UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE
14D-9
(Rule 14d-101)
SOLICITATION/RECOMMENDATION STATEMENT
UNDER SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
CON-WAY INC.
(Name of
Subject Company)
CON-WAY INC.
(Name of
Persons Filing Statement)
COMMON STOCK, PAR VALUE $0.625 PER SHARE
(Title of Class of Securities)
205944101
(CUSIP Number
of Class of Securities)
Stephen K. Krull
Executive Vice President, General Counsel and Secretary
Con-way Inc.
2211 Old
Earhart Road, Suite 100
Ann Arbor, Michigan 48105
Telephone (734) 757-1444
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications on Behalf of the Person Filing Statement)
COPIES TO:
Thomas Cole
Larry
Barden
Scott Williams
Sidley Austin LLP
1
South Dearborn Street
Chicago, Illinois 60603
Telephone (312) 853-7000
Fax (312) 853-7036
¨ |
|
Check the box if the filing relates solely to preliminary communications made before the commencement of a tender offer. |
TABLE OF CONTENTS
Item 1. |
Subject Company Information. |
Name and Address
The name of the subject company to which this Solicitation/Recommendation Statement on Schedule 14D-9 (together with the exhibits and annex
hereto, this Schedule 14D-9) relates is Con-way Inc., a Delaware corporation (Con-way or the Company). The address of the
Companys principal executive offices is 2211 Old Earhart Road, Suite 100, Ann Arbor, Michigan 48105. The telephone number of the Companys principal executive offices is (734) 757-1444.
Securities
The title of the class
of equity securities to which this Schedule 14D-9 relates is the Companys common stock, par value $0.625 per share (each, a Share). As of the close of business on September 3, 2015, there were
56,866,820 Shares issued and outstanding (including 28,508 restricted stock awards (each a Restricted Stock Award)) and 5,000,000 shares of preferred stock, without par value, none of which were outstanding.
In addition, as of September 3, 2015, 2,084,711 Shares were reserved for issuance under the Companys 2012 Equity and Incentive Plan (the 2012 Plan), 468,010 Shares were reserved for issuance under
the Companys 2006 Equity and Incentive Plan (the 2006 Plan), 0 Shares were reserved for issuance under the Companys Amended and Restated 2003 Equity Plan for Non-Employee Directors (the
2003 Plan) and 131,600 Shares were reserved for issuance under the Companys 1997 Equity and Incentive Plan (the 1997 Plan, and together with the 2012
Plan, the 2006 Plan and the 2003 Plan, the Stock Plans).
As of September 3, 2015,
pursuant to grants under the Stock Plans, (A) 504,719 Shares were issuable upon the exercise of vested and unvested outstanding options to purchase Shares (each, an Option), with a weighted average
exercise price of $44.73, (B) 101,898 Shares were issuable upon the exercise of outstanding vested and unvested stock appreciation rights (each, an SAR), with a weighted average base price of $28.92,
(C) 679,829 Shares were issuable upon the vesting of outstanding restricted stock unit awards (each an RSU), and (D) 553,769 Shares were issuable upon the vesting of outstanding awards of
performance-share plan units (assuming achievement of the applicable performance goals at the one-hundred percent level) (each a PSPU).
Item 2. |
Identity and Background of Filing Person. |
Name and Address
Con-way, the subject company, is the person filing this Schedule 14D-9. The name, business address and business telephone number of the Company
are set forth above in Item 1. Subject Company InformationName and Address.
Tender Offer
This Schedule 14D-9 relates to the cash tender offer by Canada Merger Corp., a Delaware corporation (Purchaser) and a
wholly owned subsidiary of XPO Logistics, Inc., a Delaware corporation (XPO or Parent), as disclosed in the Tender Offer Statement on Schedule TO filed by Parent and Purchaser with the U.S.
Securities and Exchange Commission (the SEC) on September 15, 2015 (as amended or supplemented from time to time, the Schedule TO). The Schedule TO relates to Purchasers offer to
purchase any (subject to the Minimum Condition, as defined below) and all of the outstanding Shares, other than Shares otherwise cancelled or converted pursuant to the Merger Agreement, at a price per Share of $47.60 (the Offer
Price), payable net to the seller thereof in cash, without interest, and less any applicable withholding taxes, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated September 15, 2015 (the
Offer to Purchase), and the related letter of transmittal (the Letter of Transmittal, which, together with the Offer to Purchase, as each may be amended or supplemented from time to time,
constitutes the Offer).
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
September 9, 2015 (as amended or modified from to time, the Merger Agreement), by and among the Company, Parent and
Purchaser. The Merger Agreement provides that, following the consummation of the Offer and subject to the satisfaction or, if permissible, waiver of the other conditions set forth in the Merger
Agreement, Purchaser will merge with and into the Company (the Merger), with the Company surviving the Merger (the Surviving Corporation). Because the Merger will be governed by Section 251(h)
of the General Corporation Law of the State of Delaware (the DGCL), no stockholder vote will be required to consummate the Merger, and the Merger will be effected immediately following the consummation of the Offer. At the
effective time of the Merger (the Effective Time), each Share issued and outstanding immediately prior to the Effective Time (other than (i) Shares that are owned by any direct or indirect wholly-owned subsidiary of
the Company or by Parent, Purchaser or any other direct or indirect wholly-owned subsidiary of Parent and not, in each case, held on behalf of third parties and (ii) Shares held by stockholders, if any, who are entitled to appraisal rights
under Section 262 of the DGCL and who have complied in all respects with all of the provisions of the DGCL relevant to the exercise and perfection of dissenters rights concerning such Shares) will automatically be cancelled and converted
into the right to receive the Offer Price in cash, without interest (the Merger Consideration), less any applicable withholding taxes. As a result of the Merger, the Shares will cease to be publicly traded, and the
Surviving Corporation will become a wholly-owned subsidiary of Parent.
The closing of the Offer is subject to the satisfaction or waiver
of certain closing conditions as further described in the Offer to Purchase, including, without limitation, the valid tender of the number of Shares that, when added to the Shares beneficially owned by Parent and its subsidiaries (if any),
would represent at least one Share more than one half of all Shares then outstanding, determined on a fully diluted basis (the Minimum Condition).
The Offer is initially scheduled to expire at 12:01 a.m., New York City time, on October 14, 2015, subject to extension in certain
circumstances as required or permitted by the Merger Agreement, the SEC or applicable law. Either party may, subject to certain exceptions provided for under the Merger Agreement, terminate the Merger Agreement if Shares are not accepted for payment
pursuant to the Offer on or prior to March 9, 2016.
The foregoing summary of the Offer is qualified in its entirety by the more
detailed description and explanation contained in the Offer to Purchase and the Letter of Transmittal, which have been filed as Exhibits (a)(1)(A) and (a)(1)(B) hereto, respectively, and are incorporated herein by reference.
As set forth in the Schedule TO, the address of the principal executive offices of Parent, which is also the business address of the
Purchaser, is Five Greenwich Office Park, Greenwich, CT 06831.
Information relating to the Offer, including this Schedule 14D-9 and
related documents, can be found on the SECs website at www.sec.gov, or on the Companys website at www.con-way.com. The information on the Companys website should not be considered a part of this Schedule 14D-9 and is not
incorporated herein by reference.
Item 3. |
Past Contacts, Transactions, Negotiations and Agreements. |
Except as set forth in this
Schedule 14D-9 or as incorporated herein by reference, to the knowledge of the Company, as of the date of this Schedule 14D-9, there are no material agreements, arrangements or understandings, nor any actual or potential conflicts of interest,
between (a) the Company or any of its affiliates, on the one hand, and (b)(i) any of the Companys executive officers, directors or affiliates or (b)(ii) Purchaser or any of its executive officers, directors or affiliates, on the other
hand.
Arrangements with Parent, Purchaser and Certain of Their Affiliates
Merger Agreement
On September 9,
2015, the Company, Parent and Purchaser entered into the Merger Agreement. A summary of the Merger Agreement is contained in Section 11The Merger Agreement; Other AgreementsThe Merger
4
Agreement in the Offer to Purchase and is hereby incorporated herein by reference. This summary does not purport to be complete and is qualified in its entirety by reference to the
Merger Agreement, which is filed as Exhibit (d)(1) hereto and is incorporated herein by reference.
Holders of Shares and other interested
parties should read the Merger Agreement for a more complete description of the provisions summarized in the Offer to Purchase. The Merger Agreement has been provided solely to inform holders of Shares of its terms. The representations, warranties
and covenants contained in the Merger Agreement were made only for the purposes of such agreement, were made as of specific dates, were made solely for the benefit of the parties to the Merger Agreement, may be subject to limitations agreed
upon by the contracting parties, including being qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Merger Agreement instead of establishing matters as facts, and may be subject to
standards of materiality applicable to the contracting parties that are different from what may be viewed as material by holders of Shares. Additionally, information concerning the subject matter of the representations and warranties may change
after the date of the Merger Agreement. Accordingly, the representations and warranties in the Merger Agreement may not constitute the actual state of facts about the Company, Parent or Purchaser and should not be relied upon as disclosures about
the Company, Parent or Purchaser. Factual disclosures about the Company contained in public reports filed with the SEC may supplement, update or modify the factual disclosures contained in the Merger Agreement.
Confidentiality Agreement
Parent and the
Company entered into a confidentiality agreement, dated July 28, 2015 (as amended or supplemented from time to time, the Confidentiality Agreement). Under the terms of the Confidentiality Agreement, each party agreed to
keep confidential, subject to certain exceptions provided for in the Confidentiality Agreement, information furnished directly or indirectly by the disclosing party or any of its affiliates or representatives to the receiving party or any of its
affiliates or representatives and to use such information solely for the purpose of evaluating, negotiating, advising or financing with respect to, or consummating, a possible transaction between Parent and the Company. Each party has agreed,
subject to certain exceptions, that it and its representatives would not, for a period of one year from the date of the Confidentiality Agreement, directly or indirectly, solicit the services of, whether as an employee, consultant or otherwise, any
officer or other director-level employee of the other party or any of its affiliates with whom such party first comes into contact with or learns of through its consideration of a possible transaction between Parent and the Company. Parent also
agreed to standstill provisions that prohibit Parent and its representatives from taking certain actions involving or with respect to the Company for a period ending on the eighteen-month anniversary of the date of the Confidentiality Agreement,
subject to certain exceptions.
Arrangements with Executive Officers and Directors of the Company
Certain of the Companys executive officers and directors have interests in the transactions contemplated by the Merger Agreement,
including the Offer and the Merger, that are different from, or in addition to, the interests of holders of Shares generally. The Board of Directors of the Company (the Board) was aware of these interests and considered
them, among other matters, in evaluating and negotiating the Merger Agreement and in reaching its decision to approve the Merger Agreement and the transactions contemplated thereby, as more fully discussed below in Item 4The
Solicitation or RecommendationBackground of the Offer and the MergerReasons for the Boards Recommendation.
5
Effect of the Offer and the Merger on Outstanding Equity Awards Held by the Executive Officers and Directors
of the Company
Company Options and Stock Appreciation Rights
The Merger Agreement requires that, as of the Effective Time, each Option and each SAR, whether vested or unvested, will be converted into an
option to purchase shares of Parent common stock (an Adjusted Option) or a stock appreciation right in respect of Parent common stock (an Adjusted SAR), as applicable, on the same terms and
conditions as were applicable under such Option or SAR immediately prior to the Effective Time (including vesting terms and conditions), with the number of shares of Parent common stock subject to such Adjusted Option or Adjusted SAR equal to the
product (rounded down to the nearest whole number of shares) of (i) the total number of Shares underlying such Option or SAR immediately prior to the Effective Time, multiplied by (ii) the Equity Award Conversion Amount (as defined below),
and with the exercise price applicable to such Adjusted Option or Adjusted SAR to equal the quotient (rounded up to the nearest whole cent) obtained by dividing (1) the exercise price per Share applicable to such Option or SAR immediately prior
to the Effective Time, by (2) the Equity Award Conversion Amount. The Equity Award Conversion Amount means the quotient obtained by dividing the per Share Merger Consideration by the volume weighted average trading
price of Parent common stock on the New York Stock Exchange as reported by The Wall Street Journal for the five consecutive trading days ending on the trading day immediately preceding the closing date of the Merger.
Restricted Stock
The Merger Agreement
requires that, as of the Effective Time, each outstanding Restricted Stock Award will be cancelled and entitle the holder to receive the per Share Merger Consideration with respect to the Shares subject to such Restricted Stock Award in accordance
with the terms of the Merger Agreement, less applicable withholding taxes.
RSUs
The Merger Agreement requires that, as of the Effective Time, (i) each outstanding RSU that is scheduled to vest on or prior to
February 29, 2016 will vest in full, be cancelled and entitle the holder to receive the per Share Merger Consideration multiplied by the number of Shares subject to such RSU, less applicable withholding taxes, and (ii) each RSU that is
scheduled to vest after February 29, 2016 will be converted into a restricted stock unit award (an Adjusted RSU) with the same terms and conditions as were applicable under such RSU immediately prior to the Effective
Time (including vesting and settlement terms and conditions), and relating to the number of shares of Parent common stock equal to the product of (i) the number of Shares subject to such RSU immediately prior to the Effective Time, multiplied
by (ii) the Equity Award Conversion Amount, with any fractional shares rounded to the nearest whole number of shares. Prior to the Effective Time, it is expected that Parent will enter into individual letter agreements with certain RSU holders
who are notified by Parent prior to the Effective Time that, subject to the occurrence of the Effective Time, they will experience a severance-qualifying termination of employment upon the completion of the Merger (including Messrs. Stotlar,
Bruffett, Krull and Dagnese and, in Parents discretion, certain other executive officers and/or employees) providing that any such holders RSUs that are scheduled to vest after February 29, 2016, will be converted into a cash amount
equal to the product (rounded to the nearest whole cent) of the number of Shares subject to such RSUs and the per Share Merger Consideration, and will otherwise continue to be subject to the same terms and conditions as were applicable under such
RSUs immediately prior to the Effective Time (including vesting and settlement terms and conditions).
PSPUs
The Merger Agreement requires that, as of the Effective Time, (i) each outstanding PSPU that is scheduled to vest on or prior to
February 29, 2016 will vest in full (with the performance-based vesting conditions deemed satisfied at target) and be cancelled and will entitle the holder to receive the per Share Merger Consideration
6
multiplied by the number of Shares subject to such PSPU, less applicable withholding taxes, and (ii) each PSPU that is scheduled to vest after February 29, 2016 will be converted into
an award of performance-share plan units (an Adjusted PSPU) with the same terms and conditions as were applicable under such PSPU immediately prior to the Effective Time (including vesting and settlement terms and
conditions, provided that the performance-based vesting terms relating to such PSPUs will be deemed satisfied at target as of the Effective Time), and relating to the number of shares of Parent common stock equal to the product of
(i) the number of Shares subject to such PSPU immediately prior to the Effective Time, multiplied by (ii) the Equity Award Conversion Amount, with any fractional shares rounded to the nearest whole number of shares. Prior to the Effective
Time, it is expected that Parent will enter into individual letter agreements with certain PSPU holders who are notified by Parent prior to the Effective Time that, subject to the occurrence of the Effective Time, they will experience a
severance-qualifying termination of employment upon the completion of the Merger (including Messrs. Stotlar, Bruffett, Krull and Dagnese and, in Parents discretion, certain other executive officers and/or employees) providing that any such
holders PSPUs that are scheduled to vest after February 29, 2016, will be converted into a cash amount equal to the product (rounded to the nearest whole cent) of the number of Shares subject to such PSPUs (determined assuming that
performance-based vesting conditions applicable to the PSPUs are satisfied at target) and the per Share Merger Consideration, and will otherwise continue to be subject to the same terms and conditions as were applicable under such PSPUs immediately
prior to the Effective Time (including time-based vesting and settlement terms and conditions, but excluding performance-based vesting terms and conditions).
Phantom Stock Units
The Con-way Deferred
Compensation Plan for Non-Employee Directors (Amended and Restated 2008), the Con-way 2005 Deferred Compensation Plan for Non-Employee Directors (Amended and Restated December 2008), the Con-way 2005 Deferred Compensation Plan for Executives and Key
Employees (Amended and Restated December 2008), and the Con-way 1993 Deferred Compensation Plan for Executives and Key Employees (Amended and Restated December 2008) (collectively, the Deferred Compensation Plans) include
as a notional investment option phantom stock units in respect of Shares (Phantom Stock Units). Pursuant to the terms of the Merger Agreement, each Phantom Stock Unit will, by virtue of the Merger, be deemed to be an
obligation relating to shares of Parent common stock, with the same terms and conditions as were applicable under such Phantom Stock Unit immediately prior to the Effective Time (including vesting and settlement terms and conditions), and relating
to the number of shares of Parent common stock equal to the product of (i) the number of Shares in respect of a Phantom Stock Unit immediately prior to the Effective Time, multiplied by (ii) the Equity Award Conversion Amount, with any
fractional shares rounded to the nearest whole number of shares.
7
Summary of Equity Award-Related Payments to the Executive Officers and Directors of the Company
The following table sets forth the number and estimated value of the outstanding vested Options, vested SARs and vested Phantom Stock Units
held by each of the Companys executive officers as of September 14, 2015, and valued based on the Offer Price of $47.60 per Share. As of September 14, 2015, none of the Companys directors held vested equity-based compensation
awards. All Share, unit numbers and values have been rounded to the nearest whole number.
Vested Equity Awards Summary Table
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Name |
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Vested Options/SARs (#) (1) |
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|
Vested Options/SARs ($) |
|
|
Vested Phantom Stock Units (#) (2) |
|
|
Vested Phantom Stock Units ($) |
|
Douglas W. Stotlar |
|
|
203,919 |
|
|
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1,088,283 |
|
|
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14,835 |
|
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706,146 |
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Stephen L. Bruffett |
|
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41,292 |
|
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531,630 |
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|
|
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Robert L. Bianco, Jr. |
|
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8,700 |
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Kevin S. Coel |
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17,855 |
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134,381 |
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3,502 |
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166,695 |
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Joseph M. Dagnese |
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16,575 |
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27,023 |
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Stephen K. Krull |
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Michael J. Morris |
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Leslie P. Lundberg |
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16,562 |
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12,133 |
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C. Randall Mullett |
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18,609 |
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149,947 |
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248 |
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11,805 |
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(1) |
Options and SARs will be converted into Adjusted Options and Adjusted SARs, as the case may be, in respect of Parents common stock based on the Equity Award Conversion Amount, as described above. Adjusted Options
and Adjusted SARs will be subject to the same terms and conditions as were applicable under the Options and SARs immediately prior to the Effective Time (including vesting terms and conditions). |
(2) |
Phantom Stock Units will be adjusted into phantom stock units in respect of Parents common stock based on the Equity Award Conversion Amount. |
8
Assuming completion of the Merger as of October 14, 2015 (the earliest date on which the
Offer may be consummated) and a qualifying termination of employment immediately thereafter, the following table sets forth the cash values of each of the Companys executive officers and directors outstanding Restricted Stock
Awards, RSUs, and PSPUs as of October 14, 2015 (the earliest date on which the Offer may be consummated). The values reported in the table are based on the Offer Price of $47.60 per Share. This table excludes any equity awards that are scheduled to
vest between the date of this filing and October 14, 2015 (the earliest date on which the Offer may be consummated). All share, unit numbers and values have been rounded to the nearest whole number.
Unvested Equity Awards Summary Table (1)
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Name |
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Restricted Stock Awards (#) |
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Restricted Stock Awards ($) |
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RSU Awards (#) |
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RSU Awards ($) |
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PSPU Awards (#) |
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PSPU Awards ($) |
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Douglas W. Stotlar |
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94,248 |
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4,486,205 |
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107,789 |
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5,130,756 |
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Stephen L. Bruffett |
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37,056 |
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1,763,866 |
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37,056 |
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1,763,866 |
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Robert L. Bianco, Jr. |
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32,719 |
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1,557,425 |
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32,719 |
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1,557,425 |
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Kevin S. Coel |
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12,284 |
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584,718 |
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12,284 |
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584,718 |
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Joseph M. Dagnese |
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25,026 |
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1,191,238 |
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19,530 |
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929,628 |
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Stephen K. Krull |
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28,814 |
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1,371,546 |
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28,814 |
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1,371,546 |
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Leslie P. Lundberg |
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19,155 |
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911,778 |
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19,155 |
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911,778 |
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C. Randall Mullett |
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10,743 |
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511,367 |
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10,743 |
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511,367 |
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Michael J. Morris |
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16,165 |
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769,454 |
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16,165 |
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769,454 |
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Matthew J. Espe |
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2,274 |
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108,242 |
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W. Keith Kennedy, Jr. |
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Gretchen W. McClain |
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2,274 |
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108,242 |
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Michael J. Murray |
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2,396 |
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114,050 |
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Edith R. Perez |
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2,396 |
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114,050 |
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P. Cody Phipps |
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2,396 |
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114,050 |
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John C. Pope |
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2,396 |
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114,050 |
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William J. Schroeder |
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2,396 |
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114,050 |
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Wayne R. Shurts |
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2,396 |
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114,050 |
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Peter W. Stott |
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2,396 |
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114,050 |
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Roy W. Templin |
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2,396 |
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114,050 |
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Chelsea C. White III |
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2,396 |
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114,050 |
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(1) |
Amounts listed in this table include (i) the amounts payable in respect of RSUs and PSPUs that are scheduled to vest on or prior to February 29, 2016, which will vest and be cancelled and converted into the
right to receive the per Share Merger Consideration in respect of each Share subject to each such RSU and PSPU automatically upon the Effective Time pursuant to the Merger Agreement (as described above), (ii) Restricted Stock Awards held by the
Companys non-employee directors that will be cancelled and converted into the right to receive the per Share Merger Consideration in respect of each Share subject to each such Restricted Stock Award automatically upon the Effective Time (as
described above), and (iii) the amounts that would be payable with respect to Adjusted RSUs and Adjusted PSPUs upon a qualifying termination of employment within 24 months following the Effective Time (as described below). |
Change in Control Severance Benefits Agreements with Executive Officers
The Company previously entered into change-in-control severance agreements (each, a CIC Agreement and, collectively,
the CIC Agreements) with each of its executive officers specifying certain compensation and benefits payable to such executive officers in the event of a qualifying termination of employment related to a change in control.
Under the terms of the CIC Agreements, an executive officer will become entitled to the following severance benefits if, within 24 months after a change in control of the Company, (a) the executive
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officers employment is terminated by the Company other than for cause, or (b) the executive officer terminates his or her employment for good reason:
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severance in an amount ranging from one to two times (or, in the case of Messrs. Stotlar and Bianco, three times) the sum of the executive officers current annual base salary and target annual incentive
compensation award for the year of termination; |
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a pro-rated target annual bonus, for the year of termination; |
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outplacement services in an amount ranging from $10,000 to $25,000 (or, in the case of Mr. Stotlar, $90,000); and |
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continued coverage under the Companys medical and life insurance plans ranging from 12 months to 24 months following termination (or, in the case of Messrs. Stotlar and Bianco, 36 months).
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The severance agreements also require the executive officers to comply with restrictive covenants with respect to
confidentiality, non-solicitation and non-disparagement and to execute a written release of claims.
The CIC Agreements include a
net-better-off golden parachute cut-back, whereby payments and benefits that are contingent on a change in control will be reduced to the minimum extent necessary so that no portion of the payment is subject to excise taxes, as
determined in accordance with Sections 280G and 4999 of the Internal Revenue Code of 1986, as amended (the Code), unless the executive officer would be better off, on an after-tax basis, receiving all payments and benefits
due and paying all applicable excise and income taxes. In consideration for their entry into the restrictive covenant letter agreements described below, Parent waived the Section 280G cut-back with respect to Messrs. Stotlar, Bruffett, Krull,
and Dagnese.
For illustrative purposes only, it is currently estimated that, assuming the Merger is completed on October 14, 2015
(the earliest date on which the Offer may be consummated) and a qualifying termination of employment of each of the Companys executive officers occurs immediately following completion of the Merger, the Companys executive officers would
be entitled to receive, in the aggregate, approximately $18.0 million in cash severance benefits and $900,000 in out placement and continual benefits coverage (based on coverage levels as of December 31, 2014) under the CIC Agreements.
See also Item 8Additional InformationGolden Parachute Compensation for quantification of the severance
payments and benefits to the Companys named executive officers under their CIC Agreements.
Accelerated Equity Vesting
Pursuant to their applicable equity award agreements, in the event of a severance-qualifying termination of employment under their CIC
Agreements (as described above), the RSUs and PSPUs held by the Companys executive officers will vest in full upon the date of termination. Please see the Unvested Equity Awards Summary Table above for quantification of the
cash value of the RSUs and PSPUs held by the Companys executive officers that would vest in full upon the executive officers severance-qualifying termination of employment.
Restrictive Covenant Letter Agreements
In connection with the Merger, Parent entered into restrictive covenant letter agreements with Messrs. Stotlar, Bruffett, Krull, Bianco and
Dagnese. In consideration for their entry into the restrictive covenant letter agreements and their provision of limited consulting services until March 31, 2016, each of Messrs. Stotlar, Bruffett, Krull and Dagnese will (i) receive a
grant of fully vested shares of Parent common stock, with a grant date fair value equal to (a) $50,000 for each of Messrs. Stotlar, Bruffett and Krull, and (b) $150,000 for Mr. Dagnese, (ii) no longer be subject to a
Section 280G cut-back pursuant to their CIC Agreements, and (iii) receive a mutual release by Parent and its affiliates of them and, in the case of Messrs. Stotlar, Bruffett and Krull, their heirs, executors, administrators,
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representatives, successors and assigns (other than with respect to their obligations or restrictions described in their restrictive covenant letter agreements). In addition, Mr. Dagnese
will receive a $200,000 lump sum cash payment. The shares of Parent common stock will be granted subject to the approval of the Compensation Committee of Parents Board of Directors, and will be subject to transferability restrictions until the
third anniversary of the Effective Time (for Messrs. Stotlar, Bruffett, and Krull) or the second anniversary of the Effective Time (for Mr. Dagnese). Pursuant to the restrictive covenant letter agreements, Messrs. Stotlar, Bruffett, Krull and
Dagnese will be subject to 36-month (Mr. Stotlar) or 24-month (Messrs. Bruffett, Krull, and Dagnese) post-termination non-competition and non-solicitation of customers and carriers covenants, which covenants are subject to certain exceptions set
forth therein. In the event of a breach by Messrs. Stotlar, Bruffett, Krull or Dagnese of the non-competition and/or non-solicitation covenants in their restrictive covenant letter agreements, the shares of Parent common stock and, in the case of
Mr. Dagnese, the cash award, are subject to recoupment by Parent.
In consideration for his entry into the restrictive covenant
letter agreement, and for retention purposes, Mr. Bianco will receive a grant of fully vested shares of Parent common stock, with a grant date fair value equal to $400,000. The shares of Parent common stock will be granted subject to the
approval of the Compensation Committee of Parents Board of Directors, and will be subject to transferability restrictions, (i) with respect to one-half of the shares, until the 18-month anniversary of the Effective Time, and
(ii) with respect to the remaining half of the shares, until the third anniversary of the Effective Time. Pursuant to the restrictive covenant letter agreement, Mr. Bianco will be subject to a 24-month post-termination non-solicitation of
customers and carriers covenant.
The foregoing summary of the restrictive covenant letter agreements does not purport to be complete and
is qualified in its entirety by reference to the form of restrictive covenant letter agreement with Messrs. Stotlar, Bruffett and Krull, the restrictive covenant letter agreement with Mr. Bianco and the restrictive covenant letter agreement
with Mr. Dagnese, which are filed as Exhibits (d)(3), (d)(4) and (d)(5) hereto, respectively, and are incorporated herein by reference.
Employee
Matters Following Closing
The Merger Agreement provides that, until the first anniversary of the Effective Time, Parent will cause the
Company or the Surviving Corporation to provide each employee of the Company or its subsidiaries who remain employed by the Company and its Affiliates following the Effective Time (each, a Continuing Employee) with
(i) base salary or regular hourly wages that are no less favorable than those provided to such employees immediately prior to the Effective Time and (ii) incentive compensation opportunities (except for equity-based incentive compensation
opportunities) and employee benefits that are substantially similar, in the aggregate, to those provided to similarly situated employees of Parent. Parent has also agreed to, or to cause the Surviving Corporation to, take commercially reasonable
efforts so that such Continuing Employees shall be given credit for services rendered for purposes of eligibility, vesting, benefit accrual, and entitled to benefits where length of service is relevant under benefit plans maintained by Parent or one
of its subsidiaries, subject to certain customary exceptions.
The foregoing summary of employee matters following the Effective Time does
not purport to be complete and is qualified in its entirety be reference to the Merger Agreement, which is filed as Exhibit (d)(1) hereto and is incorporated herein by reference.
Section 16 Matters
The Merger
Agreement provides that, assuming the delivery of any necessary information to Parent, the Company and Parent each shall take such steps as may be necessary or appropriate to ensure that the dispositions of equity securities of the Company
(including derivative securities) by any officer or director of the Company who is subject to Section 16 of the Securities Exchange Act of 1934, as amended (the Exchange Act), pursuant to the transactions contemplated
by the Merger Agreement are exempt under Rule 16b-3 promulgated under the Exchange Act.
