pre14a
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 þ
Filed by a Party other than the Registrant o
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Preliminary Proxy Statement |
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Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
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Definitive Proxy Statement |
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Definitive Additional Materials |
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Soliciting Material Pursuant to §240.14a-12 |
EXPRESS-1 EXPEDITED SOLUTIONS, INC.
(Name of Registrant as Specified In Its Charter)
N/A
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
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No fee required. |
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Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
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Title of each class of securities to which transaction applies: |
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Aggregate number of securities to which transaction applies: |
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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): |
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Proposed maximum aggregate value of transaction: |
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Fee paid previously with preliminary materials. |
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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. |
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Form, Schedule or Registration Statement No.: |
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PRELIMINARY
PROXY MATERIAL SUBJECT TO COMPLETION
EXPRESS-1
EXPEDITED SOLUTIONS, INC.
3399 South Lakeshore Drive, Suite 225
Saint Joseph, Michigan 49085
[ ], 2011
Dear Fellow Stockholders:
On behalf of the Board of Directors of Express-1 Expedited
Solutions, Inc., a Delaware Corporation (the
Company, we,
us or our), we invite you
to join us at a special meeting of stockholders of the Company,
which will be held at [ ] at [ ], Eastern
Daylight Time, on [ ], 2011.
On June 13, 2011, the Company entered into an Investment
Agreement (the Investment Agreement) with
Jacobs Private Equity, LLC (JPE) and the
other investors party thereto (including by joinders thereto)
(collectively with JPE, the Investors),
providing for an aggregate investment by the Investors of up to
$150,000,000 in cash in the Company, including amounts payable
upon exercise of the warrants described herein. Up to an
aggregate of $135,000,000 of such investment will be made by
JPE. The Investment Agreement has been approved by the
Companys Board of Directors, acting upon the unanimous
recommendation of a special committee composed of independent
directors. Following the closing of the transactions
contemplated by the Investment Agreement, JPE will be the
controlling stockholder of the Company, and Bradley Jacobs, the
Managing Member of JPE, will become Chairman of the Board of
Directors of the Company. Mr. Jacobs will also become the
Companys Chief Executive Officer following the closing.
The Company expects to use the proceeds primarily to make
strategic acquisitions and any balance will be used for general
corporate purposes.
As controlling stockholder, JPE intends to cause the Company to
leverage its prominent positions in expedited transportation
solutions, freight brokerage and freight forwarding to make the
Company a platform for growth through strategic acquisitions and
organic expansion, with a view to building a multi-billion
dollar market leader.
Subject to the terms and conditions of the Investment Agreement,
upon the closing, the Company will issue to the Investors, for
$75,000,000 in cash, (i) shares of Series A
Convertible Perpetual Preferred Stock of the Company (the
Preferred Stock), which will initially be
convertible into an aggregate of 42,857,143 shares of
Company common stock (subject to adjustment in connection with
the contemplated reverse stock split described below) and will
vote together with the Company common stock on an
as-converted basis on all matters on which the
Company common stock may vote, except as otherwise required by
law, and (ii) warrants to purchase 42,857,143 shares
of Company common stock at an initial exercise price of $1.75
per share (subject to adjustment in connection with the
contemplated reverse stock split described below) (the
Warrants, and together with the Preferred
Stock, the Securities). We refer to this
investment as the Equity Investment, and to
the Equity Investment collectively with the other transactions
contemplated by the Investment Agreement as the
Proposed Transaction.
In connection with the closing of the Equity Investment, the
common stock of the Company will undergo a 4:1 reverse stock
split.
Upon the closing of the Equity Investment, the Board of
Directors will be reconstituted such that: (i) there will
be eight Board members, (ii) one of such directors will be
James Martell, our current Chairman, (iii) seven of such
directors will be designated by JPE (including Bradley Jacobs),
(iv) each standing committee of the Board will be
reconstituted in a manner reasonably acceptable to JPE and
(v) Bradley Jacobs will become the Chairman of the Board.
After giving effect to the reconstitution of the Board, a
majority of the members of the Board will continue to be
independent.
You will be asked, at the special meeting of the Companys
stockholders, to vote to approve, as a condition to the Equity
Investment, each of the following:
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1.
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The issuance of the Securities, which will constitute an
issuance of securities convertible into or exercisable for a
number of shares of Company common stock in excess of 20% of our
presently outstanding common stock, and thus requires the
approval of stockholders in accordance with NYSE Amex Rule 713;
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2.
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An amendment to the certificate of incorporation of the Company
(as amended, the Company Certificate) to
increase the number of authorized shares of Company common stock
to 150,000,000 shares;
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3.
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An amendment to the Company Certificate to give effect to a
4-for-1
reverse stock split of the Company common stock;
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4.
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An amendment to the Company Certificate providing that any
vacancy on our Board of Directors shall be filled by the
remaining directors or director (consistent with our existing
by-laws); and
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5.
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The 2011 Omnibus Incentive Compensation Plan, to be implemented
following the closing.
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The failure of the Companys stockholders to approve any of
the foregoing Proposals will prevent the Company from
consummating the Proposed Transaction.
The Board of Directors believes that the Proposed Transaction
is in the best interests of the Company and its stockholders
and, therefore, recommends that the Companys stockholders
vote FOR Proposals 1 through 5 at the special
meeting.
The proxy statement attached to this letter provides you with
information about the Proposed Transaction and the special
meeting of the Companys stockholders. We encourage you to
read the entire proxy statement carefully. You may also obtain
more information about the Company from documents we have filed
with the Securities and Exchange Commission. See Where
You Can Find Additional Information in the
accompanying proxy statement.
Regardless of the number of shares of Company common stock
you own, your vote is important. Because certain of the
Proposals require the approval of a majority of the outstanding
shares of Company common stock, the failure to vote on such
Proposals will have the same effect as a vote against each of
such Proposals. Whether or not you plan to attend the special
meeting, please take the time to submit a proxy by following the
instructions on your proxy card as soon as possible. If your
shares of Company common stock are held in an account at a
broker, dealer, commercial bank, trust company or other nominee,
you should instruct such broker or other nominee how to vote in
accordance with the voting instruction form furnished by such
broker or other nominee.
Voting by proxy will not prevent you from voting your shares in
person if you subsequently choose to attend the special meeting.
Thank you for your cooperation and continued support.
Sincerely,
[ ]
THE
ACCOMPANYING PROXY STATEMENT IS DATED [ ], 2011
AND IS FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT
[ ], 2011.
EXPRESS-1
EXPEDITED SOLUTIONS, INC.
3399 South Lakeshore Drive, Suite 225
Saint Joseph, Michigan 49085
NOTICE OF SPECIAL MEETING OF
STOCKHOLDERS
TO BE HELD ON [ ], 2011
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of
Express-1 Expedited Solutions, Inc., a Delaware corporation (the
Company, we,
us or our), will be
held at [ ] at [ ], Eastern Daylight Time,
on [ ], 2011, for the following purposes:
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1.
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To approve the issuance to Jacobs Private Equity, LLC
(JPE) and the other investors party to the
Investment Agreement, dated as of June 13, 2011 (the
Investment Agreement), for $75,000,000 in
cash, of (i) 75,000 shares of Series A
Convertible Perpetual Preferred Stock of the Company (the
Preferred Stock), which are initially
convertible into an aggregate of 42,857,143 shares of
Company common stock at a conversion price of $1.75 per share
(subject to adjustment in connection with the Reverse Stock
Split (as defined below)), and (ii) warrants to purchase
42,857,143 shares of Company common stock at an exercise
price of $1.75 per share (subject to adjustment in connection
with the Reverse Stock Split) (the Warrants,
and together with the Preferred Stock, the
Securities);
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2.
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To approve an amendment to the certificate of incorporation of
the Company (as amended, the Company
Certificate) to increase the number of authorized
shares of Company common stock to 150,000,000 shares;
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3.
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To approve an amendment to the Company Certificate to give
effect to a
4-for-1
reverse stock split of the Company common stock (the
Reverse Stock Split);
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4.
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To approve an amendment to the Company Certificate providing
that any vacancy on our Board of Directors shall be filled by
the remaining directors or director;
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5.
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To adopt the 2011 Omnibus Incentive Compensation Plan (the
Plan);
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To approve the adjournment of the special meeting, if necessary
or appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to adopt
Proposals 1 through 5; and
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To transact such other business as may properly come before the
special meeting or any adjournment or postponement thereof.
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Only stockholders of record as of the close of business on
[ ], 2011, are entitled to notice of and to vote at
the special meeting and at any adjournment or postponement of
the special meeting. All stockholders of record are cordially
invited to attend the special meeting in person.
The issuance of the Securities (Proposal 1) and the
adoption of the Plan (Proposal 5) require the
affirmative vote of a majority of the shares of Company common
stock voting thereon at a meeting at which a quorum is present.
The amendment to increase the number of authorized shares of
Company common stock (Proposal 2), the amendment to give
effect to the Reverse Stock Split (Proposal 3) and the
amendment to provide that vacancies on the Board of Directors
shall be filled by the remaining directors or director
(Proposal 4) require the affirmative vote of a
majority of the shares of Company common stock outstanding at
the close of business on the record date. The approval of the
adjournment of the special meeting
(Proposal 6) requires the affirmative vote of a
majority of the shares of Company common stock present and
entitled to vote at the special meeting, whether or not a quorum
is present. The failure of the Companys
stockholders to approve any of Proposals 1 through 5 will
prevent the Company from consummating the transactions
contemplated by the Investment Agreement.
Even if you plan to attend the special meeting in person, we
request that you submit a proxy by following the instructions on
your proxy card as soon as possible and thus ensure that your
shares will be represented at the special meeting if you are
unable to attend. Because Proposals 2, 3 and 4 require the
affirmative vote of a majority of the shares of Company common
stock outstanding at the close of business on the record date,
the failure to vote on such Proposals will have the same effect
as a vote against each of such Proposals. If you sign, date and
return your proxy card without indicating how you wish to vote,
your vote will be counted as a vote FOR
Proposals 1 through 5 (and, if necessary and appropriate,
Proposal 6). If your shares of Company common stock are
held in an account at a broker, dealer, commercial bank, trust
company or other nominee, you should instruct such broker or
other nominee how to vote in accordance with the voting
instruction form furnished by such broker or other nominee.
Whether you attend the special meeting or not, you may revoke a
proxy at any time before your proxy is voted at the special
meeting. You may do so by properly delivering a later-dated
proxy either by mail, the internet or telephone or by attending
the special meeting in person and voting. You also may revoke
your proxy by delivering a notice of revocation to the Company
(Attention: Chief Executive Officer, 3399 South Lakeshore Drive,
Suite 225, Saint Joseph, Michigan 49085) prior to the
vote at the special meeting. If you hold your shares through a
broker, dealer, commercial bank, trust company or other nominee,
you should follow the instructions of such broker or other
nominee regarding revocation of proxies.
By order of the Board of Directors,
[ ]
[ ]
Saint Joseph, Michigan
[ ],
2011
Important Notice of Internet Availability
This proxy statement for the special meeting to be held on
[ ],
2011, is available free of charge at
www.envisionreports.com/XPO2.
ii
SUMMARY
VOTING INSTRUCTIONS
Ensure that your shares of Company common stock can be voted
at the special meeting by submitting your proxy or contacting
your broker, dealer, commercial bank, trust company or other
nominee.
If your shares of Company common stock are registered in
the name of a broker, dealer, commercial bank, trust company or
other nominee: check the voting instruction card
forwarded by your broker or other nominee to see which voting
options are available or contact such broker or other nominee in
order to obtain directions as to how to ensure that your shares
of Company common stock are voted at the special meeting.
If your shares of Company common stock are registered in
your name: submit your proxy as soon as possible by
telephone, via the internet or by signing, dating and returning
the enclosed proxy card in the enclosed postage-paid envelope,
so that your shares of Company common stock can be voted at the
special meeting.
Instructions regarding telephone and internet voting are
included on the proxy card.
Because Proposals 2, 3 and 4 require the affirmative
vote of a majority of the shares of Company common stock
outstanding at the close of business on the record date, and
because Proposals 1 through 5 are conditioned on each
other, the failure to vote will have the same effect as a vote
against each of such Proposals. If you sign, date and return
your proxy card without indicating how you wish to vote, your
vote will be counted as a vote FOR Proposals 1
through 5 (and, if necessary and appropriate,
Proposal 6).
For additional questions about the Proposed Transaction,
assistance in submitting proxies or voting shares of Company
common stock, or to request additional copies of the proxy
statement or the enclosed proxy card, please contact the Company
at
(269) 429-9761.
iii
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Investment Agreement, dated as of June 13,
2011, by and among Jacobs Private Equity, LLC, each of the other
investors party thereto and Express-1 Expedited Solutions,
Inc.
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Fairness Opinion of Ladenburg
Thalmann & Co. Inc.
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Voting Agreement, dated as of June 13, 2011,
between Jacobs Private Equity, LLC and Michael R. Welch
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Voting Agreement, dated as of June 13, 2011,
between Jacobs Private Equity, LLC and Daniel Para
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v
QUESTIONS
AND ANSWERS ABOUT THE SPECIAL MEETING AND THE
PROPOSALS
The following questions and answers address briefly some
questions you may have regarding the special meeting and the
Proposals. These questions and answers may not address all
questions that may be important to you as a stockholder of the
Company. Please refer to the more detailed information contained
elsewhere in this proxy statement, the annexes to this proxy
statement and the documents referred to or incorporated by
reference in this proxy statement.
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Why did I receive these proxy materials? |
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We are providing these proxy materials in connection with the
solicitation by our Board of Directors of proxies to be voted at
the special meeting in connection with the transactions
contemplated by the Investment Agreement (such transactions,
collectively, the Proposed Transaction), as
further described in this proxy statement. |
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What items of business will be voted on at the special
meeting? |
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The business expected to be voted on at the special meeting is a
series of Proposals related to the Proposed Transaction,
described in detail in this proxy statement. |
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What is the Proposed Transaction? |
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The Investment Agreement with JPE and the other investors party
thereto (including by joinders thereto) (collectively with JPE,
the Investors) provides for an aggregate
investment by the Investors of up to $150,000,000 in cash in the
Company (including amounts payable upon exercise of the
Warrants). Pursuant to the Investment Agreement, at the closing,
the Investors will invest an aggregate of $75,000,000 in cash
into the Company in return for the Companys issuance of: |
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75,000 shares of Preferred Stock, which
shares will initially be convertible into 42,857,143 shares
of Company common stock at an initial conversion price of $1.75
per share of Company common stock (before giving effect to the
contemplated 4:1 Reverse Stock Split, and subject to customary
anti-dilution adjustments); the Preferred Stock carries an
annual cash dividend of 4% and will generally vote together with
the Company common stock on an as-converted basis on
all matters; and
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Warrants to purchase 42,857,143 shares of
Company common stock at an initial exercise price of $1.75 per
share (before giving effect to the 4:1 Reverse Stock Split, and
subject to customary anti-dilution adjustments); the Warrants
will be exercisable for 10 years.
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We refer to the foregoing transactions as the Equity
Investment. |
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In addition, in connection with the Equity Investment, among
other things: |
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The number of authorized shares of Company
common stock will be increased to 150,000,000;
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The Company common stock will undergo the 4:1
Reverse Stock Split;
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The Company Certificate will be amended to
provide that any vacancy on our Board of Directors shall be
filled by the remaining directors or director (consistent with
our by-laws as currently in effect);
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The Company will implement a new Omnibus
Incentive Compensation Plan; and
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The Board of Directors will be reconstituted
such that: (i) there will be eight directors, (ii) one
of such directors will be James Martell, our current Chairman
(or a replacement acceptable to JPE), (iii) seven of such
directors will be designated by JPE (including Bradley Jacobs,
the Managing Member of JPE), (iv) each standing committee
of the Board will be reconstituted in a manner reasonably
acceptable to JPE and (v) Bradley Jacobs will become the
Chairman of the Board; and JPE will have certain ongoing Board
nomination rights tied to its equity interest in the Company.
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Following the closing Mr. Jacobs will become the
Companys Chief Executive Officer. |
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What will I receive in the Proposed Transaction? |
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You will not receive any consideration in the Proposed
Transaction. Your shares of Company common stock will remain
outstanding following the closing of the Proposed Transaction,
and you will continue to participate as a stockholder by virtue
of such shares. |
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What percentage of the Companys voting stock will the
Investors own upon completion of the Proposed Transaction? |
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As of the record date, there were [ ] shares of
Company common stock outstanding, plus outstanding options to
purchase an additional [ ] shares of Company
common stock. Based upon the number of shares of Company common
stock outstanding on the record date, and excluding any shares
issuable upon the exercise of currently outstanding options, the
Investors would have held in the aggregate approximately
[ ]% of the total voting power of the Companys
capital stock before giving effect to the exercise of any
Warrants, and approximately [ ]% of the total voting
power of the Companys capital stock after giving effect to
the exercise of all of the Warrants. Because the Preferred Stock
votes on an as converted basis, the conversion of
the Preferred Stock into Company common stock will not affect
the general voting power allocable to the Preferred Stock upon
its issuance. The Reverse Stock Split will not affect the
relative percentage of the voting power held by any stockholder
or any of the Investors. |
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Where and when is the special meeting? |
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The special meeting will be held at [ ] at
[ ], Eastern Daylight Time, on [ ], 2011. |
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What vote is required to approve the Proposals? |
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The issuance of the Securities (Proposal 1) and the
adoption of the Plan (Proposal 5) require the
affirmative vote of a majority of the shares of Company common
stock voting thereon at a meeting at which a quorum is present.
The amendment to increase the number of authorized shares of
Company common stock (Proposal 2), the amendment to give
effect to the Reverse Stock Split (Proposal 3) and the
amendment to provide that vacancies on the Board of Directors
shall be filled by the remaining directors or director
(Proposal 4) require the affirmative vote of a
majority of the shares of Company common stock outstanding at
the close of business on the record date. The approval of the
adjournment of the special meeting
(Proposal 6) requires the affirmative vote of a
majority of the shares of Company common stock present and
entitled to vote at the special meeting, whether or not a quorum
is present. If the Companys stockholders fail to approve
any of Proposals 1 through 5, the Proposed Transaction will
not occur. |
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What are my voting choices? |
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You may vote FOR or AGAINST or you may
ABSTAIN from voting on any Proposal to be voted on
at the special meeting. Your shares will be voted as you
specifically instruct. If you sign your proxy or voting
instruction card without giving specific instructions, your
shares will be voted in accordance with the recommendations of
our Board of Directors and in the discretion of the proxy
holders on any other matters that properly come before the
meeting. Because Proposals 2, 3 and 4 require the
affirmative vote of a majority of the shares of Company common
stock outstanding at the close of business on the record date,
and because Proposals 1 through 5 are conditioned on each
other, an abstention will have the same effect as a vote against
each of such Proposals. |
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How does the Companys Board of Directors recommend that
I vote? |
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Our Board of Directors, after careful consideration and acting
on the unanimous recommendation of a special committee composed
entirely of independent directors, recommends that our
stockholders vote FOR the approval of each of
Proposals 1 through 5 and FOR
Proposal 6 to approve the adjournment of the special
meeting, if necessary or appropriate, to solicit additional
proxies if there are insufficient votes at the time of the
special meeting to approve each of Proposals 1 through 5. |
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James Martell, our current Chairman, is an Investor in the
Equity Investment and is expected to continue as a member of the
Board of Directors following the closing of the Equity
Investment, and consequently he recused himself from the
Boards approval of the Proposed Transaction and
recommendation of the Proposals. |
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You should read The Proposed
TransactionBackground of the Proposed
Transaction and The Proposed
TransactionReasons for the Proposed Transaction
for a discussion of the factors that our special committee and
Board of Directors considered in deciding to recommend the
approval of the Proposals. In addition, in considering the
recommendation of the special committee and the Board of
Directors in connection with the Proposed Transaction, you
should be aware that some of the Companys directors and
executive officers may have interests that are different from,
or in addition to, the interests of our stockholders generally.
See The Proposed TransactionInterests of the
Companys Directors and Executive Officers in the Proposed
Transaction, beginning on page [ ]. |
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Who can attend and vote at the special meeting? |
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All stockholders of record as of the close of business on
[ ], 2011, the record date for the special meeting,
are entitled to receive notice of and to attend and vote at the
special meeting, or any postponement or adjournment thereof. If
you wish to attend the special meeting and your shares of
Company common stock are held in an account at a broker, dealer,
commercial bank, trust company or other nominee (i.e., in
street name), you will need to bring a copy of your
voting instruction card or statement reflecting your share
ownership as of the record date. Street name holders
who wish to vote at the special meeting will need to obtain a
proxy from the broker, dealer, commercial bank, trust company or
other nominee that holds their shares of Company common stock.
Seating will be limited at the special meeting. Admission to the
special meeting will be on a first-come, first-served basis. |
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How will our directors and executive officers vote on the
Proposals with respect to the Proposed Transaction? |
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Our directors and current executive officers have informed us
that, as of the date of this proxy statement, they intend to
vote all of their shares of Company common stock in favor of the
approval of each of the Proposals with respect to the Proposed
Transaction. In particular, each of Michael Welch, Chief
Executive Officer and a director of the Company, and Daniel
Para, an officer and director of the Company, entered into
voting agreements with JPE, pursuant to which they have agreed,
in their capacities as stockholders of the Company and subject
to the terms of such agreements, to, among other things, vote
their shares of Company common stock in favor of the Proposals,
and have granted JPE a proxy in respect of their shares of
Company common stock in connection therewith. As of
[ ], 2011, the record date for the special meeting,
our directors and current executive officers owned, in the
aggregate, [ ] shares of Company common stock, or
collectively approximately [ ]% of the outstanding
shares of Company common stock. |
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What do I need to do now? |
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We urge you to read this proxy statement carefully, including
its annexes, and to consider how the Proposed Transaction
affects you. Then just mail your completed, dated and signed
proxy card in the enclosed return envelope as soon as possible
so that your shares can be voted at the special meeting of our
stockholders. Holders of record may also vote by telephone or
the internet by following the instructions on the proxy card. |
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What happens if I do not respond or if I respond and fail to
indicate my voting preference or if I abstain from voting? |
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If you fail to sign, date and return your proxy card or fail to
vote by telephone or internet as provided on your proxy card,
your shares of Company common stock will not be counted towards
establishing a quorum for the special meeting, which requires
holders representing a majority of the outstanding shares of
Company common stock to be present in person or by proxy. If you
respond and do not indicate your voting preference, we will
count your proxy as a vote in favor of the approval of each of |
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the Proposals relating to the Proposed Transaction. Because
Proposals 2, 3 and 4 require the affirmative vote of a
majority of the shares of Company common stock outstanding at
the close of business on the record date, and because
Proposals 1 through 5 are conditioned on each other, the
failure to vote will have the same effect as a vote against each
of such Proposals. |
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If my shares are held in street name by my
broker, dealer, commercial bank, trust company or other nominee,
will such broker or other nominee vote my shares for me? |
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You should instruct your broker or other nominee on how to vote
your shares using the instructions provided by such broker or
other nominee. Absent specific voting instructions, brokers or
other nominees who hold shares of Company common stock in
street name for customers are prevented by NYSE Amex
rules from exercising voting discretion in respect of
non-routine or contested matters. The Company expects that NYSE
Amex will evaluate the Proposals to be voted on at the special
meeting to determine whether each Proposal is a routine or
non-routine matter. Shares not voted by a broker or other
nominee because such broker or other nominee does not have
instructions or cannot exercise discretionary voting power with
respect to one or more Proposals are referred to as broker
non-votes. Such broker non-votes may not be counted for
the purpose of determining the presence of a quorum at the
special meeting in the absence of a routine Proposal. In
addition, because Proposals 2, 3 and 4 require the
affirmative vote of a majority of the shares of Company common
stock outstanding at the close of business on the record date, a
broker non-vote with respect to any of Proposals 2, 3 or 4
will have the same effect as a vote against such Proposal.
Therefore, it is important that you instruct your broker or
other nominee on how to vote your shares of Company common stock
held in street name in accordance with the voting
instructions provided by such broker or other nominee, because
the failure of the Companys stockholders to approve any of
the Proposals will prevent the Company from consummating the
Proposed Transaction. |
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How do I vote my shares held in the Companys Employee
Stock Ownership Plan? |
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The trustee of the plan will vote your plan shares as you direct
on your proxy card. If you do not vote your plan shares or if
you sign and return a proxy card but fail to indicate how you
wish to vote, the trustee will vote your plan shares in
accordance with the direction of the plans named
fiduciary, unless it is contrary to applicable law to do so. You
must complete, sign and return your proxy card, or vote by phone
or through the internet, no later than 5:00 p.m., Eastern
Daylight Time, on [ ], 2011, for the shares
represented by the proxy to be voted in the manner directed
therein. |
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Can I change my vote after I have mailed my proxy card? |
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Yes. Whether you attend the special meeting or not, you may
revoke a proxy at any time before your proxy is voted at the
special meeting. You may do so by properly delivering a
later-dated proxy either by mail, the internet or telephone or
by attending the special meeting in person and voting. You also
may revoke your proxy by delivering a notice of revocation to
the Company (Attention: Chief Executive Officer, 3399 South
Lakeshore Drive, Suite 225, Saint Joseph, Michigan
49085) prior to the vote at the special meeting. If you
hold your shares through a broker, dealer, commercial bank,
trust company or other nominee, you should follow the
instructions of such broker or other nominee regarding
revocation of proxies. |
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Am I entitled to appraisal rights? |
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No. You will have no right under Delaware law to seek
appraisal of your shares of Company common stock in connection
with the Proposed Transaction. |
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What is householding and how does it affect
me? |
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We have adopted a procedure approved by the Securities and
Exchange Commission (SEC) called
householding. Under this procedure, stockholders of
record who have the same address and last name will receive only
one copy of our Notice of Special Meeting and proxy statement,
unless one or more of these stockholders notifies us that they
wish to continue receiving individual copies. This |
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procedure will reduce our printing costs and postage fees.
Stockholders who participate in householding will continue to
receive separate proxy cards. |
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If you are eligible for householding, but you and other
stockholders of record with whom you share an address currently
receive multiple copies of our Notice of Special Meeting and
proxy statement, or if you hold stock in more than one account,
and in either case you wish to receive only a single copy of
each of these documents for your household, you may contact our
transfer agent, Computershare at: |
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Computershare |
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7530 Lucerne Drive, Suite 305 |
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Cleveland, OH 44130 |
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(440) 239-7361 |
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In addition, this proxy statement, the accompanying Notice of
Special Meeting and the proxy card are available on the internet
at www.envisionreports.com/XPO2. |
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If you participate in householding and wish to receive a
separate copy of this Notice of Special Meeting and proxy
statement, or if you do not wish to participate in householding
and prefer to receive separate copies of these documents in the
future, please contact Computershare as indicated above. |
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If your shares of Company common stock are held in an account at
a broker, dealer, commercial bank, trust company or other
nominee, you should also call such broker or other nominee for
additional information. |
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Can I obtain an electronic copy of proxy material? |
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A: |
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Yes, this proxy statement, the accompanying Notice of Special
Meeting and the proxy card are available on the internet at:
www.envisionreports.com/XPO2. |
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Who can help answer my other questions? |
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A: |
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If you have more questions about the Proposed Transaction or the
Proposals, you should contact the Company at
(269) 429-9761.
If you have questions regarding voting, you should contact the
proxy solicitation agent, Innisfree M&A Incorporated
(Innisfree), toll-free at (888) 750-5834. If
your shares of Company common stock are held in an account at a
broker, dealer, commercial bank, trust company or other nominee,
you should also call such broker or other nominee for additional
information. |
5
SUMMARY
The following summary highlights selected information from this
proxy statement and may not contain all of the information that
may be important to you. Accordingly, we encourage you to read
carefully this entire proxy statement, its annexes and the
documents referred to or incorporated by reference in this proxy
statement. Each item in this summary includes a page reference
directing you to a more complete description of that item.
The
Parties to the Proposed Transaction
(Page [ ])
Express-1 Expedited Solutions, Inc.
3399 South Lakeshore Drive, Suite 225
Saint Joseph, Michigan 49085
(269) 429-9761
The Company is a non-asset-based, third-party logistics services
provider that uses a network of relationships with ground, sea
and air carriers to find the best transportation solutions for
its customers. The Company offers its services through three
distinct business units: Express-1, Inc. (expedited
transportation solutions), the fifth largest U.S. expedited
freight service provider, according to The Journal of Commerce;
Concert Group Logistics, Inc. (domestic and international
freight forwarding); and Bounce Logistics, Inc. (premium
truckload brokerage). The Company serves more than 4,000 retail,
commercial, manufacturing and industrial customers through six
U.S. operations centers and 22 agent locations. In 2010,
the Company completed more than 144,000 transactions for
customers and generated revenues of approximately
$158 million. More information about the Company may be
found in the documents we file with the SEC. See Where
You Can Find Additional Information.
Jacobs Private Equity, LLC
350 Round Hill Road
Greenwich, CT 06831
(203) 413-4000
JPE is an investment vehicle of Bradley Jacobs.
Since 1979, Bradley Jacobs has founded and led four highly
successful companies, including two multi-billion dollar,
publicly-traded corporations: United Rentals (NYSE: URI), the
worlds largest equipment rental company, and United Waste
Systems, which was sold in 1997 for $2.5 billion. As
Chairman of United Rentals from 1997 through 2007,
Mr. Jacobs grew the company to $3.9 billion in
revenues, with more than 700 branch locations,
13,000 employees, and a ranking as the 536th largest
public corporation in America by Fortune magazine.
In 1989, Mr. Jacobs founded United Waste and built it into
the fifth largest solid waste management business in North
America. In 1987, he founded Hamilton Resources (UK) Ltd., a
worldwide oil trading company that served major oil companies
and oil-producing countries and generated annual revenues of
approximately $1 billion. In 1979, he co-founded Amerex Oil
Associates, Inc., creating one of the worlds largest oil
brokerage firms, with an annual gross contract volume of
approximately $4.7 billion.
Business
Strategy
As controlling stockholder, JPE intends to cause the Company to
leverage its prominent positions in expedited transportation
solutions, freight brokerage and freight forwarding to make the
Company a platform for growth through strategic acquisitions and
organic expansion, with a view to building a multi-billion
dollar market leader.
The
Special Meeting
Time, Place and Date (Page [ ])
The special meeting will be held at [ ] at
[ ], Eastern Daylight Time, on [ ], 2011.
6
Purpose (Page [ ])
You will be asked to consider and vote upon the following
Proposals in connection with the Proposed Transaction, the
approval of each of which is a condition to the closing of the
Proposed Transaction:
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The issuance of the Securities, which will constitute an
issuance of securities convertible into or exercisable for a
number of shares of Company common stock in excess of 20% of our
presently outstanding common stock, and thus requires the
approval of stockholders in accordance with NYSE Amex Rule 713
(Proposal 1);
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An amendment to the Company Certificate to increase the number
of authorized shares of Company common stock to
150,000,000 shares (Proposal 2);
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An amendment to the Company Certificate to give effect to the
4:1 Reverse Stock Split (Proposal 3);
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An amendment to the Company Certificate providing that any
vacancy on our Board of Directors shall be filled by the
remaining directors or director (consistent with our existing
by-laws) (Proposal 4); and
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To adopt the Plan (Proposal 5).
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In conjunction with the special meeting, you will be asked to
approve the adjournment of the special meeting, if necessary or
appropriate, to solicit additional proxies if there are
insufficient votes at the time of the special meeting to adopt
Proposals 1 through 5. You will also be asked to transact
such other business as may properly come before the special
meeting or any adjournment or postponement thereof.
Record Date and Voting (Page [ ])
You are entitled to vote at the special meeting if you owned
shares of Company common stock as of the close of business on
[ ], 2011, the record date for the special meeting.
You will have one vote for each share of Company common stock
that you owned on the record date. There are
[ ] shares of Company common stock entitled to
be voted.
Vote Required (Page [ ])
The issuance of the Securities (Proposal 1) and the
adoption of the Plan (Proposal 5) require the
affirmative vote of a majority of the shares of Company common
stock voting thereon at a meeting at which a quorum is present.
The amendment to increase the number of authorized shares of
Company common stock (Proposal 2), the amendment to give
effect to the Reverse Stock Split (Proposal 3) and the
amendment to provide that vacancies on the Board of Directors
shall be filled by the remaining directors or director
(Proposal 4) require the affirmative vote of a
majority of shares of Company common stock outstanding at the
close of business on the record date. The approval of the
adjournment of the special meeting
(Proposal 6) requires the affirmative vote of a
majority of the shares of Company common stock present and
entitled to vote at the special meeting, whether or not a quorum
is present. Failure to approve any of Proposals 1 through 5
will cause the Proposed Transaction not to occur.
Share Ownership of Directors and Executive Officers
(Page [ ])
As of [ ], 2011, the record date for the special
meeting, our directors and current executive officers
beneficially owned, in the aggregate, [ ] shares
of Company common stock, or collectively approximately
[ ]% of the outstanding shares of Company common
stock.
Voting and Proxies (Page [ ])
Any Company stockholder entitled to vote may vote by returning
the enclosed proxy card or by telephone or internet in
accordance with the instructions on the enclosed proxy card, or
by appearing at the special meeting. If your shares are held in
street name by your broker, dealer, commercial bank,
trust company or other nominee, you should instruct such broker
or other nominee on how to vote your shares using the
instructions provided by such broker or other nominee.
7
Revocability of Proxy (Page [ ])
Whether you attend the special meeting or not, you may revoke a
proxy at any time before your proxy is voted at the special
meeting. You may do so by properly delivering a later-dated
proxy either by mail, telephone or the internet or by attending
the special meeting in person and voting. You also may revoke
your proxy by delivering a notice of revocation to the Company
(Attention: Chief Executive Officer, 3399 South Lakeshore Drive,
Suite 225, Saint Joseph, Michigan 49085) prior to the
vote at the special meeting.
Simply attending the special meeting will not constitute
revocation of a proxy. If you have instructed your broker,
dealer, commercial bank, trust company or other nominee to vote
your shares, the above-described options for revoking your proxy
do not apply and instead you must follow the directions provided
by such broker or other nominee regarding revocation of proxies.
When Will
the Proposed Transaction be Completed
(Page [ ])
We are working to complete the Proposed Transaction as soon as
possible. We anticipate completing the Proposed Transaction in
the third quarter of 2011, subject to receipt of stockholder
approvals and satisfaction of the other closing conditions.
Recommendation
of the Companys Board of Directors
(Page [ ])
After careful consideration, our Board of Directors, acting upon
the unanimous recommendation of a special committee composed of
independent directors, recommends that the Companys
stockholders vote FOR the approval of each of
Proposals 1 through 5 (and, if necessary and appropriate,
Proposal 6).
Financial
Advisors Opinion (Page [ ])
Ladenburg Thalmann & Co. Inc.
(Ladenburg) has delivered to the special
committee of the Companys Board of Directors its opinion,
dated June 12, 2011, to the effect that, as of
June 12, 2011, based upon and subject to the assumptions
made, matters considered, procedures followed and limitations on
Ladenburgs review as set forth in the opinion, the
Proposed Transaction is fair, from a financial point of view, to
our stockholders. The full text of the written opinion, setting
forth the assumptions made, matters considered, procedures
followed and limitations in connection with the opinion, is
attached as Annex B to this proxy statement. We recommend
that you read the opinion in its entirety.
Ownership
Upon Closing (Page [ ])
As of the record date, there were [ ] shares of
Company common stock outstanding, plus outstanding options to
purchase an additional [ ] shares of Company
common stock. Based upon the number of shares of Company common
stock outstanding on the record date, and excluding any shares
issuable upon the exercise of currently outstanding options, the
Investors would have held in the aggregate approximately
[ ]% of the total voting power of the capital stock
of the Company before giving effect to the exercise of any
Warrants, and approximately [ ]% of the total voting
power of the capital stock of the Company after giving effect to
the exercise of all of the Warrants. Because the Preferred Stock
votes on an as converted basis, the conversion of
the Preferred Stock into Company common stock will not effect
the general voting power allocable to the Preferred Stock upon
its issuance. The Reverse Stock Split will not effect the
relative percentage of the voting power held by any stockholder
or Investor.
Interests
of the Companys Directors and Executive Officers in the
Proposed Transaction (Page [ ])
Our directors and executive officers may have interests in the
Proposed Transaction that are different from, or in addition to,
yours, including the vesting of stock options and the
entitlement to certain other benefits pursuant to their
employment agreements. James Martell, our current Chairman, is
an Investor in the Equity Investment and is expected to continue
as a member of the Board of Directors following the closing of
the Equity Investment, and consequently he recused himself from
the Board of Directors approval of the
8
Proposed Transaction and recommendation of the Proposals. Our
Board of Directors was aware of these interests and considered
them, among other matters, in making its determinations.
