consolidated
federal income Tax Return.
(b) Each of the Company, its Subsidiaries and its former
Subsidiaries has filed or caused to be filed all Tax Returns required to have
been filed by or for it, and all information set forth in such Tax Returns is
correct and complete in all material respects.
(c) Each of the Company, its Subsidiaries and its former
Subsidiaries has paid all Taxes due and payable by it as shown on such Tax
Returns.
(d) Except as set forth on Part 4.9(d) of the Company
Disclosure Memorandum, there are no unpaid Taxes due and payable by the Company,
its Subsidiaries or its former Subsidiaries that are or could become a lien on
any asset of the Company, or otherwise materially adversely affect the business,
properties or financial condition of the Company or any of its Subsidiaries.
(e) Each of the Company and its Subsidiaries is in material
compliance with, and the records of each of them contain all information and
documents (including, without limitation, properly completed IRS Forms W-9)
necessary to comply with, all applicable Tax information reporting and Tax
withholding requirements.
(f) Except as set forth on Part 4.9(f) of the Company
Disclosure Memorandum, each of the Company and its Subsidiaries has collected or
withheld all amounts required to be collected or withheld by it for any Taxes,
and all such amounts have been paid to the appropriate Governmental Authority or
set aside in appropriate accounts for future payment when due.
-18-
4.10 EMPLOYEE BENEFIT PLANS; LABOR MATTERS.
(a) Except as set forth in the Company SEC Reports, the
Company does not maintain any Company Benefit Plans.
(b) All contributions and other payments required to have been
made by the Company or any Company ERISA Affiliate with respect to any Company
Benefit Plan (or to any Person pursuant to the terms thereof) have been or will
be timely made, and all such amounts properly accrued through the date of the
Company SEC Reports have been reflected therein.
(c) The terms of all Company Benefit Plans that are intended
to be "qualified" within the meaning of Section 401(a) of the Code have been
determined by the IRS to be so qualified or the applicable remedial periods will
not have ended prior to the Effective Time of the Merger. To the Company's
Knowledge, no event or condition exists or has occurred that could cause the IRS
to disqualify any Company Benefit Plan that is intended to be qualified under
Section 401(a) of the Code. With respect to each Company Benefit Plan, the
Company and each Company ERISA Affiliate are in compliance in all material
respects with, and each Company Benefit Plan and related source of benefit
payment is and has been operated in material compliance with, its terms, all
applicable laws, rules and regulations governing such plan or source, including,
without limitation, ERISA, the Code and applicable local Law. To the Knowledge
of the Company, no Company Benefit Plan is subject to any ongoing audit,
investigation, or other administrative proceeding of the IRS, the Department of
Labor, or any other federal, state, or local Governmental Authority or is
scheduled to be subject to such an audit investigation or proceeding.
(d) With respect to each Company Benefit Plan, to the
Knowledge of the Company, there exists no condition or set of circumstances that
could subject the Company or any Company ERISA Affiliate to any liability
arising under the Code, ERISA or any other applicable Law (including, without
limitation, any liability to or under any such plan or under any indemnity
agreement to which the Company or any Company ERISA Affiliate is a party). No
claim, action or litigation has been made, commenced or, to the Knowledge of the
Company, threatened, by or against any Company Benefit Plan or the Company or
any of its Subsidiaries with respect to any Company Benefit Plan (other than for
benefits in the ordinary course).
(e) No Company Benefit Plan that is a "welfare benefit plan"
(within the meaning of Section 3(1) of ERISA) provides benefits for any retired
or former employees (other than as required under the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended, or other applicable state or
local Law that specifically mandates continued health coverage).
(f) Except as set forth in the Company SEC Reports and except
for the Company Change in Control Payments and except for accelerated vesting of
Company Options, there are no (i) payments (whether of severance pay or
otherwise) which will become due from the Company or any of its Subsidiaries,
which individually or in the aggregate are material, to any Company Beneficiary
or to the trustee under any "rabbi trust" or similar arrangement, or (ii)
material benefits under any Company Benefit Plan being established or increased,
or becoming accelerated, vested or payable, in either case as a result of the
commencement or announcement of the transaction contemplated by this Agreement.
-19-
(g) Neither the Company nor any entity that was at any time
during the six-year period ending on the Signing Date a Company ERISA Affiliate
has ever maintained, had an obligation to contribute to, contributed to, or had
any liability with respect to any plan that (A) is or was a pension plan (as
defined in Section 3(2) of ERISA) that is or was subject to Title IV of ERISA,
Section 412 of the Code or Section 302 of ERISA or (B) that is or was a
multiemployer plan (as defined in Section 414(f) of the Code or Sections 3(37)
or 4001(a)(31) of ERISA).
(h) Each Company Benefit Plan may be terminated or modified by
the Company or Purchaser without material liability to the Company, Purchaser or
any ERISA Affiliate of either, excluding liabilities attributable to
administrative costs or to acceleration of the vesting and exercisability of
Company Options.
(i) Neither the Company nor any of its Subsidiaries is a party
to any collective bargaining or other arrangement with any labor union.
4.11 ENVIRONMENTAL LAWS AND REGULATIONS.
(a) The Company and each of its Subsidiaries is now in
compliance in all material respects with all Environmental Laws, and has been in
compliance in all material respects with Environmental Laws. The conduct of the
businesses of the Company and each of its Subsidiaries does not violate or
conflict with any Environmental Laws in any material respect.
(b) The Company and each of its Subsidiaries has obtained all
necessary Environmental Permits. The Environmental Permits are in full force and
effect, and are being complied with in all material respects. The Environmental
Permits are transferable and will remain in effect or will be replaced, renewed
or transferred as appropriate immediately following the Closing. No other
governmental authorizations are necessary for the day to day operations of the
Company and each of its Subsidiaries.
(c) Neither the Company nor any of its Subsidiaries has
received any formal complaint or notice from any Environmental Authority or any
other Person alleging any past or present violation of any Environmental Law in
connection with the operation of its business that is currently unresolved. As
of the Signing Date, to the Knowledge of the Company, there is no investigative
proceeding against the Company or any of its Subsidiaries by any Environmental
Authority in connection with the past or present operation of its business.
There are no pending claims under any Environmental Law against the Company or
any of its Subsidiaries.
(d) Neither the Company nor any of its Subsidiaries has been
subject to any administrative or judicial enforcement action pursuant to any
Environmental Law either now or at any time during the past three years in
connection with the business of the Company and its Subsidiaries.
(e) Neither the Company nor or any of its Subsidiaries is
subject to any remedial obligation or other response action under a currently
issued and applicable administrative order, decree, or agreement pursuant to any
Environmental Law.
-20-
(f) To the Company's Knowledge, no Company Real Property or
real property currently or formerly owned, leased, operated or used by the
Company or any of its Subsidiaries (including real property used for off-site
disposal of any Regulated Material) is listed on any federal list of Superfund
or National Priorities List sites or similar governmental lists. To the
Company's Knowledge, there exist no circumstances that could result in any such
property being listed on any federal list of Superfund or National Priorities
List sites or similar governmental lists regarding waste sites at which there
has been a Release or threatened Release of Regulated Materials. To the
Company's Knowledge, none of the Company Real Property has been used at any time
by any Person as a hazardous waste treatment, storage or disposal site.
(g) To the Company's Knowledge, there are no (i) underground
storage tanks (as defined under the Resource Conservation and Recovery Act or
any equivalent Environmental Law), or (ii) capacitors, transformers or other
equipment or fixtures containing polychlorinated biphenyls ("PCBS") (other than
light fixtures which contain PCBs), located in, at, under or on the Company Real
Property.
(h) To the Company's Knowledge, there are no facts, actions,
activities, circumstances, conditions, occurrences, events, liabilities, or
incidents, including any Release, threatened Release, generation, use,
treatment, storage, disposal, arranging for disposal, transportation, or the
presence of Regulated Materials, that are likely to (i) result in any
environmental liability, (ii) prevent or interfere with the operation of the
Company's business as it is currently being conducted, in compliance with all
applicable Environmental Laws, (iii) materially affect the assets, business or
financial conditions of the Company or any of its Subsidiaries, or (iv)
adversely impact or affect the use of any Company Real Property.
(i) No property owned or used by the Company or any of its
Subsidiaries and located in the State of New Jersey is an "industrial
establishment" within the meaning of ISRA or is or has been used by the Company
or any of its Subsidiaries (or, to the Company's Knowledge, by any other Person)
for the generation, manufacture, refining, transportation, treatment, storage,
handling or disposal of any "hazardous substances" or "hazardous wastes" within
the meaning of ISRA. There is no North American Industry Classification System
code applicable to the properties and operations of the Company or any of its
Subsidiaries which is subject to ISRA.
4.12 INTELLECTUAL PROPERTY. Except as set forth on Part 4.12 of the
Company Disclosure Memorandum:
(a) Prior to the Signing Date, the Company has delivered or
made available to Purchaser true and correct copies of (i) all registered
service marks which are material to the business of the Company and its
Subsidiaries as currently conducted, taken as a whole ("COMPANY INTELLECTUAL
PROPERTY") and (ii) all written agreements relating to software which the
Company or its Subsidiaries is licensed or authorized by third parties to use
and which are material to the business of the Company and its Subsidiaries as
currently conducted, taken as a whole ("COMPANY SOFTWARE"). Neither the Company
nor any of its Subsidiaries has any material patents or rights or owned
software, nor have any of them granted any third parties any license to use any
Company Intellectual Property.
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(b) As of the Signing Date, (i) the Company or a Subsidiary of
the Company is the owner of, or a licensee under a valid license for, all
Company Intellectual Property and Company Software, and (ii) there were no
claims pending or, to the Company's Knowledge, threatened, that the Company or
any Subsidiary was in violation of any such intellectual property rights of any
third party.
4.13 COMPLIANCE WITH LAWS AND ORDERS. Except with respect to the
matters described in Sections 4.9, 4.10 and 4.11, neither the Company nor any
Subsidiary is in violation of or in default under any law, statute, rule or
regulation having the effect of law of the United States or any state, county,
city or other political subdivision thereof or of any government or regulatory
authority ("LAWS") or writ, judgment, decree, injunction or similar order of any
Governmental Authority, in each case, whether preliminary or final (an "ORDER"),
applicable to the Company or any Subsidiary or any of their respective assets
and properties the effect of which, individually, or in the aggregate with other
such violations and defaults, could reasonably be expected to have a Company
Material Occurrence. The Company is in compliance with all listing and corporate
governance requirements of the American Stock Exchange ("AMEX"), and since the
enactment of SOX, has been and is in compliance in all material respects, and
will continue to remain in compliance following the effective time, in all
material respects, with all applicable rules, regulations, and requirements of
SOX and the SEC.
4.14 CERTAIN AGREEMENTS.
(a) Neither the Company nor any of its Subsidiaries is a party
to any oral or written agreement or plan, including any stock option plan, stock
appreciation rights plan, restricted stock plan or stock purchase plan, any of
the benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement, except (i) as expressly required or permitted by this Agreement, (ii)
for accelerated vesting of Company Options, and (iii) for the Company Change in
Control Payments.
(b) The transactions contemplated by this Agreement will not
constitute a "change of control" under, require the consent from or the giving
of notice to any third party pursuant to, or accelerate the vesting of or lapse
of repurchase rights or other rights under, the terms, conditions or provisions
of any loan or commitment letter, note, bond, mortgage, indenture, license, or
any material lease, contract, agreement or other instrument or obligation to
which the Company or any of its Subsidiaries is a party or by which any of them
or any of their properties or assets may be bound, except (i) for the Company
Change in Control Payments, (ii) for the Company's repayment in full its credit
facility with Bank of America, (iii) for any payment required to be made to the
holders of the Company Series A Preferred pursuant to the Company's Certificate
of Incorporation, and (iv) for acceleration of principal and interest due under
any of the Seller Notes or Company Notes; provided, however, that the Company
makes no representation as to the effect on the consummation of the Merger and
the other transactions contemplated by this Agreement on any real estate lease
or equipment lease.
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(c) There are no amounts payable by the Company or its
Subsidiaries to any officers of the Company or its Subsidiaries (in their
capacity as officers) as a result of the transactions contemplated by this
Agreement and/or any subsequent employment termination, except for the Company
Change in Control Payments.
4.15 BROKERS AND FINDERS. The Company has not employed any investment
banker, broker, finder, consultant or intermediary in connection with the
transactions contemplated by this Agreement which would be entitled to any
investment banking, brokerage, finder's or other fee or commission in connection
with this Agreement or the transactions contemplated hereby, except that the
Company has employed Scura Rise & Partners, LLC, as its financial advisor, and
Thomas E. Durkin III, as a consultant, pursuant to agreements with Purchaser,
true and correct copies of which have been furnished to Purchaser.
4.16 OPINION OF FINANCIAL ADVISOR. The Company has received the opinion
of Scura Rise & Partners, LLC, dated as of June 26, 2006, to the effect that, as
of such date, the Merger Consideration to be received by the common stockholders
of the Company pursuant to the Merger, taking into account the amount and form
of consideration and taking into account the consideration to be received by
securityholders of the Company pursuant to the Securities Purchase Agreements,
is fair to such common stockholders from a financial point of view.
4.17 CUSTOMERS AND SUPPLIERS. Except as set forth on Part 4.17 of the
Company Disclosure Memorandum, neither the Company nor any Subsidiary thereof
has received any notice, nor does the Company have any Knowledge, that any
material customer or supplier of the Company or any Subsidiary thereof has taken
or contemplates taking, any steps that would be reasonably likely to disrupt the
business relationship of the Company with such material customer or supplier, or
could result in a Company Material Occurrence other than such steps that might
result from the announcement of this transaction.
4.18 NO DEFAULT. Except as set forth on Part 4.18 of the Company
Disclosure Memorandum, neither the Company nor any of its Subsidiaries is in
material breach, default or violation (and no event has occurred which with
notice or the lapse of time or both would constitute a material breach, default
or violation) of any term, condition or provision of (i) its Certificate of
Incorporation or Bylaws (or similar governing documents), or (ii) any Law
applicable to the Company or its Subsidiaries or any of their respective
properties or assets.
4.19 MATERIAL CONTRACTS. The Company has delivered or made available to
Purchaser a true and complete copy of each written Contract that is of a type
described below (collectively, the "COMPANY MATERIAL CONTRACTS"):
(a) any Contract for capital expenditures or the acquisition
or construction of fixed assets in excess of $250,000.00 per annum;
(b) any Contract for the purchase or lease of goods or
services (including without limitation, equipment, materials, software,
hardware, supplies, merchandise, parts or other property, assets or services),
requiring aggregate future payments in excess of $250,000.00 per annum, other
than standard inventory purchase orders executed in the ordinary course of
business;
(c) any Contract relating to the borrowing of money or
guaranty of indebtedness;
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(d) any collective bargaining or other arrangement with any
labor union;
(e) any Contract granting a first refusal, first offer or
similar preferential right to purchase or acquire any of the Company's capital
stock or assets;
(f) any Contract limiting, restricting or prohibiting the
Company from conducting business anywhere in the United States or elsewhere in
the world or any Contract limiting the freedom of the Company to engage in any
line of business or to compete with any other Person;
(g) any joint venture or partnership Contract;
(h) any written employment Contract, severance agreement or
other similar binding agreement or policy with any officer or employee; and
(i) any Contracts requiring future payments of $250,000.00 or
more per annum which are not otherwise described in clauses (a) though (h)
above.
The Company has also delivered or made available to Purchaser a copy of the
Company's form of independent contractor agreement. Each Company Material
Contract is a valid and legally binding obligation of the Company, enforceable
against the Company in accordance with its terms, subject only to bankruptcy,
reorganization, receivership or other laws affecting creditors' rights generally
and general principles of equity (whether applied in an action at law or in
equity). The Company is in compliance with all obligations required to be
performed by it under the Company Material Contracts, and the Company is not
and, to the Knowledge of the Company, no other party to a Company Material
Contract is, in breach or default thereunder in any material respect. Each
Contract of the Company that is a "material contract" as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC has been filed in the Company SEC
Reports prior to the date hereof. The Company is not a party to any written or
oral customer contract with revenues of over $150,000 per year which requires
the Company to pay any material penalty upon termination of such contract.
4.20 STATE TAKEOVER STATUTES; ANTI-TAKEOVER PROVISIONS. The Company has
taken all actions with respect to any anti-takeover provisions of the Company's
Bylaws or Certificate of Incorporation or applicable provisions of the DGCL
necessary to enter into and consummate the Merger on the terms set forth in this
Agreement.
4.21 TRANSACTIONS WITH AFFILIATES. The Company's Material Contracts
(other than employment or consulting related Contracts or the Company
Stockholders Agreement) do not include any obligation or commitment between the
Company and (i) any employee of the Company, (ii) to the Knowledge of the
Company, any stockholder of the Company beneficially owning 5% or more of the
Company Common Stock, (iii) any Person that directly or indirectly controls, is
controlled by or is under common control with the Company, or (iv) any member of
the immediate family of any of the foregoing Persons (each, a "COMPANY
AFFILIATE"). The assets of the Company do not include any receivable or other
obligation or commitment from a Company Affiliate to the Company.
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4.22 LICENSES.
(a) The Company has delivered or made available to Purchaser a
true and complete copy of all material licenses, permits approvals,
certificates, titles, fuel permits, franchises, operating authorizations
(including without limitation any necessary operating authorizations from the
Federal Motor Carrier Safety Administration or Department of Transportation),
state operating licenses or registrations and other interstate or intrastate
regulatory licenses or authorizations required for the operation of the business
of the Company and its Subsidiaries (the "LICENSES"). Each of the Licenses is in
full force and effect, and there are no pending modifications, amendments or
revocation proceedings for any of the Licenses which would materially adversely
affect the operations of the Company.
