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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
þ   Preliminary Proxy Statement
 
o   Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
 
o   Definitive Proxy Statement
 
o   Definitive Additional Materials
 
o   Soliciting Material Pursuant to §240.14a-12
EXPRESS-1 EXPEDITED SOLUTIONS, INC.
 
(Name of Registrant as Specified In Its Charter)
N/A
 
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
þ   No fee required.
 
o   Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
  (1)   Title of each class of securities to which transaction applies:
 
     
 
 
  (2)   Aggregate number of securities to which transaction applies:
 
     
 
 
  (3)   Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
 
     
 
 
  (4)   Proposed maximum aggregate value of transaction:
 
     
 
 
  (5)   Total fee paid:
 
     
 
o   Fee paid previously with preliminary materials.
 
o   Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
  (1)   Amount Previously Paid:
 
     
 
 
  (2)   Form, Schedule or Registration Statement No.:
 
     
 
 
  (3)   Filing Party:
 
     
 
 
  (4)   Date Filed:
 
     
 


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PRELIMINARY PROXY MATERIAL SUBJECT TO COMPLETION
 
(XPO LOGO)
 
EXPRESS-1 EXPEDITED SOLUTIONS, INC.
3399 South Lakeshore Drive, Suite 225
Saint Joseph, Michigan 49085
 
 
[     ], 2011
 
 
Dear Fellow Stockholders:
 
On behalf of the Board of Directors of Express-1 Expedited Solutions, Inc., a Delaware Corporation (the “Company”, “we”, “us” or “our”), we invite you to join us at a special meeting of stockholders of the Company, which will be held at [  ] at [  ], Eastern Daylight Time, on [  ], 2011.
 
On June 13, 2011, the Company entered into an Investment Agreement (the “Investment Agreement”) with Jacobs Private Equity, LLC (“JPE”) and the other investors party thereto (including by joinders thereto) (collectively with JPE, the “Investors”), providing for an aggregate investment by the Investors of up to $150,000,000 in cash in the Company, including amounts payable upon exercise of the warrants described herein. Up to an aggregate of $135,000,000 of such investment will be made by JPE. The Investment Agreement has been approved by the Company’s Board of Directors, acting upon the unanimous recommendation of a special committee composed of independent directors. Following the closing of the transactions contemplated by the Investment Agreement, JPE will be the controlling stockholder of the Company, and Bradley Jacobs, the Managing Member of JPE, will become Chairman of the Board of Directors of the Company. Mr. Jacobs will also become the Company’s Chief Executive Officer following the closing. The Company expects to use the proceeds primarily to make strategic acquisitions and any balance will be used for general corporate purposes.
 
As controlling stockholder, JPE intends to cause the Company to leverage its prominent positions in expedited transportation solutions, freight brokerage and freight forwarding to make the Company a platform for growth through strategic acquisitions and organic expansion, with a view to building a multi-billion dollar market leader.
 
Subject to the terms and conditions of the Investment Agreement, upon the closing, the Company will issue to the Investors, for $75,000,000 in cash, (i) shares of Series A Convertible Perpetual Preferred Stock of the Company (the “Preferred Stock”), which will initially be convertible into an aggregate of 42,857,143 shares of Company common stock (subject to adjustment in connection with the contemplated reverse stock split described below) and will vote together with the Company common stock on an “as-converted” basis on all matters on which the Company common stock may vote, except as otherwise required by law, and (ii) warrants to purchase 42,857,143 shares of Company common stock at an initial exercise price of $1.75 per share (subject to adjustment in connection with the contemplated reverse stock split described below) (the “Warrants”, and together with the Preferred Stock, the “Securities”). We refer to this investment as the “Equity Investment”, and to the Equity Investment collectively with the other transactions contemplated by the Investment Agreement as the “Proposed Transaction”.
 
In connection with the closing of the Equity Investment, the common stock of the Company will undergo a 4:1 reverse stock split.
 
Upon the closing of the Equity Investment, the Board of Directors will be reconstituted such that: (i) there will be eight Board members, (ii) one of such directors will be James Martell, our current Chairman, (iii) seven of such directors will be designated by JPE (including Bradley Jacobs), (iv) each standing committee of the Board will be reconstituted in a manner reasonably acceptable to JPE and (v) Bradley Jacobs will become the Chairman of the Board. After giving effect to the reconstitution of the Board, a majority of the members of the Board will continue to be independent.


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You will be asked, at the special meeting of the Company’s stockholders, to vote to approve, as a condition to the Equity Investment, each of the following:
 
  1.      The issuance of the Securities, which will constitute an issuance of securities convertible into or exercisable for a number of shares of Company common stock in excess of 20% of our presently outstanding common stock, and thus requires the approval of stockholders in accordance with NYSE Amex Rule 713;
 
  2.      An amendment to the certificate of incorporation of the Company (as amended, the “Company Certificate”) to increase the number of authorized shares of Company common stock to 150,000,000 shares;
 
  3.      An amendment to the Company Certificate to give effect to a 4-for-1 reverse stock split of the Company common stock;
 
  4.      An amendment to the Company Certificate providing that any vacancy on our Board of Directors shall be filled by the remaining directors or director (consistent with our existing by-laws); and
 
  5.      The 2011 Omnibus Incentive Compensation Plan, to be implemented following the closing.
 
The failure of the Company’s stockholders to approve any of the foregoing Proposals will prevent the Company from consummating the Proposed Transaction.
 
The Board of Directors believes that the Proposed Transaction is in the best interests of the Company and its stockholders and, therefore, recommends that the Company’s stockholders vote “FOR” Proposals 1 through 5 at the special meeting.
 
The proxy statement attached to this letter provides you with information about the Proposed Transaction and the special meeting of the Company’s stockholders. We encourage you to read the entire proxy statement carefully. You may also obtain more information about the Company from documents we have filed with the Securities and Exchange Commission. See “Where You Can Find Additional Information” in the accompanying proxy statement.
 
Regardless of the number of shares of Company common stock you own, your vote is important. Because certain of the Proposals require the approval of a majority of the outstanding shares of Company common stock, the failure to vote on such Proposals will have the same effect as a vote against each of such Proposals. Whether or not you plan to attend the special meeting, please take the time to submit a proxy by following the instructions on your proxy card as soon as possible. If your shares of Company common stock are held in an account at a broker, dealer, commercial bank, trust company or other nominee, you should instruct such broker or other nominee how to vote in accordance with the voting instruction form furnished by such broker or other nominee.
 
Voting by proxy will not prevent you from voting your shares in person if you subsequently choose to attend the special meeting.
 
Thank you for your cooperation and continued support.
 
Sincerely,
 
[          ]
 
THE ACCOMPANYING PROXY STATEMENT IS DATED [  ], 2011
AND IS FIRST BEING MAILED TO STOCKHOLDERS ON OR ABOUT [  ], 2011.


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(XPO LOGO)
 
EXPRESS-1 EXPEDITED SOLUTIONS, INC.
3399 South Lakeshore Drive, Suite 225
Saint Joseph, Michigan 49085
 
 
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON [  ], 2011
 
 
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of Express-1 Expedited Solutions, Inc., a Delaware corporation (the “Company”, “we”, “us” or ‘‘our”), will be held at [  ] at [  ], Eastern Daylight Time, on [  ], 2011, for the following purposes:
 
  1.      To approve the issuance to Jacobs Private Equity, LLC (“JPE”) and the other investors party to the Investment Agreement, dated as of June 13, 2011 (the “Investment Agreement”), for $75,000,000 in cash, of (i) 75,000 shares of Series A Convertible Perpetual Preferred Stock of the Company (the “Preferred Stock”), which are initially convertible into an aggregate of 42,857,143 shares of Company common stock at a conversion price of $1.75 per share (subject to adjustment in connection with the Reverse Stock Split (as defined below)), and (ii) warrants to purchase 42,857,143 shares of Company common stock at an exercise price of $1.75 per share (subject to adjustment in connection with the Reverse Stock Split) (the “Warrants”, and together with the Preferred Stock, the “Securities”);
 
  2.      To approve an amendment to the certificate of incorporation of the Company (as amended, the “Company Certificate”) to increase the number of authorized shares of Company common stock to 150,000,000 shares;
 
  3.      To approve an amendment to the Company Certificate to give effect to a 4-for-1 reverse stock split of the Company common stock (the “Reverse Stock Split”);
 
  4.      To approve an amendment to the Company Certificate providing that any vacancy on our Board of Directors shall be filled by the remaining directors or director;
 
  5.      To adopt the 2011 Omnibus Incentive Compensation Plan (the “Plan”);
 
  6.      To approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt Proposals 1 through 5; and
 
  7.      To transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.
 
Only stockholders of record as of the close of business on [  ], 2011, are entitled to notice of and to vote at the special meeting and at any adjournment or postponement of the special meeting. All stockholders of record are cordially invited to attend the special meeting in person.
 
The issuance of the Securities (Proposal 1) and the adoption of the Plan (Proposal 5) require the affirmative vote of a majority of the shares of Company common stock voting thereon at a meeting at which a quorum is present. The amendment to increase the number of authorized shares of Company common stock (Proposal 2), the amendment to give effect to the Reverse Stock Split (Proposal 3) and the amendment to provide that vacancies on the Board of Directors shall be filled by the remaining directors or director (Proposal 4) require the affirmative vote of a majority of the shares of Company common stock outstanding at the close of business on the record date. The approval of the adjournment of the special meeting (Proposal 6) requires the affirmative vote of a majority of the shares of Company common stock present and entitled to vote at the special meeting, whether or not a quorum is present. The failure of the Company’s


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stockholders to approve any of Proposals 1 through 5 will prevent the Company from consummating the transactions contemplated by the Investment Agreement.
 
Even if you plan to attend the special meeting in person, we request that you submit a proxy by following the instructions on your proxy card as soon as possible and thus ensure that your shares will be represented at the special meeting if you are unable to attend. Because Proposals 2, 3 and 4 require the affirmative vote of a majority of the shares of Company common stock outstanding at the close of business on the record date, the failure to vote on such Proposals will have the same effect as a vote against each of such Proposals. If you sign, date and return your proxy card without indicating how you wish to vote, your vote will be counted as a vote “FOR” Proposals 1 through 5 (and, if necessary and appropriate, Proposal 6). If your shares of Company common stock are held in an account at a broker, dealer, commercial bank, trust company or other nominee, you should instruct such broker or other nominee how to vote in accordance with the voting instruction form furnished by such broker or other nominee.
 
Whether you attend the special meeting or not, you may revoke a proxy at any time before your proxy is voted at the special meeting. You may do so by properly delivering a later-dated proxy either by mail, the internet or telephone or by attending the special meeting in person and voting. You also may revoke your proxy by delivering a notice of revocation to the Company (Attention: Chief Executive Officer, 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085) prior to the vote at the special meeting. If you hold your shares through a broker, dealer, commercial bank, trust company or other nominee, you should follow the instructions of such broker or other nominee regarding revocation of proxies.
 
By order of the Board of Directors,
 
[                    ]
 
[                    ]
 
Saint Joseph, Michigan
 
[          ], 2011
 
Important Notice of Internet Availability
This proxy statement for the special meeting to be held on [          ], 2011, is available free of charge at www.envisionreports.com/XPO2.


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SUMMARY VOTING INSTRUCTIONS
 
Ensure that your shares of Company common stock can be voted at the special meeting by submitting your proxy or contacting your broker, dealer, commercial bank, trust company or other nominee.
 
If your shares of Company common stock are registered in the name of a broker, dealer, commercial bank, trust company or other nominee: check the voting instruction card forwarded by your broker or other nominee to see which voting options are available or contact such broker or other nominee in order to obtain directions as to how to ensure that your shares of Company common stock are voted at the special meeting.
 
If your shares of Company common stock are registered in your name: submit your proxy as soon as possible by telephone, via the internet or by signing, dating and returning the enclosed proxy card in the enclosed postage-paid envelope, so that your shares of Company common stock can be voted at the special meeting.
 
Instructions regarding telephone and internet voting are included on the proxy card.
 
Because Proposals 2, 3 and 4 require the affirmative vote of a majority of the shares of Company common stock outstanding at the close of business on the record date, and because Proposals 1 through 5 are conditioned on each other, the failure to vote will have the same effect as a vote against each of such Proposals. If you sign, date and return your proxy card without indicating how you wish to vote, your vote will be counted as a vote “FOR” Proposals 1 through 5 (and, if necessary and appropriate, Proposal 6).
 
For additional questions about the Proposed Transaction, assistance in submitting proxies or voting shares of Company common stock, or to request additional copies of the proxy statement or the enclosed proxy card, please contact the Company at (269) 429-9761.


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PROPOSAL 2 – AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMPANY COMMON STOCK TO 150,000,000 SHARES     62  
       
PROPOSAL 3 – AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT A 4:1 REVERSE STOCK SPLIT OF COMPANY COMMON STOCK     64  


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PROPOSAL 4 – AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO PERMIT VACANCIES ON THE BOARD OF DIRECTORS TO BE FILLED BY THE REMAINING DIRECTORS     69  
       
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  Investment Agreement, dated as of June 13, 2011, by and among Jacobs Private Equity, LLC, each of the other investors party thereto and Express-1 Expedited Solutions, Inc.
  Fairness Opinion of Ladenburg Thalmann & Co. Inc.
  Voting Agreement, dated as of June 13, 2011, between Jacobs Private Equity, LLC and Michael R. Welch
  Voting Agreement, dated as of June 13, 2011, between Jacobs Private Equity, LLC and Daniel Para


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QUESTIONS AND ANSWERS ABOUT THE SPECIAL MEETING AND THE PROPOSALS
 
The following questions and answers address briefly some questions you may have regarding the special meeting and the Proposals. These questions and answers may not address all questions that may be important to you as a stockholder of the Company. Please refer to the more detailed information contained elsewhere in this proxy statement, the annexes to this proxy statement and the documents referred to or incorporated by reference in this proxy statement.
 
Q: Why did I receive these proxy materials?
 
A: We are providing these proxy materials in connection with the solicitation by our Board of Directors of proxies to be voted at the special meeting in connection with the transactions contemplated by the Investment Agreement (such transactions, collectively, the “Proposed Transaction”), as further described in this proxy statement.
 
Q: What items of business will be voted on at the special meeting?
 
A: The business expected to be voted on at the special meeting is a series of Proposals related to the Proposed Transaction, described in detail in this proxy statement.
 
Q: What is the Proposed Transaction?
 
A: The Investment Agreement with JPE and the other investors party thereto (including by joinders thereto) (collectively with JPE, the “Investors”) provides for an aggregate investment by the Investors of up to $150,000,000 in cash in the Company (including amounts payable upon exercise of the Warrants). Pursuant to the Investment Agreement, at the closing, the Investors will invest an aggregate of $75,000,000 in cash into the Company in return for the Company’s issuance of:
 
•  75,000 shares of Preferred Stock, which shares will initially be convertible into 42,857,143 shares of Company common stock at an initial conversion price of $1.75 per share of Company common stock (before giving effect to the contemplated 4:1 Reverse Stock Split, and subject to customary anti-dilution adjustments); the Preferred Stock carries an annual cash dividend of 4% and will generally vote together with the Company common stock on an “as-converted” basis on all matters; and
 
•  Warrants to purchase 42,857,143 shares of Company common stock at an initial exercise price of $1.75 per share (before giving effect to the 4:1 Reverse Stock Split, and subject to customary anti-dilution adjustments); the Warrants will be exercisable for 10 years.
 
We refer to the foregoing transactions as the “Equity Investment”.
 
In addition, in connection with the Equity Investment, among other things:
 
•  The number of authorized shares of Company common stock will be increased to 150,000,000;
 
•  The Company common stock will undergo the 4:1 Reverse Stock Split;
 
•  The Company Certificate will be amended to provide that any vacancy on our Board of Directors shall be filled by the remaining directors or director (consistent with our by-laws as currently in effect);
 
•  The Company will implement a new Omnibus Incentive Compensation Plan; and
 
•  The Board of Directors will be reconstituted such that: (i) there will be eight directors, (ii) one of such directors will be James Martell, our current Chairman (or a replacement acceptable to JPE), (iii) seven of such directors will be designated by JPE (including Bradley Jacobs, the Managing Member of JPE), (iv) each standing committee of the Board will be reconstituted in a manner reasonably acceptable to JPE and (v) Bradley Jacobs will become the Chairman of the Board; and JPE will have certain ongoing Board nomination rights tied to its equity interest in the Company.


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Following the closing Mr. Jacobs will become the Company’s Chief Executive Officer.
 
Q: What will I receive in the Proposed Transaction?
 
A: You will not receive any consideration in the Proposed Transaction. Your shares of Company common stock will remain outstanding following the closing of the Proposed Transaction, and you will continue to participate as a stockholder by virtue of such shares.
 
Q: What percentage of the Company’s voting stock will the Investors own upon completion of the Proposed Transaction?
 
A: As of the record date, there were [  ] shares of Company common stock outstanding, plus outstanding options to purchase an additional [  ] shares of Company common stock. Based upon the number of shares of Company common stock outstanding on the record date, and excluding any shares issuable upon the exercise of currently outstanding options, the Investors would have held in the aggregate approximately [  ]% of the total voting power of the Company’s capital stock before giving effect to the exercise of any Warrants, and approximately [  ]% of the total voting power of the Company’s capital stock after giving effect to the exercise of all of the Warrants. Because the Preferred Stock votes on an “as converted” basis, the conversion of the Preferred Stock into Company common stock will not affect the general voting power allocable to the Preferred Stock upon its issuance. The Reverse Stock Split will not affect the relative percentage of the voting power held by any stockholder or any of the Investors.
 
Q: Where and when is the special meeting?
 
A: The special meeting will be held at [  ] at [  ], Eastern Daylight Time, on [  ], 2011.
 
Q: What vote is required to approve the Proposals?
 
A: The issuance of the Securities (Proposal 1) and the adoption of the Plan (Proposal 5) require the affirmative vote of a majority of the shares of Company common stock voting thereon at a meeting at which a quorum is present. The amendment to increase the number of authorized shares of Company common stock (Proposal 2), the amendment to give effect to the Reverse Stock Split (Proposal 3) and the amendment to provide that vacancies on the Board of Directors shall be filled by the remaining directors or director (Proposal 4) require the affirmative vote of a majority of the shares of Company common stock outstanding at the close of business on the record date. The approval of the adjournment of the special meeting (Proposal 6) requires the affirmative vote of a majority of the shares of Company common stock present and entitled to vote at the special meeting, whether or not a quorum is present. If the Company’s stockholders fail to approve any of Proposals 1 through 5, the Proposed Transaction will not occur.
 
Q: What are my voting choices?
 
A: You may vote “FOR” or “AGAINST” or you may “ABSTAIN” from voting on any Proposal to be voted on at the special meeting. Your shares will be voted as you specifically instruct. If you sign your proxy or voting instruction card without giving specific instructions, your shares will be voted in accordance with the recommendations of our Board of Directors and in the discretion of the proxy holders on any other matters that properly come before the meeting. Because Proposals 2, 3 and 4 require the affirmative vote of a majority of the shares of Company common stock outstanding at the close of business on the record date, and because Proposals 1 through 5 are conditioned on each other, an abstention will have the same effect as a vote against each of such Proposals.
 
Q: How does the Company’s Board of Directors recommend that I vote?
 
A: Our Board of Directors, after careful consideration and acting on the unanimous recommendation of a special committee composed entirely of independent directors, recommends that our stockholders vote “FOR” the approval of each of Proposals 1 through 5 and “FOR” Proposal 6 to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve each of Proposals 1 through 5.


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James Martell, our current Chairman, is an Investor in the Equity Investment and is expected to continue as a member of the Board of Directors following the closing of the Equity Investment, and consequently he recused himself from the Board’s approval of the Proposed Transaction and recommendation of the Proposals.
 
You should read “The Proposed Transaction—Background of the Proposed Transaction” and “The Proposed Transaction—Reasons for the Proposed Transaction” for a discussion of the factors that our special committee and Board of Directors considered in deciding to recommend the approval of the Proposals. In addition, in considering the recommendation of the special committee and the Board of Directors in connection with the Proposed Transaction, you should be aware that some of the Company’s directors and executive officers may have interests that are different from, or in addition to, the interests of our stockholders generally. See “The Proposed Transaction—Interests of the Company’s Directors and Executive Officers in the Proposed Transaction”, beginning on page [  ].
 
Q: Who can attend and vote at the special meeting?
 
A: All stockholders of record as of the close of business on [  ], 2011, the record date for the special meeting, are entitled to receive notice of and to attend and vote at the special meeting, or any postponement or adjournment thereof. If you wish to attend the special meeting and your shares of Company common stock are held in an account at a broker, dealer, commercial bank, trust company or other nominee (i.e., in “street name”), you will need to bring a copy of your voting instruction card or statement reflecting your share ownership as of the record date. “Street name” holders who wish to vote at the special meeting will need to obtain a proxy from the broker, dealer, commercial bank, trust company or other nominee that holds their shares of Company common stock. Seating will be limited at the special meeting. Admission to the special meeting will be on a first-come, first-served basis.
 
Q: How will our directors and executive officers vote on the Proposals with respect to the Proposed Transaction?
 
A: Our directors and current executive officers have informed us that, as of the date of this proxy statement, they intend to vote all of their shares of Company common stock in favor of the approval of each of the Proposals with respect to the Proposed Transaction. In particular, each of Michael Welch, Chief Executive Officer and a director of the Company, and Daniel Para, an officer and director of the Company, entered into voting agreements with JPE, pursuant to which they have agreed, in their capacities as stockholders of the Company and subject to the terms of such agreements, to, among other things, vote their shares of Company common stock in favor of the Proposals, and have granted JPE a proxy in respect of their shares of Company common stock in connection therewith. As of [  ], 2011, the record date for the special meeting, our directors and current executive officers owned, in the aggregate, [  ] shares of Company common stock, or collectively approximately [  ]% of the outstanding shares of Company common stock.
 
Q: What do I need to do now?
 
A: We urge you to read this proxy statement carefully, including its annexes, and to consider how the Proposed Transaction affects you. Then just mail your completed, dated and signed proxy card in the enclosed return envelope as soon as possible so that your shares can be voted at the special meeting of our stockholders. Holders of record may also vote by telephone or the internet by following the instructions on the proxy card.
 
Q: What happens if I do not respond or if I respond and fail to indicate my voting preference or if I abstain from voting?
 
A: If you fail to sign, date and return your proxy card or fail to vote by telephone or internet as provided on your proxy card, your shares of Company common stock will not be counted towards establishing a quorum for the special meeting, which requires holders representing a majority of the outstanding shares of Company common stock to be present in person or by proxy. If you respond and do not indicate your voting preference, we will count your proxy as a vote in favor of the approval of each of


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the Proposals relating to the Proposed Transaction. Because Proposals 2, 3 and 4 require the affirmative vote of a majority of the shares of Company common stock outstanding at the close of business on the record date, and because Proposals 1 through 5 are conditioned on each other, the failure to vote will have the same effect as a vote against each of such Proposals.
 
Q: If my shares are held in “street name” by my broker, dealer, commercial bank, trust company or other nominee, will such broker or other nominee vote my shares for me?
 
A: You should instruct your broker or other nominee on how to vote your shares using the instructions provided by such broker or other nominee. Absent specific voting instructions, brokers or other nominees who hold shares of Company common stock in “street name” for customers are prevented by NYSE Amex rules from exercising voting discretion in respect of non-routine or contested matters. The Company expects that NYSE Amex will evaluate the Proposals to be voted on at the special meeting to determine whether each Proposal is a routine or non-routine matter. Shares not voted by a broker or other nominee because such broker or other nominee does not have instructions or cannot exercise discretionary voting power with respect to one or more Proposals are referred to as “broker non-votes”. Such broker non-votes may not be counted for the purpose of determining the presence of a quorum at the special meeting in the absence of a routine Proposal. In addition, because Proposals 2, 3 and 4 require the affirmative vote of a majority of the shares of Company common stock outstanding at the close of business on the record date, a broker non-vote with respect to any of Proposals 2, 3 or 4 will have the same effect as a vote against such Proposal. Therefore, it is important that you instruct your broker or other nominee on how to vote your shares of Company common stock held in “street name” in accordance with the voting instructions provided by such broker or other nominee, because the failure of the Company’s stockholders to approve any of the Proposals will prevent the Company from consummating the Proposed Transaction.
 
Q: How do I vote my shares held in the Company’s Employee Stock Ownership Plan?
 
A: The trustee of the plan will vote your plan shares as you direct on your proxy card. If you do not vote your plan shares or if you sign and return a proxy card but fail to indicate how you wish to vote, the trustee will vote your plan shares in accordance with the direction of the plan’s named fiduciary, unless it is contrary to applicable law to do so. You must complete, sign and return your proxy card, or vote by phone or through the internet, no later than 5:00 p.m., Eastern Daylight Time, on [  ], 2011, for the shares represented by the proxy to be voted in the manner directed therein.
 
Q: Can I change my vote after I have mailed my proxy card?
 
A: Yes. Whether you attend the special meeting or not, you may revoke a proxy at any time before your proxy is voted at the special meeting. You may do so by properly delivering a later-dated proxy either by mail, the internet or telephone or by attending the special meeting in person and voting. You also may revoke your proxy by delivering a notice of revocation to the Company (Attention: Chief Executive Officer, 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085) prior to the vote at the special meeting. If you hold your shares through a broker, dealer, commercial bank, trust company or other nominee, you should follow the instructions of such broker or other nominee regarding revocation of proxies.
 
Q: Am I entitled to appraisal rights?
 
A: No. You will have no right under Delaware law to seek appraisal of your shares of Company common stock in connection with the Proposed Transaction.
 
Q: What is “householding” and how does it affect me?
 
A: We have adopted a procedure approved by the Securities and Exchange Commission (“SEC”) called “householding”. Under this procedure, stockholders of record who have the same address and last name will receive only one copy of our Notice of Special Meeting and proxy statement, unless one or more of these stockholders notifies us that they wish to continue receiving individual copies. This


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procedure will reduce our printing costs and postage fees. Stockholders who participate in householding will continue to receive separate proxy cards.
 
If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of our Notice of Special Meeting and proxy statement, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of each of these documents for your household, you may contact our transfer agent, Computershare at:
 
Computershare
7530 Lucerne Drive, Suite 305
Cleveland, OH 44130
(440) 239-7361
 
In addition, this proxy statement, the accompanying Notice of Special Meeting and the proxy card are available on the internet at www.envisionreports.com/XPO2.
 
If you participate in householding and wish to receive a separate copy of this Notice of Special Meeting and proxy statement, or if you do not wish to participate in householding and prefer to receive separate copies of these documents in the future, please contact Computershare as indicated above.
 
If your shares of Company common stock are held in an account at a broker, dealer, commercial bank, trust company or other nominee, you should also call such broker or other nominee for additional information.
 
Q: Can I obtain an electronic copy of proxy material?
 
A: Yes, this proxy statement, the accompanying Notice of Special Meeting and the proxy card are available on the internet at: www.envisionreports.com/XPO2.
 
Q: Who can help answer my other questions?
 
A: If you have more questions about the Proposed Transaction or the Proposals, you should contact the Company at (269) 429-9761. If you have questions regarding voting, you should contact the proxy solicitation agent, Innisfree M&A Incorporated (“Innisfree”), toll-free at (888) 750-5834. If your shares of Company common stock are held in an account at a broker, dealer, commercial bank, trust company or other nominee, you should also call such broker or other nominee for additional information.


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SUMMARY
 
The following summary highlights selected information from this proxy statement and may not contain all of the information that may be important to you. Accordingly, we encourage you to read carefully this entire proxy statement, its annexes and the documents referred to or incorporated by reference in this proxy statement. Each item in this summary includes a page reference directing you to a more complete description of that item.
 
The Parties to the Proposed Transaction (Page [  ])
 
Express-1 Expedited Solutions, Inc.
3399 South Lakeshore Drive, Suite 225
Saint Joseph, Michigan 49085
(269) 429-9761
 
The Company is a non-asset-based, third-party logistics services provider that uses a network of relationships with ground, sea and air carriers to find the best transportation solutions for its customers. The Company offers its services through three distinct business units: Express-1, Inc. (expedited transportation solutions), the fifth largest U.S. expedited freight service provider, according to The Journal of Commerce; Concert Group Logistics, Inc. (domestic and international freight forwarding); and Bounce Logistics, Inc. (premium truckload brokerage). The Company serves more than 4,000 retail, commercial, manufacturing and industrial customers through six U.S. operations centers and 22 agent locations. In 2010, the Company completed more than 144,000 transactions for customers and generated revenues of approximately $158 million. More information about the Company may be found in the documents we file with the SEC. See “Where You Can Find Additional Information”.
 
Jacobs Private Equity, LLC
350 Round Hill Road
Greenwich, CT 06831
(203) 413-4000
 
JPE is an investment vehicle of Bradley Jacobs.
 
Since 1979, Bradley Jacobs has founded and led four highly successful companies, including two multi-billion dollar, publicly-traded corporations: United Rentals (NYSE: URI), the world’s largest equipment rental company, and United Waste Systems, which was sold in 1997 for $2.5 billion. As Chairman of United Rentals from 1997 through 2007, Mr. Jacobs grew the company to $3.9 billion in revenues, with more than 700 branch locations, 13,000 employees, and a ranking as the 536th largest public corporation in America by Fortune magazine.
 
In 1989, Mr. Jacobs founded United Waste and built it into the fifth largest solid waste management business in North America. In 1987, he founded Hamilton Resources (UK) Ltd., a worldwide oil trading company that served major oil companies and oil-producing countries and generated annual revenues of approximately $1 billion. In 1979, he co-founded Amerex Oil Associates, Inc., creating one of the world’s largest oil brokerage firms, with an annual gross contract volume of approximately $4.7 billion.
 
Business Strategy
 
As controlling stockholder, JPE intends to cause the Company to leverage its prominent positions in expedited transportation solutions, freight brokerage and freight forwarding to make the Company a platform for growth through strategic acquisitions and organic expansion, with a view to building a multi-billion dollar market leader.
 
The Special Meeting
 
Time, Place and Date (Page [  ])
 
The special meeting will be held at [  ] at [  ], Eastern Daylight Time, on [  ], 2011.


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Purpose (Page [  ])
 
You will be asked to consider and vote upon the following Proposals in connection with the Proposed Transaction, the approval of each of which is a condition to the closing of the Proposed Transaction:
 
  •   The issuance of the Securities, which will constitute an issuance of securities convertible into or exercisable for a number of shares of Company common stock in excess of 20% of our presently outstanding common stock, and thus requires the approval of stockholders in accordance with NYSE Amex Rule 713 (Proposal 1);
 
  •   An amendment to the Company Certificate to increase the number of authorized shares of Company common stock to 150,000,000 shares (Proposal 2);
 
  •   An amendment to the Company Certificate to give effect to the 4:1 Reverse Stock Split (Proposal 3);
 
  •   An amendment to the Company Certificate providing that any vacancy on our Board of Directors shall be filled by the remaining directors or director (consistent with our existing by-laws) (Proposal 4); and
 
  •   To adopt the Plan (Proposal 5).
 
In conjunction with the special meeting, you will be asked to approve the adjournment of the special meeting, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt Proposals 1 through 5. You will also be asked to transact such other business as may properly come before the special meeting or any adjournment or postponement thereof.
 
Record Date and Voting (Page [  ])
 
You are entitled to vote at the special meeting if you owned shares of Company common stock as of the close of business on [  ], 2011, the record date for the special meeting. You will have one vote for each share of Company common stock that you owned on the record date. There are [  ] shares of Company common stock entitled to be voted.
 
Vote Required (Page [  ])
 
The issuance of the Securities (Proposal 1) and the adoption of the Plan (Proposal 5) require the affirmative vote of a majority of the shares of Company common stock voting thereon at a meeting at which a quorum is present. The amendment to increase the number of authorized shares of Company common stock (Proposal 2), the amendment to give effect to the Reverse Stock Split (Proposal 3) and the amendment to provide that vacancies on the Board of Directors shall be filled by the remaining directors or director (Proposal 4) require the affirmative vote of a majority of shares of Company common stock outstanding at the close of business on the record date. The approval of the adjournment of the special meeting (Proposal 6) requires the affirmative vote of a majority of the shares of Company common stock present and entitled to vote at the special meeting, whether or not a quorum is present. Failure to approve any of Proposals 1 through 5 will cause the Proposed Transaction not to occur.
 
Share Ownership of Directors and Executive Officers (Page [  ])
 
As of [  ], 2011, the record date for the special meeting, our directors and current executive officers beneficially owned, in the aggregate, [  ] shares of Company common stock, or collectively approximately [  ]% of the outstanding shares of Company common stock.
 
Voting and Proxies (Page [  ])
 
Any Company stockholder entitled to vote may vote by returning the enclosed proxy card or by telephone or internet in accordance with the instructions on the enclosed proxy card, or by appearing at the special meeting. If your shares are held in “street name” by your broker, dealer, commercial bank, trust company or other nominee, you should instruct such broker or other nominee on how to vote your shares using the instructions provided by such broker or other nominee.


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Revocability of Proxy (Page [  ])
 
Whether you attend the special meeting or not, you may revoke a proxy at any time before your proxy is voted at the special meeting. You may do so by properly delivering a later-dated proxy either by mail, telephone or the internet or by attending the special meeting in person and voting. You also may revoke your proxy by delivering a notice of revocation to the Company (Attention: Chief Executive Officer, 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085) prior to the vote at the special meeting.
 
Simply attending the special meeting will not constitute revocation of a proxy. If you have instructed your broker, dealer, commercial bank, trust company or other nominee to vote your shares, the above-described options for revoking your proxy do not apply and instead you must follow the directions provided by such broker or other nominee regarding revocation of proxies.
 
When Will the Proposed Transaction be Completed (Page [  ])
 
We are working to complete the Proposed Transaction as soon as possible. We anticipate completing the Proposed Transaction in the third quarter of 2011, subject to receipt of stockholder approvals and satisfaction of the other closing conditions.
 
Recommendation of the Company’s Board of Directors (Page [  ])
 
After careful consideration, our Board of Directors, acting upon the unanimous recommendation of a special committee composed of independent directors, recommends that the Company’s stockholders vote “FOR” the approval of each of Proposals 1 through 5 (and, if necessary and appropriate, Proposal 6).
 
Financial Advisor’s Opinion (Page [  ])
 
Ladenburg Thalmann & Co. Inc. (“Ladenburg”) has delivered to the special committee of the Company’s Board of Directors its opinion, dated June 12, 2011, to the effect that, as of June 12, 2011, based upon and subject to the assumptions made, matters considered, procedures followed and limitations on Ladenburg’s review as set forth in the opinion, the Proposed Transaction is fair, from a financial point of view, to our stockholders. The full text of the written opinion, setting forth the assumptions made, matters considered, procedures followed and limitations in connection with the opinion, is attached as Annex B to this proxy statement. We recommend that you read the opinion in its entirety.
 