No
Solicitation of Transactions
(Page [ ])
The Investment Agreement contains restrictions on our ability to
solicit or engage in discussions or negotiations with third
parties regarding specified transactions involving the Company.
Notwithstanding these restrictions, under certain circumstances,
our Board of Directors may respond to a bona fide written
unsolicited proposal for an alternative acquisition. In certain
circumstances, we may also change our recommendation to the
Companys stockholders, terminate the Investment Agreement
and enter into an agreement with respect to a superior
acquisition proposal.
Conditions
to Closing (Page [ ])
The respective obligations of the Investors and the Company to
complete the Proposed Transaction are subject to the
satisfaction or waiver of certain conditions, including the
condition that Proposals 1 through 5 have been approved by
the stockholders.
The Company and JPE have determined that no filing under the
Hart-Scott-Rodino
Antitrust Improvements Act of 1976 (the HSR
Act), or any similar antitrust approval, is required
in connection with the Equity Investment.
The obligations of the Investors to complete the Proposed
Transaction are also subject to the satisfaction or waiver of
certain conditions, including that (i) the representations
and warranties of the Company in the Investment Agreement that
are qualified by materiality or material adverse effect must be
true and correct and all representations and warranties which
are not so qualified must be true and correct in all material
respects, (ii) the performance by the Company in all
material respects of all of its obligations in the Investment
Agreement, (iii) no material adverse effect has occurred
and (iv) all consents and approvals required to effect the
Equity Investment have been obtained, among others.
The obligations of the Company to complete the Proposed
Transaction are also subject to the satisfaction or waiver of
certain conditions, including that (i) the representations
and warranties of each Investor in the Investment Agreement that
are qualified by materiality must be true and correct and all
representations and warranties which are not so qualified must
be true and correct in all material respects and (ii) the
performance by the Investors in all material respects of all of
their obligations under the Investment Agreement.
Termination
of the Investment Agreement (Page [ ])
The Company and JPE may agree in writing to terminate the
Investment Agreement at any time prior to completing the Equity
Investment, even after the stockholders of the Company have
voted on the Proposals. The Investment Agreement may also be
terminated at any time prior to completing the Equity Investment
in certain other circumstances, including by either JPE or the
Company if the closing has not occurred on or before
December 13, 2011, so long as the failure to complete the
Equity Investment is not the result of the failure of the
terminating party to comply with the terms of the Investment
Agreement. The Investment Agreement may also be terminated at
any time prior to stockholder approval of the Proposals
(i) by JPE if the Board of Directors changes its
recommendation to the stockholders regarding the Proposals and
(ii) by the Company in order to enter into a definitive
agreement to consummate a superior acquisition
proposal.
Termination
Fee and Expenses (Page [ ])
Upon termination of the Investment Agreement in connection with
a superior proposal and certain other circumstances
described in the Investment Agreement, the Company may be
obligated to pay JPE a termination fee equal either to
$2,249,000 or $2,774,000, determined as provided in the
Investment Agreement. In addition, in the event the closing
occurs or the Investment Agreement is terminated in certain
specified circumstances, the Company will be obligated to
reimburse up to $1,000,000 of expenses of JPE.
9
JPE is obligated under the Investment Agreement to reimburse the
Company for fees paid by the Company to KPMG LLP in certain
circumstances.
Composition
of Board of Directors (Page [ ])
Upon the closing, the Board of Directors of the Company will be
reconstituted such that: (i) there will be eight Board
members, (ii) one of such directors will be James Martell,
our current Chairman (or a replacement acceptable to JPE),
(iii) seven of such directors will be designated by JPE
(including Bradley Jacobs), (iv) each standing committee of
the Board will be reconstituted in a manner reasonably
acceptable to JPE and (v) Bradley Jacobs will become the
Chairman of the Board. After giving effect to the reconstitution
of the Board, a majority of the members of the Board will
continue to be independent. Additionally, following the closing,
JPE will be entitled to nominate for election to the Board in
connection with each meeting of stockholders at which directors
are to be elected (i) a majority of the directors on the
Board, for so long as JPE controls at least 33% of the total
voting power of the capital stock of the Company on a
fully-diluted basis or (ii) 25% of the directors on the
Board, for so long as JPE controls at least 20% (but less than
33%) of the total voting power of the capital stock of the
Company on a fully-diluted basis.
Preferred
Stock Certificate of Designation
(Page [ ])
Pursuant to the Investment Agreement, the Company has agreed to
file the Certificate of Designation of Series A Convertible
Perpetual Preferred Stock of Express-1 Expedited Solutions, Inc.
(the Certificate of Designation) with respect
to the Preferred Stock, which sets forth the rights,
designations and preferences of the Preferred Stock.
The
Warrants (Page [ ])
Pursuant to the Investment Agreement, the Company has agreed to
issue warrant certificates with respect to the Warrants (each, a
Warrant Certificate), which will govern the
terms of the Warrants.
Registration
Rights Agreement (Page [ ])
Pursuant to the Investment Agreement, the Company has agreed to
enter into a Registration Rights Agreement concurrently with the
closing. The Registration Rights Agreement provides the
Investors with certain rights to cause the Company to register
the shares of Preferred Stock, the Warrants and shares of
Company common stock issued or issuable upon conversion of the
Preferred Stock or upon exercise of the Warrants.
Market
Price of Our Stock (Page [ ])
The Company common stock is traded on the NYSE Amex under the
trading symbol XPO. On June 13, 2010, which was
the last trading day before we entered into the Investment
Agreement, the closing price of the Company common stock was
$2.19 per share. On [ ], 2011, which was the last
trading day before this proxy statement was mailed, the closing
price of the Company common stock was $[ ] per share.
10
CAUTIONARY
STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
This proxy statement and the documents incorporated by reference
herein contain forward-looking statements. Statements that are
not historical facts, including statements about beliefs or
expectations, are forward-looking statements. These statements
are based on plans, estimates and projections at the time the
statements are made, and readers should not place undue reliance
on them. In some cases, readers can identify forward-looking
statements by the use of forward-looking terms such as
may, will, should,
expect, intend, plan,
anticipate, believe,
estimate, predict, potential
or continue or the negative of these terms or other
comparable terms. Forward-looking statements involve inherent
risks and uncertainties and readers are cautioned that a number
of important factors could cause actual results to differ
materially from those contained in any such forward-looking
statements. Factors that could cause actual results to differ
materially from those described in this proxy statement and the
documents incorporated by reference herein include, among
others: uncertainties as to the timing of the Equity Investment;
the possibility that competing transaction proposals will be
made; the possibility that various closing conditions for the
Equity Investment may not be satisfied or waived; the
possibility that the Warrants, if issued, will not be exercised;
general economic and business conditions; the possibility that
the Company may be unable to identify suitable acquisition
candidates or otherwise execute its business plan after closing;
and other factors. Readers are cautioned not to place undue
reliance on the forward-looking statements included in this
proxy statement and the documents incorporated by reference
herein, which speak only as of the date hereof or of the
applicable incorporated document. Neither the Company nor any
other person undertakes any obligation to update any of these
statements in light of new information or future events. Some
important factors (but not necessarily all factors) that could
negatively affect our revenues, growth strategies, future
profitability and operating results, or that otherwise could
cause actual results to differ materially from those expressed
in or implied by any forward-looking statement, include the
following:
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the risk that the Proposed Transaction is not completed;
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the possibility that alternative takeover proposals will or will
not be made;
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the amount of fees and expenses related to the Proposed
Transaction;
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the effect of the announcement of the Proposed Transaction on
our business relationships;
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the diversion of managements attention from ongoing
business concerns;
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the inability of the Company to identify suitable acquisition
candidates, integrate acquisitions or access the capital markets
or otherwise fail to execute its business plan after closing;
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changes in business and economic conditions and other adverse
conditions in our markets;
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increased competition could lead to negative pressure on our
pricing and the need for increased marketing;
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our inability to maintain, establish or renew relationships with
customers, whether due to competition or other factors;
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the Investment Agreements contractual restrictions on the
conduct of the business prior to the completion of the Proposed
Transaction;
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our operating results and business generally, including our
ability to retain key employees; and
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other risks set forth in the Companys filings with the
SEC, which filings are available without charge at www.sec.gov.
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11
THE
PARTIES TO THE PROPOSED TRANSACTION
Express-1
Expedited Solutions, Inc.
The Company is a non-asset-based, third-party logistics services
provider that uses a network of relationships with ground, sea
and air carriers to find the best transportation solutions for
its customers. The Company offers its services through three
distinct business units: Express-1, Inc. (expedited
transportation solutions), the fifth largest U.S. expedited
freight service provider, according to The Journal of
Commerce; Concert Group Logistics, Inc. (domestic and
international freight forwarding); and Bounce Logistics, Inc.
(premium truckload brokerage). The Company serves more than
4,000 retail, commercial, manufacturing and industrial customers
through six U.S. operations centers and 22 agent locations.
In 2010, the Company completed more than 144,000 transactions
for customers and generated revenues of approximately
$158 million. Our principal executive office is located at
3399 South Lakeshore Drive, Suite 225, Saint Joseph,
Michigan 49085. Our telephone number is
(269) 429-9761.
More information about the Company may be found in the documents
we file with the SEC. See Where You Can Find Additional
Information.
Jacobs
Private Equity, LLC
JPE was formed by Bradley Jacobs to make a substantial equity
investment in a company with the potential for exceptional value
creation. Since 1979, Bradley Jacobs has founded and led four
highly successful companies, including two multi-billion dollar,
publicly-traded corporations: United Rentals (NYSE: URI), the
worlds largest equipment rental company, and United Waste
Systems, which was sold in 1997 for $2.5 billion. As
Chairman of United Rentals from 1997 through 2007, Jacobs grew
the company to $3.9 billion in revenues, with more than 700
branch locations, 13,000 employees and a ranking as the
536th largest public corporation in America by Fortune
magazine.
In 1989, Jacobs founded United Waste and built it into the fifth
largest solid waste management business in North America. In
1987, he founded Hamilton Resources (UK) Ltd., a worldwide oil
trading company that served major oil companies and
oil-producing countries and generated annual revenues of
approximately $1 billion. In 1979, he co-founded Amerex Oil
Associates, Inc., creating one of the worlds largest oil
brokerage firms, with an annual gross contract volume of
approximately $4.7 billion. The mailing address of the
principal executive offices of JPE is Jacobs Private Equity,
LLC, 350 Round Hill Road, Greenwich, CT 06831. The telephone
number is
(203) 413-4000.
12
THE
SPECIAL MEETING
Time,
Place and Purpose of the Special Meeting
This proxy statement is being furnished to our stockholders as
part of the solicitation of proxies by our Board of Directors
for use at the special meeting that will be held at
[ ], at [ ], Eastern Daylight Time, on
[ ], 2011.
The purpose of the special meeting is for our stockholders to
consider and vote to approve the Proposals in connection with
the Proposed Transaction. Our stockholders must approve all five
transaction-related Proposals for the Proposed Transaction to
occur. If the stockholders fail to approve any of the five
transaction-related Proposals, the Proposed Transaction will not
occur. This proxy statement and the enclosed form of proxy
are first being mailed to our stockholders on or about
[ ], 2011.
Record
Date and Voting
The holders of record of shares of Company common stock as of
the close of business on [ ], 2011, the record date
for the special meeting, are entitled to receive notice of, and
to vote at, the special meeting. On the record date, there were
[ ] outstanding shares of Company common stock.
Holders representing a majority of the outstanding shares of
Company common stock on [ ], 2011, represented in
person or by proxy, will constitute a quorum for purposes of the
special meeting. A quorum is necessary to hold the special
meeting. For purposes of determining the presence of a quorum,
abstentions will be included in determining the number of shares
present and voting at the special meeting; however, broker
non-votes will not be included in the number of shares present
and voting at the special meeting. Any shares of common stock
held in treasury by the Company or by any of its subsidiaries
are not considered to be outstanding for purposes of determining
a quorum. Once a share is represented at the special meeting, it
will be counted for the purpose of determining a quorum at the
special meeting and any adjournment or postponement of the
special meeting. However, if a new record date is set for the
adjourned special meeting, then a new quorum will have to be
established.
Required
Vote
Each outstanding share of Company common stock on
[ ], 2011 entitles the holder to one vote at the
special meeting. The issuance of the Securities
(Proposal 1) and the adoption of the Plan
(Proposal 5) require the affirmative vote of a
majority of the shares of Company common stock voting thereon at
a meeting at which a quorum is present. The amendment to
increase the number of authorized shares of Company common stock
(Proposal 2), the amendment to give effect to the Reverse
Stock Split (Proposal 3) and the amendment to provide
that vacancies on the Board of Directors shall be filled by the
remaining directors or director (Proposal 4) require
the affirmative vote of a majority of the shares of Company
common stock outstanding at the close of business on the record
date. The approval of the adjournment of the special meeting
(Proposal 6) requires the affirmative vote of a
majority of the shares of Company common stock present and
entitled to vote at the special meeting, whether or not a quorum
is present. Proposals 1 through 5 are each conditioned on
the others. If the stockholders fail to approve any of
Proposals 1 through 5, the Proposed Transaction will not
occur. In order for your shares of Company common stock to be
included in the vote, you must vote your shares by completing,
signing, dating and returning the enclosed proxy card or by
voting by telephone or the internet in accordance with the
instructions set forth on the proxy card, or by voting in person
at the special meeting.
If your shares are held in street name by your
broker, dealer, commercial bank, trust company or other nominee,
you should instruct your broker or other nominee on how to vote
your shares using the instructions provided by such broker or
other nominee. If you have not received such voting instructions
or require further information regarding such voting
instructions, contact your broker or other nominee and they can
give you directions on how to vote your shares. Absent specific
voting instructions, brokers or other nominees who hold shares
of Company common stock in street name for customers
are prevented by NYSE Amex rules from exercising voting
discretion in respect of non-routine or contested matters. The
Company
13
expects that NYSE Amex will evaluate the Proposals to be voted
on at the special meeting to determine whether each Proposal is
a routine or non-routine matter. Shares not voted by a broker or
other nominee because such broker or other nominee does not have
instructions or cannot exercise discretionary voting power with
respect to one or more Proposals are referred to as broker
non-votes. Such broker non-votes may not be counted for
the purpose of determining the presence of a quorum at the
special meeting in the absence of a routine Proposal. In
addition, because Proposals 2, 3 and 4 require the
affirmative vote of a majority of the shares of Company common
stock outstanding at the close of business on the record date, a
broker non-vote with respect to any of Proposals 2, 3 or 4
will have the same effect as a vote against such Proposal.
Therefore, it is important that you instruct your broker or
other nominee on how to vote your shares of Company common stock
held in street name in accordance with the voting
instructions provided by such broker or other nominee, because
the failure of the Companys stockholders to approve any of
the Proposals will prevent the Company from consummating the
Proposed Transaction.
Our directors and current executive officers have informed us
that, as of the date of this proxy statement, they intend to
vote all of their shares of Company common stock in favor of the
approval of each of the Proposals with respect to the Proposed
Transaction. In particular, each of Michael Welch, Chief
Executive Officer and a director of the Company, and Daniel
Para, an officer and director of the Company, have entered into
voting agreements with JPE, pursuant to which they have agreed,
in their capacities as stockholders of the Company and subject
to the terms of such agreements, to, among other things, vote
their shares of Company common stock in favor of the Proposals,
and have granted JPE a proxy in respect of their shares of
Company common stock in connection therewith. As of
[ ], 2011, the record date for the special meeting,
our directors and current executive officers beneficially owned,
in the aggregate, [ ] shares of Company common
stock, or collectively approximately [ ]% of the
outstanding shares of Company common stock.
Proxies;
Revocation
If you vote your shares of Company common stock by properly
completing, signing, dating and returning the enclosed proxy
card or by voting by telephone or the internet in accordance
with the instructions set forth on the proxy card, your shares
will be voted at the special meeting as you have indicated. If
you vote by returning the enclosed proxy card and no
instructions are indicated on your signed and dated proxy card,
your shares of Company common stock will be voted
FOR Proposals 1 through 5 (and, if necessary
and appropriate, Proposal 6) at the special meeting.
Whether you attend the special meeting or not, you may revoke
your proxy at any time before the vote is taken at the special
meeting. You may do so by properly delivering a later-dated
proxy either by mail, the internet or telephone or attending the
special meeting in person and voting. You also may revoke your
proxy by delivering a notice of revocation to the Company
(Attention: Chief Executive Officer, 3399 South Lakeshore Drive,
Suite 225, Saint Joseph, Michigan 49085) prior to the
vote at the special meeting.
If you have instructed your broker, dealer, commercial bank,
trust company or other nominee to vote your shares, the
above-described options for revoking your proxy do not apply and
instead you must follow the directions provided by such broker
or other nominee to change these instructions.
The Company does not expect that any matter other than the
Proposals with respect to the Proposed Transaction will be
brought before the special meeting. If, however, such a matter
is properly presented at the special meeting or any adjournment
or postponement of the special meeting, the persons appointed as
proxies will have discretionary authority to vote the shares
represented by duly executed proxies in accordance with their
discretion and judgment only with respect to routine and
uncontested matters. No such discretionary authority to vote
such shares will exist with respect to non-routine or contested
matters pursuant to NYSE Amex rules and applicable law.
The Company will pay the cost of this proxy solicitation, other
than the fees and expenses of Innisfree, which will be paid by
JPE. In addition to soliciting proxies by mail, directors,
officers and employees of the Company may solicit proxies
personally and by telephone, facsimile or other electronic means
of communication. These persons will not receive additional or
special compensation for such solicitation services. The Company
will, upon request, reimburse brokers, dealers, commercial
banks, trust companies or
14
other nominees for their expenses in sending proxy materials to
their customers who are beneficial owners and obtaining their
voting instructions. JPE has retained Innisfree to assist in the
solicitation of proxies for the special meeting and will pay
Innisfree a fee not to exceed $25,000, plus reimbursement of
out-of-pocket
expenses.
Independent
Registered Public Accountants
Representatives of KPMG LLP, the principal independent
registered public accountant for the Company for the fiscal year
ending December 31, 2011, are not expected to be present at
the special meeting. Representatives of Pender
Newkirk & Company LLP, the principal independent
registered public accountant for the Company for the fiscal year
ending December 31, 2010, are not expected to be present at
the special meeting.
Adjournments
and Postponements
Although it is not expected, the special meeting may be
adjourned or postponed for the purpose of soliciting additional
proxies. Any adjournment or postponement may be made without
notice, other than by an announcement made at the special
meeting, by approval of the holders of a majority of the
outstanding shares of Company common stock present in person or
represented by proxy at the special meeting, whether or not a
quorum exists. Any signed proxies received by the Company will
be voted in favor of an adjournment or postponement in these
circumstances. Any adjournment or postponement of the special
meeting for the purpose of soliciting additional proxies will
allow Company stockholders who have already sent in their
proxies to revoke them at any time prior to their use.
15
THE
PROPOSED TRANSACTION
Description
of the Proposed Transaction
On June 13, 2011, the Company entered into the Investment
Agreement with JPE and the other Investors party thereto,
providing for an aggregate investment by the Investors of up to
$150,000,000 in cash in the Company, including amounts payable
upon exercise of the Warrants. Up to an aggregate of
$135,000,000 of such investment will be made by JPE. The
Investment Agreement has been approved by the Companys
Board of Directors, acting upon the unanimous recommendation of
a special committee composed of independent directors. Following
the closing of the Proposed Transaction, JPE will be the
controlling stockholder of the Company, and Bradley Jacobs, the
Managing Member of JPE, will become Chairman of the Board of
Directors of the Company. Mr. Jacobs will also become the
Companys Chief Executive Officer following the closing.
Under the terms of the Investment Agreement, the Investors will
invest $75,000,000 in cash into the Company in exchange for
75,000 shares of Preferred Stock and 42,857,143 Warrants
exercisable into one share each of Company common stock. The
Preferred Stock will have an initial liquidation preference of
$1,000 per share, for an aggregate initial liquidation
preference of $75,000,000. The Preferred Stock will be
convertible at any time, in whole or in part and from time to
time, at the option of the holder thereof into a number of
shares of Company common stock equal to the then-applicable
liquidation preference divided by the conversion price, which
will initially be $1.75 per share of Company common stock
(before giving effect to the contemplated 4:1 Reverse Stock
Split, and subject to customary anti-dilution adjustments), for
an effective initial aggregate conversion rate of
42,857,143 shares of Company common stock. The Preferred
Stock will pay quarterly cash dividends equal to the greater of
(i) the as-converted dividends on the
underlying Company common stock for the relevant quarter and
(ii) 4% per annum of the then-applicable liquidation
preference. Accrued and unpaid dividends for any completed
quarter will accrete to liquidation preference for all purposes.
The Preferred Stock is not redeemable or subject to any required
offer to purchase, and will vote together with the
Companys common stock on an as-converted basis
on all matters, except as otherwise required by law, and
separately as a class with respect to certain matters
implicating the rights of holders of shares of Preferred Stock.
The terms of the Preferred Stock are more fully set forth in
Exhibit A to the Investment Agreement, which is filed
herewith as Annex A and incorporated by reference herein.
Each Warrant will initially be exercisable at any time and from
time to time from the closing date until the tenth anniversary
of the closing date, at the option of the holder thereof, into
one share of Company common stock at an initial exercise price
of $1.75 in cash per share of Company common stock (before
giving effect to the contemplated 4:1 Reverse Stock Split, and
subject to customary anti-dilution adjustments). The initial
aggregate number of shares of Company common stock subject to
Warrants will be 42,857,143 shares. The terms of the
Warrants are more fully set forth in Exhibit B to the
Investment Agreement, which is filed herewith as Annex A
and incorporated by reference herein.
Upon the closing of the Equity Investment, the Board of
Directors will be reconstituted such that: (i) there will
be eight Board members, (ii) one of such directors will be
James Martell, our current Chairman, (iii) seven of such
directors will be designated by JPE (including Bradley Jacobs),
(iv) each standing committee of the Board will be
reconstituted in a manner reasonably acceptable to JPE and
(v) Bradley Jacobs will become the Chairman of the Board.
After giving effect to the reconstitution of the Board of
Directors, a majority of the members of the Board will continue
to be independent.
In addition to the Equity Investment, the Proposed Transaction
contemplates: (i) an amendment to the Company Certificate
to increase the number of authorized shares of Company common
stock to 150,000,000 shares; (ii) an amendment to the
Company Certificate to give effect to the
4-for-1
Reverse Stock Split; (iii) an amendment to the Company
Certificate providing that any vacancy on our Board of Directors
shall be filled by the remaining directors or director
(consistent with our existing by-laws as currently in effect);
and (iv) implementation of the Plan.
16
Business
Strategy
As controlling stockholder, JPE intends to leverage the
Companys prominent positions in expedited transportation
solutions, freight brokerage and freight forwarding to make the
Company a platform for growth, with a view to building a
multi-billion dollar market leader. JPE intends to grow the
Company organically and through multiple strategic acquisitions.
Bradley Jacobs, the Managing Member of JPE, has extensive
experience growing companies in fragmented industries. Since
1979, he has founded and led four highly successful companies,
including two multi-billion dollar, publicly-traded
corporations: United Rentals, the worlds largest equipment
rental company, and United Waste Systems, which was sold for
$2.5 billion. Mr. Jacobs co-founded United Rentals in
1997 to capitalize on the early-stage consolidation
opportunities in the construction equipment rental industry in
North America. As chairman of United Rentals from 1997 through
2007, Mr. Jacobs grew the company to $3.9 billion in
revenues. Mr. Jacobs oversaw the completion of over 400
acquisitions at United Rentals and United Waste Systems. In
addition, he has been instrumental in raising more than
$6 billion in the debt and equity markets since 1992.
The combined annual revenues of international freight forwarding
and domestic freight brokerage companies are approximately
$200,000,000,000. Of the over 10,000 licensed freight brokers in
the industry, only a few dozen have revenues in excess of
$200,000,000 per year. Given this size and fragmentation, JPE
views the Companys industry segments as a prime
opportunity for consolidation and growth in market share. In
addition, JPE intends to grow the Company organically by
utilizing the increased access to capital markets, and reduced
working capital constraints, that it expects to result from the
Proposed Transaction.
JPE intends to cause the Company to pursue dynamic growth in the
freight brokerage business though strategic acquisitions. JPE
also intends to cause the Company to pursue robust internal
growth through new hires.
In the freight forwarding business, JPE intends to generate
additional growth at the Company by increasing the number of
domestic agents (currently 22) by approximately 10 agents
over the next several years. In addition, JPE intends to cause
the Company to expand its presence in international freight
forwarding by growing its existing owned operations in Florida
by hiring additional personnel, and by acquiring additional
international freight forwarding businesses both domestically
and abroad and expanding those acquired companies organically by
hiring additional personnel.
JPE intends to cause the Company to grow the expedited
transportation solutions business in the near-term organically
through accelerated recruiting of owner-operators and the hiring
of additional sales and support personnel. In addition, JPE
intends to cause the Company to pursue complimentary
acquisitions on a selective basis.
The foregoing description of the post-closing business strategy
of the Company includes forward-looking statements that are
subject to numerous risks and uncertainties. See
Cautionary Statement Concerning Forward-Looking
Information on page [ ] of this proxy
statement.
Background
of the Proposed Transaction
Our Board of Directors and senior management periodically review
the Companys long-term strategic plan with the goal of
maximizing stockholder value. As part of this ongoing process,
the Board and senior management also have periodically reviewed
strategic alternatives that may be available to the Company.
On April 19, 2010, at a regularly scheduled meeting of the
Board of Directors, Michael Welch, the Companys Chief
Executive Officer, presented managements then current
estimates for first quarter results and managements then
current outlook for the second quarter and full year performance
to the Board. A discussion ensued regarding the Companys
financial and operational performance relative to the valuation
placed on the Company by the public equity markets. The Board of
Directors agreed that the market valuation of the Company, which
had changed little over the last several years, failed to
accurately reflect the Companys financial and operational
results. The Board of Directors concluded that industry research
analysts were not
17
focusing on the Company and that the Company was not well
positioned to attract the interest of institutional investors,
principally because of its size. The Board resolved to have
preliminary discussions with investment bankers to determine if
other strategic alternatives were available to the Company that
would provide more value to the Companys stockholders.
Over the ensuing 30 days, members of the Board of Directors
discussed the Companys financial and operational
performance with a number of investment banks. Based on those
discussions, James Martell, the Chairman of the Board, contacted
Calvin Pete Whitehead, Jennifer H. Dorris and John
F. Affleck-Graves, each of whom is independent under the rules
of the NYSE Amex, and requested that they, as a special
committee of the Board of Directors, take additional steps to
analyze the Companys business and outlook, industry
positioning and potential strategic planning and alternatives,
and to formally interview investment banks to serve as financial
advisors to the special committee. On May 27, 2010,
Mr. Whitehead, Mrs. Dorris and Mr. Affleck-Graves
held an initial meeting via teleconference to discuss the
foregoing.
On June 8, 2010, the special committee and
Roetzel & Andress LPA, the Companys outside
legal counsel (R&A), interviewed
BB&T Capital Markets, a division of Scott &
Stringfellow, LLC (BB&T), and on
June 9, 2010, interviewed Eve Partners, LLC
(Eve). Each investment bank was seeking to
act as financial advisor to the special committee. The
investment banks discussed the Companys current financial
and operational performance, the Companys valuation and
stock price challenges despite the Companys long-term
track record of revenue and profit growth, and their knowledge
of the Companys business sector. The investment banks
presented a variety of strategic alternatives to the special
committee, including a potential sale of the Company or an
equity capital raise transaction, to help address these issues.
The investment banks also discussed possible outcomes and
responded to the special committees questions.
On June 9, 2010, at a regularly scheduled meeting of the
Board of Directors attended by R&A, Mr. Whitehead
presented to the Board of Directors a summary of the meetings
between the special committee and the investment banks. The
Board of Directors discussed its knowledge of BB&T and Eve,
the involvement of BB&T and Eve in the transportation
industry, transactions in which BB&T or Eve had provided
consulting services and the ability of BB&T and Eve to
assist the Company with an in-depth analysis of all possible
strategic alternatives. Thereafter the Board of Directors
formally set forth the mandate of the special committee and
adopted a Charter of the Special Committee. The Board of
Directors delegated to the special committee full power and
authority in connection with its evaluation of strategic
alternatives, including full power and authority to
(i) formulate, establish, oversee and direct a process for
the identification, evaluation and negotiation of a potential
sale of the Company, (ii) evaluate and negotiate the terms
of any proposed definitive or other agreements in respect of a
potential sale of the Company, (iii) make recommendations
to the Board in respect of any potential transaction, including,
but not limited to, any recommendation to not proceed with or to
recommend that the Companys stockholders reject a
potential sale of the Company and (iv) make recommendations
to the Board of Directors that the Board of Directors take other
actions or consider other matters that the special committee
deems necessary or appropriate with respect to any potential
sale of the Company or potential strategic transactions.
Later on June 9, 2010, after considering the presentations
made by each investment bank, including their respective
qualifications, reputation and experience, the special committee
elected to engage BB&T and Eve to serve jointly as
financial advisors to the special committee.
Over the following three weeks, the special committee, R&A,
BB&T and Eve communicated several times to discuss the
fiduciary duties of the special committee and the Board of
Directors, the potential risks and benefits involved in the
execution of the Companys business plan as an independent
company, strategic alternatives available to the Company, and
the process of identifying parties interested in engaging in a
strategic transaction with the Company. Ultimately it was
determined that the special committee, through BB&T and
Eve, would conduct a controlled process with the goal of
effecting a go-private sale of the Company.
On June 30, 2010, a kick-off meeting was held among
Mr. Whitehead, BB&T, Eve and the Companys
executive management team. The parties discussed due diligence,
process, strategy, timing and the universe of
18
financial and strategic buyers that might be interested in
engaging in a transaction with the Company. Later that day the
Companys stock price closed at $1.26 per share of Company
common stock.
Over the ensuing six weeks, BB&T and Eve conducted
extensive due diligence on the Company, assisted the Company in
the preparation of financial projections, established an
electronic data site populated with Company due diligence
materials and prepared and finalized a Confidential Information
Memorandum and a buyers list.
On August 23, 2010, BB&T and Eve began contacting 51
prospective acquirors. Throughout the remainder of August and
early September the special committee negotiated and entered
into nondisclosure agreements with 39 interested parties. The
agreements contained customary restrictions on the disclosure
and use of confidential information, standstill provisions
restricting the prospective acquirors ability to purchase
our securities or engage in other takeover activities without
our consent, and certain nonsolicitation provisions. Upon
execution of the nondisclosure agreement the prospective
acquirors were given the Companys Confidential Information
Memorandum and information on the process going forward.
By September 24, 2010, BB&T and Eve had received six
initial indications of interest (each, an
IOI) for the Company, with prices ranging
from $1.59 to $2.50 per share of Company common stock. Each IOI
was subject to certain stated assumptions and to further due
diligence.
From October 5, 2010 through October 12, 2010, Company
management, BB&T and Eve conducted management presentations
with the five prospective acquirors that had submitted IOIs with
the highest per share consideration. The prospective acquirors
were granted access to the Companys electronic data room.
On October 12, 2010, the Companys stock price closed
at $2.35 per share of Company common stock.
On October 20, 2010, at a regularly scheduled meeting of
the Board of Directors attended by R&A, BB&T and Eve,
Mr. Whitehead updated the Board of Directors on the status
of the strategic process being conducted by BB&T and Eve. A
discussion ensued regarding the process timeline, feedback
received regarding the management presentations and the recent
increase in the Companys stock price. R&A discussed
the Boards and special committees fiduciary duties
at length. The Board members evaluated the IOIs received
relative to the option of the Company to continue as an
independent publicly-traded company, and the Board members asked
questions of BB&T and Eve. The Board and the special
committee determined that it was appropriate to continue the
strategic process. Mr. Affleck-Graves was removed from the
special committee at his request, due to his stated concern that
his indirect business associations with one of more of the
potential acquirors might be perceived as adversely affecting
his independence in the strategic process.
On October 28, 2010, BB&T and Eve received two letters
of intent (each, an LOI), and on
October 29, 2010, BB&T and Eve received a third LOI,
setting forth offers to acquire the Company for prices ranging
from $2.26 per share to $2.70 per share. The following day the
Companys stock price closed at $2.45 per share.
On November 8, 2010, at a special meeting of the Board of
Directors attended by BB&T and Eve in person and by
R&A telephonically, BB&T and Eve presented a summary
of the three LOIs received, including an analysis of total
consideration to stockholders, transaction multiples and
premiums, key valuation and financing terms, key process terms,
key legal terms and sources and uses of the transaction
consideration.
During the following week the potential acquirors conducted
extensive due diligence on the Company, and BB&T and Eve
held several discussions with each acquiror in an effort to
convince each acquiror to increase the price per share set forth
in their respective LOI. Ultimately the potential acquirors with
the lowest per share purchase prices dropped out of the bidding,
leaving one final potential acquiror.
On November 16, 2010, the Companys stock price closed
at $2.59 per share. The remaining potential acquiror notified
BB&T and Eve that it intended to stand still until early
2011.
On December 9, 2010, BB&T and Eve introduced JPE and
its principal Bradley Jacobs to the special committee. Based on
Mr. Jacobs track record of successfully growing
businesses, the special committee expressed interest in
exploring Mr. Jacobs business strategy of rapidly
building a multi-billion dollar logistics company using the
Company as a platform.
19
On December 15, 2010, JPE executed a confidentiality
agreement with the Company and received access to the
Companys electronic data room.
On January 20, 2011, Michael Welch met with Mr. Jacobs
and discussed generally the Company and Mr. Jacobs
business strategy.
On February 23, 2011, the remaining potential acquiror
notified BB&T and Eve that it continued to evaluate a
strategic transaction with the Company, but that the potential
acquiror was not prepared to move forward at that time.
On February 28, 2011, BB&T advised the special
committee that JPE was going to stand still until further notice.
On March 1, 2011, at a meeting of the Board of Directors,
the special committee discussed the current status of the
strategic process and that both remaining potential acquirors
were currently on hold, and it was decided to suspend the
strategic process. BB&T and Eve were advised of the special
committees decision.
On April 15, 2011, a conference call was held to discuss
JPEs renewed interest in the Company. Participating on the
call were Mr. Martell, Michael Welch, John Welch, the
Companys Chief Financial Officer, Mr. Whitehead and
R&A. The parties discussed JPE, Mr. Jacobs and the
Companys financial and operational performance.
Mr. Whitehead agreed to convene the special committee to
re-open the strategic process that had been put on hold on
March 1, 2011, and to conduct additional diligence on JPE
and Mr. Jacobs.
On April 18, 2011, JPE submitted a nonbinding term sheet
outlining a private investment in the Company of up to
$150,000,000. The proposal involved the purchase of $75,000,000
in liquidation preference of convertible preferred stock,
convertible at the holders option into
45,454,545 shares of Company common stock at $1.65 per
share, subject to adjustment. The preferred stock carried a
dividend, payable in cash, at the greater of 1.00% of
liquidation preference per quarter and the
as-converted dividends on the underlying shares of
Company common stock for the relevant quarter. The preferred
stock would vote on an as-converted basis with the Company
common stock. Additionally, the investors would receive warrants
to purchase 45,454,545 shares of Company common stock at an
exercise price of $1.65 per share with a term of 10 years.
The securities would be purchased in two stages. In stage one,
on the date of the execution of an investment agreement, the
Company would issue to JPE, and JPE would purchase for cash,
(i) shares of convertible preferred stock convertible into
a number of shares of Company common stock equal to 9.95% of the
number of shares of Company common stock outstanding immediately
prior to such issuance, and (ii) warrants to purchase a
number of shares of Company common stock equal to 9.95% of the
number of shares of Company common stock outstanding immediately
prior to such issuance. The stage one purchase was to be made
for a portion of the $75,000,000 that corresponded to the
portion of the total convertible preferred stock issued in stage
one. In stage two, subject to and as soon as practicable
following the approval by the stockholders of the Company of the
remaining equity issuances contemplated by the investment
agreement, the Company would issue to JPE, and JPE would
purchase for cash, (i) the balance of the shares of
convertible preferred stock remaining to be issued after stage
one and (ii) the balance of the warrants remaining to be
issued after stage one. The stage two purchase was to be made
for the balance of the $75,000,000 remaining following the
investment in stage one. At the closing of stage two, the Board
of Directors would be reconstituted in its entirety with
individuals acceptable to JPE, and the Board would appoint
Mr. Jacobs as the Chairman of the Board of the Company. JPE
would have Board representation rights in its capacity as a
holder of shares of convertible preferred stock.