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Indemnification, Directors and Officers Insurance
The Companys certificate of incorporation contains certain provisions permitted under the DGCL relating to the liability of the
Companys directors and officers. These provisions eliminate the Companys directors personal liability to the Company or its stockholders for monetary damages resulting from a breach of fiduciary duty to the extent permitted by
Delaware statutory and decisional law. The Companys bylaws also contain provisions that require the Company to indemnify any current or former director, officer, employee, or agent of the Company to the fullest extent permitted by the DGCL
against all expenses, liability, and loss (including attorneys fees) reasonably incurred or suffered by such person in connection such persons service as a director, officer, employee or agent of the Company or services performed by such
person at the request of the Company. The Companys bylaws also require the Company to advance expenses to any officer or director (acting in his capacity as such) in connection with defending any proceeding; provided that, if required
by the DGCL, such person provides an undertaking to repay such advance if it is ultimately determined that such person is not legally entitled to indemnification.
Pursuant to the Merger Agreement, for six years after the Effective Time, Parent, Purchaser and the Surviving Corporation have each agreed
that the provisions in the certificate of incorporation and bylaws of the Company or any of its subsidiaries relating to exculpation, indemnification and advancement of expenses for acts or omissions occurring prior to the Effective Time shall
remain in full force and effect.
Additionally, pursuant to the Merger Agreement, Parent and the Surviving Corporation have each agreed to
indemnify, to the fullest extent permitted by applicable law, each current or former director, officer or employee of the Company and its subsidiaries (each, an Indemnified Party) against costs or expenses (including
reasonable attorneys fees) or other liabilities arising out of or related to such Indemnified Partys service as a director, officer, employee or agent of the Company or its subsidiaries or services performed by such Indemnified Party at
the request of the Company or its subsidiaries at or prior to the Effective Time. In connection with the foregoing, each of Parent and the Surviving Corporation will advance the expenses (including reasonable attorneys fees) of any such
Indemnified Party incurred (provided that the person to whom expenses are advanced provides an undertaking to repay such advance if it is ultimately determined that such person is not legally entitled to indemnification under applicable law).
The Company also maintains officers and directors liability insurance which insures against liabilities that officers and
directors of the Company may incur in such capacities. Pursuant to the Merger Agreement, if the Company has not done so prior to the Effective Time, Parent has agreed to cause the Surviving Corporation to obtain and fully pay the premium for the
extension of the directors and officers liability coverage of the Companys existing officers and directors insurance policies and the Companys existing fiduciary liability insurance policies, in each case that
provide coverage for a period of six years from and after the Effective Time for events occurring at or prior to the Effective Time (the D&O Insurance) and that are at least as favorable as the Companys existing
directors and officers liability insurance policy and fiduciary liability insurance policies. If the Company and the Surviving Corporation for any reason fail to obtain such tail insurance policy as of the Effective Time, the
Surviving Corporation shall, and Parent has agreed to cause the Surviving Corporation to, either continue to maintain in effect the D&O Insurance in place as of the date of the Merger Agreement or to purchase comparable D&O Insurance, in
each case for a period of at least six years from and after the Effective Time and with terms, conditions, retentions and limits of liability that are at least as favorable as the Companys existing policies as of the date of the Merger
Agreement. However, if the premium for such tail policy exceeds 300% of the current annual premium, the Surviving Corporation shall obtain a policy with the greatest coverage available for a cost not exceeding such amount.
The foregoing summary of the indemnification of officers and directors and directors and officers liability insurance pursuant to
the Merger Agreement, the Companys charter and the Companys bylaws does not purport to be complete and is qualified in its entirety by reference to the Merger Agreement, the Companys charter and the Companys bylaws (as
applicable), which are filed as Exhibits (d)(1), (e)(41) and (e)(42) hereto, respectively, and are incorporated herein by reference.
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Item 4. |
The Solicitation or Recommendation. |
Recommendation of the Board
At a special telephonic meeting held on September 8, 2015, the Board unanimously:
(a) declared the Merger Agreement advisable and declared it to be in the best interests of the Company and its stockholders for the Company to
enter into the Merger Agreement and to consummate the transactions contemplated thereby, including the Offer and the Merger, each on the terms and subject to the conditions set forth in the Merger Agreement;
(b) authorized, approved and adopted the execution, delivery and performance of the Merger Agreement and the consummation of the transactions
contemplated thereby, including the Offer and the Merger; and
(c) recommended that, subject to the terms and conditions of the Merger
Agreement, the stockholders of the Company accept the Offer and tender their Shares pursuant to the Offer.
Accordingly, and for the
reasons described in more detail below, the Board unanimously recommends that the Companys stockholders accept the Offer and tender their Shares pursuant to the Offer.
Background of the Offer and the Merger
The Board periodically reviews industry dynamics for the transportation industry and considers potential strategic alternatives for Con-way in
order to enhance stockholder value.
In January 2014, Mr. Bradley Jacobs, Chief Executive Officer of XPO, contacted a representative
of Citigroup Global Markets Inc. (Citi) asking if such Citi representative had any contacts at Con-way and expressing interest in acquiring Con-ways Menlo Logistics business, which represented less than 10% of the
Companys consolidated EBITDA for the year ended December 31, 2014. The representative of Citi indicated that Citi had a relationship with Con-way and could contact Con-way regarding XPOs interest. The Citi representative
subsequently informed Con-ways Chief Executive Officer, Mr. Douglas Stotlar, of XPOs expression of interest in acquiring Con-ways Menlo Logistics business. After determining it was interested in exploring a possible sale of
its Menlo Logistics business, Con-way engaged Citi as its financial advisor for such transaction.
On April 15, 2014, the Board held
a meeting. Also present were members of Con-way management. At the meeting, Con-way management briefed the Board on the oral indications of interest Con-way had received from XPO and another third party regarding the potential purchase of
Con-ways Menlo Logistics business. The Board discussed with management whether the sale of the Menlo Logistics business fit with Con-ways strategic plan, other possible methods of disposing of the Menlo Logistics business and the
potential use of proceeds of a sale of the Menlo Logistics business. The Board directed management to complete the analysis of whether the sale or other disposition of the Menlo Logistics business, including the use of proceeds from a disposition,
would further the Companys strategic plan, provide an analysis of the intrinsic value of the Menlo Logistics business and obtain more definitive proposals from XPO and the other third party.
As directed by the Board, Con-way engaged in discussions with XPO and another party regarding the potential sale of Con-ways Menlo
Logistics business in order to obtain written non-binding proposals from each.
On May 24, 2014, Con-way and XPO executed a
confidentiality agreement in order for Con-way to share confidential information regarding the Menlo Logistics business and to continue discussions regarding the sale of its Menlo Logistics business to XPO.
On June 4, 2014, XPO sent to Con-way an indicative non-binding indication of interest for the purchase of all of the assets or equity
interests of the Menlo Logistics business. The other third party did not submit a non-binding indication of interest for the acquisition of the Menlo Logistics business and informed Con-way that such
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third party had determined to cease having discussions with Con-way regarding the potential acquisition of the Menlo Logistics business.
On June 17, 2014, after further consideration, the Board determined not to further explore a potential sale of its Menlo Logistics
business at that time given, among other things, the lack of a tax efficient method to dispose of the business and strategic considerations, including that retaining the Menlo Logistics business did not impair the Companys ability to pursue
its strategic plan and the adverse impact the disposition would have on the Companys future earnings and cash flow.
In May 2015, a representative of a private equity sponsor (Fund X) contacted Citi, indicated to Citi
that Fund X was interested in the Company and requested that Citi arrange a meeting between Fund X and Mr. Stotlar. Citi relayed Fund Xs interest and request to Mr. Stotlar who declined to meet with Fund X. No meeting took place, and
Fund X did not follow-up.
In mid-June 2015, a representative of Citi contacted Mr. Jacobs to discuss various matters
in the ordinary course, including current events in the industries in which XPO operates and XPOs recently publicly announced acquisition of Norbert Dentressangle SA. During such conversation and following discussion of XPOs interest in
the asset heavy trucking component of Norbert Dentressangle SA in Europe, Citi inquired, among other things, as to whether this new strategic interest would translate to the North American markets and specifically to all of Con-way.
On July 1, 2015, Mr. Jacobs contacted a Citi representative to request contact information for Mr. Stotlar in order to arrange
a meeting between Mr. Jacobs and Mr. Stotlar to discuss industry trends and possible business opportunities between Con-way and XPO.
After being informed by the Citi representative of the request of Mr. Jacobs, Mr. Stotlar consulted with Con-ways non-executive
Chairman, Mr. Roy Templin. Messrs. Templin and Stotlar concluded that a meeting between Mr. Stotlar and Mr. Jacobs to discuss industry trends and potential business opportunities could be constructive and Mr. Stotlar authorized
Citi to provide Mr. Stotlars contact information to Mr. Jacobs.
On July 2, 2015, Messrs. Jacobs and Stotlar met. At
the meeting, in addition to discussing industry trends and other topics, Mr. Jacobs inquired whether the Board would be interested in exploring a potential acquisition by XPO of Con-way at a per Share price in the high $40s. Mr. Stotlar
indicated that he did not know whether the Board would be interested in pursuing such a transaction but if XPO made an offer he would communicate the offer to the Board for its consideration.
On several occasions throughout the parties discussions, Mr. Jacobs and other members of XPO management told Con-way management and
Citi that XPO was not interested in participating in an auction or other process in which Con-way solicited acquisition proposals from other third parties given confidentiality concerns, the potential for leaks and XPOs preference for
proprietary acquisition opportunities.
On July 8, 2015, Mr. Jacobs sent a written non-binding proposal to Mr. Stotlar
proposing an acquisition by XPO of all of Con-ways outstanding common stock at a price of $47.50 per Share in cash (which represented a premium of approximately 34% over the closing price of Con-way common stock on July 8, 2015). The
proposal indicated that the transaction would be fully financed and not subject to any financing condition.
On
July 12, 2015, the Board held a special telephonic meeting to discuss XPOs proposal, a copy of which had been provided to the Board in advance of the meeting. Also present at the meeting were members of Con-way management. At
Mr. Templins request, Mr. Stotlar described for the Board his meeting with Mr. Jacobs and XPOs proposal. Following discussion, the Board concluded that it needed additional information in order to determine whether to
explore the XPO proposal and requested that Con-ways management engage advisors on Con-ways behalf and prepare materials in order to facilitate the Boards evaluation of XPOs proposal. The
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Board then authorized management to retain Citi, subject to clearing conflicts, as Con-ways financial advisor, and Sidley Austin LLP (Sidley
Austin) as Con-ways outside legal advisor. The Board selected Citi because of, among other things, Citis familiarity with the industry and with Con-way, including acting as financial advisor to Con-way in connection with
its consideration of the potential divestiture of its Menlo Logistics business in 2014. Following the meeting, members of Con-way management contacted Citi and Sidley Austin to engage them as the Companys advisors, subject, in the case of
Citi, to clearing conflicts.
On July 17, 2015, the Board participated in a regularly scheduled monthly financial
results update call. Also participating in the call were members of Con-way management and, for a portion of the call, representatives of Sidley Austin. A representative of Sidley Austin briefed the Con-way directors on their fiduciary duties in
connection with considering a potential change of control transaction. Following discussion, members of Con-way management summarized for the Board the economic and other terms of the proposed Citi engagement and relevant bench-marking data
pertaining to such economic terms.
Following completion of Con-ways conflicts review with respect to Citi, a summary of the Citi
fee structure and a summary of Citis relationships were provided to the Board on July 20, 2015. Con-way concluded that there did not appear to be any relationships that would result in Citi having a conflict with its role as financial advisor
to the Company in connection with the Companys evaluation of a potential transaction with XPO and other potential strategic alternatives. Following this, Con-way formally retained Citi to act as Con-ways financial advisor in connection
with Con-ways consideration of a potential transaction with XPO and other potential strategic alternatives.
On July 22, 2015,
the Board held a special telephonic meeting. Also present at the meeting were members of Con-way management and representatives of Citi and Sidley Austin. At the Boards request, members of Con-way management discussed with the Board the
Companys financial model, which is described under Item 4. The Solicitation or RecommendationForward-Looking Financial Information as the Con-way Initial Management Case, as well as certain potential growth
initiatives that could add incremental value to the Con-way Initial Management Case. During the discussion, Con-way management summarized for the Board the principal assumptions used in the model, including the assumptions that there would be no
deceleration of growth and no recession during the periods covered by the model. Citi then discussed with the Board Citis preliminary financial perspectives regarding the Company and the XPO proposal of July 8, 2015. Citi also discussed
with the Board recent industry trends and Con-ways performance relative to that of its peers. The Board, management and Con-ways advisors discussed other strategic parties that might be interested in pursuing an acquisition of Con-way.
During this discussion, upon the Boards inquiry, Citi expressed its view that based on its knowledge of the industry and other potentially interested parties, it believed it was highly unlikely that a strategic party would be interested in
pursuing an acquisition of the Company at a price per Share in excess of the price per Share set forth in the XPO proposal. Management concurred with Citis view and noted for the Board that during their tenure only one other strategic party
had expressed any interest in acquiring Con-way as an entirety, and that such expression of interest occurred roughly eight years ago and did not result in any substantial discussions between the parties. The Board, management and Con-ways
advisors also discussed the likelihood that a private equity sponsor would be interested in acquiring Con-way at a price per Share in excess of the price per Share set forth in the XPO proposal. As part of this discussion, Citi noted for the Board
the request of Fund X to meet with Mr. Stotlar in May 2015, and that management had informed Citi that no meeting took place and that Con-way did not have any discussions with Fund X. Citi noted that the capital intensive nature of
Con-ways business would likely constrain a private equity sponsors ability to acquire Con-way at a valuation higher than that of a strategic party. Citi also noted that a strategic party could potentially realize synergies that generally
might not be available to a financial sponsor. Citi expressed to the Board its view that, given these factors, Citi believed it was unlikely that a private equity sponsor would acquire Con-way at a price per Share in excess of the price per Share
set forth in the XPO proposal of July 8, 2015. Following discussion, the Board concluded that the XPO proposal was at a valuation for the Company that the Board felt should continue to be explored. The Board, management and the Companys
advisors then discussed how to obtain the highest price per Share proposal for Con-way in order to enhance value for its stockholders, including
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whether Con-way should solicit proposals from other potentially interested parties. The Board concluded that it would continue to engage in discussions with XPO and not solicit other proposals at
that time, after taking into account, among other things, (a) its familiarity with the industry and its belief that there was a low likelihood that other parties would be interested in acquiring Con-way at a price per Share in excess of the
price per Share set forth in the XPO proposal of July 8, 2015, (b) the concern that soliciting proposals from third parties could result in a leak or could confirm for XPO that there were no other parties interested in pursuing an
acquisition of Con-way at a price per Share in excess of the price per Share set forth in the XPO proposal of July 8, 2015 and (c) given XPOs statements to management that it would not engage in an auction process and did not want to
be a stalking horse, the Boards concern that XPO would discontinue discussions if the Company solicited other proposals. The Board also discussed how best to get XPO to increase the price per Share in its proposal. Following
further discussion, the Board authorized management to inform XPO that while the Board was interested in exploring a potential transaction, XPO would need to increase its price per Share and that, subject to the execution of a confidentiality
agreement, the Board was willing to provide certain non-public information to XPO that might enhance XPOs views as to the potential value that could result from a transaction between Con-way and XPO. The Board also directed management to
(a) update Con-ways financial model for, among other things, additional potential cost savings opportunities, (b) in coordination with Citi, review the potential value that could be realized by Con-ways sale of its truckload
business and how such a transaction would compare to remaining as a standalone company and to XPOs proposal and (c) following execution of a confidentiality agreement with XPO, provide XPO with certain non-public information through a
management presentation. The Board also confirmed that, based on the information it had received, Citi did not appear to have any relationships that would constitute a conflict for Citi with respect to its role as financial advisor to the Company in
connection with the Companys evaluation of a potential transaction with XPO and other potential strategic alternatives.
Consistent
with the Boards instructions, on July 24, 2015, Mr. Stotlar contacted Mr. Jacobs and informed him that while the Board found XPOs proposal to be of some interest, XPO would need to increase its per Share price and, in
furtherance thereof, the Board had authorized Con-way management to present certain non-public information concerning Con-way, subject to the execution of a confidentiality agreement. Mr. Jacobs reiterated during the discussion XPOs
position that it would not be a stalking horse and would not participate in a process in which Con-way solicited proposals to acquire Con-way from other third parties given, among other things, confidentiality concerns, the potential for
leaks and XPOs preference for proprietary acquisition opportunities.
Also on July 24, 2015, Con-ways
General Counsel sent to XPOs General Counsel a draft confidentiality agreement. Over the next several days, Con-way and XPO and their respective outside legal advisors, Sidley Austin and Wachtell, Lipton, Rosen & Katz
(Wachtell Lipton), negotiated the confidentiality agreement. On July 28, 2015, Con-way and XPO executed the confidentiality agreement. The confidentiality agreement included a standstill agreement in favor of Con-way
and provided, among other things, that XPO would not (a) enter into any exclusive arrangement with any potential financing source with respect to Con-way or (b) have discussions with any potential co-bidder regarding a potential
acquisition of Con-way.
Also on July 28, 2015, Wachtell Lipton delivered a draft Merger Agreement to Sidley Austin.
The draft agreement contemplated that the potential transaction would be structured as a tender offer followed by a merger pursuant to Section 251(h) of the DGCL and provided, among other things, (a) that a termination fee of 4.5% of the
transaction value would be payable by Con-way if the Merger Agreement was terminated by Con-way to accept a superior proposal or by XPO if the Board changed its recommendation in favor of the transaction (the termination fee),
(b) that Con-way would pay XPO an amount equal to 1.0% of the transaction value as an expense reimbursement if either party terminated the Merger Agreement at the outside date and the Minimum Condition had not been satisfied
(referred to as the minimum condition failure expense reimbursement obligation), (c) that XPO would have five business days to match the terms of any competing acquisition proposal that the Board determined was a
superior proposal (and an additional five business days if such proposal were materially modified), (d) that Con-way would be required to use reasonable best efforts to provide financing cooperation to XPO and must provide certain information
and cooperation to XPO, (e) that XPO would
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be given a 20 business day period after all of the conditions to closing (including the Minimum Condition) were satisfied to market its proposed financing, during which marketing period the
transaction would not close and (f) XPO would not be required to close the tender offer or the merger if there was a default under Con-ways indentures. In addition, the draft Merger Agreement did not contemplate that XPO would have
committed financing at the time of signing the Merger Agreement nor did it expressly provide that a failure by XPO to consummate the tender offer or merger when required to do so would permit Con-way to seek damages.
On July 29, 2015, XPO sent Con-way a business, finance and legal due diligence request list. Con-ways General Counsel informed
XPOs General Counsel that Con-way would not respond to the draft Merger Agreement delivered by Wachtell Lipton or to XPOs due diligence request list unless XPO increased its price per Share to a level at which the Board determined it
would be willing to proceed further with exploring a potential transaction.
Also on July 29, 2015, Con-way announced its results for
the second quarter of 2015. The results were below those contemplated by the Con-way operating plan developed in 2014. The results were also below Wall Street consensus estimates for the second quarter of Con-ways fiscal year 2015 as of the
time of XPOS initial proposal on July 8, 2015.
On July 31, 2015, members of Con-way management made a presentation to members
of XPO management and certain advisors to XPO regarding Con-ways business, including Con-way managements forecasts, which are referred to under Item 4. The Solicitation or RecommendationForward-Looking Financial
Information as the Con-way Management Case, as well as certain growth initiatives that were not included in the Con-way Management Case but that the Company may undertake over the next five years (which are referred to under
Item 4. The Solicitation or RecommendationForward-Looking Financial Information as the Con-way Management Case with Growth Initiatives). The Con-way Management Case and the Con-way Management Case with Growth
Initiatives, although generally reflecting higher overall financial performance for Con-way than the Con-way Initial Management Case, each contemplated lower revenue and EBITDA for Con-ways full fiscal year 2015 than Wall Street consensus
estimates as of the time of XPOs initial proposal of July 8, 2015.
Over the course of the first several days in August, XPO
management indicated to Con-way management on multiple occasions that XPO would not submit a revised proposal until XPO (a) had received a response from Con-way to XPOs draft Merger Agreement and (b) had been permitted to conduct
legal due diligence and further business and financial due diligence. XPO management also indicated that (i) XPO believed its initial proposal reflected a full price for Con-way in light of the disparity between Con-way managements
forecasts and higher Wall Street consensus estimates on which XPO had based its initial proposal, and that any increase in its proposed price would not be significant and (ii) the deal protections in the Merger Agreement, including
the prohibition on Con-way soliciting alternative proposals and the size of the termination fee, were of significant importance to XPO and that XPO was not willing to move significantly from its initial proposal on those terms.
Following discussions between Con-way management and Mr. Templin, Mr. Templin and Con-way management determined Con-way should
provide due diligence materials to XPO and respond to XPOs draft Merger Agreement. At the direction of Con-way, on August 7, 2015, Sidley Austin delivered a revised draft of the Merger Agreement to Wachtell Lipton, on behalf of XPO. The
August 7 Con-way draft, among other things, (a) contemplated a two-tier termination fee whereby if Con-way were to terminate the Merger Agreement to accept a superior proposal from a party that made an initial offer to Con-way within the
first 45 days after signing of the Merger Agreement, the termination fee would be 1.25% of the equity value of the transaction and in all other cases in which Con-way terminated the Merger Agreement to accept a superior proposal or XPO terminated
because the Board changed its recommendation with respect to the transaction, the fee would be 3% of the equity value of the transaction, (b) provided that the initial expiration period of the tender offer would not expire earlier than the date
45 days after the date of the agreement, (c) contemplated that XPO would have committed financing as of the signing of the Merger Agreement, (d) deleted the minimum condition failure expense reimbursement obligation, (e) reduced the
marketing period from 20 business days to 10 business days and provided that the minimum tender condition did not need to be satisfied in order for the marketing period to
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begin, (f) reduced XPOs match right period with respect to any superior proposal to three days from five business days and one day upon any material revisions (reduced from
five business days), (g) clarified that Con-way would be able to pursue damages if XPO did not consummate the tender offer and merger when it was required to do so and (h) deleted the closing condition that Con-way not be in default under
its indentures.
On August 12, 2015, Con-way provided XPO and its advisors with access to a virtual data room containing business,
financial and legal due diligence materials. From August 12, 2015 through signing of the Merger Agreement, XPO and its advisors conducted due diligence on Con-way, including a review of documents and discussions with employees and advisors of
Con-way.
On August 13, 2015, Wachtell Lipton provided a revised draft of the Merger Agreement. The revised draft, among other
things, (a) rejected the concept of the two-tier termination fee that was contained in the Sidley Austin markup but reduced the termination fee originally proposed by XPO from 4.5% of the transaction value to 4% of the equity value,
(b) rejected the reduction in the match right periods proposed in the Sidley Austin draft, (c) rejected the concept that the initial tender offer remain open for at least 45 days after signing, (d) reinserted the minimum condition
failure expense reimbursement obligation, (e) accepted the requirement that XPO would have committed financing at signing, (f) reverted to the 20 business day marketing period, (g) accepted the clarification that Con-way could pursue
damages if XPO did not consummate the tender offer and merger when required to do so and (h) accepted the removal of the closing condition related to Con-ways indentures.
On August 14, 2015, at the direction of Con-way, a representative of Citi discussed with a member of XPO management the status of the
transaction, with the Citi representative relaying the Boards requirement for an updated written proposal from XPO with an improved purchase price in order for the Board to determine whether it would continue to engage in discussions with XPO.
The member of XPO management indicated that XPO would need to complete more diligence before it could provide a revised proposal and that, based on XPOs review to date, any increase in proposed purchase price would not be significant. XPO also
reiterated that XPO was particularly focused on the strength of the deal protections.
On August 16, 2015, in accordance
with Con-ways instructions, a representative of Citi had a follow-up conversation with XPOs General Counsel to reiterate the Boards requirement for a written updated proposal reflecting an improved purchase price. XPOs
General Counsel indicated that, while the Board could expect a reconfirmation of XPOs interest in advance of the Boards upcoming meeting, there would be no meaningful change in XPOs proposed purchase price.
Also on August 16, 2015, the Board held a special telephonic meeting. Also present at the meeting were members of Con-way management and
representatives of Citi and Sidley Austin. At Mr. Templins request, Mr. Stotlar summarized for the Board the factors underlying the Companys results for the second quarter and the steps management contemplated taking in an
effort to improve the Companys results so they were closer to those contemplated by the Companys operating plan. Following discussion, management discussed with the Board managements updated financial model (which is
described under Item 4. The Solicitation or RecommendationForward-Looking Financial Information as the Con-way Management Case) and certain potential growth initiatives that could add incremental
value thereto (which are described under Item 4. The Solicitation or RecommendationForward-Looking Financial Information as the Con-way Management Case with Growth Initiatives). Management also updated the Board
on discussions to date with XPO. Citi then discussed with the Board Citis updated preliminary financial perspectives regarding the Company and XPOs proposal. Citi also discussed the potential value creation from possible strategic
alternatives involving a disposition or separation of the Companys truckload or Menlo Logistics businesses combined with various alternatives for the use of the proceeds therefrom. The Board discussed with management and the Companys
advisors the feasibility of these alternatives, as well as the risks and uncertainties associated with pursuing these alternatives and the Companys ability to successfully execute and implement such alternatives. A representative of Sidley
Austin then described for the Board the material terms of the revised draft Merger Agreement provided by Wachtell Lipton, including a comparison to the terms in XPOs original draft and the markup provided by
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Sidley Austin. During executive session, the Board again discussed various possible strategic alternatives that the Company might pursue, including operating as a standalone company and pursuing
the Companys existing operating plan or pursuing one of the other transactions described above. The Board discussed the Companys operating plan, the fact that the Company was performing below the levels contemplated by the plan, possible
steps to improve the Companys near-term and long-term performance, the risks associated with taking such actions and the likelihood of successfully executing such actions. The Board then discussed possible negotiating strategies with respect
to XPO should the parties continue to engage in discussions following the Companys receipt of XPOs revised proposal.
On
August 19, 2015, XPO delivered to Con-way a revised proposal to acquire Con-way at a purchase price per Share of $47.60 in cash. The revised proposal outlined several reasons that XPO was unwilling to increase its price further, including a
lower projected EBITDA for the Company than what XPO used in submitting its initial proposal in July. The revised proposal further indicated that XPO was not prepared to increase its proposed purchase price per Share any further or to proceed
otherwise than on substantially the basis set forth in the draft Merger Agreement delivered by Wachtell Lipton on August 13, including as it related to deal protections. In addition the revised proposal noted that given changes in
the debt financing markets, the costs of XPOs financing had materially increased. XPO also noted that there had been a reduction in the 2015 EBITDA expectations for Con-way since the time that XPO submitted its initial proposal on July 8,
2015.
On August 20, 2015, the Board held a special telephonic meeting. Members of Con-way management and representatives of Citi and
Sidley Austin were also present. Mr. Templin began the meeting by describing XPOs revised proposal, a copy of which had been provided to the Board in advance of the meeting. Management then described for the Board the discussions with XPO
since the last Board meeting. Citi then discussed with the Board preliminary financial perspectives with respect to XPOs proposal and the Company as well as other transaction-related information. The terms of the revised XPO proposal were then
discussed. As part of the discussion regarding the size of the termination fee proposed by XPO, members of the Board asked Citi for its views regarding the likelihood that there were other potentially interested parties that would be willing to pay
a higher price than that proposed by XPO following the announcement of a signed a Merger Agreement. Based on the factors previously considered, Citi indicated it believed that following public announcement of the signing of any Merger Agreement with
XPO it would be highly unlikely that potentially interested parties would be willing to acquire Con-way at a price per Share higher than that proposed by XPO. Management confirmed that it concurred with Citis view. The Board again discussed
potential strategic alternatives as outlined in the August 16, 2015 Board meeting, the feasibility of such strategic alternatives and the risks and uncertainties associated with pursuing such alternatives as well as the Companys ability
to successfully execute and implement such alternatives. Following this discussion, it was the sense of the Board that neither remaining as a standalone company nor pursuing the other strategic alternatives discussed above were likely to create
greater overall value for the Companys stockholders than XPOs proposal. The Board noted that while it viewed the terms currently proposed by XPO as attractive, it would like to improve the terms proposed by XPO, and discussed how to
proceed. Following discussion, the Board reached a consensus that Messrs. Templin and Stotlar would contact Mr. Jacobs and take the following negotiating positions: (a) the price per Share in XPOs August 19th proposal potentially undervalues the Company when taking into consideration the value of the Companys business to XPO, and the Board would like to see if the price can be negotiated higher,
(b) the termination fee should be reduced from 4% to 3% of the equity value of the transaction and the tender offer should not be commenced until 15 days after signing, (c) the minimum condition failure expense reimbursement obligation
should be removed from the proposed terms and (d) the Company needed to have an opportunity to review and understand XPOs financing commitments prior to any signing of a Merger Agreement.
On August 21, 2015, Messrs. Templin and Stotlar, together with a representative of Citi, communicated the Boards message to
Mr. Jacobs as directed.
