AMENDMENT NO. 3 TO
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF
THE SECURITIES EXCHANGE ACT OF 1934
/X/ Filing by the Registrant
/ / Filing by a party other than the Registrant
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CELADON GROUP,
INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/ / No fee required.
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
Common Stock (par value $0.033 per share) of CELADON GROUP, INC.
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(2) Aggregate number of securities to which transaction applies:
7,857,135 (a) shares of Common Stock of CELADON GROUP, INC.
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined): $20.00(b)
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(4) Proposed maximum aggregate value of transaction: $151,584,421 (b)
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(5) Total fee paid: $30,310 (b)
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(a) This represents 7,406,989 shares of common stock, par value $0.033 per
share, of Celadon Group, Inc. (the "Celadon Common Stock") (other than
320,000 shares to be retained by certain stockholders of Celadon
(including an officer and director and an entity affiliated with a
director)), options to purchase 438,025 shares of Celadon Common Stock,
and warrants to purchase 12,121 shares of Celadon Common Stock, all of
which are estimated to be outstanding as of September 18, 1998.
(b) Pursuant to Rule 0-11, the filing fee was computed as set forth in the
following table:
CONSIDERATION AGGREGATE
NUMBER PER UNIT CONSIDERATION
---------- ------------- --------------
Celadon Common Stock....................................................... 7,406,989 $ 20.00 $ 148,139,780
Options to purchase Celadon Common Stock................................... 438,025 $ 7.61* $ 3,333,370
Warrants to purchase Celadon Common Stock.................................. 12,121 $ 9.18** $ 111,271
- ------------------------
* Based on the weighted average exercise price of such options.
** Based on the exercise price of such warrants.
/X/ Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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PRELIMINARY COPY
[LETTERHEAD OF CELADON GROUP, INC.]
, 1998
Dear Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders of
Celadon Group, Inc. ("Celadon" or the "Company") to be held at a.m. on
, 1998 at (the "Special Meeting").
At this meeting, you will be asked to consider and vote upon a proposal to
approve and adopt the Agreement and Plan of Merger, dated as of June 23, 1998
(the "Merger Agreement"), by and between Celadon and Laredo Acquisition Corp.
("Merger Sub"). Merger Sub is a newly-formed Delaware corporation controlled by
Odyssey Investment Partners Fund, L.P. ("Odyssey"). The material terms of the
Merger Agreement are described below and in the Proxy Statement attached as
Annex A hereto. The descriptions of the Merger (defined below) and the Merger
Agreement herein and in the Proxy Statement do not purport to be complete and
are subject to, are qualified in their entirety by reference to, the text of the
Merger Agreement.
Consummation of the Merger is subject to certain conditions, including the
obtaining of the Financing (as defined in the Merger Agreement) contemplated by
the Financing Letters (as defined in the Merger Agreement). It is contemplated
that the financing required to pay the Cash Merger Price (defined below), to pay
the value of the Options (defined below) and the Hanseatic Warrants (defined
below), to refinance certain existing indebtedness and capital leases of the
Company and its subsidiaries and to pay the fees and expenses in connection with
the Merger and such financing will be provided by (a) the issuance by the
Company of senior discount notes for gross proceeds of $25 million (the "Company
Senior Discount Notes") and the issuance by Celadon Trucking Services, Inc.
("CTSI"), a wholly-owned subsidiary of the Company, of $150 million of senior
subordinated notes (the "CTSI Senior Subordinated Notes" and together with the
Company Senior Discount Notes, the "Debt Securities"), (b) drawings of up to
$7.5 million under a $25 million revolving credit facility, and (c) equity
financing provided by Odyssey in the amount of approximately $57.6 million
through the purchase of common stock of Merger Sub. In the event that the
offering of the Debt Securities is not consummated prior to the Effective Time,
bridge loans (the "Bridge Loans") in an aggregate amount not to exceed $125
million will be incurred by the Company and CTSI and will be used to finance the
Merger. See "Financing of the Merger" in the accompanying Proxy Statement.
Merger Sub informed the Company in writing that it had received notice on
September 15, 1998 from Bankers Trust Corporation ("BT"), the institution that
is to provide the Bridge Loans, that BT would not be obligated to provide such
financing under the then existing market conditions. Pursuant to the commitment
letter issued to Merger Sub by BT with respect to the financing of the Merger
(the "BT Financing Letter"), BT would not be obligated to provide the Bridge
Loans if, in the reasonable judgment of BT, market conditions which would
materially and adversely affect the ability to sell or place the Debt Securities
exist at the time funding is requested. BT has noted that the conditions to
funding the Bridge Loans, including the absence of adverse market conditions,
need only be satisified on the date of request for funds. No such request has
yet been made by Merger Sub. The BT Financing Letter has not been terminated or
otherwise modified as of this date. The BT Financing Letter will terminate in
accordance with its terms on November 30, 1998 if no amounts have yet been
funded thereunder. Pursuant to the terms of the Merger Agreement, Merger Sub
would not be obligated to consummate the Merger if the financing contemplated by
the BT Financing Letter was not available. If the Merger is not consummated on
or prior to November 30, 1998, the Merger Agreement will terminate in accordance
with it terms. See "Special Factors--Recent Developments; Material Uncertainty
of Consummating of the Merger" and "Certain Provisions of the Merger
Agreement--Termination; Effect of Termination" in the accompanying Proxy
Statement.
As a result of the information available to the Company, including, without
limitation, the notice from BT and the Company's understanding of current market
conditions, the Company believes it is highly unlikely that the Merger will be
consummated at the Cash Merger Price. Notwithstanding the Company's
belief as to the likelihood that the Merger will be consummated, the Company is
proceeding to take the actions required to close the Merger, including the
mailing of this Proxy Statement and obtaining stockholder approval of the Merger
at the Special Meeting. However, even if the Company's stockholders adopt and
approve the Merger Agreement, there can be no assurance that the Merger will be
consummated. See "Special Factors--Recent Developments; Material Uncertainty of
Consummating the Merger" in the accompanying Proxy Statement.
Upon the terms and subject to the conditions of the Merger Agreement, at the
effective time of the transactions contemplated thereby (the "Effective Time"),
(a) Merger Sub will be merged into Celadon (the "Merger"), with Celadon
continuing as the surviving corporation (the "Surviving Corporation"); (b) the
current directors of Celadon will be replaced by the directors of Merger Sub
(and a majority of the directors of the Surviving Corporation will be designees
of Odyssey); (c) the shares of common stock of Merger Sub held by Odyssey will
be converted into shares of common stock of the Surviving Corporation,
representing approximately 90% of the outstanding shares of common stock of the
Surviving Corporation immediately following the Effective Time; (d) Hanseatic
Corporation ("Hanseatic"), an entity affiliated with a director of Celadon, and
Stephen Russell, President, Chief Executive Officer and Chairman of Celadon will
retain an aggregate of 320,000 shares of common stock of Celadon (the "Rollover
Shares"), which represent approximately 4.1% of the outstanding shares of common
stock of Celadon and which will represent approximately 10% of the outstanding
shares of common stock of the Surviving Corporation immediately after the
Effective Time; (e) each share of common stock of Celadon outstanding
immediately prior to the Effective Time (except for the Rollover Shares,
treasury shares held by Celadon, and shares held by dissenting stockholders who
have properly exercised their rights pursuant to Section 262 of the Delaware
General Corporation Law) will be converted into the right to receive $20.00 per
share in cash (the "Cash Merger Price"); (f) the warrants granted to Hanseatic
(such warrants, the "Hanseatic Warrants") will be canceled and Hanseatic shall
thereafter have the right to receive cash in an amount equal to the product of
the number of shares of common stock of Celadon previously subject to the
Hanseatic Warrants and the excess of the Cash Merger Price per share over the
exercise price per share of the Hanseatic Warrants; and (g) except for certain
Options (defined below) to be retained by Stephen Russell, Ronald S. Roman,
Robert Goldberg, Michael Archual, and Nancy Morris (collectively, the
"Management Team" and, such Options, the "Rollover Options") which represent the
right to purchase approximately 1.2% of the outstanding common stock of Celadon
and which will represent the right to purchase approximately 2.8% of the common
stock of the Surviving Corporation outstanding immediately following the
Effective Time, each outstanding employee or director stock option (the
"Options") granted under the 1994 Celadon Stock Option Plan and the 1996
Non-Employee Director Stock Option Plan (collectively, the "Stock Option Plans")
will be canceled and the former holder thereof shall thereafter have the right
to receive cash in an amount equal to the product of the number of shares of
common stock of Celadon previously subject to such Option and the excess of the
Cash Merger Price per share over the exercise price per share of such Option.
Applicable withholding taxes will be deducted from all payments made in respect
of the Options and the Hanseatic Warrants.
Stephen Russell and the other members of the Management Team will enter into
new employment agreements, which will have a term of four years with respect to
Stephen Russell and three years with respect to each other member of the
Management Team and provide for severance payments under certain circumstances.
In addition, an annual bonus plan, and a stock option plan with respect to an
aggregate of 7.5% of the common stock of the Surviving Corporation, will be
instituted for approximately twenty of the Company's executives, including the
Management Team, and the Management Team will receive signing bonuses
aggregating approximately $1.1 million. The chart below describes the interests
of Stephen Russell
2
and the other members of the Management Team in the Company both prior to and
following the Merger, and the benefits to be received by the Management Team
upon consummation of the Merger:
SHARES HELD OPTIONS HELD
PRIOR TO ROLLOVER PRIOR TO ROLLOVER NEW SIGNING
NAME MERGER SHARES MERGER OPTIONS OPTIONS BONUS
- ----------------------------------------- ----------- --------- ------------- ----------- --------- ----------
Stephen Russell.......................... 924,804 200,000 70,000 70,000 65,000 $ 500,000
Ronald S. Roman.......................... 1,000 0 45,000 10,000 42,000 $ 200,000
Robert Goldberg.......................... 0 0 20,000 4,000 20,000 $ 150,000
Michael Archual.......................... 4,200 0 17,500 1,000 12,000 $ 127,500
Nancy Morris............................. 1,000 0 14,000 5,000 20,000 $ 140,000
The interests of the Company's management in the Merger are described in the
accompanying Proxy Statement under the headings "Summary--Interests of Certain
Persons in the Merger" and "Special Factors--Interests of Certain Persons in the
Merger."
Two substantially similar litigations were filed by the same law firm in the
Delaware Court of Chancery challenging the proposed Merger. In sum, these
putative class actions allege (a) that the payment of $20.00 per share to public
stockholders upon consummation of the Merger would constitute an acquisition of
such shares by management of the Company for less than fair and adequate
consideration and (b) that the Company's directors breached their fiduciary
duties to the Company and its stockholders. These actions have recently been
consolidated into one action. The above-mentioned litigation is described in the
accompanying Proxy Statement under the heading "Litigation."
The affirmative vote of a majority of the issued and outstanding shares of
common stock of Celadon entitled to vote thereon is required to approve and
adopt the Merger Agreement. Stephen Russell and Hanseatic, as stockholders of
Celadon, have entered into a Voting Agreement, dated as of June 23, 1998, with
Merger Sub pursuant to which they appointed certain persons designated by Merger
Sub as proxy to vote each of their respective shares of common stock of Celadon
in favor of the Merger Agreement at the Special Meeting. As of June 23, 1998,
the shares of common stock of Celadon held by such stockholders represented
approximately 25% of the outstanding shares of common stock of Celadon.
The Board of Directors of the Company has unanimously approved the Merger
Agreement and has determined that the Merger is fair to, and in the best
interests of, the holders of Celadon's common stock (other than the holders of
the Rollover Shares) and recommends that stockholders vote FOR the approval and
adoption of the Merger Agreement. The rights of dissenting stockholders are
described in the accompanying Proxy Statement and a copy of Section 262 of the
Delaware General Corporation Law is included as Annex B with the Proxy
Statement.
The approval and determination of the Board was based on a number of
factors, described in the accompanying Proxy Statement, including the opinion of
Wasserstein Perella & Co. ("Wasserstein Perella"), the Company's financial
advisor, to the effect that, based upon and subject to various considerations
set forth in such opinion, as of the date of such opinion, the consideration to
be received by the holders of Celadon's common stock in connection with the
Merger was fair to such holders (other than the holders of the Rollover Shares)
from a financial point of view. The opinion of Wasserstein Perella is included
as Annex C to the Proxy Statement and should be read in its entirety.
Your vote is important. Regardless of whether you plan to attend the Special
Meeting, please sign and date the enclosed proxy and return it in the envelope
provided in order that your shares may be represented at the Special Meeting. If
you decide to attend the Special Meeting, you may revoke your proxy and vote
your shares in person.
Sincerely,
Stephen Russell
Chairman of the Board
3
PRELIMINARY COPY
CELADON GROUP, INC.
ONE CELADON DRIVE
INDIANAPOLIS, INDIANA 46235-4207
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
To the Stockholders of Celadon Group, Inc.:
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders of Celadon
Group, Inc. ("Celadon") will be held at a.m., local time, on , 1998,
at for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt the
Agreement and Plan of Merger, dated as of June 23, 1998 (the "Merger
Agreement"), by and between Celadon and Laredo Acquisition Corp. ("Merger
Sub"), a newly formed Delaware corporation controlled by Odyssey Investment
Partners Fund, LP ("Odyssey"), and the transactions contemplated thereby.
Upon the terms and subject to the conditions of the Merger Agreement at the
effective time of the transaction contemplated (the "Effective Time"), (a)
Merger Sub will be merged into Celadon, with Celadon continuing as the
surviving corporation (the "Surviving Corporation"); (b) the current
directors of Celadon will be replaced by the directors of Merger Sub (and a
majority of the directors of the Surviving Corporation will be designees of
Odyssey); (c) the shares of common stock of Merger Sub held by Odyssey will
be converted into shares of common stock of the Surviving Corporation,
representing approximately 90% of the outstanding shares of common stock of
the Surviving Corporation immediately following the Effective Time; (d)
Hanseatic Corporation ("Hanseatic"), an entity affiliated with a director of
Celadon, and Stephen Russell, President, Chief Executive Officer and
Chairman of Celadon will retain existing shares of common stock in Celadon
(the "Rollover Shares"), which now represent approximately 4.1% of the
outstanding shares of common stock of Celadon and will represent
approximately 10% of the outstanding shares of common stock of the Surviving
Corporation immediately after the Effective Time; (e) each share of common
stock of Celadon outstanding immediately prior to the Effective Time (except
for the Rollover Shares, treasury shares held by Celadon, and shares held by
dissenting stockholders who have properly exercised their rights pursuant to
Section 262 of the Delaware General Corporation Law), will be converted into
the right to receive $20.00 per share in cash (the "Cash Merger Price"); (f)
the warrants granted to Hanseatic (such warrants, the "Hanseatic Warrants")
will be canceled and Hanseatic shall thereafter have the right to receive
cash in an amount equal to the product of the number of shares of common
stock of Celadon previously subject to the Hanseatic Warrants and the excess
of the Cash Merger Price per share over the exercise price per share of the
Hanseatic Warrants, reduced by applicable withholding taxes or other taxes
required by law to be withheld; (g) except for certain Options (defined
below) to be retained by Stephen Russell, Ronald S. Roman, Robert Goldberg,
Michael Archual and Nancy Morris (collectively, the "Management Team" and
such Options, the "Rollover Options") which represent the right to purchase
approximately 1.2% of the outstanding common stock of Celadon and which will
represent the right to purchase approximately 2.8% of the common stock of
the Surviving Corporation outstanding immediately following the Effective
Time, each outstanding employee or director stock option (the "Options")
granted under the 1994 Celadon Stock Option Plan and the 1996 Non-Employee
Director Stock Option Plan (the "Stock Option Plans") will be canceled and
the former holder thereof shall thereafter have the right to receive cash in
an amount equal to the product of the number of shares of common stock of
Celadon previously subject to such Options and the excess of the Cash Merger
Price per share over the exercise price per share of such Option, less
applicable withholding taxes; and (h) Stephen Russell and the other members
of the Management Team will enter into new employment agreements which will
(i) have a term of four years with respect to Stephen Russell and three
years with respect to each other member of the Management Team and (ii)
provide for severance payments to the members of the Management Team under
certain circumstances. In addition, an annual bonus plan, and a stock option
plan with respect to an aggregate amount of 7.5% of the common stock of the
Surviving Corporation, will be instituted for approximately twenty of the
Company's executives, including members of the Management Team. Upon
consummation of the Merger and the other transactions contemplated by the
Merger Agreement, (i) options with respect to 1.8% of the common stock of
the Surviving Corporation will be granted to Stephen Russell pursuant to the
stock option plan described in the preceding sentence, and options with
respect to 4.0% of such common stock will be distributed among designated
executives, including the other members of the Management Team and (ii)
signing bonuses in an aggregate amount of approximately $1.1 million will be
distributed to the Management Team, including approximately $500,000 to be
distributed to Stephen Russell. The interests of the Company's management in
the Merger are described in the accompanying Proxy Statement under the
headings "Summary--Interests of Certain Persons in the Merger" and "Special
Factors--Interests of Certain Persons in the Merger".
(2) To consider and vote upon a proposal to adjourn or postpone the
Special Meeting in the event that the number of proxies obtained is not
sufficient to ensure the success of the proposal to adopt and approve the
Merger Agreement.
(3) To transact such other business as may properly come before the
meeting or any continuation, adjournment or postponement thereof.
Two substantially similar litigations were filed by the same law firm in the
Delaware Court of Chancery challenging the proposed Merger. In sum, these
putative class actions allege (a) that the payment of $20.00 per share to public
stockholders upon consummation of the Merger would constitute an acquisition of
such shares by management of the Company for less than fair and adequate
consideration and (b) that the Company's directors breached their fiduciary
duties to the Company and its stockholders. These actions have recently been
consolidated into a single action. The above-mentioned litigation is described
in the accompanying Proxy Statement under the heading "Litigation."
A copy of the Merger Agreement appears as Annex A to, and is described in,
the accompanying Proxy Statement. Rights of dissenting stockholders, are
described in the accompanying Proxy Statement and a copy of Section 262 of the
Delaware General Corporations Law appears as Annex B thereto.
All stockholders are cordially invited to attend the meeting, although only
those stockholders of record at the close of business on October 22, 1998, are
entitled to notice of and to vote at the meeting or any adjournment or
postponement thereof.
By Order of the Board of Directors
Paul Will, Secretary
Dated: October , 1998
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING IN PERSON, PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT
PROMPTLY IN THE ACCOMPANYING ENVELOPE. YOUR PROXY MAY BE REVOKED AT ANY TIME
BEFORE IT IS VOTED AT THE SPECIAL MEETING BY DELIVERING WRITTEN NOTICE OF
REVOCATION TO THE SECRETARY OF THE COMPANY, BY SUBMITTING TO THE SECRETARY OF
THE COMPANY A LATER DATED PROXY OR BY VOTING IN PERSON AT THE SPECIAL MEETING.
2
PRELIMINARY COPY
CELADON GROUP, INC.
ONE CELADON DRIVE
INDIANAPOLIS, INDIANA 46235-4207
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 1998
This proxy statement is being furnished to the stockholders of Celadon
Group, Inc., a Delaware corporation ("Celadon" or the "Company"), in connection
with the solicitation of proxies by the Board of Directors of the Company for
use at a Special Meeting of Stockholders to be held on , 1998, at
local time, at .
At the Special Meeting, you will be asked to consider and vote upon a
proposal to approve and adopt the Agreement and Plan of Merger, dated as of June
23, 1998 (the "Merger Agreement"), by and between Celadon and Laredo Acquisition
Corp. ("Merger Sub"). Merger Sub is a newly-formed Delaware corporation
controlled by Odyssey Investment Partners Fund, L.P. ("Odyssey"). Upon the terms
and subject to the conditions of the Merger Agreement, at the Effective Time (as
defined below) (a) Merger Sub will be merged into Celadon (the "Merger"), with
Celadon continuing as the surviving corporation (the "Surviving Corporation");
(b) the current directors of Celadon will be replaced by the directors of Merger
Sub and a majority of the directors of the Surviving Corporation will be
designees of Odyssey; (c) the shares of common stock of Merger Sub held by
Odyssey will be converted into shares of common stock, par value $0.033 per
share, of the Surviving Corporation (the "Surviving Corporation Common Stock"),
representing approximately 90% of the outstanding shares of the Surviving
Corporation Common Stock immediately following the Effective Time; (d) Hanseatic
Corporation ("Hanseatic"), an entity affiliated with a director of Celadon, and
Stephen Russell, President, Chief Executive Officer and Chairman of Celadon will
retain an aggregate of 320,000 outstanding shares (the "Rollover Shares") of
common stock, par value $0.033 per share, in Celadon (the "Celadon Common
Stock"), which now represent approximately 4.1% of the outstanding shares of
Celadon Common Stock and will represent approximately 10% of the outstanding
shares of the Surviving Corporation Common Stock immediately following the
Effective Time; (e) each share of Celadon Common Stock outstanding immediately
prior to the Effective Time (except for the Rollover Shares, treasury shares
held by Celadon (the "Excluded Shares") and shares ("Dissenting Shares"), held
by dissenting stockholders who have properly exercised their rights pursuant to
Section 262 of the Delaware General Corporation Law ("DGCL")) will be converted
into the right to receive $20.00 per share in cash (the "Cash Merger Price");
(f) the warrants granted to Hanseatic (such warrants, the "Hanseatic Warrants")
will be canceled and Hanseatic shall thereafter have the right to receive cash
in an amount equal to the product of the number of shares of Celadon Common
Stock previously subject to the Hanseatic Warrants and the excess of the Cash
Merger Price per share over the exercise price per share of the Hanseatic
Warrants, reduced by applicable withholding taxes or other taxes required by law
to be withheld ; and (g) except for certain Options (as defined below) to be
retained by Stephen Russell, Ronald S. Roman, Robert Goldberg, Michael Archual,
and Nancy Morris (collectively, the "Management Team, and such Options, the
"Rollover Options") which will represent the right to purchase approximately
2.8% of the Surviving Corporation Common Stock outstanding immediately following
the Effective Time, each outstanding employee or director stock option (the
"Options") granted under the 1994 Celadon Stock Option Plan and the 1996 Non-
Employee Director Stock Option Plan (the "Stock Option Plans") will be canceled
and the former holder thereof shall thereafter have the right to receive cash in
an amount equal to the product of the number of shares of Celadon Common Stock
previously subject to such option and the excess of the Cash Merger Price per
share over the exercise price per share of such Options, reduced by applicable
withholding taxes or other taxes required by law to be withheld. Stephen
Russell, and other members of the Management Team will
enter into new employment agreements which will (i) have a term of four years
with respect to Stephen Russell and three years with respect to each other
member of the Management Team and (ii) provide for severance payments to the
members of the Management Team under certain circumstances. In addition, an
annual bonus plan, and a stock option plan with respect to an aggregate amount
of 7.5% of the Surviving Corporation Common Stock, will be instituted for
approximately twenty of the Company's executives, including members of the
Management Team. Upon consummation of the Merger and the other transactions
contemplated by the Merger Agreement, (i) options with respect to 1.8% of the
Surviving Corporation Common Stock will be granted to Stephen Russell pursuant
to the stock option plan described in the preceding sentence, and options with
respect to 4.0% of the Surviving Corporation Common Stock will be distributed
among the designated executives, including the other members of the Management
Team and (ii) signing bonuses in an aggregate amount of approximately $1.1
million will be distributed to the Management Team, including approximately
$500,000 to be distributed to Stephen Russell. See "Summary--Interests of
Certain Persons in the Merger" and "Special Factors--Interests of Certain
Persons in the Merger."
Consummation of the Merger is subject to certain conditions, including the
obtaining of the Financing contemplated by the Financing Letters. It is
contemplated that the financing required to pay the Cash Merger Price, to pay
the value of the Options and the Hanseatic Warrants, to refinance certain
existing indebtedness and capital leases of the Company and its subsidiaries and
to pay the fees and expenses in connection with the Merger and such financing
will be provided by (a) the issuance by the Company of senior discount notes for
gross proceeds of $25 million (the "Company Senior Discount Notes") and the
issuance by Celadon Trucking Services, Inc. ("CTSI"), a wholly-owned subsidiary
of the Company, of $150 million of senior subordinated notes (the "CTSI Senior
Subordinated Notes" and together with the Company Senior Discount Notes, the
"Debt Securities"), (b) drawings of up to $7.5 million under a $25 million
revolving credit facility, and (c) equity financing provided by Odyssey in the
amount of approximately $57.6 million through the purchase of common stock of
Merger Sub. In the event that the offering of the Debt Securities is not
consummated prior to the Effective Time, bridge loans (the "Bridge Loans") in an
aggregate amount not to exceed $125 million will be incurred by the Company and
CTSI and will be used to finance the Merger. See "Financing the Merger" in the
accompanying Proxy Statement.
Merger Sub informed the Company in writing that it had received notice on
September 15, 1998 from Bankers Trust Corporation ("BT"), the institution that
is to provide bridge loans for the Merger, that BT would not be obligated to
provide such financing under the then existing market conditions. Pursuant to
the commitment letter issued to Merger Sub by BT with respect to the financing
of the Merger (the "BT Financing Letter"), BT would not be obligated to provide
the bridge loans if, in the reasonable judgement of BT, market conditions which
would materially and adversely affect the ability to sell or place the Debt
Securities exist at the time funding is requested. BT has noted that the
conditions to funding the Bridge Loans, including the absence of adverse market
conditions, need only be satisified on the date of request for funds. No such
request has yet been made by Merger Sub. The BT Financing Letter has not been
terminated or otherwise modified as of this date. The BT Financing Letter will
terminate in accordance with its terms on November 30, 1998 if no amounts have
yet been funded thereunder. Pursuant to the terms of the Merger Agreement,
Merger Sub would not be obligated to consummate the Merger if the financing
contemplated by the BT Financing Letter was not available. If the Merger is not
consummated on or prior to November 30, 1998, the Merger Agreement will
terminate in accordance with its terms. See "Special Factors--Recent
Developments; Material Uncertainty of Consummating the Merger," and "Certain
Provisions of the Merger Agreement--Termination; Effect of Termination."
As a result of the information available to the Company, including, without
limitation, the notice from BT and the Company's understanding of current market
conditions, the Company believes it is highly unlikely that the Merger will be
consummated at the Cash Merger Price. Notwithstanding the Company's belief as to
the likelihood that the Merger will be consummated, the Company is proceeding to
take all required action to close the Merger, including the mailing of this
Proxy Statement and obtaining
2
stockholder approval of the Merger at the Special Meeting. However, even if the
Company's stockholders adopt and approve the Merger Agreement, there can be no
assurance that the Merger will be consummated. See "Special Factors--Recent
Developments; Material Uncertainty of Consummating the Merger."
Two substantially similar litigations were filed by the same law firm in the
Delaware Court of Chancery challenging the proposed Merger. In sum, these
putative class actions allege (a) that the payment of $20.00 per share to public
stockholders upon consummation of the Merger would constitute an acquisition of
such shares by management of the Company for less than fair and adequate
consideration and (b) that the Company's directors breached their fiduciary
duties to the Company and its stockholders. These actions have recently been
consolidated into a single action. See "Litigation."
The Excluded Shares will be canceled and retired. The effective time of the
Merger will be the date and time of the filing of the Certificate of Merger with
the Delaware Secretary of State in accordance with the DGCL (the "Effective
Time"), which is scheduled to occur as soon as practicable after the
satisfaction of certain closing conditions. See "Special Factors--Interests of
Certain Persons in the Merger" and "Certain Provisions of the Merger
Agreement--Treatment of Securities in the Merger."
A copy of the Merger Agreement is included as Annex A hereto. The summaries
of the portions of the Merger Agreement set forth in this Proxy Statement do not
purport to be complete and are subject to, and are qualified in their entirety
by reference to, the text of the Merger Agreement.
A copy of Section 262 of the DGCL is included as Annex B hereto. The
summaries the rights of dissenting stockholders set forth in this Proxy
Statement do not purport to be complete and are qualified in their entirety by
reference to, the text of Section 262 of the DGCL.
The affirmative vote of the holders of a majority of the issued and
outstanding shares of Celadon Common Stock entitled to vote thereon is required
to adopt the Merger Agreement. Only holders of record of shares of Celadon
Common Stock at the close of business on October 22, 1998 (the "Record Date")
are entitled to notice of and to vote at the Special Meeting and any and all
adjournments and postponements thereof. Stephen Russell and Hanseatic, as
stockholders of Celadon, have entered into a Voting Agreement, dated as of June
23, 1998, with Merger Sub (the "Voting Agreement"), pursuant to which each such
stockholder appointed certain persons designated by Merger Sub as his or its
proxy, as applicable, to, among other things, vote all of the outstanding shares
of Celadon Common Stock owned by him or it, as applicable, or an aggregate of
approximately 25% of the outstanding shares of Celadon Common Stock held by such
stockholders in favor of the Merger. In addition, Stephen Russell and Hanseatic
own, respectively, 200,000 and 120,000 Rollover Shares, which represent
approximately 2.6% and 1.6% of the outstanding shares of Celadon Common Stock
and which will represent approximately 6.25% and 3.75% respectively, of the
outstanding shares of Surviving Corporation Common Stock immediately after the
Effective Time. Paul Biddleman, President of Hanseatic, acts as Hanseatic's
designee to the Company's Board. Stephen Russell and other members of the
Management Team own an aggregate of 90,000 Rollover Options, which will
represent the right to purchase an additional 2.8%, of the shares of Surviving
Corporation Common Stock outstanding immediately after the Effective Time. See
"Special Factors--Interests of Certain Persons in the Merger."
THE BOARD OF DIRECTORS OF THE COMPANY UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER. See "Special Factors--
Interests of Certain Persons in the Merger."
This Proxy Statement is first being mailed to the Company's stockholders on
or about October , 1998.
3
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF SUCH
TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED IN
THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THE DATE OF THIS PROXY STATEMENT IS October , 1998.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT OR IN THE DOCUMENTS
INCORPORATED HEREIN BY REFERENCE IN CONNECTION WITH THE SOLICITATION MADE HEREBY
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY CELADON, MERGER SUB OR ODYSSEY. THE DELIVERY
OF THIS PROXY STATEMENT SHALL NOT, UNDER ANY CIRCUMSTANCES, CREATE ANY
IMPLICATION THAT THE INFORMATION CONTAINED HEREIN OR IN ANY DOCUMENT
INCORPORATED HEREIN BY REFERENCE IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF OR THE DATE OF SUCH DOCUMENT, AS THE CASE MAY BE, OR THAT THERE HAS
BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF CELADON
SINCE THE DATE HEREOF OR THE DATE OF SUCH DOCUMENT, AS THE CASE MAY BE. THIS
PROXY STATEMENT DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY FROM ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH PROXY SOLICITATION.
4
SUMMARY
The following is a brief summary of certain information contained elsewhere
in this Proxy Statement. This summary is not intended to be a complete
description of the matters covered in this Proxy Statement and is subject to and
qualified in its entirety by reference to the more detailed information
contained elsewhere or incorporated by reference in this Proxy Statement,
including the Annexes hereto. Stockholders are urged to read and consider
carefully this entire Proxy Statement, including the Annexes.
THE PARTIES TO THE MERGER
CELADON. Celadon, a Delaware corporation, has its principal executive
offices located at One Celadon Drive, Indianapolis, Indiana 46235-4207
(Telephone: (317) 972-7000). Formed in July 1986 through the combination of two
companies, Celadon Trucking Services, Inc. ("CTSI") and Celadon Logistics, Inc.,
Celadon is a leading trucking company that specializes in providing and
arranging van transport services from the United States and Canada to and from
locations in Mexico. For additional information regarding Celadon and its
business, see "Selected Historical Consolidated Financial Information" and
"Incorporation of Certain Documents by Reference."
MERGER SUB AND ODYSSEY. Merger Sub was recently incorporated under the laws
of the State of Delaware for the purpose of consummating the Merger. Merger Sub
has not conducted any business other than the transactions described herein and
has no assets. Merger Sub was formed by and is controlled by Odyssey. Odyssey is
a Delaware limited partnership principally engaged in the business of investing
in companies. The address of the principal executive offices of each of Merger
Sub and Odyssey is located at c/o Odyssey Investment Partners, LLC, 280 Park
Avenue, 38th Floor, New York, New York 10017. See "Merger Sub and Odyssey."
THE SPECIAL MEETING
The Special Meeting will be held at a.m., local time, on 1998 at
. At the Special Meeting, stockholders of Celadon (a) will be asked
to consider and vote upon a proposal to approve and adopt the Merger Agreement
and the transactions contemplated thereby, (b) will be asked to consider and
vote upon a proposal to adjourn or postpone the Special Meeting in the event
that the number of proxies received are insufficient to ensure the success of
the proposal to approve and adopt the Merger Agreement, and (c) will transact
such other business as may properly come before the Special Meeting. The Board
of Directors has fixed the Record Date as the date for the determination of
stockholders entitled to notice of and to vote at the Special Meeting and any
and all adjournments and postponements thereof. As of the Record Date, there
were 7,726,989 shares of Celadon Common Stock issued and outstanding and
entitled to vote at the Special Meeting.
Adoption of the Merger Agreement requires the affirmative vote of the
holders of a majority of the issued and outstanding shares of Celadon Common
Stock entitled to vote at the Special Meeting. As of the Record Date, the
directors and executive officers of Celadon were the beneficial owners of
1,316,093 shares of Celadon Common Stock (including shares of Celadon Common
Stock issuable upon the exercise of Options and the Hanseatic Warrants prior to
the Effective Time). The directors and executive officers of Celadon have
indicated that they intend to vote such shares in favor of the approval and
adoption of the Merger Agreement. In addition, Stephen Russell and Hanseatic
have entered into the Voting Agreement pursuant to which they agreed with Merger
Sub to vote all of the shares of Celadon Common Stock owned by him or it, as
applicable, in favor of the Merger Agreement. Stephen Russell and Hanseatic
beneficially own 1,989,860 shares of Celadon Common Stock (including shares of
Celadon Common Stock issuable upon the exercise of Options and the Hanseatic
Warrants prior to the Effective Time) of which 1,907,739 shares, constituting
approximately 25% of the outstanding Celadon Common Stock, are outstanding as of
the Record Date. As of the Record Date, the total number of outstanding shares
of Celadon Common Stock that either are held by the directors and officers of
Celadon or are
5
subject to the Voting Agreement is 2,069,345, or approximately 27% of the
outstanding shares of Celadon Common Stock. See "Special Factors--Interests of
Certain Persons in the Merger--Voting Agreement."
REASONS FOR THE MERGER
The Board of Directors of Celadon, in attempting to maximize stockholder
value, has unanimously approved the Merger Agreement and has determined that the
Merger Agreement is fair to and in the best interests of Celadon's stockholders
(other than the holders of the Rollover Shares and Excluded Shares). This
determination was based on, among other things, the following factors: a
comparison of the risks and benefits of the Merger against the risks and
benefits of continuing as an independent entity; the Cash Merger Price of $20.00
per share of the Celadon Common Stock, which represents a premium over recent
historical price levels; the written opinion of Wasserstein Perella with respect
to the fairness from a financial point of view of the consideration to be
received by Celadon's stockholders (other than the holders of Rollover Shares
and Excluded Shares) in the Merger; and the terms and conditions of the Merger
Agreement. In light of the fact that no Acquisition Proposal (as such term is
defined in the Merger Agreement) has been or is, in the opinion of the Board of
Directors of the Company, likely to be received by the Company, in the event
that the Merger is not approved by the stockholders the Company will continue to
operate as an independent entity and to explore other means of pursuing its
growth strategy. See "Special Factors--Reasons for the Merger; Recommendation of
the Board of Directors."
TERMS OF THE MERGER
GENERAL. At the Effective Time, Merger Sub will be merged with and into the
Company, with the Company continuing as the Surviving Corporation. Also at the
Effective Time, the current directors of the Company will be replaced by the
directors of Merger Sub, and a majority of the directors of the Surviving
Corporation will be designees of Odyssey. Stephen Russell (the President, Chief
Executive Officer, and Chairman of the Board of Celadon) will, upon consummation
of the Merger, become a director of the Surviving Corporation. All members of
the Company's current management will continue as such immediately after the
Effective Time. See "Certain Provisions of the Merger Agreement--Board of
Directors and Officers of the Surviving Corporation" and "Directors and
Executive Officers of the Surviving Corporation."
CASH MERGER PRICE. At the Effective Time, each share of Celadon Common
Stock held by the Company's stockholders (other than the Rollover Shares,
Excluded Shares, and Dissenting Shares) will be converted into the right to
receive the Cash Merger Price. No interest will be paid or accrued on the Cash
Merger Price.
PAYMENT OF CASH MERGER PRICE. The Cash Merger Price will be paid as soon as
practicable after the Effective Time upon receipt by a paying agent selected by
Merger Sub (the "Paying Agent") of certificates which, immediately prior to the
Effective Time, represented the shares of Celadon Common Stock held by such
stockholders. As of or at the Effective Time, Merger Sub will deposit with the
Paying Agent for the benefit of the holders of shares of Celadon Common Stock,
the funds necessary to pay the Cash Merger Price for each share payable pursuant
to the terms of the Merger Agreement. As soon as practicable after the Effective
Time, the Paying Agent will mail to each record holder of Celadon Common Stock a
notice and letter of transmittal advising the holder of the effectiveness of the
Merger and the procedure for surrendering certificates to the Paying Agent for
exchange into the Cash Merger Price. Stockholders should not forward stock
certificates to the Paying Agent until they have received transmittal forms.
Certificates should not be returned with the enclosed proxy cards.
ROLLOVER SHARES. At the Effective Time, the Rollover Shares will be
converted on a share-for-share basis into shares of Surviving Corporation Common
Stock. The Rollover Shares will represent approximately 10% of the total
outstanding shares of Surviving Corporation Common Stock. Stephen Russell
(Chairman, Chief Executive Officer and President of Celadon ) and Hanseatic own,
respectively, 200,000
6
and 120,000 Rollover Shares, which represent approximately 2.6% and 1.6%,
respectively, of the outstanding shares of Celadon Common Stock and which will
represent approximately 6.25% and 3.75%, respectively, of the total outstanding
shares of Surviving Corporation Common Stock immediately after the Effective
Time. See "Special Factors--Interests of Certain Persons in the
Merger--Retention of Rollover Shares" and "Certain Provisions of the Merger
Agreement--Treatment of Securities in the Merger."
EXCLUDED SHARES. At the Effective Time, the Excluded Shares will be
canceled and retired without payment of any consideration therefor.
ISSUANCE OF SURVIVING CORPORATION COMMON STOCK TO ODYSSEY. At the Effective
Time, the issued and outstanding shares of Merger Sub will be converted into
2,880,000 shares of Surviving Corporation Common Stock, representing
approximately 90% of the total outstanding shares of Surviving Corporation
Common Stock immediately following the Effective Time.
PAYMENT FOR OPTIONS AND HANSEATIC WARRANTS. Except for the Rollover
Options, the Company will cause each Option under the Stock Option Plans,
whether or not then exercisable or vested, to be canceled. In consideration of
such cancellation, the Company will pay to such holders of Options an amount in
cash in respect thereof equal to the product of the excess of the Cash Merger
Price over the exercise price of each such Option and the number of shares of
Celadon Common Stock previously subject to the Option immediately prior to its
cancellation (such payment to be net of withholding taxes). The Company will
cause the Hanseatic Warrants to be canceled. In consideration of such
cancellation, the Company will pay to Hanseatic an amount in cash in respect
thereof equal to the product of the excess of the Cash Merger Price over the
exercise price of the Hanseatic Warrants and the number of shares of Celadon
Common Stock previously subject to the Hanseatic Warrants immediately prior to
cancellation (such payment to be net of withholding taxes).
EFFECTIVE TIME
The Effective Time of the Merger will be the date and time of the filing of
the Certificate of Merger with the Delaware Secretary of State in accordance
with the DGCL, which is scheduled to occur as soon as practicable after the
satisfaction of certain closing conditions. Either Merger Sub or the Company may
terminate the Merger Agreement should the Merger not be consummated by November
30, 1998. See "Certain Provisions of the Merger Agreement--Conditions to the
Consummation of the Merger" and "--Termination; Effects of Termination."
FINANCING ARRANGEMENTS
Consummation of the Merger will require approximately $233.8 million to pay
the Cash Merger Price, to pay the value of the Options and the Hanseatic
Warrants, to refinance certain existing indebtedness and capital leases of the
Company and its subsidiaries (the "Refinancing") and to pay the fees and
expenses in connection with the Merger and such financing. It is contemplated
that the financing required in connection with the consummation of the Merger
will be provided by (a) the issuance by the Company of senior discount notes for
gross proceeds of $25 million (the "Company Senior Discount Notes") and the
issuance by Celadon Trucking Services, Inc. ("CTSI"), a wholly-owned subsidiary
of the Company, of $150 million of senior subordinated notes (the "CTSI Senior
Subordinated Notes" and together with the Company Senior Notes, the "Debt
Securities"), (b) drawings of up to $7.5 million under a $25 million revolving
credit facility (the "Revolver"), and (c) equity financing provided by Odyssey
in the amount of approximately $57.6 million through the purchase of common
stock of Merger Sub. In the event that the offering of the Debt Securities is
not consummated prior to the Effective Time, bridge loans (the "Bridge Loans")
in an aggregate amount not to exceed $125 million will be incurred by the
Company and CTSI and will be used to finance the Merger. Merger Sub has obtained
financing letters (each a "Financing Letter") from BT with respect to the Bridge
Loans and from General Electric Capital Corporation ("GE") with respect to the
Revolver and a $150 million senior secured capital expenditure and acquisition
line (the
7
"CAPEX Line") to be provided by GE upon consummation of the Merger. In addition,
Merger Sub has engaged BT Alex. Brown Incorporated (the "Take-Out Bank") to
privately place the Debt Securities. If the Bridge Loans are incurred, the
proceeds of the Debt Securities will be used to prepay the Bridge Loans, in
whole or in part. For a summary of certain terms of the CTSI Senior Subordinated
Notes, Company Senior Discount Notes, the Bridge Loans, the Revolver and the
CAPEX Line, and a discussion of the sources of funds for the financing of the
Merger, see "Financing of the Merger."
Merger Sub has informed the Company in writing that it received notice on
September 15, 1998 from BT that BT would not be obligated to provide the Bridge
Loans under the then existing market conditions. The BT Financing Letter will
terminate in accordance with its terms on November 30, 1998 if no amounts have
yet been funded thereunder. Pursuant to the terms of the Merger Agreement,
Merger Sub would not be obligated to consummate the Merger if the financing
contemplated by the BT Financing Letter was not available. See "Special
Factors--Recent Developments; Material Uncertainty of Consummating the Merger"
and "Certain Provisions of the Merger Agreement--Termination; Effect of
Termination."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Company's Board of Directors that
stockholders vote in favor of the Merger Agreement, stockholders should be aware
that certain members of Celadon's management and Board of Directors have
interests in the Merger that are in addition to, and may be deemed to be in
conflict with, the interests of the stockholders of Celadon generally. These
interests include (a) (i) benefits under certain employment agreements to be
executed by the Company, on the one hand, and by each of Stephen Russell and the
four other members of the Management Team on the other hand, (ii) an annual
bonus plan for Company executives (including the Management Team) to be adopted
after the Effective Time, (iii) a new stock option plan for Company executives
(including the Management Team) with respect to 7.5% of the Surviving
Corporation Common Stock, to be adopted after the Effective Time, and (iv) the
payment of signing bonuses in an aggregate amount of $1.1 million to the
Management Team; (b) the retention by Stephen Russell and Hanseatic of the
Rollover Shares; (c) the cash settlement of Options and the Hanseatic Warrants
pursuant to the terms of the Merger Agreement; (d) indemnification of officers
and directors; and (e) the retention by the Management Team of the Rollover
Options. Hanseatic, an entity affiliated with a director of Celadon, and Stephen
Russell, President, Chief Executive Officer, and Chairman of the Company's
Board, own 120,000 and 200,000 Rollover Shares, respectively, which represent
approximately 1.6% and 2.6%, respectively, of the outstanding shares of Celadon
Common Stock and which will represent approximately 3.75% and 6.25%,
respectively, of the outstanding shares of Surviving Corporation Common Stock
immediately following the Effective Time. Paul Biddleman, President of
Hanseatic, acts as Hanseatic's designee to the Company's Board. Stephen Russell
and other members of the Management Team own an aggregate of 90,000 Rollover
Options which will represent the right to purchase an additional 2.8% of the
shares of Surviving Corporation Common Stock outstanding immediately following
the Effective Time. See "Special Factors-- Interests of Certain Persons in the
Merger."
RECOMMENDATION OF THE BOARD
The Board of Directors of the Company unanimously approved the Merger
Agreement and the transactions contemplated thereby, including the Merger. The
Board has determined that the Merger Agreement is fair to, and in the best
interests of, the stockholders of the Company (other than holders of the
Rollover Shares) and recommends that the stockholders vote FOR the approval and
adoption of the Merger Agreement and FOR the adjournment or postponement of the
Special Meeting in the event that the number of proxies obtained is not
sufficient to ensure the success of the proposal to adopt the Merger Agreement.
For a discussion of the factors considered by the Board in reaching its
recommendation and determination, see "Special Factors--Reasons for the Merger;
Recommendation of the Board of Directors."
8
Merger Sub informed the Company in writing that Merger Sub had received
notice on September 15, 1998 from BT that BT would not be obligated to provide
the Bridge Loans under the then existing market conditions. Pursuant to the BT
Financing Letter, BT would not be obligated to provide the Bridge Loans if, in
the reasonable judgment of BT, market conditions which would materially and
adversely affect the ability to sell or place the Debt Securities exist at the
time funding is requested. As a result of the information available to the
Company, including, without limitation, the notice from BT and the Company's
understanding of current market conditions, the Company believes it is highly
unlikely that the Merger will be consummated at the Cash Merger Price.
Notwithstanding the Company's belief as to the likelihood that the Merger will
be consummated, the Company is proceeding to take the actions required to close
the Merger, including the mailing of this Proxy Statement and obtaining
stockholder approval of the Merger at the Special Meeting. The Board of
Directors continues to believe that the consummation of the Merger on the terms
set forth in the Merger Agreement is in the best interests of the Company's
stockholders. However, even if the Company's stockholders adopt and approve the
Merger Agreement, there can be no assurance that the Merger will be consummated.
See "Special Factors--Recent Developments; Material Uncertainty of Consummating
the Merger."
Two substantially similar litigations were filed by the same law firm in the
Delaware Court of Chancery challenging the proposed Merger. In sum, these
putative class actions allege (a) that the payment of $20.00 per share to public
stockholders upon consummation of the Merger would constitute an acquisition of
such shares by management of the Company for less than fair and adequate
consideration and (b) that the Company's directors breached their fiduciary
duties to the Company and its stockholders. These actions have recently been
consolidated into one action. See "Litigation."
OPINION OF FINANCIAL ADVISOR
Wasserstein Perella has delivered to the Board of Directors of the Company
its written opinion to the effect that, based upon and subject to various
considerations set forth in such opinion, as of the date of such opinion, the
consideration to be received by the holders of Celadon Common Stock (other than
holders of the Rollover Shares) in connection with the Merger was fair to
stockholders from a financial point of view. The full text of Wasserstein
Perella's opinion, including the procedures followed, the matters considered and
the assumptions made by Wasserstein Perella, is included as Annex C to this
Proxy Statement and should be read in its entirety. See "Special
Factors--Opinion of Wasserstein Perella, Financial Advisor to Celadon."
CONDITIONS TO CONSUMMATION OF THE MERGER
Consummation of the Merger is subject to various conditions, including among
other matters: (a) approval of the Merger Agreement and the transactions
contemplated thereby by the holders of a majority of the issued and outstanding
shares of Celadon Common Stock entitled to vote thereon; (b) receipt of all
governmental and other consents and approvals necessary to permit consummation
of the Merger, including expiration or termination of the statutory waiting
period under the Hart-Scott-Rodino Antitrust Improvements Acts of 1976, as
amended (the "HSR Act"); (c) receipt of the funding contemplated by the
Financing Letters; (d) Merger Sub's reasonable satisfaction that the Merger will
be accounted for as a recapitalization; and (e) satisfaction of certain
customary conditions. See "Special Factors--Recent Developments; Material
Uncertainty of Consummating the Merger" and "Certain Provisions of the Merger
Agreement--Conditions to the Consummation of the Merger."
CERTAIN RELATED AGREEMENTS
For a summary of certain terms of agreements entered into in connection with
the Merger, see "Special Factors--Certain Related Agreements."