On April 20, 2011, a conference call was held to discuss
the JPE proposal. Participating on the call were
Mr. Whitehead, Mrs. Dorris, Mr. Martell, Michael
Welch, BB&T and R&A. BB&T presented the terms of
the JPE proposal to the participants, discussed the market for
PIPE transactions in detail, and provided a background of
Mr. Jacobs and his prior business dealings at United
Rentals, Inc. and United Waste Systems, Inc. The special
committee expressed concern over the two stage aspect of the
proposal under which JPE would receive an estimated 17% interest
in the Company (making JPE the Companys largest
shareholder), and the Company would have material contractual
obligations to JPE, in each case without having received
20
stockholder approval. Questions were also raised regarding
JPEs intended use of proceeds. Ms. Dorris requested
that BB&T provide an analysis of change of control PIPE
transactions not involving financial institutions or negative
EBITDA companies. The special committee directed BB&T to
discuss its concerns with JPE.
On April 28, 2011, Eve advised the special committee that,
upon advice of counsel, it had elected to waive its rights under
the Eve engagement letter with respect to the potential
transaction with JPE, to avoid any potential conflict of
interest that could potentially arise as a result of Eves
ongoing involvement with JPE in connection with other M&A
transactions. From that point forward Eve ceased participating
in the Companys strategic process.
On May 2, 2011, a meeting between the Company and JPE was
held to provide JPE with an opportunity to present its business
plan to the Company. Present were all members of the Board of
Directors (Mr. Affleck-Graves participated telephonically),
John Welch, representatives of BB&T, Mr. Jacobs, a
representative of JPEs outside legal advisor Cravath,
Swaine & Moore LLP (Cravath),
representatives of JPEs outside financial advisors
Deutsche Bank Securities Inc. and UBS Investment Bank, and
R&A (telephonically). During the meeting Mr. Jacobs
discussed his personal and business background, the details of
his proposed investment in the Company and his intended use of
proceeds. At the conclusion of the presentation the parties
agreed that if the transaction were to go forward it would be in
the form of a single stage investment that would close only upon
receipt of stockholder approval. The Board of Directors and its
advisors continued to discuss the JPE proposal after
Mr. Jacobs and his advisors left the meeting. The parties
discussed the fiduciary duties of the Board of Directors. It was
agreed that the JPE proposal had potential merit, but that the
potential dilution to the Companys stockholders was a
significant concern and that the effective price per Company
common share needed to be increased.
On May 4, 2011, Mr. Affleck-Graves accepted a
re-appointment as a member of the special committee. BB&T
provided the special committee with a written analysis
summarizing the premiums/discounts of other PIPE transactions
and follow-on offerings in which the offering size was greater
than the pre-money market capitalization of the issuing company.
The special committee asked BB&T for its view on the
ability of the Company to raise funds through a PIPE offering,
registered direct offering or other follow-on offering.
On May 6, 2011, the special committee and R&A met via
conference call. R&A presented a detailed description of
the Board of Directors fiduciary duties in change of
control transactions. The parties discussed the terms of the JPE
proposal, Mr. Jacobs commitment to the Companys
industry and the obligations of the special committee and the
Board to the Companys stockholders. The special committee
agreed that additional information was needed before it could
determine whether to continue discussions with JPE.
Specifically, the special committee requested that BB&T
prepare an analysis of the following strategic alternatives
available to the Company: (i) continue as a stand-alone
entity, growing organically; (ii) continue as a stand-alone
entity, with both organic growth and growth through
acquisitions; (iii) sell the Company in a go-private
transaction to either a financial or a strategic buyer; and
(iv) accept the JPE proposal.
On May 9, 2011, BB&T provided the special committee
and R&A with a written analysis of the four strategic
alternatives requested by the special committee. The analysis
described in detail each strategic alternative and the projected
Company stock price through 2015. The JPE proposal resulted in
the highest projected stock price in each year of the analysis.
Members of the special committee and R&A discussed the
report over the following several days. The special committee
agreed to proceed with the JPE proposal to the extent JPE would
agree to increase the effective price from $1.65 per share to
$1.75 per share.
On May 13, 2011, JPE submitted a revised term sheet
providing for a single stage transaction in which the
transaction would not close until stockholder approval was
received (and other customary closing conditions were
satisfied). The price was increased to $1.75 per share. In
consideration for the concessions, JPE required that the Company
agree to a no-shop provision. The special committee, after
consultation with R&A regarding the Companys ability
to receive third-party proposals during a no-shop period, agreed
to pursue a transaction on the general terms set forth in the
revised term sheet. BB&T communicated this to JPE and a
timeline for in-depth due diligence was agreed upon.
21
On May 20, 2011 and May 21, 2011, Mr. Whitehead
and R&A conducted telephone interviews with two financial
advisory firms regarding the preparation and issuance of a
fairness opinion.
During the week of May 23, 2011, JPEs accounting
advisors, KPMG LLP (KPMG), conducted
extensive due diligence on the Company, primarily at the offices
of the Companys independent registered public accounting
firm Pender Newkirk & Company LLP.
On May 23, 2011, Cravath presented R&A with the
initial draft of the investment agreement, which R&A
forwarded to the special committee and to BB&T.
On May 24, 2011, after considering the presentations made
by each financial advisory firm, including their respective
qualifications, reputation and experience, the special committee
engaged Ladenburg to render an opinion to the special committee
as to whether, on the date of such opinion, the consideration to
be received by the Company in connection with the JPE
transaction is fair, from a financial point of view, to the
Companys stockholders.
On May 25, 2011, R&A presented the special committee
with a memo summarizing the material terms of the investment
agreement and R&As proposed revisions thereto. The
following day a conference call was held between the special
committee and R&A to discuss R&As proposed
revisions to the investment agreement. The primary areas of
concern were the Companys inability to terminate the
agreement upon receipt of a superior proposal, the ability to
treat as a superior proposal offers to acquire a majority of the
Company but less than all or substantially all of the Company,
the Companys obligation to reimburse JPE for all of
JPEs transaction-related costs and expenses, the amount of
the termination fee, the length of the tail period during which,
in certain circumstances, the Company would be obligated to pay
the termination fee, the requirement that the Company engage
KPMG to conduct a re-audit of the Companys financial
statements for the years ended December 31, 2008, 2009 and
2010, and to conduct a full internal control over financial
reporting audit, the inclusion of a cashless exercise feature in
the warrants, and the right of JPE to nominate persons to fill
80% of the seats on the Board of Directors as long as JPE holds
at least 50% of the equity securities purchased by JPE in the
transaction. After R&As presentation the parties
discussed the Board of Directors fiduciary duties to the
Companys stockholders and the impact certain of the
proposed terms would have on the special committees
ability to maximize stockholder value. The special committee
directed R&A to negotiate the proposed revisions to the
investment agreement directly with Cravath.
On May 27, 2011, R&A and Cravath discussed the
proposed revisions to the investment agreement. As a result of
those discussions, JPE agreed to allow the Company to terminate
the investment agreement upon receipt of a superior proposal to
acquire all or substantially all of the Company, but only in the
event the Company concurrently entered into an agreement with
the third party to effectuate the superior proposal, to decrease
the termination fee from 3.5% of the Companys equity value
to 3.0%, and to eliminate the cashless exercise feature from the
warrants. Left as open issues were the amount of JPE expenses to
be reimbursed by the Company, JPEs ability to nominate
directors and the Companys obligation to engage KPMG for a
re-audit of the Companys financial statements and an audit
of the Companys internal control over financial reporting.
JPE rejected the Companys request to be able to treat as a
superior proposal a takeover proposal for the acquisition of
less than all or substantially all of the Company.
On May 28, 2011 and May 29, 2011, the special
committee and R&A discussed the outstanding issues under
the investment agreement and related transaction documents. The
parties agreed the following revisions should be requested: that
the Company would have no obligation to reimburse JPEs
expenses in the event of a stockholder no vote or if
the Company were to terminate the investment agreement as a
result of a JPE breach, that the Company would agree to engage
KPMG for the re-audits for 2009 and 2010, but not for an audit
of internal control over financial reporting, the elimination of
JPEs ability to nominate persons to serve on the Board,
that Daniel Para, the Chief Executive Officer of Concert Group
Logistics, Inc., and Michael Welch should be able to terminate
their voting agreements with JPE in the event of a superior
proposal (whether or not the investment agreement was
terminated), and that the Company should be able to treat as a
superior proposal a takeover proposal to acquire a majority of
the Company but less than all or substantially all of the
Company. The Company also requested a reduction in the term of
the warrants from 10 years to one year.
22
On May 30, 2011, R&A and Cravath discussed the
proposed revisions to the investment agreement. During the
discussions Cravath advised of JPEs estimate that the JPE
expenses subject to Company reimbursement would be approximately
$1.5 million and JPEs agreement to eliminate the
reimbursement requirement should JPE breach the investment
agreement. JPE maintained that JPEs expenses should be
reimbursed in the event of a stockholder no vote.
The negotiation of JPEs nomination rights continued. JPE
again rejected R&As request that the Company be able
to treat as a superior proposal certain takeover proposals
involving offers for a majority of the Company but less than all
or substantially all of the Company.
On May 31, 2011, Mr. Whitehead and R&A discussed
the status of negotiations and agreed to present JPE with a set
of terms that would resolve all of the outstanding issues. The
Company was willing to withdraw its request that the term of the
warrants be reduced to one year, was willing to accept the
payment of JPEs expenses up to a cap of $1.5 million
and was willing to provide JPE the right to nominate a majority
of the Board as long as JPE holds at least 33% of the
Companys voting rights and 25% of the Board as long as JPE
holds at least 20% of the Companys voting rights. The
Company maintained its position that a superior proposal should
include proposals to acquire a majority of the Company.
On May 31, 2011, R&A and Cravath discussed the
Companys proposal during a series of conference calls. The
following day Cravath distributed revised transaction documents
evidencing the foregoing.
In the evening of June 1, 2011, the special committee met
with R&A to discuss the status of negotiations with JPE and
Ladenburgs fairness opinion. Immediately thereafter the
Board of Directors held a meeting attended by all Board members,
R&A, BB&T and John Welch. Mr. Martell recused
himself from the meeting after being advised that JPE was
interested in having Mr. Martell remain on the Board
post-closing, and that if Mr. Martell desired, JPE would
extend to Mr. Martell an opportunity to invest in the JPE
transaction along with JPE and the other investors.
Mr. Whitehead began the meeting with a general status
update of the special committees negotiations with JPE and
Cravath. Next, R&A presented a detailed description of all
material terms of the JPE transaction documents as then drafted.
In so doing R&A identified all outstanding issues, and
provided a background of the negotiations that had transpired
over the prior week. The Board deliberated over the terms of the
transaction, and R&A discussed with the Board the
Boards fiduciary duties. The Board expressed its desire
that the Companys obligation to pay JPEs expenses,
and to pay a termination fee, be limited to the greatest extent
possible. Further, the Board supported the special
committees position that it should be able to terminate
the investment agreement if it receives a superior proposal to
acquire a majority (but less than all or substantially all) of
the Company. After the Board meeting was adjourned, a series of
conference calls were conducted between R&A and Cravath
during which R&A conveyed the special committees
position on the outstanding issues.
On June 3, 2011, the special committee held a conference
call with R&A to discuss the status of negotiations with
JPE. It was agreed that R&A and Cravath had reached an
impasse, and that R&A would cease working on the JPE
transaction unless and until the remaining issues were resolved.
Mr. Whitehead directed BB&T to advise JPE of the
foregoing, and to attempt to continue negotiations directly with
Mr. Jacobs on the Companys behalf. Mr. Whitehead
advised BB&T that the special committee might be able to
accept the inability to terminate the investment agreement upon
receipt of a majority (but less than all or substantially all)
superior proposal, as long as in connection therewith the voting
agreements with Mr. Para and Michael Welch could be
terminated. Mr. Whitehead also suggested that if JPE was
willing to increase the pricing of the transaction the special
committee would likely withdraw its remaining demands.
Over the next several days extensive negotiations took place
between the special committee and its advisors and JPE and its
advisors in an unsuccessful attempt to resolve the outstanding
issues.
On June 7, 2011, the Board held a telephonic meeting in
which R&A participated (Mr. Martell was not present).
R&A provided an update on the outstanding issues. The Board
suggested that Mike Welch attempt to resolve the outstanding
issues directly with Mr. Jacobs. Following the meeting
Mr. Welch and Mr. Jacobs had a telephone conference
but were unable to resolve the outstanding issues.
23
On June 8, 2011, the special committee, through R&A,
advised Cravath that if JPE was willing to limit the
Companys obligations to pay expenses and termination fees
the proposed transaction could likely move forward.
On June 9, 2011, Cravath advised that JPE was willing to
reduce the cap on the termination fee (which was equal to 3% of
the post-announcement equity value) to 4.5% of pre-announcement
equity value from 5% of pre-announcement equity value, and that
the termination fee payable in any event other than the
termination by the Company upon receipt of a superior proposal
for all or substantially all of the Company, or by JPE due to a
change in recommendation by the Company in connection with a
superior proposal, would be limited to 3% of pre-announcement
equity value.
Later on June 9, 2011, following the Companys annual
meeting of stockholders, Mr. Whitehead and Mrs. Dorris
discussed the current status of negotiations with JPE. Still
later that day the Board of Directors met via conference call
(Mr. Martell was not present), during which R&A
presented an outline of the Companys obligations to pay
JPEs expenses and termination fees under the current draft
of the investment agreement. A discussion ensued about the
transaction generally and the concessions that had been obtained
from JPE to date. At the conclusion of the meeting, the special
committee contacted BB&T and directed BB&T to contact
JPE and advise that if JPE would be willing to reduce the cap on
reimbursable expenses from $1.5 million to $1 million,
the special committee would be in a position to support the
transaction and recommend it to the Board for approval.
On June 10, 2011, JPE advised that the reduction of the cap
on reimbursable expenses from $1.5 million to
$1 million was acceptable.
On June 12, 2011, the special committee held a telephonic
meeting with R&A to discuss the final terms of the
investment agreement and related documents. Immediately
thereafter the Board of Directors held a telephonic meeting also
attended by John Welch, R&A, BB&T and Ladenburg
(Mr. Martell did not attend). R&A presented a summary
of the terms of the investment agreement and related documents,
and discussed the fiduciary duties of the members of the special
committee and the Board. Next, Ladenburg reviewed with the Board
Ladenburgs financial analyses of the consideration and
delivered to the Board an oral opinion, which opinion was
confirmed by delivery of a written opinion, dated June 12,
2011, to the effect that, as of that date and based on and
subject to various assumptions, matters considered and
limitations described in its opinion, the transaction with JPE
is fair, from a financial point of view, to the Companys
stockholders. Next, BB&T outlined the strategic
alternatives available to the Company, and presented the Board
with BB&Ts opinion that the Proposed Transaction with
JPE represents a superior potential outcome for the
Companys stockholders relative to the other possible
alternatives. The special committee, having deliberated
regarding the terms of the Proposed Transaction, the Ladenburg
presentation and opinion and the BB&T presentation,
unanimously determined that the investment agreement and the
transactions contemplated thereby are advisable and in the best
interests of the Company and the Companys stockholders,
and recommended that the Board approve the investment agreement
and the transactions contemplated thereby, and that the Board
recommend that the Companys stockholders vote to approve
the Equity Investment as set forth in the investment agreement,
certain amendments to the Companys certificate of
incorporation as set forth in the investment agreement and the
omnibus incentive compensation plan as set forth in the
investment agreement. Following the special committees
recommendation to the Board, the Board, by unanimous vote of
those directors in attendance, determined that the investment
agreement and the transactions contemplated thereby are
advisable and in the best interests of the Company and the
Companys stockholders, and recommended that the
Companys stockholders vote to approve the Equity
Investment as set forth in the investment agreement, certain
amendments to the Companys certificate of incorporation as
set forth in the investment agreement and the omnibus incentive
compensation plan as set forth in the investment agreement.
On June 13, 2011, the Company and JPE executed the
investment agreement and other transaction documents, and
Mr. Para and Michael Welch executed voting agreements.
On June 14, 2011, prior to the opening of the market, the
Company and JPE issued a joint press release announcing the
execution of the investment agreement, and filed a
Form 8-K
with the SEC describing the terms of the Transaction.
24
Reasons
for the Proposed Transaction
In reaching its determination, the special committee consulted
with and received the advice of its financial and legal
advisors, discussed certain issues with the Companys
senior management team, and considered a number of factors that
it believed supported its decision to recommend that the Company
enter into the Investment Agreement and consummate the Equity
Investment, and recommend that the stockholders vote in favor of
the Proposals, including, but not limited to, the following
material factors:
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the per share price contemplated by the Proposed Transaction was
a reasonable discount to the Companys market price in
light of JPEs business strategy, JPEs ability to
effectuate its business strategy, the stated use of proceeds and
the higher multiples received by mid-cap and large-cap public
companies in the Companys industry;
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the financial analyses presented to the special committee by
BB&T and shared with the Board of Directors, as well as the
opinion of BB&T that the Proposed Transaction represents a
superior potential outcome for the Companys stockholders
relative to the other possible alternatives;
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the financial analyses presented to the special committee by
Ladenburg and shared with the Board of Directors, as well as the
opinion of Ladenburg, dated June 12, 2011, to the special
committee, which expressly allows reliance on the opinion by
those members of the Board of Directors who are not members of
the special committee, to the effect that, as of that date, and
based upon and subject to the various assumptions made,
procedures followed, matters considered and qualifications and
limitations set forth therein, the Proposed Transaction is fair,
from a financial point of view, to the Companys
stockholders; the full text of the written opinion of Ladenburg
is attached as Annex B to this proxy statement;
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the possible alternatives to the Proposed Transaction, including
an alternative sales process or continuing as a standalone
company with or without additional bolt-on acquisitions, which
alternatives the special committee evaluated with the assistance
of Ladenburg and BB&T and determined were less favorable to
the Companys stockholders than the Proposed Transaction
given the potential risks, rewards and uncertainties associated
with those alternatives;
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the extensive efforts made by the Company and its advisors over
a period of many months to solicit interest on the part of
potential acquirors of the Company, with the result that
BB&T spoke to approximately 50 potentially interested
parties;
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the expectation that the market price of the Companys
shares would increase significantly following announcement of
the Proposed Transaction and allow existing stockholders to sell
their shares at a premium to the then-current market price;
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the fact that the Companys stockholders would have the
ability to share in any upside that might result from any future
improved performance on the part of the Company;
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the reputation of JPE and Mr. Jacobs;
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the Companys business, operations, financial condition,
strategy and prospects, as well as the risks involved in
achieving those prospects, the nature of the third-party
logistics industry, and general industry, economic and market
conditions, both on an historical and on a prospective basis;
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the likelihood that the Proposed Transaction would be completed
based on, among other things (not in any relative order of
importance):
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the absence of a financing condition in the Investment Agreement;
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the likelihood and anticipated timing of completing the Proposed
Transaction in light of the scope of the conditions to
completion, including the absence of significant required
regulatory approvals; and
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25
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the ability of JPE and Mr. Jacobs to complete the Proposed
Transaction, raise funds in follow-on offerings and complete
accretive acquisitions on a large-scale basis;
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the other terms of the Investment Agreement and related
agreements, including:
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the Companys ability, at any time from and after the
execution of the Investment Agreement but prior to the time the
Companys stockholders adopt the Proposals, to consider and
respond to an unsolicited written acquisition proposal, to
furnish confidential information to the person making such a
proposal and to engage in discussions or negotiations with the
person making such a proposal, if the special committee, prior
to taking any such actions, determines in good faith that such
acquisition proposal either constitutes a superior proposal or
could reasonably be expected to lead to a superior proposal;
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the Board of Directors ability (acting upon the
recommendation of the special committee), under certain
circumstances, to withhold, withdraw, qualify or modify its
recommendation that its stockholders vote to adopt the Proposals;
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the Companys ability, under certain circumstances, to
terminate the Investment Agreement in order to enter into an
agreement providing for a superior acquisition proposal,
provided that the Company complies with its obligations relating
to the entering into of any such agreement and concurrently with
the termination of the Investment Agreement pays to JPE a
termination fee determined in accordance with the Investment
Agreement, in connection with an agreement for a superior
acquisition proposal, plus up to $1 million of JPEs
expenses; and
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the termination fee and expenses payable to JPE under certain
circumstances, including as described above, in connection with
a termination of the Investment Agreement, which the special
committee concluded were reasonable in the context of
termination fees and expenses payable in comparable transactions
and in light of the overall terms of the Investment Agreement,
including the total consideration.
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The special committee also believed that sufficient procedural
safeguards were and are present to ensure the fairness of the
Proposed Transaction and to permit the special committee to
represent effectively the interests of the Companys
stockholders. These procedural safeguards include:
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the fact that the special committee is comprised of three
independent directors who are not affiliated with JPE or the
other Investors and are not employees of the Company or any of
its subsidiaries;
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the fact that, other than their receipt of Board of Directors
and special committee fees (which are not contingent upon the
consummation of the Proposed Transaction or the special
committees or the Boards recommendation of the
Proposed Transaction) and their interests described under
Special FactorsInterests of the Companys
Directors and Executive Officers, members of the
special committee do not have interests in the Proposed
Transaction different from, or in addition to, those of the
Companys unaffiliated stockholders;
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the fact that the determination to engage in discussions related
to the Proposed Transaction and the consideration and
negotiation of the price and other terms of the Proposed
Transaction was conducted entirely under the oversight of the
members of the special committee without the involvement of any
director who is affiliated with the Investors or is a member of
the Companys management and without any limitation on the
authority of the special committee to act with respect to any
alternative transaction or any related matters;
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the recognition by the special committee that it had the
authority not to recommend the approval of the Proposed
Transaction or any other transaction;
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the special committees extensive negotiations with JPE,
which, among other things, resulted in an increase in the
effective price from $1.65 to $1.75 per share and resulted in
significantly better contractual terms than initially proposed
by JPE, including the ability of the Company to terminate
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26
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the Investment Agreement upon the receipt of superior proposal
for all or substantially all of the Company and entry into an
agreement with respect to same; the capping of JPEs
reimbursable expenses at $1 million; and the elimination of
the cashless exercise provision from the Warrants;
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the fact that the special committee was advised by BB&T, as
financial advisor, and R&A, as legal advisor, and the fact
that the special committee requested and received from Ladenburg
an opinion (based upon and subject to the various assumptions
made, procedures followed, matters considered and qualifications
and limitations set forth therein), as of June 12, 2011,
with respect to the fairness of the Proposed Transaction to the
Companys stockholders from a financial point of
view; and
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the fact that the terms and conditions of the Investment
Agreement and related agreements were designed to allow the
Company to change its recommendation to the Companys
stockholders or terminate the Investment Agreement entirely,
upon receipt of a superior proposal, depending on the nature of
the superior proposal.
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In the course of its deliberations, the special committee also
considered a variety of risks and other countervailing factors
related to entering into the Proposed Transaction, including
(not in any relative order of imporance):
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the risk that the Proposed Transaction might not be completed in
a timely manner or at all;
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the restrictions on the conduct of the Companys business
prior to the completion of the Equity Investment, which may
delay or prevent the Company from undertaking business
opportunities that may arise or any other action it would
otherwise take with respect to the operations of the Company
pending completion of the Equity Investment;
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the risks and costs to the Company if the Proposed Transaction
does not close, including the diversion of management and
employee attention, potential employee attrition and the
potential disruptive effect on business and customer
relationships;
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the possibility that the up to $1 million in JPEs
expenses plus the applicable termination fee payable by the
Company upon the termination of the Investment Agreement could
discourage other potential acquirors from making a competing bid
to acquire the Company; and
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if the Proposed Transaction is not completed, the Company will
be required to pay its own expenses associated with the
Investment Agreement, the Equity Investment and the other
transactions contemplated by the Investment Agreement as well
as, under certain circumstances, pay JPE a termination fee
and/or
reimburse JPEs expenses (up to a $1 million cap), in
connection with the termination of the Investment Agreement.
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The foregoing discussion of the factors considered by the
special committee is not intended to be exhaustive, but rather
includes the principal factors considered by the special
committee. The special committee collectively reached the
conclusion to approve the Proposed Transaction, the Investment
Agreement and the other transactions contemplated by the
Investment Agreement in light of the various factors described
above and other factors that the members of the special
committee believed were appropriate. In view of the wide variety
of factors considered by the special committee in connection
with its evaluation of the Proposed Transaction and the
complexity of these matters, the special committee did not
consider it practical, and did not attempt, to quantify, rank or
otherwise assign relative weights to the specific factors it
considered in reaching its decision and did not undertake to
make any specific determination as to whether any particular
factor, or any aspect of any particular factor, was favorable or
unfavorable to the ultimate determination of the special
committee. Rather, the special committee made its recommendation
based on the totality of information presented to it and the
investigation conducted by it. In considering the factors
discussed above, individual members of the special committee may
have given different weights to different factors.
27
Recommendation
of the Companys Board
After careful consideration, the Companys Board of
Directors (excluding Mr. Martell, who recused himself),
acting upon the unanimous recommendation of the special
committee of the Board of Directors:
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has determined that the Proposed Transaction and the related
Proposals are advisable and in the best interests of the Company
and its stockholders;
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recommends that the Companys stockholders vote
FOR the approval of the issuance of the Securities
(Proposal 1), the amendment to increase the number of
authorized shares of Company common stock (Proposal 2), the
amendment to give effect to the Reverse Stock Split
(Proposal 3), the amendment to provide that vacancies on
the Board of Directors shall be filled by the remaining
directors or director (Proposal 4) and the adoption of
the Plan (Proposal 5); and
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if necessary and appropriate, recommends the approval of the
adjournment of the special meeting to solicit additional proxies
if there are insufficient votes at the time of the special
meeting to adopt Proposals 1 through 5 (Proposal 6).
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Financial
Advisors Opinion
Ladenburg made a presentation to our Board of Directors on
June 12, 2011 and subsequently delivered its written
opinion to the special committee of our Board of Directors. The
opinion stated that, as of June 12, 2011, based upon and
subject to the assumptions made, matters considered, procedures
followed and limitations on Ladenburgs review as set forth
in the opinion, the Proposed Transaction is fair, from a
financial point of view, to our stockholders. The financial
terms and other terms of the Proposed Transaction were
determined pursuant to negotiations between us, JPE and each of
our respective advisors and not pursuant to any recommendation
from Ladenburg.
The full text of Ladenburgs written opinion dated as of
June 12, 2011, which sets forth the assumptions made,
matters considered, procedures followed, and limitations on the
review undertaken by Ladenburg in rendering its opinion, is
attached as Annex B to this proxy statement and is
incorporated herein by reference. Ladenburgs opinion is
not intended to be, and does not constitute, a recommendation to
you as to how you should vote or act with respect to the
Proposed Transaction or any other matter relating thereto. The
summary of the Ladenburg opinion set forth in this proxy
statement is qualified in its entirety by reference to the full
text of the opinion. We urge you to read the opinion carefully
and in its entirety.
Ladenburgs opinion is for the use and benefit of our Board
of Directors in connection with its consideration of the
Proposed Transaction. Ladenburgs opinion may not be used
by any other person or for any other purpose without
Ladenburgs prior written consent. Ladenburgs opinion
should not be construed as creating any fiduciary duty on its
part to any party.
Ladenburg was not requested to opine as to, and its opinion does
not address, the relative merits of the Proposed Transaction as
compared to any alternative business strategy that might exist
for us, whether we should complete the Proposed Transaction, and
other alternatives to the Proposed Transaction that might exist
for us. Ladenburg has not been retained to render an opinion as
to whether the Proposed Transaction is the best reasonably
available to us. Ladenburg does not express any opinion as to
the underlying valuation or future performance of the Company or
the price at which our securities might trade at any time in the
future.
Ladenburgs analysis and opinion are necessarily based upon
market, economic and other conditions, as they existed on, and
could be evaluated as of, June 12, 2011. Accordingly,
although subsequent developments may affect its opinion,
Ladenburg assumed no obligation to update, review or reaffirm
its opinion to us or any other person.
28
In arriving at its opinion, Ladenburg took into account an
assessment of general economic, market and financial conditions,
as well as its experience in connection with similar
transactions and securities valuations generally. In so doing,
among other things, Ladenburg:
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|
Reviewed a draft of the Investment Agreement dated as of
June 10, 2011;
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|
Reviewed a draft of the Certificate of Designation of the
Preferred Stock as of June 10, 2011;
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|
Reviewed a draft of the Warrant Certificate as of June 10,
2011;
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|
Reviewed publicly available financial information and other data
with respect to the Company that it deemed relevant, including
its Annual Report on
Form 10-K
for the year ended December 31, 2010 and its Quarterly
Report on
Form 10-Q
for the quarter ended March 31, 2011;
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|
Reviewed non-public information and other data with respect to
the Company, including financial projections for the five-year
period ending December 31, 2015 (the Standalone
Projections), and other internal financial information
and management reports;
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|
Reviewed financial projections prepared by the Company and
BB&T, assuming one bolt-on acquisition per year starting in
2012 (Standalone with Acquisitions
Projections);
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|
Reviewed financial projections assuming the Proposed Transaction
takes place (JPE Projections);
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|
Reviewed and analyzed the Proposed Transactions pro forma
impact on the Companys outstanding securities and
stockholder ownership;
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Considered the historical financial results and present
financial condition of the Company;
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|
Reviewed certain publicly available information concerning the
trading of, and the trading market for, the Companys
common stock;
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Reviewed and analyzed the Companys projected unlevered
free cash flows derived from the Standalone Projections and
prepared a discounted cash flow analysis;
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Reviewed and analyzed certain financial characteristics of
publicly-traded companies that were deemed to have
characteristics comparable to the Company;
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Reviewed and analyzed certain financial characteristics of
target companies in transactions where such target company was
deemed to have characteristics comparable to that of the Company;
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Reviewed and compared the terms of the Proposed Transaction to
the terms of certain private investments in public equity
(PIPE) and follow-on offering transactions;
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Reviewed and discussed with the Companys management, other
Company representatives, JPE and BB&T certain financial and
operating information furnished by them, including the
Standalone Projections, Standalone with Acquisitions Projections
and JPE Projections (collectively, the
Projections); and
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Performed such other analyses and examinations as were deemed
appropriate.
|
In arriving at its opinion, with our consent, Ladenburg relied
upon and assumed, without assuming any responsibility for
independent verification, the accuracy and completeness of all
of the financial and other information that was supplied or
otherwise made available to Ladenburg and Ladenburg further
relied upon the assurances of our management that we were not
aware of any facts or circumstances that would make any such
information inaccurate or misleading. With respect to the
financial information and the Projections reviewed, Ladenburg
assumed that such information was reasonably prepared on a basis
reflecting the best currently available estimates and judgments,
and that such information provided a reasonable basis upon which
it could make its analysis and form an opinion. The Projections
were solely used in connection with the rendering of
Ladenburgs fairness opinion. Stockholders should not place
reliance upon such Projections, as they are not necessarily an
indication of what our revenues and profit margins will be in
the future. The Projections were prepared by our management, JPE
and BB&T and are not to be interpreted as projections of
future performance (or guidance) by the Company.
29
Ladenburg assumed that the Proposed Transaction will be
consummated in a manner that complies in all respects with
applicable foreign, federal, state and local laws, rules and
regulations. Ladenburg assumed, with our consent, that the final
executed forms of the Investment Agreement, Certificate of
Designation and Warrant Certificate do not differ in any
material respect from the drafts Ladenburg reviewed and that the
Proposed Transaction will be consummated on the terms set forth
in the Investment Agreement, without further amendments thereto,
and without waiver by the Company of conditions to any of its
obligations thereunder or in the alternative that any such
amendments or waivers thereto will not be detrimental to the
Company or its stockholders in any material respect.
In connection with rendering its opinion, Ladenburg performed
certain financial, comparative and other analyses as summarized
below. Each of the analyses conducted by Ladenburg was carried
out to provide a different perspective on the Proposed
Transaction, and to enhance the total mix of information
available. Ladenburg did not form a conclusion as to whether any
individual analysis, considered in isolation, supported or
failed to support its opinion. Further, the summary of
Ladenburgs analyses described below is not a complete
description of the analyses underlying Ladenburgs opinion.
The preparation of a fairness opinion is a complex process
involving various determinations as to the most appropriate and
relevant methods of financial analysis and the application of
those methods to the particular circumstances and, therefore, a
fairness opinion is not readily susceptible to partial analysis
or summary description. In arriving at its opinion, Ladenburg
made qualitative judgments as to the relevance of each analysis
and factors that it considered. Also, Ladenburg may have given
various analyses more or less weight than other analyses, and
may have deemed various assumptions more or less probable than
other assumptions, so that the range of valuations resulting
from any particular analysis described below should not be taken
to be Ladenburgs view of the value of our assets. The
estimates contained in Ladenburgs analyses and the ranges
of valuations resulting from any particular analysis are not
necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than
suggested by such analyses. Also, analyses relating to the value
of businesses or assets neither purport to be appraisals nor do
they necessarily reflect the prices at which businesses or
assets may actually be sold. Accordingly, Ladenburgs
analyses and estimates are inherently subject to substantial
uncertainty. Ladenburg believes that its analyses must be
considered as a whole and that selecting portions of its
analyses or the factors it considered, without considering all
analyses and factors collectively, could create a misleading or
incomplete view of the process underlying the analyses performed
by Ladenburg in connection with the preparation of its opinion.
The summaries of the financial reviews and analyses include
information presented in tabular format. To fully understand
Ladenburgs financial reviews and analyses, you must read
the tables together with the accompanying text of each summary.
The tables alone do not constitute a complete description of the
financial analyses, including the methodologies and assumptions
underlying the analyses, and if viewed in isolation could create
a misleading or incomplete view of the financial analyses
Ladenburg performed.
The analyses performed were prepared solely as part of
Ladenburgs analysis of the fairness of the Proposed
Transaction to our stockholders from a financial point of view,
and were provided to the special committee of our Board of
Directors in connection with the delivery of Ladenburgs
opinion. Ladenburgs opinion was just one of the several
factors the special committee and our Board of Directors took
into account in making its determination to approve the Proposed
Transaction, including those described elsewhere in this proxy
statement.
Analysis
of Terms
Ladenburg analyzed 41 convertible preferred and common stock
PIPEs and 34 follow-on offerings of U.S. traded companies
since January 2008, where the shares issued in all transactions
exceeded the shares outstanding at the time of the transaction
and the transaction values were between $20 million and
$1 billion. The analysis focused on the following terms:
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Security discount/premium
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Coupon
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Warrant coverage
|
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Warrant discount/premium
|
30
Ladenburg noted that the security discount and the coupon of the
Equity Investment are not outliers as compared to the universe
of reviewed transactions and they do not appear unreasonable
when compared to the terms of other transactions. However,
Ladenburg noted that the warrant coverage and warrant discount
are significantly higher than the mean and median of comparable
transactions, particularly those of profitable companies.
Valuation
Overview
Ladenburg reviewed three strategic alternatives deemed to be
currently available for the Company and generated an indicated
per share equity valuation range for each alternative.
The Standalone alternative assumed the Company
continues on its current growth trajectory with no future
acquisitions or capital raises. Ladenburg generated an indicated
valuation range for this alternative based on comparable company
analysis, comparable transaction analysis and discounted cash
flow analyses, each as more fully discussed below. Ladenburg
weighted the three approaches 60%, 20%, 20%, and arrived at an
indicated equity value per share range of approximately $2.20 to
approximately $2.60.
The Standalone with Acquisitions alternative assumed
the Company completes one bolt-on acquisition every year
(starting in 2012) and was based on the Standalone with
Acquisitions Projections prepared by the Company and BB&T.
Under this alternative, the Company would achieve accelerated
growth and increased scale and thus command a higher EBITDA
multiple at the end of the projection period (2015) than
under the Standalone alternative. Ladenburg generated an
indicated valuation range for this alternative based on
discounting the projected 2015 share price of $8.81 by
utilizing discount rates ranging from 19.5% to 20.5%, and
arrived at an indicated equity value per share range of
approximately $3.80 to approximately $3.90. For purposes of
Ladenburgs analyses, EBITDA means earnings
before interest, taxes, depreciation and amortization, as
adjusted for add-backs for non-cash stock compensation expenses
and one-time charges.
The JPE PIPE alternative assumed the Proposed
Transaction takes place and the Company would raise additional
capital subsequent to the Proposed Transaction to support
acquisitions. This alternative was based on the JPE Projections
prepared by JPE and BB&T and assumed that the Company, as a
result of its significantly increased size, would command a
higher EBITDA multiple at the end of the projection period
(2015) than under the Standalone with Acquisitions
alternative. Ladenburg generated an indicated valuation range
for this alternative based on discounting the projected
2015 share price of $10.63 by utilizing discount rates
ranging from 20.5% to 25.5%, and arrived at an indicated equity
value per share range of approximately $3.80 to approximately
$4.50.