Later on August 21, 2015, Mr. Jacobs responded informing Messrs. Templin and Stotlar that
(a) XPO would not increase its proposed price per Share, (b) while XPO already had reduced the termination fee, it would be
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willing to further reduce the fee to 3.8% of the equity value of the transaction but would not agree to delay the launch of the tender offer until 15 days after signing of a definitive Merger
Agreement, (c) XPO would be willing to reduce the minimum condition failure expense reimbursement obligation from 1% of the equity value of the transaction to $5 million and (d) the Company would be afforded an opportunity to review the
XPO financing commitment letters prior to the signing of any Merger Agreement. Mr. Jacobs also noted that XPOs financing costs had increased materially as a result of changes in the financing markets and that Con-ways full fiscal
year 2015 revenue and EBITDA contemplated by the Con-way Management Case and Con-way Management Case with Growth Initiatives were lower than Wall Street consensus estimates as of the time of XPOs initial proposal of July 8, 2015.
On August 22, 2015, the Board held a special telephonic meeting. Also present at the meeting were members of management, representatives
of Citi and representatives of Sidley Austin. Mr. Templin began by describing XPOs response to the Boards message. Following discussion, the Board directed Mr. Templin to inform Mr. Jacobs that the revised terms were
sufficient for Con-way to permit XPO to complete its due diligence and negotiate the remaining terms of the Merger Agreement but that the Board requested a further reduction in the termination fee from 3.8% of the equity value of the transaction to
3.25% of the equity value of the transaction. Following the meeting, Mr. Templin communicated the Boards message to Mr. Jacobs.
On August 23, 2015, Sidley Austin sent a markup of the Merger Agreement to Wachtell Lipton. From August 23, 2015 through signing,
Con-way and XPO and their respective advisors negotiated the terms of the Merger Agreement.
On August 25, 2015, members of Con-way
management, members of XPO management and certain advisors met to discuss follow-up due diligence inquiries from XPO.
On August 26,
2015, a member of XPO management informed Con-ways General Counsel that XPO would require as a condition to signing a Merger Agreement that certain members of Con-way management, including, among others, Messrs. Stotlar, Bruffett and Krull,
enter into non-competition agreements with XPO. From August 26, 2015 through signing, the members of the Con-way management team contemplated to enter into the non-compete agreements negotiated the terms of their respective agreements with XPO.
XPO management also discussed with Con-way management XPOs request that certain rabbi trust agreements related to non-qualified deferred compensation obligations of the Company be amended so that the Company would not be required to fund such
trusts with marketable securities or letters of credit upon the occurrence of a change of control of the Company or a potential change of control (as described in the trust agreements).
On August 29, 2015, the Board held an in-person meeting. Also present at the meeting were members of Con-way management and
representatives of Citi and Sidley Austin. Mr. Templin and members of management updated the Board on the status of the negotiations, including that they had not yet received drafts of XPOs financing commitment letters, XPO continued to
resist decreasing the termination fee from 3.8% of the equity value of the transaction and that XPO recently made demand that certain members of Con-way management execute non-compete agreements and the requests for amendments to the rabbi trust
agreements. Representatives of Sidley Austin again reviewed with the Board its fiduciary duties in considering a change of control transaction and provided an overview of the draft Merger Agreement. Citi then discussed with the Board updated
preliminary financial perspectives with respect to Con-way and the financial terms of XPOs proposal. The Board then reviewed the various factors they had considered in evaluating the potential transaction, including managements
recommendation in favor of the transaction. As part of this discussion, the Board again discussed the likelihood that other potentially interested parties would acquire the Company at a price per Share higher than the $47.60 per Share proposed by
XPO. At the Boards request, Citi confirmed its view that it believed it was highly unlikely that a potentially interested party would acquire the Company at a price per Share higher than the $47.60 per Share proposed by XPO. Management again
confirmed it agreed with such view. The Board also discussed again various possible strategic alternatives that the Company might pursue, including remaining as a standalone company. It remained the sense of the Board that neither remaining as a
standalone company nor
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pursuing the other strategic alternatives discussed above were likely to create greater overall value for the Companys stockholders than XPOs proposal. Following discussion, the Board
determined that Mr. Templin and management should continue to negotiate with XPO to resolve the open issues.
On August 31,
2015, the Board held a telephonic meeting. Also present at the meeting were members of Con-way management and representatives of Citi and Sidley Austin. Mr. Templin provided the Board with an update of the status of negotiations with XPO.
During the week of August 31, XPO completed its confirmatory due diligence and synergies analysis and Con-way and XPO worked to resolve
the remaining issues, including finalizing the Merger Agreement, the XPO financing commitment letter, the non-compete agreements and the rabbi trust agreement amendments. The Company was able to obtain an amendment to the executive rabbi trust
agreement so that the Company would not be required to fund the trust upon a potential change of control with respect to certain plan liabilities but was not able to obtain an amendment to the executive trust agreement so that the Company would not
be required to deposit marketable securities or letters of credit in the trust upon a change of control. Also during that week, Con-way management shared with the Board summaries of the material terms of the XPO commitment letters and summaries of
the consideration to be received by Con-way management in exchange for their non-compete agreements. The parties set September 8, 2015 as a target for the Board to consider approval of the Merger Agreement and, if the Merger Agreement was so
approved, the signing of the Merger Agreement by the parties.
On September 7, 2015, Mr. Jacobs informed Mr. Stotlar that
XPO had concerns regarding the amount of Con-ways transaction costs as disclosed to XPO.
On September 8, 2015, the Board held
a telephonic special meeting. Also present at the meeting were members of Con-way management, representatives of Citi and representatives of Sidley Austin. Management informed the Board that the only outstanding matter to be addressed between the
parties was XPOs concerns regarding Con-ways transaction costs and that Mr. Jacobs had informed Mr. Stotlar and Citi that XPOs board had approved the transaction and was ready to proceed on the terms reached by the
parties but XPO would not proceed until its concerns had been resolved. Following discussion regarding how to proceed, the Board determined it would approve the transaction on the terms that had been previously reached by the parties and inform
Mr. Jacobs that Con-way was prepared to proceed on the terms previously reached by the parties. Sidley Austin reviewed with the Board the changes to the terms of the transaction documents from those last reviewed by the Board. Citi reviewed
with the Board its financial analysis of the $47.60 per Share consideration and delivered an oral opinion, confirmed by delivery of a written opinion dated September 8, 2015, to the Board to the effect that, as of such date and based on and
subject to various assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken described in such opinion, the $47.60 per Share consideration to be received in the Offer and the Merger, taken
together as an integrated transaction, by holders of Con-way common stock (other than XPO, Purchaser and their respective affiliates) was fair, from a financial point of view, to such holders. The Board then adopted resolutions approving the Merger
Agreement and the Con-way compensation committee adopted resolutions approving the treatment of the outstanding equity awards in the transaction. The Board then directed Mr. Templin to inform Mr. Jacobs that the Board had approved the
Merger Agreement and Con-way was prepared to proceed on the terms previously reached by the parties. The meeting was then recessed so Mr. Templin could deliver the message to Mr. Jacobs and report back to the Board.
As directed by the Board, Mr. Templin delivered the Boards message to Mr. Jacobs that the Board had approved the Merger
Agreement and Con-way was prepared to proceed on the terms previously reached by the parties.
Later on September 8, 2015, the Board
reconvened, reaffirmed its approval of the Merger Agreement and directed Mr. Templin to inform Mr. Jacobs that the Board had approved the transaction on the terms previously reached by the parties. After the meeting adjourned,
Mr. Templin delivered the message to Mr. Jacobs.
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On September 9, 2015, Mr. Jacobs contacted Mr. Stotlar and indicated XPO was
willing to proceed on the terms approved by the Board, including as to the transaction costs disclosed to XPO. In the afternoon of September 9, 2015, Con-way, XPO and Purchaser executed the Merger Agreement, XPO and Morgan Stanley executed the
financing commitment letter and ancillary agreements and Con-way and XPO announced the execution of the Merger Agreement. The press release is filed as Exhibit (a)(5)(A) hereto and is incorporated herein by reference. The following day, Con-way
filed the Merger Agreement with the SEC as an exhibit to a Current Report on Form 8-K.
Following the public announcement of the transaction, on September 10, 2015, a representative of Fund X informed Citi that Fund X had
seen the September 9th announcement of the execution of the Merger Agreement and was formally expressing interest in the Company. The representative of Fund X did not provide any terms for a potential transaction with Con-way. Con-way and its
advisors informed the Board of Fund Xs message and, consistent with the terms of the Merger Agreement, informed XPO orally and in writing of the message from Fund X.
On September 15, 2015, XPO and Purchaser filed the Offer to Purchase and related documents with the SEC and commenced the tender offer.
On September 17, 2015, a representative of Fund X sent a message to a representative of Citi reiterating Fund Xs interest in
the Company. The representative of Fund X did not provide any terms for a potential transaction with Con-way. Pursuant to instructions from the Company, the representative of Citi informed the representative of Fund X that the Company and its
representatives are subject to the non-solicitation provisions of the Merger Agreement. Con-way and its advisors informed the Board of Fund Xs message and, consistent with the terms of the Merger
Agreement, informed XPO orally and in writing of the message from Fund X.
On September 21, 2015, the Board held a regularly
scheduled Board meeting. Also present for a portion of the meeting were members of management and representatives of Citi and Sidley Austin. The Board reviewed with management, Citi and Sidley Austin the September 10 and September 17
messages from Fund X that Fund X was interested in the Company. After discussion, the Board determined that, at that time, the messages from Fund X to Citi on September 10 and September 17 were not sufficient for the Board to make a
finding required under the Merger Agreement that would allow the Company to engage in negotiations with Fund X. In reaching this conclusion, the Board noted that the messages from Fund X did not contain a proposed purchase price, did not express a
view that Fund X was willing to pay more per Share than the Offer Price and did not request non-public information.
Reasons for the Boards
Recommendation
In evaluating the Merger Agreement and the transactions contemplated thereby, including the Offer and the Merger, and
recommending that the Company stockholders accept the Offer and tender their Shares in the Offer, the Board consulted with the Companys senior management team and outside legal and financial advisors and considered and evaluated numerous
factors over the course of over seven meetings of the Board since July 12, 2015, including the following material factors, each of which the Board believes supported its unanimous determinations:
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Transaction Consideration. That the Offer Price and Merger Consideration represented: |
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a 35.1% premium over the closing price of the Company common stock on September 4, 2015; |
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a 37.5% premium over the volume-weighted average closing price of the Company common stock reported for the ten trading day period prior to September 4, 2015; and |
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a 33.7% premium over the volume-weighted average closing price of the Company common stock reported for the twenty trading day period prior to September 4, 2015. |
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Historical Performance and Prospects. |
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The current and historical financial condition, results of operations and business of the Company and the Companys historical performance relative to other companies in the industry. |
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The strategic plan developed by the Companys senior management and the uncertainty regarding whether the Company would be able to execute the strategic plan and achieve the results contemplated by the plan,
including the fact that the Company is currently performing below the levels contemplated by the plan, the risks associated with potential actions designed to return to plan levels, the Companys historical performance relative to projected
results and the fact that the plan does not contemplate a deceleration of growth or recession during the period covered by the projections. |
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The view that a global integrated supply chain model is likely to be a more successful model for future growth and the challenges the Company faces in implementing such a model. |
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The current state of the economy and uncertainty surrounding projected macroeconomic conditions both in the near term and the long term. |
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In light of the foregoing, the Companys near-term and longer-term prospects as an independent standalone company. |
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Potential Strategic Alternatives. |
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The potential strategic alternatives available to the Company, including pursuing a standalone strategy, divesting Truckload and/or Menlo through a sale, spin-off or spin/merge transaction and using the proceeds
therefrom for a material share repurchase or repayment of indebtedness, and the potential stockholder value that might result from such alternatives. |
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The feasibility of such alternatives, the risks and uncertainties associated with pursuing such alternatives and the ability of the Company to successfully execute and implement such alternatives. |
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The Boards view, taking into account, among other things, its review and discussions with the Companys senior management and advisors regarding potential strategic alternatives for the Company, that other
strategic alternatives reviewed by the Board were unlikely to create greater overall value for the Companys stockholders than the Offer and the Merger. |
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Other Potentially Interested Parties. The Boards belief, taking into account, among other things, its familiarity with the industry and discussions with the Companys senior management and financial
advisor, that other potentially interested parties were unlikely to be willing to acquire the Company at a purchase price in excess of the $47.60 per Share consideration offered by Parent and that such other potentially interested parties would be
able to submit a competing proposal, if they so desired, following the announcement of the execution of the Merger Agreement. |
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Cash Consideration; Certainty of Value. The fact that the Offer Price and Merger Consideration is a fixed cash amount, providing the Companys stockholders with certainty of value and liquidity
immediately upon the closing of the transaction, in comparison to the risks and uncertainty that would be inherent in remaining a stand-alone company or pursuing a transaction in which all or a portion of the consideration is payable in stock.
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Opinion of the Companys Financial Advisor. The opinion of Citi, dated September 8, 2015, to the Board as to the fairness, from a financial point of view and as of the date of the opinion, of the
$47.60 per Share consideration to be received in the Offer and the Merger, taken together as an integrated transaction, by holders of Shares (other than XPO, Purchaser and their respective affiliates), which opinion was based on and subject to the
assumptions made, procedures followed, matters considered and limitations and qualifications on the review undertaken as more fully described below under the caption Opinion of the Companys Financial Advisor. |
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No Financing Condition. The Offer and the Merger are not subject to a financing condition and, in particular, that Parent has entered into a commitment letter for a senior secured second lien bridge credit
facility with Morgan Stanley Senior Funding, Inc. to provide up to $2.025 billion of funding for the transaction and is representing that it has and will have sufficient cash funds for the remaining amount payable in connection with the transactions
contemplated by the Merger Agreement and any obligations of the Surviving Corporation or its subsidiaries that become payable in connection with or as a result of such transactions. |
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Likelihood of Consummation. The conditions to the consummation of the Offer and the Merger and the likelihood of closing and the fact that no third-party (non-governmental) consents are conditions to the
consummation of the Offer or the Merger as well as the Boards belief that the prospects for receiving all required regulatory approvals are favorable. |
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Specific Performance; Other Remedies. |
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The fact that, if Parent or Purchaser fails, or threatens to fail, to satisfy its obligations under the Merger Agreement, the Company is entitled to specifically enforce the Merger Agreement. |
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The Company is entitled to seek other remedies if Parent or Purchaser fails to consummate the Offer or the Merger when it is obligated to do so. |
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The Merger Agreement requires Parent to pay the Company $54,137,000 if Parent materially breaches the Merger Agreement in a way that materially delays or impairs the consummation of the Offer or the Merger.
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Availability of Appraisal Rights. The availability of appraisal rights under the DGCL to Company stockholders who do not tender in the Offer and who otherwise comply with all of the required procedures under the
DGCL, which provides those eligible stockholders with an opportunity to have the Delaware Court of Chancery (the Court of Chancery) determine the fair value of their Shares, which may be more than, less than or the same as
the amount such stockholders would have received under the Merger Agreement. |
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Terms of the Merger Agreement. The general terms and conditions of the Merger Agreement and the course of negotiations of the key provisions thereof, including: |
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the parties representations, warranties and covenants; |
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the Companys ability, under certain circumstances, to furnish information to and conduct negotiations with a third party, if the Board determines in good faith, after consultation with the Companys financial
advisor and outside legal counsel, that the third party has made a competing proposal that constitutes or could reasonably be expected to lead to a superior proposal and, after consultation with outside legal counsel, that the failure to take such
actions would reasonably be expected to result in a violation of the Boards fiduciary obligations; |
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the fact that, in certain circumstances, the Board is permitted to change its recommendation that the Companys stockholders tender their Shares in the Offer, which would result in Parent having the right to
terminate the Merger Agreement at which time the Company would be required to pay Parent a termination fee of $102,861,000 (or approximately 3.8% of the equity value of the transaction); and |
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the Boards belief that the terms of the Merger Agreement were reasonable and would not discourage other potential acquirors from making an alternative proposal to acquire the Company. |
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Potentially negative factors, including: |
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the fact that the Company had not engaged in a competitive bid process or other broad solicitation of interest; the Board noted that its decision not
to engage in a competitive bid process was informed by, among other factors, (a) the strength of Parents initial proposed purchase price of $47.50 per Share and subsequent increase in such proposed price to $47.60 per Share, (b) its
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belief, taking into account its familiarity with the industry and discussions with the Companys senior management and financial advisor, that other potentially interested parties were
unlikely to acquire the Company at a purchase price in excess of the purchase price offered by Parent, (c) concern that conducting a bid process would be disruptive to the Company as well as concerns regarding confidentiality resulting from
engaging in a competitive bid process and the potential, as indicated by Parent, that Parent would terminate discussions with the Company in such event, and (d) the fact that other potentially interested parties would be able to submit a
competing proposal, if they so desired, following the announcement of the execution of the Merger Agreement; |
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the fact that the Merger Agreement precludes the Company from actively soliciting alternative proposals; the Board noted that its decision not to require a provision that would permit the Company to actively solicit
proposals was based on, among other things, (a) the Boards belief that the public announcement of the transaction would afford other potentially interested parties sufficient notice that the Company was interested in pursuing a
transaction and (b) Parents consistent statements that it would not accept a go-shop provision; |
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the fact that, following the Merger, the Company will no longer exist as an independent public company and the Companys existing stockholders will not participate in the future earnings of the Company or Parent or
growth or benefit from any synergies resulting from the consummation of the transactions contemplated by the Merger Agreement; |
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the restrictions on the conduct of the Companys business prior to the consummation of the Offer and the Merger, which may delay or prevent the Company from undertaking certain business opportunities that may
arise; |
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the possibility that the Offer and Merger may not be completed and potential adverse consequences to the Company if the transactions are not completed, including the potential impact on the Companys stock price,
the potential loss of customers and employees, and the potential erosion of third-party confidence in the Company. The Board believes that such risks are mitigated by certain terms in the Merger Agreement, including: the absence of significant
required third-party approvals (other than antitrust approvals and the Minimum Condition); the absence of any financing condition to Parents obligations to complete the Offer and the Merger; and the Companys ability to specifically
enforce the Merger Agreement; |
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the fact that, for U.S. federal income tax purposes, the Offer Price and Merger Consideration will be taxable to Company stockholders who are entitled to receive such consideration; |
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the significant costs involved in connection with entering into and completing the Offer and the Merger and the substantial time and effort of management required to complete the transactions contemplated by the Merger
Agreement, which may disrupt the Companys business operations; and |
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the fact that the Companys directors and executive officers may receive certain benefits that are different from, and in addition to, those of Company stockholders (such as change in control or termination
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The foregoing discussion of the information and factors considered by the Board is not intended to be
exhaustive, but includes the material factors considered by the Board. In view of the wide variety of factors considered in connection with its evaluation of the Offer and the Merger and the complexity of these matters, the Board did not find it
practicable to, and did not, quantify or otherwise assign relative weights to the specific factors considered in reaching its determination and recommendation. In addition, individual directors may have given different weights to different factors.
The Board did not undertake to make any specific determination as to whether, or to what extent, any factor, or any particular aspect of any factor, supported or did not support its ultimate determination. The Board based its recommendation on the
totality of the information presented, including the factors described above.
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Intent to Tender
To the Companys knowledge, after making reasonable inquiry, all of the Companys executive officers and directors currently intend
to tender or cause to be tendered pursuant to the Offer all Shares held of record or beneficially owned by such persons immediately prior to the expiration of the Offer, as it may be extended (other than Shares for which such holder does not have
discretionary authority and other than Shares subject to Options, SARs, Restricted Stock Awards, RSUs or PSPUs). The foregoing does not include any Shares over which, or with respect to which, any such executive officer or director acts in a
fiduciary or representative capacity or is subject to the instructions of a third party with respect to such tender.
Opinion of the Companys
Financial Advisor
Con-way has retained Citi as its financial advisor in connection with the Offer and the Merger. In connection
with this engagement, Con-way requested that Citi evaluate the fairness, from a financial point of view, of the $47.60 per Share consideration to be received in the Offer and the Merger, taken together as an integrated transaction, by holders of
Shares. On September 8, 2015, at a meeting of the Board held to evaluate the Offer and the Merger, Citi delivered an oral opinion, confirmed by delivery of a written opinion dated September 8, 2015, to the Board to the effect that, as of
that date and based on and subject to various assumptions made, procedures followed, matters considered and limitations and qualifications described in its opinion, the $47.60 per Share consideration to be received in the Offer and the Merger, taken
together as an integrated transaction, by holders of Shares (other than XPO, Purchaser and their respective affiliates) was fair, from a financial point of view, to such holders.
The full text of Citis written opinion, dated September 8, 2015, which describes the assumptions made, procedures followed, matters
considered and limitations and qualifications on the review undertaken, is attached as Annex A and is incorporated herein by reference. The description of Citis opinion set forth below is qualified in its entirety by reference to the full text
of Citis opinion. Citis opinion was provided for the information of the Board (in its capacity as such) in connection with its evaluation of the per Share consideration from a financial point of view and did not address any other
aspects or implications of the Offer or the Merger. Citi was not requested to consider, and its opinion did not address, the underlying business decision of Con-way to effect the Offer or the Merger, nor did Citis opinion address the relative
merits of the Offer or the Merger as compared to any alternative business strategies or opportunities that might exist for Con-way or the effect of any other transaction in which Con-way might engage. Citis opinion is not intended to be and
does not constitute a recommendation as to whether any stockholder should tender Shares in the Offer or how any stockholder should otherwise act on any matters relating to the Offer, the Merger or otherwise.
In arriving at its opinion, Citi:
|
|
|
Reviewed a draft, dated September 7, 2015, of the Merger Agreement; |
|
|
|
held discussions with certain of Con-ways senior officers, directors and other representatives and advisors concerning the businesses, operations and prospects of Con-way; |
|
|
|
reviewed certain publicly available business and financial information relating to Con-way as well as certain financial forecasts and other information and data relating to Con-way under both a management case and an
alternative management case with growth initiatives provided to or discussed with Citi by the management of Con-way; |
|
|
|
reviewed the financial terms of the Offer and the Merger as set forth in the Merger Agreement in relation to, among other things, current and historical market prices and trading volumes of Shares, Con-ways
projected earnings and other operating data, and the capitalization and financial condition of Con-way; |
|
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|
analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations Citi considered relevant in evaluating those of Con-way;
|
26
|
|
|
considered, to the extent publicly available, the financial terms of certain other transactions which Citi considered relevant in evaluating the Offer and the Merger; and |
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|
|
conducted such other analyses and examinations and considered such other information and financial, economic and market criteria as Citi deemed appropriate in arriving at its opinion. |
In rendering its opinion, Citi assumed and relied, without independent verification, upon the accuracy and completeness of all financial and
other information and data publicly available or provided to or otherwise reviewed by or discussed with Citi and upon the assurances of the management of Con-way that it was not aware of any relevant information that was omitted or that remained
undisclosed to Citi. With respect to the financial forecasts and other information and data provided to or otherwise reviewed by or discussed with Citi relating to Con-way that Citi was directed to utilize in its analyses, Citi was advised by the
management of Con-way and, with Con-ways consent, Citi assumed that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of Con-ways management as
to the future financial performance of Con-way under the alternative cases reflected therein and the other matters covered thereby. Citi relied, with Con-ways consent, upon the assessments of Con-ways management as to, among other
things, the potential impact on Con-way of market, cyclical and other trends in and prospects for the transportation, logistics and supply-chain management services industries and assumed, with Con-ways consent, that there would be no
developments with respect to any such matters that would be meaningful in any respect to Citis analyses or opinion.
Citi did not
make, and it was not provided with, an independent evaluation or appraisal of the assets or liabilities (contingent, off-balance sheet or otherwise) of Con-way or any other entity and Citi did not make any physical inspection of the properties or
assets of Con-way or any other entity. Citi assumed, with Con-ways consent, that the Offer and the Merger would be consummated in accordance with their terms without waiver, modification or amendment of any material term, condition or
agreement and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases and waivers for the Offer and the Merger, no delay, limitation, restriction or condition would be imposed that would
have an adverse effect on Con-way or the Offer and the Merger. Representatives of Con-way advised Citi, and Citi also assumed, that the final terms of the Merger Agreement would not vary materially from those set forth in the draft that Citi
reviewed.
Citis opinion did not address any terms (other than the per Share consideration to the extent expressly specified in its
opinion) or other aspects or implications of the Offer or the Merger, including, without limitation, the form or structure of the Offer and the Merger or any agreement, arrangement or understanding to be entered into in connection with or
contemplated by the Offer and the Merger or otherwise. In connection with its engagement, Citi was not requested to, and it did not, solicit third-party indications of interest in the possible acquisition of all or a part of Con-way. Citi expressed
no view as to, and its opinion did not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or employees of any parties to the Offer and the Merger, or any class of
such persons, relative to the per Share consideration or otherwise. Citis opinion was necessarily based on information available, and financial, stock market and other conditions and circumstances existing and disclosed, to Citi as of the date
of its opinion. The issuance of Citis opinion was authorized by Citis fairness opinion committee.
Miscellaneous
Citi and its affiliates in the past have provided, currently are providing and in the future may provide investment banking and other financial
services to Con-way and XPO unrelated to the Offer and the Merger, for which services Citi and its affiliates have received and expect to receive compensation including, during the two-year period prior to the date of its opinion, having acted or
acting (i) as a foreign exchange liability management provider and global cash management provider to, and as a lender under certain letters of credit and other credit arrangements for, Con-way, and (ii) as a foreign exchange liability
management provider to XPO, joint bookrunning manager and/or joint structuring advisor for certain equity and senior notes offerings of XPO, and joint
27
lead arranger, joint bookrunning manager and co-documentation agent for, and as a lender under, a revolving credit facility of XPO. In the ordinary course of business, Citi and its affiliates may
actively trade or hold the securities of Con-way and XPO for their own account or for the account of their customers and, accordingly, may at any time hold a long or short position in such securities. In addition, Citi and its affiliates (including
Citigroup Inc. and its affiliates) may maintain relationships with Con-way, XPO and their respective affiliates.
Con-way selected Citi as
its financial advisor in connection with the Offer and the Merger based on Citis reputation, experience, industry knowledge and familiarity with Con-way and its business. Citi is an internationally recognized investment banking firm that
regularly engages in the valuation of businesses and their securities in connection with mergers and acquisitions, negotiated underwritings, competitive bids, secondary distributions of listed and unlisted securities, private placements and
valuations for estate, corporate and other purposes.
For a description of the terms of Citis engagement as Con-ways
financial advisor, see the discussion under Item 5. Persons/Assets Retained, Employed, Compensated or Used below.
Summary of
Financial Analyses
In preparing its opinion, Citi performed a variety of financial and comparative analyses, including those described
below. The summary of the analyses below is not a complete description of Citis opinion or the analyses underlying, and factors considered, in connection with such opinion. The preparation of a financial opinion is a complex analytical 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 financial opinion is not readily susceptible to summary
description. Citi arrived at its opinion based on the results of all analyses undertaken and assessed as a whole, and it did not draw, in isolation, conclusions from or with regard to any one factor or method of analysis. Accordingly, Citi believes
that the analyses must be considered as a whole and that selecting portions of such analyses and factors or focusing on information presented in tabular format, without considering all analyses and factors or the narrative description of the
analyses, could create a misleading or incomplete view of the processes underlying such analyses and their respective opinions.
In its
analyses, Citi considered industry performance, general business, economic, market and financial conditions and other matters existing as of the date of its opinion, many of which are beyond Con-ways control. No company, business or
transaction reviewed is identical to Con-way or the Offer and the Merger and an evaluation of these analyses is not entirely mathematical; rather, the analyses involve complex considerations and judgments concerning financial and operating
characteristics and other factors that could affect the public trading, acquisition or other values of the companies, business segments or transactions reviewed.
The estimates contained in the analyses performed by Citi and the valuation ranges resulting from any particular analysis are not necessarily
indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by such analyses. In addition, analyses relating to the value of businesses or securities do not purport to
be appraisals or to reflect the prices at which businesses or securities actually may be sold or acquired. Accordingly, the estimates used in, and the results derived from, the analyses are inherently subject to substantial uncertainty.
Citi was not requested to, and it did not, recommend the specific consideration payable in the Offer and the Merger. The type and amount of
consideration payable in the Offer and the Merger was determined through negotiations between Con-way and XPO and the decision to enter into the Merger Agreement was solely that of the Board. Citis opinion was only one of many factors
considered by the Board in its evaluation of the Offer and the Merger and should not be viewed as determinative of the views of the Board or Con-way management with respect to the Offer, the Merger or the consideration payable in the Offer and the
Merger.
The following is a summary of the material financial analyses presented to the Board in connection with the Citis opinion.
The financial analyses summarized below include information presented in tabular format. In order to fully understand such financial analyses, the tables must be read together with the text of each
28
summary. The tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the
financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of such analyses. Financial data for Con-way utilized in the financial analyses described below were based on
internal forecasts and estimates prepared by Con-way management (the Con-way Management Case) and, in the case of the discounted cash flow analysis, on both the Con-way Management Case and an alternative case prepared by
Con-way management reflecting certain growth initiatives for Con-way to enter new markets or provide new services that Con-way management intended to explore or undertake within the next five years (the Con-way Management Case with
Growth Initiatives). For purposes of the financial analyses described below, (i) implied per Share equity value reference ranges derived from such analyses were rounded to the nearest $1.00, and (ii) estimated earnings before
interest, taxes, depreciation and amortization (EBITDA), means EBITDA excluding one-time, non-recurring items.
