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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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SCHEDULE 14D-9/A
AMENDMENT NO. 1 TO
SOLICITATION/RECOMMENDATION STATEMENT PURSUANT TO
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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JEVIC TRANSPORTATION, INC.
(NAME OF SUBJECT COMPANY)
JEVIC TRANSPORTATION, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, NO PAR VALUE
(TITLE OF CLASS OF SECURITIES)
47719P107
(CUSIP NUMBER OF CLASS OF SECURITIES)
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HARRY J. MUHLSCHLEGEL
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
600 CREEK ROAD
DELANCO, NEW JERSEY 08075
(609) 461-7111
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO RECEIVE
NOTICE AND COMMUNICATIONS ON BEHALF OF THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO:
BARRY M. ABELSON, ESQ.
ROBERT A. FRIEDEL, ESQ.
PEPPER HAMILTON LLP
3000 TWO LOGAN SQUARE
PHILADELPHIA, PA 19103
(215) 981-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Jevic Transportation, Inc., a New Jersey
corporation (the "Company"). The principal executive offices of the Company are
located at 600 Creek Road Delanco, New Jersey 08075. The classes of securities
to which this Statement relates are the Company's Common Stock, no par value,
and Class A Common Stock, no par value, (the "Company Stock" or the "Shares").
ITEM 2. TENDER OFFER OF THE BIDDER.
This Statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1 dated June 9, 1999 (the "Schedule 14D-1") filed by
Yellow Corporation, a Delaware corporation ("Parent"), and its wholly-owned
subsidiary JPF Acquisition Corp., a New Jersey corporation (the "Purchaser" and,
together with Parent, the "Bidder"), to purchase all of the outstanding Shares
at a price of $14.00 per Share, upon the terms and subject to the conditions set
forth in the Offer to Purchase dated June 9, 1999 (the "Offer to Purchase") and
the related Letter of Transmittal (which, as amended from time to time, together
with any amendments and supplements thereto, collectively constitute the
"Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of June 6, 1999 (the "Merger Agreement"), by and among Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, that as soon
as practicable after the satisfaction or waiver of the conditions set forth in
the Merger Agreement, Purchaser will be merged with and into the Company (the
"Merger"), with the Company surviving as a wholly-owned subsidiary of Parent
(the "Surviving Corporation"). A copy of the Merger Agreement is filed herewith
as Exhibit 1 to this Schedule 14D-9 and is incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Parent and Purchaser are P.O. Box 7563, 10990 Roe Avenue, Overland Park, Kansas
66211.
ITEM 3. IDENTITY AND BACKGROUND.
(a) NAME AND ADDRESS OF THE COMPANY. The name and address of the Company,
which is the person filing this Statement, are set forth in Item 1 above.
(b) MATERIAL CONTRACTS, ETC.
(1) Between the Company and Its Executive Officers, Directors and
Affiliates
General
Certain contracts, agreements, arrangements and understandings between the
Company and its executive officers, directors or affiliates are described in an
"Information Statement Pursuant to Section 14(f) of the Securities Exchange Act
of 1934 and Rule 14f-1 Thereunder" (the "Information Statement") dated June 9,
1999, which is attached hereto as Annex II and incorporated herein by reference
in its entirety.
Stock Options
On March 18, 1999, the Company granted 10,000 options to purchase shares of
Company Common Stock at $6.25 per share, the fair market value on the date of
grant, to each of Paul J. Karvois, Brian J. Fitzpatrick, Joseph A. Librizzi and
Raymond M. Conlin under its 1997 Incentive Plan. The options vest with respect
to 40% of the shares purchasable upon the exercise of the option on the second
anniversary of the date of grant and will vest as to an additional 20% of the
shares on each of the three succeeding anniversaries. The options expire ten
years after the date of grant, subject to the earlier termination upon the
occurrence of certain events.
Employment Agreements
The Company entered into employment agreements (the "Employment
Agreements") dated June 4, 1999 with Paul J. Karvois, Brian J. Fitzpatrick,
Joseph A. Librizzi and Raymond M. Conlin (each, an
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"Executive Officer"). Pursuant to such Employment Agreements, each Executive
Officer will continue his employment in his current position receiving base
salary, a minimum target bonus, and other Company benefits. Parent is also a
party to these Employment Agreements and has agreed to cause the Surviving
Corporation to satisfy the Company's obligations thereunder after the date on
which the Purchaser purchases Shares pursuant to the Offer (the "Purchase
Date"). In addition, under the Employment Agreements, Parent agrees to grant to
the Executive Officers as of the Purchase Date stock options to purchase Parent
common stock (Mr. Karvois - 30,000 shares; Mr. Fitzpatrick - 20,000 shares; Mr.
Librizzi - 20,000 shares; and Mr. Conlin - 20,000 shares) and to cause the
Surviving Corporation to provide certain specified perquisites after the
Purchase Date. With respect to calendar years after the Purchase Date, the
Executive Officers will be entitled to participate in Parent's stock option
plans on terms and conditions substantially similar to those generally
applicable to executives of Parent and its subsidiaries. The Employment
Agreements recognize the Company's obligation to pay benefits under certain
Severance Agreements (as defined below) entered into between the Company and the
Executive Officers (if the conditions set forth in such Severance Agreements are
met), but vary the terms of the Severance Agreements effective as of the
Purchase Date so that certain contemplated changes in an Executive Officer's
responsibilities and benefits after the Purchase Date will not be considered
"Good Reason" entitling the Executive Officer upon termination of employment to
benefits under the applicable Severance Agreement. Copies of these Employment
Agreements are filed herewith as Exhibits 2 through 5 respectively and are
incorporated herein by reference.
Severance Agreements
The Company entered into Severance Agreements dated April 5, 1999 with each
Executive Officer, which were amended and restated on June 4, 1999 (as amended
and restated, the "Severance Agreements"). Under the Severance Agreements, on
the Purchase Date, the Executive Officers will receive bonuses in an aggregate
amount of $875,000 (Mr. Karvois - $315,000; Mr. Fitzpatrick - $280,000; Mr.
Librizzi - $225,000; and Mr. Conlin - $55,000). The Severance Agreements provide
certain additional benefits to each Executive Officer if, within two years after
the Purchase Date, (i) he is terminated by the Company without cause or (ii) he
resigns for good reason. In such circumstances, the Executive Officer will be
entitled to receive a lump sum payment equal to two times the sum of (a) the
Executive Officer's salary, at the greater of his salary immediately prior to
the Purchase Date or on the date of termination, plus (b) the Executive
Officer's bonus, at the greater of his target bonus for the year of his
termination or the best actual bonus he received in the five previous years. As
part of the amendment and restatement of the Severance Agreements, the Executive
Officers agreed to forego the right to receive the additional benefits described
above as a result of any resignation without good reason following six months
after a change of control of the Company. Copies of these Severance Agreements
are filed herewith as Exhibits 6 through 9 respectively and are incorporated
herein by reference.
Indemnification
Section 14A:3-5 of the Corporation Law of the State of New Jersey ("NJCL")
permits each New Jersey business corporation to indemnify a "corporate agent"
against expenses and liability in connection with any proceeding involving the
corporate agent by reason of his being or having been such a corporate agent,
other than a proceeding by or in the right of the corporation (unless the
corporate agent shall have been adjudged not liable to the corporation or shall
have been adjudged liable, but in view of all the circumstances in the case, the
court in which such proceeding was brought shall determine that such corporate
agent is fairly and reasonably entitled to indemnity), if such actions were
taken in good faith and in a manner which he or she reasonably believed to be in
or not opposed to the best interests of the corporation, and with respect to any
criminal proceeding, if he or she had no reasonable cause to believe his or her
conduct was unlawful. Such indemnification may only be made by the corporation
as authorized in a specific case upon a determination (by the board of directors
of the corporation, a committee thereof, independent legal counsel via a written
opinion or by the shareholders (if the board so directs)) that indemnification
is proper because the corporate agent has met the applicable standard of
conduct. The NJCL defines a "corporate agent" as any person who is or was a
director, officer, employee or agent of the indemnifying corporation or of any
constituent corporation absorbed by the indemnifying corporation in a
consolidation or merger and any person who is or was a director,
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officer, trustee, employee or agent of any other enterprise, serving as such at
the request of the indemnifying corporation, or of any such constituent
corporation, or the legal representative of any such director, officer, trustee,
employee or agent. Article VII of the Company's by-laws provides that the
Company shall indemnify any corporate agent to the full extent permitted by
Section 14A:3-5 of the NJCL. To the extent that a director, officer, employee or
agent of the Company has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in NJCL Section 14A:3-5(2) or (3),
or in defense of any claim, issue or matter therein, he or she shall be
indemnified by the Company against expenses in connection therewith. Such
expenses may be paid by the Company in advance of the final disposition of the
action, suit or proceeding as authorized by the Board of Directors upon receipt
of an undertaking to repay the advance if it is ultimately determined that such
person is not entitled to indemnification.
Section 14A:3-5(9) permits, and Article VII of the Company's by-laws
provides, that any corporate agent may be insured by insurance purchased and
maintained by the Company against any expenses incurred in any proceeding and
any liabilities asserted against him or her in his or her capacity as a
corporate agent, whether or not the Company would have the power to indemnify
him or her against any such liability. In this regard, the Company maintains a
policy insuring it and its directors and officers against certain liabilities,
including liabilities under the Securities Act of 1933 and the Securities
Exchange Act of 1934.
(2) Between the Company and Parent, Their Executive Officers, Directors
and Affiliates
The Merger Agreement
The Offer. The Merger Agreement provides that the Purchaser will commence
the Offer and that, upon the terms and subject to prior satisfaction or waiver
of certain conditions of the Offer set forth in the Merger Agreement (the "Offer
Conditions"), the Purchaser will purchase all Shares validly tendered pursuant
to the Offer at a price of $14.00 per Share, net to the seller in cash, without
interest thereon. The Merger Agreement provides that, without the prior written
consent of the Company, the Purchaser will not decrease the price per share of
Class A Common Stock (the "Class A Common Shares") or Common Stock (the "Common
Shares") or change the form of consideration payable in the Offer, decrease the
number of Shares sought to be purchased in the Offer, change the Offer
Conditions, waive or reduce the condition that there be validly tendered and not
withdrawn prior to the expiration date for the Offer that number of Shares which
represents at least 51% of the outstanding Common Shares on a fully diluted
basis (including Common Shares issuable upon conversion of Class A Common
Shares) on the date of purchase (the "Minimum Condition"), impose additional
conditions to the Offer or amend any other term of the Offer in any manner
adverse to the holders of any Shares; provided, however, that if all the Offer
Conditions are then satisfied or waived, the Parent, in order to permit the
Merger to become effective without a meeting of the Company's shareholders (the
"Shareholders") in accordance with Section 14A:10-5.1 of the NJCL, shall have
the right (i) to extend the Offer for a period or periods aggregating up to ten
business days from the then effective Expiration Date and (ii) thereafter to
extend the Offer with the prior written consent of the Company; and provided,
further, that if Parent elects to extend the Offer pursuant to clause (i) above,
Parent and the Purchaser shall be deemed to have permanently and irrevocably
waived all of the Offer Conditions (other than the Minimum Condition and the
conditions set forth in clause (a) of the Offer Conditions); and provided,
further, that the Purchaser may extend the Offer to the extent any Offer
Conditions have not been satisfied on the applicable Expiration Date.
Recommendation. The Merger Agreement provides that, subject to the
conditions thereof, the Board of Directors of the Company has (i) determined
that the Offer and the Merger are fair to and in the best interests of the
Company and its Shareholders, (ii) irrevocably approved the Tender and Voting
Agreement (as defined below), the Offer and the Merger in accordance with
Section 14A:10A-1 of the NJCL (and for purposes of any other applicable state
takeover law), and (iii) resolved to recommend acceptance of the Offer and
approval and adoption of the Merger and the Merger Agreement by the Company's
Shareholders (in accordance with the requirements of the Company's Restated
Certificate of Incorporation and applicable law).
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The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, and in accordance
with the NJCL, at the time the Merger becomes effective in accordance with
applicable law (the "Effective Time"), the Purchaser will be merged with and
into the Company. As a result of the Merger, the separate corporate existence of
the Purchaser will cease and the Company will continue as the surviving
corporation (the "Surviving Corporation"). The Merger Agreement provides that
Parent, the Purchaser and the Company shall use their reasonable best efforts to
consummate the Merger as soon as practicable.
Under the NJCL, the approval of the Board of Directors of the Company and
the affirmative vote of holders of a majority of the outstanding Shares is
required to approve and adopt the Merger Agreement and the transactions
contemplated thereby, including the Merger. Section 14A:10A-4 of the NJCL
prevents certain "business combinations" with an "interested stockholder"
(generally, any person who owns or has the right to acquire 10% or more of a
corporation's outstanding voting stock) for a period of five years following the
time such person became an interested stockholder, unless, among other things,
prior to the time the interested stockholder became such the board of directors
of the corporation approved the business combination. Section 14A:10A-5 of the
NJCL further provides that a business combination is permissible if approved by
two-thirds of the outstanding shares of voting stock of the Company, excluding
voting stock held by any "interested stockholder," or if certain price criteria
and procedural standards are satisfied.
The Board of Directors of the Company has unanimously approved the Offer,
the Merger, the Merger Agreement and the Tender and Voting Agreement and the
transactions contemplated thereby for the purposes of Section 14A:10A-4 of the
NJCL.
Pursuant to the Merger Agreement, the Company will, if required by the
Company's Restated Certificate of Incorporation and/or applicable law in order
to consummate the Merger, duly call, give notice of, convene and hold a special
meeting of its Shareholders (the "Special Meeting") as soon as practicable
following the acceptance for payment and purchase of the Shares by the Purchaser
pursuant to the Offer for the purpose of considering and taking action upon the
Merger and the adoption of the Merger Agreement. The Merger Agreement provides
that the Company will (a) prepare and file with the Commission a preliminary
proxy or information statement and (b) use its reasonable best efforts to (x)
obtain and furnish the information required to be included by the Commission in
a definitive proxy or information statement (the "Statement") and (y) obtain the
necessary approvals of the Merger and the Merger Agreement from its
Shareholders. The Board of Directors of the Company, subject to the fiduciary
obligation of the Board under applicable law, will include in the Statement the
recommendation of the Board that the Shareholders of the Company vote in favor
of the approval of the Merger and the Merger Agreement. Parent agrees that it
will vote, or cause to be voted, all of the Shares then owned by it and the
Purchaser or any of its other subsidiaries in favor of the Merger and adoption
of the Merger Agreement. If the Purchaser acquires at least a majority of the
Shares on a fully diluted basis, pursuant to the Offer or otherwise, the
Purchaser will have sufficient voting power to approve the Merger, even if no
other Shareholder votes in favor of the Merger.
The Merger Agreement provides that in the event that Parent, the Purchaser
or any other subsidiary of Parent acquires at least 90% of the outstanding Class
A Common Shares and at least 90% of the outstanding Common Shares on a fully
diluted basis, pursuant to the Offer or otherwise, Parent, the Purchaser and the
Company will, at the request of the Parent and subject to the terms and
conditions of the Merger Agreement, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of Shareholders of the Company, in accordance
with Section 14A:10-5.1 of the NJCL.
Conversion of Securities. At the Effective Time, each Share issued and
outstanding prior to the Effective Time shall be converted into the right to
receive in cash the Merger Price. Shares held by Parent, the Purchaser, any
wholly owned subsidiary of Parent or the Purchaser, in the treasury of the
Company or by any wholly owned subsidiary of the Company ("Excluded Shares")
shall be canceled and retired.
