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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
WORLDWAY CORPORATION
(Name of Subject Company)
WORLDWAY CORPORATION
(Title of Person Filing Statement)
COMMON STOCK, $.50 PAR VALUE PER SHARE
(Name of Class of Securities)
98155F 10 3
(CUSIP Number of Class of Securities)
JOHN B. YORKE
VICE PRESIDENT AND GENERAL COUNSEL
WORLDWAY CORPORATION
400 TWO COLISEUM CENTER, 2400 YORKMONT ROAD
CHARLOTTE, NORTH CAROLINA 28217
(704) 329-0123
(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of the Person Filing Statement)
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COPIES TO:
ROBIN L. HINSON
ROBINSON, BRADSHAW & HINSON, P.A.
1900 INDEPENDENCE CENTER
101 NORTH TRYON STREET
CHARLOTTE, NORTH CAROLINA 28246
(704) 377-2536
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is WorldWay Corporation, a North Carolina
corporation (the "Company"), and the address of the principal executive offices
of the Company is 400 Two Coliseum Center, 2400 Yorkmont Road, Charlotte, North
Carolina 28217. The title of the class of equity securities to which this
Statement relates is the common stock, $.50 par value per share (the "Shares"),
of the Company.
ITEM 2. TENDER OFFER OF THE BIDDER
This Statement relates to the tender offer by ABC Acquisition Corporation,
a North Carolina corporation (the "Purchaser"), which is a wholly owned
subsidiary of Arkansas Best Corporation, a Delaware corporation (the "Parent"),
disclosed in a Tender Offer Statement on Schedule 14D-1 dated July 14, 1995 (the
"Schedule 14D-1"), to purchase all of the outstanding Shares at a price of
$11.00 per Share, net to seller in cash (the "Offer Price"), upon the terms and
conditions set forth in the Offer to Purchase dated July 14, 1995 (the "Offer to
Purchase"), and in the related Letter of Transmittal (which together constitute
the "Offer" and are contained within the Schedule 14D-1). Capitalized terms used
herein and not otherwise defined herein have the meanings assigned thereto in
the Offer.
The Offer is conditioned upon, among other things, there having been
validly tendered and not withdrawn prior to the expiration of the Offer that
number of shares that represents at least a majority of the Shares outstanding
on a fully diluted basis (the "Minimum Condition"). See Offer to
Purchase -- "Introduction -- The Offer -- Terms of the Offer."
The Offer is being made pursuant to an Agreement and Plan of Merger dated
as of July 8, 1995, by and among Parent, the Purchaser, and the Company (the
"Merger Agreement"). The Merger Agreement provides that, following completion of
the Offer and subject to the terms and conditions of the Merger Agreement, the
Purchaser will be merged with and into the Company (the "Merger"), with the
Company being the surviving corporation (the "Surviving Corporation"). At the
time the Merger is effective, each Share then outstanding (other than Shares
held by the Purchaser, Parent, the Company or any of their respective
subsidiaries and other than Shares held by shareholders who have exercised the
right (to the extent such right is available by law) to demand and to receive
the fair value of such Shares (the "Dissenting Shares") under Article 13 of the
North Carolina Business Corporation Act (the "NCBCA")) will be cancelled and
converted into the right to receive from the Surviving Corporation $11.00 in
cash (the "Merger Consideration"). A copy of the Merger Agreement is filed
herewith as Exhibit 1 and incorporated herein by reference.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and address of the Company, which is the person filing this
Statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding and
each actual or potential conflict of interest between the Company or its
affiliates and (i) its executive officers, directors or affiliates or (ii) the
Purchaser, its executive officers, directors, or affiliates is described in the
attached Annex I (which is incorporated herein by reference) or set forth below.
THE MERGER AGREEMENT
The summary of the Merger Agreement contained in the Offer to Purchase
which has been filed with the Securities and Exchange Commission (the
"Commission") as an exhibit to the Schedule 14D-1, a copy of which is enclosed
with this Schedule 14D-9, is incorporated herein by reference. Such summary
should be read in its entirety for a more complete description of the terms and
provisions of the Merger Agreement. The following is a summary of certain
portions of the Merger Agreement that describe the terms of the Offer and that
relate to arrangements among the Company, Parent and the Company's executive
officers and directors.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the initial public announcement of
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the Offer. The obligation of Purchaser to accept for payment Shares tendered
pursuant to the Offer is subject to the satisfaction of the Minimum Condition
and certain other conditions that are described in Section 15 of the Offer to
Purchase. Purchaser and Parent have agreed with the Company that, without the
prior written consent of the Company, no change in the Offer may be made that
decreases the price per Share payable in the Offer, that changes the form of
consideration payable in the Offer, that reduces the number of Shares sought
pursuant to the Offer, that modifies or adds to the conditions set forth in the
Merger Agreement, or that changes or waives the condition that there shall have
been validly tendered and not withdrawn prior to the expiration that number of
Shares that represents at least a majority of the Shares outstanding on a fully
diluted basis.
The Purchaser may, without the consent of the Company, extend the Offer (i)
beyond any scheduled expiration date if at such scheduled expiration date any of
the conditions to the Purchaser's obligation to accept for payment, and pay for,
Shares are not satisfied or waived, until such time as such conditions are
satisfied or waived and (ii) for any period required by any rule, regulation,
interpretation or position of the Commission or staff thereof applicable to the
Offer.
Board of Directors. The Merger Agreement provides that, promptly upon the
acceptance for payment of any Shares by the Purchaser pursuant to the Offer, the
Purchaser shall be entitled to designate such number of directors, rounded up to
the next whole number, on the Board of Directors of the Company as will give the
Purchaser, subject to compliance with Section 14(f) of the Exchange Act,
representation on the Board of Directors equal to at least that number of
directors that equals the product of the total number of directors on such Board
(giving effect to the directors elected pursuant to this sentence) multiplied by
the percentage that the aggregate number of Shares held by the Purchaser,
including Shares accepted for payment pursuant to the Offer, bears to the number
of Shares then outstanding, and the Company and its Board of Directors shall, at
such time, take any and all such action needed to cause the Purchaser's
designees to be appointed to the Company's Board of Directors (including to
cause directors to resign).
Indemnification and Insurance. The Merger Agreement provides that Parent
and the Surviving Corporation agree that the indemnification obligations set
forth in the Company's Articles of Incorporation, as amended, and the Amended
and Restated By-laws on the date of the Merger Agreement and the indemnification
obligations set forth on a schedule to the Merger Agreement shall survive the
Merger and shall not be amended, repealed or otherwise modified for a period of
six years after the Effective Time in any manner that would adversely affect the
rights thereunder of individuals who on or prior to the Effective Time were
directors, officers, employees or agents of the Company (the "Indemnified
Parties").
The Merger Agreement provides that for six years from the Effective Time
the Surviving Corporation shall either (x) maintain in effect the Company's
current directors' and officers' liability insurance covering those persons who
are covered on the date of the Merger Agreement by the Company's directors' and
officers' liability insurance policy; provided, however, that in no event shall
the Surviving Corporation be required to expend in any one year an amount in
excess of 200% of the annual premiums currently paid by the Company for such
insurance which the Company represented to be $105,000 for the twelve-month
period ended May 12, 1996; and, provided, further, that if the annual premiums
of such insurance coverage exceed such amount, the Surviving Corporation shall
be obligated to obtain a policy with the greatest coverage available for a cost
not exceeding such amount or (y) cause Parent's directors' and officers'
liability insurance then in effect to cover those persons who are covered on the
date of the Merger Agreement by the Company's directors' and officers' liability
insurance policy with respect to those matters covered by the Company's
directors' and officers' liability policy (such coverage to be not less
favorable than the coverage provided under such policy to Parent's directors and
officers). Notwithstanding the foregoing, on and after the date two years from
the Effective Time, Parent, at its option, may agree in writing to guarantee or
assume indemnification obligations in lieu of maintaining the insurance
described in clauses (x) or (y) above.
For two years from the Effective Time, the Surviving Corporation shall
maintain in effect the Company's current or similar professional liability
insurance with respect to Company employee attorneys so long as premium amounts
do not exceed $8,000 per year; provided, however, that if the annual premiums of
such
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insurance coverage exceed such amount, the Surviving Corporation shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
AGREEMENTS WITH OFFICERS AND DIRECTORS
The Company entered into an employment agreement with Mr. Scott on June 2,
1995 that terminates three (3) years after either party gives notice of
termination. The contract calls for annual compensation of not less than
$250,000 and certain other benefits and perquisites. The agreement also
prohibits Mr. Scott from competing with the Company, or any subsidiary of the
Company, during the term of the Agreement and for six months thereafter. A copy
of the employment agreement is filed herewith as Exhibit 8 and incorporated by
reference herein.
The Company and certain executives, including Messrs. Scott and Hertwig,
have entered into certain amendments to the severance agreements between the
Company and such executives (described in Annex I -- "Compensation of
Officers -- Officer Severance Agreements"). The amendments provide that,
following a change of control, if the officer's employment is terminated for any
reason (including resignation) during the six-month period after the first
anniversary of the change of control, the officer will be entitled to receive a
payment in cash equal to 2.99 times his average W-2 earnings for the five-year
period that immediately precedes the year in which termination occurs. A form of
such amendments is filed herewith as Exhibit 9 and incorporated by reference
herein.
On June 2, 1995, the Company granted certain stock options to certain
executive officers of the Company pursuant to its 1995 Nonqualified Stock Option
Plan, which is described in the Proxy Statement distributed in connection with
the Company's annual meeting of shareholders on May 3, 1995, the pertinent
portion of which is filed herewith as Exhibit 10 and incorporated herein by
reference. See Item 6 below, which is incorporated herein by reference.