Selected Public Companies Analysis. Citi reviewed publicly available financial and stock market information of Con-way and the
following four selected companies that in its professional judgment Citi considered generally relevant for comparative purposes as U.S. publicly traded companies in the less-than-truckload sector of the surface transportation industry (collectively,
the Selected Companies):
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Old Dominion Freight Line, Inc. |
Citi reviewed, among other information, enterprise values of the Selected
Companies, calculated as fully diluted equity values based on closing stock prices on September 4, 2015 plus debt, less cash and cash equivalents, as multiples of calendar year 2015 and calendar year 2016 estimated EBITDA and calendar year 2015
and calendar year 2016 estimated earnings before interest and taxes (EBIT). Citi also reviewed fully diluted equity values as of September 4, 2015 as a multiple of calendar year 2015 and calendar year 2016 estimated
net income. The overall low to high calendar year 2015 and calendar year 2016 estimated EBITDA multiples observed for the Selected Companies were 3.7x to 8.5x (with a median of 5.2x) and 3.2x to 7.5x (with a median of 4.5x), respectively, the
overall low to high calendar year 2015 and calendar year 2016 estimated EBIT multiples observed for the Selected Companies were 7.1x to 11.2x (with a median of 9.5x) and 5.6x to 9.8x (with a median of 7.9x), respectively, and the overall low to high
calendar year 2015 and calendar year 2016 estimated net income multiples observed for the Selected Companies were 12.8x to 18.1x (with a median of 15.6x) and 8.5x to 15.7x (with a median of 11.2x), respectively. Citi then applied selected ranges of
calendar year 2015 and calendar year 2016 estimated EBITDA multiples of 3.7x to 5.8x and 3.2x to 5.2x, respectively, selected ranges of calendar year 2015 and calendar year 2016 estimated EBIT multiples of 7.1x to 9.5x and 5.6x to 8.1x,
respectively, and selected ranges of calendar year 2015 and calendar year 2016 estimated net income multiples of 12.8x to 17.0x and 8.5x to 12.2x, respectively, derived from the Selected Companies to corresponding data of Con-way. Financial data of
the Selected Companies were based on publicly available research analysts estimates, public filings and other publicly available information. Financial data of Con-way was based on the Con-way Management Case. This analysis indicated the
following approximate implied per Share equity value reference ranges for Con-way, as compared to the per Share consideration:
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Implied Per Share
Equity Value Reference Ranges Based on: |
|
|
Per Share Consideration |
|
2015E EBITDA |
|
2016E EBITDA |
|
|
2015E EBIT |
|
|
2016E EBIT |
|
|
2015E Net Income |
|
|
2016E Net Income |
|
|
$28.00-$47.00 |
|
$ |
27.00-$47.00 |
|
|
$ |
29.00-$40.00 |
|
|
$ |
27.00-$41.00 |
|
|
$ |
31.00-$41.00 |
|
|
$ |
25.00-$36.00 |
|
|
$ |
47.60 |
|
29
Selected Precedent Transactions Analysis. Using publicly available information, Citi
reviewed financial data relating to the following six selected transactions publicly announced from November 13, 2000 to May 26, 2006 (noting, in particular, that no sizable transactions in the less-than-truckload sector of the surface
transportation industry had been announced since 2006) that Citi in its professional judgment considered generally relevant for comparative purposes as transactions involving target companies with operations primarily in the less-than-truckload
sector of the surface transportation industry (collectively, the Selected Transactions):
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|
Announcement Date |
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Acquiror |
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Target |
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May 26, 2006 |
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FedEx Corporation |
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Watkins Motorlines, Inc. (LTL Service Business) |
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May 16, 2005 |
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United Parcel Service Inc. |
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Overnite Corporation |
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February 27, 2005 |
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Yellow Roadway Corporation |
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USF Corporation |
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July 8, 2003 |
|
Yellow Corporation |
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Roadway Corporation |
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August 22, 2001 |
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Roadway Corporation |
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Arnold Industries, Inc. |
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November 13, 2000 |
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FedEx Corporation |
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American Freightways Corporation |
Citi reviewed, among other information, transaction values of the Selected Transactions, calculated as the
purchase prices paid for the target companies, plus debt and less cash and cash equivalents and non-controlling interests (as applicable), as a multiple of such target companies latest 12 months EBITDA and latest 12 months EBIT. The overall
low to high latest 12 months EBITDA and latest 12 months EBIT multiples observed for the Selected Transactions for which information was publicly available were 5.8x to 7.4x (with a median of 6.4x) and 9.3x to 12.4x (with a median of 10.9x),
respectively. Citi then applied a selected range of latest 12 months EBITDA multiples of 5.8x to 7.4x and latest 12 months EBIT multiples of 9.3x to 12.4x derived from the Selected Transactions to Con-ways latest 12 months EBITDA and EBIT,
respectively, as of July 31, 2015. Financial data of the Selected Transactions were based on publicly available information. Financial data of Con-way was based on the Con-way Management Case. This analysis indicated the following approximate
implied per Share equity value reference ranges for Con-way, as compared to the per Share consideration:
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|
Implied Per Share
Equity Value Reference Ranges Based on: |
|
|
Per Share Consideration |
LTM EBITDA |
|
LTM EBIT |
|
|
|
$46.00 - $60.00 |
|
$ |
39.00 - $53.00 |
|
|
$47.60 |
Discounted Cash Flow Analysis. Citi performed a discounted cash flow analysis of Con-way by calculating
the estimated present value of the unlevered, after-tax free cash flows that Con-way was forecasted to generate during the second half of the fiscal year ending December 31, 2015 through the full fiscal year ending December 31, 2020 based
both on the Con-way Management Case and the Con-way Management Case with Growth Initiatives. For purposes of this analysis, stock-based compensation was treated as a cash expense. The terminal year reflected normalized depreciation and amortization
for ongoing maintenance capital expenditures and, under the Con-way Management Case, the elimination of certain pension plan cash funding needs. The implied terminal values for Con-way were calculated by applying to Con-ways estimated
standalone unlevered after-tax free cash flows for the fiscal year ending December 31, 2020 a selected range of perpetuity growth rates of 1.5% to 2.5%. The cash flows and terminal values were discounted to present value (as of June 30,
2015) using discount rates ranging from 8.2% to 9.7%. This analysis indicated the following overall approximate implied per Share equity value reference ranges for Con-way based both on the Con-way Management Case and the Con-way Management Case
with Growth Initiatives, as compared to the per Share consideration:
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|
|
Implied Per Share
Equity Value Reference Ranges Based on: |
|
Per Share
Consideration |
Con-way
Management Case |
|
Con-way Management Case
with Growth Initiatives |
|
|
$39.00 - $58.00 |
|
$39.000 - $59.00 |
|
$47.60 |
30
Other Information. Citi observed certain additional factors that were not considered part
of its financial analyses for its opinion but were noted for informational purposes, including the following:
|
|
historical trading prices of Shares during the 52-week period ended September 4, 2015, which reflected low to high closing prices for Shares during such period of approximately $34.00 to $54.00 per Share;
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|
one-year forward stock price targets for Shares as reflected in selected publicly available Wall Street research analysts reports, which indicated a target stock price range (discounted to present value as of
June 30, 2015 utilizing a discount rate of 10.0% based on Con-ways cost of equity) for Con-way of approximately $34.00 to $53.00 per Share; |
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premiums paid in 30 selected transactions announced between January 1, 2015 and September 4, 2015 with transaction values of greater than $1.0 billion involving global industrial target companies which
indicated, after applying to the closing price of Shares on September 4, 2015 a selected range of one-day premiums of 20% to 40% (derived from the average premiums paid in such selected transactions of approximately 29.3% based on the closing
stock prices of the target companies involved in such transactions one trading day prior to public announcement of the relevant transactions), an approximate implied per Share equity value reference range for Con-way of $42.00 to $49.00 per Share;
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implied calendar year 2015 and calendar year 2016 estimated EBITDA, EBIT and net income multiples of five selected publicly traded companies with operations primarily in the truckload sector of the surface
transportation industry, Celadon Group, Inc., Heartland Express, Inc., Knight Transportation Inc., Swift Transportation Company and Werner Enterprises, Inc., which indicated implied calendar year 2015 and calendar year 2016 estimated EBITDA
multiples of 5.0x to 7.3x (with a median of 6.8x) and 4.7x to 6.6x (with a median of 5.9x), respectively, calendar year 2015 and calendar year 2016 estimated EBIT multiples of 8.7x to 14.4x (with a median of 11.5x) and 7.8x to 12.3x (with a median
of 10.0x), respectively, and calendar year 2015 and calendar year 2016 estimated net income multiples of 11.2x to 20.5x (with a median of 16.2x) and 9.8x to 18.6x (with a median of 14.6x), respectively; and |
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implied latest 12 months EBITDA and EBIT multiples paid in seven selected transactions announced during the period December 11, 2000 to July 24, 2014 involving target companies with operations primarily in the
truckload sector of the surface transportation industry (acquiror/target), Swift Transportation Co., Inc./M.S. Carriers, Inc. (December 11, 2000), SAINT Corporation/Swift Transportation Co., Inc. (January 19, 2007), New Mountain Lake Acquisition
Company/U.S. Xpress Enterprises, Inc. (June 22, 2007), Con-way Inc./Contract Freighters, Inc. (July 16, 2007), Heartland Express, Inc./Gordon Trucking, Inc. (November 12, 2013), TransForce Inc./Transport America, Inc. (June 2, 2014) and TransForce
Inc./Contrans Group Inc. (July 24, 2014), which indicated latest 12 months EBITDA and latest 12 months EBIT multiples of 4.9x to 6.7x (with a median of 5.8x) and 9.6x to 17.1x (with a median of 12.2x), respectively. |
Forward-Looking Financial Information
The Company does not as a matter of general practice make public detailed projections as to its anticipated financial position or results of
operations given the unpredictability of the underlying assumptions and estimates inherent in preparing financial projections, other than providing, from time to time, estimated ranges of certain expected financial results and operational metrics in
its regular earnings press releases and other investor material. However, in connection with the transaction, the Companys management prepared certain forward-looking financial information relating to the Company for fiscal years 2015 through
2020. These projections were initially presented to the Board on July 22, 2015 (such projections, the Con-way Initial Management Case and, together with the Con-way Management Case and the Con-way Management Case with
Growth Initiatives, the Financial Projections), along with projections showing the incremental impact of growth initiatives on the Con-way Initial Management Case that were the same as the incremental impact of the growth
initiatives on the Con-way Management Case with Growth Initiatives. Subsequently, per feedback received from the Board relating to the Con-way Initial Management Case, the Companys management prepared the Con-way Management Case, which, along
with the Con-way Management Case with Growth Initiatives, was presented to
the Board on August 16, 2015 and also was provided to the Companys
financial advisor. In addition to the Con-
31
way Management Case, the Companys management prepared the Con-way Management Case with Growth Initiatives to reflect the incremental effect of certain initiatives to enter new markets or
provide new services that the Companys management intended to explore or undertake within the next five years. While the Con-way Initial Management Case also was provided to the Companys financial advisor, the Company instructed the
Companys financial advisor to use and rely on the Con-way Management Case and the Con-way Management Case with Growth Initiatives for purposes of its financial analyses and opinion. The Financial Projections are summarized below.
None of the Financial Projections were intended for public disclosure. Nonetheless, a summary of the Financial Projections is included in this
Schedule 14D-9 only because certain of the Financial Projections were made available to Parent, the Board and the Companys financial advisor. The inclusion of the Financial Projections in this Schedule 14D-9 does not constitute an admission or
representation by the Company that the information is material.
The Financial Projections are unaudited and were not prepared with a view
toward public disclosure or compliance with the American Institute of Certified Public Accountants requirements for preparation and presentation of prospective financial information or United States generally accepted accounting principles
(GAAP) or the published guidelines of the SEC regarding projections and the use of non-GAAP financial measures. Neither the Companys independent auditors, nor any other independent accountants, have compiled, examined
or performed any procedures with respect to the Financial Projections, nor have they expressed any opinion or any other form of assurance on the Financial Projections or their achievability, and they assume no responsibility for, and disclaim any
association with, the Financial Projections.
In the view of the Companys management, the Financial Projections were prepared on a
reasonable basis and reflected the best available estimates and judgments of the Companys management at the time of preparation as to the future financial performance of the Company. The Con-way Management Case reflected the view of the
Companys management as to the most likely future financial performance of the Company, while the Con-way Management Case with Growth Initiatives reflected the possible upside potential future financial performance of the Company. The Financial
Projections have not been updated, are not facts and should not be relied upon as necessarily indicative of actual future results, and stockholders are cautioned not to place undue reliance on the Financial Projections. Some or all of the
assumptions that have been made in connection with the preparation of the Financial Projections may have changed since the date the Financial Projections were prepared. Neither the Company nor any of its affiliates intends to, and each of them
disclaims any obligation to, update, revise or correct the Financial Projections if any or all of them have become, are or become inaccurate (even in the short term) since the time of their preparation. These considerations should be taken into
account in reviewing the Financial Projections, which were prepared as of an earlier date.
Because the Financial Projections reflect
subjective judgment in many respects, they are susceptible to multiple interpretations and frequent revisions based on actual experience and business developments. The Financial Projections also cover multiple years, and such information by its
nature becomes less predictive with each succeeding year. The Financial Projections constitute forward-looking information and are subject to a wide variety of significant risks and uncertainties that could cause the actual results to differ
materially from the projected results, including, but not limited to, the factors described in the section entitled Risk Factors in the Companys annual report on Form 10-K for the year ended December 31, 2014 and the
Companys quarterly report on Form 10-Q for the quarter ended June 30, 2015 and in the Companys other filings with the SEC. For additional information on factors that may cause the Companys future financial results to
materially vary from the projected results summarized below, see the section below entitled Cautionary Statement Regarding Forward-Looking Statements. Accordingly, there can be no assurance that the projected results summarized
below are necessarily indicative of the actual future performance of the Company or that actual results will not differ materially from the projected results summarized below, and the Financial Projections cannot be considered a guarantee of future
operating results and should not be relied upon as such.
32
The Financial Projections should be evaluated, if at all, in conjunction with the historical
financial statements and other information regarding the Company contained in the Companys public filings with the SEC. The Financial Projections do not take into account any circumstances or events occurring after the date they were prepared,
including the Offer and the Merger. Further, the Financial Projections do not take into account the effect of any failure of the Offer and the Merger to be consummated and should not be viewed as accurate or continuing in that context.
Non-GAAP financial measures such as EBIT, EBITDA, unlevered free cash flow and risk adjusted unlevered free cash flow should not be considered
in isolated form, or as a substitute for, financial information presented in accordance with GAAP, and non-GAAP financial measures as used by the Company may not be comparable to similarly titled amounts used by other companies.
Financial Projections
Con-way Initial
Management Case
The Con-way Initial Management Case reflects various estimates and assumptions made by the Company, all of which are
difficult to predict and many of which are beyond the Companys control, including, among others, the following assumptions ($ in millions):
|
|
|
A long-term GDP growth forecast of 2.4%, 2.8%, 2.5%, 2.5%, 2.5% and 2.5% for 2H 2015, 2016, 2017, 2018, 2019 and 2020, respectively; |
|
|
|
Net capital expenditures of $(180), $(304), $(319), $(333), $(352) and $(364) for 2H 2015, 2016, 2017, 2018, 2019 and 2020, respectively; |
|
|
|
Change in net working capital of $(5), $(18), $(17), $(18), $(18) and $(19) for 2H 2015, 2016, 2017, 2018, 2019 and 2020; |
|
|
|
Pre-tax cash funding of employee benefits of $(20), $(40), $(40), $(40), $(30) and $(30) for 2H 2015, 2016, 2017, 2018, 2019 and 2020, respectively; |
|
|
|
Deferred income tax benefit of $(5), $10, $10, $10, $10 and $10 for 2H 2015, 2016, 2017, 2018, 2019 and 2020, respectively; |
|
|
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No mergers or acquisitions activity; |
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A tax rate of 40% through 2020; |
|
|
|
Dividends would be maintained at their current level of 60 cents per Share annually; |
|
|
|
No Share repurchasing was assumed beyond 2015; and |
|
|
|
Diesel fuel prices would remain constant through 2020. |
The following table summarizes the
Con-way Initial Management Case:
Con-way Initial Management Case
|
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($ in millions) |
|
|
|
2H 2015E |
|
|
2016E |
|
|
2017E |
|
|
2018E |
|
|
2019E |
|
|
2020E |
|
Revenue |
|
$ |
2,999 |
|
|
$ |
6,180 |
|
|
$ |
6,554 |
|
|
$ |
6,934 |
|
|
$ |
7,324 |
|
|
$ |
7,737 |
|
EBITDA |
|
$ |
273 |
|
|
$ |
590 |
|
|
$ |
643 |
|
|
$ |
695 |
|
|
$ |
751 |
|
|
$ |
809 |
|
EBIT |
|
$ |
149 |
|
|
$ |
334 |
|
|
$ |
374 |
|
|
$ |
413 |
|
|
$ |
454 |
|
|
$ |
497 |
|
Net Operating Profit After Tax |
|
$ |
90 |
|
|
$ |
201 |
|
|
$ |
225 |
|
|
$ |
248 |
|
|
$ |
272 |
|
|
$ |
298 |
|
Unlevered Free Cash Flow |
|
$ |
(3 |
) |
|
$ |
101 |
|
|
$ |
129 |
|
|
$ |
150 |
|
|
$ |
179 |
|
|
$ |
206 |
|
33
Con-way Management Case
The Con-way Management Case reflects various estimates and assumptions made by the Company, all of which are difficult to predict and many of
which are beyond the Companys control, including, among others, the following assumptions ($ in millions):
|
|
|
A long-term GDP growth forecast of 2.4%, 2.9%, 2.7%, 2.4%, 2.0% and 2.0% for 2H 2015, 2016, 2017, 2018, 2019 and 2020, respectively; |
|
|
|
Net capital expenditures of $(174), $(300), $(320), $(337), $(348) and $(361) for 2H 2015, 2016, 2017, 2018, 2019 and 2020, respectively; |
|
|
|
Change in net working capital of $(5), $(18), $(18), $(18), $(17) and $(18) for 2H 2015, 2016, 2017, 2018, 2019 and 2020, respectively. |
|
|
|
Pre-tax cash funding of employee benefits of $(20), $(40), $(40), $(40), $(30) and $(30) for 2H 2015, 2016, 2017, 2018, 2019 and 2020, respectively; |
|
|
|
Deferred income tax benefit of $(5), $10, $10, $10, $10 and $10 for 2H 2015, 2016, 2017, 2018, 2019 and 2020, respectively; |
|
|
|
No mergers or acquisitions activity; |
|
|
|
A tax rate of 40% through 2020; |
|
|
|
Dividends would be maintained at their current level of 60 cents per Share annually; |
|
|
|
No Share repurchasing was assumed beyond 2015; and |
|
|
|
Diesel fuel prices would remain constant through 2020. |
The following table summarizes the
Con-way Management Case:
Con-way Management Case
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
2H 2015E |
|
|
2016E |
|
|
2017E |
|
|
2018E |
|
|
2019E |
|
|
2020E |
|
Revenue |
|
$ |
2,999 |
|
|
$ |
6,189 |
|
|
$ |
6,571 |
|
|
$ |
6,944 |
|
|
$ |
7,302 |
|
|
$ |
7,678 |
|
EBITDA |
|
$ |
272 |
|
|
$ |
596 |
|
|
$ |
659 |
|
|
$ |
715 |
|
|
$ |
773 |
|
|
$ |
836 |
|
EBIT |
|
$ |
148 |
|
|
$ |
340 |
|
|
$ |
388 |
|
|
$ |
430 |
|
|
$ |
471 |
|
|
$ |
518 |
|
Net Operating Profit After Tax |
|
$ |
89 |
|
|
$ |
204 |
|
|
$ |
233 |
|
|
$ |
258 |
|
|
$ |
283 |
|
|
$ |
311 |
|
Unlevered Free Cash Flow |
|
$ |
2 |
|
|
$ |
109 |
|
|
$ |
138 |
|
|
$ |
160 |
|
|
$ |
199 |
|
|
$ |
228 |
|
Con-way Management Case with Growth Initiatives
The Con-way Management Case with Growth Initiatives represents the incremental effect of initiatives to enter new markets or provide new
services that Company management intends to explore or undertake within the next five years. The potential illustrative financial impact of the initiatives assumed for the Con-way Management Case with Growth Initiatives reflect the probability
weighting of cash flows of the Companys growth initiative with respect to national accounts and the Companys growth initiative with respect to new services.
34
The following table summarizes the estimated incremental impact of the growth initiatives on the
Con-way Management Case:
Con-way Management Case with Growth Initiatives
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
($ in millions) |
|
|
|
2H 2015E |
|
|
2016E |
|
|
2017E |
|
|
2018E |
|
|
2019E |
|
|
2020E |
|
Revenue |
|
$ |
0 |
|
|
$ |
108 |
|
|
$ |
236 |
|
|
$ |
344 |
|
|
$ |
452 |
|
|
$ |
550 |
|
EBITDA |
|
$ |
0 |
|
|
$ |
6 |
|
|
$ |
14 |
|
|
$ |
22 |
|
|
$ |
31 |
|
|
$ |
41 |
|
EBIT |
|
$ |
0 |
|
|
$ |
5 |
|
|
$ |
11 |
|
|
$ |
18 |
|
|
$ |
28 |
|
|
$ |
38 |
|
Net Operating Profit After Tax |
|
$ |
0 |
|
|
$ |
3 |
|
|
$ |
7 |
|
|
$ |
11 |
|
|
$ |
17 |
|
|
$ |
23 |
|
Unlevered Free Cash Flow |
|
$ |
0 |
|
|
$ |
(4 |
) |
|
$ |
(1 |
) |
|
$ |
2 |
|
|
$ |
7 |
|
|
$ |
9 |
|
Risk Adjusted Unlevered Free Cash Flow |
|
$ |
0 |
|
|
$ |
(2 |
) |
|
$ |
0 |
|
|
$ |
1 |
|
|
$ |
4 |
|
|
$ |
5 |
|
Item 5. |
Persons/Assets, Retained, Employed, Compensated or Used. |
Con-way has agreed to pay Citi
for its services as Con-ways financial advisor in connection with the Offer and the Merger an aggregate fee of approximately $20.1 million, of which portions were payable upon delivery of Citis opinion and upon announcement of the Offer
and approximately $16.1 million is payable contingent upon completion of the Offer. In addition, Con-way has agreed to reimburse Citi for its expenses, including fees and expenses of counsel, and to indemnify Citi and related parties against
certain liabilities, including liabilities under federal securities laws, arising from Citis engagement.
Neither Con-way nor any
person acting on its behalf has or currently intends to employ, retain or compensate any person to make solicitations or recommendations to the stockholders of Con-way on its behalf with respect to the transaction or related matters.
Item 6. |
Interest in Securities of the Subject Company. |
During the past 60 days, except for
scheduled vesting of outstanding equity awards and issuances by the Company of Shares with respect thereto, to the Companys knowledge, no transactions with respect to the Shares have been effected by any of the Companys directors,
executive officers, affiliates or any of the Companys subsidiaries.
Item 7. |
Purposes of the Transaction and Plans or Proposals. |
Subject Company Negotiations
Except as otherwise set forth in this Schedule 14D-9 (including in the Exhibits to this Schedule 14D-9) or as incorporated in
this Schedule 14D-9 by reference, the Company is not currently undertaking or engaged in any negotiations in response to the Offer that relate to (a) a tender offer for, or other acquisition of, Shares by the Company, any of its subsidiaries or
any other person, (b) any extraordinary transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries, (c) any purchase, sale or transfer of a material amount of assets of the Company or any
of its subsidiaries or (d) any material change in the present dividend rate or policy, or indebtedness or capitalization, of the Company.
The Company has agreed that from the date of the Merger Agreement until the earlier of the Effective Time and the termination of the Merger
Agreement (a) the Company will, and will cause its affiliates and representatives to, cease any solicitations, encouragement, discussions or negotiations with any persons that may be ongoing with respect to any acquisition proposal (as defined
in the Merger Agreement) and (b) the Company will not, and will cause its affiliates and representatives not to, initiate, solicit or knowingly encourage or
35
facilitate any inquiries regarding, or the making of any proposal or offer that constitutes or could reasonably be expected to lead to an acquisition proposal, furnish any non-public information
to any third party in connection with an acquisition proposal or participate in any discussion or negotiations with any third party with respect to an acquisition proposal. The Company has also agreed that it will not, and will cause its affiliates
and representatives not to, approve, recommend or enter into, propose to take such action with respect to, or take other actions to support or in furtherance of an acquisition proposal. In the event the Company receives an unsolicited acquisition
proposal under circumstances not in breach of the non-solicitation provisions of the Merger Agreement, the Company has agreed to certain procedures that it must follow. The information set forth in Section 11 of the Offer to Purchase under the
headings The Merger Agreement; Other AgreementsThe Merger AgreementNo Solicitation and The Merger Agreement; Other AgreementsThe Merger AgreementChanges of Recommendation are incorporated
herein by reference.
Except as set forth in this Schedule 14D-9 (including in the Exhibits to this Schedule 14D-9) or as incorporated in
this Schedule 14D-9 by reference, there are no transactions, resolutions of the Board, agreements in principle or signed contracts in response to the Offer that relate to, or would result in, one or more of the events referred to in this
Item 7.
Item 8. |
Additional Information. |
Regulatory Approvals
United States
The Offer is conditioned on
satisfaction of the condition that any applicable waiting period (or any extensions thereof) under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the HSR Act) relating to the purchase of Shares
pursuant to the Offer or the consummation of the Merger shall have expired or been terminated (the Regulatory Condition). To satisfy the Regulatory Condition, the parties were required to make pre-merger notification
filings with the Premerger Notification Office of the United States Federal Trade Commission (the FTC) and the Antitrust Division of the Department of Justice (the Antitrust Division) within 10
business days of entering into the Merger Agreement.
Antitrust
Under the HSR Act and the rules that have been promulgated thereunder by the FTC, certain acquisition transactions may not be consummated
unless Premerger Notification and Report Forms have been filed with the Antitrust Division and the FTC and certain waiting period requirements have been satisfied. The requirements of the HSR Act apply to the acquisition of Shares in the Offer and
the Merger. See Section 16Certain Legal Matters; Regulatory ApprovalsCompliance with the HSR Act in the Offer to Purchase.
Under the HSR Act, the initial waiting period for a cash tender offer is 15 days. However, this period may be shortened if the reviewing
agency grants early termination of the waiting period, and this period may be extended if either (a) the acquiring person voluntarily withdraws and re-files to allow a second 15-day waiting period, or (b) the reviewing agency
issues a formal request for additional information and documentary material.
On September 17, 2015, Parent filed a Premerger Notification
and Report Form with the FTC and the Antitrust Division for review in connection with the Offer. Consequently, the required waiting period with respect to the Offer was initially set to expire at 11:59 p.m., New York City time, on October 2, 2015,
unless earlier terminated or extended. On September 18, 2015, the Company filed a Premerger Notification and Report Form with the FTC and the Antitrust Division in response to Parents filing.
The FTC and the Antitrust Division may further consider the legality under the antitrust laws of Purchasers proposed acquisition of
Shares pursuant to the Offer. At any time before or after Purchasers acceptance for payment of Shares pursuant to the Offer, if the Antitrust Division or the FTC believes that the Offer would
36
violate the U.S. federal antitrust laws by substantially lessening competition in any line of commerce affecting U.S. consumers, the FTC and the Antitrust Division have the authority to challenge
the transaction by seeking a federal court order enjoining the transaction or, if Shares have already been acquired, requiring disposition of such Shares, or the divestiture of substantial assets of Parent, Purchaser, the Company or any of their
respective subsidiaries or affiliates. U.S. state attorneys general and private persons may also bring legal action under the antitrust laws seeking similar relief or seeking conditions to the completion of the Offer. Although the Company believes
that the consummation of the Offer will not violate any U.S. federal or state antitrust laws, there can be no assurance that a challenge to the Offer on antitrust grounds will not be made or, if a challenge is made, what the result will be. If any
such action is threatened or commenced by the FTC, the Antitrust Division or any state or any other person, Purchaser may not be obligated to consummate the Offer or the Merger. See Section 15Conditions of the Offer in
the Offer to Purchase.
Other Jurisdictions
The Company and certain of its subsidiaries and affiliates and certain affiliates of Parent conduct business in several foreign countries where
regulatory filings or approvals may be required or desirable in connection with the closing of the Offer or the Merger. In addition to the aforementioned filings pursuant to the HSR Act, Parent (together with the Company, as applicable) have made
pre-merger filings under the competition and foreign investment laws of Mexico and the Netherlands. The purchase of Shares in the Offer may not be completed until after the applicable waiting periods have expired or the relevant approvals have been
obtained under such laws.
Notice of Appraisal Rights
Holders of Shares will not have appraisal rights in connection with the Offer. However, if Purchaser purchases Shares in the Offer, and the
Merger is effected, holders of Shares immediately prior to the Effective Time who did not tender such Shares and who otherwise complied with the applicable statutory procedures under Section 262 of the DGCL will be entitled to appraisal rights
in connection with the Merger under Section 262 of the DGCL.