(b) All material fees due and payable to Governmental
Authorities pursuant to the rules governing the Licenses have been paid and, to
the Company's Knowledge, no event has occurred with respect to the Licenses held
by the Company which, with the giving of notice or the lapse of time or both,
would constitute grounds for revocation thereof. The Company is in compliance in
all material respects with the terms of the Licenses, as applicable, and there
is no condition, event or occurrence existing, nor is there any proceeding being
conducted of which the Company has received notice, nor, to the Company's
Knowledge, is there any proceeding threatened, by any Governmental Authority
(including without limitation the Federal Motor Carrier Safety Administration or
Department of Transportation), which would cause the termination, suspension,
cancellation or nonrenewal of any of the Licenses, or the imposition of any
penalty or fine.
4.23 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by the Company in writing for inclusion or incorporation by reference
in the Proxy Statement will, at the date the Proxy Statement is first mailed to
the Company's stockholders or, except as set forth in any amendments or
supplements to the Proxy Statement filed with the SEC and timely mailed to the
Company's stockholders, at the time of the Company Stockholders Meeting contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Proxy Statement, as it relates to the Company Stockholders
Meeting, will comply as to form in all material respects with the applicable
requirements of the Exchange Act and the rules and regulations thereunder,
except that no representation or warranty is made by the Company with respect to
statements made or incorporated by reference therein based on information
supplied by Purchaser for inclusion or incorporation by reference therein.
4.24 TITLE TO AND CONDITION OF ASSETS.
(a) Each of the Company and its Subsidiaries has good title
to, or valid licenses to or leasehold interests in, all of the material
properties and assets used by them in connection with their businesses, except
for minor defects in title, easements, restrictive covenants and similar
encumbrances or impediments that, in the aggregate do not and will not
materially interfere with its ability to conduct its business as currently
conducted. All such assets and properties, other than assets and properties in
which the Company or any of the Subsidiaries has leasehold interests, are free
and clear of all Liens, except for such Liens, that, in the aggregate, do not
and will not materially interfere with the ability of the Company or any of its
Subsidiaries to conduct its business as currently conducted.
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(b) Each of the Company and each of its Subsidiaries has
complied in all material respects with the terms of all leases to which it is a
party and under which it is in occupancy, and all such leases are in full force
and effect, except for such invalidity as would not, individually or in the
aggregate, reasonably be expected to be material to the Company and its
Subsidiaries, taken as a whole, and except that the Company makes no
representation here or elsewhere in this Agreement as to the effect of the
consummation of the Merger and the other transactions contemplated by this
Agreement on such leases. Each of the Company and each of its Subsidiaries
enjoys peaceful and undisturbed possession under all such leases.
4.25 REAL PROPERTY.
(a) Neither the Company nor any Subsidiary thereof owns, or
has at any time owned (in the case of a Subsidiary, since the Company's
acquisition thereof), any real property.
(b) Each parcel or tract of real property that is used or
occupied by the Company or any Subsidiary thereof (the "COMPANY REAL PROPERTY")
is subject to a written lease or sublease to which the Company or any Subsidiary
thereof is a party as lessee or sublessee (individually a "REAL PROPERTY
LEASE"). All such Real Property Leases are valid and in full force and effect in
accordance with their terms, except for such invalidity as would not,
individually or in the aggregate, reasonably be expected to be material to the
Company and its Subsidiaries, taken as a whole, and except that the Company
makes no representation (here or in any other section dealing with required
consents) as to the effect of the consummation of the Merger and the other
transactions contemplated by this Agreement on such leases. The Company has
previously furnished or made available to Purchaser true, correct and complete
copies of all Real Property Leases. There is not, with respect to any Real
Property Lease (i) any material default by the Company or any Subsidiary
thereof, or any event of default or event which with notice or lapse of time, or
both, would constitute a material default by the Company or any Subsidiary
thereof, or (ii) to the Knowledge of the Company, any existing material default
by any other party to any Real Property Lease, or event of default or event
which with notice or lapse of time, or both, would constitute a material default
by any other party to any Real Property Lease.
(c) No options have been granted by the Company to others to
purchase, lease or otherwise acquire any interest in the Company Real Property
or any part thereof. Except as set forth in the applicable Real Property Lease,
the Company and its Subsidiaries have the exclusive right of possession of the
Company Real Property.
(d) To the Company's Knowledge, the present use, occupancy and
operation of the Company Real Property, and all aspects of the improvements to
the Company Real Property are in compliance, in all material respects, with all
Laws, the applicable Real Property Lease and private restrictive covenants of
record, and, there has not been any proposed change thereto that would affect
any of the Company Real Property or its use, occupancy or operation. All
improvements on the real property are in good condition and repair, and are
suited for the operation of the business of the Company and its Subsidiaries as
it currently is conducted.
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4.26 COMPANY INDEPENDENT CONTRACTORS. The Company is not a party to any
agreement with any Company Independent Contractor who employs or represents more
than ten (10) other drivers, couriers and/or operators.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PURCHASER AND NEWCO
To induce the Company to enter into and perform this
Agreement, Purchaser and Newco hereby represent and warrant to the Company that
each of the representations, warranties and statements in the following
paragraphs of this Article V is true and correct as of the Signing Date and will
be true and correct as of the Effective Time:
5.1 CORPORATE ORGANIZATION AND QUALIFICATION. Each of Purchaser and
Newco is a corporation duly organized, validly existing and in good standing
under the laws of Delaware.
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Purchaser and Newco
has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. This Agreement
and the consummation by Purchaser and Newco of the transactions contemplated
hereby have been duly and validly authorized by the respective Boards of
Directors of Purchaser and Newco. No other corporate proceedings on the part of
Purchaser and Newco or their stockholders are necessary to authorize this
Agreement or to consummate the transactions contemplated hereby. This Agreement
has been duly and validly executed and delivered by each of Purchaser and Newco
and, assuming this Agreement constitutes the valid and binding agreement of the
Company, constitutes the valid and binding agreement of each of Purchaser and
Newco, enforceable against each of them in accordance with its terms, except
that such enforceability may be limited by (i) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
relating to creditors' rights generally and (ii) general principles of equity
(regardless of whether enforceability is considered in a proceeding in equity or
at law).
5.3 CONSENTS AND APPROVALS; NO VIOLATION.
(a) Neither the execution and delivery of this Agreement by
Purchaser or Newco nor the consummation by Purchaser and Newco of the
transactions contemplated hereby will:
(i) conflict with or result in any breach of any
provision of the Certificate of
Incorporation or the Bylaws, as amended, respectively, of Purchaser or Newco;
(ii) require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental Authority, except
(A) if any, pursuant to the applicable requirements of the Exchange Act and the
Securities Act, (B) the filing of the certificate of merger pursuant to the DGCL
and appropriate documents with the relevant authorities of other states in which
Purchaser is authorized to do business, (C) as may be required by any applicable
state securities or "blue sky" laws or state takeover laws, (D) such filings and
consents as may be required under any environmental, health or safety Law
pertaining to any notification, disclosure or required approval triggered by the
Merger or the transactions contemplated by this Agreement, (E) where the failure
to obtain such consent, approval, authorization or permit, or to make such
filing or notification, would not, individually or in the aggregate, reasonably
be expected to have a Purchaser Material Occurrence or materially adversely
affect the consummation of the transactions contemplated hereby or (F) such
filings, consents, approvals, orders, registrations and declarations as may be
required as a result of the status or identity of the Company;
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(iii) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration or lien or
other charge or encumbrance) under any of the terms, conditions or provisions of
any note, license, agreement or other instrument or obligation to which
Purchaser or any of its Subsidiaries or any of their assets may be bound, except
for such violations, breaches and defaults (or rights of termination,
cancellation or acceleration or lien or other charge or encumbrance) as to which
requisite waivers or consents have been obtained or which individually or in the
aggregate materially adversely affect the consummation of the transactions
contemplated hereby or reasonably be expected to result in a Purchaser Material
Occurrence; or
(iv) assuming the consents, approvals, authorizations
or permits and filings or notifications referred to in this Section 5.3 are duly
and timely obtained or made, violate any material order, writ, injunction,
decree, statute, rule or regulation applicable to Purchaser or any of its
Subsidiaries or to any of their respective assets.
(b) The affirmative vote of Purchaser as the sole holder of
voting capital stock of Newco is the only vote of the holders of any class or
series of Purchaser's or its Subsidiaries' securities necessary to approve this
Agreement and the transactions contemplated hereby.
5.4 INFORMATION SUPPLIED. None of the information supplied or to be
supplied by Purchaser for inclusion or incorporation by reference in the Proxy
Statement will, at the date the Proxy Statement is first mailed to the Company's
stockholders or, except as disclosed in any amendments or supplements to the
Proxy Statement filed with the SEC and timely mailed to the Company's
stockholders, at the time of the Company Stockholders Meeting, contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
5.5 LITIGATION. As of the Signing Date, there are no actions, claims,
suits, proceedings or governmental investigations pending or, to the Knowledge
of Purchaser, threatened against Purchaser or any of its Subsidiaries which
question the validity of this Agreement or any action taken or to be taken in
connection herewith or which could adversely affect the ability of Purchaser to
consummate the transactions contemplated by this Agreement. Neither Purchaser
nor any Subsidiary thereof is a party to or subject to the provisions of any
order, writ, injunction, judgment or decree of any court or other Governmental
Authority which would reasonably be expected to materially and adversely affect
Purchaser's ability to consummate the transactions contemplated by this
Agreement.
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5.6 CAPITAL RESOURCES. As of the Closing, in addition to funds
deposited with the Paying Agent pursuant to Section 3.4(a), Purchaser will have
funds that are sufficient to (i) make the payments required under Section
7.2(b), (ii) operate its business as currently contemplated after giving effect
to the Merger and the other transactions contemplated by this Agreement, and
(iii) to pay its debts as they become due.
5.7 NO DEFAULT. Neither Purchaser nor any of its Subsidiaries is in
breach, default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a breach, default or violation) of any
term, condition or provision of (i) its Certificate of Incorporation or Bylaws
(or similar governing documents), (ii) any Law applicable to Purchaser or its
Subsidiaries or any of their respective properties or assets or (iii) any
material agreement to which it is a party or by which it is bound, in each case
for clauses (i)-(iii) above except for such breach, default or violation that
would not, individually or in the aggregate, reasonably be expected to adversely
effect Purchaser's ability to consummate the transactions contemplated by this
Agreement.
ARTICLE VI --
ADDITIONAL COVENANTS AND AGREEMENTS
6.1 CONDUCT OF BUSINESS OF THE COMPANY. The Company agrees that during
the period from the Signing Date to the Effective Time (unless Purchaser shall
otherwise agree in writing and except as otherwise contemplated by this
Agreement), the Company will, and will cause each of its Subsidiaries to,
conduct its operations according to its ordinary and usual course of business
consistent with past practice and, to the extent consistent therewith, with no
less diligence and effort than would be applied in the absence of this
Agreement, seek to preserve intact its current business organizations, keep
available the service of its current officers, employees and independent
contractors and preserve its relationships with customers, suppliers and others
having business dealings with it. Without limiting the generality of the
foregoing, and except as otherwise permitted in this Agreement, or as Purchaser
shall otherwise agree in writing, neither the Company nor any of its
Subsidiaries will, without the prior written consent of Purchaser, which shall
not be unreasonably withheld, delayed or conditioned:
(a) (except for shares of Company Common Stock to be issued or
delivered pursuant to (i) the Company Option Plans with respect to the exercise
of options, (ii) the conversion of Company Series A Preferred, (iii) the
exercise of Company Warrants, (iv) the conversion of Company Notes, or (v) the
conversion of Seller Notes (to the extent convertible), which in each case are
outstanding on the Signing Date and, in each case, together with any Company
Rights issued in respect thereof and initially attached thereto) issue, deliver,
sell, dispose of, pledge or otherwise encumber, or authorize or propose the
issuance, sale, disposition or pledge or other encumbrance of (x) any additional
shares of capital stock of any class (including the Company Shares), or any
Convertible Securities (including issuances pursuant to any of the Company
Option Plans or the ESPP), or (y) any other securities in respect of, in lieu
of, or in substitution for, Company Shares outstanding on the Signing Date;
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(b) redeem, purchase or otherwise acquire, or propose to
redeem, purchase or otherwise acquire, any of its outstanding Company Shares or
any other outstanding Convertible Securities, provided that the Company may
repurchase outstanding stock options in accordance with the terms of the Company
Option Plans;
(c) split, combine, subdivide or reclassify any Company Shares
or Convertible Securities or declare, set aside for payment or pay any dividend,
or make any other actual, constructive or deemed distribution in respect of any
Company Shares or Convertible Securities or otherwise make any payments to
securityholders in their capacity as such, except for dividends by a wholly
owned Subsidiary of the Company to the Company;
(d) adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring, recapitalization or other
reorganization of the Company or any of its Subsidiaries not constituting an
inactive Subsidiary (other than the Merger);
(e) adopt any amendments to its Certificate of Incorporation
or Bylaws or alter through merger, liquidation, reorganization, restructuring or
in any other fashion the corporate structure or ownership of any Subsidiary not
constituting an inactive Subsidiary of the Company, except as expressly required
or permitted by this Agreement;
(f) make any material divestiture or acquisition, by means of
merger, consolidation or otherwise, or material disposition, of assets or
securities;
(g) incur any indebtedness for borrowed money or guarantee any
such indebtedness, except for (i) indebtedness for borrowed money incurred in
the ordinary course of business and consistent with past practice, (ii)
indebtedness for borrowed money in replacement of existing indebtedness for
borrowed money on customary commercial terms, or (iii) guarantees by the Company
of indebtedness of wholly-owned Subsidiaries of the Company or guarantees by
Subsidiaries of indebtedness of the Company (provided that all such guaranteed
indebtedness, together with the indebtedness of the Company and its Subsidiaries
incurred pursuant to clause (i) above, was incurred in the ordinary course of
business and consistent with past practice);
(h) make any loans, advances or capital contributions to, or
investments in, any other Person, other than to the Company or any wholly owned
Subsidiary of the Company in excess of $250,000 in the aggregate;
(i) grant any increases in the compensation of any of its
directors, officers or employees, except (i) in the ordinary course of business
and consistent with past practice, (ii) as required under any Company Benefit
Plan in effect on the Signing Date and set forth in the Company SEC Reports,
(iii) as required under any written severance, termination or employment
agreement in effect on the Signing Date, copies of which have been provided or
made available to Purchaser prior to the Signing Date, or (iv) to the extent
reflected in the Company Change in Control Payments;
(j) pay or agree to pay any pension, retirement allowance or
other employee benefit not required or contemplated by any of the existing
benefit, severance, termination, pension or employment plans, agreements or
arrangements as in effect on the Signing Date and provided or made available to
Purchaser prior to the Signing Date;
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(k) except as expressly provided by this Agreement, enter into
any new or materially amend any existing employment or severance or termination
agreement with any director, officer or employee;
(l) except as may be required to comply with applicable Law,
become obligated under any new pension plan, welfare plan, multiemployer plan,
employee benefit plan, severance plan, benefit arrangement, or similar plan or
arrangement, which was not in existence on the Signing Date, or amend any such
plan or arrangement in existence on the Signing Date if such amendment would
have the effect of materially enhancing any benefits thereunder;
(m) make or agree to make any material capital expenditures or
material commitments not in the ordinary course of business and consistent with
past practice;
(n) take any action or fail to take any action which could
reasonably be expected to result in any of the covenants or conditions to the
Merger set forth in Article VII not being satisfied; or
(o) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
6.2 NO SOLICITATION OF TRANSACTIONS.
(a) The Company agrees that, as of the Signing Date, it has,
and has caused each officer, director or employee of, or any investment banker,
attorney or other advisor or representative of the Company or any Subsidiary
(the "COMPANY REPRESENTATIVES"), to immediately cease and cause to be terminated
any existing activities, discussions or negotiations with any Third Party
conducted heretofore with respect to any Competing Transaction. The Company
shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any Company Representatives to:
(i) solicit or initiate, or knowingly encourage or
facilitate, directly or indirectly, any inquiries relating to, or the submission
of, any proposal or offer, whether in writing or otherwise, from any Person
other than Purchaser, Newco or any affiliates thereof (a "THIRD PARTY") to
acquire beneficial ownership (as defined under Rule 13(d) of the Exchange Act)
of all or more than 10% of the assets of the Company and its Subsidiaries, taken
as a whole, or 10% or more of any class of equity securities of the Company
pursuant to a merger, consolidation or other business combination, sale of
shares of stock, sale of assets, tender offer, exchange offer or similar
transaction or series of related transactions, which is structured to permit
such Third Party to acquire beneficial ownership of more than 10% of the assets
of the Company and its Subsidiaries, taken as a whole, or 10% or more of any
class of equity securities of the Company (a "COMPETING TRANSACTION");
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(ii) participate in any discussions or negotiations
regarding, or furnish to any Person any information or data with respect to or
access to the properties of, or take any other action to knowingly facilitate
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any Competing Transaction;
(iii) enter into any agreement with respect to any
Competing Transaction, approve or recommend or resolve to approve or recommend
any Competing Transaction or enter into any agreement requiring it to abandon,
terminate or fail to consummate the Merger and the other transactions
contemplated by this Agreement.
(b) Notwithstanding paragraph (a) above, if the Company
receives a bona fide, unsolicited, written proposal or offer for a Competing
Transaction by a Third Party, which the Board of Directors determines in good
faith (after consulting its independent financial advisor) (i) will result in,
or is reasonably likely to lead to, terms which are more favorable to the
holders of Company Shares than the Merger and the other transactions
contemplated by this Agreement and, after consultation with counsel, determines
in good faith that failure to take an action otherwise prohibited under
paragraph (a) above would result in a breach of its fiduciary duties under
applicable laws, (ii) is reasonably capable of being consummated (provided that
the Company, including the Board of Directors, and any of its advisors shall be
permitted to contact such Third Party and its advisors solely for the purpose of
clarifying the proposal and any material contingencies and the capability of
consummation), and (iii) is subject to a confidentiality agreement with such
Third Party on terms no less favorable to the Company, in all material respects,
than the confidentiality agreement with Purchaser (each as amended or restated,
a "SUPERIOR COMPETING TRANSACTION"), then the Company may, in response to an
unsolicited request therefor and subject to compliance with Section 6.2(d),
furnish information with respect to the Company and its Subsidiaries to and
participate in discussions and negotiations directly or through its
representatives with, such Third Party, provided that the Company shall have
delivered to Purchaser prior written notice that it intends to take such action.