Pursuant to the Merger Agreement, the Board of Directors of the Company has
adopted such resolutions, and has agreed to take such other actions as may be
necessary, so that each outstanding option (an "Option") granted under the
Company's 1994 Stock Option Plan and 1997 Incentive Plan (collectively, the
"Option
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Plans"), whether or not then exercisable or vested, shall become fully
exercisable and vested and, except to the extent that Parent or the Purchaser
and the holder of any such Option otherwise agree, immediately following
consummation of the Offer or, at the option of Parent, the Effective Time, the
Company shall pay to such holders of Options an amount in respect thereof equal
to the product of (A) the excess of the Merger Price over the exercise price
thereof and (B) the number of Shares subject thereto (such payment to be net of
taxes required by law to be withheld with respect thereto); provided that the
foregoing shall be subject to the obtaining of any necessary consents of holders
of awards of Options under the Option Plans, it being agreed that the Company
will use its best efforts to obtain any such consent.
Board of Directors. Upon payment by the Purchaser for Shares pursuant to
the Offer representing at least a majority of the votes entitled to be cast by
all holders of Shares and from time to time thereafter so long as the Purchaser
and/or Parent (and/or their respective wholly-owned subsidiaries) continue to
hold at least such number of Shares, Parent will be entitled to designate such
number of directors, rounded up to the next whole number, on the Company's Board
of Directors as is equal to the product of the total number of directors on the
Company's Board (determined after giving effect to the directors elected
pursuant to this sentence) multiplied by the percentage that the aggregate
number of Shares beneficially owned by Parent or its affiliates bears to the
total number of Shares outstanding. The Company shall, upon request of Parent,
promptly take all actions necessary to cause Parent's designees to be so
elected, including, if necessary, seeking the resignations of one or more
existing directors. If Parent's designees are so elected, prior to the Effective
Time the Board shall always have at least one member who is neither an officer,
director, stockholder or designee of Parent or any of its affiliates. The
Company's obligation to appoint Parent's designees to the Board of Directors is
subject to compliance with Section 14(f) of the Exchange Act and Rule 14f-1
promulgated thereunder.
Representations and Warranties. Pursuant to the Merger Agreement, the
Company has made customary representations and warranties to Parent and the
Purchaser with respect to, among other things, its organization and
qualifications, capitalization, authority, financial statements, public filings,
litigation, compliance with law, employee benefit plans, intellectual property,
material contracts, insurance, labor matters, real property matters, suppliers
and customers, accounts receivable, "Year 2000" compliance, environmental
matters, granting of certain approvals, opinion of financial advisor,
information in the Statement, tax status and the absence of material adverse
change on the Company or any of its subsidiaries since March 31, 1999. Parent
and the Purchaser have made customary representations and warranties to the
Company with respect to, among other things, its organization and
qualifications, authority, public filings, information in the Statement and
financing for the Offer.
Covenants. The Merger Agreement contains certain restrictive covenants as
to the conduct of the Company, Parent, the Purchaser and the Surviving
Corporation in contemplation of the Merger including, without limitation, access
by Parent and the Purchaser to information concerning the Company, use of
reasonable best efforts to consummate the Merger, use of reasonable best efforts
to ensure that the Offer Conditions are satisfied, and notification of the other
parties of certain matters.
Conduct of Business of the Company. Pursuant to the Merger Agreement, the
Company has agreed that, except with the prior written consent of Parent or as
otherwise required by the Merger Agreement, during the period from execution of
the Merger Agreement to the Effective Time, the Company and its subsidiaries
will conduct operations only in the ordinary course of business consistent with
past practice and will use reasonable best efforts to preserve intact the
business organization of the Company and each of its subsidiaries, to keep
available the services of its and their present officers and employees, and to
preserve the good will of those having business relationships with it.
No Solicitation. Pursuant to the Merger Agreement, the Company has
represented and warranted to, and covenanted and agreed with, Parent and the
Purchaser that neither the Company nor any of its subsidiaries has any
agreement, arrangement or understanding with any potential acquiror that,
directly or indirectly, would be violated, or require any payments, by reason of
the execution, delivery and/or consummation of the Merger Agreement. The Merger
Agreement provides that the Company shall, and shall cause its subsidiaries and
its and their officers, directors, employees, investment bankers, attorneys and
other agents and representatives to, immediately cease any existing discussions
or negotiations with any person other
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than Parent or the Purchaser (a "Third Party") heretofore conducted with respect
to any Acquisition Transaction (as hereinafter defined). The Merger Agreement
provides that the Company and the Board of Directors of the Company shall not,
and the Company shall cause its subsidiaries and its and their respective
officers, directors, employees, investment bankers, attorneys and other agents
and representatives not to, directly or indirectly, (w) withdraw or modify (or
resolve to withdraw or modify) in a manner adverse to Parent the approval or
recommendation of the Board of Directors of the Company of the Merger Agreement
or any of the transactions contemplated thereby or recommend (or resolve to
recommend) an Acquisition Transaction with a Third Party to the Shareholders,
(x) solicit, initiate, continue, facilitate or encourage (including by way of
furnishing or disclosing non-public information) any inquiries, proposals or
offers from any Third Party with respect to, or that could reasonably be
expected to lead to, any acquisition or purchase of a material portion of the
assets or business of, or a 15% or more voting equity interest in (including by
way of a tender offer), or any amalgamation, merger, consolidation or business
combination with, or any recapitalization or restructuring, or any similar
transaction involving, the Company or any of its subsidiaries (the foregoing
being referred to collectively as an "Acquisition Transaction"), or (y)
negotiate, explore or otherwise communicate in any way with any Third Party with
respect to any Acquisition Transaction or enter into, approve or recommend any
agreement, arrangement or understanding requiring the Company to abandon,
terminate or fail to consummate the Offer and/or the Merger or any other
transaction contemplated by the Merger Agreement. The Merger Agreement provides
that notwithstanding anything to the contrary in the foregoing, the Company may,
prior to the purchase of Shares pursuant to the Offer, in response to an
unsolicited written proposal with respect to an Acquisition Transaction
involving the acquisition of all of the Shares (or all or substantially all of
the assets of the Company and its subsidiaries) from a Third Party or in
response to an unsolicited all cash tender offer for any and all Shares (i)
furnish or disclose non-public information to such Third Party, (ii) negotiate,
discuss or otherwise communicate with such Third Party and (iii) in the case of
an unsolicited all cash tender offer for any and all Shares, withdraw or modify
(or resolve to withdraw or modify) in a manner adverse to Parent the approval or
recommendation of the Merger Agreement and the transactions contemplated thereby
or recommend (or resolve to recommend) an Acquisition Transaction with a Third
Party to Shareholders, in each case only if the Board of Directors of the
Company determines in good faith: (1) (after consultation with Janney Montgomery
Scott Inc.) that such proposal or such unsolicited all cash tender offer, as the
case may be, is more favorable to the Shareholders from a financial point of
view than the transaction contemplated by the Merger Agreement (including any
adjustment to the terms and conditions proposed by Parent and the Purchaser in
response to such proposal or such unsolicited all cash tender offer, as the case
may be), (2) (after consultation with Janney Montgomery Scott Inc.) that
sufficient financing is obtainable with respect to such proposal or such
unsolicited all cash tender offer, as the case may be, such that the proposed
Acquisition Transaction will be consummated without material delay and (3) that
the proposed Acquisition Transaction (including, if applicable, such an
unsolicited all cash tender offer) is not subject to any regulatory approvals
that could reasonably be expected to prevent or materially delay its
consummation (a proposal with respect to an Acquisition Transaction (including,
if applicable, such an unsolicited all cash tender offer) meeting the
requirements of clauses (1) through (3) is referred to herein as a "Superior
Proposal"). The Merger Agreement also provides that prior to furnishing or
disclosing any non-public information to, or entering into negotiations,
discussions or other communications with, such Third Party, the Company shall
receive from such Third Party an executed confidentiality agreement with terms
no less favorable in the aggregate to the Company than those contained in the
Confidentiality Agreement between the Company and Parent (the "Confidentiality
Agreement"), but which confidentiality agreement shall not provide for any
exclusive right to negotiate with the Company or any payments by the Company.
The Merger Agreement also provides that the Company shall provide to Parent
copies of all such non-public information delivered to such Third Party
concurrently with such delivery. The Merger Agreement provides that,
notwithstanding the foregoing, the Company and the Board of Directors of the
Company shall not, and the Company shall cause its affiliates not to, withdraw
or modify (or resolve to withdraw or modify) in a manner adverse to Parent the
approval or recommendation of this Agreement or any of the transactions
contemplated hereby, or recommend (or resolve to recommend) an Acquisition
Transaction with a Third Party to Shareholders or enter into a definitive
agreement with respect to a Superior Proposal unless (w) the Company has given
Parent three business days' notice of the intention of the Board of Directors to
withdraw or modify (or resolve to withdraw or modify) in a manner adverse to
Parent the
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approval or recommendation of the Merger Agreement or any of the transactions
contemplated thereby, or recommend (or resolve to recommend) an Acquisition
Transaction with a Third Party to the Shareholders or the intention of the
Company to enter into such definitive agreement, as the case may be, (x) if
Parent makes a counter-proposal within such three business day period, the Board
of Directors of the Company shall have determined, in light of any such
counter-proposal, that the Third Party Acquisition Transaction proposal is still
a Superior Proposal, (y) the Company concurrently terminates the Merger
Agreement in accordance with the terms thereof and pays any Termination Fee (as
defined) required under the termination provisions of the Merger Agreement and
agrees to pay any other amounts required under such provisions, and (z) with
respect to a definitive agreement, such agreement permits the Company to
terminate it if it receives a Superior Proposal, such termination and related
provisions to be on terms no less favorable to the Company, including as to fees
and reimbursement of expenses, as those contained in the Merger Agreement.
The Merger Agreement provides that the Company shall promptly (but in any
event within one day of the Company becoming aware of same) advise Parent of the
receipt by the Company, any of its subsidiaries or any of its or their bankers,
attorneys or other agents or representatives of any inquiries or proposals
relating to an Acquisition Transaction and of certain actions taken with respect
thereto. The Merger Agreement provides that the Company shall promptly (but in
any event within one day of the Company becoming aware of same) provide Parent
with a copy of any such inquiry or proposal in writing and a written statement
with respect to any such inquiries or proposals not in writing, which statement
shall include the identity of the parties making such inquiries or proposal and
the material terms thereof. The Merger Agreement provides that the Company
shall, from time to time, promptly (but in any event within one day of the
Company becoming aware of same) inform Parent of the status and content of and
developments with respect to any discussions regarding any Acquisition
Transaction with a Third Party, including (i) the calling of meetings of the
Board of Directors of the Company to take action with respect to such
Acquisition Transaction, (ii) the execution of any letters of intent, memoranda
of understanding or similar non-binding agreements with respect to such
Acquisition Transaction, (iii) the waiver of any standstill agreement to which
the Company is or becomes a party, (iv) the determination by the Board of
Directors of the Company to recommend to the Shareholders that they approve or
accept a Superior Proposal or withdraw or modify in a manner adverse to the
Parent its approval or recommendation of the Merger Agreement or the
transactions contemplated thereby, (v) the determination by the Company to
publicly disclose receipt of a Superior Proposal and (vi) the waiver by the
Company of any confidentiality agreement with a person proposing a Superior
Proposal. The Merger Agreement provides that for the avoidance of doubt, the
Company agrees that it will not enter into any definitive agreement with respect
to a Superior Proposal unless and until Parent has been given notice of the
identity of the parties making such Superior Proposal, the terms thereof and
developments referred to in the preceding sentence and the intent to enter into
such a definitive agreement at least three business days prior to the entering
into such agreement.
State Takeover Laws. The Merger Agreement provides that the Company shall,
upon the request of the Purchaser, take all reasonable steps to assist in any
challenge by the Purchaser to the validity or applicability to the transactions
contemplated by the Merger Agreement, including the Offer and the Merger, and
the Tender and Voting Agreement of any state takeover law. The Merger Agreement
provides that the Board of Directors of the Company shall not amend, modify or
rescind the approval of any purchase of Shares in the Offer for purposes of
Section 14A:10A-1 of the NJCL.
Indemnification. Pursuant to the Merger Agreement, all rights to
indemnification now existing in favor of any director or officer of the Company,
as provided in the Company's Restated Certificate of Incorporation or by laws,
in an agreement between any such person and the Company, or otherwise in effect
on the date thereof shall survive the Merger and shall continue in full force
and effect indefinitely after the Effective Time. The Merger Agreement provides
that Parent also agrees to indemnify all current and former directors and
officers of the Company ("Indemnified Parties") to the fullest extent permitted
by applicable law with respect to all acts and omissions arising out of such
individuals' services as officers or directors of the Company or any of its
subsidiaries or as trustees or fiduciaries of any plan for the benefit of
employees occurring prior to the Effective Time. The Merger Agreement provides
that without limitation of the foregoing, in the event any such Indemnified
Party is or becomes involved in any capacity in any action, proceeding or
investigation in
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connection with any matter, including, without limitation, the transactions
contemplated by the Merger Agreement, occurring prior to, and including, the
Effective Time, Parent will pay as incurred such Indemnified Party's reasonable
legal and other expenses of counsel selected by the Indemnified Party and
reasonably acceptable to Parent (including the cost of any investigation,
preparation and settlement) incurred in connection therewith; provided, however,
that Parent shall not, in connection with any one such action or proceeding or
separate but substantially similar actions or proceedings arising out of the
same general allegations be liable for fees and expenses of more than one
separate firm of attorneys (in addition to any local counsel) at any time for
all Indemnified Parties. The Merger Agreement provides that Parent shall be
entitled to participate in the defense of any such action or proceeding, and
counsel selected by the Indemnified Party shall, to the extent consistent with
their professional responsibilities, cooperate with Parent and any counsel
designated by Parent. The Merger Agreement provides that Parent shall pay all
reasonable expenses, including attorneys' fees, that may be incurred by any
Indemnified Party in enforcing the indemnity and other obligations provided for
in the Merger Agreement.
The Merger Agreement provides that Parent agrees that the Company and, from
and after the Effective Time, the Surviving Corporation shall cause to be
maintained in effect for not less than six years from the Effective Time the
current policies of the directors' and officers' liability insurance maintained
by the Company; provided that the Surviving Corporation may substitute therefor
policies of at least the same coverage containing terms and conditions which are
no less advantageous and provided that such substitution shall not result in any
gaps or lapses in coverage with respect to matters occurring prior to the
Effective Time; and provided, further, that the Surviving Corporation shall not
be required to pay an annual premium in excess of 200% of the last annual
premium paid by the Company prior to the date of the Merger Agreement and if the
Surviving Corporation is unable to obtain the insurance required by the Merger
Agreement it shall obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount.
Employee Matters. The Merger Agreement provides that on and after the
Effective Time, Parent shall cause the Surviving Corporation and its
subsidiaries to promptly pay or provide when due all compensation and benefits
earned through or prior to the Effective Time as provided pursuant to the terms
of any Company employee benefit plans disclosed to Parent ("Company Plans") for
all employees (and former employees) and directors (and former directors) of the
Company and its subsidiaries. Pursuant to the Merger Agreement, Parent and
Company have agreed that the Surviving Corporation and its subsidiaries shall
pay promptly or provide when due all compensation and benefits required to be
paid pursuant to the terms of any individual agreement with any employee, former
employee, director or former director in effect as of the date of the Merger
Agreement and disclosed to Parent.