9
CERTAIN EFFECTS OF THE MERGER
If the Merger is consummated, the Company's stockholders (other than the
holders of the Rollover Shares, the Excluded Shares, and the Dissenting Shares)
will have the right to receive $20.00 in cash, without interest, for each share
of Celadon Common Stock held immediately prior to the Effective Time. As a
result of the Merger, such stockholders will cease to have any ownership
interest in Celadon and will cease to participate in future earnings and growth,
if any, of Celadon. Moreover, if the Merger is consummated, public trading of
the Celadon Common Stock will cease, the Celadon Common Stock will cease to be
quoted on the Nasdaq National Market, the registration of the Celadon Common
Stock under the Securities Exchange Act of 1934, as amended (the "Exchange Act")
will be terminated; and the Company will cease filing reports with the
Securities and Exchange Commission (the "Commission").
Immediately following the Merger, approximately 90% of the outstanding
shares of Surviving Corporation Common Stock will be owned by Odyssey and the
remaining 10% will be owned by certain stockholders (including Stephen Russell)
of the Company. See "Special Factors--Interests of Certain Persons in the
Merger" and "Certain Provisions of the Merger Agreement--Treatment of Securities
in the Merger."
The Merger Agreement provides that the current directors of the Company will
be replaced by the directors of the Merger Sub. All members of the Company's
current management will continue as such immediately after the Effective Time.
See "Directors and Executive Officers of the Surviving Corporation."
Upon consummation of the Merger, the Surviving Corporation expects to
refinance certain existing indebtedness and capital leases of Celadon. See
"Financing of the Merger."
It is currently anticipated that the Surviving Corporation will be operated
after the Merger in a manner substantially the same as Celadon's current
operations.
ACCOUNTING TREATMENT OF TRANSACTION
The Merger will be accounted for as a recapitalization. Accordingly, the
historical basis of Celadon's assets and liabilities will not be impacted by the
Merger and the transactions contemplated thereby.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The receipt of cash for Celadon Common Stock in the Merger will be a taxable
transaction for federal income tax purposes. See "Special Factors--Certain
Federal Income Tax Consequences of the Merger."
NO SOLICITATION; FIDUCIARY DUTIES
Under the Merger Agreement, Celadon has agreed as of June 23, 1998 to cease
any existing activities, discussions or negotiations with any parties (other
than Odyssey and Merger Sub) with respect to (a) any acquisition or purchase of
20% or more of the assets or of over 20% of any class of equity securities of
the Company and its subsidiaries, (b) any tender offer (including a self tender
offer) or exchange offer that if consummated would result in any person
beneficially owning 20% or more of any class of equity securities of the Company
or any of its subsidiaries, (c) any merger, consolidation, recapitalization,
sale of all or substantially all of its assets, liquidation, dissolution or
similar transaction involving the Company or any of its subsidiaries whose
assets, individually or in the aggregate, constitute more than 20% of the assets
other than the transactions contemplated by the Merger Agreement, or (d) any
other transaction the consummation of which could reasonably be expected to
impede, interfere with, prevent or materially delay the Merger or which could
reasonably be expected to materially dilute the benefits to Merger Sub of the
transactions contemplated hereby (each such transaction being referred to herein
as an "Acquisition Proposal"). Pursuant to the Merger Agreement, Celadon has
agreed that neither it nor its subsidiaries will initiate, solicit or encourage,
directly or indirectly, or take any other action to facilitate, any inquiries or
the
10
making or implementation of any proposal or offer that constitutes an
Acquisition Proposal, or negotiate or discuss with, or provide any confidential
information or data to, any person relating to an Acquisition Proposal, or
authorize or permit any of its officers, directors, employees, agents, or
representatives to take any such action. Celadon is obligated to notify Merger
Sub if any such inquiries or proposals are received by, or any such information
is requested from, the Company, or any such negotiations or discussions are
sought to be initiated or continued with the Company. Nothing contained in the
Merger Agreement prohibits the Board of Directors of the Company from furnishing
information to, or entering into discussions or negotiations with, any person or
entity that makes a bona fide Acquisition Proposal if, and only to the extent
that, (a) the furnishing of such information is pursuant to an appropriate
confidentiality agreement, (b) the Board of Directors of the Company determines
in good faith in reliance upon written advice of outside counsel that such
action is required for the Board to comply with its fiduciary duties to
stockholders imposed by law, (c) the Board determines in good faith after
consultation with its financial advisor that such Acquisition Proposal, if
accepted, is reasonably likely to be consummated, taking into account all legal,
financial, and regulatory aspects of the proposal and the person making the
proposal, and would, if consummated, result in a more favorable transaction than
the transaction contemplated by the Merger Agreement, and (d) the Company is
otherwise in compliance with its obligations regarding Acquisition Proposals as
provided in the Merger Agreement. See "Certain Provisions of the Merger
Agreement--No Solicitation; Fiduciary Out."
If the Merger Agreement is terminated under certain circumstances generally
related to the presence of an Acquisition Proposal, the Company will be
obligated to pay a fee to the Merger Sub and to reimburse Merger Sub for its
out-of-pocket expenses in an aggregate amount of up to $8.0 million. See
"Certain Provisions of the Merger Agreement--Termination; Effects of
Termination."
REGULATORY APPROVALS
The consummation of the Merger is subject to the expiration or termination
of the statutory waiting period under the HSR Act. The Company and the Merger
Sub will be filing notification and report forms under the HSR Act with the
Federal Trade Commission ("FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division"). See "Special Factors--Regulatory Approvals."
TERMINATION; FEES AND EXPENSES
The Merger Agreement may be terminated at any time prior to the Effective
Time upon the occurrence of certain events or if the Merger is not consummated
by November 30, 1998. Under certain circumstances generally related to the
presence of an Acquisition Proposal, or withdrawal by the Board of Directors or
modification in a manner adverse to Merger Sub of its approval or recommendation
of the Merger Agreement or the Merger, termination of the Merger Agreement will
result in a fee and reimbursement by the Company of Merger Sub's out-of-pocket
expenses in an aggregate amount of up to $8.0 million. See "Certain Provisions
of the Merger Agreement--Termination; Effects of Termination."
APPRAISAL RIGHTS
Stockholders who meet the requirements of and follow the procedures set
forth in Section 262 of the DGCL may receive, in lieu of the $20.00 cash per
share of Celadon Common Stock to be paid in the Merger, a cash payment equal to
the "fair value" of their shares, exclusive of any element of value arising from
the accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by the Delaware Court of Chancery. Such fair
value is to be determined by judicial appraisal and could be more than, the same
as, or less than, the Cash Merger Price.
To be entitled to receive payment of the fair value of the shares of Celadon
Common Stock, a stockholder (a) must file a written demand for appraisal of his
or her shares with the Company prior to the voting by stockholders on the Merger
Agreement at the Special Meeting (such demand must reasonably
11
inform the Company of the identity of the stockholder and that the stockholder
intends thereby to demand an appraisal of his or her shares); (b) must not vote
his or her shares in favor of approval and adoption of the Merger Agreement; (c)
must hold shares of Celadon Common Stock on the date of the making of a demand
for appraisal and continuously hold such shares through the Effective Time; and
(d) must have his or her shares valued in an appraisal proceeding, as described
below. See "Special Factors--Appraisal Rights." A proxy or vote against approval
and adoption of the Merger Agreement will not satisfy the requirement that a
stockholder file a written demand for appraisal as set forth above.
MARKET PRICES; DIVIDENDS
Celadon Common Stock is quoted on the Nasdaq National Market under the
symbol "CLDN."
The following table sets forth the high and low sale prices per share of
Celadon Common Stock on the Nasdaq National Market with respect to each
quarterly period since the First Quarter of fiscal year 1997.
HIGH LOW
--------- ---------
FISCAL 1997
First Quarter (July 1-September 30)............................................................ $ 9.50 $ 5.75
Second Quarter (October 1-December 31)......................................................... $ 11.25 $ 8.47
Third Quarter (January 1-March 31)............................................................. $ 12.75 $ 10.00
Fourth Quarter (April 1-June 30)............................................................... $ 11.75 $ 10.25
FISCAL 1998
First Quarter (July 1-September 30)............................................................ $ 15.75 $ 11.13
Second Quarter (October 1-December 31)......................................................... $ 17.00 $ 12.88
Third Quarter (January 1-March 31)............................................................. $ 16.00 $ 13.00
Fourth Quarter (April 1-June 22)............................................................... $ 15.38 $ 12.75
Fourth Quarter (June 23-June 30)............................................................... $ 19.25 $ 14.00
FISCAL 1999
First Quarter (July 1-September 30)............................................................ $ 19.38 $ 9.38
Second Quarter (October 1-October ).......................................................... $ $
On June 22, 1998, the last trading day prior to the public announcement that
Celadon and Merger Sub had executed the Merger Agreement, the high and low sale
prices per share of Celadon Common Stock as reported on the Nasdaq National
Market were $15 and $14.25, respectively. On September 17, the last trading day
prior to the public announcement that BT, the institution that is to provide the
Bridge Loans, had concluded that under the market conditions existing as of
September 15, 1998, it would not be obligated to provide such financing, the
high and low sale prices per share of Celadon Common Stock as reported on the
Nasdaq National Market were $16 and $14, respectively. On September 19, the day
following the public announcement with respect to the uncertainty as to whether
BT will be obligated to provide the Bridge Loans, the high and low sale prices
per share of Celadon Common Stock as reported on the Nasdaq National Market were
$10.50 and $9.38, respectively. On October , 1998, the last trading day prior
to the distribution of this Proxy Statement, the high and low sale prices of the
Celadon Common Stock as reported on the Nasdaq National Market were and
, respectively. Stockholders are urged to obtain a current quotation with
respect to the Celadon Common Stock.
The Company has not paid cash dividends on the Celadon Common Stock as a
public company and has no present intention of paying cash dividends on the
Celadon Common Stock in the foreseeable future. In addition, the payment of
dividends by the Company is subject to certain restrictions under the Company's
existing credit agreements, which will be refinanced in connection with the
Merger. Under the Merger Agreement, the Company has agreed not to pay any
dividends on the Celadon Common Stock prior to the Effective Time. Pursuant to
the terms of the agreements contemplated by the Financing Letters, the Surviving
Corporation's ability to pay certain dividends will be restricted. See "Market
Prices and Dividends."
12
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The selected consolidated financial information set forth below is qualified
in its entirety by reference to, and should be read in conjunction with, the
consolidated financial statements and notes thereto included in the documents
incorporated by reference herein. The consolidated financial information set
forth below for and as of each of the years in the five-year period ended June
30, 1998 has been derived from audited consolidated financial statements of the
Company. See "Incorporation of Certain Documents by Reference."
YEAR ENDED
JUNE 30,
---------------------------------------------------------
1994 1995 1996 1997 1998
--------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
INCOME STATEMENT
Operating revenue............................................ $ 94,746 $ 116,360 $ 166,544 $ 191,035 $ 229,928
Operating income........................................... 8,330 9,179 1,737 12,435 15,804
Interest expense, net........................................ 4,342 3,171 3,672 4,944 5,905
Equity loss in unconsolidated affiliate...................... -- -- -- -- --
Gain on sale of investment in unconsolidated affiliate....... (189) -- -- -- --
Other (income) expense....................................... (6) 103 72 (37) (12)
Income (loss) from continuing operations before income
taxes...................................................... 4,183 5,905 (2,007) 7,528 9,911
Provision for income taxes (benefit)......................... 1,711 3,690 (411) 3,024 3,902
Income (loss) continuing operations........................ 2,472 2,215 (1,596) 4,504 6,009
Income (loss) discontinued operations...................... 731 (2,606) (15,203) -- --
Net income (loss)............................................ 3,203 (391) (16,799) 4,504 6,009
Preferred stock dividends and redemption premium (1)......... 262 -- -- -- --
Net income (loss) attributable to common stockholders...... $ 2,941 $ (391) $ (16,799) $ 4,504 $ 6,009
Earnings (loss per common share):
Continuing Operations........................................ $ .46 $ .31 $ (.20) $ .59 $ .78
Discontinued Operations...................................... .15 (.36) (1.93) -- --
Net income (loss) (2)........................................ $ .61 $ (.05) $ (2.13) $ .59 $ .78
Dividends per common share................................... $ -- $ -- $ -- $ -- $ --
Weighted average number of common shares and common share
equivalents outstanding.................................... 4,853 7,192 7,877 7,660 7,752
---------------------------------------------------------
YEAR ENDED JUNE 30,
---------------------------------------------------------
1994 1995 1996 1997 1998
--------- ---------- ---------- ---------- ----------
(IN THOUSANDS)
BALANCE SHEET
Working Capital (deficit)................................. $ 17,491 $ 23,801 $ 17,039 $ 16,435 $ 18,027
Total assets............................................ 99,265 151,624 141,921 142,902 $ 194,777
Long-term debt.......................................... 29,234 39,557 50,025 54,361 $ 82,843
Redeemable Preferred Stock................................ -- -- -- -- --
Redeemable Common Stock................................... -- 3,614 -- -- --
Stockholders' Equity...................................... 42,079(3) 57,839(4) 41,962 45,794 52,322
- ------------------------
(1) Represents (i) dividends and redemption premium on the Series I Preferred
Stock which was redeemed in fiscal 1994, (ii) dividends on the Series F 12%
Convertible Preferred Stock which was converted into Celadon Common Stock in
fiscal 1993, and (iii) dividends on previously redeemed issuances of
preferred stock.
13
(2) Calculation of diluted net income (loss) per common share for all periods
are anti-dilutive. All share and per shares amounts have been adjusted to
reflect the one-for-3.3 reverse stock split in January 1994.
(3) Includes the effect of the net proceeds ($29.9 million) from the Company's
initial public offering and the conversion of the senior subordinated debt
($7.6 million) to Celadon Common Stock.
(4) Includes the effect of the net proceeds ($15.9 million) from the issuance of
Celadon Common Stock in a public offering.
14
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS; EXCEPT PER SHARE DATA)
The accompanying unaudited pro forma condensed consolidated income statement
for the year ended June 30, 1998 has been prepared to give effect to the
completion of the acquisition of the net assets of General Electric
Transportation Services ("GETS") and the acquisition of Gerth Transport of
Ontario, Canada ("Gerth"), in each case as if it had occurred on July 1, 1997.
The acquisitions of GETS and of Gerth were completed on September 3, 1997 and
May 22, 1998, respectively, and were accounted for under the purchase method of
accounting.
All adjustments necessary to fairly present this pro forma condensed
consolidated financial information have been made based on available information
and assumptions which, in the opinion of management, are reasonable. All such
pro forma adjustments and the assumptions on which they are based are described
in the accompanying notes to the pro forma condensed consolidated financial
statements. The unaudited pro forma condensed consolidated financial information
is based upon and should be read in conjunction with, the historical
consolidated financial statements of the Company and the notes thereto included
elsewhere in this Proxy Statement. The pro forma condensed consolidated
financial statements do not purport to represent what the Company's results of
operations or financial condition would actually have been had the acquisitions
of GETS and Gerth, and the other adjustments described below in fact occurred as
of such dates or to project the Company's results of operations or financial
condition for any future period or as of any date. In addition, there can be no
assurance that the assumptions used in the preparation of the pro forma
condensed consolidated financial statements will prove to be correct.
15
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED JUNE 30, 1998
(1) (2)
RECENT PRO FORMA
HISTORICAL ACQUISITIONS ADJUSTMENTS PRO FORMA
---------- ----------- ----------- -----------
Operating revenue................................................ $ 229,928 $ 33,794 $ 263,722
Operating expenses............................................... 214,124 31,978 (2,835)A 243,267
---------- ----------- ----------- -----------
Operating income................................................. 15,804 1,816 2,835 20,455
Other (income) expense:
Interest expense (Net)......................................... 5,905 647 1,219B 7,771
Other.......................................................... (12) (12)
---------- ----------- ----------- -----------
Income before taxes.............................................. 9,911 1,169 1,616 12,696
Provision for income taxes....................................... 3,902 460 636C 4,998
---------- ----------- ----------- -----------
Net income....................................................... $ 6,009 $ 709 $ 980 $ 7,698
---------- ----------- ----------- -----------
---------- ----------- ----------- -----------
Per share data--net income:
Diluted EPS.................................................... $ 0.78 $ 0.09 $ 0.12 $ 0.99
Basic EPS...................................................... $ 0.78 $ 0.09 $ 0.13 $ 1.00
Average shares outstanding:
Diluted........................................................ 7,752 7,752 7,752 7,752
Basic.......................................................... 7,664 7,664 7,664 7,664
Other data:
EBITDA(3)........................................................ $ 28,692 $ 2,555 $ 4,060 $ 35,308
Depreciation and amortization.................................... $ 12,888 $ 740 $ 1,226 $ 14,853
16
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED INCOME STATEMENT
(1) This column reflects the results of operations for GETS from July 1, 1997 to
September 3, 1997 (the date of its acquisition by the Company) and the
results of operations of Gerth from July 1, 1997 to May 22, 1998 (the date
of its acquisition by the Company). The acquisitions of GETS and Gerth were
accounted for by the purchase method of accounting.
(2) This column reflects certain adjustments arising out of the acquisition of
GETS and the acquisition of Gerth and certain other adjustments as follows:
(A) The following are adjustments to operating expense:
YEAR
ENDED
06/30/98
-------------
Reflects the elimination of third-party maintenance expense for 455 trailers
acquired in the acquisition of GETS. The Company's own maintenance facilities
have absorbed the costs of maintaining these trailers. The savings were
computed by comparing the difference between the maintenance mileage charge
paid by GETS to the Company's internal variable cost for trailer maintenance. ($ 39)
Reflects the reduction in liability and cargo insurance and claims expense due
to incorporating the Gerth operations under the Company's then existing
insurance policies. The Company's incremental insurance and claims expense as
applied to Gerth was determined based on the Company's historical cost
structure under its then existing policies. The coverages under both policies
were substantially similar. (961)
Reflects the depreciation expense on 11 tractors and 52 trailers acquired from
a former affiliate of Gerth as part of the acquisition of Gerth. These
tractors and trailers had previously been leased by Gerth from such
affiliate. 147
Reflects the depreciation expense resulting from the refinancing of 355
trailers in connection with the acquisition of GETS. The Company assumed
existing operating leases for these trailers. These leases were refinanced
following the acquisition of GETS, and are currently treated as capitalized
leases. 142
Reflects depreciation expense associated with the conversion of 1,354 trailers
from operating leases to capital leases that occurred in January 1998. At
that time, the Company declared that it would exercise its end of lease
option to purchase these trailers. Upon declaration of this intent to
purchase, the accounting treatment was appropriately changed from operating
lease to capital lease. 714
Reflects the elimination of the rental expense resulting from the refinancing
of 355 trailers (discussed above). (320)
Reflects the elimination of rental expense associated with the conversion of
1,354 trailers from operating leases to capital leases (discussed above). (1,906)
Reflects the expense savings associated with the turn-in of 100 short-term
rental trailers. Due to the size of the combined trailer pool resulting from
the acquisition of Gerth, these trailers represent excess capacity and will
be returned to the lessors and not replaced by the Company. (307)
17
NOTES TO THE UNAUDITED PRO FORMA CONDENSED
CONSOLIDATED INCOME STATEMENT (CONTINUED)
YEAR
ENDED
06/30/98
-------------
Reflects the elimination of intercompany rental expense on 11 tractors and 52
trailers acquired from a former affiliate of Gerth as part of the acquisition
of Gerth. These tractors and trailers had previously been leased by Gerth
from such affiliate. (231)
Reflects the reduction of third-party sales commission expense paid by Gerth
for one-half of Gerth's northbound Mexico loads. Gerth utilizes a third-party
agent to solicit shipments from Mexico to the United States and Canada. The
Company has its own sales force in Mexico, which will assist in soliciting
northbound business on behalf of Gerth. The savings were calculated by
comparing the incremental difference between Gerth's third-party agent rate
and the Company's internal cost. (250)
Reflects the elimination of intercompany charges previously allocated to GETS
by a subsidiary of General Electric Company. These functions have been
absorbed by the Company without an incremental increase in costs. (32)
Reflects the incremental goodwill amortization resulting from the purchase
accounting treatment of the acquisitions of GETS and Gerth. 208
-------------
Operating expenses subtotal ($ 2,835)
(B) The following are adjustments to interest expense:
Reflects the interest expense relating to the debt incurred to
purchase GETS and Gerth. $ 373
Reflects the interest expense related to the refinancing of 355
trailers discussed above. 92
Reflects the interest expense associated with the conversion of
1,354 trailers from operating leases to capital leases
(discussed above). 754
-----------
Interest expense subtotal $ 1,219
(C) Reflects the income tax effect of the pro forma adjustments at an
assumed rate of 39% for 1998. $ 636
(3) "EBITDA" is defined as earnings before interest, taxes, depreciation and
amortization. Although EBITDA is not a measure of performance calculated in
accordance with GAAP, the Company believes that EBITDA is accepted as a
generally recognized measure of performance in the truckload industry.
Nevertheless, this measure should not be considered in isolation or as a
substitute for operating income, net income, net cash provided by operating
activities or any other measure for determining the Company's operating
performance or liquidity which is calculated in accordance with GAAP.
18
THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to the holders of Celadon Common
Stock in connection with the solicitation of proxies by the Board of Directors
of Celadon from holders of the outstanding shares of Celadon Common Stock for
use at the Special Meeting of Stockholders to be held at a.m., local time, on ,
1998 at and any adjournments and postponements thereof. At the Special Meeting,
stockholders of Celadon (a) will be asked to consider and vote upon a proposal
to approve and adopt the Merger Agreement and the transactions contemplated
thereby, (b) will be asked to consider and vote upon a proposal to adjourn or
postpone the Special Meeting to another time for the purpose of soliciting
proxies in the event that the number of proxies obtained is not sufficient to
ensure the adoption and approval of the Merger Agreement, and (c) will transact
such other business as may properly come before the Special Meeting.
RECORD DATE, SOLICITATION, AND REVOCABILITY OF PROXIES
The Board of Directors of the Company has fixed the Record Date as the date
for determining the Celadon stockholders entitled to receive notice of and to
vote at the Special Meeting and any adjournments or postponements thereof. Only
holders of record of Celadon Common Stock as of the Record Date are entitled to
notice of and to vote at the Special Meeting. As of the Record Date, there were
7,726,989 shares of Celadon Common Stock issued, outstanding, and held by 1,576
holders of record. Holders of Celadon Common Stock are entitled to one vote on
each matter considered and voted on at the Special Meeting for each share of
Celadon Common Stock held of record at the close of business on the Record Date.
Proxies in the form enclosed are being solicited by the Board of Directors
of the Company. Shares of Celadon Common Stock represented by properly executed
proxies, if such proxies are received in time and are not revoked, will be voted
in accordance with the instructions indicated on the proxies. If no instructions
are indicated, such proxies will be voted FOR approval and adoption of the
Merger Agreement and the transactions contemplated thereby and FOR the
adjournment or postponement of the Special Meeting in the event that the number
of proxies obtained is not sufficient to ensure the adoption and approval of the
Merger Agreement. Any holder of Celadon Common Stock who returns a signed proxy
but fails to provide instructions as to the manner in which such holder's shares
are to be voted will be deemed to have voted FOR approval and adoption of the
Merger Agreement and the transactions contemplated thereby and FOR the
adjournment or postponement of the Special Meeting in the event that the number
of proxies obtained is not sufficient to ensure the adoption and approval of the
Merger Agreement.
It is not anticipated that any matter other than (a) the proposal to approve
and adopt the Merger Agreement and (b) the proposal to adjourn or postpone the
Special Meeting to another time for the purpose of soliciting additional proxies
in the event that the number of proxies obtained is not sufficient to ensure the
adoption and approval of the Merger Agreement, will be brought before the
Special Meeting. If any other matter is properly presented at the Special
Meeting for consideration, the persons named in the enclosed form of proxy card
and acting thereunder will have discretion to vote on such matter in accordance
with their best judgment.
A stockholder who has given a proxy may revoke it at any time prior to its
exercise at the Special Meeting, by (a) giving written notice of revocation to
the Secretary of the Company, (b) properly submitting to the Company a duly
executed proxy bearing a later date, or (c) voting in person at the Special
Meeting. All written notices of revocation and other communications with respect
to revocation of proxies should be addressed to the Company as follows: Celadon
Group, Inc., One Celadon Drive, Indianapolis, Indiana 42635-4207, Attention:
Corporate Secretary. A proxy appointment will not be revoked by death or
supervening incapacity of the stockholder executing the proxy unless, before the
shares are voted, notice of
19
such death or incapacity is filed with the Company's Secretary or other person
responsible for tabulating votes on behalf of the Company.
The expense of soliciting proxies for the Special Meeting will be paid by
the Company. In addition to solicitation by use of the mails, proxies may be
solicited by directors, officers, and employees of Celadon in person or by
telephone, telegram, or other means of communication. Such directors, officers,
and employees will not be additionally compensated, but may be reimbursed for
reasonable out-of-pocket expenses incurred in connection with such solicitation.
Arrangements will be made with custodians, nominees, and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of shares held
of record by such custodians, nominees, and fiduciaries, and Celadon will
reimburse such custodians, nominees, and fiduciaries for reasonable
out-of-pocket expenses incurred in connection therewith. In addition, Celadon
has retained D.F. King & Co., Inc., a proxy solicitation organization, to assist
in the solicitation of proxies for the Special Meeting for a fee of $6,000, plus
reasonable out-of-pocket expenses.
QUORUM; REQUIRED VOTE
Approval of the Merger Agreement and the transactions contemplated thereby
requires the presence of a quorum and the affirmative vote of the holders of a
majority of the issued and outstanding shares of Celadon Common Stock entitled
to vote thereon at the Special Meeting. The presence, in person or by properly
executed proxy, of the holders of a majority of the issued and outstanding
shares of Celadon Common Stock at the Special Meeting is necessary to constitute
a quorum of the holders of Celadon Common Stock at the Special Meeting.
Abstentions and broker non-votes will be counted as shares present for purposes
of determining the presence of a quorum. However, because the proposal to
approve and adopt the Merger Agreement requires the affirmative vote of a
majority of the issued and outstanding shares of Celadon Common Stock,
abstentions and broker non- votes will have the effect of a vote against the
Merger Agreement and the transactions contemplated thereby in determining
whether effective action has been taken. THE EFFECT ON APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT OF FAILING TO PROPERLY EXECUTE AND RETURN A PROXY CARD OR
TO VOTE AT THE SPECIAL MEETING WILL BE THE SAME AS VOTING AGAINST THE APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
As of the Record Date, the directors and executive officers of Celadon were
the beneficial owners of shares of Celadon Common Stock. The directors and
executive officers of Celadon have indicated that they intend to vote such
shares in favor of the approval and adoption of the Merger Agreement. Stephen
Russell, President, Chief Executive Officer, and Chairman of the Company's Board
and Hanseatic, principal stockholders of the Company, who beneficially own in
the aggregate 1,989,860 shares of Celadon Common Stock (including shares of
Celadon Common Stock issuable upon the exercise of Options and the Hanseatic
Warrants prior to the Effective Time) of which 1,907,739 shares, constituting
approximately 25% of the outstanding Celadon Common Stock, are outstanding as of
June 23, 1998, have entered into the Voting Agreement, pursuant to which each of
them appointed certain persons designated by Merger Sub as his or its proxy to,
among other things, vote their respective shares of Celadon Common Stock in
favor of the Merger Agreement. Paul Biddleman, President of Hanseatic, is
Hanseatic's designee to the Company's Board of Directors. See "Special
Factors--Interests of Certain Persons in the Merger-- Voting Agreement."
SPECIAL FACTORS
BACKGROUND OF THE TRANSACTION
Historically, the for-hire truckload industry in which the Company competes
has been highly fragmented. More recently, however, there has been increasing
movement toward consolidation in the industry, with larger carriers gaining
market share over smaller carriers. To position itself strategically in the
industry, the Company, beginning in 1996, reorganized its senior management
team. The new senior
20
management of the Company focused its attention on refining and furthering the
Company's existing core routing strategy by making strategic acquisitions along
core routes. In order to continue to pursue this strategy, and to take advantage
of other opportunities for growth within the industry, senior management
believed that the Company needed additional sources of capital.
In early January 1998, Stephen Russell, Chairman, Chief Executive Officer,
and President of the Company, was approached by two senior executive officers of
Swift Transportation Co., Inc., a leading public trucking and transportation
services company (the "Potential Strategic Acquiror"), who expressed their
company's interest in a strategic purchase of Celadon in a stock-for-stock
exchange, in which holders of Celadon Common Stock would receive shares of the
Potential Strategic Acquiror's common stock in exchange for their shares of
Celadon Common Stock. The executives originally indicated that the exchange rate
for the Celadon Common Stock would be based upon a valuation of the Celadon
Common Stock at $18.00 per share. The transaction would be structured to qualify
as a pooling transaction under applicable accounting rules and would be tax-free
to Celadon under the Internal Revenue Code of 1986, as amended (the "Code").
Following completion of the proposed transaction, the Company would operate as a
division of the Proposed Strategic Acquiror and the Company's existing senior
management would be retained. Following the initial meeting with the senior
executives, Mr. Russell discussed with the Board of Directors the structure of
the proposed transaction and the valuation placed on the Celadon Common Stock by
the Potential Strategic Acquiror. Celadon consulted with Furman Selz,
Incorporated ("Furman Selz"), which had previously advised the Company with
respect to its initial public offering and certain financial matters, about the
proposal made by the Potential Strategic Acquiror. The Company's consultation
with Furman Selz was based upon Furman Selz's historical knowledge of the
Company and of the trucking industry generally. The Company did not request, and
Furman Selz did not provide, any analyses in connection with, or any opinion
with respect to the fairness of, the preliminary proposal of the Potential
Strategic Acquiror.
Following its consultation with Furman Selz, and based on its belief that
the $18 per share valuation proposed by the Potential Strategic Acquiror did not
adequately value the Company's position in the international market and the
Company's earnings potential, the Board rejected the Potential Strategic
Acquiror's $18 valuation of the Celadon Common Stock, but indicated that the
Company would be willing to continue discussions at a per share valuation of
approximately $22. Thereafter Stephen Russell responded to questions and
provided operational and financial information to the Potential Strategic
Acquiror. At a meeting on February 12, 1998, the Potential Strategic Acquiror
rejected the Board's valuation of $22 per share and suggested that its initial
valuation of $18 per share would be reduced based upon the Potential Strategic
Acquiror's financial and strategic analysis of the Company, but did not make a
firm offer for, or any proposal to acquire, the Company. As a result of the
meeting, the Board of Directors, with the advice of senior management, decided
not to proceed further with discussions.
Following the termination of discussions with the Potential Strategic
Acquiror, the Company continued to pursue and consider other alternatives for
obtaining capital to further its growth strategy. In February, Furman Selz
proposed to the Company, a $15--$30 million issuance of convertible preferred
stock to strengthen the Company's balance sheet and provide funds to pursue its
growth strategy. After reviewing the proposed terms and having discussions with
Furman Selz regarding the convertible preferred stock, the Company determined
that the proposed terms, including the coupon rate, conversion price, and a
mandatory put option, made this alternative too costly for the Company. On
February 10, 1998, Stephen Russell (with the authorization of the Board of
Directors) met with representatives of Donaldson, Lufkin & Jenrette Securities
Corporation ("DLJ") to discuss additional strategic alternatives. DLJ suggested
that the Company make an offering of $50 million in debt securities in order to
provide funds for the Company to pursue its growth strategy. The Board of
Directors considered and rejected this alternative because the proposed terms of
the debt securities (which included a possible issuance of warrants) were
expensive and because the issuance of such debt securities would result in the
Company being substantially and excessively leveraged.
21
On February 19, 1998, Mr. Russell met with representatives of Wasserstein
Perella to discuss alternatives for the Company that would enable the Company to
maintain its acquisition strategy. Wasserstein Perella suggested that the
Company consider both opportunities in the equity markets and a sale of the
Company. Thereafter, Wasserstein Perella made a presentation to the Board
regarding various alternatives including a private placement of the Company's
equity and a possible sale of the Company. After considering Wasserstein
Perella's suggestions, the Board determined that a private sale of the Company
was an attractive alternative, particularly in light of the fact that an equity
offering would have required the sale of shares of Celadon Common Stock or
securities convertible into shares of Celadon Common Stock at a time when the
Celadon Common Stock was trading in the range of $13 to $16 per share.
On March 20, 1998, Celadon engaged Wasserstein Perella to act as the
Company's financial advisor in connection with the possible merger with, or sale
of substantially all of the Company's assets or stock to, a third party.
Wasserstein Perella identified a list of potential buyers within the trucking
industry ("potential strategic buyers"), based primarily upon Wasserstein
Perella's trucking industry knowledge and a list of potential non-industry
buyers ("potential financial buyers"), based upon their familiarity with
potential financial buyers.
The Company advised Wasserstein Perella that it believed that, other than
the Potential Strategic Acquiror, the number of companies within the trucking
industry that might be interested in acquiring the Company was small, and that
those companies were likely to value the Company on a basis consistent with the
Potential Strategic Acquiror's valuation of the Company and not at a price
equalling or exceeding $18.00 per share. The Company was also concerned that,
even though potential strategic buyers would be required to execute
confidentiality agreements, the receipt of confidential information about the
Company by potential strategic buyers who were actual or potential competitors
of the Company, in light of the cost and difficulty of policing and enforcing
such agreements, posed a risk of an adverse affect on the Company, and that the
knowledge within the industry of a possible sale of the Company could lead to
destabilization of the Company's relationship with its drivers in an industry
where driver shortages and turnover are a persistent problem. In light of the
forgoing, the Company determined that the risks associated with seeking
potential strategic buyers outweighed the likely benefits, and advised
Wasserstein Perella to limit the distribution of information about the Company
to potential financial buyers rather than attempting to solicit buyers within
the trucking industry. Thereafter, on behalf of Celadon, Wasserstein Perella
contacted a total of 31 potential financial buyers, 16 of which, including
Odyssey, executed confidentiality agreements and were subsequently furnished
with a package containing information concerning the Company.
On April 4, 1998, a representative of Odyssey contacted Stephen Russell to
express an interest in a recapitalization transaction following which the
Company would be privately held. The transaction contemplated by Odyssey
included the refinancing of certain existing indebtedness and capital leases of
the Company and obtaining new financing for use in making acquisitions and
funding certain other capital expenditures. Based on their initial review of the
information provided by Wasserstein Perella following its receipt of Odyssey's
executed confidentiality agreement, on April 13, 1998, representatives of
Odyssey (accompanied by representatives of GE) conducted a due diligence visit
with the Company and had discussions with senior management regarding the
Company's business and operations. At this meeting, Odyssey indicated that, as a
financial buyer, its interest in any transaction with the Company was contingent
upon the retention of the Company's senior management. Odyssey expressed
continued interest in the Company following the initial meeting and called the
Company's senior management for additional information regarding financial
projections. Odyssey also reiterated that Odyssey's interest was conditioned
upon the transaction qualifying for treatment as a recapitalization for
accounting purposes. In connection with the transaction and in furtherance of
the foregoing, Odyssey would require a limited number of stockholders of the
Company, including Stephen Russell to rollover a portion of their shares of
Celadon Common Stock into shares of Surviving Corporation Common Stock. Although
Wasserstein Perella proposed equity as an alternative, it was clear to the Board
that Odyssey's interest in the Company was limited to a recapitalization
transaction. Although Wasserstein Perella continued discussions with one
22
other potential buyer, such party did not meet with the Company or make any
formal or informal proposal to enter into a transaction with the Company.
On April 29, 1998, Odyssey, together with GE, indicated in writing its
desire to continue to discuss pursuing a recapitalization transaction with the
Company at a price of $18.50 per share of Celadon Common Stock (the "Odyssey
Proposal"), subject to, among other things, the satisfactory completion of due
diligence. The Board of Directors indicated to Odyssey that it believed that the
valuation of Celadon Common Stock at $18.50 per share did not adequately reflect
the impact on the Company of its fiscal 1998 acquisitions, specifically the
acquisition of the net assets of GETS in September 1997 and the acquisition of
Gerth, which was scheduled to be completed in May 1998. As a result, Odyssey (GE
having at this point withdrawn from the discussions) reviewed and revised the
Odyssey Proposal to take into account the Gerth transaction (which expanded the
Company's service area to Canada) and the GETS acquisition. The revised Odyssey
Proposal, which was presented to the Company on April 30, 1998, provided for a
valuation of $20.00 per share for the Celadon Common Stock, subject, among other
things, to the satisfactory completion of due diligence. In addition, Odyssey
conditioned its willingness to proceed with the revised Odyssey Proposal upon
the Company entering into an exclusivity agreement and reimbursement arrangement
with Odyssey and Odyssey and the Company agreeing upon the terms of employment
agreements for senior management and annual bonus, signing bonus, and stock
option plans for certain Company executives (including members of senior
management). After considering the revised Odyssey Proposal at a meeting on May
1, 1998, the Board authorized Stephen Russell to continue discussions with
Odyssey.
The Company and Odyssey reached a preliminary understanding with respect to
pricing of the transaction and the terms and conditions of the exclusivity and
reimbursement arrangements, subject to among other things, Odyssey's completion
of due diligence and on reaching an understanding with the Company with respect
to the retention of the Management Team. Approximately one week later, the
Company and Odyssey reached an understanding with respect to the employment
terms for the Management Team. All of the aforementioned understandings between
the Company and Odyssey were memorialized in an agreement, dated as of May 15,
1998. The agreement provided that, for a period of 21 days (the "Exclusivity
Period") following its execution, the Company would not (a) solicit, initiate or
encourage any offers or proposals relating to, (b) respond to any submissions,
proposals, or offers relating to, (c) engage in any negotiations or discussions
with any person relating to, or (d) otherwise cooperate in any way with any
person in connection with any acquisition, recapitalization, liquidation,
dissolution, or similar transaction involving all or any portion of the Company
or its business or assets or all or any portion of the Company's capital stock
or other equity interests. The agreement provided for extensions of the
Exclusivity Period at Odyssey's request under certain circumstances, subject to
Odyssey reconfirming its interest in pursuing a transaction. The Board of
Directors agreed to the Exclusivity Period based upon (a) the level of the
Odyssey valuation, (b) the fact that no other party contacted by Wasserstein
Perella had made, or then appeared likely to make, a more favorable proposal to
the Company with respect to the acquisition of the Company, and (c) the
understanding of the parties that definitive documentation for the transaction
would provide that it could be terminated by the Board of Directors in the
exercise of its fiduciary duties if a proposal for a superior transaction were
later received. On May 19, 1998 the Board of Directors authorized Mr. Russell to
negotiate the terms of definitive agreements with respect to the revised Odyssey
Proposal.
During the Exclusivity Period, Odyssey performed detailed legal, business
and accounting due diligence. At the conclusion of the Exclusivity Period,
Odyssey reconfirmed its interest in a possible recapitalization transaction at
the Cash Merger Price and, as a result, the Exclusivity Period was extended, as
provided in the agreement, for an additional nine days. At the end of the
nine-day period, Odyssey again reconfirmed its interest in a possible
recapitalization transaction at the Cash Merger Price and the Exclusivity Period
was extended, as provided in the agreement, for an additional seven days to June
22, 1998. During that seven-day period, the parties negotiated the definitive
Merger Agreement and the Voting Agreement.
23
At a meeting held on June 22, 1998, the Board of Directors of Celadon met to
review drafts of the definitive documentation with respect to the proposed
Merger. At the meeting, the Board of Directors received the opinion of
Wasserstein Perella with respect to the fairness, from a financial point of
view, of the Cash Merger Price to be received by Celadon's stockholders (other
than holders of Rollover Shares) described under "Opinion of Wasserstein
Perella, Financial Advisor to Celadon," and, based on that opinion and on the
other factors described herein under "Reasons for the Merger; Recommendation of
the Board of Directors," the Board approved the Merger Agreement and the Voting
Agreement in substantially the forms submitted to the Board, and authorized
senior management to complete negotiation of certain remaining points and to
execute final documents. On June 22, 1998, Odyssey requested that the
Exclusivity Period be extended until noon on June 23, 1998, to provide
sufficient time to finalize the definitive Merger Agreement and Voting
Agreement. On June 23, 1998, the Merger Agreement and the Voting Agreement were
executed by the parties, and Odyssey and Celadon issued a press release
announcing the transaction.
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS
At a meeting held at 4:30 pm on June 22, 1998, the Board of Directors
unanimously approved the Merger Agreement and determined, among other things,
that the Merger Agreement was fair to and in the best interests of Celadon's
stockholders (other than Rollover Shares) and recommended that Celadon's
stockholders approve the Merger Agreement. In reaching these conclusions, the
Board of Directors consulted with Wasserstein Perella and Celadon 's legal
counsel and considered the following factors:
(a) A comparison of the risks and benefits of the Merger against the
risks and benefits of the other strategic alternatives available to Celadon.
The Company needed to continue its growth strategy in order to compete
effectively in a consolidating industry. In order to pursue its growth
strategy by making additional acquisitions the Company needed access to
capital. The alternatives proposed by Furman Selz and DLJ, a $15-30 million
offering of convertible preferred stock and a $50 million debt offering,
respectively, were unattractive to the Company, in the first case, because
the proposed terms, including the coupon rate, conversion price and
mandatory put option made the deal too dilutive and, in the second case,
because the proposed terms (including the possible issuance of warrants)
were too costly and would result in the excessive leveraging of the Company.
In connection with the Merger, the Company would have access to the CAPEX
Line, which could be used for future acquisitions and certain other
permitted capital expenditures. The Company believes that the terms of the
CAPEX Line to be obtained by the Company following the effectiveness of the
Merger are more favorable than those that could have been obtained by the
Company if it were to continue as an independent entity. The Company also
assessed the Merger against the likelihood of an Acquisition Proposal
providing greater value to stockholders. The $18.00 per share valuation of
the Company suggested by the Potential Strategic Acquiror had been rejected
by the Board of Directors because it did not adequately value the Company's
position in the international market and the Company's earnings potential.
Following the rejection of the Potential Strategic Acquiror's initial
valuation the Company responded to additional inquiries from the Potential
Strategic Acquiror. The Potential Strategic Acquiror suggested that it
intended to reduce its initial valuation of the Company, but did not
thereafter make a firm offer to purchase the Company. Discussions with the
Potential Strategic Acquiror terminated soon thereafter. Other than the
Potential Strategic Acquiror, the number of companies within the trucking
industry that were positioned to acquire the Company was small, and the
Board of Directors believed that the likelihood of the Company receiving an
Acquisition Proposal that would provide greater value than the Merger was
minimal. The Board believes that the after-tax proceeds to stockholders as a
result of the Merger will be greater than that that could have resulted if
the Potential Strategic Acquiror had made a firm offer for a tax-free
transaction at less than $18.00 per share and such proposal had been
accepted by the Board. Finally, while the Company expects continued growth
in the future, there can be no assurance that this will occur. In light of
all of the foregoing, the payment to stockholders of the Cash Merger Price
was, from a financial point of view,
24
the best result that could be achieved from among the available alternatives
for pursuing the Company's growth strategy while maximizing stockholder
value. See "--Background of the Transaction."
(b) The $20.00 per share of Celadon Common Stock to be paid to
stockholders in the Merger represented a premium of approximately 36.8% over
the closing price of $14.63 per share of Celadon Common Stock on June 22,
1998, which closing immediately preceded the June 22, 1998 board meeting,
and approximately 8.1% over the initial Odyssey Proposal of $18.50. The
Board of Directors considered that shares of Celadon Common Stock have
traded at a range from a low of $10.25 to a high of $17.00 during the 52
weeks prior to June 22, 1998. The consideration to be paid in the Merger
also represented a premium of approximately 11.1% over the $18.00 valuation
initially proposed by the Potential Strategic Acquiror. The Board believes
that the after-tax proceeds to stockholders resulting from the Merger will
be greater that those that may have been received in a transaction involving
the Potential Strategic Acquiror, although the transaction suggested by the
Potential Strategic Acquiror was a tax-deferred transaction. In addition,
the Board of Directors considered the fact that the Potential Strategic
Acquiror had expressed its intention to reduce its initial per share
valuation of the Celadon Common Stock in determining that the Merger offered
a substantial premium to stockholders compared to recent historical price
levels of Celadon Common Stock. The Board also considered the fact that the
Potential Strategic Acquiror, following its preliminary discussions with
Stephen Russell, never made an offer to acquire the Company at any price.
Although during its discussions with the Potential Strategic Acquiror the
Board suggested a valuation of $22 per share of Celadon Common Stock, this
valuation was for negotiation purposes and not a firm offer to sell the
Company at that price or at any price. The Board's conclusion that the Cash
Merger Price is fair to the stockholders (other than holders of the Rollover
Shares) is supported in part by the opinion of its financial advisor.
(c) The written opinion, dated as of June 22, 1998, of Wasserstein
Perella (and the analysis presented to the Board of Directors of Celadon
underlying such opinion) to the effect that, based on the assumptions made,
matters considered and limits of the review undertaken by Wasserstein
Perella, the Cash Merger Price to be received by Celadon's stockholders
(other than holders of the Rollover Shares) in the Merger was fair, from a
financial point of view, to the stockholders. See "Special Factors--Opinion
of Wasserstein Perella, Financial Advisor to Celadon."
(d) The terms and conditions of the Merger Agreement and related matters
were the product of arm's-length negotiations in which Celadon was assisted
by its legal counsel, Proskauer Rose LLP, and its financial advisor,
Wasserstein Perella. In particular, the Board considered that under the
terms of the Merger Agreement, the Board was not prohibited from furnishing
information in response to an unsolicited bona fide written Acquisition
Proposal or from considering, negotiating, or participating in discussions
regarding an unsolicited bona fide written Acquisition Proposal, if (i) such
information was furnished pursuant to a reasonable and customary
confidentiality agreement, (ii) such consideration, negotiation or
discussion of an Acquisition Proposal was conducted in good faith, upon
written advice of outside counsel that such action was required by the
Board's fiduciary responsibility to the Company's stockholders, and (iii)
the Board determined in good faith after consultation with its financial
advisor that such Acquisition Proposal is on financial terms more favorable
to the Company's stockholders than the Merger. Under such circumstances, the
Board could terminate the Merger Agreement upon payment of a break-up fee of
$6.5 million to Merger Sub and reimbursement of Merger Sub's out-of-pocket
expenses, up to a maximum of $1.5 million. See "Certain Provisions of The
Merger Agreement."
(e) The Board considered as a negative factor, the fact that Merger
Sub's obligation to consummate the transaction is contingent upon Merger
Sub's ability to obtain the Financing contemplated by the Financing Letters
to pay the Cash Merger Price, to pay the value of the Options and Hanseatic
Warrants, to consummate the Refinancing and to pay the fees and expenses in
connection
25
with the Merger and such financing. However, the Board also considered that
such a condition to closing is common in transactions involving financial
buyers. If the Merger is consummated, it is contemplated that the required
financing will be provided by the issuance of the Debt Securities, drawings
of up to $7.5 million under the Revolver, and equity financing provided by
Odyssey in the amount of approximately $57.6 million through the purchase of
common stock of Merger Sub. Merger Sub has informed the Company in writing
that it received notice on September 15, 1998 from BT that BT would not be
obligated to provide the Bridge Loans under the then existing market
conditions. The BT Financing Letter will terminate in accordance with its
terms on November 30, 1998 if no amounts have yet been funded thereunder.
See "Special Factors--Recent Developments; Material Uncertainty of
Consummating the Merger" and "Financing of the Merger."
(f) The Board considered that (i) the affirmative vote of a majority of
the outstanding shares of Celadon Common Stock were required for adoption of
the Merger Agreement and approval of the transactions contemplated thereby
and (ii) the Voting Agreement, to which both Stephen Russell and Hanseatic
were signatories, provided that the shares of Celadon Common Stock held by
them, constituting approximately 25% of the outstanding shares of Celadon
Common Stock, would be voted in favor of the adoption of the Merger
Agreement and approval of the transaction. In addition, the Board considered
the fact that the Voting Agreement would terminate in accordance with its
terms in the event that the Board recommended or the stockholders approved
or accepted an Acquisition Proposal received by the Company. The Board of
Directors also considered the employment agreements and other benefits to be
received by members of the Management Team upon effectiveness of the Merger,
but determined that such interests, including the Rollover Shares, the
Rollover Options and signing bonuses, were reasonable and appropriate in
light of Odyssey's requirement that the Management Team participate in the
transaction. Odyssey specifically insisted that Mr. Russell maintain an
equity interest in the Company by retaining the Rollover Shares and that
each member of the Management Team execute new employment agreements with
the Surviving Corporation. The Board of Directors, including each of the
non-employee directors who comprise a majority of the Board of Directors,
have determined that the interests of certain officers and directors in the
Merger have not impacted the fairness of the consideration to be paid to the
Company's stockholders. See "Special Factors--Interests of Certain Persons
in the Merger."