(c) Notwithstanding anything in this Agreement to the
contrary, the Board of Directors (including any committee thereof) shall be
permitted to (A) withhold, withdraw or modify in a manner adverse to Purchaser,
or publicly propose to withhold, withdraw or modify in a manner adverse to
Purchaser, its recommendation to the holders of the Company Shares as a result
of any Competing Transaction, or (B) adopt or recommend, or propose publicly to
adopt or recommend, any Competing Transaction (any action described in either
clause (A) or (B) or in paragraph (h) below being referred to as a "COMPANY
ADVERSE RECOMMENDATION CHANGE") and, concurrently therewith or thereafter, enter
into any letter of intent, memorandum of understanding, agreement in principle,
merger agreement, acquisition agreement, option agreement, joint venture
agreement, partnership agreement or other similar contract constituting or
related to any Competing Transaction, but only if (i) a Third Party submits an
unsolicited Competing Transaction that the Board of Directors determines, in its
good faith judgment, is reasonably likely to result in a Superior Competing
Transaction and after consultation with counsel, determines that failure to take
such action would result in a breach of fiduciary duties under applicable Laws,
(ii) the Company shall have delivered to Purchaser prior written notice that it
intends to take such action, including therein the identity of such Third Party
and the terms and conditions of such Competing Transaction, (iii) seven (7)
business days have elapsed following delivery to Purchaser of written notice of
such prior written notice and during such seven (7) business day period the
Company has given Purchaser reasonable opportunity to discuss with the Company
the Competing Transaction and any proposed amendments to this Agreement, and
(iv) at the of end such seven (7) business day period the Board of Directors
determines in good faith that the Competing Transaction continues to be
reasonably likely to result in a Superior Competing Transaction (taking into
consideration any modifications to the terms hereof proposed by Purchaser),
after consultation with its counsel and its independent financial advisor.
Nothing contained in this Agreement shall prevent the Company or the Board of
Directors from complying with Rule 14d-9 and Rule 14e-2 promulgated under the
Exchange Act or from making any disclosure to the stockholders of the Company
that is required by applicable Laws.
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(d) The Company shall promptly advise Purchaser orally and in
writing of (i) any Competing Transaction or any inquiry with respect to or which
could reasonably be expected to lead to any Competing Transaction received by
any officer or director of the Company or, to the Knowledge of the Company, any
financial advisor, attorney or other advisor or representative of the Company;
(ii) the identity of the Third Party submitting such Competing Transactions or
making such inquiry; and (iii) the material terms and conditions of such
Competing Transaction. The Company will keep Purchaser reasonably informed on a
current basis of the status and details of any such Competing Transaction
(including amendments and proposed amendments) proposal or inquiry in a timely
manner.
(e) Purchaser and Newco agree and covenant that, in the event
that a vote or consent of the Company's stockholders is required in connection
with the approval of any Superior Competing Transaction, then:
(i) the total amount of Company Shares owned (of
record or beneficially) by Purchaser Companies which are voted against
any Superior Competing Transaction shall represent no more than twenty
five percent (25%) of the issued and outstanding voting stock of the
Company which are entitled to vote in respect of such Superior
Competing Transaction as of the date of such stockholder vote; and
(ii) all Company Shares which are owned (of record or
beneficially) by Purchaser Companies, which are entitled to vote in
respect of such Superior Competing Transaction and which are not voted
against such Superior Competing Transaction (the "PROXY SHARES") shall
be voted for or voted against such Superior Competing Transaction, or
abstained or not voted, in a manner which emulates the percentages of
votes, abstentions and failures to vote by all of the other holders of
all Company Shares which are entitled to vote in respect of such
Superior Competing Transaction (the "EMULATED SHARES"). For example, if
40% of the Emulated Shares voted in favor of the Superior Competing
Transaction, 20% of the Emulated Shares voted against the Superior
Competing Transaction, and 40% of the Emulated Shares abstained or not
voted, then 40% of the Proxy Shares must be voted in favor of the
Superior Competing Transaction, 20% of the Proxy Shares must be voted
against the Superior Competing Transaction, and 40% of the Proxy Shares
must be abstained or not voted.
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(f) Purchaser hereby waives, and agrees not to assert and to
cause all Purchaser Companies not to assert, any appraisal rights any of the
Purchaser Companies may have under the DGCL with respect to any Company Shares
owned (of record or beneficially) by them in connection with a Superior
Competing Transaction, provided that such waiver and agreements not to assert
are conditioned upon and subject to the Company's compliance with Section
8.5(d).
(g) Purchaser hereby irrevocably appoints and constitutes the
Secretary of the Company (the "PROXYHOLDER") as the agent, attorney and proxy of
the Purchaser with respect to the Proxy Shares solely for purposes of causing
the Proxyholder to vote the Proxy Shares as set forth in Sections 6.2(e)(ii)
above and 6.11 below. The Proxyholder may not exercise such proxy rights with
respect to any other matter. Such proxy rights shall be deemed coupled with an
interest and are irrevocable prior to the termination of this Agreement;
provided, however, that if this Agreement is terminated pursuant to Sections 8.3
or 8.4 hereof, then such proxy rights shall survive the termination of this
Agreement solely with respect to votes in respect of the Superior Competing
Transaction giving rise to such termination.
(h) Notwithstanding anything in this Agreement to the
contrary, in the absence of a Competing Transaction, the Board of Directors
(including any committee thereof) shall be permitted to make a Company Adverse
Recommendation Change if the Board of Directors determines in good faith, after
consultation with counsel, that failure to take such action would result in a
breach of its fiduciary duties under applicable laws.
6.3 REASONABLE EFFORTS. Subject to the terms and conditions herein
provided, each of the parties hereto shall use all reasonable efforts to take,
or cause to be taken, all action and to do, or cause to be done, and to assist
and cooperate with the other parties in doing, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective, in the most expeditious manner practicable, the transactions
contemplated by this Agreement, including using its reasonable efforts to (i)
take all acts necessary to cause the conditions to Closing to be satisfied as
promptly as practicable, (ii) obtain all necessary or appropriate waivers,
consents and approvals, (iii) effect all necessary registrations, filings and
submissions (including, but not limited to, such filings, consents, approvals,
orders, registrations and declarations as may be required under the laws of any
foreign country in which the Company or any of its Subsidiaries conducts any
business or owns any assets), and (iv) lift any injunction or other legal bar to
the Merger (and, in such case, to proceed with the Merger as expeditiously as
possible), subject, however, to the Company Stockholder Approval.
Notwithstanding the foregoing, the Company shall not be obligated to use its
reasonable efforts or take any action pursuant to this Section 6.3 if in the
good faith opinion of the Board of Directors in accordance with Section 6.2
after consultation with its counsel such actions might be inconsistent with its
fiduciary duties to the Company's stockholders under applicable Law.
6.4 ACCESS TO INFORMATION; SOLICITATION OF EMPLOYEES.
(a) Access to Information. Upon reasonable prior notice, each
party shall (and shall cause each of its Subsidiaries to) afford to officers,
employees, consultants, counsel, accountants, financial advisors, insurance
advisors and other authorized representatives of any other party
("REPRESENTATIVES"), in order to evaluate the transactions contemplated by this
Agreement, full and free access, during normal business hours and upon
reasonable notice throughout the period prior to the Effective Time, to its
properties, books and records and, during such period, shall (and shall cause
each of its Subsidiaries to) furnish or make available reasonably promptly to
such Representatives all information concerning its business, properties,
personnel, contracts, books and records, and other information and data
(including, without limitation, by (i) furnishing copies of the Company's
contracts, plans, and other books, records and correspondence (including
electronic books, records and correspondence); (ii) granting full access to the
Company's tracking systems and all hardware or software related thereto; (iii)
by granting reasonable access to the Company's Representatives; and (iv)
granting reasonable access to the Company's customers and vendors and the
Company Independent Contractors, provided that the foregoing shall not authorize
Purchaser to contact any such customer, vendor or Company Independent Contractor
without first receiving clearance from the Company (which clearance shall not be
unreasonably withheld, delayed or conditioned) and without offering the Company
an opportunity to jointly participate)) as may reasonably be requested;
provided, however, that a party shall not be required to (or to cause any of its
Subsidiaries to) so afford such access or furnish or make available such
information to the extent that doing so would result in the loss of
attorney-client privilege (provided that such party shall use its reasonable
efforts to allow for such access or disclosure in a manner that does not result
in a loss of attorney-client privilege). Each party agrees that it will not, and
will cause its Representatives not to, use any information obtained pursuant to
this Section 6.4 for any purpose unrelated to the consummation of the
transactions contemplated by this Agreement. Each of the confidentiality
agreements dated October 22, 2004 and March 29, 2005, respectively, by and
between the Company and Purchaser, as amended (collectively, the
"CONFIDENTIALITY AGREEMENTS") shall apply with respect to information furnished
by each party, its Subsidiaries and its Representatives to the other hereunder.
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(b) Solicitation of Employees. Notwithstanding the terms of
the Confidentiality Agreements, Purchaser and the Company agree that until the
earlier of the consummation of this Agreement or the one-year anniversary of the
date of termination of this Agreement, as applicable, each party and its
respective Subsidiaries shall not, without the other party's prior written
consent, directly or indirectly solicit for employment (other than through
advertising in newspapers or periodicals of general circulation or recruiters'
searches, in each case not specifically directed at the employees of the other
party or its Subsidiaries) any person currently employed by the other party or
any of its Subsidiaries with whom it has contact or who is identified to such
party in connection with the transactions contemplated by this Agreement.
6.5 PUBLICITY. Except with respect to any Company Adverse
Recommendation Change, neither the Company nor Purchaser will cause or permit
the issuance of any press release or public announcement pertaining to this
Agreement and the Merger without the prior approval of the other party, which
approval shall not be unreasonably conditioned, delayed or withheld; provided,
however, that such approval shall not be required for such press releases or
public announcements as may be required by applicable Law or by obligations
pursuant to any agreement with any national securities exchange or automated
quotation system, provided that the party proposing to issue such press release
or make such public announcement shall consult in good faith with the other
party before issuing any such press release or making any such public
announcement.
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6.6 INDEMNIFICATION OF DIRECTORS AND OFFICERS.
(a) In the event of any threatened or actual claim, action,
suit, demand, proceeding or investigation, whether civil, criminal or
administrative, including, without limitation, any such claim, action, suit,
demand, proceeding or investigation in which any Person who is now, or has been
at any time prior to the Signing Date, or who becomes prior to the Effective
Time, a director, officer, employee, fiduciary or agent of the Company or any
Subsidiary of the Company (the "INDEMNIFIED PARTIES") is, or is threatened to
be, made a party based in whole or in part on, or arising in whole or in part
out of, or pertaining to:
(i) the fact that he is or was a director, officer,
employee, fiduciary or agent of the Company or any Subsidiary of the
Company, or is or was serving at the request of the Company or any
Subsidiary of the Company as a director, officer, employee, fiduciary
or agent of another corporation, partnership, joint venture, trust or
other enterprise; or
(ii) the negotiation, execution or performance of
this Agreement or any of the transactions contemplated hereby, whether
in any case asserted or arising before or after the Effective Time,
the parties hereto agree to cooperate and use their commercially reasonable
efforts to defend against and respond thereto.
(b) The parties further acknowledge and agree that: (i) the
Company shall indemnify and hold harmless, and after the Effective Time, each of
Purchaser and the Surviving Corporation shall, and Purchaser shall cause the
Surviving Corporation to, jointly and severally indemnify and hold harmless, as
and to the full extent permitted by applicable Law, each Indemnified Party
against any losses, claims, damages, liabilities, costs, expenses (including
reasonable attorneys' fees and expenses), judgments, fines and amounts paid in
settlement in connection with any such threatened or actual claim, action, suit,
demand, proceeding or investigation, and in the event of any such threatened or
actual claim, action, suit, demand, proceeding or investigation (whether
asserted or arising before or after the Effective Time), (ii) the Company shall,
and after the Effective Time, each of Purchaser and the Surviving Corporation
shall, and Purchaser shall cause the Surviving Corporation to, promptly pay
expenses in advance of the final disposition of any claim, action, suit, demand,
proceeding or investigation to each Indemnified Party to the fullest extent
permitted by Law, subject to the provision by such Indemnified Party of an
undertaking to reimburse the amounts so advanced in the event of a final
non-appealable determination by a court of competent jurisdiction that such
Indemnified Party is not entitled to such amounts, (iii) the Indemnified Parties
may retain one counsel satisfactory to them (except in case of a conflict of
interest among two or more Indemnified Parties, in which case more than one
counsel may be retained), and the Company, and after the Effective Time, each of
Purchaser and the Surviving Corporation shall, and Purchaser shall cause the
Surviving Corporation to, pay all reasonable fees and expenses of such counsel
for the Indemnified Parties within thirty (30) days after statements therefor
are received and (iv) the Company and each of Purchaser and the Surviving
Corporation will, and Purchaser will cause the Surviving Corporation to, use
their commercially reasonable efforts to assist in the defense of any such
matter; provided, however, that neither the Company, Purchaser nor the Surviving
Corporation shall be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld); and
provided, further, that the Surviving Corporation shall have no obligation
hereunder to any Indemnified Party when and if, but only to the extent that, a
court of competent jurisdiction shall ultimately determine, and such
determination shall have become final and non-appealable, that indemnification
of such Indemnified Party in the manner contemplated hereby is prohibited by
applicable Law. Any Indemnified Party wishing to claim indemnification under
this Section 6.6, upon learning of any such claim, action, suit, demand,
proceeding or investigation, shall notify the Company and, after the Effective
Time, the Surviving Corporation, thereof; provided, however, that the failure to
so notify shall not affect the obligations of the Company and the Surviving
Corporation except to the extent such failure to notify materially prejudices
such party.
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(c) Purchaser and Newco agree that all rights to
indemnification and advancement of expenses existing in favor of, and all
exculpations and limitations of the personal liability of, the directors,
officers, employees and agents of the Company and the Subsidiaries of the
Company in the Certificate of Incorporation and Bylaws of the Company as in
effect as of the Signing Date with respect to matters occurring at or prior to
the Effective Time, including the Merger, shall continue in full force and
effect for a period of not less than six years from the Effective Time;
provided, however, that all rights to indemnification and advancement of
expenses in respect of any claims asserted or made within such period shall
continue until the disposition of such claim. In addition, the Surviving
Corporation shall, and Purchaser shall cause the Surviving Corporation to,
purchase a six-year "tail" prepaid policy prior to the Effective Time on terms
and conditions no less advantageous to the Indemnified Parties than the existing
directors' and officers' liability insurance maintained by the Company;
provided, however, that if such six-year "tail" prepaid policy is not available
for an annual premium of no more than 250% of the current annual premium, then
six-year "tail" prepaid policies in an amount and scope as great as can be
obtained for an annual premium of 250% of the current annual premium shall be
obtained. The Surviving Corporation shall, and Purchaser shall cause the
Surviving Corporation to, maintain such six-year "tail" prepaid policy in full
force and effect, for its full term, and continue to honor their respective
obligations thereunder.
(d) This Section 6.6 is intended for the irrevocable benefit
of, and to grant third-party rights to, the Indemnified Parties and shall be
binding on all successors and assigns of Purchaser, the Company and the
Surviving Corporation. The obligations of Purchaser and the Surviving
Corporation under this Section 6.6 shall not be terminated or modified by such
parties in a manner so as to adversely affect any Indemnified Party to whom this
Section 6.6 applies without the consent of the affected Indemnified Party. Each
of the Indemnified Parties shall be entitled to enforce the covenants contained
in this Section 6.6. In the event that the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other Person and
shall not be the continuing or surviving entity of such consolidation or merger
or (ii) transfers or conveys all or substantially all of its properties and
assets to any Person, then, and in each such case, proper provision shall be
made so that the successors, assigns and transferees of Purchaser or the
Surviving Corporation, as the case may be, assume the obligations set forth in
this Section 6.6.
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(e) To the extent permitted by Law, all rights of
indemnification and advancement of expenses for the benefit of any Indemnified
Party shall be mandatory rather than permissive.
(f) The rights of the Indemnified Parties and their heirs and
legal representatives under this Section 6.6 shall be in addition to any rights
such Indemnified Parties may have under the Certificate of Incorporation or
Bylaws of the Company or any of its Subsidiaries, or under any other applicable
Laws.
6.7 PROXY STATEMENT.
(a) As promptly as practicable after the execution of this
Agreement, but in no event more than five (5) business days after the Signing
Date, the Company shall prepare and file with the SEC a preliminary version of a
proxy statement (the "PROXY STATEMENT") with respect to the Company Stockholders
Meeting satisfying the requirements of the Securities Exchange Act. The Company
shall cooperate and provide Purchaser (and its counsel) with a reasonable
opportunity to review and comment on the preliminary version of the Proxy
Statement prior to filing such with the SEC. The Company will respond as
promptly as practicable to any comments from the SEC with respect to the
preliminary version of the Proxy Statement, and will use all reasonable efforts
to cause the definitive version of the Proxy Statement to be mailed to its
stockholders as soon as it is legally permitted to do so.
(b) The Company will notify Purchaser promptly upon the
receipt of any comments from the SEC or its staff in connection with the filing
of, or amendments or supplements to, the Proxy Statement. Whenever any event
occurs which is required to be set forth in an amendment or supplement to the
Proxy Statement, the Company or Purchaser, as applicable, will promptly inform
the other of such occurrence and cooperate in filing with the SEC or its staff,
and/or mailing to stockholders of the Company, such amendment or supplement. The
Company shall cooperate and provide Purchaser (and its counsel) with a
reasonable opportunity to review and comment on any amendment or supplement to
the Proxy Statement prior to filing such with the SEC, and will provide
Purchaser with a copy of all such filings made with the SEC. Except as may be
required by Law, no amendment or supplement to the Proxy Statement will be made
by the Company without the approval of Purchaser, which will not be unreasonably
withheld or delayed.