Ownership Upon Closing (Page [  ])
 
As of the record date, there were [  ] shares of Company common stock outstanding, plus outstanding options to purchase an additional [  ] shares of Company common stock. Based upon the number of shares of Company common stock outstanding on the record date, and excluding any shares issuable upon the exercise of currently outstanding options, the Investors would have held in the aggregate approximately [  ]% of the total voting power of the capital stock of the Company before giving effect to the exercise of any Warrants, and approximately [  ]% of the total voting power of the capital stock of the Company after giving effect to the exercise of all of the Warrants. Because the Preferred Stock votes on an “as converted” basis, the conversion of the Preferred Stock into Company common stock will not effect the general voting power allocable to the Preferred Stock upon its issuance. The Reverse Stock Split will not effect the relative percentage of the voting power held by any stockholder or Investor.
 
Interests of the Company’s Directors and Executive Officers in the Proposed Transaction (Page [  ])
 
Our directors and executive officers may have interests in the Proposed Transaction that are different from, or in addition to, yours, including the vesting of stock options and the entitlement to certain other benefits pursuant to their employment agreements. James Martell, our current Chairman, is an Investor in the Equity Investment and is expected to continue as a member of the Board of Directors following the closing of the Equity Investment, and consequently he recused himself from the Board of Directors’ approval of the


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Proposed Transaction and recommendation of the Proposals. Our Board of Directors was aware of these interests and considered them, among other matters, in making its determinations.
 
No Solicitation of Transactions (Page [  ])
 
The Investment Agreement contains restrictions on our ability to solicit or engage in discussions or negotiations with third parties regarding specified transactions involving the Company. Notwithstanding these restrictions, under certain circumstances, our Board of Directors may respond to a bona fide written unsolicited proposal for an alternative acquisition. In certain circumstances, we may also change our recommendation to the Company’s stockholders, terminate the Investment Agreement and enter into an agreement with respect to a “superior acquisition proposal”.
 
Conditions to Closing (Page [  ])
 
The respective obligations of the Investors and the Company to complete the Proposed Transaction are subject to the satisfaction or waiver of certain conditions, including the condition that Proposals 1 through 5 have been approved by the stockholders.
 
The Company and JPE have determined that no filing under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the “HSR Act”), or any similar antitrust approval, is required in connection with the Equity Investment.
 
The obligations of the Investors to complete the Proposed Transaction are also subject to the satisfaction or waiver of certain conditions, including that (i) the representations and warranties of the Company in the Investment Agreement that are qualified by materiality or material adverse effect must be true and correct and all representations and warranties which are not so qualified must be true and correct in all material respects, (ii) the performance by the Company in all material respects of all of its obligations in the Investment Agreement, (iii) no material adverse effect has occurred and (iv) all consents and approvals required to effect the Equity Investment have been obtained, among others.
 
The obligations of the Company to complete the Proposed Transaction are also subject to the satisfaction or waiver of certain conditions, including that (i) the representations and warranties of each Investor in the Investment Agreement that are qualified by materiality must be true and correct and all representations and warranties which are not so qualified must be true and correct in all material respects and (ii) the performance by the Investors in all material respects of all of their obligations under the Investment Agreement.
 
Termination of the Investment Agreement (Page [  ])
 
The Company and JPE may agree in writing to terminate the Investment Agreement at any time prior to completing the Equity Investment, even after the stockholders of the Company have voted on the Proposals. The Investment Agreement may also be terminated at any time prior to completing the Equity Investment in certain other circumstances, including by either JPE or the Company if the closing has not occurred on or before December 13, 2011, so long as the failure to complete the Equity Investment is not the result of the failure of the terminating party to comply with the terms of the Investment Agreement. The Investment Agreement may also be terminated at any time prior to stockholder approval of the Proposals (i) by JPE if the Board of Directors changes its recommendation to the stockholders regarding the Proposals and (ii) by the Company in order to enter into a definitive agreement to consummate a “superior acquisition proposal”.
 
Termination Fee and Expenses (Page [  ])
 
Upon termination of the Investment Agreement in connection with a “superior proposal” and certain other circumstances described in the Investment Agreement, the Company may be obligated to pay JPE a termination fee equal either to $2,249,000 or $2,774,000, determined as provided in the Investment Agreement. In addition, in the event the closing occurs or the Investment Agreement is terminated in certain specified circumstances, the Company will be obligated to reimburse up to $1,000,000 of expenses of JPE.


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JPE is obligated under the Investment Agreement to reimburse the Company for fees paid by the Company to KPMG LLP in certain circumstances.
 
Composition of Board of Directors (Page [  ])
 
Upon the closing, the Board of Directors of the Company will be reconstituted such that: (i) there will be eight Board members, (ii) one of such directors will be James Martell, our current Chairman (or a replacement acceptable to JPE), (iii) seven of such directors will be designated by JPE (including Bradley Jacobs), (iv) each standing committee of the Board will be reconstituted in a manner reasonably acceptable to JPE and (v) Bradley Jacobs will become the Chairman of the Board. After giving effect to the reconstitution of the Board, a majority of the members of the Board will continue to be independent. Additionally, following the closing, JPE will be entitled to nominate for election to the Board in connection with each meeting of stockholders at which directors are to be elected (i) a majority of the directors on the Board, for so long as JPE controls at least 33% of the total voting power of the capital stock of the Company on a fully-diluted basis or (ii) 25% of the directors on the Board, for so long as JPE controls at least 20% (but less than 33%) of the total voting power of the capital stock of the Company on a fully-diluted basis.
 
Preferred Stock Certificate of Designation (Page [  ])
 
Pursuant to the Investment Agreement, the Company has agreed to file the Certificate of Designation of Series A Convertible Perpetual Preferred Stock of Express-1 Expedited Solutions, Inc. (the “Certificate of Designation”) with respect to the Preferred Stock, which sets forth the rights, designations and preferences of the Preferred Stock.
 
The Warrants (Page [  ])
 
Pursuant to the Investment Agreement, the Company has agreed to issue warrant certificates with respect to the Warrants (each, a “Warrant Certificate”), which will govern the terms of the Warrants.
 
Registration Rights Agreement (Page [  ])
 
Pursuant to the Investment Agreement, the Company has agreed to enter into a Registration Rights Agreement concurrently with the closing. The Registration Rights Agreement provides the Investors with certain rights to cause the Company to register the shares of Preferred Stock, the Warrants and shares of Company common stock issued or issuable upon conversion of the Preferred Stock or upon exercise of the Warrants.
 
Market Price of Our Stock (Page [  ])
 
The Company common stock is traded on the NYSE Amex under the trading symbol “XPO”. On June 13, 2010, which was the last trading day before we entered into the Investment Agreement, the closing price of the Company common stock was $2.19 per share. On [  ], 2011, which was the last trading day before this proxy statement was mailed, the closing price of the Company common stock was $[  ] per share.


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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING INFORMATION
 
This proxy statement and the documents incorporated by reference herein contain forward-looking statements. Statements that are not historical facts, including statements about beliefs or expectations, are forward-looking statements. These statements are based on plans, estimates and projections at the time the statements are made, and readers should not place undue reliance on them. In some cases, readers can identify forward-looking statements by the use of forward-looking terms such as “may,” “will,” “should”, “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “potential” or “continue” or the negative of these terms or other comparable terms. Forward-looking statements involve inherent risks and uncertainties and readers are cautioned that a number of important factors could cause actual results to differ materially from those contained in any such forward-looking statements. Factors that could cause actual results to differ materially from those described in this proxy statement and the documents incorporated by reference herein include, among others: uncertainties as to the timing of the Equity Investment; the possibility that competing transaction proposals will be made; the possibility that various closing conditions for the Equity Investment may not be satisfied or waived; the possibility that the Warrants, if issued, will not be exercised; general economic and business conditions; the possibility that the Company may be unable to identify suitable acquisition candidates or otherwise execute its business plan after closing; and other factors. Readers are cautioned not to place undue reliance on the forward-looking statements included in this proxy statement and the documents incorporated by reference herein, which speak only as of the date hereof or of the applicable incorporated document. Neither the Company nor any other person undertakes any obligation to update any of these statements in light of new information or future events. Some important factors (but not necessarily all factors) that could negatively affect our revenues, growth strategies, future profitability and operating results, or that otherwise could cause actual results to differ materially from those expressed in or implied by any forward-looking statement, include the following:
 
  •   the risk that the Proposed Transaction is not completed;
 
  •   the possibility that alternative takeover proposals will or will not be made;
 
  •   the amount of fees and expenses related to the Proposed Transaction;
 
  •   the effect of the announcement of the Proposed Transaction on our business relationships;
 
  •   the diversion of management’s attention from ongoing business concerns;
 
  •   the inability of the Company to identify suitable acquisition candidates, integrate acquisitions or access the capital markets or otherwise fail to execute its business plan after closing;
 
  •   changes in business and economic conditions and other adverse conditions in our markets;
 
  •   increased competition could lead to negative pressure on our pricing and the need for increased marketing;
 
  •   our inability to maintain, establish or renew relationships with customers, whether due to competition or other factors;
 
  •   the Investment Agreement’s contractual restrictions on the conduct of the business prior to the completion of the Proposed Transaction;
 
  •   our operating results and business generally, including our ability to retain key employees; and
 
  •   other risks set forth in the Company’s filings with the SEC, which filings are available without charge at www.sec.gov.


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THE PARTIES TO THE PROPOSED TRANSACTION
 
Express-1 Expedited Solutions, Inc.
 
The Company is a non-asset-based, third-party logistics services provider that uses a network of relationships with ground, sea and air carriers to find the best transportation solutions for its customers. The Company offers its services through three distinct business units: Express-1, Inc. (expedited transportation solutions), the fifth largest U.S. expedited freight service provider, according to The Journal of Commerce; Concert Group Logistics, Inc. (domestic and international freight forwarding); and Bounce Logistics, Inc. (premium truckload brokerage). The Company serves more than 4,000 retail, commercial, manufacturing and industrial customers through six U.S. operations centers and 22 agent locations. In 2010, the Company completed more than 144,000 transactions for customers and generated revenues of approximately $158 million. Our principal executive office is located at 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085. Our telephone number is (269) 429-9761. More information about the Company may be found in the documents we file with the SEC. See “Where You Can Find Additional Information”.
 
Jacobs Private Equity, LLC
 
JPE was formed by Bradley Jacobs to make a substantial equity investment in a company with the potential for exceptional value creation. Since 1979, Bradley Jacobs has founded and led four highly successful companies, including two multi-billion dollar, publicly-traded corporations: United Rentals (NYSE: URI), the world’s largest equipment rental company, and United Waste Systems, which was sold in 1997 for $2.5 billion. As Chairman of United Rentals from 1997 through 2007, Jacobs grew the company to $3.9 billion in revenues, with more than 700 branch locations, 13,000 employees and a ranking as the 536th largest public corporation in America by Fortune magazine.
 
In 1989, Jacobs founded United Waste and built it into the fifth largest solid waste management business in North America. In 1987, he founded Hamilton Resources (UK) Ltd., a worldwide oil trading company that served major oil companies and oil-producing countries and generated annual revenues of approximately $1 billion. In 1979, he co-founded Amerex Oil Associates, Inc., creating one of the world’s largest oil brokerage firms, with an annual gross contract volume of approximately $4.7 billion. The mailing address of the principal executive offices of JPE is Jacobs Private Equity, LLC, 350 Round Hill Road, Greenwich, CT 06831. The telephone number is (203) 413-4000.


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THE SPECIAL MEETING
 
Time, Place and Purpose of the Special Meeting
 
This proxy statement is being furnished to our stockholders as part of the solicitation of proxies by our Board of Directors for use at the special meeting that will be held at [  ], at [  ], Eastern Daylight Time, on [  ], 2011.
 
The purpose of the special meeting is for our stockholders to consider and vote to approve the Proposals in connection with the Proposed Transaction. Our stockholders must approve all five transaction-related Proposals for the Proposed Transaction to occur. If the stockholders fail to approve any of the five transaction-related Proposals, the Proposed Transaction will not occur. This proxy statement and the enclosed form of proxy are first being mailed to our stockholders on or about [  ], 2011.
 
Record Date and Voting
 
The holders of record of shares of Company common stock as of the close of business on [  ], 2011, the record date for the special meeting, are entitled to receive notice of, and to vote at, the special meeting. On the record date, there were [  ] outstanding shares of Company common stock.
 
Holders representing a majority of the outstanding shares of Company common stock on [  ], 2011, represented in person or by proxy, will constitute a quorum for purposes of the special meeting. A quorum is necessary to hold the special meeting. For purposes of determining the presence of a quorum, abstentions will be included in determining the number of shares present and voting at the special meeting; however, broker non-votes will not be included in the number of shares present and voting at the special meeting. Any shares of common stock held in treasury by the Company or by any of its subsidiaries are not considered to be outstanding for purposes of determining a quorum. Once a share is represented at the special meeting, it will be counted for the purpose of determining a quorum at the special meeting and any adjournment or postponement of the special meeting. However, if a new record date is set for the adjourned special meeting, then a new quorum will have to be established.
 
Required Vote
 
Each outstanding share of Company common stock on [  ], 2011 entitles the holder to one vote at the special meeting. The issuance of the Securities (Proposal 1) and the adoption of the Plan (Proposal 5) require the affirmative vote of a majority of the shares of Company common stock voting thereon at a meeting at which a quorum is present. The amendment to increase the number of authorized shares of Company common stock (Proposal 2), the amendment to give effect to the Reverse Stock Split (Proposal 3) and the amendment to provide that vacancies on the Board of Directors shall be filled by the remaining directors or director (Proposal 4) require the affirmative vote of a majority of the shares of Company common stock outstanding at the close of business on the record date. The approval of the adjournment of the special meeting (Proposal 6) requires the affirmative vote of a majority of the shares of Company common stock present and entitled to vote at the special meeting, whether or not a quorum is present. Proposals 1 through 5 are each conditioned on the others. If the stockholders fail to approve any of Proposals 1 through 5, the Proposed Transaction will not occur. In order for your shares of Company common stock to be included in the vote, you must vote your shares by completing, signing, dating and returning the enclosed proxy card or by voting by telephone or the internet in accordance with the instructions set forth on the proxy card, or by voting in person at the special meeting.
 
If your shares are held in “street name” by your broker, dealer, commercial bank, trust company or other nominee, you should instruct your broker or other nominee on how to vote your shares using the instructions provided by such broker or other nominee. If you have not received such voting instructions or require further information regarding such voting instructions, contact your broker or other nominee and they can give you directions on how to vote your shares. Absent specific voting instructions, brokers or other nominees who hold shares of Company common stock in “street name” for customers are prevented by NYSE Amex rules from exercising voting discretion in respect of non-routine or contested matters. The Company


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expects that NYSE Amex will evaluate the Proposals to be voted on at the special meeting to determine whether each Proposal is a routine or non-routine matter. Shares not voted by a broker or other nominee because such broker or other nominee does not have instructions or cannot exercise discretionary voting power with respect to one or more Proposals are referred to as “broker non-votes”. Such broker non-votes may not be counted for the purpose of determining the presence of a quorum at the special meeting in the absence of a routine Proposal. In addition, because Proposals 2, 3 and 4 require the affirmative vote of a majority of the shares of Company common stock outstanding at the close of business on the record date, a broker non-vote with respect to any of Proposals 2, 3 or 4 will have the same effect as a vote against such Proposal. Therefore, it is important that you instruct your broker or other nominee on how to vote your shares of Company common stock held in “street name” in accordance with the voting instructions provided by such broker or other nominee, because the failure of the Company’s stockholders to approve any of the Proposals will prevent the Company from consummating the Proposed Transaction.
 
Our directors and current executive officers have informed us that, as of the date of this proxy statement, they intend to vote all of their shares of Company common stock in favor of the approval of each of the Proposals with respect to the Proposed Transaction. In particular, each of Michael Welch, Chief Executive Officer and a director of the Company, and Daniel Para, an officer and director of the Company, have entered into voting agreements with JPE, pursuant to which they have agreed, in their capacities as stockholders of the Company and subject to the terms of such agreements, to, among other things, vote their shares of Company common stock in favor of the Proposals, and have granted JPE a proxy in respect of their shares of Company common stock in connection therewith. As of [  ], 2011, the record date for the special meeting, our directors and current executive officers beneficially owned, in the aggregate, [  ] shares of Company common stock, or collectively approximately [  ]% of the outstanding shares of Company common stock.
 
Proxies; Revocation
 
If you vote your shares of Company common stock by properly completing, signing, dating and returning the enclosed proxy card or by voting by telephone or the internet in accordance with the instructions set forth on the proxy card, your shares will be voted at the special meeting as you have indicated. If you vote by returning the enclosed proxy card and no instructions are indicated on your signed and dated proxy card, your shares of Company common stock will be voted “FOR” Proposals 1 through 5 (and, if necessary and appropriate, Proposal 6) at the special meeting.
 
Whether you attend the special meeting or not, you may revoke your proxy at any time before the vote is taken at the special meeting. You may do so by properly delivering a later-dated proxy either by mail, the internet or telephone or attending the special meeting in person and voting. You also may revoke your proxy by delivering a notice of revocation to the Company (Attention: Chief Executive Officer, 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085) prior to the vote at the special meeting.
 
If you have instructed your broker, dealer, commercial bank, trust company or other nominee to vote your shares, the above-described options for revoking your proxy do not apply and instead you must follow the directions provided by such broker or other nominee to change these instructions.
 
The Company does not expect that any matter other than the Proposals with respect to the Proposed Transaction will be brought before the special meeting. If, however, such a matter is properly presented at the special meeting or any adjournment or postponement of the special meeting, the persons appointed as proxies will have discretionary authority to vote the shares represented by duly executed proxies in accordance with their discretion and judgment only with respect to routine and uncontested matters. No such discretionary authority to vote such shares will exist with respect to non-routine or contested matters pursuant to NYSE Amex rules and applicable law.
 
The Company will pay the cost of this proxy solicitation, other than the fees and expenses of Innisfree, which will be paid by JPE. In addition to soliciting proxies by mail, directors, officers and employees of the Company may solicit proxies personally and by telephone, facsimile or other electronic means of communication. These persons will not receive additional or special compensation for such solicitation services. The Company will, upon request, reimburse brokers, dealers, commercial banks, trust companies or


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other nominees for their expenses in sending proxy materials to their customers who are beneficial owners and obtaining their voting instructions. JPE has retained Innisfree to assist in the solicitation of proxies for the special meeting and will pay Innisfree a fee not to exceed $25,000, plus reimbursement of out-of-pocket expenses.
 
Independent Registered Public Accountants
 
Representatives of KPMG LLP, the principal independent registered public accountant for the Company for the fiscal year ending December 31, 2011, are not expected to be present at the special meeting. Representatives of Pender Newkirk & Company LLP, the principal independent registered public accountant for the Company for the fiscal year ending December 31, 2010, are not expected to be present at the special meeting.
 
Adjournments and Postponements
 
Although it is not expected, the special meeting may be adjourned or postponed for the purpose of soliciting additional proxies. Any adjournment or postponement may be made without notice, other than by an announcement made at the special meeting, by approval of the holders of a majority of the outstanding shares of Company common stock present in person or represented by proxy at the special meeting, whether or not a quorum exists. Any signed proxies received by the Company will be voted in favor of an adjournment or postponement in these circumstances. Any adjournment or postponement of the special meeting for the purpose of soliciting additional proxies will allow Company stockholders who have already sent in their proxies to revoke them at any time prior to their use.


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THE PROPOSED TRANSACTION
 
Description of the Proposed Transaction
 
On June 13, 2011, the Company entered into the Investment Agreement with JPE and the other Investors party thereto, providing for an aggregate investment by the Investors of up to $150,000,000 in cash in the Company, including amounts payable upon exercise of the Warrants. Up to an aggregate of $135,000,000 of such investment will be made by JPE. The Investment Agreement has been approved by the Company’s Board of Directors, acting upon the unanimous recommendation of a special committee composed of independent directors. Following the closing of the Proposed Transaction, JPE will be the controlling stockholder of the Company, and Bradley Jacobs, the Managing Member of JPE, will become Chairman of the Board of Directors of the Company. Mr. Jacobs will also become the Company’s Chief Executive Officer following the closing.
 
Under the terms of the Investment Agreement, the Investors will invest $75,000,000 in cash into the Company in exchange for 75,000 shares of Preferred Stock and 42,857,143 Warrants exercisable into one share each of Company common stock. The Preferred Stock will have an initial liquidation preference of $1,000 per share, for an aggregate initial liquidation preference of $75,000,000. The Preferred Stock will be convertible at any time, in whole or in part and from time to time, at the option of the holder thereof into a number of shares of Company common stock equal to the then-applicable liquidation preference divided by the conversion price, which will initially be $1.75 per share of Company common stock (before giving effect to the contemplated 4:1 Reverse Stock Split, and subject to customary anti-dilution adjustments), for an effective initial aggregate conversion rate of 42,857,143 shares of Company common stock. The Preferred Stock will pay quarterly cash dividends equal to the greater of (i) the “as-converted” dividends on the underlying Company common stock for the relevant quarter and (ii) 4% per annum of the then-applicable liquidation preference. Accrued and unpaid dividends for any completed quarter will accrete to liquidation preference for all purposes. The Preferred Stock is not redeemable or subject to any required offer to purchase, and will vote together with the Company’s common stock on an “as-converted” basis on all matters, except as otherwise required by law, and separately as a class with respect to certain matters implicating the rights of holders of shares of Preferred Stock. The terms of the Preferred Stock are more fully set forth in Exhibit A to the Investment Agreement, which is filed herewith as Annex A and incorporated by reference herein.
 
Each Warrant will initially be exercisable at any time and from time to time from the closing date until the tenth anniversary of the closing date, at the option of the holder thereof, into one share of Company common stock at an initial exercise price of $1.75 in cash per share of Company common stock (before giving effect to the contemplated 4:1 Reverse Stock Split, and subject to customary anti-dilution adjustments). The initial aggregate number of shares of Company common stock subject to Warrants will be 42,857,143 shares. The terms of the Warrants are more fully set forth in Exhibit B to the Investment Agreement, which is filed herewith as Annex A and incorporated by reference herein.
 
Upon the closing of the Equity Investment, the Board of Directors will be reconstituted such that: (i) there will be eight Board members, (ii) one of such directors will be James Martell, our current Chairman, (iii) seven of such directors will be designated by JPE (including Bradley Jacobs), (iv) each standing committee of the Board will be reconstituted in a manner reasonably acceptable to JPE and (v) Bradley Jacobs will become the Chairman of the Board. After giving effect to the reconstitution of the Board of Directors, a majority of the members of the Board will continue to be independent.
 
In addition to the Equity Investment, the Proposed Transaction contemplates: (i) an amendment to the Company Certificate to increase the number of authorized shares of Company common stock to 150,000,000 shares; (ii) an amendment to the Company Certificate to give effect to the 4-for-1 Reverse Stock Split; (iii) an amendment to the Company Certificate providing that any vacancy on our Board of Directors shall be filled by the remaining directors or director (consistent with our existing by-laws as currently in effect); and (iv) implementation of the Plan.


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Business Strategy
 
As controlling stockholder, JPE intends to leverage the Company’s prominent positions in expedited transportation solutions, freight brokerage and freight forwarding to make the Company a platform for growth, with a view to building a multi-billion dollar market leader. JPE intends to grow the Company organically and through multiple strategic acquisitions.
 
Bradley Jacobs, the Managing Member of JPE, has extensive experience growing companies in fragmented industries. Since 1979, he has founded and led four highly successful companies, including two multi-billion dollar, publicly-traded corporations: United Rentals, the world’s largest equipment rental company, and United Waste Systems, which was sold for $2.5 billion. Mr. Jacobs co-founded United Rentals in 1997 to capitalize on the early-stage consolidation opportunities in the construction equipment rental industry in North America. As chairman of United Rentals from 1997 through 2007, Mr. Jacobs grew the company to $3.9 billion in revenues. Mr. Jacobs oversaw the completion of over 400 acquisitions at United Rentals and United Waste Systems. In addition, he has been instrumental in raising more than $6 billion in the debt and equity markets since 1992.
 
The combined annual revenues of international freight forwarding and domestic freight brokerage companies are approximately $200,000,000,000. Of the over 10,000 licensed freight brokers in the industry, only a few dozen have revenues in excess of $200,000,000 per year. Given this size and fragmentation, JPE views the Company’s industry segments as a prime opportunity for consolidation and growth in market share. In addition, JPE intends to grow the Company organically by utilizing the increased access to capital markets, and reduced working capital constraints, that it expects to result from the Proposed Transaction.
 
JPE intends to cause the Company to pursue dynamic growth in the freight brokerage business though strategic acquisitions. JPE also intends to cause the Company to pursue robust internal growth through new hires.
 
In the freight forwarding business, JPE intends to generate additional growth at the Company by increasing the number of domestic agents (currently 22) by approximately 10 agents over the next several years. In addition, JPE intends to cause the Company to expand its presence in international freight forwarding by growing its existing owned operations in Florida by hiring additional personnel, and by acquiring additional international freight forwarding businesses both domestically and abroad and expanding those acquired companies organically by hiring additional personnel.
 
JPE intends to cause the Company to grow the expedited transportation solutions business in the near-term organically through accelerated recruiting of owner-operators and the hiring of additional sales and support personnel. In addition, JPE intends to cause the Company to pursue complimentary acquisitions on a selective basis.
 
The foregoing description of the post-closing business strategy of the Company includes forward-looking statements that are subject to numerous risks and uncertainties. See “Cautionary Statement Concerning Forward-Looking Information” on page [  ] of this proxy statement.
 
Background of the Proposed Transaction
 
Our Board of Directors and senior management periodically review the Company’s long-term strategic plan with the goal of maximizing stockholder value. As part of this ongoing process, the Board and senior management also have periodically reviewed strategic alternatives that may be available to the Company.
 
On April 19, 2010, at a regularly scheduled meeting of the Board of Directors, Michael Welch, the Company’s Chief Executive Officer, presented management’s then current estimates for first quarter results and management’s then current outlook for the second quarter and full year performance to the Board. A discussion ensued regarding the Company’s financial and operational performance relative to the valuation placed on the Company by the public equity markets. The Board of Directors agreed that the market valuation of the Company, which had changed little over the last several years, failed to accurately reflect the Company’s financial and operational results. The Board of Directors concluded that industry research analysts were not


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focusing on the Company and that the Company was not well positioned to attract the interest of institutional investors, principally because of its size. The Board resolved to have preliminary discussions with investment bankers to determine if other strategic alternatives were available to the Company that would provide more value to the Company’s stockholders.
 
Over the ensuing 30 days, members of the Board of Directors discussed the Company’s financial and operational performance with a number of investment banks. Based on those discussions, James Martell, the Chairman of the Board, contacted Calvin “Pete” Whitehead, Jennifer H. Dorris and John F. Affleck-Graves, each of whom is independent under the rules of the NYSE Amex, and requested that they, as a special committee of the Board of Directors, take additional steps to analyze the Company’s business and outlook, industry positioning and potential strategic planning and alternatives, and to formally interview investment banks to serve as financial advisors to the special committee. On May 27, 2010, Mr. Whitehead, Mrs. Dorris and Mr. Affleck-Graves held an initial meeting via teleconference to discuss the foregoing.
 
On June 8, 2010, the special committee and Roetzel & Andress LPA, the Company’s outside legal counsel (“R&A”), interviewed BB&T Capital Markets, a division of Scott & Stringfellow, LLC (“BB&T”), and on June 9, 2010, interviewed Eve Partners, LLC (“Eve”). Each investment bank was seeking to act as financial advisor to the special committee. The investment banks discussed the Company’s current financial and operational performance, the Company’s valuation and stock price challenges despite the Company’s long-term track record of revenue and profit growth, and their knowledge of the Company’s business sector. The investment banks presented a variety of strategic alternatives to the special committee, including a potential sale of the Company or an equity capital raise transaction, to help address these issues. The investment banks also discussed possible outcomes and responded to the special committee’s questions.
 
On June 9, 2010, at a regularly scheduled meeting of the Board of Directors attended by R&A, Mr. Whitehead presented to the Board of Directors a summary of the meetings between the special committee and the investment banks. The Board of Directors discussed its knowledge of BB&T and Eve, the involvement of BB&T and Eve in the transportation industry, transactions in which BB&T or Eve had provided consulting services and the ability of BB&T and Eve to assist the Company with an in-depth analysis of all possible strategic alternatives. Thereafter the Board of Directors formally set forth the mandate of the special committee and adopted a Charter of the Special Committee. The Board of Directors delegated to the special committee full power and authority in connection with its evaluation of strategic alternatives, including full power and authority to (i) formulate, establish, oversee and direct a process for the identification, evaluation and negotiation of a potential sale of the Company, (ii) evaluate and negotiate the terms of any proposed definitive or other agreements in respect of a potential sale of the Company, (iii) make recommendations to the Board in respect of any potential transaction, including, but not limited to, any recommendation to not proceed with or to recommend that the Company’s stockholders reject a potential sale of the Company and (iv) make recommendations to the Board of Directors that the Board of Directors take other actions or consider other matters that the special committee deems necessary or appropriate with respect to any potential sale of the Company or potential strategic transactions.
 
Later on June 9, 2010, after considering the presentations made by each investment bank, including their respective qualifications, reputation and experience, the special committee elected to engage BB&T and Eve to serve jointly as financial advisors to the special committee.
 
Over the following three weeks, the special committee, R&A, BB&T and Eve communicated several times to discuss the fiduciary duties of the special committee and the Board of Directors, the potential risks and benefits involved in the execution of the Company’s business plan as an independent company, strategic alternatives available to the Company, and the process of identifying parties interested in engaging in a strategic transaction with the Company. Ultimately it was determined that the special committee, through BB&T and Eve, would conduct a controlled process with the goal of effecting a go-private sale of the Company.
 
On June 30, 2010, a kick-off meeting was held among Mr. Whitehead, BB&T, Eve and the Company’s executive management team. The parties discussed due diligence, process, strategy, timing and the universe of


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financial and strategic buyers that might be interested in engaging in a transaction with the Company. Later that day the Company’s stock price closed at $1.26 per share of Company common stock.
 
Over the ensuing six weeks, BB&T and Eve conducted extensive due diligence on the Company, assisted the Company in the preparation of financial projections, established an electronic data site populated with Company due diligence materials and prepared and finalized a Confidential Information Memorandum and a buyers list.
 
On August 23, 2010, BB&T and Eve began contacting 51 prospective acquirors. Throughout the remainder of August and early September the special committee negotiated and entered into nondisclosure agreements with 39 interested parties. The agreements contained customary restrictions on the disclosure and use of confidential information, standstill provisions restricting the prospective acquirors’ ability to purchase our securities or engage in other takeover activities without our consent, and certain nonsolicitation provisions. Upon execution of the nondisclosure agreement the prospective acquirors were given the Company’s Confidential Information Memorandum and information on the process going forward.
 
By September 24, 2010, BB&T and Eve had received six initial indications of interest (each, an “IOI”) for the Company, with prices ranging from $1.59 to $2.50 per share of Company common stock. Each IOI was subject to certain stated assumptions and to further due diligence.
 
From October 5, 2010 through October 12, 2010, Company management, BB&T and Eve conducted management presentations with the five prospective acquirors that had submitted IOIs with the highest per share consideration. The prospective acquirors were granted access to the Company’s electronic data room. On October 12, 2010, the Company’s stock price closed at $2.35 per share of Company common stock.
 
On October 20, 2010, at a regularly scheduled meeting of the Board of Directors attended by R&A, BB&T and Eve, Mr. Whitehead updated the Board of Directors on the status of the strategic process being conducted by BB&T and Eve. A discussion ensued regarding the process timeline, feedback received regarding the management presentations and the recent increase in the Company’s stock price. R&A discussed the Board’s and special committee’s fiduciary duties at length. The Board members evaluated the IOIs received relative to the option of the Company to continue as an independent publicly-traded company, and the Board members asked questions of BB&T and Eve. The Board and the special committee determined that it was appropriate to continue the strategic process. Mr. Affleck-Graves was removed from the special committee at his request, due to his stated concern that his indirect business associations with one of more of the potential acquirors might be perceived as adversely affecting his independence in the strategic process.
 
On October 28, 2010, BB&T and Eve received two letters of intent (each, an “LOI”), and on October 29, 2010, BB&T and Eve received a third LOI, setting forth offers to acquire the Company for prices ranging from $2.26 per share to $2.70 per share. The following day the Company’s stock price closed at $2.45 per share.
 
On November 8, 2010, at a special meeting of the Board of Directors attended by BB&T and Eve in person and by R&A telephonically, BB&T and Eve presented a summary of the three LOIs received, including an analysis of total consideration to stockholders, transaction multiples and premiums, key valuation and financing terms, key process terms, key legal terms and sources and uses of the transaction consideration.
 
During the following week the potential acquirors conducted extensive due diligence on the Company, and BB&T and Eve held several discussions with each acquiror in an effort to convince each acquiror to increase the price per share set forth in their respective LOI. Ultimately the potential acquirors with the lowest per share purchase prices dropped out of the bidding, leaving one final potential acquiror.
 
On November 16, 2010, the Company’s stock price closed at $2.59 per share. The remaining potential acquiror notified BB&T and Eve that it intended to stand still until early 2011.
 
On December 9, 2010, BB&T and Eve introduced JPE and its principal Bradley Jacobs to the special committee. Based on Mr. Jacobs’ track record of successfully growing businesses, the special committee expressed interest in exploring Mr. Jacobs’ business strategy of rapidly building a multi-billion dollar logistics company using the Company as a platform.


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On December 15, 2010, JPE executed a confidentiality agreement with the Company and received access to the Company’s electronic data room.
 
On January 20, 2011, Michael Welch met with Mr. Jacobs and discussed generally the Company and Mr. Jacobs’ business strategy.
 
On February 23, 2011, the remaining potential acquiror notified BB&T and Eve that it continued to evaluate a strategic transaction with the Company, but that the potential acquiror was not prepared to move forward at that time.
 
On February 28, 2011, BB&T advised the special committee that JPE was going to stand still until further notice.
 
On March 1, 2011, at a meeting of the Board of Directors, the special committee discussed the current status of the strategic process and that both remaining potential acquirors were currently on hold, and it was decided to suspend the strategic process. BB&T and Eve were advised of the special committee’s decision.
 
On April 15, 2011, a conference call was held to discuss JPE’s renewed interest in the Company. Participating on the call were Mr. Martell, Michael Welch, John Welch, the Company’s Chief Financial Officer, Mr. Whitehead and R&A. The parties discussed JPE, Mr. Jacobs and the Company’s financial and operational performance. Mr. Whitehead agreed to convene the special committee to re-open the strategic process that had been put on hold on March 1, 2011, and to conduct additional diligence on JPE and Mr. Jacobs.
 