CERTAIN CONFLICTS
Vesting of stock options granted to executive officers and directors under
certain of the Company's stock option plans is accelerated under certain
circumstances involving a change of control of the Company. The Company has
entered into severance agreements with certain executives, including Messrs.
Scott and Hertwig, that provide for continued compensation in the event of
certain qualifying terminations of their employment within 24 months after a
change of control. The benefits payable to certain officers of the Company and
its subsidiaries under the Company's Supplemental Benefit Plan are subject to
accelerated payment in the event of a change of control of the Company. The
acquisition of Shares in the Offer will constitute a change of control under
such stock option plans, such severance agreements, and the Supplemental Benefit
Plan. See Annex I -- "Compensation of Officers."
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors has
unanimously approved the Merger Agreement and the transactions contemplated
thereby and recommends that the shareholders of the Company accept the Offer and
tender all of their Shares pursuant to the Offer.
(b) BACKGROUND; REASONS FOR THE RECOMMENDATION. The Company is a holding
company with headquarters in Charlotte, North Carolina. The Company was
originally incorporated in 1982 as Carolina Freight Corporation and changed its
name in May 1995 to WorldWay Corporation. The Company owns seven operating
subsidiaries, which offer domestic and international surface transportation
services, logistics management, and certain other transportation-related
services. Its subsidiaries include three regional less-than-truckload ("LTL")
trucking companies: Carolina Freight Carriers Corporation ("Carolina Freight
Carriers"), based in Cherryville, North Carolina; G.I. Trucking Company
("G.I."), based in LaMirada, California; and Red Arrow Freight Lines, Inc. ("Red
Arrow"), based in Dallas, Texas; and one truckload carrier, Cardinal Freight
Carriers, Inc. ("Cardinal"), based in Concord, North Carolina. The Company also
owns The Complete Logistics Company ("Complete Logistics"), based in Buena Park,
California, which provides dedicated truckload, metropolitan LTL, and
warehousing services; Innovative Logistics Incorporated
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("Innovative Logistics"), based in Fort Mill, South Carolina, which provides
transportation-related services including intermodal shipping, rate negotiation,
and freight payment services; and CaroTrans International, Inc. ("CaroTrans"), a
non-vessel operating common carrier based in Cherryville, North Carolina, which
provides international transportation of exported and imported goods.
Historically, the largest part of the Company's revenues has been generated
by its LTL carriers. Through 1991, the Company's LTL operations were generally
profitable; however, deregulation of the trucking industry in the 1980s led to
dramatic changes in the business. While G.I. Trucking has remained profitable,
Carolina Freight Carriers and Red Arrow suffered losses of $668,000 in 1992,
$7.5 million in 1993, and $4.8 million in 1994. The ability of Carolina Freight
Carriers and Red Arrow to avoid a general work stoppage by the International
Brotherhood of Teamsters affecting most unionized trucking companies reduced
1994 losses.
The Company has made several major changes in its operations in an effort
to restore the profitability of its LTL carriers. Among these were major
cost-cutting initiatives, the establishment of a system of metropolitan and
regional distribution centers, restructuring of top management positions, and
implementation of a receivables financing facility to reduce financing costs.
Beginning early in 1994, the Board of Directors also began exploring
long-range strategic options to maximize the value of the Company's stock in the
face of the declining performance of the LTL carriers. At its meeting on March
7, 1994, the Board of Directors began to review a range of possible strategies
identified by the Company's management. On April 11, 1994, the Board authorized
management to engage Donaldson, Lufkin and Jenrette Securities Corporation
("DLJ") to provide advice on strategic alternatives. With the advice of DLJ, the
Board continued to examine long-term alternatives during 1994 and the first two
quarters of 1995.
On January 31, 1994, the Company's Chairman and Chief Executive Officer,
Lary R. Scott, met with Robert A. Young, III, President and Chief Executive
Officer of Parent, at Mr. Young's request, to discuss the potential of Parent
pursuing the acquisition of the Company. On February 16, 1994, Mr. Young, Mr.
William A. Marquard, Chairman of Parent, and a representative from Morgan
Stanley & Co. Incorporated, financial advisor to Parent, met with Mr. Scott and
Mr. K.G. Younger, the former Chairman of the Company, to discuss the issues and
possibilities surrounding such a transaction. During the remainder of the first
quarter of 1994, certain executives of Parent commenced an analysis of the
Company based upon publicly available information, but this activity was halted
in April 1994 when Parent was in the midst of a strike and, subsequently, Parent
pursued and completed two other acquisitions in the second half of 1994.
At its meeting on July 6, 1994, the Company's Board authorized Mr. Scott
and representatives of DLJ to identify and contact the most likely potential
candidates for a possible purchase of or combination with the Company or one or
more of its subsidiaries. During the next few months, Mr. Scott contacted
several firms to assess their preliminary interest in a purchase or combination.
DLJ representatives also contacted one potential purchaser. This process
revealed some preliminary interest by potential strategic purchasers, but no
concrete proposals were received.
The strike and work stoppage at the Company's LTL competitors during the
second quarter of 1994 improved the operating results of the Company's LTL
carriers; however, performance declined during the latter part of 1994 and into
1995. The Company reported a consolidated net loss of $4.5 million for the first
quarter of 1995, and announced on June 8, 1995, that it anticipated a second
quarter consolidated net loss in a range of $11 million to $12.5 million. The
Company's management continued to implement operational changes, initiated an
examination of ways to restructure the Company's working capital financing to
provide greater liquidity, and intensified efforts to identify possible
strategic alternatives. In addition, the Company's management contacted several
additional potential purchasers and furnished nonpublic information to one
potential purchaser in addition to Parent.
On May 25, 1995, Mr. Scott and Mr. Young met in Charlotte, at Mr. Young's
request, and discussed generally the idea of the merger. At the meeting, Mr.
Young expressed interest in obtaining detailed nonpublic information regarding
the Company's operations in order to evaluate a possible acquisition.
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On June 8, 1995, Mr. Scott traveled to Fort Smith, Arkansas, headquarters
of Parent, to meet with Mr. Young. At that meeting, Mr. Scott and Mr. Young
discussed preliminarily the range of prices that Mr. Scott might recommend to
the Company's Board of Directors, but no agreement was reached. Mr. Scott and
Mr. Young agreed that the Company would furnish nonpublic information to Parent,
and Parent signed a confidentiality and standstill letter agreement, filed
herewith as Exhibit 7 and incorporated herein by reference.
During the periods of June 13 through June 15, and June 23 through June 27,
representatives of Parent and of Morgan Stanley & Co., Parent's investment
advisor, visited several of the Company's facilities, met with certain
representatives of the Company's management, and reviewed various documents and
detailed financial information regarding the Company's operations.
On June 26, Parent forwarded to the Company a proposed draft Merger
Agreement. The Company reviewed the draft agreement, and forwarded comments and
questions to Parent on June 29. The Company's general counsel, John B. Yorke,
other Company counsel, and representatives of its outside counsel had a
conference call on June 30 with Parent's general counsel, Richard F. Cooper, and
representatives of Parent's outside counsel to review the Company's comments and
discuss various issues in the draft. That same evening, Mr. Scott and Mr. Young
agreed to meet on July 5 at the Company's offices in Charlotte to discuss the
draft agreement and hold further conversations regarding a proposed purchase
price.
Messrs. Scott, Young, Cooper, Yorke and other management representatives of
the Company and Parent, and representatives of the Company's and Parent's
respective outside counsel, met on July 5 in Charlotte. Mr. Scott and Mr. Young
had further discussions regarding a purchase price that each of them would be
willing to recommend to their respective boards of directors, and discussed a
price of $11.00 per share. Messrs. Scott and Young agreed that Parent would hold
a meeting of its board of directors on July 7 and that the Company would call a
meeting for July 8 to consider a possible transaction.
On July 6, Parent sent to the Company a revised draft Merger Agreement. The
Company provided comments on the revised draft to the Parent on July 7. Parent's
board of directors approved the proposed Merger Agreement and the proposed
acquisition, at a price of $11.00 per share, at its meeting on July 7.
The Board of Directors of the Company met on Saturday, July 8, at the
Company's Charlotte offices, to review the proposed Merger Agreement.
Representatives of DLJ and the Company's outside counsel attended the meeting.
After reviewing the transaction with the Company's legal and financial advisors
and hearing a presentation by DLJ, the Board discussed and unanimously approved
the proposed Merger Agreement and all transactions contemplated thereby. With
respect to the Offer, the Board of Directors unanimously recommended that the
shareholders of the Company accept the Offer and tender all of their Shares
pursuant to the Offer.
Copies of the press releases of the Company and Parent announcing the
execution of the Merger Agreement are filed herewith as Exhibits 3 and 4 and are
incorporated herein by reference thereto. A copy of a letter to shareholders of
the Company, which accompanies this Schedule 14D-9, is filed herewith as Exhibit
5 and is incorporated herein by reference.
In reaching its conclusion and recommendation described above, the Board of
Directors considered the following factors:
1. the business, results of operations, and financial condition of the
Company;
2. the rapidly deteriorating performance of Carolina Freight Carriers;
3. alternatives to the Merger, including an analysis of the value that
might be achieved for the Company's shareholders through a shutdown and
liquidation of its unprofitable subsidiaries;
4. the Company's discussions with its working capital lenders and
other potential lenders;
5. the terms and conditions of the Merger Agreement;
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6. the opinion of DLJ to the effect that, as of the date of its
opinion and based upon and subject to certain matters stated therein, the
consideration to be received by the holders of Shares pursuant to the Offer
and the Merger was fair to such holders from a financial point of view.
