<PAGE> 1
SCHEDULE 14A
(RULE 14A)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. 2)
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14A-6(E)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Roadway Services, Inc
----------------------------------------------------------------------------
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Roadway Services, Inc
----------------------------------------------------------------------------
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
/ / $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/X/ Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
Roadway Express, Inc. ("REX") common stock, $.01 par value per share
--------------------------------------------------------------------------
("REX Common Stock")
--------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
Number of shares of Common Stock of Roadway Express, Inc. to be
determined
--------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:* (Set forth the amount on which the
filing fee is calculated and state how it was determined):
$
--------------------------------------------------------------------------
--------------------
* Such fee represents 1/50 of 1% of 95% of the book value (based on
shareholder's equity) of shares of Common Stock of Roadway Express, Inc.
(the amount of shares to be distributed). The aggregate book value of
such Common Stock was $223,491,300 at September 9, 1995 and 95% of such
value is $225,491,300.
(4) Proposed maximum aggregate value of transaction:
Not Applicable
--------------------------------------------------------------------------
(5) Total fee paid:
$44,698.26
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/X/ Fee paid previously with preliminary materials.
/X/ Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
$44,698.26
--------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
Schedule 14A
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(3) Filing Party:
Roadway Services, Inc.
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(4) Date Filed:
October 11, 1995
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<PAGE> 2
==============
ROADWAY
SERVICES, INC.
--------------
1077 GORGE BOULEVARD
AKRON, OH 44310
P.O. BOX 88
AKRON, OH 44309-0088
DANIEL J. SULLIVAN (216) 384-8184
CHAIRMAN, PRESIDENT FAX: (216) 258-6009
AND CHIEF EXECUTIVE OFFICER
November 24, 1995
Dear Shareholder:
You are cordially invited to attend a Special Meeting of the shareholders of
Roadway Services, Inc. ("RSI") to be held on December 14, 1995 at 9:00 a.m.
Eastern Standard Time, at the offices of Jones, Day, Reavis & Pogue, located at
North Point, 901 Lakeside Avenue, Cleveland, Ohio.
At the Special Meeting, you will be asked to approve the proposed
distribution by RSI to holders of RSI's Common Stock of at least ninety-five
percent (95%) of the outstanding shares of common stock of Roadway Express, Inc.
("REX"), our largest wholly-owned subsidiary. The distribution will separate RSI
into two publicly-owned companies. REX will continue to operate its national
long haul, less-than-truckload trucking business. RSI will continue to own and
coordinate the operations of its various freight transportation subsidiaries and
will directly conduct the business of ROLS. It is anticipated that each holder
of RSI Common Stock on the record date for the distribution will receive one
share of REX Common Stock for each two shares of RSI Common Stock then held.
Your Board believes that, following the Distribution, REX, as an independent
company, will be better able to manage its cost structure through the increased
use of incentive equity-based compensation for salaried and hourly employees
which is based solely on REX performance. Your Board also believes that the
distribution will allow REX and the other RSI businesses to compete more
vigorously in the transportation marketplace without the constraints of the
marketing positions of affiliated companies.
Lastly, your Board believes that each company should be able, after the
distribution, to achieve cost savings through focusing resources on its
respective operations and through rationalization of its organizational
structure. Hence, investors should be better able to evaluate the financial
performance of each company, thus enhancing the likelihood that each will
achieve appropriate market recognition.
Your Board has unanimously approved the distribution and unanimously
recommends that shareholders vote "FOR" the Distribution Proposals described in
the accompanying Proxy Statement. The distribution is subject to certain
conditions, including: (i) approval of the distribution by shareholders holding
at least a majority of the outstanding shares of RSI's Common Stock; and (ii)
receipt of a ruling from the Internal Revenue Service that the distribution will
constitute a tax-free distribution for U.S. Federal income tax purposes for both
holders of RSI Common Stock and RSI, or, at the option of your Board, an opinion
of Jones, Day, Reavis & Pogue that the distribution should constitute a tax-free
distribution for U.S. Federal income tax purposes for both holders of RSI Common
Stock and RSI.
At the Special Meeting, RSI shareholders will also be asked to approve: (i)
an amendment to our Articles of Incorporation changing RSI's name to "Caliber
System, Inc."; and (ii) the Roadway Express, Inc. Management Incentive Stock
Plan, both to be effective only following the Distribution.
DETAILS ABOUT THE DISTRIBUTION AND OTHER IMPORTANT INFORMATION ARE SET FORTH
IN THE ACCOMPANYING NOTICE OF SPECIAL MEETING AND PROXY STATEMENT. EVERY
SHAREHOLDER SHOULD CONSIDER THESE DOCUMENTS CAREFULLY.
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING AND REGARDLESS OF THE
NUMBER OF SHARES OF RSI COMMON STOCK THAT YOU OWN, I URGE YOU TO COMPLETE, DATE
AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT PROMPTLY IN THE ACCOMPANYING
POSTAGE-PAID ENVELOPE. YOU MAY, OF COURSE, ATTEND THE SPECIAL MEETING AND VOTE
IN PERSON, EVEN IF YOU HAVE PREVIOUSLY RETURNED YOUR PROXY CARD. PLEASE DO NOT
SEND IN YOUR STOCK CERTIFICATES WITH YOUR PROXY CARD.
Sincerely,
DANIEL J. SULLIVAN
/s/ Daniel J. Sullivan
Chairman, President and
Chief Executive Officer
[LOGO]
<PAGE> 3
ROADWAY SERVICES, INC.
1077 GORGE BLVD.
AKRON, OHIO 44310
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER 14, 1995
TO THE SHAREHOLDERS:
You are hereby notified that a Special Meeting (the "Special Meeting") of
the Shareholders of Roadway Services, Inc., an Ohio corporation (the "Company"),
will be held on Thursday, December 14, 1995, at 9:00 A.M., Eastern Standard
Time, at the offices of Jones, Day, Reavis & Pogue, located at North Point, 901
Lakeside Avenue, Cleveland, Ohio, for the following purposes:
1. To consider and vote upon three separate but related proposals
(collectively, the "Distribution Proposals") described in the
accompanying Proxy Statement providing for:
(i) Proposal One: Approval of the distribution by the Company of at
least ninety-five percent (95%) of the outstanding shares of common
stock of Roadway Express, Inc., a wholly-owned and Delaware-chartered
subsidiary of the Company ("REX"), on the basis of one share of common
stock of REX for each two shares of common stock of the Company, as
further described in the attached Proxy Statement (the "Distribution");
(ii) Proposal Two: Approval of an amendment to the Amended Articles
of Incorporation of the Company changing the name of the Company to
"Caliber System, Inc.", to be effective only following the Distribution
(the "Name Change Proposal");
(iii) Proposal Three: Approval of the adoption by REX of the REX
Management Incentive Stock Plan, to be effective only following the
Distribution.