On April 18, 2011, JPE submitted a nonbinding term sheet outlining a private investment in the Company of up to $150,000,000. The proposal involved the purchase of $75,000,000 in liquidation preference of convertible preferred stock, convertible at the holder’s option into 45,454,545 shares of Company common stock at $1.65 per share, subject to adjustment. The preferred stock carried a dividend, payable in cash, at the greater of 1.00% of liquidation preference per quarter and the “as-converted” dividends on the underlying shares of Company common stock for the relevant quarter. The preferred stock would vote on an as-converted basis with the Company common stock. Additionally, the investors would receive warrants to purchase 45,454,545 shares of Company common stock at an exercise price of $1.65 per share with a term of 10 years. The securities would be purchased in two stages. In stage one, on the date of the execution of an investment agreement, the Company would issue to JPE, and JPE would purchase for cash, (i) shares of convertible preferred stock convertible into a number of shares of Company common stock equal to 9.95% of the number of shares of Company common stock outstanding immediately prior to such issuance, and (ii) warrants to purchase a number of shares of Company common stock equal to 9.95% of the number of shares of Company common stock outstanding immediately prior to such issuance. The stage one purchase was to be made for a portion of the $75,000,000 that corresponded to the portion of the total convertible preferred stock issued in stage one. In stage two, subject to and as soon as practicable following the approval by the stockholders of the Company of the remaining equity issuances contemplated by the investment agreement, the Company would issue to JPE, and JPE would purchase for cash, (i) the balance of the shares of convertible preferred stock remaining to be issued after stage one and (ii) the balance of the warrants remaining to be issued after stage one. The stage two purchase was to be made for the balance of the $75,000,000 remaining following the investment in stage one. At the closing of stage two, the Board of Directors would be reconstituted in its entirety with individuals acceptable to JPE, and the Board would appoint Mr. Jacobs as the Chairman of the Board of the Company. JPE would have Board representation rights in its capacity as a holder of shares of convertible preferred stock.
 
On April 20, 2011, a conference call was held to discuss the JPE proposal. Participating on the call were Mr. Whitehead, Mrs. Dorris, Mr. Martell, Michael Welch, BB&T and R&A. BB&T presented the terms of the JPE proposal to the participants, discussed the market for PIPE transactions in detail, and provided a background of Mr. Jacobs and his prior business dealings at United Rentals, Inc. and United Waste Systems, Inc. The special committee expressed concern over the two stage aspect of the proposal under which JPE would receive an estimated 17% interest in the Company (making JPE the Company’s largest shareholder), and the Company would have material contractual obligations to JPE, in each case without having received


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stockholder approval. Questions were also raised regarding JPE’s intended use of proceeds. Ms. Dorris requested that BB&T provide an analysis of change of control PIPE transactions not involving financial institutions or negative EBITDA companies. The special committee directed BB&T to discuss its concerns with JPE.
 
On April 28, 2011, Eve advised the special committee that, upon advice of counsel, it had elected to waive its rights under the Eve engagement letter with respect to the potential transaction with JPE, to avoid any potential conflict of interest that could potentially arise as a result of Eve’s ongoing involvement with JPE in connection with other M&A transactions. From that point forward Eve ceased participating in the Company’s strategic process.
 
On May 2, 2011, a meeting between the Company and JPE was held to provide JPE with an opportunity to present its business plan to the Company. Present were all members of the Board of Directors (Mr. Affleck-Graves participated telephonically), John Welch, representatives of BB&T, Mr. Jacobs, a representative of JPE’s outside legal advisor Cravath, Swaine & Moore LLP (“Cravath”), representatives of JPE’s outside financial advisors Deutsche Bank Securities Inc. and UBS Investment Bank, and R&A (telephonically). During the meeting Mr. Jacobs discussed his personal and business background, the details of his proposed investment in the Company and his intended use of proceeds. At the conclusion of the presentation the parties agreed that if the transaction were to go forward it would be in the form of a single stage investment that would close only upon receipt of stockholder approval. The Board of Directors and its advisors continued to discuss the JPE proposal after Mr. Jacobs and his advisors left the meeting. The parties discussed the fiduciary duties of the Board of Directors. It was agreed that the JPE proposal had potential merit, but that the potential dilution to the Company’s stockholders was a significant concern and that the effective price per Company common share needed to be increased.
 
On May 4, 2011, Mr. Affleck-Graves accepted a re-appointment as a member of the special committee. BB&T provided the special committee with a written analysis summarizing the premiums/discounts of other PIPE transactions and follow-on offerings in which the offering size was greater than the pre-money market capitalization of the issuing company. The special committee asked BB&T for its view on the ability of the Company to raise funds through a PIPE offering, registered direct offering or other follow-on offering.
 
On May 6, 2011, the special committee and R&A met via conference call. R&A presented a detailed description of the Board of Directors’ fiduciary duties in change of control transactions. The parties discussed the terms of the JPE proposal, Mr. Jacobs’ commitment to the Company’s industry and the obligations of the special committee and the Board to the Company’s stockholders. The special committee agreed that additional information was needed before it could determine whether to continue discussions with JPE. Specifically, the special committee requested that BB&T prepare an analysis of the following strategic alternatives available to the Company: (i) continue as a stand-alone entity, growing organically; (ii) continue as a stand-alone entity, with both organic growth and growth through acquisitions; (iii) sell the Company in a go-private transaction to either a financial or a strategic buyer; and (iv) accept the JPE proposal.
 
On May 9, 2011, BB&T provided the special committee and R&A with a written analysis of the four strategic alternatives requested by the special committee. The analysis described in detail each strategic alternative and the projected Company stock price through 2015. The JPE proposal resulted in the highest projected stock price in each year of the analysis. Members of the special committee and R&A discussed the report over the following several days. The special committee agreed to proceed with the JPE proposal to the extent JPE would agree to increase the effective price from $1.65 per share to $1.75 per share.
 
On May 13, 2011, JPE submitted a revised term sheet providing for a single stage transaction in which the transaction would not close until stockholder approval was received (and other customary closing conditions were satisfied). The price was increased to $1.75 per share. In consideration for the concessions, JPE required that the Company agree to a no-shop provision. The special committee, after consultation with R&A regarding the Company’s ability to receive third-party proposals during a no-shop period, agreed to pursue a transaction on the general terms set forth in the revised term sheet. BB&T communicated this to JPE and a timeline for in-depth due diligence was agreed upon.


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On May 20, 2011 and May 21, 2011, Mr. Whitehead and R&A conducted telephone interviews with two financial advisory firms regarding the preparation and issuance of a fairness opinion.
 
During the week of May 23, 2011, JPE’s accounting advisors, KPMG LLP (“KPMG”), conducted extensive due diligence on the Company, primarily at the offices of the Company’s independent registered public accounting firm Pender Newkirk & Company LLP.
 
On May 23, 2011, Cravath presented R&A with the initial draft of the investment agreement, which R&A forwarded to the special committee and to BB&T.
 
On May 24, 2011, after considering the presentations made by each financial advisory firm, including their respective qualifications, reputation and experience, the special committee engaged Ladenburg to render an opinion to the special committee as to whether, on the date of such opinion, the consideration to be received by the Company in connection with the JPE transaction is fair, from a financial point of view, to the Company’s stockholders.
 
On May 25, 2011, R&A presented the special committee with a memo summarizing the material terms of the investment agreement and R&A’s proposed revisions thereto. The following day a conference call was held between the special committee and R&A to discuss R&A’s proposed revisions to the investment agreement. The primary areas of concern were the Company’s inability to terminate the agreement upon receipt of a superior proposal, the ability to treat as a superior proposal offers to acquire a majority of the Company but less than all or substantially all of the Company, the Company’s obligation to reimburse JPE for all of JPE’s transaction-related costs and expenses, the amount of the termination fee, the length of the tail period during which, in certain circumstances, the Company would be obligated to pay the termination fee, the requirement that the Company engage KPMG to conduct a re-audit of the Company’s financial statements for the years ended December 31, 2008, 2009 and 2010, and to conduct a full internal control over financial reporting audit, the inclusion of a cashless exercise feature in the warrants, and the right of JPE to nominate persons to fill 80% of the seats on the Board of Directors as long as JPE holds at least 50% of the equity securities purchased by JPE in the transaction. After R&A’s presentation the parties discussed the Board of Directors’ fiduciary duties to the Company’s stockholders and the impact certain of the proposed terms would have on the special committee’s ability to maximize stockholder value. The special committee directed R&A to negotiate the proposed revisions to the investment agreement directly with Cravath.
 
On May 27, 2011, R&A and Cravath discussed the proposed revisions to the investment agreement. As a result of those discussions, JPE agreed to allow the Company to terminate the investment agreement upon receipt of a superior proposal to acquire all or substantially all of the Company, but only in the event the Company concurrently entered into an agreement with the third party to effectuate the superior proposal, to decrease the termination fee from 3.5% of the Company’s equity value to 3.0%, and to eliminate the cashless exercise feature from the warrants. Left as open issues were the amount of JPE expenses to be reimbursed by the Company, JPE’s ability to nominate directors and the Company’s obligation to engage KPMG for a re-audit of the Company’s financial statements and an audit of the Company’s internal control over financial reporting. JPE rejected the Company’s request to be able to treat as a superior proposal a takeover proposal for the acquisition of less than all or substantially all of the Company.
 
On May 28, 2011 and May 29, 2011, the special committee and R&A discussed the outstanding issues under the investment agreement and related transaction documents. The parties agreed the following revisions should be requested: that the Company would have no obligation to reimburse JPE’s expenses in the event of a stockholder “no” vote or if the Company were to terminate the investment agreement as a result of a JPE breach, that the Company would agree to engage KPMG for the re-audits for 2009 and 2010, but not for an audit of internal control over financial reporting, the elimination of JPE’s ability to nominate persons to serve on the Board, that Daniel Para, the Chief Executive Officer of Concert Group Logistics, Inc., and Michael Welch should be able to terminate their voting agreements with JPE in the event of a superior proposal (whether or not the investment agreement was terminated), and that the Company should be able to treat as a superior proposal a takeover proposal to acquire a majority of the Company but less than all or substantially all of the Company. The Company also requested a reduction in the term of the warrants from 10 years to one year.


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On May 30, 2011, R&A and Cravath discussed the proposed revisions to the investment agreement. During the discussions Cravath advised of JPE’s estimate that the JPE expenses subject to Company reimbursement would be approximately $1.5 million and JPE’s agreement to eliminate the reimbursement requirement should JPE breach the investment agreement. JPE maintained that JPE’s expenses should be reimbursed in the event of a stockholder “no” vote. The negotiation of JPE’s nomination rights continued. JPE again rejected R&A’s request that the Company be able to treat as a superior proposal certain takeover proposals involving offers for a majority of the Company but less than all or substantially all of the Company.
 
On May 31, 2011, Mr. Whitehead and R&A discussed the status of negotiations and agreed to present JPE with a set of terms that would resolve all of the outstanding issues. The Company was willing to withdraw its request that the term of the warrants be reduced to one year, was willing to accept the payment of JPE’s expenses up to a cap of $1.5 million and was willing to provide JPE the right to nominate a majority of the Board as long as JPE holds at least 33% of the Company’s voting rights and 25% of the Board as long as JPE holds at least 20% of the Company’s voting rights. The Company maintained its position that a superior proposal should include proposals to acquire a majority of the Company.
 
On May 31, 2011, R&A and Cravath discussed the Company’s proposal during a series of conference calls. The following day Cravath distributed revised transaction documents evidencing the foregoing.
 
In the evening of June 1, 2011, the special committee met with R&A to discuss the status of negotiations with JPE and Ladenburg’s fairness opinion. Immediately thereafter the Board of Directors held a meeting attended by all Board members, R&A, BB&T and John Welch. Mr. Martell recused himself from the meeting after being advised that JPE was interested in having Mr. Martell remain on the Board post-closing, and that if Mr. Martell desired, JPE would extend to Mr. Martell an opportunity to invest in the JPE transaction along with JPE and the other investors. Mr. Whitehead began the meeting with a general status update of the special committee’s negotiations with JPE and Cravath. Next, R&A presented a detailed description of all material terms of the JPE transaction documents as then drafted. In so doing R&A identified all outstanding issues, and provided a background of the negotiations that had transpired over the prior week. The Board deliberated over the terms of the transaction, and R&A discussed with the Board the Board’s fiduciary duties. The Board expressed its desire that the Company’s obligation to pay JPE’s expenses, and to pay a termination fee, be limited to the greatest extent possible. Further, the Board supported the special committee’s position that it should be able to terminate the investment agreement if it receives a superior proposal to acquire a majority (but less than all or substantially all) of the Company. After the Board meeting was adjourned, a series of conference calls were conducted between R&A and Cravath during which R&A conveyed the special committee’s position on the outstanding issues.
 
On June 3, 2011, the special committee held a conference call with R&A to discuss the status of negotiations with JPE. It was agreed that R&A and Cravath had reached an impasse, and that R&A would cease working on the JPE transaction unless and until the remaining issues were resolved. Mr. Whitehead directed BB&T to advise JPE of the foregoing, and to attempt to continue negotiations directly with Mr. Jacobs on the Company’s behalf. Mr. Whitehead advised BB&T that the special committee might be able to accept the inability to terminate the investment agreement upon receipt of a majority (but less than all or substantially all) superior proposal, as long as in connection therewith the voting agreements with Mr. Para and Michael Welch could be terminated. Mr. Whitehead also suggested that if JPE was willing to increase the pricing of the transaction the special committee would likely withdraw its remaining demands.
 
Over the next several days extensive negotiations took place between the special committee and its advisors and JPE and its advisors in an unsuccessful attempt to resolve the outstanding issues.
 
On June 7, 2011, the Board held a telephonic meeting in which R&A participated (Mr. Martell was not present). R&A provided an update on the outstanding issues. The Board suggested that Mike Welch attempt to resolve the outstanding issues directly with Mr. Jacobs. Following the meeting Mr. Welch and Mr. Jacobs had a telephone conference but were unable to resolve the outstanding issues.


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On June 8, 2011, the special committee, through R&A, advised Cravath that if JPE was willing to limit the Company’s obligations to pay expenses and termination fees the proposed transaction could likely move forward.
 
On June 9, 2011, Cravath advised that JPE was willing to reduce the cap on the termination fee (which was equal to 3% of the post-announcement equity value) to 4.5% of pre-announcement equity value from 5% of pre-announcement equity value, and that the termination fee payable in any event other than the termination by the Company upon receipt of a superior proposal for all or substantially all of the Company, or by JPE due to a change in recommendation by the Company in connection with a superior proposal, would be limited to 3% of pre-announcement equity value.
 
Later on June 9, 2011, following the Company’s annual meeting of stockholders, Mr. Whitehead and Mrs. Dorris discussed the current status of negotiations with JPE. Still later that day the Board of Directors met via conference call (Mr. Martell was not present), during which R&A presented an outline of the Company’s obligations to pay JPE’s expenses and termination fees under the current draft of the investment agreement. A discussion ensued about the transaction generally and the concessions that had been obtained from JPE to date. At the conclusion of the meeting, the special committee contacted BB&T and directed BB&T to contact JPE and advise that if JPE would be willing to reduce the cap on reimbursable expenses from $1.5 million to $1 million, the special committee would be in a position to support the transaction and recommend it to the Board for approval.
 
On June 10, 2011, JPE advised that the reduction of the cap on reimbursable expenses from $1.5 million to $1 million was acceptable.
 
On June 12, 2011, the special committee held a telephonic meeting with R&A to discuss the final terms of the investment agreement and related documents. Immediately thereafter the Board of Directors held a telephonic meeting also attended by John Welch, R&A, BB&T and Ladenburg (Mr. Martell did not attend). R&A presented a summary of the terms of the investment agreement and related documents, and discussed the fiduciary duties of the members of the special committee and the Board. Next, Ladenburg reviewed with the Board Ladenburg’s financial analyses of the consideration and delivered to the Board an oral opinion, which opinion was confirmed by delivery of a written opinion, dated June 12, 2011, to the effect that, as of that date and based on and subject to various assumptions, matters considered and limitations described in its opinion, the transaction with JPE is fair, from a financial point of view, to the Company’s stockholders. Next, BB&T outlined the strategic alternatives available to the Company, and presented the Board with BB&T’s opinion that the Proposed Transaction with JPE represents a superior potential outcome for the Company’s stockholders relative to the other possible alternatives. The special committee, having deliberated regarding the terms of the Proposed Transaction, the Ladenburg presentation and opinion and the BB&T presentation, unanimously determined that the investment agreement and the transactions contemplated thereby are advisable and in the best interests of the Company and the Company’s stockholders, and recommended that the Board approve the investment agreement and the transactions contemplated thereby, and that the Board recommend that the Company’s stockholders vote to approve the Equity Investment as set forth in the investment agreement, certain amendments to the Company’s certificate of incorporation as set forth in the investment agreement and the omnibus incentive compensation plan as set forth in the investment agreement. Following the special committee’s recommendation to the Board, the Board, by unanimous vote of those directors in attendance, determined that the investment agreement and the transactions contemplated thereby are advisable and in the best interests of the Company and the Company’s stockholders, and recommended that the Company’s stockholders vote to approve the Equity Investment as set forth in the investment agreement, certain amendments to the Company’s certificate of incorporation as set forth in the investment agreement and the omnibus incentive compensation plan as set forth in the investment agreement.
 
On June 13, 2011, the Company and JPE executed the investment agreement and other transaction documents, and Mr. Para and Michael Welch executed voting agreements.
 
On June 14, 2011, prior to the opening of the market, the Company and JPE issued a joint press release announcing the execution of the investment agreement, and filed a Form 8-K with the SEC describing the terms of the Transaction.


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Reasons for the Proposed Transaction
 
In reaching its determination, the special committee consulted with and received the advice of its financial and legal advisors, discussed certain issues with the Company’s senior management team, and considered a number of factors that it believed supported its decision to recommend that the Company enter into the Investment Agreement and consummate the Equity Investment, and recommend that the stockholders vote in favor of the Proposals, including, but not limited to, the following material factors:
 
  •   the per share price contemplated by the Proposed Transaction was a reasonable discount to the Company’s market price in light of JPE’s business strategy, JPE’s ability to effectuate its business strategy, the stated use of proceeds and the higher multiples received by mid-cap and large-cap public companies in the Company’s industry;
 
  •   the financial analyses presented to the special committee by BB&T and shared with the Board of Directors, as well as the opinion of BB&T that the Proposed Transaction represents a superior potential outcome for the Company’s stockholders relative to the other possible alternatives;
 
  •   the financial analyses presented to the special committee by Ladenburg and shared with the Board of Directors, as well as the opinion of Ladenburg, dated June 12, 2011, to the special committee, which expressly allows reliance on the opinion by those members of the Board of Directors who are not members of the special committee, to the effect that, as of that date, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth therein, the Proposed Transaction is fair, from a financial point of view, to the Company’s stockholders; the full text of the written opinion of Ladenburg is attached as Annex B to this proxy statement;
 
  •   the possible alternatives to the Proposed Transaction, including an alternative sales process or continuing as a standalone company with or without additional bolt-on acquisitions, which alternatives the special committee evaluated with the assistance of Ladenburg and BB&T and determined were less favorable to the Company’s stockholders than the Proposed Transaction given the potential risks, rewards and uncertainties associated with those alternatives;
 
  •   the extensive efforts made by the Company and its advisors over a period of many months to solicit interest on the part of potential acquirors of the Company, with the result that BB&T spoke to approximately 50 potentially interested parties;
 
  •   the expectation that the market price of the Company’s shares would increase significantly following announcement of the Proposed Transaction and allow existing stockholders to sell their shares at a premium to the then-current market price;
 
  •   the fact that the Company’s stockholders would have the ability to share in any upside that might result from any future improved performance on the part of the Company;
 
  •   the reputation of JPE and Mr. Jacobs;
 
  •   the Company’s business, operations, financial condition, strategy and prospects, as well as the risks involved in achieving those prospects, the nature of the third-party logistics industry, and general industry, economic and market conditions, both on an historical and on a prospective basis;
 
  •   the likelihood that the Proposed Transaction would be completed based on, among other things (not in any relative order of importance):
 
  •   the absence of a financing condition in the Investment Agreement;
 
  •   the likelihood and anticipated timing of completing the Proposed Transaction in light of the scope of the conditions to completion, including the absence of significant required regulatory approvals; and


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  •   the ability of JPE and Mr. Jacobs to complete the Proposed Transaction, raise funds in follow-on offerings and complete accretive acquisitions on a large-scale basis;
 
  •   the other terms of the Investment Agreement and related agreements, including:
 
  •   the Company’s ability, at any time from and after the execution of the Investment Agreement but prior to the time the Company’s stockholders adopt the Proposals, to consider and respond to an unsolicited written acquisition proposal, to furnish confidential information to the person making such a proposal and to engage in discussions or negotiations with the person making such a proposal, if the special committee, prior to taking any such actions, determines in good faith that such acquisition proposal either constitutes a superior proposal or could reasonably be expected to lead to a superior proposal;
 
  •   the Board of Directors’ ability (acting upon the recommendation of the special committee), under certain circumstances, to withhold, withdraw, qualify or modify its recommendation that its stockholders vote to adopt the Proposals;
 
  •   the Company’s ability, under certain circumstances, to terminate the Investment Agreement in order to enter into an agreement providing for a superior acquisition proposal, provided that the Company complies with its obligations relating to the entering into of any such agreement and concurrently with the termination of the Investment Agreement pays to JPE a termination fee determined in accordance with the Investment Agreement, in connection with an agreement for a superior acquisition proposal, plus up to $1 million of JPE’s expenses; and
 
  •   the termination fee and expenses payable to JPE under certain circumstances, including as described above, in connection with a termination of the Investment Agreement, which the special committee concluded were reasonable in the context of termination fees and expenses payable in comparable transactions and in light of the overall terms of the Investment Agreement, including the total consideration.
 
The special committee also believed that sufficient procedural safeguards were and are present to ensure the fairness of the Proposed Transaction and to permit the special committee to represent effectively the interests of the Company’s stockholders. These procedural safeguards include:
 
  •   the fact that the special committee is comprised of three independent directors who are not affiliated with JPE or the other Investors and are not employees of the Company or any of its subsidiaries;
 
  •   the fact that, other than their receipt of Board of Directors and special committee fees (which are not contingent upon the consummation of the Proposed Transaction or the special committee’s or the Board’s recommendation of the Proposed Transaction) and their interests described under “Special Factors—Interests of the Company’s Directors and Executive Officers,” members of the special committee do not have interests in the Proposed Transaction different from, or in addition to, those of the Company’s unaffiliated stockholders;
 
  •   the fact that the determination to engage in discussions related to the Proposed Transaction and the consideration and negotiation of the price and other terms of the Proposed Transaction was conducted entirely under the oversight of the members of the special committee without the involvement of any director who is affiliated with the Investors or is a member of the Company’s management and without any limitation on the authority of the special committee to act with respect to any alternative transaction or any related matters;
 
  •   the recognition by the special committee that it had the authority not to recommend the approval of the Proposed Transaction or any other transaction;
 
  •   the special committee’s extensive negotiations with JPE, which, among other things, resulted in an increase in the effective price from $1.65 to $1.75 per share and resulted in significantly better contractual terms than initially proposed by JPE, including the ability of the Company to terminate


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  the Investment Agreement upon the receipt of superior proposal for all or substantially all of the Company and entry into an agreement with respect to same; the capping of JPE’s reimbursable expenses at $1 million; and the elimination of the cashless exercise provision from the Warrants;
 
  •   the fact that the special committee was advised by BB&T, as financial advisor, and R&A, as legal advisor, and the fact that the special committee requested and received from Ladenburg an opinion (based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth therein), as of June 12, 2011, with respect to the fairness of the Proposed Transaction to the Company’s stockholders from a financial point of view; and
 
  •   the fact that the terms and conditions of the Investment Agreement and related agreements were designed to allow the Company to change its recommendation to the Company’s stockholders or terminate the Investment Agreement entirely, upon receipt of a superior proposal, depending on the nature of the superior proposal.
 
In the course of its deliberations, the special committee also considered a variety of risks and other countervailing factors related to entering into the Proposed Transaction, including (not in any relative order of imporance):
 
  •   the risk that the Proposed Transaction might not be completed in a timely manner or at all;
 
  •   the restrictions on the conduct of the Company’s business prior to the completion of the Equity Investment, which may delay or prevent the Company from undertaking business opportunities that may arise or any other action it would otherwise take with respect to the operations of the Company pending completion of the Equity Investment;
 
  •   the risks and costs to the Company if the Proposed Transaction does not close, including the diversion of management and employee attention, potential employee attrition and the potential disruptive effect on business and customer relationships;
 
  •   the possibility that the up to $1 million in JPE’s expenses plus the applicable termination fee payable by the Company upon the termination of the Investment Agreement could discourage other potential acquirors from making a competing bid to acquire the Company; and
 
  •   if the Proposed Transaction is not completed, the Company will be required to pay its own expenses associated with the Investment Agreement, the Equity Investment and the other transactions contemplated by the Investment Agreement as well as, under certain circumstances, pay JPE a termination fee and/or reimburse JPE’s expenses (up to a $1 million cap), in connection with the termination of the Investment Agreement.
 
The foregoing discussion of the factors considered by the special committee is not intended to be exhaustive, but rather includes the principal factors considered by the special committee. The special committee collectively reached the conclusion to approve the Proposed Transaction, the Investment Agreement and the other transactions contemplated by the Investment Agreement in light of the various factors described above and other factors that the members of the special committee believed were appropriate. In view of the wide variety of factors considered by the special committee in connection with its evaluation of the Proposed Transaction and the complexity of these matters, the special committee did not consider it practical, and did not attempt, to quantify, rank or otherwise assign relative weights to the specific factors it considered in reaching its decision and did not undertake to make any specific determination as to whether any particular factor, or any aspect of any particular factor, was favorable or unfavorable to the ultimate determination of the special committee. Rather, the special committee made its recommendation based on the totality of information presented to it and the investigation conducted by it. In considering the factors discussed above, individual members of the special committee may have given different weights to different factors.


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Recommendation of the Company’s Board
 
After careful consideration, the Company’s Board of Directors (excluding Mr. Martell, who recused himself), acting upon the unanimous recommendation of the special committee of the Board of Directors:
 
  •   has determined that the Proposed Transaction and the related Proposals are advisable and in the best interests of the Company and its stockholders;
 
  •   recommends that the Company’s stockholders vote “FOR” the approval of the issuance of the Securities (Proposal 1), the amendment to increase the number of authorized shares of Company common stock (Proposal 2), the amendment to give effect to the Reverse Stock Split (Proposal 3), the amendment to provide that vacancies on the Board of Directors shall be filled by the remaining directors or director (Proposal 4) and the adoption of the Plan (Proposal 5); and
 
  •   if necessary and appropriate, recommends the approval of the adjournment of the special meeting to solicit additional proxies if there are insufficient votes at the time of the special meeting to adopt Proposals 1 through 5 (Proposal 6).
 
Financial Advisor’s Opinion
 
Ladenburg made a presentation to our Board of Directors on June 12, 2011 and subsequently delivered its written opinion to the special committee of our Board of Directors. The opinion stated that, as of June 12, 2011, based upon and subject to the assumptions made, matters considered, procedures followed and limitations on Ladenburg’s review as set forth in the opinion, the Proposed Transaction is fair, from a financial point of view, to our stockholders. The financial terms and other terms of the Proposed Transaction were determined pursuant to negotiations between us, JPE and each of our respective advisors and not pursuant to any recommendation from Ladenburg.
 
The full text of Ladenburg’s written opinion dated as of June 12, 2011, which sets forth the assumptions made, matters considered, procedures followed, and limitations on the review undertaken by Ladenburg in rendering its opinion, is attached as Annex B to this proxy statement and is incorporated herein by reference. Ladenburg’s opinion is not intended to be, and does not constitute, a recommendation to you as to how you should vote or act with respect to the Proposed Transaction or any other matter relating thereto. The summary of the Ladenburg opinion set forth in this proxy statement is qualified in its entirety by reference to the full text of the opinion. We urge you to read the opinion carefully and in its entirety.
 
Ladenburg’s opinion is for the use and benefit of our Board of Directors in connection with its consideration of the Proposed Transaction. Ladenburg’s opinion may not be used by any other person or for any other purpose without Ladenburg’s prior written consent. Ladenburg’s opinion should not be construed as creating any fiduciary duty on its part to any party.
 
Ladenburg was not requested to opine as to, and its opinion does not address, the relative merits of the Proposed Transaction as compared to any alternative business strategy that might exist for us, whether we should complete the Proposed Transaction, and other alternatives to the Proposed Transaction that might exist for us. Ladenburg has not been retained to render an opinion as to whether the Proposed Transaction is the best reasonably available to us. Ladenburg does not express any opinion as to the underlying valuation or future performance of the Company or the price at which our securities might trade at any time in the future.
 
Ladenburg’s analysis and opinion are necessarily based upon market, economic and other conditions, as they existed on, and could be evaluated as of, June 12, 2011. Accordingly, although subsequent developments may affect its opinion, Ladenburg assumed no obligation to update, review or reaffirm its opinion to us or any other person.


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In arriving at its opinion, Ladenburg took into account an assessment of general economic, market and financial conditions, as well as its experience in connection with similar transactions and securities valuations generally. In so doing, among other things, Ladenburg:
 
  •   Reviewed a draft of the Investment Agreement dated as of June 10, 2011;
 
  •   Reviewed a draft of the Certificate of Designation of the Preferred Stock as of June 10, 2011;
 
  •   Reviewed a draft of the Warrant Certificate as of June 10, 2011;
 
  •   Reviewed publicly available financial information and other data with respect to the Company that it deemed relevant, including its Annual Report on Form 10-K for the year ended December 31, 2010 and its Quarterly Report on Form 10-Q for the quarter ended March 31, 2011;
 
  •   Reviewed non-public information and other data with respect to the Company, including financial projections for the five-year period ending December 31, 2015 (the “Standalone Projections”), and other internal financial information and management reports;
 
  •   Reviewed financial projections prepared by the Company and BB&T, assuming one bolt-on acquisition per year starting in 2012 (“Standalone with Acquisitions Projections”);
 
  •   Reviewed financial projections assuming the Proposed Transaction takes place (“JPE Projections”);
 
  •   Reviewed and analyzed the Proposed Transaction’s pro forma impact on the Company’s outstanding securities and stockholder ownership;
 
  •   Considered the historical financial results and present financial condition of the Company;
 
  •   Reviewed certain publicly available information concerning the trading of, and the trading market for, the Company’s common stock;
 
  •   Reviewed and analyzed the Company’s projected unlevered free cash flows derived from the Standalone Projections and prepared a discounted cash flow analysis;
 
  •   Reviewed and analyzed certain financial characteristics of publicly-traded companies that were deemed to have characteristics comparable to the Company;
 
  •   Reviewed and analyzed certain financial characteristics of target companies in transactions where such target company was deemed to have characteristics comparable to that of the Company;
 
  •   Reviewed and compared the terms of the Proposed Transaction to the terms of certain private investments in public equity (“PIPE”) and follow-on offering transactions;
 
  •   Reviewed and discussed with the Company’s management, other Company representatives, JPE and BB&T certain financial and operating information furnished by them, including the Standalone Projections, Standalone with Acquisitions Projections and JPE Projections (collectively, the “Projections”); and
 
  •   Performed such other analyses and examinations as were deemed appropriate.
 
In arriving at its opinion, with our consent, Ladenburg relied upon and assumed, without assuming any responsibility for independent verification, the accuracy and completeness of all of the financial and other information that was supplied or otherwise made available to Ladenburg and Ladenburg further relied upon the assurances of our management that we were not aware of any facts or circumstances that would make any such information inaccurate or misleading. With respect to the financial information and the Projections reviewed, Ladenburg assumed that such information was reasonably prepared on a basis reflecting the best currently available estimates and judgments, and that such information provided a reasonable basis upon which it could make its analysis and form an opinion. The Projections were solely used in connection with the rendering of Ladenburg’s fairness opinion. Stockholders should not place reliance upon such Projections, as they are not necessarily an indication of what our revenues and profit margins will be in the future. The Projections were prepared by our management, JPE and BB&T and are not to be interpreted as projections of future performance (or “guidance”) by the Company.


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Ladenburg assumed that the Proposed Transaction will be consummated in a manner that complies in all respects with applicable foreign, federal, state and local laws, rules and regulations. Ladenburg assumed, with our consent, that the final executed forms of the Investment Agreement, Certificate of Designation and Warrant Certificate do not differ in any material respect from the drafts Ladenburg reviewed and that the Proposed Transaction will be consummated on the terms set forth in the Investment Agreement, without further amendments thereto, and without waiver by the Company of conditions to any of its obligations thereunder or in the alternative that any such amendments or waivers thereto will not be detrimental to the Company or its stockholders in any material respect.
 
In connection with rendering its opinion, Ladenburg performed certain financial, comparative and other analyses as summarized below. Each of the analyses conducted by Ladenburg was carried out to provide a different perspective on the Proposed Transaction, and to enhance the total mix of information available. Ladenburg did not form a conclusion as to whether any individual analysis, considered in isolation, supported or failed to support its opinion. Further, the summary of Ladenburg’s analyses described below is not a complete description of the analyses underlying Ladenburg’s opinion. The preparation of a fairness opinion is a complex process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances and, therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. In arriving at its opinion, Ladenburg made qualitative judgments as to the relevance of each analysis and factors that it considered. Also, Ladenburg may have given various analyses more or less weight than other analyses, and may have deemed various assumptions more or less probable than other assumptions, so that the range of valuations resulting from any particular analysis described below should not be taken to be Ladenburg’s view of the value of our assets. The estimates contained in Ladenburg’s analyses and the ranges of valuations resulting from any particular analysis are not necessarily indicative of actual values or actual future results, which may be significantly more or less favorable than suggested by such analyses. Also, analyses relating to the value of businesses or assets neither purport to be appraisals nor do they necessarily reflect the prices at which businesses or assets may actually be sold. Accordingly, Ladenburg’s analyses and estimates are inherently subject to substantial uncertainty. Ladenburg believes that its analyses must be considered as a whole and that selecting portions of its analyses or the factors it considered, without considering all analyses and factors collectively, could create a misleading or incomplete view of the process underlying the analyses performed by Ladenburg in connection with the preparation of its opinion.
 
The summaries of the financial reviews and analyses include information presented in tabular format. To fully understand Ladenburg’s financial reviews and analyses, you must read the tables together with the accompanying text of each summary. The tables alone do not constitute a complete description of the financial analyses, including the methodologies and assumptions underlying the analyses, and if viewed in isolation could create a misleading or incomplete view of the financial analyses Ladenburg performed.
 
The analyses performed were prepared solely as part of Ladenburg’s analysis of the fairness of the Proposed Transaction to our stockholders from a financial point of view, and were provided to the special committee of our Board of Directors in connection with the delivery of Ladenburg’s opinion. Ladenburg’s opinion was just one of the several factors the special committee and our Board of Directors took into account in making its determination to approve the Proposed Transaction, including those described elsewhere in this proxy statement.
 