(The full text of DLJ's written opinion, which sets forth the assumptions
made, matters considered and limitations on the review undertaken by DLJ,
is attached hereto as Exhibit 6 and is incorporated herein by reference
thereto. SHAREHOLDERS ARE URGED TO READ THE OPINION OF DLJ CAREFULLY IN ITS
ENTIRETY.);
7. the fact that the Offer is not subject to a due diligence condition
or a general financing condition, but is subject to receipt by Parent of
funding of its bank commitment letter, which is subject, among other
things, to a due diligence condition;
8. the fact that the Merger Agreement, which prohibits the Company,
its subsidiaries or its affiliates from initiating, soliciting or
encouraging any potential acquisition transaction, does permit the Company
(conditioned upon the execution of confidentiality agreements) to furnish
nonpublic information to, allow access by, and participate in discussions
and negotiations with any third party that has submitted an unsolicited
acquisition proposal to the Company, provided that the Board of Directors,
after consultation with outside counsel, determines that failure to do so
would likely constitute a breach of its fiduciary duties;
9. the fact that the Company had, during the past year, contacted
those firms that management and DLJ viewed as the most likely candidates
for an acquisition of, or combination with, all or part of the Company, and
that none of such firms other than Parent had submitted a concrete proposal
with respect to an acquisition transaction;
10. the concern that public disclosure of a sale process might have a
damaging effect on the Company's employee and customer relations;
11. the provisions of the Merger Agreement that require the Company to
pay the Parent a termination fee of $1.75 million and reimburse the
Purchaser for its out-of-pocket expenses of up to $500,000 under certain
circumstances;
12. the regulatory approvals required to consummate the Offer and
Merger and the likelihood of receiving all such approvals; and
13. the likely impact of the Merger on employees of the Company,
customers, suppliers, and the communities and markets in which the Company
operates.
The Board of Directors did not assign relative weights to the factors or
determine that any factor was of particular importance, and the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
DLJ has been retained by the Company to act as the Company's exclusive
financial advisor with respect to the Offer and the Merger. Pursuant to an
engagement letter with DLJ, the Company has agreed to pay DLJ for its services a
transaction fee equal to $1,800,000, less any quarterly or monthly fees paid
since their engagement began, and less fees paid in connection with the fairness
opinion. The Company has also agreed to reimburse DLJ for its out-of-pocket
expenses, including the fees and expenses of its counsel, and to indemnify DLJ
and certain related parties against certain liabilities, including liabilities
under the federal securities laws. In the ordinary course of business, DLJ and
its affiliates may actively trade the debt and equity securities of the Company
and the Purchaser for their own account and for the accounts of customers and,
accordingly, may at any time hold a long or short position in such securities.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained, or compensated any person to make solicitations
or recommendations to the Company's shareholders with respect to the Offer.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) On June 2, 1995, pursuant to the employee option grant provision of the
1995 Nonqualified Stock Option Plan, approved by the shareholders on May 3,
1995, the Company granted options to purchase 480,000 Shares to certain
employees at an exercise price of $9.625 (the market price of the Shares on that
date). Of these options, the following were granted to executive officers of the
Company:
James Hertwig.............................................. 70,000
James Justiss.............................................. 5,000
Shawn W. Poole............................................. 30,000
Robert C. Rains............................................ 20,000
D.E. Randolph.............................................. 23,000
Lary R. Scott.............................................. 140,000
David D. Taggart........................................... 30,000
John B. Yorke.............................................. 32,000
Except as disclosed in the preceding sentence, there have been no
transactions in Shares which were effected during the past 60 days by the
Company, or, to the best knowledge of the Company, any executive officer,
director, affiliate or subsidiary of the Company.
(b) Robert C. Rains and David D. Taggart, officers of subsidiaries of the
Company, do not presently intend to tender Shares to the Purchaser pursuant to
the Offer. With the exception noted in the preceding sentence, to the best
knowledge of the Company, (i) all of its executive officers, directors,
affiliates or subsidiaries presently intend to tender shares to the Purchaser
pursuant to the Offer and (ii) none of its executive officers, directors,
affiliates or subsidiaries presently intends to otherwise sell any Shares which
are owned beneficially or held of record by such persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as referred to in Item 3 (b) or Item 4 hereof, the Company is
not engaged in any other negotiation in response to the Offer which relates to
or would result in (i) an extraordinary transaction such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described above or in Item 3(b), there are no transactions,
board resolutions, agreements in principle or signed contracts in response to
the Offer which relate or would result in one or more of the matters referred to
in Item 7(a).
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
(a) NORTH CAROLINA TENDER OFFER DISCLOSURE ACT. The North Carolina Tender
Offer Disclosure Act (the "Tender Offer Disclosure Act") applies to tender
offers for equity securities of a North Carolina corporation. The Tender Offer
Disclosure Act requires the Purchaser to file a statement with the North
Carolina Secretary of State relating to the Offer and contains prohibitions
against deceptive practices in connection with making a tender offer. In Eure v.
Grand Metropolitan Limited, a North Carolina Superior Court held that the Tender
Offer Disclosure Act's 30-day notice period prior to the commencement of a
tender offer is unenforceable and preempted by the Exchange Act. The Purchaser
has informed the Company that it plans to file concurrently with the Commission
and the North Carolina Secretary of State a Tender Offer Statement on Schedule
14D-1, together with all exhibits thereto, upon commencement of the Offer.
(b) REQUIRED REGULATORY APPROVALS
General. The Company is not aware of any licenses or regulatory permits
that are material to the business of the Company and its subsidiaries, taken as
a whole, that might be adversely affected by the Purchaser's acquisition of
Shares as contemplated in the Offer or of any approval or other action by any
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Governmental Entity that would be required for the acquisition or ownership of
Shares by the Purchaser as contemplated in the Offer, except as otherwise
described in the Offer to Purchase. While, except as otherwise expressly
described below, the Purchaser does not presently intend to delay the acceptance
for payment of or payment for Shares tendered pursuant to the Offer pending the
outcome of any such matter, there can be no assurance that any such approval or
other action, if needed, would be obtained or would be obtained without
substantial conditions or that failure to obtain any such approval or other
action might not result in consequences adverse to the Company's business or
that certain parts of the Company's business might not have to be disposed of if
such approvals were not obtained or such other actions were not taken or in
order to obtain any such approval or other action. If certain types of adverse
action are taken with respect to the matters discussed below, the Purchaser
could decline to accept for payment or pay for any Shares tendered.
The Voting Trusts. Six subsidiaries of the Company ("ICC Subsidiaries")
engage in the interstate transportation of property, an activity causing those
subsidiaries, and acquisition of control of those subsidiaries, to be subject to
the jurisdiction of the Interstate Commerce Commission ("ICC"). Provisions of
the Interstate Commerce Act require approval of, or the granting of an exemption
from approval by, the ICC for the acquisition of control of two or more carriers
subject to the jurisdiction of the ICC ("Carriers") by a person that is not a
Carrier and for the acquisition or control of a Carrier by a person that is not
a Carrier but that controls any number of Carriers. As a result, ICC exemption
or approval is required for Purchaser to acquire control of the Company's ICC
Subsidiaries. The exemption from or approval by the ICC of the acquisition by
Parent or Purchaser of the Company or its ICC Subsidiaries is not a condition of
the Offer.
To ensure that the Purchaser does not acquire and directly or indirectly
exercise control over the ICC Subsidiaries in violation of the requirements of
the Interstate Commerce Act, the Purchaser intends to cause the Company, and the
Company has agreed in the Merger Agreement, to deposit the shares of its ICC
Subsidiaries ("ICC Subsidiary Shares") in separate voting trusts (the "Voting
Trusts") substantially in accordance with the terms and conditions of a voting
trust agreement (the "Voting Trust Agreement") to be entered into with the
Trustee thereof, promptly upon Purchaser's acquisition of Shares pursuant to the
Offer. The Offer is conditioned upon the issuance by the staff of the ICC of an
informal, non-binding opinion, without the imposition of any conditions
reasonably unacceptable to the Purchaser, that the use of the Voting Trusts in
this transaction is consistent with the policies of the ICC against unauthorized
acquisitions of control of a regulated carrier. Parent and the Purchaser
requested the staff of the ICC on July 10 to issue such an opinion. Pursuant to
ICC regulations, the ICC staff has the power to issue such opinions. Generally,
the ICC staff has issued such opinions within one or two weeks of a request,
although there can be no assurance that Parent and the Purchaser will be able to
obtain an opinion this quickly.
Pursuant to the terms of the Voting Trust Agreement, it is expected that
the Trustee would hold the ICC Subsidiary Shares until (i) the effective date of
the ICC's approval or exemption from approval of Parent's and Purchaser's
acquisition of control of the ICC Subsidiaries, (ii) the ICC Subsidiary Shares
are sold to a third party or otherwise disposed of, or (iii) the Voting Trust is
otherwise terminated. The Voting Trust Agreement is expected to provide that the
Trustee will have the sole power to vote such ICC Subsidiary Shares. In
addition, it is expected that the Voting Trust Agreement will provide that the
Company or its successor in interest will be entitled to receive any cash
dividends paid by the ICC Subsidiaries.
Notice of Exemption. The ICC has provided by regulation that it will
exempt from the requirement for prior ICC approval all acquisitions of control
involving only motor carriers of property subject to the ICC's jurisdiction
unless it determines that such an exemption is not warranted because of issues
regarding competition, impacts on employees and the safety ratings of the
parties. The ICC regulations require parties to all such acquisitions of control
to file a notice of exemption with the ICC, and also provide that the exemption
from approval will automatically become effective 60 days after the ICC
publishes the notice of exemption in the ICC Register unless complaints
concerning the notice of exemption are timely filed. The regulations further
provide that the ICC will generally decide any complaints within 30 days after
receiving them; such decisions may deny the complaint and permit the exemption
to become effective or may prevent the exemption from becoming effective.