Ladenburg noted that the indicated equity value per share range
in the JPE PIPE alternative was higher than the indicated value
ranges in the other two alternatives.
31
Standalone
Comparable Company Analysis
A selected comparable company analysis reviews the trading
multiples of publicly traded companies that are similar to the
Company with respect to business and revenue model, operating
sector, size and target customer base.
Ladenburg identified the following 13 companies that it
deemed comparable to the Company with respect to their industry
sector and operating model:
Large-Cap
Comparables:
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CH Robinson Worldwide Inc.
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Expeditors International of Washington Inc.
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Mid-Cap
Comparables:
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Landstar System Inc.
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Uti Worldwide Inc.
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Hub Group Inc.
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Forward Air Corp.
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Roadrunner Transportation Systems, Inc.
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Echo Global Logistics, Inc.
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Quality Distribution Inc.
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Universal Truckload Services Inc.
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Pacer International Inc.
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Small-Cap
Comparables:
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AutoInfo Inc.
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US1 Industries Inc.
|
Multiples utilizing enterprise value were used in the analyses.
For comparison purposes, all operating profits including EBITDA
were normalized to exclude unusual and extraordinary expenses
and income. For purposes of Ladenburgs analyses,
enterprise value means equity value plus all
interest-bearing debt less cash.
Ladenburg generated the following multiples worth noting with
respect to the comparable companies:
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Enterprise Value Multiple
of
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Mean
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Median
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High
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Low
|
|
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LTM EBITDA All Comparables
|
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11.1
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x
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11.7
|
x
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17.8
|
x
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5.1
|
x
|
LTM EBITDA Small-Cap Comparables
|
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|
5.8
|
x
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|
5.8
|
x
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6.6
|
x
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|
|
5.1
|
x
|
The Company, from a size perspective, is most comparable to the
Small-Cap Comparables. Ladenburg noted that the Small-Cap
Comparables are less profitable than the Company, with EBITDA
margins ranging from approximately 2.1% to 2.9%, compared with
the Companys approximately 6.2%. Further, the Small-Cap
Comparables experienced lower growth than the Company, with
one-year EBITDA growth average of 55.8%, compared with the
Companys approximately 68.4%. In addition, AutoInfos
leverage is significantly higher than that of the Company.
Ladenburg selected an appropriate multiple range for the Company
by examining the range indicated by the comparable companies and
taking into account certain company-specific factors. Ladenburg
selected multiples above the mean of the Small-Cap Comparable
companies to reflect the Companys higher growth
32
and lower leverage. Based on the above factors, Ladenburg
applied EBITDA multiples of 6.5x to 7.5x to the Companys
LTM EBITDA, and calculated a range of indicated enterprise
values for the Company. Ladenburg then deducted net debt of
approximately $2.0 million to derive a per share range of
equity values of approximately $1.90 to approximately $2.30,
based on approximately 34.0 million outstanding shares and
in-the-money
options/warrants utilizing the treasury stock method.
None of the comparable companies have characteristics identical
to the Company. An analysis of publicly-traded comparable
companies is not mathematical; rather it involves complex
considerations and judgments concerning differences in financial
and operating characteristics of the comparable companies and
other factors that could affect the public trading of the
comparable companies.
Standalone
Comparable Transaction Analysis
A comparable transaction analysis involves a review of merger,
acquisition and asset purchase transactions involving target
companies that are in related industries to the Company. The
comparable transaction analysis generally provides the widest
range of values due to the varying importance of an acquisition
to a buyer (i.e., a strategic buyer willing to pay more than a
financial buyer) in addition to the potential differences in the
transaction process (i.e., competitiveness among potential
buyers).
Ladenburg located 25 transactions announced since January 2008
involving target companies providing freight transport and
logistics services and for which financial information was
available.
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Target
|
|
Acquiror
|
|
DBA Distribution Services, Inc.
|
|
Radiant Logistics, Inc. (OTCPK:RLGT)
|
Wim Bosman Holding B.V.
|
|
Mainfreight Limited (NZSE:MFT)
|
Dynamex Inc.
|
|
TransForce Inc. (TSX:TFI)
|
Morgan Southern, Inc.
|
|
Roadrunner Transportation Systems (NYSE:RRTS)
|
Total Logistic Control LLC
|
|
Ryder Integrated Logistics Inc.
|
ATC Technology Corporation
|
|
Laxey Partners Ltd.
|
Mar-Ter Spedizioni S.p.A.
|
|
Mid Industry Capital SpA (BIT:MIC)
|
Summit Logistics International
|
|
Toll Holdings Ltd.
|
Air Tiger Express Companies, Inc.
|
|
Kawasaki Kisen Kaisha Ltd. (TSE:9107)
|
Livingston International Income Fund
|
|
Sterling Partners; CPP Investment Board
|
RayTrans Distribution Services, Inc.
|
|
Echo Global Logistics, Inc. (NasdaqGS:ECHO)
|
Adcom Express, Inc.
|
|
Radiant Logistics, Inc. (OTCPK:RLGT)
|
LGT Logistics Holding AB
|
|
Axcel Industriinvestor A/S
|
J Martens AS
|
|
Kuehn & Nagel International AG (SWX:KNIN)
|
ATS Andlauer Transportation Services Limited Partnership
|
|
Andlauer Management Group Inc.
|
ELI-Logistik GmbH
|
|
Wincanton plc (LSE:WIN)
|
Alloin Transports
|
|
Kuehne & Nagel International AG (SWX:KNIN)
|
ABX LOGISTICS Worldwide S.A./N.V.
|
|
DSV A/S (CPSE:DSV)
|
CrossGlobe Group
|
|
Pine Creek Partners
|
Service Express, Inc.
|
|
Forward Air Solutions, Inc.
|
Transera International Logistics Ltd.
|
|
CH Robinson Worldwide Inc. (NasdaqGS:CHRW)
|
Compagnie Européenne de Prestations Logistiques SAS
|
|
Arcapita Bank B.S.C.(c); European Capital Ltd.
|
Groupe Malherbe
|
|
Natixis Investissement Partners
|
Pinch Holdings, Inc.
|
|
Forward Air Corp.
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Concert Group Logistics, Inc.
|
|
Express-1 Expedited Solutions, Inc. (AMEX:XPO)
|
Based on the information disclosed with respect to the targets
in each of the comparable transactions, Ladenburg calculated and
compared the enterprise values as a multiple of LTM revenue and
LTM EBITDA.
33
Ladenburg noted the following with respect to the multiples
generated:
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|
Multiple of Enterprise Value
to
|
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Mean
|
|
|
Median
|
|
|
High
|
|
|
Low
|
|
|
LTM revenue
|
|
|
0.69
|
x
|
|
|
0.49
|
x
|
|
|
3.33
|
x
|
|
|
0.18
|
x
|
LTM EBITDA
|
|
|
7.7
|
x
|
|
|
6.9
|
x
|
|
|
13.9
|
x
|
|
|
4.5
|
x
|
Ladenburg selected an appropriate multiple range for the Company
by examining the range indicated by the comparable companies and
taking into account certain company-specific factors. Based on
the above factors, Ladenburg applied EBITDA multiples of 7.0x to
8.0x to the Companys LTM EBITDA, and calculated a range of
indicated enterprise values for the Company. Ladenburg then
deducted net debt of approximately $2.0 million to derive a
per share range of equity values of approximately $2.10 to
approximately $2.40, based on approximately 34.0 million
outstanding shares and
in-the-money
options/warrants utilizing the treasury stock method.
None of the target companies in the comparable transactions have
characteristics identical to the Company. Accordingly, an
analysis of comparable business combinations is not
mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating
characteristics of the target companies in the comparable
transactions and other factors that could affect the respective
acquisition values.
Standalone
Discounted Cash Flow Analysis
A discounted cash flow analysis estimates value based upon a
companys projected future free cash flow discounted at a
rate reflecting risks inherent in its business and capital
structure. Unlevered free cash flow represents the amount of
cash generated and available for principal, interest and
dividend payments after providing for ongoing business
operations.
While the discounted cash flow analysis is the most scientific
of the methodologies used, it is dependent on projections and is
further dependent on numerous industry-specific and
macroeconomic factors.
Ladenburg utilized the Standalone Projections, which forecast a
compound annual growth rate, or CAGR, of approximately 32.6%
EBITDA growth from fiscal year, or FY, 2010 through FY2013,
representing an EBITDA margin improvement from approximately
6.5% to approximately 8.4% and a revenue CAGR of approximately
21.8%.
To arrive at a present value, Ladenburg utilized discount rates
ranging from 15.0% to 17.0%. This was based on an estimated
weighted average cost of capital of 16.0% (based on an estimated
weighted average cost of debt of 2.5% and 17.5% estimated cost
of equity). The cost of equity calculation was derived utilizing
the unlevered beta of the comparable companies, the appropriate
equity risk and size premiums and a company specific risk
factor, reflecting the risks associated with the Standalone
Projections, including, but not limited to, achieving the
projected revenue and EBITDA growth.
Ladenburg presented a range of terminal values at the end of the
forecast period by applying a range of terminal exit multiples
based on EBITDA as well as long term perpetual growth.
Utilizing terminal EBITDA multiples of between 5.5x and 6.5x and
long term perpetual growth rates of between 4.5% and 5.5%,
Ladenburg calculated a range of indicated enterprise values and
then deducted net debt of approximately $2.0 million to
derive a per share range of equity values of approximately $3.00
to approximately $3.80, based on approximately 34.0 million
outstanding shares and
in-the-money
options/warrants utilizing the treasury stock method.
Conclusion
Based on the information and analyses set forth above, Ladenburg
delivered its written opinion to the special committee of our
Board of Directors, which stated that, as of June 12, 2011,
based upon and subject to the assumptions made, matters
considered, procedures followed and limitations on its review as
set forth in the opinion, the Proposed Transaction is fair, from
a financial point of view, to the Companys stockholders.
34
As part of its investment banking business, Ladenburg regularly
is engaged in the evaluation of businesses and their securities
in connection with mergers, acquisitions, corporate
restructurings, negotiated underwritings, private placements and
for other purposes. We determined to use the services of
Ladenburg because it is a recognized investment banking firm
that has substantial experience in similar matters. Ladenburg
has received a fee of $140,000, of which $90,000 was paid upon
execution of the engagement letter and $40,000 was paid when
Ladenburg notified the Company that Ladenburg was prepared to
deliver the opinion. Ladenburg is also entitled to reimbursement
for its reasonable expenses, including attorneys fees.
Also, we have agreed to indemnify Ladenburg and related persons
and entities for certain liabilities that may relate to, or
arise out of, its engagement. Further, Ladenburg has not
previously provided, nor are there any pending agreements to
provide, any other services to us.
In the ordinary course of business, Ladenburg, certain of
Ladenburgs affiliates, as well as investment funds in
which Ladenburg or its affiliates may have financial interests,
may acquire, hold or sell long or short positions, or trade or
otherwise effect transactions in debt, equity and other
securities and financial instruments (including bank loans and
other obligations) of, or investments in, the Company or any
other party that may be involved in the Proposed Transaction and
their respective affiliates.
Ownership
Upon Closing
Set forth below is a table depicting the ownership of Company
common stock upon the closing of the Proposed Transaction, based
on the following assumptions (and without giving effect to the
Reverse Stock Split, which will not impact relative ownership
percentages):
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|
|
|
|
the number of outstanding shares of Company common stock is
based upon the number outstanding as of the record date of
[ ], 2011;
|
|
|
|
the Preferred Stock is immediately converted at the closing;
|
|
|
|
the Warrants are immediately exercised at the closing; and
|
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|
|
no options for the purchase of Company common stock will be
exercised.
|
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|
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
of Shares
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
of
|
|
|
|
|
|
|
|
|
|
|
|
Common Stock Owned
|
|
|
|
|
|
|
Shares of
|
|
|
Preferred
|
|
|
Common Stock Owned
|
|
|
Number of
|
|
|
Common Stock Owned
|
|
|
Assuming Conversion of all
|
|
|
|
|
|
|
Common
|
|
|
Stock
|
|
|
Assuming Conversion
|
|
|
Warrants
|
|
|
Assuming Conversion of
|
|
|
Preferred Stock and Exercise
|
|
|
|
|
Name
|
|
Stock Owned
|
|
|
Owned
|
|
|
of all Preferred Stock
|
|
|
Owned
|
|
|
all Warrants
|
|
|
of all Warrants
|
|
|
|
|
|
|
|
|
|
|
|
|
# of Shares
|
|
|
% of
|
|
|
|
|
|
# of Shares
|
|
|
% of
|
|
|
# of Shares of
|
|
|
% of
|
|
|
|
|
|
|
|
|
|
|
|
|
of Common
|
|
|
Common
|
|
|
|
|
|
of Common
|
|
|
Common
|
|
|
Common
|
|
|
Common
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
Stock
|
|
|
|
|
Investors
|
|
|
0
|
|
|
|
75,000
|
|
|
|
42,857,143
|
|
|
|
[ ]
|
|
|
|
42,857,143
|
|
|
|
42,857,143
|
|
|
|
[ ]
|
|
|
|
85,714,286
|
|
|
|
[ ]
|
|
|
|
|
|
Other Shareholders
|
|
|
[ ]
|
|
|
|
0
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
0
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
[ ]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
[ ]
|
|
|
|
75,000
|
|
|
|
[ ]
|
|
|
|
|
|
|
|
42,857,143
|
|
|
|
[ ]
|
|
|
|
|
|
|
|
[ ]
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Use of
Proceeds
The Company expects to use the proceeds of the Equity Investment
primarily to make strategic acquisitions and any balance will be
used for general corporate purposes.
Interests
of the Companys Directors and Executive Officers in the
Proposed Transaction
In considering the recommendation of the Board of Directors that
you vote to approve the Proposals, you should be aware that
aside from their interests as Company stockholders, the
Companys directors and executive officers have interests
in the Proposed Transaction that may be different from, or in
addition to, those of other Company stockholders generally. The
members of the special committee and the Board of Directors were
aware of and considered these interests, among other matters, in
evaluating and negotiating the Proposed Transaction, and in
recommending to the Companys stockholders that the
Proposals be approved. See the section entitled The
Proposed TransactionBackground of the Proposed
Transaction beginning on
35
page [ ]. The Companys stockholders should
take these interests into account in deciding whether to vote
FOR the approval and adoption of the Proposals.
As described in more detail below, the interests of the
Companys directors and executive officers in the Proposed
Transaction that are different from, or in addition to, those of
other Company stockholders may include:
|
|
|
|
|
the accelerated vesting of option awards held by our directors
and executive officers upon cessation of services to the Board
of Directors or termination of employment under certain
circumstances, in each case following consummation of the Equity
Investment; and
|
|
|
|
in the case of executive officers, the receipt of certain
severance payments and benefits upon termination of employment
under certain circumstances following consummation of the Equity
Investment.
|
In addition, James Martell, who is currently the Chairman of the
Board of Directors, will continue as a director following the
closing and will participate with JPE as an Investor in the
Proposed Transaction. Mr. Martell recused himself from the
activities of the Board of Directors relating to the Proposed
Transaction after being advised that JPE was interested in
having Mr. Martell remain on the Board post-closing and
that, if Mr. Martell desired, JPE would extend to
Mr. Martell an opportunity to invest in the Proposed
Transaction along with JPE.
These interests are described in more detail below, and certain
of them are quantified in the tables that follow the narrative
below.
Company
Stock Options
The Investment Agreement does not provide for special treatment
of outstanding options to purchase shares of our common stock,
and outstanding options do not automatically vest under the
terms of our stock option plan as a result of the Proposed
Transaction. Except for the options held by Mr. Martell,
each unvested option held by our non-employee directors and each
unvested option held by our current employee directors that was
received pursuant to such employees service as a director
will vest and become immediately exercisable upon consummation
of the Equity Investment, at which time such directors
services on the Board of Directors will cease. All other
unvested options will remain unvested and outstanding pursuant
to their current terms and conditions, unless and until our
executive officers experience a qualifying termination of
employment as described in more detail in the section entitled
Employment Agreements with Executive
Officers. All outstanding options held by
Mr. Michael Welch were granted to him in connection with
his service as an employee and, therefore, will not accelerate
vesting when his service as a director ceases.
Employment
Agreements with Executive Officers
We have previously entered into employment agreements with each
of Messrs. Michael Welch, as Chief Executive Officer, and
John Welch, as Chief Financial Officer. We plan to enter into
amendments to these agreements in connection with the Proposed
Transaction. The following summary describes the current terms
of each Executives agreement and does not reflect any
amendments that may be entered into following the date of this
Proxy Statement.
Under the agreements with each of Messrs. Michael Welch and
John Welch, if the executive officers employment is
terminated without cause (as defined in the employment
agreements), or if the executive officer resigns for good reason
(as defined in the employment agreements) within one year
following a change in control (as defined in the employment
agreements), such as the Proposed Transaction, then the
executive officer will receive:
|
|
|
|
|
a lump-sum payment equal to the sum of (a) one years
base salary and (b) the greater of (1) the executive
officers performance-based bonus payments for the year
preceding the date of termination or (2) the executive
officers average annual performance-based bonus during the
two years immediately preceding the termination;
|
36
|
|
|
|
|
one year continued benefits for the executive officer and his
dependents under all health, dental, disability, accident and
life insurance plans or arrangements in which the executive
officer or his dependents were participating immediately prior
to the date of the executive officers termination; and
|
|
|
|
immediate vesting of outstanding options.
|
Under their respective employment agreements with the Company,
Messrs. Michael Welch and John Welch are subject to certain
restrictive covenants regarding competition, solicitation and
confidentiality. The non-competition and non-solicitation
covenants apply during their employment and for the one-year
period following the termination of their employment, and the
confidentiality covenant applies during the term of their
respective employment agreements and at all times thereafter.
The following definitions apply to the employment agreements
with each of Messrs. Michael Welch and John Welch.
Cause, for purposes of the employment
agreements, generally means (i) the executive
officers material violation of any of the provisions of
their employment agreement, or the rules, policies,
and/or
procedures of the Company, or commission of any material act of
fraud, misappropriation, breach of fiduciary duty or theft
against or from the Company, (ii) the executive
officers violation of any law, rule or regulation of a
governmental authority or regulatory body with jurisdiction over
the Company or the executive officer relative to the conduct of
the executive officer in connection with the Companys
business or its securities or (iii) the conviction of the
executive officer of a felony under the laws of the United
States of America or any state therein. In the event the
executive officer engages in conduct described in
clauses (i) or (ii) of the definition of cause, the
executive officer will have an opportunity to cure such conduct
within 30 days after the Company provides written notice to
the executive officer. If the executive officer fails to cure
such conduct within the
30-day
period or, if the executive officer commits the same violation
within 12 months of receiving notice from the Company, then
the Company may terminate the executive officers
employment for cause.
Good reason, for purposes of the employment
agreements, will exist if, without the executive officers
express written consent (i) the Company assigns to the
executive officer duties of a non-executive nature or for which
the executive officer is not reasonably equipped by his skills
and experience, (ii) the Company reduces the salary of the
executive officer, or materially reduces the amount of paid
vacations to which he is entitled, or his fringe benefits and
perquisites, (iii) the Company requires the executive
officer to relocate his principal business office or his
principal place of residence greater than 50 miles outside
of St. Joseph, Michigan, or assigns to the executive officer
duties that would reasonably require such relocation,
(iv) the Company requires the executive officer, or assigns
duties to the executive officer that would reasonably require
him, to spend more than 60 normal working days away from the St.
Joseph, Michigan area during any consecutive
12-month
period, (v) the Company fails to provide office facilities,
secretarial services and other administrative services to the
executive officer, which are substantially equivalent to the
facilities and services provided to executive officer on the
date the executive officer entered into the employment agreement
or (vi) the Company terminates incentive plans and benefit
plans or arrangements, or reduces or limits the executive
officers participation therein relative to the level of
participation of other executives of similar rank, to such an
extent as to materially reduce the aggregate value of the
executive officers incentive compensation and benefits
below their aggregate value as of the date the executive officer
entered into the employment agreement.
Arrangements
with our Directors
We have previously entered into an employment agreement with
Daniel Para, a director of the Company, in his capacity as Chief
Executive Officer of Concert Group Logistics, Inc., a wholly
owned subsidiary of the Company. We plan to enter into an
amendment to Mr. Paras agreement in connection with the
Proposed Transaction. The following summary describes the
current terms of Mr. Paras agreement and does not reflect
any amendment that may be entered into following the date of
this Proxy Statement.
Mr. Paras employment agreement provides for severance
benefits and payments substantially similar to the benefits and
payments payable to Messrs. Michael Welch and John Welch,
as well as substantially similar restrictive covenants, in each
case as described above in the section entitled
Employment Agreements with
37
Executive Officers. In addition, the definitions
contained in Mr. Paras employment agreement are
identical to the definitions contained in Messrs. Michael
Welch and John Welch, except that clauses (iii) and
(iv) of the definition of good reason apply with respect to
the greater Chicago metropolitan area instead of St. Joseph,
Michigan. As with the employment agreements with
Messrs. Michael Welch and John Welch, the Proposed
Transaction will be a change of control under
Mr. Paras employment agreement.
Under the terms of the option award agreement for options
granted to directors pursuant to the Companys Amended and
Restated 2001 Stock Option Plan, if, within one year following a
change in control of the Company (which includes the Proposed
Transaction), the directors service as a member of the
Board of Directors ceases for any reason, then any unvested
options held by such director will immediately vest and become
exercisable upon the cessation of service. Pursuant to the
Investment Agreement, with the exception of Mr. James
Martell, the service of the Companys current directors
will terminate upon the consummation of the Proposed Transaction
and their outstanding options will vest and become exercisable
at such time.
Mr. Martell, who is currently Chairman of the Board of
Directors, and who will continue as a director following the
consummation of the Proposed Transaction, will be an Investor in
the Proposed Transaction. The details of Mr. Martells
investment are as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
Number of Shares
|
|
|
|
|
|
|
Shares of
|
|
|
of Common Stock
|
|
|
Aggregate
|
|
|
|
Preferred
|
|
|
Subject to
|
|
|
Purchase
|
|
Director
|
|
Stock(1)
|
|
|
Warrants(2)
|
|
|
Price
|
|
|
|
|
James J. Martell
|
|
|
725
|
|
|
|
414,286
|
|
|
$
|
725,000
|
|
|
|
|
(1) |
|
Shares of Preferred Stock have an initial conversion price of
$1.75 per share of Company common stock, without giving effect
to the 4:1 Reverse Stock Split. Giving effect to the 4:1 Reverse
Stock Split, shares of Preferred Stock have an initial
conversion price of $7.00 per share of Company common stock. |
|
(2) |
|
Share numbers in this column do not give effect to the 4:1
Reverse Stock Split. The initial exercise price of the Warrants
is $1.75 per share of Company common stock, without giving
effect to the 4:1 Reverse Stock Split. Giving effect to the 4:1
Reverse Stock Split, the initial exercise price of the Warrants
is $7.00 per share of Company common stock. |
Quantification
of Payments and Benefits
The following table shows the amounts of payments and benefits
that each director and executive officer of the Company would
receive in connection with the Proposed Transaction, assuming
the consummation of the Proposed Transaction occurred on
June 30, 2011, the latest practicable date prior to the
filing of this proxy
38
statement, and, as applicable, the service of the director
ceased and the employment of the executive officer was
terminated by the Company without cause or by the executive
officer for good reason, in each case, on such date.
Executive
Officers and Directors
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Perquisites and
|
|
|
|
Name
|
|
|
Cash
($)(1)
|
|
|
Equity
($)(2)
|
|
|
Benefits
($)(3)
|
|
|
Total ($)
|
Executive Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Michael R. Welch
|
|
|
|
391,900
|
|
|
|
|
109,300
|
|
|
|
|
5,909
|
|
|
|
|
497,109
|
|
President and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John D. Welch Chief
|
|
|
|
236,000
|
|
|
|
|
38,558
|
|
|
|
|
5,717
|
|
|
|
|
280,275
|
|
Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Daniel Para Director,
|
|
|
|
227,300
|
|
|
|
|
113,760
|
|
|
|
|
5,284
|
|
|
|
|
346,344
|
|
President and Chief
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive Officers of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Concert Group Logistics,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inc.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
James J. Martell
|
|
|
|
|
|
|
|
|
28,842
|
|
|
|
|
|
|
|
|
|
28,842
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jay N. Taylor
|
|
|
|
|
|
|
|
|
29,500
|
|
|
|
|
|
|
|
|
|
29,500
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Calvin (Pete) R. Whitehead
|
|
|
|
|
|
|
|
|
28,550
|
|
|
|
|
|
|
|
|
|
28,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jennifer H. Dorris
|
|
|
|
|
|
|
|
|
39,806
|
|
|
|
|
|
|
|
|
|
39,806
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John F. AffleckGraves
|
|
|
|
|
|
|
|
|
27,465
|
|
|
|
|
|
|
|
|
|
27,465
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
As described above, the cash payments to the named executive
officers and Mr. Para consist of (a) a lump-sum
payment equal to the sum of the employees one years
base salary and (b) the greater of (1) his
performance-based
bonus payments for the year preceding the date of termination or
(2) his average annual bonus during the two years
immediately preceding the termination payment, in each case,
payable upon a qualifying termination of employment following
the consummation of the Proposed Transaction. The salary and
bonus components of the cash severance, respectively, for each
employee are as follows: (i) Mr. Michael Welch -
$240,000 and $151,900; (ii) Mr. John Welch -
$160,000 and 76,000; and (ii) Mr. Para - $180,000
and $47,300. The cash payments are double-trigger in
that they are payable upon a qualifying termination of the
executive officers employment within one year following
consummation of the Proposed Transaction. These cash payments
are based on each employees base salary as of
June 30, 2011 and bonus payments made with respect to 2010
and 2009. As a result, if the employees base salary or
bonus payment increases prior to the date the employees
employment is terminated, actual payment to the employee may be
greater than set forth in this table. |
|
(2) |
|
As described above, the equity amounts consist of accelerated
vesting of unvested option awards, which is
double-trigger in that it will occur immediately
upon a qualifying termination of employment or cessation of
services on the board for any reason, in each case, within one
year following consummation of the Proposed Transaction.
Pursuant to the Investment Agreement, with the exception of
Mr. James Martell, the service of each of the
Companys current directors will terminate upon the
consummation of the Proposed Transaction and their outstanding
options will vest and become exercisable at such time. The value
of the option awards is based on the average per share closing
price of Company common stock over the five business days
following public announcement of the Proposed Transaction, or
$2.772. As a result, if the per share price of Company common
stock increases prior to the date the holder exercises the
option award, actual equity amounts may be greater than set
forth in this table. |
39
|
|
|
(3) |
|
The amounts in this column represent the aggregate incremental
cost to the Company with respect to continued health and welfare
benefits to be provided to the employee and his dependents for a
period of one year following a qualifying termination of
employment within one year following consummation of the
Proposed Transaction. The Company has assumed, for purposes of
the calculation, that the costs to the Company for the one-year
period following a qualifying termination of employment will be
the same as the costs to the Company for 2010. |
|
(4) |
|
The equity amount to Mr. Para represents total value of
stock options that will accelerate vesting immediately upon
Mr. Paras termination of employment by the Company
other than for cause or by him for good reason and upon
Mr. Paras ceasing to be a director. Of the equity
amount listed in the table, $8,760 is attributable to options
that Mr. Para received for services rendered as a director,
which will immediately vest and become exercisable upon
consummation of the Proposed Transaction when
Mr. Paras service as a director ceases. |
Payment
in Respect of Vested Options
|
|
|
|
|
|
|
|
|
|
|
|
|
Resulting Consideration
|
|
|
Number of Shares Underlying
|
|
from Vested Option
|
Name
|
|
Vested Option
Awards (#)
|
|
Awards(1)($)
|
|
Executive Officers
|
|
|
|
|
|
|
|
|
Michael Welch
|
|
|
413,333
|
|
|
|
763,560
|
|
John Welch
|
|
|
42,333
|
|
|
|
61,070
|
|
Directors
|
|
|
|
|
|
|
|
|
Daniel
Para(1)
|
|
|
50,694
|
|
|
|
82,490
|
|
James J. Martell
|
|
|
281,944
|
|
|
|
488,508
|
|
Jay N. Taylor
|
|
|
179,167
|
|
|
|
331,400
|
|
Calvin (Pete) R. Whitehead
|
|
|
181,944
|
|
|
|
335,100
|
|
Jennifer H. Dorris
|
|
|
175,694
|
|
|
|
324,844
|
|
John F. AffleckGraves
|
|
|
157,639
|
|
|
|
238,885
|
|
|
|
|
(1) |
|
The value of the option awards is based on the average per share
closing price of the Company common stock over the five business
days following public announcement of the Proposed Transaction,
or $2.772. As a result, if the per share price of Company common
stock increases prior to the date the holder exercises the
option award, actual equity amounts may be greater than set
forth in this table. |
Regulatory
Approvals
Under the Investment Agreement, the Company and the Investors
have agreed to use their reasonable best efforts to obtain all
required governmental approvals in connection with the
completion of the Proposed Transaction.
The Company and JPE have determined that no filing under the HSR
Act is required in connection with the Equity Investment.
We are unaware of any material federal, state or foreign
regulatory requirements or approvals required for completion of
the Equity Investment.
Special
Considerations
The presence of a significant stockholder may affect the ability
of a third party to acquire the Company. As of the record date,
there were [ ] shares of
Company common stock outstanding, plus outstanding options to
purchase an additional
[ ] shares of Company common
stock. Based upon the number of shares of Company common stock
outstanding on the record date, and excluding any shares
issuable upon the exercise of currently outstanding options, JPE
would have held in the aggregate approximately
[ ]% of the total voting power of
the Companys capital stock before giving effect to the
40
exercise of any Warrants, and approximately
[ ]% of the total voting power of
the Companys capital stock after giving effect to the
exercise of all of the Warrants. Because the Preferred Stock
votes on an as converted basis, the conversion of
the Preferred Stock into Company common stock will not effect
the general voting power allocable to the Preferred Stock upon
its issuance. The Reverse Stock Split will not effect the
relative percentage of the voting power held by JPE or any other
stockholder.
In addition, it is expected that the Company will use the
proceeds of the Equity Investment principally to make
acquisitions, and JPE intends following the closing to raise
additional capital to consummate acquisitions. The additional
capital may include debt financing, which would increase the
Companys leverage risk and debt service expense, or
additional equity financing, which would further dilute the
ownership of the Companys existing stockholders.
U.S.
Federal Income Tax Matters
For U.S. Federal income tax purposes, no income, gain or
loss will be recognized by the Companys stockholders in
connection with the Proposed Transaction.
Absence
of Appraisal Rights
The Company is incorporated in the State of Delaware and,
accordingly, subject to the Delaware General Corporation Law, or
the DGCL. The Companys stockholders are
not entitled to appraisal rights under the DGCL with respect to
the Proposed Transaction.
41
THE
INVESTMENT AGREEMENT
On June 13, 2011, the Company entered into the Investment
Agreement with the Investors. The summary of the material terms
of the Investment Agreement below and elsewhere in this proxy
statement is qualified in its entirety by reference to the
Investment Agreement, a copy of which is attached to this proxy
statement as Annex A and which we incorporate by reference
into this document. This summary may not contain all of the
information about the Investment Agreement that is important to
you. We encourage you to read carefully the Investment Agreement
in its entirety.
Consideration
to be Paid in the Equity Investment
Subject to the terms and conditions of the Investment Agreement,
upon the closing, the Company will issue to the Investors, for
$75,000,000 in cash, (i) an aggregate of 75,000 shares
of Preferred Stock and (ii) Warrants to purchase
42,857,143 shares of common stock of the Company (subject
to adjustment in connection with the contemplated Reverse Stock
Split).
Investor
Representative
In the Investment Agreement, JPE is empowered to act on behalf
of the other Investors in connection with the transactions
contemplated thereunder. This appointment entitles JPE to, among
other things:
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exercise discretion in agreeing to amendments to the Investment
Agreement;
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exercise discretion in executing and delivering waivers in
connection with the transactions contemplated by the Investment
Agreement;
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exercise discretion in making necessary agreements in connection
with the Investment Agreement; and
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communicate to, and receive communications from, the Company on
behalf of the Investors.
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Closing
of the Equity Investment
Unless the Company and JPE agree otherwise, the Equity
Investment will close on a date to be specified by the Company
and JPE not later than two days after the satisfaction or waiver
of all the conditions in the Investment Agreement. The parties
expect to close the Equity Investment in the third quarter of
2011.
In the event that any Investor (other than JPE) breaches its
obligation to pay to the Company at the closing its portion of
the purchase price for the Securities in accordance with the
Investment Agreement, JPE is obligated to purchase such
Securities from the Company. In that event, JPE has the right,
in its sole discretion, to delay the closing for a period of up
to five business days.
Representations
and Warranties of the Company and the Investors
The representations and warranties of the Company contained in
the Investment Agreement have been made solely for the benefit
of the Investors. In addition, such representations and
warranties (a) have been made only for purposes of the
Investment Agreement, (b) have been qualified by
confidential disclosures made to the Investors in connection
with the Investment Agreement, (c) are subject to
materiality qualifications contained in the Investment Agreement
which may differ from what may be viewed as material by
investors generally, (d) were made only as of the date of
the Investment Agreement or such other date as is specified in
the Investment Agreement and (e) have been included in the
Investment Agreement for the purpose of allocating risk between
the contracting parties rather than establishing matters as
facts. Accordingly, the summary of the representations and
warranties set forth below and the Investment Agreement annexed
hereto are included in this filing only to provide stockholders
with information regarding the terms of the Investment Agreement
and not to provide investors with any other factual information
regarding the Company or its business. The Companys
stockholders should not rely on the representations and
warranties or any descriptions thereof as characterizations of
the actual state of facts or condition of the Company or any of
its subsidiaries or affiliates. Moreover, information concerning
the subject matter of the representations and
42
warranties may change after the date of the Investment
Agreement, which subsequent information may or may not be fully
reflected in the Companys public disclosures.
Our representations and warranties relate to, among other things:
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our and our subsidiaries proper organization, good
standing and corporate power to operate our businesses;
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our certificate of incorporation and by-laws and those of our
subsidiaries;
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the absence of encumbrances on our capital stock;
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the due issuance of the Preferred Stock;
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our capitalization, including in particular the number of shares
of preferred stock, common stock and stock options outstanding
and the status of our indebtedness;
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our corporate power and authority to enter into the Investment
Agreement and to consummate the transactions contemplated
thereby;
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the absence of any violation of or conflict with our
organizational documents, applicable law or certain agreements
as a result of entering into the Investment Agreement and
consummating the transactions contemplated thereby;
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required consents and approvals of governmental entities as a
result of the transactions contemplated by the Investment
Agreement;
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our SEC filings since January 1, 2009 and the financial
statements contained therein;
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our implementation of certain internal controls over financial
reporting and a system of disclosure controls as required by the
Exchange Act and the Sarbanes-Oxley Act;
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the accuracy and completeness of information supplied by us in
this proxy statement;
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the absence of certain changes and events, including any
material adverse effect, since January 1, 2011;
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the absence of litigation or outstanding court orders against us;
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material and certain other specified contracts;
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our possession of all licenses and permits necessary to operate
our properties and carry on our business;
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employment and labor matters affecting us, including matters
relating to our employee benefit plans;
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tax matters;
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environmental matters;
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real property owned and leased by us and title to assets;
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our intellectual property;
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our compliance with the Foreign Corrupt Practices Act of 1977,
as amended;
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the absence of any application of Section 203 of the DGCL
or other state takeover laws;
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the required vote of our stockholders in connection with the
approval of the transactions contemplated by the Investment
Agreement;
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the absence of undisclosed brokers fees;
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receipt by us of a fairness opinion from Ladenburg
Thalmann & Co. Inc.;
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our insurance arrangements; and
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our compliance with applicable securities laws in conjunction
with the offer and sale of the Securities (including applicable
exemptions from registration under the Securities Act of 1933,
as amended, and the rules promulgated by the SEC thereunder).
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For purposes of the Investment Agreement, material
adverse effect means any state of facts, change,
development, event, effect, condition, occurrence, action or
omission that, alone or together with any other state of facts,
change, development, event, effect, condition, occurrence,
action or omission, (i) materially adversely affects the
business, assets, properties, financial condition or results of
operations of the Company and its subsidiaries, taken as a
whole, or (ii) prevents, materially impedes or materially
delays the consummation by the Company of the Equity Investment
or the other transactions contemplated by the Investment
Agreement.