Analysis of Terms
 
Ladenburg analyzed 41 convertible preferred and common stock PIPEs and 34 follow-on offerings of U.S. traded companies since January 2008, where the shares issued in all transactions exceeded the shares outstanding at the time of the transaction and the transaction values were between $20 million and $1 billion. The analysis focused on the following terms:
 
  •   Security discount/premium
 
  •   Coupon
 
  •   Warrant coverage
 
  •   Warrant discount/premium


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Ladenburg noted that the security discount and the coupon of the Equity Investment are not outliers as compared to the universe of reviewed transactions and they do not appear unreasonable when compared to the terms of other transactions. However, Ladenburg noted that the warrant coverage and warrant discount are significantly higher than the mean and median of comparable transactions, particularly those of profitable companies.
 
 
Valuation Overview
 
Ladenburg reviewed three strategic alternatives deemed to be currently available for the Company and generated an indicated per share equity valuation range for each alternative.
 
The “Standalone” alternative assumed the Company continues on its current growth trajectory with no future acquisitions or capital raises. Ladenburg generated an indicated valuation range for this alternative based on comparable company analysis, comparable transaction analysis and discounted cash flow analyses, each as more fully discussed below. Ladenburg weighted the three approaches 60%, 20%, 20%, and arrived at an indicated equity value per share range of approximately $2.20 to approximately $2.60.
 
The “Standalone with Acquisitions” alternative assumed the Company completes one bolt-on acquisition every year (starting in 2012) and was based on the Standalone with Acquisitions Projections prepared by the Company and BB&T. Under this alternative, the Company would achieve accelerated growth and increased scale and thus command a higher EBITDA multiple at the end of the projection period (2015) than under the Standalone alternative. Ladenburg generated an indicated valuation range for this alternative based on discounting the projected 2015 share price of $8.81 by utilizing discount rates ranging from 19.5% to 20.5%, and arrived at an indicated equity value per share range of approximately $3.80 to approximately $3.90. For purposes of Ladenburg’s analyses, “EBITDA” means earnings before interest, taxes, depreciation and amortization, as adjusted for add-backs for non-cash stock compensation expenses and one-time charges.
 
The “JPE PIPE” alternative assumed the Proposed Transaction takes place and the Company would raise additional capital subsequent to the Proposed Transaction to support acquisitions. This alternative was based on the JPE Projections prepared by JPE and BB&T and assumed that the Company, as a result of its significantly increased size, would command a higher EBITDA multiple at the end of the projection period (2015) than under the Standalone with Acquisitions alternative. Ladenburg generated an indicated valuation range for this alternative based on discounting the projected 2015 share price of $10.63 by utilizing discount rates ranging from 20.5% to 25.5%, and arrived at an indicated equity value per share range of approximately $3.80 to approximately $4.50.
 
Ladenburg noted that the indicated equity value per share range in the JPE PIPE alternative was higher than the indicated value ranges in the other two alternatives.


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Standalone Comparable Company Analysis
 
A selected comparable company analysis reviews the trading multiples of publicly traded companies that are similar to the Company with respect to business and revenue model, operating sector, size and target customer base.
 
Ladenburg identified the following 13 companies that it deemed comparable to the Company with respect to their industry sector and operating model:
 
Large-Cap Comparables:
 
  •   CH Robinson Worldwide Inc.
 
  •   Expeditors International of Washington Inc.
 
Mid-Cap Comparables:
 
  •   Landstar System Inc.
 
  •   Uti Worldwide Inc.
 
  •   Hub Group Inc.
 
  •   Forward Air Corp.
 
  •   Roadrunner Transportation Systems, Inc.
 
  •   Echo Global Logistics, Inc.
 
  •   Quality Distribution Inc.
 
  •   Universal Truckload Services Inc.
 
  •   Pacer International Inc.
 
Small-Cap Comparables:
 
  •   AutoInfo Inc.
 
  •   US1 Industries Inc.
 
Multiples utilizing enterprise value were used in the analyses. For comparison purposes, all operating profits including EBITDA were normalized to exclude unusual and extraordinary expenses and income. For purposes of Ladenburg’s analyses, “enterprise value” means equity value plus all interest-bearing debt less cash.
 
Ladenburg generated the following multiples worth noting with respect to the comparable companies:
 
                                 
Enterprise Value Multiple of
  Mean     Median     High     Low  
 
LTM EBITDA – All Comparables
    11.1 x     11.7 x     17.8 x     5.1 x
LTM EBITDA – Small-Cap Comparables
    5.8 x     5.8 x     6.6 x     5.1 x
 
The Company, from a size perspective, is most comparable to the Small-Cap Comparables. Ladenburg noted that the Small-Cap Comparables are less profitable than the Company, with EBITDA margins ranging from approximately 2.1% to 2.9%, compared with the Company’s approximately 6.2%. Further, the Small-Cap Comparables experienced lower growth than the Company, with one-year EBITDA growth average of 55.8%, compared with the Company’s approximately 68.4%. In addition, AutoInfo’s leverage is significantly higher than that of the Company.
 
Ladenburg selected an appropriate multiple range for the Company by examining the range indicated by the comparable companies and taking into account certain company-specific factors. Ladenburg selected multiples above the mean of the Small-Cap Comparable companies to reflect the Company’s higher growth


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and lower leverage. Based on the above factors, Ladenburg applied EBITDA multiples of 6.5x to 7.5x to the Company’s LTM EBITDA, and calculated a range of indicated enterprise values for the Company. Ladenburg then deducted net debt of approximately $2.0 million to derive a per share range of equity values of approximately $1.90 to approximately $2.30, based on approximately 34.0 million outstanding shares and in-the-money options/warrants utilizing the treasury stock method.
 
None of the comparable companies have characteristics identical to the Company. An analysis of publicly-traded comparable companies is not mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the comparable companies and other factors that could affect the public trading of the comparable companies.
 
Standalone Comparable Transaction Analysis
 
A comparable transaction analysis involves a review of merger, acquisition and asset purchase transactions involving target companies that are in related industries to the Company. The comparable transaction analysis generally provides the widest range of values due to the varying importance of an acquisition to a buyer (i.e., a strategic buyer willing to pay more than a financial buyer) in addition to the potential differences in the transaction process (i.e., competitiveness among potential buyers).
 
Ladenburg located 25 transactions announced since January 2008 involving target companies providing freight transport and logistics services and for which financial information was available.
 
     
Target
 
Acquiror
 
DBA Distribution Services, Inc. 
  Radiant Logistics, Inc. (OTCPK:RLGT)
Wim Bosman Holding B.V.
  Mainfreight Limited (NZSE:MFT)
Dynamex Inc. 
  TransForce Inc. (TSX:TFI)
Morgan Southern, Inc. 
  Roadrunner Transportation Systems (NYSE:RRTS)
Total Logistic Control LLC
  Ryder Integrated Logistics Inc.
ATC Technology Corporation
  Laxey Partners Ltd.
Mar-Ter Spedizioni S.p.A. 
  Mid Industry Capital SpA (BIT:MIC)
Summit Logistics International
  Toll Holdings Ltd.
Air Tiger Express Companies, Inc. 
  Kawasaki Kisen Kaisha Ltd. (TSE:9107)
Livingston International Income Fund
  Sterling Partners; CPP Investment Board
RayTrans Distribution Services, Inc. 
  Echo Global Logistics, Inc. (NasdaqGS:ECHO)
Adcom Express, Inc. 
  Radiant Logistics, Inc. (OTCPK:RLGT)
LGT Logistics Holding AB
  Axcel Industriinvestor A/S
J Martens AS
  Kuehn & Nagel International AG (SWX:KNIN)
ATS Andlauer Transportation Services Limited Partnership
  Andlauer Management Group Inc.
ELI-Logistik GmbH
  Wincanton plc (LSE:WIN)
Alloin Transports
  Kuehne & Nagel International AG (SWX:KNIN)
ABX LOGISTICS Worldwide S.A./N.V. 
  DSV A/S (CPSE:DSV)
CrossGlobe Group
  Pine Creek Partners
Service Express, Inc. 
  Forward Air Solutions, Inc.
Transera International Logistics Ltd. 
  CH Robinson Worldwide Inc. (NasdaqGS:CHRW)
Compagnie Européenne de Prestations Logistiques SAS
  Arcapita Bank B.S.C.(c); European Capital Ltd.
Groupe Malherbe
  Natixis Investissement Partners
Pinch Holdings, Inc. 
  Forward Air Corp.
Concert Group Logistics, Inc. 
  Express-1 Expedited Solutions, Inc. (AMEX:XPO)
 
Based on the information disclosed with respect to the targets in each of the comparable transactions, Ladenburg calculated and compared the enterprise values as a multiple of LTM revenue and LTM EBITDA.


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Ladenburg noted the following with respect to the multiples generated:
 
                                 
Multiple of Enterprise Value to
  Mean     Median     High     Low  
 
LTM revenue
    0.69 x     0.49 x     3.33 x     0.18 x
LTM EBITDA
    7.7 x     6.9 x     13.9 x     4.5 x
 
Ladenburg selected an appropriate multiple range for the Company by examining the range indicated by the comparable companies and taking into account certain company-specific factors. Based on the above factors, Ladenburg applied EBITDA multiples of 7.0x to 8.0x to the Company’s LTM EBITDA, and calculated a range of indicated enterprise values for the Company. Ladenburg then deducted net debt of approximately $2.0 million to derive a per share range of equity values of approximately $2.10 to approximately $2.40, based on approximately 34.0 million outstanding shares and in-the-money options/warrants utilizing the treasury stock method.
 
None of the target companies in the comparable transactions have characteristics identical to the Company. Accordingly, an analysis of comparable business combinations is not mathematical; rather it involves complex considerations and judgments concerning differences in financial and operating characteristics of the target companies in the comparable transactions and other factors that could affect the respective acquisition values.
 
Standalone Discounted Cash Flow Analysis
 
A discounted cash flow analysis estimates value based upon a company’s projected future free cash flow discounted at a rate reflecting risks inherent in its business and capital structure. Unlevered free cash flow represents the amount of cash generated and available for principal, interest and dividend payments after providing for ongoing business operations.
 
While the discounted cash flow analysis is the most scientific of the methodologies used, it is dependent on projections and is further dependent on numerous industry-specific and macroeconomic factors.
 
Ladenburg utilized the Standalone Projections, which forecast a compound annual growth rate, or CAGR, of approximately 32.6% EBITDA growth from fiscal year, or FY, 2010 through FY2013, representing an EBITDA margin improvement from approximately 6.5% to approximately 8.4% and a revenue CAGR of approximately 21.8%.
 
To arrive at a present value, Ladenburg utilized discount rates ranging from 15.0% to 17.0%. This was based on an estimated weighted average cost of capital of 16.0% (based on an estimated weighted average cost of debt of 2.5% and 17.5% estimated cost of equity). The cost of equity calculation was derived utilizing the unlevered beta of the comparable companies, the appropriate equity risk and size premiums and a company specific risk factor, reflecting the risks associated with the Standalone Projections, including, but not limited to, achieving the projected revenue and EBITDA growth.
 
Ladenburg presented a range of terminal values at the end of the forecast period by applying a range of terminal exit multiples based on EBITDA as well as long term perpetual growth.
 
Utilizing terminal EBITDA multiples of between 5.5x and 6.5x and long term perpetual growth rates of between 4.5% and 5.5%, Ladenburg calculated a range of indicated enterprise values and then deducted net debt of approximately $2.0 million to derive a per share range of equity values of approximately $3.00 to approximately $3.80, based on approximately 34.0 million outstanding shares and in-the-money options/warrants utilizing the treasury stock method.
 
Conclusion
 
Based on the information and analyses set forth above, Ladenburg delivered its written opinion to the special committee of our Board of Directors, which stated that, as of June 12, 2011, based upon and subject to the assumptions made, matters considered, procedures followed and limitations on its review as set forth in the opinion, the Proposed Transaction is fair, from a financial point of view, to the Company’s stockholders.


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As part of its investment banking business, Ladenburg regularly is engaged in the evaluation of businesses and their securities in connection with mergers, acquisitions, corporate restructurings, negotiated underwritings, private placements and for other purposes. We determined to use the services of Ladenburg because it is a recognized investment banking firm that has substantial experience in similar matters. Ladenburg has received a fee of $140,000, of which $90,000 was paid upon execution of the engagement letter and $40,000 was paid when Ladenburg notified the Company that Ladenburg was prepared to deliver the opinion. Ladenburg is also entitled to reimbursement for its reasonable expenses, including attorneys’ fees. Also, we have agreed to indemnify Ladenburg and related persons and entities for certain liabilities that may relate to, or arise out of, its engagement. Further, Ladenburg has not previously provided, nor are there any pending agreements to provide, any other services to us.
 
In the ordinary course of business, Ladenburg, certain of Ladenburg’s affiliates, as well as investment funds in which Ladenburg or its affiliates may have financial interests, may acquire, hold or sell long or short positions, or trade or otherwise effect transactions in debt, equity and other securities and financial instruments (including bank loans and other obligations) of, or investments in, the Company or any other party that may be involved in the Proposed Transaction and their respective affiliates.
 
Ownership Upon Closing
 
Set forth below is a table depicting the ownership of Company common stock upon the closing of the Proposed Transaction, based on the following assumptions (and without giving effect to the Reverse Stock Split, which will not impact relative ownership percentages):
 
  •   the number of outstanding shares of Company common stock is based upon the number outstanding as of the record date of [     ], 2011;
 
  •   the Preferred Stock is immediately converted at the closing;
 
  •   the Warrants are immediately exercised at the closing; and
 
  •   no options for the purchase of Company common stock will be exercised.
 
                                                                                 
          Number
                               
          of Shares
                               
    Number of
    of
                      Common Stock Owned
       
    Shares of
    Preferred
    Common Stock Owned
    Number of
    Common Stock Owned
    Assuming Conversion of all
       
    Common
    Stock
    Assuming Conversion
    Warrants
    Assuming Conversion of
    Preferred Stock and Exercise
       
    Name   Stock Owned     Owned     of all Preferred Stock     Owned     all Warrants     of all Warrants        
                # of Shares
    % of
          # of Shares
    % of
    # of Shares of
    % of
       
                of Common
    Common
          of Common
    Common
    Common
    Common
       
                Stock     Stock           Stock     Stock     Stock     Stock        
Investors     0       75,000       42,857,143       [     ]       42,857,143       42,857,143       [     ]       85,714,286       [     ]          
Other Shareholders
    [     ]       0       [     ]       [     ]       0       [     ]       [     ]       [     ]       [     ]          
                                                                                 
Total
    [     ]       75,000       [     ]               42,857,143       [     ]               [     ]                  
                                                                                 
 
Use of Proceeds
 
The Company expects to use the proceeds of the Equity Investment primarily to make strategic acquisitions and any balance will be used for general corporate purposes.
 
Interests of the Company’s Directors and Executive Officers in the Proposed Transaction
 
In considering the recommendation of the Board of Directors that you vote to approve the Proposals, you should be aware that aside from their interests as Company stockholders, the Company’s directors and executive officers have interests in the Proposed Transaction that may be different from, or in addition to, those of other Company stockholders generally. The members of the special committee and the Board of Directors were aware of and considered these interests, among other matters, in evaluating and negotiating the Proposed Transaction, and in recommending to the Company’s stockholders that the Proposals be approved. See the section entitled “The Proposed Transaction—Background of the Proposed Transaction” beginning on


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page [  ]. The Company’s stockholders should take these interests into account in deciding whether to vote “FOR” the approval and adoption of the Proposals.
 
As described in more detail below, the interests of the Company’s directors and executive officers in the Proposed Transaction that are different from, or in addition to, those of other Company stockholders may include:
 
  •   the accelerated vesting of option awards held by our directors and executive officers upon cessation of services to the Board of Directors or termination of employment under certain circumstances, in each case following consummation of the Equity Investment; and
 
  •   in the case of executive officers, the receipt of certain severance payments and benefits upon termination of employment under certain circumstances following consummation of the Equity Investment.
 
In addition, James Martell, who is currently the Chairman of the Board of Directors, will continue as a director following the closing and will participate with JPE as an Investor in the Proposed Transaction. Mr. Martell recused himself from the activities of the Board of Directors relating to the Proposed Transaction after being advised that JPE was interested in having Mr. Martell remain on the Board post-closing and that, if Mr. Martell desired, JPE would extend to Mr. Martell an opportunity to invest in the Proposed Transaction along with JPE.
 
These interests are described in more detail below, and certain of them are quantified in the tables that follow the narrative below.
 
Company Stock Options
 
The Investment Agreement does not provide for special treatment of outstanding options to purchase shares of our common stock, and outstanding options do not automatically vest under the terms of our stock option plan as a result of the Proposed Transaction. Except for the options held by Mr. Martell, each unvested option held by our non-employee directors and each unvested option held by our current employee directors that was received pursuant to such employee’s service as a director will vest and become immediately exercisable upon consummation of the Equity Investment, at which time such directors’ services on the Board of Directors will cease. All other unvested options will remain unvested and outstanding pursuant to their current terms and conditions, unless and until our executive officers experience a qualifying termination of employment as described in more detail in the section entitled “—Employment Agreements with Executive Officers”. All outstanding options held by Mr. Michael Welch were granted to him in connection with his service as an employee and, therefore, will not accelerate vesting when his service as a director ceases.
 
Employment Agreements with Executive Officers
 
We have previously entered into employment agreements with each of Messrs. Michael Welch, as Chief Executive Officer, and John Welch, as Chief Financial Officer. We plan to enter into amendments to these agreements in connection with the Proposed Transaction. The following summary describes the current terms of each Executive’s agreement and does not reflect any amendments that may be entered into following the date of this Proxy Statement.
 
Under the agreements with each of Messrs. Michael Welch and John Welch, if the executive officer’s employment is terminated without cause (as defined in the employment agreements), or if the executive officer resigns for good reason (as defined in the employment agreements) within one year following a change in control (as defined in the employment agreements), such as the Proposed Transaction, then the executive officer will receive:
 
  •   a lump-sum payment equal to the sum of (a) one year’s base salary and (b) the greater of (1) the executive officer’s performance-based bonus payments for the year preceding the date of termination or (2) the executive officer’s average annual performance-based bonus during the two years immediately preceding the termination;


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  •   one year continued benefits for the executive officer and his dependents under all health, dental, disability, accident and life insurance plans or arrangements in which the executive officer or his dependents were participating immediately prior to the date of the executive officer’s termination; and
 
  •   immediate vesting of outstanding options.
 
Under their respective employment agreements with the Company, Messrs. Michael Welch and John Welch are subject to certain restrictive covenants regarding competition, solicitation and confidentiality. The non-competition and non-solicitation covenants apply during their employment and for the one-year period following the termination of their employment, and the confidentiality covenant applies during the term of their respective employment agreements and at all times thereafter.
 
The following definitions apply to the employment agreements with each of Messrs. Michael Welch and John Welch.
 
Cause”, for purposes of the employment agreements, generally means (i) the executive officer’s material violation of any of the provisions of their employment agreement, or the rules, policies, and/or procedures of the Company, or commission of any material act of fraud, misappropriation, breach of fiduciary duty or theft against or from the Company, (ii) the executive officer’s violation of any law, rule or regulation of a governmental authority or regulatory body with jurisdiction over the Company or the executive officer relative to the conduct of the executive officer in connection with the Company’s business or its securities or (iii) the conviction of the executive officer of a felony under the laws of the United States of America or any state therein. In the event the executive officer engages in conduct described in clauses (i) or (ii) of the definition of cause, the executive officer will have an opportunity to cure such conduct within 30 days after the Company provides written notice to the executive officer. If the executive officer fails to cure such conduct within the 30-day period or, if the executive officer commits the same violation within 12 months of receiving notice from the Company, then the Company may terminate the executive officer’s employment for cause.
 
Good reason”, for purposes of the employment agreements, will exist if, without the executive officer’s express written consent (i) the Company assigns to the executive officer duties of a non-executive nature or for which the executive officer is not reasonably equipped by his skills and experience, (ii) the Company reduces the salary of the executive officer, or materially reduces the amount of paid vacations to which he is entitled, or his fringe benefits and perquisites, (iii) the Company requires the executive officer to relocate his principal business office or his principal place of residence greater than 50 miles outside of St. Joseph, Michigan, or assigns to the executive officer duties that would reasonably require such relocation, (iv) the Company requires the executive officer, or assigns duties to the executive officer that would reasonably require him, to spend more than 60 normal working days away from the St. Joseph, Michigan area during any consecutive 12-month period, (v) the Company fails to provide office facilities, secretarial services and other administrative services to the executive officer, which are substantially equivalent to the facilities and services provided to executive officer on the date the executive officer entered into the employment agreement or (vi) the Company terminates incentive plans and benefit plans or arrangements, or reduces or limits the executive officer’s participation therein relative to the level of participation of other executives of similar rank, to such an extent as to materially reduce the aggregate value of the executive officer’s incentive compensation and benefits below their aggregate value as of the date the executive officer entered into the employment agreement.
 
Arrangements with our Directors
 
We have previously entered into an employment agreement with Daniel Para, a director of the Company, in his capacity as Chief Executive Officer of Concert Group Logistics, Inc., a wholly owned subsidiary of the Company. We plan to enter into an amendment to Mr. Para’s agreement in connection with the Proposed Transaction. The following summary describes the current terms of Mr. Para’s agreement and does not reflect any amendment that may be entered into following the date of this Proxy Statement.
 
Mr. Para’s employment agreement provides for severance benefits and payments substantially similar to the benefits and payments payable to Messrs. Michael Welch and John Welch, as well as substantially similar restrictive covenants, in each case as described above in the section entitled “—Employment Agreements with


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Executive Officers”. In addition, the definitions contained in Mr. Para’s employment agreement are identical to the definitions contained in Messrs. Michael Welch and John Welch, except that clauses (iii) and (iv) of the definition of good reason apply with respect to the greater Chicago metropolitan area instead of St. Joseph, Michigan. As with the employment agreements with Messrs. Michael Welch and John Welch, the Proposed Transaction will be a change of control under Mr. Para’s employment agreement.
 
Under the terms of the option award agreement for options granted to directors pursuant to the Company’s Amended and Restated 2001 Stock Option Plan, if, within one year following a change in control of the Company (which includes the Proposed Transaction), the director’s service as a member of the Board of Directors ceases for any reason, then any unvested options held by such director will immediately vest and become exercisable upon the cessation of service. Pursuant to the Investment Agreement, with the exception of Mr. James Martell, the service of the Company’s current directors will terminate upon the consummation of the Proposed Transaction and their outstanding options will vest and become exercisable at such time.
 
Mr. Martell, who is currently Chairman of the Board of Directors, and who will continue as a director following the consummation of the Proposed Transaction, will be an Investor in the Proposed Transaction. The details of Mr. Martell’s investment are as follows:
 
                         
    Number of
    Number of Shares
       
    Shares of
    of Common Stock
    Aggregate
 
    Preferred
    Subject to
    Purchase
 
Director   Stock(1)     Warrants(2)     Price  
   
 
James J. Martell
    725       414,286     $ 725,000  
 
 
(1) Shares of Preferred Stock have an initial conversion price of $1.75 per share of Company common stock, without giving effect to the 4:1 Reverse Stock Split. Giving effect to the 4:1 Reverse Stock Split, shares of Preferred Stock have an initial conversion price of $7.00 per share of Company common stock.
 
(2) Share numbers in this column do not give effect to the 4:1 Reverse Stock Split. The initial exercise price of the Warrants is $1.75 per share of Company common stock, without giving effect to the 4:1 Reverse Stock Split. Giving effect to the 4:1 Reverse Stock Split, the initial exercise price of the Warrants is $7.00 per share of Company common stock.
 
Quantification of Payments and Benefits
 
The following table shows the amounts of payments and benefits that each director and executive officer of the Company would receive in connection with the Proposed Transaction, assuming the consummation of the Proposed Transaction occurred on June 30, 2011, the latest practicable date prior to the filing of this proxy


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statement, and, as applicable, the service of the director ceased and the employment of the executive officer was terminated by the Company without cause or by the executive officer for good reason, in each case, on such date.
 
Executive Officers and Directors
 
                                         
                  Perquisites and
     
Name     Cash ($)(1)     Equity ($)(2)     Benefits ($)(3)     Total ($)
Executive Officers
 
                                         
Michael R. Welch –
      391,900         109,300         5,909         497,109  
President and Chief
                                       
Executive Officer
                                       
                                         
                                         
John D. Welch – Chief
      236,000         38,558         5,717         280,275  
Financial Officer
                                       
                                         
                                         
Daniel Para – Director,
      227,300         113,760         5,284         346,344  
President and Chief
                                       
Executive Officers of
                                       
Concert Group Logistics,
                                       
Inc.
                                       
                                         
                                         
James J. Martell
                28,842                   28,842  
                                         
                                         
Jay N. Taylor
                29,500                   29,500  
                                         
                                         
Calvin (Pete) R. Whitehead
                28,550                   28,550  
                                         
                                         
Jennifer H. Dorris
                39,806                   39,806  
                                         
                                         
John F. Affleck–Graves
                27,465                   27,465  
                                         
 
(1) As described above, the cash payments to the named executive officers and Mr. Para consist of (a) a lump-sum payment equal to the sum of the employee’s one year’s base salary and (b) the greater of (1) his performance-based bonus payments for the year preceding the date of termination or (2) his average annual bonus during the two years immediately preceding the termination payment, in each case, payable upon a qualifying termination of employment following the consummation of the Proposed Transaction. The salary and bonus components of the cash severance, respectively, for each employee are as follows: (i) Mr. Michael Welch - $240,000 and $151,900; (ii) Mr. John Welch - $160,000 and 76,000; and (ii) Mr. Para - $180,000 and $47,300. The cash payments are “double-trigger” in that they are payable upon a qualifying termination of the executive officer’s employment within one year following consummation of the Proposed Transaction. These cash payments are based on each employee’s base salary as of June 30, 2011 and bonus payments made with respect to 2010 and 2009. As a result, if the employee’s base salary or bonus payment increases prior to the date the employee’s employment is terminated, actual payment to the employee may be greater than set forth in this table.
 
(2) As described above, the equity amounts consist of accelerated vesting of unvested option awards, which is “double-trigger” in that it will occur immediately upon a qualifying termination of employment or cessation of services on the board for any reason, in each case, within one year following consummation of the Proposed Transaction. Pursuant to the Investment Agreement, with the exception of Mr. James Martell, the service of each of the Company’s current directors will terminate upon the consummation of the Proposed Transaction and their outstanding options will vest and become exercisable at such time. The value of the option awards is based on the average per share closing price of Company common stock over the five business days following public announcement of the Proposed Transaction, or $2.772. As a result, if the per share price of Company common stock increases prior to the date the holder exercises the option award, actual equity amounts may be greater than set forth in this table.


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(3) The amounts in this column represent the aggregate incremental cost to the Company with respect to continued health and welfare benefits to be provided to the employee and his dependents for a period of one year following a qualifying termination of employment within one year following consummation of the Proposed Transaction. The Company has assumed, for purposes of the calculation, that the costs to the Company for the one-year period following a qualifying termination of employment will be the same as the costs to the Company for 2010.
 
(4) The equity amount to Mr. Para represents total value of stock options that will accelerate vesting immediately upon Mr. Para’s termination of employment by the Company other than for cause or by him for good reason and upon Mr. Para’s ceasing to be a director. Of the equity amount listed in the table, $8,760 is attributable to options that Mr. Para received for services rendered as a director, which will immediately vest and become exercisable upon consummation of the Proposed Transaction when Mr. Para’s service as a director ceases.
 
Payment in Respect of Vested Options
 
                 
        Resulting Consideration
    Number of Shares Underlying
  from Vested Option
Name
  Vested Option Awards (#)   Awards(1)($)
 
Executive Officers
               
Michael Welch
    413,333       763,560  
John Welch
    42,333       61,070  
Directors
               
Daniel Para(1)
    50,694       82,490  
James J. Martell
    281,944       488,508  
Jay N. Taylor
    179,167       331,400  
Calvin (Pete) R. Whitehead
    181,944       335,100  
Jennifer H. Dorris
    175,694       324,844  
John F. Affleck–Graves
    157,639       238,885  
 
(1) The value of the option awards is based on the average per share closing price of the Company common stock over the five business days following public announcement of the Proposed Transaction, or $2.772. As a result, if the per share price of Company common stock increases prior to the date the holder exercises the option award, actual equity amounts may be greater than set forth in this table.
 
Regulatory Approvals
 
Under the Investment Agreement, the Company and the Investors have agreed to use their reasonable best efforts to obtain all required governmental approvals in connection with the completion of the Proposed Transaction.
 
The Company and JPE have determined that no filing under the HSR Act is required in connection with the Equity Investment.
 
We are unaware of any material federal, state or foreign regulatory requirements or approvals required for completion of the Equity Investment.
 
Special Considerations
 
The presence of a significant stockholder may affect the ability of a third party to acquire the Company. As of the record date, there were [     ] shares of Company common stock outstanding, plus outstanding options to purchase an additional [     ] shares of Company common stock. Based upon the number of shares of Company common stock outstanding on the record date, and excluding any shares issuable upon the exercise of currently outstanding options, JPE would have held in the aggregate approximately [     ]% of the total voting power of the Company’s capital stock before giving effect to the


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exercise of any Warrants, and approximately [     ]% of the total voting power of the Company’s capital stock after giving effect to the exercise of all of the Warrants. Because the Preferred Stock votes on an “as converted” basis, the conversion of the Preferred Stock into Company common stock will not effect the general voting power allocable to the Preferred Stock upon its issuance. The Reverse Stock Split will not effect the relative percentage of the voting power held by JPE or any other stockholder.
 
In addition, it is expected that the Company will use the proceeds of the Equity Investment principally to make acquisitions, and JPE intends following the closing to raise additional capital to consummate acquisitions. The additional capital may include debt financing, which would increase the Company’s leverage risk and debt service expense, or additional equity financing, which would further dilute the ownership of the Company’s existing stockholders.
 
U.S. Federal Income Tax Matters
 
For U.S. Federal income tax purposes, no income, gain or loss will be recognized by the Company’s stockholders in connection with the Proposed Transaction.
 
Absence of Appraisal Rights
 
The Company is incorporated in the State of Delaware and, accordingly, subject to the Delaware General Corporation Law, or the “DGCL”. The Company’s stockholders are not entitled to appraisal rights under the DGCL with respect to the Proposed Transaction.


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THE INVESTMENT AGREEMENT
 
On June 13, 2011, the Company entered into the Investment Agreement with the Investors. The summary of the material terms of the Investment Agreement below and elsewhere in this proxy statement is qualified in its entirety by reference to the Investment Agreement, a copy of which is attached to this proxy statement as Annex A and which we incorporate by reference into this document. This summary may not contain all of the information about the Investment Agreement that is important to you. We encourage you to read carefully the Investment Agreement in its entirety.
 
Consideration to be Paid in the Equity Investment
 
Subject to the terms and conditions of the Investment Agreement, upon the closing, the Company will issue to the Investors, for $75,000,000 in cash, (i) an aggregate of 75,000 shares of Preferred Stock and (ii) Warrants to purchase 42,857,143 shares of common stock of the Company (subject to adjustment in connection with the contemplated Reverse Stock Split).
 
Investor Representative
 
In the Investment Agreement, JPE is empowered to act on behalf of the other Investors in connection with the transactions contemplated thereunder. This appointment entitles JPE to, among other things:
 
  •   exercise discretion in agreeing to amendments to the Investment Agreement;
 
  •   exercise discretion in executing and delivering waivers in connection with the transactions contemplated by the Investment Agreement;
 
  •   exercise discretion in making necessary agreements in connection with the Investment Agreement; and
 
  •   communicate to, and receive communications from, the Company on behalf of the Investors.
 
Closing of the Equity Investment
 
Unless the Company and JPE agree otherwise, the Equity Investment will close on a date to be specified by the Company and JPE not later than two days after the satisfaction or waiver of all the conditions in the Investment Agreement. The parties expect to close the Equity Investment in the third quarter of 2011.
 
In the event that any Investor (other than JPE) breaches its obligation to pay to the Company at the closing its portion of the purchase price for the Securities in accordance with the Investment Agreement, JPE is obligated to purchase such Securities from the Company. In that event, JPE has the right, in its sole discretion, to delay the closing for a period of up to five business days.
 
Representations and Warranties of the Company and the Investors
 
The representations and warranties of the Company contained in the Investment Agreement have been made solely for the benefit of the Investors. In addition, such representations and warranties (a) have been made only for purposes of the Investment Agreement, (b) have been qualified by confidential disclosures made to the Investors in connection with the Investment Agreement, (c) are subject to materiality qualifications contained in the Investment Agreement which may differ from what may be viewed as material by investors generally, (d) were made only as of the date of the Investment Agreement or such other date as is specified in the Investment Agreement and (e) have been included in the Investment Agreement for the purpose of allocating risk between the contracting parties rather than establishing matters as facts. Accordingly, the summary of the representations and warranties set forth below and the Investment Agreement annexed hereto are included in this filing only to provide stockholders with information regarding the terms of the Investment Agreement and not to provide investors with any other factual information regarding the Company or its business. The Company’s stockholders should not rely on the representations and warranties or any descriptions thereof as characterizations of the actual state of facts or condition of the Company or any of its subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations and


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warranties may change after the date of the Investment Agreement, which subsequent information may or may not be fully reflected in the Company’s public disclosures.
 
Our representations and warranties relate to, among other things:
 
  •   our and our subsidiaries’ proper organization, good standing and corporate power to operate our businesses;
 
  •   our certificate of incorporation and by-laws and those of our subsidiaries;
 
  •   the absence of encumbrances on our capital stock;
 
  •   the due issuance of the Preferred Stock;
 
  •   our capitalization, including in particular the number of shares of preferred stock, common stock and stock options outstanding and the status of our indebtedness;
 
  •   our corporate power and authority to enter into the Investment Agreement and to consummate the transactions contemplated thereby;
 
  •   the absence of any violation of or conflict with our organizational documents, applicable law or certain agreements as a result of entering into the Investment Agreement and consummating the transactions contemplated thereby;
 
  •   required consents and approvals of governmental entities as a result of the transactions contemplated by the Investment Agreement;
 
  •   our SEC filings since January 1, 2009 and the financial statements contained therein;
 
  •   our implementation of certain internal controls over financial reporting and a system of disclosure controls as required by the Exchange Act and the Sarbanes-Oxley Act;
 
  •   the accuracy and completeness of information supplied by us in this proxy statement;
 
  •   the absence of certain changes and events, including any “material adverse effect”, since January 1, 2011;
 
  •   the absence of litigation or outstanding court orders against us;
 
  •   material and certain other specified contracts;
 
  •   our possession of all licenses and permits necessary to operate our properties and carry on our business;
 
  •   employment and labor matters affecting us, including matters relating to our employee benefit plans;
 
  •   tax matters;
 
  •   environmental matters;
 
  •   real property owned and leased by us and title to assets;
 
  •   our intellectual property;
 
  •   our compliance with the Foreign Corrupt Practices Act of 1977, as amended;
 
  •   the absence of any application of Section 203 of the DGCL or other state takeover laws;
 
  •   the required vote of our stockholders in connection with the approval of the transactions contemplated by the Investment Agreement;
 
  •   the absence of undisclosed broker’s fees;
 
  •   receipt by us of a fairness opinion from Ladenburg Thalmann & Co. Inc.;


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  •   our insurance arrangements; and
 
  •   our compliance with applicable securities laws in conjunction with the offer and sale of the Securities (including applicable exemptions from registration under the Securities Act of 1933, as amended, and the rules promulgated by the SEC thereunder).
 