The Board believed that other than the Potential Strategic Acquiror, the
number of companies within the trucking industry that might be interested in
acquiring the Company was small, and that each of those companies was likely to
value the Company similarly. In light of the fact that (i) the Potential
Strategic Acquiror initially valued the Company at $18.00 per share and then
expressed its intention to reduce that valuation if discussions proceeded
further, (ii) following its consultation with Furman Selz the Board believed
that a higher valuation for the Company could be obtained, and (iii) the Board
had determined that the risks associated with (A) a public sale of the Company,
which included the destabilization of the Company's relationship with its
drivers, and (B) the distribution of confidential information about the Company
to actual or potential competitors within the trucking industry outweighed the
possible benefits to the Company, the Board was fully aware that the Company was
not put up for sale publically, but concluded that a private sale of the Company
was the best alternative for maximizing shareholder value while allowing the
Company to maintain its growth strategy. The Board also determined that, if
another bidder made a proposal to acquire the Company following the public
announcement of the Merger, the terms of the Merger Agreement would not prevent
a transaction with such other bidder, if the other bidder's proposal was
determined to be more favorable to the Company's stockholders and such proposal
otherwise satisfied the conditions set forth in the Merger Agreement.
The Board did not consider the liquidation value or the net book value of
the Company in making its determination to recommend the Merger. The value of
the Company as a going concern far exceeded both measures and provided the best
opportunity for maximizing shareholder value. Therefore, the Board investigated
and considered various alternatives for allowing the Company to pursue its
existing growth strategy and did not consider or pursue a liquidation strategy
or a sale of the Company's assets.
26
The foregoing discussion of the information and factors considered by the
Board of Directors is not intended to be exhaustive, but includes the material
factors considered by the Board of Directors. In reaching its determination to
approve the Merger Agreement, and in view of the variety of factors considered
by the Board of Directors in connection with its evaluation of the Merger
Agreement, the Board of Directors did not assign any relative or specific
weights to the various factors considered by it.
No unaffiliated representative was retained by the Board of Directors to act
on behalf of unaffiliated securityholders. The Board determined that this was
not necessary in light of the fact that a majority of the members of Board of
Directors are non-employee directors. Each of these non-employee directors has
voted in favor of the adoption of the Merger Agreement and the consummation of
the transactions contemplated thereby.
PURPOSES AND REASONS OF ODYSSEY AND MERGER SUB FOR THE MERGER
The purposes of the Merger are (a) to enable Odyssey, through Merger Sub, to
make an investment in, and obtain a controlling interest in, the Company, and
(b) to enable existing stockholders of the Company to realize a substantial
premium over recent historical market prices for the shares of Celadon Common
Stock owned by them. Merger Sub was formed by Odyssey for the purpose of
engaging in such transaction. Merger Sub elected to proceed with the Merger for
the same reasons that motivated Odyssey.
The acquisition of Celadon has been structured as a merger pursuant to which
Celadon will be the surviving corporation, and certain current officers,
directors and stockholders of the Company will retain an interest in the Company
in order to (a) effect a recapitalization of the Company for accounting purposes
and (b) preserve the corporate identity of Celadon and its existing contractual
arrangements with third parties.
POSITION OF ODYSSEY AND MERGER SUB AS TO FAIRNESS OF THE MERGER
Odyssey and Merger Sub believe that the Merger is fair to the stockholders
of the Company (other than holders of the Rollover Shares). In determining the
fairness of the Merger, Odyssey and Merger Sub considered the following factors:
(a) the Cash Merger Price represented a premium over historical market prices
for shares of the Celadon Common Stock, and also a substantial premium of
approximately 36.8% over the closing price of the Celadon Common Stock on June
22, 1998, (b) the extent of the sale process undertaken by the Company and the
Board of Directors, as more fully described in "Background of the Transaction,"
(c) the unanimous recommendation of the Merger Agreement and the transactions
contemplated thereby by the Board of Directors, a majority of whose members are
independent, (d) the fact that certain principal stockholders of the Company
agreed to vote their shares of Celadon Common Stock in favor of the Merger
Agreement and the transactions contemplated thereby, (e) the receipt by the
Board of the written opinion of its independent financial advisor (see "--
Opinion of Wasserstein Perella, Financial Advisor to Celadon") to the effect
that, based on the assumptions made, matters considered and limits of the review
undertaken, the Cash Merger Price to be received was fair from a financial point
of view, to Celadon's stockholders (other than holders of the Rollover Shares)
and (f) the fact that the purchase price and other business terms of the Merger
Agreement were negotiated on an arms-length basis with the Company. This belief
should not, however, be construed as a recommendation to the Company's
stockholders by Odyssey or Merger Sub to vote to approve the Merger Agreement
and the transactions contemplated thereby nor should it be construed as an
adoption of the conclusions of the Board with respect to such matters. Neither
Odyssey nor Merger Sub has undertaken any formal evaluation of the fairness of
the Merger to the stockholders of the Company and neither of them has assigned
specific relative weights to the factors considered by them.
Odyssey and Merger Sub believe that the Merger is procedurally fair to the
Company's stockholders (other than the holders of the Rollover Shares), although
the approval of a majority of the Company's unaffiliated stockholders is not
separately required, and an unaffiliated representative was not retained to act
on behalf of such stockholders. In reaching this conclusion, Odyssey and Merger
Sub took into account
27
a number of factors relevant to procedural fairness as described above,
including the sale process conducted by the Company, the unanimous
recommendation of the Merger by the Board, a majority of whose members are
independent and voted to approve the Merger, and the fairness opinion issued to
the Board by the Company's financial advisor.
PURPOSES AND REASONS OF STEPHEN RUSSELL IN AGREEING TO THE MERGER
The purpose of Stephen Russell in agreeing to the transactions contemplated
by the Merger Agreement is to continue the pursuit of his strategic view of the
future of the Company and to enable existing stockholders of the Company to
realize a substantial premium on the shares of Celadon Common Stock owned by
them. See "--Reasons for the Merger; Recommendation of the Board of Directors"
and "--Interests of Certain Persons in the Merger."
POSITION OF STEPHEN RUSSELL AS TO FAIRNESS OF THE MERGER
In arriving at his belief that the Merger is fair to the stockholders of the
Company (other than the holders of the Rollover Shares), Mr. Russell considered
the same factors considered by the Board, including (a) the premium of the Cash
Merger Price over historical market prices for shares of the Celadon Common
Stock, and the substantial premium of the Cash Merger Price over the closing
price on June 22, 1998, (b) the extent of the sale process described in
"Background of the Transaction," (c) the unanimous recommendation of the Merger
Agreement and the transactions contemplated thereby by the Board of Directors,
(d) the agreement of certain principal stockholders to vote their shares of
Celadon Common Stock in favor of the Merger Agreement and the transactions
contemplated thereby, (e) the receipt by the Board of the written opinion of its
independent financial advisor (see "--Opinion of Wasserstein Perella, Financial
Advisor to Celadon") to the effect that, based on the assumptions made, matters
considered and limits of the review undertaken, the Cash Merger Price to be
received was fair from a financial point of view, to Celadon's stockholders
(other than holders of Rollover Shares) and (f) the arm's-length nature of the
negotiations between Odyssey and Merger Sub, on the one hand and the Company on
the other. However, Mr. Russell's belief that the Merger and the transactions
related thereto are fair to the Company's stockholders (other than the holders
of the Rollover Shares) should not be construed as a recommendation to the
Company's stockholders by Stephen Russell (in his individual capacity as a
stockholder of the Company and not in his capacity as a member of the Board of
Directors) to vote to approve the Merger Agreement and the transactions
contemplated thereby.
In reaching his conclusion with respect to the fairness of the Merger, Mr.
Russell also relied, in part, on his own general familiarity with, and
significant experience in, the trucking industry. Mr. Russell also considered
the environment for merger transactions in the United States capital markets and
the availability to Merger Sub of financing at the time the Merger Agreement was
executed. This environment and the availability of financing are factors that
are subject to change, and recent developments within the United States capital
markets have made it highly unlikely that the Merger can be consummated at the
Cash Merger Price. See "--Recent Developments; Material Uncertainty of
Consummating the Merger." Mr. Russell did not consider the net book value or the
liquidation value of the Company. Such values are significantly less than the
value of the Company as a going concern.
Mr. Russell believes that the Merger is procedurally fair to the Company's
stockholders (other than the holders of the Rollover Shares), although the
approval of a majority of the Company's unaffiliated stockholders is not
separately required, and an unaffiliated representative was not retained to act
on behalf of such stockholders. In reaching this conclusion, Mr. Russell took
into account a number of factors relevant to procedural fairness as described
above, including the sale process conducted by the Company, the unanimous
recommendation of the Merger by the Board, a majority of whose members are
independent and voted to approve the Merger, and the fairness opinion issued to
the Board by the Company's financial advisor.
28
RECENT DEVELOPMENTS; MATERIAL UNCERTAINTY OF CONSUMMATING THE MERGER
The Company announced on September 18, 1998 that it had received written
notice from Merger Sub to the effect that BT had concluded as of September 15,
1998, that under then existing market conditions, it would not be obligated to
provide the Bridge Loans contemplated by the Merger Agreement and the BT
Financing Letter. Pursuant to the BT Financing Letter, BT would not be obligated
to provide the Bridge Loans if, in the reasonable judgment of BT, market
conditions which would materially and adversely affect the ability to sell or
place the Debt Securities exist at the time funding is requested. BT has noted
that the conditions to funding, including the absence of adverse market
conditions, need only be satisfied on the date of request for funds. No such
request has yet been made by Merger Sub. The BT Financing Letter has not been
terminated or otherwise modified as of this date. The BT Financing Letter will
terminate in accordance with its terms on November 30, 1998 if no amounts have
yet been funded thereunder. Merger Sub would not be obligated to consummate the
Merger if the financing contemplated by the BT Financing Letter was not
available. If the Merger is not consummated on or prior to November 30, 1998,
the Merger Agreement will terminate in accordance with its terms. See "Certain
Provisions of the Merger Agreement--Termination; Effect of Termination."
As a result of the information available to the Company, including, without
limitation, the notice from BT and the Company's understanding of current market
conditions, the Company believes it is highly unlikely that the Merger will be
consummated at the Cash Merger Price. However, the Company believes that the
Merger, on the terms set forth in the Merger Agreement, is in the best interests
of the Company's stockholders. Therefore, notwithstanding the Company's belief
as to the likelihood that the Merger will be consummated, the Company is
proceeding to take the actions required to close the Merger, including the
mailing of this Proxy Statement and obtaining stockholder approval of the Merger
at the Special Meeting. In determining how to vote at the Special Meeting the
Company's stockholders should consider that the absence of stockholder approval
would constitute the failure of a condition to closing that would permit Merger
Sub to terminate the Merger Agreement and would make it legally impossible for
the Company to consummate the Merger. However, even if the stockholders adopt
and approve the Merger Agreement and the transactions contemplated thereby,
there can be no assurances that the Merger will be consummated. See "Certain
Provisions of the Merger Agreement--Termination; Effects of Termination."
29
OPINION OF WASSERSTEIN PERELLA, FINANCIAL ADVISOR TO CELADON
Celadon retained Wasserstein Perella on March 20, 1998 on an exclusive basis
to assist the Company in its analysis and consideration of various financial and
strategic alternatives available to it. In connection with the contemplated
Merger, Celadon's Board of Directors requested that Wasserstein Perella render
its opinion as to the fairness, from a financial point of view, of the Cash
Merger Price to be received by Celadon's stockholders (other than the holders of
the Rollover Shares).
At the June 22, 1998 meeting of Celadon's Board of Directors,
representatives of Wasserstein Perella made a presentation with respect to the
Merger and tendered to Celadon's Board of Directors its oral opinion,
subsequently confirmed in writing as of the same date, that, as of such date,
and based on the assumptions made, matters considered and limits of the review
undertaken by Wasserstein Perella, the Cash Merger Price to be received by
Celadon's stockholders (other than holders of the Rollover Shares) was fair,
from a financial point of view, to such stockholders.
THE FULL TEXT OF WASSERSTEIN PERELLA'S WRITTEN OPINION DATED JUNE 22, 1998
(THE "WASSERSTEIN PERELLA OPINION"), WHICH SETS FORTH, AMONG OTHER THINGS,
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW UNDERTAKEN, IS
ATTACHED HERETO AS ANNEX C AND INCORPORATED HEREIN BY REFERENCE. CELADON
STOCKHOLDERS ARE URGED TO READ THE WASSERSTEIN PERELLA OPINION IN ITS ENTIRETY.
THE WASSERSTEIN PERELLA OPINION IS DIRECTED TO CELADON'S BOARD OF DIRECTORS,
ADDRESSES ONLY THE FAIRNESS OF THE MERGER CONSIDERATION TO CELADON'S
STOCKHOLDERS (OTHER THAN THE HOLDERS OF THE ROLLOVER SHARES) FROM A FINANCIAL
POINT OF VIEW, AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY CELADON
STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE SPECIAL MEETING. THE
WASSERSTEIN PERELLA OPINION WAS RENDERED TO CELADON'S BOARD OF DIRECTORS FOR ITS
CONSIDERATION IN DETERMINING WHETHER TO APPROVE THE MERGER AGREEMENT. THE
DISCUSSION OF THE WASSERSTEIN PERELLA OPINION IN THIS PROXY STATEMENT IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE FULL TEXT OF THE WASSERSTEIN
PERELLA OPINION.
In connection with the Wasserstein Perella Opinion, Wasserstein Perella
reviewed drafts of the Merger Agreement and related documents, and for purposes
thereof, assumed that the final forms of such documents would not differ in any
material respect from the drafts provided to it. Wasserstein Perella also
reviewed and analyzed certain publicly available business and financial
information relating to Celadon for recent years and interim periods to the date
of the Wasserstein Perella Opinion, as well as certain internal financial and
operating information, including financial forecasts, analyses, and projections
prepared by or on behalf of Celadon and provided to it for purposes of its
analysis, and Wasserstein Perella met with management of the Company to review
and discuss such information and, among other matters, Celadon's business,
operations, assets, financial condition, and future prospects.
Wasserstein Perella reviewed and considered certain financial and stock
market data relating to Celadon, and compared that data with similar data for
certain other companies, the securities of which are publicly traded, that it
believed may have been relevant or comparable in certain respects to Celadon or
one or more of its businesses or assets, and Wasserstein Perella reviewed and
considered the financial terms of certain recent acquisitions and business
combination transactions in the trucking industry specifically, and in other
industries generally, that it believed to be reasonably comparable to the Merger
or otherwise relevant to its inquiry. Wasserstein Perella also performed such
other financial studies, analyses, and investigations and reviewed such other
information as it considered appropriate for purposes of the Wasserstein Perella
Opinion.
In Wasserstein Perella's review and analysis and in formulating its opinion,
Wasserstein Perella assumed and relied upon the accuracy and completeness of all
of the financial and other information provided to or discussed with it or
publicly available, and Wasserstein Perella did not assume any
30
responsibility for independent verification of any of such information.
Wasserstein Perella also assumed and relied upon the reasonableness and accuracy
of the financial projections, forecasts and analyses provided to it, and it
assumed that such projections, forecasts and analyses were reasonably prepared
in good faith and on bases reflecting the best currently available judgments and
estimates of Celadon's management. Wasserstein Perella expressed no opinion with
respect to such projections, forecasts and analyses or the assumptions upon
which they are based. In addition, Wasserstein Perella did not review any of the
books and records of Celadon, or assume any responsibility for conducting a
physical inspection of the properties or facilities of Celadon, or for making or
obtaining an independent valuation or appraisal of the assets or liabilities of
Celadon, and no such independent valuation or appraisal was provided to it.
Wasserstein Perella also assumed that the transactions described in the Merger
Agreement would be consummated without waiver or modification of any of the
material terms or conditions contained therein by any party thereto. The
Wasserstein Perella Opinion is necessarily based on economic and market
conditions and other circumstances as they existed and could be evaluated by it
as of the date thereof.
The following is a brief summary of certain of the quantitative analyses
performed and factors considered by Wasserstein Perella in connection with
rendering the Wasserstein Perella Opinion and reviewed with the Board of
Directors of Celadon at its June 22, 1998 meeting.
HISTORICAL FINANCIAL POSITION. In rendering its opinion, Wasserstein
Perella reviewed and analyzed historical and current financial information of
Celadon which included, but was not limited to, Celadon's (i) balance sheets,
(ii) annual income statements, (iii) cash flow statements, (iv) operating
margins, and (v) growth rates. Such review served as the basis for the financial
analyses described below.
CASH MERGER PRICE PREMIUM OVER HISTORICAL STOCK PRICE. Wasserstein Perella
reviewed and analyzed the average closing prices per share for the Celadon
Common Stock for various periods prior to June 22, 1998, in order to compute the
premium over these average prices that the Cash Merger Price ($20.00) would
represent. The Cash Merger Price was a 36.8% premium over the June 22, 1998
single day closing price of $14.63 per share. The Cash Merger Price was a 39.9%
premium over the prior one week daily average (June 16 to June 22, 1998) closing
price of $14.30 per share. The Cash Merger Price was a 42.4% premium over the
prior four week daily average (May 26 to June 22, 1998) closing price of $14.05
per share. The Cash Merger Price was a 38.2% premium over the prior twelve week
daily average (March 31 to June 22, 1998) closing price of $14.47 per share.
This information was presented to the Board of Directors of Celadon to give it
background information regarding the stock price performance of the Celadon
Common Stock over the periods indicated. In addition, the fact that the Cash
Merger Price exceeded the price per share at which the Celadon Common Stock
traded during the periods reviewed was consistent with a determination that the
Cash Merger Price was fair to Celadon's stockholders (other than the holders of
the Rollover Shares).
ANALYSIS OF CERTAIN OTHER PUBLICLY TRADED COMPANIES. Wasserstein Perella
compared certain financial information and commonly used valuation measurements
for Celadon to corresponding information for two groups of publicly traded
trucking companies. The first group, collectively referred to as "Smaller Market
Cap Trucking Companies" consisted of six companies: Covenant Transport, Inc.,
Knight Transportation, Inc., M.S. Carriers, Inc., Transport Corporation of
America, Inc., USA Truck, Inc., and U.S. Express Enterprises, Inc. Celadon is
classified as a Smaller Market Cap Trucking Company. The second group,
collectively referred to as "Larger Market Cap Trucking Companies" consisted of
four companies: Heartland Express, Inc., J.B. Hunt Transport Services, Inc.,
Swift Transportation Co., Inc., and Werner Enterprises, Inc. The Smaller Market
Cap Trucking Companies and Larger Market Cap Trucking Companies were selected
based upon the similarity of their truckload operations to those of Celadon.
Such companies were divided into the corresponding two groups based upon their
individual Firm Values (as hereinafter defined) as of June 17, 1998, with the
Smaller Market Cap Trucking Companies having estimated Firm Values (as
hereinafter defined) of $500 million or less and the Larger Market Cap Trucking
Companies having estimated Firm Values in excess of $500 million. The financial
information used by Wasserstein Perella in its analysis included, among other
things, (i) common equity market valuation;
31
(ii) operating performance; (iii) capitalization ratios; (iv) ratios of common
equity market value ("Equity Value") and Equity Value as adjusted to include
debt plus preferred stock less cash ("Firm Value") to earnings before interest
expense, income taxes, depreciation and amortization ("EBITDA"), and (v) ratios
of common equity market prices per share ("Market Price") to common equity
earnings per share ("EPS"). The ratios set forth above were calculated using
closing stock prices as of June 17, 1998. In the case of Celadon, Wasserstein
Perella also computed such ratios using the Cash Merger Price of $20.00 per
share, Celadon's Equity Value as implied in the Merger (the "Equity Merger
Value") and Celadon's Firm Value as implied in the Merger (the "Firm Merger
Value"), where each was appropriate. The financial information used in
connection with the multiples provided below was based on (i) the latest
reported 12 month period as derived from publicly available information, (ii)
estimated EPS for calendar years 1998 and 1999 as reported by the Institutional
Brokers Estimating System ("IBES"), and (iii) projected EBITDA and other
estimated financial projections derived from publicly available equity research
analysis.
In conjunction with Celadon's management, Wasserstein Perella made
adjustments (described below) to Celadon's EBITDA and net income figures in
order to more accurately evaluate the valuation multiple range implied by the
Cash Merger Price; these adjusted figures were among the key financial figures
used to negotiate the Merger Agreement. Such figures were adjusted and pro forma
in an attempt to more accurately depict Celadon's most recent financial results,
while adding the results Celadon may have achieved if it had actually operated
its recent acquisitions--GETS and Gerth--for a full year. "Expected Fiscal 1998
Adjusted EBITDA and EPS" were derived by (a) estimating Celadon's fiscal year
results for July 1, 1997 to June 30, 1998, excluding Gerth's results for the
period it was owned by Celadon, (b) adding two additional months of results for
GETS (which was acquired on September 1, 1997 and thus had only 10 months of
results included in Celadon's fiscal year results), (c) adding estimated 12
months of results Celadon may have achieved if it had actually operated Gerth
(which was acquired by Celadon in May 1998) from July 1, 1997 to June 30, 1998,
and (d) adjusting for the conversion of certain trailer leases from operating to
capital leases. "Projected Calendar 1998 Adjusted EBITDA and EPS" were derived
by adding the projected calendar 1998 Celadon results (excluding Gerth results
for the period it was owned by Celadon) to the current run rate results for
Gerth assuming Celadon's ownership of Gerth for such period.
Using the Celadon Common Stock price of $14.25 and share prices of other
comparable companies as of June 17, 1998 ("Market Price"), Wasserstein Perella
noted that (a) the multiple of Firm Value to Expected Fiscal 1998 Adjusted
EBITDA was 6.0x for Celadon (and the multiple of Firm Merger Value to Expected
Fiscal 1998 Adjusted EBITDA was 7.3x), compared to a range of 5.0x to 8.6x of
trailing 12 months EBITDA, with a median of 5.7x, for the Smaller Market Cap
Trucking Companies and a range of 5.9x to 9.2x of trailing 12 months EBITDA,
with a median of 7.8x, for the Larger Market Cap Trucking Companies; (b) the
multiple of Firm Value to Projected Calendar 1998 Adjusted EBITDA was 5.7x for
Celadon (and the multiple of Firm Merger Value to Projected Calendar 1998
Adjusted EBITDA was 7.0x), compared to a range of 4.4x to 7.4x of projected
calendar 1998 EBITDA, with a median of 4.7x, for the Smaller Market Cap Trucking
Companies and a range of 5.3x to 8.4x of projected calendar 1998 EBITDA, with a
median of 6.5x, for the Larger Market Cap Trucking Companies; (c) the multiple
of Market Price to Expected Fiscal 1998 Adjusted EPS was 14.0x for Celadon (and
the multiple of the Cash Merger Price to Expected Fiscal 1998 Adjusted EPS was
20.0x), compared to a range of 13.8x to 22.5x of trailing 12 months EPS, with a
median of 15.6x, for the Smaller Market Cap Trucking Companies and a range of
17.2x to 21.1x of trailing 12 months EPS, with a median of 18.8x, for the Larger
Market Cap Trucking Companies; and (d) the multiple of Market Price to Projected
Calendar 1998 Adjusted EPS was 11.9x for Celadon (and the multiple of the Cash
Merger Price to Projected Calendar 1998 Adjusted EPS was 17.1x), compared to a
range of 12.0x to 19.8x of projected calendar 1998 EPS, with a median of 13.8x,
for the Smaller Market Cap Trucking Companies and a range of 15.7x to 21.6x of
projected calendar 1998 EPS, with a median of 18.0x, for the Larger Market Cap
Trucking Companies. Based on the foregoing comparisons, Wasserstein Perella
noted that the multiples implied in the Merger were generally within the ranges
and above the medians of trading multiples for the Smaller Market Cap Trucking
Companies and the Larger Market Cap Trucking
32
Companies and that this fact supported a determination that the Cash Merger
Price was fair to Celadon's stockholders (other than the holders of the Rollover
Shares).
ANALYSIS OF SELECTED PRECEDENT TRANSACTIONS. Wasserstein Perella reviewed
the financial terms, to the extent publicly available, of two announced and
completed mergers and acquisitions since January 1, 1995 in the full truckload
carriage industry (the "Full Truckload Transactions") and six announced or
completed mergers and acquisitions (including the two Full Truckload
Transactions) since January 1, 1995 in the general trucking industry (the
"Trucking Transactions"). These transactions were (i) the acquisition of the
Mayflower Group by Laidlaw announced on January 10, 1995; (ii) the acquisition
of Leaseway Transportation Corp. by Penske Truck Leasing, announced March 14,
1995; (iii) the acquisition of WorldWay Corp. ("WorldWay") by Arkansas Best
Corp., announced July 10, 1995; (iv) the acquisition of Caliber Systems Inc. by
Federal Express Corp., announced October 6, 1997; (v) the acquisition of MTL
Inc. ("MTL") by Apollo Management LP, announced February 2, 1998 and (vi) the
acquisition of Matlack Systems by Apollo Management LP, announced February 25,
1998. Both the Matlack Systems and the MTL transactions were Full Truckload
Transactions. The Matlack Systems transaction was not completed. Wasserstein
Perella calculated various financial multiples based on certain publicly
available information for each of the Full Truckload Transactions and the
Trucking Transactions and compared them to corresponding financial multiples for
the Merger, based on the Firm Merger Value. Wasserstein Perella noted that the
multiple of Firm Value was 7.3x the Expected Fiscal 1998 Adjusted EBITDA for the
Merger, versus (i) a range of 7.0x to 7.2x of trailing 12 months EBITDA with a
median of 7.1x for the Full Truckload Transactions and (ii) a range of 5.8x to
11.0x with a median of 7.4x for the Trucking Transactions. Wasserstein Perella
noted that all multiples for the Full Truckload Transactions and the Trucking
Transactions were based on information available at the time of announcement of
each of such transactions, without taking into account differing market and
other conditions during the period during which each of such transactions
occurred. Wasserstein Perella noted that based on the foregoing comparisons, and
subject to the limitations of its review, the multiples implied in the Merger
were generally within the ranges of multiples implied in the Full Truckload
Transactions and the Trucking Transactions and that this fact supported a
determination that the Cash Merger Price was fair to Celadon's stockholders
(other than the holders of the Rollover Shares).
DISCOUNTED CASH FLOW ANALYSIS. Wasserstein Perella performed discounted
cash flow analyses for Celadon using financial projections for fiscal years 1998
through 2003 provided by the management of Celadon. Celadon's management
prepared a set of financial projections which were based on management base
assumptions for future performance. Wasserstein Perella aggregated the present
value of the cash flows from 1998 through 2003 with the present value of a range
of terminal values. All cash flows were discounted at rates ranging from 11.0%
to 13.0%. The terminal values were computed using a range of multiples of 6.0x
to 7.0x for fiscal year 2002 EBITDA. Wasserstein Perella arrived at such
discount rates based on its judgment of the weighted average cost of capital of
selected publicly traded trucking companies, and arrived at such terminal values
based on its review of the trading characteristics of the common stock of
selected publicly traded trucking companies. This analysis indicated a range of
values for the Celadon Common Stock of $17.35 and $26.04 per share with a
midpoint of $21.70 per share. Wasserstein Perella noted that the Cash Merger
Price was within the foregoing valuation range and that this fact supported a
determination that the Cash Merger Price was fair to Celadon's stockholders
(other than the holders of the Rollover Shares).
LEVERAGED EQUITY RETURN ANALYSIS. Wasserstein Perella calculated the
projected internal rates of return that could be realized on the equity invested
in a leveraged acquisition of the Company at a purchase price per share of
Celadon Common Stock of $20.00 using projections provided by Celadon's
management. Wasserstein Perella assumed an initial post-transaction equity
amount invested in Celadon of $64.0 million, consisting of $60.0 million of
equity from Odyssey and $4.0 million consisting of the Rollover Shares. Assuming
that Celadon achieves between 90% and 110% of its projections, that the interest
rate on its $150 million of post-transaction subordinated debt ranges within
8.5% to 10.5%, and that its
33
terminal Firm Value multiples ranges from 6.0x to 7.0x EBITDA, this analysis
indicated a five year internal rate of return ranging from 8.6% to 38.0%. Based
on Wasserstein Perella's understanding of the return expectations of a financial
buyer, this supported a conclusion that the Company would be unlikely to achieve
a price from a financial buyer that was materially higher than the Cash Merger
Price.
RELEVANT MARKET AND ECONOMIC FACTORS. In rendering its opinion, Wasserstein
Perella considered, among other factors, the condition of the U.S. stock markets
and the current level of economic activity, particularly in the long haul
trucking industry. No company used in the analysis of certain other publicly
traded companies nor any transaction used in the analysis of selected mergers
and acquisitions summarized above is identical to Celadon or the Merger. In
addition, Wasserstein Perella believes that both the analysis of certain other
publicly traded companies and the analysis of selected mergers and acquisitions
are not simply mathematical. Rather, such analyses must take into account
differences in the financial and operating characteristics of these companies
and other factors, such as general economic conditions, conditions in the
traffic lanes and markets in which such companies compete and strategic and
operating plans for such companies, that could affect the public trading value
and acquisition value of these companies and therefore any such analyses must be
made as of a specific date.
While the foregoing summary describes the analyses and factors that
Wasserstein Perella deemed material in its presentation to the Board of
Directors of Celadon, it is not a comprehensive description of all analyses and
factors considered by Wasserstein Perella. 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 applications of these methods
to the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Wasserstein Perella believes that its
analyses must be considered as a whole and that selecting portions of its
analyses and of the factors considered by it, without considering all analyses
and factors, would create an incomplete view of the evaluation process
underlying the Wasserstein Perella Opinion. In performing its analyses,
Wasserstein Perella considered general economic, market and financial conditions
and other matters, as they existed as of the date of the Wasserstein Perella
Opinion, many of which are beyond the control of Celadon. The analyses performed
by Wasserstein Perella are not necessarily indicative of actual values or future
results, which may be significantly more or less favorable than those suggested
by such analyses. Accordingly, such analyses and estimates are inherently
subject to substantial uncertainty. Additionally, analyses relating to the value
of a business do not purport to be appraisals or to reflect the prices at which
the business actually may be sold. Furthermore, no opinion is being expressed as
to the prices at which the Celadon Common Stock may trade at any future time.
The terms of the Merger were determined through negotiations between Celadon
and Merger Sub and were approved by the Board of Directors of Celadon. Although
Wasserstein Perella provided advice to Celadon during the course of these
negotiations, the decision to enter into the Merger Agreement was solely that of
the Board of Directors of Celadon. As described above, the Wasserstein Perella
Opinion and the presentation of Wasserstein Perella to the Board of Directors of
Celadon were only one of a number of factors taken into consideration by such
Board in making its determination to approve the Merger. The Wasserstein Perella
Opinion was provided to the Board of Directors of Celadon to assist it in
connection with its consideration of the Merger and does not constitute a
recommendation to any holder of Celadon Common Stock as to how to vote with
respect to the Merger.
Pursuant to a letter agreement dated March 20, 1998 between Celadon and
Wasserstein Perella, the fee payable to Wasserstein Perella upon consummation of
the Merger will be approximately $3.0 million. Such fee is contingent upon the
consummation of the Merger. In addition, Celadon has agreed to reimburse
Wasserstein Perella for its reasonable out-of-pocket expenses incurred in
connection with rendering financial advisory services, including fees and
disbursements of its legal counsel. Celadon has agreed to indemnify Wasserstein
Perella and its directors, officers, agents, employees and controlling persons,
for certain costs, expenses, losses, claims, damages and liabilities related to
or arising out of its rendering of services under its engagement as financial
advisor.
34
The Board of Directors of Celadon retained Wasserstein Perella to act as its
advisor based upon Wasserstein Perella's qualifications, reputation, experience
and expertise. Wasserstein Perella is an internationally recognized investment
banking firm and, as a customary part of its investment banking business, is
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwriting transactions, private
placements and valuations for corporate and other purposes. Wasserstein Perella
may actively trade the debt and equity securities of Celadon for its own account
and for the account of its customers and accordingly may at any time hold a long
or short position in such securities.
CERTAIN PROJECTIONS
The Company does not as a matter of policy make public forecasts or
projections as to future performance or earnings. However, in connection with
the sale of the Company, the Company prepared projections of its anticipated
future operating performance of the five fiscal years ended June 30, 2002.
Such projections were prepared assuming that the sale had not occurred and
upon estimates and assumptions (including with respect to industry performance,
general economic and business conditions, taxes, and other matters) that
inherently are subject to material uncertainties and risk, all of which are
difficult to quantify and many of which are beyond the control of the Company.
The projections were not prepared with a view to public disclosure or compliance
with the published guidelines of the Commission or the guidelines established by
the American Institute of Certified Public Accountants regarding projections or
forecasts and are included herein only because such information was provided to
potential acquirors. The Company's internal operating projections are, in
general, prepared solely for internal use in connection with capital budgeting
and other management decisions and are subjective in many respects and thus
susceptible to various interpretations. Certain assumptions on which the
projections were based related to the achievement of strategic goals,
objectives, and targets over the applicable periods that are more favorable than
historical results. There can be no assurance that the assumptions made in
preparing the projections will prove accurate, and actual results may be
materially greater or less than those contained in the projections. Neither the
Company's independent auditors, nor any other independent accountants or
financial advisors, have compiled, examined, or performed any procedures with
respect to the projections contained herein, nor have they expressed any opinion
or any form of assurance on such information or its achievability, and assume no
responsibility for, and disclaim any association with, the projections. The
inclusion of the projections should not be regarded as an indication that the
Company, or any other person who received such information, considers it an
accurate prediction of future events. The Company does not intend to update,
revise, or correct such projections if they become inaccurate (even in the short
term).
The projections below constitute forward looking statements and involve
numerous risks and uncertainties. The Company's actual results may differ
materially from the results anticipated from the projections discussed herein as
a result of various factors, including, but not limited to, the effect of
changing economic or business conditions, weather conditions, competitive
initiatives and pricing pressures, shifts in market demand, the performance and
needs of industries served by the Company, actual future costs of operating
expenses such as fuel and related taxes, increases in labor costs, and
management retention. There can be no assurance that the Company will achieve
the results anticipated from the projections discussed herein.
Set forth below is a summary of the projections for the five fiscal years
ended June 30, 2002:
35
PROJECTED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PROJECTED FOR THE YEAR ENDING JUNE 30,
----------------------------------------------------------
1998 1999 2000 2001 2002
---------- ---------- ---------- ---------- ----------
Total revenues....................................... $ 226,271 $ 287,984 $ 331,727 $ 380,075 $ 436,543
Total operating expenses............................. 210,086 262,633 296,761 334,719 381,598
Operating income..................................... 16,185 25,351 34,966 45,356 54,945
Operating ratio...................................... 92.8% 91.2% 89.5% 88.1% 87.4%
Earnings before taxes................................ 10,319 16,344 24,146 32,623 39,751
Net income........................................... 6,372 10,133 14,488 19,574 23,851
Earnings per share................................... $ 0.82 1.30 $ 1.86 $ 2.51 $ 3.06
PROJECTED BALANCE SHEETS
(IN THOUSANDS)
PROJECTED AS AT JUNE 30,
----------------------------------------------------------
1998 1999 2000 2001 2002
---------- ---------- ---------- ---------- ----------
Total assets......................................... $ 190,290 $ 229,092 $ 269,449 $ 325,224 $ 373,065
Total liabilities.................................... 137,637 166,306 192,175 228,376 252,367
Total stockholders' equity........................... 52,641 62,774 77,262 96,836 120,686
Total liabilities & equity........................... $ 190,290 $ 229,092 $ 269,449 $ 325,224 $ 373,065
Material assumptions on which the revenue projections were based include the
following:
(a) Revenue growth is based upon an assumed overall medium term growth
rate of 15%. The Company anticipates that the revenue growth will stem from
market share gains, increased volume with existing customers and rate
increases. Revenue growth of 27.3% in 1999 reflects a full year's effect of
the acquisitions of GETS and Gerth, which occurred on September 3, 1997 and
May 22, 1998, respectively. Annual revenue growth is expected to reach
approximately 15% in 2000 and continue at that rate over the remaining
years.
(b) Revenue growth from the Company's dry van and Mexico operations
assumes increases in loads carried and to a lesser extent increases in
revenue per load. Revenue per load is projected to remain flat in 1999 and
then grow at the rate of 0.8% per year over the remaining projection period.
It is projected that this improvement in pricing performance will result
from the Company's pursuit of rate increases and the elimination of less
profitable business.
(c) Revenue growth from the Company's flatbed operations is expected to
grow 3% in 1999 and then at the rate of 10% annually over the remaining
projection period. This growth assumes increases in loads carried as well as
minor increases in revenue per load.
Material assumptions on which the operating expenses projections were based
include the following:
(a) The Company assumes that its operating ratio gradually decreases to
87.4% in 2002 from 92.8% as a result of the revenue growth on which its
revenue projections were based and as a result of the cost trends described
below.
(b) Driver compensation rates are expected to increase at the rate of
approximately 1% per year throughout the projection period, due to projected
improvements in driver retention and resulting seniority mix changes. Owner
-operator compensation rates are expected to increase at the rate of
approximately 1.2% annually due to increases in the owner-operator pay
package. Owner-operator capacity as a percentage of total capacity is
expected to increase from 10.1% in 1998 to 15.2% by 2002.
36
(c) Fuel expense as a percentage of Company tractor generated revenue
decreases from 17.7% in 1998 to 17.1% by 2002. The Company realized fuel
hedge losses in 1998 that are not projected to recur during the projection
period.
(d) A decrease in operating supplies and maintenance expenses as a
percentage of revenue over the course of the projection period is based upon
the assumption that higher revenues are achieved without a corresponding
increase in costs, reflecting increased efficiencies associated with a
larger base of operations.
(e) An increase in depreciation and amortization from 5.8% of revenues
to 7.1% of revenues over the projection period is primarily based on the
Company's plan to finance all future equipment purchases under capital
leases. Historically the Company has utilized a combination of operating
leases and capital leases to finance equipment purchases. A corresponding
decrease in equipment lease expense is included in the projections. The sum
of depreciation and equipment lease expense as a percentage of revenue
decreases over the projection period due to expected improvements in
equipment utilization as the Company improves driver retention and increases
traffic density along key lanes.
(f) The Company expects its costs related to insurance and claims, taxes
and licenses, and communications to remain constant at 2.9%, 2.0% and 1.8%
of total revenue, respectively. These costs fundamentally vary with the size
of the Company's overall operation.
(g) Selling and administrative expenses as a percentage of revenues
decrease over the projection period since it is assumed that higher revenues
are achieved without a corresponding increase in costs. The Company does not
anticipate a significant increase in back-office resources over the
projection period and does not expect to add personnel to its corporate
staff.
(h) Interest expense is projected to increase from $6.0 million in 1998
to $15.2 million in 2002 primarily as a result of the Company's plan to
finance all future equipment purchases under capital leases. Historically,
the Company has utilized a combination of operating leases and capital
leases to finance equipment purchases. This increase in interest expense is
net of interest expense decreases resulting from decreasing working capital
loan balances over the projection period. These projections assume that
excess cash is assumed to be used to reduce outstanding balances under the
Company's bank loan agreement. The Company has assumed that the interest
rates on all of its debt obligations will remain consistent with current
rates.
(i) The Company is projecting its effective income tax rate to be 40.0%
in 1999 through 2002.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Company's Board of Directors that
stockholders vote in favor of the Merger Agreement, stockholders should be aware
that certain members of Celadon's management and Board of Directors have certain
interests in the Merger that are in addition to, and may be deemed to be in
conflict with, the interests of the stockholders of Celadon generally.
OFFICERS OF THE SURVIVING CORPORATION. All members of the Company's current
management will continue as such after the Effective Time until their successors
are duly appointed or elected in accordance with applicable law. See "Directors
and Executive Officers of the Surviving Corporation."
BENEFITS UNDER EMPLOYMENT AGREEMENTS, SIGNING BONUSES, AND NEW STOCK OPTION
PLAN. The Company has existing employment agreements with each member of the
Management Team, other than Robert Goldberg, Executive Vice President and Chief
Financial Officer of the Company. At the Effective Time, the Surviving
Corporation will enter into new employment agreements (each a "New Employment
Agreement") with each member of the Management Team, including Mr. Goldberg. The
New Employment Agreements executed by Messrs. Russell, Roman and Archual, and by
Ms. Morris, will be on terms at least as favorable as those contained in their
existing employment agreements, and the employment
37
agreement executed by Mr. Goldberg shall be consistent with that of Mr. Roman.
The New Employment Agreements will each (a) have a three-year term (except for
that of Mr. Russell, which shall have a four-year term), and (b) provide for
certain severance payments to be made upon (i) termination of the officer's
employment by the Surviving Corporation without "cause" or (ii) the failure to
offer such officer continued employment with the Surviving Corporation upon
expiration of the term of his or her New Employment Agreement, on substantially
similar terms as set forth therein. In addition, an annual bonus plan, and a
stock option plan with respect to an aggregate amount of 7.5% of the common
stock of the Surviving Corporation, will be instituted for approximately twenty
of the Company's executives, including the Management Team. The chart below
describes the interests of Stephen Russell and the other members of the
Management Team in the Company both prior to and following the Merger, and the
benefits to be received by the Management Team upon consummation of the Merger:
SHARES HELD OPTIONS HELD
PRIOR TO ROLLOVER PRIOR TO ROLLOVER NEW SIGNING
NAME MERGER SHARES MERGER OPTIONS OPTIONS BONUS
- -------------------------- --------------- ------------ ----------------- ------------ ----------- ----------
Stephen Russell........... 924,804 200,000 70,000 70,000 65,000 $ 500,000
Ronald S. Roman........... 1,000 0 45,000 10,000 42,000 $ 200,000
Robert Goldberg........... 0 0 20,000 4,000 20,000 $ 150,000
Michael Archual........... 4,200 0 17,500 1,000 12,000 $ 127,500
Nancy Morris.............. 1,000 0 14,000 5,000 20,000 $ 140,000
RETENTION OF ROLLOVER SHARES. At the Effective Time, an aggregate of
320,000 shares of Celadon Common Stock held by Stephen Russell and Hanseatic
will be converted into shares of Surviving Corporation Common Stock on a
share-for-share basis. The Rollover Shares represent approximately 4.1% of the
outstanding shares of Celadon Common Stock and will represent approximately 10%
of the total outstanding shares of the Surviving Corporation Common Stock
immediately following the Effective Time.
The Rollover Shares are held as follows:
NAME NUMBER OF SHARES
- --------------------------------------------------------------------------- -----------------
Stephen Russell............................................................ 200,000 shares
Hanseatic Corporation...................................................... 120,000 shares
OPTIONS AND WARRANTS. As of June 23, 1998, the directors and executive
officers of the Company held Options to acquire an aggregate of 317,121 shares
of Celadon Common Stock and Hanseatic held Hanseatic Warrants to acquire an
aggregate of 12,121 shares of Celadon Common Stock. Except with respect to the
Rollover Options, under the terms of the Merger Agreement, each holder of
Options and Hanseatic will receive in cash an amount equal to the number of
shares of Celadon Common Stock subject to such Options or Hanseatic Warrants
(regardless of whether or not such Options and Hanseatic Warrants are then
exercisable or vested) multiplied by the amount by which the Cash Merger Price
exceeds the exercise price of such Options or Hanseatic Warrants, less any
applicable withholding taxes. Pursuant to such provision, the executive officers
and directors of Celadon will be entitled to receive for their Options an
aggregate of approximately $1,644,305 (before federal and state income taxes)
upon consummation of the Merger, and Hanseatic will be entitled to receive
$111,271 for the Hanseatic Warrants.
The executive officers and directors named in the table below (a) held the
number of outstanding Options indicated as of June 23, 1998, (b) held the number
of Rollover Options indicated as of June 23, 1998, and (c) will receive the
indicated amounts before federal and state income taxes in respect of Options or
Hanseatic Warrants pursuant to the Merger Agreement. As of June 23, 1998
Hanseatic held the
38
Hanseatic Warrants indicated in the table below and will receive the indicated
amount before federal and state income taxes in respect of the Hanseatic
Warrants pursuant to the Merger Agreement.
WEIGHTED
OPTIONS OR AVERAGE AMOUNT
WARRANTS EXERCISE OF ROLLOVER
NAME OUTSTANDING PRICE PAYMENT OPTIONS
- -------------------------------------------------------- --------------- ------------- ----------- ------------
Stephen Russell......................................... 70,000 $ 12.01 0 70,000
Ronald S. Roman......................................... 45,000 $ 9.89 $ 353,850 10,000
Robert Goldberg......................................... 20,000 $ 14.25 $ 92,000 4,000
Michael Archual......................................... 17,500 $ 9.71 $ 169,785 1,000
Nancy L. Morris......................................... 14,000 $ 11.12 $ 79,920 5,000
Michael W. Dunlap....................................... 10,000 $ 12.06 $ 79,400 0
Paul A. Will............................................ 15,000 $ 12.71 $ 109,350 0
Paul A. Biddleman....................................... 32,500 $ 13.60 $ 208,000 0
Michael Miller.......................................... 32,500 $ 13.60 $ 208,000 0
Joel E. Smilow.......................................... 16,000 $ 11.50 $ 136,000 0
Kilin To................................................ 32,500 $ 13.60 $ 208,000 0
Hanseatic Corporation................................... 12,121 $ 10.82 $ 111,271
------- ------ ----------- ------------
Total............................................. 317,121 $ 12.19 1,644,305 90,000
PRESENT INTERESTS IN CELADON COMMON STOCK. As of June 23, 1998, the
directors and executive officers of Celadon owned an aggregate of 2,069,345
shares of Celadon Common Stock (excluding shares subject to Options). Excluding
the Rollover Shares owned by Stephen Russell, 1,869,345 shares will be converted
into the right to receive the Cash Merger Price per share pursuant to the Merger
Agreement. Such Cash Merger Price will be $37,144,500 in the aggregate. The
executive officers and directors named in the table below (a) held the number of
shares of Celadon Common Stock indicated as of June 23, 1998, (b) will receive
the Cash Merger Price in respect of the number of shares indicated, (c) will
receive the indicated aggregate amount in respect to all shares held other than
the Rollover Shares, and (d) will retain the indicated number of Rollover
Shares.
SHARES TO BE
AGGREGATE EXCHANGED AMOUNT AGGREGATE
NUMBER OF FOR CASH TO BE ROLLOVER
NAME SHARES OWNED MERGER PRICE RECEIVED SHARES
- ------------------------------------------- ----------------- ---------------- --------------- -------------
Stephen Russell............................ 924,804 724,805 $ 14,496,100 200,000
Ronald S. Roman............................ 1,000 1,000 $ 20,000 0
Robert Goldberg............................ 0 0 $ 0 0
Michael Archual............................ 4,200 4,200 $ 84,000 0
Nancy L. Morris............................ 1,000 1,000 $ 20,000 0
Michael W. Dunlap.......................... 0 0 $ 0 0
Paul A. Will............................... 0 0 $ 0 0
Paul A. Biddleman(1)....................... 862,935 982,935 $ 17,258,700 120,000
Michael Miller............................. 0 0 $ 0 0
Joel E. Smilow............................. 119,200 119,200 $ 2,384,000 0
Kilin To................................... 24,085 24,085 $ 481,700 0
Total...................................... 2,069,345 1,629,345 $ 34,744,500 320,000
- ------------------------
(1) 946,021 of such shares of Celadon Common Stock are owned by Hanseatic
Americas LDC, a Bahamian limited duration company in which the sole managing
member is Hansabel Partner LLC, a Delaware limited liability company in
which Hanseatic is the sole managing member. Mr. Biddleman is President of
Hanseatic and holds shared voting and investment power with respect to the
shares held by Hanseatic. The remaining 36,916 shares are held by Hanseatic
for discretionary customer accounts. Excludes 924,804 shares of Celadon
Common Stock owned by Mr. Russell that are subject
39
to a stockholder agreement among Mr. Russell, Hanseatic and the Company,
which agreement is to be terminated prior to the Effective Time.