The Merger Agreement provides that if employees of the Surviving
Corporation and its subsidiaries become eligible to participate in a medical,
dental or health plan of Parent or its subsidiaries, Parent shall cause such
plan to (i) waive any preexisting condition limitations for conditions under the
applicable medical, health or dental plans of the Company and its subsidiaries
(other than any limitation already in effect with respect to the applicable
employee that has not been satisfied as of the Effective Time under the
applicable Company Plan) and (ii) honor any deductible and out-of-pocket
expenses incurred by the employees and their beneficiaries under such plans
during the portion of the calendar year prior to such participation.
Waiver. The Merger Agreement provides that, prior to the Effective Time,
the parties may (i) extend the time for the performance of any of the
obligations or other acts of any other party, (ii) waive any inaccuracies in the
representations and warranties contained in the Merger Agreement by any other
party or in any document, certificate or writing delivered pursuant thereto by
any other party or (iii) waive compliance with any of the agreements of any
other party or with any conditions to its own obligations. Any agreement on the
part of any party to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
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Termination. The Merger Agreement provides that it may be terminated and
the Merger contemplated thereby may be abandoned at any time prior to the
Effective Time, whether or not approval thereof by the Shareholders has been
obtained:
(a) by the mutual written consent of Parent and the Company;
(b) by the Company if the Company is not in material breach of any of
its representations, warranties, covenants or agreements contained in the
Merger Agreement and if (i) the Purchaser fails to commence the Offer as
provided in the Merger Agreement, (ii) the Purchaser shall not have
accepted for payment and paid for Shares pursuant to the Offer in
accordance with the terms hereof on or before August 31, 1999 (provided
that if the only unsatisfied condition to the Offer at August 31, 1999 is
the expiration or termination of all applicable waiting periods relating to
the Offer under the HSR Act, termination pursuant to this clause (ii) may
not occur until after October 31, 1999), (iii) the Purchaser fails to
purchase validly tendered Shares in violation of the terms of the Offer or
the Merger Agreement or (iv) the Merger shall not have occurred on or
before December 31, 1999;
(c) by Parent or the Company if the Offer is terminated or withdrawn
pursuant to its terms without any Shares being purchased in the Offer;
provided that Parent may terminate the Merger Agreement pursuant to this
clause only if Parent's or the Purchaser's termination or withdrawal of the
Offer is not in violation of the terms of the Merger Agreement or the
Offer;
(d) by Parent or the Company if any court or other government or
subdivision thereof, or any administrative governmental or regulatory
authority, agency, commission, tribunal or body, domestic, foreign or
supranational (a "Governmental Entity") shall have issued, enacted,
entered, promulgated or enforced any order, judgment, decree, injunction,
or ruling or taken any other action restraining, enjoining or otherwise
prohibiting the Offer or the Merger and such order, judgment, decree,
injunction, ruling or other action shall have become final and
nonappealable;
(e) by the Company if prior to the purchase by the Purchaser of any
Shares in the Offer (i) there shall have occurred, on the part of Parent or
the Purchaser, a material breach of any representation or warranty,
covenant or agreement contained in the Merger Agreement which is not
curable or, if curable, is not cured within ten business days after written
notice of such breach is given by the Company to the party committing the
breach or (ii)(A)(x) the Company proposes entering into a definitive
agreement with respect to a Superior Proposal or (y) the Board of Directors
of the Company recommends a Third Party Acquisition Transaction which is an
unsolicited all cash tender offer for any and all Shares and which
constitutes a Superior Proposal, (B) the Company gives Parent the three
business days' notice as required pursuant to the Merger Agreement, (C) if
a counter-proposal was made by Parent within such three business day
period, the Board of Directors of the Company has determined, in light of
the counter-proposal, that the Third Party Acquisition Transaction (or
proposal therefor) is still a Superior Proposal as required by the Merger
Agreement, and (D) the Company pays any Termination Fee (as defined below)
and any other amounts required under the Merger Agreement;
(f) by Parent if prior to the purchase by the Purchaser of any Shares
in the Offer (i) there shall have occurred, on the part of the Company, a
material breach of any representation, warranty, covenant or agreement
contained in the Merger Agreement which is not curable or, if curable, is
not cured within ten business days after written notice of such breach is
given by Parent to the Company or (ii) there shall have occurred, on the
part of any shareholder party to the Tender and Voting Agreement, a
material breach of any representation, warranty, covenant or agreement
contained in the Tender and Voting Agreement which is not curable or, if
curable, is not cured within five business days after written notice of
such breach is given by Parent to the applicable shareholder or (iii) if
the Board of Directors of the Company or committee thereof shall have
withdrawn or modified (or shall have resolved to withdraw or modify) in a
manner adverse to Parent, its approval or recommendation of the Merger
Agreement or any of the transactions contemplated thereby or shall have
recommended (or resolved to recommend) an Acquisition Transaction (other
than the Offer and Merger) to the Shareholders; or
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(g) by Parent if it is not in material breach of its obligations under
the Merger Agreement or under the Offer and no Shares shall have been
purchased pursuant to the Offer on or before August 31, 1999 (provided that
if the only unsatisfied condition to the Offer at August 31, 1999 is the
expiration or termination of all applicable waiting periods relating to the
Offer under the HSR Act, termination pursuant to this clause (g) may not
occur until October 31, 1999).
Fees and Expenses.
(a) The Merger Agreement provides that whether or not the Merger is
consummated, all costs and expenses incurred in connection with the Offer, the
Merger Agreement and the transactions contemplated thereby shall be paid by the
party incurring such expenses.
(b) The Merger Agreement provides that in the event it is terminated
pursuant to clause (e)(ii) or clause (f)(iii) under "-- Termination" above, then
the Company shall (i) promptly reimburse Parent for the documented fees and
expenses of Parent and the Purchaser related to the Merger Agreement and the
transactions contemplated thereby not to exceed $1.0 million, and (ii) promptly
pay Parent a termination fee (a "Termination Fee") of $4.75 million, in each
case by wire transfer of same day funds to an account designated by Parent as a
condition of such termination. In the event the Merger Agreement is terminated
pursuant to clause (f)(i) or clause (f)(ii) under "-- Termination" above, the
Company shall promptly reimburse Parent for the documented fees and expenses of
Parent and the Purchaser related to the Merger Agreement and the transactions
contemplated hereby not to exceed $1.0 million by wire transfer of same day
funds to an account designated by Parent.
(c) The Merger Agreement provides that in the event that (i) prior to the
termination of the Merger Agreement, a Third Party shall have made a proposal
regarding an Acquisition Transaction and (ii) thereafter (x) such proposal is
publicly disclosed and August 31, 1999 occurs (or, if the only unsatisfied
condition to the Offer at August 31, 1999 is the expiration or termination of
all applicable waiting periods relating to the Offer under the HSR Act, October
31, 1999 occurs) without the Minimum Condition being satisfied (other than as a
result of a material breach of the Merger Agreement by Parent or the Purchaser
that has not been cured within the time period set forth in the Merger
Agreement) or (y) the Merger Agreement is terminated (A) by the Company pursuant
to clause (b)(ii) or clause (c) under "-- Termination" above or (B) by Parent
pursuant to clause (f)(i), clause (f)(ii) or clause (g) under "-- Termination"
above, and, in each case, at the time the event giving rise to the right to so
terminate the Merger Agreement, such Third Party Acquisition Transaction
proposal shall not have been withdrawn and (iii) prior to twelve months after
any termination of the Merger Agreement the Company shall have entered into an
agreement for a Third Party Acquisition Transaction which constitutes a Superior
Proposal, or a Third Party Acquisition Transaction which constitutes a Superior
Proposal shall have been consummated, then the Company shall promptly, but in no
event later than immediately prior to, and as a condition of, entering into such
definitive agreement, or, if there is no such definitive agreement then
immediately upon consummation of the Acquisition Transaction, reimburse Parent
for the documented fees and expenses of Parent and the Purchaser relating the
Merger Agreement and the transactions contemplated thereby (to the extent not
previously reimbursed and without duplication of any amounts pursuant to clause
(b) above) not to exceed $1.0 million and pay Parent a Termination Fee of $4.75
million (it being understood that only one Termination Fee shall be payable
pursuant to clause (b) above and this clause (c) in the aggregate), which
amounts shall be payable by wire transfer of same day funds to an account
designated by Parent.
The Tender and Voting Agreement
Concurrently with the execution and delivery of the Merger Agreement, the
Company, Parent, Purchaser and the holders of the Class A Common Shares (the
"Class A Common Shareholders") entered into the Tender and Voting Agreement (the
"Tender and Voting Agreement").
Tender of Shares. Pursuant to the Tender and Voting Agreement, Parent and
the Purchaser have jointly and severally agreed: (i) subject to the Offer
Conditions and the other terms and conditions of the Merger Agreement, that the
Purchaser will purchase all Shares tendered pursuant to the Offer as promptly as
practicable following commencement of the Offer and that the Purchaser will
consummate the Merger in
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accordance with the terms of the Merger Agreement; and (ii) not to decrease the
price per share to be paid to the Company's shareholders in the Offer below
$14.00 per share. Pursuant to the Tender and Voting Agreement, each Class A
Common Shareholder has agreed to (i) tender such Class A Common Shareholder's
Class A Common Shares ("Subject Shares") other than Contributed Shares (as
defined below), if applicable, into the Offer promptly, and in any event no
later than the fifth business day following the commencement of the Offer, or,
if such Class A Common Shareholder has not received the Offer Documents (as
defined in the Merger Agreement) by such time, within two business days
following receipt of such documents, and (ii) not withdraw any Subject Shares so
tendered. Each of Harry J. Muhlschlegel and Karen B. Muhlschlegel shall be
permitted to not tender into the Offer 18,875 of their Subject Shares (for a
total of 37,750 Subject Shares, collectively herein referred to as the
"Contributed Shares"), provided that, so long as the Purchaser notifies Mr. and
Mrs. Muhlschlegel at least eight hours prior to the purchase of Shares by
Purchaser pursuant to the Offer, Mr. and Mrs. Muhlschlegel shall be obligated to
contribute their respective Contributed Shares to the capital of the Company
prior to the purchase of Shares by Purchaser pursuant to the Offer. The
foregoing obligations of the parties to the Tender and Voting Agreement shall
terminate on the Termination Date. As used in the Tender and Voting Agreement,
"Termination Date" means the date the Merger Agreement is terminated in
accordance with its terms.
Transfer of Subject Shares. The Tender and Voting Agreement provides that,
until the Termination Date, each Class A Common Shareholder will not, except as
required pursuant to the terms of the Tender and Voting Agreement, (i) sell,
offer to sell, pledge or otherwise dispose of any of such Class A Common
Shareholder's Subject Shares; (ii) enter into any contract, option or other
agreement or understanding with respect to any transfer of any or all of such
Subject Shares or any interest therein; (iii) grant any proxy, power-
of-attorney or other authorization or consent in or with respect to such Subject
Shares; (iv) deposit such Subject Shares into a voting trust or enter into a
voting agreement or assignment with respect to the Subject Shares; or (v) take
any other action with respect to such Subject Shares that would in any way
restrict, limit or interfere with the performance of such Class A Common
Shareholder's obligations under the Tender and Voting Agreement.
No Solicitation. The Tender and Voting Agreement provides that each Class
A Common Shareholder represents and warrants to, and covenants and agrees with,
Parent and the Purchaser that such Class A Common Shareholder does not have any
agreement, arrangement or understanding with any potential acquiror of the
Company that, directly or indirectly, would be violated, or require any
payments, by reason of the execution, delivery and/or consummation of the Tender
and Voting Agreement.
The Tender and Voting Agreement also provides that each Class A Common
Shareholder shall, and shall cause its agents and representatives to,
immediately cease any existing discussions or negotiations with any Third Party
heretofore conducted with respect to any Acquisition Transaction. The Tender and
Voting Agreement provides that, until the Termination Date, each Class A Common
Shareholder shall not, and shall cause its agents and representatives not to,
directly or indirectly, (x) solicit, initiate, continue, facilitate or encourage
(including by way of furnishing or disclosing non-public information) any
inquiries, proposals or offers from any Third Party with respect to, or that
could reasonably be expected to lead to, any Acquisition Transaction or (y)
negotiate, explore or otherwise communicate in any way with any Third Party with
respect to any Acquisition Transaction. The Tender and Voting Agreement provides
that if the Board of Directors of the Company determines that a Third Party
proposal for an Acquisition Transaction constitutes a Superior Proposal in
accordance with the provisions of the Merger Agreement discussed above under
"-- The Merger Agreement -- No Solicitation," then, notwithstanding the
provisions of this paragraph, the Class A Common Shareholders shall be permitted
to negotiate, discuss or otherwise communicate with such Third Party with
respect to a tender and voting agreement with terms no less favorable in the
aggregate to each Class A Common Shareholder than those contained in the Tender
and Voting Agreement; provided that no Class A Common Shareholder shall enter
into any such tender and voting agreement (i) prior to the Termination Date or
(ii) with any Third Party with whom negotiations for an Acquisition Transaction
had taken place prior to the Termination Date, if such tender and voting
agreement contains provisions less favorable in the aggregate to such Class A
Common Shareholder than those contained in the Tender and Voting Agreement. In
addition, the provisions of this paragraph shall not be deemed to prohibit any
Class A Common Shareholder who is an
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officer or director of the Company from taking actions permitted to be taken by
an officer or director, as the case may be, in such Class A Common Shareholder's
capacity as an officer and/or director, as the case may be, of the Company.
The Tender and Voting Agreement further provides that until the Termination
Date, each Class A Common Shareholder shall promptly (but in any event within
one day of such Class A Common Shareholder becoming aware of same) (i) advise
Parent of the receipt by such Class A Common Shareholder or any of its agents or
representatives of any inquiries or proposals relating to an Acquisition
Transaction, (ii) provide Parent with a copy of any such inquiry or proposal in
writing and a written statement with respect to any such inquiries or proposals
not in writing, which statement shall include the identity of the parties making
such inquiries or proposal and the material terms thereof and (iii) inform
Parent of the status and content of and developments with respect to any
discussions regarding any Acquisition Transaction with a Third Party.
Voting of Subject Shares. The Tender and Voting Agreement provides that,
until the Termination Date, each Class A Common Shareholder shall, at any
meeting of the stockholders of the Company, however called, or in connection
with any written consent of the stockholders of the Company, vote (or cause to
be voted) all Shares beneficially owned by such Class A Common Shareholder (i)
in favor of the Merger, the execution and delivery by the Company of the Merger
Agreement and the approval of the terms thereof and each of the other actions
contemplated by the Merger Agreement and the Tender and Voting Agreement and any
actions required in furtherance thereof; (ii) against any other Acquisition
Transaction and against any action or agreement that would impede, frustrate,
prevent or nullify the Merger Agreement or the Tender and Voting Agreement or
the transactions contemplated thereby, or result in a breach in any respect of
any covenant, representation or warranty or any other obligation or agreement of
the Company under the Merger Agreement or which would result in any of the
conditions to the Merger in the Merger Agreement not being fulfilled; and (iii)
if requested by Parent, in favor of a stockholder resolution proposed by Parent
in accordance with the New Jersey Act, the purpose of which is to cause the
Offer and the Merger to be consummated and which does not relate to election of
directors. A copy of the Tender and Voting Agreement is filed herewith as
Exhibit 10 and is incorporated herein by reference.