For purposes of the Investment Agreement, “material adverse effect” means any state of facts, change, development, event, effect, condition, occurrence, action or omission that, alone or together with any other state of facts, change, development, event, effect, condition, occurrence, action or omission, (i) materially adversely affects the business, assets, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, or (ii) prevents, materially impedes or materially delays the consummation by the Company of the Equity Investment or the other transactions contemplated by the Investment Agreement.
 
However, none of the following will be deemed either alone or in combination to constitute, and none of the following will be taken into account in determining whether there has been or would be, a “material adverse effect” on the Company:
 
  •   general legal, market, economic or political conditions affecting the industry in which the Company operates, provided that such conditions do not disproportionately affect the Company and its subsidiaries, taken as a whole, in relation to other companies in the industry in which the Company operates;
 
  •   changes affecting general worldwide economic or capital market conditions (including changes in interest or exchange rates), provided that such changes do not disproportionately affect the Company and its subsidiaries, taken as a whole, in relation to other companies in the industry in which the Company operates;
 
  •   the pendency or announcement of the Investment Agreement or the anticipated consummation of the Equity Investment, including any reaction of any customer, employee, supplier, service provider, partner or other constituency to the identity of the Investors or any of the transactions contemplated by the Investment Agreement;
 
  •   any decrease in the market price or trading volume of the Company common stock (except that the underlying cause or causes of any such decrease may be deemed to constitute, in and of itself or themselves, a “material adverse effect” and may be taken into consideration when determining whether there has occurred a “material adverse effect”);
 
  •   the Company’s failure to meet any internal or published projections, forecasts or other predictions or published industry analyst expectations of financial performance (except that the underlying cause or causes of any such failure may be deemed to constitute, in and of itself or themselves, a “material adverse effect” and may be taken into consideration when determining whether there has occurred a “material adverse effect”);
 
  •   any change in GAAP which occurs or becomes effective after the date of the Investment Agreement;
 
  •   actions or omissions of the Company or any of its subsidiaries taken with the prior written consent of JPE; and
 
  •   any natural disaster, any act or threat of terrorism or war anywhere in the world, any armed hostilities or terrorist activities anywhere in the world, any threat or escalation of armed hostilities or terrorist activities anywhere in the world to the extent they do not disproportionately affect the Company and its subsidiaries, taken as a whole, in relation to other companies in the industry in which the Company operates.


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In the Investment Agreement, the Investors make various customary representations and warranties. Their representations and warranties relate to, among other things:
 
  •   their proper organization and good standing;
 
  •   their corporate or other power and authority to enter into the Investment Agreement and to consummate the transactions contemplated by the Investment Agreement;
 
  •   the accuracy and completeness of information supplied by them in this proxy statement;
 
  •   the sufficiency of their available funds at closing to consummate the Equity Investment;
 
  •   matters relating to the absence of any application of Section 203 of the DGCL;
 
  •   their status as “accredited investors”;
 
  •   the appropriate advice obtained and the due diligence investigation made with respect to the Investment Agreement and the transactions contemplated thereby; and
 
  •   their understanding of the limitations on transfers and other restrictions on the Securities they will receive pursuant to the Equity Investment.
 
Conduct of Our Business Pending the Closing
 
Under the Investment Agreement, we have agreed that, subject to certain exceptions set forth in the Investment Agreement, between June 13, 2011 and the closing we and our subsidiaries will:
 
  •   conduct our business in the ordinary course in all material respects; and
 
  •   use commercially reasonable efforts to keep available the services of our and our subsidiaries’ current officers and employees, and preserve our assets, technology and current relationships with customers, suppliers and other persons with whom we have material business dealings.
 
We have also agreed that during the same period, subject to certain exceptions set forth in the Investment Agreement, neither we nor our subsidiaries will:
 
  •   declare or pay any dividends or make other distributions with respect to our or our subsidiaries’ capital stock;
 
  •   split, combine, reclassify, redeem, purchase or otherwise acquire any of our or our subsidiaries’ capital stock;
 
  •   modify any term of our or our subsidiaries’ indebtedness;
 
  •   issue, deliver, sell, pledge or otherwise encumber any of our or our subsidiaries’ equity interests, or securities convertible into, exchangeable for or exercisable for, or any options, warrants, calls or other rights to acquire, any of our or our subsidiaries’ equity interests;
 
  •   adopt or implement any stockholder rights plan or similar arrangement;
 
  •   amend or propose to amend our or our subsidiaries’ organizational documents;
 
  •   acquire any business or business entity or any division thereof, or any other assets other than immaterial assets acquired in the ordinary course of business;
 
  •   sell, lease, license, sell and lease back, mortgage or encumber or otherwise dispose of any of our or our subsidiaries’ material properties or assets, except in the ordinary course of business;
 
  •   repurchase, prepay or incur any indebtedness, or make loans, advances or capital contributions to or investments in any other person;
 
  •   incur or commit to incur any capital expenditures that are individually in excess of $200,000 or in the aggregate are in excess of $500,000;


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  •   settle or satisfy any claims, actions or proceedings, other than in the ordinary course of business, for amounts not in excess of $200,000 or waive any material benefits of, or modify in any adverse respect, or fail to enforce, any confidentiality, standstill or similar contract;
 
  •   enter into any lease or sublease of real property or modify in any material respect or exercise any right to renew any lease or sublease of real property, or acquire any interest in real property;
 
  •   modify or amend in any material respect or terminate any material contracts or waive any right to enforce rights or claims thereunder;
 
  •   increase, adopt, terminate or amend compensation, retention, severance or benefit plan arrangements, or grant any award thereunder;
 
  •   form any subsidiary;
 
  •   enter into any contract which will conflict with the Proposed Transaction or otherwise result in any violation or breach under such contract upon consummation of the Proposed Transaction or give rise to any loss or the creation of any material encumbrance as a result of the Proposed Transaction;
 
  •   take any action or fail to take any action which would be expected to result in any representation or warranty becoming untrue;
 
  •   adopt or enter into any collective bargaining agreement or other labor union contract;
 
  •   write down the book value of any material assets or make changes to financial or tax accounting practices except as required by GAAP or applicable law;
 
  •   engage in any trade loading practices or other promotional sales or discount activity with the effect of accelerating to prior fiscal quarters sales to the trade that would otherwise be expected to occur in subsequent fiscal quarters;
 
  •   engage in any practice which would have the effect of postponing to subsequent fiscal quarters payments by the Company or any of its subsidiaries that would otherwise be expected to be made in prior fiscal quarters;
 
  •   engage in any promotional sales otherwise outside the ordinary course of business or inconsistent with past practice;
 
  •   enter into, extend or renew any contract pursuant to which the Company or any of its subsidiaries agrees not to compete with any person in any area or to engage in any activity or business that is material to the Company and its subsidiaries, or containing any provisions contemplating a “change in control” or similar event with respect to the Company or one or more of its subsidiaries, including provisions requiring consent or approval of any person in the event of a change in control or otherwise having the effect of providing that the consummation of the transactions contemplated by the Investment Agreement will materially conflict with such contract or give rise under such contract to any right of termination or other adverse right; or
 
  •   authorize or commit, resolve or agree to take any of the foregoing actions.
 
Stockholders’ Meeting
 
We have agreed to, as promptly as reasonably practicable after the date of the Investment Agreement, establish a record date for, duly call, give notice of, convene and hold a meeting of our stockholders, and have agreed to cause such meeting to occur by the 45th calendar day following the mailing of this proxy statement, for the purpose of obtaining stockholder approval of the Proposals, regardless of whether our Board of Directors has determined at any time that the Investment Agreement is no longer advisable or recommends that the stockholders of the Company vote against the Proposals (subject to our right to terminate the Investment Agreement in certain circumstances), subject to certain exceptions specified in the Investment Agreement.


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In addition, we have agreed, subject to the exceptions set forth in the following section, that our Board of Directors will recommend to our stockholders that they vote in favor of the Proposals and include such recommendation in this proxy statement, and to use our reasonable best efforts to solicit stockholder approval of the Proposals.
 
No Solicitation of Transactions
 
We have agreed that neither we nor any of our subsidiaries, directors, officers, employees, investment bankers or other representatives will, directly or indirectly:
 
  •   solicit, initiate, knowingly encourage or take any action to knowingly facilitate any takeover proposal or inquiry or the making of any proposal that could reasonably be expected to lead to a takeover proposal; or
 
  •   enter into, continue or otherwise participate in any discussions or negotiations regarding, or furnish any information to any person or otherwise cooperate with any person with respect to, any takeover proposal.
 
However, prior to the receipt of stockholder approval of the Proposals, if we receive an unsolicited bona fide written takeover proposal from a third party that our Board of Directors (acting upon the affirmative recommendation of the special committee), after consultation with our financial advisor and outside legal counsel, determines in good faith constitutes or could reasonably be expected to lead to a superior proposal, we may, and we may permit our subsidiaries and representatives to, furnish information with respect to the Company and our subsidiaries to the person making such takeover proposal pursuant to a nondisclosure agreement which contains terms that are no less restrictive than those contained in the nondisclosure agreement with JPE (provided that all such information has been or is provided to JPE), and participate in discussions or negotiations with the person making such takeover proposal.
 
For purposes of the Investment Agreement, “takeover proposal” means any inquiry, proposal or offer from any person or group relating to, or that could reasonably be expected to lead to, any merger, consolidation, business combination, recapitalization, merger, consolidation, liquidation or dissolution involving the Company, or the direct or indirect acquisition (including by way of any tender offer, exchange offer, liquidation, joint venture or other similar transaction), of:
 
  •   assets or businesses representing 15% or more of the total revenue, net income, EBITDA or assets of the Company and its subsidiaries, taken as a whole; or
 
  •   15% or more of the outstanding shares of Company common stock or of any class of capital stock of, or other equity or voting interests in, one or more subsidiaries of the Company which, in the aggregate, directly or indirectly hold assets or businesses representing 15% or more of the total revenue, net income, EBITDA or assets of the Company and its subsidiaries, taken as a whole.
 
For purposes of the Investment Agreement, “superior proposal” means any binding bona fide written offer which did not result from a breach of the above restrictions, and which:
 
  •   if consummated, would result in the offering person (or, in the case of a direct merger between such person and the Company, the stockholders of such person) acquiring, directly or indirectly, 50% or more of the voting power of the capital stock of the Company or 50% or more of the assets of the Company and its subsidiaries, taken as a whole; and
 
  •   in the good faith judgment of the Board of Directors (acting upon the affirmative recommendation of the special committee) (after consultation with its financial advisor and outside legal counsel), (i) is more favorable to the holders of Company common stock than the Equity Investment from a financial point of view (taking into account all of the terms and conditions of such proposal and the Investment Agreement (including any changes to the terms of the Investment Agreement proposed by the Investors in response to such superior proposal or otherwise)) and (ii) is reasonably capable of being completed, taking into account all financial, legal, regulatory and other aspects of such proposal.


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We have agreed that neither the Board of Directors nor any committee thereof will (or will agree or resolve to):
 
  •   withdraw or modify in a manner adverse to the Investors, or propose publicly to withdraw or modify in a manner adverse to the Investors, the approval, recommendation or declaration of advisability by the Board of Directors or any such committee of the transactions contemplated by the Investment Agreement; or
 
  •   approve, recommend or declare advisable, or propose publicly to approve, recommend or declare advisable, any takeover proposal.
 
We refer to any action described in the foregoing bullets as an “adverse recommendation change”.
 
In addition, we have agreed that neither the Board of Directors nor any committee thereof will (or will agree or resolve to) cause or permit the Company to enter into any letter of intent, memorandum of understanding, acquisition agreement, merger agreement or other agreement (each of which we refer to as an “acquisition agreement”) constituting or related to, or which is intended to or is reasonably likely to lead to, any takeover proposal (other than a permitted nondisclosure agreement).
 
Notwithstanding the foregoing two paragraphs, at any time prior to stockholder approval of the Proposals, the Board of Directors may:
 
  •   in response to a “superior proposal” or an “intervening event”, effect an adverse recommendation change; or
 
  •   in response to a “superior acquisition proposal”, cause the Company to enter into a definitive agreement to consummate such superior acquisition proposal and concurrently terminate the Investment Agreement;
 
in each case, if the Board of Directors determines in good faith, after consultation with its outside legal counsel and its financial advisor, that the failure to do so would be inconsistent with its fiduciary duties to the stockholders of the Company under applicable law. However, the Board of Directors and the committees thereof may not, and will cause the Company not to, take any of the actions described in the foregoing two bullets unless:
 
  •   the Board of Directors has first provided prior written notice to JPE that it is prepared to take such action, which notice must, in the case of a superior proposal, attach the most current version of any written agreement relating to the superior proposal, and, in the case of an intervening event, attach information describing the intervening event; and
 
  •   JPE does not make, within three business days after the receipt of such notice, a proposal that would, in the good faith judgment of the Board of Directors (acting upon the affirmative recommendation of the special committee) (after consultation with its financial advisor and outside legal counsel), cause the offer previously constituting a superior proposal to no longer constitute a superior proposal, or obviate the need for an adverse recommendation change as a result of an intervening event (and any amendment or modification of such superior proposal requires a new notice and a new three business day period).
 
During the three business day period described above, the Company is obligated to negotiate in good faith with JPE regarding any revisions to the terms of the Investment Agreement proposed by JPE.
 
For purposes of the Investment Agreement, the term “superior acquisition proposal” means a superior proposal that, if consummated, would result in the offering person (or, in the case of a direct merger between such person and the Company, the stockholders of such person) acquiring, directly or indirectly, all or substantially all of the voting power of the capital stock of the Company or all or substantially all of the assets of the Company and its subsidiaries, taken as a whole.
 
For purposes of the Investment Agreement, the term “intervening event” means an event or other information (other than any related to a takeover proposal), unknown to the Board of Directors as of the date


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of the Investment Agreement, which becomes known prior to stockholder approval of the Proposals and which causes the Board of Directors to determine in good faith, after consultation with its outside legal counsel and its financial advisor, that its failure to effect an adverse recommendation change would be inconsistent with its fiduciary duties to the stockholders of the Company under applicable law.
 
In addition, we have agreed to, as promptly as possible and in any event within 24 hours after the receipt thereof, advise JPE of any takeover proposal and the terms and conditions of, and other facts regarding, such takeover proposal, and to keep JPE informed on a reasonably current basis of the status and other developments with respect to such takeover proposal and promptly provide JPE with copies of all documentation relating to such takeover proposal.
 
Re-Audit Engagement
 
We have agreed to engage (and have as of the date of this proxy statement engaged) an independent registered public accounting firm of national reputation designated by JPE for the purpose of re-auditing the historical consolidated financial statements of the Company for fiscal years 2009 and 2010. In the event that the closing does not occur (other than as a result of the termination of the Investment Agreement by the Company in connection with a “superior acquisition proposal”, or by JPE as a result of a breach by the Company or an “adverse recommendation change”) and the engagement of the new auditor is terminated in connection with the termination of the Investment Agreement, JPE is obligated to reimburse the Company for the fees and expenses of the accounting firm.
 
Agreement to Take Further Action and to Use Reasonable Best Efforts
 
Subject to the terms and conditions of the Investment Agreement, each party has agreed to use its reasonable best efforts to take all actions necessary, proper or advisable to consummate and to make effective the transactions contemplated by the Investment Agreement. Among other things, each party has committed to use such efforts to cooperate with each other to obtain all necessary consents, approvals and authorizations from governmental authorities and third parties.
 
The Company and JPE have determined that no filing under the HSR Act, or any similar antitrust approval, is required in connection with the Equity Investment.
 
Composition of Board of Directors
 
Upon the closing of the Equity Investment, the Board will be reconstituted such that: (1) there will be eight Board members, (2) one of such directors will be James Martell (or a replacement acceptable to JPE), (3) seven of such directors will be designated by JPE (including Bradley Jacobs), (4) each standing committee of the Board will be reconstituted in a manner reasonably acceptable to JPE and (5) Bradley Jacobs will become the Chairman of the Board.
 
In connection with each meeting of stockholders of the Company at which directors are to be elected to serve on the Board of Directors, the Company has agreed to take all necessary steps to nominate the candidates appointed by JPE and to use its reasonable best efforts to cause the Board of Directors to unanimously recommend that the stockholders of the Company vote in favor of each such person for election to the Board of Directors. If, for any reason, a candidate appointed by JPE is determined to be unqualified to serve on the Board of Directors because such appointment would constitute a breach of the fiduciary duties of the Board of Directors or applicable law or stock exchange requirements, JPE will have the right to designate an alternative person. Each person so appointed will hold office as a director of the Company for such term as is provided in the Company’s constituent documents or until his or her death, resignation or removal from the Board of Directors or until his or her successor has been duly elected and qualified. If any such appointee ceases to serve as a director of the Company for any reason during his or her term, the Company will use its reasonable best efforts to cause the Board of Directors to fill the vacancy with a replacement designated by JPE.


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Subject to applicable law and stock exchange requirements, JPE will have the right to designate:
 
  •   no less than a majority of the members of the Board of Directors for so long as JPE owns Preferred Stock, Company common stock or other voting securities, or Warrants exercisable for such securities, representing, in the aggregate, no less than 33% of the total voting power of the capital stock of the Company, calculated on a fully-diluted basis; and
 
  •   no less than 25% of the members of the Board of Directors for so long as JPE owns Preferred Stock, Company common stock or other voting securities, or Warrants exercisable for such securities, representing, in the aggregate, less than 33% but greater than or equal to 20% of the total voting power of the capital stock of the Company, calculated on a fully-diluted basis.
 
None of the foregoing will prevent the Board of Directors from acting in accordance with its fiduciary duties or applicable law or stock exchange requirements or from acting in good faith in accordance with the Company’s constituent documents, while giving due consideration to the intent of the Investment Agreement.
 
The board representation rights of JPE under the Investment Agreement are in addition to, and not in limitation of, JPE’s voting rights as a holder of capital stock of the Company.
 
Mr. James Martell, who is currently Chairman of the Board of the Company, and who will continue as a director on the reconstituted Board of Directors as described above and will be an Investor in the Equity Investment, recused himself from Board of Directors approval of the Investment Agreement and related recommendations.
 
Conditions to Closing
 
The respective obligations of the Investors and the Company to complete the Equity Investment are subject to the satisfaction or waiver of the following conditions:
 
  •   the Proposals shall have been approved by the stockholders;
 
  •   any waiting period applicable to the transactions contemplated by the Investment Agreement under the HSR Act shall have been terminated or shall have expired, and any other approval under any other applicable antitrust or similar law shall have been obtained or terminated or shall have expired (the Company has determined that no antitrust approval is necessary in connection with the Equity Investment); and
 
  •   no temporary restraining order, preliminary or permanent injunction or other judgment issued by any court of competent jurisdiction or other legal restraint or prohibition that has the effect of preventing, prohibiting or making illegal the consummation of the Equity Investment shall be in effect.
 
The obligations of the Investors to complete the Equity Investment are further subject to the satisfaction or waiver of the following conditions:
 
  •   the representations and warranties made by the Company in the Investment Agreement that are qualified by materiality or material adverse effect must be true and correct and the representations and warranties which are not so qualified must be true and correct in all material respects, in each case as of the date of the Investment Agreement and on the date of the closing with the same effect as though made on the closing date (except that those representations and warranties that speak as of a specified date will be determined as of such date);
 
  •   the Company has performed in all material respects all obligations required to be performed by it under the Investment Agreement at or prior to the closing;
 
  •   there being no litigation brought or threatened by any governmental entity challenging or seeking to restrain the consummation of the transactions contemplated by the Investment Agreement or seeking to obtain damages in relation thereto, or seeking to limit the Investors’ ability to acquire


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  and exercise full ownership rights of any Warrants, shares of Preferred Stock or Company common stock, or any legal restraint in effect that could reasonably be expected to result in any such effects;
 
  •   all material governmental consents and approvals required to effect the Equity Investment have been obtained;
 
  •   since the date of the Investment Agreement, no material adverse effect or any state of facts, change, development, event, effect, condition, occurrence, action or omission that is reasonably likely to have a material adverse effect has occurred;
 
  •   the Certificate of Designation has been duly adopted by us and duly filed with the Secretary of State of the State of Delaware;
 
  •   we have executed and delivered the Registration Rights Agreement in a form reasonably acceptable to JPE; and
 
  •   there being no stop order or suspension of trading in effect with respect to our common stock.
 
The obligation of the Company to complete the Equity Investment is further subject to the satisfaction or waiver of the following conditions:
 
  •   the representations and warranties of each Investor in the Investment Agreement that are qualified by materiality must be true and correct and the representations and warranties which are not so qualified must be true and correct in all material respects, in each case as of the date of the Investment Agreement and on the date of the closing with the same effect as though made on the closing date (except that those representations and warranties that speak as of a specified date will be determined as of such date); and
 
  •   each Investor has performed in all material respects all obligations required to be performed by it under the Investment Agreement at or prior to closing.
 
In the event of any breach by any Investor (other than JPE) that would result in the failure of a closing condition, JPE will be entitled, in its sole discretion, to purchase the shares of Preferred Stock and Warrants otherwise allocable to the breaching Investor on the terms set forth in the Investment Agreement and, in such event, the breach by such Investor that would otherwise result in the failure of a closing condition will be deemed cured for purposes of the closing.
 
Termination
 
The Company and JPE may agree in writing to terminate the Investment Agreement at any time prior to completing the Equity Investment, even after the stockholders of the Company have voted on the Proposals. The Investment Agreement may also be terminated in certain other circumstances, including:
 
  •   by either JPE or the Company if:
 
  •   the closing has not occurred on or before December 13, 2011, provided that such right to terminate will not be available to any party whose action or failure to act has been a principal cause of or resulted in the failure of the Equity Investment to occur on or before such date and such action or failure to act constitutes a breach of the Investment Agreement;
 
  •   certain legal restraints shall be in effect and shall have become final and nonappealable; or
 
  •   the stockholders meeting in respect of the Proposed Transaction shall have been held and the stockholders shall not have approved the Proposals at such meeting or at any adjournment or postponement of such meeting;
 
  •   by JPE prior to the receipt of approval by the stockholders of the Proposals if an adverse recommendation change has occurred;


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  •   by JPE if:
 
  •   there is a breach by the Company of its representations, warranties, covenants or agreements in the Investment Agreement such that the closing conditions would not be satisfied, and that is incapable of being cured within 30 business days of such breach, or if capable of being cured, the Company does not commence to cure such breach within 10 business days after its receipt of written notice of such breach; or
 
  •   certain legal restraints shall be in effect and shall have become final and nonappealable;
 
  •   by the Company if there is a breach by any Investor of its representations, warranties, covenants or agreements in the Investment Agreement such that the closing conditions would not be satisfied, and that is incapable of being cured by the Investor or JPE within 30 business days of such breach, or if capable of being cured, the Investor or JPE does not commence to cure such breach within 10 business days after receipt of written notice of such breach; or
 
  •   by the Company prior to the receipt of approval by the stockholders of the Proposals, in order to enter into a definitive agreement to consummate a “superior acquisition proposal”.
 
Termination Fees and Expenses
 
A termination fee equal to $2,774,000 (determined in accordance with the Investment Agreement) is payable by the Company to JPE if the Investment Agreement is terminated:
 
  •   by JPE due to an adverse recommendation change made in connection with a “superior proposal”; or
 
  •   by the Company in order to enter into a definitive agreement to consummate a “superior acquisition proposal”.
 
A termination fee of $2,249,000 is payable by the Company to JPE if the Investment Agreement is terminated:
 
  •   by JPE due to an adverse recommendation change made other than in connection with a “superior proposal”; or
 
  •   by either JPE or the Company due to the failure of the closing to occur on or prior to December 13, 2011 or because the stockholders meeting was held and the Proposals were not approved at such meeting, or by JPE due to a breach of the Investment Agreement by the Company, in each case in circumstances in which:
 
  •   prior to such termination, a takeover proposal was made to the Company or its stockholders or any person publicly announced an intention (whether or not conditional and whether or not withdrawn) to make a takeover proposal or a takeover proposal otherwise became publicly known; and
 
  •   prior to the date that is nine months after such termination, the Company or any of its subsidiaries enters into any definitive contract to consummate any takeover proposal or any takeover proposal is consummated (solely for purposes of this bullet, the term “takeover proposal” has the meaning set forth above, except that all references to 15% are deemed references to 50%).


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In addition, whether or not the Closing occurs, the Company is obligated to reimburse JPE for up to $1,000,000 of the expenses incurred by JPE in connection with the transactions contemplated by the Investment Agreement. However, such expenses are not reimbursable by the Company if the Investment Agreement is terminated:
 
  •   by the mutual written consent of the Company and JPE;
 
  •   by either JPE or the Company due to the failure of the closing to occur on or prior to December 13, 2011 or because the stockholders meeting was held and the Proposals were not approved at such meeting (in each case, other than in circumstances involving a takeover proposal in which the termination fee described above is payable), or due to certain legal restraints having come into effect and becoming final and nonappealable; or
 
  •   by the Company as a result of an Investor breach.
 
The reimbursement of JPE’s expenses as provided above does not relieve the Company of any obligation to pay any applicable termination fee.


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THE PREFERRED STOCK CERTIFICATE OF DESIGNATION
 
The following is a summary of the material terms of the Preferred Stock as contained in the Certificate of Designation of Series A Convertible Perpetual Preferred Stock, which will be filed with the Secretary of State of the State of Delaware (the “Certificate of Designation”). The Certificate of Designation is set forth in Exhibit A to the Investment Agreement, which is filed herewith as Annex A to this proxy statement and is incorporated by reference herein. Stockholders are urged to carefully read the Certificate of Designation in its entirety.
 
Authorized Shares and Liquidation Preference
 
We will designate 75,000 authorized preferred shares as “Series A Convertible Perpetual Preferred Stock”, with a par value of $0.001 per share and an initial liquidation preference of $1,000 per share, for an aggregate initial liquidation preference of $75,000,000.
 
Ranking
 
The Preferred Stock will rank, with respect to dividend rights and rights on liquidation, winding-up or dissolution, senior to Company common stock and each other class or series of capital stock outstanding or established after the date of issuance of the Preferred Stock the terms of which do not expressly provide that it ranks on a parity with or senior to the Preferred Stock as to dividend rights and rights on liquidation, winding-up and dissolution. The Preferred Stock will rank on a parity with or junior to each class or series of capital stock the terms of which expressly provide for a pari passu or senior ranking relative to the Preferred Stock, respectively.
 
Dividends
 
Dividends on the Preferred Stock will be payable quarterly, when, as and if declared by the Board of Directors or a duly authorized committee, out of the assets of the Company legally available for the payment of dividends, on the 15th calendar day (or the following business day if the 15th is not a business day) of January, April, July and October of each year at the rate per annum of 4% per share on the then-applicable liquidation preference (subject to the following paragraph). The amount of dividends payable for any other period that is shorter or longer than a full quarterly dividend period will be computed on the basis of a 360-day year consisting of twelve 30-day months.
 
In the event that dividends are paid on shares of Company common stock in any dividend period with respect to the Preferred Stock, then the dividend payable in respect of each share of Preferred Stock for such period will be equal to the greater of (1) the amount otherwise payable in respect of such share of Preferred Stock in accordance with the foregoing paragraph and (2) the product of (A) the aggregate dividends payable per share of Company common stock in such dividend period times (B) the number of shares of Company common stock into which such share of Preferred Stock is then convertible.
 
A dividend period with respect to a dividend payment date is the period commencing on the preceding dividend payment date or, if none, the date of original issuance, and ending on the day immediately prior to the next dividend payment date.
 
The Company will make each dividend payment on the Preferred Stock in cash.
 
Accretion
 
If the Company is unable to, or otherwise fails to, pay dividends in full on the Preferred Stock on any dividend payment date, the then-applicable liquidation preference will be increased as of the first day of the immediately succeeding dividend period by the amount of the unpaid dividends. The amount of dividends payable for any dividend period following a non-payment of dividends will be calculated on the basis of the liquidation preference, including such accreted dividends, determined as of the first day of the relevant dividend period. The Company may pay all or a portion of any dividends so accreted on any regular dividend payment date or any other date fixed by the Board of Directors or a duly authorized committee.


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Payment Restrictions
 
No dividends may be declared or paid on any capital stock of the Company ranking on a parity with or junior to the Preferred Stock (including the Company common stock), and no such capital stock may be redeemed or repurchased by or on behalf of the Company, unless all accrued and unpaid dividends have been paid on the Preferred Stock and any capital stock of the Company ranking on a parity with the Preferred Stock. Notwithstanding the foregoing, if full dividends have not been paid on the Preferred Stock and any parity stock, dividends may be declared and paid on the Preferred Stock and such parity stock so long as the dividends are declared and paid pro rata.
 
Liquidation
 
In the event we voluntarily or involuntarily liquidate, dissolve or wind up, the holders of the Preferred Stock will be entitled, before any distribution to the holders of our common stock or any other junior capital stock, and subject to the rights of our creditors, to receive an amount equal to the greater of (i) the aggregate accreted liquidation preference plus an amount equal to any accrued and unpaid dividends (whether or not declared) for the then-current dividend period and (ii) the payment or distribution to which such holders would have been entitled if the Preferred Stock were converted into Company common stock immediately before such liquidation, dissolution or winding-up.
 
Voting Rights
 
The Preferred Stock will vote together with the Company common stock on an “as-converted” basis on all matters, except as otherwise required by law. In addition, the approval of the holders of at least a majority of outstanding shares of the Preferred Stock, voting separately as a single class, will be required (1) for any amendment of the Company Certificate if the amendment would alter the powers, preferences, privileges or rights of the holders of Preferred Stock so as to affect them adversely, (2) to issue, authorize or increase the authorized amount of, or issue or authorize any obligation or security convertible into or evidencing a right to purchase, any capital stock of the Company ranking on a parity with or senior to the Preferred Stock, or (3) to reclassify any authorized capital stock of the Company into any parity stock or senior stock, or any obligation or security convertible into or evidencing a right to purchase any parity stock or senior stock.
 
Conversion
 
The Preferred Stock will be convertible at any time, in whole or in part and from time to time, at the option of the holder thereof into a number of shares of Company common stock equal to the then-applicable liquidation preference divided by the then-applicable conversion price, which shall initially be $1.75 per share of Company common stock, for an effective initial aggregate conversion rate of 42,857,143 shares of Company common stock (before giving effect to the Reverse Stock Split).
 
After giving effect to the 4:1 Reverse Stock Split, the Preferred Stock will have a conversion price of $7.00 per share of Company common stock.
 
The Preferred Stock will have the benefit of customary anti-dilution adjustments.
 
Transfer of Securities
 
The Preferred Stock and the shares of Company common stock issuable upon conversion thereof will initially not be registered under the Securities Act and may not be offered or sold except in compliance with the registration requirements of the Securities Act and any other applicable securities laws. The above mentioned securities will have the benefit of certain registration rights under the Securities Act pursuant to a Registration Rights Agreement to be entered into by the Company as described below.
 
Redemption
 
The Preferred Stock is not redeemable or subject to any required offer to purchase.


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THE WARRANTS
 
The summary of the material terms of the Warrants below and elsewhere in this proxy statement is qualified in its entirety by reference to the Warrant Certificate, a copy of which is set forth as Exhibit B to the Investment Agreement, which is filed herewith as Annex A to this proxy statement and incorporated by reference into this document. This summary may not contain all of the information about the Warrants that is important to you. We encourage you to read carefully the Warrant Certificate in its entirety.
 
The Warrants will initially grant the holders the right to purchase an aggregate of 42,857,143 shares of Company common stock at an exercise price of $1.75 per share of Company common stock, in each case subject to customary anti-dilution adjustments and before giving effect to the 4:1 Reverse Stock Split. The Warrants will be exercisable at the option of the holder at any time from the closing date until the tenth anniversary of the closing date.
 
After giving effect to the Reverse Stock Split, the Warrants will have an exercise price of $7.00 per share of Company common stock, and the aggregate number of shares of Company common stock subject to the Warrants will be 10,714,286 shares.
 
Transfer of Securities
 
The Warrants and the shares of Company common stock issuable upon exercise thereof will initially not be registered under the Securities Act and may not be offered or sold except in compliance with the registration requirements of the Securities Act and any other applicable securities laws. The above mentioned securities will have the benefit of certain registration rights under the Securities Act pursuant to a Registration Rights Agreement to be entered into by the Company as described below.
 
Voting Rights and Dividends
 
Holders of the Warrants (in their capacity as such) will not be entitled to any rights of a stockholder of the Company, including the right to vote or to consent with respect to any matter, or to receive dividends, prior to exercising their Warrants.


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THE REGISTRATION RIGHTS AGREEMENT
 
Pursuant to the Investment Agreement, the Company has agreed to enter into a Registration Rights Agreement concurrently with the closing. The summary of the material terms of the Registration Rights Agreement below and elsewhere in this proxy statement is qualified in its entirety by reference to the Summary of Principal Registration Rights Provisions, a copy of which is set forth in Exhibit C to the Investment Agreement, which is filed herewith as Annex A to this proxy statement and incorporated by reference into this document. This summary may not contain all of the information about the Summary of Principal Registration Rights Provisions that is important to you. We encourage you to read carefully the Summary of Principal Registration Rights Provisions in its entirety. In addition, the complete terms of the Registration Rights Agreement are not yet final.
 
The Registration Rights Agreement will provide the holders of the Securities with certain rights to cause the Company to register the sale of shares of Preferred Stock, Warrants and shares of Company common stock issued or issuable upon conversion of the Preferred Stock or upon exercise of the Warrants, in each case other than any such securities that are then freely transferable without registration pursuant to Rule 144 under the Securities Act without limitation as to volume, manner of sale or other restrictions under Rule 144. We refer to the securities that are subject to registration under the Registration Rights Agreement as provided above as “Registrable Securities”.
 