INDEMNIFICATION OF OFFICERS AND DIRECTORS. The Merger Agreement provides
that the Surviving Corporation will use best efforts to provide a run-off policy
for the current directors and officers liability insurance policy maintained by
the Company, which run-off policy will remain in effect for a period of six
years after the Effective Time of the Merger, at a premium not to exceed 125% of
the annual premium of the Company's directors and officers insurance policy in
effect as of the date of the Merger Agreement. In addition, the Merger Agreement
provides that all rights to indemnification for acts or omissions occurring
prior to the Effective Time in favor of the current or former directors or
officers of the Company, as provided in the Articles of Incorporation or By-laws
of the Company, will survive the Merger and continue in full force and effect in
accordance with their terms from the Effective Time to the maximum extent
permitted by law with respect to any claims against the current or former
directors or officers of the Company arising out of such acts or omissions.
VOTING AGREEMENT. Stephen Russell, President, Chief Executive Officer, and
Chairman of the Board of the Company and Hanseatic, have entered into the Voting
Agreement with Merger Sub, pursuant to which they have each agreed to vote their
respective shares of Celadon Common Stock (including shares issuable upon
exercise of Options prior to the Effective Time) in favor of the Merger
Agreement and the transactions contemplated thereby at the Special Meeting or
any adjournment thereof. Paul Biddleman, President of Hanseatic, is Hanseatic's
designee to the Company's Board of Directors. Unless the Merger Agreement has
been terminated in accordance with its terms, such stockholders agreed to vote
their respective shares of Celadon Common Stock against (i) any merger agreement
or merger (other than the Merger Agreement and Merger), consolidation, sale of
substantially all of the assets, reorganization, dissolution, or other similar
transaction or any other Acquisition Proposal, and (ii) any amendment of the
Company's Certificate of Incorporation or By-Laws or other proposal or
transaction involving the Company or any of its subsidiaries, which amendment or
other proposal or transaction would in any manner impede, frustrate, prevent, or
nullify the Merger, the Merger Agreement, or any of the other transactions
contemplated thereby. Until the Merger is consummated or the Merger Agreement is
terminated in accordance with its terms, such stockholders agreed they will not
transfer their shares to any person other than Merger Sub or its designee, or
enter into any other voting arrangement with respect to their shares. The Voting
Agreement terminates upon the consummation of the transactions contemplated by
the Merger Agreement or in the event the Board recommends or the stockholders
approve or accept an Acquisition Proposal received by the Company. As of June
23, 1998, the parties to the Voting Agreement owned 1,907,739 shares of Celadon
Common Stock, or 25% of the outstanding Celadon Common Stock.
LITIGATION
Two substantially similar litigations were filed by the same law firm in the
Delaware Court of Chancery in and for New Castle County (David Finkelstein v.
Stephen Russell et. al (the "Finkelstein Action") and Lila Gold and Jocelyn
Feuerstein v. Stephen Russell et. al, (the "Gold Action") (civil action nos.
16480NC and 16481NC, respectively)) challenging the proposed Merger. In sum,
these putative class actions allege that the $20.00 per share to be paid
pursuant to the Merger would permit management of the Company to acquire the
public shares of the Company for less than fair and adequate consideration
because, inter alia, the intrinsic value of the Celadon Common Stock is claimed
to be (an unspecified amount) higher, the Cash Merger Price allegedly does not
provide an adequate premium to the public stockholders of the Company, and the
Cash Merger Price is supposedly arbitrary, not the result of arm's length
negotiations and reached without "shopping" the Company or taking other
(unspecified) steps to ascertain the best price for the Company. Both actions
name the Company and its directors and claim that the individual defendants
breached their fiduciary duties to the Company and its stockholders. Odyssey
Investment Partners, LLC, manager of Odyssey, is also named in the Finkelstein
Action. The complaints seek certification of the class, certain injunctive and
declaratory relief, rescission of the Merger if it is consummated, and
unspecified money damages and costs. The Gold Action and the Finkelstein Action
40
have been recently consolidated into one action (civil action no. 16480NC). No
answer has yet been filed to this complaint. The Company believes that the
allegations are not supported by the facts, including the financial analyses
provided by Wasserstein Perella, and as a result that it will be successful in
defending this action.
CERTAIN EFFECTS OF THE MERGER
If the Merger is consummated, the Company's stockholders (other than the
holders of the Rollover Shares, the Excluded Shares, and the Dissenting Shares)
will have the right to receive $20.00 in cash, without interest, for each share
of Celadon Common Stock held immediately prior to the Effective Time. As a
result of the Merger, such stockholders will cease to have any ownership
interest in Celadon and will cease to participate in future earnings and growth,
if any, of Celadon. Moreover, if the Merger is consummated, public trading of
the Celadon Common Stock will cease, the Celadon Common Stock will cease to be
quoted on the Nasdaq National Market, the registration of the Celadon Common
Stock under the Exchange Act will be terminated and the Company will cease
filing reports with the Commission.
Immediately after the Merger, approximately 90% of the outstanding shares of
Surviving Corporation Common Stock will be owned by Odyssey and the remaining
10% will be owned by Stephen Russell, President, Chief Executive Officer, and
Chairman of the Company and Hanseatic, an affiliate of a director of the
Company. See "--Interests of Certain Persons in the Merger" and "Certain
Provisions of the Merger--Treatment of Securities in the Merger."
The Merger Agreement provides that the current directors of the Company will
be replaced by the directors of the Merger Sub. All members of the Company's
current management will continue as such after the Effective Time. See
"Directors and Executive Officers of the Surviving Corporation."
Upon consummation of the Merger, the Surviving Corporation expects to
refinance certain existing indebtedness and capital leases of Celadon. See
"Financing of the Merger."
It is currently anticipated that the Surviving Corporation will be operated
after the Merger in a manner substantially the same as Celadon's current
operations.
ACCOUNTING TREATMENT OF TRANSACTION
The Merger will be accounted for as a recapitalization. Accordingly the
historical basis of Celadon's assets and liabilities will not be impacted by the
Merger and the transactions contemplated thereby.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes the material federal income tax
consequences of the Merger that are generally applicable to holders of Celadon
Common Stock who, pursuant to the Merger, exchange all of their Celadon Common
Stock for cash. The discussion is generally limited to the federal income tax
consequences to stockholders who hold Celadon Common Stock as capital assets
(within the meaning of Section 1221 of the Code). The discussion is based upon
current provisions of the Code, currently applicable Treasury regulations, and
judicial and administrative decisions and rulings. Future legislative, judicial,
or administrative changes or interpretations could alter or modify the
statements and conclusions set forth herein, and any such changes or
interpretations could be retroactive and could affect the tax consequences to
the stockholders of the Company.
The discussion below does not purport to deal with all aspects of federal
income taxation that may affect particular stockholders in light of their
individual circumstances, and is not intended for stockholders subject to
special treatment under the federal income tax law (including insurance
companies, tax-exempt organizations, financial institutions, broker-dealers,
foreign persons, stockholders who hold their stock as part of a hedge,
appreciated financial position, straddle or conversion transaction, stockholders
who do not hold their stock as capital assets, and stockholders who have
acquired their stock upon the exercise of employee options or otherwise as
compensation). Furthermore, the discussion below does not
41
address the federal income tax consequences of the Merger to (i) stockholders
who hold Rollover Shares and/or Rollover Options (including, without limitation,
the federal income tax consequences to such stockholders of the receipt of cash
pursuant to the Merger) or (ii) stockholders who may be considered to own shares
of stock of the Surviving Corporation after the Effective Time through
application of constructive ownership rules of Section 318 of the Code (which,
in very general terms, deem a stockholder to own shares of stock that are owned
by certain members of his or her family (spouse, children, grandchildren, and
parents) and other related parties including, for example, certain entities in
which such stockholder has a direct or indirect interest (including
partnerships, estates, trusts and corporations), as well as shares of stock that
such stockholder (or a related party) has the right to acquire upon exercise of
an option or conversion right). In addition, the discussion below does not
consider the effect of any applicable state, local, or foreign tax laws.
EACH HOLDER OF CELADON COMMON STOCK IS STRONGLY URGED AND EXPECTED TO
CONSULT WITH SUCH HOLDER'S TAX ADVISOR TO DETERMINE THE PARTICULAR FEDERAL
INCOME TAX CONSEQUENCES OF THE MERGER TO SUCH HOLDER IN LIGHT OF SUCH HOLDER'S
SPECIFIC CIRCUMSTANCES AS WELL AS THE APPLICABILITY AND EFFECT OF STATE, LOCAL,
AND FOREIGN TAX LAWS.
THE MERGER. A stockholder who, pursuant to the Merger, exchanges all of
such stockholder's Celadon Common Stock for cash will recognize gain or loss
equal to the difference between (a) the amount of cash such stockholder receives
in the Merger and (b) the stockholder's adjusted tax basis in such shares. In
general, such gain or loss will be capital gain or loss, and will be a long-term
capital gain or loss if at the Effective Time the stockholder's holding period
for the Celadon Common Stock is more than one year. Under recently enacted
legislation, the 20% maximum tax rate on long-term capital gains would apply to
capital assets held by an individual stockholder for more than one year. In the
event the stockholder's holding period for the Celadon Common Stock is one year
or less, gain or loss on the exchange will be treated as short term capital gain
or loss. The tax rate applicable to an individual stockholder with respect to
short term capital gains is equal to the tax rate on ordinary income, which
presently ranges between 15 and 39.6 percent depending upon the stockholder's
taxable income and filing status. In general, short term capital losses may be
utilized to offset short or long term capital gains and, with respect to
individual stockholders, up to $3,000 of capital losses in excess of capital
gains may be used to offset other taxable income.
BACKUP WITHHOLDING. Stockholders who own Celadon Common Stock should be
aware that the Company will be required in certain cases to withhold and remit
to the United States Internal Revenue Service 31% of amounts payable in the
Merger to any person (a) who has provided either an incorrect tax identification
number or no number at all, (b) who is subject to backup withholding by the
Internal Revenue Service for failure to report the receipt of interest or
dividend income properly, or (c) who has failed to certify to the Company that
it is not subject to backup withholding or that is an "exempt recipient." Backup
withholding is not an additional tax, but rather may be credited against the
taxpayer's tax liability for the year.
42
APPRAISAL RIGHTS
The following summary does not purport to be a complete statement of the
provisions of Delaware law relating to the appraisal rights of stockholders and
is qualified in its entirety by reference to the provisions of Section 262 of
the DGCL set forth in full as Annex B to this Proxy Statement.
Holders of record of shares of Celadon Common Stock who meet the
requirements summarized herein and comply with the applicable procedures
summarized herein will be entitled to appraisal rights under Section 262 of the
DGCL. A person having a beneficial interest in shares of Celadon Common Stock
held of record in the name of another person, such as a broker or nominee, must
act promptly to cause the record holder to follow the steps summarized below
properly and in a timely manner to perfect appraisal rights.
ALL REFERENCES IN SECTION 262 AND IN THIS SUMMARY TO A "STOCKHOLDER" ARE TO
THE RECORD HOLDER OF CELADON COMMON STOCK AS TO WHICH APPRAISAL RIGHTS ARE
ASSERTED. VOTING AGAINST, ABSTAINING FROM VOTING OR FAILING TO VOTE ON APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT WILL NOT CONSTITUTE A DEMAND FOR APPRAISAL
WITHIN THE MEANING OF SECTION 262 OF THE DGCL.
Stockholders who meet the requirements and follow the procedures set forth
in Section 262 of the DGCL may receive, in lieu of the $20.00 cash of Celadon
Common Stock to be paid in the Merger, a cash payment equal to the "fair value"
of their shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by the Court of Chancery. Such fair value is to
be determined by judicial appraisal and could be more than, the same as, or less
than, the Cash Merger Price. The statutory right of appraisal granted in Section
262 is subject to strict compliance with the procedures set forth below and in
Section 262. Failure to follow any of these procedures may result in termination
or waiver of appraisal rights under Section 262.
To be entitled to receive payment of the fair value of the shares of Celadon
Common Stock, a stockholder (a) must file a written demand for appraisal of his
or her shares with the Company prior to the voting by stockholders on the Merger
Agreement at the Special Meeting (such demand must reasonably inform the Company
of the identity of the stockholder and that the stockholder intends thereby to
demand an appraisal of his or her shares); (b) must not vote his or her shares
in favor of approval and adoption of the Merger Agreement; and (c) must have his
or her shares valued in an appraisal proceeding, as described below. A proxy or
vote against approval and adoption of the Merger Agreement will not satisfy the
requirement that a stockholder file a written demand for appraisal as set forth
above. The requirement of a written demand is separate from, and should not be
confused with, the requirement that a stockholder not vote in favor of approval
and adoption of the Merger Agreement. A failure to vote on the Merger Agreement
will not be construed as a vote in favor of approval and adoption of the Merger
Agreement and will not constitute a waiver of a stockholder's rights of
appraisal. A stockholder who returns a signed proxy indicating that he or she
abstains from voting will similarly not waive his or her rights of appraisal.
However, because a proxy signed and left blank will, unless properly revoked, be
voted in favor of approval and adoption of the Merger Agreement, a stockholder
who returns a signed proxy left blank will waive his or her rights of appraisal.
Therefore, a stockholder electing to exercise appraisal rights who votes by
proxy must not leave his or her proxy blank, but must either vote against
approval and adoption of the Merger Agreement or abstain from voting.
A holder of shares of Celadon Common Stock wishing to exercise such holder's
appraisal rights must be the record holder of such shares on the date the
written demand for appraisal is made and must continue to hold such shares of
record until the Effective Time of the Merger. Accordingly, a holder of shares
of Celadon Common Stock who is the record holder of such shares on the date the
written demand for appraisal is made, but who thereafter transfers such shares
prior to the Effective Time of the Merger, will lose any right to appraisal in
respect to such shares.
43
Only a holder of record of shares of Celadon Common Stock is entitled to
assert appraisal rights for the shares registered in the holder's name. A demand
for appraisal should be executed by or on behalf of the holder of record, fully
and correctly, as such holder's name appears on such holder's stock
certificates. If the shares are owned of record in a fiduciary capacity, such as
by a trustee, guardian or custodian, execution of the demand should be made in
that capacity, and if the shares are owned of record by more than one person as
in a joint tenancy or tenancy in common, the demand should be executed by or on
behalf of all joint owners. An authorized agent, including an agent for two or
more joint owners, may execute a demand for appraisal on behalf of a holder of
record; however, the agent must identify the record owner or owners and
expressly disclose the fact that, in executing the demand, the agent is an agent
acting for such owner or owners. A record holder such as a broker who holds
shares as nominee for several beneficial owners may exercise appraisal rights
with respect to the shares held for one or more beneficial owners; in such case,
the written demand should set forth the number of shares as to which appraisal
is sought, and where no number of shares is expressly mentioned the demand will
be presumed to cover all shares held in the name of the record owner.
Stockholders who hold their shares in brokerage accounts or other nominee forms
and who wish to exercise appraisal rights are urged to consult with their
brokers to determine the appropriate procedures for the making of a demand for
appraisal by such a nominee.
If the Merger Agreement is approved and adopted by the stockholders, the
Surviving Corporation will send a notice within ten days after the Effective
Time to each stockholder who has complied with Section 262 of the DGCL by
delivering to the Company a demand for appraisal of his or her shares and not
voting in favor of or consenting to the Merger, stating the date that the Merger
became effective. Within 120 days after the Effective Time, the Surviving
Corporation, or any stockholder seeking appraisal rights who has theretofore
complied with Section 262, may file a petition in the Court of Chancery
demanding a determination of the value of shares of all stockholders seeking
appraisal rights. The Surviving Corporation is under no obligation, and has no
present intention, to file such a petition, and all stockholders seeking to
exercise appraisal rights should initiate all necessary action with respect to
the perfection of their appraisal rights within the time periods and in the
manner prescribed in Section 262. Within 120 days after the Effective Time, any
stockholder who has complied with the provisions of Section 262, upon written
request, shall be entitled to receive from the Surviving Corporation a statement
setting forth the aggregate number of shares of Celadon Common Stock not voted
in favor of approval and adoption of the Merger Agreement and with respect to
which demands for appraisal have been received and the aggregate number of
holders of such shares. Such written statement must be mailed to any such
stockholder within ten days after his or her written request for such a
statement is received by the Surviving Corporation or within ten days after
expiration of the period of delivery of demands for appraisal under Section
262(d), whichever is later.
If a petition for appraisal is timely filed, the Court of Chancery will
conduct a hearing on such petition to determine whether the stockholders seeking
appraisal rights have complied with Section 262 and have thereby become entitled
to appraisal rights. The Court of Chancery will then determine the fair value of
the shares of Celadon Common Stock exclusive of any element of value arising
from the expectation or accomplishment of the Merger, but including a fair rate
of interest, if any, to be paid on the amount determined to be the fair value.
In determining fair value, the Court of Chancery is to take into account all
relevant factors. Stockholders considering appraisal should bear in mind that
the fair value of their shares determined under Section 262 could be more than,
the same as, or less than, the consideration they will receive pursuant to the
Merger Agreement if they do not seek appraisal of their shares, and that the
written opinion of Wasserstein Perella set forth as Annex B hereto is not
necessarily an opinion regarding fair value under Section 262. The Delaware
Supreme Court has stated that "proof of value by any techniques or methods which
are generally considered acceptable in the financial community and otherwise
admissible in court" should be considered in the appraisal proceedings.
The Court of Chancery will determine the amount of interest, if any, to be
paid upon the amounts to be received by persons whose shares have been
appraised. The costs of the appraisal proceeding may be
44
assessed against one or more parties to the proceeding as the Court of Chancery
may consider equitable. Upon application by a stockholder, the Court of Chancery
may order all or a portion of the expenses incurred by any stockholder in
connection with the appraisal proceedings (including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts) to be charged
pro rata against the value of all of the shares of Celadon Common Stock entitled
to an appraisal.
A stockholder will fail to perfect his or her right of appraisal if he or
she (a) does not deliver a written demand for appraisal to the Company prior to
the vote for approval and adoption of the Merger Agreement, (b) votes his or her
shares of Celadon Common Stock in favor of approval and adoption of the Merger
Agreement, (c) does not file a petition for appraisal within 120 days after the
Effective Time, or (d) delivers to the Company both a written withdrawal of his
or her demand for appraisal and an acceptance of the terms of the Merger
Agreement, except that any such attempt to withdraw such demand not made within
60 days after the Effective Time requires the written approval of the Company.
If any stockholder who properly demands appraisal of such stockholder's shares
of Celadon Common Stock under Section 262 fails to perfect, or effectively
withdraws or loses, such stockholder's right to appraisal, the shares of Celadon
Common Stock of such stockholder will be converted into the right to receive the
Cash Merger Price receivable with respect to such shares in accordance with the
Merger Agreement.
If an appraisal proceeding is properly instituted, such proceeding may not
be dismissed as to any stockholder who has perfected his or her right of
appraisal without the approval of the Court of Chancery, and any such approval
may be conditioned on such terms as the Court of Chancery deems just.
After the Effective Time, no stockholder who has demanded appraisal rights
will be entitled to vote his or her shares of Celadon Common Stock for any
purpose or to receive dividends on, or other distributions in respect of, such
shares (except dividends or distributions payable to stockholders as of a record
date prior to the Effective Time).
Delaware courts have decided that the statutory appraisal remedy, depending
on factual circumstances, may or may not be a dissenter's exclusive remedy.
Several decisions by the Delaware courts have held that a controlling
stockholder has a fiduciary duty to the other stockholders which requires that
the merger be "entirely fair" to such other stockholders. In determining whether
a merger is fair to minority stockholders, the Delaware courts have considered,
among other things, the type of and amount of consideration to be received by
stockholders and whether there was fair dealing among the parties. The Delaware
Supreme Court stated in Weinberger v. UOP, Inc., 457 A.2d 701, 714 (1983), that
although the remedy ordinarily available in a merger that is found not to be
"fair" to minority stockholders is the right to appraisal described above, such
appraisal remedy may not be adequate "in certain cases, particularly where
fraud, misrepresentations, self-dealing, deliberate waste of corporate assets,
or gross and palpable overreaching are involved," and that in such cases the
Chancery Court would be free to fashion any form of appropriate relief.
FAILURE BY A STOCKHOLDER TO FOLLOW THE STEPS REQUIRED BY DELAWARE LAW FOR
PERFECTING RIGHTS OF APPRAISAL MAY RESULT IN THE LOSS OF SUCH RIGHTS. IN VIEW OF
THE COMPLEXITY OF THESE PROVISIONS OF THE DELAWARE GENERAL CORPORATION LAW,
STOCKHOLDERS WHO ARE CONSIDERING DISSENTING FROM THE APPROVAL AND ADOPTION OF
THE MERGER AGREEMENT AND EXERCISING THEIR RIGHTS UNDER SECTION 262 SHOULD
CONSULT THEIR LEGAL ADVISORS.
All written communications from stockholders with respect to the exercise of
appraisal rights should be mailed to Celadon Group, Inc., One Celadon Drive,
Indianapolis, Indiana 46235-4207, Attention: Secretary.
45
REGULATORY APPROVALS
The consummation of the Merger is subject to the expiration or termination
of the statutory waiting period under the HSR Act. Under the HSR Act and the
rules promulgated thereunder, the Merger may not be consummated until
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division and the applicable statutory waiting period has
expired or been terminated. Celadon and Merger Sub will be filing notification
and report forms under the HSR Act with the FTC and the Antitrust Division.
CERTAIN RELATED AGREEMENTS
Certain related agreements will be entered into in connection with the
Merger Agreement. These agreements include a stockholder's agreement governing
certain aspects of the relationship between the holders of the Rollover Shares
and Odyssey and an agreement granting Odyssey certain registration rights
relating to Surviving Corporation Common Stock. The terms of such agreements are
being negotiated.
CERTAIN PROVISIONS OF THE MERGER AGREEMENT
The following is a brief summary of the material aspects of the Merger
Agreement, which appears as Annex A to this Proxy Statement and is incorporated
herein by reference. This summary is qualified in its entirety by reference to
the Merger Agreement.
GENERAL
The Merger Agreement provides that, following the approval of the Merger and
the adoption of the Merger Agreement by the vote of the holders of a majority of
the issued and outstanding shares of the Celadon Common Stock and the
satisfaction or waiver of the other conditions to the Merger, Merger Sub will be
merged with and into Celadon, and Celadon will continue as the Surviving
Corporation after the Merger.
Upon the terms and subject to the conditions of the Merger Agreement, at the
closing of the Merger the parties will cause the Certificate of Merger to be
executed and filed in accordance with the requirements of the DGCL. Unless
otherwise agreed between the Merger Sub and the Company and so stated in the
Certificate of Merger, the Merger will become effective upon the filing of the
Certificate of Merger with the Delaware Secretary of State in accordance with
the DGCL.
TREATMENT OF SECURITIES IN THE MERGER
At the Effective Time, the shares of Celadon Common Stock and Options in
respect thereof will be treated as follows:
CASH MERGER PRICE. At the Effective Time, each share of Celadon Common
Stock held by the Company's stockholders (other than the Rollover Shares, the
Excluded Shares, and the Dissenting Shares) will be converted into the right to
receive the Cash Merger Price.
PAYMENT OF CASH MERGER PRICE. The Cash Merger Price will be paid as soon as
practicable after the Effective Time upon receipt by the Paying Agent of
certificates representing the shares of Celadon Common Stock held by such
stockholders. No interest will be paid or accrued on the Cash Merger Price. As
of or at the Effective Time, Merger Sub will deposit with the Paying Agent for
the benefit of the holders of shares of Celadon Common Stock, the funds
necessary to pay the Cash Merger Price for each share payable pursuant to the
terms of the Merger Agreement. As soon as practicable after the Effective Time,
the Paying Agent will mail to each record holder of Celadon Common Stock a
notice and letter of transmittal advising the holder of the effectiveness of the
Merger and the procedure for surrendering certificates to the Paying Agent for
exchange into the Cash Merger Price. Stockholders should not forward stock
certificates to the Paying Agent until they have received transmittal forms.
Certificates should not be
46
returned with the enclosed proxy cards. From and after the Effective Time, the
stock transfer books of the Company in place prior to the Effective Time will be
closed and thereafter there will be no transfers on such books of the shares of
Celadon Common Stock which were outstanding immediately prior to the Effective
Time.
ROLLOVER SHARES. At the Effective Time, the Rollover Shares will be
converted on a share-for-share
basis into shares of the Surviving Corporation Common Stock. The Rollover Shares
represent approximately 4.1% of the outstanding shares of Celadon Common Stock
and will represent approximately 10% of the total outstanding shares of
Surviving Corporation Common Stock immediately following the Effective Time.
Stephen Russell (Chairman, Chief Executive Officer, and President of Celadon)
and Hanseatic own, respectively, 200,000 and 120,000 Rollover Shares, which
represent approximately 2.6% and 1.6% of the outstanding shares of Celadon
Common Stock and which will represent approximately 6.25% and 3.75%,
respectively, of the total outstanding shares of Surviving Corporation Common
Stock immediately following the Effective Time. See "Special Factors--Interests
of Certain Persons in the Merger--Retention of Rollover Shares."
EXCLUDED SHARES. At the Effective Time, each share of Celadon Common Stock
held in the Company's treasury, if any, will be canceled and retired without
payment of any consideration therefor.
ISSUANCE OF SURVIVING CORPORATION COMMON STOCK TO ODYSSEY. At the Effective
Time, the issued and outstanding shares of Merger Sub will be converted into
2,880,000 shares of Surviving Corporation Common Stock, representing
approximately 90% of the total outstanding shares of Surviving Corporation
Common Stock.
PAYMENT FOR OPTIONS AND HANSEATIC WARRANTS. Except with respect to the
Rollover Options, the Company will cause each Option, whether or not then
exercisable or vested, to be canceled. In consideration of such cancellation,
the Company will pay to such holders of options an amount in cash in respect
thereof equal to the product of the excess, of the Cash Merger Price over the
exercise price of each such Option and the number of shares of Celadon Common
Stock previously subject to the Option immediately prior to its cancellation
(such payment to be net of withholding taxes). The Company will cause the
Hanseatic Warrants to be canceled. In consideration of such cancellation, the
Company will pay to Hanseatic an amount in cash in respect thereof equal to the
product of the excess of the Cash Merger Price over the exercise price of the
Hanseatic Warrants and the number of shares of Celadon Common Stock previously
subject to the Hanseatic Warrants immediately prior to cancellation (such
payment to be net of withholding taxes).
ROLLOVER OPTIONS. At the Effective Time, each Rollover Option will be
converted, on a share-for-share basis, into an option to purchase shares of
Surviving Corporation Common Stock. The Management Team owns, in the aggregate,
90,000 Rollover Options, which will represent the right to purchase an aggregate
of 2.8%, of the Surviving Corporation Common Stock outstanding immediately
following the Effective Time.
BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION
The directors of Merger Sub immediately prior to the Effective Time shall be
the directors of the Surviving Corporation as of the Effective Time and until
their successors are duly appointed or elected in accordance with applicable
law. The officers of the Company immediately prior to the Effective Time shall
be the officers of the Surviving Corporation as of the Effective Time and until
their successors are duly appointed or elected in accordance with applicable
law. See "Directors and Executive Officers of the Surviving Corporation."
47
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION
Immediately following the Effective Time, the Certificate of Incorporation
of the Company in effect immediately prior to the Effective Time shall be
amended so as to read in its entirety in the form attached as Annex D hereto and
shall thereafter be the Certificate of Incorporation of the Surviving
Corporation, until duly changed or amended as provided therein or in accordance
with applicable law.
The bylaws of Merger Sub in effect immediately prior to the Effective Time
shall be the bylaws of the Surviving Corporation, until duly amended as provided
therein or in accordance with applicable law.
PAYMENT FOR SHARES
As of or after the Effective Time, the Company will deposit with the Paying
Agent for the benefit of the holders of shares of Celadon Common Stock the funds
necessary to pay the Cash Merger Price for each share payable pursuant to the
terms of the Merger Agreement. Holders of Dissenting Shares who meet the
qualification of and follow the requirements of Section 262 of the DGCL may
receive, in lieu of the Cash Merger Price, a cash payment equal to the "fair
value" of their shares, pursuant to Section 262 of the DGCL, as determined by
the Delaware Court of Chancery.
As soon as practicable after the Effective Time the Paying Agent will send
to each record holder of Celadon Common Stock a notice and a letter of
transmittal advising the holder of the effectiveness of the Merger and the
procedure for surrendering to the Paying Agent certificates for exchange into
the Cash Merger Price and, with respect to the holders of Rollover Shares, the
shares of Surviving Corporation Common Stock into which the Rollover Shares will
be converted (the "Rollover Share Consideration").
STOCKHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE PAYING AGENT UNTIL
THEY HAVE RECEIVED TRANSMITTAL FORMS. STOCKHOLDERS SHOULD NOT RETURN STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD.
As soon as practicable after the Effective Time (a) each holder of an
outstanding share certificate or certificates which prior to the Effective Time
represented shares of Celadon Common Stock (other than the Rollover Shares),
upon surrender to the Paying Agent of such certificate or certificates, and
acceptance thereof by the Paying Agent, shall be entitled to receive the Cash
Merger Price in respect of each share of Celadon Common Stock theretofore
evidenced by such certificate or certificates so surrendered and (b) each holder
of an outstanding certificate or certificates representing one share of the
Rollover Shares, upon surrender to the Paying Agent of such certificate or
certificates and acceptance thereof by the Paying Agent, shall be entitled to
receive a certificate or certificates representing one share of Surviving
Corporation Common Stock in respect of each share of Celadon Common Stock
theretofore evidenced by such certificate or certificates so surrendered. Upon
such surrender, the Paying Agent will, as promptly as practicable, pay the Cash
Merger Price or the Rollover Share Consideration, as the case may be. Until
surrendered, each such certificate (other than certificates representing
Excluded Shares and Dissenting Shares), will be deemed for all purposes to
evidence only the right to receive the Cash Merger Price for holders of Celadon
Common Stock (other than the Rollover Shares), or the Rollover Share
Consideration for holders of the Rollover Shares. In no event will the holder of
any surrendered certificate be entitled to receive interest on the Cash Merger
Price.
If the Cash Merger Price or Rollover Share Consideration (or any portion
thereof) is to be delivered to a person other than the person in whose name the
certificates surrendered in exchange therefor are registered, it will be a
condition to the payment of such consideration that the certificates so
surrendered are properly endorsed and otherwise are in proper form for transfer,
that such transfer otherwise is proper and that the person requesting such
transfer pay to the Paying Agent any transfer or other taxes payable by reason
of the foregoing or establish to the satisfaction of the Paying Agent that such
taxes have been paid or are not required to be paid.
48
From and after the Effective Time, the stock transfer books of the Company
in place prior to the Effective Time will be closed and thereafter there will be
no transfers on such books of the shares of Celadon Common Stock which were
outstanding immediately prior to the Effective Time. If, after the Effective
Time, certificates are presented to the Surviving Corporation, they will be
canceled and exchanged for the Cash Merger Price or the Rollover Share
Consideration, as the case may be.
Any funds remaining with the Paying Agent one year following the Effective
Time will be delivered to the Surviving Corporation, after which any holders of
Celadon Common Stock (other than Rollover Shares) prior to the Merger shall
thereafter look only to the Surviving Corporation and only as general unsecured
creditors thereof for payment of their claims for cash, if any.
REPRESENTATIONS AND WARRANTIES
REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Merger Agreement
contains representations and warranties of the Company with respect to the
Company and its subsidiaries relating to, among other things, (a) organization
and capitalization; (b) the authorization, execution, delivery, performance, and
enforceability of the Merger Agreement and related matters; (c) subsidiaries;
(d) absence of certain changes or events; (e) title to assets and absence of
liens and encumbrances; (f) contracts and commitments; (g) absence of breaches
and defaults; (h) permits; (i) the non-contravention of organizational
documents, material contracts, indebtedness, leases, encumbrances, permits, or
authorizations, and applicable laws; (j) consents and approvals; (k) SEC
documents, financial statements, and other financial information; (l) the
absence of undisclosed liabilities; (m) litigation; (n) labor matters; (o)
compliance with applicable laws; (p) matters related to brokers, fees, and other
expenses; (q) proprietary rights; (r) benefit plans and other matters relating
to the Employee Retirement Income Security Act of 1974, as amended, and
employment matters; (s) taxes; (t) insurance matters; (u) customers and
suppliers; (v) environmental, health, and safety matters; (w) absence of other
agreements with respect to assets or capital stock of the Company or its
subsidiaries; (x) prohibited payments; (y) the receipt of an opinion of the
Company's financial advisor; (z) the recommendation of the Board of Directors of
the Company with respect to the Merger Agreement, the Merger, and related
transactions; (aa) the required vote of the Company's Stockholders; and (bb) the
accuracy of information contained in this Proxy Statement and the Transaction
Statement on Schedule 13E-3.
REPRESENTATIONS AND WARRANTIES OF MERGER SUB. The Merger Agreement contains
representations and warranties of Merger Sub relating to, among other things,
(a) organization; (b) the authorization, execution, delivery, performance, and
enforceability of the Merger Agreement and related matters; (c) consents and
approvals; (d) the non-contravention of organizational documents and certain
material contracts; (e) the accuracy of information provided by Merger Sub for
use in this Proxy Statement and the Transaction Statement on Schedule 13E-3; and
(f) the financing of the Merger.
COVENANTS
INTERIM OPERATIONS. In general, the Company has agreed that prior to the
Effective Time, except as otherwise provided in the Merger Agreement or unless
Merger Sub has consented in writing thereto, the Company will, and will cause
its subsidiaries to, (a) conduct its business in the ordinary course consistent
with past practice; (b) use its best efforts to maintain its business
organizations, goodwill, relationships with officers and employees, and business
relationships; (c) promptly notify Merger Sub of any Material Adverse Change,
material litigation, or material government complaints or investigations and
breaches of any representation or warranty contained in the Merger Agreement;
and (d) deliver to Merger Sub all filings made with the Commission subsequent to
the date of the Merger Agreement . Furthermore, the Company has generally agreed
that, prior to the Effective Time, except as otherwise provided in the Merger
Agreement or unless Merger Sub has consented in writing thereto, the Company
will not, and will cause its subsidiaries not to, (a) amend any of its
organizational and governing instruments; (b) authorize, propose, or announce an
intention to authorize or propose, or enter into an agreement with respect to
any
49
merger, consolidation, or business combination (other than the Merger) or
relinquish any material contract rights or acquire or dispose of assets or
securities other than in the ordinary course of business consistent with past
practice; (c) grant, confer, or award any options, warrants, conversion rights,
or other rights not existing on the date of the Merger Agreement to acquire
shares of the Company's Capital Stock or other securities of the Company or its
subsidiaries; modify, accelerate, or change the period of exercisability of
employee stock options or restricted stock; or authorize cash payments in
exchange for such employee stock options (except as contemplated by the Merger
Agreement); (d) amend any benefit plans existing on the date of the Merger
Agreement or adopt any new employee benefit plans; (e) increase or agree to
increase the compensation payable to any officer or, except in accordance with
past practice, any employee or enter into any collective bargaining agreement;
(f) incur any debt or other liabilities (except for borrowings under existing
credit facilities in the ordinary course) or make any loans or advances to any
person (except for advances consistent with past practice which are not
material); (g) change any practice with respect to taxes or a material tax
election or settle or compromise any material tax dispute; (h) declare, set
aside, or pay any dividend or distribution in respect of its capital stock or
other ownership interests; redeem, purchase, or otherwise acquire any shares of
its capital stock or capital stock of any of its subsidiaries; or split,
combine, or reclassify any of its capital stock or take steps to issue any other
securities in respect of shares of its capital stock; (i) issue, deliver, sell,
pledge, or otherwise encumber any shares of its capital stock or certain other
securities related to its capital stock; (j) make or agree to make any capital
expenditure or expenditures except in accordance with the Company's capital
expenditure plan for fiscal years 1998 and 1999; (k) change any accounting
principles or practices; (l) pay, discharge, settle, or satisfy any claims,
liabilities, or obligations other than the payment, in the ordinary course
consistent with past practice or in accordance with their terms, of liabilities
reflected or reserved against in the most recent consolidated financial
statements; (m) waive any material benefits of, or agree to modify in any
material respect, any confidentiality, standstill, non-solicitation, or similar
agreement; or (n) agree to (in writing or otherwise), or resolve to take, any of
the prohibited actions described in this paragraph.
INVESTIGATION BY MERGER SUB. Under the Merger Agreement, the Company has
agreed to allow Merger Sub, its counsel, accountants and other representatives
(including, without limitation GE and BT and their counsel and representatives,
during regular business hours upon reasonable notice, to make such reasonable
inspection of the assets, facilities, business and operations of the Company and
its subsidiaries and to inspect and make copies of contracts, books, and records
and all other documents and information reasonably requested by Merger Sub and
related to the operations and business of the Company and its subsidiaries and
to meet with designated personnel of the Company or its subsidiaries and/or
their representatives. The Company and its subsidiaries shall (a) furnish to
Merger Sub promptly upon request all additional documents and information with
respect to the affairs of the Company and its subsidiaries' as Merger Sub, or
its counsel or accountants, may from time to time reasonably request and (b)
have instructed their personnel, accountants, and counsel to cooperate with
Merger Sub. Merger Sub has agreed to hold, and will use its reasonable best
efforts to cause its counsel, accountants, and other representatives (including,
without limitation, GE and BT and their counsel and representatives) to hold any
nonpublic information in confidence to the extent required by, and in accordance
with, a confidentiality letter between Wasserstein Perella and Odyssey
Investment Partners, LLC, dated April 9, 1998.
ADDITIONAL COVENANTS. In addition to the foregoing, the Company and Merger
Sub have agreed to certain covenants regarding (a) convening of the Special
Meeting; (b) HSR filings and other governmental or regulatory filings; (c)
access of Merger Sub to the offices, records, files, correspondence, audits, and
properties of the Company; (d) publicity; (e) preparation and filing of this
Proxy Statement and a Transaction Statement on Schedule 13E-3; (f) the
performance of additional actions as may be necessary to effect the Merger; (g)
expenses related to the Merger Agreement; (h) insurance and indemnity; (i)
resignation of the Company's directors; (j) notice of changes with respect to
the Company and its subsidiaries; and (k) the Company supplying financial
information to Merger Sub.
50
CONSENTS AND EFFORTS. Each of the parties to the Merger Agreement has
agreed to (a) promptly make its respective filings under the HSR Act with
respect to the Merger and (b) use its reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, and to assist and
cooperate with the other parties in doing, all things necessary, proper or
advisable under applicable laws and regulations to consummate and make
effective, in the most expeditious manner practicable, the Merger and the other
transactions contemplated by the Merger Agreement. Merger Sub and the Company
have agreed to use their reasonable best efforts and cooperate with one another
(a) in promptly determining whether any filings are required to be made or
consents, approvals, waivers, licenses, permits, or authorizations are required
to be obtained (or, which if not obtained, would result in an event of default,
termination, or acceleration of any agreement or any put right under any
agreement) under any applicable law or regulation or from any governmental
authorities or third parties, including parties to loan agreements or other debt
instruments, in connection with the transactions contemplated by the Merger
Agreement, including the Merger and (b) in promptly making any such filings, in
furnishing information required in connection therewith and in timely seeking to
obtain any such consents, approvals, permits, or authorizations.
The Company has agreed to cooperate with any reasonable requests of Merger
Sub or the Commission related to the recording of the Merger as a
recapitalization for financial reporting purposes, and to provide and to cause
its subsidiaries and its and their respective officers, directors, employees,
and advisors to provide, all reasonable cooperation in connection with the
arrangement of any financing to be consummated contemporaneously with or at or
after the Closing. In addition, the Company agrees, at the request of Merger
Sub, to call for prepayment or redemption, as the case may be, of then existing
indebtedness of the Company; provided that such prepayment or redemption shall
only be made contemporaneously with or after the Effective Time. Merger Sub has
agreed to use its reasonable best efforts to arrange the financing pursuant to
the Financing Letters.
51
CONDITIONS TO THE CONSUMMATION OF THE MERGER
Conditions to Each Party's Obligation to Effect the Merger. The respective
obligations of each of the Company and Merger Sub to effect the Merger are
subject to the satisfaction at or prior to the closing date of the Merger of the
following conditions:
(a) The Merger Agreement and the transactions contemplated thereby shall
have been approved by a majority of the holders of the issued and outstanding
shares of the Celadon Common Stock in accordance with the DGCL;
(b) The waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated; and
(c) No law or regulation, and no judgment order, decree, or injunction shall
prohibit or restrain the consummation of the Merger. In the event any such order
or injunction shall have been issued, each party agrees to use its reasonable
best efforts to have any such judgment, order, decree, or injunction vacated.
CONDITIONS TO THE OBLIGATION OF THE COMPANY TO EFFECT THE MERGER. The
obligation of the Company to effect the Merger is subject to the following
conditions, any of which may be waived by the Company: (a) the representations
and warranties of Merger Sub contained in the Merger Agreement shall be true and
correct in all material respects at and as of the closing date (except to the
extent that any such representations and warranties were made as of a specified
date, which representations and warranties shall continue on the closing date to
be true as of such specified date) (b) Merger Sub shall have performed in all
material respects its obligations arising under the agreements and covenants
contained in the Merger Agreement required to be performed on or prior to the
closing date of the Merger, (c) the Company shall have received a certificate of
the President of Merger Sub certifying that, as of the closing date, the
conditions set forth in (a) and (b) have been satisfied.
CONDITIONS TO THE OBLIGATION OF MERGER SUB TO EFFECT THE MERGER. The
obligation of Merger Sub to effect the Merger is subject to the satisfaction of
the following conditions, any of which may be waived by Merger Sub:
(a) (i) the representations and warranties of the Company contained in the
Merger Agreement shall be true and correct at and as of the closing date,
(except that to the extent that any such representations and warranties were
made as of a specific date, such representations and warranties shall continue
on the closing date to be true in all material respects as of such date), except
where the untruth or incorrectness of such representations and warranties would
not, singly, or in the aggregate, have a Material Adverse Effect (as defined in
the Merger Agreement) (for purposes of this condition, the representations and
warranties contained in the Merger Agreement shall be deemed to have been made
without any qualification as to knowledge or materiality), (ii) the Company
shall have performed in all material respects all obligations arising under the
agreements and covenants required to be performed by it on or prior to the
closing date, and (iii) Merger Sub shall have received a certificate of the
President and Chief Financial Officer of the Company, certifying that, as of the
Closing Date, the conditions set forth in clauses (i) and (ii) above have been
satisfied, that no actions described in clause (b) below have been commenced or
threatened, that no Material Adverse Change (as defined in the Merger Agreement)
has occurred, and that, to the knowledge of the Company, there is no potential
or threatened Material Adverse Change;
(b) No actions by any governmental authority or any other entity or person
shall have been instituted or threatened for the purpose of enjoining or
preventing, or which question the validity or legality of, the transactions
contemplated by the Merger Agreement and which could reasonably be expected to
damage Merger Sub or materially adversely affect the value of the Celadon Common
Stock or the Assets (as defined in the Merger Agreement), business, or
operations of the Company and its subsidiaries or Merger Sub's ability to own
and operate the Assets, business, or operations of the Company and its
subsidiaries, if the transactions contemplated by the Merger Agreement are
consummated;
52
(c) Merger Sub shall be reasonably satisfied that the transaction will be
recorded as a "recapitalization" for financial reporting purposes;
(d) (i) All consents, approvals, and licenses of any governmental or other
regulatory body required in connection with the execution, delivery, and
performance of the Merger Agreement and for the Surviving Corporation to conduct
the business and operations of the Company in substantially the same manner as
it was conducted prior to the Effective Time shall have been obtained, unless
the failure to obtain such consents, authorizations, orders, or approvals would
not, individually or in the aggregate, have a Material Adverse Effect after
giving effect to the transactions contemplated by the Merger Agreement, and (ii)
all consents listed on the disclosure schedule to the Merger Agreement shall
have been obtained;
(e) From March 31, 1998, there shall not have occurred a Material Adverse
Change (as defined in the Merger Agreement) with respect to the Company and to
the knowledge of the Company, there shall have been no potential or threatened
Material Adverse Change;
(f) The funding contemplated by the Financing Letters shall have been
obtained. See "Special Factors--Recent Developments; Material Uncertainty of
Consummating the Merger";
(g) The New Employment Agreements between the Company, on the one hand, and
Stephen Russell, Robert Goldberg, Ronald S. Roman, Nancy L. Morris, and Michael
Archual, on the other hand, shall have been executed and delivered and shall be
in full force and effect. See "Special Factors--Interests of Certain Persons in
the Merger" and "--Certain Related Agreements";
(h) The stockholders party to the Voting Agreement shall have performed
their obligations thereunder in all material respects;
(i) The stockholders' agreement dated as of October 8,1992, and as amended
as of July 3, 1996, by between Stephen Russell and Hanseatic shall have been
terminated and of no further force and effect; and
(j) Ernst & Young LLP shall have completed its audit, in accordance with
generally accepted auditing standards, of the Company's financial statements for
the year ended June 30, 1998 and shall have issued an unqualified report with
respect thereto (indicating that such statements are in accordance with GAAP).
NO SOLICITATION; FIDUCIARY OUT
Under the Merger Agreement, Celadon has agreed to immediately cease any
existing activities, discussions or negotiations with any parties (other than
Odyssey and Merger Sub) with respect to any Acquisition Proposal. Pursuant to
the Merger Agreement, Celadon has agreed that neither it nor its subsidiaries
(whether directly or indirectly through advisors, agents or other
intermediaries) will initiate, solicit, or encourage, directly or indirectly, or
take any other action to facilitate, any inquiries or the making or
implementation of any proposal or offer that constitutes an Acquisition
Proposal, or (a) agree to or endorse any Acquisition Proposal, (b) enter into or
participate in any discussions or negotiations regarding an Acquisition
Proposal, or otherwise cooperate in anyway with, or knowingly assist or
participate in facilitate or encourage, any effort or attempt by any person
(other than the Merger Sub) to do or seek any of the foregoing, (c) grant any
waiver or release under any standstill or similar agreement with respect to the
equity securities of the Company or any of its subsidiaries, or (d) authorize or
permit any of its officers, directors, employees, agents, or representatives do
any of the foregoing. Celadon is obligated to notify Merger Sub if any such
inquiries or proposals are received by, any such information is requested from,
the Company or any such negotiations or discussions are sought to be initiated
or continued with the Company. Nothing contained in the Merger Agreement
prohibits the Board of Directors of the Company from furnishing information to,
or entering into discussions or negotiations with, any person or entity that
makes a bona fide Acquisition Proposal if, and only to the extent that, (a) the
furnishing of such information is pursuant to a reasonable and customary
confidentiality agreement, (b) the Board of Directors of the Company determines
in good faith on the basis of written advice of outside counsel that such action
is required for the Board to comply with its fiduciary duties to stockholders
imposed by law,
53
and (c) the Board determines in good faith after consultation with its financial
advisor that such Acquisition Proposal, if accepted, is reasonably likely to be
consummated, taking into account all legal, financial, and regulatory aspects of
the proposal and the person making the proposal, and would, if consummated,
result in a more favorable transaction than the transaction contemplated by the
Merger Agreement. Except as provided in the Merger Agreement, the foregoing
provisions do not permit the Company to (a) terminate the Merger Agreement, (b)
enter into any agreement with respect to an Acquisition Proposal during the term
of the Merger Agreement, or (c) affect any other obligation of the Company under
the Merger Agreement.
If the existence of an Acquisition Proposal results in the termination of
the Merger Agreement by the Company or Merger Sub, the Company may be obligated
to pay a fee of $6.5 million to Merger Sub, together with reimbursement of
Merger Sub's out-of-pocket expenses up to a maximum of $1.5 million.
If the Company fails to promptly pay any amount due in respect of the fees
and reimbursements described in the preceding sentence, and, in order to obtain
such payment, Merger Sub commences a suit which results in a judgment against
the Company for such fee or fees and expenses, the Company shall also pay to
Merger Sub its costs and expenses incurred in connection with such litigation.
TERMINATION; EFFECTS OF TERMINATION
Termination by Mutual Written Consent. The Merger Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of the
Company by mutual written consent of Merger Sub and the Company.