2. To consider such other business as may properly come before the Special
Meeting.
The record date for shareholders entitled to notice of, and to vote at, the
Special Meeting is the close of business on November 14, 1995. This Notice, the
Proxy Statement and the accompanying form of proxy are first being mailed to
shareholders of the Company on or about November 24, 1995.
The Board of Directors of the Company (the "Company Board") has retained
discretion, even if shareholder approval of the Distribution Proposals is
obtained and the other conditions to the Distribution are satisfied, to abandon,
defer or modify the Distribution or any other element contained in the
Distribution Proposals. If the Company Board takes any such action, it will be
on the basis that the Company Board believes that it will be in the best
interests of the Company and its shareholders.
Additionally, the Chairman of the Company Board may determine to withdraw
the Name Change Proposal from consideration at the Special Meeting, or if
adopted by the shareholders, may determine not to file the amendment to the
Amended Articles of Incorporation with the Ohio Secretary of State, if further
investigation reveals that "Caliber System, Inc." may not be reasonably
available for use by the Company. In such case, the Company intends to propose a
change to another name for a vote by shareholders at the next annual meeting of
shareholders of the Company.
THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" ALL
OF THE DISTRIBUTION PROPOSALS.
You are invited to attend the meeting, but whether or not you expect to
attend in person, please mark, sign, date and return the enclosed proxy in the
accompanying postage-paid envelope so that your shares will be represented at
the meeting and any adjournment thereof. PLEASE DO NOT SEND IN YOUR STOCK
CERTIFICATES WITH YOUR PROXY CARD.
If you wish to have your vote treated in a confidential manner, please mark
the box "Confidential Vote Requested" on your proxy card.
D.A. WILSON
Secretary
November 24, 1995
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PROXY STATEMENT SUMMARY.......................................................... 1
THE SPECIAL MEETING............................................................ 1
CERTAIN SPECIAL CONSIDERATIONS................................................. 2
BOARD RECOMMENDATION........................................................... 2
THE DISTRIBUTION............................................................... 2
ROADWAY SERVICES, INC.......................................................... 5
ROADWAY EXPRESS, INC........................................................... 6
ROADWAY SERVICES, INC. SUMMARY OF SELECTED HISTORICAL
AND PRO FORMA FINANCIAL DATA................................................... 7
ROADWAY EXPRESS, INC. SUMMARY OF SELECTED HISTORICAL
AND PRO FORMA FINANCIAL DATA................................................... 8
THE SPECIAL MEETING.............................................................. 9
Purpose of the Special Meeting................................................. 9
Voting Policy.................................................................. 10
Vote Required.................................................................. 10
Employee Benefit Holdings...................................................... 11
Proxies........................................................................ 11
Costs of Solicitation.......................................................... 12
Rights of Dissenting Shareholders.............................................. 12
CERTAIN SPECIAL CONSIDERATIONS................................................... 14
Certain Financial Considerations Related to REX and RSI........................ 14
Pension Benefit Guaranty Corporation........................................... 14
Advantages and Disadvantages of the Distribution............................... 15
Competition and Industry Factors............................................... 15
Certain Tax Considerations..................................................... 15
Substantial Ownership by REX and RSI Employee Stock Plans Following the
Distribution................................................................ 16
Intellectual Property -- Trademarks and Tradenames............................. 17
No Current Public Market for REX Common Stock.................................. 17
Changes in Trading Prices of RSI Common Stock.................................. 17
Dividend Policies.............................................................. 18
Interests of Certain Persons in the Distribution............................... 18
Comparison of Rights of Shareholders of the Company and REX.................... 18
Governmental Regulation........................................................ 18
THE DISTRIBUTION PROPOSALS....................................................... 19
THE DISTRIBUTION................................................................. 19
Background and Reasons for the Distribution.................................... 19
Opinion of Financial Advisor................................................... 20
Transactions Prior to or Contemporaneous with the Distribution................. 21
Manner of Effecting the Distribution........................................... 21
Fractional Shares.............................................................. 22
Federal Income Tax Consequences of the Distribution............................ 22
Listing and Trading of REX Common Stock........................................ 23
Listing and Trading of Company Common Stock.................................... 24
Different Jurisdiction of Incorporation........................................ 24
Conditions; Termination........................................................ 25
Regulatory Approvals........................................................... 25
Interest of Certain Persons in the Distribution................................ 25
Accounting Treatment........................................................... 25
RELATIONSHIP BETWEEN RSI AND REX AFTER THE DISTRIBUTION.......................... 26
</TABLE>
i
<PAGE> 5
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Agreements..................................................................... 26
Real Estate Transactions....................................................... 28
Directors...................................................................... 29
DIVIDEND POLICIES................................................................ 29
RSI Dividend Policy............................................................ 29
REX Dividend Policy............................................................ 29
DIVIDENDS AND PRICE RANGE OF COMPANY COMMON STOCK................................ 30
ROADWAY SERVICES, INC. SELECTED HISTORICAL FINANCIAL DATA........................ 31
ROADWAY SERVICES, INC. AND SUBSIDIARIES CAPITALIZATION........................... 32
ROADWAY SERVICES, INC. PRO FORMA CONDENSED FINANCIAL STATEMENTS.................. 33
RSI MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA
FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................. 39
Background and Business Conditions............................................. 39
Results of Operations.......................................................... 40
Liquidity and Capital Resources................................................ 41
ROADWAY EXPRESS, INC. SELECTED HISTORICAL FINANCIAL DATA......................... 43
ROADWAY EXPRESS, INC. AND SUBSIDIARIES CAPITALIZATION............................ 44
REX MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS............................................ 45
Results of Operations.......................................................... 46
Liquidity and Capital Resources................................................ 47
REX PRO FORMA CONDENSED FINANCIAL STATEMENTS..................................... 49
BUSINESS OF RSI.................................................................. 54
Introduction................................................................... 54
Strategy....................................................................... 54
Businesses..................................................................... 54
Competition.................................................................... 55
Government Regulation.......................................................... 56
Cyclicality.................................................................... 56