8
10
Parent and Purchaser and Company filed with the ICC a notice of exemption
(the "Notice of Exemption") on July 10, 1995, to permit Parent and Purchaser to
acquire control of the Company's ICC Subsidiaries without formal ICC approval.
The ICC generally publishes such notices in the Federal Register three to four
weeks after they are filed, although there can be no assurance that the Notice
of Exemption will be published that quickly. Parent and Purchaser expect that
the Notice of Exemption will become effective 60 days after it is published.
Temporary Authority. Pending receipt of final and effective exemption from
or approval by the ICC, the Interstate Commerce Act authorizes the ICC to permit
Parent or Purchaser temporarily to operate through management the properties of
the ICC Subsidiaries if the ICC concludes that failure to grant such temporary
operating authority may result in injury to those properties or substantially
interfere with their future usefulness in providing adequate and continuous
service to the public. Parent and Purchaser have applied for such temporary
authority to permit Parent or Purchaser to operate the properties of the ICC
Subsidiaries pending the effectiveness of the Notice of Exemption. Purchaser's
obligations under the Offer are conditioned upon the ICC's granting of such
temporary authority.
(c) PURCHASER'S DESIGNATION OF PERSONS TO BE ELECTED TO THE COMPANY'S BOARD
OF DIRECTORS. The information statement attached hereto as Annex I is being
furnished in connection with the possible designation by the Purchaser, pursuant
to the Merger Agreement, of certain persons to be appointed to the Board of
Directors of the Company other than at a meeting of the Company's shareholders.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS
Exhibit 1 -- Agreement and Plan of Merger dated July 8, 1995, among Parent, the Purchaser
and the Company.
Exhibit 2 -- Form of Voting Trust Agreement to be entered into among Parent, the Purchaser,
the Company and the Trustee.
Exhibit 3 -- Press Release of the Company issued on July 10, 1995.
Exhibit 4 -- Press Release of Parent issued on July 10, 1995.
Exhibit 5* -- Letter to Shareholders of the Company dated July 14, 1995.
Exhibit 6* -- Opinion of Donaldson, Lufkin & Jenrette Securities Corporation dated July 8,
1995.
Exhibit 7 -- Confidentiality and Standstill Letter Agreement of Parent dated June 8, 1995.
Exhibit 8 -- Employment Agreement dated June 2, 1995, between the Company and Lary R.
Scott.
Exhibit 9 -- Form of Amendment to Severance Agreements dated as of July 8, 1995, between
the Company and Certain Executive Officers.
Exhibit 10 -- Excerpt from Proxy Statement distributed in connection with the Company's
annual meeting of shareholders on May 3, 1995.
- ---------------
* Included in the materials sent to shareholders of the Company.
9
11
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
WORLDWAY CORPORATION
By: /s/ JOHN B. YORKE
-----------------------------------
Name: John B. Yorke
Title: Vice President and General
Counsel
Date: July 14, 1995
10
12
ANNEX I
WORLDWAY CORPORATION
400 TWO COLISEUM CENTER
2400 YORKMONT ROAD
CHARLOTTE, NORTH CAROLINA 28217
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14f-1 THEREUNDER
This Information Statement is being mailed on or about July 14, 1995 as
part of Solicitation/ Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") of WorldWay Corporation (the "Company"). You are receiving this
Information Statement in connection with the possible election of persons
designated by the Purchaser to a majority of the seats on the Board of Directors
of the Company (the "Board"). You are urged to read this Information Statement
carefully. You are not, however, required to take any action. Capitalized terms
used and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on July
14, 1995. The Offer is scheduled to expire at 12:00 midnight on August 10, 1995,
New York City time, unless extended, at which time, upon the expiration of the
Offer, if all conditions of the Offer have been satisfied or waived, the
Purchaser has agreed with the Company that it will purchase all Shares validly
tendered pursuant to the Offer and not withdrawn. The consummation of the Offer
and the Merger pursuant to the terms of the Merger Agreement would result in a
change of control of the Company.
The information contained in this Information Statement concerning Parent
and the Purchaser has been furnished to the Company by Parent and the Purchaser,
and the Company assumes no responsibility for the accuracy or completeness of
such information.
BOARD OF DIRECTORS
GENERAL
The common stock, $0.50 par value per share (the "Company Common Stock"),
is the only class of voting stock of the Company outstanding. As of July 7,
1995, there were outstanding and entitled to vote 6,561,672 shares of Company
Common Stock, each of which is entitled to one vote. An additional 875,450
shares of Company Common Stock are issuable pursuant to outstanding options,
which options are immediately exercisable. For information regarding the
ownership of the Company Common Stock by holders of more than five percent of
the outstanding shares and by the management of the Company, see "Security
Ownership of Certain Beneficial Owners and Management."
The Company's Articles of Incorporation provide that its Board of Directors
shall be divided into three classes, such classes to be as nearly equal in
number as possible, and that each year the shareholders of its Common Stock
shall elect the members of one of the three classes to serve three-year terms of
office. The number of directors is currently fixed by the Articles of
Incorporation of the Company at a variable number, with a minimum of seven and a
maximum of nine. Currently, there are eight members of the Board of Directors.
RIGHT TO DESIGNATE DIRECTORS
The Company has agreed in the Merger Agreement that, promptly upon the
acceptance for payment of the number of Shares by the Purchaser pursuant to the
Offer as represents at least a majority of the outstanding Shares (on a fully
diluted basis), the Purchaser shall be entitled to designate such number of
I-1
13
directors, rounded up to the next whole director, on the Board of Directors of
the Company as will give the Purchaser representation on the Board of Directors
equal to at least that number of directors that equals the product of the total
number of directors on the Board multiplied by the percentage that the aggregate
number of shares of Company Common Stock accepted for payment pursuant to the
Offer, bears to the number of shares of Company Common Stock then outstanding.
The Company and the Board of Directors have agreed at such time to take any and
all action needed to cause the Purchaser's designees to be appointed to the
Board of Directors (including to cause directors to resign).
The Company's obligations to appoint Parent's designees to the Board
pursuant to the Merger Agreement are subject to Section 14(f) of the Exchange
Act and Rule 14f-1 thereunder. The Company has agreed to promptly take all
actions required pursuant to such Section and Rule in order to fulfill its
obligations under the Merger Agreement and to include in the Schedule 14D-9 such
information with respect to the Company and its officers and directors as is
required under such Section and Rule to fulfill such obligations.
PURCHASER'S DESIGNEES
Pursuant to the terms of the Merger Agreement, it is expected that the
Purchaser's designees will take office as directors of the Company (the
"Purchaser Designees") upon the Purchaser's acceptance for payment of any Shares
as represents at least a majority of the outstanding Shares (on a fully diluted
basis) in the Offer.
The Purchaser has advised the Company that it will choose the Purchaser
Designees from the directors and executive officers listed on Schedule I to the
Offer to Purchase, a copy of which is being mailed to the Company's shareholders
together with this Information Statement. The Purchaser has informed the Company
that each of the directors and executive officers listed in Schedule I to the
Offer to Purchase has consented to act as a director, if so designated. The
information on such Schedule I is incorporated herein by reference.
The Purchaser has advised the Company that none of the persons listed on
such Schedule I has during the last five years been convicted in a criminal
proceeding (excluding traffic violations and similar misdemeanors) or was party
to a civil proceeding of a judicial or administrative body of competent
jurisdiction and as a result of such proceeding was, or is, subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, federal or state securities laws or finding any violation
of such laws. The Purchaser has also advised the Company that none of the
persons listed in the table above is a director of, or holds any position with,
the Company, and that none of such persons beneficially owns any equity
securities, or rights to acquire any equity securities, of the Company or has
been involved in any transactions with the Company or any of its directors,
executive officers or affiliates which are required to be disclosed pursuant to
the rules and regulations of the Securities and Exchange Commission. The
election of the Purchaser's designees will be accomplished at a meeting or by
written consent of the Board.
BOARD OF DIRECTORS OF THE COMPANY
The following table sets forth with respect to each member of the Board of
Directors of the Company (i) his name, (ii) his age, (iii) all positions and
offices with the Company, (iv) his business experience, including principal
occupation, and (v) his directorships in other publicly held companies, if any.
Daniel A. Boggan, Jr., 49, Group Executive Director for Education Services, The
National Collegiate Athletic Association (education). Former Vice-Chancellor,
University of California, Berkeley, California, 1986-1994. Serves on board of
directors of The Clorox Company (household products), Chairman of the Board of
the East Oakland Youth Development Corporation.
Member: Audit Committee First became a Director: 1995
I-2
14
J. M. Carstarphen, 62, President and Chairman of the Board, Stowe-Pharr Mills
(textiles and carpet). President, Belmont Land Investment Company and Strand
Development Corporation (both of which are real estate development firms).
Serves on boards of directors of R. L. Stowe Mills, Inc. (textiles), the
Community Foundation of Gaston County, Inc., and Wachovia Bank and Trust
Company, Southern Region (banking). Member of Liberty Mutual Advisory Board
(insurance).
Member: Compensation Committee First became a Director: 1991
Charles L. Grace, 60, President, Cummins Atlantic, Inc. (distributor of diesel
engines). Serves on boards of directors of First Union National Bank (North
Carolina board) (banking), Mercy Health Services (Mercy Hospital) (health
services) and North Carolina Trucking Association. Member of North Carolina
Board of Advisors of Liberty Mutual Insurance Company, Chairman of the Board of
Trustees of Belmont Abbey College.