The following discussion is not a complete statement of the law
pertaining to appraisal rights under the DGCL and is qualified in its entirety by the full text of Section 262 of the DGCL, which is attached to this Schedule 14D-9 as Annex B. All references in Section 262 of the DGCL and in this summary
to a stockholder are to the record holder of Shares immediately prior to the Effective Time as to which appraisal rights are asserted. A person having a beneficial interest in Shares held of record in the name of another person, such as
a broker or nominee, must act promptly to cause the record holder to follow the steps summarized below properly and in a timely manner to perfect appraisal rights. Stockholders should carefully review the full text of Section 262 of the DGCL as
well as the information discussed below.
Under the DGCL, if the Merger is effected, holders of Shares immediately prior to the
Effective Time and who (i) did not tender such Shares in the Offer; (ii) follow the procedures set forth in Section 262 of the DGCL; and (iii) do not thereafter withdraw their demand for appraisal of such Shares or otherwise lose
their appraisal rights, in each case in accordance with the DGCL, will be entitled to have such Shares appraised by the Court of Chancery and to receive payment of the fair value of such Shares, exclusive of any element of value arising
from the accomplishment or expectation of the Merger, together with interest, as determined by such court. The fair value could be greater than, less than or the same as the Offer Price or the Merger Consideration.
Under Section 262 of the DGCL, where a merger is approved under Section 251(h), either a constituent corporation before the
effective date of the merger, or the surviving corporation within ten days thereafter, is required to notify each of the holders of any class or series of stock of such constituent corporation who are entitled to appraisal rights of the approval of
the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and is required to include in such notice a copy of Section 262. This Schedule 14D-9
constitutes the formal notice of appraisal rights
37
under Section 262 of the DGCL. Any holder of Shares who wishes to exercise such appraisal rights, or who wishes to preserve such holders right to do so, should review the
following discussion and Annex B carefully because failure to timely and properly comply with the procedures specified will result in the loss of appraisal rights under the DGCL.
Any stockholder wishing to exercise appraisal rights is urged to consult legal counsel before attempting to exercise such rights.
If a stockholder elects to exercise appraisal rights under Section 262 of the DGCL with respect to Shares held immediately prior to the
Effective Time, such stockholder must do all of the following:
|
|
|
within the later of the consummation of the Offer and 20 days after the date of mailing of this notice, demand in writing appraisal of such Shares, which demand must reasonably inform the Company of the identity of the
stockholder and that the stockholder is demanding appraisal; |
|
|
|
not tender such Shares in the Offer; and |
|
|
|
continuously hold of record such Shares from the date on which the written demand for appraisal is made through the Effective Time. |
Written Demand by the Record Holder
All
written demands for appraisal should be addressed to Con-way Inc., 2211 Old Earhart Road, Suite 100, Ann Arbor, Michigan 48105, attention: Stephen L. Bruffett. The written demand for appraisal must be executed by or for the record holder of Shares,
fully and correctly, as such holders name appears on the certificate(s) for the Shares owned by such holder. If the Shares are owned of record in a fiduciary capacity, such as by a trustee, guardian or custodian, execution of the demand must
be made in that capacity, and if the Shares are owned of record by more than one person, such as in a joint tenancy or tenancy in common, the demand must be executed by or for all joint owners. An authorized agent, including one of two or more joint
owners, may execute the demand for appraisal for a holder of record. However, the agent must identify the record owner(s) and expressly disclose the fact that, in executing the demand, the agent is acting as agent for the record owner(s).
A beneficial owner of Shares held in street name who wishes to exercise appraisal rights should take such actions as may be
necessary to ensure that a timely and proper demand for appraisal is made by the record holder of the Shares. If Shares are held through a brokerage firm, bank or other nominee who in turn holds the Shares through a central securities depository
nominee, such as Cede & Co., a demand for appraisal of such Shares must be made by or on behalf of the depository nominee, and must identify the depository nominee as the record holder. Any beneficial owner who wishes to exercise appraisal
rights and holds Shares through a nominee holder is responsible for ensuring that the demand for appraisal is timely made by the record holder. The beneficial holder of the Shares should instruct the nominee holder that the demand for appraisal
should be made by the record holder of the Shares, which may be a central securities depository nominee if the Shares have been so deposited.
A record holder, such as a broker, bank, fiduciary, depository or other nominee, who holds Shares as a nominee for several beneficial owners
may exercise appraisal rights with respect to the Shares held for one or more beneficial owners while not exercising such rights with respect to the Shares held for other beneficial owners. In such case, the written demand must set forth the number
of Shares covered by the demand. Where the number of Shares is not expressly stated, the demand will be presumed to cover all Shares held in the name of the record owner.
Filing a Petition for Appraisal
Within 120 days after the Effective Time, but not thereafter, the Surviving Corporation, or any holder of Shares who has complied
with Section 262 of the DGCL and is entitled to appraisal rights under Section 262 may
38
commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the fair value of the Shares held by all holders who did not
tender in the Offer and demanded appraisal of such Shares. If no such petition is filed within that 120-day period, appraisal rights will be lost for all holders of Shares who had previously demanded appraisal of their Shares. The
Company is under no obligation to, and has no present intention to, file a petition and holders should not assume that the Company will file a petition or that it will initiate any negotiations with respect to the fair value of the Shares.
Accordingly, it is the obligation of the holders of Shares to initiate all necessary action to perfect their appraisal rights in respect of the Shares within the period prescribed in Section 262 of the DGCL.
Within 120 days after the Effective Time, any holder of Shares who has complied with the requirements for exercise of appraisal rights will be
entitled, upon written request, to receive from the Surviving Corporation a statement setting forth the aggregate number of Shares not tendered into the Offer and with respect to which demands for appraisal have been received and the aggregate
number of holders of such Shares. Such statement must be mailed within 10 days after a written request therefor has been received by the Surviving Corporation or within 10 days after the expiration of the period for delivery of demands for
appraisal, whichever is later. Notwithstanding the requirement that a demand for appraisal must be made by or on behalf of the record owner of the Shares, a person who is the beneficial owner of Shares held either in a voting trust or by a nominee
on behalf of such person, and as to which demand has been properly made and not effectively withdrawn, may, in such persons own name, file a petition for appraisal or request from the Surviving Corporation the statement described in this
paragraph.
Upon the filing of such petition by any such holder of Shares, service of a copy thereof must be made upon the Surviving
Corporation, which will then be obligated within 20 days after such service to file with the Register in Chancery of the Court of Chancery of the State of Delaware (the Delaware Register in Chancery) a duly verified list
(the Verified List) containing the names and addresses of all stockholders who have demanded payment for their Shares and with whom agreements as to the value of their Shares has not been reached. Upon the filing of any
such petition, the Court of Chancery may order that notice of the time and place fixed for the hearing on the petition be mailed to the Surviving Corporation and all of the stockholders shown on the Verified List. Such notice will also be published
at least one week before the day of the hearing in a newspaper of general circulation published in the City of Wilmington, Delaware, or in another publication determined by the Court of Chancery. The costs of these notices are borne by the Surviving
Corporation.
After notice to the stockholders as required by the Court of Chancery, the Court of Chancery is empowered to conduct a
hearing on the petition to determine those stockholders who have complied with Section 262 of the DGCL and who have become entitled to appraisal rights thereunder. The Court of Chancery may require the stockholders who demanded payment for
their Shares to submit their stock certificates to the Delaware Register in Chancery for notation thereon of the pendency of the appraisal proceeding and, if any stockholder fails to comply with the direction, the Court of Chancery may dismiss the
proceedings as to that stockholder.
Determination of Fair Value
After the Court of Chancery determines which stockholders are entitled to appraisal, the appraisal proceeding will be conducted in accordance
with the rules of the Court of Chancery, including any rules specifically governing appraisal proceedings. Through the appraisal proceeding, the Court of Chancery will determine the fair value of the Shares, exclusive of any element of value arising
from the accomplishment or expectation of the Merger, together with interest, if any, to be paid upon the amount determined to be the fair value. Unless the Court of Chancery in its discretion determines otherwise for good cause shown, interest from
the Effective Time through the date of payment of the judgment will be compounded quarterly and will accrue at 5% over the Federal Reserve discount rate (including any surcharge) as established from time to time during the period between the
Effective Time and the date of payment of the judgment.
In determining fair value, the Court of Chancery will take into account all
relevant factors. In Weinberger v. UOP, Inc., the Supreme Court of Delaware discussed the factors that could be considered in determining fair
39
value in an appraisal proceeding, stating that proof of value by any techniques or methods that are generally considered acceptable in the financial community and otherwise admissible in
court should be considered, and that fair price obviously requires consideration of all relevant factors involving the value of a company. The Delaware Supreme Court stated that, in making this determination of fair value, the
Court of Chancery must consider market value, asset value, dividends, earnings prospects, the nature of the enterprise and any other facts that could be ascertained as of the date of the merger that throw any light on future prospects of the merged
corporation. Section 262 of the DGCL provides that fair value is to be exclusive of any element of value arising from the accomplishment or expectation of the merger[.] In Cede & Co. v. Technicolor, Inc., the
Delaware Supreme Court stated that such exclusion is a narrow exclusion that does not encompass known elements of value, but which rather applies only to the speculative elements of value arising from such accomplishment or expectation.
In Weinberger, the Supreme Court of Delaware also stated that elements of future value, including the nature of the enterprise, which are known or susceptible of proof as of the date of the merger and not the product of speculation, may
be considered.
Stockholders considering appraisal should be aware that the fair value of their Shares as so determined could be
more than, the same as or less than the Offer Price or the Merger Consideration and that an investment banking opinion as to the fairness, from a financial point of view, of the consideration payable in a sale transaction, such as the Offer and the
Merger, is not an opinion as to, and does not otherwise address, fair value under Section 262 of the DGCL. Although the Company believes that the Offer Price (which is equivalent to the Merger Consideration) is fair, no
representation is made as to the outcome of the appraisal of fair value as determined by the Court of Chancery. Neither Parent nor the Company anticipates offering more than the Offer Price to any stockholder exercising appraisal rights, and Parent
and the Company reserve the right to assert, in any appraisal proceeding, that for purposes of Section 262 of the DGCL, the fair value of a Share is less than the Offer Price or the Merger Consideration.
Upon application by the Surviving Corporation or by any holder of Shares entitled to participate in the appraisal proceeding, the Court of
Chancery may, in its discretion, proceed to trial upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any holder of Shares whose name appears on the Verified List and, if such Shares are represented by
certificates and if so required, who has submitted such stockholders certificates of stock to the Delaware Register in Chancery, may participate fully in all proceedings until it is finally determined that such stockholder is not entitled to
appraisal rights. The Court of Chancery will direct the payment of the fair value of the Shares, together with interest, if any, by the Surviving Corporation to the stockholders entitled thereto. Payment will be so made to each such stockholder upon
the surrender to the Surviving Corporation of such stockholders certificates. The Court of Chancerys decree may be enforced as other decrees in such Court may be enforced.
The costs of the action (which do not include attorneys fees or the fees and expenses of experts) may be determined by the Court of
Chancery and taxed upon the parties as the Court of Chancery deems equitable. Upon application of a stockholder, the Court of Chancery may order all or a portion of the expenses incurred by a stockholder in connection with an appraisal proceeding,
including, without limitation, reasonable attorneys fees and the fees and expenses of experts utilized in the appraisal proceeding, to be charged pro rata against the value of all the Shares entitled to appraisal. In the absence of an
order, each party bears its own expenses.
Any stockholder who has duly demanded and perfected appraisal rights for Shares in compliance
with Section 262 of the DGCL will not, after the Effective Time, be entitled to vote such Shares for any purpose or be entitled to the payment of dividends or other distributions thereon, except dividends or other distributions payable to
holders of record of Shares as of a date or time prior to the Effective Time.
At any time within 60 days after the Effective Time, any
stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party will have the right to withdraw such stockholders demand for appraisal and to accept the terms offered in the Merger; after this period, the
stockholder may withdraw such stockholders demand for appraisal only with the consent of the Company. If no petition for appraisal is filed
40
with the Court of Chancery within 120 days after the Effective Time, stockholders rights to appraisal shall cease, and all holders of Shares will be entitled to receive the Merger
Consideration. Inasmuch as the Company has no obligation to file such a petition and has no present intention to do so, any holder of Shares who desires such a petition to be filed is advised to file it on a timely basis. Any stockholder may
withdraw such stockholders demand for appraisal by delivering to the Company a written withdrawal of its demand for appraisal and acceptance of the Merger Consideration, except that (i) any such attempt to withdraw made more than 60 days
after the Effective Time will require written approval of the Company and (ii) no appraisal proceeding in the Court of Chancery shall be dismissed as to any stockholder without the approval of the Court of Chancery, and such approval may be
conditioned upon such terms as the Court of Chancery deems just. However, notwithstanding the foregoing, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party may withdraw such stockholders
demand for appraisal and accept the terms offered upon the Merger within 60 days after the Effective Time.
If you wish to exercise
your appraisal rights, you must not tender your Shares in the Offer, and you must strictly comply with the procedures set forth in Section 262 of the DGCL. If you fail to take any required step in connection with the exercise of appraisal
rights, it will result in the termination or waiver of your appraisal rights.
The foregoing summary of the rights of the
Companys stockholders to seek appraisal rights under Delaware law does not purport to be a complete statement of the procedures to be followed by the stockholders of the Company desiring to exercise any appraisal rights available thereunder
and is qualified in its entirety by reference to Section 262 of the DGCL. The proper exercise of appraisal rights requires strict adherence to the applicable provisions of the DGCL. A copy of Section 262 of the DGCL is included as Annex B
to this Schedule 14D-9.
State Takeover Laws
A number of states (including Delaware, where the Company is incorporated) have adopted takeover laws and regulations that purport, to varying
degrees, to be applicable to attempts to acquire securities of corporations that are incorporated in such states or that have substantial assets, stockholders, principal executive offices or principal places of business therein.
Section 203 of the DGCL prohibits an interested stockholder (generally defined as a person who, together with its affiliates
and associates, beneficially owns 15% or more of a corporations outstanding voting stock) from engaging in a business combination (which includes a merger, consolidation, a sale of a significant amount of assets and a sale of
stock) with certain Delaware corporations for three years following the time such person became an interested stockholder, unless:
(a)
before such person became an interested stockholder, the board of directors of the corporation approved either the business combination or the transaction in which the interested stockholder became an interested stockholder;
(b) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder
owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding, only for purposes of determining the number of shares of voting stock outstanding (but not for determining the number of shares
of outstanding voting stock owned by the interested stockholder), stock held (x) by directors who are also officers and (y) by employee stock plans that do not allow plan participants to determine confidentially whether shares held subject
to the plan will be tendered in a tender or exchange offer); or
(c) following the transaction in which such person became an interested
stockholder, the business combination is (i) approved by the board of directors of the corporation and (ii) authorized at a meeting of stockholders by the affirmative vote of the holders of at least 662/3% of the outstanding voting stock of the corporation which is not owned by the interested stockholder.
41
In connection with its approval of the Merger Agreement, the Offer and the Merger, the Board, for
purposes of Section 203 of the DGCL and the requirements of any moratorium, control share acquisition, fair price, supermajority, affiliate transactions or business combination
statute or regulation or other similar anti-takeover laws or regulations or other takeover laws and regulations of any state, adopted a resolution approving the Merger Agreement and the transactions contemplated thereby, including the Offer
and the Merger.
Stockholder Approval Not Required
Neither Parent nor Purchaser is, nor at any time for the past three years has been, an interested stockholder of the Company as
defined in Section 203 of the DGCL. Because the Merger will be consummated in accordance with Section 251(h) of the DGCL, no stockholder vote will be necessary to effect the Merger.
Golden Parachute Compensation
Background
The information set forth in the table below is intended to comply with Item 402(t) of Regulation S-K regarding the compensation
for each of the Companys named executive officers that is based on or otherwise relates to the Offer and the Merger. This compensation is referred to as golden parachute compensation by the applicable SEC executive compensation
disclosure rules, and in this section such term is used to describe the Merger-related compensation payable to the Companys named executive officers.
Aggregate Amounts of Potential Compensation
The following table summarizes potential golden parachute compensation that each named executive officer could be entitled to receive if the
Offer and the Merger are consummated (including the value of payments made with respect to the accelerated vesting and cash-out of RSUs and PSPUs pursuant to the Merger Agreement) and, for certain payments and benefits, if the named executive
officer thereafter incurs a qualifying termination of employment under certain circumstances. The amounts shown in the table are approximate and reflect certain assumptions that the Company has made in accordance with the SECs executive
compensation disclosure rules, including, among other things:
|
|
|
That the Offer and Merger were consummated on October 14, 2015 (the first date upon which the Offer may be consummated); |
|
|
|
That each of the named executive officers experienced a severance-qualifying termination of employment pursuant to their applicable CIC Agreements immediately following the consummation of the Offer and Merger;
|
|
|
|
That the value of a Share upon consummation of the Offer and Merger was $47.60, which is equal to the Offer Price and the per Share Merger Consideration. |
In addition, in accordance with the SECs executive compensation disclosure rules, the following discussion and amounts do not include payments and
benefits that are not enhanced by the Offer and Merger.
42
See also Item 3Past Contacts, Transactions, Negotiations and
AgreementsArrangements with Executive Officers and Directors of the Company for information regarding the current change in control arrangements with the Companys current executive officers.
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|
Golden Parachute Compensation (1) |
|
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|
Cash (2) |
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|
Equity (3) |
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|
Pension/ NQDC |
|
|
Perquisites/ Benefits (4) |
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|
Tax Reimbursement |
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Other |
|
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Total |
|
D.W. Stotlar |
|
$ |
6,350,882 |
|
|
$ |
9,666,961 |
|
|
|
|
|
|
$ |
343,557 |
|
|
|
|
|
|
|
|
|
|
$ |
16,361,400 |
|
President & Chief Executive Officer |
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|
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|
|
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S.L. Bruffett |
|
$ |
1,852,198 |
|
|
$ |
3,577,731 |
|
|
|
|
|
|
$ |
134,467 |
|
|
|
|
|
|
|
|
|
|
$ |
5,564,396 |
|
Exec. Vice President & Chief Financial Officer |
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|
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|
|
|
|
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|
R.L. Bianco, Jr. |
|
$ |
2,505,959 |
|
|
$ |
3,514,849 |
|
|
|
|
|
|
$ |
128,883 |
|
|
|
|
|
|
|
|
|
|
$ |
6,149,691 |
|
Exec. Vice President |
|
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|
|
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
S.W. Krull |
|
$ |
1,631,462 |
|
|
$ |
2,793,093 |
|
|
|
|
|
|
$ |
57,477 |
|
|
|
|
|
|
|
|
|
|
$ |
4,482,032 |
|
Exec. Vice President, General Counsel & Secretary |
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|
|
|
|
|
|
|
|
W.G. Lehmkuhl (5) |
|
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|
|
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|
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|
|
|
|
|
|
|
|
Former Exec. Vice President |
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|
|
|
|
|
(1) |
All amounts reflected in the table are attributable to double-trigger arrangements (i.e., the payments are subject to the occurrence of both a change in control and upon the named executive officers
qualifying termination of employment within 24 months thereafter), except for (i) the accelerated vesting and payment in cancellation of those RSUs and PSPUs that are scheduled to vest on or prior to February 29, 2016, which occurs
automatically upon the Effective Time pursuant to the Merger Agreement, and (ii) the grant date fair value of fully vested shares of Parent common stock received as consideration for the Non-Competition Agreements and, in the case of
Mr. Bianco, for retention purposes. |
(2) |
Amounts reflect cash severance benefits that would be payable under the CIC Agreements, equal to two times (or, in the case of Messrs. Stotlar and Bianco, three times) the sum of the named executive officers
current annual base salary and target annual incentive compensation award for the year of termination. These amounts also include a pro-rated target annual bonus for the year of termination. |
(3) |
Amounts reflect the value of (i) accelerated vesting of equity awards in connection with the completion of the Merger and, other than with respect to RSUs and PSPUs that are scheduled to vest on or prior to
February 29, 2016, a qualifying termination of employment following the consummation of the Merger, and (ii) the value of fully vested shares of Parent common stock to be received as consideration for the Non-Competition Agreements or for
retention purposes (Messrs. Stotlar, Bruffett and Krull in the amount of $50,000 and Mr. Bianco in the amount of $400,000). The values in this column exclude any equity awards that are scheduled to vest between the date of this filing and
October 14, 2015 (the earliest date on which the Offer may be consummated). |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SINGLE TRIGGER EQUITY ACCELERATION (A) |
|
|
|
Unvested RSU Awards (#) |
|
|
Unvested RSU Awards ($) |
|
|
Unvested PSPU Awards (#) |
|
|
Unvested PSPU Awards ($) |
|
D.W. Stotlar |
|
|
35,492 |
|
|
|
1,689,419 |
|
|
|
35,492 |
|
|
|
1,689,419 |
|
S.L. Bruffett |
|
|
14,063 |
|
|
|
669,399 |
|
|
|
14,063 |
|
|
|
669,399 |
|
R.L. Bianco, Jr. |
|
|
12,798 |
|
|
|
609,185 |
|
|
|
12,798 |
|
|
|
609,185 |
|
S.W. Krull |
|
|
11,012 |
|
|
|
524,171 |
|
|
|
11,012 |
|
|
|
524,171 |
|
W.G. Lehmkuhl |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
43
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DOUBLE TRIGGER EQUITY ACCELERATION (B) |
|
|
|
Unvested RSU Awards (#) |
|
|
Unvested RSU Awards ($) |
|
|
Unvested PSPU Awards (#) |
|
|
Unvested PSPU Awards ($) |
|
D.W. Stotlar |
|
|
58,756 |
|
|
|
2,796,786 |
|
|
|
72,297 |
|
|
|
3,441,337 |
|
S.L. Bruffett |
|
|
22,993 |
|
|
|
1,094,467 |
|
|
|
22,993 |
|
|
|
1,094,467 |
|
R.L. Bianco, Jr. |
|
|
19,921 |
|
|
|
948,240 |
|
|
|
19,921 |
|
|
|
948,240 |
|
S.W. Krull |
|
|
17,802 |
|
|
|
847,375 |
|
|
|
17,802 |
|
|
|
847,375 |
|
W.G. Lehmkuhl |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(A) |
Pursuant to the Merger Agreement, RSUs and PSPUs that are scheduled to vest on or prior to February 29, 2016 will vest in full and will be cancelled and exchanged for the right to receive the per Share Merger
Consideration with respect to each Share subject to such RSU or PSPU upon the Effective Time. This single trigger equity acceleration table does not include the value of the fully vested shares of Parent common stock to be received as consideration
for the restrictive covenant letter agreements or for retention purposes (Messrs. Stotlar, Bruffett and Krull in the amount of $50,000 and Mr. Bianco in the amount of $400,000). These fully vested shares are included in the Equity column of the
Golden Parachute Compensation Table. |
|
(B) |
Pursuant to the Merger Agreement, those RSUs and PSPUs that are scheduled to vest after February 29, 2016 will be converted into Adjusted RSUs and Adjusted PSPUs, as applicable, upon the Effective Time. Under the
terms of the applicable equity award agreements, the vesting of outstanding equity awards will accelerate in full if, within 24 months after a change in control of the Company, (a) the named executive officers employment is
terminated by the Company other than for cause, or (b) the named executive officer terminates his or her employment for good reason, each as defined in the CIC Agreements. |
(4) |
Amounts reflect (i) the cost of providing 24 months (or, in the case of Messrs. Stotlar and Bianco, 36 months) of continued coverage under the Companys medical and life and accidental
death & dismemberment (AD&D) insurance plans (estimated based on COBRA and insurance premiums determined based on the executives coverage as of December 31, 2014 and the duration of the continuation period), and (ii) the
cost of providing outplacement services ($25,000 or, in the case of Mr. Stotlar, $90,000). |
(5) |
Mr. Lehmkuhl resigned from his position as President of Con-way Freight, Inc. and as an Executive Vice President of the Company effective June 29, 2015. Accordingly, Mr. Lehmkuhl is not eligible to
receive any Merger-related compensation as a result of the Merger. |
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This Schedule 14D-9 contains forward-looking statements that involve significant risks and uncertainties. All statements other than
statements of historical fact are statements that could be deemed forward-looking statements, including: any statements regarding the anticipated timing of filings and approvals relating to the Offer and the Merger; any statements regarding the
expected timing of the completion of the Offer and the Merger; any statements regarding the ability to complete the Offer or the Merger considering the various closing conditions, including that Purchaser must have accepted for payment all Shares
that Purchaser becomes obligated to purchase pursuant to the Offer; any statements of expectation or belief; any statement regarding the future financial performance of the Company; and any statements of assumptions underlying any of the foregoing.
These statements reflect managements expectations, estimates and assumptions, based on current and available information at the time the document was prepared. The words anticipate, believe, estimate,
target, expect, predict, plan, possible, project, intend, likely, will, should, could, may,
foreseeable, would and similar expressions are intended to identify forward-looking statements. Investors and holders of Shares are cautioned not to place undue reliance on these forward-looking statements. Forward-looking
statements are not guarantees of future performance and involve risks, uncertainties and other factors that may cause actual performance or achievements to be materially different from any future results, performance or achievements expressed or
implied by those statements. Risks and uncertainties that could cause results to differ from expectations include: uncertainties as to the timing of the Offer and the Merger; uncertainties as to how
44
many of the holders of Shares will tender their Shares into the Offer; the possibility that various closing conditions for the Offer or the Merger may not be satisfied or waived, including that a
governmental entity may investigate, prohibit, condition, enjoin or delay the consummation of the Offer or the Merger; the effects of disruption from the Offer and the Merger making it more difficult for the Company to maintain relationships with
employees (including potential difficulties in employee retention), collaboration parties, other business partners or governmental entities; legal proceedings that may be instituted against the Company and others following announcement of the
definitive agreement entered into with Parent and Purchaser; other business effects, including the effects of industrial, economic or political conditions outside of the Companys control; transaction costs; actual or contingent liabilities;
and other risks and uncertainties discussed in this Schedule 14D-9 and other documents filed with the SEC by the Company, as well as the Schedule TO filed with the SEC by Parent and Purchaser. All of the materials related to the Offer (and all other
offer documents filed with the SEC) are available at no charge from the SEC through its website at www.sec.gov. Holders of Shares may also obtain free copies of the documents filed with the SEC, through the website maintained by the SEC at
www.sec.gov. Copies of the documents filed with the SEC by the Company will be available free of charge on the Companys website at www.con-way.com under the heading Annual Reports & SEC Filings within the
Investors portion of the Companys website. The Company does not undertake any obligation to update any forward-looking statements as a result of new information, future developments or otherwise, except as expressly required by
law.
