A.
Merger
Agreement
On
September 17, 2007, Target Logistics, Inc., a Delaware corporation
(“
Target,
”
or
the
“
Company
”),
Mainfreight Limited, a New Zealand corporation (“
Mainfreight
”),
and
Saleyards Corp., a Delaware corporation and wholly owned subsidiary of
Mainfreight (“
Saleyards
”),
entered into an Agreement and Plan of Merger (the “
Merger
Agreement
”).
The
Merger Agreement provides that, upon the terms and subject to the conditions
set
forth in the Merger Agreement, Saleyards will merge with and into Target (the
“
Merger
”),
with
Target continuing as the surviving corporation and a wholly owned subsidiary
of
Mainfreight.
Upon
consummation of the Merger, each share of Target’s Common Stock, par value $0.01
per share (the “
Common
Stock
”)
issued
and outstanding immediately prior to the Merger (other than shares of Common
Stock with respect to which a demand for appraisal pursuant to the General
Corporation Law of the State of Delaware (the “
DGCL
”)
has
been properly made, and any shares of Common Stock owned by Target, Mainfreight,
Saleyards and any wholly owned subsidiary of Target, Mainfreight or Saleyards)
shall be canceled and converted automatically into the right to receive $2.50
in
cash payable to the holder of such share, without interest. Each share of
Target’s Class F Preferred Stock, par value $10.00 per share (the “
Class
F Preferred Stock
”)
issued
and outstanding immediately prior to the Merger (other than shares of Class
F
Preferred Stock with respect to which a demand for appraisal pursuant to the
DGCL has been properly made, and any shares of Class F Preferred Stock owned
by
Target, Mainfreight, Saleyards and any wholly owned subsidiary of Target,
Mainfreight or Saleyards) shall be canceled and converted automatically into
the
right to receive $62.50 in cash
(the
equivalent of $2.50 per share of Common Stock multiplied by 25, which is the
number of shares of Common Stock into which each share of Class F Preferred
Stock may be converted)
payable to the holder of such share, without
interest.
Under
Section 251 of the DGCL, the approval of the holders of a majority of the voting
power of the outstanding shares of Common Stock and Class F Preferred stock,
voting together as a single class, is required to adopt the Merger Agreement
and
approve the Merger. On September 17, 2007, three stockholders that, in the
aggregate, are the record owners of 10,978,853 shares of Common Stock and all
of
the shares of Class F Preferred Stock, representing in the aggregate
approximately 66.4% of the outstanding voting power of the Company, executed
and
delivered to the Company written consents adopting the Merger Agreement and
approving the Merger. Accordingly, the Merger has been approved by holders
representing approximately 66.4% of the outstanding voting securities of the
Company, and no vote or further action of the stockholders of the Company is
required to adopt the Merger Agreement or approve the Merger.
The
parties have made customary representations, warranties and covenants in the
Merger Agreement, including, among others, Target’s agreement (subject to
certain exceptions) (i) to conduct its business in the ordinary course
consistent with past practice between the execution of the Merger Agreement
and
consummation of the Merger, and not to engage in certain kinds of transactions
during this period; to (ii) to use its reasonable best efforts to consummate
the
Merger; and (iii) to not solicit proposals relating to alternative business
combination transactions or, subject to certain exceptions, enter into
discussions concerning or provide confidential information in connection with
alternative business combination transactions.
Consummation
of the Merger is subject to customary conditions set forth in the Merger
Agreement.
The
Merger Agreement contains certain termination rights for both Target and
Mainfreight, and further provides that, upon termination of the Merger Agreement
under specified circumstances, Target may be required to pay Mainfreight a
termination fee of up to $2,115,000.
The
foregoing description of the Merger Agreement does not purport to be complete
and is qualified in its entirety by reference to the Merger Agreement, which
is
filed as Exhibit 2.1 hereto, and is incorporated herein by
reference.
The
Merger Agreement, which has been included to provide investors with information
regarding its terms, contains representations and warranties of the parties.
The
assertions embodied in those representations and warranties were made for
purposes of the Merger Agreement and are subject to modifications,
qualifications and limitations agreed by the respective parties in connection
with negotiating the terms of the Merger Agreement. In addition, certain
representations and warranties were made as of a specific date, may be subject
to a contractual standard of materiality different from what a stockholder
might
view as material, or may have been used for purposes of allocating risk between
the respective parties rather than establishing matters as facts. Investors
should read the Merger Agreement together with the other information concerning
Target that Target publicly files in reports and statements with the Securities
and Exchange Commission, which are available without charge at
www.sec.gov.
B.
Employment
Agreement
On
September 17, 2007, Mr. Christopher Coppersmith, President Chief Executive
Officer of Target Logistic Services, Inc. (the Company’s wholly-owned
subsidiary, “TLSI”) entered into an employment agreement with TLSI. The
agreement takes effect on the date that the Merger is consummated, and provides
for the continuation of Mr. Coppersmith’s employment for three years following
such date, and is renewable for additional two-year periods unless the
employment agreement is terminated in accordance with its terms or TLSI or
Mr.
Coppersmith give 60 days notice prior to the end of the term not to extend
such
term. During the term of the employment agreement, Mr. Coppersmith is entitled
to receive an annual base salary of not less than $243,512, annual cash bonuses
based on a formula specified in the agreement and Target equity bonuses based
on
a formula specified in the agreement. If the employment agreement is terminated
by Mr. Coppersmith for “good reason” (as defined in the agreement) or by TLSI,
then he will be paid a severance payment equal to the amount of his base salary
in effect at the time of such termination, payable over 12 months, plus payments
for medical and dental coverage for a period of 24 months.
C.
Change
in Control Agreements
On
September 17, 2007, Mr. Stuart Hettleman and Mr. Philip Dubato each entered
into
a change in control agreement with the Company. Under the terms of the
respective agreements, if,
within
the period beginning on the occurrence of a change in control (as defined
therein) and ending on a specified date following such change in control (for
Mr. Hettleman, two years following such change in control, and for Mr. Dubato,
six months following such change in control), either individual’s employment
with the Company terminates for any reason, then
he
will
receive a one time lump sum payment, payable within 60 days following
termination, and will be entitled to Company paid medical and dental insurance
for three years following his termination of employment. The lump sum payment
for Mr. Hettleman is $400,000, and the lump sum payment for Mr. Dubato is
$300,000.
As
a
condition precedent to and in consideration of the receipt of the payments
and
benefits under each agreement, Mr. Hettleman and Mr. Dubato have each agreed
to
maintain the confidentiality of all Target proprietary information. Furthermore,
Mr. Hettleman has agreed not to solicit Target employees or customers for a
period of 36 months, and Mr. Dubato has agreed not to solicit Target employees
or customers for a period of 24 months. In addition, Mr. Hettleman may not
compete with Target for a period of 24 months following termination of
employment, and Mr. Dubato may not compete with Target for a period of six
months following termination of employment. In addition, each individual is
required to release all claims against the Company as a condition to the receipt
of the benefits under his respective agreement.
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