However, none of the following will be deemed either alone or in
combination to constitute, and none of the following will be
taken into account in determining whether there has been or
would be, a material adverse effect on the Company:
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general legal, market, economic or political conditions
affecting the industry in which the Company operates, provided
that such conditions do not disproportionately affect the
Company and its subsidiaries, taken as a whole, in relation to
other companies in the industry in which the Company operates;
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changes affecting general worldwide economic or capital market
conditions (including changes in interest or exchange rates),
provided that such changes do not disproportionately affect the
Company and its subsidiaries, taken as a whole, in relation to
other companies in the industry in which the Company operates;
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the pendency or announcement of the Investment Agreement or the
anticipated consummation of the Equity Investment, including any
reaction of any customer, employee, supplier, service provider,
partner or other constituency to the identity of the Investors
or any of the transactions contemplated by the Investment
Agreement;
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any decrease in the market price or trading volume of the
Company common stock (except that the underlying cause or causes
of any such decrease may be deemed to constitute, in and of
itself or themselves, a material adverse effect and
may be taken into consideration when determining whether there
has occurred a material adverse effect);
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the Companys failure to meet any internal or published
projections, forecasts or other predictions or published
industry analyst expectations of financial performance (except
that the underlying cause or causes of any such failure may be
deemed to constitute, in and of itself or themselves, a
material adverse effect and may be taken into
consideration when determining whether there has occurred a
material adverse effect);
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any change in GAAP which occurs or becomes effective after the
date of the Investment Agreement;
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actions or omissions of the Company or any of its subsidiaries
taken with the prior written consent of JPE; and
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any natural disaster, any act or threat of terrorism or war
anywhere in the world, any armed hostilities or terrorist
activities anywhere in the world, any threat or escalation of
armed hostilities or terrorist activities anywhere in the world
to the extent they do not disproportionately affect the Company
and its subsidiaries, taken as a whole, in relation to other
companies in the industry in which the Company operates.
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In the Investment Agreement, the Investors make various
customary representations and warranties. Their representations
and warranties relate to, among other things:
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their proper organization and good standing;
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their corporate or other power and authority to enter into the
Investment Agreement and to consummate the transactions
contemplated by the Investment Agreement;
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the accuracy and completeness of information supplied by them in
this proxy statement;
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the sufficiency of their available funds at closing to
consummate the Equity Investment;
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matters relating to the absence of any application of
Section 203 of the DGCL;
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their status as accredited investors;
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the appropriate advice obtained and the due diligence
investigation made with respect to the Investment Agreement and
the transactions contemplated thereby; and
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their understanding of the limitations on transfers and other
restrictions on the Securities they will receive pursuant to the
Equity Investment.
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Conduct
of Our Business Pending the Closing
Under the Investment Agreement, we have agreed that, subject to
certain exceptions set forth in the Investment Agreement,
between June 13, 2011 and the closing we and our
subsidiaries will:
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conduct our business in the ordinary course in all material
respects; and
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use commercially reasonable efforts to keep available the
services of our and our subsidiaries current officers and
employees, and preserve our assets, technology and current
relationships with customers, suppliers and other persons with
whom we have material business dealings.
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We have also agreed that during the same period, subject to
certain exceptions set forth in the Investment Agreement,
neither we nor our subsidiaries will:
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declare or pay any dividends or make other distributions with
respect to our or our subsidiaries capital stock;
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split, combine, reclassify, redeem, purchase or otherwise
acquire any of our or our subsidiaries capital stock;
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modify any term of our or our subsidiaries indebtedness;
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issue, deliver, sell, pledge or otherwise encumber any of our or
our subsidiaries equity interests, or securities
convertible into, exchangeable for or exercisable for, or any
options, warrants, calls or other rights to acquire, any of our
or our subsidiaries equity interests;
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adopt or implement any stockholder rights plan or similar
arrangement;
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amend or propose to amend our or our subsidiaries
organizational documents;
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acquire any business or business entity or any division thereof,
or any other assets other than immaterial assets acquired in the
ordinary course of business;
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sell, lease, license, sell and lease back, mortgage or encumber
or otherwise dispose of any of our or our subsidiaries
material properties or assets, except in the ordinary course of
business;
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repurchase, prepay or incur any indebtedness, or make loans,
advances or capital contributions to or investments in any other
person;
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incur or commit to incur any capital expenditures that are
individually in excess of $200,000 or in the aggregate are in
excess of $500,000;
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settle or satisfy any claims, actions or proceedings, other than
in the ordinary course of business, for amounts not in excess of
$200,000 or waive any material benefits of, or modify in any
adverse respect, or fail to enforce, any confidentiality,
standstill or similar contract;
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enter into any lease or sublease of real property or modify in
any material respect or exercise any right to renew any lease or
sublease of real property, or acquire any interest in real
property;
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modify or amend in any material respect or terminate any
material contracts or waive any right to enforce rights or
claims thereunder;
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increase, adopt, terminate or amend compensation, retention,
severance or benefit plan arrangements, or grant any award
thereunder;
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form any subsidiary;
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enter into any contract which will conflict with the Proposed
Transaction or otherwise result in any violation or breach under
such contract upon consummation of the Proposed Transaction or
give rise to any loss or the creation of any material
encumbrance as a result of the Proposed Transaction;
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take any action or fail to take any action which would be
expected to result in any representation or warranty becoming
untrue;
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adopt or enter into any collective bargaining agreement or other
labor union contract;
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write down the book value of any material assets or make changes
to financial or tax accounting practices except as required by
GAAP or applicable law;
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engage in any trade loading practices or other promotional sales
or discount activity with the effect of accelerating to prior
fiscal quarters sales to the trade that would otherwise be
expected to occur in subsequent fiscal quarters;
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engage in any practice which would have the effect of postponing
to subsequent fiscal quarters payments by the Company or any of
its subsidiaries that would otherwise be expected to be made in
prior fiscal quarters;
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engage in any promotional sales otherwise outside the ordinary
course of business or inconsistent with past practice;
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enter into, extend or renew any contract pursuant to which the
Company or any of its subsidiaries agrees not to compete with
any person in any area or to engage in any activity or business
that is material to the Company and its subsidiaries, or
containing any provisions contemplating a change in
control or similar event with respect to the Company or
one or more of its subsidiaries, including provisions requiring
consent or approval of any person in the event of a change in
control or otherwise having the effect of providing that the
consummation of the transactions contemplated by the Investment
Agreement will materially conflict with such contract or give
rise under such contract to any right of termination or other
adverse right; or
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authorize or commit, resolve or agree to take any of the
foregoing actions.
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Stockholders
Meeting
We have agreed to, as promptly as reasonably practicable after
the date of the Investment Agreement, establish a record date
for, duly call, give notice of, convene and hold a meeting of
our stockholders, and have agreed to cause such meeting to occur
by the 45th calendar day following the mailing of this
proxy statement, for the purpose of obtaining stockholder
approval of the Proposals, regardless of whether our Board of
Directors has determined at any time that the Investment
Agreement is no longer advisable or recommends that the
stockholders of the Company vote against the Proposals (subject
to our right to terminate the Investment Agreement in certain
circumstances), subject to certain exceptions specified in the
Investment Agreement.
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In addition, we have agreed, subject to the exceptions set forth
in the following section, that our Board of Directors will
recommend to our stockholders that they vote in favor of the
Proposals and include such recommendation in this proxy
statement, and to use our reasonable best efforts to solicit
stockholder approval of the Proposals.
No
Solicitation of Transactions
We have agreed that neither we nor any of our subsidiaries,
directors, officers, employees, investment bankers or other
representatives will, directly or indirectly:
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solicit, initiate, knowingly encourage or take any action to
knowingly facilitate any takeover proposal or inquiry or the
making of any proposal that could reasonably be expected to lead
to a takeover proposal; or
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enter into, continue or otherwise participate in any discussions
or negotiations regarding, or furnish any information to any
person or otherwise cooperate with any person with respect to,
any takeover proposal.
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However, prior to the receipt of stockholder approval of the
Proposals, if we receive an unsolicited bona fide written
takeover proposal from a third party that our Board of Directors
(acting upon the affirmative recommendation of the special
committee), after consultation with our financial advisor and
outside legal counsel, determines in good faith constitutes or
could reasonably be expected to lead to a superior proposal, we
may, and we may permit our subsidiaries and representatives to,
furnish information with respect to the Company and our
subsidiaries to the person making such takeover proposal
pursuant to a nondisclosure agreement which contains terms that
are no less restrictive than those contained in the
nondisclosure agreement with JPE (provided that all such
information has been or is provided to JPE), and participate in
discussions or negotiations with the person making such takeover
proposal.
For purposes of the Investment Agreement, takeover
proposal means any inquiry, proposal or offer from any
person or group relating to, or that could reasonably be
expected to lead to, any merger, consolidation, business
combination, recapitalization, merger, consolidation,
liquidation or dissolution involving the Company, or the direct
or indirect acquisition (including by way of any tender offer,
exchange offer, liquidation, joint venture or other similar
transaction), of:
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assets or businesses representing 15% or more of the total
revenue, net income, EBITDA or assets of the Company and its
subsidiaries, taken as a whole; or
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15% or more of the outstanding shares of Company common stock or
of any class of capital stock of, or other equity or voting
interests in, one or more subsidiaries of the Company which, in
the aggregate, directly or indirectly hold assets or businesses
representing 15% or more of the total revenue, net income,
EBITDA or assets of the Company and its subsidiaries, taken as a
whole.
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For purposes of the Investment Agreement, superior
proposal means any binding bona fide written offer
which did not result from a breach of the above restrictions,
and which:
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if consummated, would result in the offering person (or, in the
case of a direct merger between such person and the Company, the
stockholders of such person) acquiring, directly or indirectly,
50% or more of the voting power of the capital stock of the
Company or 50% or more of the assets of the Company and its
subsidiaries, taken as a whole; and
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in the good faith judgment of the Board of Directors (acting
upon the affirmative recommendation of the special committee)
(after consultation with its financial advisor and outside legal
counsel), (i) is more favorable to the holders of Company
common stock than the Equity Investment from a financial point
of view (taking into account all of the terms and conditions of
such proposal and the Investment Agreement (including any
changes to the terms of the Investment Agreement proposed by the
Investors in response to such superior proposal or otherwise))
and (ii) is reasonably capable of being completed, taking
into account all financial, legal, regulatory and other aspects
of such proposal.
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We have agreed that neither the Board of Directors nor any
committee thereof will (or will agree or resolve to):
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withdraw or modify in a manner adverse to the Investors, or
propose publicly to withdraw or modify in a manner adverse to
the Investors, the approval, recommendation or declaration of
advisability by the Board of Directors or any such committee of
the transactions contemplated by the Investment
Agreement; or
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approve, recommend or declare advisable, or propose publicly to
approve, recommend or declare advisable, any takeover proposal.
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We refer to any action described in the foregoing bullets as an
adverse recommendation change.
In addition, we have agreed that neither the Board of Directors
nor any committee thereof will (or will agree or resolve to)
cause or permit the Company to enter into any letter of intent,
memorandum of understanding, acquisition agreement, merger
agreement or other agreement (each of which we refer to as an
acquisition agreement) constituting or
related to, or which is intended to or is reasonably likely to
lead to, any takeover proposal (other than a permitted
nondisclosure agreement).
Notwithstanding the foregoing two paragraphs, at any time prior
to stockholder approval of the Proposals, the Board of Directors
may:
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in response to a superior proposal or an
intervening event, effect an adverse recommendation
change; or
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in response to a superior acquisition proposal,
cause the Company to enter into a definitive agreement to
consummate such superior acquisition proposal and concurrently
terminate the Investment Agreement;
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in each case, if the Board of Directors determines in good
faith, after consultation with its outside legal counsel and its
financial advisor, that the failure to do so would be
inconsistent with its fiduciary duties to the stockholders of
the Company under applicable law. However, the Board of
Directors and the committees thereof may not, and will cause the
Company not to, take any of the actions described in the
foregoing two bullets unless:
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the Board of Directors has first provided prior written notice
to JPE that it is prepared to take such action, which notice
must, in the case of a superior proposal, attach the most
current version of any written agreement relating to the
superior proposal, and, in the case of an intervening event,
attach information describing the intervening event; and
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JPE does not make, within three business days after the receipt
of such notice, a proposal that would, in the good faith
judgment of the Board of Directors (acting upon the affirmative
recommendation of the special committee) (after consultation
with its financial advisor and outside legal counsel), cause the
offer previously constituting a superior proposal to no longer
constitute a superior proposal, or obviate the need for an
adverse recommendation change as a result of an intervening
event (and any amendment or modification of such superior
proposal requires a new notice and a new three business day
period).
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During the three business day period described above, the
Company is obligated to negotiate in good faith with JPE
regarding any revisions to the terms of the Investment Agreement
proposed by JPE.
For purposes of the Investment Agreement, the term
superior acquisition proposal means a
superior proposal that, if consummated, would result in the
offering person (or, in the case of a direct merger between such
person and the Company, the stockholders of such person)
acquiring, directly or indirectly, all or substantially all of
the voting power of the capital stock of the Company or all or
substantially all of the assets of the Company and its
subsidiaries, taken as a whole.
For purposes of the Investment Agreement, the term
intervening event means an event or other
information (other than any related to a takeover proposal),
unknown to the Board of Directors as of the date
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of the Investment Agreement, which becomes known prior to
stockholder approval of the Proposals and which causes the Board
of Directors to determine in good faith, after consultation with
its outside legal counsel and its financial advisor, that its
failure to effect an adverse recommendation change would be
inconsistent with its fiduciary duties to the stockholders of
the Company under applicable law.
In addition, we have agreed to, as promptly as possible and in
any event within 24 hours after the receipt thereof, advise
JPE of any takeover proposal and the terms and conditions of,
and other facts regarding, such takeover proposal, and to keep
JPE informed on a reasonably current basis of the status and
other developments with respect to such takeover proposal and
promptly provide JPE with copies of all documentation relating
to such takeover proposal.
Re-Audit
Engagement
We have agreed to engage (and have as of the date of this proxy
statement engaged) an independent registered public accounting
firm of national reputation designated by JPE for the purpose of
re-auditing the historical consolidated financial statements of
the Company for fiscal years 2009 and 2010. In the event that
the closing does not occur (other than as a result of the
termination of the Investment Agreement by the Company in
connection with a superior acquisition proposal, or
by JPE as a result of a breach by the Company or an
adverse recommendation change) and the engagement of
the new auditor is terminated in connection with the termination
of the Investment Agreement, JPE is obligated to reimburse the
Company for the fees and expenses of the accounting firm.
Agreement
to Take Further Action and to Use Reasonable Best
Efforts
Subject to the terms and conditions of the Investment Agreement,
each party has agreed to use its reasonable best efforts to take
all actions necessary, proper or advisable to consummate and to
make effective the transactions contemplated by the Investment
Agreement. Among other things, each party has committed to use
such efforts to cooperate with each other to obtain all
necessary consents, approvals and authorizations from
governmental authorities and third parties.
The Company and JPE have determined that no filing under the HSR
Act, or any similar antitrust approval, is required in
connection with the Equity Investment.
Composition
of Board of Directors
Upon the closing of the Equity Investment, the Board will be
reconstituted such that: (1) there will be eight Board
members, (2) one of such directors will be James Martell
(or a replacement acceptable to JPE), (3) seven of such
directors will be designated by JPE (including Bradley Jacobs),
(4) each standing committee of the Board will be
reconstituted in a manner reasonably acceptable to JPE and
(5) Bradley Jacobs will become the Chairman of the Board.
In connection with each meeting of stockholders of the Company
at which directors are to be elected to serve on the Board of
Directors, the Company has agreed to take all necessary steps to
nominate the candidates appointed by JPE and to use its
reasonable best efforts to cause the Board of Directors to
unanimously recommend that the stockholders of the Company vote
in favor of each such person for election to the Board of
Directors. If, for any reason, a candidate appointed by JPE is
determined to be unqualified to serve on the Board of Directors
because such appointment would constitute a breach of the
fiduciary duties of the Board of Directors or applicable law or
stock exchange requirements, JPE will have the right to
designate an alternative person. Each person so appointed will
hold office as a director of the Company for such term as is
provided in the Companys constituent documents or until
his or her death, resignation or removal from the Board of
Directors or until his or her successor has been duly elected
and qualified. If any such appointee ceases to serve as a
director of the Company for any reason during his or her term,
the Company will use its reasonable best efforts to cause the
Board of Directors to fill the vacancy with a replacement
designated by JPE.
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Subject to applicable law and stock exchange requirements, JPE
will have the right to designate:
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no less than a majority of the members of the Board of Directors
for so long as JPE owns Preferred Stock, Company common stock or
other voting securities, or Warrants exercisable for such
securities, representing, in the aggregate, no less than 33% of
the total voting power of the capital stock of the Company,
calculated on a fully-diluted basis; and
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no less than 25% of the members of the Board of Directors for so
long as JPE owns Preferred Stock, Company common stock or other
voting securities, or Warrants exercisable for such securities,
representing, in the aggregate, less than 33% but greater than
or equal to 20% of the total voting power of the capital stock
of the Company, calculated on a fully-diluted basis.
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None of the foregoing will prevent the Board of Directors from
acting in accordance with its fiduciary duties or applicable law
or stock exchange requirements or from acting in good faith in
accordance with the Companys constituent documents, while
giving due consideration to the intent of the Investment
Agreement.
The board representation rights of JPE under the Investment
Agreement are in addition to, and not in limitation of,
JPEs voting rights as a holder of capital stock of the
Company.
Mr. James Martell, who is currently Chairman of the Board
of the Company, and who will continue as a director on the
reconstituted Board of Directors as described above and will be
an Investor in the Equity Investment, recused himself from Board
of Directors approval of the Investment Agreement and related
recommendations.
Conditions
to Closing
The respective obligations of the Investors and the Company to
complete the Equity Investment are subject to the satisfaction
or waiver of the following conditions:
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the Proposals shall have been approved by the stockholders;
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any waiting period applicable to the transactions contemplated
by the Investment Agreement under the HSR Act shall have been
terminated or shall have expired, and any other approval under
any other applicable antitrust or similar law shall have been
obtained or terminated or shall have expired (the Company has
determined that no antitrust approval is necessary in connection
with the Equity Investment); and
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no temporary restraining order, preliminary or permanent
injunction or other judgment issued by any court of competent
jurisdiction or other legal restraint or prohibition that has
the effect of preventing, prohibiting or making illegal the
consummation of the Equity Investment shall be in effect.
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The obligations of the Investors to complete the Equity
Investment are further subject to the satisfaction or waiver of
the following conditions:
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the representations and warranties made by the Company in the
Investment Agreement that are qualified by materiality or
material adverse effect must be true and correct and the
representations and warranties which are not so qualified must
be true and correct in all material respects, in each case as of
the date of the Investment Agreement and on the date of the
closing with the same effect as though made on the closing date
(except that those representations and warranties that speak as
of a specified date will be determined as of such date);
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the Company has performed in all material respects all
obligations required to be performed by it under the Investment
Agreement at or prior to the closing;
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there being no litigation brought or threatened by any
governmental entity challenging or seeking to restrain the
consummation of the transactions contemplated by the Investment
Agreement or seeking to obtain damages in relation thereto, or
seeking to limit the Investors ability to acquire
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and exercise full ownership rights of any Warrants, shares of
Preferred Stock or Company common stock, or any legal restraint
in effect that could reasonably be expected to result in any
such effects;
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all material governmental consents and approvals required to
effect the Equity Investment have been obtained;
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since the date of the Investment Agreement, no material adverse
effect or any state of facts, change, development, event,
effect, condition, occurrence, action or omission that is
reasonably likely to have a material adverse effect has occurred;
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the Certificate of Designation has been duly adopted by us and
duly filed with the Secretary of State of the State of Delaware;
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we have executed and delivered the Registration Rights Agreement
in a form reasonably acceptable to JPE; and
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there being no stop order or suspension of trading in effect
with respect to our common stock.
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The obligation of the Company to complete the Equity Investment
is further subject to the satisfaction or waiver of the
following conditions:
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the representations and warranties of each Investor in the
Investment Agreement that are qualified by materiality must be
true and correct and the representations and warranties which
are not so qualified must be true and correct in all material
respects, in each case as of the date of the Investment
Agreement and on the date of the closing with the same effect as
though made on the closing date (except that those
representations and warranties that speak as of a specified date
will be determined as of such date); and
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each Investor has performed in all material respects all
obligations required to be performed by it under the Investment
Agreement at or prior to closing.
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In the event of any breach by any Investor (other than JPE) that
would result in the failure of a closing condition, JPE will be
entitled, in its sole discretion, to purchase the shares of
Preferred Stock and Warrants otherwise allocable to the
breaching Investor on the terms set forth in the Investment
Agreement and, in such event, the breach by such Investor that
would otherwise result in the failure of a closing condition
will be deemed cured for purposes of the closing.
Termination
The Company and JPE may agree in writing to terminate the
Investment Agreement at any time prior to completing the Equity
Investment, even after the stockholders of the Company have
voted on the Proposals. The Investment Agreement may also be
terminated in certain other circumstances, including:
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by either JPE or the Company if:
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the closing has not occurred on or before December 13,
2011, provided that such right to terminate will not be
available to any party whose action or failure to act has been a
principal cause of or resulted in the failure of the Equity
Investment to occur on or before such date and such action or
failure to act constitutes a breach of the Investment Agreement;
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certain legal restraints shall be in effect and shall have
become final and nonappealable; or
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the stockholders meeting in respect of the Proposed Transaction
shall have been held and the stockholders shall not have
approved the Proposals at such meeting or at any adjournment or
postponement of such meeting;
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by JPE prior to the receipt of approval by the stockholders of
the Proposals if an adverse recommendation change has occurred;
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there is a breach by the Company of its representations,
warranties, covenants or agreements in the Investment Agreement
such that the closing conditions would not be satisfied, and
that is incapable of being cured within 30 business days of such
breach, or if capable of being cured, the Company does not
commence to cure such breach within 10 business days after its
receipt of written notice of such breach; or
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certain legal restraints shall be in effect and shall have
become final and nonappealable;
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by the Company if there is a breach by any Investor of its
representations, warranties, covenants or agreements in the
Investment Agreement such that the closing conditions would not
be satisfied, and that is incapable of being cured by the
Investor or JPE within 30 business days of such breach, or if
capable of being cured, the Investor or JPE does not commence to
cure such breach within 10 business days after receipt of
written notice of such breach; or
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by the Company prior to the receipt of approval by the
stockholders of the Proposals, in order to enter into a
definitive agreement to consummate a superior acquisition
proposal.
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Termination
Fees and Expenses
A termination fee equal to $2,774,000 (determined in accordance
with the Investment Agreement) is payable by the Company to JPE
if the Investment Agreement is terminated:
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by JPE due to an adverse recommendation change made in
connection with a superior proposal; or
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by the Company in order to enter into a definitive agreement to
consummate a superior acquisition proposal.
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A termination fee of $2,249,000 is payable by the Company to JPE
if the Investment Agreement is terminated:
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by JPE due to an adverse recommendation change made other than
in connection with a superior proposal; or
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by either JPE or the Company due to the failure of the closing
to occur on or prior to December 13, 2011 or because the
stockholders meeting was held and the Proposals were not
approved at such meeting, or by JPE due to a breach of the
Investment Agreement by the Company, in each case in
circumstances in which:
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prior to such termination, a takeover proposal was made to the
Company or its stockholders or any person publicly announced an
intention (whether or not conditional and whether or not
withdrawn) to make a takeover proposal or a takeover proposal
otherwise became publicly known; and
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prior to the date that is nine months after such termination,
the Company or any of its subsidiaries enters into any
definitive contract to consummate any takeover proposal or any
takeover proposal is consummated (solely for purposes of this
bullet, the term takeover proposal has the meaning
set forth above, except that all references to 15% are deemed
references to 50%).
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In addition, whether or not the Closing occurs, the Company is
obligated to reimburse JPE for up to $1,000,000 of the expenses
incurred by JPE in connection with the transactions contemplated
by the Investment Agreement. However, such expenses are not
reimbursable by the Company if the Investment Agreement is
terminated:
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by the mutual written consent of the Company and JPE;
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by either JPE or the Company due to the failure of the closing
to occur on or prior to December 13, 2011 or because the
stockholders meeting was held and the Proposals were not
approved at such meeting (in each case, other than in
circumstances involving a takeover proposal in which the
termination fee described above is payable), or due to certain
legal restraints having come into effect and becoming final and
nonappealable; or
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by the Company as a result of an Investor breach.
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The reimbursement of JPEs expenses as provided above does
not relieve the Company of any obligation to pay any applicable
termination fee.
53
THE
PREFERRED STOCK CERTIFICATE OF DESIGNATION
The following is a summary of the material terms of the
Preferred Stock as contained in the Certificate of Designation
of Series A Convertible Perpetual Preferred Stock, which
will be filed with the Secretary of State of the State of
Delaware (the Certificate of Designation).
The Certificate of Designation is set forth in Exhibit A to
the Investment Agreement, which is filed herewith as
Annex A to this proxy statement and is incorporated by
reference herein. Stockholders are urged to carefully read the
Certificate of Designation in its entirety.
Authorized
Shares and Liquidation Preference
We will designate 75,000 authorized preferred shares as
Series A Convertible Perpetual Preferred Stock,
with a par value of $0.001 per share and an initial liquidation
preference of $1,000 per share, for an aggregate initial
liquidation preference of $75,000,000.
Ranking
The Preferred Stock will rank, with respect to dividend rights
and rights on liquidation,
winding-up
or dissolution, senior to Company common stock and each other
class or series of capital stock outstanding or established
after the date of issuance of the Preferred Stock the terms of
which do not expressly provide that it ranks on a parity with or
senior to the Preferred Stock as to dividend rights and rights
on liquidation,
winding-up
and dissolution. The Preferred Stock will rank on a parity with
or junior to each class or series of capital stock the terms of
which expressly provide for a pari passu or senior ranking
relative to the Preferred Stock, respectively.
Dividends
Dividends on the Preferred Stock will be payable quarterly,
when, as and if declared by the Board of Directors or a duly
authorized committee, out of the assets of the Company legally
available for the payment of dividends, on the
15th calendar day (or the following business day if the
15th is not a business day) of January, April, July and
October of each year at the rate per annum of 4% per share on
the then-applicable liquidation preference (subject to the
following paragraph). The amount of dividends payable for any
other period that is shorter or longer than a full quarterly
dividend period will be computed on the basis of a
360-day year
consisting of twelve
30-day
months.
In the event that dividends are paid on shares of Company common
stock in any dividend period with respect to the Preferred
Stock, then the dividend payable in respect of each share of
Preferred Stock for such period will be equal to the greater of
(1) the amount otherwise payable in respect of such share
of Preferred Stock in accordance with the foregoing paragraph
and (2) the product of (A) the aggregate dividends
payable per share of Company common stock in such dividend
period times (B) the number of shares of Company common
stock into which such share of Preferred Stock is then
convertible.
A dividend period with respect to a dividend payment date is the
period commencing on the preceding dividend payment date or, if
none, the date of original issuance, and ending on the day
immediately prior to the next dividend payment date.
The Company will make each dividend payment on the Preferred
Stock in cash.
Accretion
If the Company is unable to, or otherwise fails to, pay
dividends in full on the Preferred Stock on any dividend payment
date, the then-applicable liquidation preference will be
increased as of the first day of the immediately succeeding
dividend period by the amount of the unpaid dividends. The
amount of dividends payable for any dividend period following a
non-payment of dividends will be calculated on the basis of the
liquidation preference, including such accreted dividends,
determined as of the first day of the relevant dividend period.
The Company may pay all or a portion of any dividends so
accreted on any regular dividend payment date or any other date
fixed by the Board of Directors or a duly authorized committee.
54
Payment
Restrictions
No dividends may be declared or paid on any capital stock of the
Company ranking on a parity with or junior to the Preferred
Stock (including the Company common stock), and no such capital
stock may be redeemed or repurchased by or on behalf of the
Company, unless all accrued and unpaid dividends have been paid
on the Preferred Stock and any capital stock of the Company
ranking on a parity with the Preferred Stock. Notwithstanding
the foregoing, if full dividends have not been paid on the
Preferred Stock and any parity stock, dividends may be declared
and paid on the Preferred Stock and such parity stock so long as
the dividends are declared and paid pro rata.
Liquidation
In the event we voluntarily or involuntarily liquidate, dissolve
or wind up, the holders of the Preferred Stock will be entitled,
before any distribution to the holders of our common stock or
any other junior capital stock, and subject to the rights of our
creditors, to receive an amount equal to the greater of
(i) the aggregate accreted liquidation preference plus an
amount equal to any accrued and unpaid dividends (whether or not
declared) for the then-current dividend period and (ii) the
payment or distribution to which such holders would have been
entitled if the Preferred Stock were converted into Company
common stock immediately before such liquidation, dissolution or
winding-up.
Voting
Rights
The Preferred Stock will vote together with the Company common
stock on an as-converted basis on all matters,
except as otherwise required by law. In addition, the approval
of the holders of at least a majority of outstanding shares of
the Preferred Stock, voting separately as a single class, will
be required (1) for any amendment of the Company
Certificate if the amendment would alter the powers,
preferences, privileges or rights of the holders of Preferred
Stock so as to affect them adversely, (2) to issue,
authorize or increase the authorized amount of, or issue or
authorize any obligation or security convertible into or
evidencing a right to purchase, any capital stock of the Company
ranking on a parity with or senior to the Preferred Stock, or
(3) to reclassify any authorized capital stock of the
Company into any parity stock or senior stock, or any obligation
or security convertible into or evidencing a right to purchase
any parity stock or senior stock.
Conversion
The Preferred Stock will be convertible at any time, in whole or
in part and from time to time, at the option of the holder
thereof into a number of shares of Company common stock equal to
the then-applicable liquidation preference divided by the
then-applicable conversion price, which shall initially be $1.75
per share of Company common stock, for an effective initial
aggregate conversion rate of 42,857,143 shares of Company
common stock (before giving effect to the Reverse Stock Split).
After giving effect to the 4:1 Reverse Stock Split, the
Preferred Stock will have a conversion price of $7.00 per share
of Company common stock.
The Preferred Stock will have the benefit of customary
anti-dilution adjustments.
Transfer
of Securities
The Preferred Stock and the shares of Company common stock
issuable upon conversion thereof will initially not be
registered under the Securities Act and may not be offered or
sold except in compliance with the registration requirements of
the Securities Act and any other applicable securities laws. The
above mentioned securities will have the benefit of certain
registration rights under the Securities Act pursuant to a
Registration Rights Agreement to be entered into by the Company
as described below.
Redemption
The Preferred Stock is not redeemable or subject to any required
offer to purchase.
55
THE
WARRANTS
The summary of the material terms of the Warrants below and
elsewhere in this proxy statement is qualified in its entirety
by reference to the Warrant Certificate, a copy of which is set
forth as Exhibit B to the Investment Agreement, which is
filed herewith as Annex A to this proxy statement and
incorporated by reference into this document. This summary may
not contain all of the information about the Warrants that is
important to you. We encourage you to read carefully the Warrant
Certificate in its entirety.
The Warrants will initially grant the holders the right to
purchase an aggregate of 42,857,143 shares of Company
common stock at an exercise price of $1.75 per share of Company
common stock, in each case subject to customary anti-dilution
adjustments and before giving effect to the 4:1 Reverse Stock
Split. The Warrants will be exercisable at the option of the
holder at any time from the closing date until the tenth
anniversary of the closing date.
After giving effect to the Reverse Stock Split, the Warrants
will have an exercise price of $7.00 per share of Company common
stock, and the aggregate number of shares of Company common
stock subject to the Warrants will be 10,714,286 shares.
Transfer
of Securities
The Warrants and the shares of Company common stock issuable
upon exercise thereof will initially not be registered under the
Securities Act and may not be offered or sold except in
compliance with the registration requirements of the Securities
Act and any other applicable securities laws. The above
mentioned securities will have the benefit of certain
registration rights under the Securities Act pursuant to a
Registration Rights Agreement to be entered into by the Company
as described below.
Voting
Rights and Dividends
Holders of the Warrants (in their capacity as such) will not be
entitled to any rights of a stockholder of the Company,
including the right to vote or to consent with respect to any
matter, or to receive dividends, prior to exercising their
Warrants.
56
THE
REGISTRATION RIGHTS AGREEMENT
Pursuant to the Investment Agreement, the Company has agreed to
enter into a Registration Rights Agreement concurrently with the
closing. The summary of the material terms of the Registration
Rights Agreement below and elsewhere in this proxy statement is
qualified in its entirety by reference to the Summary of
Principal Registration Rights Provisions, a copy of which is set
forth in Exhibit C to the Investment Agreement, which is
filed herewith as Annex A to this proxy statement and
incorporated by reference into this document. This summary may
not contain all of the information about the Summary of
Principal Registration Rights Provisions that is important to
you. We encourage you to read carefully the Summary of Principal
Registration Rights Provisions in its entirety. In addition, the
complete terms of the Registration Rights Agreement are not yet
final.
The Registration Rights Agreement will provide the holders of
the Securities with certain rights to cause the Company to
register the sale of shares of Preferred Stock, Warrants and
shares of Company common stock issued or issuable upon
conversion of the Preferred Stock or upon exercise of the
Warrants, in each case other than any such securities that are
then freely transferable without registration pursuant to
Rule 144 under the Securities Act without limitation as to
volume, manner of sale or other restrictions under
Rule 144. We refer to the securities that are subject to
registration under the Registration Rights Agreement as provided
above as Registrable Securities.
Demand
Registrations
At any time on or after the closing of the Equity Investment,
holders of Registrable Securities representing no less than a
majority of the Company common stock constituting Registrable
Securities or issuable upon conversion of Preferred Stock or
exercise of Warrants constituting Registrable Securities may
request registration of the sale of such securities by giving
the Company written notice thereof. The Company must then use
reasonable best efforts to (1) file a registration
statement registering such Registrable Securities as promptly as
reasonably practicable and in any event within 30 days (if
on
Form S-3)
or 45 days (if on
Form S-1)
and (2) have such registration statement declared effective
as promptly as reasonably practicable thereafter (subject to
customary exceptions to be agreed). Such majority holders may
request a total of three demand registrations.
Piggyback
Registrations
If the Company registers its securities on a registration
statement that permits the inclusion of the Registrable
Securities, the Company must give JPE prompt written notice
thereof (subject to certain exceptions to be agreed). The
Company must then include on such registration statement all
Registrable Securities requested to be included therein (subject
to certain exceptions to be agreed).
Expenses
of Registration and Selling
Subject to certain exceptions, all expenses incurred in
connection with the registration or sale of the Registrable
Securities will be borne by the Company.
57
THE
VOTING AGREEMENTS
Concurrently with the execution of the Investment Agreement,
certain stockholders of the Company entered into Voting
Agreements with JPE. The summary of the material terms of the
Voting Agreements below and elsewhere in this proxy statement is
qualified in its entirety by reference to the two Voting
Agreements, copies of which are filed herewith as Annex C
and Annex D to this proxy statement and which we
incorporate by reference into this document. This summary may
not contain all of the information about the Voting Agreements
that is important to you. We encourage you to read carefully the
Voting Agreements in their entirety.
Pursuant to the Voting Agreements, each of Michael Welch, Chief
Executive Officer and a director of the Company, and Daniel
Para, an officer and director of the Company (the
Stockholders), have agreed in their
capacities as stockholders of the Company to vote their shares
of Company common stock in favor of the Equity Investment and
related approvals, and have granted JPE a proxy in respect of
their shares of Company common stock in connection therewith.
Voting
The Stockholders unconditionally agree to vote all of their
respective shares of Company common stock to approve the
Proposals. They further agree to vote their shares against and
not consent to the approval of any (1) takeover proposal,
(2) reorganization, recapitalization, liquidation or
winding-up
of the Company or (3) other extraordinary transaction
involving the Company or corporate action the consummation of
which would prevent, impede or delay the consummation of the
transactions contemplated by the Investment Agreement.
Irrevocable
Proxy
The Stockholders have granted an irrevocable proxy appointing
JPE as their attorney-in-fact and proxy, with full power of
substitution, for and in Stockholders names, to vote,
express consent or dissent, or otherwise to utilize such voting
power solely in the manner described above. The proxies so
granted will be automatically revoked upon termination of the
Voting Agreements in accordance with their terms.
Covenants
of Stockholders
Except as provided above, the Stockholders agree not to enter
into any voting trust or other arrangement with respect to the
voting of any shares of Company common stock. Nor will they
sell, assign or otherwise dispose of or encumber any shares of
Company common stock during the term of the agreements. They
similarly agree not to seek or solicit any such sale, assignment
or disposition of their shares of Company common stock, and must
provide prompt notice to JPE if they are approached by any
person for that purpose.