Member: Audit Committee First became a Director: 1991
Nominating Committee
William M. R. Mapel, 63, Retired Senior Vice President/Chairman-Policy
Committee, North American Finance Group, Citibank, N.A., New York (1986-1988).
Previously Senior Vice President/Division Executive of Citibank (1969-1985).
Chairman of the Board of Mercantile & General Reinsurance Company of America
(insurance). Serves on boards of directors of Mercantile & General Life
Reassurance Company of America (insurance), Brundage, Story & Rose Investment
Trust, Galey & Lord, Inc. (textiles), Churchill Capital, Inc., NSC Corporation
(environmental services), and USLIFE Income Fund, Inc.
Member: Audit Committee First became a Director: 1989
(Chairman)
Dr. James G. Martin, 59, Chairman of the Research Development Board, James C.
Cannon Research Center, Charlotte-Mecklenburg Hospital Authority. Serves on
boards of directors of J.A. Jones, Inc. (construction), Duke Power Company
(electric utility), and Blue Cross/Blue Shield of North Carolina (insurance);
former Governor of the State of North Carolina (1985-1993), Member, United
States House of Representatives (1973-1985), former Associate Professor of
Chemistry, Davidson College.
Member: Compensation Committee First Became a Director: 1993
Paul F. Richardson, 66, President, Paul F. Richardson Associates, Inc.
(international maritime consulting firm) since 1977. Seventeen years with
Sea-Land Service, Inc., serving as President from 1970 to 1976 and Vice Chairman
from 1976 to 1977. Currently Vice President and Director of the U.S. Coast Guard
Foundation. Awarded the Meritorious Public Service Citation in 1981 by the
Secretary of the Navy for service on behalf of the United States Navy in the
fields of public relations and maritime education and cooperation. In 1993, Mr.
Richardson received the Connie Award from the Containerization and Intermodal
Institute in recognition of his leadership in the transportation industry and
many contributions to the advancement of international intermodal
transportation.
Member: Compensation Committee First became a Director: 1986
(Chairman)
Nominating Committee
Lary R. Scott, 58, Chairman of the Board and Chief Executive Officer of the
Company. Mr. Scott joined the Company in 1993 as Vice Chairman and Chief
Executive Officer. Mr. Scott was elected as Chairman of the Board in May, 1994.
For approximately two years prior to joining the Company, Mr. Scott served as a
transportation consultant. Prior to that time he was President and Chief
Executive Officer of Consolidated Freightways, Inc. Serves on boards of
directors of Mayflower Group, Inc. (transportation) and The Clorox Company
(household products).
Member: Executive Policy Committee First became a Director: 1993
(Chairman)
I-3
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Kenneth G. Younger, 69, Retired Chairman of the Board of the Company. Mr.
Younger joined the Company in 1977 and retired from the Company in 1990 as Chief
Executive Officer. Mr. Younger returned to the Company in 1993 as Chairman and
Chief Executive Officer, retired as Chief Executive Officer upon the election of
Mr. Scott as Chief Executive Officer, and continued to serve in the capacity of
Chairman until May 1994. Director of First Union Corporation (banking and
financial services), member of the Board of Trustees of Duke University.
Member: Nominating Committee First became a Director: 1977
(Chairman)
The classes in which the directors serve are as follows:
CLASS I CLASS II CLASS III
- ------------------ -------------------- ----------------------
J. M. Carstarphen Dr. James G. Martin Daniel A. Boggan, Jr.
Charles L. Grace K. G. Younger William M. R. Mapel
Lary R. Scott Paul F. Richardson
The term of office of each of the Class II directors expires at the 1996
Annual Meeting of Shareholders; the term of office of each of the Class I
directors expires at the 1997 Annual Meeting of Shareholders; and the term of
office of each of the Class III directors expires at the 1998 Annual Meeting of
Shareholders or in each case until their respective successors shall be duly
elected and qualified to serve.
The Company, Parent and the Purchaser have agreed pursuant to the Merger
Agreement that, following the election or appointment of Parent's designees and
prior to the Effective Time, any amendment of the Merger Agreement by the
Company will require the affirmative vote of a majority of directors of the
Company that have not been designated by the Purchaser or Parent.
Each of the directors has agreed to resign from the Board of Directors to
the extent that additional vacancies will be required to appoint the Purchaser's
designees.
BOARD MEETINGS -- COMMITTEES OF THE BOARD
The Board of Directors met eight (8) times in 1994. The Company has
standing Audit, Nominating, and Compensation Committees elected by the Board of
Directors. Committee membership is indicated in the preceding biographical
section on directors.
The Audit Committee of the Company met twice during 1994. Functions
performed by this committee consist generally of recommending the audit firm to
be employed as independent auditors for the Company and consulting with
independent auditors for the purpose of reviewing the scope of the audit, their
audit report, and the adequacy of internal controls.
The Nominating Committee functions consist of receiving and reviewing
nominations to the Board of Directors, recommending to the Board nominees to
fill Board vacancies, and recommending to the Board nominees for membership on
committees of the Board. It met one (1) time during 1994. The Nominating
Committee considers nominees recommended by shareholders.
The Compensation Committee met six (6) times during 1994. This committee
approves the compensation for the officers of the Company. Other functions
performed include the approval of compensation plans for consideration by the
Board of Directors and the granting of stock options under the Company's stock
option plans.
COMPENSATION OF DIRECTORS
Directors who are not employees are paid an annual retainer of $12,000 each
for their service on the Board of Directors. In addition, each such director
receives $450 plus travel expenses for every board and
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16
committee meeting attended, except for committee meetings held on the same day
of a board or other committee meeting, in which case the compensation rate is
$100 for each additional meeting. Directors who are employees of the Company
receive no additional compensation for board service except for being included
for coverage under the directors' fee continuation plan described below.
After three years of service with the Company for Directors joining the
Board prior to 1995, and after five years of service for Directors joining the
Board in 1995 or thereafter, members of the Board of Directors are covered by a
fee continuation plan which provides for the payment of $8,500 annually for a
period of ten years upon retirement as director at age 60. Reduced benefits are
available to retired directors at age 55. A director who dies before retirement
and who has at least five years of service with the Company will receive a
continuation of fees for a period of fifteen years. Amounts payable under this
plan are scheduled and vary based upon the age of the director. Benefits payable
to directors under this plan are subject to acceleration in the event a
director's service on the Board is involuntarily terminated following a change
in control of the Company. A change in control means one of a nature that would
require reporting under the Exchange Act by a person, as defined in the Exchange
Act, other than the Company, its subsidiaries, or an employee benefit plan
sponsored by the Company or one of its subsidiaries.
I-5
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SECURITY OWNERSHIP OF
CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
HOLDERS OF MORE THAN FIVE PERCENT BENEFICIAL OWNERSHIP
The following are shareholders known to the Company to beneficially own (as
determined in accordance with Rule 13d-3 under the Exchange Act) more than five
percent of the Company's outstanding Common Stock as of July 12, 1995:
NUMBER OF
NAME OF SHAREHOLDER SHARES HELD(1) PERCENTAGE
--------------------------------------------------------- -------------- ----------
David L. Babson & Co., Inc............................... 336,100(2) 5.12%
One Memorial Drive
Cambridge, Massachusetts 02142-1300
Fisher Investments, Inc. ................................ 416,500(3) 6.35%
13100 Skyline Boulevard
Woodside, California 94062
The Prudential Insurance
Company of America..................................... 364,278(4) 5.5%
Prudential Plaza
Newark, New Jersey 07102-3777
Tweedy, Browne Company L.P............................... 439,689(5) 6.70%
52 Vanderbilt Avenue
New York, New York 10017
- ---------------
(1) Information provided herein has been obtained from Schedules 13D or 13G, as
applicable, filed with the Securities and Exchange Commission.
(2) As set forth in Schedule 13G, David L. Babson & Co., Inc. has sole voting
power with respect to 264,700 shares, shared voting power with respect to
71,400 shares, and sole dispositive power with respect to all 336,100
shares.
(3) As set forth in Schedule 13G, Fisher Investments, Inc. has sole voting power
with respect to 416,500 shares, and sole dispositive power with respect to
all 416,500 shares.
(4) As set forth in Schedule 13G, Prudential Insurance Company of America has
sole voting power with respect to 4,400 shares, shared voting power with
respect to 357,100 shares, sole dispositive power with respect to 4,400
shares and shared dispositive power with respect to 357,100 shares.
(5) Includes shares beneficially held by Tweedy Browne Company, L.P. ("TBC"),
TBK Partners, L.P. ("TBK"), and Vanderbilt Partners, L.P. ("Vanderbilt"),
as reported on Schedule 13D. As set forth in Schedule 13D, of the shares
reported, TBC has sole voting power with respect to 370,644 shares, and
shared dispositive power with respect to 439,689 shares. Vanderbilt has
sole voting power with respect to 11,000 shares and sole dispositive power
with respect to 11,000 shares.
BENEFICIAL OWNERSHIP OF DIRECTORS AND MANAGEMENT
The following table sets forth certain information concerning the
beneficial ownership of Company Common Stock as of July 12, 1995, by each
director of the Company, by each of the executive officers listed in the Summary
Compensation Table ("Named Executive Officers"), and by all directors and
executive officers of the Company as a group. Unless otherwise noted in the
footnotes following the table, the persons as
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to whom the information is given had sole voting and investment power with
respect to the shares of Company Common Stock shown as beneficially owned.