Employees...................................................................... 56
Properties..................................................................... 56
Legal Proceedings.............................................................. 57
BUSINESS OF REX.................................................................. 58
Business....................................................................... 58
Business Strategy.............................................................. 58
Operations..................................................................... 58
Information and Data Processing Systems........................................ 59
Equipment...................................................................... 59
Competition.................................................................... 60
Government Regulation.......................................................... 60
Insurance and Safety........................................................... 60
Cyclicality.................................................................... 61
Employees...................................................................... 61
Participation in Multi-Employer Pension Plans.................................. 61
Properties..................................................................... 62
Legal Proceedings.............................................................. 62
HOLDERS OF COMPANY COMMON STOCK.................................................. 63
</TABLE>
ii
<PAGE> 6
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
HOLDERS OF REX STOCK............................................................. 66
HOLDERS OF RSI STOCK............................................................. 68
RSI MANAGEMENT AND EXECUTIVE COMPENSATION........................................ 70
RSI Board of Directors......................................................... 70
Director Compensation.......................................................... 71
RSI Executive Officers......................................................... 73
Executive Compensation and Shareholdings by Executive Officers................. 74
REX MANAGEMENT AND EXECUTIVE COMPENSATION........................................ 77
REX Board of Directors......................................................... 77
Director Compensation.......................................................... 77
Liability and Indemnification of Directors and Officers........................ 77
Committees of the REX Board of Directors....................................... 78
REX Executive Officers......................................................... 79
Executive Compensation and Shareholdings by Executive Officers................. 80
REX Management Incentive Stock Plan............................................ 82
Federal Income Tax Consequences................................................ 86
Other Stock Plans.............................................................. 86
DESCRIPTION OF RSI CAPITAL STOCK................................................. 88
Authorized Capital Stock....................................................... 88
RSI Common Stock............................................................... 88
No Preemptive Rights........................................................... 88
DESCRIPTION OF REX CAPITAL STOCK................................................. 88
Authorized Capital Stock....................................................... 88
REX Common Stock............................................................... 88
No Preemptive Rights........................................................... 88
CERTAIN CHANGE IN CONTROL EFFECTS OF CERTAIN PROVISIONS
OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS OF REX......................... 88
Number of Directors; Removal; Filling Vacancies................................ 89
No Stockholder Action by Written Consent; Special Meetings..................... 89
Advance Notice Provisions for Stockholder Nominations and Stockholder
Proposals................................................................... 89
Preferred Stock................................................................ 90
Amendment of Certain Provisions of the Certificate of Incorporation and
By-Laws..................................................................... 90
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS.......................... 91
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE
LAW AND CHARTER DOCUMENTS GOVERNING REX AND
THE LAW AND CHARTER DOCUMENTS GOVERNING RSI.................................... 93
Certain Voting Rights.......................................................... 93
Special Meetings of Stockholders; Stockholder Action by Written Consent........ 93
Amendment of Certificate of Incorporation and By-Laws.......................... 94
Board-Approved Preferred Stock................................................. 95
Cumulative Voting of Shares.................................................... 95
Number of Directors............................................................ 95
Removal of Directors........................................................... 95
Dissenters' Rights............................................................. 95
Payment of Dividends........................................................... 96
Repurchase of Shares........................................................... 96
Control Share Acquisition Statute.............................................. 96
Merger Moratorium Statutes..................................................... 97
Profit Disgorgement Statute.................................................... 98
</TABLE>
iii
<PAGE> 7
<TABLE>
<CAPTION>
PAGE NO.
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<S> <C>
AMENDMENT TO THE AMENDED ARTICLES
OF INCORPORATION OF THE COMPANY................................................ 98
Name Change.................................................................... 98
Recommendation................................................................. 98
APPROVAL OF THE ADOPTION OF THE
REX MANAGEMENT INCENTIVE STOCK PLAN............................................ 98
Recommendation................................................................. 99
OTHER MATTERS.................................................................... 99
EXPERTS.......................................................................... 99
SHAREHOLDER PROPOSALS............................................................ 99
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE.................................. 99
AVAILABLE INFORMATION............................................................ 100
REPORTS OF REX................................................................... 100
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE....................................... F-1
ANNEX A -- DISSENTER'S RIGHTS.................................................... A-1
ANNEX B -- FAIRNESS OPINION OF GOLDMAN, SACHS & CO............................... B-1
ANNEX C -- ROADWAY EXPRESS, INC. MANAGEMENT INCENTIVE STOCK PLAN................. C-3
</TABLE>
iv
<PAGE> 8
PROXY STATEMENT SUMMARY
The following is a summary of certain information contained in this Proxy
Statement. This summary is included for convenience only and should not be
considered complete. This summary is qualified in its entirety by the more
detailed information and financial statements contained elsewhere in this Proxy
Statement. Throughout this Proxy Statement (i) the term "the Company" refers to
Roadway Services, Inc. before the Distribution, (ii) the term "RSI" refers to
Roadway Services, Inc. after the Distribution, (iii) the term "REX" refers to
Roadway Express, Inc. before and after the Distribution, (iv) the term "Company
Common Stock" refers to Roadway Services, Inc. Common Stock before the
Distribution, (v) the term "RSI Common Stock" refers to Roadway Services, Inc.
Common Stock after the Distribution and (vi) the term "REX Common Stock" refers
to Roadway Express, Inc. Common Stock after the Distribution. Certain
capitalized terms used in this summary are defined elsewhere in this Proxy
Statement.
THE SPECIAL MEETING
DATE, TIME AND PLACE OF
SPECIAL MEETING A Special Meeting (the "Special Meeting") of the
shareholders of the Company will be held on
December 14, 1995 at 9:00 A.M., Eastern Standard
Time, at the offices of Jones, Day, Reavis & Pogue,
North Point, 901 Lakeside Avenue, Cleveland, Ohio.