Subsequent
Acquisitions of Shares
In the event that either Stockholder acquires ownership of, or
the power to vote or direct the voting of, any shares of Company
common stock following the date of his respective Voting
Agreement, such shares will, without further action of the
parties, be subject to the provisions of such Voting Agreement.
Termination
The Voting Agreements automatically terminate upon the earliest
of (1) the termination of the Investment Agreement,
(2) the consummation of the Equity Investment and
(3) the date of any amendment, modification, change or
waiver of the Investment Agreement that results in a change to
the terms of the Securities that is material and adverse to the
Company and that is not consented to in writing by the
Stockholder in his sole discretion prior to such amendment,
modification, change or waiver of the Investment Agreement.
58
MARKET
PRICE OF THE COMPANY COMMON STOCK
The Company common stock is traded on the NYSE Amex under the
symbol XPO. The following table sets forth the high
and low daily closing sales prices per share of Company common
stock on the NYSE Amex for the periods indicated.
Market
Information
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Company Common Stock
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High
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Low
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Fiscal Year 2009:
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1st Quarter
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$1.15
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$0.67
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2nd Quarter
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$0.95
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$0.77
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3rd Quarter
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$0.96
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$0.81
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4th Quarter
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$1.29
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$0.91
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Fiscal Year 2010:
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1st Quarter
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$1.65
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$1.22
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2nd Quarter
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$1.56
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$1.26
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3rd
Quarter
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$1.88
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$1.24
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4th Quarter
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$2.82
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$1.99
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Fiscal Year 2011:
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1st Quarter
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$3.03
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$2.12
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2nd Quarter (through [ ], 2011)
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[ ]
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[ ]
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On June 13, 2011, which was the last trading day before we
entered into the Investment Agreement, the closing price of the
Company common stock was $2.19 per share. On
[ ], 2011, which was the last
trading day before this proxy statement was finalized, the
closing price of the Company common stock was
$[ ] per share.
59
PROPOSAL 1
ISSUANCE OF PREFERRED STOCK AND WARRANTS
General
The Board of Directors has unanimously approved (excluding James
Martell, who recused himself from approval), subject to
stockholder approval, the issuance to JPE and the other
Investors of 75,000 shares of Preferred Stock and of
42,857,143 Warrants exercisable into one share each of Company
common stock.
The Preferred Stock will have an initial liquidation preference
of $1,000 per share, for an aggregate initial liquidation
preference of $75,000,000. The Preferred Stock will be
convertible at any time, in whole or in part and from time to
time, at the option of the holder thereof, into a number of
shares of Company common stock equal to the then-applicable
liquidation preference divided by the conversion price, which
shall initially be $1.75 per share of Company common stock
(before giving effect to the contemplated 4:1 Reverse Stock
Split, and subject to customary anti-dilution adjustments), for
an effective initial aggregate conversion rate of
42,857,143 shares of Company common stock. The Preferred
Stock will pay quarterly cash dividends equal to the greater of
(1) the as-converted dividends on the
underlying Company common stock for the relevant quarter and
(2) 4% of the then-applicable liquidation preference per
annum. Accrued and unpaid dividends for any quarter will accrete
to liquidation preference for all purposes. The Preferred Stock
is not redeemable or subject to any required offer to purchase,
and will vote together with the Companys common stock on
an as-converted basis on all matters, except as
otherwise required by law, and separately as a class with
respect to certain matters implicating the rights of holders of
shares of the Preferred Stock. The terms of the Preferred Stock
are more fully set forth in Exhibit A to the Investment
Agreement, which is filed herewith as Annex A and
incorporated by reference herein.
Each Warrant will initially be exercisable at any time and from
time to time from the closing date until the tenth anniversary
of the closing date, at the option of the holder thereof, into
one share of Company common stock at an initial exercise price
of $1.75 in cash per share of Company common stock (before
giving effect to the contemplated 4:1 Reverse Stock Split, and
subject to customary anti-dilution adjustments). The initial
aggregate number of shares of Company common stock subject to
Warrants will be 42,857,143 shares (before giving effect to
the contemplated Reverse Stock Split). The terms of the Warrants
are more fully set forth in Exhibit B to the Investment
Agreement, which is filed herewith as Annex A and
incorporated by reference herein.
Section 713 of the NYSE Amex Company Guide requires
stockholder approval prior to the issuance of common stock, or
securities convertible into or exercisable for common stock, in
any transaction or series of transactions involving the issuance
of common stock (or securities convertible into common stock)
equal to 20% or more of the presently outstanding common stock
for less than the greater of book or market value of the common
stock.
Purpose
of the Equity Issuance
The purpose of Proposal 1 is to permit the Equity
Investment, which will result in JPE becoming our controlling
stockholder and Bradley Jacobs becoming our Chairman of the
Board, and provide an opportunity for our existing stockholders
to participate in JPEs plans to grow the Company and
create value for our stockholders. The Equity Investment will
also provide initial capital to support JPEs plans to
cause the Company to pursue strategic acquisitions.
Under the Investment Agreement, receipt of stockholder approval
for the issuance of the Securities is a condition to closing the
Equity Investment. If such approval is not obtained, the
investment by the Investors will not be made, JPE will not
become majority stockholder of the Company and Bradley Jacobs
will not become Chairman of our Board of Directors and Chief
Executive Officer of the Company. You should read The
Proposed TransactionBackground of the Proposed
Transaction and The Proposed
TransactionReasons for the Proposed Transaction
for a discussion of the factors that our special committee and
Board of Directors considered in deciding to recommend the
approval of Proposal 1.
60
Effect of
Proposal
If our stockholders approve this Proposal and the Equity
Investment is consummated, the Company could raise up to
$150,000,000 in additional capital and the Investors will
receive 75,000 shares of Preferred Stock and 42,857,143
Warrants (before giving effect to the contemplated Reverse Stock
Split). Based upon the number of outstanding shares of Company
common stock on the record date, and excluding any shares
issuable upon the exercise of currently outstanding options,
upon the closing, the Investors will own approximately
[ ]% of the total voting power of
the capital stock of the Company outstanding upon closing, and
JPE would own approximately [ ]% of
the total voting power of the capital stock of the Company,
making JPE the largest stockholder of the Company. If the
Investors were to exercise their Warrants in full at the
closing, the Investors would own approximately
[ ]% of the total voting power of
the capital stock of the Company and JPE would own approximately
[ ]% of the total voting power of
the capital stock of the Company. Additionally, the issuance of
the Preferred Stock and the Warrants (when the Warrants are
exercised) will have the effect of diluting the aggregate
interest owned by our existing stockholders from 100% of the
total voting power of the capital stock of the Company prior to
the transaction to approximately
[ ]% of the total voting power of
the capital stock of the Company immediately following
consummation of the Equity Investment, assuming the Investors
exercise their Warrants immediately following the consummation
of the issuance. Also, our pro forma book value per share as of
December 31, 2010, after giving effect to the issuance and
payment of transaction costs, will decrease from approximately
$[ ] per share to approximately
$[ ] per share.
Relationship
to Other Proposals
Implementation of Proposal 1 is contingent upon obtaining
stockholder approval of Proposals 2 through 5.
Vote
Required
The affirmative vote of holders of a majority of the shares of
Company common stock voting thereon at a meeting at which a
quorum is present is required to approve Proposal 1
pursuant to NYSE Amex Company Guide Rule 713. The failure
of the Companys stockholders to approve any of
Proposals 1 through 5 will prevent the Company from
consummating the Proposed Transaction.
Recommendation
The Board of Directors (excluding Mr. Martell, who
recused himself), acting upon the affirmative recommendation of
the special committee, unanimously recommends that you vote
FOR Proposal 1.
61
PROPOSAL 2
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMPANY COMMON STOCK TO
150,000,000 SHARES
General
The Board of Directors has unanimously approved (excluding
Mr. Martell, who recused himself from approval) and
declared advisable, subject to stockholder approval, an
amendment to the Company Certificate to increase the number of
authorized shares of our common stock, $0.001 par value, to
150,000,000 shares.
The following table summarizes the shares of Company common
stock outstanding, the shares held by the Company as treasury
shares and the shares reserved for issuance pursuant to the
Amended and Restated 2001 Stock Option Plan of the Company, in
each case as of the close of business on the record date for the
special meeting. In addition, the table shows the shares of
Company common stock that must be reserved for issuance upon
conversion of the Preferred Stock and the shares of Company
common stock that must be reserved for issuance upon exercise of
the Warrants.
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Before
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Reverse Stock
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Split
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After Reverse
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(But After
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Stock Split
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Company Common
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Increase in
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and Increase
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Stock Shares:
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[ ], 2011
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Authorized)
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in Authorized
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Outstanding
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[ ]
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[ ]
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[ ]
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Treasury Shares
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[ ]
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[ ]
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[ ]
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Reserved for 2001 Stock Option Plan
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[ ]
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[ ]
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[ ]
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Underlying the Preferred Stock
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42,857,143
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10,714,286
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Underlying the Warrants
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42,857,143
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10,714,286
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Potential outstanding
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[ ]
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[ ]
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[ ]
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Available for future issuance
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[ ]
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[ ]
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[ ]
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Total authorized
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100,000,000
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150,000,000
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150,000,000
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Shares available for issuance as a percentage of potential
shares outstanding
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[ ]
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[ ]
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[ ]
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The increase in the number of authorized shares of Company
common stock would become effective upon the filing of the
certificate of amendment to the Company Certificate with the
Secretary of State of the State of Delaware.
Purpose
of Increasing Authorized Shares of Company Common
Stock
The purpose of increasing the authorized number of shares of
Company common stock is to provide for a sufficient number of
authorized shares to permit the full conversion of the Preferred
Stock and the full exercise of the Warrants, as well as to
provide the Company with sufficient common share capacity to
allow the flexibility for future equity financings to raise
funds to support the intended growth of the Companys
business, including through strategic acquisitions.
Effect of
Proposal
If this Proposal is approved, there will be a sufficient number
of shares of Company common stock to permit the full conversion
of the Preferred Stock and the full exercise of the Warrants and
to provide adequate financing flexibility to support JPEs
plan to grow the Companys business for the foreseeable
future. We do not currently have any material commitments which
would require the issuance of additional shares of Company
common stock, other than as described in this proxy statement
and the documents attached hereto.
62
The Board of Directors does not believe that an increase in the
number of authorized shares of Company common stock, without
more, will have a significant impact on the market price of our
common stock. The availability of significant authorized but
unissued shares of Company common stock will however (in
addition to enabling the consummation of the Equity Investment)
give the Company the flexibility to issue additional common
equity and create dilution without further approval of
stockholders. The Board of Directors believes, however, that
this additional flexibility is warranted, as it would facilitate
execution of future financings and strategic acquisitions and
thereby facilitate the growth of the Companys business.
Relationship
to Other Proposals
Implementation of Proposal 2 is contingent upon obtaining
stockholder approval of Proposal 1 and Proposals 3
through 5.
Vote
Required
The affirmative vote of holders of a majority of the shares of
Company common stock outstanding at the close of business on the
record date is required to approve Proposal 2. Accordingly,
the failure to vote with respect to Proposal 2 will have
the same effect as a vote against Proposal 2. The failure
of the Companys stockholders to approve any of
Proposals 1 through 5 will prevent the Company from
consummating the Proposed Transaction.
Recommendation
The Board of Directors (excluding Mr. Martell, who
recused himself), acting upon the affirmative recommendation of
the special committee, unanimously recommends that you vote
FOR Proposal 2.
63
PROPOSAL 3
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT A 4:1
REVERSE STOCK SPLIT OF COMPANY COMMON STOCK
General
The Board of Directors has unanimously approved (excluding
Mr. Martell, who recused himself from approval) and
declared advisable, subject to stockholder approval, an
amendment to the Company Certificate to effect a 4:1 Reverse
Stock Split.
In connection with the Reverse Stock Split, every four shares of
Company common stock will be combined into one share of Company
common stock. The amendment to the Company Certificate would not
proportionately reduce the number of shares of our authorized
preferred stock. In addition, Proposal 2 would be effected
after giving effect to the Reverse Stock Split, and thus our
authorized shares of Company common stock would not, after
giving effect to both Proposals 2 and 3, proportionately
reduce our authorized common stock (which will be 150,000,000
after giving effect to the implementation of both Proposals).
To avoid the existence of fractional shares of Company common
stock, stockholders of record who would otherwise hold
fractional shares of Company common stock as a result of the
Reverse Stock Split will be entitled to receive a cash payment
(without interest and subject to applicable withholding taxes)
in lieu of such fractional shares from our transfer agent. The
total amount of cash that will be paid to holders of fractional
shares following the Reverse Stock Split will be an amount equal
to the net proceeds attributable to the sale of such fractional
shares following the aggregation and sale by our transfer agent
of all fractional shares otherwise issuable. Holders of
fractional shares as a result of the Reverse Stock Split will be
paid such proceeds on a pro rata basis, according to the
fractional shares that they owned (without interest and subject
to applicable withholding taxes).
The Reverse Stock Split, if approved by the Companys
stockholders, would become effective upon the filing of the
certificate of amendment to the Company Certificate with the
Secretary of State of the State of Delaware.
Purpose
of the Reverse Stock Split
The Board of Directors is submitting this Proposal 3 to
stockholders for approval with the intent of increasing the
market price of shares of Company common stock after giving
effect to the Equity Investment to make the Company common stock
more attractive to a broader range of investors and thereby
increase the Companys flexibility for future equity
financings to support JPEs intended growth of the
Companys business, including through strategic
acquisitions, as well as to provide additional liquidity to the
Companys stockholders. We believe that the Reverse Stock
Split will make the Company common stock more attractive as the
current market price of the Company common stock may affect its
acceptability to certain institutional investors, professional
investors and other members of the investing public.
It should be noted, however, that although the Reverse Stock
Split is being proposed for the purpose of increasing the market
price of the Companys common stock, there can be no
assurance that such price increase can be achieved or
maintained. A number of factors will influence the future
trading price of the Company common stock, many of which are not
within the Companys control. As a result, there can be no
assurance that the Reverse Stock Split, if completed, will
result in the intended benefits described above, including that
the market price of the Company common stock will increase
following the Reverse Stock Split (either at all or in
proportion to the reduction in the number of shares of Company
common stock outstanding before the Reverse Stock Split), or
that the market price of the Company common stock will not
decrease in the future.
64
Effect of
Proposal
The Reverse Stock Split would affect all of the holders of
Company common stock and would not affect any stockholders
percentage ownership interest or proportionate voting power,
except as described below under Fractional Shares.
The principal effect of the Reverse Stock Split would be that
every four shares of Company common stock would be reclassified
and combined into one share of Company common stock.
The following table summarizes the shares of Company common
stock outstanding, the shares held by the Company as treasury
shares and the shares reserved for issuance pursuant to the
Amended and Restated 2001 Stock Option Plan of the Company, as
well as the shares of Company common stock that must be reserved
for issuance upon conversion of the Preferred Stock and the
shares of Company common stock that must be reserved for
issuance upon exercise of the Warrants, in each case both before
and after the implementation of the Reverse Stock Split.
Common Stock Shares
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Before
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Reverse Stock
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After Reverse
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Split (But
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Stock Split
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Company Common
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After Increase
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and Increase
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Stock Shares:
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[ ], 2011
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in Authorized)
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in Authorized
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Outstanding
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[ ]
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[ ]
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[ ]
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Treasury Shares
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[ ]
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[ ]
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[ ]
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Reserved for 2001 Stock Option Plan
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[ ]
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[ ]
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[ ]
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Underlying the Preferred Stock
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42,857,143
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10,714,286
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Underlying the Warrants
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42,857,143
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10,714,286
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Potential outstanding
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[ ]
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[ ]
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[ ]
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Available for future issuance
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[ ]
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[ ]
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[ ]
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Total authorized
|
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100,000,000
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150,000,000
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150,000,000
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Shares available for issuance as a percentage of potential
shares outstanding
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[ ]
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[ ]
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[ ]
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The number of shares subject to our outstanding stock options
will automatically be reduced in the same ratio as the 4:1
Reverse Stock Split ratio. Accordingly, the per share exercise
price of those options will be increased in direct proportion to
the Reverse Stock Split ratio, so that the aggregate dollar
amount payable for the purchase of the shares of Company common
stock subject to the options will remain unchanged. In
connection with the Reverse Stock Split, the number of shares of
Company common stock issuable upon exercise or conversion of
outstanding stock options will be rounded to the nearest whole
share and no cash payment will be made in respect of such
rounding.
After giving effect to the Reverse Stock Split, the Preferred
Stock will have a conversion price of $7.00 per share of Company
common stock. Also after giving effect to the Reverse Stock
Split, the Warrants will have an exercise price of $7.00 per
share of Company common stock, and the aggregate number of
shares of Company common stock subject to the Warrants will be
10,714,286 shares.
The Reverse Stock Split may increase the number of our
stockholders who own odd lots of less than
100 shares of Company common stock. Brokerage commissions
and other costs of transactions in odd lots are generally higher
than the costs of transactions of more than 100 shares of
Company common stock.
The Reverse Stock Split would not affect the par value, nor any
of the terms, of the Company common stock. After the Reverse
Stock Split, all shares of Company common stock would have the
same voting rights and rights to dividends and other
distributions (if any). All shares of Company common stock other
than
65
fractional shares would be reclassified and combined,
automatically and without further action on the
stockholders part, into the number of shares determined
according to the 4:1 Reverse Stock Split ratio.
After the Reverse Stock Split is consummated, Company common
stock will have new Committee on Uniform Securities
Identification Procedures (CUSIP) numbers,
which is a number used to identify securities, and stock
certificates with the older CUSIP numbers will need to be
exchanged for stock certificates with the new CUSIP numbers by
following the procedures described below.
Beneficial
Holders of Company Common Stock
Upon the implementation of the Reverse Stock Split, we intend to
treat shares of Company common stock held by stockholders
through a broker, dealer, commercial bank, trust company or
other nominee in the same manner as registered stockholders
whose shares are registered in their names. Brokers and other
nominees will be instructed to effect the Reverse Stock Split
for their beneficial holders holding Company common stock in
street name. However, these brokers and other nominees may have
different procedures than registered stockholders for processing
the Reverse Stock Split. Stockholders who hold shares of Company
common stock with a broker or other nominee and who have any
questions in this regard are encouraged to contact their broker
or other nominee.
Registered
Book-Entry Holders of Company Common Stock
Certain of our registered holders of Company common stock may
hold some or all of their shares electronically in book-entry
form with our transfer agent. These stockholders do not have
stock certificates evidencing their ownership of Company common
stock. They are, however, provided with a statement reflecting
the number of shares registered in their accounts. If a
stockholder holds registered shares in book-entry form with the
transfer agent, they will be sent a transmittal letter by our
agent and will need to return a properly completed and duly
executed transmittal letter in order to receive any cash payment
in lieu of fractional shares that may be declared and payable to
holders of record following the Reverse Stock Split.
Holders
of Certificated Shares
Stockholders holding shares of Company common stock in
certificated form will be sent a transmittal letter by the
transfer agent after the Reverse Stock Split is consummated. The
letter of transmittal will contain instructions on how a
stockholder should surrender his, her or its certificate(s)
representing shares of Company common stock (the Old
Shares) to the transfer agent in exchange for a
book-entry with the Companys transfer agent representing
the appropriate number of shares of post-Reverse Stock Split
Company common stock (the New Shares). No New
Shares will be issued to a stockholder until such stockholder
has surrendered all Old Shares, together with a properly
completed and executed letter of transmittal, to the transfer
agent. No stockholder will be required to pay a transfer or
other fee to exchange Old Shares. Stockholders will then receive
confirmation from the transfer agent that a book entry has been
made for the New Shares, representing the number of shares of
Company common stock to which such stockholder is entitled as a
result of the Reverse Stock Split. Until surrendered, we will
deem outstanding Old Shares held by stockholders to be cancelled
and only to represent the number of shares of post-Reverse Stock
Split Company common stock to which these stockholders are
entitled. Any Old Shares submitted for exchange, whether because
of a sale, transfer or other disposition of stock, will
automatically be exchanged for New Shares. If Old Shares contain
a restrictive legend, the New Shares will be restricted. Upon
request to the transfer agent, stockholders may elect for the
transfer agent to deliver physical stock certificates
representing the New Shares in lieu of the book entry described
above.
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND
SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO
SO.
Fractional
Shares
We do not intend to issue fractional shares of Company common
stock in connection with the Reverse Stock Split. Instead,
stockholders who otherwise would be entitled to receive
fractional shares because they hold a number of shares not
evenly divisible by the Reverse Stock Split ratio will receive a
cash payment in
66
lieu of any fractional shares as a result of the Reverse Stock
Split. The total amount of cash that will be paid to holders of
fractional shares following the Reverse Stock Split will be an
amount equal to the net proceeds attributable to the sale of
such fractional shares following the aggregation and sale by our
transfer agent of all fractional shares otherwise issuable.
Specifically, the transfer agent will act on account of the
holders of those entitled to receive fractional shares and will
accumulate such fractional shares, sell the shares and
distribute the cash proceeds directly to the stockholders
entitled to receive the fractional shares (without interest and
subject to applicable withholding taxes).
Accounting
Matters
The proposed certificate of amendment will not affect the par
value of Company common stock and preferred stock per share,
which will each continue to have $0.001 par value per
share. As a result, the stated capital attributable to Company
common stock will be reduced proportionately based on the
Reverse Stock Split ratio (including a retroactive adjustment of
prior periods), and the additional paid-in capital account will
be credited with the amount by which the stated capital is
reduced. Reported per share net income or loss will be higher
because there will be fewer shares of Company common stock
outstanding.
Material
U.S. Federal Income Tax Consequences of the Reverse Stock
Split
The following summary describes the material U.S. Federal
income tax consequences of the Reverse Stock Split to holders of
Company common stock. This summary is based on the Internal
Revenue Code of 1986, as amended (the Code),
and current Treasury regulations, administrative rulings and
judicial decisions, all of which are subject to change, possibly
on a retroactive basis, and any such change could affect the
validity of this summary.
Each holder should consult its own tax advisor regarding the
U.S. Federal, state, local and foreign income tax
consequences of the Reverse Stock Split. This summary is
included for general information purposes only and does not
purport to address all aspects of U.S. Federal income tax
law that may be relevant to holders of Company common stock in
light of their particular circumstances. This summary also does
not address the tax consequences of the Reverse Stock Split to
holders subject to special tax rules, such as banks, insurance
companies, regulated investment companies, personal holding
companies, foreign entities, non-resident alien individuals,
broker-dealers and tax-exempt entities. This summary assumes
that the holders hold the Company common stock as capital
assets (as defined in Section 1221 of the Code).
As used herein, the term U.S. Holder
means a holder that is, for U.S. Federal income tax
purposes:
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a citizen or resident of the United States;
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a corporation (or other entity taxed 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 thereof;
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an estate the income of which is subject to U.S. Federal
income tax regardless of its source; or
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a trust (A) if a U.S. court is able to exercise
primary supervision over the administration of the trust and one
or more U.S. person (as defined in the Code)
have the authority to control all substantial decisions of the
trust or (B) that has a valid election in effect to be
treated as a U.S. person.
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If a partnership (or other entity classified as a partnership
for U.S. Federal income tax purposes) is the holder of
Company common stock, the U.S. Federal income tax treatment
of a partner in the partnership will generally depend on the
status of the partner and the activities of the partnership.
Partnerships that hold Company common stock, and partners in
such partnerships, should consult their own tax advisors
regarding the U.S. federal income tax consequences of the
Reverse Stock Split.
The Reverse Stock Split is intended to qualify as a
reorganization (within the meaning of
Section 368 of the Code) for U.S. Federal income tax
purposes. If it qualifies as such, except as provided in the
following paragraph, (i) no gain or loss should be
recognized by U.S. Holders, (ii) the aggregate tax
basis
67
in the Company common stock received in the Reverse Stock Split
should equal the aggregate tax basis in Company common stock
surrendered therefor and (iii) the holding period of the
Company common stock received in the Reverse Stock Split should
include the holding period of the Company common stock
surrendered therefor.
If a U.S. Holder of Company common stock receives cash in
lieu of fractional shares, such holder generally will be treated
as if it received the fractional shares in the Reverse Stock
Split and then received the cash in redemption of the fractional
shares. The U.S. Holder generally should recognize capital
gain or loss equal to the difference between the amount of the
cash received in lieu of fractional shares and the portion of
such holders tax basis allocable to those fractional
shares.
Relationship
to Other Proposals
Implementation of Proposal 3 is contingent upon obtaining
stockholder approval of Proposals 1 through 2 and
Proposals 4 through 5.
Vote
Required
The affirmative vote of holders of a majority of the shares of
Company common stock outstanding at the close of business on the
record date is required to approve Proposal 3. Accordingly,
the failure to vote with respect to Proposal 3 will have
the same effect as a vote against Proposal 3. The failure
of the Companys stockholders to approve any of
Proposals 1 through 5 will prevent the Company from
consummating the Proposed Transaction.
Recommendation
The Board of Directors (excluding Mr. Martell, who
recused himself), acting upon the affirmative recommendation of
the special committee, unanimously recommends that you vote
FOR Proposal 3.
68
PROPOSAL 4
AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO PERMIT
VACANCIES ON THE BOARD OF DIRECTORS TO BE FILLED BY THE
REMAINING DIRECTORS
General
The Board of Directors has unanimously approved (excluding
Mr. Martell, who recused himself from approval), subject to
stockholder approval, an amendment to the Company Certificate to
provide that any vacancy on our Board of Directors, whether
resulting from an increase in the number of directors or
otherwise, shall be filled by the affirmative vote of a majority
of the directors then holding office, even if less than a
quorum, or a sole remaining director (consistent with
Section 5 of Article III of the Companys
by-laws). Furthermore, the amendment will provide that any
director elected to fill a vacancy not resulting from an
increase in the number of directors shall have the same
remaining term as that of his or her predecessor.
The ability of the remaining Board members to fill vacancies on
the Board of Directors would become effective upon the filing of
the certificate of amendment to the Company Certificate with the
Secretary of State of the State of Delaware.
Purpose
of Amendment
The purpose of this amendment to the Company Certificate is to
carry out the intent of the Investment Agreement regarding the
rights of JPE to fill vacancies on the Board of Directors.
Pursuant to the Investment Agreement, JPE is entitled to
nominate for election to the Board of Directors, in connection
with each meeting of stockholders at which directors are
elected, a number of directors tied to JPEs equity
interest in the Company. If any JPE appointee ceases to serve as
a director of the Company for any reason during his or her term,
the Company is required to use its reasonable best efforts to
cause the Board of Directors to fill the vacancy created thereby
with a replacement designated by JPE. In order to ensure that
such replacement obligations cannot effectively be superseded
without the approval of the Board of Directors, and to realize
the intent of the Investment Agreement, the current provision in
the Companys by-laws regarding the filling of vacancies by
the Board of Directors is proposed to be added to the Company
Certificate.
Although the Proposal is intended to effectuate the arrangements
set forth in the Investment Agreement, it may also discourage or
increase the cost of some takeover bids in the future,
especially where the stockholders wish to pack the
board, including some bids that a majority of the
independent stockholders believe would be in their best
interests to accept or where the reason for the desired change
is inadequate performance of the directors or management.
Effect of
Proposal
The amendment to the Company Certificate will provide that, in
accordance with the current by-law provision, any vacancy on our
Board of Directors, whether resulting from an increase in the
number of directors or otherwise, shall be filled by the
affirmative vote of a majority of the directors then holding
office, even if less than a quorum, or a sole remaining
director. Furthermore, such newly appointed director (unless the
vacancy was a result of an increase in the size of the Board of
Directors) will serve for the full term of his or her
predecessor.
Relationship
to Other Proposals
Implementation of Proposal 4 is contingent upon obtaining
stockholder approval of Proposals 1 through 3 and
Proposal 5.
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Vote
Required
The affirmative vote of holders of a majority of the shares of
Company common stock outstanding at the close of business on the
record date is required to approve Proposal 4. Accordingly,
the failure to vote with respect to Proposal 4 will have
the same effect as a vote against Proposal 4. The failure
of the Companys stockholders to approve any of
Proposals 1 through 5 will prevent the Company from
consummating the Proposed Transaction.
Recommendation
The Board of Directors (excluding Mr. Martell, who
recused himself), acting upon the affirmative recommendation of
the special committee, unanimously recommends that you vote
FOR Proposal 4.
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PROPOSAL 5
ADOPTION OF THE 2011 OMNIBUS INCENTIVE COMPENSATION
PLAN
General
The Board of Directors has unanimously approved (excluding
Mr. Martell, who recused himself from approval), subject to
stockholder approval and the consummation of the Equity
Investment, the Plan. Our Board of Directors has approved the
Plan as a flexible omnibus incentive compensation plan that
would allow us to use different forms of compensation awards
following the consummation of the Equity Investment to attract,
retain and reward eligible participants under the Plan and
strengthen the mutuality of interests between management and our
stockholders. The purpose of the Plan would be to promote the
interests of the Company and our stockholders by
(1) attracting and retaining exceptional directors,
officers, employees and consultants (including prospective
directors, officers, employees and consultants) and
(2) enabling such individuals to participate in our
long-term growth and financial success. The Plan is intended to
replace the Express-1 Expedited Solutions, Inc., Amended and
Restated 2001 Stock Option Plan (the Stock Option
Plan), which would be automatically terminated,
replaced and superseded by the Plan on the date on which the
Plan is approved by our stockholders. Any stock options granted
under the Stock Option Plan would remain in effect pursuant to
their terms. If stockholder approval is not received or if the
Proposed Transaction is not consummated, the Stock Option Plan
will not be terminated, replaced and superseded and will remain
in place pursuant to its current terms.
Set forth below is a summary of the Plan, which is qualified in
its entirety by the specific language of the Plan set forth in
Exhibit D to the Investment Agreement, which is filed
herewith as Annex A to this proxy statement and
incorporated by reference herein.
Summary
of the Plan
Types
of Awards
The Plan would provide for the grant of options intended to
qualify as incentive stock options (ISOs),
under Section 422 of the Code, nonqualified stock options
(NSOs), stock appreciation rights
(SARs), restricted share awards, restricted
stock units (RSUs), performance compensation
awards, performance units, cash incentive awards, deferred share
units and other equity-based and equity-related awards, as well
as cash-based awards.
Plan
Administration
The Plan would be administered by the Compensation Committee of
our Board of Directors or such other committee our Board of
Directors designates to administer the Plan (the
Committee). Subject to the terms of the
Plan and applicable law, the Committee would have sole authority
to administer the Plan, including, but not limited to, the
authority to (1) designate plan participants,
(2) determine the type or types of awards to be granted to
a participant, (3) determine the number of shares of our
common stock to be covered by awards, (4) determine the
terms and conditions of awards, (5) determine the vesting
schedules of awards and, if certain performance criteria were
required to be attained in order for an award to vest or be
settled or paid, establish such performance criteria and certify
whether, and to what extent, such performance criteria have been
attained, (6) interpret, administer, reconcile any
inconsistency in, correct any default in
and/or
supply any omission in, the Plan, (7) establish, amend,
suspend or waive such rules and regulations and appoint such
agents as it should deem appropriate for the proper
administration of the Plan, (8) accelerate the vesting or
exercisability of, payment for or lapse of restrictions on,
awards, and (9) make any other determination and take any
other action that the Committee deemed necessary or desirable
for the administration of the Plan.
Shares Available
For Awards
Subject to adjustment for changes in capitalization and without
giving effect to the 4:1 Reverse Stock Split, the aggregate
number of shares of the Companys common stock that would
be available to be delivered pursuant to awards granted under
the Plan (which will include any shares delivered pursuant to
awards granted
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under the Stock Option Plan prior to the approval of the Plan by
our stockholders) would be equal to the sum of
(i) 2,000,000, (ii) any shares remaining available for
future grants of options under the Stock Option Plan as of the
date the Plan is approved by our stockholders (as of
June 25, 2011, 1,933,488 shares remain available for
future grants of options under the Stock Option Plan) plus
(iii) any shares with respect to options granted under the
Stock Option Plan that are forfeited following the date that the
Plan is approved by our stockholders (as of June 25, 2011,
options with respect to 2,692,750 shares are outstanding
under the Stock Option Plan), of which 2,000,000 shares
could be granted pursuant to incentive stock options, provided
that any shares with respect to options that are forfeited
pursuant to clause (iii), will only become available to be
delivered under the Plan pursuant to stock options and no other
type of award. Upon exercise of a stock-settled SAR, the maximum
aggregate number of shares available under the Plan would be
reduced by the actual number of shares delivered upon settlement
of such stock-settled SAR. Awards that are settled in cash would
not reduce the number of shares available for delivery under the
Plan. If, after the effective date of the Plan, any award
granted under the Plan or the Stock Option Plan were forfeited,
or otherwise expired, terminated or were canceled without the
delivery of all shares subject thereto, or were settled other
than by the delivery of shares (including cash settlement), then
the number of shares subject to such award that were not issued
would not be treated as issued for purposes of reducing the
maximum aggregate number of shares that may be delivered
pursuant the Plan. In addition, shares that were surrendered or
tendered to us in payment of the exercise price of an award or
any taxes required to be withheld in respect of an award would
become available again to be delivered pursuant to awards under
the Plan, provided that such surrendered or tendered shares
would not increase the number of shares that may be delivered
pursuant to ISOs under the Plan. Subject to adjustment for
changes in capitalization and without giving effect to the 4:1
reverse stock split, the maximum number of shares of our common
stock that would be available to be granted pursuant to awards
to any participant in the Plan in any fiscal year would be
1,000,000. In the case of awards settled in cash based on the
fair market value of a share, the maximum aggregate amount of
cash that would be permitted to be paid pursuant to awards
granted to any participant in the Plan in any fiscal year would
be equal to the per-share fair market value as of the relevant
vesting, payment or settlement date multiplied by the maximum
number of shares which could be granted, as described above. The
maximum aggregate amount of cash and other property (valued at
fair market value) that would be permitted to be paid or
delivered pursuant to awards under the Plan, the value of which
would be determined by reference to the fair market value of our
shares, to any participant in any fiscal year would be
$3,000,000.
Changes
in Capitalization
In the event of any extraordinary dividend or other
extraordinary distribution, recapitalization, rights offering,
stock split, reverse stock split,
split-up or
spin-off affecting the shares of our common stock, the Committee
would make equitable adjustments and other substitutions to
awards under the Plan in the manner it determined to be
appropriate or desirable. In the event of any reorganization,
merger, consolidation, combination, repurchase or exchange of
our common stock or other similar corporate transactions, the
Committee in its discretion would be permitted to make such
adjustments and other substitutions to the Plan and awards under
the Plan as it deemed appropriate or desirable.
Upon consummation of the 4:1 Reverse Stock Split, the Committee
would make equitable adjustments to the aggregate number of
shares of Company common stock that would be available to be
delivered pursuant to awards granted under the Plan, such that
the aggregate number would be equal to the sum of
(i) 500,000, (ii) any shares remaining available for
future grants of options under the Stock Option Plan as of the
date the Plan is approved by our stockholders (as of
June 25, 2011, 483,372 shares remain available for
future grants of options under the Stock Option Plan after
giving effect to the 4:1 Reverse Stock Split) plus
(iii) any shares with respect to options granted under the
Stock Option Plan that are forfeited following the date that the
Plan is approved by our stockholders (as of June 25, 2011,
options with respect to 673,188 shares are outstanding
under the Stock Option Plan after giving effect to the 4:1
Reverse Stock Split), of which 500,000 shares could be
granted pursuant to incentive stock options after giving effect
to the 4:1 Reverse Stock Split, provided that any shares with
respect to options that are forfeited pursuant to clause (iii),
will only become available to be delivered under the Plan
pursuant to stock options and no other type of award. After
giving effect to the 4:1
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Reverse Stock Split, the maximum number of shares of our common
stock that would be available to be granted pursuant to awards
to any participant in the Plan in any fiscal year would be
250,000.
Substitute
Awards
The Committee would be permitted to grant awards in assumption
of, or in substitution for, outstanding awards previously
granted by us or any of our affiliates or a company that we
acquired or with which we combined. Any shares issued by us
through the assumption of or substitution for outstanding awards
granted by a company that we acquired would not reduce the
aggregate number of shares of our common stock available for
awards under the Plan, except that awards issued in substitution
for ISOs would reduce the number of shares of our common stock
available for ISOs under the Plan.
Source
of Shares
Any shares of our common stock issued under the Plan would
consist, in whole or in part, of authorized and unissued shares
or of treasury shares.
Eligible
Participants
Any director, officer, employee or consultant (including any
prospective director, officer, employee or consultant) of us or
our affiliates would be eligible to participate in the Plan. The
Company currently expects that awards will be generally limited
to approximately 218 employees and non-employee directors
(of whom there are currently five eligible directors).