SHARES OF PERCENT OF
NAME OF BENEFICIAL OWNER(1) COMMON STOCK OUTSTANDING SHARES
------------------------------------------------------ ------------ ------------------
Daniel A. Boggan, Jr.................................. 2,500(2) *
J. M. Carstarphen..................................... 3,000(3) *
Charles L. Grace...................................... 3,500(4) *
James R. Hertwig...................................... 89,900(5) 1.37
Palmer E. Huffstetler................................. -0- --
William M. R. Mapel................................... 3,500(6) *
Dr. James G. Martin................................... 2,700(7) *
Robert C. Rains....................................... 40,485(8) *
Edmond Randolph....................................... 42,600(9) *
Paul F. Richardson.................................... 3,500(10) *
Lary R. Scott......................................... 216,000(11) 3.3
David D. Taggart...................................... 54,975(12) *
K. G. Younger......................................... 45,948(13) *
All directors and executive officers (a total of
fifteen persons) as a group......................... 638,108(14) 9.7%
- ---------------
* Less than 1%
(1) The nature of the beneficial ownership for all shares is sole voting and
investment power.
(2) Represents shares Mr. Boggan had the right to acquire within sixty days
under stock option plans of the Company.
(3) Includes 2,500 shares Mr. Carstarphen had the right to acquire within sixty
days under stock option plans of the Company.
(4) Includes 2,500 shares Mr. Grace had the right to acquire within sixty days
under stock option plans of the Company.
(5) Includes 88,000 shares Mr. Hertwig had the right to acquire within sixty
days under stock option plans of the Company.
(6) Includes 2,500 shares Mr. Mapel had the right to acquire within sixty days
under stock option plans of the Company.
(7) Includes 2,500 shares Dr. Martin had the right to acquire within sixty days
under stock option plans of the Company.
(8) Includes 39,480 shares Mr. Rains had the right to acquire within sixty days
under stock option plans of the Company.
(9) Includes 42,600 shares Mr. Randolph had the right to acquire within sixty
days under stock option plans of the Company.
(10) Includes 2,500 shares Mr. Richardson had the right to acquire within sixty
days under stock option plans of the Company.
(11) Includes 206,000 shares Mr. Scott had the right to acquire within sixty
days under stock option plans of the Company.
(12) Includes 54,720 shares Mr. Taggart had the right to acquire within sixty
days under stock option plans of the Company.
(13) Includes 2,500 shares Mr. Younger had the right to acquire within sixty
days under stock option plans of the Company.
(14) Includes 577,800 shares the executive officers and directors had the right
to acquire within sixty days under stock option plans of the Company.
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EXECUTIVE OFFICERS
Listed below are the current executive officers of the Company who do not
serve on the Board of Directors:
James R. Hertwig, 44, serves as President of Carolina Freight Carriers
Corporation. He joined the Company in January 1994 as Vice President and was
elected to his current position in October 1994. Prior to joining the Company he
was President and Chief Executive Officer of Conway Intermodal.
James A. Justiss, 57, serves as President of CaroTrans International, Inc.
Prior to that, he served with Carolina Freight Carriers Corporation as Vice
President -- International Division since 1982.
Shawn W. Poole, 36, serves as Vice President and Chief Financial Officer of
the Company. He joined the Company as Treasurer in January 1990 and was elected
to his present position in May 1994.
Robert C. Rains, 41, has served as President of The Complete Logistics
Company since 1988.
D. Edmond Randolph, 59, serves as President of Cardinal Freight Carriers,
Inc. He joined Cardinal in May 1991 as President. Prior to joining Cardinal, Mr.
Randolph was Division Manager for National Freight Incorporated.
David D. Taggart, 51, serves as President of G. I. Trucking Company. Mr.
Taggart joined G. I. Trucking as Vice President of Operations in November 1988.
He was elected to his present position in May 1991.
John B. Yorke, 40, serves as Vice President and General Counsel of the
Company. He joined Carolina Freight Carriers Corporation in 1987 as Assistant
General Counsel. He was elected Secretary and Assistant General Counsel of the
Company in 1990 and was elected to his present position in January 1993.
COMPENSATION OF OFFICERS
The table below sets forth the compensation paid by the Company to the
chief executive officer and the four additional most highly compensated
executive officers (other than the chief executive officer), for services
rendered in all capacities to the Company and its subsidiaries during the fiscal
year ended December 31, 1994.
SUMMARY COMPENSATION TABLE
LONG TERM COMPENSATION
-----------------------------------
AWARDS
ANNUAL COMPENSATION ------------------------- PAYOUTS
----------------------------------------- RESTRICTED SECURITIES -------
OTHER ANNUAL STOCK UNDERLYING LTIP ALL OTHER
NAME AND PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) OPTIONS/SARS PAYOUTS COMPENSATION
POSITION(1) YEAR $ ($) ($) ($) (#) ($) ($)
- ----------------------------------- ----- -------- -------- ------------ ---------- ------------ ------- ------------
Lary R. Scott(2)................... 1994 $250,016 $129,796 $ 0 $ 0 45,000 $ 0 $ 19,653(7)
Chairman & CEO 1993 187,512 0 0 0 35,000 0 0
1992 -- -- -- -- -- -- --
James R. Hertwig(3)................ 1994 146,309 44,646 0 0 25,000 0 20,179(8)
President -- Carolina Freight 1993 -- -- -- -- -- -- --
Carriers(4) 1992 -- -- -- -- -- -- --
Palmer E. Huffstetler.............. 1994 227,683(6) 70,127 0 0 16,000 0 690,972(9)
President(5) 1993 180,362 0 0 0 27,000 0 8,955(10)
1992 141,669 0 0 0 0 0 7,804(10)
D. Edmond Randolph(2).............. 1994 110,400 313,105 0 0 19,000 0 0
President -- Cardinal Freight 1993 109,000 252,201 0 0 1,000 0 0
Carriers(4) 1992 -- -- -- -- -- -- --
David D. Taggart................... 1994 145,000 69,731 0 0 20,300 0 0
President -- G.I. Trucking(4) 1993 128,483 0 0 0 4,700 0 0
1992 122,061 0 0 0 0 0 0
- ---------------
(1) Reflects the capacities in the Company held by such individuals as of
December 31, 1994.
(2) First became an executive officer of the Company in 1993.
(3) First became an executive officer of the Company in 1994.
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(4) A wholly owned subsidiary of the Company.
(5) Mr. Huffstetler retired as President of the Company effective December 31,
1994.
(6) Includes amounts paid for accrued unused vacation.
(7) Represents the present value of the premium relating to the benefit to be
received pursuant to the Company's split dollar life insurance plan.
(8) Represents the amount of interest ($179) that would have been payable at
market rates during 1994 on a loan provided by the Company without
interest, and amounts paid ($20,000) to Mr. Hertwig for consulting services
performed prior to his becoming an employee of the Company.
(9) Includes $18,682 representing the present value of the premium relating to
the benefit to be received pursuant to the Company's split dollar life
insurance plan. Also includes compensation paid pursuant to a retirement
agreement that was effective November 4, 1994, including $300,000 payable
in equal weekly installments of $1,923.08 through December 31, 1997; a
$15,000 cash payment; and $357,290.22 representing enhanced pension
benefits calculated as though Mr. Huffstetler were a participant in the
1992 retirement incentive plan. Does not include amounts paid or payable
under the deferred compensation plans, the directors' fee continuation
plan, or other employee benefit plans. The agreement provided that Mr.
Huffstetler would not compete with the company for a period of one year.
(10) Amounts reflect the differential between interest accrued at
higher-than-market rates under the Company's deferred compensation plans
and amount of interest that would have accrued (or been paid) at market
rates. The higher-than-market rates are only paid if the service
requirements in the plan are met.
OPTIONS
Shown below is further information on new grants of stock options pursuant
to the Company's stock option plans during the fiscal year ended December 31,
1994 to the Named Executive Officers.
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OF GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
GRANTED(1) FISCAL YEAR ($/SH) DATE ($)(2)
------------ ------------ ----------- ---------- -------------
Lary R. Scott......................... 45,000 15.5 $ 11.25 05-03-04 237,600
James R. Hertwig...................... 15,000 5.2 11.25 05-03-04 79,200
10,000 3.5 10.875 03-06-04 50,600
Palmer E. Huffstetler................. 16,000 5.5 11.25 05-03-04 84,480
D. Edmond Randolph.................... 19,000 6.6 11.25 05-03-04 100,320
David D. Taggart...................... 20,300 7.0 11.25 05-03-04 107,184
- ---------------
(1) All grants of options were made on May 4, 1994, under the 1994 Nonqualified
Stock Option Plan ("1994 Plan") with the exception that an option to
purchase 10,000 shares at a base price of $10.875 was granted to Mr.
Hertwig on March 7, 1994 under the 1984 Incentive Stock Option Plan (the
"1984 Plan"). Such options have an exercise price equal to 100% of the fair
market value of the options on the date of grant. Options remain
outstanding for 10 years and become exercisable cumulatively in annual
installments so long as employment with the Company continues. Pursuant to
the terms of the 1984 Plan, during the first year an option is outstanding
it may not be exercised. Thereafter, the option shall be exercisable in
installments as follows: 30% of the number of shares after commencement of
the second year, 30% after the third year and 40% after the fourth year.
Options otherwise exercisable may be exercised within the following periods
of time when employment is terminated for the indicated reason: three
months following the optionee's termination of employment, except when
termination is for cause, and one year following the death of the optionee.