Best Efforts. The Tender and Voting Agreement provides that, subject to
the terms and conditions thereof, until the Termination Date, each Class A
Common Shareholder agrees to use all reasonable best efforts to take, or cause
to be taken, all actions, and to do, or cause to be done, all things necessary,
proper or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by the Tender and Voting Agreement and
the Merger Agreement. The Tender and Voting Agreement provides that, until the
Termination Date, each Class A Common Shareholder shall properly consult with
Parent and the Purchaser and provide any necessary information and material with
respect to all filings with any Governmental Entity in connection with the
Tender and Voting Agreement and the Merger Agreement and the transactions
contemplated thereby.
Confidentiality Agreement
Pursuant to a December 22, 1998 Confidentiality Agreement between the
Company and Parent, Parent contractually agreed (i) not to disclose any
information obtained during its due diligence investigation of the Company to
any person not actively and directly participating in the investigation or
negotiations with the Company, (ii) not to use any information obtained for a
purpose other than a possible transaction with the Company, or (iii) to destroy
any information obtained if the transaction is not completed. In addition, in
consideration of its receipt of the information, Parent agreed that for a period
of three years it would not (a) acquire, seek to acquire or cause to acquire the
assets, business, Shares or rights related thereto of the Company (b) make or
participate in any solicitation of a proxy to vote or influence any votes with
respect to the Shares, (c) form, join or participate in a group with respect to
voting the Shares, (d) arrange or participate in any financing to purchase
Shares or assets of the Company, (e) solicit employees of the Company or (f)
enter into any discussions, negotiations or understandings with or advise,
assist or encourage any third party with respect to any of the foregoing, in
each case without the Company's prior written consent. A copy of the
Confidentiality Agreement is filed herewith as Exhibit 11 and is incorporated
herein by reference.
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Except as described in this Item 3(b) or incorporated herein by reference,
to the knowledge of the Company, as of the date hereof, there are no material
contracts, agreements, arrangements or undertakings, or any actual or potential
conflicts of interest between the Company or its affiliates and (1) its
executive officers, directors or affiliates or (2) the Bidder or its executive
officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS
The Board of Directors of the Company has unanimously determined that each
of the transactions contemplated by the Merger Agreement, including the Offer
and the Merger, are fair to and in the best interests of the shareholders of the
Company and unanimously recommends that the Company's shareholders accept the
Offer and tender their Shares to Purchaser pursuant to the Offer.
A letter to the Company's shareholders communicating the Board of
Director's recommendation and a press release announcing the execution of the
Merger Agreement are filed herewith as Exhibits 12 and 13, respectively, and are
incorporated herein by reference.
(b) REASONS FOR THE BOARD'S RECOMMENDATION
Background of the Offer and Merger
In late October 1998, Samuel A. Woodward, Senior Vice President of
Operations and Planning of Parent, contacted Harry J. Muhlschlegel, Chief
Executive Officer and Chairman of the Board of the Company, to discuss the
possibility of exploring a strategic relationship between Parent and the
Company.
On November 10, 1998, Mr. Woodward met with Mr. Muhlschlegel and Brian J.
Fitzpatrick, Senior Vice President and Chief Financial Officer of the Company,
and discussed possible strategic relationships between Parent and the Company.
At this meeting, the participants concluded that discussions concerning a
possible strategic alliance or business combination involving Parent and the
Company should continue.
On December 15, 1998, Mr. Woodward met with Messrs. Muhlschlegel, Karvois
and Fitzpatrick. At this meeting, Mr. Woodward indicated that Parent was
primarily interested in pursuing a business combination with the Company. After
the December 15, 1998 meeting, the Company's legal counsel distributed a form of
confidentiality agreement to Parent, which was negotiated over the course of the
following week and was executed by Parent and the Company on December 23, 1998.
On January 8, 1999, Mr. Woodward contacted Mr. Muhlschlegel to schedule a
meeting at which Parent could further explore the potential benefits to both
companies of a business combination. On January 12, 1999, Mr. Woodward, William
F. Martin, Jr., General Counsel of the Company, and the president of Parent's
information services subsidiary met with Messrs. Muhlschlegel, Karvois and
Fitzpatrick and the Company's legal counsel to explore such benefits and to
preliminarily discuss the structure of a potential business combination.
On February 18, 1999, Mr. Muhlschlegel contacted Mr. Woodward to further
discuss the potential operating benefits that could result from a business
combination and to schedule a meeting where representatives of Parent could meet
with a larger group of management of the Company. On March 2, 1999, Mr. Woodward
and certain operations personnel of Parent met with Messrs. Muhlschlegel,
Karvois and Fitzpatrick and certain operations personnel of the Company to
discuss potential operating benefits that could result from a business
combination.
On March 18, 1999, at a meeting of the Company's Board of Directors, Mr.
Muhlschlegel discussed the status of discussions with Parent.
On March 24, 1999, Mr. Woodward contacted Messrs. Muhlschlegel, Karvois and
Fitzpatrick to arrange to have them meet with A. Maurice Myers, Chief Executive
Officer of Parent, and H.A. Trucksess, III, Senior Vice President and Chief
Financial Officer of Parent. On March 29, 1999, Messrs. Myers and Trucksess met
with Mr. Muhlschlegel, Karvois and Fitzpatrick to discuss the status of
discussions between the
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parties. At this meeting, it was determined that the parties would proceed with
negotiations with respect to the terms of a business combination.
On April 9, 1999, Mr. Woodward contacted Mr. Muhlschlegel to schedule
meetings at which the parties would begin negotiating the terms of a business
combination. On April 15, 1999, the Company's legal counsel contacted Mr. Martin
to discuss the agenda of such meetings, which were scheduled for April 28-29,
1999. On April 28, 1999, Messrs. Myers, Martin and Woodward met with Messrs.
Muhlschlegel, Karvois and Fitzpatrick and the Company's legal counsel for a
dinner discussion in anticipation of a formal negotiating session the following
day. On April 29, 1999, Mr. Martin, together with legal counsel to Parent and a
representative of J. P. Morgan & Co., financial advisor to Parent, commenced
such negotiations with Messrs. Muhlschlegel, Karvois and Fitzpatrick and the
Company's legal counsel.
The Company engaged Janney Montgomery Scott Inc. ("Janney") as the
Company's financial advisor effective as of April 28, 1999.
During the period from May 1, 1999 through May 17, 1999, representatives of
J.P. Morgan & Co. and Janney conferred and discussed the potential financial
impact of combining the two companies.
On May 17, 1999, Mr. Martin of Parent, together with Parent's legal and
financial advisors, met with the Company's legal and financial advisors to
continue to negotiate the terms of a transaction. On May 18, 1999, tentative
agreement on the form of the transaction and the consideration to the Company's
shareholders was reached in discussions between Mr. Myers and Mr. Muhlschlegel,
subject to continuing due diligence and negotiation and the approval of the
Boards of Directors of Parent and the Company.
On May 20, 1999, Parent's legal counsel distributed first drafts of the
Merger Agreement and the Tender and Voting Agreement to the Company and its
counsel.
On May 20, 1999, the Company's Board of Directors met to discuss the
developments in the negotiations with Parent concerning a business combination
transaction. The Board authorized the Company's management to continue to
negotiate the terms of the transaction, subject to Board approval of any
negotiated transaction. The Board also discussed the potential risks and
benefits which would be involved in a solicitation of interest from parties
other than Parent, including the possibility of a higher offer, the risk of
Parent terminating negotiations and the risk of damage to the Company's business
that might arise in the event of premature disclosure of the possible sale of
the Company. The Board requested that Mr. Muhlschlegel indicate its possible
interest in engaging in a solicitation of interest from third parties to Mr.
Myers. Following the Board meeting, Mr. Muhlschlegel contacted Mr. Myers and
informed him that the Company's Board of Directors was considering soliciting
from third parties other offers to purchase the Company. Mr. Myers informed Mr.
Muhlschlegel that in the event the Company's Board determined to solicit other
offers, he could not assure Mr. Muhlschlegel that Parent would continue to be
willing to proceed with a transaction. Mr. Myers also informed Mr. Muhlschlegel
that in the event the Company's Board agreed not to solicit any offers from
third parties, the Merger Agreement would not contain provisions of a nature
that would be preclusive with respect to unsolicited third party proposals.
On May 21, 1999, at a meeting of the Company's Board of Directors, Mr.
Muhlschlegel reviewed his discussion of the day before with Mr. Myers. On the
basis of that discussion and the Board's continued consideration, including
consultations with the Company's legal counsel and financial advisor, the Board
authorized the Company's management to continue to negotiate with Parent and not
to solicit third party indications of interest. On May 21, 1999, Mr.
Muhlschlegel contacted Mr. Myers and informed him that the Company's Board had
determined not to solicit third party offers on the condition that the Merger
Agreement not contain provisions of a nature that would be preclusive with
respect to third party proposals. Mr. Myers informed Mr. Muhlschlegel that
Parent was willing to proceed with the transaction on this basis.
On May 24, 1999, Mr. Martin contacted Mr. Fitzpatrick to schedule Parent's
legal, tax and accounting due diligence review. During May 26-28, 1999,
representatives of Parent conducted their legal, tax and accounting due
diligence. On May 26, 1999, Mr. Myers contacted Mr. Muhlschlegel and indicated
Parent's interest in revising certain severance agreements of certain officers
of the Company and in having certain officers of the Company enter into
employment agreements with Parent to provide appropriate incentives to
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retain such officers on a long term basis. On May 27, 1999, Mr. Muhlschlegel
contacted Mr. Myers and scheduled a meeting at which Mr. Myers could discuss
these employment matters with the applicable officers of the Company.
On May 28, 1999, Mr. Martin, together with Parent's legal counsel,
contacted the Company's legal counsel to discuss the Company's comments on the
drafts of the Merger Agreement and the Tender and Voting Agreement. On the basis
of these discussions, revised drafts of the Merger Agreement and the Tender and
Voting Agreement were thereafter distributed to the Company and its legal
counsel.
On June 2, 1999, Mr. Myers met with officers of the Company and negotiated
Parent's proposed amendments to their severance agreements and the proposed
employment agreements. In addition, Mr. Martin, together with Parent's legal
counsel, contacted the Company's legal counsel to discuss the Company's comments
on the revised drafts of Merger Agreement and the Tender and Voting Agreement.
On this basis of these discussions, revised drafts of the Merger Agreement and
the Tender and Voting Agreement were distributed to the Company and its counsel.
During June 3-6, 1999 the parties' respective legal counsel and financial
advisors conferred to finalize the Merger Agreement and the Tender and Voting
Agreement and related documentation.
On June 4, 1999, Mr. Myers contacted Mr. Muhlschlegel and informed him that
the Board of Directors of Parent had unanimously approved the Merger Agreement
and the Tender Voting Agreement, subject to the finalization of the Merger
Agreement and the Tender and Voting Agreement and related documentation.
On June 4, 1999, the Board of Directors of the Company held a meeting at
which management, its financial advisor and its legal counsel reviewed the
status of negotiations with Parent. Legal counsel again advised the Board with
respect to certain legal matters and reviewed the principal aspects of the
Merger Agreement, including termination fee and expense reimbursement provisions
and provisions concerning the ability of the Company to negotiate with third
parties concerning unsolicited Superior Proposals, as well as the Tender and
Voting Agreement, Employment Agreements and Amended and Restated Severance
Agreements. The financial advisor delivered its oral opinion to the Board as to
the fairness of the $14.00 cash consideration to be paid to the Company's
shareholders. The Board of the Company then analyzed and discussed the Offer,
the Merger Agreement and the transactions contemplated thereby, the Tender and
Voting Agreement, the Employment Agreements and the Amended and Restated
Severance Agreements. Thereafter, the Board unanimously resolved to approve the
Merger Agreement, the Offer and the Merger and to recommend that the
Shareholders accept the Offer and adopt and approve the Merger Agreement subject
to the finalization of the Merger Agreement and the Tender and Voting Agreement
and related documentation. Following the Board meeting, Mr. Muhlschlegel
contacted Mr. Myers and informed him of the Board's action.
On June 6, 1999, the Merger Agreement and the Tender and Voting Agreement
were executed and delivered by the parties thereto, and the applicable officers
of the Company executed and delivered the amendments to their severance
agreements and executed their employment agreements.
On June 7, 1999, the terms of the Merger Agreement and the Tender and
Voting Agreement were publicly announced.
Reasons for Recommendation
In reaching the determination and recommendation discussed in Item 4(a)
above, the Board considered a number of factors, including:
1. The Board's familiarity with the business, assets, financial
condition, results of operations, business plans and current business
strategy and future prospects of the Company, the nature of the industry in
which the Company operates and the Company's competitive position in such
industry.
2. The Board's belief that the consideration to be received by the
Company's shareholders in the Offer and Merger fairly reflects the
Company's intrinsic value.
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<PAGE> 17
3. The Board's view that a sale of the Company at this time is in the
best interest of the Company and its shareholders in light of: (a) the
Company's historical operating performance; (b) the Company's historical
financial results; and (c) the market price and performance of the
Company's Common Stock. The Board also considered the prospect of
increasing competition in the Company's industry and, as a result, the
increased need for continued investment in the Company's business in order
to maintain competitiveness.
4. The opinion of Janney presented to the Company's Board on June 4,
1999, to the effect that the consideration to be paid to the Company's
shareholders in the proposed acquisition by Purchaser is fair to the
shareholders of the Company from a financial point of view. In considering
such opinion, the Company's Board was aware that, upon completion of the
Merger, Janney becomes entitled to certain fees described in Item 5 below
in connection with its engagement by the Company.
5. The presentation of Janney in connection with such opinion, as to
various financial and other considerations deemed relevant to the Board's
evaluation of the Offer and the Merger, including (i) the terms and
conditions of the Merger Agreement; (ii) the business, financial condition,
results of operations and prospects of the Company; (iii) the financial
terms of certain business combinations that Janney deemed relevant; (iv)
selected financial and stock market data for certain other publicly traded
companies that Janney deemed relevant; (v) the recent trading history of
the Company's common stock; and (vi) other financial studies and analyses
that Janney deemed appropriate.
6. The fact that the Company's shareholders will realize the entire
value of the purchase price without the risk of post-closing
indemnification obligations.
7. The fact that the consideration to be paid to the Company's
shareholders in the Offer and Merger is all cash.
8. The fact that there are no unusual requirements or conditions to
the Offer and the Merger.
9. The terms and conditions of the Merger Agreement, which the Board
views as favorable to the Company's shareholders.
10. The Board's ability (i) to provide non-public information to and
negotiate with a third party concerning a possible acquisition of the
Company, and (ii) to withdraw or modify its approval or recommendation of
the Offer, the Merger and the transactions contemplated by the Merger
Agreement, in each case in response to an unsolicited Superior Proposal.
11. The Company's ability to terminate the Merger Agreement if it
receives a Superior Proposal, subject to the payment to Parent of a
termination fee of $4.75 million and reimbursement for expenses up to $1
million, and subject to satisfaction of certain other conditions.
12. Purchaser's ability to conclude the transaction expeditiously and
without any financing contingency.
The foregoing discussion of factors considered and given weight by the
Company Board is not intended to be exhaustive. In view of the variety of
factors considered in connection with its evaluation of the Offer and the
Merger, the Company Board did not find it practicable to, and did not, quantify
or otherwise assign relative weights to the specific factors considered in
reaching its determinations and recommendations. In addition, individual members
of the Company Board may have given different weights to different factors in
reaching their own respective determinations.
Opinion of Financial Advisor
The Board retained Janney as its financial advisor to review the Merger and
the Offer (together, the "Transaction") and to render an opinion as to the
fairness, from a financial point of view, of the consideration to be received by
the shareholders of the Company. As described herein, Janney's opinion, dated
June 4, 1999, together with the related presentation to the Board, was only one
of many factors taken into consideration by the Board in making its
determination to approve the Transaction.