(c) The Proxy Statement shall include, among other things: (i)
subject to Section 6.2, the recommendation of the Board of Directors to the
stockholders of the Company in favor of Company Stockholder Approval; provided,
however, that notwithstanding anything to the contrary in this Agreement, the
Board of Directors may withhold, withdraw, modify or amend its recommendation as
provided in Section 6.2, (ii) the written opinion dated as of June 26, 2006 of
Scura Rise & Partners, LLC, financial advisor to the Company, to the effect that
as of such date the Merger Consideration to be received by the common
stockholders of the Company pursuant to the Merger, taking into account the
amount and form of consideration and taking into account the consideration to be
received by securityholders of the Company pursuant to the Securities Purchase
Agreements, is fair to the common stockholders of the Company from a financial
point of view, and (iii) a statement that stockholders of the Company are or may
be entitled to assert appraisal rights under Section 262 of the DGCL and a copy
of Section 262 of the DGCL.
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6.8 STOCKHOLDERS' APPROVAL.
(a) The Company, acting through its Board of Directors, shall,
in accordance with the provisions of this Agreement, the rules and regulations
of AMEX, the DGCL, any other applicable Law and its Certificate of Incorporation
and Bylaws, promptly and duly call, give notice of, and convene and hold as soon
as practicable following the Signing Date the meeting of the Company's
stockholders (the "COMPANY STOCKHOLDERS MEETING") for the purpose of obtaining
the Company Stockholder Approval. Once the Company Stockholders Meeting has been
called and noticed, the Company shall not postpone or adjourn (other than for
the absence of a quorum and then only to the next possible future date) the
Company Stockholders Meeting without Purchaser's consent unless this Agreement
has been terminated. Without limiting the generality of the foregoing, the
Company agrees that, unless this Agreement has been terminated, its obligations
pursuant to this Section 6.8(a) shall not be affected by (i) any Company Adverse
Recommendation Change, or (ii) the commencement, public proposal, public
disclosure or communication to the Company of any Competing Transaction or
Superior Competing Transaction.
(b) The Company shall use commercially reasonable efforts to
solicit from its stockholders proxies in favor of the Company Stockholder
Approval, and shall take all other action necessary or advisable to secure the
vote or consent of stockholders required by the rules, regulations and listing
standards of the AMEX, the DGCL, any other applicable Law, its Certificate of
Incorporation and Bylaws and any agreement to which it is a party, and to obtain
such approvals, in accordance with the provisions of this Agreement unless the
Board of Directors has made a Company Adverse Recommendation Change.
6.9 SECTION 16 MATTERS. Prior to the Effective Time, the Company shall
take all such steps as may be required (to the extent permitted under applicable
Law) to cause any dispositions of Company Shares or Convertible Securities
resulting from the transactions contemplated by this Agreement and the
Securities Purchase Agreements by each officer and director of the Company who
is subject to the reporting requirements of Section 16(a) of the Exchange Act
with respect to the Company's equity securities to be exempt under Rule 16b-3
promulgated under the Exchange Act.
6.10 EMPLOYEE MATTERS. Purchaser shall, or shall cause the Surviving
Corporation to, cause each Purchaser employee benefit plan (including, but not
limited to each severance plan or arrangement) in which an individual who as of
the Effective Time was an employee or former employee of the Company and its
Subsidiaries (each, an "AFFECTED EMPLOYEE") participates or will participate to
(i) recognize all service of such Affected Employee with the Company or its
Subsidiaries and their predecessor entities for purposes of vesting,
eligibility, participation and coverage (but excluding, for the avoidance of
doubt, accrual and level of benefits) to the extent such service would be
recognized under the analogous Purchaser employee benefit plan, (ii) honor or
provide appropriate credit for co-payments, deductibles and other expenses
incurred by such Affected Employee or his or her beneficiaries under the
analogous Company employee benefit plans, and (iii) if applicable, waive any
waiting periods or other eligibility limitations and exclusions for preexisting
conditions.
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6.11 PURCHASER'S VOTING OF SECURITIES OF NEWCO AND THE COMPANY.
(a) As promptly as practicable following the execution and
delivery of this Agreement, Purchaser, as the sole holder of voting capital
stock of Newco, shall approve and adopt this Agreement and the transactions
contemplated hereby in accordance with the DGCL.
(b) Purchaser covenants and agrees to cause all Company Shares
which are entitled to vote at the Company Stockholders Meeting and owned of
record or beneficially by Purchaser Companies to be voted in favor of the
adoption of this Agreement (but Purchaser shall not act by written consent with
respect thereto).
(c) Purchaser covenants and agrees that during the First
Purchaser Restricted Period and the Second Purchaser Restricted Period (if any),
without the prior approval of the Company, it shall not act by written consent
in lieu of a meeting of stockholders with respect to any matter in respect of
its Company Shares.
(d) Except with respect to a vote regarding the approval of
any Superior Competing Transaction (in which case Section 6.2(e) hereof shall
apply) or the adoption of this Agreement (in which case Section 6.11(b) hereof
shall apply), Purchaser covenants and agrees that during the First Purchaser
Restricted Period, it shall not, without the prior approval of the Company, vote
any Company Shares with respect to: (i) any extraordinary corporate transaction,
such as a merger, consolidation or other business combination involving the
Company; (ii) a sale, lease or transfer of a material amount of assets of the
Company, or a reorganization, recapitalization, dissolution or liquidation of
the Company; (iii) any change in the individuals who constitute the Company's
board of directors; (iv) any change in the present capitalization of the Company
or any amendment of the Company's Certificate of Incorporation or By-Laws; (v)
any material change in the Company's corporate structure or business; or (vi)
any other action which is intended, or could reasonably be expected, to impede,
interfere with, delay, postpone, or materially and adversely affect the Merger
and the transactions contemplated by this Agreement or the Company's ability to
effect a Superior Competing Transaction (except as contemplated by Section
6.2(e)).
(e) Except with respect to a vote regarding the approval of
any Superior Competing Transaction (in which case Section 6.2(e) hereof shall
apply) or the adoption of this Agreement (in which case Section 6.11(b) hereof
shall apply), Purchaser covenants and agrees that during the Second Purchaser
Restricted Period (if any), it shall not vote any Company Shares with respect to
any action described in clauses (i)-(v) of paragraph (d) above if such vote is
intended, or could reasonably be expected, to impede, interfere with, delay,
postpone, or materially and adversely affect the Company's ability to effect a
Superior Competing Transaction (except as contemplated by Section 6.2(e)).
(f) Purchaser covenants and agrees that during the First
Purchaser Restricted Period and the Second Purchaser Restricted Period (if any),
it shall not, without the prior approval of the Company, exercise any rights it
may have under the Company Stockholders Agreement, the Company Registration
Rights Agreement or the Company Senior Subordinated Loan Agreement, except that
during the Second Purchaser Restricted Period (if any) it may exercise the
following rights:
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(i) Sections 4 (Preemptive Rights) and 5.2 (Management
and Control) (and, if incidental to an exercise of
Purchaser's rights under said Sections 4 and 5.2, any
rights under Section 7) of the Company Stockholders
Agreement, provided that no consent of the Purchaser
Companies shall be required with respect to a
Superior Competing Transaction,
(ii) Section 2 (Piggyback Registrations) (and, if
incidental to an exercise of Purchaser's rights under
said Section 2, any rights under Sections 3 through
9) of the Company Registration Rights Agreement, and
(iii) Section 5.01 (Information Covenants), 5.02 (Books,
Records and Inspections), 6.01 (Dividends), 6.03(c)
(Limitations on Modifications of Certificate of
Incorporation and Bylaws) and 6.04 (Limitations on
Certain Restrictions of Subsidiaries) (and, if
incidental to an exercise of Purchaser's rights under
said Sections 5.01, 5.02, 6.01 or 6.03(c), any rights
under Sections 7 and 10) of the Company Senior
Subordinated Loan Agreement, provided that no
information need be made available to Purchaser or
its affiliates with respect to a Competing
Transaction except as expressly provided in Section
6.2 of this Agreement;
provided, however, that Purchaser may not take any action pursuant to clauses
(i), (ii) or (iii) above which is intended, or could reasonably be expected, to
impede, interfere with, delay, postpone, or materially and adversely affect the
Company's ability to effect a Superior Competing Transaction.
(g) Purchaser covenants and agrees that during the First
Purchaser Restricted Period and the Second Purchaser Restricted Period (if any),
it shall not, without the prior approval of the Company, acquire any Company
Shares or Convertible Securities (excluding any purchases made pursuant to the
terms of the Securities Purchase Agreements).
6.12 COMPANY RIGHTS PLAN. The Company covenants and agrees not to amend
the Company Rights Plan in any manner which is intended or could reasonably be
expected to impede, interfere with, delay, postpone, or materially and adversely
affect the ability of any of the Purchaser Companies to (i) commence or, prior
to the termination of this Agreement, consummate the transactions contemplated
by this Agreement or by the Securities Purchase Agreements or the Voting
Agreement (subject to the Company's rights under Section 6.2 and subject to the
Company's ability to negotiate and consummate a Superior Competing Transaction
in accordance with the terms of this Agreement), (ii) effect any conversion,
exercise or exchange of any Convertible Securities acquired pursuant to the
Securities Purchase Agreements, or (iii) after termination of this Agreement,
acquire Company Shares or Convertible Securities (A) which are consummated at a
purchase price of not less than $3.00 per share of Company Common Stock (on an
as-converted-to-common basis, in the case of Convertible Securities), (B) which
do not cause any of the Purchaser Companies to become the beneficial owner of
more than 51% of the shares of Company Common Stock outstanding at the time of
such additional acquisitions and (C) which, in the event there is a Second
Purchaser Restricted Period, are acquired after the expiration of the Second
Purchaser Restricted Period. The Company further covenants and agrees not to
adopt any new stockholder protection rights plan (or similar plan or agreement)
or any other takeover defense which is intended or could reasonably be expected
to impede, interfere with, delay, postpone, or materially and adversely affect
the ability of any of the Purchaser Companies to cause the occurrence of any of
the events described in clauses (i), (ii) or (iii) above.
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ARTICLE VII --
CONDITIONS TO CONSUMMATION OF THE MERGER
ACTIONS AND DELIVERIES AT CLOSING
7.1 CONDITIONS TO EACH PARTY'S OBLIGATIONS TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver at or prior to the Effective Time of each of the
following conditions:
(a) There shall not be in effect any statute, rule,
regulation, executive order, decree, ruling or injunction or other order of a
court or Governmental Authority of competent jurisdiction directing that the
transactions contemplated herein not be consummated; provided, however, that
prior to invoking this condition each party shall use all commercially
reasonable efforts to have any such decree, ruling, injunction or order vacated.
(b) All governmental consents, orders and approvals legally
required for the consummation of the Merger and the transactions contemplated
hereby shall have been obtained and be in effect at the Effective Time, and all
waiting periods imposed by applicable Law shall have expired or been terminated.
(c) The Company Stockholder Approval shall have been obtained
in accordance with the rules, regulations and listing standards of AMEX, the
DGCL, any other applicable Law, the Company's Certificate of Incorporation and
Bylaws and the Company Stockholder Agreement.
7.2. ACTIONS AND DELIVERIES AT CLOSING.
(a) Purchaser covenants and agrees that, at or prior to the
Signing Date, Purchaser shall have deposited with the Paying Agent all funds
required to pay the Total Merger Consideration in full to all holders of Company
Common Stock and Convertible Securities issued and outstanding at the Effective
Time (other than Company Shares or Convertible Securities owned by Purchaser
Companies).
(b) Purchaser covenants and agrees that, at or prior to the
Effective Time, Purchaser shall cause each of the following to occur:
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(i) Purchaser shall have provided the Company with
funds to repay in full the Company's credit facility with Bank of
America.
(ii) Purchaser shall have provided the Company with
funds to pay in full all Company Change in Control Payments to the Key
Officers who are entitled to receive them at the Effective Time.
(iii) Purchaser shall have provided the Company with
funds to repay in full the Seller Notes (to the extent repayment
thereof is accelerated or required as a result of the transactions
contemplated herein or in the Securities Purchase Agreements).
(iv) Purchaser shall have used commercially
reasonable efforts to negotiate with each of the individuals listed on
Exhibit D hereto as to mutually agreeable terms and conditions for each
such individual's post-merger employment with the Company or engagement
as a consultant by the Company, all as more particularly described on
Exhibit D (the "TRANSITION AGREEMENTS").
ARTICLE VIII --
TERMINATION
8.1 TERMINATION BY MUTUAL CONSENT. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time, whether
before or after the Company Stockholder Approval, by the mutual written consent
of Purchaser and the Company approved by action of their respective board of
directors.
8.2 TERMINATION BY EITHER PURCHASER OR THE COMPANY. This Agreement may
be terminated and the Merger may be abandoned by Purchaser or the Company,
whether before or after the Company Stockholder Approval, upon written notice
if:
(a) any court of competent jurisdiction in the United States
or some other Governmental Authority shall have issued an order, decree or
ruling or taken any other action permanently restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action shall have
become final and non-appealable;
(b) the Company Stockholders Meeting shall have been held and
the Company Stockholder Approval shall not have been obtained thereat; or
(c) the Effective Time shall not have occurred on or before
the 180th day following the Signing Date unless otherwise extended in accordance
with the terms of this Agreement (as so extended, the "TERMINATION DATE");
provided, however, that the right to terminate this Agreement pursuant to this
Section 8.2(c) shall not be available to any party whose failure to fulfill any
of its obligations under this Agreement results in such failure to close.
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8.3 TERMINATION BY PURCHASER. This Agreement may be terminated by
Purchaser, whether before or after the Company Stockholder Approval, prior to
the Effective Time, upon written notice if the Company materially breaches the
provisions of Section 6.2 or there is a Company Adverse Recommendation Change.
8.4 TERMINATION BY THE COMPANY. This Agreement may be terminated by the
Company and the Merger may be abandoned through a resolution adopted by the
Board of Directors at any time prior to the time the Company Stockholder
Approval is obtained at the Company Stockholders Meeting, upon written notice
if: (a) there is a Company Adverse Recommendation Change, and (b) there exists
at such time a proposal or offer for a Competing Transaction that constitutes a
Superior Competing Transaction; provided, however, that the Company may not
terminate this Agreement pursuant to this Section 8.4 unless and until:
(i) the Company shall have complied with the
requirements and time periods set forth in clauses (ii), (iii) and (iv)
of Section 6.2(c);
(ii) the Company shall have paid the Company
Termination Fee to Purchaser in accordance with Section 8.5(b); and
(iii) a definitive agreement to consummate the
Superior Competing Transaction shall have been executed by the Company
and the third party acquiror prior to or simultaneously with the
termination of this Agreement.
8.5 EFFECT OF TERMINATION.
(a) General. In the event of the proper termination and
abandonment of this Agreement pursuant to this Article VIII, this Agreement
(other than as set forth in Section 9.2) shall forthwith become void and have no
effect, without any liability on the part of any party hereto or its affiliates,
directors, officers, employees, stockholders, or other Representatives.
(b) Superior Competing Transaction. In the event of
termination of this Agreement without consummation of the transactions
contemplated hereby:
(i) by Purchaser pursuant to Section 8.3, then the
Company shall make payment to Purchaser by wire transfer of immediately
available funds of a fee in the amount equal to Two Million Five
Hundred Thousand Dollars ($2,500,000) (the "COMPANY TERMINATION FEE"),
payable within five (5) business days following the Company's receipt
of Purchaser's notice of termination, such amount to constitute
liquidated (and exclusive) damages; or
(ii) by the Company pursuant to Section 8.4, then concurrently
with such termination the Company shall make payment to Purchaser by
wire transfer of immediately available funds of the Company Termination
Fee, such amount to constitute liquidated (and exclusive) damages.
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(c) Terminations Requiring No Payment of Fees. For the
avoidance of doubt, in the event of (i) a mutual termination by
Purchaser and the Company under Section 8.1, or (ii) a termination by
either Purchaser or the Company under Section 8.2, then in each case no
party to this Agreement shall be required to make any payments to the
other under this Section 8.5 and no party to this Agreement shall be
entitled to any damages for the breach or breaches giving rise to such
termination.
(d) Acquisition of Purchaser Acquired Securities in Superior
Competing Transaction. The Company agrees that, as a condition to the
consummation of a Superior Competing Transaction in which all or any
portion of the acquisition consideration is in a form other than cash,
it shall cause a portion of the consideration payable to Purchaser in
respect of the Purchaser Acquired Securities in such Superior Competing
Transaction to be paid in the form of cash (such portion being an
amount equal to the aggregate price which Purchaser paid in cash for
the Purchaser Acquired Securities under the Securities Purchase
Agreements), and the balance of the consideration payable to Purchaser
shall consist of the same form of consideration as is paid to the other
stockholders of the Company in such Superior Competing Transaction.
Compliance with this Section 8.5(d) shall be set forth in any
definitive agreement reflecting a Superior Competing Transaction as a
condition precedent to the consummation of the transactions
contemplated thereby.
ARTICLE IX --
MISCELLANEOUS AND GENERAL
9.1 PAYMENT OF EXPENSES. Subject to Section 8.5 and the last sentence
of Section 9.3(c), whether or not the Merger shall be consummated each party
hereto shall pay its own expenses incident to preparing for, entering into and
carrying out this Agreement and the consummation of the transactions
contemplated hereby, provided that the Surviving Corporation shall pay, with
funds of the Company and not with funds provided by any of Purchaser Companies,
any and all property or transfer taxes imposed on the Surviving Corporation.
9.2 SURVIVAL OF REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS;
SURVIVAL OF CONFIDENTIALITY. This Article IX and the agreements of the Company,
Purchaser and Newco contained in Section 6.6 (Indemnification of Directors and
Officers) shall survive the consummation of the Merger. This Article IX and the
agreements of the Company, Purchaser and Newco contained in Section 8.5 (Effect
of Termination), the last two sentences of Section 6.4(a), all of Section
6.4(b), Section 6.11, Section 6.12 and the Confidentiality Agreements shall
survive the termination of this Agreement. In addition, if this Agreement is
terminated pursuant to Sections 8.3 or 8.4 hereof, then Sections 6.2(e), (f) and
(g) shall survive the termination of this Agreement solely with respect to votes
in respect of the Superior Competing Transaction giving rise to such termination
and the waiver of appraisal rights in connection therewith. All other
representations, warranties, covenants and agreements in this Agreement shall
not survive the consummation of the Merger or the termination of this Agreement
except in the event of fraud.