PURPOSE OF THE SPECIAL
MEETING At the Special Meeting, holders of Company Common
Stock will be asked to consider and vote upon the
following "Distribution Proposals":
Proposal One: Approval of the Distribution;
Proposal Two: Approval of an amendment to the
Amended Articles of Incorporation of the Company
changing the name of the Company to "Caliber
System, Inc.", to be effective only following the
Distribution; and
Proposal Three: Approval of the adoption by REX
of the REX Management Incentive Stock Plan, to be
effective only following the Distribution.
VOTING Holders of record of Company Common Stock at the
close of business on November 14, 1995 (the
"Special Meeting Record Date") are entitled to
notice of, and to vote at, the Special Meeting.
Each share of Company Common Stock outstanding at
the close of business on the Special Meeting Record
Date is entitled to one vote on each matter
presented at the Special Meeting. All such shares
entitled to notice of and to vote at the Special
Meeting are referred to herein as "Record Shares".
The presence in person or by proxy of shareholders
holding Record Shares which are entitled to vote a
majority of the votes of all holders of Record
Shares will constitute a quorum for the transaction
of business at the Special Meeting.
1
<PAGE> 9
VOTE REQUIRED Approval of Proposals One and Two at the Special
Meeting will require the affirmative vote of
holders of a majority of the outstanding Record
Shares. Approval of Proposal Three at the Special
Meeting will require the affirmative vote of
holders of a majority of the outstanding Record
Shares present in person or by proxy at the Special
Meeting. See "The Special Meeting -- Vote
Required".
DISSENTERS' RIGHTS If, under Ohio law, the Distribution constitutes a
disposition of substantially all of the assets of
the Company, shareholders of the Company who comply
with the requirements of Ohio Revised Code
("O.R.C.") Section 1701.85 will be entitled to
dissent from Proposal One. The Company, however,
does not believe that, under Ohio law, the
Distribution would be a disposition of
substantially all of the assets of the Company and,
accordingly, does not believe that dissenters'
rights would arise by reason of the Distribution.
If, contrary to the Company's belief, such rights
of dissent are available, shareholders who perfect
dissenters' rights in accordance with O.R.C.
Section 1701.85 will be entitled to the "fair cash
value" of their Company Common Stock, determined in
accordance with the statutory procedure. See "The
Special Meeting -- Rights of Dissenting
Shareholders". A condition to the Distribution is
that, if, contrary to the Company's belief,
dissenters' rights are available under Ohio law, a
claim of dissenters' rights shall not have been
properly asserted by holders of more than 1% of the
outstanding shares of Company Common Stock. See
"The Distribution -- Conditions; Termination".
CERTAIN SPECIAL
CONSIDERATIONS Shareholders should carefully consider the factors
discussed under "Certain Special Considerations" as
well as the other information set forth herein
before voting on the Distribution Proposals.
BOARD RECOMMENDATION THE COMPANY BOARD UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" ALL OF THE DISTRIBUTION
PROPOSALS.
THE DISTRIBUTION
BACKGROUND AND REASONS
FOR THE DISTRIBUTION The Company Board believes that, following the
Distribution, (i) REX, as an independent company,
will be able to manage its cost structure more
effectively and incentivize its employees through
the increased use of cash and equity-based
incentive compensation for both salaried and hourly
employees, which is based solely on REX
performance, (ii) the Distribution will allow both
companies to better compete in the transportation
marketplace without the constraints of the
marketing position of affiliated companies, (iii)
each company should be able to achieve certain cost
savings through focusing resources on its
respective operations and through rationalization
of its organizational structure, and (iv) investors
should be able to better evaluate the financial
performance of each company, thus enhancing the
likelihood that each will achieve appropriate
market recognition.
2
<PAGE> 10
DISTRIBUTION RECORD DATE
AND DISTRIBUTION It is expected that the Company Board will declare
the Distribution after the Special Meeting. The
"Distribution Record Date" will be established by
the Company Board after the Special Meeting and
shortly before the Distribution. The "Distribution
Date" will be established by the Company Board and
is presently expected to be on or about December
31, 1995. On the Distribution Date, the Company
will deliver shares of REX Common Stock to the
Distribution Agent. The Distribution Agent will
mail certificates as soon as practicable
thereafter.
SHARES TO BE DISTRIBUTED The Distribution will be made to holders of record
on the Distribution Record Date of issued and
outstanding shares of Company Common Stock. Each
shareholder will receive one share of REX Common
Stock for each two shares of Company Common Stock
then held by such shareholder.
FRACTIONAL SHARES No certificates representing fractional shares will
be issued. Fractional share interests will be sold
by the Distribution Agent and the net proceeds
(after deduction of brokerage fees) will be
remitted to shareholders who would otherwise be
entitled to the fractional shares.
DISTRIBUTION AGENT KeyCorp Shareholder Services, Inc. will be the
Distribution Agent (the "Distribution Agent") for
the Distribution.
FEDERAL INCOME TAX
CONSEQUENCES OF THE
DISTRIBUTION The Distribution will not occur unless, on or
before the Distribution Date, the Company has
received (i) a ruling from the IRS to the effect
that the Distribution will constitute a "spin-off",
under Section 355 of the Internal Revenue Code,
tax-free to the Company and its shareholders or
(ii) an opinion of Jones, Day, Reavis & Pogue,
counsel to the Company, to the effect that the
Distribution should constitute a spin-off tax-free
to the Company and its shareholders. If the
Distribution so qualifies, the receipt of REX
Common Stock will be tax-free for Federal income
tax purposes to the Company shareholders, and RSI
will not recognize income, gain or loss, solely as
a result of the Distribution. Company shareholders
will be required to apportion their tax basis in
the Company Common Stock held by them immediately
before the Distribution between the RSI Common
Stock and the REX Common Stock received in the
Distribution based on the relative fair market
values of such stocks on the Distribution Date. See
"The Distribution -- Federal Income Tax
Consequences of the Distribution".
3
<PAGE> 11
COMPARISON OF RIGHTS OF
SHAREHOLDERS OF THE
COMPANY AND REX The rights of the Company's shareholders will
continue to be governed by Ohio law and the
Company's charter documents after the Distribution.
The rights of REX stockholders, however, will be
governed by Delaware law and REX's charter
documents. There are certain differences between
Delaware and Ohio corporate law, as well as
differences between the charter documents of the
Company and the charter documents of REX,
including, among other things, the calling of
special meetings of shareholders, the number of
directors, rights of shareholders to dissent,
limitation of directors' liability and amendment of
corporate governance documents. See "Certain
Significant Differences between the Law and Charter
Documents Governing REX and the Law and Charter
Documents Governing RSI".