The nonvested portion of an employee's options shall be considered
forfeited upon termination of his or her employment with the Company for
whatever reason. Options
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granted under the 1994 Plan vest in 25% increments annually beginning one
year following the date of grant of the option. No option granted under the
1994 Plan may be exercised prior to two years from the date of grant of
such option. Upon termination of employment for any reason, any nonvested
portion of an option granted under the 1994 Plan is forfeited. In the event
an optionee's employment terminates by reason of death, retirement (as
defined in the 1994 Plan), permanent and total disability (as determined
generally pursuant to the long-term disability plan applicable to such
optionee), or under such other circumstances as may be determined by the
Compensation Committee, the vested portion of such optionee's options
granted under the 1994 Plan shall be exercisable for a period of one year
thereafter. In the event of termination of an optionee's employment for any
other reason, all of such optionee's options granted under the 1994 Plan
shall terminate, and shall no longer be exercisable, as of the date of
termination of employment. Vesting of such options may be accelerated under
certain circumstances involving a change of control of the Company. All
options were granted with an exercise price equal to the closing price on
the New York Stock Exchange -- Composite Transactions of the Company's
common stock on May 4, 1994, and on March 7, 1994 for such options granted
Mr. Hertwig under the 1984 Plan.
(2) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. The estimated values under that model are based on the
following assumptions: exercise price is 100% of the fair market value at
date of grant; exercise term is ten years; no discounts have been taken for
vesting or restrictions; the risk free rate is 7.14% (based on the 10-year
Treasury note yield as of the date the options were issued); the volatility
factor is .33 (based on the preceding 12 months); and the dividend yield is
1.78% (based on the preceding 12 months). At year end, the option price was
substantially above the then-current market price of the Company's common
stock.
The following table sets forth information regarding the number of
unexercised options held by the named executives at December 31, 1994. No
options were exercised by the named executives during 1994.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END
OPTION/SAR VALUES
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
OPTIONS/SARS AT OPTIONS/SARS AT
FY-END (#) FY-END ($)
SHARE ACQUIRED EXERCISABLE/ EXERCISABLE/
NAME ON EXERCISE (#) VALUE REALIZED UNEXERCISABLE UNEXERCISABLE
- ---------------------------------- ---------------- -------------- --------------- ---------------
Lary R. Scott..................... 0 N/A 10,500/69,500 *
Palmer E. Huffstetler............. 0 N/A 40,552/26,448 *
James R. Hertwig.................. 0 N/A 0/25,000 *
D. Edmond Randolph................ 0 N/A 300/19,700 *
David D. Taggart.................. 0 N/A 4,210/20,790 *
- ---------------
* The exercise prices for all options outstanding were higher than the market
value of the Company's Common Stock, as reported on the New York Stock
Exchange, at December 31, 1994.
EMPLOYMENT CONTRACTS
The Company entered into a contract of employment with Mr. Scott during
1993 that expires on March 21, 1998. The contract calls for annual compensation
of not less than $250,000. The contract provides for certain other benefits and
perquisites afforded all other officers of the Company, and in some cases,
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afforded all other employees of the Company. On June 2, 1995, Mr. Scott entered
into an employment agreement extending the term of his employment with the
Company.
The Company entered into a contract of employment with Mr. Hertwig during
1994 that terminates two (2) years after the Company gives notice of
termination. The contract calls for annual compensation of not less than
$135,000. The contract provides for certain other benefits and perquisites
afforded all other officers of the Company, and in some cases, afforded all
other employees of the Company.
The Company also entered into a contract of employment with Mr. Huffstetler
during 1993 which by its terms was to expire on March 21, 1997. The contract
called for annual compensation of not less than $182,000 as well as certain
other benefits and perquisites afforded all other officers of the Company and,
in some cases, afforded all other employees of the Company. Pursuant to mutual
agreement of Mr. Huffstetler and the Company, such contract was terminated upon
Mr. Huffstetler's retirement from the Company effective December 31, 1994.
Pursuant to the provisions of such contract, upon his retirement Mr. Huffstetler
became entitled to retirement benefits similar to those provided under the 1992
Retirement Incentive Program of Carolina Freight Carriers Corporation.
OFFICER SEVERANCE AGREEMENTS
The Company has entered into agreements with certain executives, including
Messrs. Scott and Hertwig that provide for continued compensation in the event
of their termination of employment following a change in control of the Company.
Under the agreements, a change in control means one of a nature that would
require reporting under the Act by a person, as defined in the Act, other than
the Company, its subsidiaries, or an employee benefit plan sponsored by the
Company or one of its subsidiaries. Following a change in control, if the
officer is terminated within 24 months for any reason other than for cause,
disability, retirement or death, or should the officer leave his employment for
good reason, as defined in the agreement, then the officer is entitled to
receive a payment in cash equal to 2.99 times his average W-2 earnings for the
five-year period which immediately precedes the year in which the termination
occurs. Each agreement expires December 31, 1995 but is automatically extended
from year to year unless the Company provides notice of its intent to terminate
at least ninety (90) days prior to January 1 of any succeeding year. The
severance agreements were amended in July 1995, to provide that the officers
will be entitled to receive the compensation described above if the officer's
employment is terminated for any reason (including resignation) during the
six-month period after the first anniversary of a change of control.
SUPPLEMENTAL BENEFIT PLAN
The Supplemental Benefit Plan provides for a salary continuation benefit in
the event the participating officer dies before such officer's 65th birthday; a
supplemental retirement benefit payable upon early retirement, late retirement,
or disability; and a postretirement benefit payable upon the death of the
participating officer. Amounts payable under this plan are scheduled and are
based upon individual participant's age and rate of compensation. The
supplemental retirement benefit becomes fully vested in a participating officer
upon his attainment of age 65, upon his attainment of age 55 provided he has ten
or more years of service with the Company, upon his becoming disabled, or upon
his completion of 15 years of service with the Company. (The vesting schedule is
eight (8) years for Mr. Scott and five (5) years for Mr. Randolph). The term for
payment of benefits varies for each participant depending upon the participant's
age and length of service with the Company. The normal retirement benefit,
generally, is equal to 12% of base salary. Officers relinquished individual
group life insurance benefits equal, generally, to one and one-half times their
base salary to participate in the executive benefit plan. For the named
executives the benefit at the normal retirement date, which is payable monthly
for a period of 15 years, is as follows: Lary R. Scott -- $2,500; James R.
Hertwig -- $1,350; Palmer E. Huffstetler -- $2,000; D. Edmond
Randolph -- $1,850; and David D. Taggart -- $1,450. Benefits payable to officers
of the Company under this plan are subject to accelerated payment in the event
of a change in control of the Company. A change in control means one of a nature
that would require reporting under the Act by a person, as defined in the Act,
other than the Company, its subsidiaries, or an employee benefit plan sponsored
by the Company or one of its subsidiaries. Life insurance has been purchased on
the lives of the participants, with the Company as owner and beneficiary, to
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indemnify the Company upon the death of the covered employees for the cost of
benefits paid. The costs of the plans are being amortized over the lives of the
participants. On an after-tax basis, it is anticipated that there will be no
cost to the Company resulting from these plans, except for the cost of money
invested in the plans, which is not expected to be significant throughout the
duration of the program.
EMPLOYEES' PENSION PLAN
This is a defined benefit plan in which all officers of the Company are
participants. This plan also covers noncontractual employees of Carolina Freight
Carriers and Red Arrow Freight Lines, Inc., and all employees of other
wholly-owned subsidiaries of the Company. In addition, certain contractual
employees of Red Arrow have a deferred-vested interest in the plan. Under this
plan, at normal retirement age the amount of straight life-time pension is an
amount equal to nine-tenths percent of the participant's average pay over the
five (5) consecutive years during the employee's term of service that produce
the highest average multiplied by his or her number of years of service (not to
exceed 35 years of service) plus an added amount based on the amount by which an
employee's remuneration exceeds the Social Security contribution and benefit
base. The table below sets forth estimated annual benefits payable upon
retirement at normal retirement age of 65 to persons in specified remuneration
and years of service classifications. Amounts presented in the pension table are
based upon straight-life annuity amounts, and remuneration, for purposes of the
plan, includes all earnings from the Company which are reportable on Form W-2
for federal income tax withholding purposes, and such amounts of compensation
deferred under the Company's Employee Savings and Protection Plan. Such amounts
are not subject to offset for Social Security or other amounts. Such earnings
for executive officers are those as reported in the Salary Column of the Summary
Compensation Table. The number of credited years of service under the Pension
Plan for the following individuals is as indicated in parentheses immediately
after their names: Mr. Scott (2), Mr. Randolph (4), Mr. Huffstetler (30), Mr.
Hertwig (1), and Mr. Taggart (6). The amounts shown are formula amounts but are
subject to certain limitations as provided in the plan as approved by the
Internal Revenue Service. The 1994 aggregate maximum annual pension which may be
paid under the plan and all other defined benefit plans of the Company taken
together is restricted to $118,800, adjusted annually for increases in the cost
of living, as required by the provisions of Section 415 of the Internal Revenue
Code of 1986, as amended ("Code"), which limits the maximum benefits payable
from the plans.
THE WORLDWAY CORPORATION RETIREMENT PLAN
FINAL YEARS OF SERVICE
AVERAGE ------------------------------------------------------------
COMPENSATION 15 20 25 30 35
- ------------ -------- -------- -------- -------- --------
$100,000............................... $ 20,880 $ 27,839 $ 34,799 $ 41,759 $ 48,719
125,000............................... 26,692 35,589 44,487 53,384 62,282
150,000............................... 32,505 43,339 54,174 65,009 75,844
175,000**............................. 38,317 51,089 63,862 76,634 89,407
200,000**............................. 44,130 58,839 73,549 88,259 102,969
225,000**............................. 49,942 66,589 83,237 99,884 116,532
250,000**............................. 55,755 74,339 92,924 111,509 130,094*
300,000**............................. 67,380 89,839 112,299 134,759* 157,219*
400,000**............................. 90,630 120,839* 151,049* 181,259* 211,469*
500,000**............................. 113,880 151,839* 189,799* 227,759* 265,719*
- ---------------
* Exceeds 1994 maximum benefit of $118,800.