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9.3 LIMITATION OF LIABILITY; WAIVER OF JURY TRIAL.
(a) The remedies set forth in Section 8.5 and Section 9.3(c)
shall be the sole and exclusive remedies for any breach of this agreement, other
than for actual fraud. NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE
CONTRARY, NO PARTY TO THIS AGREEMENT SHALL BE LIABLE FOR SPECIAL, INCIDENTAL,
CONSEQUENTIAL OR PUNITIVE DAMAGES.
(b) EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED ON CONTRACT, TORT
OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS AGREEMENT OR THE ACTIONS OF THE
PARTIES TO THIS AGREEMENT IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT HEREOF.
(c) Each of the parties hereto agrees, recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other parties to sustain damages for which they
would not have an adequate remedy at law for money damages, and therefore each
of the parties hereto agrees that in the event of any such breach any aggrieved
party shall be entitled to the remedy of specific performance of such covenants
and agreements (without any requirement to post bond or other security and
without having to prove actual damages) and injunctive and other equitable
relief in addition to any other remedy to which it may be entitled, at law or in
equity. In the event that any party shall seek specific performance under this
Section 9.3(c), the prevailing party, as determined by a court of competent
jurisdiction, shall be entitled to recover all costs and expenses incurred in
connection with or arising out of such proceedings (including reasonable
attorney's fees and expenses incurred in such proceedings and any appeals
thereof).
9.4 MODIFICATION OR AMENDMENT. Subject to the applicable provisions of
the DGCL, at any time prior to the Effective Time, the parties hereto may modify
or amend this Agreement, by written agreement executed and delivered by duly
authorized officers of the respective parties; provided, however, that after the
Company Stockholder Approval, no amendment shall be made which by law or
Contract requires the further approval of stockholders without such further
approval (including but not limited to amendments which change the consideration
payable in the Merger or adversely affect the rights of the Company's
stockholders hereunder).
9.5 WAIVER OF CONDITIONS. The conditions to each of the parties'
obligations to consummate the Merger are for the sole benefit of such party and
may be waived by such party, or the time for performance may be extended by such
party, in whole or in part to the extent permitted by applicable Law. Any
agreement on the part of either party hereto to any such extension or waiver
shall be valid only if set forth in any instrument in writing signed on behalf
of such party. The failure of any party hereto to assert any of its rights
hereunder shall not constitute a waiver of such rights.
9.6 COUNTERPARTS. For the convenience of the parties hereto, this
Agreement may be executed in any number of counterparts, including by means of
facsimile, electronic mail or similar means, each such counterpart being deemed
to be an original instrument, and all such counterparts shall together
constitute the same agreement.
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9.7 GOVERNING LAW; SUBMISSION TO JURISDICTION.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without giving effect to the
principles of conflicts of law thereof.
(b) Each party to this Agreement irrevocably consents and
agrees that any legal action or proceeding with respect to this Agreement and
any action for enforcement of any judgment in respect thereof will be brought in
the state or federal courts located within the jurisdiction of the United States
District Court for the Southern District of New York, and, by execution and
delivery of this Agreement, each party to this Agreement hereby irrevocably
submits to and accepts for itself and in respect of its property, generally and
unconditionally, the exclusive jurisdiction of the aforesaid courts and
appellate courts from any appeal thereof. Each party to this Agreement further
irrevocably consents to the service of process out of any of the aforementioned
courts in any such action or proceeding by the mailing of copies thereof in the
manner set forth in Section 9.8. Each party to this Agreement hereby irrevocably
waives any objection which it may now or hereafter have to the laying of venue
of any of the aforesaid actions or proceedings arising out of or in connection
with this Agreement brought in the courts referred to above and hereby further
irrevocably waives and agrees not to plead or claim in any such court that any
such action or proceeding brought in any such court has been brought in an
inconvenient forum. Nothing in this Section 9.7 shall be deemed to constitute a
submission to jurisdiction, consent or waiver with respect to any matter not
specifically referred to herein.
9.8 NOTICES. Any notice, request, instruction, consent or other
document to be given hereunder by any party to the other parties shall be in
writing and shall be deemed duly given (i) on the date delivered, if delivered
personally, (ii) three (3) business days after being sent by registered or
certified mail, return receipt requested, postage prepaid, (iii) one (1)
business day after being sent via a reputable nationwide overnight courier
service guaranteeing next business day delivery, or (iv) on the date sent by
facsimile transmission, if a confirming copy is sent by overnight courier, in
each case to the intended recipient addressed as follows:
(a) If to the Company, to
CD&L, Inc.
80 Wesley Street
South Hackensack, NJ 07606
Attention: Albert W. Van Ness, Jr.
Fax: 212.575.7953
with copies to:
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CD&L, Inc.
80 Wesley Street
South Hackensack, NJ 07606
Attention: Mark T. Carlesimo, Esq.
Fax: 201.489.6974
and
Lowenstein Sandler PC
65 Livingston Avenue
Roseland, NJ 07068-1791
Attention: Alan Wovsaniker, Esq.
Fax: 973.597.2565
(b) If to Purchaser or Newco, to
Velocity Express Corporation
One Morningside Drive North
Building B, Suite 300
Westport, CT 06880
Attention: General Counsel
Fax: 952.835.4997
with copies to:
Budd Larner, PC
150 John F. Kennedy Parkway
Short Hills, NJ 07078
Attention: James F. Fitzsimmons, Esq.
Fax: 973.379.7734
and
Briggs and Morgan, P.A.
2200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attention: Avron L. Gordon, Esq.
Fax: 612.977.8650
or to such other Persons or addresses as may be designated in writing by the
party to receive such notice.
9.9 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
schedules and the other documents and the instruments referred to herein), the
Voting Agreement, the Transition Agreements and the Confidentiality Agreements
(a) constitute the entire agreement among the parties with respect to the
subject matter hereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them with
respect to the subject matter hereof, and (b) shall not be assigned by operation
of law or otherwise.
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9.10 PARTIES IN INTEREST. This Agreement shall be binding upon and
inure solely to the benefit of each party hereto and their respective successors
and assigns. Nothing in this Agreement, express or implied, other than the right
to receive the consideration payable in the Merger pursuant to Article III
hereof following the Effective Time, is intended to or shall confer upon any
other Person any rights, benefits or remedies of any nature whatsoever under or
by reason of this Agreement; provided however, that the provisions of Section
6.6 shall inure to the benefit of and be enforceable by the Indemnified Parties.
9.11 CERTAIN DEFINITIONS/INTERPRETATION.
(a) As used herein:
"COMPANY BENEFICIARY" any director, officer, employee or
former employee (or any of their beneficiaries) of the Company or any of its
Subsidiaries who is a beneficiary under any Company Benefit Plans.
"COMPANY BENEFIT PLANS" means all (A) employee welfare benefit
and employee pension benefit plans as defined in Sections 3(1) and 3(2) of
ERISA, including, but not limited to, plans that provide retirement income or
result in a deferral of income by employees for periods extending to termination
of employment or beyond, and plans that provide medical, surgical, or hospital
care benefits or benefits in the event of sickness, accident, disability, death
or unemployment and (B) other material employee benefit agreements or
arrangements, including without limitation deferred compensation plans,
incentive plans, bonus plans or arrangements, stock option plans, stock purchase
plans, stock award plans, golden parachute agreements, severance pay plans,
dependent care plans, cafeteria plans, employee assistance programs, scholarship
programs, employee discount programs, employment contracts, retention incentive
agreements, noncompetition agreements, consulting agreements, confidentiality
agreements, vacation policies, and other similar plans, agreements and
arrangements that were in effect as of the Signing Date, or were approved before
that date but are not yet effective, for the benefit of any Company Beneficiary,
or with respect to which the Company or any of its Subsidiaries may have any
liability.
"COMPANY CHANGE IN CONTROL PAYMENTS" means severance and
change of control payments to be made to the Company's Key Officers which (i) in
the aggregate do not exceed $5,467,002 (plus approximately $68,571 for
continuing insurance costs) (with certain individual amounts set forth on Part
9.11 of the Company Disclosure Memorandum), (ii) are made as a result of or in
connection with the consummation of the transactions contemplated by this
Agreement and/or any subsequent employment termination, and (iii) the Company is
required to make pursuant to the terms of an employment agreement, severance
agreement or other Contract between the Company and such Key Officers, copies of
which have been provided or made available to Purchaser prior to the Signing
Date.
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"COMPANY ERISA AFFILIATE" means any entity (whether or not
incorporated) that is treated as a single employer with the Company under
Section 414 of the Code.
"COMPANY INDEPENDENT CONTRACTORS" means all independent
contractors who provide delivery, courier or similar services on behalf of the
Company and its Subsidiaries as of the Signing Date.
"COMPANY MATERIAL OCCURRENCE" means any claim, change, effect,
event, occurrence or development which individually or in the aggregate would
reasonably be expected to be materially adverse to the business, financial
condition or results of operations of the Company and its Subsidiaries, taken as
a whole.
"COMPANY NOTES" means the $4.0 million aggregate outstanding
principal amount of notes designated as the Series A Convertible Subordinated
Debentures.
"COMPANY REGISTRATION RIGHTS AGREEMENT" means the Registration
Rights Agreement dated April 14, 2004 by and among the Company and the
securityholders of the Company listed as "Lenders" therein.
"COMPANY RIGHT" means a right to purchase one one-hundredth of
a share of Preferred Stock of the Company, subject to adjustment, issued
pursuant to the Company Rights Plan.
"COMPANY RIGHTS PLAN" means the Stockholder Protection Rights
Agreement, dated as of December 27, 1999, between the Company and American Stock
Transfer & Trust Company, as Rights Agent, and amended as of April 14, 2004 (as
amended).
"COMPANY SENIOR SUBORDINATED LOAN AGREEMENT" means the Amended
and Restated $8,000,000 Senior Subordinated Loan Agreement amended and restated
as of April 14, 2004 among the Company and the parties set forth as "Lenders"
therein.
"COMPANY STOCKHOLDERS AGREEMENT" means the Stockholders
Agreement dated as of April 14, 2004 by and among the Company and the
securityholders of the Company listed as "Stockholders" therein.
"CONTRACTS" means all written or oral contracts, agreements,
leases, instruments or legally binding contractual commitments, together with
all amendments thereto.
"CONVERTIBLE SECURITIES" means any securities convertible or
exchangeable into or exercisable for shares of capital stock of the Company,
other than the Company Series A Preferred and the Seller Notes.
"ENVIRONMENTAL AUTHORITY" shall mean any federal, state, or
local governmental body, department, agency or subdivision responsible for the
due administration and/or enforcement of any Environmental Law.
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"ENVIRONMENTAL LAWS" shall mean any and all federal, state or
local laws, rules, orders, regulations, statutes, common law, ordinances, codes,
decrees or requirements of any Governmental Authority regulating, relating to or
imposing liability or standards of conduct concerning any Regulated Materials,
environmental protection, or protection of public health, safety and welfare
involving Regulated Materials as in effect as of the Effective Time of the
Merger or at any time in the past.
"ENVIRONMENTAL PERMITS" shall mean all governmental approvals,
authorizations, registrations, permits and licenses, including those related to
environmental quality and the emission, discharge, storage, handling, treatment,
use, generation or transportation of Regulated Materials required by
Environmental Laws or otherwise required for the Company to conduct its
business.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"FIRST PURCHASER RESTRICTED PERIOD" means the period
commencing upon the Signing Date and terminating upon the earliest to occur of
(i) the Effective Time, and (ii) the date of termination of this Agreement for
any reason.
"GOVERNMENTAL AUTHORITY" shall mean any federal, state, or
local governmental or regulatory body, or any department, agency, subdivision,
commission, board, bureau, agency, authority, instrumentality or unit thereof.
"IRS" means the U.S. Internal Revenue Service.
"ISRA" means the New Jersey Industrial Site Recovery Act,
N.J.S.A. 13:1K-6 et seq.
"KEY OFFICERS" means each of the individuals listed on Exhibit
E hereto.
"KNOWLEDGE OF THE COMPANY" or "THE COMPANY'S KNOWLEDGE" means
any fact, circumstance, event or other matter that (a) any of Albert W. Van
Ness, Jr., William T. Brannan, Michael Brooks, Russell Reardon, or Mark T.
Carlesimo actually knows, or (b) any of the individuals referred to in the
preceding clause (a) should know or would reasonably be expected to know in the
normal discharge of his assigned duties and responsibilities.
"PERFORMANCE SHARES" shall have the meaning ascribed thereto
in the Company's Year 2000 Stock Incentive Plan.
"PERFORMANCE UNITS" shall have the meaning ascribed thereto in
the Company's Year 2000 Stock Incentive Plan.
"PERSON" shall mean any individual, corporation, partnership
(general or limited), association, limited liability company, trust, estate or
other entity.
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"PURCHASER MATERIAL OCCURRENCE" means any change, effect,
event, occurrence or development which individually or in the aggregate would
reasonably be expected to be materially adverse to the business, financial
condition or results of operations of Purchaser and its Subsidiaries, taken as a
whole.
"REGULATED MATERIALS" shall mean any pollutant, contaminant,
hazardous material, hazardous waste, infectious medical waste, hazardous or
toxic substance defined or regulated as such in or under any Environmental Law,
including, without limitation, petroleum, crude oil or fractions thereof,
petroleum products, waste or used oil, natural or synthetic gas, materials
exhibiting the characteristics of ignitability, corrosivity, reactivity or
extraction procedure toxicity, as such terms are defined in connection with
hazardous materials or hazardous wastes or hazardous or toxic substances in any
Environmental Law.
"RELEASE" shall have the same meaning as provided in the
Comprehensive Environmental Response, Compensation, and Liability Act, as
amended, sec. 101(22), 42 U.S.C. sec. 9601(22) and shall also include any
"discharge" as defined in the New Jersey Spill Compensation and Control Act,
N.J.S.A. 58:10-23.11b.
"SECOND PURCHASER RESTRICTED PERIOD" has the following
meaning:
(a) in the event of the termination of this Agreement by the
Company pursuant to Section 8.4 in connection with a Superior Competing, the
period commencing upon such termination and ending upon the earlier to occur of
(i) the consummation of such Superior Competing Transaction or (ii) the
termination of the definitive agreement with respect to such Superior Competing
Transaction; and
(b) in the event of the termination of this Agreement by
Purchaser pursuant to Section 8.3 at a time in which there exists a proposal or
offer for a Competing Transaction, the period commencing upon such termination
and ending as follows: (i) if the Company does not enter into a definitive
agreement with respect to such Competing Transaction within thirty (30) days of
termination, the Second Purchaser Restricted Period shall end upon the
thirty-first (31st) day; or (ii) if the Company enters into a definitive
agreement with respect to such Competing Transaction within thirty (30) days of
termination, the Second Purchaser Restricted Period shall end upon the earlier
to occur of the consummation of such Competing Transaction or the termination of
such definitive agreement.
"SELLER NOTES" shall mean the promissory notes set forth on
Exhibit F hereto.
"SEPARATION TIME" shall have the meaning ascribed thereto in
the Company Rights Plan.
"SHARES OF RESTRICTED STOCK" shall have the meaning ascribed
thereto in the Company's Year 2000 Stock Incentive Plan.
"SUBSIDIARY" shall mean, when used with reference to any
entity, any corporation a majority of the outstanding voting securities of which
are owned directly or indirectly by such former entity (other than a corporation
having no current operations and no material assets).
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"TAX" or "TAXES" shall mean all taxes of any kind, including,
without limitation, those on or measured by or referred to as income, gross
receipts, sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, estimated, excise, severance, stamp, occupation, premium,
value added, property or windfall profits taxes, customs, duties or similar
fees, assessments or charges of any kind whatsoever, together with any interest
and any penalties, additions to tax or additional amounts imposed by any
Governmental Authority, domestic or foreign.
"TAX RETURN" shall mean any return, report, statement or
information required to be filed with any Governmental Authority with respect to
Taxes.
The following capitalized terms defined elsewhere in this
Agreement are defined in the sections indicated below.