ACCOUNTING TREATMENT Upon approval of the Distribution Proposals at the
Special Meeting, the Company will present the
business of REX as a discontinued operation to the
extent financial information for periods prior to
the Distribution is required to be included in the
Company's historical financial statements. After
the Distribution, the business of REX will be
reflected in separate consolidated financial
statements. See "The Distribution -- Accounting
Treatment".
LISTING OF RSI COMMON
STOCK The Company Common Stock is currently traded on the
Nasdaq Stock Market-National Market System
("Nasdaq-NMS"). Application has been made to list
the Company Common Stock on the New York Stock
Exchange ("NYSE"). It is expected that, prior to
the Distribution, the Company Common Stock will
commence trading on the NYSE under the trading
symbol "CBB". In such event, the Company Common
Stock will no longer trade on the Nasdaq-NMS.
There is currently no market for the REX Common
Stock. After the Distribution it is expected that
REX Common Stock will be traded on the Nasdaq-NMS
under the symbol "ROAD".
LIMITED RELATIONSHIPS
BETWEEN THE COMPANIES
AFTER THE DISTRIBUTION REX and RSI plan to enter into agreements effective
following the Distribution, including agreements
related to tax matters, data processing,
alternative dispute resolution, employee matters,
intellectual property, services and support, and
real estate. See "Relationship between RSI and REX
after the Distribution".
DIVIDEND POLICIES The amount and payment of dividends by RSI and REX
after the Distribution will be subject to the
discretion of the respective companies' Boards of
Directors. Dividend decisions will be based on, and
affected by, a number of factors, including future
operating results and financial requirements of RSI
and REX on a stand-alone basis. See "Dividend
Policies".
4
<PAGE> 12
CONDITIONS TO THE
DISTRIBUTION The Distribution is conditioned upon, among other
things, (i) receipt of a ruling from the IRS to the
effect that the Distribution will constitute a
tax-free distribution for U.S. Federal income tax
purposes for both holders of Company Common Stock
and the Company, or, at the option of the Company
Board, an opinion of Jones, Day, Reavis & Pogue,
the Company's counsel, to the effect that the
Distribution should constitute a tax-free
distribution for Federal income tax purposes for
both holders of Company Common Stock and the
Company; (ii) approval of the Distribution by
holders of at least a majority of the outstanding
Company Common Stock; (iii) the Registration
Statement on Form 10 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), filed
by REX with the Securities and Exchange Commission
(the "Commission") being effective; and (iv) there
not being in effect any statute, rule, regulation
or order of any court, governmental or regulatory
body that prohibits or makes illegal the
transactions contemplated by the Distribution,
which conditions are not waivable. Even if all
conditions are satisfied the Company Board has
reserved the right to abandon, defer or modify the
Distribution. See "The Distribution -- Conditions;
Termination".
ROADWAY SERVICES, INC.
BUSINESS AFTER THE
DISTRIBUTION RSI is a holding company that after the
Distribution will be engaged directly in the
contract logistics services business and through
its operating companies in express small package
delivery services, less-than-truckload ("LTL")
trucking and related transportation activities. Its
remaining operating companies are Roadway Package
System, Inc. ("RPS"), Roadway Regional Group, Inc.
("RRG"), which is the corporate parent of Viking
Freight System, Inc., Spartan Express, Inc., Coles
Express, Inc. and Central Freight Lines, Inc., and
Roberts Express, Inc. ("Roberts"). The business of
Roadway Logistics Systems, Inc. ("ROLS"), which
operates the contract logistics services business,
will be merged into RSI prior to the Distribution.
RSI's carrier operating units provide
transportation services to meet customer
requirements based on shipment size, distance, and
time in transit. ROLS provides contract logistics
services designed to develop customized solutions
for customers' distribution needs. The operating
units compete in portions of the transportation
market, none of which is dominated by a single
carrier or small number of carriers with one
exception. The surface small package shipping
market, in which RPS competes, is dominated by
United Parcel Service. See "Business of RSI". On
November 6, 1995, the Company Board announced plans
to exit the air-freight business served by Roadway
Global Air, Inc. ("RGA"). See "Roadway Services,
Inc. Pro Forma Condensed Financial Statements".
PRINCIPAL OFFICE Roadway Services, Inc.
1077 Gorge Boulevard
Akron, Ohio 44310
P.O. Box 88
Akron, Ohio 44309-0088
(216) 384-8184
5
<PAGE> 13
ROADWAY EXPRESS, INC.
BUSINESS AFTER THE
DISTRIBUTION REX, a Delaware corporation founded in 1930,
provides primarily nationwide, long-haul LTL
freight services in the United States. It provides
similar LTL service in Canada through its
wholly-owned subsidiary, Roadway Express (Canada),
Inc. Service in Mexico is provided through
TNL-Roadway S.A. de C.V., a company in which REX
owns 70% of the capital stock and which functions
as a logistics company for customers by
coordinating the handling and flow of their
shipments. REX serves over half a million customers
in North America and offers service to 62 countries
worldwide. Based on revenues for the year ended
December 31, 1994, REX is one of the largest LTL
motor carriers in the United States.
REX operations consist of an extensive
transportation network which provides primarily LTL
shipments of general commodity freight. LTL
shipments require less than the full cargo and/or
weight-capacity of a trailer which are thus most
efficiently transported by sharing trailer capacity
with other LTL shipments. General commodities
include, among other things, apparel, appliances,
automotive parts, chemicals, food, furniture,
glass, machinery, metal and metal products,
non-bulk petroleum products, rubber, textiles,
wood, and miscellaneous manufactured products.
During the 36 weeks ended September 9, 1995, no
single customer accounted for more than 2% of REX's
total revenues, and the ten largest customers
accounted for less than 8% of REX's total revenues.
See "Business of REX".
PRINCIPAL OFFICE Roadway Express, Inc.
1077 Gorge Boulevard
Akron, Ohio 44310
P.O. Box 471
Akron, Ohio 44309-0471
(216) 384-1717
6
<PAGE> 14
ROADWAY SERVICES, INC.