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<PAGE> 18
At the June 4, 1999 meeting of the Company's Board, representatives of
Janney made a presentation with respect to the Transaction and rendered to the
Board 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 Janney, the consideration to be received in
the Transaction was fair to the Company's shareholders from a financial point of
view.
THE FULL TEXT OF JANNEY'S WRITTEN OPINION, DATED JUNE 4, 1999, WHICH SETS
FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITATIONS ON REVIEW
UNDERTAKEN, IS ATTACHED TO THIS SCHEDULE 14D-9 AS ANNEX I AND IS INCORPORATED
HEREIN BY REFERENCE. JANNEY'S OPINION IS DIRECTED TO THE BOARD OF DIRECTORS OF
THE COMPANY AND ADDRESSES THE FAIRNESS OF THE CONSIDERATION TO BE RECEIVED IN
THE TRANSACTION BY THE COMPANY'S SHAREHOLDERS FROM A FINANCIAL POINT OF VIEW.
JANNEY'S OPINION DOES NOT ADDRESS THE UNDERLYING DECISION OF THE COMPANY TO
ENGAGE IN THE TRANSACTION AND DOES NOT CONSTITUTE A RECOMMENDATION TO ANY
SHAREHOLDER AS TO WHETHER SUCH SHAREHOLDER SHOULD TENDER THEIR SHARES OR HOW
SUCH SHAREHOLDER SHOULD VOTE OR AS TO ANY OTHER ACTION SUCH SHAREHOLDER SHOULD
TAKE IN CONNECTION WITH THE TRANSACTION. THE DISCUSSION OF THE JANNEY OPINION
SET FORTH IN THIS SCHEDULE 14D-9 IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
THE FULL TEXT OF SUCH OPINION.
In connection with its opinion, Janney reviewed certain publicly available
financial information and other information concerning the Company and certain
internal analyses and other information furnished to it by the Company. Janney
also held discussions with the members of management of the Company regarding
this information and the business and prospects of the Company. Janney did not
independently verify any of the information described above and for purposes of
its opinion assumed the accuracy, completeness and fairness of all such
information. Janney did not make and it was not provided with an independent
evaluation or appraisal of the assets of the Company. With respect to the
financial forecast information furnished by or discussed with the Company,
Janney assumed that such information was prepared on the basis of reasonable
assumptions and reflected the best currently available judgments and estimates
of the management of the Company as to the likely future financial performance
of the Company. Janney's opinion is necessarily based on market, economic and
other conditions as they existed and should be evaluated as of the date of such
opinion.
In reaching its opinion, Janney (i) reviewed selected financial and stock
market data for the Company and certain other publicly traded companies; (ii)
reviewed the recent trading history of the Company's common stock; (iii)
reviewed the financial terms of certain recent business combinations; (iv)
performed discounted cash flow analysis for the Company; (v) reviewed the terms
of the Merger Agreement and certain related documents in draft form; and (vi)
performed such other analyses, and considered such other factors, as it deemed
appropriate. Janney assumed that the final terms of the Merger Agreement and
certain related documents reviewed by it in draft form would not vary materially
from the drafts reviewed by it.
The following is a brief summary of the material factors considered and
analyses performed by Janney and presented to the Board of Directors at its
meeting on June 4, 1999.
Historical Operating Results and Financial Condition
In rendering its opinion, Janney reviewed and analyzed the historical and
current financial information of the Company which included (i) the Company's
recent financial statements and (ii) the Company's recent revenue growth and
operating performance trends.
Projections
Janney analyzed the Company's projections in support of its fairness
opinion. The projections were not reviewed by independent auditors and were not
prepared in accordance with generally accepted accounting principles. Such
projections were based on numerous estimates and other assumptions and are
inherently
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<PAGE> 19
subject to significant uncertainties and contingencies. There is no assurance
that the projections will be achieved and the use thereof by Janney should not
be regarded as an indication that the Company or any other person considers such
estimates an accurate prediction of future events.
Historical Stock Price Performance
Janney reviewed and analyzed the reported daily closing market prices and
trading volume of the Shares for the period from the Company's initial public
offering on October 7, 1997 until June 3, 1999. Since October 7, 1997, the
Shares closed at a high of $18.875 per share on November 6, 1997; over the past
year (June 4, 1998 to June 3, 1999), the Shares closed at a high of $13.00 on
June 10, 1998; and over the past six months (December 4, 1998 to June 3, 1999)
the Shares closed at a high of $11.25 on June 3, 1999. Since October 7, 1997,
the Shares closed at a low of $5.375 on March 2, 1999. The last date on which
the Shares closed at or above $14.00 per share was May 19, 1998.
Janney also compared the movement of the closing prices of the Shares with
the movement of (i) the Standard & Poor's 500 composite average (the "S&P 500"),
(ii) the Standard & Poor's Small Cap Truckers Index ("S&P Truckers Index") and
(iii) a less-than-truckload carrier composite average (the "LTL Composite"),
consisting of American Freightways Corporation, Arnold Industries, Inc., Motor
Cargo Industries Inc., Old Dominion Freight Line, Inc., USFreightways
Corporation and Vitran Corporation Inc. On a relative basis, the Shares
underperformed the S&P 500, the S&P Truckers Index and the LTL Composite since
the date of the Company's initial public offering; underperformed the S&P 500,
the S&P Truckers Index and the LTL Composite over the past year; and
outperformed the S&P 500 and S&P Truckers Index, but underperformed the LTL
Composite, over the past six months. The historical stock price performance
review was presented to the Board to provide background information and to add
context to the other analyses performed by Janney, as described below. In
addition, the fact that the Shares underperformed the indicated indices over the
indicated periods, that the last date on which the Shares closed at or above
$14.00 per share was May 19, 1998 and that the Shares closed at $11.25 on June
3, 1999, at $9.625 on May 28, 1999 (one week prior to June 4) and at $9.50 on
May 7, 1999 (four weeks prior to June 4),was consistent with a determination
that the consideration to be received by the Company's shareholders in the
Transaction was fair to such shareholders from a financial point of view.
Analysis of Selected Publicly Traded Comparable Companies
Using publicly available information, Janney compared the operating and
financial performance, capitalization and stock market valuation for the Company
with respective corresponding data and ratios for certain similar publicly
traded companies. Janney selected these companies from the universe of possible
companies based upon Janney's view as to the comparability of financial and
operating characteristics for these companies to the Company. With respect to
each such analysis, Janney made such comparisons among the following companies:
American Freightways Corporation, Arnold Industries, Inc., Motor Cargo
Industries Inc., Old Dominion Freight Line, Inc., USFreightways Corporation and
Vitran Corporation Inc. (the "Comparable Companies").
Among other multiples calculated and reviewed by Janney were the Comparable
Companies' (a) common stock equity market value ("Equity Value") to historical
and estimated net income and (b) Equity Value adjusted for debt and cash
("Enterprise Value") to latest twelve months ("LTM") revenue, earnings before
interest and taxes ("EBIT") and earnings before interest, taxes, depreciation
and amortization ("EBITDA"). The financial information used in connection with
the multiples set forth below assumed 10,733,847 Shares outstanding, net debt of
the Company of $42,377,000, and was based on the latest reported 12 month period
as derived from publicly available information and on estimated EPS for calendar
years 1999 and 2000 for the Comparable Companies as reported as the consensus
estimates by First Call Corporation.
Janney noted that: (i) the Enterprise Value of the Comparable Companies as
a multiple of LTM revenue ranged from 0.4x to 1.0x, with an adjusted average
(adjusted to exclude the highest and lowest values before averaging) of 0.6x;
applying these multiples to the Company's LTM revenue of $237.1 million results
in low, high and adjusted average per share values of $4.38, $17.72 and $8.44,
respectively; (ii) the Enterprise Value
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<PAGE> 20
of the Comparable Companies as a multiple of LTM EBITDA ranged from 2.9x to
6.4x, with an adjusted average of 4.7x; applying these multiples to the
Company's LTM EBITDA of $33.4 million results in low, high and adjusted average
per share values of $5.03, $15.87 and $10.71, respectively; (iii) the Enterprise
Value of the Comparable Companies as a multiple of LTM EBIT ranged from 5.5x to
11.9x, with an adjusted average of 7.7x; applying these multiples to the
Company's LTM EBIT of $17.8 million results in low, high and adjusted average
per share values of $5.18, $15.82 and $8.84, respectively; (iv) the Equity Value
of the Comparable Companies as a multiple of LTM net income ranged from 9.0x to
20.5x, with an adjusted average of 11.1x; applying these multiples to the
Company's LTM net income of $9.6 million results in low, high and adjusted
average per share values of $8.12, $18.42 and $9.98, respectively; (v) the
Equity Value of the Comparable Companies as a multiple of estimated calendar
year 1999 net income ranged from 6.3x to 15.2x, with an adjusted average of
10.2x; applying these multiples to the Company's estimate for calendar year 1999
net income of $12.4 million results in low, high and adjusted average per share
values of $7.25, $17.56 and $11.75, respectively; and (vi) the Equity Value of
the Comparable Companies as a multiple of estimated calendar year 2000 net
income ranged from 5.5x to 13.3x, with an adjusted average of 8.6x; applying
these multiplies to the Company's estimate for calendar year 2000 net income of
$15.2 million results in low, high and adjusted average per share values of
$7.76, $18.83 and $12.22, respectively.
Based on the foregoing comparisons, Janney noted that the $14.00 per share
value of the consideration to be received by shareholders represented an Equity
Value which, as a multiple of the Company's historical and estimated future
financial results set forth above, was above the adjusted average per share
trading values of the Comparable Companies and that this fact supported a
determination that the consideration to be received in the Transaction was fair
to the Company's shareholders from a financial point of view.
Analyses of Selected Comparable Transactions
Janney reviewed the financial terms, to the extent publicly available, of
five completed acquisitions since January 1, 1998 in the trucking industry (US
Xpress / PST Vans; Transport Corp. of America / North Star Transport; Apollo
Management / MTL Inc.; US Xpress / Victory Express; FDX Corp. / Caliber Systems)
(the "Comparable Transactions"). Because data from completed transactions must
be evaluated in the context of market conditions prevailing at the time of the
acquisition, Janney noted that a review of transactions completed before 1998
would be of more limited value. Janney calculated various financial multiples
based on publicly available information for each of the Comparable Transactions
and applied these multiples to the Company's financial results. All multiples
for the Comparable Transactions were based on information available at the time
of announcement of such transaction, without taking into account differing
market and other conditions during the period during which such transactions
occurred.
Janney noted that: (i) the Enterprise Value of the Comparable Transactions
as a multiple of LTM revenue ranged from 0.4x to 0.8x, with an adjusted average
(adjusted to exclude the highest and lowest values before averaging) of 0.7x;
applying these multiples to the Company's LTM revenue of $237.1 million results
in low, high and adjusted. average per share values of $3.86, $14.54 and $10.70,
respectively; (ii) the Enterprise Value of the Comparable Transactions as a
multiple of LTM EBITDA ranged from 3.6x to 7.8x, with an adjusted average of
5.7x; applying these multiples to the Company's LTM EBITDA of $33.4 million
results in low, high and adjusted average per share values of $7.33, $20.34 and
$13.85, respectively; (iii) the Equity Value of the Comparable Transactions as a
multiple of LTM net income ranged from 5.7x to 170.1x (relating to an
acquisition of a company without significant net income), with an adjusted
average of 17.9x; applying the multiples to the Company's LTM net income of $9.6
million results in low, high and adjusted average per share values of $5.13,
$153.09 and $16.09, respectively; and (iv) the Equity Values of the Comparable
Transactions as a multiple of shareholders' equity ranged from 0.9x to 3.3x,
with an adjusted average of 1.9x; applying these multiples to the Company's
shareholders' equity of $77.9 million results in low, high and adjusted average
per share values of $6.46, $23.87 and $13.46, respectively.
Based on the foregoing comparisons, Janney noted that the $14.00 per share
value of the consideration to be received by shareholders represented an Equity
Value which, as a multiple of the Company's historical financial results and
condition set forth above, was within the range of the Comparable Transactions
and that
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<PAGE> 21
this fact supported a determination that the consideration to be received in the
Transaction was fair to the Company's shareholders from a financial point of
view.
Discounted Cash Flow Analysis
Janney prepared a discounted cash flow analysis of the future unleveraged
free cash flows that the Company's operations could be expected to generate
during various periods using projections provided to Janney by the Company.
Unleveraged free cash flows of the Company were projected over a period ending
December 31, 2003. A terminal value was calculated utilizing an exit multiple
between 4.5x and 6.5x projected EBITDA in 2003. Such terminal values were based
upon a review of the trading characteristics of the common stock of selected
publicly traded trucking companies. The estimated future unleveraged free cash
flows and the terminal value were discounted to present values using a range of
discount rates from between 6% and 14%. Janney arrived at such discount rates
based on its judgement of the weighted average cost of capital of selected
publicly traded trucking companies. After subtracting the present value of
payments due to debtholders, Janney arrived at a range of estimated per share
values for the Shares of between $7.22 and $24.04. Based on a midpoint exit
multiple of 5.5x EBITDA in the year 2003, and a midpoint discount rate of 10%,
this analysis produced a midpoint per share value of $14.50 for the Shares.
Based on the foregoing analysis, Janney noted that the $14.00 per share
value of the consideration to be received by shareholders represented an Equity
Value which was within the valuation range of the Discounted Cash Flow Analysis,
and that this fact supported a determination that the consideration to be
received in the Transaction was fair to the Company's shareholders from a
financial point of view.
Market and Economic Factors
In rendering its opinion, Janney considered, among other factors, the
condition of the U.S. stock markets and the current level of economic activity,
particularly in the 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 are identical to the
Company or the Transaction. In addition, Janney 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 markets in which such companies compete and strategies and operating plans
for such companies, that could affect the public trading value and acquisition
value of these companies.
In arriving at its opinion, Janney did not ascribe a specific range of
values to the Company, but made its determination as to the fairness, from a
financial point of view, of the consideration to be received by the shareholders
of the Company in the Transaction on the basis of a variety of financial and
comparative analyses, including those described above. The summary of analyses
performed by Janney as set forth above does not purport to be a complete
description of the analyses underlying Janney's opinion. The presentation of a
fairness opinion is a complex analytic process involving various determinations
as to the most appropriate and relevant methods of financial analysis and the
application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial or summary description.
The estimates contained in such analyses and the ranges of valuations resulting
from any particular analysis are not necessarily indicative of actual values or
predictive of future results or values, which may be significantly more or less
favorable than those suggested by such analyses. In addition, analyses relating
to the value of the business or securities do not purport to be appraisals or to
reflect the prices at which businesses, companies or securities actually may be
sold. Accordingly, such analyses and estimates are inherently subject to
substantial uncertainty. In arriving at its opinion, Janney made qualitative
judgements as to the significance and relevance of each analysis and factor
considered by it. Accordingly, Janney believes that its analyses must be
considered as a whole and that selecting portions of its analyses and factors,
without considering all analyses and factors, could create an incomplete view of
the processes underlying such analyses and its opinion.