TERM SECTION
---- -------
Affected Employee .............................................................................................6.10
Agreement .............................................................................................Introduction
AMEX ..........................................................................................................4.13
As Converted Total Company Shares ..............................................................................4.2
Board of Directors ........................................................................................Recitals
Certificates ...................................................................................................3.1
Closing ........................................................................................................1.4
Code ...........................................................................................................3.9
Company ...............................................................................................Introduction
Company Adverse Recommendation Change...........................................................................6.2
Company Affiliate .............................................................................................4.21
Company 2005 Audit Date.........................................................................................4.5
Company Beneficiary ...........................................................................................9.11
Company Benefit Plans .........................................................................................9.11
Company Change in Control Payments ............................................................................9.11
Company Common Stock ...........................................................................................3.1
Company Equity Holders .........................................................................................3.4
Company ERISA Affiliate .......................................................................................9.11
Company Independent Contractors ...............................................................................9.11
Company Insurance Policies .....................................................................................4.8
Company Intellectual Property .................................................................................4.12
Company's Knowledge or Knowledge of Company ...................................................................9.11
Company Material Contracts ....................................................................................4.19
Company Notes .................................................................................................9.11
Company Note Repayment Limit ..................................................................................9.11
Company Option .................................................................................................3.7
Company Option Plans ...........................................................................................3.7
Company Real Property .........................................................................................4.25
Company Representatives ........................................................................................6.2
Company Registration Rights Agreement ..........................................................................7.2
Company Right .................................................................................................9.11
Company Rights Plan ...........................................................................................9.11
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TERM SECTION
---- -------
Company SEC Reports ............................................................................................4.5
Company Series A Approval ......................................................................................4.4
Company Series A Preferred .....................................................................................3.1
Company Stockholder Approval ...................................................................................4.4
Company Stockholders Agreement .................................................................................4.4
Company Stockholders Meeting ...................................................................................6.9
Company Shares .................................................................................................3.1
Company Termination Fee ........................................................................................8.4
Company Voting Agreement ..................................................................................Recitals
Company Warrant ................................................................................................3.7
Competing Transaction ..........................................................................................6.2
Confidentiality Agreements .....................................................................................6.4
Contracts .....................................................................................................9.11
Convertible Securities ........................................................................................9.11
Convertible Security Instruments ...............................................................................3.1
DGCL.......................................................................................................Recitals
Dissenting Shares ..............................................................................................3.3
Effective Time .................................................................................................1.2
Emulated Shares ................................................................................................6.2
Environmental Authority .......................................................................................9.11
Environmental Laws ............................................................................................9.11
Environmental Permits .........................................................................................9.11
ERISA .........................................................................................................9.11
Exchange Act ...................................................................................................4.4
First Purchaser Restricted Period .............................................................................9.11
GAAP ...........................................................................................................4.5
Governmental Authority.........................................................................................9.11
Indemnified Parties ............................................................................................6.6
ISRA ..........................................................................................................9.11
Irrevocable Proxies .......................................................................................Recitals
Laws ..........................................................................................................4.13
Letter of Transmittal ..........................................................................................3.4
Licenses ......................................................................................................4.22
Liens ..........................................................................................................4.2
Merger .........................................................................................................1.1
Merger Consideration ...........................................................................................3.1
Emulated Shares ................................................................................................4.2
Newco .................................................................................................Introduction
Newco Common Stock .............................................................................................3.2
Order .........................................................................................................4.13
PCBs ..........................................................................................................4.11
Paying Agent ...................................................................................................3.2
Paying Agent Agreement .........................................................................................3.4
Performance Shares ............................................................................................9.11
Performance Units .............................................................................................9.11
Person.........................................................................................................9.11
-54-
TERM SECTION
---- -------
Proxyholder ....................................................................................................6.2
Proxy Shares ...................................................................................................6.2
Proxy Statement ................................................................................................6.7
Purchaser .............................................................................................Introduction
Purchaser Companies ............................................................................................3.1
Purchaser Material Occurrence .................................................................................9.11
Purchaser Restricted Period ...................................................................................9.11
Real Property Lease ...........................................................................................4.25
Regulated Materials ...........................................................................................9.11
Release .......................................................................................................9.11
Remaining Equity-Based Awards ..................................................................................3.7
Representatives ................................................................................................6.4
SEC ............................................................................................................4.5
Second Purchaser Restricted Period ............................................................................9.11
Securities Purchase Agreements ............................................................................Recitals
Securities Act .................................................................................................4.4
Separation Date ...............................................................................................9.11
Shares of Restricted Stock ....................................................................................9.11
Signing Date ..........................................................................................Introduction
SOX.............................................................................................................4.5
Subsidiary ....................................................................................................9.11
Superior Competing Transaction .................................................................................6.2
Superior Per Share Price........................................................................................8.5
Surviving Corporation ..........................................................................................1.1
Tax Return ....................................................................................................9.11
Tax, Taxes ....................................................................................................9.11
Termination Date ...............................................................................................8.2
Third Party ....................................................................................................6.2
Total Merger Consideration ....................................................................................3.10
Transition Agreements ..........................................................................................7.2
Treasury Shares ................................................................................................3.1
(c) In interpreting this Agreement, the following rules of
construction shall apply:
(i) Where the context requires, the use of the
singular form in this Agreement will include the plural, the
use of the plural will include the singular, and the use of
any gender will include any and all genders.
(ii) The word "including" (and, with
correlative meaning, the word "include") means that the
generality of any description preceding such word is not
limited, and the words "shall" and "will" are used
interchangeably and have the same meaning.
(iii) References in this Agreement to "Articles",
"Sections", or "Exhibits" shall be to Articles, Sections or
Exhibits of or to this Agreement unless otherwise specifically
provided.
-55-
(iv) References to any agreement or contract are
to such agreement or contract as amended, modified or
supplemented from time to time in accordance with the terms
hereof and thereof.
(v) References to any statute and related
regulation shall include any amendments of the same and any
successor statutes and regulations.
(vi) References to any Person include the
successors and permitted assigns of such Person.
(vii) References "from" or "through" any date
mean, unless otherwise specified, "from and including" or
"through and including," respectively.
9.12 OBLIGATION OF PURCHASER. Whenever this Agreement requires Newco to
take any action, such requirement shall be deemed to include an undertaking on
the part of Purchaser to cause Newco to take such action and a guarantee of the
performance thereof.
9.13 VALIDITY. The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provisions of this Agreement, each of which shall remain in full force and
effect.
9.14 CAPTIONS. The Article, Section and paragraph captions herein are
for convenience of reference only, do not constitute part of this Agreement and
shall not be deemed to limit or otherwise affect any of the provisions hereof.
[SIGNATURE PAGE FOLLOWS]
-56-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement and Plan of Merger to be executed by their respective duly authorized
officers as of the date first above written.
VELOCITY EXPRESS CORPORATION
By: /s/ E. W. Stone, Jr.
-------------------------------------
Name: E. W. Stone, Jr.
Title: CFO
CD&L, INC.
By: /s/ Albert W. Van Ness, Jr.
-------------------------------------
Name: Albert W. Van Ness, Jr.
Title: Chairman
CD&L ACQUISITION CORP.
By: /s/ E. W. Stone, Jr.
-------------------------------------
Name: E. W. Stone, Jr.
Title: CFO
[SIGNATURE PAGE TO MERGER AGREEMENT]
-57-
EXHIBIT A
Amendment to Company Rights Plan
AMENDMENT NO. 2
TO
STOCKHOLDER PROTECTION RIGHTS AGREEMENT
This Amendment No. 2 (this "Amendment"), dated as of July 3, 2006, is
between CD&L, Inc., a Delaware corporation formerly known as Consolidated
Delivery & Logistics, Inc. (the "Company"), and American Stock Transfer & Trust
Company, a New York corporation (the "Rights Agent").
WHEREAS, the Company and the Rights Agent entered into a Stockholder
Protection Rights Agreement, dated as of December 27, 1999, and amended as of
April 14, 2004 (as amended, the "Rights Agreement"); and
WHEREAS, Section 5.4 of the Rights Agreement provides that, prior to
the Flip-in Date, the Company and the Rights Agent may amend the Rights
Agreement in any respect without the approval of any holders of Rights; and
WHEREAS, the Board of Directors of the Company has approved this
Amendment;
NOW, THEREFORE, the Rights Agreement is hereby amended as follows:
1. Amendment of Section 1.1
(a) Section 1.1 of the Rights Agreement is amended by adding
thereto the following definitions:
"'Merger Agreement' shall mean the Agreement and Plan of
Merger, dated as of July 3, 2006, by and among Velocity
Express Corporation, a Delaware corporation ("Purchaser"),
CD&L Acquisition Corp., a Delaware corporation and wholly
owned subsidiary of Purchaser ("Newco"), and the Company, as
the same may be amended from time to time.
'Company Voting Agreement' shall mean the Company Voting
Agreement (as defined in the Merger Agreement).
'Securities Purchase Agreements' shall mean the Securities
Purchase Agreements (as defined in the Merger Agreement)."
-58-
(b) Section 1.1 of the Rights Agreement is amended further by
deleting the definition of "Expiration Time" in its entirety and inserting the
following in lieu thereof:
"'Expiration Time' shall mean the earliest of (i) the Exchange
Time, (ii) the Redemption Time, (iii) the close of business on
the tenth anniversary of the Record Time or (iv) immediately
prior to the Effective Time (as defined in the Merger
Agreement)."
2. Addition of New Section 5.19.
The Rights Agreement is amended by adding a Section 5.19
thereof which shall read as follows:
"Section 5.19. Exception For Purchaser. Notwithstanding any
provision of this Agreement to the contrary, neither a Flip-in
Date, Flip-over Transaction or Event, Separation Time nor a
Stock Acquisition Date shall be deemed to have occurred, none
of the Purchaser, Newco or any of their Affiliates or
Associates shall be deemed to have become an Acquiring Person,
and no holder of any Rights shall be entitled to exercise such
Rights under, or be entitled to any rights pursuant to, this
Agreement, in any such case by reason of: (a) the approval,
execution or delivery of the Merger Agreement, the Company
Voting Agreement, the Securities Purchase Agreements or any
amendments thereof, provided that any such amendment is
approved in advance by the Board of Directors of the Company;
(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 (as
defined in the Merger Agreement), or by the Company Voting
Agreements or the Securities Purchase Agreements; (c) any
conversion, exercise or exchange of any of the Company's
securities acquired pursuant to the Securities Purchase
Agreements; or (d) in the event of a termination of the Merger
Agreement, any additional acquisitions of the Company's
securities by any of Purchaser, Newco or any of their
Affiliates or Associates (i) which are consummated after
termination of the Merger Agreement at a purchase price of not
less than $3.00 per share of Common Stock (on an as-converted
basis, in the case of Convertible Securities (as defined in
the Merger Agreement)) (ii) which do not cause any of
Purchaser, Newco or any of their Affiliates or Associates to
become the Beneficial Owner of more than 51% of the shares of
Common Stock outstanding at the time of such additional
acquisitions, and (iii) which, in the event there is a Second
Purchaser Restricted Period (as defined in the Merger
Agreement), occur after the expiration of the Second Purchaser
Restricted Period."
-59-
3. Effectiveness.
This Amendment shall be deemed effective as of the date hereof as if
executed by both parties hereto on such date. Except as amended hereby, the
Rights Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
4. Miscellaneous.
This Amendment shall be deemed to be a contract made under the laws of
the State of Delaware and for all purposes shall be governed by and construed in
accordance with the laws of such state applicable to contracts to be made and
performed entirely within such state. This Amendment may be executed in any
number of counterparts, including by means of facsimile, electronic mail or
similar means, each of such counterparts shall for all purposes be deemed to be
an original, and all such counterparts shall together constitute but one and the
same instrument. If any term, provision, covenant or restriction of this
Amendment is held by a court of competent jurisdiction or other authority to be
invalid, illegal, or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Amendment shall remain in full force and
effect and shall in no way be affected, impaired or invalidated.
[SIGNATURE PAGE FOLLOWS]
-60-
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 2
to be duly executed as of the date set forth above.
CD&L, INC.
By:
---------------------------------------------
Name:
Title:
AMERICAN STOCK TRANSFER & TRUST COMPANY
By:
---------------------------------------------
Name:
-61-
EXHIBIT B
Securityholders Who are Parties to the Company Voting Agreement
Albert W. Van Ness, Jr.
William T. Brannan
Michael Brooks
Russell J. Reardon
Matthew J. Morahan
Vincent Brana
Jack McCorkell
-62-
EXHIBIT C
Restated Certificate of Incorporation of the Surviving Corporation
AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CD&L, INC.
FIRST: The name of the corporation (hereinafter called the
"CORPORATION") is CD&L, Inc.
SECOND: The address of the Corporation's registered office in
the State of Delaware is c/o Corporation Service Company, 2711 Centerville Road,
Suite 400, Wilmington, New Castle County, Delaware 19808. The name of its
registered agent at such office is Corporation Service Company.
THIRD: The nature of the business and the purposes to be
conducted and promoted by the Corporation is to conduct any lawful business, to
promote any lawful purpose, and to engage in any lawful act or activity for
which corporations may be organized under the DGCL.
FOURTH: The total number of shares of which the Corporation
shall have authority to issue is one thousand (1,000) shares, par value $0.004
per share. All such shares shall be of one class and shall be designated Common
Stock.
FIFTH: The name and the mailing address of the incorporator
are as follows:_______________________________.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: Whenever a compromise or arrangement is proposed
between this Corporation and its creditors or any class of them and/or between
this Corporation and its stockholders or any class of them, any court of
equitable jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof or on
the application of any receiver or receivers appointed for this Corporation
under ss.291 of Title 8 of the Delaware Code or on the application of trustees
in dissolution or of any receiver or receivers appointed for this Corporation
under ss.279 of Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of stockholders of this
Corporation, as the case may be, to be summoned in such manner as the said court
directs. If a majority in number representing three fourths in value of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, agree to any compromise or
arrangement and to any reorganization of this Corporation as consequence of such
compromise or arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the said application
has been made, be binding on all the creditors or class of creditors, and/or on
all the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
-63-
EIGHTH: For the management of the business and for the conduct
of the affairs of the Corporation, and in further definition, limitation, and
regulation of the powers of the Corporation and of its directors and of its
stockholders or any class thereof, as the case may be, it is further provided:
1. The management of the business and the conduct of the
affairs of the Corporation shall be vested in its Board of Directors. The
number of directors which shall constitute the whole Board of Directors
shall be fixed by, or in the manner provided in, the Bylaws. The phrase
"whole Board" and the phrase "total number of directors" shall be deemed to
have the same meaning, to wit, the total number of directors which the
Corporation would have if there were no vacancies. No election of directors
need be by written ballot.
2. After the original or other By-laws of the Corporation have
been adopted, amended, or repealed, as the case may be, in accordance with
the provisions of ss.109 of the DGCL, and, after the Corporation has
received any payment for any of its stock, the power to adopt, amend, or
repeal the By-laws of the Corporation may be exercised by the Board of
Directors of the Corporation.
3. Whenever the Corporation shall be authorized to issue only
one class of stock, each outstanding share shall entitle the holder thereof
to notice of, and the right to vote at, any meeting of stockholders.
Whenever the Corporation shall be authorized to issue more than one class
of stock, no outstanding share of any class of stock which is denied voting
power under the provisions of the certificate of incorporation shall
entitle the holder thereof to the right to vote at any meeting of
stockholders except as the provisions of paragraph (2) of subsection (b) of
ss. 242 of the DGCL shall otherwise require; provided, that no share of any
such class which is otherwise denied voting power shall entitle the holder
thereof to vote upon the increase or decrease in the number of authorized
shares of said class.
NINTH: The personal liability of the directors of the
Corporation is hereby eliminated to the fullest extent permitted by the
provisions of paragraph (7) of subsection (b) of ss. 102 of the DGCL, as the
same may be amended and supplemented.
TENTH: The Corporation shall, to the fullest extent permitted
by the provisions of ss. 145 of the DGCL, as the same may be amended and
supplemented, indemnify any and all persons whom it shall have power to
indemnify under said section from and against any and all of the expenses,
liabilities, or other matters referred to in or covered by said section, and the
indemnification provided for herein shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any Bylaw, agreement,
vote of stockholders or disinterested directors or otherwise, both as to action
in his official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee, or agent and shall inure to the benefit of the heirs,
executors, and administrators of such a person.
-64-
ELEVENTH: From time to time any of the provisions of this
certificate of incorporation may be amended, altered, or repealed, and other
provisions authorized by the laws of the State of Delaware at the time in force
may be added or inserted in the manner and at the time prescribed by said laws,
and all rights at any time conferred upon the stockholders of the Corporation by
this certificate of incorporation are granted subject to the provisions of this
Article ELEVENTH.
-65-
EXHIBIT D
Transition Agreements
William T. Brannan (full time employment)
Michael Brooks (full time employment)
Curtis G. Hight (full time employment)
Dominick Simone (full time employment)
Paul Calabro (full time employment)
Russell J. Reardon (full time employment)
Mark T. Carlesimo (full time employment)
-66-
EXHIBIT E
Key Officers
Albert W. Van Ness, Jr.
William T. Brannan
Michael Brooks
Russell Reardon
Mark T. Carlesimo
Paul Calabro
J. Daniel Ayer
Curtis Hight
Martin C. Galinsky
Dominick Simone
Jack McCorkell
Peter Silver
Stuart Hyden
Roy Liller
-67-
EXHIBIT F
Seller Notes
1. That certain promissory note dated June 24, 2004 issued to Terry Bozzay in
the original principal amount of $411,675.79.
2. That certain promissory note dated June 24, 2004 issued to Westwind Express,
Inc. in the original principal amount of $887,210.61
3. That certain promissory note dated June 24, 2004 issued to David L. Chesney
in the original principal amount of $1,096,657.42
4. That certain promissory note dated March 28, 2002 issued to Randy Cooper in
the original principal amount of $122,707.00.
-68-
APPENDIX B
[SRP LOGO]
SCURA, RISE & PARTNERS, LLC
1211 Avenue of the Americas, 27th Floor, New York, New York 10036
phone . 212.596.3380 fax . 212.596.3390
June 26, 2006
The Board of Directors
CD&L, Inc.
80 Wesley Street
South Hackensack, New Jersey 07606
Members of the Boards of Directors:
We understand that CD&L, Inc., a Delaware corporation (the "Seller"), Velocity
Express Corporation, a Delaware corporation (the "Buyer"), and CD&L Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of the Buyer (the
"Company"), will enter into an Agreement and Plan of Merger (the "Merger
Agreement"), which provides for, among other things, the merger of the Company
with and into the Seller (the "Merger"). Pursuant to the Merger, the Seller will
become a wholly owned subsidiary of the Buyer and (A) all outstanding shares of
common stock, par value $.001 per share, of the Seller (the "Common Stock"),
other than shares of Common Stock owned by the Buyer or the Company, will be
converted into the right to receive $3.00 per share of Common Stock (the "Common
Consideration"); and (B) the Buyer and/or Company shall acquire or enter into
binding agreements to acquire in separate negotiated transactions from existing
holders (i) all outstanding Series A convertible preferred stock of the Seller,
par value $.001 per share, representing 3,937,010 equivalent shares of Common
Stock of the Seller (the "Series A Preferred Stock"), (ii) all outstanding
Series A convertible notes of the Seller, representing 3,937,008 equivalent
shares of Common Stock of the Seller (the "Series A Notes"), (iii) all
outstanding warrants representing the right to acquire up to an aggregate of
506,250 shares of Common Stock of the Seller (the "Warrants"), and (iv) 656,000
outstanding shares of Common Stock of the Seller (the "Acquired Shares") (the
transactions in clauses (i), (ii), (iii) and (iv) are reflected in the
"Securities Purchase Agreements"). The terms and conditions of the Merger are
more fully set forth in the Merger Agreement.