------------------
SUMMARY OF SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary consolidated historical financial
data of the Company and pro forma financial data of RSI. The summary historical
data has been derived from and should be read in conjunction with the audited
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 1994 and unaudited financial data
included in the Company's Quarterly Report on Form 10-Q for the quarterly period
ended September 9, 1995, both of which are incorporated herein by reference. The
summary pro forma financial data has been derived from the RSI unaudited pro
forma condensed financial statements for the thirty-six weeks ended September 9,
1995 and September 10, 1994 and for the year ended December 31, 1994 included
elsewhere in this Proxy Statement and should be read in conjunction with the
information set forth therein.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRO FORMA (A) HISTORICAL
----------------------------- --------------------------------------------------------------------
THIRTY-SIX WEEKS THIRTY-SIX WEEKS ENDED
ENDED
(THREE QUARTERS) YEAR (THREE QUARTERS)
------------------- ENDED ------------------------ YEAR ENDED DECEMBER 31,
SEPT. 9, SEPT. 10, DEC. 31, SEPT. 9, SEPT. 10, ---------------------------------------
1995 1994 1994 1995 1994 1994 1993 1992 1991
-------- --------- -------- --------- ---------- ------ ------ ------ ------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.................. $1,647 $ 1,559 $2,328 $ 3,293 $3,045(b) $4,572(b) $4,156 $3,578 $3,177
Operating expenses....... 1,545 1,439 2,158 3,276 3,033(b) 4,520(b)(c) 3,952 3,341 2,971
Operating income......... 102 120 170 17 12(b) 52(b)(c) 204 237 206
Pro forma income from
continuing
operations............. 68 73 101
Pro forma income per
share from continuing
operations............. 1.73 1.86 2.58
Net income............... 6 6(b) 20(b)(c) 101(d) 147 127
Net income per share..... 0.16 0.15(b) 0.50(b)(c) 2.56(d) 3.73 3.27
BALANCE SHEET DATA:
Current assets........... 403 675 667 643 619 698 550
Carrier operating
property............... 824 1,294 1,138 1,210 1,126 896 852
Total assets............. 1,369 2,064 1,904 1,949 1,846 1,681 1,489
Long-term debt........... -- -- -- -- -- -- --
Shareholders' equity..... 741 982 1,014 1,015 1,047 1,021 890
OTHER DATA:
Book value per common
share.................. 18.77 24.88 25.73 25.76 26.60 25.71 22.72
Cash dividends declared
per common share....... 1.05 1.05 1.40 1.05 1.05 1.40 1.375 1.275 1.175
<CAPTION>
1990
------
<S> <C>
INCOME STATEMENT DATA:
Revenue.................. $2,971
Operating expenses....... 2,782
Operating income......... 189
Pro forma income from
continuing
operations.............
Pro forma income per
share from continuing
operations.............
Net income............... 119
Net income per share..... 3.05
BALANCE SHEET DATA:
Current assets........... 442
Carrier operating
property............... 811
Total assets............. 1,341
Long-term debt........... --
Shareholders' equity..... 778
OTHER DATA:
Book value per common
share.................. 20.15
Cash dividends declared
per common share....... 1.10
</TABLE>
- ---------------
(a) On November 6, 1995, the Company Board announced plans to exit the air
freight business served by RGA, RSI's worldwide air freight subsidiary. The
Company estimated a pre-tax charge of approximately $65 million for the
operation's discontinuance which is not reflected in the pro forma financial
statements. On November 17, 1995, the Company announced an agreement with an
air freight company to provide continuing services to RGA's former U.S.
customers and to sell certain limited U.S. assets. Although no assurances
can be given, discussions are continuing with respect to the disposition of
other U.S. assets and with an international freight forwarder with respect
to the non-U.S. operations of RGA. The estimate of the pre-tax charge does
not include the effects of any transactions or any sale proceeds which may
be realized. No revised estimate is available as of the date of this Proxy
Statement. The pro forma income statement data assumes the Distribution and
the discontinuance of the operations of RGA were completed on January 1,
1995 or January 1, 1994, as applicable and accordingly does not include the
results of REX or RGA. The pro forma balance sheet data assumes the
Distribution and the discontinuance of the operations of RGA were completed
on September 9, 1995. Such information may not be indicative of the results
that would have occurred had the Distribution and such discontinuance
occurred on those respective dates.
(b) Includes the effect of a 24-day Teamsters strike against REX in the second
quarter of 1994.
(c) Includes the net after tax effect of $13.7 million ($0.35 per share) related
to an employment tax settlement with the IRS in 1994 as described in the
notes to the consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994.
(d) Includes a net charge of $18.1 million ($0.46 per share) for the cumulative
effect of accounting changes for the after tax effect of postretirement
benefits other than pensions and income taxes as described in the notes to
the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994.
7
<PAGE> 15
ROADWAY EXPRESS, INC.