Janney is a nationally recognized investment banking firm and, as part of
its investment banking activities, is regularly engaged in the valuation of
businesses and securities in connection with mergers and
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<PAGE> 22
acquisitions, negotiated underwritings, secondary distributions of securities,
private placements and valuations for corporate and other purposes. The Board
retained Janney to act as its financial advisor based on Janney's
qualifications, reputation and experience. Pursuant to the terms of Janney's
engagement, the fee payable to Janney upon consummation of the Transaction will
be equal to 0.3% of the total value of the Transaction, or approximately
$600,000. In addition, the Company has agreed to reimburse Janney for its
reasonable out-of-pocket expenses and to indemnify Janney for certain costs,
expenses and liabilities related to or arising out of Janney's rendering of
services under its engagement as financial advisor, or to contribute to payments
Janney may be required to make in respect thereof.
Certain Projections
The Company does not as a matter of policy make public forecasts or
projections as to future performance or earnings. However, in the course of
discussions with Parent, the Company prepared projections of its anticipated
future operating performance for the four calendar years ending December 31,
2002. Certain of these projections are summarized below.
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
Parent. 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
significantly from those discussed herein. Factors that might cause such a
difference include, but are not limited to, the effect of changing economic or
business conditions and the impact of competition and other factors.
Set forth below is a summary of the projections for the four calendar years
ended December 31, 2002:
PROJECTED INCOME STATEMENTS
(IN THOUSANDS, EXCEPT FOR PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PROJECTED FOR THE YEAR ENDING DECEMBER 31,
--------------------------------------------
1999 2000 2001 2002
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Operating Revenues.............. $278,297 $320,042 $368,048 $423,255
Operating Income................ 23,509 28,804 33,124 38,093
Income Before Taxes............. 20,521 25,151 28,924 33,263
Net Income...................... 12,415 15,217 17,499 20,124
-------- -------- -------- --------
Earnings Per Share.............. $ 1.15 $ 1.41 $ 1.62 $ 1.86
</TABLE>
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<PAGE> 23
Material assumptions on which the projections were based include the
following:
(i) Revenue growth is based upon an estimated 23.1% growth rate from
1998 to 1999, with a projected 15.0% growth rate thereafter. The Company
believes that revenue growth will come from (a) additional business from
existing customers, (b) new business from new customers in the Company's
current primary markets, (c) additional business in geographical regions in
which the Company has during 1998 either opened or significantly expanded a
terminal and (d) investment and expansion into new regions and lanes.
(ii) Operating expense growth is based upon projected revenue growth
and an assumption that the Company's operating ratio will decrease from
92.6% in 1998 to 91.6% in 1999 and 91.0% thereafter. Selected cost trends
underlying the assumed reduction in operating ratio include the following:
(a) Salaries, wages and benefits are projected to increase from
50.5% of revenue in 1998 to 52.6% of revenue in 1999, then decrease to
51.0% of revenue in 2000 through 2002. The increase in 1999 is due in
large part to the increased use of salaried drivers, a trend which began
in late 1998, and an increase in late 1998 in the Company's non-driver
employees. Further, to attract and retain experienced drivers, the
Company increased the start rates for certain drivers in 1998. Going
forward, the Company expects a stabilization in both the non-driver
headcount and in the mix of Company drivers versus owner-operators.
Taken with the projected increase in revenues, this stabilization and
shift in driver mix is projected to result in a reduction from 1999 in
salaries, wages, and benefits as a percentage of revenue for the years
2000 through 2002.
(b) Supplies and other expenses are projected to decrease from
17.4% of revenue in 1998 to 15.8% of revenue in 1999, then increase to
16.5% of revenue in 2000 through 2002. The decrease in 1999 is due in
part to historically low fuel prices, and to the Company increasingly
owning, rather than leasing, equipment and terminals. In addition, a
portion of this expense item is fixed cost in nature, so it declines as
a percentage of revenue as revenue increases. The projection of 16.5%
for the years 2000 through 2002 reflects various factors, including an
anticipated increase in the cost of fuel from historical lows as a
percentage of revenue.
(c) Purchased transportation is projected to decrease from 12.0% of
revenue in 1998 to 10.1% of revenue in 1999, then increase to 11.0% of
revenue in 2000 through 2002. The trend in decreasing purchased
transportation for 1999 relates to the trend in decreasing independent
contractors and increasing salaried drivers. For the years 2000 through
2002, purchased transportation is projected consistent with the
Company's anticipated mix between salaried drivers, independent
contractors and third-party purchased transportation, all as a
percentage of revenue.
(d) Depreciation and amortization are projected to increase to 6.7%
of revenue in 1999 from 6.5% of revenue in 1998, then decrease to 6.5%
of revenue in 2000 through 2002, based on projected equipment
requirements and revenue growth.
(e) Operating taxes and licenses are projected to increase from
4.6% of revenue in 1998 to 4.7% of revenue in 1999, then decrease to
4.4% of revenue in the years 2000 through 2002. The increase in 1999
reflects various vehicle fees and fuel taxes associated with the
Company's increased use of Company owned vehicles beginning in late
1998. Projections for the years 2000 through 2002 are based on
anticipated steady levels of driver and vehicle mix as a percentage of
revenue growth.
(f) Insurance and claims are projected to decrease from 1.8% of
revenue in 1998 to 1.7% percent of revenue in 1999. The Company has
historically had insurance costs and claims experience of under 1.8% of
revenue. Going forward the Company may benefit from favorable premium
levels provided by a new insurance provider as of April, 1998. Insurance
costs and claims are projected at 1.7% of revenue for the years 2000
through 2002.
(g) Interest expense is projected to increase from 0.6% of revenue
in 1998 to 1.1% of revenue in 1999. The increase is largely due to
increased percentages of owned equipment and higher working capital
requirements. Interest expense is projected for the years 2000 through
2002 at 1.2% of revenue.
23
<PAGE> 24
(h) Income Taxes are projected at 39.5% of projected pre-tax
income. The projected tax rate is based on current and anticipated
experience.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to the terms of a letter agreement dated April 28, 1999 (the
"Engagement Letter"), the Company retained Janney as its financial advisor in
evaluating the terms of the Offer and the Merger and to render an opinion as to
the fairness, from a financial point of view, of the consideration to be
received by the shareholders of the Company pursuant to the Offer and the
Merger. A copy of Janney's opinion is attached to this Schedule 14D-9 as Exhibit
14 and incorporated herein by reference. The Company has agreed to pay Janney
(a) 0.3% of the total fair market value (at the time of closing) of the
aggregate consideration paid or payable to the Company or the Company's
shareholders in connection with an acquisition transaction with Parent, or (b)
0.5% of the total fair market value (at the time of closing) of the aggregate
consideration paid or payable to the Company or the Company's shareholders in
connection with an acquisition transaction with a company other than Parent.
The Company has also agreed to reimburse Janney for reasonable
out-of-pocket expenses, including the fees and expenses of legal counsel, and to
indemnify Janney and certain related parties against certain liabilities,
including liabilities under the federal securities laws, arising out of Janney's
engagement.
Except as disclosed herein, neither the Company nor any person acting on
its behalf has employed, retained or compensated any person to make
solicitations or recommendations to the Company's stockholders with respect to
the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) RECENT TRANSACTIONS. There have been no transactions in the Shares
during the past 60 days by the Company or, to the best of the Company's
knowledge, by any executive officer, director, affiliate or subsidiary of the
Company.
(b) INTENT WITH RESPECT TO SECURITIES. To the best knowledge of the
Company, all of its executive officers, directors, affiliates and subsidiaries
currently intend to tender pursuant to the Offer all Shares held of record or
beneficially owned by them.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) NEGOTIATIONS. Except as set forth in this Schedule 14D-9, the Company
is not engaged in any negotiation in response to the Offer which relates to or
would result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) TRANSACTIONS. Except as described in Item 3(b) and Item 4 above (the
provisions of which are hereby incorporated by reference), there are no
transactions, board resolutions, agreements in principle or signed contracts in
response to the Offer which relate to or would result in one or more of the
matters referred to in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The Information Statement attached hereto as Annex II is being furnished to
the Company's shareholders in connection with the possible designation by
Purchaser, pursuant to the Merger Agreement, of certain persons to be appointed
to the Company's Board other than at a meeting of the Company's shareholders,
and such information is incorporated herein by reference.
24
<PAGE> 25
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
+Exhibit 1. Agreement and Plan of Merger dated June 6, 1999, by and among
the Company, Parent and Purchaser.
+Exhibit 2. Employment Agreement of Paul J. Karvois.
+Exhibit 3. Employment Agreement of Brian J. Fitzpatrick.
+Exhibit 4. Employment Agreement of Joseph A. Librizzi.
+Exhibit 5. Employment Agreement of Raymond M. Conlin.
+Exhibit 6. Amended and Restated Severance Agreement of Paul J. Karvois.
+Exhibit 7. Amended and Restated Severance Agreement of Brian J.
Fitzpatrick.
+Exhibit 8. Amended and Restated Severance Agreement of Joseph A.
Librizzi.
+Exhibit 9. Amended and Restated Severance Agreement of Raymond M.
Conlin.
+Exhibit 10. Tender and Voting Agreement among Parent, Purchaser and
Certain Shareholders of the Company.
+Exhibit 11. Confidentiality Agreement dated December 22, 1998, by and
between the Company and Parent.
+Exhibit 12. Letter to Shareholders, dated June 9, 1999.*
+Exhibit 13. Press Release of the Company, dated June 7, 1999.
+Exhibit 14. Opinion of Janney Montgomery Scott, Inc. dated June 4, 1999.*
- ---------------
* Included in copies of the Schedule 14D-9 mailed to shareholders.
+ Previously filed.
25
<PAGE> 26
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
By:
/s/ Harry J. Muhlschlegel
------------------------------------
Harry J. Muhlschlegel
Chairman of the Board Chief
Executive Officer
Dated: June 17, 1999
26
<PAGE> 27
ANNEX I
JANNEY MONTGOMERY SCOTT
INVESTMENT BANKING
June 4, 1999
Board of Directors
Jevic Transportation, Inc.
700 Creek Road
Delanco, NJ 08075
Dear Members of the Board:
You have requested our opinion with respect to the fairness, from a
financial point of view, to the shareholders of Jevic Transportation, Inc. (the
"Company") of the consideration to be received by such shareholders pursuant to
the Agreement and Plan of Merger (the "Agreement") dated June 6, 1999 by and
among Yellow Corporation, JPF Acquisition Corp. (together, "Yellow") and the
Company.
Under the terms of the Agreement, Yellow will commence a tender offer (the
"Tender Offer") to purchase all of the issued and outstanding common stock of
the Company for $14.00 per share, in cash (the "Merger Consideration"), and
after acceptance for payment of all shares tendered and not withdrawn in the
Tender Offer, the Company would be merged with and into JPF Acquisition Corp.
(the "Merger" and, together with the Tender Offer, the "Transaction") and the
holders of all issued and outstanding shares of common stock not purchased
pursuant to the Tender Offer, other than Yellow or its affiliates, would be
entitled to receive the Merger Consideration, or such greater amount as may be
paid in the Tender Offer. The terms and conditions of the Merger are more fully
set forth in the Agreement.
In reaching our opinion, we (i) reviewed selected financial and stock
market data for the Company and certain other publicly traded companies; (ii)
reviewed the recent trading history of the Company's common stock; (iii)
reviewed the financial terms of certain recent business combinations; (iv)
performed discounted cash flow analysis for the Company; (v) reviewed the terms
of the Agreement and certain related documents in draft form; and (vi) performed
such other analyses, and considered such other factors, as we deemed
appropriate. In addition, we held discussions with the management of the Company
regarding the Company's business, operating results, financial condition and
prospects.
In connection with our review, we have relied upon the accuracy and
completeness of all information provided to us by the Company and its
representatives, and we have not attempted to independently verify any such
information. We have also relied upon the assessment of the management of the
Company regarding the Company's business and prospects, and assumed that the
budgets and financial projections of the Company were prepared by management on
the basis of reasonable assumptions and reflected the best currently available
estimates and good faith judgments of the future financial performance of the
Company. We have also assumed that the final terms of the Agreement and certain
related documents reviewed by us in draft form will not vary materially from the
drafts reviewed by us. We have not made an independent evaluation or appraisal
of the Company's assets and liabilities. Our opinion is necessarily based on
financial, market, economic and other conditions as they exist and can be
evaluated as of the date of this letter. We undertake no obligation to update
this opinion to reflect any developments occurring after the date hereof.
Janney Montgomery Scott Inc. ("Janney") is acting as financial advisor to
the Company in connection with the Transaction and will receive customary fees
in connection with, and upon completion of, the
<PAGE> 28
Board of Directors
June 4, 1999
Page 2
Transaction. In addition, the Company has agreed to indemnify Janney against
certain liabilities arising out of the rendering of this opinion. Janney is a
nationally recognized investment banking firm and, as part of its investment
banking activities, is regularly engaged in the valuation of businesses and
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
valuations for corporate and other purposes.
It is understood that this letter is for the information of the Board of
Directors of the Company in evaluating the Transaction and does not constitute a
recommendation to any shareholder of the Company as to whether such shareholder
should tender their shares in the Tender Offer or as to how such shareholder
should vote their shares in the Merger. This opinion may not be used for any
other purpose, and may not be quoted or referred to, in whole or in part,
without our prior written consent, except that this opinion may be included in
its entirety in any filing with the Securities and Exchange Commission and any
documents mailed to the Company's shareholders in connection with the
Transaction.
Based upon the foregoing, we are of the opinion, as of the date hereof,
that the Merger Consideration to be received by the shareholders of the Company
pursuant to the Agreement is fair to the shareholders of the Company from a
financial point of view.
Very truly yours,
/S/ JANNEY MONTGOMERY SCOTT INC.
<PAGE> 29
ANNEX II
JEVIC TRANSPORTATION, INC.
600 CREEK ROAD
DELANCO, NEW JERSEY 08075
------------------------
INFORMATION STATEMENT PURSUANT
TO SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
------------------------
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS
IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
------------------------
This Information Statement is being mailed on or about June 9, 1999 by
Jevic Transportation, Inc., a New Jersey corporation (the "Company"), together
with the Company's Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9"), to the holders of record of shares of Company Common Stock
and Class A Common Stock, no par value, (the "Stock" or the "Shares"). You are
receiving this Information Statement in connection with the possible election of
persons designated by Yellow Corporation, a Delaware corporation (the "Parent"),
to the Board of Directors of the Company (the "Board of Directors" or the
"Board").
Pursuant to an Agreement and Plan of Merger, dated June 6, 1999 (the
"Merger Agreement"), among the Company, the Parent and JPF Acquisition Corp., a
New Jersey corporation and a wholly owned subsidiary of the Parent (the
"Purchaser"), the Purchaser has commenced a tender offer (the "Offer") for all
of the issued and outstanding Shares, at a price of $14.00 per Share, net to the
seller in cash, and following the consummation of the Offer, the Purchaser will
be merged with and into the Company (the "Merger"), with the Company surviving
as a wholly owned subsidiary of Parent. The Offer is currently scheduled to
expire at 12:00 midnight, Eastern Standard Time, on July 7, 1999, at which time,
if the Offer is not extended and all conditions to the Offer have not been
satisfied or waived, Purchaser is obligated to purchase all Shares validly
tendered pursuant to the Offer not withdrawn.
The Merger Agreement provides that, promptly after the purchase of and
payment for a majority in voting power of the outstanding Shares pursuant to the
Offer, the Parent will be entitled to designate such number of directors as will
give the Parent representation on the Board proportionate to its ownership
interest in the Shares, rounded up to the next whole number. The Merger
Agreement requires the Company to take all actions necessary (other than the
calling of a shareholders meeting) to cause designees of the Parent (the "Parent
Designees") to be elected to the Board under the circumstances described
therein. This Information Statement is being mailed to shareholders of the
Company pursuant to Section 14(f) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), and Rule 14f-1 promulgated thereunder.