Scura, Rise & Partners, LLC ("SRP"), as part of its investment banking business,
is regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, competitive biddings, secondary
distributions of unlisted securities, private placements, financial
restructurings and other financial services. We have been engaged to act as
financial advisor to the Board of Directors of the Seller in connection with the
Acquisition and will receive a fee for our services. We also will be reimbursed
for expenses incurred (including certain expenses of our legal counsel). The
Seller has agreed to indemnify SRP against certain liabilities, including
liabilities arising out of or in connection with the services rendered and to be
rendered by SRP under such engagement. We have in the past provided, are
currently providing and in the future may provide, investment banking and other
financial services to the Seller, the Buyer, the Company and their respective
affiliates for which we have received, and would expect to receive,
compensation.
You have asked for our opinion as investment bankers as to whether the Common
Consideration to be received by the holders of shares of Common Stock pursuant
to the Merger Agreement is fair, from a financial point of view, to such holders
(other than the Buyer, the Company or any affiliates or associates thereof).
In conducting our analysis and arriving at the opinion expressed herein, we
have, among other things:
(i) reviewed the draft Merger Agreement and the draft Securities
Purchase Agreements (including certain of the schedules and
exhibits thereto);
(ii) reviewed certain publicly available business and financial
statements, including publicly available financial projections
and other information about the Seller;
(iii) reviewed certain internal financial statements and other
financial and operating data concerning the Seller prepared by
and furnished to us by the management of the Seller;
(iv) held discussions with various members of senior management of
the Seller and the Buyer concerning historical and current
operations, financial conditions and prospects, including
recent financial performance;
(v) reviewed the reported prices and trading activity of the
common stock of the Seller;
(vi) reviewed the financial performance of the Seller and the
prices and valuation of the its common stock with valuations
of certain publicly-traded companies and their securities that
we deemed comparable in certain respects to the Seller;
(vii) reviewed the financial terms, to the extent publicly
available, of selected acquisition transactions involving
companies in lines of business that we deemed comparable in
certain respects to the business of the Seller; and
(viii) participated in discussions and negotiations among
representatives of the Seller, the Buyer and their respective
advisors.
In addition, we have conducted such other analyses and examinations and
considered such other information and financial, economic and market criteria as
we deemed appropriate in rendering this opinion.
In our review and analysis and in rendering this opinion, we have assumed and
relied upon, but have not assumed any responsibility to independently
investigate or verify, the accuracy, completeness and fair presentation of all
financial and other information that was provided to us by the Seller and its
representatives or that was publicly available to us (including, without
limitation, the information described above), or that was otherwise reviewed by
us. This opinion is expressly conditioned upon such information (whether written
or oral) being complete and accurate in all material respects.
Accordingly, our analyses must be considered as a whole. Considering any portion
of such analyses or the factors considered, without considering all analyses and
factors, could create a misleading or incomplete view of the process underlying
the conclusions expressed herein. We expressly disclaim any undertaking or
obligation to advise any person of any change in any fact or matter affecting
our opinion of which we become aware after the date hereof.
In our review, we did not obtain any independent evaluation or appraisal of the
assets or liabilities of, nor did we conduct a comprehensive physical inspection
of any of the assets of, the Seller, nor have we been furnished with any such
evaluations or appraisals or reports of such physical inspections, nor do we
assume any responsibility to obtain any such evaluations, appraisals or
inspections. In addition, we have not evaluated the solvency or fair value of
the Seller under any state or federal laws relating to bankruptcy, insolvency or
similar matters. Our opinion is based on economic, monetary, regulatory, market
and other conditions existing and which can be evaluated as of the date hereof.
Such conditions are subject to rapid and unpredictable change and such changes
could affect the conclusions expressed herein. We have made no independent
investigation of any legal or accounting matters affecting the Seller and we
have assumed the correctness of all legal and accounting advice given to the
Seller and its Board of Directors, including, without limitation, any advice as
to the legal, accounting and tax consequences of the terms of, and the
transactions contemplated by, the Merger Agreement, to the Seller or any of its
stockholders. We did not attempt to independently determine the value of the
outstanding Series A Preferred Stock, Series A Notes, Warrants or Acquired
Shares or the appropriateness of the amounts to be received by the holders
thereof pursuant to the Securities Purchase Agreements on either an absolute or
relative basis and we are not rendering any opinion as to the fairness of the
consideration to be received by any party to any of the Securities Purchase
Agreements.
In rendering this opinion we have also assumed with your consent that:
(i) the final execution forms of the Merger Agreement and the
Securities Purchase Agreements will not differ in any material
respect from the last drafts reviewed by us;
(ii) in the course of obtaining the necessary regulatory or
third-party approvals, consents and releases for the Merger,
no delay, limitation, restriction or condition will be imposed
that would have an adverse effect on the Seller or the Merger;
(iii) the transactions contemplated by the Merger Agreement will be
consummated on the terms described in the Merger Agreement,
without any waiver, modification or amendment of any material
term, condition or agreement and that all conditions will be
satisfied without material expense; and
(iv) all material assets and liabilities (contingent or otherwise,
known or unknown) of the Seller were as set forth in the
consolidated financial statements provided to us by the
Seller, as of the dates of such financial statements.
It is understood that our opinion is for the use and benefit of the Board of
Directors of the Seller in the Seller's consideration of the Merger, is not on
behalf of, and shall not confer any rights or remedies upon, any other person,
and may not be used or relied upon for any other purpose. Our opinion does not
address the relative merits of the transactions contemplated by the Merger
Agreement as compared to any alternative transactions that might be available to
the Seller, nor does it address the underlying business decision by the Seller
to engage in the Merger or to enter into the Merger Agreement or any of the
documents referred to therein. Our opinion does not constitute a recommendation
as to how any holder of Common Stock of the Seller should vote on any matter
relevant to the Merger Agreement. Except as provided in our engagement letter
with the Seller, our opinion may not be used or referred to by the Seller, or
quoted or disclosed to any person in any matter, without our prior written
consent.
Based upon and subject to the foregoing, we are of the opinion as investment
bankers that, as of the date hereof, the Common Consideration to be received by
the holders of shares of Common Stock pursuant to the Merger Agreement, taking
into account the amount and form of consideration and taking into account the
consideration to be received by securityholders of the Company pursuant to the
Securities Purchase Agreements, is fair to the Common Stockholders of the
Company, from a financial point of view
Very truly yours,
/s/ Scura Rise & Partners, LLC
Scura, Rise & Partners, LLC
APPENDIX C
VOTING AGREEMENT
VOTING AGREEMENT dated July 3, 2006 (as amended, this "Voting
Agreement") is by and between VELOCITY EXPRESS CORPORATION, a Delaware
corporation ("Parent") and the individuals listed on Schedule A annexed hereto
(collectively, the "Stockholders" and each individually is a "Stockholder").
RECITALS
WHEREAS, the Stockholders are the record and beneficial owners of
shares of common stock, par value $0.001 per share the ("Shares"), of CD&L,
Inc., a Delaware corporation (the "Company") in the amounts set forth opposite
the Stockholder's name on Schedule A hereto; and
WHEREAS, prior to the execution and delivery of this Voting Agreement,
the Board of Directors of the Company has taken all actions required to: (a)
approve the execution and delivery of that certain Agreement and Plan of Merger
of even date herewith, by and between the Company, Buyer and CD&L Acquisition
Corp., a Delaware corporation ("Merger Sub") (the "Merger Agreement"), pursuant
to which Merger Sub will be merged with and into the Company, with the Company
continuing as the surviving corporation and as a direct wholly owned subsidiary
of Parent (the "Merger"); (b) prevent any right issued pursuant to that certain
Stockholder Protection Rights Agreement, dated as of December 27, 1999 between
the Company and American Stock Transfer & Trust Company, as Rights Agent, and
amended as of April 14, 2004 (the "Stockholder Protection Rights Agreement")
from being exercisable pursuant to the Stockholder Protection Rights Agreement
as a result of the transactions contemplated herein and under the Merger
Agreement or Purchase Agreement (as defined below); (c) prevent any Flip-in
Date, Flip-over Transaction or Event, Stock Acquisition Date or Separation Time
(as each such term is defined in the Stockholder Protection Rights Agreement)
from occurring as a result of the transactions contemplated herein or under the
Merger Agreement or Purchase Agreement (as defined below); and (d) waive the
applicability of Section 203 of the Delaware General Corporation Law with
respect to the acquisition by the Company, Newco and their affiliates and
associates of 15% or more of the Company's outstanding voting stock;
WHEREAS, concurrent with the execution of this Voting Agreement, Parent
and the Stockholders have entered into a Series A Convertible Subordinated
Debenture Purchase Agreement dated of even date herewith (as amended from time
to time, the "Purchase Agreement") pursuant to which Parent is acquiring from
Stockholders all of their Series A Convertible Subordinated Debentures;
WHEREAS, as an inducement and a condition to entering into the Merger
Agreement and the Purchase Agreement, Parent requires that each of the
Stockholders agree, and each of the Stockholders is willing to agree, to enter
into this Voting Agreement.
NOW, THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, Parent and each of the Stockholders, intending to be legally
bound, hereby agree as follows:
(1) Certain Definitions. In addition to the terms defined elsewhere
herein, capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement. For purposes of this Voting
Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to
any securities means having "beneficial ownership" of such
securities as determined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended (the "Exchange
Act"), including pursuant to any agreement, arrangement or
understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities
Beneficially Owned by a Person shall include securities
Beneficially Owned by all other Persons with whom such Person
would constitute a "group" within the meaning of Section
13(d)(3) of the Exchange Act.
(b) "Person" means any individual, corporation, partnership,
limited liability company, joint venture, association, joint
stock company, trust (including any beneficiary thereof),
unincorporated organization or government or any agency or
political subdivision thereof.
(2) Disclosure. Each of the Stockholders hereby agrees to permit the
Company and Parent to publish and disclose in the Company's Proxy Statement, and
any press release or other disclosure document which Parent and the Company
reasonably determine to be necessary or desirable in connection with the Merger
and any transactions related thereto, each Stockholder's identity and ownership
of the Shares and the nature of each Stockholder's commitments, arrangements and
understandings under this Voting Agreement.
(3) Voting of Company Stock.
(a) Each of the Stockholders hereby agrees that, during the period
commencing on the Closing of the Purchase Agreement and continuing until the
first to occur of (x) the Effective Time of the Merger, (y) the date of a
Company Adverse Recommendation Change by the Board of Directors of the Company
(the "Board") in connection with a Superior Competing Transaction and a
termination of the Merger Agreement as a result thereof in accordance with the
terms of the Merger Agreement, or (z) the date of termination of the Merger
Agreement for any reason in accordance with its terms (whichever date is first,
the "Termination Date"), at any meeting of the holders of the Shares, however
called, or in connection with any written consent of the holders of the Shares,
he shall vote (or cause to be voted) the Shares held of record or Beneficially
Owned by the Stockholder, whether now owned or hereafter acquired:
(i) in favor of approval of the Merger, adoption of the Merger
Agreement and any actions required in furtherance thereof and hereof,
(ii) against any action or agreement that would result in a
breach in any respect of any covenant, representation or warranty, or
any other obligation or agreement, of the Company under the Merger
Agreement or any Stockholder under this Voting Agreement, and
2
(iii) except as otherwise agreed to in writing in advance by
Parent, against the following actions (other than the Merger and the
transactions contemplated by this Voting Agreement and the Merger
Agreement):
(A) any extraordinary corporate transaction, such as a
merger, consolidation or other business
combination involving the Company;
(B) a sale, lease or transfer of a material amount of
assets of the Company, or a reorganization,
recapitalization, dissolution or liquidation of
the Company; or
(C) (1) any change in a majority of the individuals
who constitute the Company's board of directors;
(2) any change in the present capitalization of
the Company or any amendment of the Company's
Certificate of Incorporation or By-Laws;
(3) any material change in the Company's corporate
structure or business; or
(4) any other action which, in the case of each of
the matters referred to in clauses (C)(1), (2) or
(3), is intended, or could reasonably be expected,
to impede, interfere with, delay, postpone, or
materially and adversely affect the Merger and the
transactions contemplated by this Voting Agreement
and the Merger Agreement;
provided, however, that the restrictions in this clause (iii) shall not
apply to a vote in connection with a Superior Competing Offer if such
vote is made subsequent to a Company Adverse Recommendation Change by
the Board attributable to such Superior Competing Transaction.
(b) Each of the Stockholders agrees that the Stockholder's
obligations under this Voting Agreement are unconditional and will remain in
full force and effect notwithstanding that the Company may have received a
proposal for a Competing Transaction unless there is a termination of the Merger
Agreement for any reason in accordance with its terms, in which case this Voting
Agreement shall terminate, or unless the offer constitutes a Superior Competing
Transaction and there has been a Company Adverse Recommendation Change. Further,
none of the Stockholders will enter into any agreement or understanding with any
Person the effect of which would be inconsistent with or violative of any
provision contained in this Section 3. Nothing in this Section 3 shall require
any Stockholder to exercise any options or warrants with respect to the Shares
or to convert any convertible notes or other convertible securities.
3
(c) Contemporaneously with the execution of this Agreement, each
Stockholder, severally and not jointly, agrees to deliver to Purchaser a proxy
in the form attached hereto as EXHIBIT A, which shall be irrevocable, with
respect to the Shares, subject to the other terms of this Agreement.
(4) Covenants, Representations and Warranties of each Stockholder. Each
of the Stockholders hereby represents and warrants (with respect to such
Stockholder only and not with respect to each other Stockholder) to, and agrees
with, Parent as follows:
(a) Ownership of Securities. Such Stockholder is the sole record
and Beneficial Owner of the number of Shares set forth
opposite such Stockholder's name on Schedule A hereto. On the
date hereof, the Shares set forth opposite the Stockholder's
name on Schedule A hereto constitute all of the Shares owned
of record or Beneficially Owned by such Stockholder or with
respect to which such Stockholder has voting power by proxy,
voting agreement, voting trust or other similar instrument.
Such Stockholder has sole voting power and sole power to issue
instructions with respect to the matters set forth in Section
3 hereof, sole power of disposition, sole power of conversion,
sole power to demand and waive appraisal rights and sole power
to agree to all of the matters set forth in this Voting
Agreement, in each case with respect to all of the Shares set
forth opposite such Stockholder's name on Schedule A hereto,
with no limitations, qualifications or restrictions on such
rights, subject to applicable securities laws, and the terms
of this Voting Agreement.
(b) Authorization. Such Stockholder has the legal capacity, power
and authority to enter into and perform all of such
Stockholder's obligations under this Voting Agreement. The
execution, delivery and performance of this Voting Agreement
by such Stockholder will not violate any other agreement to
which such Stockholder is a party including, without
limitation, any voting agreement, stockholders agreement,
voting trust, trust or similar agreement. This Voting
Agreement has been duly and validly executed and delivered by
such Stockholder and constitutes a valid and binding agreement
enforceable against such Stockholder in accordance with its
terms. There is no beneficiary or holder of a voting trust
certificate or other interest of any trust of which such
Stockholder is a trustee whose consent is required for the
execution and delivery of this Voting Agreement or the
consummation by such Stockholder of the transactions
contemplated hereby. If such Stockholder is married and such
Stockholder's Shares constitute community property, this
Voting Agreement has been duly authorized, executed and
delivered by, and constitutes a valid and binding agreement
of, such Stockholder's spouse, enforceable against such person
in accordance with its terms.
4
(c) No Conflicts. (i) Except as may be required under Section 13
of the Exchange Act, no filing with, and no permit,
authorization, consent or approval of, any state or federal
public body or authority is necessary for the execution of
this Voting Agreement by such Stockholder and the consummation
by such Stockholder of the transactions contemplated hereby
and (ii) none of the execution and delivery of this Voting
Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or
compliance by such Stockholder with any of the provisions
hereof shall (A) conflict with or result in any breach of the
organizational documents of such Stockholder (if applicable),
(B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give
rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms,
conditions or provisions of any note, bond, mortgage,
indenture, license, contract, commitment, arrangement,
understanding, agreement or other instrument or obligation of
any kind to which such Stockholder is a party or by which such
Stockholder or any of its properties or assets may be bound,
or (C) violate any order, writ injunction, decree, judgment,
order, statute, rule or regulation applicable to such
Stockholder or any of its properties or assets.
(d) No Encumbrances. Except as applicable in connection with the
transactions contemplated by Section 3 hereof, such
Stockholder's Shares at all times during the term hereof will
be Beneficially Owned by such Stockholder, free and clear of
all liens, claims, security interests, proxies, voting trusts
or agreements, understandings or arrangements or any other
encumbrances whatsoever.
(e) No Solicitation. Such Stockholder agrees not to take any
action in his capacity as a record or beneficial owner of
Shares inconsistent with or in violation of Section 6.2 of the
Merger Agreement, provided that this paragraph (e) shall not
apply to actions which would otherwise be permitted to be
taken by the Company under Section 6.2 of the Merger
Agreement.
(f) Restriction on Transfer; Proxies and Non-Interference. Such
Stockholder shall not, directly or indirectly (i) except for a
Permitted Transfer (as defined below) and except as
contemplated by the Merger Agreement, offer for sale, sell,
transfer, tender, pledge, encumber, assign or otherwise
dispose of, or enter into any contract, option or other
arrangement or understanding with respect to or consent to the
offer for sale, sale, transfer, tender, pledge, encumbrance,
assignment or other disposition of, any or all of any such
Stockholder's Shares or any interest therein, (ii) except as
contemplated by this Voting Agreement, grant any proxies or
powers of attorney, deposit any Shares into a voting trust or
enter into a voting agreement with respect to the Shares, or
(iii) take any action that would make any representation or
warranty of such Stockholder contained herein untrue or
incorrect or have the effect of preventing or disabling such
Stockholder from performing such Stockholder's obligations
under this Voting Agreement.