Termination by the Company. The Merger Agreement may be terminated by the
Company at any time prior to the Effective Time, if the Board of Directors of
the Company, acting in good faith based upon written advice from outside counsel
and in order to prevent the Board of Directors from breaching its fiduciary
duty, shall have withdrawn or modified or amended, in a manner adverse to Merger
Sub, its approval or recommendation of the Merger Agreement and the Merger or
its recommendation that stockholders of the Company adopt and approve the Merger
Agreement and the Merger in order to permit the Company to execute a definitive
agreement providing for the acquisition of the Company or in order to approve a
tender or exchange offer for any or all of the Celadon Common Stock, in either
case, that is determined, by the Board of Directors of the Company to be on
financial terms more favorable to the Company's stockholders than the Merger. In
the event that the Merger Agreement is terminated by the Company pursuant to the
provision of the Merger Agreement described in this paragraph, the Company shall
pay Merger Sub a fee of $6.5 million and shall reimburse Merger Sub for its
out-of-pocket expenses in an amount not to exceed $1.5 million.
Termination by Merger Sub. The Merger Agreement may be terminated at any
time prior to the Effective Time by Merger Sub if the Board of Directors of the
Company shall have (i) withdrawn or modified or amended, in a manner adverse to
Merger Sub, its approval or recommendation of the Merger Agreement and the
Merger or its recommendation that stockholders of the Company adopt and approve
the Merger Agreement and the Merger, (ii) approved, recommended or endorsed an
Acquisition Proposal (including a tender or exchange offer for Celadon Common
Stock) or shall have failed to reconfirm its recommendation of the Merger
Agreement and the Merger within five business days of Merger Sub's request that
it do so, (iii) failed to call a stockholders meeting or failed as promptly as
practicable to mail the Proxy Statement to its stockholders or failed to include
in such statement the recommendation referred to above, (iv) in response to the
commencement of any tender offer or exchange offer for more than 20% of the
outstanding shares of Celadon Common Stock, not recommended rejection of such
tender offer or exchange offer, or (v) resolved to do any of the foregoing. In
the event that the Merger Agreement is terminated by the Company pursuant to the
provision of the Merger Agreement described in this paragraph, the Company shall
pay Merger Sub a fee of $6.5 million and shall reimburse Merger Sub for its
out-of-pocket expenses in an amount not to exceed $1.5 million.
54
Termination by Either Merger Sub or the Company. The Merger Agreement may be
terminated and the Merger may be abandoned at any time prior to the Effective
Time, whether before or after approval of the Merger by the stockholders of the
Company by either Merger Sub or the Company if:
(a) the Merger shall not have been consummated by November 30, 1998;
provided, that the terminating party shall not have breached in any material
respect its obligations under the Merger Agreement;
(b) if any of the conditions to such party's obligation to consummate the
transactions contemplated by the Merger Agreement shall have become impossible
to satisfy;
(c) if there shall be any law or regulation that makes consummation of the
Merger illegal or otherwise prohibited or if any judgment, injunction, order, or
decree enjoining Merger Sub or the Company from consummating the Merger is
entered and such judgment, injunction, order or decree shall have become final
and non-appealable; or
(d) if, at the duly held stockholders meeting of the Company or any
adjournment thereof at which the Merger Agreement and the Merger are voted upon,
the requisite adoption and approval of the Company's stockholders shall not have
been obtained.
The Company shall pay Merger Sub a fee of $6.5 million in the event that the
Merger Agreement is terminated: (a) by Merger Sub due to the Company's failure
to satisfy any condition to Merger Sub's obligation to consummate the Merger and
the other transactions contemplated by the Merger Agreement, if the failure to
satisfy such condition arises from a breach of obligation or untruth or
incorrectness of any representation or warranty arising out of the bad faith or
willful misconduct of the Company; or (b) (i) by Merger Sub upon the occurrence
of any of the following: (1) the failure of the Company to obtain stockholder
approval of the Merger Agreement; (2) the failure of the representations and
warranties of the Company to be true and correct at and as of the closing date
(except to the extent that the failure of such representations and warranties to
be true and correct does not have a Material Adverse Effect (as defined in the
Merger Agreement excluding for such purposes all materiality and knowledge
qualifiers contained in the representations and warranties); (3) the failure of
the Company to perform its obligations under the Merger Agreement in all
material respects and perform all covenants required thereby on or prior to the
closing date; (4) failure of the Company to deliver the officer's certificate
required by the Merger Agreement certifying that (I) the representations and
warranties of the Company are true and correct at and as of the closing date
(except to the extent that the failure of such representations and warranties to
be true and correct does not have a Material Adverse Effect (as defined in the
Merger Agreement) (excluding for such purposes all materiality and knowledge
qualifiers contained in the representations and warranties), (II) the Company
performed its obligations under the Merger Agreement in all material respects
and performed all covenants required thereby on or prior to the closing date
(III) certain actions have not been instituted or threatened; and (IV) no
Material Adverse Change (as defined in the Merger Agreement) shall have occurred
and the Company knows of no potential or threatened Material Adverse Change with
respect to the Company; (5) a Material Adverse Change or the existence of a
potential or threatened Material Adverse Change of which the Company has
knowledge; (6) the failure of any member of the Management Team to enter into
the New Employment Agreements and agreements with respect to their respective
equity interests in the Company after the Effective Time, on terms and
conditions substantially similar to those set forth in the Merger Agreement; (7)
failure of the stockholders party to the Voting Agreement to perform their
obligations thereunder in all material respects; (8) failure of the parties to
the Stockholder's Agreement dated October 8, 1992 (as amended as of July 3,
1996) to terminate such agreement; or (9) failure of Ernst & Young to complete
its audit of the Company for the fiscal year end June 30, 1998 and to issue an
unqualified report with respect thereto, but only, with respect to clauses (1)
through (9) hereof, if (x) any third party (other than Merger Sub, its
affiliates, or any party to the Voting Agreement) shall have become the
beneficial owner of more than 20% of the outstanding shares of Celadon Common
Stock or (y)(I) any third party (other than Merger Sub or any of its affiliates)
shall have
55
made, or proposed, communicated or disclosed in a manner that is or otherwise
becomes public a bona fide intention to make an Acquisition Proposal and (II) on
or prior to the expiration of the twelve months from the date of termination of
the Merger Agreement, the Company consummates with a third party an Acquisition
Proposal or enters into a definitive agreement with respect to such Acquisition
Proposal, irrespective of whether the third party is the third party referred to
in clause (I) above; or (ii) by either party if the Merger is not approved by
the Company's stockholders or if the Merger is not consummated prior to November
30, 1998, but only if one of the circumstances set forth in clause (x) or (y)
above is then existing or shall have occurred.
In the event that the Merger Agreement is terminated (a) by Merger Sub upon
the occurrence of any of the events set forth in clauses (b)(i)(1) -(b)(i)(9) in
the immediately preceding paragraph or (b) by the Company or Merger Sub due to
the failure of the stockholders to approve the Merger Agreement, the Company
shall reimburse Merger Sub, in an amount not to exceed $1.5 million, for the
out-of-pocket expenses incurred by Merger Sub in connection with the Merger
Agreement and the transactions contemplated thereby.
AMENDMENT
The Merger Agreement may be amended by the parties thereto at any time
before or after approval of matters presented in connection with the Merger by
the stockholders of the Company, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. The Merger Agreement may
not be amended except by an instrument in writing signed on behalf of each of
the parties thereto.
56
THE SPECIAL MEETING
GENERAL
This Proxy Statement is being furnished to the holders of Celadon Common
Stock in connection with the solicitation of proxies by the Board of Directors
of Celadon from holders of the outanding shares of Celadon Common Stock for use
at the Special Meeting of Stockholders to be held at a.m., local time, on
, 1998 at and any adjournments and postponements thereof. At the
Special Meeting, stockholders of Celadon (a) will be asked to consider and vote
upon a proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby, (b) will be asked to consider and vote upon a proposal to
adjourn or postpone the Special Meeting to another time in the event that the
number of proxies obtained is not sufficient to ensure the adoption and approval
of the Merger Agreement and (c) will transact such other business as may
properly come before the Special Meeting.
RECORD DATE, SOLICITATION, AND REVOCABILITY OF PROXIES
The Board of Directors of the Company has fixed the Record Date as the date
for determining the Celadon stockholders entitled to receive notice of and to
vote at the Special Meeting and any adjournments or postponements thereof. Only
holders of record of Celadon Common Stock as of the Record Date are entitled to
notice of and to vote at the Special Meeting. As of the Record Date, there were
7,726,989 shares of Celadon Common Stock issued, outstanding, and held by 1,576
holders of record. Holders of Celadon Common Stock are entitled to one vote on
each matter considered and voted on at the Special Meeting for each share of
Celadon Common Stock held of record at the close of business on the Record Date.
Proxies in the form enclosed are being solicited by the Board of Directors
of the Company. Shares of Celadon Common Stock represented by properly executed
proxies, if such proxies are received in time and are not revoked, will be voted
in accordance with the instructions indicated on the proxies. If no instructions
are indicated, such proxies will be voted FOR approval and adoption of the
Merger Agreement and the transactions contemplated thereby and FOR the proposal
to adjourn or postpone the Special Meeting to another time for the purpose of
soliciting additional proxies in the event that the number of proxies obtained
is not sufficient to ensure the adoption and approval of the Merger Agreement.
Any holder of Celadon Common Stock who returns a signed proxy but fails to
provide instructions as to the manner in which such holder's shares are to be
voted will be deemed to have voted FOR approval and adoption of the Merger
Agreement and the transactions contemplated thereby and FOR the proposal to
adjourn or postpone the Special Meeting to another time for the purpose of
soliciting additional proxies in the event that the number of proxies obtained
is not sufficient to ensure the adoption and approval of the Merger Agreement.
57
MARKET PRICES AND DIVIDENDS
Celadon Common Stock is traded on the Nasdaq National Market under the
symbol "CLDN."
The following table sets forth the high and low sale prices per share of
Celadon Common Stock on the Nasdaq National Market with respect to each
quarterly period since January 1, 1996.
HIGH LOW
--------- ---------
FISCAL 1997
First Quarter (July 1--September 30)......................................................... $ 9.50 $ 5.75
Second Quarter (October 1--December 31)...................................................... $ 11.25 $ 8.47
Third Quarter (January 1--March 31).......................................................... $ 12.75 $ 10.00
Fourth Quarter (April 1--June 30)............................................................ $ 11.75 $ 10.25
FISCAL 1998
First Quarter (July 1--September 30)......................................................... $ 15.75 $ 11.13
Second Quarter (October 1--December 31)...................................................... $ 17.00 $ 12.88
Third Quarter (January 1--March 31).......................................................... $ 16.00 $ 13.00
Fourth Quarter (April 1--June 22)............................................................ $ 15.38 $ 12.75
Fourth Quarter (June 23--June 30)............................................................ $ 19.25 $ 14.00
FISCAL 1999
First Quarter (July 1--September 30)......................................................... $ 19.38 $ 9.38
Second Quarter (October 1--October )....................................................... $ -- $ --
On June 22, 1998, the last trading day prior to the public announcement that
Celadon and Merger Sub had executed the Merger Agreement, the high and low sale
prices per share of Celadon Common Stock as reported on the Nasdaq National
Market were $15.00 and $14.25, respectively. On September 17, the last trading
day prior to the public announcement that BT, the institution that is to provide
the Bridge Loans, had concluded that under the market conditions existing as of
September 15, 1998, it would not be obligated to provide such financing, the
high and low sale prices per share of Celadon Common Stock as reported on the
Nasdaq National Market were $16 and $14, respectively. On September 19, the day
following the public announcement with respect to the uncertainty as to whether
BT will be obligated to provide the Bridge Loans, the high and low sale prices
per share of Celadon Common Stock as reported on the Nasdaq National Market were
$10.50 and $9.38, respectively. On October , 1998, the last trading day prior
to the distribution of this Proxy Statement, the high and low sale prices of the
Celadon Common Stock as reported on the Nasdaq National Market were and
, respectively, Stockholders are urged to obtain a current quotation with
respect to the Celadon Common Stock.
The Company has not paid cash dividends on the Celadon Common Stock as a
public company and has no present intention of paying cash dividends on its
common stock in the foreseeable future. In addition, the payment of dividends by
the Company is subject to certain restrictions under the Company's existing
credit agreements, which will be refinanced in connection with the Merger. Under
the Merger Agreement, the Company has agreed not to pay any dividends on the
Celadon Common Stock prior to the Effective Time. Pursuant to the terms of the
agreements contemplated by the Financing Letters, the Surviving Corporation's
ability to pay certain dividends will be restricted.
FINANCING OF THE MERGER
The Merger will require approximately $233.8 million to pay the Cash Merger
Price, to pay the value of the Options and the Hanseatic Warrants, to complete
the Refinancing and to pay the fees and expenses in connection with the Merger
and such financing. If the Merger is consummated it is contemplated that the
required financing will be provided by the Issuance of the Debt Securities,
drawings of up to $7.5 million under the Revolver, and equity financing provided
by Odyssey in the amount of approximately $57.6 million through the purchase of
common stock of Merger Sub. Merger Sub has obtained a Financing
58
Letter from BT with respect to the Bridge Loans and from GE with respect to the
Revolver and the CAPEX Line to be provided upon consummation of the Merger. In
addition, Merger Sub has engaged the Take-Out Bank to privately place the Debt
Securities. If the Bridge Loans are incurred, the proceeds of the Debt
Securities will be used to prepay the Bridge Loans, in whole or in part. Merger
Sub informed the Company in writing that on September 15, 1998, Merger Sub had
received notice from BT that BT would not be obligated to provide the Bridge
Loans under the then existing market conditions. Pursuant to the BT Financing
Letter, BT would not be obligated to provide the Bridge Loans if, in the
reasonable judgment of BT, market conditions which would materially and
adversely affect the ability to sell or place the Debt Securities exist at the
time funding is requested. The BT Financing Letter will terminate in accordance
with its terms on November 30, 1998 if no amounts have yet been funded
thereunder. Merger Sub would not be obligated to consummate the Merger if the
financing contemplated by the BT Financing Letter was not available. See
"Special Factors--Recent Developments; Material Uncertainty of Consummating the
Merger" and "Certain Provisions of the Merger Agreement--Termination: Effect of
Termination."
BRIDGE LOANS
CTSI and the Company intend to incur the Bridge Loans in an amount
aggregating $125 million. The Bridge Loans will be governed by definitive loan
and related agreements to be entered into by each of CTSI and the Company, as
borrower, and BT, as Lender.
In connection with the execution of the BT Financing Letter, Merger Sub
engaged the Take-Out Bank to privately place the Debt Securities, the proceeds
of which will be used to finance the Merger and the Refinancing or to prepay the
Bridge Loans and pay related fees and expenses.
CTSI BRIDGE LOAN ($100 MILLION).
GUARANTEES. The CTSI Bridge Loan will be guaranteed on a senior
subordinated basis by each of CTSI's subsidiaries, if any, that guarantee the
Revolver and the CAPEX Line.
MATURITY. The commitment to provide the CTSI Bridge Loan shall
automatically expire on November 30, 1998 if the Bridge Loan has not yet been
funded, except if the failure to fund the CTSI Bridge Loan was caused by the
failure of BT to fulfill its obligations under the BT Financing Letter. All
outstanding amounts under the CTSI Bridge Loan are required to be repaid on the
earlier of (i) one year following the initial funding date (the "Initial Funding
Date") of any portion of the CTSI Bridge Loan and (ii) the closing date of any
permanent financing. If CTSI fails to raise permanent financing before the first
anniversary of the Initial Funding Date, the CTSI Bridge Loan, subject to
certain exceptions, will be automatically converted into an unsecured senior
subordinated term loan facility (the "CTSI Converted Term Loan") with a maturity
of six months after the scheduled maturity of the Revolver and the CAPEX Line.
USE OF PROCEEDS. The CTSI Bridge Loan is expected to be made available to
the Company to finance in part the Merger and certain related costs and
expenses, and for the Refinancing.
RANKING. The CTSI Bridge Loan and the guarantee thereof will be a senior
subordinated obligation of CTSI and each guarantor, respectively, and will rank
(i) PARI PASSU with all other senior subordinated indebtedness of CTSI or such
guarantor, as the case may be, (ii) senior to any subordinated indebtedness of
CTSI or such guarantor, as the case may be, and (iii) junior in right of payment
to all senior indebtedness of CTSI or such guarantor, as the case may be.
REPRESENTATIONS AND WARRANTIES, CONDITIONS, AND COVENANTS. The BT Financing
Letter provides that the documentation for the CTSI Bridge Loan will contain
customary representations and warranties by CTSI. In addition, such
documentation is expected to contain customary conditions to funding and
affirmative and negative covenants for high-yield transactions (with customary
carve-outs and exceptions).
59
EVENTS OF DEFAULT. The BT Financing Letter provides that the events of
default under the loan documentation will include customary events of default,
including, without limitation, payment defaults, covenant defaults, bankruptcy
and insolvency, judgments, and cross acceleration of and failure to pay at final
maturity certain other indebtedness, subject to, in certain cases, notice and
grace provisions.
COMPANY BRIDGE LOAN ($25 MILLION).
GUARANTEES. The Company Bridge Loan will not be guaranteed.
MATURITY. The commitment to provide the Company Bridge Loan shall
automatically expire on November 30, 1998 if the Company Bridge Loan has not yet
been funded, except if the failure to fund the Company Bridge Loan was caused by
the failure of BT to fulfill its obligations under the BT Financing Letter. All
outstanding amounts under the Company Bridge Loans are required to be repaid on
the earlier of (i) one year following the initial funding date (the "Initial
Funding Date") of any portion of the Company Bridge Loan and (ii) the closing
date of any permanent financing. If Company fails to raise permanent financing
before the first anniversary of the Initial Funding Date, the Company Bridge
Loan, subject to certain exceptions, will be automatically converted into an
unsecured senior subordinated term loan facility with a maturity of twelve
months after the scheduled maturity of the Revolver and the CAPEX Line.
USE OF PROCEEDS. The Company Bridge Loan is expected to be made available
to the Company to finance in part the Merger and the other transactions
contemplated by the Merger Agreement (including the Refinancing) and to pay
certain related costs and expenses.
RANKING. The Company Bridge Loan will be a senior obligation of the
Company, and will rank (i) PARI PASSU with all other senior indebtedness of
Company and (ii) senior to any subordinated indebtedness of the Company.
REPRESENTATIONS AND WARRANTIES, CONDITIONS, AND COVENANTS. The BT Financing
Letter provides that the documentation for the Company Bridge Loan will contain
customary representations and warranties by the Company. In addition, such
documentation is expected to contain customary conditions to funding and
affirmative and negative covenants for high-yield transactions (with customary
carve-outs and exceptions).
EVENTS OF DEFAULT. The BT Financing Letter provides that the events of
default under the loan documentation will include customary events of default,
including, without limitation, payment defaults, covenant defaults, bankruptcy
and insolvency, judgments, and cross acceleration of and failure to pay at final
maturity certain other indebtedness, subject to, in certain cases, notice and
grace provisions.
DEBT SECURITIES
CTSI SENIOR SUBORDINATED NOTES. CTSI intends to issue $150 million
principal amount of CTSI Senior Subordinated Notes on or prior to the
consummation of the Merger. It is anticipated that the CTSI Senior Subordinated
Notes will be issued in a private placement exempt from registration under the
Securities Act pursuant to Rule 144A.
COMPANY SENIOR DISCOUNT NOTES. The Company intends to issue, for gross
proceeds of $25 million, the Company Senior Discount Notes. It is anticipated
that the Company Senior Discount Notes will be issued in a private placement
exempt from registration under the Securities Act pursuant to Rule 144A.
REVOLVING CREDIT FACILITY ($25 MILLION) AND CAPEX LINE ($150 MILLION).
Merger Sub has obtained the GE Financing Letter pursuant to which GE has
agreed on the terms and conditions provided therein to the $25 million Revolver
and the $150 million CAPEX Line (the CAPEX Line together with the Revolver, the
"Financing"). The Revolver is to be used for working capital purposes
60
and other corporate purposes of CTSI (including to partially finance the
Refinancing in an amount not to exceed $7.5 million). Use of the CAPEX Line is
limited to certain permitted capital expenditures and permitted acquisitions.
Pursuant to the GE Financing Letter, GE reserves the right to syndicate all
or a portion of the Financing to one or more financial institutions. The
Company, CTSI, Odyssey and Merger Sub have each agreed to assist GE in the
syndication of the transaction by providing, among other things, such
information and cooperation of officers, directors, and employees as is
requested by GE in connection with such syndication.
USE OF PROCEEDS; MATURITY. Up to $7.5 million of the Revolver will be made
available to CTSI to finance, in part, the Refinancing on the date of
consummation of the Merger (the "Initial Borrowing Date"). The remainder of the
Revolver will be made available for loans ("Revolver Loans") after the Initial
Borrowing Date to be used for working capital requirements and general corporate
purposes of CTSI. Loans under the CAPEX Line ("CAPEX Loans", and together with
the Revolver Loans, the "Loans" and each a "Loan") will be used for certain
permitted capital expenditures and permitted acquisitions. No CAPEX Loans will
be made on the Initial Borrowing Date. Both the Revolver Loans and the CAPEX
Loans will mature on the fifth anniversary of the Initial Borrowing Date. If the
Revolver is terminated for any reason prior to maturity, the CAPEX Line will
immediately be due and payable in full. Borrowings under the Refinancing are
subject to borrowing base tests.
PREPAYMENTS. The GE Financing Letter contemplates that CTSI will be
required to make prepayments against principal in the following amounts: (a) all
net proceeds of any sale or other disposition of any of the assets of the
Surviving Corporation or any of its subsidiaries (other than the sale of
inventory in the ordinary course), (b) subject to exceptions for repairs and
replacements, all net insurance proceeds or other awards payable in connection
with the loss, destruction, or condemnation of any assets of the Surviving
Corporation or its subsidiaries, (c) 100% of the net proceeds from the issuance
or sale of debt which is used to refinance debt incurred under the CAPEX Line to
purchase tractors, trailers, and other equipment and (d) 50% of the net cash
proceeds from the sale or issuance of public equity which is not determined by
GE to be for permitted capital expenditures and permitted acquisitions.
Mandatory prepayments made pursuant to the preceding paragraph shall be
applied as follows: (a) net proceeds from the disposition of the Surviving
Corporation's or any of its subsidiaries tractors or trailers, any net insurance
proceeds related to the loss, destruction or condemnation of such assets, or any
net proceeds from the sale or issuance of public equity or debt securities shall
first be applied against outstanding CAPEX Loans until such Loans are repaid in
full, second against outstanding swing line advances until such advances are
repaid in full, and third against outstanding Revolving Loans; and (b) all other
such payments shall be applied first against outstanding swing line advances
until such advances are repaid in full, second against outstanding Revolving
Loans until such Loans are repaid in full, and third against outstanding CAPEX
Loans. In general, such payments will not require a permanent reduction in
availability; provided, that such net proceeds attributable to the sale or
issuance of debt or public equity and requiring prepayments above shall in an
amount equal to any such proceeds permanently reduce commitments under the CAPEX
Line. In addition to the foregoing and without requiring a mandatory prepayment
of outstanding Loans, the net proceeds from capital leases used to finance the
purchase of tractors, trailers, and other equipment which was not previously
financed with proceeds of the CAPEX Line will permanently reduce commitments
under the CAPEX Line in an amount equal to the lesser of (a) 100% of such
proceeds and (b) the excess of (i) the maximum CAPEX Line over (ii) outstanding
CAPEX Loans at the time of such issuance.
In addition, CTSI make voluntary prepayments of all, or any portion of, the
Loans and may voluntarily reduce the commitment under the Revolver and /or CAPEX
Line in minimum amounts to be agreed upon at any time, upon a minimum of three
days' (in the case of Loans bearing interest based on the LIBOR Rate and
otherwise one day's) prior written notice. In connection with any voluntary
61
prepayment or any mandatory prepayment pursuant to clause (d) of the first
paragraph of this section, CTSI will be obligated to pay a prepayment premium
and LIBOR breakage costs, if any.
INTEREST. At CTSI's option, all Loans will bear interest at either (a) a
floating rate equal to the higher of (i) the prime rate as reported in the Wall
Street Journal or (ii) the overnight Federal funds rate plus 50 basis points, in
each case plus the applicable margin or (b) absent a default, a fixed rate for
periods of one, two, three or six months equal to the reserve adjusted London
Interbank Offered Rate ("LIBOR Rate"), plus the applicable margin. Commencing
upon the delivery to GE of the Surviving Corporation's quarterly consolidated
financial statements for the first fiscal quarter following the first
anniversary of the consummation of the Merger, the applicable margins provided
by GE are subject to adjustment (up or down), prospectively, based upon the
Surviving Corporation's consolidated financial performance for the trailing four
quarters most recently ended.
FEES. The GE Financing Letter contemplates that CTSI will be required to
pay the following fees: (a) a letter of credit fee equal to the applicable
letter of credit margin per annum (calculated on the basis of a 360 day year and
actual days elapsed) on the face amount of outstanding letters of credit under
the Revolver, plus any costs, expenses, and charges incurred by GE in arranging
for the issuance or guaranty of any letter of credit; (b) an unused Revolver
facility fee margin (calculated on the basis of a 360 day year and actual days
elapsed) on the average unused daily balance of the Revolver; (c) an unused
CAPEX facility fee margin (calculated on the basis of a 360 day year and actual
days elapsed) on the average unused daily balance of the CAPEX Line; and (d)
prepayment premiums with respect to each voluntary prepayment and each mandatory
prepayment required due to the sale or issuance by CTSI of public equity not
reasonably determined by the agent to be for permitted capital expenditures and
permitted acquisitions.
REPRESENTATIONS AND WARRANTIES; CONDITIONS; COVENANTS. The GE Financing
Letter provides that the loan documentation will include customary
representations and warranties and customary covenants restricting, among other
things, the ability of the Company to (a) declare dividends or make
distributions to equity holders; (b) make payments on the CTSI Subordinated
Notes, the Company Senior Notes, and other subordinated debt; (c) pay management
fees to affiliates; (d) redeem common or preferred stock; (e) incur additional
indebtedness; (f) engage in mergers, acquisitions, or asset sales; (g) effect a
change in control of the Surviving Corporation or CTSI; and (h) make capital
expenditures. In addition, the GE Financing Letter provides that CTSI, the
Company and the Surviving Corporation will be required to comply with certain
financial covenants and customary affirmative covenants.
EVENTS OF DEFAULT. The loan documentation is expected to provide for
customary events of default, including, without limitation, payment defaults,
covenant defaults, breaches of representations and warranties, bankruptcy and
insolvency, judgments, change of control and cross default with certain other
indebtedness and significant other contracts, subject to, in certain
circumstances, grace provisions.
Security Interest. GE, as Agent, will receive a fully perfected first
priority security interest in all of the existing and after acquired real and
personal, tangible and intangible assets of all the Surviving Corporation's
domestic subsidiaries including, without limitation, all cash, cash equivalents,
bank accounts, accounts, other receivables, chattel paper, contract rights,
inventory, instruments, documents, securities, equipment, fixtures, real
property interests, franchise rights, proprietary rights, general intangibles,
investment property, and all substitutions, accessions, and proceeds of the
foregoing (the "Collateral"). All Collateral will be free of liens and
encumbrances, except for existing capital leases and other permitted liens and
encumbrances. The Surviving Corporation will guarantee the obligations of CTSI
under the Financing documents and will pledge the capital stock of CTSI and its
other subsidiaries (but only 65% of such capital stock with respect to foreign
subsidiaries) to GE as Agent. All obligations of CTSI hereunder will be
cross-defaulted to each other and to all other material indebtedness of the
Surviving Corporation or any of its subsidiaries. All such obligations will be
cross- collateralized with each other and cross-collateralized and guaranteed by
all domestic subsidiaries of the Surviving Corporation (other than CTSI).
62
EQUITY INVESTMENT.
Odyssey's investment in the Surviving Corporation after the Effective Time
will consist of a cash contribution to Merger Sub in a aggregate amount of
approximately $57.6 million, which Merger Sub intends to contribute to Celadon
at the Effective Time.
The total investment in Celadon after the Effective Time will be
approximately $64.0 million, consisting of (a) approximately $57.6 million of
Celadon Common Stock, in the form of approximately $57.6 million contributed by
Odyssey through the Merger Sub; and (b) the approximately $6.4 million value of
the Rollover Shares.
SOURCES AND USES OF FUNDS
The estimated cash sources and uses of the financing for the consummation of
the Merger and the refinancing of certain indebtedness and capital leases of the
Company are as follows:
(IN MILLIONS)
---------------
SOURCES OF FUNDS:
Revolver......................................................................................... $ 1.2
CTSI Senior Subordinated Notes................................................................... $ 150.0
Company Senior Discount Notes.................................................................... $ 25.0
Equity financing from Odyssey.................................................................... $ 57.6
------
Total............................................................................................ $ 233.8
USES OF FUNDS:
Cash Merger Price (1)............................................................................ $ 148.1
Payment to holders of Options and Hanseatic Warrants(2).......................................... $ 3.4
Repayment of certain indebtedness and capital leases............................................. $ 61.8
Estimated fees and expenses and signing bonuses.................................................. $ 20.5
------
Total............................................................................................ $ 233.8
The sources and uses of funds described above are based upon the CTSI Senior
Subordinated Notes and the Company Senior Discount Notes having been issued
prior to or at the Effective Time. The incurrence of the Bridge Loans will alter
the aggregate amounts of the sources and uses of funds but will not affect the
amounts to be paid to stockholders in respect of the Cash Merger Price or
amounts to be paid to holders of Options or Hanseatic Warrants.
It is a condition to the obligations of Merger Sub to affect the Merger that
sufficient funds have been received to finance the Merger and to consummate the
transactions contemplated by the Merger Agreement. Merger Sub informed the
Company in writing that on September 15, 1998, Merger Sub had received notice
from BT that BT would not be obligated to provide the Bridge Loans under the
then existing market conditions. Pursuant to the BT Financing Letter, BT would
not be obligated to provide the Bridge Loans if, in the reasonable judgment of
BT, market conditions which would materially and adversely affect the ability to
sell or place the Debt Securities exist at the time funding is requested. See
"Special Factors--Recent Developments; Material Uncertainty of Consummating the
Merger" and "Financing of the Merger."
- ------------------------
(1) Does not include the approximately $6.4 million value of the Rollover
Shares.
(2) Assumes all outstanding Options and the Hanseatic Warrants are canceled.
63
EXPENSES OF THE MERGER
The Merger Agreement provides that the Company and Merger Sub will bear
their respective expenses incurred in connection with the Merger Agreement and
the transactions contemplated thereby, whether or not the Merger is consummated,
except in certain circumstances specified in the Merger Agreement relating to
the termination thereof. See "Certain Provisions of the Merger Agreement--
Termination; Effects of Termination." The estimated fees and expenses incurred
and to be incurred by the Company and Merger Sub in connection with the Merger
and the related transactions (assuming the consummation thereof) are as follows:
Financing and commitment fees (1).............................. $11,888,000
Financial advisory fees........................................ $5,700,000
Legal fees..................................................... $1,000,000
Accounting fees................................................ $ 500,000
SEC filing fees................................................ $ 30,310
Printing and mailing........................................... $ 85,000
Miscellaneous.................................................. $ 147,690
----------
Total.......................................................... $19,351,000
- ------------------------
(1) Assuming the CTSI Senior Subordinated Notes and the Company Senior Discount
Notes are issued and the Company Bridge Loan and the CTSI Bridge Loan are
not incurred. Includes prepayment penalties incurred in connection with the
repayment of certain indebtedness and capital leases.
MERGER SUB AND ODYSSEY
GENERAL
Merger Sub was recently incorporated under the laws of the State of Delaware
for the purpose of consummating the Merger. Merger Sub has not conducted any
business other than the transactions described herein. Merger Sub will not have
any assets or liabilities other than those arising under the Merger Agreement or
in connection with the Merger, or engage in any activities other than those
incident to its formation and capitalization and the Merger. Merger Sub is
controlled by Odyssey and may issue equity to certain institutional investors
prior to the Effective Time. Odyssey is principally engaged in the business of
investing in companies. Odyssey is a Delaware limited partnership, the general
partner of which is Odyssey Capital Partners, LLC, a Delaware limited liability
company (the "General Partner") and the manager of which is Odyssey Investment
Partners, LLC, a Delaware limited liability company (the "Manager"). The
principal business office of each of Merger Sub and Odyssey is c/o Odyssey
Investment Partners, LLC, 280 Park Avenue, 38th Floor, New York, New York 10017.
The managing members of the General Partner and the Manager are Stephen
Berger ("Senior Managing Member"), Brian Kwait, Muzzafar Mirza, Paul D. Barnett,
William Hopkins, and Brian F. Wruble. The officers of Merger Sub are as of the
date hereof: Mr. Berger, Chief Executive Officer; Mr. Kwait, President and
Secretary; and Mr. Douglas Hitchner, Vice President and Treasurer. Mr. Kwait and
Mr. Hitchner are the present directors of Merger Sub. Prior to the Effective
Time, Mr. Berger is expected to become a director of Merger Sub. The business
address of Messrs. Berger, Kwait, Mirza, Barnett, Hopkins, Wruble and Hitchner
is c/o Odyssey Investment Partners, LLC, 280 Park Avenue, 38th Floor, New York,
New York 10017. Each of Messrs. Berger, Kwait, Mirza, Barnett, Hopkins, Wruble
and Hitchner is a citizen of the United States.
The principal occupation of each of Messrs. Berger, Kwait, Mirza, Barnett,
Hopkins and Wruble is to act as a managing member of the General Partner and the
Manager. From 1993 to 1998, Mr. Berger served as a general partner of Odyssey
Partners, L.P., where he headed the private equity investment business. From
1993 to 1997, each of Messrs. Kwait, Mirza and Barnett served as a principal in
the private equity
64
investment group at Odyssey Partners, L.P. From 1994 to 1997, Mr. Hopkins served
as a principal in the private equity investment group at Odyssey Partners, L.P.
and prior to that, he was a member of GE Capital's merchant banking group. From
1995 to 1997, Mr. Wruble served as a general partner at Odyssey Partners, L.P.
and prior to that Mr. Wruble was president and chief executive officer of the
Delaware Group mutual funds and president and chief operating officer of
Delaware Management.
For additional information regarding the directors and officers of Merger
Sub, see "Directors and Executive Officers of the Surviving Corporation."
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information furnished to the Company
regarding the beneficial ownership of Common Stock (a) by each person who, to
the knowledge of the Company, based upon filings with the Securities and
Exchange Commission, beneficially owns more than five percent of the outstanding
shares of the Common Stock, (b) by each director of the Company, (c) by each
executive officer of the Company, and (d) by all directors and executive
officers of the Company as a group. Unless otherwise indicated, each of the
stockholders has sole voting and investment power with respect to the shares
beneficially owned.
DIRECTORS AND EXECUTIVE OFFICERS
CELADON COMMON STOCK
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP (1) PERCENT OF SHARES
NAME (AS OF SEPTEMBER 18, 1998) OUTSTANDING
- ---------------------------------------------------------- ---------------------------- -------------------------
Stephen Russell, President, Chief Executive Officer and
Chairman................................................ 994,804(2)(3) 12.9
Ronald S. Roman, Senior Executive Vice President and Chief
Operating Officer....................................... 27,668(3) *
Robert Goldberg, Executive Vice President and Chief
Financial Officer....................................... 0 *
Michael Archual, Executive Vice President--Mexico......... 17,534(3) *
Nancy L. Morris, Executive Vice President-- Operations.... 5,334(3) *
Michael W. Dunlap, Vice President--Treasurer.............. 5,001(3) *
Paul A. Will, Vice President, Secretary and Controller.... 9,167(3) *
Paul A. Biddleman, Director of the Company................ 1,027,556(3)(4) 13.3
Joel E. Smilow, Director of the Company................... 135,200(3) 1.7
Kilin To, Director of the Company......................... 56,585(3) *
Michael Miller, Director of the Company................... 32,500(3) *
---------- ---
All executive officers and directors as a group
(11 persons)............................................ 1,316,093(5) 17.0
65
AMOUNT AND NATURE
OF BENEFICIAL
OWNERSHIP (1) PERCENT OF SHARES
NAME (AS OF SEPTEMBER 18, 1998) OUTSTANDING
- ---------------------------------------------------------- ---------------------------- -------------------------
FIVE-PERCENT OWNERS
Brinson Partners (6)...................................... 459,100(7) 5.9
Citicorp Venture Capital, Ltd.(8)......................... 438,358 5.6
Dimensional Fund Advisors(9).............................. 503,900(7) 6.5
Hanseatic Corporation..................................... 995,056(4) 12.9
Wolfgang Traber........................................... 995,056(4) 12.9
- ------------------------
(1) Based upon 7,726,989 shares of Celadon Common Stock outstanding at September
18, 1998.
(2) Excludes 995,056 shares of Celadon Common Stock reported as beneficially
owned by Hanseatic in filings with the Commission, all of which may be
deemed to be beneficially owned by Mr. Russell by virtue of a stockholders
agreement among Mr. Russell, Hanseatic and the Company, which agreement will
be terminated prior to the Effective Time. Mr. Russell disclaims beneficial
ownership of such shares. Mr. Russell's address is One Celadon Drive,
Indianapolis, Indiana 46235-4207.
(3) Includes shares of Celadon Common Stock which the directors and executive
officers had the right to acquire through the exercise of options within 60
days of September 18 as follows: Steven Russell-- 70,000 shares, Ronald S.
Roman--26,668 shares, Michael Archual--13,334 shares, Nancy Morris-- 4,334
shares, Michael Dunlap--5,001 shares, Paul Will--9,167 shares, Paul A.
Biddleman--32,500 shares, Michael Miller--32,500 shares, Joel Smilow--16,000
shares, Kilin To--32,500 shares.
(4) Of such shares, 946,021 shares of Celadon Common Stock are held by Hanseatic
Americas LDC, a Bahamian limited duration company in which the sole managing
member is Hansabel Partners LLC, a Delaware limited liability company in
which Hanseatic is the sole managing member. 49,037 shares of Celadon Common
Stock are held by Hanseatic for discretionary customer accounts, including
12,121 shares of Celadon Common Stock issuable upon the exercise of the
Hanseatic Warrants.
(5) Does not include 995,056 shares of Celadon Stock reported as beneficially
owned by Hanseatic in filings with the Commission, all of which are deemed
to be beneficially owned by Mr. Biddleman. Mr. Biddleman is the president of
Hanseatic and holds shared investment and voting power with respect to the
shares held by Hanseatic.
(6) The address of Brinson Partners is 209 South LaSalle, Chicago, IL
60604-1295.
(7) This information is based upon Schedules 13G filed with the Securities and
Exchange Commission for the June 30, 1998 reporting period.
(8) The address of Citicorp Venture Capital, Ltd. is 300 Park Avenue, New York,
New York.
(9) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment
advisor, is deemed to have beneficial ownership of 503,900 shares of Celadon
Common Stock as of September 18, 1998, all of which shares are held in
portfolios of DFA Investment Dimensions Group Inc., a registered open-end
investment company, or in series of the DFA Investment Trust Company, a
Delaware business trust, or the DFA Group Trust and DFA Participation Group
Trust, investment vehicles for qualified employee benefit plans, all of
which Dimensional Fund Advisors Inc. serves as investment manager.
Dimensional disclaims beneficial ownership of all such shares. The address
of Dimensional Fund Advisors Inc. is 1299 Ocean Avenue, 11(th) Floor, Santa
Monica, CA 90401.
66
DIRECTORS AND EXECUTIVE OFFICERS OF THE SURVIVING CORPORATION
It is expected that the Board of the Surviving Corporation following the
Merger will be comprised of Stephen Russell and the directors of Merger Sub as
of the Effective Time and that the current officers of the Company immediately
prior to the Effective Time will be the officers of the Surviving Corporation
after the Merger. The directors and executive officers of the Surviving
Corporation following the Merger are expected to include:
NAME AGE POSITION
- ------------------------------------------ ----- --------------------------------------------------------------
Stephen Russell........................... 58 President, Chief Executive Officer and Chairman
Ronald S. Roman........................... 54 Senior Executive Vice President and Chief Operating Officer
Robert Goldberg........................... 46 Executive Vice President and Chief Financial Officer
Michael Archual........................... 47 Executive Vice President--Mexico
Nancy L. Morris........................... 39 Executive Vice President--Operations
Michael W. Dunlap......................... 36 Vice President--Treasurer
Paul A. Will.............................. 32 Vice President--Secretary and Controller
Stephen Berger............................ 59 Director
Brian Kwait............................... 37 Director
Douglas Hitchner.......................... 37 Director
Mr. Russell has been Chairman of the Board and Chief Executive Officer of
the Company since its inception in July 1986. He is also a director of Petroleum
Heat and Power Co., Inc., a director of the Interstate Truckload Carriers
Conference, a director of the American Trucking Association ("ATA"), a director
of the Truckload Carriers Association ("TCA"), chairman of the International
committees of both the ATA and TCA, and a member of the North American
Transportation Alliance advisory board. Mr. Russell has been a member of the
Board of Advisors of the Cornell University Johnson Graduate School of
Management since 1983.
Mr. Roman has been Senior Executive Vice President--Chief Operating Officer
of the Company since June 1997. He was Executive Vice President--Fleet
Management and Customer Service of Celadon Trucking Services, Inc. from July
1996 to June 1997. From October 1985 to July 1996, Mr. Roman was employed by
North American Van Lines, Inc., an over-the-road household goods and high value
product full truckload transportation company, holding executive positions,
primarily Vice President--Fleet Services, from October 1985 to August 1995.
Mr. Goldberg has been Executive Vice President and Chief Financial Officer
of the Company since February 1998. From November 1993 to December 1997, Mr.
Goldberg was President of Tran-Star, Inc, a refrigerated trucking company. From
October 1992 to October 1993, Mr. Goldberg was Vice President-Chief Financial
Officer of Proline Carriers, Inc., a van trucking company. Mr. Goldberg is a
certified public accountant.
Mr. Archual has been Executive Vice President--Mexico since October 1997,
and oversees the Company's Mexico operations. He was Executive Vice
President--Sales and Marketing from July 1995 to October 1997. From October 1982
to June 1995, Mr. Archual was employed by Schneider National, Inc., a trucking
and logistics company, holding various positions, including Regional Vice
President--Sales, overseeing that company's Western region sales and marketing.
67
Ms. Morris has been Executive Vice President--Operations since February
1998. She was Vice President--Operations of CTSI from January 1997 to February
1998, and Director, Operations & Support Services of CTSI from August 1996 to
January 1997. From June 1984 to July 1996 Ms. Morris held various management
positions with North American Van Lines, Inc., an over-the-road household goods
and high value product full truckload transportation company, including
Director--Employee Relations and Support Services and Director-Customized
Logistics.
Mr. Dunlap has been Vice President--Treasurer of the Company since July
1996. He served as Vice President of Finance for National Freight, Inc., a
regional truckload transportation company, from October 1993 to July 1996, and
as Vice President--Treasurer for Burlington Motor Carriers, Inc. from October
1993 to July 1996.
Mr. Will has been Vice President--Secretary and Controller of the Company
since September 1996. He was Vice President--Controller for Celadon Trucking
Services, Inc. from January 1996 to September 1996 and Controller from September
1993 to January 1996. He served as Controller for American Hi-Lift, a company
engaged in the business of renting aerial work platform equipment, from February
1992 to September 1993. Mr. Will is a certified public accountant.
Mr. Berger will be a Director of the Surviving Corporation. He is currently
chairman of Odyssey Investment Partners, LLC. Prior to joining Odyssey
Investment Partners, LLC, Mr. Berger was a general partner of Odyssey Partners,
L.P. From 1990 to 1993, Mr. Berger served as Chairman and CEO of FGIC, a
wholly-owned subsidiary of GE Capital Corp. and subsequently become Executive
Vice President of GE Capital Corp. From 1985 to 1990, he was Executive Director
of the Port Authority of New York and New Jersey. Mr. Berger presently serves as
a member of the Board of Trustees of Brandeis University.
Mr. Kwait will be a Director of the Surviving Corporation. He is currently a
managing principal at Odyssey Investment Partners, LLC. From 1989 to 1997, he
served as a principal in the private equity investment group at Odyssey
Partners, L.P.
Mr. Hitchner will be a Director of the Surviving Corporation. He is
currently a principal at Odyssey Investment Partners, LLC. Prior to joining the
firm, Mr. Hitchner was a Vice President at Goldman, Sachs & Co. From 1990 to
1996, he was a Senior Vice President in GE Capital Corp.'s leveraged lending
business.
DESCRIPTION OF CAPITAL STOCK
CELADON COMMON STOCK
The Company's Certificate of Incorporation authorizes the Company to issue
up to 17 million shares of Celadon Common Stock, par value $0.033 per share. As
of June 23, 1998 there were outstanding 7,721,989 shares of Celadon Common
Stock. Subject to the rights of the holders of any outstanding shares of
preferred stock and any restrictions that may be imposed by any lender to the
Company, holders of Celadon Common Stock are entitled to receive such dividends,
if any, as may be declared by the Board of Directors out of legally available
funds. For certain restrictions on the Company's ability to pay dividends, see
"Market Prices and Dividends." In the event of liquidation, dissolution or
winding up of the Company, holders of Celadon Common Stock are entitled to share
ratably in the assets, if any, remaining after payment of all of the Company's
debts and liabilities and the liquidation preference of any outstanding stock.
Holders of Celadon Common Stock are entitled to one vote per share on any
matter submitted to them. Because holders of Celadon Common Stock do not have
cumulative voting rights in the election of directors, the holders of a majority
of the shares of Celadon Common Stock represented at a meeting can elect all of
the directors. Holders of Celadon Common Stock do not have preemptive rights to
subscribe for or purchase any additional shares of capital stock issued by the
Company. All outstanding shares of the Celadon Common Stock are duly authorized,
validly issued, fully paid and nonassessable.
68
CELADON PREFERRED STOCK
The Company's Certificate of Incorporation authorize the issuance of up to
179,985 shares of preferred stock. No shares of preferred stock are issued and
outstanding, but the Board of Directors is authorized to issue preferred stock
at any time without approval of holders of Celadon Common Stock. The Board of
Directors, without approval of the holders of Celadon Common Stock, can issue
preferred stock with voting rights which could adversely affect the voting power
of holders of the Celadon Common Stock. The issuance of preferred stock could
have the effect of delaying, deferring or preventing a change in control of the
Company. The Company has no present intention to issue any shares of preferred
stock.
Under the Company's Certificate of Incorporation, the Board of Directors is
authorized to divide the preferred stock into one or more series with such
designations, assigned values, preferences and relative, participating, optional
or other rights, qualifications, limitations or restrictions thereof as stated
and expressed in the resolution or resolutions providing for the issue of such
series as adopted by the Board of Directors.
AVAILABLE INFORMATION
Celadon has filed with the Commission a Rule 13e-3 Transaction Statement
(including any amendments thereto, the "Schedule 13E-3") under the Exchange Act
with respect to the Merger. This Proxy Statement does not contain all of the
information set forth in the Schedule 13E-3 and the exhibits thereto, certain
parts of which are omitted in accordance with the rules and regulations of the
Commission.
Celadon is subject to the informational requirements of the Exchange Act and
in accordance therewith files periodic reports, proxy statements and other
information with the Commission. The Schedule 13E-3 proxy statements and other
information filed by Celadon can be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549, and at the Commission's Regional offices located
at Seven World Trade Center, Suite 1300, New York, New York 10048 and Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials can be obtained from the Public Reference Section of the
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at the prescribed
rates. The Commission maintains a Website that contains reports, proxy and
information statements and other information regarding registrants that file
electronically with the Commission. Such reports, proxy and information
statements and other information may be found on the Commission's site address,
http://www.sec.gov. Celadon Common Stock is quoted on the Nasdaq National
Market, and certain reports, proxy statements and other information can also be
inspected and copied at the offices of the National Association of Securities
Dealers, Inc., 1735 K Street, Washington, D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by Celadon are
incorporated herein by reference:
(1) The Company's Quarterly Report on Form 10-Q for the quarterly period ended
March 31, 1998 (SEC File No. 000-23192);
(2) The Company's Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1997 (SEC File No. 000-23192);
(3) The Company's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1997 (SEC File No. 000-23192);
(4) The Company's Current Report on Form 8-K dated June 23, 1998 (SEC File No.
000-23192); and
(5) The Company's Annual Report on Form 10-K for the year ended June 30, 1998
(SEC File No. 000-23192).