------------------
SUMMARY OF SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth summary consolidated historical and pro
forma financial data for REX. The summary historical data as of December 31,
1994 and 1993, and for the years ended December 31, 1994, 1993 and 1992 has been
derived from and should be read in conjunction with the audited consolidated
financial statements of REX contained elsewhere in this Proxy Statement. The
historical financial data is unaudited except for the years ended December 31,
1994, 1993 and 1992. The data set forth below and the historical financial
statements of REX contained in this Proxy Statement are presented as if REX were
a separate entity for all periods presented. The summary pro forma financial
data has been derived from the REX unaudited pro forma condensed financial
statements for the thirty-six weeks ended September 9, 1995 and September 10,
1994 and for the year ended December 31, 1994 included elsewhere in this Proxy
Statement and should be read in conjunction with the information set forth
therein.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRO FORMA (A) HISTORICAL
-------------------------------- ------------------------------------------------------------------
THIRTY-SIX WEEKS THIRTY-SIX WEEKS ENDED
ENDED
(THREE QUARTERS) YEAR (THREE QUARTERS)
------------------- ENDED ------------------------ YEAR ENDED DECEMBER 31,
SEPT. 9, SEPT. 10, DEC. 31, SEPT. 9, SEPT. 10, -------------------------------------
1995 1994 1994 1995 1994 1994 1993 1992
-------- --------- --------- --------- ---------- --------- --------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.................... $1,570 $ 1,443(b) $ 2,171 $1,570 $1,443 (b) $2,171(b) $2,324 $2,186
Operating expenses......... 1,588 1,495(b) 2,205 1,585 1,491 (b) 2,200(b) 2,251 2,088
Operating income (loss).... (18) (52)(b) (34) (15) (48 )(b) (29)(b) 73 98
Net income (loss).......... (15) (29)(b) (24) (13) (27 )(b) (21)(b) 26(d) 61
Pro forma net income (loss)
per share (c)............ (0.73) (1.40)(b) (1.17)(b)
BALANCE SHEET DATA:
Current assets............. 277 277 286 272 235 231
Carrier operating
property................. 440 440 456 474 505 472
Total assets............... 734 720 742 746 740 705
Long-term debt............. -- -- -- -- -- --
Shareholder's equity....... 213 235 250 256 300 301
OTHER DATA:
Pro forma book value per
common share (c)......... 10.25 11.33 12.07 12.34 14.50 14.41
(AMOUNTS IN THOUSANDS)
Tons of freight -- LTL..................................... 4,108 3,734 5,598 6,221 5,873
TL........................................ 995 981 1,439 1,639 1,587
Total..................................... 5,103 4,715 7,037 7,860 7,460
Intercity miles............................................ 431,957 387,138 588,499 648,831 601,659
Ton miles.................................................. 6,538,605 5,873,308 8,792,871 9,714,031 9,170,521
Number of employees........................................ 26 27 27 27 26
<CAPTION>
1991 1990
--------- ---------
<S> <C> <C>
INCOME STATEMENT DATA:
Revenue.................... $2,063 $1,982
Operating expenses......... 1,960 1,885
Operating income (loss).... 103 97
Net income (loss).......... 62 60
Pro forma net income (loss)
per share (c)............
BALANCE SHEET DATA:
Current assets............. 223 225
Carrier operating
property................. 479 488
Total assets............... 704 716
Long-term debt............. -- --
Shareholder's equity....... 298 321
OTHER DATA:
Pro forma book value per
common share (c)......... 14.47 15.81
(AMOUNTS IN THOUSANDS)
Tons of freight -- LTL..... 5,634 5,528
TL........ 1,605 1,587
Total..... 7,239 7,115
Intercity miles............ 583,839 560,711
Ton miles.................. 8,833,070 8,536,483
Number of employees........ 26 26
</TABLE>
- ---------------
(a) The pro forma income statement data assumes the Distribution was completed
on January 1, 1995 or January 1, 1994, as applicable. The pro forma balance
sheet data assumes the Distribution was completed on September 9, 1995. Such
information may not be indicative of the results that would have occurred
had the Distribution occurred on those respective dates.
(b) Includes the effect of a 24-day Teamsters strike against REX in the second
quarter of 1994.
(c) Pro forma per share data is computed based on the equivalent shares
outstanding for all periods presented. The number of shares was determined
based on the Distribution ratio of REX Common Stock to RSI Common Stock.
(d) Includes a charge of $14.7 million ($.71 on a pro forma per share basis) for
the cumulative effect of accounting changes for postretirement benefits
other than pensions and income taxes as described in the notes to the
consolidated financial statements of REX included elsewhere in this Proxy
Statement.
8
<PAGE> 16
PROXY STATEMENT
ROADWAY SERVICES, INC.
1077 GORGE BLVD.
AKRON, OHIO 44310
SPECIAL MEETING OF SHAREHOLDERS OF ROADWAY SERVICES, INC.
TO BE HELD ON DECEMBER 14, 1995
This Proxy Statement is being provided to the shareholders of the Company
in connection with the solicitation by the Company's Board of Directors (the
"Company Board") of proxies to be used at the Special Meeting of Shareholders to
be held on Thursday, December 14, 1995, at 9:00 A.M., Eastern Standard Time, at
the offices of Jones, Day, Reavis & Pogue, located at North Point, 901 Lakeside
Avenue, Cleveland, Ohio, and any adjournment thereof. The Notice of Special
Meeting of Shareholders, this Proxy Statement and the form of Proxy are being
mailed on or about November 24, 1995 to shareholders of record on November 14,
1995 ("the Special Meeting Record Date").
THE SPECIAL MEETING
PURPOSE OF THE SPECIAL MEETING
At the Special Meeting, shareholders will be asked to approve the proposed
distribution by the Company to holders of the Company Common Stock of at least
ninety-five percent (95%) of the outstanding shares of the REX Common Stock,
(the "Distribution"). Each holder of record of Company Common Stock on the
Distribution Record Date (other than shareholders who properly exercise their
dissenters' rights under Ohio law, if, contrary to the Company's belief,
dissenters' rights are available under Ohio law) will receive one share of REX
Common Stock for each two shares of Company Common Stock held on the
Distribution Record Date. No consideration will be paid by the holders of
Company Common Stock for the REX Common Stock.
The Company Board has conditioned the Distribution upon, among other
things: (i) approval of Proposal One by shareholders holding at least a majority
of the outstanding shares of Company Common Stock; (ii) receipt of a ruling from
the Internal Revenue Service (the "IRS"), in form and substance satisfactory to
the Company Board, to the effect that the Distribution will constitute a
tax-free distribution for Federal income tax purposes for both holders of
Company Common Stock and the Company, or, at the option of the Company Board, an
opinion of Jones, Day, Reavis & Pogue, the Company's counsel, in form and
substance satisfactory to the Company Board, that the Distribution should
constitute a tax-free distribution for U.S. Federal income tax purposes for both
holders of Company Common Stock and the Company; and (iii) if, contrary to the
Company's belief, dissenters' rights are available under Ohio law, a claim of
dissenters' rights by holders of less than 1% of the Company Common Stock.
Conditions (i) and (ii) in the preceding sentence cannot be waived by the
Company Board. See "The Distribution -- Conditions; Termination".
The Distribution will separate the Company into two publicly-owned
companies. After the Distribution, REX will continue to operate its long haul,
LTL trucking business; RSI will continue to operate the remainder of the
Company's transportation services business.
The Company Common Stock is currently traded on the Nasdaq-NMS. The Company
has filed an application to list the Company Common Stock on the NYSE and
expects that, prior to the Distribution Date, the Company Common Stock will
commence trading on the NYSE under the trading symbol "CBB". In such event, the
Company Common Stock will no longer be traded on the Nasdaq-NMS. REX has filed
an application to list REX Common Stock on the Nasdaq-NMS under the symbol
"ROAD".