The following Exhibits are filed herewith or incorporated by reference:
|
|
|
Exhibit Number |
|
Description |
|
|
(a)(1)(A) |
|
Offer to Purchase, dated September 15, 2015 (incorporated by reference to Exhibit (a)(1)(A) to the Schedule TO of Purchaser filed with the SEC on September 15, 2015). |
|
|
(a)(1)(B) |
|
Form of Letter of Transmittal (incorporated by reference to Exhibit (a)(1)(B) to the Schedule TO of Purchaser filed with the SEC on September 15, 2015). |
|
|
(a)(1)(C) |
|
Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies and other Nominees (incorporated by reference to Exhibit (a)(1)(D) to the Schedule TO of Purchaser filed with the SEC on September 15, 2015). |
|
|
(a)(1)(D) |
|
Form of Letter to Clients for Use by Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees (incorporated by reference to Exhibit (a)(1)(E) to the Schedule TO of Purchaser filed with the SEC on September 15,
2015). |
|
|
(a)(1)(E) |
|
Form of Summary Advertisement as published in The Wall Street Journal on September 15, 2015 (incorporated by reference to Exhibit (a)(1)(J) to the Schedule TO of Purchaser filed with the SEC on September 15,
2015). |
|
|
(a)(5)(A) |
|
Press Release issued by the Company and Parent, dated September 9, 2015 (incorporated by reference to Exhibit 99.1 to the Companys Form 8-K filed with the SEC on September 9, 2015). |
(a)(5)(B) |
|
Opinion of Citigroup Global Markets Inc., dated September 8, 2015 (incorporated by reference to Annex A attached to this Schedule 14D-9). |
|
|
(a)(5)(C) |
|
XPO-Con-way Merger Employee FAQs, dated September 16, 2015. |
|
|
(b)(1) |
|
Debt Commitment Letter, dated September 9, 2015, by and among Morgan Stanley Senior Funding, Inc. and Parent (incorporated by reference to Exhibit 10.1 to the Current Report on Form 8-K of Parent filed with the SEC on September 10,
2015). |
|
|
(d)(1) |
|
Agreement and Plan of Merger, dated September 9, 2015, by and among the Company, Parent and Purchaser (incorporated by reference to Exhibit 2.1 to the Companys Form 8-K filed with the SEC on September 10,
2015). |
45
|
|
|
|
|
(d)(2) |
|
Form of Restrictive Covenant Letter Agreement. |
|
|
(d)(3) |
|
Retention Letter, dated September 4, 2015, by and between Parent and Mr. Bianco. |
|
|
(d)(4) |
|
Retention Letter, dated September 8, 2015, by and between Parent and Mr. Dagnese. |
|
|
(e)(1) |
|
Con-way Inc. Deferred Compensation Plan for Non-Employee Directors Amended and Restated December 2008 (incorporated by reference to Exhibit 10.50 to the Companys Form 10-K for the year ended December 31, 2008). |
|
|
(e)(2) |
|
Con-way Inc. 2005 Deferred Compensation Plan for Non-Employee Directors Amended and Restated December 2008 (incorporated by reference to Exhibit 10.51 to the Companys Form 10-K for the year ended December 31,
2008). |
|
|
(e)(3) |
|
Con-way Inc. Amended and Restated 2003 Equity Incentive Plan for Non-Employee Directors Amended and Restated December 2011 (incorporated by reference to Exhibit 10.34 to the Companys Form 10-K for the year ended December 31,
2011). |
|
|
(e)(4) |
|
Con-way Inc. 1997 Equity and Incentive Plan (2006 Amendment and Restatement) (incorporated by reference to Exhibit 99.7 to the Companys Form 8-K filed with the SEC on December 6, 2005). |
|
|
(e)(5) |
|
Con-way Inc. 2006 Equity and Incentive Plan Amended and Restated December 2008 (incorporated by reference to Exhibit 10.52 to the Companys Form 10-K for the year ended December 31, 2008). |
|
|
(e)(6) |
|
Amendment No. 1 to the Con-way Inc. 2006 Equity and Incentive Plan Amended and Restated December 2008 (incorporated by reference to Exhibit 99.7 to the Companys Report on Form 8-K filed with the SEC on December 18,
2009). |
|
|
(e)(7) |
|
Con-way Inc. 2012 Equity and Incentive Plan (incorporated by reference to Appendix A to the Companys Proxy Statement filed on April 3, 2012). |
|
|
(e)(8) |
|
Con-way Inc. 1993 Deferred Compensation Plan for Executives and Key Employees Amended and Restated December 2008 (incorporated by reference to Exhibit 10.53 to the Companys Form 10-K for the year ended December 31,
2008). |
|
|
(e)(9) |
|
Con-way Inc. 2005 Deferred Compensation Plan for Executives and Key Employees Amended and Restated December 2008 (incorporated by reference to Exhibit 10.54 to the Companys Form 10-K for the year ended December 31,
2008). |
|
|
(e)(10) |
|
Form of Severance Agreement (Change in Control) for Douglas W. Stotlar (incorporated by reference to Exhibit 99.1 to the Companys Form 8-K filed with the SEC on December 18, 2009). |
|
|
(e)(11) |
|
Form of Severance Agreement (Change in Control) for Stephen L. Bruffett (incorporated by reference to Exhibit 99.2 to the Companys Form 8-K filed with the SEC on December 18, 2009). |
|
|
(e)(12) |
|
Form of Severance Agreement (Change in Control) for Robert L. Bianco Jr. (incorporated by reference to Exhibit 99.3 to the Companys Form 8-K filed with the SEC on December 18, 2009). |
|
|
(e)(13) |
|
Form of Severance Agreement (Change in Control) for Leslie P. Lundberg (incorporated by reference to Exhibit 10.61 to Con-ways Form 10-K for the year ended December 31, 2009). |
|
|
(e)(14) |
|
Form of Severance Agreement (Change in Control) for Kevin S. Coel (incorporated by reference to Exhibit 10.63 to the Companys Form 10-K for the year ended December 31,
2009). |
46
|
|
|
|
|
(e)(15) |
|
Form of Amendment No. 1 to Severance Agreement (Change in Control) (incorporated by reference to Exhibit 10.64 to the Companys Form 10-K for the year ended December 31, 2009). |
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|
(e)(16) |
|
Form of Amendment No. 2 to Severance Agreement (Change in Control) (incorporated by reference to Exhibit 10.2 to the Companys Form 10-Q for the quarter ended September 30, 2012). |
|
|
(e)(17) |
|
Form of Severance Agreement (Change in Control) for Stephen K. Krull (incorporated by reference to Exhibit 10.4 to the Companys Form 10-Q for the quarter ended September 30, 2012). |
|
|
(e)(18) |
|
Form of Severance Agreement (Change in Control) for W. Gregory Lehmkuhl (incorporated by reference to Exhibit 10.5 to the Companys Form 10-Q for the quarter ended September 30, 2012). |
|
|
(e)(19) |
|
Form of Severance Agreement (Change in Control) for C. Randal Mullett (incorporated by reference to Exhibit 10.6 to the Companys Form 10-Q for the quarter ended September 30, 2012). |
|
|
(e)(20) |
|
Form of Non-Change in Control Severance Policy (Con-way Inc. and Con-way Enterprise Services, Inc.) (incorporated by reference to Exhibit 10.42 to the Companys Form 10-K for the
year ended December 31, 2014). |
|
|
(e)(21) |
|
Form of Non-Change in Control Severance Policy (Con-way Affiliates) (incorporated by reference to Exhibit 10.43 to the Companys Form 10-K for the year ended December 31, 2014). |
|
|
(e)(22) |
|
Con-way Inc. Executive Incentive Plan (incorporated by reference to Exhibit 10.3 to the Companys Form 10-Q for the quarter ended March 31, 2014). |
|
|
(e)(23) |
|
Amended and Restated Form of Severance Agreement (Non-Change in Control) for Douglas W. Stotlar (incorporated by reference to Exhibit 99.1 to the Companys Form 8-K filed with the SEC on June 24, 2010). |
|
|
(e)(24) |
|
Amended and Restated Form of Severance Agreement (Non-Change in Control) for Stephen L. Bruffett (incorporated by reference to Exhibit 99.2 to the Companys Form 8-K filed with the SEC on June 24, 2010). |
|
|
(e)(25) |
|
Amended and Restated Form of Severance Agreement (Non-Change in Control) for Robert L. Bianco Jr. (incorporated by reference to Exhibit 99.3 to the Companys Form 8-K filed with the SEC on June 24, 2010). |
|
|
(e)(26) |
|
Amended and Restated Form of Severance Agreement (Non-Change in Control) for Leslie P. Lundberg (incorporated by reference to Exhibit 10.74 to the Companys Form 10-K for the year ended December 31, 2010). |
|
|
(e)(27) |
|
Amended and Restated Form of Severance Agreement (Non-Change in Control) for Kevin S. Coel (incorporated by reference to Exhibit 10.76 to the Companys Form 10-K for the year ended December 31, 2010). |
|
|
(e)(28) |
|
Form of Amendment No. 1 to Severance Agreement (Non-Change in Control) (incorporated by reference to Exhibit 10.74 to the Companys Form 10-K for the year ended December 31, 2009). |
|
|
(e)(29) |
|
Form of Amendment No. 2 to Amended and Restated Severance Agreement (Non-Change in Control) (incorporated by reference to Exhibit 10.7 to the Companys Form 10-Q for the quarter ended September 30,
2012). |
47
|
|
|
|
|
(e)(30) |
|
Form of Severance Agreement (Non-Change in Control) for Stephen K. Krull (incorporated by reference to Exhibit 10.9 to the Companys Form 10-Q for the quarter ended September 30, 2012). |
|
|
(e)(31) |
|
Form of Severance Agreement (Non-Change in Control) for W. Gregory Lehmkuhl (incorporated by reference to Exhibit 10.10 to the Companys Form 10-Q for the quarter ended September 30, 2012). |
|
|
(e)(32) |
|
Form of Restricted Stock Award Agreement for Non-Employee Directors (incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q for the quarter ended June 30, 2013). |
|
|
(e)(33) |
|
Form of Stock Option Agreement (incorporated by reference to Exhibit 99.10 to the Companys Form 8-K filed with the SEC on December 6, 2005). |
|
|
(e)(34) |
|
Form of Stock Option Agreement (incorporated by reference to Exhibit 99.2 to the Companys Form 8-K filed with the SEC on September 29, 2006). |
|
|
(e)(35) |
|
Form of Stock Appreciation Rights Agreement (incorporated by reference to Exhibit 99.2 to the Companys Form 8-K filed with the SEC on February 11, 2010). |
|
|
(e)(36) |
|
Form of Stock Option Agreement (incorporated by reference to Exhibit 99.1 to the Companys Form 8-K filed with the SEC on February 9, 2011). |
|
|
(e)(37) |
|
Form of Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q for the quarter ended March 31, 2013). |
|
|
(e)(38) |
|
Form of Restricted Stock Unit Grant Agreement (incorporated by reference to Exhibit 10.1 to the Companys Form 10-Q for the quarter ended March 31, 2014). |
|
|
(e)(39) |
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Form of Performance Share Plan Unit Grant Agreement (incorporated by reference to Exhibit 10.2 to the Companys Form 10-Q for the quarter ended March 31, 2013). |
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(e)(40) |
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Form of Performance Share Plan Unit Grant Agreement (incorporated by reference to Exhibit 10.2 to the Companys Form 10-Q for the quarter ended March 31, 2014). |
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(e)(41) |
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Con-way Inc. Certificate of Incorporation, as amended May 8, 2013 (incorporated by reference to Exhibit 3.1 to the Companys Form 8-K with the SEC on January 26, 2015). |
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(e)(42) |
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Con-way Inc. Bylaws, as amended January 21, 2015 (incorporated by reference to Exhibit 3.1 to the Companys Form 8-K filed with the SEC on January 26, 2015). |
48
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and
correct.
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CON-WAY INC. |
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By: |
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/s/ Stephen K. Krull |
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Stephen K. Krull |
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Executive Vice President, General Counsel and Secretary |
Dated: September 22, 2015
Annex A
[LETTERHEAD OF CITIGROUP GLOBAL MARKETS INC.]
September 8, 2015
The Board of Directors
Con-way Inc.
2211 Old Earhart Road, Suite 100
Ann Arbor, Michigan 48105
The Board of Directors:
You have requested our opinion as to the fairness, from a financial point of view, to holders of the common stock of Con-way Inc. (Con-way), other
than as specified herein, of the Consideration (defined below) to be received by such holders pursuant to the terms and subject to the conditions set forth in an Agreement and Plan of Merger (the Agreement) proposed to be entered into
among XPO Logistics, Inc. (XPO), Canada Merger Corp., a wholly owned subsidiary of XPO (Sub), and Con-way. As more fully described in the Agreement or as otherwise described to us by representatives of Con-way, (i) Sub
will commence a tender offer to purchase all outstanding shares of the common stock, par value $0.625 per share, of Con-way (Con-way Common Stock and, such tender offer, the Tender Offer) for $47.60 in cash (the
Consideration) and (ii) subsequent to consummation of the Tender Offer, Sub will be merged with and into Con-way (the Merger and, together with the Tender Offer, the Transaction) and each outstanding share of
Con-way Common Stock not previously tendered in the Tender Offer will be converted into the right to receive the Consideration. The terms and conditions of the Transaction are more fully set forth in the Agreement.
In arriving at our opinion, we reviewed a draft, dated September 7, 2015, of the Agreement and held discussions with certain senior officers, directors
and other representatives and advisors of Con-way concerning the businesses, operations and prospects of Con-way. We reviewed certain publicly available business and financial information relating to Con-way as well as certain financial forecasts
and other information and data relating to Con-way under both a management case and an alternative management case with growth initiatives provided to or discussed with us by the management of Con-way. We reviewed the financial terms of the
Transaction as set forth in the Agreement or as otherwise described to us in relation to, among other things: current and historical market prices and trading volumes of Con-way Common Stock; the projected earnings and other operating data of
Con-way; and the capitalization and financial condition of Con-way. We analyzed certain financial, stock market and other publicly available information relating to the businesses of other companies whose operations we considered relevant in
evaluating those of Con-way and considered, to the extent publicly available, the financial terms of certain other transactions which we considered relevant in evaluating the Transaction. In addition to the foregoing, we conducted such other
analyses and examinations and considered such other information and financial, economic and market criteria as we deemed appropriate in arriving at our opinion. The issuance of our opinion has been authorized by our fairness opinion committee.
In rendering our opinion, we have assumed and relied, without independent verification, upon the accuracy and completeness of all financial and other
information and data publicly available or provided to or otherwise reviewed by or discussed with us and upon the assurances of the management of Con-way that it is not aware of any relevant information that has been omitted or that remains
undisclosed to us. With respect to the financial forecasts and other information and data provided to or otherwise reviewed by or discussed with us relating to Con-way that we have been directed to utilize in our analyses, we have been advised by
the management of Con-way and, with your consent, we have assumed that such forecasts and other information and data were reasonably prepared on bases reflecting the best currently available estimates and judgments of such management as to the
future financial performance of Con-way under the alternative cases reflected therein and the other matters covered thereby. We have relied, with your consent, upon the assessments of the management of Con-way as to, among other things, the
potential impact on Con-way of market, cyclical and other trends in and prospects for the transportation, logistics and supply-chain management services industries. We have assumed, with your consent, that there will be no developments with respect
to any such matters that would be meaningful in any respect to our analyses or opinion.
The Board of Directors
Con-way Inc.
September 8, 2015
Page 2
We have not made or been provided with an independent evaluation or appraisal of the assets or liabilities (contingent, off-balance sheet or otherwise) of
Con-way or any other entity nor have we made any physical inspection of the properties or assets of Con-way or any other entity. We have assumed, with your consent, that the Transaction will be consummated in accordance with its terms without
waiver, modification or amendment of any material term, condition or agreement and that, in the course of obtaining the necessary governmental, regulatory or third party approvals, consents, releases and waivers for the Transaction, no delay,
limitation, restriction or condition will be imposed that would have an adverse effect on Con-way or the Transaction. We are not expressing any opinion with respect to accounting, tax, regulatory, legal or similar matters and we have relied, with
your consent, upon the assessments of representatives of Con-way as to such matters. Representatives of Con-way have advised us, and we also have assumed, that the final terms of the Agreement will not vary materially from those set forth in the
draft reviewed by us.
Our opinion does not address any terms (other than the Consideration to the extent expressly specified herein) or other aspects or
implications of the Transaction, including, without limitation, the form or structure of the Transaction or any agreement, arrangement or understanding to be entered into in connection with or contemplated by the Transaction or otherwise. In
connection with our engagement, we were not requested to, and we did not, solicit third-party indications of interest in the possible acquisition of all or a part of Con-way. We were not requested to consider, and our opinion does not address, the
underlying business decision of Con-way to effect the Transaction nor does our opinion address the relative merits of the Transaction as compared to any alternative business strategies or opportunities that might exist for Con-way or the effect of
any other transaction in which Con-way might engage. We also express no view as to, and our opinion does not address, the fairness (financial or otherwise) of the amount or nature or any other aspect of any compensation to any officers, directors or
employees of any parties to the Transaction, or any class of such persons, relative to the Consideration or otherwise. Our opinion is necessarily based upon information available to us, and financial, stock market and other conditions and
circumstances existing and disclosed to us, as of the date hereof.
Citigroup Global Markets Inc. has acted as financial advisor to Con-way in connection
with the proposed Transaction and will receive a fee for such services, the principal portion of which is contingent upon consummation of the Tender Offer. We also will receive a fee in connection with the delivery of this opinion. As you are aware,
we and our affiliates in the past have provided, currently are providing and in the future may provide investment banking and other financial services to Con-way and XPO unrelated to the proposed Transaction, for which services we and our affiliates
have received and expect to receive compensation, including, during the past two years, having acted or acting (i) as a foreign exchange liability management provider and global cash management provider to, and as a lender under certain letters
of credit, lines of credit and other credit arrangements for, Con-way and (ii) as a foreign exchange liability management provider to XPO, joint bookrunning manager and/or joint structuring advisor for certain equity and senior notes offerings
of XPO, and joint lead arranger, joint bookrunning manager and co-documentation agent for, and as a lender under, a revolving credit facility of XPO. In the ordinary course of business, we and our affiliates may actively trade or hold the securities
of Con-way and XPO for our own account or for the account of our customers and, accordingly, may at any time hold a long or short position in such securities. In addition, we and our affiliates (including Citigroup Inc. and its affiliates) may
maintain relationships with Con-way, XPO and their respective affiliates.
Our advisory services and the opinion expressed herein are provided for the
information of the Board of Directors of Con-way (in its capacity as such) in its evaluation of the proposed Transaction, and our opinion is not intended to be and does not constitute a recommendation as to whether any stockholder should tender
shares of Con-way Common Stock in the Tender Offer or how any stockholder should act on any matters relating to the proposed Transaction or otherwise.
The Board of Directors
Con-way Inc.
September 8, 2015
Page 3
Based upon and subject to the foregoing, our experience as investment bankers, our work as described above and other factors we deemed relevant, we are of the
opinion that, as of the date hereof, the Consideration to be received in the Transaction by holders of Con-way Common Stock (other than XPO, Sub and their respective affiliates) is fair, from a financial point of view, to such holders.
Very truly yours,
/s/ Citigroup Global Markets Inc.
CITIGROUP GLOBAL MARKETS INC.
Annex B
Delaware General Corporations Law § 262 Appraisal rights
(a) Any stockholder of a corporation of this State who holds shares of stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through the effective date of the merger or consolidation, who has otherwise complied with subsection (d) of this section and who has neither voted in favor of the merger
or consolidation nor consented thereto in writing pursuant to § 228 of this title shall be entitled to an appraisal by the Court of Chancery of the fair value of the stockholders shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word stockholder means a holder of record of stock in a corporation; the words stock and share mean and include what is ordinarily
meant by those words; and the words depository receipt mean a receipt or other instrument issued by a depository representing an interest in 1 or more shares, or fractions thereof, solely of stock of a corporation, which stock is
deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or series of stock of a constituent corporation in a
merger or consolidation to be effected pursuant to § 251 (other than a merger effected pursuant to § 251(g) of this title and, subject to paragraph (b)(3) of this section, § 251(h) of this title), § 252, § 254, § 255,
§ 256, § 257, § 258, § 263 or § 264 of this title:
(1) Provided, however, that, except as expressly provided in
§ 363(b) of this title, no appraisal rights under this section shall be available for the shares of any class or series of stock, which stock, or depository receipts in respect thereof, at the record date fixed to determine the stockholders
entitled to receive notice of the meeting of stockholders to act upon the agreement of merger or consolidation, were either: (i) listed on a national securities exchange or (ii) held of record by more than 2,000 holders; and further
provided that no appraisal rights shall be available for any shares of stock of the constituent corporation surviving a merger if the merger did not require for its approval the vote of the stockholders of the surviving corporation as provided in
§ 251(f) of this title.
(2) Notwithstanding paragraph (b)(1) of this section, appraisal rights under this section shall be available
for the shares of any class or series of stock of a constituent corporation if the holders thereof are required by the terms of an agreement of merger or consolidation pursuant to §§ 251, 252, 254, 255, 256, 257, 258, 263 and 264 of this
title to accept for such stock anything except:
a. Shares of stock of the corporation surviving or resulting from such merger or
consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts in respect
thereof, which shares of stock (or depository receipts in respect thereof) or depository receipts at the effective date of the merger or consolidation will be either listed on a national securities exchange or held of record by more than 2,000
holders;
c. Cash in lieu of fractional shares or fractional depository receipts described in the foregoing paragraphs (b)(2)a. and b. of
this section; or
d. Any combination of the shares of stock, depository receipts and cash in lieu of fractional shares or fractional
depository receipts described in the foregoing paragraphs (b)(2)a., b. and c. of this section.
(3) In the event all of the stock of a
subsidiary Delaware corporation party to a merger effected under § 251(h), § 253 or § 267 of this title is not owned by the parent immediately prior to the merger, appraisal rights shall be available for the shares of the subsidiary
Delaware corporation.
(4) In the event of an amendment to a corporations certificate of incorporation contemplated by § 363(a)
of this title, appraisal rights shall be available as contemplated by § 363(b) of this title, and the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly as
practicable, with the word amendment substituted for the words merger or consolidation, and the word corporation substituted for the words constituent corporation and/or surviving or resulting
corporation.
(c) Any corporation may provide in its certificate of incorporation that appraisal rights under this section
shall be available for the shares of any class or series of its stock as a result of an amendment to its certificate of incorporation, any merger or consolidation in which the corporation is a constituent corporation or the sale of all or
substantially all of the assets of the corporation. If the certificate of incorporation contains such a provision, the procedures of this section, including those set forth in subsections (d) and (e) of this section, shall apply as nearly
as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to the meeting, shall notify each of its stockholders who was such on the record date for notice of such meeting (or such members who received notice in accordance with §
255(c) of this title) with respect to shares for which appraisal rights are available pursuant to subsection (b) or (c) of this section that appraisal rights are available for any or all of the shares of the constituent corporations, and
shall include in such notice a copy of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of § 114 of this title. Each stockholder electing to demand the appraisal of such stockholders shares shall
deliver to the corporation, before the taking of the vote on the merger or consolidation, a written demand for appraisal of such stockholders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of
the stockholder and that the stockholder intends thereby to demand the appraisal of such stockholders shares. A proxy or vote against the merger or consolidation shall not constitute such a demand. A stockholder electing to take such action
must do so by a separate written demand as herein provided. Within 10 days after the effective date of such merger or consolidation, the surviving or resulting corporation shall notify each stockholder of each constituent corporation who has
complied with this subsection and has not voted in favor of or consented to the merger or consolidation of the date that the merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to § 228, § 251(h), § 253, or § 267 of this title, then either a
constituent corporation before the effective date of the merger or consolidation or the surviving or resulting corporation within 10 days thereafter shall notify each of the holders of any class or series of stock of such constituent corporation who
are entitled to appraisal rights of the approval of the merger or consolidation and that appraisal rights are available for any or all shares of such class or series of stock of such constituent corporation, and shall include in such notice a copy
of this section and, if 1 of the constituent corporations is a nonstock corporation, a copy of § 114 of this title. Such notice may, and, if given on or after the effective date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation. Any stockholder entitled to appraisal rights may, within 20 days after the date of mailing of such notice or, in the case of a merger approved pursuant to § 251(h) of this
title, within the later of the consummation of the tender or exchange offer contemplated by § 251(h) of this title and 20 days after the date of mailing of such notice, demand in writing from the surviving or resulting corporation the appraisal
of such holders shares. Such demand will be sufficient if it reasonably informs the corporation of the identity of the stockholder and that the stockholder intends thereby to demand the appraisal of such holders shares. If such notice
did not notify stockholders of the effective date of the merger or consolidation, either (i) each such constituent corporation shall send a second notice before the effective date of the merger or consolidation notifying each of the holders of
any class or series of stock of such constituent corporation that are entitled to appraisal rights of the effective date of the merger or consolidation or (ii) the surviving or resulting corporation shall send such a second notice to all such
holders on or within 10 days after such effective date; provided, however, that if such second notice is sent more than 20 days following the sending of the first notice or, in the case of a merger approved pursuant to § 251(h) of this title,
later than the later of the consummation of the tender or exchange offer contemplated by § 251(h) of this title and 20 days following the sending of the first notice, such second notice need only be sent to each stockholder who is entitled to
appraisal rights and who has demanded appraisal of such holders shares in accordance with this subsection. An affidavit of the secretary or assistant secretary or of the transfer agent of the corporation that is required to give either notice
that such notice has been given shall, in the absence of fraud, be prima facie evidence of the facts stated therein. For purposes of determining the stockholders entitled to receive either notice, each constituent corporation may fix, in advance, a
record date
that shall be not more than 10 days prior to the date the notice is given, provided, that if the notice is given on or after the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the notice is given prior to the effective date, the record date shall be the close of business on the day next preceding the day on which the notice is given.
(e) Within 120 days after the effective date of the merger or consolidation, the surviving or resulting corporation or any stockholder who has complied with
subsections (a) and (d) of this section hereof and who is otherwise entitled to appraisal rights, may commence an appraisal proceeding by filing a petition in the Court of Chancery demanding a determination of the value of the stock of all
such stockholders. Notwithstanding the foregoing, at any time within 60 days after the effective date of the merger or consolidation, any stockholder who has not commenced an appraisal proceeding or joined that proceeding as a named party shall have
the right to withdraw such stockholders demand for appraisal and to accept the terms offered upon the merger or consolidation. Within 120 days after the effective date of the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) of this section hereof, upon written request, shall be entitled to receive from the corporation surviving the merger or resulting from the consolidation a statement setting forth the aggregate number
of shares not voted in favor of the merger or consolidation and with respect to which demands for appraisal have been received and the aggregate number of holders of such shares. Such written statement shall be mailed to the stockholder within 10
days after such stockholders written request for such a statement is received by the surviving or resulting corporation or within 10 days after expiration of the period for delivery of demands for appraisal under subsection (d) of this
section hereof, whichever is later. Notwithstanding subsection (a) of this section, a person who is the beneficial owner of shares of such stock held either in a voting trust or by a nominee on behalf of such person may, in such persons
own name, file a petition or request from the corporation the statement described in this subsection.
(f) Upon the filing of any such petition by a
stockholder, service of a copy thereof shall be made upon the surviving or resulting corporation, which shall within 20 days after such service file in the office of the Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded payment for their shares and with whom agreements as to the value of their shares have not been reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be accompanied by such a duly verified list. The Register in Chancery, if so ordered by the Court, shall give notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation and to the stockholders shown on the list at the addresses therein stated. Such notice shall also be given by 1 or more publications at least 1 week before the day of the
hearing, in a newspaper of general circulation published in the City of Wilmington, Delaware or such publication as the Court deems advisable. The forms of the notices by mail and by publication shall be approved by the Court, and the costs thereof
shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the stockholders who have
complied with this section and who have become entitled to appraisal rights. The Court may require the stockholders who have demanded an appraisal for their shares and who hold stock represented by certificates to submit their certificates of stock
to the Register in Chancery for notation thereon of the pendency of the appraisal proceedings; and if any stockholder fails to comply with such direction, the Court may dismiss the proceedings as to such stockholder.
(h) After the Court determines the stockholders entitled to an appraisal, the appraisal proceeding shall be conducted in accordance with the rules of the
Court of Chancery, including any rules specifically governing appraisal proceedings. Through such proceeding the Court shall determine the fair value of the shares exclusive of any element of value arising from the accomplishment or expectation of
the merger or consolidation, together with interest, if any, to be paid upon the amount determined to be the fair value. In determining such fair value, the Court shall take into account all relevant factors. Unless the Court in its discretion
determines otherwise for good cause shown, interest from the effective date of the merger through the date of payment of the judgment shall be compounded quarterly and shall accrue at 5% over the Federal Reserve discount rate (including any
surcharge) as established from time to time during the period between the effective date of the merger and the date of payment of the judgment. Upon application by the surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, proceed to trial
upon the appraisal prior to the final determination of the stockholders entitled to an appraisal. Any stockholder whose name appears on the list filed by the surviving or resulting corporation
pursuant to subsection (f) of this section and who has submitted such stockholders certificates of stock to the Register in Chancery, if such is required, may participate fully in all proceedings until it is finally determined that such
stockholder is not entitled to appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares, together with
interest, if any, by the surviving or resulting corporation to the stockholders entitled thereto. Payment shall be so made to each such stockholder, in the case of holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the certificates representing such stock. The Courts decree may be enforced as other decrees in the Court of Chancery may be enforced, whether such surviving or resulting
corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed upon the parties as
the Court deems equitable in the circumstances. Upon application of a stockholder, the Court may order all or a portion of the expenses incurred by any stockholder in connection with the appraisal proceeding, including, without limitation,
reasonable attorneys fees and the fees and expenses of experts, to be charged pro rata against the value of all the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive payment of dividends or other distributions on the stock (except dividends or other distributions payable to stockholders of record at a date which is prior to the
effective date of the merger or consolidation); provided, however, that if no petition for an appraisal shall be filed within the time provided in subsection (e) of this section, or if such stockholder shall deliver to the surviving or
resulting corporation a written withdrawal of such stockholders demand for an appraisal and an acceptance of the merger or consolidation, either within 60 days after the effective date of the merger or consolidation as provided in subsection
(e) of this section or thereafter with the written approval of the corporation, then the right of such stockholder to an appraisal shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery shall be dismissed
as to any stockholder without the approval of the Court, and such approval may be conditioned upon such terms as the Court deems just; provided, however that this provision shall not affect the right of any stockholder who has not commenced an
appraisal proceeding or joined that proceeding as a named party to withdraw such stockholders demand for appraisal and to accept the terms offered upon the merger or consolidation within 60 days after the effective date of the merger or
consolidation, as set forth in subsection (e) of this section.
(l) The shares of the surviving or resulting corporation to which the shares of such
objecting stockholders would have been converted had they assented to the merger or consolidation shall have the status of authorized and unissued shares of the surviving or resulting corporation.
Exhibit (a)(5)(C)
XPO-Con-way Merger Employee FAQs
updated 09/16/2015
Pay and Benefits
1. |
What happens to our pay and benefits between now and the planned completion of the acquisition by XPO? |
Until the merger is completed it remains business as usual. Con-way and XPO will remain independent companies, and we do not expect any changes
to existing compensation and benefit plans.
2. |
What happens to our pay and payroll schedule once the acquisition is completed? |
XPO has
committed to maintain base compensation for continuing employees at a level that is no less than currently offered to Con-way employees for one year following the closing of the merger. Step increases for hourly employees progressing through the
step structures will continue. Similar to Con-ways process, XPO will assess company and market data to determine next steps for market based pay adjustments and payroll schedule.
3. |
Will our employee benefit plans, including medical, paid time off, and 401(k), change after the merger? |
XPO has committed to maintain employee benefit plans for one year after the closing of the merger that are at least substantially similar to
those provided to XPO employees. However, XPO has further advised us that Con-ways employee benefit plans will generally be maintained for 2016.