Demand Registrations
 
At any time on or after the closing of the Equity Investment, holders of Registrable Securities representing no less than a majority of the Company common stock constituting Registrable Securities or issuable upon conversion of Preferred Stock or exercise of Warrants constituting Registrable Securities may request registration of the sale of such securities by giving the Company written notice thereof. The Company must then use reasonable best efforts to (1) file a registration statement registering such Registrable Securities as promptly as reasonably practicable and in any event within 30 days (if on Form S-3) or 45 days (if on Form S-1) and (2) have such registration statement declared effective as promptly as reasonably practicable thereafter (subject to customary exceptions to be agreed). Such majority holders may request a total of three demand registrations.
 
Piggyback Registrations
 
If the Company registers its securities on a registration statement that permits the inclusion of the Registrable Securities, the Company must give JPE prompt written notice thereof (subject to certain exceptions to be agreed). The Company must then include on such registration statement all Registrable Securities requested to be included therein (subject to certain exceptions to be agreed).
 
Expenses of Registration and Selling
 
Subject to certain exceptions, all expenses incurred in connection with the registration or sale of the Registrable Securities will be borne by the Company.


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THE VOTING AGREEMENTS
 
Concurrently with the execution of the Investment Agreement, certain stockholders of the Company entered into Voting Agreements with JPE. The summary of the material terms of the Voting Agreements below and elsewhere in this proxy statement is qualified in its entirety by reference to the two Voting Agreements, copies of which are filed herewith as Annex C and Annex D to this proxy statement and which we incorporate by reference into this document. This summary may not contain all of the information about the Voting Agreements that is important to you. We encourage you to read carefully the Voting Agreements in their entirety.
 
Pursuant to the Voting Agreements, each of Michael Welch, Chief Executive Officer and a director of the Company, and Daniel Para, an officer and director of the Company (the “Stockholders”), have agreed in their capacities as stockholders of the Company to vote their shares of Company common stock in favor of the Equity Investment and related approvals, and have granted JPE a proxy in respect of their shares of Company common stock in connection therewith.
 
Voting
 
The Stockholders unconditionally agree to vote all of their respective shares of Company common stock to approve the Proposals. They further agree to vote their shares against and not consent to the approval of any (1) takeover proposal, (2) reorganization, recapitalization, liquidation or winding-up of the Company or (3) other extraordinary transaction involving the Company or corporate action the consummation of which would prevent, impede or delay the consummation of the transactions contemplated by the Investment Agreement.
 
Irrevocable Proxy
 
The Stockholders have granted an irrevocable proxy appointing JPE as their attorney-in-fact and proxy, with full power of substitution, for and in Stockholders’ names, to vote, express consent or dissent, or otherwise to utilize such voting power solely in the manner described above. The proxies so granted will be automatically revoked upon termination of the Voting Agreements in accordance with their terms.
 
Covenants of Stockholders
 
Except as provided above, the Stockholders agree not to enter into any voting trust or other arrangement with respect to the voting of any shares of Company common stock. Nor will they sell, assign or otherwise dispose of or encumber any shares of Company common stock during the term of the agreements. They similarly agree not to seek or solicit any such sale, assignment or disposition of their shares of Company common stock, and must provide prompt notice to JPE if they are approached by any person for that purpose.
 
Subsequent Acquisitions of Shares
 
In the event that either Stockholder acquires ownership of, or the power to vote or direct the voting of, any shares of Company common stock following the date of his respective Voting Agreement, such shares will, without further action of the parties, be subject to the provisions of such Voting Agreement.
 
Termination
 
The Voting Agreements automatically terminate upon the earliest of (1) the termination of the Investment Agreement, (2) the consummation of the Equity Investment and (3) the date of any amendment, modification, change or waiver of the Investment Agreement that results in a change to the terms of the Securities that is material and adverse to the Company and that is not consented to in writing by the Stockholder in his sole discretion prior to such amendment, modification, change or waiver of the Investment Agreement.


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MARKET PRICE OF THE COMPANY COMMON STOCK
 
The Company common stock is traded on the NYSE Amex under the symbol “XPO”. The following table sets forth the high and low daily closing sales prices per share of Company common stock on the NYSE Amex for the periods indicated.
 
Market Information
 
                 
    Company Common Stock  
    High     Low  
 
Fiscal Year 2009:
               
1st Quarter
    $1.15       $0.67  
2nd Quarter
    $0.95       $0.77  
3rd Quarter
    $0.96       $0.81  
4th Quarter
    $1.29       $0.91  
                 
Fiscal Year 2010:
               
1st Quarter
    $1.65       $1.22  
2nd Quarter
    $1.56       $1.26  
3rd Quarter
    $1.88       $1.24  
4th Quarter
    $2.82       $1.99  
                 
Fiscal Year 2011:
               
1st Quarter
    $3.03       $2.12  
2nd Quarter (through [     ], 2011)
    [     ]       [     ]  
 
On June 13, 2011, which was the last trading day before we entered into the Investment Agreement, the closing price of the Company common stock was $2.19 per share. On [     ], 2011, which was the last trading day before this proxy statement was finalized, the closing price of the Company common stock was $[     ] per share.


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PROPOSAL 1 – ISSUANCE OF PREFERRED STOCK AND WARRANTS
 
General
 
The Board of Directors has unanimously approved (excluding James Martell, who recused himself from approval), subject to stockholder approval, the issuance to JPE and the other Investors of 75,000 shares of Preferred Stock and of 42,857,143 Warrants exercisable into one share each of Company common stock.
 
The Preferred Stock will have an initial liquidation preference of $1,000 per share, for an aggregate initial liquidation preference of $75,000,000. The Preferred Stock will be convertible at any time, in whole or in part and from time to time, at the option of the holder thereof, into a number of shares of Company common stock equal to the then-applicable liquidation preference divided by the conversion price, which shall initially be $1.75 per share of Company common stock (before giving effect to the contemplated 4:1 Reverse Stock Split, and subject to customary anti-dilution adjustments), for an effective initial aggregate conversion rate of 42,857,143 shares of Company common stock. The Preferred Stock will pay quarterly cash dividends equal to the greater of (1) the “as-converted” dividends on the underlying Company common stock for the relevant quarter and (2) 4% of the then-applicable liquidation preference per annum. Accrued and unpaid dividends for any quarter will accrete to liquidation preference for all purposes. The Preferred Stock is not redeemable or subject to any required offer to purchase, and will vote together with the Company’s common stock on an “as-converted” basis on all matters, except as otherwise required by law, and separately as a class with respect to certain matters implicating the rights of holders of shares of the Preferred Stock. The terms of the Preferred Stock are more fully set forth in Exhibit A to the Investment Agreement, which is filed herewith as Annex A and incorporated by reference herein.
 
Each Warrant will initially be exercisable at any time and from time to time from the closing date until the tenth anniversary of the closing date, at the option of the holder thereof, into one share of Company common stock at an initial exercise price of $1.75 in cash per share of Company common stock (before giving effect to the contemplated 4:1 Reverse Stock Split, and subject to customary anti-dilution adjustments). The initial aggregate number of shares of Company common stock subject to Warrants will be 42,857,143 shares (before giving effect to the contemplated Reverse Stock Split). The terms of the Warrants are more fully set forth in Exhibit B to the Investment Agreement, which is filed herewith as Annex A and incorporated by reference herein.
 
Section 713 of the NYSE Amex Company Guide requires stockholder approval prior to the issuance of common stock, or securities convertible into or exercisable for common stock, in any transaction or series of transactions involving the issuance of common stock (or securities convertible into common stock) equal to 20% or more of the presently outstanding common stock for less than the greater of book or market value of the common stock.
 
Purpose of the Equity Issuance
 
The purpose of Proposal 1 is to permit the Equity Investment, which will result in JPE becoming our controlling stockholder and Bradley Jacobs becoming our Chairman of the Board, and provide an opportunity for our existing stockholders to participate in JPE’s plans to grow the Company and create value for our stockholders. The Equity Investment will also provide initial capital to support JPE’s plans to cause the Company to pursue strategic acquisitions.
 
Under the Investment Agreement, receipt of stockholder approval for the issuance of the Securities is a condition to closing the Equity Investment. If such approval is not obtained, the investment by the Investors will not be made, JPE will not become majority stockholder of the Company and Bradley Jacobs will not become Chairman of our Board of Directors and Chief Executive Officer of the Company. You should read “The Proposed Transaction—Background of the Proposed Transaction” and “The Proposed Transaction—Reasons for the Proposed Transaction” for a discussion of the factors that our special committee and Board of Directors considered in deciding to recommend the approval of Proposal 1.


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Effect of Proposal
 
If our stockholders approve this Proposal and the Equity Investment is consummated, the Company could raise up to $150,000,000 in additional capital and the Investors will receive 75,000 shares of Preferred Stock and 42,857,143 Warrants (before giving effect to the contemplated Reverse Stock Split). Based upon the number of outstanding shares of Company common stock on the record date, and excluding any shares issuable upon the exercise of currently outstanding options, upon the closing, the Investors will own approximately [     ]% of the total voting power of the capital stock of the Company outstanding upon closing, and JPE would own approximately [     ]% of the total voting power of the capital stock of the Company, making JPE the largest stockholder of the Company. If the Investors were to exercise their Warrants in full at the closing, the Investors would own approximately [     ]% of the total voting power of the capital stock of the Company and JPE would own approximately [     ]% of the total voting power of the capital stock of the Company. Additionally, the issuance of the Preferred Stock and the Warrants (when the Warrants are exercised) will have the effect of diluting the aggregate interest owned by our existing stockholders from 100% of the total voting power of the capital stock of the Company prior to the transaction to approximately [     ]% of the total voting power of the capital stock of the Company immediately following consummation of the Equity Investment, assuming the Investors exercise their Warrants immediately following the consummation of the issuance. Also, our pro forma book value per share as of December 31, 2010, after giving effect to the issuance and payment of transaction costs, will decrease from approximately $[     ] per share to approximately $[     ] per share.
 
Relationship to Other Proposals
 
Implementation of Proposal 1 is contingent upon obtaining stockholder approval of Proposals 2 through 5.
 
Vote Required
 
The affirmative vote of holders of a majority of the shares of Company common stock voting thereon at a meeting at which a quorum is present is required to approve Proposal 1 pursuant to NYSE Amex Company Guide Rule 713. The failure of the Company’s stockholders to approve any of Proposals 1 through 5 will prevent the Company from consummating the Proposed Transaction.
 
Recommendation
 
The Board of Directors (excluding Mr. Martell, who recused himself), acting upon the affirmative recommendation of the special committee, unanimously recommends that you vote “FOR” Proposal 1.


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PROPOSAL 2 – AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE
NUMBER OF AUTHORIZED SHARES OF COMPANY COMMON STOCK TO 150,000,000 SHARES
 
General
 
The Board of Directors has unanimously approved (excluding Mr. Martell, who recused himself from approval) and declared advisable, subject to stockholder approval, an amendment to the Company Certificate to increase the number of authorized shares of our common stock, $0.001 par value, to 150,000,000 shares.
 
The following table summarizes the shares of Company common stock outstanding, the shares held by the Company as treasury shares and the shares reserved for issuance pursuant to the Amended and Restated 2001 Stock Option Plan of the Company, in each case as of the close of business on the record date for the special meeting. In addition, the table shows the shares of Company common stock that must be reserved for issuance upon conversion of the Preferred Stock and the shares of Company common stock that must be reserved for issuance upon exercise of the Warrants.
 
                         
          Before
       
          Reverse Stock
       
          Split
    After Reverse
 
          (But After
    Stock Split
 
Company Common
        Increase in
    and Increase
 
Stock – Shares:
  [     ], 2011     Authorized)     in Authorized  
 
Outstanding
    [     ]       [     ]       [     ]  
Treasury Shares
    [     ]       [     ]       [     ]  
Reserved for 2001 Stock Option Plan
    [     ]       [     ]       [     ]  
Underlying the Preferred Stock
          42,857,143       10,714,286  
Underlying the Warrants
          42,857,143       10,714,286  
                         
Potential outstanding
    [     ]       [     ]       [     ]  
Available for future issuance
    [     ]       [     ]       [     ]  
                         
Total authorized
        100,000,000       150,000,000       150,000,000  
                         
Shares available for issuance as a percentage of potential shares outstanding
    [     ]       [     ]       [     ]  
 
The increase in the number of authorized shares of Company common stock would become effective upon the filing of the certificate of amendment to the Company Certificate with the Secretary of State of the State of Delaware.
 
Purpose of Increasing Authorized Shares of Company Common Stock
 
The purpose of increasing the authorized number of shares of Company common stock is to provide for a sufficient number of authorized shares to permit the full conversion of the Preferred Stock and the full exercise of the Warrants, as well as to provide the Company with sufficient common share capacity to allow the flexibility for future equity financings to raise funds to support the intended growth of the Company’s business, including through strategic acquisitions.
 
Effect of Proposal
 
If this Proposal is approved, there will be a sufficient number of shares of Company common stock to permit the full conversion of the Preferred Stock and the full exercise of the Warrants and to provide adequate financing flexibility to support JPE’s plan to grow the Company’s business for the foreseeable future. We do not currently have any material commitments which would require the issuance of additional shares of Company common stock, other than as described in this proxy statement and the documents attached hereto.


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The Board of Directors does not believe that an increase in the number of authorized shares of Company common stock, without more, will have a significant impact on the market price of our common stock. The availability of significant authorized but unissued shares of Company common stock will however (in addition to enabling the consummation of the Equity Investment) give the Company the flexibility to issue additional common equity and create dilution without further approval of stockholders. The Board of Directors believes, however, that this additional flexibility is warranted, as it would facilitate execution of future financings and strategic acquisitions and thereby facilitate the growth of the Company’s business.
 
Relationship to Other Proposals
 
Implementation of Proposal 2 is contingent upon obtaining stockholder approval of Proposal 1 and Proposals 3 through 5.
 
Vote Required
 
The affirmative vote of holders of a majority of the shares of Company common stock outstanding at the close of business on the record date is required to approve Proposal 2. Accordingly, the failure to vote with respect to Proposal 2 will have the same effect as a vote against Proposal 2. The failure of the Company’s stockholders to approve any of Proposals 1 through 5 will prevent the Company from consummating the Proposed Transaction.
 
Recommendation
 
The Board of Directors (excluding Mr. Martell, who recused himself), acting upon the affirmative recommendation of the special committee, unanimously recommends that you vote “FOR” Proposal 2.


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PROPOSAL 3 – AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO EFFECT A 4:1
REVERSE STOCK SPLIT OF COMPANY COMMON STOCK
 
General
 
The Board of Directors has unanimously approved (excluding Mr. Martell, who recused himself from approval) and declared advisable, subject to stockholder approval, an amendment to the Company Certificate to effect a 4:1 Reverse Stock Split.
 
In connection with the Reverse Stock Split, every four shares of Company common stock will be combined into one share of Company common stock. The amendment to the Company Certificate would not proportionately reduce the number of shares of our authorized preferred stock. In addition, Proposal 2 would be effected after giving effect to the Reverse Stock Split, and thus our authorized shares of Company common stock would not, after giving effect to both Proposals 2 and 3, proportionately reduce our authorized common stock (which will be 150,000,000 after giving effect to the implementation of both Proposals).
 
To avoid the existence of fractional shares of Company common stock, stockholders of record who would otherwise hold fractional shares of Company common stock as a result of the Reverse Stock Split will be entitled to receive a cash payment (without interest and subject to applicable withholding taxes) in lieu of such fractional shares from our transfer agent. The total amount of cash that will be paid to holders of fractional shares following the Reverse Stock Split will be an amount equal to the net proceeds attributable to the sale of such fractional shares following the aggregation and sale by our transfer agent of all fractional shares otherwise issuable. Holders of fractional shares as a result of the Reverse Stock Split will be paid such proceeds on a pro rata basis, according to the fractional shares that they owned (without interest and subject to applicable withholding taxes).
 
The Reverse Stock Split, if approved by the Company’s stockholders, would become effective upon the filing of the certificate of amendment to the Company Certificate with the Secretary of State of the State of Delaware.
 
Purpose of the Reverse Stock Split
 
The Board of Directors is submitting this Proposal 3 to stockholders for approval with the intent of increasing the market price of shares of Company common stock after giving effect to the Equity Investment to make the Company common stock more attractive to a broader range of investors and thereby increase the Company’s flexibility for future equity financings to support JPE’s intended growth of the Company’s business, including through strategic acquisitions, as well as to provide additional liquidity to the Company’s stockholders. We believe that the Reverse Stock Split will make the Company common stock more attractive as the current market price of the Company common stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public.
 
It should be noted, however, that although the Reverse Stock Split is being proposed for the purpose of increasing the market price of the Company’s common stock, there can be no assurance that such price increase can be achieved or maintained. A number of factors will influence the future trading price of the Company common stock, many of which are not within the Company’s control. As a result, there can be no assurance that the Reverse Stock Split, if completed, will result in the intended benefits described above, including that the market price of the Company common stock will increase following the Reverse Stock Split (either at all or in proportion to the reduction in the number of shares of Company common stock outstanding before the Reverse Stock Split), or that the market price of the Company common stock will not decrease in the future.


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Effect of Proposal
 
The Reverse Stock Split would affect all of the holders of Company common stock and would not affect any stockholder’s percentage ownership interest or proportionate voting power, except as described below under “Fractional Shares”. The principal effect of the Reverse Stock Split would be that every four shares of Company common stock would be reclassified and combined into one share of Company common stock.
 
The following table summarizes the shares of Company common stock outstanding, the shares held by the Company as treasury shares and the shares reserved for issuance pursuant to the Amended and Restated 2001 Stock Option Plan of the Company, as well as the shares of Company common stock that must be reserved for issuance upon conversion of the Preferred Stock and the shares of Company common stock that must be reserved for issuance upon exercise of the Warrants, in each case both before and after the implementation of the Reverse Stock Split.
 
Common Stock – Shares
 
                         
          Before
       
          Reverse Stock
    After Reverse
 
          Split (But
    Stock Split
 
Company Common –
        After Increase
    and Increase
 
  Stock Shares:
  [     ], 2011     in Authorized)     in Authorized  
 
Outstanding
    [     ]       [     ]       [     ]  
Treasury Shares
    [     ]       [     ]       [     ]  
Reserved for 2001 Stock Option Plan
    [     ]       [     ]       [     ]  
Underlying the Preferred Stock
          42,857,143       10,714,286  
Underlying the Warrants
          42,857,143       10,714,286  
                         
Potential outstanding
    [     ]       [     ]       [     ]  
Available for future issuance
    [     ]       [     ]       [     ]  
                         
Total authorized
    100,000,000       150,000,000       150,000,000  
                         
Shares available for issuance as a percentage of potential shares outstanding
    [     ]       [     ]       [     ]  
 
The number of shares subject to our outstanding stock options will automatically be reduced in the same ratio as the 4:1 Reverse Stock Split ratio. Accordingly, the per share exercise price of those options will be increased in direct proportion to the Reverse Stock Split ratio, so that the aggregate dollar amount payable for the purchase of the shares of Company common stock subject to the options will remain unchanged. In connection with the Reverse Stock Split, the number of shares of Company common stock issuable upon exercise or conversion of outstanding stock options will be rounded to the nearest whole share and no cash payment will be made in respect of such rounding.
 
After giving effect to the Reverse Stock Split, the Preferred Stock will have a conversion price of $7.00 per share of Company common stock. Also after giving effect to the Reverse Stock Split, the Warrants will have an exercise price of $7.00 per share of Company common stock, and the aggregate number of shares of Company common stock subject to the Warrants will be 10,714,286 shares.
 
The Reverse Stock Split may increase the number of our stockholders who own “odd lots” of less than 100 shares of Company common stock. Brokerage commissions and other costs of transactions in odd lots are generally higher than the costs of transactions of more than 100 shares of Company common stock.
 
The Reverse Stock Split would not affect the par value, nor any of the terms, of the Company common stock. After the Reverse Stock Split, all shares of Company common stock would have the same voting rights and rights to dividends and other distributions (if any). All shares of Company common stock other than


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fractional shares would be reclassified and combined, automatically and without further action on the stockholders’ part, into the number of shares determined according to the 4:1 Reverse Stock Split ratio.
 
After the Reverse Stock Split is consummated, Company common stock will have new Committee on Uniform Securities Identification Procedures (“CUSIP”) numbers, which is a number used to identify securities, and stock certificates with the older CUSIP numbers will need to be exchanged for stock certificates with the new CUSIP numbers by following the procedures described below.
 
Beneficial Holders of Company Common Stock
 
Upon the implementation of the Reverse Stock Split, we intend to treat shares of Company common stock held by stockholders through a broker, dealer, commercial bank, trust company or other nominee in the same manner as registered stockholders whose shares are registered in their names. Brokers and other nominees will be instructed to effect the Reverse Stock Split for their beneficial holders holding Company common stock in street name. However, these brokers and other nominees may have different procedures than registered stockholders for processing the Reverse Stock Split. Stockholders who hold shares of Company common stock with a broker or other nominee and who have any questions in this regard are encouraged to contact their broker or other nominee.
 
Registered “Book-Entry” Holders of Company Common Stock
 
Certain of our registered holders of Company common stock may hold some or all of their shares electronically in book-entry form with our transfer agent. These stockholders do not have stock certificates evidencing their ownership of Company common stock. They are, however, provided with a statement reflecting the number of shares registered in their accounts. If a stockholder holds registered shares in book-entry form with the transfer agent, they will be sent a transmittal letter by our agent and will need to return a properly completed and duly executed transmittal letter in order to receive any cash payment in lieu of fractional shares that may be declared and payable to holders of record following the Reverse Stock Split.
 
Holders of Certificated Shares
 
Stockholders holding shares of Company common stock in certificated form will be sent a transmittal letter by the transfer agent after the Reverse Stock Split is consummated. The letter of transmittal will contain instructions on how a stockholder should surrender his, her or its certificate(s) representing shares of Company common stock (the “Old Shares”) to the transfer agent in exchange for a book-entry with the Company’s transfer agent representing the appropriate number of shares of post-Reverse Stock Split Company common stock (the “New Shares”). No New Shares will be issued to a stockholder until such stockholder has surrendered all Old Shares, together with a properly completed and executed letter of transmittal, to the transfer agent. No stockholder will be required to pay a transfer or other fee to exchange Old Shares. Stockholders will then receive confirmation from the transfer agent that a book entry has been made for the New Shares, representing the number of shares of Company common stock to which such stockholder is entitled as a result of the Reverse Stock Split. Until surrendered, we will deem outstanding Old Shares held by stockholders to be cancelled and only to represent the number of shares of post-Reverse Stock Split Company common stock to which these stockholders are entitled. Any Old Shares submitted for exchange, whether because of a sale, transfer or other disposition of stock, will automatically be exchanged for New Shares. If Old Shares contain a restrictive legend, the New Shares will be restricted. Upon request to the transfer agent, stockholders may elect for the transfer agent to deliver physical stock certificates representing the New Shares in lieu of the book entry described above.
 
STOCKHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND SHOULD NOT SUBMIT ANY STOCK CERTIFICATE(S) UNTIL REQUESTED TO DO SO.
 
Fractional Shares
 
We do not intend to issue fractional shares of Company common stock in connection with the Reverse Stock Split. Instead, stockholders who otherwise would be entitled to receive fractional shares because they hold a number of shares not evenly divisible by the Reverse Stock Split ratio will receive a cash payment in


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lieu of any fractional shares as a result of the Reverse Stock Split. The total amount of cash that will be paid to holders of fractional shares following the Reverse Stock Split will be an amount equal to the net proceeds attributable to the sale of such fractional shares following the aggregation and sale by our transfer agent of all fractional shares otherwise issuable. Specifically, the transfer agent will act on account of the holders of those entitled to receive fractional shares and will accumulate such fractional shares, sell the shares and distribute the cash proceeds directly to the stockholders entitled to receive the fractional shares (without interest and subject to applicable withholding taxes).
 
Accounting Matters
 
The proposed certificate of amendment will not affect the par value of Company common stock and preferred stock per share, which will each continue to have $0.001 par value per share. As a result, the stated capital attributable to Company common stock will be reduced proportionately based on the Reverse Stock Split ratio (including a retroactive adjustment of prior periods), and the additional paid-in capital account will be credited with the amount by which the stated capital is reduced. Reported per share net income or loss will be higher because there will be fewer shares of Company common stock outstanding.
 
Material U.S. Federal Income Tax Consequences of the Reverse Stock Split
 
The following summary describes the material U.S. Federal income tax consequences of the Reverse Stock Split to holders of Company common stock. This summary is based on the Internal Revenue Code of 1986, as amended (the “Code”), and current Treasury regulations, administrative rulings and judicial decisions, all of which are subject to change, possibly on a retroactive basis, and any such change could affect the validity of this summary.
 
Each holder should consult its own tax advisor regarding the U.S. Federal, state, local and foreign income tax consequences of the Reverse Stock Split. This summary is included for general information purposes only and does not purport to address all aspects of U.S. Federal income tax law that may be relevant to holders of Company common stock in light of their particular circumstances. This summary also does not address the tax consequences of the Reverse Stock Split to holders subject to special tax rules, such as banks, insurance companies, regulated investment companies, personal holding companies, foreign entities, non-resident alien individuals, broker-dealers and tax-exempt entities. This summary assumes that the holders hold the Company common stock as “capital assets” (as defined in Section 1221 of the Code).
 
As used herein, the term “U.S. Holder” means a holder that is, for U.S. Federal income tax purposes:
 
  •   a citizen or resident of the United States;
 
  •   a corporation (or other entity taxed as a corporation for U.S. Federal income tax purposes) created or organized in or under the laws of the United States or any political subdivision thereof;
 
  •   an estate the income of which is subject to U.S. Federal income tax regardless of its source; or
 
  •   a trust (A) if a U.S. court is able to exercise primary supervision over the administration of the trust and one or more “U.S. person” (as defined in the Code) have the authority to control all substantial decisions of the trust or (B) that has a valid election in effect to be treated as a U.S. person.
 
If a partnership (or other entity classified as a partnership for U.S. Federal income tax purposes) is the holder of Company common stock, the U.S. Federal income tax treatment of a partner in the partnership will generally depend on the status of the partner and the activities of the partnership. Partnerships that hold Company common stock, and partners in such partnerships, should consult their own tax advisors regarding the U.S. federal income tax consequences of the Reverse Stock Split.
 
The Reverse Stock Split is intended to qualify as a “reorganization” (within the meaning of Section 368 of the Code) for U.S. Federal income tax purposes. If it qualifies as such, except as provided in the following paragraph, (i) no gain or loss should be recognized by U.S. Holders, (ii) the aggregate tax basis


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in the Company common stock received in the Reverse Stock Split should equal the aggregate tax basis in Company common stock surrendered therefor and (iii) the holding period of the Company common stock received in the Reverse Stock Split should include the holding period of the Company common stock surrendered therefor.
 
If a U.S. Holder of Company common stock receives cash in lieu of fractional shares, such holder generally will be treated as if it received the fractional shares in the Reverse Stock Split and then received the cash in redemption of the fractional shares. The U.S. Holder generally should recognize capital gain or loss equal to the difference between the amount of the cash received in lieu of fractional shares and the portion of such holder’s tax basis allocable to those fractional shares.
 
Relationship to Other Proposals
 
Implementation of Proposal 3 is contingent upon obtaining stockholder approval of Proposals 1 through 2 and Proposals 4 through 5.
 
Vote Required
 
The affirmative vote of holders of a majority of the shares of Company common stock outstanding at the close of business on the record date is required to approve Proposal 3. Accordingly, the failure to vote with respect to Proposal 3 will have the same effect as a vote against Proposal 3. The failure of the Company’s stockholders to approve any of Proposals 1 through 5 will prevent the Company from consummating the Proposed Transaction.
 
Recommendation
 
The Board of Directors (excluding Mr. Martell, who recused himself), acting upon the affirmative recommendation of the special committee, unanimously recommends that you vote “FOR” Proposal 3.


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PROPOSAL 4 – AMENDMENT TO THE CERTIFICATE OF INCORPORATION TO PERMIT
VACANCIES ON THE BOARD OF DIRECTORS TO BE FILLED BY THE REMAINING DIRECTORS
 
General
 
The Board of Directors has unanimously approved (excluding Mr. Martell, who recused himself from approval), subject to stockholder approval, an amendment to the Company Certificate to provide that any vacancy on our Board of Directors, whether resulting from an increase in the number of directors or otherwise, shall be filled by the affirmative vote of a majority of the directors then holding office, even if less than a quorum, or a sole remaining director (consistent with Section 5 of Article III of the Company’s by-laws). Furthermore, the amendment will provide that any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his or her predecessor.
 
The ability of the remaining Board members to fill vacancies on the Board of Directors would become effective upon the filing of the certificate of amendment to the Company Certificate with the Secretary of State of the State of Delaware.
 
Purpose of Amendment
 
The purpose of this amendment to the Company Certificate is to carry out the intent of the Investment Agreement regarding the rights of JPE to fill vacancies on the Board of Directors. Pursuant to the Investment Agreement, JPE is entitled to nominate for election to the Board of Directors, in connection with each meeting of stockholders at which directors are elected, a number of directors tied to JPE’s equity interest in the Company. If any JPE appointee ceases to serve as a director of the Company for any reason during his or her term, the Company is required to use its reasonable best efforts to cause the Board of Directors to fill the vacancy created thereby with a replacement designated by JPE. In order to ensure that such replacement obligations cannot effectively be superseded without the approval of the Board of Directors, and to realize the intent of the Investment Agreement, the current provision in the Company’s by-laws regarding the filling of vacancies by the Board of Directors is proposed to be added to the Company Certificate.
 
Although the Proposal is intended to effectuate the arrangements set forth in the Investment Agreement, it may also discourage or increase the cost of some takeover bids in the future, especially where the stockholders wish to “pack the board”, including some bids that a majority of the independent stockholders believe would be in their best interests to accept or where the reason for the desired change is inadequate performance of the directors or management.
 
Effect of Proposal
 
The amendment to the Company Certificate will provide that, in accordance with the current by-law provision, any vacancy on our Board of Directors, whether resulting from an increase in the number of directors or otherwise, shall be filled by the affirmative vote of a majority of the directors then holding office, even if less than a quorum, or a sole remaining director. Furthermore, such newly appointed director (unless the vacancy was a result of an increase in the size of the Board of Directors) will serve for the full term of his or her predecessor.
 
Relationship to Other Proposals
 
Implementation of Proposal 4 is contingent upon obtaining stockholder approval of Proposals 1 through 3 and Proposal 5.


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Vote Required
 
The affirmative vote of holders of a majority of the shares of Company common stock outstanding at the close of business on the record date is required to approve Proposal 4. Accordingly, the failure to vote with respect to Proposal 4 will have the same effect as a vote against Proposal 4. The failure of the Company’s stockholders to approve any of Proposals 1 through 5 will prevent the Company from consummating the Proposed Transaction.
 
Recommendation
 
The Board of Directors (excluding Mr. Martell, who recused himself), acting upon the affirmative recommendation of the special committee, unanimously recommends that you vote “FOR” Proposal 4.


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PROPOSAL 5 – ADOPTION OF THE 2011 OMNIBUS INCENTIVE COMPENSATION PLAN
 
General
 
The Board of Directors has unanimously approved (excluding Mr. Martell, who recused himself from approval), subject to stockholder approval and the consummation of the Equity Investment, the Plan. Our Board of Directors has approved the Plan as a flexible omnibus incentive compensation plan that would allow us to use different forms of compensation awards following the consummation of the Equity Investment to attract, retain and reward eligible participants under the Plan and strengthen the mutuality of interests between management and our stockholders. The purpose of the Plan would be to promote the interests of the Company and our stockholders by (1) attracting and retaining exceptional directors, officers, employees and consultants (including prospective directors, officers, employees and consultants) and (2) enabling such individuals to participate in our long-term growth and financial success. The Plan is intended to replace the Express-1 Expedited Solutions, Inc., Amended and Restated 2001 Stock Option Plan (the “Stock Option Plan”), which would be automatically terminated, replaced and superseded by the Plan on the date on which the Plan is approved by our stockholders. Any stock options granted under the Stock Option Plan would remain in effect pursuant to their terms. If stockholder approval is not received or if the Proposed Transaction is not consummated, the Stock Option Plan will not be terminated, replaced and superseded and will remain in place pursuant to its current terms.
 
Set forth below is a summary of the Plan, which is qualified in its entirety by the specific language of the Plan set forth in Exhibit D to the Investment Agreement, which is filed herewith as Annex A to this proxy statement and incorporated by reference herein.
 
Summary of the Plan
 
Types of Awards
 
The Plan would provide for the grant of options intended to qualify as incentive stock options (“ISOs”), under Section 422 of the Code, nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted share awards, restricted stock units (“RSUs”), performance compensation awards, performance units, cash incentive awards, deferred share units and other equity-based and equity-related awards, as well as cash-based awards.
 
Plan Administration
 
The Plan would be administered by the Compensation Committee of our Board of Directors or such other committee our Board of Directors designates to administer the Plan (the ‘‘Committee”). Subject to the terms of the Plan and applicable law, the Committee would have sole authority to administer the Plan, including, but not limited to, the authority to (1) designate plan participants, (2) determine the type or types of awards to be granted to a participant, (3) determine the number of shares of our common stock to be covered by awards, (4) determine the terms and conditions of awards, (5) determine the vesting schedules of awards and, if certain performance criteria were required to be attained in order for an award to vest or be settled or paid, establish such performance criteria and certify whether, and to what extent, such performance criteria have been attained, (6) interpret, administer, reconcile any inconsistency in, correct any default in and/or supply any omission in, the Plan, (7) establish, amend, suspend or waive such rules and regulations and appoint such agents as it should deem appropriate for the proper administration of the Plan, (8) accelerate the vesting or exercisability of, payment for or lapse of restrictions on, awards, and (9) make any other determination and take any other action that the Committee deemed necessary or desirable for the administration of the Plan.
 