Stock
Options
The Committee would be permitted to grant both ISOs and NSOs
under the Plan. The exercise price for options would not be less
than the fair market value (as defined in the Plan) of the
Companys common stock on the grant date. The Committee
would not reprice any option granted under the Plan without the
approval of our stockholders. All options granted under the Plan
would be NSOs unless the applicable award agreement expressly
stated that the option was intended to be an ISO. Under the
proposed Plan, all ISOs and NSOs would be intended to qualify as
performance-based compensation under
Section 162(m) of the Code. Subject to the provisions of
the Plan and the applicable award agreement, the Committee would
determine, at or after the grant of an option, the vesting
criteria, term, methods of exercise and any other terms and
conditions of any option. Unless otherwise set forth in the
applicable award agreement, each option would expire upon the
earlier of (i) the tenth anniversary of the date the option
was granted and (ii) three months after the participant who
was holding the option ceased to be a director, officer,
employee or consultant for us or one of our affiliates. The
exercise price would be permitted to be paid with cash (or its
equivalent) or, in the sole discretion of the Committee, with
previously acquired shares of our common stock or through
delivery of irrevocable instructions to a broker to sell our
common stock otherwise deliverable upon the exercise of the
option (provided that there was a public market for our common
stock at such time), or, in the sole discretion of the
Committee, a combination of any of the foregoing, provided that
the combined value of all cash and cash equivalents and the fair
market value of any such shares so tendered to us as of the date
of such tender, together with any shares withheld by us in
respect of taxes relating to an option, was at least equal to
such aggregate exercise price.
Stock
Appreciation Rights
The Committee would be permitted to grant SARs under the Plan.
The exercise price for SARs would not be less than the fair
market value (as defined in the Plan) of our common stock on the
grant date. The Committee would not reprice any SAR granted
under the Plan without the approval of our stockholders. Upon
exercise of a SAR, the holder would receive cash, shares of our
common stock, other securities, other awards, other property or
a combination of any of the foregoing, as determined by the
Committee, equal in value to the excess, if any, of the fair
market value of a share of our common stock on the date of
exercise of the SAR over the exercise price of the SAR. Under
the Plan, all SARs would be intended to qualify as
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performance-based
compensation under Section 162(m) of the Code.
Subject to the provisions of the Plan and the applicable award
agreement, the Committee would determine, at or after the grant
of a SAR, the vesting criteria, term, methods of exercise,
methods and form of settlement and any other terms and
conditions of any SAR. Unless otherwise set forth in the
applicable award agreement, each SAR would expire upon the
earlier of (i) the tenth anniversary of the date the SAR
was granted and (ii) three months after the participant who
was holding the SAR ceased to be a director, officer, employee
or consultant for us or one of our affiliates. Under certain
circumstances, the Committee would have the ability to
substitute, without the consent of the affected participant,
SARs for outstanding NSOs. No SAR granted under the Plan could
be exercised more than 10 years after the date of grant.
Restricted
Shares and Restricted Stock Units
Subject to the provisions of the Plan, the Committee would be
permitted to grant restricted shares and RSUs. Restricted shares
and RSUs would not be permitted to be sold, assigned,
transferred, pledged or otherwise encumbered except as provided
in the Plan or the applicable award agreement, except that the
Committee could determine that restricted shares and RSUs would
be permitted to be transferred by the participant for no
consideration. Restricted shares could be evidenced in such
manner as the Committee would determine.
An RSU would be granted with respect to one share of the
Companys common stock or have a value equal to the fair
market value of one such share. Upon the lapse of restrictions
applicable to an RSU, the RSU could be paid in cash, shares of
our common stock, other securities, other awards or other
property, as determined by the Committee, or in accordance with
the applicable award agreement. In connection with each grant of
restricted shares, except as provided in the applicable award
agreement, the holder would be entitled to the rights of a
stockholder (including the right to vote and receive dividends)
in respect of such restricted shares. The Committee would be
permitted to, on such terms and conditions as it might
determine, provide a participant who holds RSUs with dividend
equivalents, payable in cash, shares of our common stock, other
securities, other awards or other property. If a restricted
share or RSU were intended to qualify as performance-based
compensation under Section 162(m) of the Code, the
requirements described below in Performance Compensation
Awards would be required to be satisfied in order for such
restricted share or RSU to be granted or vest.
Performance
Units
Subject to the provisions of the Plan, the Committee would be
permitted to grant performance units to participants.
Performance units would be awards with an initial value
established by the Committee (or that was determined by
reference to a valuation formula specified by the Committee) at
the time of the grant. In its discretion, the Committee would
set performance goals that, depending on the extent to which
they were met during a specified performance period, would
determine the number
and/or value
of performance units that would be paid out to the participant.
The Committee, in its sole discretion, would be permitted to pay
earned performance units in the form of cash, shares of our
common stock or any combination thereof that would have an
aggregate fair market value equal to the value of the earned
performance units at the close of the applicable performance
period. The determination of the Committee with respect to the
form and timing of payout of performance units would be set
forth in the applicable award agreement. The Committee would be
permitted to, on such terms and conditions as it might
determine, provide a participant who holds performance units
with dividends or dividend equivalents, payable in cash, shares
of our common stock, other securities, other awards or other
property. If a performance unit were intended to qualify as
performance-based compensation under
Section 162(m) of the Code, the requirements below
described in Performance Compensation Awards would
be required to be satisfied.
Cash
Incentive Awards
Subject to the provisions of the Plan, the Committee would be
permitted to grant cash incentive awards to participants. In its
discretion, the Committee would determine the number of cash
incentive awards to be awarded, the duration of the period
which, and any condition under which, the cash incentive awards
would
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vest or be forfeited, and any other terms and conditions
applicable to the cash incentive awards. Subject to the
provisions of the Plan, the holder of a cash incentive award
would receive payment based on the number and value of the cash
incentive award earned, which would be determined by the
Committee, in its discretion, based on the extent to which
performance goals or other conditions applicable to the cash
incentive award have been achieved. If a cash incentive award
were intended to qualify as performance-based
compensation under Section 162(m) of the Code, the
requirements described below in Performance Compensation
Awards would be required to be satisfied.
Other
Stock-Based Awards
Subject to the provisions of the Plan, the Committee would be
permitted to grant to participants other equity-based or
equity-related compensation awards, including vested stock. The
Committee would be permitted to determine the amounts and terms
and conditions of any such awards. If such an award were
intended to qualify as performance-based
compensation under Section 162(m) of the Code, the
requirements described below in Performance Compensation
Awards would be required to be satisfied.
Performance
Compensation Awards
The Committee would be permitted to designate any award granted
under the Plan (other than ISOs, NSOs and SARs) as a performance
compensation award in order to qualify such award as
performance-based compensation under
Section 162(m) of the Code. Awards designated as
performance compensation awards would be subject to the
following additional requirements:
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Recipients of Performance Compensation
Awards. The Committee would, in its sole
discretion, designate within the first 90 days of a
performance period (or, if shorter, within the maximum period
allowed under Section 162(m) of the Code) the participants
who would be eligible to receive performance compensation awards
in respect of such performance period. The Committee would also
determine the length of performance periods, the types of awards
to be issued, the performance criteria that would be used to
establish the performance goals, the kinds and levels of
performance goals and any objective performance formula used to
determine whether a performance compensation award had been
earned for the performance period.
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Performance Criteria Applicable to Performance Compensation
Awards. The performance criteria would be limited
to the following: (1) share price, (2) net income or
earnings before or after taxes (including earnings before
interest, taxes, depreciation and amortization),
(3) operating income, (4) earnings per share
(including specified types or categories thereof), (5) cash
flow (including specified types or categories thereof),
(6) cash flow return on capital, (7) revenues
(including specified types or categories thereof),
(8) return on shareholders equity, (9) return on
investment or capital, (10) return on assets,
(11) gross or net profitability/profit margins,
(12) objective measures of productivity or operating
efficiency, (13) costs (including specified types or
categories thereof), (14) budgeted expenses (operating and
capital), (15) market share (in the aggregate or by
segment), (16) level of amount of acquisitions,
(17) economic value-added, (18), enterprise value,
(19) book value, (20) working capital,
(21) safety and accident rates and (22) days sales
outstanding. These performance criteria would be permitted to be
applied on an absolute basis or be relative to one or more peer
companies or indices or any combination thereof or, if
applicable, be computed on an accrual or cash accounting basis.
The performance goals and periods could vary from participant to
participant and from time to time. To the extent required under
Section 162(m) of the Code, the Committee would, within the
first 90 days of the applicable performance period (or, if
shorter, within the maximum period allowed under
Section 162(m) of the Code), define in an objective manner
the method of calculating the performance criteria it selected
to use for the performance period.
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Modification of Performance Goals. The
Committee would be permitted to adjust or modify the calculation
of performance goals for a performance period in the event of,
in anticipation of, or in recognition of, any unusual or
extraordinary corporate item, transaction, event or development
or
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any other unusual or nonrecurring events affecting the Company,
any of its affiliates, subsidiaries, divisions or operating
units (to the extent applicable to such performance goal) or its
financial statements or the financial statements of any of its
affiliates, or changes in applicable rules, rulings, regulations
or other requirements of any governmental body or securities
exchange, accounting principles, law or business conditions, so
long as that adjustment or modification did not cause the
performance compensation award to fail to qualify as
performance-based compensation under
Section 162(m) of the Code.
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Requirements to Receive Payment for 162(m)
Awards. Except as otherwise permitted by
Section 162(m) of the Code, in order to be eligible for
payment in respect of a performance compensation award for a
particular performance period, participants would be required to
be employed by us on the last day of the performance period, the
performance goals for such period would be required to be
satisfied and certified by the Committee and the performance
formula would be required to determine that all or some portion
of the performance compensation award had been earned for such
period.
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Negative Discretion. The Committee would be
permitted to, in its sole discretion, reduce or eliminate the
amount of a performance compensation award earned in a
particular performance period, even if applicable performance
goals had been attained and without regard to any employment
agreement between us and a participant.
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Limitations on Committee Discretion. Except as
otherwise permitted by Section 162(m) of the Code, in no
event could any discretionary authority granted to the Committee
under the Plan be used to grant or provide payment in respect of
performance compensation awards for which performance goals had
not been attained, increase a performance compensation award for
any participant at any time after the first 90 days of the
performance period (or, if shorter, within the maximum period
allowed under Section 162(m) of the Code) or increase a
performance compensation award above the maximum amount payable
under the underlying award.
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Form of Payment. Performance compensation
awards (other than restricted shares, RSUs and other stock-based
awards) would be payable in cash or in restricted stock, RSUs or
fully vested shares of equivalent value and would be paid on the
terms determined by the Committee in its discretion. Any shares
of restricted stock or RSUs would be subject to the terms of the
Plan or any successor equity compensation plan and any
applicable award agreement. The number of shares of restricted
stock, RSUs or fully vested shares that is equivalent in value
to a particular dollar amount would be determined in accordance
with a methodology specified by the Committee within the first
90 days of a plan year (or, if shorter, the maximum period
allowed under Section 162(m) of the Code).
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Amendment
and Termination of the Plan
Subject to any applicable law or government regulation, to any
requirement that must be satisfied if the Plan were intended to
be a stockholder-approved plan for purposes of
Section 162(m) of the Code and to the rules of the
applicable national stock exchange or quotation system on which
the shares may be listed or quoted, the Plan would be permitted
to be amended, modified or terminated by our Board of Directors
without the approval of our stockholders, except that
stockholder approval would be required for any amendment that
would (i) increase the maximum number of shares of our
common stock available for awards under the Plan or increase the
maximum number of shares of the Companys common stock that
could be delivered pursuant to ISOs granted under the Plan,
(ii) change the class of employees or other individuals
eligible to participate in the Plan, (iii) amend or
decrease the exercise price of any option or SAR,
(iv) cancel or exchange any option or SAR at a time when
its exercise price exceeds the fair market value of the
underlying shares or (v) allow repricing of any option or
SAR without stockholder approval. Under these provisions,
stockholder approval would not be required for all possible
amendments that might increase the cost of the Plan. No
modification, amendment or termination of the Plan that would
materially and adversely impair the rights of any participant
would be effective without the consent of the affected
participant, unless otherwise provided by the Committee in the
applicable award agreement.
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The Committee would be permitted to waive any conditions or
rights under, amend any terms of, or alter, suspend,
discontinue, cancel or terminate any award previously granted,
prospectively or retroactively. However, unless otherwise
provided by the Committee in the applicable award agreement or
in the Plan, any such waiver, amendment, alteration, suspension,
discontinuance, cancellation or termination that would
materially and adversely impair the rights of any participant to
any award previously granted would not to that extent be
effective without the consent of the affected participant.
The Committee would be authorized to make adjustments in the
terms and conditions of awards in the event of any unusual or
nonrecurring corporate event (including the occurrence of a
change of control of the Company) affecting the Company, any of
its affiliates or its financial statements or the financial
statements of any of its affiliates, or of changes in applicable
rules, rulings, regulations or other requirements of any
governmental body or securities exchange, accounting principles
or law whenever the Committee, in its discretion, determined
that those adjustments were appropriate or desirable, including
providing for the substitution or assumption of awards,
accelerating the exercisability of, lapse of restrictions on, or
termination of, awards or providing for a period of time for
exercise prior to the occurrence of such event and, in its
discretion, the Committee would be permitted to provide for a
cash payment to the holder of an award in consideration for the
cancellation of such award.
Change
of Control
The Plan would provide that, unless otherwise provided in an
award agreement, in the event of a change of control of the
Company, unless provision was made in connection with the change
of control for assumption of, or substitution for, awards
previously granted:
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any options and SARs outstanding as of the date the change of
control was determined to have occurred would become fully
exercisable and vested, as of immediately prior to the change of
control;
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all performance units, cash incentive awards and other awards
designated as performance compensation awards would be paid out
as if the date of the change of control were the last day of the
applicable performance period and target performance
levels had been attained; and
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all other outstanding awards would automatically be deemed
exercisable or vested and all restrictions and forfeiture
provisions related thereto would lapse as of immediately prior
to such change of control.
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Unless otherwise provided pursuant to an award agreement, a
change of control would be defined to mean any of the following
events, generally:
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during any period of 12 consecutive calendar months, a change in
the composition of a majority of the board of directors, as
constituted on the first day of such period, that was not
supported by a majority of the incumbent board of directors;
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consummation of certain mergers or consolidations of the Company
with any other corporation following which the Companys
stockholders hold 50% or less of the combined voting power of
the surviving entity;
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the stockholders approve a plan of complete liquidation or
dissolution of the Company; or
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an acquisition by any individual, entity or group of beneficial
ownership of a percentage of the combined voting power of the
then outstanding voting securities entitled to vote generally in
the election of directors that was equal to or greater than 50%.
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Although award agreements may provide for a different definition
of change of control than is provided for in the Plan, except in
the case of a transaction described in the third bullet above,
any definition of change of control set forth in any award
agreement would provide that a change of control would not occur
until consummation or effectiveness of a change in control of
the Company, rather than upon the announcement,
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commencement, stockholder approval or other potential occurrence
of any event or transaction that, if completed, would result in
a change in control of the Company.
Term
of the Plan
No award would be permitted to be granted under the Plan after
the tenth anniversary of the date the Plan was approved by the
stockholders. The Plan would not become effective until the
consummation of the Proposed Transaction.
Certain
Federal Tax Aspects of the Plan
The following summary describes the U.S. Federal income tax
treatment associated with options awarded under the Plan. The
summary is based on the law as in effect on June 25, 2011.
The summary does not discuss state, local and foreign tax
consequences.
Incentive
Stock Options
Neither the grant nor the exercise of an ISO results in taxable
income to the optionee for regular U.S. federal income tax
purposes. However, an amount equal to (i) the per-share
fair market value on the exercise date minus the exercise price
at the time of grant multiplied by (ii) the number of
shares with respect to which the ISO is being exercised will
count as alternative minimum taxable income which,
depending on the particular facts, could result in liability for
the alternative minimum tax or AMT. If the optionee
does not dispose of the shares issued pursuant to the exercise
of an ISO until the later of the two-year anniversary of the
date of grant of the ISO and the one-year anniversary of the
date of the acquisition of those shares, then (a) upon a
later sale or taxable exchange of the shares, any recognized
gain or loss would be treated for tax purposes as a long-term
capital gain or loss and (b) the Company would not be
permitted to take a deduction with respect to that ISO for
federal income tax purposes.
If shares acquired upon the exercise of an ISO were disposed of
prior to the expiration of the two-year and one-year holding
periods described above (a disqualifying
disposition), generally the optionee would realize
ordinary income in the year of disposition in an amount equal to
the lesser of (i) any excess of the fair market value of
the shares at the time of exercise of the ISO over the amount
paid for the shares or (ii) the excess of the amount
realized on the disposition of the shares over the
participants aggregate tax basis in the shares (generally,
the exercise price). A deduction would be available to the
Company equal to the amount of ordinary income recognized by the
optionee. Any further gain realized by the optionee will be
taxed as short-term or long-term capital gain and would not
result in any deduction by the Company. A disqualifying
disposition occurring in the same calendar year as the year of
exercise would eliminate the alternative minimum tax effect of
the ISO exercise.
Special rules may apply where all or a portion of the exercise
price of an ISO is paid by tendering shares, or if the shares
acquired upon exercise of an ISO are subject to substantial
forfeiture restrictions. The foregoing summary of tax
consequences associated with the exercise of an ISO and the
disposition of shares acquired upon exercise of an ISO assumes
that the ISO is exercised during employment or within three
months following termination of employment. The exercise of an
ISO more than three months following termination of employment
will result in the tax consequences described below for NSOs,
except that special rules apply in the case of disability or
death. An individuals stock options otherwise qualifying
as ISOs will be treated for tax purposes as NSOs (and not as
ISOs) to the extent that, in the aggregate, they first become
exercisable in any calendar year for stock having a fair market
value (determined as of the date of grant) in excess of $100,000.
Nonqualified
Stock Options
An NSO (that is, a stock option that does not qualify as an ISO)
would result in no taxable income to the optionee or deduction
to the Company at the time it is granted. An optionee exercising
an NSO would, at that time, realize taxable compensation equal
to (i) the per-share fair market value on the exercise date
minus the exercise price at the time of grant multiplied by
(ii) the number of shares with respect to which the option
78
is being exercised. If the NSO was granted in connection with
employment, this taxable income would also constitute
wages subject to withholding and employment taxes. A
corresponding deduction would be available to the Company. The
foregoing summary assumes that the shares acquired upon exercise
of an NSO option are not subject to a substantial risk of
forfeiture.
Section 162(m)
Section 162(m) of the Code currently provides that if, in
any year, the compensation that is paid to our Chief Executive
Officer or to any of our three other most highly compensated
executive officers (currently excluding our Chief Financial
Officer) exceeds $1,000,000 per person, any amounts that exceed
the $1,000,000 threshold will not be deductible by us for
federal income tax purposes, unless the compensation qualifies
for an exception to Section 162(m) of the Code. Certain
performance-based awards under plans approved by stockholders
are not subject to the deduction limit. Stock options that would
be awarded under the Plan are intended to be eligible for this
performance-based exception.
Section 409A
Section 409A of the Code imposes restrictions on
nonqualified deferred compensation. Failure to satisfy these
rules results in accelerated taxation, an additional tax to the
holder of the amount equal to 20% of the deferred amount, and a
possible interest charge. Stock options granted with an exercise
price that is not less than the fair market value of the
underlying shares on the date of grant will not give rise to
deferred compensation for this purpose unless they
involve additional deferral features. Stock options that would
be awarded under the Plan are intended to be eligible for this
exception.
Securities
Authorized for Issuance Under Equity Compensation
Plans
The following table provides information about equity-based
awards outstanding and shares of the Companys common stock
available for future awards under all of our equity compensation
plans as of December 31, 2010.
EQUITY
COMPENSATION PLAN INFORMATION
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of Securities
|
|
|
|
|
|
|
|
|
|
Remaining
|
|
|
|
|
|
|
|
|
|
Available for Future
|
|
|
|
|
|
|
|
|
|
Issuance
|
|
|
|
|
|
|
|
|
|
Under Equity
|
|
|
|
Number of Securities to be
|
|
|
Weighted-Average
|
|
|
Compensation
|
|
|
|
Issued Upon Exercise of
|
|
|
Exercise Price of
|
|
|
Plans (Excluding
|
|
|
|
Outstanding Options,
|
|
|
Outstanding Options,
|
|
|
Securities
|
|
|
|
Warrants and Rights
|
|
|
Warrants and Rights
|
|
|
Reflected in Column (a))
|
|
Plan Category
|
|
(a)
|
|
|
(b)
|
|
|
(c)
|
|
|
Equity compensation plans approved by security holders
|
|
|
3,005,250
|
|
|
$
|
1.18
|
|
|
|
2,122,446
|
|
Equity compensation plans not approved by security holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total
|
|
|
3,005,250
|
|
|
$
|
1.18
|
|
|
|
2,122,446
|
|
79
The following New Plan Benefits table lists each person named in
the Summary Compensation Table, all current executive officers
as a group, all current directors (other than executive
officers) as a group and all current employees of the Company
(other than executive officers) as a group, indicating the
aggregate number of determinable awards to be granted under the
Plan to each of the foregoing.
NEW PLAN
BENEFITS
Express-1
Expedited Solutions, Inc., 2011 Omnibus Incentive Compensation
Plan
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
Name and Principal
Position
|
|
|
Dollar Value
($)(1)
|
|
|
|
Units
|
|
Michael R. Welch, Chief Executive Officer
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
John D. Welch, Chief Financial Officer
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Current Executive Officers as a Group (two persons)
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Current Directors (other than Executive Officers) as a Group
(six persons)
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Current Employees (other than Executive Officers) as a Group
(211 persons)
|
|
|
$
|
|
|
|
|
|
50,000
|
(2)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Dollar value will be based upon the fair market value, as
defined in the Plan, of the Companys common stock on the
date of grant. |
|
(2) |
|
Amount represents stock options to purchase 25,000 shares
that will be granted to each of two employees in January 2012
pursuant to their respective employment agreements. The stock
options will have an exercise price per share equal to the
closing price of a share of the Companys common stock as
reported by the applicable national stock exchange or quotation
system on which the shares may be listed or quoted on the
business day immediately preceding the date of grant. |
Relationship
to Other Proposals
Implementation of Proposal 5 is contingent upon obtaining
stockholder approval of Proposals 1 through 4.
Required
Vote
The affirmative vote of holders of a majority of the shares of
Company common stock voting thereon at a meeting at which a
quorum is present is required to approve Proposal 5. The
failure of the Companys stockholders to approve any of
Proposal 1 through 5 will prevent the Company from
consummating the Proposed Transaction.
Recommendation
The Board of Directors (excluding Mr. Martell, who
recused himself), acting upon the affirmative recommendation of
the special committee, unanimously recommends that you vote
FOR Proposal 5.
80
PROPOSAL 6
PROPOSAL TO ADJOURN OR POSTPONE THE SPECIAL
MEETING
General
The special meeting may be adjourned to another time or place,
if necessary or appropriate, to solicit additional proxies if
there are insufficient votes at the time of the special meeting
to approve Proposals 1 through 5.
Purpose
If, at the special meeting, the number of shares of Company
common stock present in person or represented by proxy and
voting in favor of the Proposals is insufficient to approve such
Proposals, the Company intends to move to adjourn the special
meeting in order to enable our Board of Directors to solicit
additional proxies in favor of approval of the Proposals. In
such event, the Company will ask its stockholders to vote only
on the adjournment Proposal, and not on the other Proposals. If
the adjournment Proposal is approved, the Company may elect to
move to adjourn the special meeting in order to enable the Board
of Directors to solicit additional proxies in favor of approval
of the Proposals.
Effect of
Proposal
In this Proposal, the Company is asking its stockholders to
authorize the holder of any proxy solicited by the Board of
Directors to vote in favor of adjourning or postponing the
special meeting to another time or place for the purpose of
soliciting additional proxies. If the stockholders approve this
Proposal 6, the Company could adjourn the special meeting
and use the additional time to solicit additional proxies,
including from stockholders who have previously voted.
Required
Vote
The affirmative vote of a majority of the shares of Company
common stock present and entitled to vote at the special
meeting, whether or not a quorum is present, is required to
approve Proposal 6.
Recommendation
The Board of Directors (excluding Mr. Martell, who
recused himself), acting on the affirmative recommendation of
the special committee, unanimously recommends a vote
FOR Proposal 6 to adjourn or postpone the
special meeting, if necessary or appropriate, to solicit
additional proxies.
81
COMPENSATION
OF DIRECTORS
The following table sets forth information concerning the
compensation of our directors for fiscal 2010.
2010
DIRECTOR
COMPENSATION(1)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Options
|
|
|
|
|
Name
|
|
Paid in Cash
|
|
|
Awards(2)
|
|
|
Total
|
|
|
Daniel Para
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
James J. Martell
|
|
$
|
30,000
|
|
|
$
|
11,950
|
|
|
$
|
41,950
|
|
Jay N. Taylor
|
|
$
|
5,500
|
|
|
$
|
15,910
|
|
|
$
|
21,410
|
|
Calvin (Pete) R. Whitehead
|
|
$
|
40,000
|
|
|
$
|
11,950
|
|
|
$
|
51,950
|
|
Jennifer H. Dorris
|
|
$
|
22,000
|
|
|
$
|
11,640
|
|
|
$
|
33,640
|
|
John F. AffleckGraves
|
|
$
|
6,000
|
|
|
$
|
11,950
|
|
|
$
|
17,950
|
|
|
|
|
(1) |
|
Compensation information for those members of the Board of
Directors who are also considered named executive officers of
the Company is disclosed in the section Executive
Compensation Summary Compensation Table. |
|
(2) |
|
Amounts shown are the aggregate grant date fair value of option
awards computed in accordance with Accounting Standards
Codification (ASC) Topic 718
Compensation-Stock Compensation. For a further
discussion of the assumptions used in the calculation of the
2010 grant date fair values for option awards pursuant to
ASC 718, please see Financial StatementsNotes
to Consolidated Financial StatementsFootnote No. 1
Stock Option Plan of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2010. As of
December 31, 2010, the number of outstanding option awards
held by each of our directors (other than our named executive
officers) was as follows: Mr. Martell300,000 option
awards; Mr. Taylor200,000 option awards;
Mr. Whitehead200,000 option awards;
Ms. Dorris200,000 option awards;
Mr. Affleck-Graves175,000 option awards; and
Mr. Para125,000 option awards, 25,000 of which were
granted to Mr. Para in connection with his service on our
Board of Directors. |
Narrative
to Director Compensation
The Companys Board of Directors appoints the executive
officers to serve on the Board at the discretion of the Board.
For individual directors who are employees or those who are not
classified as independent, no additional cash compensation is
provided for service on the Board of Directors. The
Companys non-employee director compensation plan was last
modified this year to eliminate an annual grant of stock options
that was previously made to each non-employee director on his or
her anniversary of joining the Board. In the first quarter of
each year, the Board of Directors reviews the Companys
results and market comparisons for board compensation. Based
upon this review, a determination is made as to whether
modifications to the existing board compensation plan should be
considered. Under the current plan, new independent board
members are awarded a one-time grant of up to 100,000 options at
the then current market price at the time they join the Board of
Directors. All grants of options to board members vest monthly
over a three-year term and have a maturity date determined at
the time of grant, not to exceed 10 years. In addition to
stock option awards, each independent director also receives:
(i) $2,500 per fiscal quarter
(ii) $2,000 per day for each board meeting attended in
person;
(iii) $500 for participation in board or audit committee
conference calls; and
(iv) reasonable reimbursement of expenses associated with
attendance and participation at board meetings.
82
The following remuneration is also paid to the chairpersons of
the various committees. The chairperson of the Board of
Directors receives an annual fee of $25,000. The chairperson of
the Compensation Committee receives an annual fee of $10,000.
The chairperson of the Audit Committee receives an annual fee of
$15,000. The chairperson of the Nominating Committee receives an
annual fee of $5,000. Each of the chairperson fees is remitted
in four equal installments, throughout the year.
83
EXECUTIVE
COMPENSATION
The following Summary Compensation Table sets forth information
concerning the total compensation awarded to, earned by, or paid
to our Chief Executive Officer and Chief Financial Officer (the
named executive officers) for the years ended
December 31, 2010 and December 31, 2009. This Summary
Compensation Table is accompanied by an All Other
Compensation Table and an additional narrative discussion
as necessary to assist in the understanding of the information
presented in each of the tables.
SUMMARY
COMPENSATION TABLE
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nonequity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive Plan
|
|
|
Option
|
|
|
All Other
|
|
|
Total
|
|
|
|
|
|
|
Salary(1)
|
|
|
Bonus(2)
|
|
|
Compensation(3)
|
|
|
Awards(4)
|
|
|
Compensation(5)
|
|
|
Compensation
|
|
Name and Position
|
|
Year
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Michael R. Welch
|
|
|
2010
|
|
|
|
205,000
|
|
|
|
30,000
|
|
|
|
151,900
|
|
|
|
27,900
|
|
|
|
4,000
|
|
|
|
418,800
|
|
Chief Executive Officer
|
|
|
2009
|
|
|
|
200,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,800
|
|
|
|
205,800
|
|
John D.
Welch(6)
|
|
|
2010
|
|
|
|
130,000
|
|
|
|
20,000
|
|
|
|
76,000
|
|
|
|
27,500
|
|
|
|
1,000
|
|
|
|
254,500
|
|
Chief Financial Officer
|
|
|
2009
|
|
|
|
122,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,900
|
|
|
|
124,900
|
|
|
|
|
(1) |
|
Included in this column is the base salary paid to the named
executive officers during each year. |
(2) |
|
Included in this column is a discretionary cash bonus paid to
the named executive officers for 2010. For Mr. Michael
Welch, the $30,000 discretionary bonus was in lieu of $30,000
that was historically paid into a non-qualified deferred
compensation plan, which the Company decided to terminate. For
Mr. John Welch, the $20,000 discretionary bonus was made to
compensate him for the additional duties and responsibilities he
performed during 2010 when he became our Interim Chief Financial
Officer. |
(3) |
|
Included in this column is the performance-based annual cash
bonus awards earned in 2009 and 2010. The Companys annual
bonus plan is further detailed in the narrative following the
Summary Compensation Table. |
(4) |
|
Included in this column are the awards of stock options based
upon the Companys performance. In 2009, the named
executive officers did not receive any option awards. Amounts
shown are the aggregate grant date fair value of option awards
computed in accordance with ASC 718 and represent 60,000
and 50,000 option awards granted to Mr. Michael Welch and
Mr. John Welch, respectively. For a further discussion of
the assumptions used in the calculation of the 2010 grant date
fair values for option awards pursuant to ASC 718, please
see Financial StatementsNotes to Consolidated
Financial StatementsFootnote No. 1 Stock Option
Plan of the Companys Annual Report on
Form 10-K
for the year ended December 31, 2010. |
(5) |
|
Included in this column is other compensation items paid to the
named executive officers. Components of the other compensation
are further detailed in the subsequent table titled All
Other Compensation. |
(6) |
|
John Welch was appointed as the Chief Financial Officer of the
Company on January 1, 2011. Prior to the appointment, he
held the position of Interim Chief Financial Officer from
April 19, 2010 to December 31, 2010. He served as the
Corporate Controller prior to that appointment. |
84
All Other
Compensation Table
The following table describes each component of the All
Other Compensation column in the Summary Compensation
Table for our named executive officers in 2010 and 2009.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Matching
|
|
|
|
|
|
|
|
|
|
|
|
|
Contributions
|
|
|
|
|
|
|
|
|
|
Perquisites and
|
|
|
to Retirement
|
|
|
|
|
|
|
|
|
|
Other Personal
|
|
|
and 401(k)
|
|
|
|
|
|
|
|
|
|
Benefits(1)
|
|
|
Plans(2)
|
|
|
Total
|
|
Name
|
|
Year
|
|
|
$
|
|
|
$
|
|
|
$
|
|
|
Michael R. Welch
|
|
|
2010
|
|
|
|
4,000
|
|
|
|
|
|
|
|
4,000
|
|
Chief Executive Officer
|
|
|
2009
|
|
|
|
4,000
|
|
|
|
1,800
|
|
|
|
5,800
|
|
John D. Welch
|
|
|
2010
|
|
|
|
1,000
|
|
|
|
|
|
|
|
1,000
|
|
Chief Financial Officer
|
|
|
2009
|
|
|
|
1,000
|
|
|
|
1,900
|
|
|
|
2,900
|
|
|
|
|
(1) |
|
Included in this column are primarily amounts for cell phone
reimbursements, automobile allowances and club dues. |
|
(2) |
|
Included in this column are matching contributions to the
Companys 401(k) plan. Only amounts contributed directly by
the employee are eligible for matching contributions and these
matches are identical to those available to other employees. |
Narrative
to Executive Compensation
Employment
Agreements with the Named Executive OfficersGeneral
Provisions
The term of the employment agreement with Mr. Michael Welch
commenced on July 1, 2005 and was extended on July 1,
2008 to July 1, 2011. On June 10, 2011, the term of
Mr. Michael Welchs employment agreement was further
extended to July 1, 2012. During the term of the agreement,
Mr. Michael Welch will serve as the Chief Executive Officer
of the Company and, since January 1, 2011, is paid a base
salary at an annual rate of $240,000.
The term of the employment agreement with Mr. John Welch
commenced on January 1, 2011 and will continue for a period
of three years thereafter. Mr. John Welchs employment
agreement renews automatically for a two-year period unless
either party gives notice of non-renewal at least 60 days
prior to the end of the initial three-year term. During the term
of the agreement, Mr. John Welch will serve as the Chief
Financial Officer of the Company and will be paid a base salary
at an annual rate of $160,000, subject to annual review and
increase as determined by the Compensation Committee.
Messrs. Michael Welch and John Welch are also entitled to
receive annual cash bonuses during the term of their respective
employment agreements under the Companys executive bonus
plan, which is described in more detail under
Executive Annual Bonus Plan.
The employment agreements of Messrs. Michael Welch and John
Welch provide that each executive officers employment may
be terminated by the Company upon death or disability, for cause
(as defined in the employment agreements) and by the Company
other than for cause. In addition, Mr. Michael Welch may
terminate his employment for good reason (as defined in the
employment agreements) either before or after a change of
control (as defined in the employment agreements) of the
Company, and Mr. John Welch may terminate his employment
for good reason within one year following a change of control of
the Company. See
Change-of-Control
Provisions for a detailed discussion of the payment
and benefits payable to the named executive officer in
connection with a change of control of the Company. If an
executive officers employment is terminated due to death
or by the Company for cause, the executive officer is entitled
to payment of base salary through the date of death or
termination of employment. If an executive officers
employment is terminated due to disability, the executive
officer will be continue to receive the executive officers
base salary for 90 days from the date on which the
disability has been deemed to occur. If, prior to a change of
control of the Company, Mr. Michael Welchs employment
is terminated by the Company other than for cause or by
85
Mr. Welch for good reason, he will continue to receive his
base salary and any earned bonus for the one-year period
following such termination and all of Mr. Welchs
options will immediately vest and become exercisable. If, prior
to a change of control of the Company, Mr. John
Welchs employment is terminated by the Company other than
for cause, he will continue to receive his base salary for the
one-year period following such termination.
Under their respective employment agreements with the Company,
Messrs. Michael Welch and John Welch are subject to certain
restrictive covenants regarding competition, solicitation and
confidentiality. The non-competition and non-solicitation
covenants apply during their employment and for the one-year
period following the termination of their employment, and the
confidentiality covenant applies during the term of their
respective employment agreements and at all times thereafter.
Mr. Michael Welchs employment agreement also provides
for certain limited perquisites, including a $1,000 monthly
car allowance and up to $750 per month towards the cost of
country club dues.
Employment
Agreements with the Named Executive
OfficersChange-of-Control
Provisions
Further, if the employment of Messrs. Michael Welch or John
Welch is terminated by the Company without cause or by such
executive officer with good reason within one year following a
change of control of the Company, such executive officer is
entitled to (i) lump-sum severance equal to the sum of
(a) the executive officers annual base salary and
(b) an amount equal to the greater of (i) the
executive officers bonus payments for the year preceding
the date of termination, and (ii) the annual average of the
executive officers bonus payments during the two years
immediately preceding the date of termination. In addition, any
options held by the executive officer that are not yet
exercisable will immediately vest and become exercisable upon
termination.