Certain other documents (including the Merger Agreement) were filed with
the Securities and Exchange Commission (the "SEC") as exhibits to the Schedule
14D-9 and as exhibits to the Tender Offer Statement on Schedule 14D-1 of the
Purchaser and the Parent (the "Schedule 14D-1"). The exhibits to the
<PAGE> 30
Schedule 14D-9 and the Schedule 14D-1 may be examined at, and copies thereof may
be obtained from, the regional offices of and public reference facilities
maintained by the SEC (except that the exhibits thereto cannot be obtained from
the regional offices of the SEC) in the manner set forth in Section 7 of the
Offer to Purchase, as well as on the World Wide Web site maintained by the SEC
on the Internet at http://www.sec.gov.
IN THE EVENT THAT THE PARENT OR THE PURCHASER DOES NOT ACQUIRE ANY SHARES
PURSUANT TO THE OFFER, OR TERMINATES THE OFFER, OR IF THE MERGER AGREEMENT IS
TERMINATED PURSUANT TO ITS TERMS BY THE PARENT, THE PURCHASER OR THE COMPANY
PRIOR TO THE ELECTION OR APPOINTMENT OF THE PARENT DESIGNEES, NEITHER THE PARENT
NOR THE PURCHASER WILL HAVE ANY RIGHT UNDER THE MERGER AGREEMENT TO HAVE THE
PARENT DESIGNEES ELECTED OR APPOINTED TO THE COMPANY'S BOARD OF DIRECTORS.
No action is required by the shareholders of the Company in connection with
the election or appointment of the Parent Designees to the Board. However,
Section 14(f) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the mailing to the Company's shareholders of the information set
forth in this Information Statement prior to a change in a majority of the
Company's directors otherwise than at a meeting of the Company's shareholders.
The information contained in this Information Statement concerning the
Parent, the Purchaser and the Parent Designees has been furnished to the Company
by such persons, and the Company assumes no responsibility for the accuracy or
completeness of such information. The Schedule 14D-1 indicates that the
principal executive offices of the Purchaser and the Parent are located at 10990
Roe Avenue, P.O. Box 7563, Overland Park, Kansas 66211.
2
<PAGE> 31
VOTING SECURITIES AND PRINCIPAL HOLDERS THEREOF
GENERAL
The Company has two classes of voting securities outstanding: Common Stock
and Class A Common Stock. Each share of Common Stock entitles the holder thereof
to one vote, and each share of Class A Common Stock entitles the holder thereof
to two votes. As of June 4, 1999, 4,994,303 shares of Common Stock were issued
and outstanding, 5,739,544 shares of Class A Common Stock were issued and
outstanding and 1,564,056 shares of Common Stock were reserved for issuance upon
the exercise of certain options outstanding.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of June 4, 1999 the beneficial ownership
of Stock of each director, each executive officer, all directors and executive
officers as a group, and each person known to the Company who owns more than 5%
of the issued and outstanding Stock. Unless otherwise indicated, beneficial
ownership is direct.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER OWNERSHIP OF CLASS
------------------------------------ ---------- --------
<S> <C> <C>
Bruce D. Burdick and George K. Reynolds, III................ 1,345,631(1) 14.14%
Capital Guardian Trust Company.............................. 593,500(2) 11.93%
333 South Hope Street, 55th Floor, Los Angeles, CA 90071
Dalton, Greiner, Hartman, Maher & Co........................ 495,100(3) 9.95%
1100 Fifth Avenue South, Suite 301, Naples, FL 34102
The Hartford Mutual Funds and Wellington Management Company,
LLP....................................................... 486,900(4) 9.78%
Putnam Investments, Inc..................................... 403,714(5) 8.11%
One Post Office Square, Boston, MA 02109
Harry J. Muhlschlegel....................................... 2,494,717(6) 33.39%
Jevic Transportation, Inc., 600 Creek Road, Delanco, New
Jersey 08075
Karen B. Muhlschlegel....................................... 2,494,852(6) 33.39%
Jevic Transportation, Inc., 600 Creek Road, Delanco, New
Jersey 08075
Gordon R. Bowker............................................ 10,000 *
Jevic Transportation, Inc., 600 Creek Road, Delanco, New
Jersey 08075
Samuel H. Jones, Jr. ....................................... 15,000 *
Jevic Transportation, Inc., 600 Creek Road, Delanco, New
Jersey 08075
Paul J. Karvois............................................. 28,433(7) *
Jevic Transportation, Inc., 600 Creek Road, Delanco, New
Jersey 08075
Brian J. Fitzpatrick........................................ 27,933(7) *
Jevic Transportation, Inc., 600 Creek Road, Delanco, New
Jersey 08075
Joseph A. Librizzi.......................................... 700(8) *
Jevic Transportation, Inc., 600 Creek Road, Delanco, New
Jersey 08075
Raymond M. Conlin........................................... 1,567 *
Jevic Transportation, Inc., 600 Creek Road, Delanco, New
Jersey 08075
All directors and executive officers as a group (8
persons).................................................. 5,073,202(9) 50.91%
</TABLE>
- ---------------
* Less than 1%.
(1) Messrs. Burdick and Reynolds each own 1,000 shares of stock for their own
account. The remaining 1,343,631 shares are held by Messrs. Burdick and
Reynolds as trustees pursuant to trusts for the benefit of
3
<PAGE> 32
members of the Muhlschlegel family. Of such 1,343,631 shares, 749,975 are
shares of Class A Common Stock, reflected on an as-converted basis. Each
share of Class A Common Stock is convertible into one share of Common Stock
and is entitled to two votes per share on all matters on which holders of
Common Stock are entitled to vote. The address of Mr. Burdick is 148
Catherine Lane, Grass Valley, California 95945, and the address of Mr.
Reynolds is Gordon, Feinblatt, Rothman, Hoffberger and Hollander, LLC, The
Garrett Building, 233 East Redwood Street, Baltimore, Maryland 21202.
(2) Capital Guardian Trust Company is a bank, as defined in Section 3(a)(g) of
the Securities Exchange Act of 1934, and is deemed to have beneficial
ownership of these shares as a result of its serving as the investment
manager of various institutional accounts. The information set forth herein
is based on a Schedule 13G dated February 12, 1999 filed by Capital Guardian
Trust Company with the SEC.
(3) Dalton, Greiner, Hartman, Maher & Co. is an investment adviser registered
with the Securities and Exchange Commission under Section 203 of the
Investment Advisers Act of 1940, as amended. The company is deemed to have
beneficial ownership of these shares which are owned of record by its
investment advisory clients. The information set forth herein is based on a
Schedule 13G dated February 1, 1999 filed by Dalton, Greiner, Hartman, Maher
& Co. with the SEC.
(4) The Hartford Mutual Funds, P.O. Box 2999, Hartford, CT 06115, is an
investment company registered with the Securities and Exchange Commission
under Section 8 of the Investment Company Act and is deemed to have
beneficial ownership of these shares which are owned by its Hartford Capital
Appreciation Fund. Wellington Management Company, LLP, 75 State Street,
Boston, MA 02109, is an investment adviser registered with the Securities
and Exchange Commission under Section 203 of the Investment Advisers Act of
1940, as amended, and is the sub-investment adviser of the Hartford Capital
Appreciation Fund. Wellington Management Company, LLP is deemed to have
beneficial ownership of these shares which are owned of record by its
investment advisory clients. The information set forth herein is based on a
Schedule 13G/A dated February 9, 1999 filed by The Hartford Mutual Funds and
a Schedule 13G/A dated February 10, 1999 filed by Wellington Management
Company, LLP with the SEC.
(5) Certain Putnam investment managers (together with their parent corporations,
Putnam Investments, Inc. and Marsh & McLennan Companies, Inc.) are
considered the beneficial owners of these shares which were acquired for
investment purposes by such investment managers for certain of their
advisory clients. The information set forth herein is based on a Schedule
13G/A dated January 26, 1998 filed by Putnam Investments, Inc. with the SEC.
(6) The shares owned by Mr. and Mrs. Muhlschlegel are shares of Class A Common
Stock and are reflected on an as-converted basis. Shares of Class A Common
Stock are entitled to two votes per share and vote with the Common Stock on
all matters on which holders of Common Stock are entitled to vote. Each
share of Class A Common Stock is convertible into one share of Common Stock.
(7) Includes 27,433 shares of Common Stock purchasable upon the exercise of
stock options.
(8) These shares are held by Mr. Librizzi jointly with his wife.
(9) Includes 54,866 shares of Common Stock purchasable upon the exercise of
stock options.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's Directors and
executive officers, and persons who own more than 10% of the Common Stock, to
file with the Commission initial reports of ownership and reports of changes in
ownership of the Common Stock and other equity securities of the Company. To the
Company's knowledge, based solely on review of the copies of such reports
furnished to the Company and written representations that no other reports were
required, during the year ended December 31, 1998, all Section 16(a) filing
requirements applicable to the Company's officers, directors and greater than
ten-percent beneficial owners were complied with, except that Mr. Conlin filed
his initial statement of beneficial ownership late and Mr. Bowker filed one form
late relating to one transaction.
4
<PAGE> 33
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
CURRENT DIRECTORS AND EXECUTIVE OFFICERS
<TABLE>
<CAPTION>
TERM AS
DIRECTOR
NAME AGE POSITION WITH THE COMPANY EXPIRES
- ---- --- ------------------------- --------
<S> <C> <C> <C>
Harry J. Muhlschlegel(1).................. 52 Chairman and Chief Executive Officer 2000
Karen B. Muhlschlegel..................... 52 Director 2002
Gordon R. Bowker(1)(2).................... 71 Director 2001
Samuel H. Jones, Jr.(1)(2)................ 65 Director 2001
Paul J. Karvois........................... 44 President, Chief Operating Officer and 2002
Director
Brian J. Fitzpatrick...................... 39 Senior Vice President and Chief Financial
Officer
Joseph A. Librizzi........................ 50 Senior Vice President -- Marketing and
Sales
Raymond M. Conlin......................... 36 Senior Vice President -- Administration
</TABLE>
- ---------------
(1) Member of the Compensation Committee.
(2) Member of the Audit Committee.
Harry J. Muhlschlegel has over 29 years of experience in the trucking
industry. He co-founded Jevic along with his wife, Karen Muhlschlegel, in 1981
and has served as its Chairman of the Board and Chief Executive Officer since
its inception. Until March 1997, he also served as the Company's President.
Karen B. Muhlschlegel has over 29 years of experience in the trucking
industry. She co-founded Jevic along with her husband, Harry Muhlschlegel, in
1981 and has served as a Vice President, Secretary and a director of the Company
since its inception.
Gordon R. Bowker joined the Company as a director upon completion of its
October 1997 initial public offering. Mr. Bowker served in various positions
with Ryder System, Inc. from 1964 to 1973, most recently as Group Vice
President, a senior officer reporting directly to the President. Since 1973, Mr.
Bowker has been the owner and President of Bowker, Brown & Co., a management
consulting firm serving transportation related companies in the areas of truck
renting and leasing, business appraisal and sales and divestitures. Mr. Bowker
has served on the Arbitration Panel of the New York Stock Exchange since 1988,
and has served on the Arbitration Board of the National Association of
Securities Dealers since 1991.
Samuel H. Jones, Jr. also joined the Company as a director upon completion
of the October 1997 initial public offering. Since 1971, Mr. Jones has been the
owner and President of S-J Transportation, Co., a company specializing in the
transportation of industrial waste nationwide and in two Canadian provinces.
Since 1991, he has been the owner and President of S-J Venture Capital Company.
In addition, Mr. Jones currently serves as a director of MetaCreations, Inc. and
Fulton Financial Corporation, as well as a number of privately-held
organizations.
Paul J. Karvois became Jevic's President and Chief Operating Officer in
March 1997 and he was elected as a director in August 1997. He joined the
Company in January 1992 as Director of Insurance. Later in 1992, he created the
Company's risk management group and became Director of Risk Management. Mr.
Karvois was promoted to the position of Senior Vice President -- Marketing and
Sales in December 1993. Prior to joining the Company, Mr. Karvois had 21 years
of marketing, sales and operations experience in the trucking industry, serving
in a variety of positions with truckload and LTL carriers.
Brian J. Fitzpatrick joined the Company in September 1993 as Senior Vice
President -- Finance in order to create the Company's financial and
administrative division. He was elected to the office of Chief Financial Officer
in February 1995, in which capacity he is additionally responsible for
developing overall financial strategies and technology systems for the Company.
Prior to joining the Company, Mr. Fitzpatrick had 12 years of commercial banking
experience.
5
<PAGE> 34
Joseph A. Librizzi joined Jevic in April 1997 as Senior Vice
President -- Marketing and Sales. Prior to joining the Company, Mr. Librizzi had
more than 26 years of experience in Operations and Sales, holding executive
positions in the LTL industry for both regional and national companies.
Raymond M. Conlin was elected to the office of Senior Vice
President -- Administration in October 1998. Mr. Conlin joined the Company in
June 1993 and Director of Insurance and later in that year assumed the role of
Director of Risk Management. Mr. Conlin was promoted to the position of Vice
President -- Administration in June 1995. Prior to joining the Company, Mr.
Conlin had eight years of financial, sales and operations experience in the
transportation industry.
RIGHT TO DESIGNATE DIRECTORS; THE PARENT DESIGNEES
Upon payment by Purchaser for Shares pursuant to the Offer representing at
least a majority of the votes entitled to be cast by all holders of Shares and
from time to time thereafter so long as Purchaser and/or Parent (and/or their
respective wholly-owned subsidiaries) continue to hold at least such number of
Shares, Parent will be entitled to designate such number of directors, rounded
up to the next whole number, on the Company's Board of Directors as is equal to
the product of the total number of directors on the Company's Board (determined
after giving effect to directors elected pursuant to this sentence) multiplied
by the percentage that the aggregate number of Shares beneficially owned by
Parent or its affiliates bears to the total number of Shares outstanding (the
"Parent Designees"). The Company shall, upon request of Parent, promptly take
all actions necessary to cause the Parent Designees to be so elected, including,
if necessary, seeking the resignations of one or more existing directors. If the
Parent Designees are so elected, prior to the Effective Time the Board shall
always have at least one member who is neither an officer, director, stockholder
or designee of Parent or any of its affiliates. The Company's obligation to
appoint the Parent Designees to the Board of Directors is subject to compliance
with Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder.
Set forth below is certain information with respect to the initial Parent
Designees:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL OCCUPATION OR EMPLOYMENT,
PRINCIPAL BUSINESS ADDRESS AGE MATERIAL POSITIONS HELD DURING THE PAST 5 YEARS
- -------------------------- --- -----------------------------------------------
<S> <C> <C>
A. Maurice Myers 52 Chairman of Parent (since July 1996). President and
c/o Yellow Corporation Chief Executive Officer of Parent (since March 1996).
P.O. Box 7563 Formerly President and Chief Operating Officer America
10990 Roe Avenue West Airlines, Inc., Phoenix, AZ (January
Overland Park, KS 66211 1994 - December 1995); President and Chief Executive
Officer of Aloha Air Group, Inc., Honolulu, HI (August
1983 - December 1993); Director of Hawaiian Electric
Industries, Inc.
William F. Martin, Jr. 51 Senior Vice President -- Legal/Corporate Secretary of
c/o Yellow Corporation Parent (since December 1993); Vice President and
P.O. Box 7563 Secretary of Parent (prior to December 1993); Vice
10990 Roe Avenue President and Secretary of Yellow Freight (prior to
Overland Park, KS 66211 May 1992).