69
All documents filed by the Company pursuant to Sections 13(a), 13(c), 14, or
15(d) of the Exchange Act subsequent to the date of this Proxy Statement and
prior to the date of the Special Meeting shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing of such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Proxy Statement to the extent that a statement contained
herein or in any other subsequently filed documents that also is or is deemed to
be incorporated by reference herein modifies or supersedes such statement. Any
such statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this Proxy Statement. To the
extent that any document incorporated herein includes forward looking statements
made pursuant to the "safe harbor" provided by Section 21E of the Exchange Act
and Section 27A of the Securities Act such statements are not protected by such
safe harbor as incorporated herein. The Company will provide, without charge, to
each person to whom a copy of this Proxy Statement has been delivered, on the
written or oral request of such person and by first class mail or other equally
prompt means within one business day of receipt of such request, a copy of any
or all of the documents referred to above that have been or may be incorporated
by reference herein other than exhibits to such documents (unless such exhibits
are specifically incorporated by reference herein). Requests for such copies
should be made at least five business days prior to the Special Meeting and
should be directed to: Celadon Group, Inc., One Celadon Drive, Indianapolis,
Indiana.
INDEPENDENT AUDITORS
The consolidated financial statements included in the Company's Schedule
13E-3 for the year ended June 30, 1998 and its Annual Report on Form 10-K for
the year ended June 30, 1998, incorporated by reference in this Proxy Statement,
have been audited by Ernst & Young LLP, independent auditors, as stated in their
report, incorporated by reference herein. Representatives of Ernst & Young LLP
are expected to be present at the Special Meeting and will have an opportunity
to make a statement should they desire to do so. Such representatives are also
expected to be available to respond to questions.
STOCKHOLDER PROPOSALS
Pursuant to Rule 14a-8 under the Exchange Act, stockholders may present
proper proposals for inclusion in Celadon's proxy statement and for
consideration at the Annual Meeting of Stockholders by submitting such proposals
to Celadon in a timely manner. The 1999 Annual Meeting will be held only if the
Merger is not consummated.
OTHER MATTERS
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no other matters that will be presented for consideration at
the Special Meeting other than as described in this Proxy Statement. However, if
any other matter shall come before the Special Meeting or any adjournments or
postponements thereof and shall be voted upon, it is intended that the shares
represented by proxy will be voted with respect thereto in accordance with the
judgment of the persons voting them.
By Order of the Board of Directors,
Paul Will, Secretary
October , 1998
70
TABLE OF CONTENTS
PAGE
-----
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS.................................................................. 1
SUMMARY.................................................................................................... 5
THE PARTIES TO THE MERGER................................................................................ 5
Celadon................................................................................................ 5
Merger Sub and Odyssey................................................................................. 5
THE SPECIAL MEETING...................................................................................... 5
REASONS FOR THE MERGER................................................................................... 6
TERMS OF THE MERGER...................................................................................... 6
General................................................................................................ 6
Cash Merger Price...................................................................................... 6
Payment of Cash Merger Price........................................................................... 6
Rollover Shares........................................................................................ 6
Excluded Shares........................................................................................ 7
Issuance of Surviving Corporation Common Stock to Odyssey.............................................. 7
Payment for Options and Hanseatic Warrants............................................................. 7
EFFECTIVE TIME........................................................................................... 7
FINANCING ARRANGEMENTS................................................................................... 7
INTERESTS OF CERTAIN PERSONS IN THE MERGER............................................................... 8
RECOMMENDATION OF THE BOARD.............................................................................. 8
OPINION OF FINANCIAL ADVISOR............................................................................. 9
CONDITIONS TO CONSUMMATION OF THE MERGER................................................................. 9
CERTAIN RELATED AGREEMENTS............................................................................... 9
CERTAIN EFFECTS OF THE MERGER............................................................................ 9
ACCOUNTING TREATMENT OF TRANSACTION...................................................................... 10
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER.................................................... 10
NO SOLICITATION; FIDUCIARY DUTIES........................................................................ 10
REGULATORY APPROVALS..................................................................................... 11
TERMINATION; FEES AND EXPENSES........................................................................... 11
APPRAISAL RIGHTS......................................................................................... 11
MARKET PRICES; DIVIDENDS................................................................................. 12
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION................................................... 13
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION......................................... 15
THE SPECIAL MEETING........................................................................................ 19
GENERAL.................................................................................................. 19
RECORD DATE, SOLICITATION, AND REVOCABILITY OF PROXIES................................................... 19
QUORUM; REQUIRED VOTE.................................................................................... 20
SPECIAL FACTORS............................................................................................ 20
BACKGROUND OF THE TRANSACTION............................................................................ 20
REASONS FOR THE MERGER; RECOMMENDATION OF THE BOARD OF DIRECTORS......................................... 24
PURPOSES AND REASONS OF ODYSSEY AND MERGER SUB FOR THE MERGER............................................ 26
POSITION OF ODYSSEY AND MERGER SUB AS TO FAIRNESS OF THE MERGER.......................................... 26
RECENT DEVELOPMENTS; MATERIAL UNCERTAINTY OF CONSUMMATING THE MERGER..................................... 27
OPINION OF WASSERSTEIN PERELLA, FINANCIAL ADVISOR TO CELADON............................................. 28
Historical Financial Position.......................................................................... 29
i
PAGE
-----
Cash Merger Price Premium Over Historical Stock Price.................................................. 29
Analysis of Certain Other Publicly Traded Companies.................................................... 29
Analysis of Selected Precedent Transactions............................................................ 31
Discounted Cash Flow Analysis.......................................................................... 31
Leveraged Equity Return Analysis....................................................................... 31
Relevant Market and Economic Factors................................................................... 32
CERTAIN PROJECTIONS...................................................................................... 33
INTERESTS OF CERTAIN PERSONS IN THE MERGER............................................................... 35
Officers of the Surviving Corporation.................................................................. 35
Benefits Under Employment Agreements, Signing Bonuses, and New Stock Option Plan....................... 35
Retention of Rollover Shares........................................................................... 36
Options and Warrants................................................................................... 36
Present Interests in Celadon Common Stock.............................................................. 37
Indemnification of Officers and Directors.............................................................. 38
Voting Agreement....................................................................................... 38
LITIGATION................................................................................................. 38
CERTAIN EFFECTS OF THE MERGER.............................................................................. 39
ACCOUNTING TREATMENT OF TRANSACTION...................................................................... 39
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER.................................................... 39
The Merger............................................................................................. 40
Backup Withholding..................................................................................... 40
APPRAISAL RIGHTS......................................................................................... 41
REGULATORY APPROVALS..................................................................................... 44
CERTAIN RELATED AGREEMENTS............................................................................... 44
CERTAIN PROVISIONS OF THE MERGER AGREEMENT................................................................. 44
GENERAL.................................................................................................. 44
TREATMENT OF SECURITIES IN THE MERGER.................................................................... 44
Cash Merger Price...................................................................................... 44
Payment of Cash Merger Price........................................................................... 44
Rollover Shares........................................................................................ 45
Excluded Shares........................................................................................ 45
Issuance of Surviving Corporation Common Stock to Odyssey.............................................. 45
Payment for Options and Hanseatic Warrants............................................................. 45
Rollover Options....................................................................................... 45
BOARD OF DIRECTORS AND OFFICERS OF THE SURVIVING CORPORATION............................................. 45
CERTIFICATE OF INCORPORATION AND BY-LAWS OF THE SURVIVING CORPORATION.................................... 46
PAYMENT FOR SHARES....................................................................................... 46
REPRESENTATIONS AND WARRANTIES........................................................................... 47
Representations and Warranties of the Company.......................................................... 47
Representations and Warranties of Merger Sub........................................................... 47
COVENANTS................................................................................................ 47
Interim Operations..................................................................................... 47
Investigation by Merger Sub............................................................................ 48
Additional Covenants................................................................................... 48
Consents and Efforts................................................................................... 49
CONDITIONS TO THE CONSUMMATION OF THE MERGER............................................................. 50
Conditions to Each Party's Obligation to Effect the Merger............................................. 50
Conditions to the Obligation of the Company to Effect Effect the Merger................................ 50
Conditions to the Obligation of Merger Sub to Effect the Merger........................................ 50
ii
PAGE
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NO SOLICITATION; FIDUCIARY OUT........................................................................... 51
TERMINATION; EFFECTS OF TERMINATION...................................................................... 52
Termination by Mutual Written Consent.................................................................. 52
Termination by the Company............................................................................. 52
Termination by Merger Sub.............................................................................. 52
Termination by Either Merger Sub or the Company........................................................ 53
AMENDMENT................................................................................................ 54
THE SPECIAL MEETING...................................................................................... 55
GENERAL................................................................................................ 55
RECORD DATE, SOLICITATION, AND REVOCABILITY OF PROXIES................................................. 55
MARKET PRICES AND DIVIDENDS................................................................................ 56
FINANCING OF THE MERGER.................................................................................... 56
Bridge Loans........................................................................................... 57
CTSI Bridge Loan ($100 million)........................................................................ 57
Company Bridge Loan ($25 million)...................................................................... 58
CTSI Senior Subordinated Notes......................................................................... 58
Company Senior Discount Notes.......................................................................... 59
Revolving Credit Facility ($25 million) and CAPEX Line ($150 million).................................. 60
Use of Proceeds; Maturity.............................................................................. 60
Prepayments............................................................................................ 60
Interest............................................................................................... 61
Fees................................................................................................... 61
Representations and Warranties; Conditions; Covenants.................................................. 61
Events of Default...................................................................................... 61
Security Interest...................................................................................... 61
Equity Investment...................................................................................... 62
SOURCES AND USES OF FUNDS................................................................................ 62
EXPENSES OF THE MERGER................................................................................... 63
MERGER SUB AND ODYSSEY..................................................................................... 63
GENERAL.................................................................................................. 63
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................................... 64
DIRECTORS AND EXECUTIVE OFFICERS OF THE SURVIVING CORPORATION.............................................. 66
DESCRIPTION OF CAPITAL STOCK............................................................................... 67
CELADON COMMON STOCK..................................................................................... 67
CELADON PREFERRED STOCK.................................................................................. 68
AVAILABLE INFORMATION...................................................................................... 68
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 68
INDEPENDENT AUDITORS....................................................................................... 69
STOCKHOLDER PROPOSALS...................................................................................... 69
OTHER MATTERS.............................................................................................. 69
iii
TABLE OF CONTENTS
PAGE
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ARTICLE I. DEFINITIONS.................................................................................... 2
1.1. Defined Terms......................................................................... 2
1.2. Other Defined Terms................................................................... 7
ARTICLE II. THE MERGER.................................................................................... 8
2.1. The Merger............................................................................ 8
2.2. Effective Time........................................................................ 8
2.3. Closing............................................................................... 8
2.4. Certificate of Incorporation and By-Laws.............................................. 8
2.5. Directors............................................................................. 9
2.6. Officers.............................................................................. 9
ARTICLE III. EFFECT OF MERGER ON SECURITIES OF SUB AND THE COMPANY........................................ 9
3.1. Conversion of Sub Common Stock........................................................ 9
3.2. Conversion of Company Common Stock.................................................... 9
3.3. Options............................................................................... 10
3.4. Warrants.............................................................................. 10
3.5. Exchange of Certificates.............................................................. 10
3.6. Dissenting Shares..................................................................... 12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY................................................. 13
4.1. Organization and Capitalization....................................................... 13
4.2. Authorization......................................................................... 14
4.3. Subsidiaries.......................................................................... 14
4.4. Absence of Certain Changes or Events.................................................. 15
4.5. Title to Assets; Absence of Liens and Encumbrances, etc............................... 15
4.6. Contracts and Commitments............................................................. 17
4.7. Permits............................................................................... 18
4.8. No Conflict or Violation.............................................................. 19
4.9. Consents and Approvals................................................................ 19
4.10. SEC Documents; Financial Statements, etc.............................................. 19
4.11. Undisclosed Liabilities............................................................... 20
4.12. Litigation............................................................................ 20
4.13. Labor Matters......................................................................... 20
4.14. Compliance with Law................................................................... 21
4.15. No Brokers............................................................................ 21
PAGE
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4.16. Proprietary Rights.................................................................... 22
4.17. Employee Plans........................................................................ 22
4.18. Tax Matters........................................................................... 24
4.19. Insurance............................................................................. 26
4.20. Customers and Suppliers............................................................... 26
4.21. Compliance with Environmental Laws.................................................... 26
4.22. No Other Agreements to Sell the Assets or Shares of the Company or its
Subsidiaries.......................................................................... 28
4.23. Prohibited Payments................................................................... 28
4.24. Opinion of Financial Advisor.......................................................... 28
4.25. Board Recommendation.................................................................. 28
4.26. Required Company Vote................................................................. 28
4.27. Proxy Statement; Schedule 13E-3....................................................... 29
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF SUB.......................................................... 29
5.1. Organization.......................................................................... 29
5.2. Authorization......................................................................... 29
5.3. Consents and Approvals................................................................ 29
5.4. No Conflict or Violation.............................................................. 30
5.5. Proxy Statement....................................................................... 30
5.6. Financing............................................................................. 30
ARTICLE VI. COVENANTS OF THE COMPANY AND SUB.............................................................. 30
6.1. Maintenance of Business Prior to Closing.............................................. 30
6.2. Investigation by Sub.................................................................. 32
6.3. Consents and Efforts.................................................................. 33
6.4. Other Offers.......................................................................... 34
6.5. Meeting of Stockholders............................................................... 36
6.6. Proxy Statement....................................................................... 37
6.7. Schedule 13E-3........................................................................ 37
6.8. Director and Officer Liability........................................................ 37
6.9. Notices of Certain Events............................................................. 38
6.10. Further Assurances.................................................................... 39
6.11. Resignation of Directors.............................................................. 39
6.12. Financial Statements, Etc............................................................. 39
ARTICLE VII. CONDITIONS TO THE MERGER..................................................................... 39
7.1. Conditions to the Obligations of Each Party........................................... 39
7.2. Conditions to the Obligations of the Company.......................................... 40
PAGE
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7.3. Conditions to the Obligations of Sub.................................................. 40
ARTICLE VIII. MISCELLANEOUS............................................................................... 42
8.1. Termination........................................................................... 42
8.2. Assignment............................................................................ 44
8.3. Notices............................................................................... 45
8.4. Entire Agreement; Waivers............................................................. 45
8.5. Multiple Counterparts................................................................. 46
8.6. Invalidity............................................................................ 46
8.7. Titles................................................................................ 46
8.8. Fees and Expenses..................................................................... 46
8.9. Cumulative Remedies................................................................... 46
8.10. GOVERNING LAW......................................................................... 46
8.11. Amendment............................................................................. 46
8.12. Public Announcements.................................................................. 47
8.13. Enforcement of Agreement.............................................................. 47
8.14. Non-survival of Representations, Warranties........................................... 47
8.15. Interpretive Provisions............................................................... 47
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement"), dated June 23, 1998,
is by and between CELADON GROUP, INC., a Delaware corporation (the "Company"),
and LAREDO ACQUISITION CORP., a Delaware corporation ("Sub").
RECITALS
A. This Agreement provides for the merger (the "Merger") of Sub with and
into the Company, with the Company as the surviving corporation in such merger,
all in accordance with the provisions of this Agreement.
B. The respective Boards of Directors of Sub and the Company have approved
this Agreement, and deemed it advisable and in the best interests of their
respective companies and stockholders to consummate the Merger. The Company
intends promptly to submit to its Stockholders the approval of the Merger and
the approval and adoption of this Agreement.
C. Sub is unwilling to enter into this Agreement unless, contemporaneously
with the execution and delivery of this Agreement, the Company and certain
beneficial and record stockholders of the Company enter into an agreement (the
"Voting Agreement") providing for certain actions relating to the shares of
Company Common Stock owned by them; and the Board of Directors of the Company
has approved the entering into by the Company and such stockholders of the
Voting Agreement, and such stockholders have agreed to enter into, execute and
deliver the Voting Agreement.
D. The parties desire to make certain representations, warranties, covenants
and agreements in connection with the Merger and also to prescribe various
conditions to the Merger.
E. It is intended that the Merger be recorded as a recapitalization for
financial reporting purposes.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
contained herein, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE
DEFINITIONS
1.1. Defined Terms.
As used herein, the terms below shall have the following meanings:
"Affiliate" shall mean, with respect to any person or entity (the "referent
person"), any person or entity which controls the referent person, any person or
entity which the referent person controls, or any person or entity which is
under common control with the referent person. For purposes of the preceding
sentence, the term "control" shall mean the power, direct or indirect, to direct
or cause the direction of the management and policies of a person or entity
through voting securities, by contract or otherwise.
"Assets" shall mean all of the Company's and its Subsidiaries' right, title
and interest in and to all properties, assets and rights of any kind, whether
tangible or intangible, real or personal, owned by the Company or its
Subsidiaries or in which the Company or any of its Subsidiaries has any interest
whatsoever.
"Benefit Arrangement" shall mean any employment, consulting, severance or
other similar contract, arrangement or policy (written or oral) and each plan,
arrangement, program, agreement or commitment
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(written or oral) providing for insurance coverage (including, without
limitation, any self-insured arrangements), workers' compensation, disability
benefits, supplemental unemployment benefits, vacation benefits, retirement
benefits, life, health or accident benefits (including, without limitation, any
"voluntary employees' beneficiary association" as defined in Section 501(c)(9)
of the Code providing for the same or other benefits) or for deferred
compensation, profit-sharing, bonuses, stock options, stock appreciation rights,
stock purchases or other forms of incentive compensation or post-retirement
insurance, compensation or benefits which (a) is not a Welfare Plan, Pension
Plan or Multiemployer Plan, (b) is entered into, maintained, contributed to or
required to be contributed to, as the case may be, by the Company, its
Subsidiaries or any ERISA Affiliate or under which the Company, its Subsidiaries
or any ERISA Affiliate may incur any liability, and (c) covers any employee or
former employee of the Company, its Subsidiaries or any ERISA Affiliate (with
respect to their relationship with such any entity).
"Code" shall mean the Internal Revenue Code of 1986, as amended and any
successor statute.
"Company Common Stock" shall mean the Common Stock having a par value of
$0.033 per share of the Company.
"Contract" shall mean any agreement, contract, lease, note, loan, evidence
of indebtedness, purchase order, letter of credit, franchise agreement,
undertaking, covenant not to compete, employment agreement, license, instrument,
obligation, commitment, purchase and sales order, quotation and other executory
commitment to which the Company or its Subsidiaries is a party or which relates
to the Company's or its Subsidiaries' businesses or any of the Assets, whether
oral or written, express or implied, and which pursuant to its terms has not
expired, terminated or been fully performed by the parties thereto.
"DGCL" shall mean the General Corporation Law of the State of Delaware.
"Dissenting Stockholders" shall mean those Stockholders who hold Dissenting
Shares.
"Dissenting Shares" shall mean any shares held by Stockholders who are
entitled to an appraisal of their shares under the DGCL, and who have properly
exercised, perfected and not subsequently withdrawn or lost their appraisal
rights with respect to their Company Common Stock in accordance with the DGCL.
"Employee Plans" shall mean all Benefit Arrangements, Multiemployer Plans,
Pension Plans, and Welfare Plans.
"Encumbrance" shall mean any claim, lien, pledge, option, charge, easement,
security interest, deed of trust, mortgage, right-of-way, encroachment, building
or use restriction, encumbrance or other right of third parties, whether
voluntarily incurred or arising by operation of law, and includes, without
limitation, any agreement to give any of the foregoing in the future, and any
contingent or conditional sale agreement or other title retention agreement or
lease in the nature thereof.
"Environmental Claims" shall mean all accusations, allegations, notices of
violation, liens, claims, demands, suits, or causes of action for any damage,
including, without limitation, personal injury, property damage (including,
without limitation, any depreciation or diminution of property values), lost use
of property or consequential damages, arising directly or indirectly out of
Environmental Conditions or Environmental Laws. By way of example only (and not
by way of limitation), Environmental Claims include (i) violations of or
obligations under any contract related to Environmental Laws or Environmental
Conditions between the Company or its Subsidiaries and any other person, (ii)
actual or threatened damages to natural resources, (iii) claims for nuisance or
its statutory equivalent, (iv) claims for the recovery of response costs, or
administrative or judicial orders directing the performance of investigations,
responses or remedial actions under any Environmental Laws, (v) requirements to
implement "corrective action" pursuant to any order or permit issued pursuant to
the Resource Conservation and Recovery Act, as amended, or similar provisions of
applicable state law, (vi) claims related to Environmental Laws or Environmental
Conditions for restitution, contribution, or indemnity, (vii) fines, penalties
or liens of any kind against property related to Environmental Laws or
Environmental Conditions, (viii) claims related to
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Environmental Laws or Environmental Conditions for injunctive relief or other
orders or notices of violation from federal, state or local agencies or courts,
and (ix) with regard to any present or former employees, claims relating to
exposure to or injury from Environmental Conditions.
"Environmental Conditions" shall mean the state of the environment,
including natural resources (e.g., flora and fauna), soil, surface water, ground
water, any present or potential drinking water supply, subsurface strata or
ambient air.
"Environmental Laws" shall mean all applicable foreign, federal, state,
district and local laws, all rules or regulations promulgated thereunder, and
all orders, consent orders, judgments, notices, permits or demand letters
issued, promulgated or entered pursuant thereto, relating to pollution or
protection of the environment (including, without limitation, ambient air,
surface water, ground water, land surface, or subsurface strata), including,
without limitation, (i) laws relating to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, industrial
materials, wastes or other substances into the environment and (ii) laws
relating to the identification, generation, manufacture, processing,
distribution, use, treatment, storage, disposal, recovery, transport or other
handling of pollutants, contaminants, chemicals, industrial materials, wastes or
other substances. Environmental Laws shall include, without limitation, the
Comprehensive Environmental Response, Compensation and Liability Act of 1980, as
amended ("CERCLA"), the Toxic Substances Control Act, as amended, the Hazardous
Materials Transportation Act, as amended, the Resource Conservation and Recovery
Act, as amended ("RCRA"), the Clean Water Act, as amended, the Safe Drinking
Water Act, as amended, the Clean Air Act, as amended, the Occupational Safety
and Health Act, as amended, and all analogous laws promulgated or issued by any
state or other governmental authority.
"Environmental Reports" shall mean any and all written analyses, summaries
or explanations, in the possession or control of the Company or its
Subsidiaries, of (a) any Environmental Conditions in, on or about the properties
of the Company or its Subsidiaries or (b) the Company's or its Subsidiaries'
compliance with Environmental Laws.
"Equity Securities" shall mean (i) shares of capital stock or other equity
securities, (ii) subscriptions, calls, warrants, options or commitments of any
kind or character relating to, or entitling any person or entity to purchase or
otherwise acquire, any capital stock or other equity securities and (iii)
securities convertible into or exercisable or exchangeable for shares of capital
stock or other equity securities.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" shall mean any entity which is (or at any relevant time
was) a member of a "controlled group of corporations" with, under "common
control" with, or a member of an "affiliated service group" with, or otherwise
required to be aggregated with, the Company or its Subsidiaries as set forth in
Section 414(b), (c), (m) or (o) of the Code.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
"Facilities" shall mean all plants, offices, manufacturing facilities,
stores, warehouses, administration buildings and all real property and related
facilities owned or leased by the Company or its Subsidiaries.
"Fixtures and Equipment" shall mean all of the furniture, fixtures,
furnishings, machinery, equipment, spare parts, appliances and vehicles owned by
the Company or its Subsidiaries, wherever located, including all warranty rights
with respect thereto.
"GAAP" shall mean, with respect to any person, generally accepted accounting
principles in the United States of America, as in effect from time to time,
consistently applied.
"Hazardous Substances" shall mean all pollutants, contaminants, chemicals,
wastes, and any other carcinogenic, ignitable, corrosive, reactive, toxic or
otherwise hazardous substances or materials (whether solids, liquids or gases)
subject to regulation, control or remediation under Environmental Laws. By way
of
A-3
example only, the term Hazardous Substances includes petroleum, urea
formaldehyde, flammable, explosive and radioactive materials, PCBs, pesticides,
herbicides, asbestos, sludge, slag, acids, metals, solvents and waste waters.
"HSR Act" shall mean the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
"Leases" shall mean all of the leases or subleases for personal or real
property to which the Company or its Subsidiaries is a party or by which the
Company or its Subsidiaries is bound.
"Material Adverse Effect" or "Material Adverse Change" or a similar phrase
shall mean, with respect to any person, any material adverse effect on or change
with respect to (i) the business, operations, assets (taken as a whole),
liabilities (taken as a whole), condition (financial or otherwise), results of
operations or prospects of such person and its Subsidiaries, taken as a whole,
(ii) the relations with customers, suppliers, distributor or employees of such
person and its Subsidiaries, taken as a whole, or (iii) the right or ability of
such person or its Subsidiaries to consummate any of the transactions
contemplated hereby.
"Multiemployer Plan" shall mean any "multiemployer plan," as defined in
Section 4001(a)(3) or 3(37) of ERISA, which (a) the Company, its Subsidiaries or
any ERISA Affiliate maintains, administers, contributes to or is required to
contribute to, or, after September 25, 1980, maintained, administered,
contributed to or was required to contribute to, or under which the Company, its
Subsidiaries or any ERISA Affiliate may incur any liability and (b) covers any
employee or former employee of the Company, its Subsidiaries or any ERISA
Affiliate (with respect to their relationship with any such entity).
"Options" shall mean the options to purchase in the aggregate 444,675 shares
of Company Common Stock issued to certain executive employees and non-employee
directors of the Company pursuant to the Stock Option Plans.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Pension Plan" shall mean any "employee pension benefit plan" as defined in
Section 3(2) of ERISA (other than a Multiemployer Plan) (a) which the Company,
its Subsidiaries or any ERISA Affiliate maintains, administers, contributes to
or is required to contribute to, or, within the five years prior to the Closing
Date, maintained, administered, contributed to or was required to contribute to,
or under which the Company, its Subsidiaries or any ERISA Affiliate may incur
any liability (including, without limitation, any contingent liability) and (b)
which covers any employee or former employee of the Company, its Subsidiaries or
any ERISA Affiliate (with respect to their relationship with any such entity).
"Permits" shall mean all licenses, permits, franchises, approvals,
authorizations, consents or orders of, or filings with, or notifications to, any
governmental authority, whether foreign, federal, state or local, or any other
person, necessary or desirable for the past, present or currently anticipated
conduct of, or relating to the operation of the business of, the Company or its
Subsidiaries.
"Permitted Encumbrances" shall mean (a) liens for Taxes or governmental
charges or claims (i) not yet due and payable or (ii) being contested in good
faith, if a reserve or other appropriate provision, if any, as shall be required
by GAAP shall have been made therefor, (b) statutory liens of landlords, liens
of carriers, warehouse persons, mechanics and material persons and other liens
imposed by law incurred in the ordinary course of business for sums (i) not yet
due and payable or (ii) being contested in good faith, if a reserve or other
appropriate provision, if any, as shall be required by GAAP shall have been made
therefor, (c) liens incurred or deposits made in connection with workers'
compensation, unemployment insurance and other similar types of social security
programs or to secure the performance of tenders, statutory obligations, surety
and appeal bonds, bids, leases, government contracts, performance and return of
money bonds and similar obligations, in each case in the ordinary course of
business, consistent with past practice, (d) purchase money liens incurred in
the ordinary course of business, consistent with past practice, and (e)
easements, rights-of-way, restrictions and other similar charges or
encumbrances, in each
A-4
case, which do not interfere with the ordinary conduct of business of the
Company or its Subsidiaries and do not materially detract from the value of the
property to which such encumbrance relates.
"Personnel" shall mean all directors, officers and employees of the Company
or its Subsidiaries.
"Returns" shall mean any and all returns, reports, declarations and
information statements with respect to Taxes required to be filed by or on
behalf of the Company or its Subsidiaries with any governmental authority or Tax
authority or agency, whether domestic or foreign, including, without limitation,
consolidated, combined and unitary returns and all amendments thereto or
thereof.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended.
"Stock Option Plans" shall mean the 1994 Celadon Stock Option Plan and the
1996 Non- Employee Director Stock Option Plan.
"Stockholders" shall mean the record holders of Company Common Stock.
"Subsidiary" shall mean, with respect to any of the parties of this
Agreement, any corporation or other business entity, whether or not
incorporated, of which at least 50% of the securities or interests having, by
their terms, ordinary voting power to elect members of the board of directors,
or other persons performing similar functions with respect to such entity, are
held, directly or indirectly, by such party.
"Tax(es)" shall mean all taxes, estimated taxes, withholding taxes,
assessments, levies, imposts, fees and other charges, including, without
limitation, any interest, penalties, additions to tax or additional amounts that
may become payable in respect thereof, imposed by any foreign, federal, state or
local government or taxing authority, which taxes shall include, without
limitation, all income taxes, payroll and employee withholding taxes,
unemployment insurance, social security, sales and use taxes, value-added taxes,
excise taxes, franchise taxes, gross receipts taxes, occupation taxes, real and
personal property taxes, stamp taxes, transfer taxes, workers' compensation and
other obligations of the same or of a similar nature.
"Treasury Securities" shall mean Company Common Stock, Options and Warrants
owned by Sub, the Company and/or any Subsidiary of Sub or the Company.
"Warrant Agreement" shall mean that certain Warrant Agreement, dated October
8, 1992, between the Company and Deltec Asset Management Corp. as a custodian
for Hanseatic Corp.
"Warrants" shall mean the warrants held by Hanseatic Corp. pursuant to which
the holders are entitled to purchase for $10.82 per share an aggregate of 12,121
shares of Company Common Stock.
"Welfare Plan" shall mean any "employee welfare benefit plan" as defined in
Section 3(1) of ERISA, (a) which the Company, its Subsidiaries or any ERISA
Affiliate maintains, administers, contributes to or is required to contribute
to, or under which the Company, its Subsidiaries or any ERISA Affiliate may
incur any liability and (b) which covers any employee or former employee of the
Company, its Subsidiaries or any ERISA Affiliate (with respect to their
relationship with any such entity).
1.2. Other Defined Terms.
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In addition to the terms defined in the Recitals to this Agreement and
Section 1.1, the following terms shall have the meanings defined for such terms
in the Sections set forth below:
TERM SECTION
- --------------------------------------------------------------------- -----------------------
"Acquisition Proposal"............................................... 6.4(a)
"Actions"............................................................ 4.12
"Closing"............................................................ 2.3
"Closing Date"....................................................... 2.3
"Company Reports".................................................... 4.10
"Company Restricted Stock"........................................... 3.3(b)
"Confidentiality Letter"............................................. 6.2
"Disclosure Schedule"................................................ Article IV Preamble
"Effective Time"..................................................... 2.2
"Exchange Fund"...................................................... 3.5(f)
"Financing".......................................................... 5.6
"Financing Letters".................................................. 5.6
"Jaguar"............................................................. 4.6
"Laws"............................................................... 4.14
"Leased Property".................................................... 4.5(b)(ii)
"Merger"............................................................. Recitals
"Merger Consideration"............................................... 3.1(a)
"Paying Agent"....................................................... 3.5(a)
"Permitted Party".................................................... 6.4(b)
"Proxy Statement".................................................... 6.6a)
"Roll-Over Share".................................................... 3.1(b)
"Roll-Over Share Consideration"...................................... 3.1(b)
"Schedule 13E-3"..................................................... 6.7
"Servicios".......................................................... 4.6
"Special Meeting".................................................... 4.27
"Subject Litigation"................................................. 6.8
"Surviving Corporation".............................................. 2.1
"Surviving Corporation Common Stock"................................. 3.2
"Third Party"........................................................ 6.4
ARTICLE II
THE MERGER
2.1. THE MERGER.
Upon the terms and subject to the satisfaction or waiver, if permissible, of
the conditions hereof, and in accordance with the DGCL, at the Effective Time,
Sub shall be merged with and into the Company. Upon the effectiveness of the
Merger, the separate corporate existence of Sub shall cease and the Company,
under the name Celadon Group, Inc., shall continue as the surviving corporation
(the "Surviving Corporation"). The Merger shall have the effects specified under
the DGCL.
2.2. EFFECTIVE TIME.
On the Closing Date, the parties shall cause the Merger to be consummated by
causing a certificate of merger with respect to the Merger to be executed and
filed in accordance with the relevant provisions of the DGCL and shall make all
other filings or recordings required under the DGCL. The Merger shall
A-6
become effective at the time of filing of the certificate of merger or at such
later time as is specified therein (the "Effective Time").
2.3. CLOSING.
Upon the terms and subject to the conditions of this Agreement, the closing
of the Merger (the "Closing") shall take place (a) at the offices of Latham &
Watkins, 885 Third Avenue, New York, New York at 10:00 a.m., local time, on the
first business day immediately following the day on which the last to be
satisfied or waived of the conditions set forth in Article VII (other than those
conditions that by their nature are to be satisfied at the Closing, but subject
to the satisfaction or waiver of those conditions) shall be satisfied or waived
in accordance herewith or (b) at such other time, date or place as Sub and the
Company may agree. The date on which the Closing occurs is herein referred to as
the "Closing Date."
2.4. CERTIFICATE OF INCORPORATION AND BY-LAWS.
(a) At the Effective Time, and without any further action on the part
of the Company or Sub, the certificate of incorporation of the Company, as
in effect immediately prior to the Effective Time, shall be amended so as to
read in its entirety in the form set forth as Exhibit A hereto, and, as so
amended, until thereafter further amended as provided therein and under the
DGCL, it shall be the certificate of incorporation of the Surviving
Corporation following the Merger.
(b) At the Effective Time, and without any further action on the part
of the Company or Sub, the by-laws of Sub as in effect immediately prior to
the Effective Time shall be the by-laws of the Surviving Corporation
following the Merger until thereafter changed or amended as provided therein
or by applicable law.
2.5. DIRECTORS.
The directors of Sub immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation and shall hold such positions
until their respective successors are duly elected and qualified, or their
earlier death, resignation or removal.
2.6. OFFICERS.
The officers of the Company immediately prior to the Effective Time shall be
the initial officers of the Surviving Corporation and shall hold office until
their respective successors are duly elected and qualified, or their earlier
death, resignation or removal.
ARTICLE III
EFFECT OF MERGER ON SECURITIES OF SUB AND THE COMPANY
3.1. CONVERSION OF SUB COMMON STOCK.
At the Effective Time, by virtue of the Merger and without any action on the
part of the holder thereof, the shares of common stock, par value $0.01 per
share, of Sub issued and outstanding immediately prior to the Effective Time
shall automatically be converted into and thereafter represent 2,880,000 validly
issued, fully paid and non-assessable share(s) of common stock, par value $0.033
per share, of the Surviving Corporation (the "Surviving Corporation Common
Stock").
3.2. CONVERSION OF COMPANY COMMON STOCK.
(a). At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of Company Common Stock
outstanding immediately prior to the Effective Time (other than Roll-Over
Shares, Treasury Securities and Dissenting Shares, if any) shall
automatically be converted into the right to receive, and each certificate
which immediately prior to the Effective Time represented a share of Company
Common Stock shall evidence solely the right to
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receive, $20.00 in cash (the "Merger Consideration") upon surrender of the
certificate formerly representing Company Common Stock as provided in
Section 3.5.
(b). At the Effective Time, by virtue of the Merger and without any
action on the part of the holder thereof, each share of Company Common Stock
held by certain officers and key employees of the Company as set forth on
Schedule A hereto (each, a "Roll-Over Share") shall be converted into the
right to receive one share of Surviving Corporation Common Stock (the
"Roll-Over Share Consideration").
(c). All Treasury Securities shall, by virtue of the Merger and without
any action on the part of the holder thereof, automatically be canceled and
cease to exist at and after the Effective Time and no consideration shall be
paid with respect thereto.
(d). Immediately prior to the Effective Time, at Sub's election, the
Company shall effect a recapitalization, to be effective as of the Effective
Time, of the securities of the Surviving Corporation, and the number of
outstanding shares and options of the Surviving Corporation shall be
appropriately adjusted.
3.3. OPTIONS.
(a). Except as otherwise agreed to in writing between the Company and
the holder of any Option, and as consented to by Sub, immediately prior to
the Effective Time, each outstanding Option granted under the Stock Option
Plans whether or not then exercisable, shall be canceled by the Company, and
at the Effective Time, or as soon as practicable thereafter, the former
holder thereof shall be entitled to receive from the Company in
consideration for such cancellation an amount in cash equal to the product
of (i) the number of shares of Company Common Stock previously subject to
such Option and (ii) the excess, if any, of the Merger Consideration per
share over the exercise price per share, if any, previously subject to such
Option, reduced by the amount of withholding or other taxes required by law
to be withheld.
(b). Except as provided herein or as otherwise agreed by the parties,
the Stock Option Plans and any other plan, program or arrangement providing
for the issuance or grant of any other interest in respect of the capital
stock of the Company or any Subsidiary shall terminate as of the Effective
Time, and the Company shall exercise its best efforts to ensure that
following the Effective Time, no current or former employee or director
shall have any Option to purchase shares of the Company Common Stock or any
other equity interest in the Company under any Stock Option Plan.
(c). Prior to the Effective Time, the Board of Directors (or, if
appropriate, any committee administering the Stock Option Plans) shall adopt
such resolutions or take such actions as are necessary, subject if
necessary, to obtaining consents of the holders thereof, to carry out the
terms of this Section 3.3.
3.4. WARRANTS.
(a). Immediately prior to the Effective Time, each outstanding Warrant
granted under the Warrant Agreement whether or not then exercisable, shall
be canceled by the Company, and at the Effective Time or as soon as
practicable thereafter, the former holder thereof shall be entitled to
receive from the Company in consideration for such cancellation an amount in
cash equal to (i) the product of (A) the Merger Consideration, multiplied by
(B) the aggregate number of shares of Company Common Stock issuable upon
exercise in full of all Warrants held by such holder immediately prior to
the Effective Time, minus (ii) the aggregate cash exercise price payable
upon exercise of all Warrants held by such holder.
(b). The Warrant Agreement shall terminate as of the Effective Time.
Prior to the Effective Time, the Board of Directors shall adopt such
resolutions or take such actions as are necessary,
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subject if necessary, to obtaining consents of the holders thereof, to carry
out the terms of this Section 3.4.
3.5. EXCHANGE OF CERTIFICATES.
(a). As of or promptly after the Effective Time, the Company shall
deposit with a paying agent to be selected by Sub (the "Paying Agent"), as
necessary, for the benefit of the holders of shares of Company Common Stock,
for payment in accordance with this Article III, the funds necessary to pay
the Merger Consideration for each share.
(b). As soon as practicable after the Effective Time, (i) each holder
of an outstanding certificate or certificates which pursuant to Section 3.2
represent the right to receive shares of the Surviving Corporation, upon
surrender to the Paying Agent of such certificate or certificates and
acceptance thereof by the Paying Agent, shall be entitled to a certificate
or certificates representing the Roll-Over Share Consideration into which
the number of Roll-Over Shares previously represented by such certificate or
certificates surrendered shall have been converted pursuant to this
Agreement and (ii) each other holder of an outstanding certificate or
certificates which immediately prior to the Effective Time represented
shares of the Company Common Stock (other than Roll-Over Shares), upon
surrender to the Paying Agent of such certificate or certificates and
acceptance thereof by the Paying Agent, shall be entitled to receive in
exchange therefor the Merger Consideration multiplied by the number of
shares of Company Common Stock formerly represented by such certificate. No
interest will be paid on or accrue on the Merger Consideration. The Paying
Agent shall accept such certificates upon compliance with such reasonable
terms and conditions as the Paying Agent may impose to effect an orderly
exchange thereof in accordance with customary exchange practices. After the
Effective Time, there shall be no further transfer on the records of the
Company or its transfer agent of certificates formerly representing shares
of Company Common Stock which have been converted, in whole or in part,
pursuant to this Agreement, into the right to receive cash, and if such
certificates are presented to the Company for transfer, they shall be
canceled against delivery of such cash. Until surrendered as contemplated by
this Section 3.5(b), (i) each certificate formerly representing Roll-Over
Shares shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender a new certificate or
certificates representing Surviving Corporation Common Stock, as
contemplated by Section 3.2(b), and (ii) each certificate formerly
representing shares of Company Common Stock (other than the Roll-Over
Shares) shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Merger Consideration for
each share of Company Common Stock.
(c). No dividends or other distributions with respect to Surviving
Corporation Common Stock with a record date after the Effective Time shall
be paid to the holder of any certificate formerly representing shares of
Company Common Stock not surrendered with respect to the Roll-Over Shares
formerly represented thereby. Subject to applicable law, following surrender
of any such certificate, there shall be paid to the holder of the
certificate or certificates representing shares issued for the Roll-Over
Share Consideration without interest, at the appropriate payment date, the
proportionate amount of dividends or other distributions with a record date
after the Effective Time but prior to such surrender and a payment date
subsequent to such surrender payable with respect to such shares
representing the Roll-Over Share Consideration.
(d). All cash paid upon the surrender for exchange of certificates
formerly representing shares of Company Common Stock in accordance with the
terms of this Article III shall be deemed to have been paid in full
satisfaction of all rights pertaining to the shares exchanged for cash
theretofore represented by such certificates.
(e). Any cash deposited with the Paying Agent pursuant to this Section
3.5 (the "Exchange Fund") which remains undistributed to the holders of the
certificates formerly representing shares of Company Common Stock one year
after the Effective Time shall be delivered to the Surviving
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Corporation at such time and any former holders of shares of Company Common
Stock (other than Roll-Over Shares) prior to the Merger who have not
theretofore complied with this Article III shall thereafter look only to the
Surviving Corporation and only as general unsecured creditors thereof for
payment of their claim for cash, if any.
(f). None of Sub, the Company or the Paying Agent shall be liable to
any person in respect of any cash from the Exchange Fund delivered to a
public office pursuant to any applicable abandoned property, escheat or
similar law. If any certificates representing shares of Company Common Stock
shall not have been surrendered prior to one year after the Effective Time
(or immediately prior to such earlier date on which any cash in respect of
such certificate would otherwise escheat to or become the property of any
federal, state, local, or municipal, foreign or other government or
subdivision, branch, department or agency thereof and any governmental or
quasi-governmental authority of any nature, including any court or other
tribunal), any such cash in respect of such certificate shall, to the extent
permitted by applicable law, become the property of the Surviving
Corporation, free and clear of all claims or interest of any person
previously entitled thereto.
(g). In the event any certificate formerly representing Company Common
Stock shall have been lost, stolen or destroyed, upon the making of an
affidavit of that fact by the person claiming such certificate to be lost,
stolen or destroyed and, if required by Surviving Corporation, the posting
by such person of a bond in such reasonable amount as Surviving Corporation
may direct as indemnity against any claim that may be made against it with
respect to such certificate, the Paying Agent will issue in exchange for
such lost, stolen or destroyed certificate the shares representing the
Roll-Over Share Consideration, and unpaid dividends and distributions on
shares representing the Roll-Over Share Consideration deliverable in respect
thereof pursuant to this Agreement, or the Merger Consideration, as the case
may be.
3.6. DISSENTING SHARES.
Notwithstanding Section 3.2 hereof, Dissenting Shares shall not be converted
into a right to receive the Merger Consideration. The holders thereof shall be
entitled only to such rights as are granted by Section 262 of the DGCL. Each
holder of Dissenting Shares who becomes entitled to payment for such shares
pursuant to Section 262 of the DGCL shall receive payment therefor from the
Surviving Corporation in accordance with the DGCL; provided, however, that (i)
if any such holder of Dissenting Shares shall have failed to establish his
entitlement to appraisal rights as provided in Section 262 of the DGCL, (ii) if
any such holder of Dissenting Shares shall have effectively withdrawn his demand
for appraisal of such shares or lost his right to appraisal and payment for his
shares under Section 262 of the DGCL, or (iii) if neither any holder of
Dissenting Shares nor the Surviving Corporation shall have filed a petition
demanding a determination of the value of all Dissenting Shares within the time
provided in Section 262 of the DGCL, such holder shall forfeit the right to
appraisal of such shares and each such share shall be treated as if it had been
converted, as of the Effective Time, into a right to receive the Merger
Consideration, without interest thereon, from the Surviving Corporation as
provided in Section 3.2 hereof. The Company shall give Sub prompt notice of any
demands received by the Company for appraisal of shares, and Sub shall have the
right to participate in all negotiations and proceedings with respect to such
demands. The Company shall not, except with the prior written consent of Sub,
make any payment with respect to, or settle or offer to settle, any such
demands.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
As an inducement to Sub to enter into this Agreement, the Company hereby
makes, as of the date hereof and as of the Closing Date, the following
representations and warranties to Sub, except as otherwise set forth in a
written disclosure schedule (the "Disclosure Schedule") delivered by the Company
to Sub prior to the date hereof, a copy of which is attached hereto. Unless
otherwise specified, (1) each reference in this Agreement to any numbered
schedule is a reference to that numbered schedule which is included in the
Disclosure Schedule and (2) no disclosure made in any particular numbered
schedule of the Disclosure Schedule shall be deemed made in any other numbered
schedule of the Disclosure Schedule unless expressly made therein (by
cross-reference or otherwise) or unless, and only to the extent that, it is
apparent on the face of such disclosure that such disclosure contains
information which also modifies another representation and warranty therein.
4.1 ORGANIZATION AND CAPITALIZATION.
(a) Organization. The Company is duly organized, validly existing and
in good standing under the laws of the State of Delaware and has full
corporate power and authority to conduct its business as it is presently
being conducted and to own and lease its Assets. The Company is duly
qualified to do business as a foreign corporation and is in good standing in
each jurisdiction in which such qualification is necessary under applicable
law except where the failure to be so qualified and in good standing would
not reasonably be expected to have a Material Adverse Effect on the Company.
The Company has delivered to Sub true, correct and complete copies of its
certificate of incorporation and by-laws (in each case, as amended to date).
The Company is not in default under or in violation of any provision of its
certificate of incorporation or by-laws.
(b) Capitalization. The authorized capital stock of the Company
consists of 12,000,000 shares of Company Common Stock. As of June 23, 1998,
there were 7,721,989 shares of Company Common Stock issued and outstanding.
Since such date, no additional shares of capital stock of the Company have
been issued, except shares of Company Common Stock issued upon the exercise
of Options outstanding under any Stock Option Plan. As of June 23, 1998,
options to acquire 444,675 shares of Company Common Stock pursuant to the
Stock Option Plans were outstanding. Schedule 4.1(b) includes a complete and
correct list of outstanding Options under such Stock Option Plans (including
the number of Options and exercise price of each such Option) held by each
employee or director. As of June 23, 1998, warrants to acquire 12,121 shares
of Company Common Stock pursuant to the Warrant Agreement were outstanding.
Schedule 4.1(b) includes a complete and correct list of outstanding Warrants
under such Warrant Agreement. The Company has no outstanding bonds,
debentures, notes or other obligations the holders of which have the right
to vote (or which are convertible into or exercisable for securities having
the right to vote) with the stockholders of the Company on any matter. All
issued and outstanding shares of Company Common Stock are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights.
After the Effective Time, the Surviving Corporation will have no obligation
to issue, transfer or sell any shares of capital stock or other securities
of the Company or the Surviving Corporation. Schedule 4.1(b) sets forth the
total amount of indebtedness for borrowed money and the total amount of cash
on hand of the Company and its Subsidiaries on a consolidated basis as of
June 23, 1998. Except as provided in Schedule 4.1(b), all such indebtedness
is prepayable without more than two business days notice and without the
payment of any penalty. Except as set forth in this Section 4.1(b), there
are no (i) outstanding Equity Securities of the Company or (ii) commitments
or obligations of any kind or character for (A) the issuance of Equity
Securities of the Company or (B) the repurchase, redemption or other
acquisition of any Equity Securities of the Company.
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(c) Voting Trusts, Proxies, Etc. There are no stockholder agreements,
voting trusts, proxies or other agreements or understandings with respect to
or concerning the purchase, sale or voting of the Equity Securities of the
Company.
4.2 AUTHORIZATION.
The Company has all necessary corporate power and authority to execute and
deliver this Agreement and all agreements and documents contemplated hereby.
Subject only to the approval of this Agreement and the transactions contemplated
hereby by the majority of all the votes entitled to be cast on the Merger by the
holders of the Company Common Stock, the consummation by the Company of the
transactions contemplated hereby has been duly authorized by all requisite
corporate action. This Agreement has been duly authorized, executed and
delivered by the Company and is a legal, valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms, except as
the enforceability thereof may be limited by (a) applicable bankruptcy,
insolvency, moratorium, reorganization, fraudulent conveyance or similar laws in
effect which affect the enforcement of creditors' rights generally or (b)
general principles of equity, whether considered in a proceeding at law or in
equity.