** Exceeds 1994 maximum salary of $150,000.
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COMPARISON OF FIVE YEAR TOTAL RETURN*
AMONG WORLDWAY CORPORATION,
S&P 500 INDEX AND DOW JONES TRANSPORTATION INDEX**
The following chart shows the cumulative total shareholder return,
including reinvestment of all dividends, on a $100 investment over the time
periods indicated beginning December 31, 1989.
Dow Jones
Measurement Period WorldWay Transporta-
(Fiscal Year Covered) Corporation tion Group S&P 500
1989 100 100 100
1990 71.994 86.149 96.885
1991 114.544 131.791 126.276
1992 86.615 145.229 135.883
1993 76.629 178.282 149.517
1994 57.84 150.14 151.54
- ---------------
* Assumes $100 initially invested on December 31, 1989 and the reinvestment of
all dividends during the periods indicated for each of the Company Common
Stock, S&P 500 Index, and Dow Jones Transportation Index.
** Fiscal year ending December 31.
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COMMITTEE REPORT ON COMPENSATION OF EXECUTIVES
The Compensation Committee of the Board of Directors (the "Committee") is
charged with the duty of establishing the total compensation of the Chief
Executive Officer and certain other officers of the Company. The Committee is
composed of three directors, none of whom is a current employee of the Company.
The Board has established a policy that the Committee shall consider such items
as it may deem appropriate including, but not limited to, the following:
a. experience, years of service with the Company, educational
background, and special expertise of the particular officer;
b. recent and historical operating results of the Company;
c. competitive conditions within the motor carrier industry together
with general economic conditions which may influence operating results in
either a positive or negative manner;
d. competitive conditions in the industry which may affect the
Company's ability to attract and retain executives who possess the skills,
talents, and abilities to lead the business enterprise; and
e. such other items as the Committee members shall, in their sole
discretion, determine to be appropriate. Compensation may be granted by the
Committee, in its discretion, in the form of salary, bonuses and certain
perquisites. In addition, the Committee is authorized to make grants of
stock options to corporate officers and other key employees from stock
option plans that have been previously approved by the Board of Directors
and the Shareholders of the Company.
The total compensation for officers of subsidiary companies of the Company,
including Messrs. Hertwig, Randolph, and Taggart, is established by the Chief
Executive Officer of the Company in consultation with members of the board of
directors of each respective subsidiary.
COMPENSATION PHILOSOPHY
The Company's compensation policies are designed to attract and retain
competent management. The Board's goal is to provide competitive salaries to its
executive officers and to give them performance incentives to motivate superior
performance on behalf of the Company and its shareholders. The Company has
structured its compensation program such that the individual named executives
share the risk with the Company's shareholders. Less emphasis is placed on base
compensation and a corresponding greater emphasis is placed on incentive
compensation. The Company has generally used two types of incentive
compensation: annual bonuses linked to specific performance goals, payable in
cash, and long-term compensation in the form of stock options. The Committee
believes that linking long-term compensation to the value of the Company's
common stock is especially effective because it aligns the interests of
management with those of the Company's shareholders.
The Company's compensation program is designed to enhance stockholder value
by linking a large part of the executive's compensation directly to performance.
The objective is to provide base salary for executives at or below the 50th
percentile for executives at similar companies, while providing an opportunity
to achieve total compensation (including base salary, annual bonus and long-term
incentives) at the 50th percentile or above for exceptional performance. The
primary components of the compensation program are base salary, an annual cash
bonus driven by performance against pre-established financial objectives and
other strategic goals, and a long-term opportunity to participate in increased
stockholder value through grants of stock options at market price.
INDEPENDENT CONSULTANTS
In 1993, the Company employed Arthur Andersen & Co. as an independent
consultant to advise the Committee on compensation matters. Arthur Andersen
personnel provided data and expertise on the subjects of base salaries,
short-term incentive (bonus) plans and long-term incentive (stock option) plans.
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The consultants obtained a job description for certain of the executive
officers of the Company. Based on these descriptions, the consultants generated
information comparing these executives to persons holding similar positions at
comparable companies. This comparative group of companies was used to determine
the 50th percentile of compensation levels in the areas of base salary,
short-term incentive compensation, and long-term incentive compensation. This
group consisted of companies located throughout the United States, all of which
are involved in the surface transportation of freight and, in some cases, other
service areas similar to those provided by Company subsidiaries. Appropriate
adjustments were made to account for size differentials. This is not the same
group of companies that comprises the Dow Jones Transportation Index, which is
the group used for comparison on the performance chart shown on page I-13.
BASE SALARY
Base salaries were reviewed by the Committee using competitive data
provided by the compensation consultants that considers industry and national
trends. Individual salaries were adjusted based on this information and in
consideration of the duties and responsibilities of the individual position. The
Committee recognizes that job responsibilities vary from company to company and
that the particular duties of each of the Company's officers must be taken into
consideration when making industry comparisons.
The salary of Mr. Scott was established in the employment agreement entered
into with him in 1993. The salaries of the other named executive officers were
modestly increased during 1994. Based upon information furnished by the
compensation consultants, the Committee believes that these salaries are
generally competitive with those of executives in somewhat comparable positions
with other trucking companies.
ANNUAL BONUS
In 1994, Messrs. Scott, Huffstetler, and Hertwig were covered by a
short-term bonus plan covering all salaried personnel that set bonus amounts
based on operating earnings per share exclusive of changes in accounting
principles and nonrecurring charges. Bonuses are calculated as a percentage of
base salary. In 1995, Mr. Scott will participate in a similar plan. In 1995, Mr.
Hertwig will participate in a similar plan based on improvements in the
operating earnings at Carolina Freight Carriers Corporation.
In 1994, Mr. Randolph was covered by an incentive bonus plan covering all
salaried personnel at Cardinal Freight Carriers Corporation. Cardinal's earnings
before income taxes must exceed 4.5% of gross sales. For earnings above the
threshold, 25% were allocated to a bonus pool in which Mr. Randolph participates
at a set percentage. A similar bonus structure is in place for 1995, except that
the bonus pool is limited to 12% of earnings before income taxes and bonuses.
In 1994, Mr. Taggart was covered by an individual incentive bonus plan that
set bonus amounts based on G. I. Trucking Company's contributions to the
Company's operating earnings per share exclusive of changes in accounting
principles and nonrecurring charges. A similar bonus structure is in place for
1995.
LONG-TERM COMPENSATION
Stock Option Awards
The Committee believes that options motivate key employees to act in the
best interests of stockholders. Stock options, under the Company's various stock
option plans, are the only long-term incentive the CEO and other named executive
officers receive. In determining the number of options granted to executive
officers, the Compensation Committee considers the executive's level of
responsibility, and other more qualitative factors. The committee also considers
the number of options currently held by the executive. The decision to grant Mr.
Scott additional options in 1994 was based on his increased level of
responsibility and potential contribution to the Company.
ADDITIONAL BENEFITS
The Company provides a Supplemental Benefit Plan (described herein) for its
officers and certain other key employees which is designed to retain the
services of such persons on a long-term basis. Executive officers
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and all other nonunion employees also participate in either the WorldWay
Corporation Employees Pension Plan or a similar plan maintained by a subsidiary
company. Executive officers, along with all other employees, may participate in
either the WorldWay Corporation Employee Savings and Protection Plan (a 401(k)
plan) or in a similar plan offered by a subsidiary company. Executive officers,
along with all other eligible employees participate in group health, disability,
and life insurance plans.
COMPENSATION COMMITTEE
Paul F. Richardson, Chairman
J. M. Carstarphen
Dr. James G. Martin
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Charles L. Grace, a member of the Company's Board of Directors and member
of the Compensation Committee during part of 1994, is the President of Cummins
Atlantic, Inc. In 1980, the Company made the decision to specify one engine for
use in all line tractors purchased in 1980 and thereafter. Cummins engines were
specified to the various tractor manufacturers such as Ford, Freightliner,
International, and White, from which the Company purchases tractors. Cummins
Atlantic, Inc. is the distributor for Cummins diesel engines, parts, and service
for the three-state area of North Carolina, South Carolina, and Virginia.
Cummins Atlantic, Inc. receives indirect sales compensation from Cummins Engine
Company for technical support of the Company's account. The Company also
regularly purchases Cummins engine parts from area dealers which have purchased
the parts from Cummins Atlantic, Inc. If problems occur during the warranty
period, Cummins Atlantic, Inc. performs the warranty work and is reimbursed for
such work from Cummins Engine Company. In addition the Company, from time to
time, uses the services of Cummins Atlantic, Inc. for repair work not covered by
warranty, and in 1994 the Company paid $161,254 to Cummins Atlantic, Inc. for
such work.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's directors, executive officers and persons who own more than ten
percent of a registered class of the Company's equity securities to file with
the Securities and Exchange Commission (the "SEC") initial reports of ownership
and reports of changes in ownership of Company Common Stock and other equity
securities of the Company. Executive officers, directors and greater than ten
percent shareholders are required by SEC regulation to furnish the Company with
copies of all Section 16(a) forms which they file.
To the Company's knowledge, based solely on review of information furnished
to the Company, reports filed through the Company and representations that no
other reports were required, all Section 16(a) filing requirements applicable to
its executive officers, directors and greater than ten percent beneficial owners
were complied with during 1994.
John B. Yorke
Vice President and General Counsel
July 14, 1995
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