Employment
Agreements with the Named Executive OfficersDefined
Terms
Cause, for purposes of the employment
agreements, generally means (i) the executive
officers material violation of any of the provisions of
their employment agreement, or the rules, policies,
and/or
procedures of the Company, or commission of any material act of
fraud, misappropriation, breach of fiduciary duty or theft
against or from the Company, (ii) the executive
officers violation of any law, rule or regulation of a
governmental authority or regulatory body with jurisdiction over
the Company or the executive officer relative to the conduct of
the executive officer in connection with the Companys
business or its securities or (iii) the conviction of the
executive officer of a felony under the laws of the United
States of America or any state therein. In the event the
executive officer engages in conduct described in
clauses (i) or (ii) of the definition of cause, the
executive officer will have an opportunity to cure such conduct
within 30 days after the Company provides written notice to
the executive officer. If the executive officer fails to cure
such conduct within the
30-day
period or, if the executive officer commits the same violation
within 12 months of receiving notice from the Company, then
the Company may terminate the executive officers
employment for cause.
Change of control, for purposes of the
employment agreements, generally means any of the following:
(i) the acquisition by any person or group of 50% or more
of the Companys voting securities; (ii) a merger or
consolidation of the Company with one or more corporations as a
result of which the holders of the Companys voting
securities immediately prior to such merger hold less than 80%
of the voting securities of the surviving or resulting
corporation; (iii) a transfer of all or substantially all
the property of the Company other than to an entity of which the
Company owns at least 80% of the voting securities; or
(iv) the election to the Board of Directors of the Company,
without the recommendation or approval of the incumbent Board of
Directors of the Company, of the lesser of (a) three
independent directors or (b) directors constituting a
majority of the number of directors of the Company then in
office.
Good reason, for purposes of the
employment agreements, will exist if, without the executive
officers express written consent (i) the Company
assigns to the executive officer duties of a non-executive
nature or for which the executive officer is not reasonably
equipped by his skills and experience, (ii) the Company
reduces the salary of the executive officer, or materially
reduces the amount of paid vacations to which he is entitled, or
his fringe benefits and perquisites, (iii) the Company
requires the executive officer to
86
relocate his principal business office or his principal place of
residence greater than 50 miles outside of St. Joseph,
Michigan, or assigns to the executive officer duties that would
reasonably require such relocation, (iv) the Company
requires the executive officer, or assigns duties to the
executive officer that would reasonably require him, to spend
more than 60 normal working days away from the St. Joseph,
Michigan, area during any consecutive
12-month
period, (v) the Company fails to provide office facilities,
secretarial services and other administrative services to the
executive officer, which are substantially equivalent to the
facilities and services provided to executive officer on the
date the executive officer entered into the employment agreement
or (vi) the Company terminates incentive plans and benefit
plans or arrangements, or reduces or limits the executive
officers participation therein relative to the level of
participation of other executives of similar rank, to such an
extent as to materially reduce the aggregate value of the
executive officers incentive compensation and benefits
below their aggregate value as of the date the executive officer
entered into the employment agreement.
Option
Awards
During 2010, Messrs. Michael Welch and John Welch received
60,000 stock options and 50,000 stock options, respectively,
which were granted under the Companys Stock Option Plan.
The options vest monthly over a three-year period beginning on
the first of the month following the date of grant and have an
exercise price per share equal to the closing price of a share
of Company common stock on the date of grant.
Executive
Annual Bonus Plan
In addition to a base salary, each named executive officer was
eligible for a performance-based annual bonus for fiscal years
2010 and 2009. The annual bonus is designed to motivate
individual and team performance in attaining the current
years performance goals and business objectives. Annual
bonus payouts for the named executive officers are based on the
achievement of performance targets established by the
Compensation Committee. The targets are set in accordance with
and based on the Companys annual financial goals. The
Compensation Committee considers revenue and net income as
appropriate performance metrics because they reflect
Company-wide performance and align performance-based annual
bonuses with the interests of stockholders. For fiscal year
2010, each of Messrs. Michael Welch and John Welch was
eligible for a target bonus of 50% and 40% of base salary,
respectively, (or, $105,000 and $52,000, respectively) with the
opportunity to earn up to 200% of the target bonus if the
maximum performance level was reached for both equally-weighted
performance metrics. Based on achievement of performance goals
during 2010, Messrs. Michael Welch and John Welch earned
bonuses of $151,900 and $76,000, respectively, for fiscal year
2010. In fiscal year 2009, each of Messrs. Michael Welch
and John Welch were eligible for a target bonus of 50% and 30%
of base salary, respectively, (or, $100,000 and $36,600,
respectively) with the opportunity to earn up to 200% of the
target bonus if the maximum performance level was reached for
both equally-weighted performance metrics. Based on achievement
of performance goals during 2009, neither Mr. Michael Welch
nor Mr. John Welch earned a bonus for fiscal year 2009.
87
OUTSTANDING
EQUITY AWARDS AT FISCAL YEAR-END
The following table sets forth information concerning all stock
option grants held by our named executive officers as of
December 31, 2010. All outstanding equity awards are
options to purchase shares of our common stock.
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Option
Awards(1)
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Number of
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Number of
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Securities
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Securities
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Underlying
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Underlying
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Option
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Unexercised
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Unexercised
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Exercise
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Option
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Option Grant
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Number
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Options (#)
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Options (#)
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Price
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Expiration
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Name
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Date
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Granted
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Exercisable
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Unexercisable
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($)
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Date
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Michael R. Welch
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8/9/2004
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500,000
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500,000
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1.45
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8/9/2014
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Chief Executive Officer
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7/1/2005
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100,000
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100,000
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0.57
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7/1/2015
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2/28/2006
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50,000
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50,000
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0.79
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2/28/2016
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2/7/2007
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60,000
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60,000
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1.48
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2/7/2017
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1/16/2008
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60,000
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58,333
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1,667
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0.98
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1/16/2018
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12/12/2008
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150,000
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100,000
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50,000
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0.92
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12/13/2018
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7/1/2010
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60,000
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8,333
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51,667
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1.26
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7/1/2020
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John D. Welch
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2/7/2007
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10,000
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10,000
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1.48
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2/7/2017
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Chief Financial Officer
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1/16/2008
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11,500
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11,181
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319
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0.98
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1/16/2018
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3/2/2010
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50,000
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12,500
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37,500
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1.45
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3/2/2020
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(1) |
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All stock option awards vest monthly over a three-year period
following the date of the grant, except for the stock options
granted to Mr. Michael Welch in 2004, which vested monthly
over a five-year period following the date of grant. |
Retirement
Benefits
Each of the named executive officers is entitled to participate
in the Companys tax-qualified defined contribution 401(k)
plan on the same basis as all other eligible employees. The
Company matches the contributions of participants, subject to
certain criteria, and the matches available to the named
executive officers are identical to those available to other
employees. Under the terms of the 401(k) plan, as prescribed by
the Internal Revenue Code of 1986, as amended, the contribution
of any participating employee is limited to the lesser of 100%
of annual salary before taxes or a maximum dollar amount
($16,500 for 2010), subject to a $5,500 increase for
participants who are age 50 or older. The amount of the
Companys matching payments for each of the named executive
officers is included in the All Other Compensation
column of the Summary Compensation Table.
88
SECURITY
OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information known to us, as of
June 25, 2011, relating to the beneficial ownership of
shares of Company common stock by:
(i) Each person who is known by us to be the beneficial
owner of more than 5% of the Companys outstanding common
stock;
(ii) Each director;
(iii) Each executive officer; and
(iv) All executive officers and directors as a group.
Under securities laws, a person is considered to be the
beneficial owner of securities owned by him (or certain persons
whose ownership is attributed to him) or securities that can be
acquired by him within 60 days, including upon the exercise
of options, warrants or convertible securities. The Company
determines a beneficial owners percentage ownership by
assuming that options, warrants and convertible securities that
are held by the beneficial owner, but not those held by any
other person, and which are exercisable within 60 days,
have been exercised or converted.
Except with respect to the Voting Agreements entered into by JPE
with certain stockholders, the Company believes that all persons
named in the table have sole voting and investment power with
respect to all shares of Company common stock shown as being
owned by them. Unless otherwise indicated, the address of each
beneficial owner in the table set forth below is care of
Express-1 Expedited Solutions, Inc., 3399 South Lakeshore Drive,
Suite 225, Saint Joseph, Michigan 49085.
Included within the table are all beneficial owners of more than
5% of the outstanding common stock of the Company as of
June 25, 2011, based upon the public filings available to
the Company. Except with respect to the Voting Agreements, the
Company has no additional knowledge of any beneficial owner of
more than 5% of the Companys common stock, outside of the
records available through the SECs website.
89
Security
Ownership of Certain Beneficial Owners and Management
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Amount and
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Nature of
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Beneficial
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Percentage
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Name/Address of Beneficial
Owner
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Ownership
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of Class
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5% Stockholders:
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Archon Capital Management,
LLC(1)
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1,709,173
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5.2
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%
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Federated Investors,
Inc.(2)
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4,333,194
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13.1
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%
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Jacobs Private Equity,
LLC(3)
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4,354,329
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13.0
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%
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Bradley
Jacobs(4)
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4,354,329
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13.0
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%
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Named Executive Officers:
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Michael R.
Welch(5)
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1,294,789
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3.9
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%
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John D.
Welch(6)
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219,217
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*
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Employee Director:
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Daniel
Para(7)
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3,059,540
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9.3
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%
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Non-Employee Directors:
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James J.
Martell(8)
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322,822
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*
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Jay N.
Taylor(9)
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347,744
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1.1
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%
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Calvin R. (Pete)
Whitehead(10)
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209,722
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*
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Jennifer H.
Dorris(11)
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183,472
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*
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John F.
Affleck-Graves(12)
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170,417
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*
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Executive Officers and Directors as a Group
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5,930,084
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18.0
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%
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(8 People)
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* |
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Less than 1% |
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(1) |
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Archon Capital Management LLC is located at 1301 Fifth
Avenue, Suite 3008, Seattle WA 98101. |
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(2) |
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Federated Investors, Inc. is located at Federated Investors
Tower, 5800 Corporate Dr. Pittsburgh, PA 15222. |
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(3) |
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Pursuant to the Voting Agreements, JPE was granted a proxy with
respect to the shares of Company common stock owned by Michael
Welch and Daniel Para. Therefore, JPE and Bradley Jacobs
(JPEs Managing Member) have shared voting power with
respect to the shares of Company common stock subject to such
Voting Agreements. Furthermore, JPE may be deemed to be the
beneficial owner of, and Mr. Jacobs may be deemed to be the
indirect beneficial owner of, the shares subject to such Voting
Agreements. Both JPE and Bradley Jacobs expressly disclaim
beneficial ownership of such shares subject to the Voting
Agreements. Such amount excludes unvested options that will
become subject to the Voting Agreements as they vest in
Mr. Daniel Para and Mr. Michael R. Welch. |
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(4) |
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See footnote 3. |
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(5) |
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Includes 425,000 shares underlying options to purchase
common stock exercisable from $0.57 to $1.48 per share and
expiring at dates between July 1, 2015 and July 1,
2020. Pursuant to the Voting Agreement between JPE and
Michael R. Welch, JPE has the right to vote Michael
Welchs shares of Company common stock with respect to
Proposals 1 through 6. |
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(6) |
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Includes 45,111 shares underlying options to purchase
common stock exercisable from $0.98 to $1.48 per share and
expiring at dates between February 7, 2017 and
March 2, 2020. |
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(7) |
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Includes 57,639 shares underlying options to purchase
common stock exercisable from $0.97 to $1.26 per share and
expiring at dates between January 29, 2019 and July 1,
2020. Pursuant to the Voting Agreement between JPE and Daniel
Para, JPE has the right to vote Daniel Paras shares of
Company common stock with respect to Proposals 1 through 6. |
90
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(8) |
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Includes 284,722 shares underlying options to purchase
common stock exercisable from $0.74 to $1.35 per share and
expiring at dates between July 15, 2015 and
January 29, 2020. |
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(9) |
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Includes 181,944 shares underlying options to purchase
common stock exercisable from $0.67 to $1.65 per share and
expiring at dates between December 12, 2015 and
March 26, 2020 |
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(10) |
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Includes 184,722 shares underlying options to purchase
common stock exercisable from $0.74 to $1.35 per share and
expiring at dates between December 12, 2015 and
January 29, 2020. |
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(11) |
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Includes 178,472 shares underlying options to purchase
common stock exercisable from $0.74 to $1.42 per share and
expiring at dates between December 12, 2015 and
July 1, 2020 |
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(12) |
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Includes 160,417 shares underlying options to purchase
common stock exercisable from $1.00 to $1.34 per share and
expiring at dates between November 25, 2016 and
January 29, 2020. |
91
MULTIPLE
STOCKHOLDERS SHARING ONE ADDRESS
In accordance with
Rule 14a-3(e)(1)
under the Exchange Act, one proxy statement will be delivered to
two or more stockholders who share an address, unless we have
received contrary instructions from one or more of the
stockholders. We will deliver promptly upon written or oral
request a separate copy of the proxy statement to a stockholder
at a shared address to which a single copy of the proxy
statement was delivered. Requests for additional copies of the
proxy statement, and requests that in the future separate proxy
statements be sent to stockholders who share an address, should
be directed to Express-1 Expedited Solutions, Inc.,
3399 South Lakeshore Drive, Suite 225, Saint Joseph,
Michigan 49085, Attention: Chief Executive Officer. In addition,
stockholders who share a single address but receive multiple
copies of the proxy statement may request that in the future
they receive a single copy by contacting the Company at the
address and phone number set forth in the prior sentence.
92
SUBMISSION
OF STOCKHOLDER PROPOSALS
To be considered for inclusion in next years annual proxy
statement, any proposal of an eligible stockholder must be in
writing and received by the Chief Executive Officer of the
Company at its principal executive offices located at 3399 South
Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085.
A notice of recommendation for nomination or proposed item of
business at the Companys 2012 annual meeting must be
received by the Company not less than ninety nor more than
180 days prior to the earlier of the date of the meeting or
the corresponding date on which the immediately preceding
years annual meeting of stockholders was held. The Company
currently expects to hold its annual meeting in June 2012.
93
WHERE YOU
CAN FIND ADDITIONAL INFORMATION
We are subject to the informational requirements of the Exchange
Act. We file reports, proxy statements and other information
with the SEC. You may read and copy these reports, proxy
statements and other information at the SECs Public
Reference Section at 100 F Street, N.E.,
Washington, D.C. 20459. You may obtain information on the
operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330.
The SEC also maintains an internet website, located at
www.sec.gov, which contains reports, proxy statements and other
information regarding companies and individuals that file
electronically with the SEC.
You may also obtain free copies of the documents the Company
files with the SEC by written request directed to us at
Express-1 Expedited Solutions, Inc., 3399 South Lakeshore Drive,
Suite 225, Saint Joseph, Michigan 49085, Attention: Chief
Executive Officer, or by telephonic request at
(269) 429-9761.
If you would like to request documents, please do so by
[ ], 2011, in order to receive them before the
special meeting.
The information contained in this proxy statement speaks only as
of the date indicated on the cover of this proxy statement
unless the information specifically indicates that another date
applies.
Statements contained in this proxy statement, or in any document
incorporated in this proxy statement by reference, regarding the
contents of any contract or other document, are not necessarily
complete and each such statement is qualified in its entirety by
reference to that contract or other document filed as an exhibit
with the SEC. The SEC allows us to incorporate by
reference information into this proxy statement. This
means that we can disclose important information by referring to
another document filed separately with the SEC. The information
incorporated by reference is considered to be part of this proxy
statement. This proxy statement and the information we later
file with the SEC may update and supersede the information
incorporated by reference. Similarly, the information that we
later file with the SEC may update and supersede the information
in this proxy statement. We incorporate by reference into this
proxy statement the following documents filed by us with the SEC
under the Exchange Act and any documents filed by us pursuant to
Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after
the date of this proxy statement and prior to the date of the
special meeting:
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our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2010;
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our Quarterly Report on
Form 10-Q
for the quarter ended March 31, 2011; and
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our Current Reports on
Form 8-K
filed on June 13, 2011, June 14, 2011, and
June 22, 2011.
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Notwithstanding the foregoing, information furnished under
Items 2.02 and 7.01 of any Current Report on
Form 8-K,
including the related exhibits, is not incorporated by reference
in this proxy statement.
94
ANNEX A
EXECUTION COPY
INVESTMENT
AGREEMENT
Among
JACOBS PRIVATE EQUITY, LLC,
THE OTHER INVESTORS PARTY HERETO
and
EXPRESS-1 EXPEDITED SOLUTIONS, INC.
Dated as of June 13, 2011
TABLE OF
CONTENTS
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Page
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ARTICLE I
The Equity Investment
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Section 1.01.
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Purchase
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A-1
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Section 1.02.
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Investor Representative
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A-1
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ARTICLE II
The Closing
|
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Section 2.01.
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Closing
|
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A-2
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Section 2.02.
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Issuance of and Payment for Securities
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A-2
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Section 2.03.
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Actions to be Taken at the Closing
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A-3
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Section 2.04.
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Defaulting Investor
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A-3
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ARTICLE III
Representations and Warranties
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Section 3.01.
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Representations and Warranties of the Company
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A-3
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Section 3.02.
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Representations and Warranties of the Investors
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A-17
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ARTICLE IV
Covenants
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Section 4.01.
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Conduct of Business
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A-19
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Section 4.02.
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No Solicitation
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A-22
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Section 4.03.
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Legend
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A-24
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ARTICLE V
Additional Agreements
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Section 5.01.
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Preparation of the Proxy Statement; Stockholders Meeting
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A-24
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Section 5.02.
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Access to Information; Confidentiality
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A-26
|
|
|
Section 5.03.
|
|
|
Reasonable Best Efforts; Consultation and Notice
|
|
|
A-26
|
|
|
Section 5.04.
|
|
|
Fees and Expenses
|
|
|
A-28
|
|
|
Section 5.05.
|
|
|
Public Announcements
|
|
|
A-29
|
|
|
Section 5.06.
|
|
|
Board Representation Rights
|
|
|
A-30
|
|
|
Section 5.07.
|
|
|
Adjustment of Stock Options
|
|
|
A-31
|
|
|
Section 5.08.
|
|
|
Engagement of Independent Registered Public Accounting Firm
|
|
|
A-31
|
|
|
Section 5.09.
|
|
|
Listing
|
|
|
A-31
|
|
|
Section 5.10.
|
|
|
Reservation of Shares
|
|
|
A-31
|
|
|
Section 5.11.
|
|
|
Indemnification, Exculpation and Insurance
|
|
|
A-31
|
|
|
ARTICLE VI
Conditions Precedent
|
|
Section 6.01.
|
|
|
Conditions to Each Partys Obligation to Effect the Equity
Investment
|
|
|
A-32
|
|
|
Section 6.02.
|
|
|
Conditions to Obligations of the Investors
|
|
|
A-32
|
|
|
Section 6.03.
|
|
|
Conditions to Obligation of the Company
|
|
|
A-33
|
|
|
Section 6.04.
|
|
|
Frustration of Closing Conditions
|
|
|
A-33
|
|
|
Section 6.05.
|
|
|
Investor Representative Cure
|
|
|
A-33
|
|
A-i
|
|
|
|
|
|
|
|
|
|
|
|
|
Page
|
|
ARTICLE VII
Termination, Amendment and Waiver
|
|
Section 7.01.
|
|
|
Termination
|
|
|
A-34
|
|
|
Section 7.02.
|
|
|
Effect of Termination
|
|
|
A-34
|
|
|
Section 7.03.
|
|
|
Amendment
|
|
|
A-35
|
|
|
Section 7.04.
|
|
|
Extension; Waiver
|
|
|
A-35
|
|
|
ARTICLE VIII
General Provisions
|
|
Section 8.01.
|
|
|
Nonsurvival of Representations and Warranties
|
|
|
A-35
|
|
|
Section 8.02.
|
|
|
Notices
|
|
|
A-35
|
|
|
Section 8.03.
|
|
|
Definitions
|
|
|
A-36
|
|
|
Section 8.04.
|
|
|
Exhibits; Interpretation
|
|
|
A-37
|
|
|
Section 8.05.
|
|
|
Counterparts
|
|
|
A-38
|
|
|
Section 8.06.
|
|
|
Entire Agreement; No Third-Party Beneficiaries
|
|
|
A-38
|
|
|
Section 8.07.
|
|
|
Governing Law
|
|
|
A-38
|
|
|
Section 8.08.
|
|
|
Assignment
|
|
|
A-38
|
|
|
Section 8.09.
|
|
|
Consent to Jurisdiction; Service of Process; Venue
|
|
|
A-38
|
|
|
Section 8.10.
|
|
|
WAIVER OF JURY TRIAL
|
|
|
A-38
|
|
|
Section 8.11.
|
|
|
Enforcement
|
|
|
A-39
|
|
|
Section 8.12.
|
|
|
Consents and Approvals
|
|
|
A-39
|
|
|
Section 8.13.
|
|
|
Severability
|
|
|
A-39
|
|
|
|
|
|
|
|
|
|
|
|
SCHEDULE I
|
|
|
Investors
|
|
|
A-41
|
|
|
EXHIBIT A
|
|
|
Preferred Stock Certificate of Designation
|
|
|
A-42
|
|
|
EXHIBIT B
|
|
|
Warrant Certificate
|
|
|
A-56
|
|
|
EXHIBIT C
|
|
|
Summary of Principal Registration Rights Provisions
|
|
|
A-70
|
|
|
EXHIBIT D
|
|
|
The 2011 Omnibus Incentive Compensation Plan
|
|
|
A-72
|
|
A-ii
GLOSSARY
|
|
|
|
|
Term
|
|
Section
|
|
|
409A Authorities
|
|
|
3.01(o
|
)(viii)
|
Acquisition Agreement
|
|
|
4.02(b
|
)
|
Adverse Recommendation Change
|
|
|
4.02(b
|
)
|
Affiliate
|
|
|
8.03(a
|
)
|
Agreement
|
|
|
Preamble
|
|
Average Equity Value
|
|
|
8.03(b
|
)
|
Bankruptcy and Equity Exception
|
|
|
3.01(f
|
)
|
Baseline Financials
|
|
|
3.01(g
|
)(i)
|
Benefit Agreements
|
|
|
3.01(i
|
)(i)
|
Benefit Plans
|
|
|
3.01(m
|
)(i)
|
Certificate of Amendment
|
|
|
8.03(c
|
)
|
Certificate of Designation
|
|
|
3.01(c
|
)
|
Change Notice
|
|
|
4.02(b
|
)
|
Closing
|
|
|
2.01
|
|
Closing Date
|
|
|
2.01
|
|
Code
|
|
|
8.03(d
|
)
|
Commonly Controlled Entity
|
|
|
3.01(m
|
)(i)
|
Company
|
|
|
Preamble
|
|
Company Bylaws
|
|
|
3.01(a
|
)
|
Company Certificate
|
|
|
3.01(a
|
)
|
Company Common Stock
|
|
|
Preamble
|
|
Company Indemnitees
|
|
|
5.11(a
|
)
|
Company Letter
|
|
|
3.01
|
|
Company Personnel
|
|
|
3.01(i
|
)(i)
|
Company Preferred Stock
|
|
|
3.01(d
|
)(i)
|
Company SEC Documents
|
|
|
3.01(g
|
)(i)
|
Company Stock Plan
|
|
|
3.01(d
|
)(i)
|
Contract
|
|
|
3.01(f
|
)
|
DGCL
|
|
|
1.01
|
|
Environmental Claims
|
|
|
3.01(n
|
)
|
Environmental Law
|
|
|
3.01(n
|
)
|
Environmental Permits
|
|
|
3.01(n
|
)
|
Equity Equivalents
|
|
|
3.01(d
|
)(iii)
|
Equity Investment
|
|
|
1.01
|
|
ERISA
|
|
|
3.01(o
|
)(i)
|
Exchange Act
|
|
|
3.01(f
|
)
|
FCPA
|
|
|
3.01(s
|
)
|
Filed SEC Documents
|
|
|
3.01
|
|
GAAP
|
|
|
3.01(g
|
)(i)
|
Governmental Entity
|
|
|
3.01(f
|
)
|
A-iii
|
|
|
|
|
Term
|
|
Section
|
|
|
Grant Date
|
|
|
3.01(d
|
)(iii)
|
Hazardous Materials
|
|
|
3.01(n
|
)
|
HSR Act
|
|
|
3.01(f
|
)
|
indebtedness
|
|
|
3.01(d
|
)(iv)
|
Intellectual Property
|
|
|
3.01(r
|
)(iv)
|
Intervening Event
|
|
|
4.02(b
|
)
|
Investor
|
|
|
Preamble
|
|
Investor Representative
|
|
|
Preamble
|
|
Investor Representative Appointee
|
|
|
5.06(a
|
)
|
Investor Representative Expenses
|
|
|
5.04(a
|
)
|
Investors
|
|
|
Preamble
|
|
IRS
|
|
|
3.01(o
|
)(i)
|
Judgment
|
|
|
3.01(f
|
)
|
knowledge
|
|
|
8.03(e
|
)
|
Law
|
|
|
3.01(f
|
)
|
Legal Restraints
|
|
|
6.01(c
|
)
|
Liens
|
|
|
3.01(b
|
)
|
Material Adverse Effect
|
|
|
8.03(f
|
)
|
Material Contract
|
|
|
3.01(k
|
)(ii)
|
Nondisclosure Agreement
|
|
|
4.02(a
|
)
|
Nonqualified Deferred Compensation Plan
|
|
|
3.01(o
|
)(viii)
|
Omnibus ICP
|
|
|
3.01(f
|
)
|
Pension Plan
|
|
|
3.01(o
|
)(i)
|
Permits
|
|
|
3.01(l
|
)
|
Permitted Liens
|
|
|
3.01(k
|
)(i)(E)
|
person
|
|
|
8.03(g
|
)
|
Preferred Stock
|
|
|
Preamble
|
|
Proxy Statement
|
|
|
3.01(f
|
)
|
Purchase Price
|
|
|
2.02
|
|
Re-Audit Engagement
|
|
|
5.08
|
|
Release
|
|
|
3.01(n
|
)
|
Releasee
|
|
|
1.02(b
|
)
|
Releasees
|
|
|
1.02(b
|
)
|
SEC
|
|
|
3.01(f
|
)
|
Securities
|
|
|
Preamble
|
|
Securities Act
|
|
|
Preamble
|
|
SOX
|
|
|
3.01(g
|
)(ii)
|
Special Committee
|
|
|
Preamble
|
|
Specified Contracts
|
|
|
3.01(k
|
)(i)
|
Stock Options
|
|
|
3.01(d
|
)(i)
|
Stockholder Approvals
|
|
|
3.01(u
|
)
|
A-iv
|
|
|
|
|
Term
|
|
Section
|
|
|
Stockholders Meeting
|
|
|
5.01(c
|
)
|
Subsidiary
|
|
|
8.03(h
|
)
|
Superior Acquisition Proposal
|
|
|
4.02(a
|
)
|
Superior Proposal
|
|
|
4.02(a
|
)
|
Takeover Proposal
|
|
|
4.02(a
|
)
|
Tax
|
|
|
8.03(i
|
)
|
Tax Return
|
|
|
8.03(j
|
)
|
Taxing Authority
|
|
|
8.03(k
|
)
|
Termination Date
|
|
|
7.01(b
|
)(i)
|
Termination Fee
|
|
|
5.04(b
|
)
|
Voting Agreements
|
|
|
Preamble
|
|
Warrants
|
|
|
Preamble
|
|
A-v
INVESTMENT AGREEMENT dated as of June 13, 2011 (this
Agreement), by and among JACOBS PRIVATE
EQUITY, LLC (the Investor Representative),
each of the other Investors listed on Schedule I hereto
(including by joinder pursuant to Section 8.08) (including
the Investor Representative, each an
Investor, and together, the
Investors) and EXPRESS-1 EXPEDITED SOLUTIONS,
INC., a Delaware corporation (the Company).
WHEREAS, the Board of Directors of the Company, acting upon the
unanimous recommendation of the Special Committee of the Board
of Directors of the Company (the Special
Committee), deems it in the best interests of the
stockholders of the Company to enter into this Agreement and to
consummate the transactions contemplated by this Agreement, on
the terms and subject to the conditions set forth in this
Agreement, and such Board of Directors of the Company, acting
upon the unanimous recommendation of the Special Committee, has
approved this Agreement and declared the advisability of the
transactions contemplated by this Agreement;
WHEREAS, each Investor wishes to purchase, and the Company
wishes to sell to each Investor, (i) that number of shares
of the Companys convertible preferred stock having the
terms set forth in Exhibit A to this Agreement (the
Preferred Stock) set forth opposite such
Investors name in Schedule I to this Agreement, and
(ii) warrants in the form of Exhibit B to this
Agreement (the Warrants) representing the
right to purchase the number of shares of the Companys
common stock, par value $0.001 per share (the Company
Common Stock), set forth opposite such Investors
name in Schedule I to this Agreement, in each case for the
price and upon the terms and conditions set forth in this
Agreement (the Preferred Stock and the Warrants, collectively,
the Securities);
WHEREAS, the Company and the Investors are executing and
delivering this Agreement in reliance upon the exemption from
securities registration afforded by Section 4(2) of the
Securities Act of 1933, as amended, and the rules promulgated by
the SEC thereunder (collectively, the Securities
Act);
WHEREAS, concurrently with the Closing, the parties hereto will
execute and deliver a Registration Rights Agreement containing
the terms set forth in Exhibit C to this Agreement,
pursuant to which the Company will agree to provide certain
registration rights under the Securities Act with respect to the
Securities and the securities issuable upon conversion or
exercise thereof; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition to the Investors willingness
to enter into this Agreement, certain stockholders of the
Company are entering into voting agreements with the Investor
Representative (the Voting Agreements)
whereby, among other things, such stockholders undertake,
subject to certain terms and conditions, to vote all of their
shares of Company Common Stock in favor of the Stockholder
Approvals at the Stockholders Meeting.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements
set forth herein, the parties hereto agree as follows:
ARTICLE I
The Equity Investment
Section 1.01. Purchase. Upon
the terms and subject to the conditions set forth in this
Agreement, and in accordance with the General Corporation Law of
the State of Delaware (the DGCL), at the
Closing, the Company shall issue and sell to each Investor, and
each of the Investors, severally and not jointly (subject to
Section 2.04), shall purchase from the Company, the shares
of Preferred Stock and the Warrants in the respective amounts
set forth opposite such Investors name on Schedule I
hereto (such sale and purchase, the Equity
Investment).
Section 1.02. Investor
Representative. (a) The Investor
Representative hereby is appointed, authorized and empowered to
act, on behalf of each of the other Investors, during the period
from and including the date of this Agreement through and
including the Closing, in connection with and to facilitate this
Agreement, the Equity Investment and the other transactions
contemplated by this Agreement, and in connection with the
activities to be
A-1
performed on behalf of the Investors under this Agreement, for
the purposes and with the powers and authority hereinafter set
forth in this Section 1.02, which shall include the power
and authority:
(i) to agree to such amendments or modifications hereto as
the Investor Representative, in its sole discretion, may deem
necessary or desirable (other than any amendment or modification
increasing the purchase obligation of any other Investor with
respect to the Equity Investment or modifying in any material
respect the terms of the Securities as contemplated hereby, or
adversely affecting the terms of this Agreement as they apply to
another Investor in a manner disproportionate to the effect on
the Investors generally), and each Investor hereby agrees to any
such amendment or modification;
(ii) to execute and deliver such waivers and consents in
connection with this Agreement, the Equity Investment and the
other transactions contemplated by this Agreement as the
Investor Representative, in its sole discretion, may deem
necessary or desirable, and each Investor hereby agrees to any
such waiver or consent (subject to the parenthetical in
clause (i) above);
(iii) to make, execute, acknowledge and deliver, on behalf
of itself and the other Investors, all such other agreements,
and, in general, to do any and all things and to take any and
all actions that the Investor Representative, in its sole
discretion, may consider necessary, proper or convenient in
connection with this Agreement, the Equity Investment and the
other transactions contemplated by this Agreement (subject to
the parenthetical in clause (i) above);
(iv) to communicate to, and receive communications from,
the Company on behalf of the Investors; and
(v) to take such other actions as may be expressly provided
in this Agreement.
(b) Each Investor, on behalf of itself and its Affiliates,
releases and forever discharges the Investor Representative and
its Affiliates and each of their respective officers, directors,
agents, employees, attorneys, predecessors, successors and
assigns (individually, a Releasee and
collectively, Releasees) from any and all
claims, demands, proceedings, causes of action, orders,
obligations, debts and liabilities whatsoever, whether known or
unknown, both at law and in equity, which such Investor or its
Affiliates has or may hereafter have against any of the
Releasees, arising out of or relating to any action or failure
to act of the Investor Representative (in its capacity as such)
in connection with this Agreement, the Equity Investment and the
other transactions contemplated by this Agreement.
(c) Except as otherwise expressly set forth in
Section 2.04, the obligations of each Investor under this
Agreement are several and not joint with the obligations of any
other Investor, and no Investor shall be responsible for the
performance of the obligations of any other Investor under this
Agreement.
ARTICLE II
The Closing
Section 2.01. Closing. The
closing of the Equity Investment (the
Closing) will take place (subject to
Section 2.04) at 10:00 a.m., New York time, on a date
to be specified by the Company and the Investor Representative,
which shall be not later than the second business day after
satisfaction or (to the extent permitted by Law) waiver of the
conditions set forth in Article VI (other than those that
by their terms are to be satisfied or waived at the Closing, it
being understood that the occurrence of the Closing shall remain
subject to the satisfaction or waiver of such conditions at
Closing), at the offices of Cravath, Swaine & Moore
LLP, 825 Eighth Avenue, New York, New York 10019, unless another
time, date or place is agreed to in writing by the Company and
the Investor Representative; provided, however,
that if all the conditions set forth in Article VI shall
not have been satisfied or (to the extent permitted by Law)
waived on such second business day, then the Closing shall take
place (subject to Section 2.04) on the first business day
on which all such conditions shall have been satisfied or (to
the extent permitted by Law) waived. The date on which the
Closing occurs is referred to in this Agreement as the
Closing Date.
Section 2.02. Issuance
of and Payment for Securities. Upon the terms
and subject to the conditions set forth in this Agreement, at
the Closing, (a) the Company shall issue and sell to each
Investor, free and clear of any
A-2
and all Liens (except for transfer restrictions imposed by
applicable securities Laws), the shares of Preferred Stock and
Warrants set forth opposite the name of such Investor on
Schedule I hereto, and (b) each Investor shall pay to
the Company, in respect of the shares of Preferred Stock and
Warrants set forth opposite the name of such Investor on
Schedule I hereto, such Investors pro rata portion,
as set forth on Schedule I hereto, of the aggregate
purchase price (the Purchase Price) in
respect of the Preferred Stock and Warrants to be paid to the
Company pursuant to this Agreement.
Section 2.03. Actions
to be Taken at the Closing. To effect the
purchase and sale of Securities as set forth in
Section 2.02 and the other transactions contemplated by
this Agreement, upon the terms and subject to the conditions set
forth in this Agreement, at the Closing:
(a) The Company shall duly file the Certificate of
Amendment with the Secretary of State of the State of Delaware
in accordance with the laws of the State of Delaware.
(b) The Company shall issue and deliver to each Investor a
certificate or certificates, registered in such names as the
applicable Investor may designate in writing to the Company
(through the Investor Representative) no less than five business
days prior to the Closing, representing the shares of Preferred
Stock and the Warrants to be issued and delivered to such
Investor as set forth in Schedule I hereto, against payment
in full of such Investors pro rata portion of the Purchase
Price as set forth on Schedule I hereto.
(c) Each Investor shall cause a wire transfer in same day
funds to an account of the Company, which account shall be
designated in writing by the Company to the Investor
Representative no less than five business days prior to the
Closing, in an amount equal to such Investors pro rata
portion of the Purchase Price as set forth in Schedule I
hereto.
(d) The Board of Directors of the Company shall be
reconstituted as provided in Section 5.06, and such
reconstituted Board of Directors of the Company shall appoint
Bradley S. Jacobs as the Chairman of the Board of Directors of
the Company.
(e) Each of the Company and the Investors shall take all
such other actions required hereby to be performed and deliver
all other documents, certificates and other items required to be
delivered on its part, prior to or on the Closing Date,
including delivering the documents and satisfying the conditions
set forth in Article VI. All such documents and instruments
delivered to any party pursuant hereto shall be in form and
substance, and shall be executed in a manner, reasonably
satisfactory to such party and its counsel.
Section 2.04. Defaulting
Investor. Notwithstanding anything to the
contrary (but subject to the satisfaction or (to the extent
permitted by Law) waiver of the conditions to Closing set forth
in this Agreement), in the event that any Investor (other than
the Investor Representative) shall breach its obligation to pay
to the Company at the Closing its pro rata portion of the
Purchase Price in accordance with Section 2.03, the
Investor Representative shall purchase from the Company, and the
Company s