4.3 SUBSIDIARIES.
(a) Ownership; Capitalization. The Company owns, directly or
indirectly, each of the outstanding capital stock (or other ownership
interests) of each of the Company's Subsidiaries as set forth on Schedule
4.3(a), and the Company has no investments (whether through the acquisition
of an equity interest, the making of a loan or advance or otherwise) in any
other person, corporation, partnership, joint venture, business, or trust or
entity. The Company is the beneficial owner of all of the outstanding shares
of capital stock of each Subsidiary, free and clear of any and all
Encumbrances. The authorized, issued and outstanding capital stock, and the
record ownership of all such shares of capital stock, of each Subsidiary is
as set forth on part (a) of Schedule 4.3. All of the shares of capital stock
of each Subsidiary have been duly authorized and validly issued and are
fully paid and non-assessable, were issued and sold in accordance with
federal and applicable state securities laws and were not issued in
violation of any preemptive or other similar rights. Except as set forth in
this Section 4.3(a), there are no (i) outstanding Equity Securities of its
Subsidiaries or (ii) commitments or obligations of any kind or character for
(A) the issuance of Equity Securities of its Subsidiaries or (B) the
repurchase, redemption or other acquisition of any Equity Securities of its
Subsidiaries. There are no stockholder agreements, voting trusts, proxies or
other agreements or understandings with respect to or concerning the
purchase, sale or voting of the Equity Securities of its Subsidiaries.
(b) Organization. Each of the Company's Subsidiaries is duly organized,
validly existing and in good standing under the laws of the jurisdiction of
its incorporation and has full corporate power and authority to conduct its
business as it is presently being conducted and to own and lease its Assets.
Each of the Company's Subsidiaries is duly qualified to do business as a
foreign corporation and is in good standing in each jurisdiction in which
such qualification is necessary under applicable law except whether the
failure to be so qualified and in good standing would not reasonably be
expected to have a Material Adverse Effect on the Company. The Company has
delivered to Sub true, correct and complete copies of each of its
Subsidiaries' certificate of incorporation and by-laws (in each case, as
amended to date). None of the Company's Subsidiaries is in default under or
in violation of any provision of its certificate of incorporation or
by-laws.
4.4 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Since March 31, 1998, (x) the Company and its Subsidiaries have been
operated in the ordinary course of business, consistent with past practice,
(iii) there has been no Material Adverse Change in or with respect to the
Company or its Subsidiaries and (z) to the best knowledge of the Company, (i)
there has been no threatened Material Adverse Change, and (ii) no events or
developments have occurred that, individually or in the aggregate, could
reasonably be expected to result in a Material Adverse Change, with
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respect to the Company. Without limiting the generality of the foregoing, since
March 31, 1998, neither the Company nor its Subsidiaries has (i) taken any
action of the type contemplated by Section 6.1(c) and (f)-- (p) hereof or (ii)
failed to take any action of the type contemplated by Section 6.1(a) and (b)
hereof.
4.5 TITLE TO ASSETS; ABSENCE OF LIENS AND ENCUMBRANCES, etc.
(a) General. Each of the Company and its Subsidiaries owns or leases
all Assets necessary for the conduct of its business as presently conducted,
and the Assets in the aggregate are in such operating condition and repair
(subject to normal wear and tear) as is necessary for the conduct of its
business as presently conducted.
(b) Real Property
(c) Owned Real Property. Schedule 4.5(b) hereto sets forth all
Facilities owned by the Company and its Subsidiaries. With respect to each
parcel of owned real property (A) the Company or its Subsidiaries has good
and marketable fee simple title to such parcel of real property, free and
clear of any and all Encumbrances other than Permitted Encumbrances, (B)
there are no leases, subleases, licenses, options, rights, concessions or
other agreements, written or oral, granting to any party or parties the
right of use or occupancy of any portion of such parcel of real property,
(C) there are no outstanding options or rights of first refusal in favor of
any other party to purchase any such parcel of real property or any portion
thereof or interest therein, (D) there are no parties (other than the
Company and its Subsidiaries) who are in possession of or who are using any
such parcel of real property and (E) there is no (1) pending or, to the best
knowledge of the Company, threatened condemnation proceeding relating to
such parcel of real property (2) pending or, to the best knowledge of the
Company, threatened Action relating to such parcel of real property, or (3)
other matter affecting the current or currently proposed use, occupancy or
value of, such parcel of real property in any material respect.
(d) Leased Real Property. Schedule 4.5 sets forth all leases pursuant
to which Facilities are leased by the Company or its Subsidiaries (as
lessee), true and correct copies of which have been delivered to Sub.
Schedule 4.5(b) indicates with respect to each such Lease a general
description of the leased items, term, annual rent, renewal options and
number of square feet leased, as applicable. Such leases constitute all
leases, subleases or other occupancy agreements pursuant to which the
Company or its Subsidiaries occupies or uses Facilities. The Company and its
Subsidiaries have good and valid leasehold title to, and enjoy peaceful and
undisturbed possession of, all leased property described in such leases (the
"Leased Property"), free and clear of any and all Encumbrances other than
any Permitted Encumbrances which would not permit the termination of the
Lease therefor by the lessor. With respect to each such parcel of Leased
Property (A) there are no pending or, to the best knowledge of the Company,
threatened condemnation proceedings relating to, or any pending or, to the
best knowledge of the Company, threatened Actions relating to, such Leased
Property or any portion thereof, (B) none of the Company or its Subsidiaries
or, to the best knowledge of the Company, any third party has entered into
any sublease, license, option, right, concession or other agreement or
arrangement, written or oral, granting to any person the right to use or
occupy such Leased Property or any portion thereof or interest therein and
(C) neither the Company nor its Subsidiaries have received notice of any
pending or threatened special assessment relating to such Leased Property or
otherwise have any knowledge of any pending or threatened special assessment
relating thereto. Each leased Facility is supplied with utilities necessary
for the operation of such Facility.
(e) Personal Property. Schedule 4.5(c) identifies all Fixtures and
Equipment, vehicles and other similar tangible personal property Assets with
a book value or replacement cost of at least $50,000 owned or leased by the
Company or its Subsidiaries as of June 23, 1998.
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(f) Owned Personal Property. Each of the Company and its Subsidiaries
has good and marketable title to all such personal property owned by it,
free and clear of any and all Encumbrances other than Permitted
Encumbrances. With respect to each such items of personal property (A) there
are no leases, subleases, licenses, options, rights, concessions or other
agreements, written or oral, granting to any party or parties the right of
use of any portion of such item of personal property, (B) there are no
outstanding options or rights of first refusal in favor of any other party
to purchase any such item of personal property or any portion thereof or
interest therein and (C) there are no parties (other than the Company and
its Subsidiaries) who are in possession of or who are using any such item of
personal property;
(g) Leased Personal Property. Each of the Company and its Subsidiaries
has good and valid leasehold title to all of such Fixtures and Equipment,
vehicles and other tangible personal property Assets leased by it from third
parties, free and clear of any and all Encumbrances other than Permitted
Encumbrances which would not permit the termination of the lease therefor by
the lessor. Schedule 4.5(c) sets forth all Leases for personal property
involving annual payments in excess of $50,000 and includes a general
description of the leased items, term and annual rent, true and correct
copies of which have been delivered or made available to Sub.
(h) With respect to each Lease listed on Schedule 4.5(b) and Schedule
4.5(c) and each Lease for tractors and trailers, (A) there has been no
material default under any such Lease by the Company or its Subsidiaries, to
the best knowledge of the Company, by any other party, (B) such Lease is a
valid and binding obligation of the Company and/or its Subsidiaries, is in
full force and effect with respect to the Company and/or its Subsidiaries
and is enforceable against the Company and/or its Subsidiaries in accordance
with its terms, except as the enforceability thereof may be limited by (1)
applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect which affect the enforcement of
creditors' rights generally or (2) general principles of equity, whether
considered in a proceeding at law or in equity, and (C) no action has been
taken by the Company and no event has occurred which, with notice or lapse
of time or both, would permit termination, modification or acceleration by a
party thereto other than the Company and/or its Subsidiaries, without the
consent of the Company and/or its Subsidiaries, under any such Lease that is
material to the Company and/or its Subsidiaries.
4.6 CONTRACTS AND COMMITMENTS.
(a) Schedule 4.6 sets forth a complete and accurate list of all
Contracts in the following categories as of the date hereof (except to the
extent that any such category specifies a different date, in which case such
corresponding list is made as of such specified date):
(b) each Contract (or group of related Contracts) for the furnishing of
services by the Company and/or its Subsidiaries involving annual revenues of
more than $100,000 to the Company and its Subsidiaries;
(c) each Contract (or group of related Contracts) concerning a
partnership or joint venture with, or any other investment in (whether
through the acquisition of an equity interest, the making of a loan or
advance or otherwise), any other person;
(d) each Contract (or group of related Contracts) (A) under which the
Company or its Subsidiaries has created, incurred, assumed or guaranteed (or
may create, incur, assume or guarantee) indebtedness for borrowed money, (B)
constituting capital lease obligations, (C) under which the Company or its
Subsidiaries has granted (or may grant) a security interest or lien on any
of the Assets or (D) under which the Company or its Subsidiaries has
incurred any obligations for any performance bonds, payment bonds, bid
bonds, surety bonds, letters of credit, guarantees or similar instruments;
(e) each Contract (or group of related Contracts) with any of the
Personnel, any Affiliate of the Company or any member of any such person's
immediate family, including, without limitation,
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Contracts (A) to employ or terminate executive officers or other Personnel
and other Contracts with present or former officers, directors or
stockholders or other corporate Personnel or (B) that will result in the
payment by, or the creation of any commitment or obligation (absolute or
contingent, matured or unmatured) to pay on behalf of the Company or its
Subsidiaries or any Affiliate of the Company or its Subsidiaries, any
severance, termination, "golden parachute" or other similar payments to any
present or former Personnel following termination of employment or otherwise
as a result of the consummation of the transactions contemplated hereby;
(f) each Contract (or group of related Contracts), other than Contracts
covered by clause (vii) of this Section 4.6, providing for payments in
excess of $100,000 over the life of such Contract (or group of related
Contracts), except for such Contracts that are cancelable on not more than
30 days' notice by the Company or its Subsidiaries without penalty or
increased cost;
(g) each distribution, franchise, license, sales, commission,
consulting agency or advertising Contract related to the Assets or the
business, except for such Contracts that are cancelable on not more than 30
days' notice by the Company or its Subsidiaries without penalty or increased
cost;
(h) each Contract (or group of related Contracts) containing covenants
restraining or limiting the freedom of the Company or its Subsidiaries or
any officer, director, stockholder or Affiliate thereof to engage in any
line of business or compete with any person including, without limitation,
by restraining or limiting the right to solicit customers;
(i) each Contract (or group of related Contracts) with the United
States, state or local government or any agency or department thereof;
(j) each Contract (or group of related Contracts) relating to the
arrangements (A) between the Company or its Subsidiaries, on the one hand,
and Servicio de Transportacion Jaguar, S.A. de C.V. ("Jaguar") and the
persons owning any Equity Interest in Jaguar, on the other hand and (B) the
Company or its Subsidiaries, on the one hand, and Servicio Corporativos,
S.A. de C.V. ("Servicios") and the persons owning any Equity Interest in
Servicios, on the other hand;
(k) each Contract (or group of related Contracts) pursuant to which the
Company or its Subsidiaries have sold any Assets and have created any
obligation to indemnify anyone with respect thereto; and
(l) any other material Contract.
The Company and its Subsidiaries have delivered to Sub a true and correct
copy of each written Contract listed in Schedule 4.6 and has included as part of
Schedule 4.6 a brief summary of the material terms of each oral Contract.
(m) Absence of Breaches or Defaults in General. With respect to each
Contract set forth on or described in Schedule 4.6, (i) there is no material
default by the Company or its Subsidiaries or, to the knowledge of the
Company, any other party to any Contract, (ii) the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby and thereby will not cause a material default hereunder
or thereunder; (iii) such Contract is a legal, valid and binding obligation
of the Company or its Subsidiaries party thereto, is in full force and
effect and is enforceable against the Company or its Subsidiaries and, to
the knowledge of the Company, against each other party thereto in accordance
with its terms, except as the enforceability thereof may be limited by (A)
applicable bankruptcy, insolvency, moratorium, reorganization, fraudulent
conveyance or similar laws in effect which affect the enforcement of
creditors' rights generally or (B) general principles of equity, whether
considered in a proceeding at law or in equity; and (iv) no action has been
taken by the Company or its Subsidiaries and no event has occurred which,
with notice or lapse of time or both and/or the occurrence, nonoccurrence,
or existence or nonexistence of any other event
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or condition would permit termination, modification or acceleration by a
party thereto other than the Company or its Subsidiaries under any such
Contract.
4.7 PERMITS.
The Company and its Subsidiaries have all material Permits required to own
and lease their properties, the Assets and the Facilities and to conduct their
business as currently being conducted. All such Permits are valid and in full
force and effect and are listed on Schedule 4.7. The Company and its
Subsidiaries have not violated any such Permits in any material respect, and
each is in compliance with all such Permits in all material respects. Neither
the Company nor its Subsidiaries has received any notice to the effect that, or
otherwise has any knowledge that, (a) the Company and its Subsidiaries are not
currently in compliance with, or are in violation of, any such Permits in any
material respect or (b) any currently existing circumstances are likely to
result in a failure of the Company and its Subsidiaries to comply with, or in a
violation by the Company and its Subsidiaries of, any such Permits in any
material respect. No representation or warranty is made in this Section 4.7 with
respect to the matters covered in Section 4.21 (Compliance with Environmental
Laws).
4.8 NO CONFLICT OR VIOLATION.
Neither the execution, delivery and performance of this Agreement, nor the
consummation of the transactions contemplated hereby, by the Company or its
Subsidiaries will result in (a) a violation of or a conflict with any provision
of the certificate of incorporation or by-laws of the Company or its
Subsidiaries, (b) a breach of, or a default under, or the creation of any right
of any party to accelerate, terminate or cancel pursuant to (including, without
limitation, by reason of the failure to obtain a consent or approval under any
such Contract), any term or provision of any Contract, indebtedness, Lease,
Encumbrance, Permit, authorization or concession to which the Company or its
Subsidiaries is a party or by which any of the Assets are bound, (c) a violation
by the Company or its Subsidiaries of any statute, rule, regulation, ordinance,
code, order, judgment, writ, injunction, decree or award applicable to the
Company or its Subsidiaries, (d) an impairment of any right of the Company or
its Subsidiaries under any Contract to which it is a party or by which its
Assets are bound or under any Permit relating to the operation of its business,
or (e) an imposition of any Encumbrance (other than Permitted Encumbrances),
restriction or charge on the business of the Company or its Subsidiaries or on
any of the Assets, except in the case of clauses (b), (d) and (e), where such
breach, default, creation of any right, impairment or imposition would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on the Company.
4.9 CONSENTS AND APPROVALS.
No consent, waiver, agreement, approval, Permit or authorization of, or
declaration, filing, notice or registration to or with, any federal, state,
local or foreign governmental or regulatory authority or body or other person or
entity is required to be made or obtained by the Company or its Subsidiaries in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby other than (a) filings
required in connection with or in compliance with the provisions of the HSR Act,
the Securities Act, the Exchange Act or applicable state securities and "Blue
Sky" laws (collectively, the "Regulatory Filings"), (b) the filing of the Merger
Certificate under the DGCL, or (c) those consents, waivers, agreements,
approvals, authorizations, declarations, filings, notices or registrations, that
have been, or will be prior to the Closing Date, obtained or made, as set forth
on Schedule 4.9.
4.10 SEC DOCUMENTS; FINANCIAL STATEMENTS, ETC.
The Company has filed all forms, reports and documents required to be filed
by it with the SEC since June 30, 1994 through the date of this Agreement
(collectively, the "Company Reports"). As of their respective dates, the Company
Reports (i) complied in all material respects with the applicable requirements
of the Securities Act, the Exchange Act, and the rules and regulations
thereunder and (ii) did not
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contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were made, not misleading.
The consolidated financial statements of the Company included in or incorporated
by reference in the Company Reports (the "Financial Statements") (i) comply as
to form in all material respects with applicable accounts requirements and the
published rules and regulations of the SEC with respect thereto; (ii) have been
prepared in accordance with GAAP, consistently applied throughout the periods
covered thereby, and sound bookkeeping practices and (iii) present fairly in
accordance with GAAP, consistently applied throughout the periods covered, the
financial condition of the Company and its Subsidiaries as of the respective
dates thereof and the results of operations, stockholders' equity and cash flows
for the periods covered thereby. The accounting and financial records of the
Company and its Subsidiaries have been prepared and maintained in accordance
with GAAP, consistently applied throughout the periods indicated, and sound
bookkeeping practices.
4.11 UNDISCLOSED LIABILITIES.
Neither the Company nor its Subsidiaries has any liabilities, obligations or
commitments of any nature (whether direct or indirect, known or unknown,
absolute or contingent, liquidated or unliquidated, due or to become due,
accrued or unaccrued, matured or unmatured) and, to the knowledge of the
Company, there is no basis for any present or future charge, complaint, action,
suit, proceeding, hearing, investigation, claim or demand against the Company or
its Subsidiaries giving rise to any such liability, other than (a) liabilities
which are reflected and reserved against on the most recent balance sheet
contained in the Financial Statements (including, without limitation, in the
notes thereto) which have not been paid or discharged since the date thereof,
(b) liabilities which arose prior to the date of the most recent balance sheet
contained in the Financial Statements and not required under GAAP to be
reflected thereon, (c) liabilities and obligations disclosed on the Disclosure
Schedule and liabilities and obligations which are not required to be disclosed
on the Disclosure Schedule and (d) liabilities incurred since March 31, 1998 in
the ordinary course of business, consistent with past practice (none of which
liabilities incurred since March 31, 1998 relates to any material breach of
Contract, breach of warranty, tort, infringement or violation of law or which
arose out of any Action). None of the liabilities described in clauses (b), (c)
and (d) of the preceding sentence has or would reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company.
4.12 LITIGATION.
Except as set forth on Schedule 4.12 and other than Actions which are
reflected and reserved against on the face of the most recent balance sheet
contained in the Financial Statements (including, without limitation, in the
notes thereto), there are no outstanding actions, orders, writs, injunctions,
judgments or decrees or any claims, suits, charges, proceedings, labor disputes,
arbitrations, governmental audits or investigations (collectively, "Actions")
pending or, to the knowledge of the Company and its Subsidiaries, threatened or
anticipated, (a) against, related to or affecting (i) the Company and its
Subsidiaries, their business or operations or the Assets, (ii) any officers or
directors of the Company and its Subsidiaries, as such, (iii) any stockholder of
the Company and its Subsidiaries, as such, or (iv) other than routine claims for
benefits, any Employee Plan of the Company and its Subsidiaries or any trust or
funding instrument, fiduciary or administrator thereof; (b) relating to the
transactions contemplated hereby; or (c) in which Company or its Subsidiaries is
a plaintiff, including, without limitation, any derivative suits brought by or
on behalf of the Company or its Subsidiaries, except for those Actions under
clauses (a), (b) or (c) that would not have, individually or in the aggregate, a
Material Adverse Effect on the Company.
4.13 LABOR MATTERS.
Neither the Company nor its Subsidiaries is a party to, or a participant in
any negotiation of, any labor agreement with respect to any of their employees
with any labor organization, union, group or association and there are no
employee unions (nor any other similar labor or employee organizations) under
local statutes, custom or practice. In the past five years, neither the Company
nor its Subsidiaries has been
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approached by organized labor or its representatives making an effort to cause
the Company or its Subsidiaries to conform to demands of organized labor
relating to any of their employees or to enter into a binding agreement with
organized labor that would cover any of their employees. There is no labor
strike, slow-down or other work stoppage or labor disturbance pending or, to the
knowledge of the Company, threatened against the Company or its Subsidiaries nor
is any grievance currently being asserted, and in the past five years the
Company and its Subsidiaries have not experienced a strike, slow-down or other
work stoppage or other labor disturbance or difficulty. The Company and its
Subsidiaries are in compliance in all material respects with all applicable laws
respecting employment practices, employee documentation, terms and conditions of
employment and wages and hours and are not and have not engaged in any unfair
labor practice. There is no unfair labor practice charge or complaint against
the Company and its Subsidiaries pending before or, to the knowledge of the
Company, threatened by the National Labor Relations Board or any other domestic
or foreign governmental agency arising out of the conduct of their businesses,
and, to the knowledge of the Company, there are no facts or information which
would give rise thereto, and in the past five years there have not been any
unfair labor practice charges or complaints against the Company or its
Subsidiaries which could have a Material Adverse Effect on the Company.
4.14 COMPLIANCE WITH LAW
The Company and its Subsidiaries have not violated and are in compliance
with (a) all applicable laws, statutes, ordinances, regulations, rules and
orders of every federal, state, local or foreign government and every federal,
state, local or foreign court or other governmental or regulatory agency,
department, authority, body or instrumentality and (b) any judgment, decision,
decree or order of any court or governmental or regulatory agency, department,
authority, body or instrumentality (collectively, "Laws"), relating to the
Assets, business or operations of the Company or its Subsidiaries, except to the
extent that any such violation or failure to comply is not reasonably likely,
individually or in the aggregate, to have a Material Adverse Effect on the
Company. Neither the Company nor its Subsidiaries has received any written
notice to the effect that, or otherwise has any knowledge that, (i) the Company
is not currently in compliance with, or is in violation of, any applicable Laws
or (ii) any currently existing circumstances are likely to result in a failure
of the Company to comply with, or a violation by the Company of, any Laws, in
either case which such failure to comply or violation would be reasonably
likely, individually or in the aggregate, to have a Material Adverse Effect on
the Company. No representation or warranty is made in this Section 4.14 with
respect to compliance with Laws relating to the matters covered in Sections 4.13
(Labor Matters), 4.17 (Employee Plans), 4.18 (Tax Matters) and 4.21 (Compliance
with Environmental Laws).
4.15 NO BROKERS.
Other than Wasserstein Perella & Co., the arrangements with which have been
disclosed in writing to Sub prior to the date hereof, none of the Company, its
Subsidiaries or any of their officers, directors, employees, stockholders or
other Affiliates has employed or made any agreement with any broker, finder or
similar agent or any person or firm to pay any finder's fee, brokerage fee or
commission or similar payment in connection with the transactions contemplated
hereby
4.16 PROPRIETARY RIGHTS.
Schedule 4.16 lists all federal, state and foreign registrations of patents,
trademarks, trade names, servicemarks or other trade rights and copyrights and
all pending applications for any such registrations that are owned by the
Company or its Subsidiaries, or that are being or have been used in connection
with, or relate to, the Assets, the business or operations, products or
processes of the Company or its Subsidiaries (whether or not presently used in
connection with the Assets, business or operations of the Company or its
Subsidiaries) or in which the Company or its Subsidiaries have any interest
(collectively, the "Proprietary Rights"). No person has a right to receive a
royalty or similar payment in respect of any Proprietary Rights whether or not
pursuant to any contractual arrangements entered into by the Company or its
Subsidiaries. Neither the Company nor its Subsidiaries has any licenses granted,
sold or otherwise
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transferred by or to it or other agreements to which it is a party, relating in
whole or in part to any of the Proprietary Rights. Each of the Company and its
Subsidiaries owns, or possesses valid and enforceable licenses or other rights
to use, all Proprietary Rights used in or necessary for its business as it is
currently conducted, and such ownership and licenses will not cease to be valid
and in full force and effect by reason of the execution, delivery and
performance of this Agreement or the consummation of the transactions
contemplated hereby, except where the failure to own or possess such licenses or
rights would not be reasonably likely, individually or in the aggregate, to have
a Material Adverse Effect on the Company. No other firm, corporation,
association or person (a) has notified the Company or its Subsidiaries that it
is claiming any ownership of or right to use such Proprietary Rights or (b) to
the best of the Company's and its Subsidiaries' knowledge, has interfered with,
infringed upon or otherwise come into conflict with any such Proprietary Rights
in any material respect.
4.17 EMPLOYEE PLANS.
(a) Schedule 4.17 contains a complete list of Employee Plans. With
respect to each such Employee Plan, the Company has provided to Sub true and
complete copies of (i) all plan documents and related trust agreements,
annuity contracts or other funding instruments, (ii) all summary plan
descriptions, summary of material modifications, all material employee
communications, the number of and a general description of the level of
employees covered by each Benefit Arrangement and a complete description of
any Employee Plan which is not in writing, (iii) the most recent
determination letter issued by the Internal Revenue Service and any opinion
letter issued by the Department of Labor with respect to each Pension Plan
and each voluntary employees' beneficiary association as defined under
Section 501(c)(9) of the Code (other than a Multiemployer Plan), (iv) for
the three most recent plan years, the Internal Revenue Service Form 5500
including all schedules and attachments thereto for each Pension Plan and
Welfare Plan, (v) all actuarial reports prepared for the last three plan
years for each Pension Plan, and (vi) a description setting forth the amount
of any liability of the Company and its Subsidiaries as of the Closing Date
for payments more than thirty (30) calendar days past due with respect to
any Welfare Plan.
(b) (i) Each Employee Plan including any related trust agreement,
annuity contract or other funding instrument is legal, valid and binding and
in full force and effect. (ii)Each Pension Plan and each related trust
agreement, annuity contract or other funding instrument which has been
operated as a qualified plan has received a favorable determination letter
from the Internal Revenue Service stating that such Pension Plan and each
related trust is qualified and tax-exempt under the provisions of Code
Sections 401(a) and 501(a) and has been so qualified during the period from
its adoption to the date of such determination letter. (iii) Each Employee
Plan is subject only to the laws of the United States or a political
subdivision thereof. (iv) Each Employee Plan has been maintained in
compliance in all material respect to its terms and operation, with the
requirements prescribed by any and all statutes, orders, rules and
regulations which are applicable to such Employment Plan, including, without
limitation, ERISA and the Code. (v)Except as provided by law or in any
employment agreement set forth on Schedule 4.17, the employment of all
persons presently employed or retained by the Company or its Subsidiaries is
terminable at will.
(c) (i) None of the Employee Plans is a plan that is or has ever been
subject to Title IV of ERISA, Section 302 of ERISA or Section 412 of the
Code. (ii) None of the Employee Plans is a plan or arrangement described
under Section 4(b)(5) or 401(a)(1) of ERISA, or a plan maintained in
connection with a trust described in Section 501(c)(9) of the Code.
(iii)Neither the Company nor any ERISA affiliate has, at any time,
maintained, contributed to or had any obligation to maintain or contribute
to any Multiemployer Plan.
(d) (i) Neither the Company nor any ERISA Affiliate has engaged in, or
is a successor or parent corporation to an entity that has engaged in, a
transaction described in Section 4212(c) of ERISA. (ii)None of the Company,
or its Subsidiaries or any plan fiduciary of any Employee Plan has
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engaged in, or has any liability in respect of, any transaction in violation
of Sections 404 or 406 of ERISA or any "prohibited transaction," as defined
in Section 4975(c)(1) of the Code, for which no exemption exists under
Section 408 of ERISA or Section 4975(c)(2) or (d) of the Code, or has
otherwise materially violated or participated in a violation of the
provisions of Part 4 of Title I, Subtitle B of ERISA. (iii)The Company and
its Subsidiaries have not been assessed any civil penalty under Section
502(l) of ERISA. (iv)No Employee Plan (or trust or other funding vehicle
pursuant thereto) has incurred any liability under Code Section 511.
(e) Except as required by Section 4980B of the Code or Part 6 of Title
1, Subtitle B of ERISA, neither the Company nor any ERISA Affiliate or any
Welfare Plan has any present or future obligation to make any payment to, or
with respect to any present or former employee of the Company or any ERISA
Affiliate pursuant to any retiree medical benefit plan, or other retiree
Welfare Plan, and no condition exists which would prevent the Company or an
ERISA affiliate from amending or terminating any such benefit plan or such
Welfare Plan.
(f) .There is no contract, agreement, plan or arrangement covering any
employee or former employee of the Company or its Subsidiaries that,
individually or collectively, requires the payment by the Company or its
Subsidiaries of any amount (i) that is not deductible under Section
162(a)(1) or 404 of the Code or (ii) that is an "excess parachute payment"
pursuant to Section 280G of the Code.
(g) Neither the Company nor any ERISA Affiliate has announced to
employees, former employees or directors an intention to create, or has
otherwise created, a legally binding commitment to adopt any additional
Employee Plans which are intended to cover employees or former employees of
the Company or any subsidiary or to amend or modify any existing Employee
Plan which covers or has covered employees or former employees of the
Company or any subsidiary.
(h) Neither the Company nor any Employee Plan holds as an asset any
interest in any annuity contract, guaranteed investment contract or any
other investment or insurance contract issued by an insurance company that
is the subject of bankruptcy, conservatorship or rehabilitation proceedings.
The insurance policies or other funding instruments, if any, for each
Welfare Plan provide coverage for each employee, consultant, independent
contractor or retiree of the Company or its Subsidiaries (and, if
applicable, their respective dependents) who has been advised by the Company
or its Subsidiaries, whether through an Employee Plan or otherwise, that he
or she is covered by such Welfare Plan.
(i) Neither the execution and delivery of this Agreement or other
related agreements by the Company nor the consummation of the transactions
contemplated hereby or the related transactions will result in the
acceleration or creation of any rights of any person to benefits under any
Employee Plan (including, without limitation, the acceleration of the
vesting or exercisability of any share options, the acceleration of the
vesting of any restricted stock, the acceleration of the accrual or vesting
of any benefits under any Pension Plan or the acceleration or creation of
any rights under any severance, parachute or change in control agreement).
(j) No event has occurred in connection with which the Company or any
Employee Plan, directly or indirectly, could be subject to any material
liability (A) under any statute, regulation or governmental order relating
to any Employee Plan or (B) pursuant to any obligation of the Company to
indemnify any person against liability incurred under any such statute,
regulation or order as they relate to the Employee Plans.
(k) The Company is not a party to any severance or similar arrangement
in respect of any of the Personnel that will result in any obligation
(absolute or contingent) of the Company or Sub after the Closing to make any
payment to any of such Personnel following termination of employment.
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4.18 TAX MATTERS.
(a) Filing of Tax Returns. The Company and its Subsidiaries have timely
filed with the appropriate taxing authorities all Returns (including,
without limitation, information returns and other material information) in
respect of Taxes required to be filed through the date hereof and will
timely file any such returns required to be filed on or prior to the Closing
Date. All Returns and other information filed are complete and accurate in
all material respects. The Company and its Subsidiaries have not requested
any extension of time within which to file Returns (including, without
limitation, information Returns) in respect of any Taxes. The Company and
its Subsidiaries have delivered to Sub complete and accurate copies of the
federal, state and local income tax Returns for the years 1995, 1996 and
1997.
(b) Payment of Taxes. All Taxes for which the Company and its
Subsidiaries are or may be liable, in respect of periods (or portions
thereof) ending on or before the Closing Date, have been timely paid, or an
adequate reserve (in conformity with GAAP) has been established therefor, as
set forth in the Financial Statements. There are no Taxes for which the
Company and its Subsidiaries are or may become liable that will apply in a
period or a portion thereof beginning on or after the Closing Date and that
are attributable to income earned or activities of the Company and its
Subsidiaries occurring before the Closing Date.
(c) Audits, Investigations or Claims. No deficiencies for Taxes have
been claimed, proposed or assessed in writing by any taxing or other
governmental authority against the Company or its Subsidiaries which have
not been paid or reserved on the Financial Statements. There are no pending
or, to the Company's knowledge, threatened audits, investigations or claims
for or relating to any liability in respect of Taxes that in the reasonable
judgment of the Company or its counsel are likely to result in an additional
amount of Taxes, and there is no matter under discussion with any taxing or
other governmental authority with respect to Taxes that in the reasonable
judgment of the Company or its counsel is likely to result in an additional
liability for Taxes with respect to the Company or its Subsidiaries. Audits
of federal, state, and local returns for Taxes by the relevant taxing or
other governmental authorities have been completed for the periods set forth
on Schedule 4.18(c) and none of the Company or its Subsidiaries has been
notified that any taxing or other governmental authority intends to audit
any other Return for any period. No extension of any statute of limitations
relating to Taxes is in effect with respect to the Company or its
Subsidiaries. No power of attorney has been executed by the Company or its
Subsidiaries with respect to any matters relating to Taxes which is
currently in force.
(d) Liens. There are no liens for Taxes (other than for current Taxes
not yet due and payable) on the Assets.
(e) Safe Harbor Lease Property. None of the Assets is property that is
required to be treated as being owned by any other person pursuant to the
so-called safe harbor lease provisions of former Section 168(f)(8) of the
Code.
(f) Security for Tax-Exempt Obligations. None of the Assets directly or
indirectly secures any debt the interest on which is tax-exempt under
Section 103(a) of the Code.
(g) Tax-Exempt Use Property. None of the Assets is "tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(h) No Withholding. The transaction contemplated herein is not subject
to the tax withholding provisions of Section 3406 of the Code, of Subchapter
A of Chapter 3 of the Code or of any other provision of law.
(i) Tax Election. All material elections with respect to Taxes
affecting the Company or its Subsidiaries as of the date hereof are set
forth on Schedule 4.18(i). Neither the Company nor its
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Subsidiaries has consented at any time under Section 341(f)(1) of the Code
to have the provisions of Section 341(f)(2) of the Code (or similar
provisions under state or local law) apply to any disposition of the Assets.
The Company and its Subsidiaries have not agreed to make, or are not
required to make, any adjustment under Section 481(a) of the Code (or
similar provisions under state or local law) by reason of a change in
accounting method or otherwise.
(j) Tax Sharing Agreements. There are no tax sharing agreements or
similar arrangements (whether written or unwritten) with respect to or
involving the Company or its Subsidiaries.
(k) Partnerships. The Company and its Subsidiaries are not a party to
any joint venture, partnership or other arrangement or contract which is
treated as a partnership for federal income tax purposes.
(l) Parachute Payments. The Company and its Subsidiaries are not a
party to any agreement or arrangement that would result, separately or in
the aggregate, in the payment of any "excess parachute payment" within the
meaning of Section 280G of the Code, including, without limitation, as a
result of any event connected with the Merger or any other transaction
contemplated herein.
(m) Affiliated Group. The Company and its Subsidiaries have not been a
member of an affiliated group that has filed a consolidated return or any
group that has filed a combined, consolidated or unitary state or local
return, other than the group of which the Company is currently the parent.
4.19 INSURANCE.
Schedule 4.19 contains a complete and accurate list of all policies or
binders for business interruption, fire, liability, title, worker's
compensation, product liability, errors and omissions and other forms of
insurance (showing as to each policy or binder the carrier, policy number,
coverage limits, expiration date, annual premium and a general description of
the type of coverage provided) maintained by the Company and its Subsidiaries.
Such insurance provides, and during its term has provided, coverage to the
extent and in the manner (a) adequate for the Company and its Subsidiaries and
their Assets, businesses and operations and the risks insured against in
connection therewith and (b) as may be or may have been required by law and by
any and all Contracts to which the Company and/or its Subsidiaries are or have
been a party. The Company and its Subsidiaries are not in any material default
under any of such policies or binders, and the Company and its Subsidiaries have
not failed to give any notice or to present any material claim under any such
policy or binder in a due and timely fashion. No insurer has refused, denied or
disputed coverage of any material claim made thereunder. No insurer has advised
the Company and/or its Subsidiaries that it intends to reduce coverage,
materially increase any premium or fail to renew any existing policy or binder.
All such policies and binders are in full force and effect on the date hereof
and shall be kept in full force and effect through the Closing Date.
4.20 CUSTOMERS AND SUPPLIERS.
Schedule 4.20 sets forth a true and correct list of (a) the 25 largest
customers of the Company and its Subsidiaries, on a consolidated basis, in terms
of sales during each of the fiscal year ended June 30,1997 and the nine months
ended March 31, 1998, setting forth the total sales to each such customer during
such period and (b) the 10 largest suppliers of the Company and its
Subsidiaries, on a consolidated basis, in terms of purchases during each of the
fiscal year ended June 30, 1997 and the nine months ended March 31, 1998,
setting forth for each such supplier the total purchases from each such supplier
during such period. There has not been any adverse change in the business
relationship of the Company or its Subsidiaries with any customer or supplier
named in Schedule 4.20.
4.21 COMPLIANCE WITH ENVIRONMENTAL LAWS.
(a) The Company and its Subsidiaries are in material compliance with
all Environmental Laws, including, without limitation, all Permits required
thereunder to conduct their business as currently
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being conducted or proposed to be conducted. All such Permits are listed on
Schedule 4.21. Neither the Company nor its Subsidiaries has received any
notice to the effect that, or otherwise has knowledge that, (i) the Company
and its Subsidiaries are not currently in compliance in any material respect
with, or are in violation of, any such Environmental Laws or Permits
required thereunder or (ii) any currently existing circumstances are likely
to result in a failure of the Company or its Subsidiaries to comply with, or
a violation by the Company or its Subsidiaries of, any such Environmental
Laws or Permits required thereunder. The Company and its Subsidiaries at all
times during the previous five years have been in material compliance with
all Environmental Laws.
(b) There are no existing or, to the knowledge of the Company,
potential Environmental Claims against the Company or its Subsidiaries, nor
have any of them received any written notification or otherwise has any
knowledge, of any allegation of any actual, or potential responsibility for,
or any inquiry or investigation regarding, any disposal, release or
threatened release at any location of any Hazardous Substance generated or
transported by the Company or its Subsidiaries.
(c) (i) No underground tank or other underground storage receptacle for
Hazardous Substances is currently located on the Facilities and there have
been no releases of any Hazardous Substances from any such underground tank
or related piping and (ii) there have been no releases (i.e., any past or
present releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, leaching, disposing, or dumping) of
Hazardous Substances on, upon or into the Facilities other than those
authorized by Environmental Laws including, without limitation, the Permits
required thereunder. In addition, to the best knowledge of the Company,
there have been no such releases by the Company's or its Subsidiaries'
corporate predecessors and no releases on, upon, or into any real property
in the vicinity of any of the real properties of the Company or its
Subsidiaries other than those authorized by Environmental Laws which,
through soil or ground water contamination, may have come to be located on
the properties of the Company or its Subsidiaries.
(d) Except as would not have a Material Adverse Effect on the Company,
there are no PCBs or asbestos-containing materials located at or on the
Facilities.
(e) The Company and its Subsidiaries are not a party, whether as a
direct signatory or as successor, assign or third-party beneficiary, or
otherwise bound, to any Lease or other Contract (excluding insurance
policies disclosed on the Disclosure Schedule) under which the Company or
its Subsidiaries are obligated by or entitled to the benefits of, directly
or indirectly, any representation, warranty, indemnification, covenant,
restriction or other undertaking concerning Environmental Conditions or
compliance with Environmental Laws.
(f) The Company and its Subsidiaries have not released any other person
from any claim under any Environmental Law or waived any rights concerning
any Environmental Condition.
(g) There are no consent decrees, consent orders, judgments, judicial
or administrative orders or agreements (other than Permits) with or liens
by, any governmental authority or quasi-governmental entity relating to any
Environmental Law which regulate, obligate or bind the Company or its
Subsidiaries.
(h) True and correct copies of the Environmental Reports, as well as
all other written environmental reports, audits or assessments which have
been conducted, either by the Company or its Subsidiaries or any person
engaged by the Company or its Subsidiaries for such purpose, at any facility
owned or formerly owned by the Company or its Subsidiaries have been made
available to Sub and a list of all such reports, audits and assessments is
set forth on Schedule 4.21(h).
4.22 NO OTHER AGREEMENTS TO SELL THE ASSETS OR SHARES OF THE COMPANY OR ITS
SUBSIDIARIES.
Other than sales of inventory or product in the ordinary course of business,
consistent with past practice, neither the Company nor its Subsidiaries has any
legal obligation, absolute or contingent, to any
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other person or firm to (a) sell or effect a sale of any or all of the Assets,
(b) sell or effect a sale of any Equity Securities of the Company or its
Subsidiaries, (c) effect any merger, consolidation or other reorganization of
the Company or its Subsidiaries or (d) enter into any Contract or cause the
entering into a Contract with respect to any of the foregoing.
4.23 PROHIBITED PAYMENTS.
The Company and its Subsidiaries have not, directly or indirectly, (a) made
or agreed to make any contribution, payment or gift to any government official,
employee or agent where either the contribution, payment or gift or the purpose
thereof was illegal under the laws of any federal, state, local or foreign
jurisdiction, (b) established or maintained any unrecorded fund or asset for any
purpose or made any false entries on the books and records of the Company and
its Subsidiaries for any reason, (c) made or agreed to make any contribution, or
reimbursed any political gift or contribution made by any other person, to any
candidate for federal, state, local or foreign public office or (d) paid or
delivered any fee, commission or any other sum of money or item of property,
however characterized, to any finder, agent, government official or other party,
in the United States or any other country, which in any manner relates to the
Assets, business or operations of the Company or its Subsidiaries, which the
Company or its Subsidiaries knows or has reason to believe to have been illegal
under any federal, state or local laws (or any rules or regulations thereunder)
of the United States or any other country having jurisdiction.
4.24 OPINION OF FINANCIAL ADVISOR.
The Company has received the opinion of Wasserstein Perella & Co., dated the
date of this Agreement, to the effect that, as of such date, the consideration
to be received in the Merger by the Company's stockholders is fair to such
holders of the Company Common Stock from a financial point of view, a signed
copy of which opinion has been delivered to Sub.
4.25 BOARD RECOMMENDATION.
The Board of Directors of the Company, at a meeting duly called and held,
has by unanimous vote (i) determined that this Agreement and the transactions
contemplated hereby, including the Merger, taken together are fair to and in the
best interests of the stockholders of the Company and has taken all actions
necessary on the part of the Company to render the restrictions on business
combinations contained in Section 203 of the DGCL inapplicable to this
Agreement, the Merger and the Voting Agreement and (ii) resolved to recommend
that the holders of the shares of the Company Common Stock approve this
Agreement and the transactions contemplated herein, including the Merger.
4.26 REQUIRED COMPANY VOTE.
The affirmative vote of a majority of the outstanding shares of the Company
Common Stock is the only vote of the holders of any class or series of the
Company's securities necessary to approve this Agreement, the Merger and the
other transactions contemplated hereby. There is no vote of the holders of any
class or series of the Company's securities necessary to approve the Voting
Agreement.
4.27 PROXY STATEMENT; SCHEDULE 13E-3.
The Proxy Statement to be mailed to the stockholders of the Company in
connection with the special meeting of the stockholders of the Company (the
"Special Meeting") and the Schedule 13E-3, if filed, and any amendment thereof
or supplement thereto, when, in the case of the Proxy Statement, mailed and at
the time of the Special Meeting, and in the case of the Schedule 13E-3, when and
if filed, shall not contain any untrue statement of a material fact, or omit to
state any material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not false or misleading, and shall comply with all requirements of the
Securities Act and the Exchange Act. Notwithstanding the foregoing, the Company
makes no representation or warranty with respect to any information furnished in
writing by Sub or its representatives specifically for inclusion in any of the
foregoing documents.
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ARTICLE V
REPRESENTATIONS AND WARRANTIES OF SUB
As an inducement to the Company to enter into this Agreement, Sub hereby
makes the following representations and warranties as of the date hereof and as
of the Closing Date to the Company:
5.1. ORGANIZATION.
Sub is duly organized, validly existing and in good standing under the laws
of the State of Delaware.
5.2. AUTHORIZATION.
Sub has all necessary corporate power and authority to, and has taken all
corporate action necessary on its part to, execute and deliver this Agreement
and to consummate the transactions contemplated hereby. This Agreement has been
duly executed and delivered by Sub and is a legal, valid and binding obligation
of Sub, enforceable against Sub in accordance with its terms, except as the
enforceability thereof may be limited by (a) applicable bankruptcy, insolvency,
moratorium, reorganization, fraudulent conveyance or similar laws in effect
which affect the enforcement of creditors' rights generally or (b) general
principles of equity, whether considered in a proceeding at law or in equity.
5.3. CONSENTS AND APPROVALS.
No consent, waiver, agreement, approval, Permit or authorization of, or
declaration, filing, notice or registration to or with, any federal, state,
local or foreign governmental or regulatory authority or body is required to be
made or obtained by Sub in connection with the execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated hereby other than any Regulatory Filings and pursuant to the DGCL.
5.4. NO CONFLICT OR VIOLATION.
Neither the execution, delivery and performance of this Agreement, nor the
consummation of the transactions contemplated hereby, by Sub will result in (a)
a violation of or a conflict with any provision of the certificate of
incorporation or by-laws of Sub, (b) a breach of, or a default under, or the
creation of any right of any party to accelerate, terminate or cancel pursuant
to (including, without limitation, by reason of the failure to obtain a consent
or approval under any such contract), any term or provision of any contract,
encumbrance or permit to which Sub is a party or by which any of its assets are
bound, which breach, default or creation of any such right would reasonably be
expected to have a Material Adverse Effect on Sub.
5.5. PROXY STATEMENT.
The information concerning Sub, its officers, directors, employees and
shareholders furnished in writing to the Company by Sub specifically for use in
the Proxy Statement will not, when mailed to the stockholders of the Company or
at the time of the Stockholders Meeting, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Notwithstanding the
foregoing, Sub makes no representation or warranty with respect to any
information supplied by the Company or any of its representatives which is
contained in or incorporated by reference in any of the foregoing documents or
in the Schedule 13E-3.
5.6. FINANCING.
Sub has delivered to the Company complete and correct executed copies of
letters (the "Financing Letters") issued in connection with the financing of the
transactions contemplated hereby (the "Financing"). Assuming satisfaction of all
applicable conditions set forth in the Financing Letters and full funding
thereunder, Sub at Closing shall be capitalized with an equity contribution in
an amount up to $60,000,000
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and such funds, together with the proceeds from the Financing, will provide
sufficient funds to consummate the transactions contemplated hereby.
ARTICLE VI
COVENANTS OF THE COMPANY AND SUB
The Company and Sub covenant and agree with each other that from the date
hereof through the Closing:
6.1. MAINTENANCE OF BUSINESS PRIOR TO CLOSING.
Prior to the Effective Time, except as set forth in the Disclosure Schedule
or as contemplated by any other provision of this Agreement, unless Sub has
consented in writing thereto, the Company:
(a). shall, and shall cause each of its Subsidiaries to, conduct its
operations and business according to their usual, regular and ordinary
course consistent with past practice;
(b). shall use its best efforts, and shall cause each of its Subsidiaries
to use its best efforts, to preserve intact their business organizations and
goodwill, keep available the services of their respective officers and
employees and maintain satisfactory relationships with those persons having
business relationships with them;
(c). shall not, and shall cause its Subsidiaries not to, amend their
respective certificates of incorporation or by-laws or comparable governing
instruments;
(d). shall promptly notify Sub of (i) any Material Adverse Change, (ii)
any material litigation or material governmental complaints, investigations
or hearings (or communications indicating that the same may be
contemplated), or (iii) the breach of any representation or warranty
contained herein;
(e). shall promptly deliver to Sub correct and complete copies of any
report, statement or schedule filed with the SEC subsequent to the date of
this Agreement;
(f). shall not, and shall not permit any of its Subsidiaries to,
authorize, propose or announce an intention to authorize or propose, or
enter into an agreement with respect to, any merger, consolidation or
business combination (other than the Merger), release or relinquishment of
any material contract rights, or any acquisition or disposition of Assets or
securities other than in the ordinary course of business consistent with
past practice;
(g). shall not, and shall not permit any of its Subsidiaries to, (i)
grant, confer or award any options, warrants, conversion rights or other
rights or Equity Securities, not existing on the date hereof, to acquire any
shares of its capital stock or other securities of the Company or its
Subsidiaries or (ii) accelerate, amend or change the period of
exercisability of options or restricted stock granted under any employee
stock plan or, except as contemplated by Section 3.3, authorize cash
payments in exchange for any options granted under any of such plans;
(h). shall not, and shall not permit any of its Subsidiaries to, amend
the terms of the Benefit Plans, including, without limitation, any
employment, severance or similar agreements or arrangements in existence on
the date hereof, or adopt any new employee benefit plans, programs or
arrangements or any employment, severance or similar agreements or
arrangements;
(i). shall not, and shall not permit any of its Subsidiaries to, (i)
increase or agree to increase the compensation payable or to become payable
to its officers or, other than increases in accordance with past practice
which are not material, to its employees or (ii) enter into any collective
bargaining agreement;
(j). shall not, and shall not permit any of its Subsidiaries to, (i)
incur, create, assume or otherwise become liable for borrowed money or
assume, guarantee, endorse or otherwise become responsible or
A-26
liable for the obligations of any other individual, corporation or other
entity or (ii) make any loans or advances to any other person, except in the
case of clause (i) for borrowings under existing credit facilities in the
ordinary course of business and, except in the case of clause (ii) for
advances consistent with past practice which are not material;
(k). shall not, and shall not permit any of its Subsidiaries to, (i)
materially change any practice with respect to Taxes, (ii) make, change or
revoke any material Tax election, or (iii) settle or compromise any material
dispute involving a Tax liability;
(l). shall not, and shall not permit any of its Subsidiaries to, (i)
declare, set aside or pay any dividend or make any other distribution or
payment with respect to any shares of its capital stock or other ownership
interests or (ii) directly or indirectly redeem, purchase or otherwise
acquire any shares of its capital stock or capital stock of any of its
Subsidiaries, or make any commitment for any such action or (iii) split,
combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect of, in lieu of or in
substitution for share of its capital stock;
(m). shall not, and shall not permit any of its Subsidiaries to, issue,
deliver, sell, pledge or otherwise encumber any shares of its capital stock,
any other securities or any securities convertible into, or any rights,
warrants or options to acquire, any such shares, securities or convertible
securities (other than the issuance or shares of Company Common Stock upon
the exercise of Options outstanding on the date hereof in accordance with
their present terms);
(n). shall not, and shall not permit any of its Subsidiaries to, make or
agree to make any capital expenditure except in accordance with the
Company's capital expenditure plan for fiscal years 1998 and 1999, a true,
correct and complete copy of which has been delivered to Sub;
(o). shall not, and shall not permit any of its Subsidiaries to, change
any accounting principles or practices;
(p). shall not, and shall not permit any of its Subsidiaries to, pay,
discharge, settle or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their terms, of
liabilities reflected or reserved against in the most recent consolidated
financial statements (or the notes thereto) of the Company included in the
Company Reports or incurred thereafter in the ordinary course of business
consistent with past practice, or waive any material benefits of, or agree
to modify in any material respect, any confidentiality, standstill,
non-solicitation or similar agreement to which the Company or any Subsidiary
is a party; and
(q). shall not, and shall not permit any of its Subsidiaries to take, or
agree (in writing or otherwise) or resolve to take, any of the foregoing
actions.