Shares Available For Awards
 
Subject to adjustment for changes in capitalization and without giving effect to the 4:1 Reverse Stock Split, the aggregate number of shares of the Company’s common stock that would be available to be delivered pursuant to awards granted under the Plan (which will include any shares delivered pursuant to awards granted


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under the Stock Option Plan prior to the approval of the Plan by our stockholders) would be equal to the sum of (i) 2,000,000, (ii) any shares remaining available for future grants of options under the Stock Option Plan as of the date the Plan is approved by our stockholders (as of June 25, 2011, 1,933,488 shares remain available for future grants of options under the Stock Option Plan) plus (iii) any shares with respect to options granted under the Stock Option Plan that are forfeited following the date that the Plan is approved by our stockholders (as of June 25, 2011, options with respect to 2,692,750 shares are outstanding under the Stock Option Plan), of which 2,000,000 shares could be granted pursuant to incentive stock options, provided that any shares with respect to options that are forfeited pursuant to clause (iii), will only become available to be delivered under the Plan pursuant to stock options and no other type of award. Upon exercise of a stock-settled SAR, the maximum aggregate number of shares available under the Plan would be reduced by the actual number of shares delivered upon settlement of such stock-settled SAR. Awards that are settled in cash would not reduce the number of shares available for delivery under the Plan. If, after the effective date of the Plan, any award granted under the Plan or the Stock Option Plan were forfeited, or otherwise expired, terminated or were canceled without the delivery of all shares subject thereto, or were settled other than by the delivery of shares (including cash settlement), then the number of shares subject to such award that were not issued would not be treated as issued for purposes of reducing the maximum aggregate number of shares that may be delivered pursuant the Plan. In addition, shares that were surrendered or tendered to us in payment of the exercise price of an award or any taxes required to be withheld in respect of an award would become available again to be delivered pursuant to awards under the Plan, provided that such surrendered or tendered shares would not increase the number of shares that may be delivered pursuant to ISOs under the Plan. Subject to adjustment for changes in capitalization and without giving effect to the 4:1 reverse stock split, the maximum number of shares of our common stock that would be available to be granted pursuant to awards to any participant in the Plan in any fiscal year would be 1,000,000. In the case of awards settled in cash based on the fair market value of a share, the maximum aggregate amount of cash that would be permitted to be paid pursuant to awards granted to any participant in the Plan in any fiscal year would be equal to the per-share fair market value as of the relevant vesting, payment or settlement date multiplied by the maximum number of shares which could be granted, as described above. The maximum aggregate amount of cash and other property (valued at fair market value) that would be permitted to be paid or delivered pursuant to awards under the Plan, the value of which would be determined by reference to the fair market value of our shares, to any participant in any fiscal year would be $3,000,000.
 
Changes in Capitalization
 
In the event of any extraordinary dividend or other extraordinary distribution, recapitalization, rights offering, stock split, reverse stock split, split-up or spin-off affecting the shares of our common stock, the Committee would make equitable adjustments and other substitutions to awards under the Plan in the manner it determined to be appropriate or desirable. In the event of any reorganization, merger, consolidation, combination, repurchase or exchange of our common stock or other similar corporate transactions, the Committee in its discretion would be permitted to make such adjustments and other substitutions to the Plan and awards under the Plan as it deemed appropriate or desirable.
 
Upon consummation of the 4:1 Reverse Stock Split, the Committee would make equitable adjustments to the aggregate number of shares of Company common stock that would be available to be delivered pursuant to awards granted under the Plan, such that the aggregate number would be equal to the sum of (i) 500,000, (ii) any shares remaining available for future grants of options under the Stock Option Plan as of the date the Plan is approved by our stockholders (as of June 25, 2011, 483,372 shares remain available for future grants of options under the Stock Option Plan after giving effect to the 4:1 Reverse Stock Split) plus (iii) any shares with respect to options granted under the Stock Option Plan that are forfeited following the date that the Plan is approved by our stockholders (as of June 25, 2011, options with respect to 673,188 shares are outstanding under the Stock Option Plan after giving effect to the 4:1 Reverse Stock Split), of which 500,000 shares could be granted pursuant to incentive stock options after giving effect to the 4:1 Reverse Stock Split, provided that any shares with respect to options that are forfeited pursuant to clause (iii), will only become available to be delivered under the Plan pursuant to stock options and no other type of award. After giving effect to the 4:1


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Reverse Stock Split, the maximum number of shares of our common stock that would be available to be granted pursuant to awards to any participant in the Plan in any fiscal year would be 250,000.
 
Substitute Awards
 
The Committee would be permitted to grant awards in assumption of, or in substitution for, outstanding awards previously granted by us or any of our affiliates or a company that we acquired or with which we combined. Any shares issued by us through the assumption of or substitution for outstanding awards granted by a company that we acquired would not reduce the aggregate number of shares of our common stock available for awards under the Plan, except that awards issued in substitution for ISOs would reduce the number of shares of our common stock available for ISOs under the Plan.
 
Source of Shares
 
Any shares of our common stock issued under the Plan would consist, in whole or in part, of authorized and unissued shares or of treasury shares.
 
Eligible Participants
 
Any director, officer, employee or consultant (including any prospective director, officer, employee or consultant) of us or our affiliates would be eligible to participate in the Plan. The Company currently expects that awards will be generally limited to approximately 218 employees and non-employee directors (of whom there are currently five eligible directors).
 
Stock Options
 
The Committee would be permitted to grant both ISOs and NSOs under the Plan. The exercise price for options would not be less than the fair market value (as defined in the Plan) of the Company’s common stock on the grant date. The Committee would not reprice any option granted under the Plan without the approval of our stockholders. All options granted under the Plan would be NSOs unless the applicable award agreement expressly stated that the option was intended to be an ISO. Under the proposed Plan, all ISOs and NSOs would be intended to qualify as “performance-based compensation” under Section 162(m) of the Code. Subject to the provisions of the Plan and the applicable award agreement, the Committee would determine, at or after the grant of an option, the vesting criteria, term, methods of exercise and any other terms and conditions of any option. Unless otherwise set forth in the applicable award agreement, each option would expire upon the earlier of (i) the tenth anniversary of the date the option was granted and (ii) three months after the participant who was holding the option ceased to be a director, officer, employee or consultant for us or one of our affiliates. The exercise price would be permitted to be paid with cash (or its equivalent) or, in the sole discretion of the Committee, with previously acquired shares of our common stock or through delivery of irrevocable instructions to a broker to sell our common stock otherwise deliverable upon the exercise of the option (provided that there was a public market for our common stock at such time), or, in the sole discretion of the Committee, a combination of any of the foregoing, provided that the combined value of all cash and cash equivalents and the fair market value of any such shares so tendered to us as of the date of such tender, together with any shares withheld by us in respect of taxes relating to an option, was at least equal to such aggregate exercise price.
 
Stock Appreciation Rights
 
The Committee would be permitted to grant SARs under the Plan. The exercise price for SARs would not be less than the fair market value (as defined in the Plan) of our common stock on the grant date. The Committee would not reprice any SAR granted under the Plan without the approval of our stockholders. Upon exercise of a SAR, the holder would receive cash, shares of our common stock, other securities, other awards, other property or a combination of any of the foregoing, as determined by the Committee, equal in value to the excess, if any, of the fair market value of a share of our common stock on the date of exercise of the SAR over the exercise price of the SAR. Under the Plan, all SARs would be intended to qualify as


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“performance-based compensation” under Section 162(m) of the Code. Subject to the provisions of the Plan and the applicable award agreement, the Committee would determine, at or after the grant of a SAR, the vesting criteria, term, methods of exercise, methods and form of settlement and any other terms and conditions of any SAR. Unless otherwise set forth in the applicable award agreement, each SAR would expire upon the earlier of (i) the tenth anniversary of the date the SAR was granted and (ii) three months after the participant who was holding the SAR ceased to be a director, officer, employee or consultant for us or one of our affiliates. Under certain circumstances, the Committee would have the ability to substitute, without the consent of the affected participant, SARs for outstanding NSOs. No SAR granted under the Plan could be exercised more than 10 years after the date of grant.
 
Restricted Shares and Restricted Stock Units
 
Subject to the provisions of the Plan, the Committee would be permitted to grant restricted shares and RSUs. Restricted shares and RSUs would not be permitted to be sold, assigned, transferred, pledged or otherwise encumbered except as provided in the Plan or the applicable award agreement, except that the Committee could determine that restricted shares and RSUs would be permitted to be transferred by the participant for no consideration. Restricted shares could be evidenced in such manner as the Committee would determine.
 
An RSU would be granted with respect to one share of the Company’s common stock or have a value equal to the fair market value of one such share. Upon the lapse of restrictions applicable to an RSU, the RSU could be paid in cash, shares of our common stock, other securities, other awards or other property, as determined by the Committee, or in accordance with the applicable award agreement. In connection with each grant of restricted shares, except as provided in the applicable award agreement, the holder would be entitled to the rights of a stockholder (including the right to vote and receive dividends) in respect of such restricted shares. The Committee would be permitted to, on such terms and conditions as it might determine, provide a participant who holds RSUs with dividend equivalents, payable in cash, shares of our common stock, other securities, other awards or other property. If a restricted share or RSU were intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the requirements described below in “Performance Compensation Awards” would be required to be satisfied in order for such restricted share or RSU to be granted or vest.
 
Performance Units
 
Subject to the provisions of the Plan, the Committee would be permitted to grant performance units to participants. Performance units would be awards with an initial value established by the Committee (or that was determined by reference to a valuation formula specified by the Committee) at the time of the grant. In its discretion, the Committee would set performance goals that, depending on the extent to which they were met during a specified performance period, would determine the number and/or value of performance units that would be paid out to the participant. The Committee, in its sole discretion, would be permitted to pay earned performance units in the form of cash, shares of our common stock or any combination thereof that would have an aggregate fair market value equal to the value of the earned performance units at the close of the applicable performance period. The determination of the Committee with respect to the form and timing of payout of performance units would be set forth in the applicable award agreement. The Committee would be permitted to, on such terms and conditions as it might determine, provide a participant who holds performance units with dividends or dividend equivalents, payable in cash, shares of our common stock, other securities, other awards or other property. If a performance unit were intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the requirements below described in “Performance Compensation Awards” would be required to be satisfied.
 
Cash Incentive Awards
 
Subject to the provisions of the Plan, the Committee would be permitted to grant cash incentive awards to participants. In its discretion, the Committee would determine the number of cash incentive awards to be awarded, the duration of the period which, and any condition under which, the cash incentive awards would


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vest or be forfeited, and any other terms and conditions applicable to the cash incentive awards. Subject to the provisions of the Plan, the holder of a cash incentive award would receive payment based on the number and value of the cash incentive award earned, which would be determined by the Committee, in its discretion, based on the extent to which performance goals or other conditions applicable to the cash incentive award have been achieved. If a cash incentive award were intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the requirements described below in “Performance Compensation Awards” would be required to be satisfied.
 
Other Stock-Based Awards
 
Subject to the provisions of the Plan, the Committee would be permitted to grant to participants other equity-based or equity-related compensation awards, including vested stock. The Committee would be permitted to determine the amounts and terms and conditions of any such awards. If such an award were intended to qualify as “performance-based compensation” under Section 162(m) of the Code, the requirements described below in “Performance Compensation Awards” would be required to be satisfied.
 
Performance Compensation Awards
 
The Committee would be permitted to designate any award granted under the Plan (other than ISOs, NSOs and SARs) as a performance compensation award in order to qualify such award as “performance-based compensation” under Section 162(m) of the Code. Awards designated as performance compensation awards would be subject to the following additional requirements:
 
  •   Recipients of Performance Compensation Awards.  The Committee would, in its sole discretion, designate within the first 90 days of a performance period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) the participants who would be eligible to receive performance compensation awards in respect of such performance period. The Committee would also determine the length of performance periods, the types of awards to be issued, the performance criteria that would be used to establish the performance goals, the kinds and levels of performance goals and any objective performance formula used to determine whether a performance compensation award had been earned for the performance period.
 
  •   Performance Criteria Applicable to Performance Compensation Awards.  The performance criteria would be limited to the following: (1) share price, (2) net income or earnings before or after taxes (including earnings before interest, taxes, depreciation and amortization), (3) operating income, (4) earnings per share (including specified types or categories thereof), (5) cash flow (including specified types or categories thereof), (6) cash flow return on capital, (7) revenues (including specified types or categories thereof), (8) return on shareholders’ equity, (9) return on investment or capital, (10) return on assets, (11) gross or net profitability/profit margins, (12) objective measures of productivity or operating efficiency, (13) costs (including specified types or categories thereof), (14) budgeted expenses (operating and capital), (15) market share (in the aggregate or by segment), (16) level of amount of acquisitions, (17) economic value-added, (18), enterprise value, (19) book value, (20) working capital, (21) safety and accident rates and (22) days sales outstanding. These performance criteria would be permitted to be applied on an absolute basis or be relative to one or more peer companies or indices or any combination thereof or, if applicable, be computed on an accrual or cash accounting basis. The performance goals and periods could vary from participant to participant and from time to time. To the extent required under Section 162(m) of the Code, the Committee would, within the first 90 days of the applicable performance period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code), define in an objective manner the method of calculating the performance criteria it selected to use for the performance period.
 
  •   Modification of Performance Goals.  The Committee would be permitted to adjust or modify the calculation of performance goals for a performance period in the event of, in anticipation of, or in recognition of, any unusual or extraordinary corporate item, transaction, event or development or


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  any other unusual or nonrecurring events affecting the Company, any of its affiliates, subsidiaries, divisions or operating units (to the extent applicable to such performance goal) or its financial statements or the financial statements of any of its affiliates, or changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles, law or business conditions, so long as that adjustment or modification did not cause the performance compensation award to fail to qualify as “performance-based compensation” under Section 162(m) of the Code.
 
  •   Requirements to Receive Payment for 162(m) Awards.  Except as otherwise permitted by Section 162(m) of the Code, in order to be eligible for payment in respect of a performance compensation award for a particular performance period, participants would be required to be employed by us on the last day of the performance period, the performance goals for such period would be required to be satisfied and certified by the Committee and the performance formula would be required to determine that all or some portion of the performance compensation award had been earned for such period.
 
  •   Negative Discretion.  The Committee would be permitted to, in its sole discretion, reduce or eliminate the amount of a performance compensation award earned in a particular performance period, even if applicable performance goals had been attained and without regard to any employment agreement between us and a participant.
 
  •   Limitations on Committee Discretion.  Except as otherwise permitted by Section 162(m) of the Code, in no event could any discretionary authority granted to the Committee under the Plan be used to grant or provide payment in respect of performance compensation awards for which performance goals had not been attained, increase a performance compensation award for any participant at any time after the first 90 days of the performance period (or, if shorter, within the maximum period allowed under Section 162(m) of the Code) or increase a performance compensation award above the maximum amount payable under the underlying award.
 
  •   Form of Payment.  Performance compensation awards (other than restricted shares, RSUs and other stock-based awards) would be payable in cash or in restricted stock, RSUs or fully vested shares of equivalent value and would be paid on the terms determined by the Committee in its discretion. Any shares of restricted stock or RSUs would be subject to the terms of the Plan or any successor equity compensation plan and any applicable award agreement. The number of shares of restricted stock, RSUs or fully vested shares that is equivalent in value to a particular dollar amount would be determined in accordance with a methodology specified by the Committee within the first 90 days of a plan year (or, if shorter, the maximum period allowed under Section 162(m) of the Code).
 
Amendment and Termination of the Plan
 
Subject to any applicable law or government regulation, to any requirement that must be satisfied if the Plan were intended to be a stockholder-approved plan for purposes of Section 162(m) of the Code and to the rules of the applicable national stock exchange or quotation system on which the shares may be listed or quoted, the Plan would be permitted to be amended, modified or terminated by our Board of Directors without the approval of our stockholders, except that stockholder approval would be required for any amendment that would (i) increase the maximum number of shares of our common stock available for awards under the Plan or increase the maximum number of shares of the Company’s common stock that could be delivered pursuant to ISOs granted under the Plan, (ii) change the class of employees or other individuals eligible to participate in the Plan, (iii) amend or decrease the exercise price of any option or SAR, (iv) cancel or exchange any option or SAR at a time when its exercise price exceeds the fair market value of the underlying shares or (v) allow repricing of any option or SAR without stockholder approval. Under these provisions, stockholder approval would not be required for all possible amendments that might increase the cost of the Plan. No modification, amendment or termination of the Plan that would materially and adversely impair the rights of any participant would be effective without the consent of the affected participant, unless otherwise provided by the Committee in the applicable award agreement.


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The Committee would be permitted to waive any conditions or rights under, amend any terms of, or alter, suspend, discontinue, cancel or terminate any award previously granted, prospectively or retroactively. However, unless otherwise provided by the Committee in the applicable award agreement or in the Plan, any such waiver, amendment, alteration, suspension, discontinuance, cancellation or termination that would materially and adversely impair the rights of any participant to any award previously granted would not to that extent be effective without the consent of the affected participant.
 
The Committee would be authorized to make adjustments in the terms and conditions of awards in the event of any unusual or nonrecurring corporate event (including the occurrence of a change of control of the Company) affecting the Company, any of its affiliates or its financial statements or the financial statements of any of its affiliates, or of changes in applicable rules, rulings, regulations or other requirements of any governmental body or securities exchange, accounting principles or law whenever the Committee, in its discretion, determined that those adjustments were appropriate or desirable, including providing for the substitution or assumption of awards, accelerating the exercisability of, lapse of restrictions on, or termination of, awards or providing for a period of time for exercise prior to the occurrence of such event and, in its discretion, the Committee would be permitted to provide for a cash payment to the holder of an award in consideration for the cancellation of such award.
 
Change of Control
 
The Plan would provide that, unless otherwise provided in an award agreement, in the event of a change of control of the Company, unless provision was made in connection with the change of control for assumption of, or substitution for, awards previously granted:
 
  •   any options and SARs outstanding as of the date the change of control was determined to have occurred would become fully exercisable and vested, as of immediately prior to the change of control;
 
  •   all performance units, cash incentive awards and other awards designated as performance compensation awards would be paid out as if the date of the change of control were the last day of the applicable performance period and “target” performance levels had been attained; and
 
  •   all other outstanding awards would automatically be deemed exercisable or vested and all restrictions and forfeiture provisions related thereto would lapse as of immediately prior to such change of control.
 
Unless otherwise provided pursuant to an award agreement, a change of control would be defined to mean any of the following events, generally:
 
  •   during any period of 12 consecutive calendar months, a change in the composition of a majority of the board of directors, as constituted on the first day of such period, that was not supported by a majority of the incumbent board of directors;
 
  •   consummation of certain mergers or consolidations of the Company with any other corporation following which the Company’s stockholders hold 50% or less of the combined voting power of the surviving entity;
 
  •   the stockholders approve a plan of complete liquidation or dissolution of the Company; or
 
  •   an acquisition by any individual, entity or group of beneficial ownership of a percentage of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors that was equal to or greater than 50%.
 
Although award agreements may provide for a different definition of change of control than is provided for in the Plan, except in the case of a transaction described in the third bullet above, any definition of change of control set forth in any award agreement would provide that a change of control would not occur until consummation or effectiveness of a change in control of the Company, rather than upon the announcement,


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commencement, stockholder approval or other potential occurrence of any event or transaction that, if completed, would result in a change in control of the Company.
 
Term of the Plan
 
No award would be permitted to be granted under the Plan after the tenth anniversary of the date the Plan was approved by the stockholders. The Plan would not become effective until the consummation of the Proposed Transaction.
 
Certain Federal Tax Aspects of the Plan
 
The following summary describes the U.S. Federal income tax treatment associated with options awarded under the Plan. The summary is based on the law as in effect on June 25, 2011. The summary does not discuss state, local and foreign tax consequences.
 
Incentive Stock Options
 
Neither the grant nor the exercise of an ISO results in taxable income to the optionee for regular U.S. federal income tax purposes. However, an amount equal to (i) the per-share fair market value on the exercise date minus the exercise price at the time of grant multiplied by (ii) the number of shares with respect to which the ISO is being exercised will count as “alternative minimum taxable income” which, depending on the particular facts, could result in liability for the “alternative minimum tax” or AMT. If the optionee does not dispose of the shares issued pursuant to the exercise of an ISO until the later of the two-year anniversary of the date of grant of the ISO and the one-year anniversary of the date of the acquisition of those shares, then (a) upon a later sale or taxable exchange of the shares, any recognized gain or loss would be treated for tax purposes as a long-term capital gain or loss and (b) the Company would not be permitted to take a deduction with respect to that ISO for federal income tax purposes.
 
If shares acquired upon the exercise of an ISO were disposed of prior to the expiration of the two-year and one-year holding periods described above (a “disqualifying disposition”), generally the optionee would realize ordinary income in the year of disposition in an amount equal to the lesser of (i) any excess of the fair market value of the shares at the time of exercise of the ISO over the amount paid for the shares or (ii) the excess of the amount realized on the disposition of the shares over the participant’s aggregate tax basis in the shares (generally, the exercise price). A deduction would be available to the Company equal to the amount of ordinary income recognized by the optionee. Any further gain realized by the optionee will be taxed as short-term or long-term capital gain and would not result in any deduction by the Company. A disqualifying disposition occurring in the same calendar year as the year of exercise would eliminate the alternative minimum tax effect of the ISO exercise.
 
Special rules may apply where all or a portion of the exercise price of an ISO is paid by tendering shares, or if the shares acquired upon exercise of an ISO are subject to substantial forfeiture restrictions. The foregoing summary of tax consequences associated with the exercise of an ISO and the disposition of shares acquired upon exercise of an ISO assumes that the ISO is exercised during employment or within three months following termination of employment. The exercise of an ISO more than three months following termination of employment will result in the tax consequences described below for NSOs, except that special rules apply in the case of disability or death. An individual’s stock options otherwise qualifying as ISOs will be treated for tax purposes as NSOs (and not as ISOs) to the extent that, in the aggregate, they first become exercisable in any calendar year for stock having a fair market value (determined as of the date of grant) in excess of $100,000.
 
Nonqualified Stock Options
 
An NSO (that is, a stock option that does not qualify as an ISO) would result in no taxable income to the optionee or deduction to the Company at the time it is granted. An optionee exercising an NSO would, at that time, realize taxable compensation equal to (i) the per-share fair market value on the exercise date minus the exercise price at the time of grant multiplied by (ii) the number of shares with respect to which the option


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is being exercised. If the NSO was granted in connection with employment, this taxable income would also constitute “wages” subject to withholding and employment taxes. A corresponding deduction would be available to the Company. The foregoing summary assumes that the shares acquired upon exercise of an NSO option are not subject to a substantial risk of forfeiture.
 
Section 162(m)
 
Section 162(m) of the Code currently provides that if, in any year, the compensation that is paid to our Chief Executive Officer or to any of our three other most highly compensated executive officers (currently excluding our Chief Financial Officer) exceeds $1,000,000 per person, any amounts that exceed the $1,000,000 threshold will not be deductible by us for federal income tax purposes, unless the compensation qualifies for an exception to Section 162(m) of the Code. Certain performance-based awards under plans approved by stockholders are not subject to the deduction limit. Stock options that would be awarded under the Plan are intended to be eligible for this performance-based exception.
 
Section 409A
 
Section 409A of the Code imposes restrictions on nonqualified deferred compensation. Failure to satisfy these rules results in accelerated taxation, an additional tax to the holder of the amount equal to 20% of the deferred amount, and a possible interest charge. Stock options granted with an exercise price that is not less than the fair market value of the underlying shares on the date of grant will not give rise to “deferred compensation” for this purpose unless they involve additional deferral features. Stock options that would be awarded under the Plan are intended to be eligible for this exception.
 
Securities Authorized for Issuance Under Equity Compensation Plans
 
The following table provides information about equity-based awards outstanding and shares of the Company’s common stock available for future awards under all of our equity compensation plans as of December 31, 2010.
 
EQUITY COMPENSATION PLAN INFORMATION
 
                         
                Number of Securities
 
                Remaining
 
                Available for Future
 
                Issuance
 
                Under Equity
 
    Number of Securities to be
    Weighted-Average
    Compensation
 
    Issued Upon Exercise of
    Exercise Price of
    Plans (Excluding
 
    Outstanding Options,
    Outstanding Options,
    Securities
 
    Warrants and Rights
    Warrants and Rights
    Reflected in Column (a))
 
Plan Category
  (a)     (b)     (c)  
 
Equity compensation plans approved by security holders     3,005,250     $ 1.18       2,122,446  
Equity compensation plans not approved by security holders     0       0       0  
Total     3,005,250     $ 1.18       2,122,446  


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The following New Plan Benefits table lists each person named in the Summary Compensation Table, all current executive officers as a group, all current directors (other than executive officers) as a group and all current employees of the Company (other than executive officers) as a group, indicating the aggregate number of determinable awards to be granted under the Plan to each of the foregoing.
 
NEW PLAN BENEFITS
Express-1 Expedited Solutions, Inc., 2011 Omnibus Incentive Compensation Plan
 
                     
              Number of
 
Name and Principal Position     Dollar Value ($)(1)       Units  
Michael R. Welch, Chief Executive Officer
      N/A          
                     
John D. Welch, Chief Financial Officer
      N/A          
                     
All Current Executive Officers as a Group (two persons)
      N/A          
                     
All Current Directors (other than Executive Officers) as a Group (six persons)
      N/A          
                     
All Current Employees (other than Executive Officers) as a Group (211 persons)
    $      —         50,000 (2)
                     
 
(1) Dollar value will be based upon the fair market value, as defined in the Plan, of the Company’s common stock on the date of grant.
 
(2) Amount represents stock options to purchase 25,000 shares that will be granted to each of two employees in January 2012 pursuant to their respective employment agreements. The stock options will have an exercise price per share equal to the closing price of a share of the Company’s common stock as reported by the applicable national stock exchange or quotation system on which the shares may be listed or quoted on the business day immediately preceding the date of grant.
 
Relationship to Other Proposals
 
Implementation of Proposal 5 is contingent upon obtaining stockholder approval of Proposals 1 through 4.
 
Required Vote
 
The affirmative vote of holders of a majority of the shares of Company common stock voting thereon at a meeting at which a quorum is present is required to approve Proposal 5. The failure of the Company’s stockholders to approve any of Proposal 1 through 5 will prevent the Company from consummating the Proposed Transaction.
 
Recommendation
 
The Board of Directors (excluding Mr. Martell, who recused himself), acting upon the affirmative recommendation of the special committee, unanimously recommends that you vote “FOR” Proposal 5.


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PROPOSAL 6 – PROPOSAL TO ADJOURN OR POSTPONE THE SPECIAL MEETING
 
General
 
The special meeting may be adjourned to another time or place, if necessary or appropriate, to solicit additional proxies if there are insufficient votes at the time of the special meeting to approve Proposals 1 through 5.
 
Purpose
 
If, at the special meeting, the number of shares of Company common stock present in person or represented by proxy and voting in favor of the Proposals is insufficient to approve such Proposals, the Company intends to move to adjourn the special meeting in order to enable our Board of Directors to solicit additional proxies in favor of approval of the Proposals. In such event, the Company will ask its stockholders to vote only on the adjournment Proposal, and not on the other Proposals. If the adjournment Proposal is approved, the Company may elect to move to adjourn the special meeting in order to enable the Board of Directors to solicit additional proxies in favor of approval of the Proposals.
 
Effect of Proposal
 
In this Proposal, the Company is asking its stockholders to authorize the holder of any proxy solicited by the Board of Directors to vote in favor of adjourning or postponing the special meeting to another time or place for the purpose of soliciting additional proxies. If the stockholders approve this Proposal 6, the Company could adjourn the special meeting and use the additional time to solicit additional proxies, including from stockholders who have previously voted.
 
Required Vote
 
The affirmative vote of a majority of the shares of Company common stock present and entitled to vote at the special meeting, whether or not a quorum is present, is required to approve Proposal 6.
 
Recommendation
 
The Board of Directors (excluding Mr. Martell, who recused himself), acting on the affirmative recommendation of the special committee, unanimously recommends a vote “FOR” Proposal 6 to adjourn or postpone the special meeting, if necessary or appropriate, to solicit additional proxies.


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COMPENSATION OF DIRECTORS
 
The following table sets forth information concerning the compensation of our directors for fiscal 2010.
 
2010 DIRECTOR COMPENSATION(1)
 
                         
    Fees Earned or
    Options
       
Name
  Paid in Cash     Awards(2)     Total  
 
Daniel Para
  $                0     $                0     $                0  
James J. Martell
  $ 30,000     $ 11,950     $ 41,950  
Jay N. Taylor
  $ 5,500     $ 15,910     $ 21,410  
Calvin (Pete) R. Whitehead
  $ 40,000     $ 11,950     $ 51,950  
Jennifer H. Dorris
  $ 22,000     $ 11,640     $ 33,640  
John F. Affleck–Graves
  $ 6,000     $ 11,950     $ 17,950  
 
(1) Compensation information for those members of the Board of Directors who are also considered named executive officers of the Company is disclosed in the section “Executive Compensation — Summary Compensation Table”.
 
(2) Amounts shown are the aggregate grant date fair value of option awards computed in accordance with Accounting Standards Codification (“ASC”) Topic 718 “Compensation-Stock Compensation”. For a further discussion of the assumptions used in the calculation of the 2010 grant date fair values for option awards pursuant to ASC 718, please see “Financial Statements—Notes to Consolidated Financial Statements—Footnote No. 1 Stock Option Plan” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010. As of December 31, 2010, the number of outstanding option awards held by each of our directors (other than our named executive officers) was as follows: Mr. Martell—300,000 option awards; Mr. Taylor—200,000 option awards; Mr. Whitehead—200,000 option awards; Ms. Dorris—200,000 option awards; Mr. Affleck-Graves—175,000 option awards; and Mr. Para—125,000 option awards, 25,000 of which were granted to Mr. Para in connection with his service on our Board of Directors.
 
Narrative to Director Compensation
 
The Company’s Board of Directors appoints the executive officers to serve on the Board at the discretion of the Board. For individual directors who are employees or those who are not classified as independent, no additional cash compensation is provided for service on the Board of Directors. The Company’s non-employee director compensation plan was last modified this year to eliminate an annual grant of stock options that was previously made to each non-employee director on his or her anniversary of joining the Board. In the first quarter of each year, the Board of Directors reviews the Company’s results and market comparisons for board compensation. Based upon this review, a determination is made as to whether modifications to the existing board compensation plan should be considered. Under the current plan, new independent board members are awarded a one-time grant of up to 100,000 options at the then current market price at the time they join the Board of Directors. All grants of options to board members vest monthly over a three-year term and have a maturity date determined at the time of grant, not to exceed 10 years. In addition to stock option awards, each independent director also receives:
 
(i) $2,500 per fiscal quarter
(ii) $2,000 per day for each board meeting attended in person;
(iii) $500 for participation in board or audit committee conference calls; and
(iv) reasonable reimbursement of expenses associated with attendance and participation at board meetings.


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The following remuneration is also paid to the chairpersons of the various committees. The chairperson of the Board of Directors receives an annual fee of $25,000. The chairperson of the Compensation Committee receives an annual fee of $10,000. The chairperson of the Audit Committee receives an annual fee of $15,000. The chairperson of the Nominating Committee receives an annual fee of $5,000. Each of the chairperson fees is remitted in four equal installments, throughout the year.


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EXECUTIVE COMPENSATION
 
The following Summary Compensation Table sets forth information concerning the total compensation awarded to, earned by, or paid to our Chief Executive Officer and Chief Financial Officer (the “named executive officers”) for the years ended December 31, 2010 and December 31, 2009. This Summary Compensation Table is accompanied by an “All Other Compensation” Table and an additional narrative discussion as necessary to assist in the understanding of the information presented in each of the tables.
 
SUMMARY COMPENSATION TABLE
 
                                                         
                      Nonequity
                   
                      Incentive Plan
    Option
    All Other
    Total
 
          Salary(1)
    Bonus(2)
    Compensation(3)
    Awards(4)
    Compensation(5)
    Compensation
 
Name and Position
  Year     $     $     $     $     $     $  
 
Michael R. Welch
    2010       205,000       30,000       151,900       27,900       4,000       418,800  
Chief Executive Officer
    2009       200,000                         5,800       205,800  
John D. Welch(6)
    2010       130,000       20,000       76,000       27,500       1,000       254,500  
Chief Financial Officer
    2009       122,000                           2,900       124,900  
 
(1) Included in this column is the base salary paid to the named executive officers during each year.
(2) Included in this column is a discretionary cash bonus paid to the named executive officers for 2010. For Mr. Michael Welch, the $30,000 discretionary bonus was in lieu of $30,000 that was historically paid into a non-qualified deferred compensation plan, which the Company decided to terminate. For Mr. John Welch, the $20,000 discretionary bonus was made to compensate him for the additional duties and responsibilities he performed during 2010 when he became our Interim Chief Financial Officer.
(3) Included in this column is the performance-based annual cash bonus awards earned in 2009 and 2010. The Company’s annual bonus plan is further detailed in the narrative following the Summary Compensation Table.
(4) Included in this column are the awards of stock options based upon the Company’s performance. In 2009, the named executive officers did not receive any option awards. Amounts shown are the aggregate grant date fair value of option awards computed in accordance with ASC 718 and represent 60,000 and 50,000 option awards granted to Mr. Michael Welch and Mr. John Welch, respectively. For a further discussion of the assumptions used in the calculation of the 2010 grant date fair values for option awards pursuant to ASC 718, please see “Financial Statements—Notes to Consolidated Financial Statements—Footnote No. 1 Stock Option Plan” of the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
(5) Included in this column is other compensation items paid to the named executive officers. Components of the other compensation are further detailed in the subsequent table titled “All Other Compensation”.
(6) John Welch was appointed as the Chief Financial Officer of the Company on January 1, 2011. Prior to the appointment, he held the position of Interim Chief Financial Officer from April 19, 2010 to December 31, 2010. He served as the Corporate Controller prior to that appointment.


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All Other Compensation Table
 
The following table describes each component of the “All Other Compensation” column in the Summary Compensation Table for our named executive officers in 2010 and 2009.
 
                                 
                Matching
       
                Contributions
       
          Perquisites and
    to Retirement
       
          Other Personal
    and 401(k)
       
          Benefits(1)
    Plans(2)
    Total
 
Name
  Year     $     $     $  
 
Michael R. Welch
    2010       4,000             4,000  
Chief Executive Officer
    2009       4,000       1,800       5,800  
John D. Welch
    2010       1,000             1,000  
Chief Financial Officer
    2009       1,000       1,900       2,900  
 
(1) Included in this column are primarily amounts for cell phone reimbursements, automobile allowances and club dues.
 
(2) Included in this column are matching contributions to the Company’s 401(k) plan. Only amounts contributed directly by the employee are eligible for matching contributions and these matches are identical to those available to other employees.
 
Narrative to Executive Compensation
 
Employment Agreements with the Named Executive Officers—General Provisions
 
The term of the employment agreement with Mr. Michael Welch commenced on July 1, 2005 and was extended on July 1, 2008 to July 1, 2011. On June 10, 2011, the term of Mr. Michael Welch’s employment agreement was further extended to July 1, 2012. During the term of the agreement, Mr. Michael Welch will serve as the Chief Executive Officer of the Company and, since January 1, 2011, is paid a base salary at an annual rate of $240,000.
 
The term of the employment agreement with Mr. John Welch commenced on January 1, 2011 and will continue for a period of three years thereafter. Mr. John Welch’s employment agreement renews automatically for a two-year period unless either party gives notice of non-renewal at least 60 days prior to the end of the initial three-year term. During the term of the agreement, Mr. John Welch will serve as the Chief Financial Officer of the Company and will be paid a base salary at an annual rate of $160,000, subject to annual review and increase as determined by the Compensation Committee.
 
Messrs. Michael Welch and John Welch are also entitled to receive annual cash bonuses during the term of their respective employment agreements under the Company’s executive bonus plan, which is described in more detail under “—Executive Annual Bonus Plan”.
 