4. |
We will be starting open enrollment soon. Is this going to change? |
Open enrollment will
proceed as planned with current Con-way plans.
5. |
What will happen to Con-way stock in my 401(k)? |
All Con-way shareholders will have the
right to tender their shares at a price of $47.60 per share of Con-way stock. Con-way stock held inside one of Con-ways 401(k) plans will be treated the same as Con-way stock held outside of those plans. What this means is that you will
have the right to tender the Con-way shares held inside your Con-way 401(k) plan account, to be redeemed for cash at $47.60 per share at the time of closing. Proceeds from the redemption will be kept in your Con-way 401(k) plan account and
thereafter can be invested in any of the other funds made available for investment under your 401(k) plan.
6. |
Will the Variable Pay Program (VPP) continue after the merger with XPO? |
There are no
plans to change the program including the Success Sharing Plan (SSP) for 2015.
7. |
What happens to the pension plan and the Rule of 85? |
For those employees eligible for
the Con-way pension plan, we do not expect any changes to vested benefits. Future service with XPO for those eligible employees will be recognized as credit toward the rule of 85 under the Con-way pension plan.
8. |
Will XPO maintain my length of service time that I have with Con-way? |
Yes, XPO will
generally recognize employee tenure with Con-way under XPO employee benefit plans for purposes of determining eligibility to participate, vesting, accruals and entitlement to benefits, where length of service is relevant.
1
Other
1. |
Under what brand name will our businesses operate following the closing? |
XPO Logistics
is a worldwide brand with a growing recognition as a leader in transportation and logistics. Being one highly integrated global team means having one global brand XPO Logistics to ensure customers understand and appreciate the strength
of the integrated capability available to them.
2. |
How quickly will uniform name and equipment name changes take place as a result of the acquisition? |
Changes will take place as soon as possible, although due to the size and scope of the Con-way organization, these adjustments will take some
time.
Additional Information and Where to Find it
This communication is for informational purposes only and does not constitute an offer to buy or a solicitation of an offer to sell any
securities of Con-way. The solicitation and offer to buy common stock of Con-way is only being made pursuant to the Offer to Purchase and related materials on Schedule TO, as filed by Canada Merger Corp. with the SEC. Con-way will file a
Solicitation/Recommendation statement on Schedule 14D-9 with the SEC with respect to the tender offer. The tender offer materials (including an Offer to Purchase, a related Letter of Transmittal and certain other tender offer documents) contain, and
the Solicitation/Recommendation Statement will contain, important information. Investors are urged to read these materials, as well as any other relevant documents filed with the SEC, carefully and in their entirety because they contain important
information, including the terms and conditions of the offer. The Offer to Purchase and the related letter of Transmittal and certain other tender offer documents are available, and the Solicitation/Recommendation Statement will be made
available, to all holders of shares of Con-way at no expense to them. The Offer to Purchase and the related letter of Transmittal and certain other tender offer documents are, and the Solicitation/Recommendation Statement will be made, available for
free at the SECs website at www.sec.gov. Additional copies may be obtained, free of charge, through the investor relations page on XPOs corporate website at www.xpocorporate.com or by contacting XPO Logistics, Inc. at Five
Greenwich Office Park, Greenwich, CT 06831, Attention: Investor Relations.
In addition to the Offer to Purchase, the related Letter of
Transmittal and certain other tender offer documents, as well as the Solicitation/Recommendation Statement, XPO and Con-way file annual, quarterly and special reports and other information with the SEC. You may read and copy any reports or
other information filed by XPO or Con-way at the SEC public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the Commission at 1-800-SEC-0330 for further information on the public reference room. XPO and Con-ways
filings with the SEC are also available at the SECs website www.sec.gov.
Forward Looking Statements
This document includes forward-looking statements. All statements other than statements of historical fact are, or may be deemed to be,
forward-looking statements. In some cases, forward-looking statements can be identified by the use of forward-looking terms such as anticipate, estimate, believe, continue, could,
intend, may, plan, potential, predict, should, will, expect, objective, projection, forecast, goal,
guidance, outlook, effort, target or the negative of these terms or other comparable terms. However, the absence of these words does not mean that the statements are not forward-looking. These
forward-looking statements are based on certain assumptions and analyses made by us in light of our experience and our perception of historical trends, current conditions and expected future developments, as well as other factors we believe are
appropriate in the circumstances.
These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions
that may cause actual results, levels of activity, performance or achievements to be materially different from
2
any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. Factors that might cause
or contribute to a material difference include those discussed in XPOs and Con-ways filings with the SEC and the following: economic conditions generally; competition; XPOs ability to find suitable acquisition candidates and
execute its acquisition strategy; the expected impact of the Con-way acquisition, including the expected impact on XPOs results of operations; the ability to obtain the requisite regulatory approvals, the satisfaction of the conditions to the
consummation of the Offer or the Merger; the ability to realize anticipated synergies and cost savings with respect to acquired companies, including Con-way; XPOs ability to raise debt and equity capital; XPOs ability to attract and
retain key employees to execute its growth strategy, including retention of Con-ways management team; litigation, including litigation related to alleged misclassification of independent contractors; the ability to develop and implement a
suitable information technology system; the ability to maintain positive relationships with XPOs and Con-ways networks of third-party transportation providers; the ability to retain XPOs, Con-ways and other acquired
companies largest customers; XPOs ability to successfully integrate Con-way and other acquired businesses; rail and other network changes; weather and other service disruptions; and governmental regulation. All forward-looking statements
set forth in this document are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated will be realized or, even if substantially realized, that they will have the expected
consequences to, or effects on, XPO, Con-way or their respective businesses or operations. Forward-looking statements set forth in this document speak only as of the date hereof, and neither XPO nor Con-way undertakes any obligation to update
forward-looking statements to reflect subsequent events or circumstances, changes in expectations or the occurrence of unanticipated events except to the extent required by law.
3
Exhibit (d)(2)
STRICTLY CONFIDENTIAL
September 4,
2015
[EMPLOYEE]
VIA HAND DELIVERY
Dear [EMPLOYEE],
Reference is made to the
Agreement and Plan of Merger among XPO Logistics, Inc. (Parent), Con-way, Inc. (the Company) and Canada Merger Corp., dated as of the date hereof (the Merger Agreement).
This letter agreement (this Letter) will become effective upon the Effective Time (as defined in the Merger Agreement). If the Effective Time does not occur, this Letter will not become effective and will be
null and void ab initio.
1. |
Termination of Employment: We hereby agree and acknowledge that, effective as of immediately following the Effective Time, your employment with the Company and its affiliates (including Parent) will be terminated
and you will be deemed to have incurred a Severance (as defined in the Severance Agreement (Change in Control) between you and the Company, dated as of [DATE][, as amended [DATE]] (the CIC Agreement)), and that
you will become entitled to the payments and benefits set forth in Section 3.1 of the CIC Agreement. |
2. |
Waiver of Total Payment Adjustment: In consideration of the covenants and obligations referenced in Section 4 of this Letter and your provision of the Services (as defined in Section 6 of this Letter,
we hereby agree that, notwithstanding anything to the contrary in your CIC Agreement, in no event will your Total Payments (as defined in the CIC Agreement) be reduced pursuant to Section 4 of the CIC Agreement (including
Section 4.7 of the CIC Agreement). |
3. |
Covenant Consideration: In further consideration of the covenants and obligations referenced in Section 4 of this Letter and your provision of the Services (as defined in Section 6 of this Letter,
(a) subject to the approval of the Compensation Committee of Parents Board of Directors, effective as of the Effective Time, you will be granted an award of fully vested shares of Parent common stock with an aggregate grant date fair
value of $50,000 (the Shares) under the Parents Amended and Restated 2011 Omnibus Incentive Compensation Plan, as amended or restated from time to time, or any successor plan thereto (the Equity
Plan), and (b) effective as of the Effective Time, the written release substantially in the form attached as Exhibit A to your CIC Agreement will be revised to provide for a mutual unconditional release by the Parent and its
affiliates (including the Company and its affiliates) of you and your heirs, executors, administrators, representatives, successors and assigns (other than with respect to your obligations or restrictions arising under or referred or described in
this Letter (including Annex A hereto) or with respect to any liability arising out of your fraud or willful misconduct in connection with, or relating to, your employment with the Company and its affiliates). The Shares will be subject to a
lock-up on sales, offers, pledges, contracts to sell, grants of any option, right or warrant to purchase, or other transfers or dispositions, whether directly or indirectly, from the Effective Time until the third anniversary of the Effective Time
(or, if earlier, your death or a Change of Control (as defined in the Equity Plan)) and all laws, rules, and regulations applicable to you; provided that such lock-up shall not apply to Shares withheld, sold or otherwise
transferred to Parent to satisfy the applicable tax withholding in connection with the grant of the Shares. |
4. |
Restrictive Covenants: The covenants set forth on Annex A are hereby incorporated by reference to this Letter as if fully set forth herein. |
5. |
Other Agreements: This Letter shall supersede all employment and similar agreements between you and the Company (or any of its affiliates),
provided that (a) except as modified hereby, the CIC Agreement shall not be superseded hereby and shall remain in full force and effect, and (b) any restrictive covenant agreements
|
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between you and the Company or its affiliates shall be in addition to the covenants reference in Section 4 of this Letter, and shall not be superseded hereby and shall remain in full force
and effect. |
6. |
Consulting Services. Effective as of the Effective Time and continuing through March 31, 2016 (such period is referred to herein as the Term), at times mutually agreed upon by the
parties, in an amount not to exceed approximately ten (10) hours per month, you will provide consulting services as reasonably requested by XPO for the purpose of effectively transitioning your responsibilities and related matters
(collectively, the Services). In respect of your provision of the Services, you shall receive the payments and benefits set forth in Section 2 and Section 3 of this Letter, and you shall be reimbursed by XPO for
all out-of-pocket expenses reasonably incurred in connection with your provision of Services to XPO upon presentation of appropriate documentation and in accordance with Parents expense reimbursement policy. Except as provided in this
Section 6, you shall not receive compensation in respect of your provision of the Services. You acknowledge that you will not be an employee of Parent or the Company during the Term and your provision of the Services shall be done in your
capacity as an independent contractor, and that you may not, at any time, act as a representative for or on behalf of Parent or the Company for any purpose or transaction, and may not bind or otherwise obligate Parent or the Company in any manner
whatsoever without obtaining the prior written approval of Parent therefor. You and Parent hereby acknowledge and agree that all payments and benefits paid or made pursuant to this Letter represent fees for services as an independent contractor, and
shall therefor be paid without any deductions or withholdings taken therefrom for taxes or for any other purpose. You further acknowledge that Parent and the Company make no warranties as to any tax consequences regarding any payment or benefit
hereunder, and specifically agree that the determination of any tax liability or other consequences of any payment or benefit hereunder is your sole and complete responsibility and that you will pay all taxes, if any, assessed on such payments or
benefits under the applicable laws of any federal, state, local or other jurisdiction and, to the extent not so paid, will indemnify Parent or the Company, as applicable, for any taxes so assessed against Parent or the Company, as applicable. You
also agree that during the Term, you shall not be eligible to participate in any of the employee benefit plans or arrangements of Parent or the Company, or their respective affiliates. |
7. |
Amendment; Waiver: No provision of this Letter may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by you, Parent and the Company.
|
8. |
Governing Law; Arbitration; Consent to Jurisdiction; Waiver of Jury Trial: |
|
a. |
This Letter will be governed, construed, and interpreted under the laws of the State of Michigan without giving effect to any conflict of laws provisions. |
|
b. |
Any claim you wish to initiate arising out of or relating to this Letter (including Annex A hereto), the breach thereof, your employment with us, or the termination of that employment will be resolved by binding
arbitration before a single arbitrator in the City of Detroit, Michigan, administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. |
|
c. |
Any claim initiated by us arising out of or relating to this Agreement, the breach thereof, your employment or its termination, shall, at our election, be resolved in accordance with Sections 8(b) or 8(d), in our sole
discretion. |
|
d. |
You hereby irrevocably submit to the jurisdiction of any state or federal court located in Detroit, Michigan; provided,
however, that nothing herein shall preclude us from bringing any suit, action or proceeding in any other court, including without limitation for the purposes of enforcing the provisions of this Section 8 or enforcing any judgment
or award obtained by us. You waive, to the fullest extent permitted by applicable law, any objection you now or hereafter have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding brought in an applicable court
described in this Section 8(d), and agree that you will not attempt to deny or defeat such personal jurisdiction by motion or other request for leave from any court. You further agree that, to the fullest extent permitted by applicable law, a
final and non-appealable judgment in any suit, action or proceeding brought in any |
2
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applicable court described in this Section 8(d) shall be conclusive and binding upon you and may be enforced in any other jurisdiction. To the extent that, notwithstanding Section 8(b)
of this Letter, you bring an action in any court, you agree to do so exclusively in the state or federal court located in Detroit, Michigan, provided that nothing herein shall waive the Companys right to demand that you comply
with Section 8(b). YOU EXPRESSLY AND KNOWINGLY WAIVE ANY RIGHT TO A JURY TRIAL IN THE EVENT THAT ANY ACTION ARISING OUT OF OR RELATING TO THIS LETTER (INCLUDING ANNEX A HERETO) OR THE BREACH THEREOF, OR YOUR EMPLOYMENT, OR THE
TERMINATION THEREOF, IS LITIGATED OR HEARD IN ANY COURT. |
9. |
Counterparts: This Letter may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same. |
10. |
Headings: The Section and subsection headings in this Letter (including Annex A hereto) are for convenience only and shall not affect the meaning of any provisions. |
[Remainder of Page Intentionally Left Blank]
3
Please acknowledge your agreement to the terms of this Letter by your signature below.
Sincerely,
|
XPO LOGISTICS, INC. |
|
By:
Gordon Devens
Senior Vice President and General Counsel |
Acknowledged and Agreed:
Annex A
RESTRICTIVE COVENANTS
1. |
Covenant Not to Solicit Restricted Customers and Carriers. |
|
a. |
Agreement Not to Solicit. For the duration of the Severance Period (as defined in the CIC Agreement) (the Restricted Period), you agree that you will not (nor
will you assist any other person or entity to), for any reason, either directly or indirectly, call on, contact, solicit or otherwise take away or disrupt, or attempt to call on, contact, solicit or otherwise take away or disrupt, our relationship
with or business expectancy from any customer or carrier of Parent or its affiliates (including the Company and its subsidiaries) (the Parent Group) (i) on whose account you worked or with whom you had regular contact,
or (ii) as to whom you had access to Confidential Information (in either instance at any time within the one year prior to the Effective Time). This undertaking on your part for our benefit is called your Non-Solicit
Covenant. |
|
b. |
You Acknowledge the Legitimacy, Reasonableness and Fairness of Your Non-Solicit Covenant. You acknowledge that: (i) in the course of performing your duties as an employee who has had and/or will have
direct contact with the customers or carriers the Parent Group and/or access to proprietary information about them, you have had access to, and have been regularly exposed to, and in some cases have generated and controlled, Confidential Information
which is sensitive, and competitively valuable information about of the Parent Group; (ii) the Parent Group has developed its Confidential Information through considerable time, effort and expense; (iii) the relationships of the Parent
Group with its customers, carriers, vendors, suppliers, business partners and employees, as well its Confidential Information, constitute valuable and legitimate protectable business interests of the Parent Group; (iv) your Non-Solicit Covenant
is reasonable and necessary to protect those interests, the Confidential Information and goodwill of the Parent Group; and (v) your compliance with your Non-Solicit Covenant following termination of your employment will not prevent you from
earning a livelihood in a business similar to the business of the Parent Group, but, in any event, your experience and capabilities are such that you now have and will have other opportunities to earn a livelihood and adequate means of support for
yourself and your dependents. |
|
c. |
For purposes of this Letter (including this Annex A), Confidential Information means all information, written (whether generated or stored on magnetic, digital, photographic or other
media) or oral, not generally known, or proprietary to the Parent Group about the Parent Groups businesses, affairs, operations, products, services, customer and carrier lists, pricing strategies, operating processes, business methods and
procedures, information technology and information-gathering techniques and methods, business plans, financial affairs, and all other accumulated data, listings, or similar recorded matter useful in the businesses of the Parent Group, including by
way of illustration and not limitation: |
|
i. |
information about the business, affairs or operation of the Parent Group developed by you or which was furnished to you by any member of the Parent Group during your employment; |
|
ii. |
operating instructions, training manuals, procedures, and similar information; |
|
iii. |
information about customers, carriers, vendors and other with whom the Parent Group does business (e.g. customer, carrier or vendor lists, pricing, contracts, and activity records); |
|
iv. |
information about sales and marketing (e.g., plans and strategies); |
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v. |
information about any other third parties that the Parent Group has a business relationship with or owes a duty of confidentiality to; and |
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vi. |
all notes, observations, data, analyses, compilations, forecasts, studies or other documents prepared by you that contain or reflect any Confidential Information and which is not known to the public generally other than
as a result of your breach of this Letter (including this Annex A). |
However, we expressly acknowledge and agree that
the term Confidential Information excludes information which (A) is in the public domain or otherwise generally known to the trade, or (B) is disclosed
to third parties other than by reason of your breach of your confidentiality obligations under this Letter (including this Annex A), or (C) is learned of by you after the termination
of your employment from any other party not then under an obligation of confidentiality to the Parent Group.
2. |
Covenant Not to Compete. |
|
a. |
Duration and Geographic Scope. For the Restricted Period, you are not allowed to compete with the Parent Group in the Restricted Territory (geographic area) fixed below.
This undertaking on your part for our benefit is called your Non-Compete Covenant. |
|
b. |
Your Non-Compete Covenant. You expressly agree that during the Restricted Period, you will not (either directly or indirectly through others) have any of the following business relationships anywhere
within your Restricted Territory: |
|
i. |
perform any services, whether as an employee, agent or independent contractor, which are the same as or reasonably related to the services you performed while employed by the Company or its affiliates during the two
years prior to the Effective Time, for a Competing Business (defined below); |
|
ii. |
own any financial interest in a Competing Business (e.g., as a partner, member, principal, shareholder or other owner (other than a holder of less than 1% of the outstanding voting shares of any publicly held company));
or |
|
iii. |
loan money to, borrow money from, lease to, or have any other financial dealings with a Competing Business (except for ownership of less than 1% of the outstanding voting shares of any publicly held company).
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c. |
Definition of a Competing Business. You and Parent agree that a Competing Business means any individual or business (e.g., a corporation, partnership or limited
liability company) engaged in the business of the Parent Group as it is conducting it immediately following the Effective Time (including any business any member of the Parent Group is then actively considering or was considering at any time during
the 12 month period ending immediately following the Effective Time), including by way of example: |
|
i. |
any providers of transportation and transportation logistics services, including only by way of illustration, freight brokerage, freight forwarding, expediting, internet load boards, last-mile delivery logistics,
truckload or less-than-truckload carriage, contract logistics or intermodal providers, or firms such as CH Robinson, Expeditors International of Washington, Inc., Echo Global Logistics Inc., Total Quality Logistics, TransCore, DHL, FedEx
Corporation, United Parcel Service, Inc., Old Dominion Freight Line, YRC Worldwide Inc., J.B. Hunt Transport Services, Inc., Kühne + Nagel International AG, syncreon, Neovia Logistics and Hub Group Inc.; and |
|
ii. |
an individual or business that otherwise competes with the business of the Parent Group anywhere in the Restricted Territory. |
|
d. |
Your Restricted Territory. You agree that your Restricted Territory means any state, province, territory or country (including, without limitation, the United States, Canada,
Mexico, and/or the European Union) in which the Parent Groups customers are located or any member of the Parent Group performs services for or on behalf of the Parent Groups customers or carriers. |
|
e. |
You Acknowledge the Legitimacy, Reasonableness and Fairness of Your Non-Compete Covenant. You acknowledge that: (i) in the course
of performing your duties as an employee who has had and/or will have direct contact with the customers or carriers the Parent Group and/or access to proprietary information about them, you have had access to, and have been regularly exposed to, and
in some cases have generated and controlled, Confidential Information which is sensitive, and competitively valuable information about of the Parent Group; (ii) your Non-Compete Covenant is essential to protect the business and goodwill of the
Parent Group because, were you to enter into activities competitive with the business of the Parent Group, you would cause the Parent Group and/or its individual members |
A-2
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substantial harm (and not only because of your post-employment activities, but because of the impact those activities might have on the Parent Groups other employees and former employees);
and (iii) although your compliance with your Non-Compete Covenant may prevent you from earning a livelihood in a business similar to the business of the Parent Group, your experience and capabilities are such that you now have and will have
other opportunities to earn a livelihood and adequate means of support for yourself and your dependents. |
3. |
Consequences of Your Breach of Your Non-Solicit and Non-Compete Covenants. We reserve the right to use any remedies available to us in law or in equity to enforce our rights under this Letter (including
this Annex A), generally, and your Non-Compete Covenant, Non-Solicit Covenant and other covenants to us set forth in this Letter (including this Annex A), specifically. In addition to any other legal remedies we may be entitled
to, you agree that if you breach your Non-Compete Covenant and/or Non-Solicit Covenant, you will be required, within ten business days following the first date on which you first breach your Non-Compete Covenant and/or Non-Solicit Covenant, to
return to us the Shares, including any proceeds received in connection with the sale or disposition of the Shares, in each case, including any dividends and distributions that you received in respect of such Shares and net of any taxes paid by you
in respect of such Shares. You further agree that if you violate your Non-Compete Covenant and/or your Non-Solicit Covenant, the Restricted Period shall be extended by a period of time equal to that period beginning when your activities constituting
such violation commenced and ending when such violative activities terminated. |
4. |
Severability. If any provision of this Letter (including this Annex A) or its application is held invalid, such invalidation shall not affect other provisions or applications hereof which can
be given effect without the invalid provisions or applications, and so that this objective may be achieved, the provisions hereof are declared to be severable. In the event of a final, non-reviewable, non-appealable determination that any covenant
of yours set forth in this Letter (including this Annex A) (whether in whole or in part) is void or constitutes an unreasonable restriction against you, such provision shall not be rendered void but shall be deemed to be modified to the
minimum extent necessary to make such provision enforceable for the longest duration and the greatest scope as may constitute a reasonable restriction under the circumstances. |
5. |
Interpretation. You agree that to the extent you become bound by a prior or subsequent written agreement with the Parent Group or any member thereof setting forth confidentiality, non-solicit,
anti-hiring, non-compete and similar covenants in favor of the Parent Group or any member thereof, such prior or subsequent agreement shall be enforceable independent of this Letter (including this Annex A), and shall not be deemed to modify
or supersede this Letter (including this Annex A) in any way, or to be modified or superseded by this Letter (including this Annex A) in any way. You and we acknowledge that it is our common and mutual intention that, notwithstanding
the terms of any such prior or subsequent agreement, this Letter (including this Annex A) and each such prior or subsequent agreement shall be enforceable severally, and that you will be bound by and subject to the most restrictive and
comprehensive restrictive covenants in any agreement with the Parent Group or any member thereof to which you are a party. You and we further expressly acknowledge and agree that there are no oral agreements between you and us pertaining to the
subject matter hereof. |
6. |
Survival. The provisions of this Letter (including this Annex A) shall survive termination of your employment regardless of the reason. |
A-3
EXHIBIT (d)(3)
STRICTLY CONFIDENTIAL
September 4, 2015
Robert Bianco
VIA HAND DELIVERY
Dear Bob,
This retention letter (this Letter) memorializes our discussions concerning your employment at XPO Logistics, Inc.
(Parent) following the consummation of the merger (the Merger) contemplated by the Agreement and Plan of Merger among Parent, Con-way, Inc. (the Company) and Canada Merger
Corp., dated as of the date hereof (the Merger Agreement). This Letter will become effective upon the Effective Time (as defined in the Merger Agreement). If the Effective Time does not occur, this Retention Letter will not
become effective and will be null and void ab initio.
1. |
Employment with Parent: In consideration of the covenants and obligations referenced in Section 3 of this Letter, effective as of the Effective Time you will be employed with Parent and its affiliates and
will initially retain your title, duties and authorities, annual base salary and annual cash target bonus opportunity, each as in effect immediately prior to the Effective Time. Please be advised that we may modify your title after the Effective
Time to be consistent with the titles to which we provide similarly situated employees of Parent and its affiliates. |
2. |
Retention Award: In further consideration of the covenants and obligations referenced in Section 3 of this Letter, subject to the approval of the Compensation Committee of Parents Board of Directors,
effective immediately following the Effective Time, you will be granted a retention award of fully vested shares of Parent common stock (Shares) with an aggregate grant date fair value of $400,000 (the Retention
Award) under the Parents Amended and Restated 2011 Omnibus Incentive Compensation Plan, as amended or restated from time to time, or any successor plan thereto (the Equity Plan). One half of the
Retention Award will be subject to a lock-up on sales, offers, pledges, contracts to sell, grants of any option, right or warrant to purchase, or other transfers or dispositions, whether directly or indirectly (the
Lock-Up), from the Effective Time until the 18-month anniversary of the Effective Time, and one half of the Retention Award will be subject to the Lock-Up until the third anniversary of the Effective Time or, in each case,
if earlier, your death or a Change of Control (as defined in the Equity Plan), and the Retention Award will further be subject to all laws, rules, and regulations applicable to you; provided that the Lock-Up shall not apply
to Shares withheld, sold or otherwise transferred to Parent to satisfy the applicable tax withholding in connection with the grant of the Retention Award. |
3. |
Restrictive Covenants: The covenants set forth on Annex A are hereby incorporated by reference to this Letter as if fully set forth herein. |
4. |
Employment Agreement: The Severance Agreement (Change in Control) between you and the Company, dated as of December 18, 2009, as amended
January 25, 2010 and September 20, 2012 (the CIC Agreement) and the Amended and Restated Severance Agreement (Non-Change in Control) between you and the Company, dated as of June 21, 2010, as amended
September 20, 2012 (the Non-CIC Agreement), will be unaffected by this Letter, except that (i) you agree that this Letter constitutes your express written consent to the terms and conditions of your employment
with Parent and its affiliates following the Effective Time, and you hereby waive any right to terminate your employment for Good Reason pursuant to the CIC Agreement (both for purposes of such agreement and any other agreements
incorporating such definition, including, without limitation, the agreements governing your equity awards) as a result of the changes in the terms and conditions of your employment as provided in this Letter, and (ii) effective as of the
Effective Time, the definitions of Good Reason and Term under the CIC Agreement shall be amended and restated in their entirety as follows (with any capitalized terms used in
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these definitions but not otherwise defined in the CIC Agreement as defined in this Letter, and incorporated by reference into such definitions for purposes of the CIC Agreement):
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a. |
Good Reason for termination by you of your employment shall mean the occurrence (without your express written consent) after the Effective Time of any one of the following acts by Parent,
or failures by Parent to act, unless such act or failure to act is corrected within 30 days of receipt by Parent of notice of Parents intent to terminate for Good Reason hereunder: |
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i. |
the failure of Parent, following the Effective Time, to assume the CIC Agreement and all obligations thereunder, as of the Effective Time; |
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ii. |
a material reduction in your authority, duties or responsibilities from the authority, duties and responsibilities in effect immediately following the Effective Time and as set forth in the Letter;
provided; however, that (A) a mere change in your title, (B) the transactions contemplated by the Merger Agreement and any changes to your position, title, duties, reporting responsibilities or authorities in
connection therewith or as described in this Letter, and (C) a reduction in position, title, duties, reporting responsibilities or authorities (1) that is associated with you no longer being an executive at a public company or
(2) that relates to the Company becoming a subsidiary of another company, in each case, shall not constitute Good Reason; |
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iii. |
a reduction by Parent in your base salary or annual cash target bonus opportunity, each as in effect immediately following the Effective Time and as set forth in the Letter, or as the same may thereafter be increased
from time to time; |
|
iv. |
the relocation of your principal place of employment to a location that results in an increase in your one way commute of at least 40 miles more than your one way commute immediately prior to the Effective Time;
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v. |
a substantial increase in your business travel obligations from your business travel obligations immediately prior to the Effective Time; |
|
vi. |
the failure by Parent to pay to you when due any portion of the your current compensation; |
|
vii. |
the failure by Parent to comply with Section 4.8 of the Merger Agreement during the period specified in such section |
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viii. |
any purported termination of your employment which is not effected pursuant to a notice of termination satisfying the requirements of Section 5 of these Terms and Conditions of the CIC Agreement; for purposes of
the CIC Agreement, no such purported termination shall be effective; and |
|
ix. |
a material breach of the CIC Agreement (as modified by the Letter) or the Letter by Parent. |
Your right to terminate your employment for Good Reason shall not be affected by your incapacity due to Disability except as otherwise provided
in the definition of Severance.