H.A. Trucksess, III 49 Senior Vice President -- Finance and Chief Financial
c/o Yellow Corporation Officer of Parent (since June 1994) and Treasurer of
P.O. Box 7563 Parent (since December 1995); Vice President and Chief
10990 Roe Avenue Financial Officer of Preston Corporation (prior to
Overland Park, KS 66211 June 1994).
Samuel A. Woodward 49 Senior Vice President -- Operations and Planning of
c/o Yellow Corporation Parent (since July 1996); Senior Vice President and
P.O. Box 7563 Managing Officer of SH&E, a management consulting
10990 Roe Avenue business (prior to July 1996).
Overland Park, KS 66211
</TABLE>
To the Company's knowledge, none of the Parent Designees (i) is currently a
director of, or holds any position with, the Company, (ii) has a familial
relationship with any of the directors or executive officers of the Company or
(iii) beneficially owns any securities (or rights to acquire any securities) of
the Company.
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<PAGE> 35
The Company has been advised by Parent that, to Parent's knowledge, none of
the Parent Designees has been involved in any transaction with the Company or
any of its directors, executive officers or affiliates that is required to be
disclosed pursuant to the rules and regulations of the Commission, except as may
be disclosed herein or in the Schedule 14D-9.
Parent has advised the Company that each of the persons listed in the table
above has consented to act as a director, and that none of such persons has
during the past five years been convicted in a criminal proceeding (excluding
traffic violations and similar misdemeanors) or been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was, or is, subject to a judgment, decree or final
order enjoining future violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violation of such laws or is
involved in any other legal proceeding required to be disclosed under Item
401(f) of Regulation S-K promulgated by the Commission.
GENERAL INFORMATION ABOUT BOARD OF DIRECTORS
During the year ended December 31, 1998, the Board of Directors held six
meetings. During that period each Director attended at least than 75% of the
aggregate of the total number of meetings of the Board of Directors and
committees of the Board of Directors on which he or she served.
The Company's Board of Directors has an Audit Committee and a Compensation
Committee, but does not have a standing nominating committee. The Audit
Committee makes recommendations to the Board regarding the annual selection of
independent public accountants, audits annually the Company's books and records,
and reviews recommendations made by the accounting firm as a result of their
audit. The Audit Committee also periodically reviews the activities of the
Company's audit staff and the adequacy of the Company's internal controls.
During 1998, the Audit Committee held one meeting. The Compensation Committee is
responsible for establishing the salaries of the executive officers of the
Company, incentives and other forms of compensation and benefit plans and
administering the Company's employee benefit plans. The Compensation Committee
met three times in 1998.
The Company pays each director who is not also an employee of the Company
(an "outside director") an annual fee of $500 for each Board meeting and each
committee meeting attended by such director in person. The Company will also
reimburse directors for expenses incurred in connection with their activities as
directors.
The Company's 1997 Incentive Plan provides for the automatic grant of stock
options to outside directors to purchase 12,500 shares of the Company's Common
Stock upon their initial election by the shareholders as a director of the
Company at a per share purchase price equal to the fair market price of the
Common Stock on the date of grant. Of these options, 40% will vest on the second
anniversary of the date of grant and 20% will vest on each of the three
succeeding anniversaries. The options expire ten years after the date of grant
or, if the director leaves the Company, the shorter of ten years after the date
of grant or thirty days after the director leaves. In addition, upon each
election of any outside director to the Board by the shareholders in or after
the third year following such director's preceding election to the Board, a
non-qualified option to purchase an additional 5,000 shares of the Company's
Common Stock will be made to the director at an exercise price equal to the fair
market price of the Common Stock on the date of grant, with vesting and
expiration provisions identical to those noted above.
EXECUTIVE COMPENSATION
The following table sets forth, with respect to services rendered during
1998, 1997 and 1996, the total compensation paid by the Company to the Company's
Chief Executive Officer and each other executive officer whose total annual
salary and bonus exceeded $100,000 during 1998 (the "named executive officers").
7
<PAGE> 36
Except as disclosed in the Schedule 14D-9, the Company has no written employment
agreements with any of the named executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL LONG-TERM
COMPENSATION COMPENSATION
------------------- ------------
SECURITIES ALL OTHER
UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS(#) (1)
--------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Harry J. Muhlschlegel............... 1998 $505,000 -- -- $28,394
Chief Executive Officer and 1997 $514,712 -- -- $31,405
Chairman of the Board 1996 $505,000 -- -- $32,139
Paul J. Karvois..................... 1998 $270,793 -- -- $11,202
President and Chief Operating 1997 $233,755 $75,000 75,000 $11,652
Officer
1996 $123,077 $25,000 -- $11,499
Brian J. Fitzpatrick................ 1998 $186,198 -- -- $ 8,828
Senior Vice President and 1997 $179,362 $50,000 10,000 $ 9,345
Chief Financial Officer 1996 $158,703 $25,000 -- $ 8,909
William F. English(2)............... 1998 $106,745 -- -- $ 6,671
(Former) Senior Vice President -- 1997 $152,905 $30,000 10,000 $ 7,349
Operations 1996 $140,400 $25,000 -- $ 7,268
Joseph A. Librizzi(3)............... 1998 $145,680 -- 50,000 $ 1,350
Senior Vice President -- Marketing 1997 $ 92,072 $30,000 10,000 --
&
Sales
Raymond M. Conlin(4)................ 1998 $105,029 -- 50,000 $ 1,493
Senior Vice President --
Administration
</TABLE>
- ---------------
(1) Amounts include matching contributions made by the Company under the 401(k)
Plan on behalf of the executives in the following amounts: Mr. Muhlschlegel,
$1,000; Mr. Karvois, $1,250; Mr. Fitzpatrick, $1,000; Mr. Librizzi, $1,350;
and Mr. Conlin, $1,493. The Company is a party to "split dollar" life
insurance agreements with Messrs. Muhlschlegel, Karvois, Fitzpatrick and
English under which the Company advances all or a portion of the premiums on
permanent life insurance policies insuring the lives of the executives and
owned by the executives. Upon termination of the executives' employment or
the executives' death (or upon the second to die of Mr. and Mrs.
Muhlschlegel in the case of Mr. Muhlschlegel's agreement), all premiums
previously advanced by the Company under the policies are required to be
repaid by the executive. The Company retains an interest in the policies'
cash values and excess death benefits to secure the executives' repayment
obligations. Accordingly, compensation amounts include the following amounts
representing the value of the premium payments by the Company in a given
year projected on an actuarial basis assuming that each executive retires at
age 65 and the agreements are then terminated: Mr. Muhlschlegel, $27,394;
Mr. Karvois, $9,952; Mr. Fitzpatrick, $7,828; and Mr. English, $6,671.
(2) Mr. English's employment with the Company terminated in September 1998.
(3) Mr. Librizzi was elected as an officer of the Company in March 1997.
(4) Mr. Conlin was elected as an officer of the Company in October 1998.
8
<PAGE> 37
STOCK OPTIONS GRANTED TO CERTAIN EXECUTIVE OFFICERS DURING 1998
Under the 1997 Incentive Plan, options to purchase Common Stock are
available for grant to directors, officers and other key employees of the
Company. The following table sets forth certain information regarding options
for the purchase of Common Stock that were awarded to the named executive
officers during 1998.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE GAIN
% OF TOTAL AT ASSUMED ANNUAL RATES
OPTIONS OF STOCK APPRECIATION
SECURITIES GRANTED TO EXERCISE FOR OPTION TERMS
UNDERLYING EMPLOYEES OR BASE COMPOUNDED ANNUALLY
OPTIONS IN LAST PRICE EXPIRATION --------------------------
NAME GRANTED(#) Fiscal Year ($/SH) DATE(1) 5% 10%
---- ---------- ----------- -------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Harry J. Muhlschlegel..... -- -- -- -- -- --
Paul J. Karvois........... -- -- -- -- -- --
Brian J. Fitzpatrick...... -- -- -- -- -- --
William F. English........ -- -- -- -- -- --
Joseph A. Librizzi........ 50,000 45.5% $6.875 10/23/08 $216,183 $547,849
Raymond M. Conlin......... 50,000 45.5% $6.875 10/23/08 $216,183 $547,849
</TABLE>
- ---------------
(1) The stock options were granted under the Company's 1997 Incentive Plan. The
options vest with respect to 40% of the shares purchasable upon exercise of
the option on the second anniversary of the date of grant (October 23, 1998)
and will vest as to an additional 20% of the shares on each of the three
succeeding anniversaries. The options expire ten years after the date of
grant, subject to earlier termination upon the occurrence of certain events.
STOCK OPTIONS EXERCISED BY CERTAIN EXECUTIVE OFFICERS DURING 1998 AND HELD BY
CERTAIN EXECUTIVE OFFICERS AT DECEMBER 31, 1998
The following table sets forth certain information regarding options for
the purchase of Common Stock that were exercised and/or held by the named
executive officers:
AGGREGATED OPTIONS EXERCISED IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED IN-THE-
UNEXERCISED OPTIONS AT FY-END(#) MONEY OPTIONS AT FY-END($)
-------------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Harry J. Muhlschlegel.............. 0 0 -- --
Paul J. Karvois.................... 27,433 184,731 0 0
Brian J. Fitzpatrick............... 27,433 119,731 0 0
William F. English................. 0 0 -- --
Joseph A. Librizzi................. 0 60,000 -- $50,000
Raymond M. Conlin.................. 0 55,400 -- $55,400
</TABLE>
SEVERANCE AGREEMENTS
The Company entered into Severance Agreements with Paul J. Karvois, Brian
J. Fitzpatrick, Joseph A. Librizzi and Raymond M. Conlin (each, an "Executive"),
each dated April 5, 1999, that provide certain benefits to the Executive if,
following a "change of control" (as defined) (i) he is terminated by the Company
without cause, (ii) he resigns for good reason, or (iii) he resigns more than
six months following the change in control. In such circumstances, the Executive
will be entitled to receive a lump sum payment equal to two times the sum of (a)
the Executive's salary, at the greater of his salary immediately prior to the
change of control or on the date of termination, plus (b) the Executive's bonus,
at the greater of his target bonus for the
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<PAGE> 38
year of his termination or the best actual bonus he received in the five
previous years. The purchase of the Shares in the Offer and consummation of the
Merger will be deemed a change of control under these agreements, requiring the
payments set forth in the agreements to be paid by the Surviving Corporation. On
June 6, 1999, each Executive entered into an Amended and Restated Severance
Agreement with the Company and Parent which superseded and replaced the
Severance Agreements, and which are described in the Company's Schedule 14D-9.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Harry J. Muhlschlegel, a member of the Compensation Committee, is the Chief
Executive Officer of the Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Company consists of Harry Muhlschlegel,
the Company's Chief Executive Officer, and Gordon R. Bowker and Samuel H. Jones,
Jr., the Company's two outside directors. The Compensation Committee establishes
the salaries of the executive officers of the Company, incentives and other
forms of compensation and benefit plans and also administers the Company's 1994
Stock Option Plan and 1997 Incentive Plan.
Jevic's compensation program is designed to attract and retain experienced
executives and motivate them for both the short and long term. The executive
compensation program is comprised of four elements: competitive base salary,
benefits comparable to those shared by the general employee population, annual
bonus, and long term incentives linked to corporate performance.
BASE SALARY
Base salary for the Company's executive officers is determined by a
combination of several factors, salary market rates, valuation of the individual
executive officer's performance; performance of the company; and contribution to
the corporation. The various factors considered in the base salary decisions are
not formally weighted and the Committee uses subjective judgment in making its
decisions.
ANNUAL BONUS
The annual bonus rewards achievement of annual targets of both corporate
and personal performance. Key performance measures are revenue growth, operating
income growth and quality of service, as defined by on-time performance.
Notwithstanding the Company's record revenues, operating income and net income
in 1998, the Compensation Committee determined not to award the Company's
executive officers any cash bonus in 1998 as the growth in operating income and
net income did not compare favorably with the goals set forth in the Company's
financial plan for 1998.
LONG TERM INCENTIVE COMPENSATION
Jevic believes its executives should have a substantial stake in the risks
and rewards of stockholders. Grants of stock options will be used to align
management's interests with stockholders' interests and encourage long-term
investment and interest in overall Company performance. The Company's 1997
Incentive Plan provides for the granting of stock options to eligible employees
including executive officers.
During 1998, the Compensation Committee approved the grant of stock options
to one newly elected executive officer upon his being promoted and one other
executive officer based on his record of service for the Company, as reflected
elsewhere in this Proxy Statement under "Option Grants in Year Ended December
31, 1998."
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<PAGE> 39
CEO COMPENSATION
In accordance with the compensation philosophy and process described above,
the Compensation Committee has continued Mr. Muhlschlegel's base salary at
$505,000. Mr. Muhlschlegel declined to be considered for an increase in his base
salary. The Compensation Committee will annually review Mr. Muhlschlegel's
compensation based upon the same criteria with respect to executive officer
compensation generally.
LIMITS OF DEDUCTIBILITY OF COMPENSATION
Section 162(m) of the Internal Revenue Code imposes a $1 million limit on
the allowable tax deduction of compensation paid by a publicly-held corporation
to its Chief Executive Officer and its other four most highly compensated
executive officers employed at year-end, subject to certain pre-established
objective performance-based exceptions. The Committee intends to take Section
162(m) into account when formulating its compensation policies for the Company's
Chief Executive Officer and its other Executive Officers and to comply with
Section 162(m), if and where the Committee determines compliance to be
practicable and in the best interests of the Company and its stockholders.
Harry J. Muhlschlegel
Gordon R. Bowker
Samuel H. Jones, Jr.
The above report shall not be deemed incorporated by reference by any
general statement incorporating by reference this Information Statement into any
filing under the Securities Act of 1933, as amended, or the Exchange Act and
shall not otherwise be deemed filed under such Acts.
11
<PAGE> 40
PERFORMANCE GRAPH
The following Stock Performance Chart compares the Company's cumulative
total shareholder return on its Common Stock for the period from October 7, 1997
(the date the Common Stock commenced trading on the Nasdaq National Market) to
December 31, 1998 (the date the Company's 1998 fiscal year ended), with the
cumulative total return of the Standard & Poor's 500 Stock Index and the
Standard & Poor's Small Cap Trucking Group Index. The comparison assumes $100
was invested on October 7, 1997 in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends.
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
JEVIC TRANSPORTATION S&P 500 INDEX S&P TRUCKERS-SMALL
-------------------- ------------- ------------------
<S> <C> <C> <C>
'7 0ct 97' 100.00 100.00 100.00
'1997' 107.50 92.76 88.93
'1998' 52.50 119.27 98.02
</TABLE>
12
<PAGE> 41
CERTAIN TRANSACTIONS AND TRANSACTIONS
The Company currently leases its primary maintenance facility in
Willingboro, New Jersey from Harry and Karen Muhlschlegel. Rent expense on the
property was $114,240 for 1998. On or prior to completion of the tender offer
which is the subject of the Schedule 14D-9, the Company and the Muhlschlegels
will amend this lease to provide that either party may terminate the lease on
six months' notice to the other party.
In April 1997, grantor annuity trusts for Harry and Karen Muhlschlegel
borrowed a total of $438,065 from the Company. The loans were repaid in full on
February 27, 1998. Interest for 1998 was $4,299.
The Company considers the terms of its transactions with the Muhlschlegels
to be at arms length, reasonably equivalent to terms it could obtain through
negotiations with an unaffiliated third party during similar economic
conditions.
JEVIC TRANSPORTATION, INC.
June 9, 1999
13