The employment agreements of Messrs. Michael Welch and John Welch provide that each executive officer’s employment may be terminated by the Company upon death or disability, for cause (as defined in the employment agreements) and by the Company other than for cause. In addition, Mr. Michael Welch may terminate his employment for good reason (as defined in the employment agreements) either before or after a change of control (as defined in the employment agreements) of the Company, and Mr. John Welch may terminate his employment for good reason within one year following a change of control of the Company. See “—Change-of-Control Provisions” for a detailed discussion of the payment and benefits payable to the named executive officer in connection with a change of control of the Company. If an executive officer’s employment is terminated due to death or by the Company for cause, the executive officer is entitled to payment of base salary through the date of death or termination of employment. If an executive officer’s employment is terminated due to disability, the executive officer will be continue to receive the executive officer’s base salary for 90 days from the date on which the disability has been deemed to occur. If, prior to a change of control of the Company, Mr. Michael Welch’s employment is terminated by the Company other than for cause or by


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Mr. Welch for good reason, he will continue to receive his base salary and any earned bonus for the one-year period following such termination and all of Mr. Welch’s options will immediately vest and become exercisable. If, prior to a change of control of the Company, Mr. John Welch’s employment is terminated by the Company other than for cause, he will continue to receive his base salary for the one-year period following such termination.
 
Under their respective employment agreements with the Company, Messrs. Michael Welch and John Welch are subject to certain restrictive covenants regarding competition, solicitation and confidentiality. The non-competition and non-solicitation covenants apply during their employment and for the one-year period following the termination of their employment, and the confidentiality covenant applies during the term of their respective employment agreements and at all times thereafter.
 
Mr. Michael Welch’s employment agreement also provides for certain limited perquisites, including a $1,000 monthly car allowance and up to $750 per month towards the cost of country club dues.
 
Employment Agreements with the Named Executive Officers—Change-of-Control Provisions
 
Further, if the employment of Messrs. Michael Welch or John Welch is terminated by the Company without cause or by such executive officer with good reason within one year following a change of control of the Company, such executive officer is entitled to (i) lump-sum severance equal to the sum of (a) the executive officer’s annual base salary and (b) an amount equal to the greater of (i) the executive officer’s bonus payments for the year preceding the date of termination, and (ii) the annual average of the executive officer’s bonus payments during the two years immediately preceding the date of termination. In addition, any options held by the executive officer that are not yet exercisable will immediately vest and become exercisable upon termination.
 
Employment Agreements with the Named Executive Officers—Defined Terms
 
‘‘Cause”, for purposes of the employment agreements, generally means (i) the executive officer’s material violation of any of the provisions of their employment agreement, or the rules, policies, and/or procedures of the Company, or commission of any material act of fraud, misappropriation, breach of fiduciary duty or theft against or from the Company, (ii) the executive officer’s violation of any law, rule or regulation of a governmental authority or regulatory body with jurisdiction over the Company or the executive officer relative to the conduct of the executive officer in connection with the Company’s business or its securities or (iii) the conviction of the executive officer of a felony under the laws of the United States of America or any state therein. In the event the executive officer engages in conduct described in clauses (i) or (ii) of the definition of cause, the executive officer will have an opportunity to cure such conduct within 30 days after the Company provides written notice to the executive officer. If the executive officer fails to cure such conduct within the 30-day period or, if the executive officer commits the same violation within 12 months of receiving notice from the Company, then the Company may terminate the executive officer’s employment for cause.
 
‘‘Change of control”, for purposes of the employment agreements, generally means any of the following: (i) the acquisition by any person or group of 50% or more of the Company’s voting securities; (ii) a merger or consolidation of the Company with one or more corporations as a result of which the holders of the Company’s voting securities immediately prior to such merger hold less than 80% of the voting securities of the surviving or resulting corporation; (iii) a transfer of all or substantially all the property of the Company other than to an entity of which the Company owns at least 80% of the voting securities; or (iv) the election to the Board of Directors of the Company, without the recommendation or approval of the incumbent Board of Directors of the Company, of the lesser of (a) three independent directors or (b) directors constituting a majority of the number of directors of the Company then in office.
 
‘‘Good reason”, for purposes of the employment agreements, will exist if, without the executive officer’s express written consent (i) the Company assigns to the executive officer duties of a non-executive nature or for which the executive officer is not reasonably equipped by his skills and experience, (ii) the Company reduces the salary of the executive officer, or materially reduces the amount of paid vacations to which he is entitled, or his fringe benefits and perquisites, (iii) the Company requires the executive officer to


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relocate his principal business office or his principal place of residence greater than 50 miles outside of St. Joseph, Michigan, or assigns to the executive officer duties that would reasonably require such relocation, (iv) the Company requires the executive officer, or assigns duties to the executive officer that would reasonably require him, to spend more than 60 normal working days away from the St. Joseph, Michigan, area during any consecutive 12-month period, (v) the Company fails to provide office facilities, secretarial services and other administrative services to the executive officer, which are substantially equivalent to the facilities and services provided to executive officer on the date the executive officer entered into the employment agreement or (vi) the Company terminates incentive plans and benefit plans or arrangements, or reduces or limits the executive officer’s participation therein relative to the level of participation of other executives of similar rank, to such an extent as to materially reduce the aggregate value of the executive officer’s incentive compensation and benefits below their aggregate value as of the date the executive officer entered into the employment agreement.
 
Option Awards
 
During 2010, Messrs. Michael Welch and John Welch received 60,000 stock options and 50,000 stock options, respectively, which were granted under the Company’s Stock Option Plan. The options vest monthly over a three-year period beginning on the first of the month following the date of grant and have an exercise price per share equal to the closing price of a share of Company common stock on the date of grant.
 
Executive Annual Bonus Plan
 
In addition to a base salary, each named executive officer was eligible for a performance-based annual bonus for fiscal years 2010 and 2009. The annual bonus is designed to motivate individual and team performance in attaining the current year’s performance goals and business objectives. Annual bonus payouts for the named executive officers are based on the achievement of performance targets established by the Compensation Committee. The targets are set in accordance with and based on the Company’s annual financial goals. The Compensation Committee considers revenue and net income as appropriate performance metrics because they reflect Company-wide performance and align performance-based annual bonuses with the interests of stockholders. For fiscal year 2010, each of Messrs. Michael Welch and John Welch was eligible for a target bonus of 50% and 40% of base salary, respectively, (or, $105,000 and $52,000, respectively) with the opportunity to earn up to 200% of the target bonus if the maximum performance level was reached for both equally-weighted performance metrics. Based on achievement of performance goals during 2010, Messrs. Michael Welch and John Welch earned bonuses of $151,900 and $76,000, respectively, for fiscal year 2010. In fiscal year 2009, each of Messrs. Michael Welch and John Welch were eligible for a target bonus of 50% and 30% of base salary, respectively, (or, $100,000 and $36,600, respectively) with the opportunity to earn up to 200% of the target bonus if the maximum performance level was reached for both equally-weighted performance metrics. Based on achievement of performance goals during 2009, neither Mr. Michael Welch nor Mr. John Welch earned a bonus for fiscal year 2009.


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OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
 
The following table sets forth information concerning all stock option grants held by our named executive officers as of December 31, 2010. All outstanding equity awards are options to purchase shares of our common stock.
 
                                                 
    Option Awards(1)  
                Number of
    Number of
             
                Securities
    Securities
             
                Underlying
    Underlying
    Option
       
                Unexercised
    Unexercised
    Exercise
    Option
 
    Option Grant
    Number
    Options (#)
    Options (#)
    Price
    Expiration
 
Name
  Date     Granted     Exercisable     Unexercisable     ($)     Date  
 
Michael R. Welch
    8/9/2004       500,000       500,000             1.45       8/9/2014  
Chief Executive Officer
    7/1/2005       100,000       100,000             0.57       7/1/2015  
      2/28/2006       50,000       50,000             0.79       2/28/2016  
      2/7/2007       60,000       60,000             1.48       2/7/2017  
      1/16/2008       60,000       58,333       1,667       0.98       1/16/2018  
      12/12/2008       150,000       100,000       50,000       0.92       12/13/2018  
      7/1/2010       60,000       8,333       51,667       1.26       7/1/2020  
John D. Welch
    2/7/2007       10,000       10,000             1.48       2/7/2017  
Chief Financial Officer
    1/16/2008       11,500       11,181       319       0.98       1/16/2018  
      3/2/2010       50,000       12,500       37,500       1.45       3/2/2020  
 
(1) All stock option awards vest monthly over a three-year period following the date of the grant, except for the stock options granted to Mr. Michael Welch in 2004, which vested monthly over a five-year period following the date of grant.
 
Retirement Benefits
 
Each of the named executive officers is entitled to participate in the Company’s tax-qualified defined contribution 401(k) plan on the same basis as all other eligible employees. The Company matches the contributions of participants, subject to certain criteria, and the matches available to the named executive officers are identical to those available to other employees. Under the terms of the 401(k) plan, as prescribed by the Internal Revenue Code of 1986, as amended, the contribution of any participating employee is limited to the lesser of 100% of annual salary before taxes or a maximum dollar amount ($16,500 for 2010), subject to a $5,500 increase for participants who are age 50 or older. The amount of the Company’s matching payments for each of the named executive officers is included in the “All Other Compensation” column of the Summary Compensation Table.


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SECURITY OWNERSHIP BY CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
 
The following table sets forth information known to us, as of June 25, 2011, relating to the beneficial ownership of shares of Company common stock by:
 
(i) Each person who is known by us to be the beneficial owner of more than 5% of the Company’s outstanding common stock;
 
(ii) Each director;
 
(iii) Each executive officer; and
 
(iv) All executive officers and directors as a group.
 
Under securities laws, a person is considered to be the beneficial owner of securities owned by him (or certain persons whose ownership is attributed to him) or securities that can be acquired by him within 60 days, including upon the exercise of options, warrants or convertible securities. The Company determines a beneficial owner’s percentage ownership by assuming that options, warrants and convertible securities that are held by the beneficial owner, but not those held by any other person, and which are exercisable within 60 days, have been exercised or converted.
 
Except with respect to the Voting Agreements entered into by JPE with certain stockholders, the Company believes that all persons named in the table have sole voting and investment power with respect to all shares of Company common stock shown as being owned by them. Unless otherwise indicated, the address of each beneficial owner in the table set forth below is care of Express-1 Expedited Solutions, Inc., 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085.
 
Included within the table are all beneficial owners of more than 5% of the outstanding common stock of the Company as of June 25, 2011, based upon the public filings available to the Company. Except with respect to the Voting Agreements, the Company has no additional knowledge of any beneficial owner of more than 5% of the Company’s common stock, outside of the records available through the SEC’s website.


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Security Ownership of Certain Beneficial Owners and Management
 
                 
    Amount and
       
    Nature of
       
    Beneficial
    Percentage
 
Name/Address of Beneficial Owner
  Ownership     of Class  
 
5% Stockholders:
               
Archon Capital Management, LLC(1)
    1,709,173       5.2 %
Federated Investors, Inc.(2)
    4,333,194       13.1 %
Jacobs Private Equity, LLC(3)
    4,354,329       13.0 %
Bradley Jacobs(4)
    4,354,329       13.0 %
Named Executive Officers:
               
Michael R. Welch(5)
    1,294,789       3.9 %
John D. Welch(6)
    219,217       *  
Employee Director:
               
Daniel Para(7)
    3,059,540       9.3 %
Non-Employee Directors:
               
James J. Martell(8)
    322,822       *  
Jay N. Taylor(9)
    347,744       1.1 %
Calvin R. (Pete) Whitehead(10)
    209,722       *  
Jennifer H. Dorris(11)
    183,472       *  
John F. Affleck-Graves(12)
    170,417       *  
Executive Officers and Directors as a Group
    5,930,084       18.0 %
(8 People)
               
 
Less than 1%
 
(1) Archon Capital Management LLC is located at 1301 Fifth Avenue, Suite 3008, Seattle WA 98101.
 
(2) Federated Investors, Inc. is located at Federated Investors Tower, 5800 Corporate Dr. Pittsburgh, PA 15222.
 
(3) Pursuant to the Voting Agreements, JPE was granted a proxy with respect to the shares of Company common stock owned by Michael Welch and Daniel Para. Therefore, JPE and Bradley Jacobs (JPE’s Managing Member) have shared voting power with respect to the shares of Company common stock subject to such Voting Agreements. Furthermore, JPE may be deemed to be the beneficial owner of, and Mr. Jacobs may be deemed to be the indirect beneficial owner of, the shares subject to such Voting Agreements. Both JPE and Bradley Jacobs expressly disclaim beneficial ownership of such shares subject to the Voting Agreements. Such amount excludes unvested options that will become subject to the Voting Agreements as they vest in Mr. Daniel Para and Mr. Michael R. Welch.
 
(4) See footnote 3.
 
(5) Includes 425,000 shares underlying options to purchase common stock exercisable from $0.57 to $1.48 per share and expiring at dates between July 1, 2015 and July 1, 2020. Pursuant to the Voting Agreement between JPE and Michael R. Welch, JPE has the right to vote Michael Welch’s shares of Company common stock with respect to Proposals 1 through 6.
 
(6) Includes 45,111 shares underlying options to purchase common stock exercisable from $0.98 to $1.48 per share and expiring at dates between February 7, 2017 and March 2, 2020.
 
(7) Includes 57,639 shares underlying options to purchase common stock exercisable from $0.97 to $1.26 per share and expiring at dates between January 29, 2019 and July 1, 2020. Pursuant to the Voting Agreement between JPE and Daniel Para, JPE has the right to vote Daniel Para’s shares of Company common stock with respect to Proposals 1 through 6.


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(8) Includes 284,722 shares underlying options to purchase common stock exercisable from $0.74 to $1.35 per share and expiring at dates between July 15, 2015 and January 29, 2020.
 
(9) Includes 181,944 shares underlying options to purchase common stock exercisable from $0.67 to $1.65 per share and expiring at dates between December 12, 2015 and March 26, 2020
 
(10) Includes 184,722 shares underlying options to purchase common stock exercisable from $0.74 to $1.35 per share and expiring at dates between December 12, 2015 and January 29, 2020.
 
(11) Includes 178,472 shares underlying options to purchase common stock exercisable from $0.74 to $1.42 per share and expiring at dates between December 12, 2015 and July 1, 2020
 
(12) Includes 160,417 shares underlying options to purchase common stock exercisable from $1.00 to $1.34 per share and expiring at dates between November 25, 2016 and January 29, 2020.


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MULTIPLE STOCKHOLDERS SHARING ONE ADDRESS
 
In accordance with Rule 14a-3(e)(1) under the Exchange Act, one proxy statement will be delivered to two or more stockholders who share an address, unless we have received contrary instructions from one or more of the stockholders. We will deliver promptly upon written or oral request a separate copy of the proxy statement to a stockholder at a shared address to which a single copy of the proxy statement was delivered. Requests for additional copies of the proxy statement, and requests that in the future separate proxy statements be sent to stockholders who share an address, should be directed to Express-1 Expedited Solutions, Inc., 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085, Attention: Chief Executive Officer. In addition, stockholders who share a single address but receive multiple copies of the proxy statement may request that in the future they receive a single copy by contacting the Company at the address and phone number set forth in the prior sentence.


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SUBMISSION OF STOCKHOLDER PROPOSALS
 
To be considered for inclusion in next year’s annual proxy statement, any proposal of an eligible stockholder must be in writing and received by the Chief Executive Officer of the Company at its principal executive offices located at 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085.
 
A notice of recommendation for nomination or proposed item of business at the Company’s 2012 annual meeting must be received by the Company not less than ninety nor more than 180 days prior to the earlier of the date of the meeting or the corresponding date on which the immediately preceding year’s annual meeting of stockholders was held. The Company currently expects to hold its annual meeting in June 2012.


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WHERE YOU CAN FIND ADDITIONAL INFORMATION
 
We are subject to the informational requirements of the Exchange Act. We file reports, proxy statements and other information with the SEC. You may read and copy these reports, proxy statements and other information at the SEC’s Public Reference Section at 100 F Street, N.E., Washington, D.C. 20459. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an internet website, located at www.sec.gov, which contains reports, proxy statements and other information regarding companies and individuals that file electronically with the SEC.
 
You may also obtain free copies of the documents the Company files with the SEC by written request directed to us at Express-1 Expedited Solutions, Inc., 3399 South Lakeshore Drive, Suite 225, Saint Joseph, Michigan 49085, Attention: Chief Executive Officer, or by telephonic request at (269) 429-9761. If you would like to request documents, please do so by [  ], 2011, in order to receive them before the special meeting.
 
The information contained in this proxy statement speaks only as of the date indicated on the cover of this proxy statement unless the information specifically indicates that another date applies.
 
Statements contained in this proxy statement, or in any document incorporated in this proxy statement by reference, regarding the contents of any contract or other document, are not necessarily complete and each such statement is qualified in its entirety by reference to that contract or other document filed as an exhibit with the SEC. The SEC allows us to “incorporate by reference” information into this proxy statement. This means that we can disclose important information by referring to another document filed separately with the SEC. The information incorporated by reference is considered to be part of this proxy statement. This proxy statement and the information we later file with the SEC may update and supersede the information incorporated by reference. Similarly, the information that we later file with the SEC may update and supersede the information in this proxy statement. We incorporate by reference into this proxy statement the following documents filed by us with the SEC under the Exchange Act and any documents filed by us pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this proxy statement and prior to the date of the special meeting:
 
  •   our Annual Report on Form 10-K for the fiscal year ended December 31, 2010;
 
  •   our Quarterly Report on Form 10-Q for the quarter ended March 31, 2011; and
 
  •   our Current Reports on Form 8-K filed on June 13, 2011, June 14, 2011, and June 22, 2011.
 
Notwithstanding the foregoing, information furnished under Items 2.02 and 7.01 of any Current Report on Form 8-K, including the related exhibits, is not incorporated by reference in this proxy statement.


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ANNEX A
 
EXECUTION COPY
 
 
INVESTMENT AGREEMENT
Among
JACOBS PRIVATE EQUITY, LLC,
THE OTHER INVESTORS PARTY HERETO
and
EXPRESS-1 EXPEDITED SOLUTIONS, INC.
Dated as of June 13, 2011
 


Table of Contents

TABLE OF CONTENTS
 
                 
        Page
 
ARTICLE I

The Equity Investment
  Section 1.01.     Purchase     A-1  
  Section 1.02.     Investor Representative     A-1  
 
ARTICLE II

The Closing
  Section 2.01.     Closing     A-2  
  Section 2.02.     Issuance of and Payment for Securities     A-2  
  Section 2.03.     Actions to be Taken at the Closing     A-3  
  Section 2.04.     Defaulting Investor     A-3  
 
ARTICLE III

Representations and Warranties
  Section 3.01.     Representations and Warranties of the Company     A-3  
  Section 3.02.     Representations and Warranties of the Investors     A-17  
 
ARTICLE IV

Covenants
  Section 4.01.     Conduct of Business     A-19  
  Section 4.02.     No Solicitation     A-22  
  Section 4.03.     Legend     A-24  
 
ARTICLE V

Additional Agreements
  Section 5.01.     Preparation of the Proxy Statement; Stockholders Meeting     A-24  
  Section 5.02.     Access to Information; Confidentiality     A-26  
  Section 5.03.     Reasonable Best Efforts; Consultation and Notice     A-26  
  Section 5.04.     Fees and Expenses     A-28  
  Section 5.05.     Public Announcements     A-29  
  Section 5.06.     Board Representation Rights     A-30  
  Section 5.07.     Adjustment of Stock Options     A-31  
  Section 5.08.     Engagement of Independent Registered Public Accounting Firm     A-31  
  Section 5.09.     Listing     A-31  
  Section 5.10.     Reservation of Shares     A-31  
  Section 5.11.     Indemnification, Exculpation and Insurance     A-31  
 
ARTICLE VI

Conditions Precedent
  Section 6.01.     Conditions to Each Party’s Obligation to Effect the Equity Investment     A-32  
  Section 6.02.     Conditions to Obligations of the Investors     A-32  
  Section 6.03.     Conditions to Obligation of the Company     A-33  
  Section 6.04.     Frustration of Closing Conditions     A-33  
  Section 6.05.     Investor Representative Cure     A-33  


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        Page
 
ARTICLE VII

Termination, Amendment and Waiver
  Section 7.01.     Termination     A-34  
  Section 7.02.     Effect of Termination     A-34  
  Section 7.03.     Amendment     A-35  
  Section 7.04.     Extension; Waiver     A-35  
 
ARTICLE VIII

General Provisions
  Section 8.01.     Nonsurvival of Representations and Warranties     A-35  
  Section 8.02.     Notices     A-35  
  Section 8.03.     Definitions     A-36  
  Section 8.04.     Exhibits; Interpretation     A-37  
  Section 8.05.     Counterparts     A-38  
  Section 8.06.     Entire Agreement; No Third-Party Beneficiaries     A-38  
  Section 8.07.     Governing Law     A-38  
  Section 8.08.     Assignment     A-38  
  Section 8.09.     Consent to Jurisdiction; Service of Process; Venue     A-38  
  Section 8.10.     WAIVER OF JURY TRIAL     A-38  
  Section 8.11.     Enforcement     A-39  
  Section 8.12.     Consents and Approvals     A-39  
  Section 8.13.     Severability     A-39  
             
  SCHEDULE I     Investors     A-41  
  EXHIBIT A     Preferred Stock Certificate of Designation     A-42  
  EXHIBIT B     Warrant Certificate     A-56  
  EXHIBIT C     Summary of Principal Registration Rights Provisions     A-70  
  EXHIBIT D     The 2011 Omnibus Incentive Compensation Plan     A-72  


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GLOSSARY
 
         
Term
 
Section
 
 
409A Authorities
    3.01(o )(viii)
Acquisition Agreement
    4.02(b )
Adverse Recommendation Change
    4.02(b )
Affiliate
    8.03(a )
Agreement
    Preamble  
Average Equity Value
    8.03(b )
Bankruptcy and Equity Exception
    3.01(f )
Baseline Financials
    3.01(g )(i)
Benefit Agreements
    3.01(i )(i)
Benefit Plans
    3.01(m )(i)
Certificate of Amendment
    8.03(c )
Certificate of Designation
    3.01(c )
Change Notice
    4.02(b )
Closing
    2.01  
Closing Date
    2.01  
Code
    8.03(d )
Commonly Controlled Entity
    3.01(m )(i)
Company
    Preamble  
Company Bylaws
    3.01(a )
Company Certificate
    3.01(a )
Company Common Stock
    Preamble  
Company Indemnitees
    5.11(a )
Company Letter
    3.01  
Company Personnel
    3.01(i )(i)
Company Preferred Stock
    3.01(d )(i)
Company SEC Documents
    3.01(g )(i)
Company Stock Plan
    3.01(d )(i)
Contract
    3.01(f )
DGCL
    1.01  
Environmental Claims
    3.01(n )
Environmental Law
    3.01(n )
Environmental Permits
    3.01(n )
Equity Equivalents
    3.01(d )(iii)
Equity Investment
    1.01  
ERISA
    3.01(o )(i)
Exchange Act
    3.01(f )
FCPA
    3.01(s )
Filed SEC Documents
    3.01  
GAAP
    3.01(g )(i)
Governmental Entity
    3.01(f )


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Table of Contents

         
Term
 
Section
 
 
Grant Date
    3.01(d )(iii)
Hazardous Materials
    3.01(n )
HSR Act
    3.01(f )
indebtedness
    3.01(d )(iv)
Intellectual Property
    3.01(r )(iv)
Intervening Event
    4.02(b )
Investor
    Preamble  
Investor Representative
    Preamble  
Investor Representative Appointee
    5.06(a )
Investor Representative Expenses
    5.04(a )
Investors
    Preamble  
IRS
    3.01(o )(i)
Judgment
    3.01(f )
knowledge
    8.03(e )
Law
    3.01(f )
Legal Restraints
    6.01(c )
Liens
    3.01(b )
Material Adverse Effect
    8.03(f )
Material Contract
    3.01(k )(ii)
Nondisclosure Agreement
    4.02(a )
Nonqualified Deferred Compensation Plan
    3.01(o )(viii)
Omnibus ICP
    3.01(f )
Pension Plan
    3.01(o )(i)
Permits
    3.01(l )
Permitted Liens
    3.01(k )(i)(E)
person
    8.03(g )
Preferred Stock
    Preamble  
Proxy Statement
    3.01(f )
Purchase Price
    2.02  
Re-Audit Engagement
    5.08  
Release
    3.01(n )
Releasee
    1.02(b )
Releasees
    1.02(b )
SEC
    3.01(f )
Securities
    Preamble  
Securities Act
    Preamble  
SOX
    3.01(g )(ii)
Special Committee
    Preamble  
Specified Contracts
    3.01(k )(i)
Stock Options
    3.01(d )(i)
Stockholder Approvals
    3.01(u )


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Table of Contents

         
Term
 
Section
 
 
Stockholders Meeting
    5.01(c )
Subsidiary
    8.03(h )
Superior Acquisition Proposal
    4.02(a )
Superior Proposal
    4.02(a )
Takeover Proposal
    4.02(a )
Tax
    8.03(i )
Tax Return
    8.03(j )
Taxing Authority
    8.03(k )
Termination Date
    7.01(b )(i)
Termination Fee
    5.04(b )
Voting Agreements
    Preamble  
Warrants
    Preamble  


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INVESTMENT AGREEMENT dated as of June 13, 2011 (this “Agreement”), by and among JACOBS PRIVATE EQUITY, LLC (the “Investor Representative”), each of the other Investors listed on Schedule I hereto (including by joinder pursuant to Section 8.08) (including the Investor Representative, each an “Investor”, and together, the “Investors”) and EXPRESS-1 EXPEDITED SOLUTIONS, INC., a Delaware corporation (the “Company”).
 
WHEREAS, the Board of Directors of the Company, acting upon the unanimous recommendation of the Special Committee of the Board of Directors of the Company (the “Special Committee”), deems it in the best interests of the stockholders of the Company to enter into this Agreement and to consummate the transactions contemplated by this Agreement, on the terms and subject to the conditions set forth in this Agreement, and such Board of Directors of the Company, acting upon the unanimous recommendation of the Special Committee, has approved this Agreement and declared the advisability of the transactions contemplated by this Agreement;
 
WHEREAS, each Investor wishes to purchase, and the Company wishes to sell to each Investor, (i) that number of shares of the Company’s convertible preferred stock having the terms set forth in Exhibit A to this Agreement (the “Preferred Stock”) set forth opposite such Investor’s name in Schedule I to this Agreement, and (ii) warrants in the form of Exhibit B to this Agreement (the “Warrants”) representing the right to purchase the number of shares of the Company’s common stock, par value $0.001 per share (the “Company Common Stock”), set forth opposite such Investor’s name in Schedule I to this Agreement, in each case for the price and upon the terms and conditions set forth in this Agreement (the Preferred Stock and the Warrants, collectively, the “Securities”);
 
WHEREAS, the Company and the Investors are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act of 1933, as amended, and the rules promulgated by the SEC thereunder (collectively, the “Securities Act”);
 
WHEREAS, concurrently with the Closing, the parties hereto will execute and deliver a Registration Rights Agreement containing the terms set forth in Exhibit C to this Agreement, pursuant to which the Company will agree to provide certain registration rights under the Securities Act with respect to the Securities and the securities issuable upon conversion or exercise thereof; and
 
WHEREAS, concurrently with the execution and delivery of this Agreement and as a condition to the Investors’ willingness to enter into this Agreement, certain stockholders of the Company are entering into voting agreements with the Investor Representative (the “Voting Agreements”) whereby, among other things, such stockholders undertake, subject to certain terms and conditions, to vote all of their shares of Company Common Stock in favor of the Stockholder Approvals at the Stockholders Meeting.
 
NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, the parties hereto agree as follows:
 
ARTICLE I
 
The Equity Investment
 
Section 1.01.  Purchase.  Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the General Corporation Law of the State of Delaware (the “DGCL”), at the Closing, the Company shall issue and sell to each Investor, and each of the Investors, severally and not jointly (subject to Section 2.04), shall purchase from the Company, the shares of Preferred Stock and the Warrants in the respective amounts set forth opposite such Investor’s name on Schedule I hereto (such sale and purchase, the “Equity Investment”).
 
Section 1.02.  Investor Representative.  (a) The Investor Representative hereby is appointed, authorized and empowered to act, on behalf of each of the other Investors, during the period from and including the date of this Agreement through and including the Closing, in connection with and to facilitate this Agreement, the Equity Investment and the other transactions contemplated by this Agreement, and in connection with the activities to be


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performed on behalf of the Investors under this Agreement, for the purposes and with the powers and authority hereinafter set forth in this Section 1.02, which shall include the power and authority:
 
(i) to agree to such amendments or modifications hereto as the Investor Representative, in its sole discretion, may deem necessary or desirable (other than any amendment or modification increasing the purchase obligation of any other Investor with respect to the Equity Investment or modifying in any material respect the terms of the Securities as contemplated hereby, or adversely affecting the terms of this Agreement as they apply to another Investor in a manner disproportionate to the effect on the Investors generally), and each Investor hereby agrees to any such amendment or modification;
 
(ii) to execute and deliver such waivers and consents in connection with this Agreement, the Equity Investment and the other transactions contemplated by this Agreement as the Investor Representative, in its sole discretion, may deem necessary or desirable, and each Investor hereby agrees to any such waiver or consent (subject to the parenthetical in clause (i) above);
 
(iii) to make, execute, acknowledge and deliver, on behalf of itself and the other Investors, all such other agreements, and, in general, to do any and all things and to take any and all actions that the Investor Representative, in its sole discretion, may consider necessary, proper or convenient in connection with this Agreement, the Equity Investment and the other transactions contemplated by this Agreement (subject to the parenthetical in clause (i) above);
 
(iv) to communicate to, and receive communications from, the Company on behalf of the Investors; and
 
(v) to take such other actions as may be expressly provided in this Agreement.
 
(b) Each Investor, on behalf of itself and its Affiliates, releases and forever discharges the Investor Representative and its Affiliates and each of their respective officers, directors, agents, employees, attorneys, predecessors, successors and assigns (individually, a “Releasee” and collectively, “Releasees”) from any and all claims, demands, proceedings, causes of action, orders, obligations, debts and liabilities whatsoever, whether known or unknown, both at law and in equity, which such Investor or its Affiliates has or may hereafter have against any of the Releasees, arising out of or relating to any action or failure to act of the Investor Representative (in its capacity as such) in connection with this Agreement, the Equity Investment and the other transactions contemplated by this Agreement.
 
(c) Except as otherwise expressly set forth in Section 2.04, the obligations of each Investor under this Agreement are several and not joint with the obligations of any other Investor, and no Investor shall be responsible for the performance of the obligations of any other Investor under this Agreement.
 
ARTICLE II
 
The Closing
 
Section 2.01.  Closing.  The closing of the Equity Investment (the “Closing”) will take place (subject to Section 2.04) at 10:00 a.m., New York time, on a date to be specified by the Company and the Investor Representative, which shall be not later than the second business day after satisfaction or (to the extent permitted by Law) waiver of the conditions set forth in Article VI (other than those that by their terms are to be satisfied or waived at the Closing, it being understood that the occurrence of the Closing shall remain subject to the satisfaction or waiver of such conditions at Closing), at the offices of Cravath, Swaine & Moore LLP, 825 Eighth Avenue, New York, New York 10019, unless another time, date or place is agreed to in writing by the Company and the Investor Representative; provided, however, that if all the conditions set forth in Article VI shall not have been satisfied or (to the extent permitted by Law) waived on such second business day, then the Closing shall take place (subject to Section 2.04) on the first business day on which all such conditions shall have been satisfied or (to the extent permitted by Law) waived. The date on which the Closing occurs is referred to in this Agreement as the “Closing Date”.
 
Section 2.02.  Issuance of and Payment for Securities.  Upon the terms and subject to the conditions set forth in this Agreement, at the Closing, (a) the Company shall issue and sell to each Investor, free and clear of any


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and all Liens (except for transfer restrictions imposed by applicable securities Laws), the shares of Preferred Stock and Warrants set forth opposite the name of such Investor on Schedule I hereto, and (b) each Investor shall pay to the Company, in respect of the shares of Preferred Stock and Warrants set forth opposite the name of such Investor on Schedule I hereto, such Investor’s pro rata portion, as set forth on Schedule I hereto, of the aggregate purchase price (the “Purchase Price”) in respect of the Preferred Stock and Warrants to be paid to the Company pursuant to this Agreement.
 
Section 2.03.  Actions to be Taken at the Closing.  To effect the purchase and sale of Securities as set forth in Section 2.02 and the other transactions contemplated by this Agreement, upon the terms and subject to the conditions set forth in this Agreement, at the Closing:
 
(a) The Company shall duly file the Certificate of Amendment with the Secretary of State of the State of Delaware in accordance with the laws of the State of Delaware.
 
(b) The Company shall issue and deliver to each Investor a certificate or certificates, registered in such names as the applicable Investor may designate in writing to the Company (through the Investor Representative) no less than five business days prior to the Closing, representing the shares of Preferred Stock and the Warrants to be issued and delivered to such Investor as set forth in Schedule I hereto, against payment in full of such Investor’s pro rata portion of the Purchase Price as set forth on Schedule I hereto.
 
(c) Each Investor shall cause a wire transfer in same day funds to an account of the Company, which account shall be designated in writing by the Company to the Investor Representative no less than five business days prior to the Closing, in an amount equal to such Investor’s pro rata portion of the Purchase Price as set forth in Schedule I hereto.
 
(d) The Board of Directors of the Company shall be reconstituted as provided in Section 5.06, and such reconstituted Board of Directors of the Company shall appoint Bradley S. Jacobs as the Chairman of the Board of Directors of the Company.
 
(e) Each of the Company and the Investors shall take all such other actions required hereby to be performed and deliver all other documents, certificates and other items required to be delivered on its part, prior to or on the Closing Date, including delivering the documents and satisfying the conditions set forth in Article VI. All such documents and instruments delivered to any party pursuant hereto shall be in form and substance, and shall be executed in a manner, reasonably satisfactory to such party and its counsel.
 
Section 2.04.  Defaulting Investor.  Notwithstanding anything to the contrary (but subject to the satisfaction or (to the extent permitted by Law) waiver of the conditions to Closing set forth in this Agreement), in the event that any Investor (other than the Investor Representative) shall breach its obligation to pay to the Company at the Closing its pro rata portion of the Purchase Price in accordance with Section 2.03, the Investor Representative shall purchase from the Company, and the Company shall issue and deliver to the Investor Representative, the shares of Preferred Stock and the Warrants otherwise allocable to such defaulting Investor in accordance with this Agreement. In the event that the Investor Representative shall become obligated to purchase shares of Preferred Stock and Warrants otherwise allocable to a defaulting Investor in accordance with the foregoing sentence, the Investor Representative shall have the right, in its sole discretion, upon written notice to the Company, to delay the Closing for a period of up to five business days. This Section 2.04 shall be without prejudice to any rights or remedies that the Company, the Investor Representative or any other person may have against the defaulting Investor in respect of such breach.