If Good Reason first occurs during the last 30 days of the Term and you give notice of your intent to
terminate for Good Reason before the end of the Term, the correction period referred to in the first sentence of this definition of Good Reason shall end on the date of termination specified in Section 5.3 of the CIC Agreement.
|
b. |
Term means the period of time from the Effective Time through the second anniversary of the Effective Time. |
5. |
Other Agreements: This Letter shall supersede all employment and similar agreements between you and the Company (or any of its affiliates), provided that (a) except as modified hereby, the CIC
Agreement shall not be superseded hereby and shall remain in full force and effect, and (b) any restrictive covenant agreements between you and the Company or its affiliates shall be in addition to the covenants referenced in Section 3 of
this Letter, and shall not be superseded hereby and shall remain in full force and effect. |
2
6. |
Continued Employment: From and following the Effective Time, your employment will continue to be at-will and may be terminated either by you or by the Company (or its applicable affiliate) at any
time, subject to the terms and conditions of the CIC Agreement and/or the Non-CIC Agreement (as applicable). Upon termination of your employment with the Parent and its affiliates for any reason, and you hereby resign any and all positions and
offices you may hold with the Parent and its affiliates, effective upon any such termination of employment. |
7. |
Amendment; Waiver: No provision of this Letter may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by you, Parent and the Company.
|
8. |
Governing Law; Arbitration; Consent to Jurisdiction; Waiver of Jury Trial: |
|
a. |
This Letter will be governed, construed, and interpreted under the laws of the State of California without giving effect to any conflict of laws provisions. |
|
b. |
Any claim you wish to initiate arising out of or relating to this Letter (including Annex A hereto), the breach thereof, your employment with us, or the termination of that employment will be resolved by binding
arbitration before a single arbitrator in the City of San Francisco, California administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be
entered in any court having jurisdiction thereof. |
|
c. |
Any claim initiated by us arising out of or relating to this Agreement, the breach thereof, your employment or its termination, shall, at our election, be resolved in accordance with Sections 8(b) or 8(d), in our sole
discretion. |
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d. |
You hereby irrevocably submit to the jurisdiction of any state or federal court located in San Francisco, California; provided, however, that nothing herein shall preclude us from bringing
any suit, action or proceeding in any other court, including without limitation for the purposes of enforcing the provisions of this Section 8 or enforcing any judgment or award obtained by us. You waive, to the fullest extent permitted by
applicable law, any objection you now or hereafter have to personal jurisdiction or to the laying of venue of any such suit, action or proceeding brought in an applicable court described in this Section 8(d), and agree that you will not attempt
to deny or defeat such personal jurisdiction by motion or other request for leave from any court. You further agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any suit, action or proceeding
brought in any applicable court described in this Section 8(d) shall be conclusive and binding upon you and may be enforced in any other jurisdiction. To the extent that, notwithstanding Section 8(b) of this Letter, you bring an action in
any court, you agree to do so exclusively in the state or federal court located in San Francisco, California, provided that nothing herein shall waive the Companys right to demand that you comply with Section 8(b). YOU
EXPRESSLY AND KNOWINGLY WAIVE ANY RIGHT TO A JURY TRIAL IN THE EVENT THAT ANY ACTION ARISING OUT OF OR RELATING TO THIS LETTER (INCLUDING ANNEX A HERETO) OR THE BREACH THEREOF, OR YOUR EMPLOYMENT, OR THE TERMINATION THEREOF, IS LITIGATED OR
HEARD IN ANY COURT. |
9. |
Counterparts: This Letter may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same |
10. |
Headings: The Section and subsection headings in this Letter (including Annex A hereto) are for convenience only and shall not affect the meaning of any provisions. |
[Remainder of Page Intentionally Left Blank]
3
We look forward to a promising future as a combined entity and believe this opportunity will result in a mutually
beneficial and rewarding relationship! Please acknowledge your agreement to the terms of this Letter by your signature below.
Sincerely,
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XPO LOGISTICS, INC. |
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By: |
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/s/ Gordon Devens |
Gordon Devens Senior Vice President
and General Counsel |
Acknowledged and Agreed:
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/s/ Robert Bianco |
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September 4, 2015 |
ROBERT BIANCO |
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|
DATE |
ANNEX A
RESTRICTIVE COVENANTS
1. |
Covenant Not to Use Confidential Information to Solicit the Companys Customers and Carriers. |
|
a. |
Agreement Not to Use Confidential Information to Solicit. While employed by Parent or its affiliates (including the Company and its subsidiaries) (the Parent Group) and for the
two years thereafter, you agree that you will not (nor will you assist any other person or entity to), for any reason, either directly or indirectly, call on, contact, solicit or otherwise take away or disrupt, or attempt to call on, contact,
solicit or otherwise take away or disrupt, the relationship of the Parent Group with or business expectancy from any of the Parent Groups customers or carriers (i) on whose account you worked or with whom you had regular contact, or
(ii) as to whom you had access to Confidential Information (in either instance at any time within the last one year of your employment with the Parent Group). This undertaking on your part for our benefit is called your Non-Solicit
Covenant. |
|
b. |
You Acknowledge the Legitimacy, Reasonableness and Fairness of These Covenants to the Parent Group. You acknowledge that: (i) in the course of performing your duties as a sales employee and/or an
employee who has had and/or will have direct contact with the customers or carriers of the Parent Group and/or access to proprietary information about them, you will have access to, and be regularly exposed to, and in some cases will generate and
control, Confidential Information which is sensitive, and competitively valuable information about the Parent Group; (ii) the Parent Group has developed its Confidential Information through considerable time, effort and expense; (iii) the
relationships of the Parent Group with its customers, carriers, vendors, suppliers, business partners and employees, as well the Confidential Information of the Parent Group, constitute valuable and legitimate protectable business interests of the
Parent Group; (iv) the covenants in this Letter (including this Annex A) are reasonable and necessary to protect those interests, the Parent Groups Confidential Information and the Parent Groups goodwill; and (v) your
compliance with the covenants in this Letter (including this Annex A) following termination of your employment will not prevent you from earning a livelihood in a business similar to the business of the Parent Group, but, in any event, your
experience and capabilities are such that you now have and will have other opportunities to earn a livelihood and adequate means of support for yourself and your dependents. |
|
c. |
For purposes of this Letter (including this Annex A), Confidential Information means all information, written (whether generated or stored on magnetic, digital, photographic or other
media) or oral, not generally known, or proprietary to the Parent Group about the Parent Groups businesses, affairs, operations, products, services, customer and carrier lists, pricing strategies, operating processes, business methods and
procedures, information technology and information-gathering techniques and methods, business plans, financial affairs, and all other accumulated data, listings, or similar recorded matter useful in the businesses of the Parent Group, including by
way of illustration and not limitation: |
|
i. |
information about the business, affairs or operation of the Parent Group developed by you or which is furnished to you by any member of the Parent Group during your employment; |
|
ii. |
operating instructions, training manuals, procedures, and similar information; |
|
iii. |
information about customers, carriers, vendors and other with whom the Parent Group does business (e.g. customer, carrier or vendor lists, pricing, contracts, and activity records); |
|
iv. |
information about sales and marketing (e.g., plans and strategies); |
|
v. |
information about any other third parties that the Parent Group has a business relationship with or owes a duty of confidentiality to; and |
|
vi. |
all notes, observations, data, analyses, compilations, forecasts, studies or other documents prepared by you that contain or reflect any Confidential Information and which is not known to the public generally other than
as a result of your breach of this Letter (including this Annex A) or any confidentiality or similar covenant between you and any member of the Parent Group. |
However, we expressly acknowledge and agree that the term Confidential Information
excludes information which (A) is in the public domain or otherwise generally known to the trade, or (B) is disclosed to third parties other than by reason of your breach of your confidentiality obligations under this Letter (including
this Annex A) or any confidentiality or similar covenant between you and any member of the Parent Group, or (C) is learned of by you after the termination of your employment from any other party not then under an obligation of
confidentiality to the Parent Group.
2. |
Refraining from Disparaging Us. While employed by the Parent Group and thereafter, you agree never to disparage, malign or impugn the Parent Group or any of its officers, directors and employees.
|
3. |
Cooperating After Employment Ends. While employed by the Parent Group and thereafter, you agree to fully cooperate with the Parent Group in connection with any investigation, suit, action or
proceeding in which you may have relevant information or testimony, including but not limited to providing testimony at depositions or trial, which cooperation and appearance you fully agree to without the necessity of a subpoena or court order. If
your assistance is required after your employment has ended, we will reimburse you for your reasonable expenses and accommodate your personal and business schedule to the extent practicable. |
4. |
Consequences of Your Breach of Your Restrictive Covenants. We reserve the right to use any remedies available to us in law or in equity to enforce our rights under this Letter (including this Annex
A), generally, and your Non-Solicit Covenant and other covenants to us set forth in this Letter (including this Annex A), specifically. |
5. |
Severability. If any provision of this Letter (including this Annex A) or its application is held invalid, such invalidation shall not affect other provisions or applications hereof which can
be given effect without the invalid provisions or applications, and so that this objective may be achieved, the provisions hereof are declared to be severable. In the event of a final, non-reviewable, non-appealable determination that any covenant
of yours set forth in this Letter (including this Annex A) (whether in whole or in part) is void or constitutes an unreasonable restriction against you, such provision shall not be rendered void but shall be deemed to be modified to the
minimum extent necessary to make such provision enforceable for the longest duration and the greatest scope as may constitute a reasonable restriction under the circumstances. |
6. |
Interpretation. You agree that to the extent you become bound by a prior or subsequent written agreement with the Parent Group or any member thereof setting forth confidentiality, non-solicit,
anti-hiring, non-compete and similar covenants in favor of the Parent Group or any member thereof, such prior or subsequent agreement shall be enforceable independent of this Letter (including this Annex A), and shall not be deemed to modify
or supersede this Letter (including this Annex A) in any way, or to be modified or superseded by this Letter (including this Annex A) in any way. You and we acknowledge that it is our common and mutual intention that, notwithstanding
the terms of any such prior or subsequent agreement, this Letter (including this Annex A) and each such prior or subsequent agreement shall be enforceable severally, and that you will be bound by and subject to the most restrictive and
comprehensive restrictive covenants in any agreement with the Parent Group or any member thereof to which you are a party. You and we further expressly acknowledge and agree that there are no oral agreements between you and us pertaining to the
subject matter hereof. |
7. |
Survival. The provisions of this Letter (including this Annex A) shall survive termination of your employment regardless of the reason. |
A-2
EXHIBIT (d)(4)
STRICTLY CONFIDENTIAL
September 8,
2015
Joseph M. Dagnese
VIA HAND DELIVERY
Dear Joe,
Reference is made to the
Agreement and Plan of Merger among XPO Logistics, Inc. (Parent), Con-way, Inc. (the Company) and Canada Merger Corp., dated as of the date hereof (the Merger Agreement).
This letter agreement (this Letter) will become effective upon the Effective Time (as defined in the Merger Agreement). If the Effective Time does not occur, this Letter will not become effective and will be
null and void ab initio.
1. |
Termination of Employment: We hereby agree and acknowledge that, effective as of immediately following the Effective Time, your employment with the Company and its affiliates (including Parent) will be terminated
and you will be deemed to have incurred a Severance (as defined in the Severance Agreement (Change in Control) between you and the Company, dated as of February 10, 2014 (the CIC Agreement)), and that you
will become entitled to the payments and benefits set forth in Section 3.1 of the CIC Agreement. |
2. |
Waiver of Total Payment Adjustment: In consideration of the covenants and obligations referenced in Section 4 of this Letter and your provision of the Services (as defined in Section 6 of this Letter,
we hereby agree that, notwithstanding anything to the contrary in your CIC Agreement, in no event will your Total Payments (as defined in the CIC Agreement) be reduced pursuant to Section 4 of the CIC Agreement (including
Section 4.7 of the CIC Agreement). |
3. |
Covenant Consideration: In further consideration of the covenants and obligations referenced in Section 4 of this Letter and your provision of the Services (as defined in Section 6 of this Letter,
(a) subject to the approval of the Compensation Committee of Parents Board of Directors, effective as of the Effective Time, you will be granted an award of fully vested shares of Parent common stock with an aggregate grant date fair
value of $150,000 (the Shares) under the Parents Amended and Restated 2011 Omnibus Incentive Compensation Plan, as amended or restated from time to time, or any successor plan thereto (the Equity
Plan), (b) effective as of the Effective Time, you will receive a lump sum cash payment in an aggregate amount of $200,000 (the Cash Payment), and (c) effective as of the Effective Time, the written
release substantially in the form attached as Exhibit A to your CIC Agreement will be revised to provide for a mutual unconditional release by the Parent and its affiliates (including the Company and its affiliates) of you (other than with respect
to your obligations or restrictions arising under or referred or described in this Letter (including Annex A hereto) or with respect to any liability arising out of your fraud or willful misconduct in connection with, or relating to, your
employment with the Company and its affiliates). The Shares will be subject to a lock-up on sales, offers, pledges, contracts to sell, grants of any option, right or warrant to purchase, or other transfers or dispositions, whether directly or
indirectly, from the Effective Time until the second anniversary of the Effective Time (or, if earlier, your death or a Change of Control (as defined in the Equity Plan)) and all laws, rules, and regulations applicable to you;
provided that such lock-up shall not apply to Shares withheld, sold or otherwise transferred to Parent to satisfy the applicable tax withholding in connection with the grant of the Shares. |
4. |
Restrictive Covenants: The covenants set forth on Annex A are hereby incorporated by reference to this Letter as if fully set forth herein. |
5. |
Other Agreements: This Letter shall supersede all employment and similar agreements between you and the Company (or any of its affiliates),
provided that (a) except as modified hereby, the CIC Agreement shall not be superseded hereby and shall remain in full force and effect, (b) any restrictive covenant agreements between you and the Company or its affiliates
shall be in addition to the covenants reference in Section 4 of |
|
this Letter, and shall not be superseded hereby and shall remain in full force and effect and (c) this Letter shall not supersede the letter agreement dated June 17, 2015 between you
and the Company, including specifically the benefits payable to you pursuant to the Con-way Relocation Guide Plan A, including, without limitation: Lump Sum allowance for home finding and temporary living; home sale costs, including equity loss on
property; new home purchase closing costs; and household goods move, and temporary storage (up to three months). |
6. |
Consulting Services. Effective as of the Effective Time and continuing through March 31, 2016 (such period is referred to herein as the Term), at times mutually agreed upon by the parties,
in an amount not to exceed approximately ten (10) hours per month, you will provide consulting services as reasonably requested by XPO for the purpose of effectively transitioning your responsibilities and related matters (collectively, the
Services). In respect of your provision of the Services, you shall receive the payments and benefits set forth in Section 2 and Section 3 of this Letter, and you shall be reimbursed by XPO for all out-of-pocket expenses
reasonably incurred in connection with your provision of Services to XPO upon presentation of appropriate documentation and in accordance with Parents expense reimbursement policy. Except as provided in this Section 6, you shall not
receive compensation in respect of your provision of the Services. You acknowledge that you will not be an employee of Parent or the Company during the Term and your provision of the Services shall be done in your capacity as an independent
contractor, and that you may not, at any time, act as a representative for or on behalf of Parent or the Company for any purpose or transaction, and may not bind or otherwise obligate Parent or the Company in any manner whatsoever without obtaining
the prior written approval of Parent therefor. You and Parent hereby acknowledge and agree that all payments and benefits paid or made pursuant to this Letter represent fees for services as an independent contractor, and shall therefor be paid
without any deductions or withholdings taken therefrom for taxes or for any other purpose. You further acknowledge that Parent and the Company make no warranties as to any tax consequences regarding any payment or benefit hereunder, and specifically
agree that the determination of any tax liability or other consequences of any payment or benefit hereunder is your sole and complete responsibility and that you will pay all taxes, if any, assessed on such payments or benefits under the applicable
laws of any federal, state, local or other jurisdiction and, to the extent not so paid, will indemnify Parent or the Company, as applicable, for any taxes so assessed against Parent or the Company, as applicable. You also agree that during the Term,
you shall not be eligible to participate in any of the employee benefit plans or arrangements of Parent or the Company, or their respective affiliates. |
7. |
Amendment; Waiver: No provision of this Letter may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in a writing signed by you, Parent and the Company.
|
8. |
Governing Law; Arbitration; Consent to Jurisdiction; Waiver of Jury Trial: |
|
a. |
This Letter will be governed, construed, and interpreted under the laws of the State of Michigan without giving effect to any conflict of laws provisions. |
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b. |
Any claim you wish to initiate arising out of or relating to this Letter (including Annex A hereto), the breach thereof, your employment with us, or the termination of that employment will be resolved by binding
arbitration before a single arbitrator in the City of Detroit, Michigan, administered by the American Arbitration Association in accordance with its Commercial Arbitration Rules, and judgment on the award rendered by the arbitrator may be entered in
any court having jurisdiction thereof. |
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c. |
Any claim initiated by us arising out of or relating to this Agreement, the breach thereof, your employment or its termination, shall, at our election, be resolved in accordance with Sections 8(b) or 8(d), in our sole
discretion. |
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d. |
You hereby irrevocably submit to the jurisdiction of any state or federal court located in Detroit, Michigan; provided,
however, that nothing herein shall preclude us from bringing any suit, action or proceeding in any other court, including without limitation for the purposes of enforcing the provisions of this Section 8 or enforcing any judgment
or award obtained by us. You waive, to the fullest extent permitted by applicable law, any objection you now or hereafter have to personal jurisdiction or to the |
2
|
laying of venue of any such suit, action or proceeding brought in an applicable court described in this Section 8(d), and agree that you will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any court. You further agree that, to the fullest extent permitted by applicable law, a final and non-appealable judgment in any suit, action or proceeding brought in any applicable court
described in this Section 8(d) shall be conclusive and binding upon you and may be enforced in any other jurisdiction. To the extent that, notwithstanding Section 8(b) of this Letter, you bring an action in any court, you agree to do so
exclusively in the state or federal court located in Detroit, Michigan, provided that nothing herein shall waive the Companys right to demand that you comply with Section 8(b). YOU EXPRESSLY AND KNOWINGLY WAIVE ANY RIGHT TO
A JURY TRIAL IN THE EVENT THAT ANY ACTION ARISING OUT OF OR RELATING TO THIS LETTER (INCLUDING ANNEX A HERETO) OR THE BREACH THEREOF, OR YOUR EMPLOYMENT, OR THE TERMINATION THEREOF, IS LITIGATED OR HEARD IN ANY COURT. |
9. |
Counterparts: This Letter may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one and the same. |
10. |
Headings: The Section and subsection headings in this Letter (including Annex A hereto) are for convenience only and shall not affect the meaning of any provisions. |
[Remainder of Page Intentionally Left Blank]
3
Please acknowledge your agreement to the terms of this Letter by your signature below.
Sincerely,
|
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XPO LOGISTICS, INC. |
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By: |
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/s/ Gordon Devens |
Gordon Devens Senior Vice President
and General Counsel |
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Acknowledged and Agreed: |
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/s/ Joseph M. Dagnese |
|
|
|
September 8, 2015 |
JOSEPH M. DAGNESE |
|
|
|
DATE |
Annex A
RESTRICTIVE COVENANTS
1. |
Covenant Not to Solicit Restricted Customers and Carriers. |
|
a. |
Agreement Not to Solicit. For a period of two (2) years following the Effective Time (the Restricted Period), you agree that you will not (nor will you assist any
other person or entity to), for any reason, either directly or indirectly, call on, contact, solicit or otherwise take away or disrupt, or attempt to call on, contact, solicit or otherwise take away or disrupt, our relationship with or business
expectancy from any customer or carrier of Parent or its affiliates (including the Company and its subsidiaries) (the Parent Group) (i) on whose account you worked or with whom you had regular contact, or (ii) as
to whom you had access to Confidential Information (in either instance at any time within the one year prior to the Effective Time). This undertaking on your part for our benefit is called your Non-Solicit Covenant.
|
|
b. |
You Acknowledge the Legitimacy, Reasonableness and Fairness of Your Non-Solicit Covenant. You acknowledge that: (i) in the course of performing your duties as an employee who has had and/or will have
direct contact with the customers or carriers the Parent Group and/or access to proprietary information about them, you have had access to, and have been regularly exposed to, and in some cases have generated and controlled, Confidential Information
which is sensitive, and competitively valuable information about of the Parent Group; (ii) the Parent Group has developed its Confidential Information through considerable time, effort and expense; (iii) the relationships of the Parent
Group with its customers, carriers, vendors, suppliers, business partners and employees, as well its Confidential Information, constitute valuable and legitimate protectable business interests of the Parent Group; (iv) your Non-Solicit Covenant
is reasonable and necessary to protect those interests, the Confidential Information and goodwill of the Parent Group; and (v) your compliance with your Non-Solicit Covenant following termination of your employment will not prevent you from
earning a livelihood in a business similar to the business of the Parent Group, but, in any event, your experience and capabilities are such that you now have and will have other opportunities to earn a livelihood and adequate means of support for
yourself and your dependents. |
|
c. |
For purposes of this Letter (including this Annex A), Confidential Information means all information, written (whether generated or stored on magnetic, digital, photographic or other
media) or oral, not generally known, or proprietary to the Parent Group about the Parent Groups businesses, affairs, operations, products, services, customer and carrier lists, pricing strategies, operating processes, business methods and
procedures, information technology and information-gathering techniques and methods, business plans, financial affairs, and all other accumulated data, listings, or similar recorded matter useful in the businesses of the Parent Group, including by
way of illustration and not limitation: |
|
i. |
information about the business, affairs or operation of the Parent Group developed by you or which was furnished to you by any member of the Parent Group during your employment; |
|
ii. |
operating instructions, training manuals, procedures, and similar information; |
|
iii. |
information about customers, carriers, vendors and other with whom the Parent Group does business (e.g. customer, carrier or vendor lists, pricing, contracts, and activity records); |
|
iv. |
information about sales and marketing (e.g., plans and strategies); |
|
v. |
information about any other third parties that the Parent Group has a business relationship with or owes a duty of confidentiality to; and |
|
vi. |
all notes, observations, data, analyses, compilations, forecasts, studies or other documents prepared by you that contain or reflect any Confidential Information and which is not known to the public generally other than
as a result of your breach of this Letter (including this Annex A). |
However, we expressly acknowledge and agree that
the term Confidential Information excludes information which (A) is in the public domain or otherwise generally known to the trade, or (B) is disclosed
to third parties other than by reason of your breach of your confidentiality obligations under this Letter (including this Annex A), or (C) is learned of by you after the termination
of your employment from any other party not then under an obligation of confidentiality to the Parent Group.
2. |
Covenant Not to Compete. |
|
a. |
Duration and Geographic Scope. For the Restricted Period, you are not allowed to compete with the Parent Group in the Restricted Territory (geographic area) fixed below. This
undertaking on your part for our benefit is called your Non-Compete Covenant. |
|
b. |
Your Non-Compete Covenant. You expressly agree that during the Restricted Period, you will not (either directly or indirectly through others) have any of the following business relationships anywhere
within your Restricted Territory: |
|
i. |
perform any services, whether as an employee, agent or independent contractor, which are the same as or reasonably related to the services you performed while employed by the Company or its affiliates during the two
years prior to the Effective Time, for a Competing Business (defined below); |
|
ii. |
own any financial interest in a Competing Business (e.g., as a partner, member, principal, shareholder or other owner (other than a holder of less than 1% of the outstanding voting shares of any publicly held company));
or |
|
iii. |
loan money to, borrow money from, lease to, or have any other financial dealings with a Competing Business (except for ownership of less than 1% of the outstanding voting shares of any publicly held company).
|
|
c. |
Definition of a Competing Business. You and Parent agree that a Competing Business means any individual or business (e.g., a corporation, partnership or limited
liability company) engaged in the business of the Parent Group as it is conducting it immediately following the Effective Time (including any business any member of the Parent Group is then actively considering or was considering at any time during
the 12 month period ending immediately following the Effective Time), including by way of example: |
|
i. |
any providers of transportation and transportation logistics services, including only by way of illustration, freight brokerage, freight forwarding, expediting, internet load boards, last-mile delivery logistics,
truckload or less-than-truckload carriage, contract logistics or intermodal providers, or firms such as CH Robinson, Expeditors International of Washington, Inc., Echo Global Logistics Inc., Total Quality Logistics, TransCore, DHL, FedEx
Corporation, United Parcel Service, Inc., Old Dominion Freight Line, YRC Worldwide Inc., J.B. Hunt Transport Services, Inc., Kühne + Nagel International AG, syncreon, Neovia Logistics and Hub Group Inc.; and |
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ii. |
an individual or business that otherwise competes with the business of the Parent Group anywhere in the Restricted Territory. |
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d. |
Your Restricted Territory. You agree that your Restricted Territory means any state, province, territory or country (including, without limitation, the United States, Canada,
Mexico, and/or the European Union) in which the Parent Groups customers are located or any member of the Parent Group performs services for or on behalf of the Parent Groups customers or carriers. |
|
e. |
Certain Exceptions. Notwithstanding anything in this Section 2 to the contrary, you and we hereby agree as follows: |
|
i. |
The Non-Compete Covenant shall not restrict you from (i) being an employee of a company that ships goods or materials of any kind (such as, for
purposes of illustration only, Procter & Gamble or General Motors), including, but not limited to, companies that are engaged in manufacturing, assembly, retailing, e-commerce, oil and gas, chemicals and technology, among other things (any
|
A-2
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such company, a Shipper), or (ii) performing any supply chain management and engineering services, including procurement of transportation, logistics, storage and
cross-dock management services for a Shipper; provided, that, in each case, you may not be employed by any Shipper a material portion of the business of which is providing transportation and/or logistics services for third parties in exchange
for compensation, including, in any event, the following companies: Amazon, RR Donnelley and Google (or their affiliates). For the avoidance of doubt, you may provide as an agent or consultant any services for a Shipper that you are permitted to
provide directly as an employee. |
|
ii. |
The Restricted Period shall be deemed to be 12 months with respect to any Competing Business that engages only in contract logistics, pure play transportation management services, warehousing and storage (including
frozen and cold chain). |
|
iii. |
The Non-Compete Covenant shall not restrict you from engaging in the moving and storage of residential and household goods (as done by companies such as (but not limited to) Graebel Moving & Storage).
|
|
f. |
You Acknowledge the Legitimacy, Reasonableness and Fairness of Your Non-Compete Covenant. You acknowledge that: (i) in the course of performing your duties as an employee who has had and/or will have
direct contact with the customers or carriers the Parent Group and/or access to proprietary information about them, you have had access to, and have been regularly exposed to, and in some cases have generated and controlled, Confidential Information
which is sensitive, and competitively valuable information about of the Parent Group; (ii) your Non-Compete Covenant is essential to protect the business and goodwill of the Parent Group because, were you to enter into activities competitive
with the business of the Parent Group, you would cause the Parent Group and/or its individual members substantial harm (and not only because of your post-employment activities, but because of the impact those activities might have on the Parent
Groups other employees and former employees); and (iii) although your compliance with your Non-Compete Covenant may prevent you from earning a livelihood in a business similar to the business of the Parent Group, your experience and
capabilities are such that you now have and will have other opportunities to earn a livelihood and adequate means of support for yourself and your dependents. |
3. |
Consequences of Your Breach of Your Non-Solicit and Non-Compete Covenants. We reserve the right to use any remedies available to us in law or in equity to enforce our rights under this Letter (including
this Annex A), generally, and your Non-Compete Covenant, Non-Solicit Covenant and other covenants to us set forth in this Letter (including this Annex A), specifically. In addition to any other legal remedies we may be entitled to, you
agree that if you breach your Non-Compete Covenant and/or Non-Solicit Covenant, you will be required, within ten business days following a final judicial determination that you have breached your Non-Compete Covenant and/or Non-Solicit Covenant, to
return to us (i) the Shares, including any proceeds received in connection with the sale or disposition of the Shares, in each case, including any dividends and distributions that you received in respect of such Shares and net of any taxes paid
by you in respect of such Shares, and (ii) the Cash Payment, net of any taxes paid by you on such payment. You further agree that if you violate your Non-Compete Covenant and/or your Non-Solicit Covenant, the Restricted Period shall be extended
by a period of time equal to that period beginning when your activities constituting such violation commenced and ending when such violative activities terminated. |
4. |
Severability. If any provision of this Letter (including this Annex A) or its application is held invalid, such invalidation shall not affect other provisions or applications hereof which can be
given effect without the invalid provisions or applications, and so that this objective may be achieved, the provisions hereof are declared to be severable. In the event of a final, non-reviewable, non-appealable determination that any covenant of
yours set forth in this Letter (including this Annex A) (whether in whole or in part) is void or constitutes an unreasonable restriction against you, such provision shall not be rendered void but shall be deemed to be modified to the minimum
extent necessary to make such provision enforceable for the longest duration and the greatest scope as may constitute a reasonable restriction under the circumstances. |
A-3
5. |
Interpretation. You agree that to the extent you become bound by a prior or subsequent written agreement with the Parent Group or any member thereof setting forth confidentiality, non-solicit, anti-hiring,
non-compete and similar covenants in favor of the Parent Group or any member thereof, such prior or subsequent agreement shall be enforceable independent of this Letter (including this Annex A), and shall not be deemed to modify or supersede
this Letter (including this Annex A) in any way, or to be modified or superseded by this Letter (including this Annex A) in any way. You and we acknowledge that it is our common and mutual intention that, notwithstanding the terms of
any such prior or subsequent agreement, this Letter (including this Annex A) and each such prior or subsequent agreement shall be enforceable severally, and that you will be bound by and subject to the most restrictive and comprehensive
restrictive covenants in any agreement with the Parent Group or any member thereof to which you are a party. You and we further expressly acknowledge and agree that there are no oral agreements between you and us pertaining to the subject matter
hereof. |
6. |
Survival. The provisions of this Letter (including this Annex A) shall survive termination of your employment regardless of the reason. |
A-4
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