5
(g) Reliance by Parent. Such Stockholder understands and
acknowledges that Parent is entering into the Merger Agreement
and the Purchase Agreement in reliance upon such Stockholder's
execution and delivery of this Voting Agreement.
(h) Permitted Transfer. Notwithstanding the foregoing or any other
provision of this Agreement to the contrary, any Stockholder
may sell or transfer any Shares to any Stockholder or any
other Person who executes and delivers to Parent an agreement,
in form and substance acceptable to Parent, to be bound by the
terms of this Agreement to the same extent as the transferring
Stockholder (any such transfer, a "Permitted Transfer").
(5) Waiver of Appraisal Rights. Each of the Stockholders hereby
irrevocably waives any and all appraisal, dissenter or other similar rights
which the Stockholder may otherwise have with respect to the consummation of the
Merger, including without limitation, any rights pursuant to Section 262 of the
Delaware General Corporation Law. Each of the Stockholders acknowledges that it
has been afforded a reasonably opportunity to review information and ask
questions regarding the Merger Agreement and the Merger.
(6) Stop Transfer Legend.
(a) Each of the Stockholders agrees and covenants to Parent that
such Stockholder shall not request that the Company register
the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of such Stockholder's
Shares, unless such transfer is made in compliance with this
Voting Agreement.
(b) Without limiting the covenants set forth in paragraph (a)
above, in the event of a stock dividend or distribution, or
any change in Shares by reason of any stock dividend,
split-up, recapitalization, combination, exchange of shares or
the like, other than pursuant to the Merger, the term "Shares"
shall be deemed to refer to and include the Shares into which
or for which any or all of the Shares may be changed or
exchanged and appropriate adjustments shall be made to the
terms and provisions of this Voting Agreement.
7. Further Assurances. From time to time, at Parent's request and
without further consideration, each Stockholder shall execute and deliver such
additional documents and take all such further lawful action as may be necessary
or desirable to consummate and make effective, in the most expeditious manner
practicable, the transactions contemplated by this Voting Agreement.
8. Stockholder Capacity. If any Stockholder is or becomes during the
term hereof a director or an officer of the Company, such Stockholder makes no
agreement or understanding herein in his capacity as such director or officer.
Each of the Stockholders signs solely in his or her capacity as the record and
Beneficial Owner of the Stockholder's Shares.
6
9. Termination. Except as otherwise provided herein, the covenants and
agreements contained herein with respect to the Shares shall terminate upon the
earlier of (a) the Termination Date regardless of the circumstances or (b) the
Effective Time of the Merger.
10. Miscellaneous.
(a) Entire Agreement. This Voting Agreement constitutes the entire
agreement among the parties with respect to the subject matter
hereof and supersedes all other prior agreements and
understandings, both written and oral, between the parties
with respect to the subject matter hereof.
(b) Certain Events. Subject to Section 4(f) hereof, each of the
Stockholders agrees that this Voting Agreement and the
obligations hereunder shall attach to each such Stockholder's
Shares and shall be binding upon any Person to which legal or
Beneficial Ownership of such Shares shall pass, whether by
operation of law or otherwise, including without limitation,
each Stockholder's heirs, guardians, administrators or
successors. Notwithstanding any such transfer of Shares, the
transferor shall remain liable for the performance of all
obligations under this Voting Agreement.
(c) Assignment. This Voting Agreement shall not be assigned by
operation of law or otherwise without the prior written
consent of Parent in the case of an assignment by any
Stockholder and each Stockholder in the case of any assignment
by Parent; provided that Parent may assign, in its sole
discretion, its rights and obligations hereunder to any direct
or indirect wholly owned subsidiary of Parent, but no such
assignment shall relieve Parent of its obligations hereunder
if such assignee does not perform such obligations.
(d) Amendment and Modification. This Voting Agreement may not be
amended, changed, supplemented, waived or otherwise modified
or terminated, except upon the execution and delivery of a
written agreement executed by the parties hereto affected by
such amendment.
(e) Notices. Any notice or other communication required or which
may be given hereunder shall be in writing and delivered (i)
personally, (ii) via telecopy, (iii) via overnight courier
(providing proof of delivery) or (iv) via registered or
certified mail (return receipt requested). Such notice shall
be deemed to be given, dated and received (i) when so
delivered personally, via telecopy upon confirmation, or via
overnight courier upon actual delivery or (ii) two days after
the date of mailing, if mailed by registered or certified
mail. Any notice pursuant to this section shall be delivered
as follows:
If to the Stockholder, to the address set forth for the
Stockholder on Schedule A to this Voting Agreement.
7
If to Parent:
Velocity Express Corporation
One Morningside Drive North
Building B, Suite 300
Westport, CT 06880
Attn: General Counsel
Facsimile: 952.835.4997
with copies to:
Budd Larner, PC
150 John F. Kennedy Parkway
Short Hills, NJ 07078
Attention: James F. Fitzsimmons, Esq.
Fax: 973.379.7734
and to
Briggs and Morgan, P.A.
2200 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attention: Avron L. Gordon, Esq.
Fax: 612.977.8650
(f) Severability. Whenever possible, each provision or portion of
any provision of this Voting Agreement will be interpreted in
such a manner as to be effective and valid under applicable
law but if any provision or portion of any provision of this
Voting Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule
in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or
portion of any provision of this Voting Agreement in such
jurisdiction, and this Voting Agreement will be reformed,
construed and enforced in such jurisdiction as if such
invalid, illegal or unenforceable provision or portion of any
provision had never been contained herein.
(g) Specific Performance. Each of the parties hereto agrees,
recognizes and acknowledges that a breach by it of any
covenants or agreements contained in this Voting Agreement
will cause the other parties to sustain damages for which they
would not have an adequate remedy at law for money damages,
and therefore each of the parties hereto agrees that in the
event of any such breach any aggrieved party shall be entitled
to the remedy of specific performance of such covenants and
agreements (without any requirement to post bond or other
security and without having to prove actual damages) and
injunctive and other equitable relief in addition to any other
remedy to which it may be entitled, at law or in equity.
8
(h) Remedies Cumulative. All rights, powers and remedies provided
under this Voting Agreement or otherwise available in respect
hereof at law or in equity shall be cumulative and not
alternative, and the exercise of any such rights, powers or
remedies by any party shall not preclude the simultaneous or
later exercise of any other such right, power or remedy by
such party.
(i) No Waiver. The failure of any party hereto to exercise any
right, power or remedy provided under this Voting Agreement or
otherwise available in respect hereof at law or in equity, or
to insist upon compliance by any other party hereto with its
obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, will not constitute
a waiver by such party of its right to exercise any such or
other right, power or remedy or to demand such compliance.
(j) No Third Party Beneficiaries. This Voting Agreement is not
intended to confer upon any person other than the parties
hereto any rights or remedies hereunder.
(k) Governing Law. This Voting Agreement will be governed and
construed in accordance with the laws of the State of
Delaware, without giving effect to the principles of conflict
of laws thereof.
(l) Submission to Jurisdiction. Each party to this Voting
Agreement irrevocably consents and agrees that any legal
action or proceeding with respect to this Agreement and any
action for enforcement of any judgment in respect thereof will
be brought in the state or federal courts located within the
jurisdiction of the United States District Court for the
Southern District of New York, and, by execution and delivery
of this Voting Agreement, each party to this Voting Agreement
hereby irrevocably submits to and accepts for itself and in
respect of its property, generally and unconditionally, the
exclusive jurisdiction of the aforesaid courts and appellate
courts from any appeal thereof. Each party to this Voting
Agreement further irrevocably consents to the service of
process out of any of the aforementioned courts in any such
action or proceeding by the mailing of copies thereof in the
manner set forth in Section 10(e). Each party to this Voting
Agreement hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in
connection with this Voting Agreement brought in the courts
referred to above and hereby further irrevocably waives and
agrees not to plead or claim in any such court that any such
action or proceeding brought in any such court has been
brought in an inconvenient forum. Nothing in this Section
10(l) shall be deemed to constitute a submission to
jurisdiction, consent or waiver with respect to any matter not
specifically referred to herein.
9
(m) WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES ANY
RIGHT TO A TRIAL BY JURY IN CONNECTION WITH ANY ACTION, SUIT
OR PROCEEDING IN CONNECTION WITH THIS VOTING AGREEMENT.
(n) Description Headings. The description headings used herein are
for convenience of reference only and are not intended to be
part of or to affect the meaning or interpretation of this
Voting Agreement.
(o) Counterparts. This Voting Agreement may be executed in
counterparts, each of which will be considered one and the
same Voting Agreement and will become effective when such
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.
(p) No Survival. No representations, warranties and covenants of
the Stockholder in this Agreement shall survive the Merger.
The Stockholder shall have no liability hereunder except for
any willful and material breach of this Agreement by the
Stockholder.
(q) Action in Stockholder Capacity Only. The parties acknowledge
that this Agreement is entered into by each Stockholder solely
in such Stockholder's capacity as the beneficial owner of such
Stockholder's Shares and, notwithstanding anything herein to
the contrary, nothing in this Agreement in any way restricts
or limits any action taken by such Stockholder or any designee
or related party of such Stockholder in his or her capacity as
a director or officer of the Company and the taking of any
actions in his or her capacity as an officer or director of
the Company will not be deemed to constitute a breach of this
Agreement, regardless of the circumstances related thereto.
[SIGNATURE PAGE FOLLOWS]
10
IN WITNESS WHEREOF, Parent and each of the Stockholders have caused
this Voting Agreement to be duly executed as of the day and year first above
written.
PARENT:
VELOCITY EXPRESS CORPORATION
By: /s/ E.W. Stone, Jr.
--------------------------
Name: E.W. Stone, Jr.
Title: CFO
STOCKHOLDERS:
/s/ Albert W. Van Ness, Jr.
-----------------------------------
Albert W. Van Ness, Jr.
/s/ William T. Brannan
-----------------------------------
William T. Brannan
/s/ Michael Brooks
-----------------------------------
Michael Brooks
/s/ Russell J. Reardon
-----------------------------------
Russell J. Reardon
/s/ Matthew J. Morahan
-----------------------------------
Matthew J. Morahan
/s/ Vincent P. Brana
-----------------------------------
Vincent P. Brana
/s/ Jack McCorkell
-----------------------------------
Jack McCorkell
11
SCHEDULE A
Stockholders
-----------------------------------------------------------------------------
STOCKHOLDER NAME AND ADDRESS NUMBER OF SHARES
-----------------------------------------------------------------------------
Albert W. Van Ness, Jr. 136,160
89 Silver Oaks Circle, Unit 5104
Naples, FL 34119
-----------------------------------------------------------------------------
William T. Brannan 113,796
2 Carmella Court
Cedar Grove, NJ 07009
-----------------------------------------------------------------------------
Michael Brooks 251,955
3986 N W 52nd Place
Boca Raton, Fl 33496
-----------------------------------------------------------------------------
Russell J. Reardon 74,238
11 Old Quarry Road
Cedar Grove, NJ 07009
-----------------------------------------------------------------------------
Matthew J. Morahan 360,512
18126 Southeast Village Circle
Tequesta, FL 33469
-----------------------------------------------------------------------------
Vincent P. Brana 357,000
527 Eastgate Road
Ho-ho-kus, NJ 07423
-----------------------------------------------------------------------------
Jack McCorkell 52,609
125 County Park Drive
Cranford, NJ 07016
-----------------------------------------------------------------------------
12
EXHIBIT A
IRREVOCABLE PROXY
Reference is made to that certain Voting Agreement dated the date
hereof (the "Voting Agreement") by and among Velocity Express Corporation, a
Delaware corporation ("Purchaser"), CD&L Acquisition Corp., a Delaware
corporation and wholly owned subsidiary of Purchaser ("Merger Sub"), and the
stockholders of the Company signatory thereto.
1. IRREVOCABLE PROXY.
(a) The undersigned stockholder (the "Stockholder") of CD&L,
Inc., a Delaware corporation (the "Company") hereby irrevocably appoints and
constitutes each of the Chief Executive Officer, the President, the Chief
Financial Officer and the Secretary of Purchaser (collectively the
"Proxyholders"), as the agents, attorneys and proxies of the undersigned
Stockholder, with full power of substitution and resubstitution, to the full
extent of the undersigned Stockholder's rights with respect to the shares of
Common Stock of the Company that are listed below (the "Shares"), and any and
all other shares or securities issued or issuable in respect thereof on or after
the date hereof and prior to the date this Irrevocable Proxy terminates, to vote
the Shares as set forth in this paragraph 1.
(b) The Proxyholders are empowered at any time prior to
termination of this Irrevocable Proxy to exercise all voting rights with respect
to such Shares (including, without limitation, the power to execute and deliver
written consents with respect to the Shares) of the undersigned Stockholder at
every annual, special or other meeting of stockholders of the Company and at any
adjournment or postponement thereof, however called, or pursuant to any written
consent in lieu of a meeting or otherwise (such rights, the "Proxy Rights") in
accordance with Section 3(a) of the Voting Agreement.
(c) The Proxyholders may not exercise these Proxy Rights with
respect to any matter except as specifically authorized herein. The Stockholder
may vote the Shares on all such other matters, subject to such other agreements
as the Stockholder may be subject or by which the Stockholder or the Shares may
be bound. The Proxy Rights granted by Stockholder to the Proxyholders hereby is
granted as of the date of this Irrevocable Proxy in order to secure the
obligations of such Stockholder set forth in Section 3(a) of the Voting
Agreement, and is irrevocable and coupled with an interest in such obligations.
2. TERMINATION. This Irrevocable Proxy will terminate upon the
termination of the Voting Agreement in accordance with its terms.
3. MISCELLANEOUS.
a. Upon the execution hereof, all prior proxies, voting
agreements or powers-of-attorney given by the undersigned Stockholder with
respect to the Shares and any and all other shares or securities issued or
issuable in respect thereof on or after the date hereof, or which are other
inconsistent herewith, are hereby revoked and no subsequent proxies or powers-of
attorney will be given, nor voting agreements made until such time as this
Irrevocable Proxy shall be terminated in accordance with its terms.
13
b. All authority conferred herein shall survive the
insolvency, liquidation, death or incapacity of the Stockholder and any
obligation of the Stockholder hereunder shall be binding upon the heirs,
personal representatives, successors and assigns of the Stockholder.
c. The undersigned Stockholder authorizes the Proxyholders to
file this Irrevocable Proxy and any substitution or revocation of substitution
with the Secretary of the Company and with any inspector of elections at any
meeting of stockholders of the Company.
d. The Provisions of Section 10 of the Voting Agreement, to
the extent applicable, shall be incorporated herein by reference.
[SIGNATURE PAGE FOLLOWS]
14
IN WITNESS WHEREOF, the undersigned Stockholder has caused this
Irrevocable Proxy to be executed personally or by a duly authorized
representative thereof as of the day and year set forth below.
DATED: June __, 2006
Signature
Name:
----------------------------------
Title:
---------------------------------
Address:
-------------------------------
Number of Shares Held Beneficially and of Record by Stockholder:
____________ Shares owned beneficially
____________ Shares owned of record
[SIGNATURE PAGE TO IRREVOCABLE PROXY]
15
APPENDIX D
SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW
(a) Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this section
with respect to such shares, who continuously holds such shares through the
effective date of the merger or consolidation, who has otherwise complied with
subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to ss. 228 of this
title shall be entitled to an appraisal by the Court of Chancery of the fair
value of the stockholder's shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of
stock of a constituent corporation in a merger or consolidation to be effected
pursuant to ss. 251 (other than a merger effected pursuant to ss. 251(g) of this
title), ss. 252, ss. 254, ss. 257, ss. 258, ss. 263 or ss. 264 of this title:
(1) Provided, however, that no appraisal rights under this section shall be
available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of ss. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to ss. ss.
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from such
merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in
respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts and cash
in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
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(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are
available pursuant to subsection (b) or (c) hereof that appraisal rights
are available for any or all of the shares of the constituent corporations,
and shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall
notify each stockholder of each constituent corporation who has complied
with this subsection and has not voted in favor of or consented to the
merger or consolidation of the date that the merger or consolidation has
become effective; or
(2) If the merger or consolidation was approved pursuant to ss. 228 or ss.
253 of this title, then either a constituent corporation before the
effective date of the merger or consolidation or the surviving or resulting
corporation within 10 days thereafter shall notify each of the holders of
any class or series of stock of such constituent corporation who are
entitled to appraisal rights of the approval of the merger or consolidation
and that appraisal rights are available for any or all shares of such class
or series of stock of such constituent corporation, and shall include in
such notice a copy of this section. Such notice may, and, if given on or
after the effective date of the merger or consolidation, shall, also notify
such stockholders of the effective date of the merger or consolidation. Any
stockholder entitled to appraisal rights may, within 20 days after the date
of mailing of such notice, demand in writing from the surviving or
resulting corporation the appraisal of such holder's shares. Such demand
will be sufficient if it reasonably informs the corporation of the identity
of the stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the
surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) hereof and who is otherwise entitled to appraisal
rights, may file a petition in the Court of Chancery demanding a determination
of the value of the stock of all such stockholders. Notwithstanding the
foregoing, at any time within 60 days after the effective date of the merger or
consolidation, any stockholder shall have the right to withdraw such
stockholder's demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
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(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders
who have complied with this section and who have become entitled to appraisal
rights. The Court may require the stockholders who have demanded an appraisal
for their shares and who hold stock represented by certificates to submit their
certificates of stock to the Register in Chancery for notation thereon of the
pendency of the appraisal proceedings; and if any stockholder fails to comply
with such direction, the Court may dismiss the proceedings as to such
stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court shall
appraise the shares, determining their fair value exclusive of any element of
value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares, together
with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon
the parties as the Court deems equitable in the circumstances. Upon application
of a stockholder, the Court may order all or a portion of the expenses incurred
by any stockholder in connection with the appraisal proceeding, including,
without limitation, reasonable attorney's fees and the fees and expenses of
experts, to be charged pro rata against the value of all the shares entitled to
an appraisal.
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(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the shares of
such objecting stockholders would have been converted had they assented to the
merger or consolidation shall have the status of authorized and unissued shares
of the surviving or resulting corporation.
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