6.2. INVESTIGATION BY SUB.
The Company shall allow Sub, its counsel, accountants and other
representatives and the financial institutions (and their counsel and
representatives) providing or proposed to provide financing in connection with
this Agreement and the transactions contemplated hereby, during regular business
hours upon reasonable notice, to make such reasonable inspection of the Assets,
Facilities, business and operations of the Company and its Subsidiaries and to
inspect and make copies of Contracts, books and records and all other documents
and information reasonably requested by Sub and related to the operations and
business of the Company and its Subsidiaries including, without limitation,
historical financial information concerning the business of the Company and its
Subsidiaries and to meet with designated Personnel of the Company or its
Subsidiaries and/or their representatives. The Company and its Subsidiaries
shall furnish to Sub promptly upon request (a) all additional documents and
information with respect to the affairs of the Company and its Subsidiaries
relating to their businesses and (b) access to the Personnel and to the
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Company's and its Subsidiaries' accountants and counsel as Sub, or its counsel
or accountants, may from time to time reasonably request and the Company and its
Subsidiaries shall instruct their Personnel, accountants and counsel to
cooperate with Sub, and to provide such documents and information as Sub and its
representatives may request. Sub will hold, and will use its reasonable best
efforts to cause its counsel, accountants and other representatives and the
financial institutions (and their counsel and representatives) providing or
proposed to provide financing in connection herewith, any nonpublic information
in confidence to the extent required by, and in accordance with, that certain
confidentiality letter, dated April 9, 1998, between Wasserstein Perella & Co.,
Inc. and Odyssey Investment Partners, LLC (the "Confidentiality Letter").
6.3. CONSENTS AND EFFORTS.
(a). Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to (A) promptly make its respective
filings under the HSR Act with respect to the Merger and (B) use its
reasonable best efforts to take, or cause to be taken, all actions, and to
do, or cause to be done, and to assist and cooperate with the other parties
in doing, all things necessary, proper or advisable under applicable laws
and regulations to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by
this Agreement. Sub and the Company will use their reasonable best efforts
and cooperate with one another (i) in promptly determining whether any
filings are required to be made or consents, approvals, waivers, licenses,
permits or authorizations are required to be obtained (or, which if not
obtained, would result in an event of default, termination or acceleration
of any agreement or any put right under any agreement) under any applicable
law or regulation or from any governmental authorities or third parties,
including parties to loan agreements or other debt instruments, in
connection with the transactions contemplated by this Agreement, including
the Merger, and (ii) in promptly making any such filings, in furnishing
information required in connection therewith and in timely seeking to obtain
any such consents, approvals, permits or authorizations.
(b). The Company shall cooperate with any reasonable requests of Sub or
the SEC related to the recording of the Merger as a recapitalization for
financial reporting purposes, including, without limitation, to assist Sub
and its Affiliates with any presentation to the SEC with regard to such
recording and to include appropriate disclosure with regard to such
recording in all filings with the SEC and all mailings to stockholders made
in connection with the Merger. In furtherance of the foregoing, the Company
shall provide to Sub for the prior review of Sub's advisors any description
of the transactions contemplated by this Agreement which is meant to be
disseminated.
(c). The Company will provide, and will cause its Subsidiaries and its
and their respective officers, employees and advisors to provide, all
reasonable cooperation in connection with the arrangement of any financing
(including the Financing) to be consummated contemporaneous with or at or
after the Closing in respect of the transactions contemplated by this
Agreement, including without limitation, (x) participation in meetings, due
diligence sessions and road shows, (y) the preparation of offering
memoranda, private placement memoranda, prospectuses and similar documents,
and (z) the execution and delivery of any commitment letters, underwriting
or placement agreements, pledge and security documents, other definitive
financing documents, or other requested certificates or documents, including
a certificate of the chief financial officer of the Company with respect to
solvency matters, comfort letters of accountants and legal opinions as may
be requested by Sub; provided that the form and substance of any of the
material documents referred to in clause (y), and the terms and conditions
of any of the material agreements and other documents referred to in clause
(z), shall be substantially consistent with the terms and conditions of the
financing required to satisfy the condition precedent set forth in Section
7.3(f). In addition, in conjunction with the obtaining of any such
financing, the Company agrees, at the request of Sub, to call for prepayment
or redemption, as the case may be, any then existing indebtedness of the
Company; provided that such prepayment or redemption shall only be made
comteporaneously with or after the Effective Time.
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IV. Sub shall use its reasonable best efforts to arrange the Financing
pursuant to the Financing Letters.
6.4. OTHER OFFERS.
(a). Neither the Company nor any of its Subsidiaries shall (whether
directly or indirectly through advisors, agents or other intermediaries),
nor shall the Company or any of its Subsidiaries authorize or permit any of
its or their officers, directors, agents, representatives, advisors or
Subsidiaries to, (x) solicit, initiate or take any action knowingly to
facilitate the submission of inquiries, proposals or offers from any
corporation, partnership, person or other entity or group, other than Sub
and its representatives and affiliates, relating to (i) any acquisition or
purchase of 20% or more of the assets or of over 20% of any class of Equity
Securities of the Company and its Subsidiaries, (ii) any tender offer
(including a self tender offer) or exchange offer that if consummated would
result in any person beneficially owning 20% or more of any class of Equity
Securities of the Company or any of its Subsidiaries, (iii) any merger,
consolidation, recapitalization, sale of all or substantially all of the
assets, liquidation, dissolution or similar transaction involving the
Company or any of its Subsidiaries whose assets, individually or in the
aggregate, constitute more than 20% of the assets other than the
transactions contemplated by this Agreement or (iv) any other transaction
the consummation of which could reasonably be expected to impede, interfere
with, prevent or materially delay the Merger or which could reasonably be
expected to materially dilute the benefits to Sub of the transactions
contemplated hereby (each such transaction being referred to herein as an
"Acquisition Proposal"), or agree to or endorse any Acquisition Proposal,
(y) enter into or participate in any discussions or negotiations regarding
any of the foregoing, or otherwise cooperate in any way with, or knowingly
assist or participate in, facilitate or encourage, any effort or attempt by
any other person (other than Sub and its representatives and affiliates) to
do or seek any of the foregoing, (z) grant any waiver or release under any
standstill or similar agreement with respect to any Equity Securities of the
Company or any of its Subsidiaries; provided, however, that the foregoing
shall not prohibit the Company (either directly or indirectly through
advisors, agents or other intermediaries) from (i) furnishing information
pursuant to an appropriate confidentiality letter (which letter shall not be
less favorable to the Company in any material respect than the
Confidentiality Letter, and a copy of which shall be provided for
informational purposes only to Sub) concerning the Company and its
businesses, properties or Assets to any person, corporation, entity or
"group," as defined in Section 13(d) of the Exchange Act, other than Sub or
any of its Affiliates (a "Third Party") who has made a bona fide Acquisition
Proposal, (ii) engaging in discussions or negotiations with such a Third
Party who has made a bona fide Acquisition Proposal, (iii) following receipt
of a bona fide Acquisition Proposal, taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) under the Exchange Act
or otherwise making disclosure to its stockholders, (iv) following receipt
of a bona fide Acquisition Proposal, failing to make or withdrawing or
modifying its recommendation referred to in Section 4.25 hereof and/or (v)
taking any non-appealable, final action ordered to be taken by the Company
by any court of competent jurisdiction but in each case referred to in the
foregoing clauses (i) through (iv), only to the extent that (A) the Board of
Directors of the Company shall have concluded in good faith on the basis of
written advice from outside counsel that such action is required to prevent
the Board of Directors of the Company from breaching its fiduciary duties to
the stockholders of the Company under applicable law and (B) the Board of
Directors of the Company shall have concluded in good faith after
consultation with its financial advisor that such Acquisition Proposal, if
accepted, is reasonably likely to be consummated, taking into account all
legal, financial and regulatory aspects of the proposal and the person or
entity making the proposal and would, if consummated, result in a more
favorable transaction than the transaction contemplated by this Agreement;
provided, further, that the Board of Directors of the Company shall not take
any of the foregoing actions referred to in clauses (i) through (iv) until
after giving reasonable notice to Sub with respect to its intent to take
such action and informing Sub of the terms and conditions of such proposal
and the identity of the person making it. The Company shall immediately
cease and cause its advisors, agents and other
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intermediaries to cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of
the foregoing. The Company and its Subsidiaries hereby represent that they
are not now engaged in discussions or negotiations with any party other than
Sub with respect to any proposed Acquisition Transaction.
(b). If a Payment Event (as hereinafter defined) occurs, the Company
shall pay to Sub, within one business day following such event, a fee of
$6,500,000. "Payment Event" means (1) the termination of this Agreement
pursuant to Section 8.1(a)(v); (2) the termination of this Agreement
pursuant to Section 8.1(a)(vi); (III) the termination of this Agreement by
Sub pursuant to Section 8.1(a)(iii) but only if the failure of a condition
arises from a breach of obligation or untruth or incorrectness of any
representation or warranty which breach or untruth or incorrectness arises
out of the bad faith or willful misconduct of the Company; or (IV) the
occurrence of any of the following events if this Agreement shall have been
terminated (1) by Sub pursuant to Section 8.1(a)(iii) due to a failure of
any of the conditions set forth in Sections 7.1(a), 7.3(a), 7.3(e), 7.3(g)
or 7.3(h) to be satisfied, or (2) pursuant to Sections 8.1(a)(ii) or (vii),
or (3) by the Company pursuant to Section 8.1(a)(iii) due to a failure of
any of the conditions set forth in Section 7.1(a) to be satisfied: (A) any
Third Party other than Sub or any of its Affiliates or any party to the
Voting Agreement (a "Permitted Party") (so long as no such party to the
Voting Agreement is a member of a "group" (as defined in Section 13(d) of
the Exchange Act) which includes any other person) shall have become the
beneficial owner of more than 20% of the outstanding shares of Company
Common Stock; or (B)(x) any Third Party (other than Sub or any of its
Affiliates) shall have made, or proposed, communicated or disclosed in a
manner which is or otherwise becomes public (including being known by
stockholders of the Company owning of record or beneficially in the
aggregate 5% or more of the outstanding shares of Company Common Stock) a
bona fide intention to make an Acquisition Proposal (including by making
such an Acquisition Proposal) and (y) on or prior to the date that is within
12 months of the termination of this Agreement, the Company either
consummates with a Third Party a transaction the proposal of which would
otherwise qualify as an Acquisition Proposal under Section 6.4(a) or enters
into a definitive agreement with a Third Party with respect to a transaction
the proposal of which would otherwise qualify as an Acquisition Proposal
under Section 6.4 (whether or not such Third Party is the Third Party
referred to in clause (x) above).
(c). Upon termination of this Agreement (I) by Sub pursuant to Section
8.1(a)(iii) due to a failure of any of the conditions set forth in Sections
7.1(a), 7.3(a), 7.3(e), 7.3(g) or 7.3(h) to be satisfied, or (II) pursuant
to Sections 8.1(a)(v), (vi) or (vii), or (III) by the Company pursuant to
Section 8.1(a)(iii) due to a failure of any of the conditions set forth in
Section 7.1(a) to be satisfied, the Company shall reimburse Sub and its
Affiliates not later than two business days after submission of reasonable
documentation thereof for all of their documented out-of-pocket fees and
expenses (including, without limitation, the reasonable fees and expenses
for their counsel (billed at standard billing rates for Sub) and investment
banking fees), actually incurred by any of them or on their behalf in
connection with this Agreement and the transactions contemplated hereby and
the arrangement of, obtaining the commitment to provide or obtaining the
financing for transactions contemplated by this Agreement (including any
fees payable to the entities providing for such financing and their
respective counsel billed at standard rates for Sub); provided that the
aggregate amount payable pursuant to this Section 6.4(c) shall not exceed
$1,500,000.
(d). The Company acknowledges that the agreements contained in this
Section 6.4 are an integral part of the transactions contemplated by this
Agreement, and that, without these agreements, Sub would not enter into this
Agreement; accordingly, if the Company fails to promptly pay any amount due
pursuant to this Section 6.4, and, in order to obtain such payment, the
other party commences a suit which results in a judgment against the Company
for the fee or fees and expenses set forth in this Section 6.4, the Company
shall also pay to Sub its costs and expenses incurred in connection with
such litigation.
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(e). The Company and its Subsidiaries shall (i) immediately notify Sub
(orally and in writing) if any offer is made, any discussions or
negotiations are sought to be initiated, any inquiry, proposal or contact is
made or any information is requested with respect to any Acquisition
Proposal, (ii) promptly notify Sub of the terms of any proposal which it may
receive in respect of any such Acquisition Proposal, including, without
limitation, the identity of the prospective purchaser or soliciting party,
(iii) promptly provide Sub with a copy of any such offer, if written, or a
written summary (in reasonable detail) of such offer, if not in writing, and
(iv) keep Sub informed of the status of such offer and the offeror's efforts
and activities with respect thereto.
(f). This Section 6.4 shall survive any termination of this Agreement,
however caused.
6.5. MEETING OF STOCKHOLDERS.
The Company shall take all action necessary in accordance with applicable
law and its certificate of incorporation and by-laws, including the timely
mailing of the Proxy Statement, to convene the Special Meeting of its
stockholders as promptly as practicable to consider and vote upon the approval
of this Agreement and the transactions contemplated hereby. The Board of
Directors of the Company shall recommend such approval, shall not withdraw or
modify such recommendation and shall take all lawful action to solicit such
approval; provided that the Board of Directors of the Company may fail to make
or withdraw or modify such recommendation, but only to the extent that the Board
of Directors of the Company shall have concluded in good faith on the basis of
written advice from outside counsel that such action is required to prevent the
Board of Directors of the Company from breaching its fiduciary duties to the
stockholders of the Company under applicable law. The Company will use its best
efforts to hold such meeting as soon as practicable after the date hereof.
6.6. PROXY STATEMENT.
(a). Sub and the Company shall cooperate and prepare, and the Company
shall file with the SEC as soon as practicable, a proxy statement with
respect to the Special Meeting of the stockholders of the Company in
connection with the Merger (the "Proxy Statement"), respond to comments of
the staff of the SEC, clear the Proxy Statement with the staff of the SEC
and promptly thereafter mail the Proxy Statement to all holders of record of
Company Common Stock. The Company shall comply in all respect with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder applicable to the Proxy Statement and the
solicitation of proxies for the Special Meeting (including any requirement
to amend or supplement the Proxy Statement) and each party shall furnish to
the other such information relating to it and its Affiliates and the
transactions contemplated by this Agreement and such further and
supplemental information as may be reasonably requested by the other party.
The Proxy Statement shall include the recommendation of the Company's Board
of Directors in favor of the Merger, unless otherwise required by the
fiduciary duties of the directors under applicable law as contemplated
hereby. The Company shall use all reasonable efforts, and Sub will cooperate
with the Company, to have all necessary state securities law or "Blue Sky"
permits or approvals required to carry out the transactions contemplated by
this Agreement and will pay all expenses incident thereto.
(b). No amendment or supplement to the Proxy Statement shall be made by
Sub or the Company without the approval of the other party. The Company
shall advise Sub of any request by the SEC for amendment of the Proxy
Statement or comments thereon and responses thereto or requests by the SEC
for additional information.
6.7. SCHEDULE 13E-3.
If, in the opinion of the Company's counsel after consultation with counsel
to Sub, the filing with the SEC of a Transaction Statement on Schedule 13E-3
(the "Schedule 13E-3") in connection with the Merger is required by Rule 13e-3
under the Exchange Act, the Company shall file the Schedule 13E-3 with the SEC
at the time of filing of the Proxy Statement. If the Schedule 13E-3 is filed, at
the time of any
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amendment to the Proxy Statement, the parties shall cause to be file with the
SEC an appropriate amendment to the Schedule 13E-3.
6.8. DIRECTOR AND OFFICER LIABILITY.
(a). For a period of 6 years after the Effective Time, Sub will cause the
Surviving Corporation to indemnify and hold harmless the present and former
officers and directors of the Company in respect of acts or omissions
occurring prior to the Effective Time to the extent provided under the
Company's certificate of incorporation and by-laws in effect on the date
hereof; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. To the maximum
extent permitted by the DGCL, such indemnification shall be mandatory rather
than permissive and the Surviving Corporation shall advance expenses in
connection with such indemnification. The by-laws of the Surviving
Corporation shall contain provisions substantially similar in terms of the
rights granted to the provisions with respect to indemnification and
insurance set forth in the Company's certificate of incorporation, which
provisions shall not be amended in any manner that would adversely affect
the rights under those by-laws of the Company's employees, agents, directors
or officers for acts or omissions on or prior to the Effective Time, except
if such amendment is required by law. For a period of 6 years after the
Effective Time, Sub will cause the Surviving Corporation to use its best
efforts to provide officers' and directors' liability insurance in respect
of acts or omissions occurring prior to the Effective Time covering each
such person currently covered by the Company's officers' and directors'
liability insurance policy on terms with respect to coverage and amount no
less favorable than those of such policy in effect on the date hereof,
provided that in satisfying its obligation under this Section 6.8, Sub shall
not be obligated to cause the Surviving Corporation to pay premiums in
excess of 125% of the amount per annum the Company paid in its last full
fiscal year, which amount has been disclosed to Sub.
(b). In furtherance of and not in limitation of the preceding paragraph,
Sub agrees that the officers and directors of the Company that are
defendants in all litigation commenced by stockholders of the Company with
respect to (x) the performance of their duties as such officers and/or
directors under federal or state law (including litigation under federal and
state securities laws) and (y) the Merger, including, without limitation,
any and all such litigation commenced on or after the date of this Agreement
(the "Subject Litigation") shall be entitled to be represented, at the
reasonable expense of the Company, in the Subject Litigation by one counsel
(and Delaware counsel if appropriate and one local counsel in each
jurisdiction in which a case is pending) each of which such counsel shall be
selected by a plurality of such director defendants; provided that the
Company shall not be liable for any settlement effected without its prior
written consent (which consent shall not be unreasonably withheld) and that
a condition to the indemnification payments provided in Section 6.8(a) shall
be that such officer/director defendant not have settled any Subject
Litigation without the consent of the Company (such consent not to be
unreasonably withheld) and, prior to the Closing, Sub; and provided further
that neither Sub nor the Company shall have any obligation hereunder to any
officer/director defendant when and if a court of competent jurisdiction
shall ultimately determine, and such determination shall have become final
and non-appealable, that indemnification of such officer/director defendant
in the manner contemplated hereby is prohibited by applicable law.
(c). In the event the Surviving Corporation or any of its successors or
assigns (i) consolidates with or merges into any other person and shall not
be the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any person, then, and in each such case, proper provisions shall
be made so that the successors and assigns of the Surviving Corporation
shall assume its obligations set forth in this Section 6.8.
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6.9. NOTICES OF CERTAIN EVENTS.
The Company shall promptly notify Sub of:
(a). any notice or other communication from any person alleging that the
consent of such person is or may be required in connection with the
transactions contemplated by this Agreement;
(b). any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(c). any Actions commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting the Company or any
Subsidiary which, if pending on the date of this Agreement, would have been
required to have been disclosed pursuant to Section 4.12 or which relate to
the consummation of the transactions contemplated by this Agreement.
6.10. FURTHER ASSURANCES.
At and after the Effective Time, the officers and directors of the Surviving
Corporation will be authorized to execute and deliver, in the name and on behalf
of the Company or Sub, any deeds, bills of sale, assignments or assurances and
to take and do, in the name and on behalf of the Company or Sub, any other
actions and things to vest, perfect or confirm of record or otherwise in the
Surviving Corporation any and all right, title and interest in, to and under any
of the rights, properties or assets of the Company acquired or to be acquired by
the Surviving Corporation as a result of, or in connection with, the Merger.
6.11. RESIGNATION OF DIRECTORS.
At the Closing, the Company shall deliver to Sub evidence satisfactory to
Sub of the resignation of all directors of the Company, effective at the
Effective Time.
6.12. FINANCIAL STATEMENTS, ETC.
Within 30 days after the end of each calendar month, the Company and its
Subsidiaries shall provide Sub with the interim financial statements relating to
such calendar month. Such interim financial statements shall (a) be in
accordance with the books and records of the Company and its Subsidiaries, (b)
be prepared in accordance with GAAP consistently applied throughout the periods
covered thereby (except for the absence of footnotes) and present fairly and
accurately in accordance with GAAP the Assets, liabilities (including, without
limitation, all reserves) and financial condition of the Company and its
Subsidiaries as of the respective dates thereof and the results of operations,
stockholders' equity and cash flows for the periods covered thereby.
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ARTICLE VII
CONDITIONS TO THE MERGER
7.1. CONDITIONS TO THE OBLIGATIONS OF EACH PARTY.
The obligations of the Company and Sub to consummate the transactions
contemplated hereby on the Closing Date are subject to the satisfaction, on or
prior to the Closing Date, of each of the following conditions:
(a). This Agreement shall have been adopted by the stockholders of the
Company in accordance with the DGCL;
(b). Any applicable waiting period under the HSR Act relating to the
Merger shall have expired or been terminated; and
(c). No provision of any applicable law or regulation and no judgment,
order, decree or injunction shall prohibit or restrain the consummation of
the Merger; provided, however, that the Company and Sub shall each use its
reasonable best efforts to have any such judgment, order, decree or
injunction vacated.
7.2. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY.
The obligations of the Company to consummate the transactions contemplated
hereby on the Closing Date are subject, in the sole discretion of the Company,
to the satisfaction, on or prior to the Closing Date, of the following
conditions, which may be waived by the Company in accordance with Section 8.4:
(a) all representations and warranties of Sub contained in this Agreement shall
be true and correct in all material respects at and as of the Closing Date, as
if such representations and warranties were made at and as of the Closing Date
(except to the extent that any such representations and warranties were made as
of a specified date, which representations and warranties shall continue on the
Closing Date to be true as of such specified date), (b) Sub shall have performed
in all material respects all obligations arising under the agreements and
covenants required hereby to be performed by it prior to or on the Closing Date
and (c) the Company shall have received, at or prior to the Closing, a
certificate executed by the President of Sub certifying that, as of the Closing
Date, the conditions set forth in Section 7.2(a) and (b) have been satisfied.
7.3. CONDITIONS TO THE OBLIGATIONS OF SUB.
The obligations of Sub to consummate the transactions contemplated hereby on
the Closing Date are subject, in the sole discretion of Sub, to the
satisfaction, on or prior to the Closing Date, of each of the following
conditions, any of which may be waived by Sub in accordance with Section 8.4:
(a). Representations, Warranties and Covenants.
(b). All representations and warranties of the Company contained in
this Agreement shall be true and correct at and as of the Closing Date as if
such representations and warranties were made at and as of the Closing Date
(except to the extent that any such representations and warranties were made
as of a specified date, such representations and warranties shall continue
on the Closing Date to have been true in all material respects as of such
specified date), except where the untruth or incorrectness of such
representations and warranties would not, singly or in the aggregate, have a
Material Adverse Effect on the Company. For purposes of this Section
7.3(a)(i), the representations and warranties of the Company contained in
this Agreement shall be deemed to have been made without any qualification
as to knowledge or materiality and, accordingly, all references in such
representations and warranties to "material," "Material Adverse Effect," "in
all material respects," "Material Adverse Change," "knowledge," "best
knowledge" and similar terms and phrases (including, without limitation,
references to the dollar thresholds therein) shall be deemed to be deleted
therefrom, provided that the foregoing clause shall not apply solely for the
purpose of determining the
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truth and correctness of the lists set forth in certain informational
representations and warranties that require disclosure of lists of items of
a material nature or above a specified threshold.
(c). The Company shall have performed in all material respects all
obligations arising under the agreements and covenants required hereby to be
performed by it prior to or on the Closing Date.
(d). Sub shall have received, at or prior to the Closing, a certificate
executed by the President and the Chief Financial Officer of the Company
certifying that, as of the Closing Date, the conditions set forth in
Sections 7.3(a), (b) and (e) have been satisfied.
(e). No Proceedings or Litigation.
No Actions by any governmental authority or any other entity or person shall
have been instituted or threatened for the purpose of enjoining or preventing,
or which question the validity or legality of, the transactions contemplated
hereby and which could reasonably be expected to damage Sub or materially
adversely affect the value of the Company Common Stock or the Assets, business
or operations of the Company and its Subsidiaries or Sub's ability to own and
operate the Assets, business or operations of the Company and its Subsidiaries,
if the transactions contemplated hereby are consummated.
(f). Recapitalization.
Sub shall be reasonably satisfied that the Merger shall be recorded as a
"recapitalization" for financial reporting purposes.
(g). Consents.
(h). All consents, approvals and licenses of any governmental or other
regulatory body required in connection with the execution, delivery and
performance of this Agreement and for the Surviving Corporation to conduct
the business of the Company in substantially the manner now conducted, shall
have been obtained, unless the failure to obtain such consents,
authorizations, orders or approvals would not, individually or in the
aggregate, have a Material Adverse Effect on the Company after giving effect
to the transactions contemplated by this Agreement (including the
Financing).
(i). All consents listed on Schedule 4.9 of the Disclosure Schedule
shall have been obtained.
(j). Material Changes.
Since March 31, 1998, there shall not have been any Material Adverse Change
with respect to the Company and, to the knowledge of the Company, there shall
have been no potential or threatened Material Adverse Change with respect to the
Company.
(k). Financing.
The funding contemplated by the Financing Letters shall have been obtained.
(l). Certain Other Agreements.
(m). The Persons listed in Schedule 7.3(g) shall have entered into, as
applicable, (a) the employment agreements and (b) one or more agreements
relating to their respective equity interests in the Company after the
Effective Time, in each case on the terms and conditions substantially
consistent with the terms and conditions of such agreements set forth on
Schedule 7.3(g) hereto.
(n). The Stockholders party to the Voting Agreement shall have
performed their obligations under the Voting Agreement in all material
respects.
(o). That certain Stockholders Agreement, dated as of October 8, 1992,
and as amended as of July 3, 1996, by and among the Company, Stephen Russell
and Hanseatic Corp. shall be terminated and of no further force or effect
and any and all rights conferred to such parties therein shall have been
waived pending the consummation of the Merger.
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(p). Financial Information. Ernst & Young LLP shall have completed its
audit, in accordance with generally accepted auditing standards, of the
Company's balance sheet as of June 30, 1998 and the corresponding statement
of income, change in stockholders' equity and cash flows for the fiscal year
ended June 30, 1998, and shall have issued an unqualified report with
respect thereto (including that such audited financial statements are in
accordance with GAAP).
ARTICLE VIII
MISCELLANEOUS
8.1. TERMINATION.
(a). Termination. This Agreement may be terminated prior to the
Effective Time as follows (notwithstanding any approval of the Merger by the
stockholders of the Company):
(b). by mutual written consent of Sub and the Company at any time;
(c). by Sub or the Company if the Closing shall not have occurred on or
before November 30, 1998, provided that the party seeking to exercise such
right is not then in breach in any material respect of any of its
obligations under this Agreement;
(d). by either the Company or Sub, if any of the conditions to such
party's obligation to consummate the transactions contemplated in this
Agreement shall have become impossible to satisfy;
(e). by either the Company or Sub, if there shall be any law or
regulation that makes consummation of the Merger illegal or otherwise
prohibited or if any judgment, injunction, order or decree enjoining Sub or
the Company from consummating the Merger is entered and such judgment,
injunction, order or decree shall become final and non-appealable;
(f). by Sub if the Board of Directors of the Company shall have (A)
withdrawn or modified or amended, in a manner adverse to Sub, its approval
or recommendation of this Agreement and the Merger or its recommendation
that stockholders of the Company adopt and approve this Agreement and the
Merger, (B) approved, recommended or endorsed an Acquisition Proposal
(including a tender or exchange offer for Company Common Stock) or shall
have failed to reconfirm its recommendation of this Agreement and the Merger
within five business days of Sub's request that it do so, (C) failed to call
the Stockholders Meeting or failed as promptly as practicable to mail the
Proxy Statement to its stockholders or failed to include in such statement
the recommendation referred to above, (D) in response to the commencement of
any tender offer of exchange offer for more then 20% of the outstanding
shares of Company Common Stock, not recommended rejection of such tender
offer or exchange offer; or (E) resolved to do any of the foregoing;
(g). by the Company if prior to the Effective Time, in good faith,
based upon written advice from outside counsel and in order to prevent the
Board of Directors from breaching its fiduciary duty, the Board of Directors
of the Company shall have withdrawn or modified or amended, in a manner
adverse to Sub, its approval or recommendation of this Agreement and the
Merger or its recommendation that stockholders of the Company adopt and
approve this Agreement and the Merger in order to permit the Company to
execute a definitive agreement providing for the acquisition of the Company
or in order to approve a tender or exchange offer for any or all of the
Company Common Stock, in either case, that is determined, by the Board of
Directors of the Company to be on financial terms more favorable to the
Company's stockholders than the Merger, provided that the Company shall be
in compliance with Section 6.4; or
(h). by either the Company or Sub if, at a duly held stockholders
meeting of the Company or any adjournment thereof at which this Agreement
and the Merger is voted upon, the requisite stockholder adoption and
approval shall not have been obtained.
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The party desiring to terminate this Agreement pursuant to Sections
8.1(a)(ii)-(vii) shall give written notice of such termination to the other
party in accordance with Section 8.3.
(i). Effect of Termination.
If this Agreement is terminated pursuant to Section 8.1, this Agreement
shall become void and of no effect with no liability on the part of any party
hereto or such party's officers, directors, employees or representatives, except
(i) that the agreements contained in Sections 6.4, 8.8 and 8.13 hereof shall
survive the termination hereof and (ii) nothing herein shall relieve any party
from liability for any breach of this Agreement.
(j). Procedure Upon Termination.
In the event of termination of this Agreement pursuant to Section 8.1:
(k). Each party shall redeliver all documents, work papers and other
material of any other party and any and all copies thereof relating to the
transactions contemplated hereby, whether obtained before or after the
execution hereof, to the party furnishing the same;
(l). No confidential information received by any party with respect to
the business of any other party or its Affiliates shall be disclosed to any
third party, unless required by law; and
(m). The Confidentiality Letter shall survive in accordance with its
terms.
8.2. ASSIGNMENT.
Neither this Agreement nor any of the rights or obligations hereunder may be
assigned, in whole or in part, by operation of law or otherwise by any party
without the prior written consent of all other parties to this Agreement.
Subject to the foregoing, this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns, and,
with respect to the provisions of Section 6.8 hereof, shall inure to the benefit
of the persons or entities benefiting from the provisions thereof who are
intended to be third-party beneficiaries thereof, `and no other person shall
have any right, benefit or obligation hereunder.
8.3. NOTICES.
All notices, requests, demands and other communications which are required
or may be given under this Agreement shall be in writing and shall be deemed to
have been duly given when received, if personally delivered; when transmitted,
if transmitted by telecopy, upon receipt of telephonic or electronic
confirmation; the day after it is sent, if sent for next day delivery to a
domestic address by recognized overnight delivery service (e.g., Federal
Express); and upon receipt, if sent by certified or registered mail, return
receipt requested. In each case notice shall be sent to:
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If to the Company, addressed to:
Celadon Group, Inc.
One Celadon Drive
Indianapolis, IN 46236-4207
Attention: Stephen Russell
Telecopy: (317) 890-8099
With a copy to:
Proskauer Rose LLP
1585 Broadway
New York, NY 10037
Attention: Arnold Jacobs, Esq.
Telecopy: (212) 969-2900
If to Sub, addressed to:
Laredo Acquisition Corp.
c/o Odyssey Investment Partners, LLC
280 Park Avenue, 38th Floor
New York, NY 10017
Attention: Brian Kwait
Telecopy: (212) 351-7925
With a copy to:
Latham & Watkins
885 Third Avenue
Suite 1000
New York, NY 10022
Attention: Richard Trobman, Esq.
Telecopy: (212) 751-4864
or to such other place and with such other copies as either party may
designate as to itself by written notice to the others.
8.4. ENTIRE AGREEMENT; WAIVERS.
This Agreement, together with all exhibits and schedules hereto (including,
without limitation, the Disclosure Schedule), and the other agreements referred
to herein, constitute the entire agreement among the parties pertaining to the
subject matter hereof and supersedes all prior agreements, understandings,
negotiations and discussions, whether oral or written, of the parties. No waiver
of any of the provisions of this Agreement shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided. The
Confidentiality Letter shall terminate at the Effective Time.
8.5. MULTIPLE COUNTERPARTS.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
8.6. INVALIDITY.
In the event that any one or more of the provisions contained in this
Agreement or in any other instrument referred to herein, shall, for any reason,
be held to be invalid, illegal or unenforceable in any
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respect, then to the maximum extent permitted by law, such invalidity,
illegality or unenforceability shall not affect any other provision of this
Agreement or any other such instrument.
8.7. TITLES.
The titles, captions or headings of the Articles and Sections herein are
inserted for convenience of reference only and are not intended to be a part of
or to affect the meaning or interpretation of this Agreement.
8.8. FEES AND EXPENSES.
Except as provided in Section 6.4 hereof, all costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost or
expense.
8.9. CUMULATIVE REMEDIES.
All rights and remedies of either party hereto are cumulative of each other
and of every other right or remedy such party may otherwise have at law or in
equity, and the exercise of one or more rights or remedies shall not prejudice
or impair the concurrent or subsequent exercise of other rights or remedies.
8.10. GOVERNING LAW.
THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE
LAWS OF THE STATE OF DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE
GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
8.11. AMENDMENT.
This Agreement may be amended by the parties hereto at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of the Company, but after any such stockholder approval, no
amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto shall terminate at the Effective Time.
8.12. PUBLIC ANNOUNCEMENTS.
Neither Sub, on the one hand, nor the Company, on the other hand, will issue
any press release or public statement with respect to the transactions
contemplated by this Agreement and the Voting Agreement, including the Merger,
without the other party's prior consent (such consent not to be unreasonably
withheld), except as may be required by applicable law, court process or the
quotation requirements of NASDAQ. In addition to the foregoing, Sub and the
Company will consult with each other before issuing, and provide each other the
opportunity to review and comment upon, any such press release or other public
statements with respect to such transactions. The parties agree that the initial
press release or releases to be issued with respect to the transactions
contemplated by this Agreement shall be mutually agreed upon prior to the
issuance thereof.
8.13. ENFORCEMENT OF AGREEMENT.
The parties hereto agree that irreparable damage would occur in the event
that any of the provisions of this Agreement was not performed in accordance
with its specific terms or was otherwise breached. It is accordingly agreed that
the parties shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and provisions
hereof, this being in addition to any other remedy to which they are entitled at
law or in equity.
8.14. NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES.
The representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall terminate at the Effective Time.
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8.15. INTERPRETIVE PROVISIONS.
(a). The words "hereof," "herein," "hereby" and "hereunder" and words
of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision hereof.
(b). Accounting terms used but not otherwise defined herein shall have
the meanings given to such terms under GAAP.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed on their respective behalf, by their respective officers thereunto duly
authorized, all as of the day and year first above written.
LAREDO ACQUISITION CORP.
By: __________________________________
Name: ________________________________
Title: _______________________________
CELADON GROUP, INC.
By: __________________________________
Name: ________________________________
Title: _______________________________
ANNEX B
262 APPRAISAL RIGHTS. (a) Any stockholder of a corporation of this State who
holds shares of stock on the date of the making of a demand pursuant to
subsection (d) of this section with respect to such shares, who continuously
holds such shares through the effective date of the merger or consolidation, who
has otherwise complied with subsection (d) of this section and who has neither
voted in favor of the merger or consolidation nor consented thereto in writing
pursuant to ss.228 of this title shall be entitled to an appraisal by the Court
of Chancery of the fair value of the stockholder's shares of stock under the
circumstances described in subsections (b) and (c) of this section. As used in
this section, the word "stockholder" means a holder of record of stock in a
stock corporation and also a member of record of a nonstock corporation; the
words "stock" and "share" mean and include what is ordinary meant by those words
and also membership or membership interest of a member of a nonstock
corporation; and the words "depository receipt" mean a receipt or other
instrument issued by a depository representing an interest in one or more
shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to ss.251 (other than a merger effected pursuant to ss.251(g)
of this title), ss.252, ss.254, ss.257, ss.258, ss.263 or ss.264 of this title:
(1) Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which stock, or
depository receipts in respect thereof, at the record date fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc., or (ii) held
of record by more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation as
provided in subsection (f) of ss.251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required by
the terms of an agreement of merger or consolidation pursuant to ss.ss.251,
252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under ss.253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
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(c) Any corporation may provide in its certificate of incorporation that
apprisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting,
shall notify each of its stockholders who was such on the record date for
such meeting with respect to shares for which appraisal rights are available
pursuant to subsections (b) or (c) hereof that appraisal rights are
available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section. Each stockholder
electing to demand the appraisal of such stockholder's shares shall deliver
to the corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's shares.
Such demand will be sufficient if it reasonably informs the corporation of
the identity of the stockholder and that the stockholder intends thereby to
demand the appraisal of such stockholder's shares. A proxy or vote against
the merger or consolidation shall not constitute such a demand. A
stockholder electing to take such action must do so by a separate written
demand as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation shall notify
each stockholder of each constituent corporation who has complied with this
subsection and has not voted in favor of or consented to the merger or
consolidation of the date that the merger or consolidation has become
effective; or
(2) If the merger or consolidation was approved pursuant to ss.228 or
ss.253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days thereafter,
shall notify each of the holders of any class or series stock of such
constituent corporation who are entitled to appraisal rights of the approval
of the merger or consolidation and that appraisal rights are available for
any or all shares of such class or series of stock of such constituent
corporation, and shall include in such notice a copy of this section;
provided that, if the notice is given on or after the effective date of the
merger or consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of stock of
a constituent corporation that are entitled to appraisal rights. Such notice
may, and, if given on or after the effective date of the merger or
consolidation, shall, also notify such stockholders of the effective date of
the merger or consolidation. Any stockholder entitled to appraisal rights
may, within 20 days after the date of mailing of such notice, demand in
writing from the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the stockholder
intends thereby to demand the appraisal of such holder's shares. If such
notice did not notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall send a
second notice before the effective date of the merger or consolidation
notifying each of the holders of any class or series of stock of such
constituent corporation that are entitled to appraisal rights of the
effective date of the merger or consolidation or (ii) the surviving or
resulting corporation shall send such a second notice to all such holders on
or within 10 days after such effective date; provided, however, that if such
second notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder who is
entitled to appraisal rights and who has demanded appraisal of such holder's
shares in accordance with this subsection. An affidavit of the secretary or
assistant secretary or of the transfer agent of the corporation that is
required to give either notice that such notice has been given shall, in the
absence of fraud, be prima facie evidence of the facts stated
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therein. For purposes of determining the stockholders entitled to receive
either notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the notice is
given, provided, that if the notice is given on or after the effective date
of the merger or consolidation, the record date shall be such effective
date. If no record date is fixed and the notice is give prior to the
effective date, the record date shall be the close of business on the day
next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has complied with
subsection (a) and (d) hereof and who is otherwise entitled to appraisal rights,
may file a petition in the Court of Chancery demanding a determination of the
value of the stock of all such stockholders. Notwithstanding the foregoing, at
any time within 60 days after the effective date of the merger or consolidation,
any stockholder shall have the right to withdraw such stockholder's demand for
appraisal and to accept the terms offered upon the merger or consolidation.
Within 120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections (a) and (d)
hereof, upon written request, shall be entitled to receive from the corporation
surviving the merger or resulting from the consolidation a statement setting
forth the aggregate number of shares not voted in favor of the merger or
consolidation and with respect to which demands for appraisal have been received
and the aggregate number of holders of such shares. Such written statement shall
be mailed to the stockholder within 10 days after such stockholder's written
request for such a statement is received by the surviving or resulting
corporation or within 10 days after expiration of the period for delivery of
demands for appraisal under subsection (d) hereof, whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which shall
within 20 days after such service file in the office of the Register in Chancery
in which the petition was filed a duly verified list containing the names and
addresses of all stockholders who have demanded payment for their shares and
with whom agreements as to the value of their shares have not been reached by
the surviving or resulting corporation. If the petition shall be filed by the
surviving or resulting corporation, the petition shall be accompanied by such a
duly verified list. The Register in Chancery, if so ordered by the Court, shall
give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to
the stockholders shown on the list at the addresses therein stated. Such notice
shall also be given by 1 or more publications at least 1 week before the day of
the hearing, in a newspaper of general circulation published in the City of
Wilmington, Delaware or such publication as the Court deems advisable. The forms
of the notices by mail and by publication shall be approved by the Court, and
the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on
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the list filed by the surviving or resulting corporation pursuant to subsection
(f) of this section and who has submitted such stockholder's certificates of
stock to the Register in Chancery, if such is required, may participate in all
proceedings until it is finally determined that such stockholder is not entitled
to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded such stockholder's appraisal rights as provided in
subsection (d) of this section shall be entitled to vote such stock for any
purpose or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of record at a
date which is prior to the effective date of the merger or consolidation);
provided, however, that if no petition for an appraisal shall be filed within
the time provided in subsection (e) of this section, or if such stockholder
shall deliver to the surviving or resulting corporation a written withdrawal of
such stockholder's demand for an appraisal and an acceptance of the merger or
consolidation, either within 60 days after the effective date of the merger or
consolidation as provided in subsection (e) of this section or thereafter with
the written approval of the corporation, then the right of such stockholder to
an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding
in the Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such terms as
the Court deems just.
(l) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they assented to
the merger or consolidation shall have the status of authorized and unissued
shares of the surviving or resulting corporation. (Last amended by Ch. 120, L.
'97, eff. 7-1-97.)
B-4
ANNEX C
June 23, 1998
Board of Directors
Celadon Group, Inc.
One Celadon Drive
Indianapolis, IN 46236-4207
Members of the Board:
You have asked us to advise you with respect to the fairness, from a
financial point of view, to the holders of the common stock, par value $0.033
per share (the "Shares), of Celadon Group, Inc. (the "Company") (other than a
portion of such shares held by certain officers, directors and employees of the
Company as set forth on Schedule A to the Merger Agreement (as herein after
defined) (the "Rollover Shares") of the consideration to be received by such
holders pursuant to the terms of the Agreement and Plan of Merger, dated June
23, 1998 (the "Merger Agreement"), by and between the Company and Laredo
Acquisition Corp. ("Sub"). The Merger Agreement provides for, among other
things, a merger of Sub with and into the Company pursuant to which each
outstanding Share (other than the Rollover Shares and Treasury Securities (as
defined in the Merger Agreement)), will be converted into the right to receive
$20.00 in cash (the "Transaction"). The terms and conditions of the Transaction
are set forth in more detail in the Merger Agreement.
In connection with rendering our opinion, we have reviewed drafts of the
Merger Agreement and related documents, and for purposes hereof, we have assumed
that the final forms of these documents will not differ in any material respect
from the drafts provided to us. We have also reviewed and analyzed certain
publicly available business and financial information relating to the Company
for recent years and interim periods to date, as well as certain internal
financial and operating information, including financial forecasts, analyses and
projections prepared by or on behalf of the Company and provided to us for
purposes of our analysis, and we have met with management of the Company to
review and discuss such information and, among other matters, the Company's
business, operations, assets, financial condition and future prospects.
We have reviewed and considered certain financial and stock market data
relating to the Company, and we have compared that data with similar data for
certain other companies, the securities of which are publicly traded, that we
believe may be relevant or comparable in certain respects to the Company or one
or more of its businesses or assets, and we have reviewed and considered the
financial terms of certain recent acquisitions and business combination
transactions in the trucking industry specifically, and in other industries
generally, that we believe to be reasonably comparable to the Transaction or
otherwise relevant to our inquiry. We have also performed such other financial
studies, analyses, and investigations and reviewed such other information as we
considered appropriate for purposes of this opinion.
In our review and analysis and in formulating our opinion, we have assumed
and relied upon the accuracy and completeness of all of the financial and other
information provided to or discussed with us or publicly available, and we have
not assumed any responsibility for independent verification of any of such
information. We have also assumed and relied upon the reasonableness and
accuracy of the financial projections, forecasts and analyses provided to us,
and we have assumed that such projections, forecasts and analyses were
reasonably prepared in good faith and on bases reflecting the best currently
available judgments and estimates of the Company's management. We express no
opinion with respect to such projections, forecasts and analyses or the
assumptions upon which they are based. In addition, we have not reviewed any of
the books and records of the Company, or assumed any responsibility for
conducting a physical inspection of the properties or facilities of the Company,
or for making or obtaining an independent valuation or appraisal of the assets
or liabilities of the Company, and no such independent valuation or appraisal
was provided to us. We also have assumed that the transactions described in the
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Board of Directors of Celadon Group, Inc.
Merger Agreement will be consummated without waiver or modification of any of
the material terms or conditions contained therein by any party thereto. Our
opinion is necessarily based on economic and market conditions and other
circumstances as they exist and can be evaluated by us as of the date hereof.
It should be noted that in the context of our engagement by the Company, we
were authorized only to solicit indications of interest in acquiring all or any
part of the Company from private investment groups.
In the ordinary course of our business, we may actively trade the debt and
equity securities of the Company for our own account and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
We are acting as financial advisor to the Company in connection with the
proposed Transaction and will receive a fee for our services, which is
contingent upon the consummation of the Transaction. Our opinion addresses only
the fairness from a financial point of view to the shareholders of the Company
(other than the holders of the Rollover Shares) of the consideration to be
received by such shareholders pursuant to the Transaction, and we do not express
any views on any other terms of the Transaction. Specifically, our opinion does
not address the Company's underlying business decision to effect the
transactions contemplated by the Merger Agreement. In addition, our opinion does
not address the solvency of the Company or any other entity following
consummation of the Transaction or at any time.
It is understood that this letter is for the benefit and use of the Board of
Directors of the Company in its consideration of the Transaction and except for
inclusion in its entirety in any proxy statement required to be circulated to
shareholders of the Company relating to the Transaction, may not be quoted,
referred to or reproduced at any time or in any manner without our prior written
consent. This opinion does not constitute a recommendation to any shareholder
with respect to how such holder should vote with respect to the Transaction, and
should not be relied upon by any shareholder as such.
Based upon and subject to the foregoing, including the various assumptions
and limitations set forth herein, it is our opinion that as of the date hereof,
the $20.00 per Share cash consideration to be received by the shareholders of
the Company pursuant to the Transaction is fair to such shareholders (other than
the holders of the Rollover Shares) from a financial point of view.
Very truly yours,
WASSERSTEIN PERELLA & CO., INC.
June 23, 1998
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