FOR A DESCRIPTION OF CERTAIN SPECIAL CONSIDERATIONS IN CONNECTION WITH THE
DISTRIBUTION, SEE "CERTAIN SPECIAL CONSIDERATIONS".
9
<PAGE> 17
At the Special Meeting shareholders will also be asked to approve two other
Distribution Proposals to be effective only following the Distribution: (i) an
amendment to the Amended Articles of Incorporation of the Company changing the
name of the Company to "Caliber System, Inc."; and (ii) approval of the adoption
by REX of the REX Management Incentive Stock Plan.
Although the Company does not believe that shareholder approval of the
Distribution is required under Ohio law, the Company Board has made shareholder
approval of the Distribution (along with shareholder approval of each of the
other Distribution Proposals) a condition to Distribution because of the
importance of the Distribution to the Company and its shareholders. THE
EFFECTIVENESS OF DISTRIBUTION PROPOSALS TWO AND THREE IS CONDITIONED UPON THE
APPROVAL OF DISTRIBUTION PROPOSAL ONE. The Company Board has further retained
discretion, even if shareholder approval of Distribution Proposal One is
obtained and the other conditions to the Distribution are satisfied, to abandon,
defer or modify the Distribution or any other element contained in the
Distribution Proposals. See "The Distribution -- Conditions; Termination". If
the Company Board takes any such action, it will be on the basis that the
Company Board believes such action will be in the best interests of the Company
and its shareholders.
Additionally, the Chairman of the Company Board may determine to withdraw
the Name Change Proposal from consideration at the Special Meeting, or if
adopted by the shareholders, may determine not to file the amendment to The
Amended Articles of Incorporation with the Ohio Secretary of State, if further
investigation reveals that "Caliber System, Inc." may not be reasonably
available for use by the Company. In such case, the Company intends to propose a
change to another name for a vote by shareholders at the next annual meeting of
shareholders of the Company.
THE COMPANY BOARD HAS UNANIMOUSLY APPROVED THE DISTRIBUTION AND UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" EACH OF THE PROPOSALS CONSTITUTING THE
DISTRIBUTION PROPOSALS (AS DEFINED HEREIN).
VOTING POLICY
Shares can be voted only if the shareholder is present in person or by
proxy. The Company has adopted a policy relating to proxy voting and independent
tabulation and inspection of elections. The policy provides that the Company
will furnish shareholders the opportunity to request confidential treatment of
their votes. There is a place on the enclosed proxy card for shareholders to
make such an election. If a shareholder so requests confidential treatment, an
independent vote tabulator and the independent inspectors of election will keep
the shareholder's vote permanently confidential and not disclose the vote to
anyone. This policy will be in effect at the Special Meeting. Confidential
treatment will not apply when disclosure is required by law or under
circumstances such as a proxy contest.
VOTE REQUIRED
The Company believes that under Ohio law, which governs the Distribution, a
vote of shareholders is not required in connection with the Distribution. Ohio
law requires the approval by the holders of at least two-thirds (or if a
corporation's articles so provide or permit, by the affirmative vote of a
greater or lesser proportion, but not less than a majority) of a corporation's
outstanding shares entitled to vote thereon for a lease, sale, exchange,
transfer, or other disposition of all, or substantially all, of the assets of a
corporation. The Company has provided in its Amended Articles of Incorporation
that the approval required for a disposition of all or substantially all of the
assets of the Company is the affirmative vote of at least a majority of the
Company's outstanding shares entitled to vote thereon, provided that at least
87.5% of the Company Board has voted to recommend approval of the disposition of
substantially all of the assets of the Company or to proceed to the shareholders
with a proposal for a disposition of substantially all of the assets of the
Company. The Company believes that the Distribution is not a disposition of
substantially all of the assets of the Company. Although the Company believes
that shareholder approval is not required on Proposal One, the Company is
seeking to obtain the views of its shareholders because of the importance of the
Distribution to shareholders. The affirmative vote of at
10
<PAGE> 18
least a majority of the Record Shares is required for approval of Proposal One
and Proposal Two. The affirmative vote of at least a majority of the Record
Shares present in person or represented by proxy at the Special Meeting is
required to approve Proposal Three. The Company Board has unanimously
recommended approval of the Distribution Proposals.
Each share of Company Common Stock outstanding at the close of business on
the Special Meeting Record Date is entitled to one vote at the Special Meeting.
As of the Special Meeting Record Date there were 39,069,312 shares of Company
Common Stock outstanding and entitled to vote at the Special Meeting. The
representation in person or by proxy of at least a majority of the outstanding
shares entitled to vote is necessary to provide a quorum at the meeting.
Abstentions and "non-votes" are counted as present in determining whether the
quorum requirement is satisfied. A "non-vote" occurs when a broker or other
nominee holding shares for a beneficial owner votes on one proposal, but does
not vote on another proposal. Abstentions and "non-votes" will be treated as
though they were votes against the Distribution Proposals.
The Company Board has designated R. A. Chenoweth, Director, Daniel J.
Sullivan, Director, Chairman, Chief Executive Officer and President, and D. A.
Wilson, Senior Vice President-Finance and Planning, Chief Financial Officer and
Secretary, as Proxies for appointment by shareholders to represent and vote
their shares in accordance with their directions.
EMPLOYEE BENEFIT HOLDINGS
Each participant in the employee benefit plans of the Company who has
Company Common Stock allocated to his or her accounts in each of the Roadway
Services, Inc. Stock Bonus Plan, the Roadway Services, Inc. Stock Savings and
Retirement Income Plan and the Roadway Services, Inc. Employee Stock Ownership
Plan is entitled to instruct the trustee of the respective Plan as to the voting
of any full or partial shares of Company Stock allocated to his or her accounts
as of the Special Meeting Record Date. The trustee for each Plan will provide
each participant therein with a copy of this Proxy Statement and a blank form to
instruct the trustee how to vote the shares of Company Common Stock allocated to
his or her account as of the Special Meeting Record Date. Upon receipt of such
instructions, the trustee will vote the shares (or, if applicable, exercise any
dissenters' rights) as instructed. The trustee will vote all other Company
Common Stock in its possession (including shares for which it does not receive
instruction, from participants in the respective plan) in its discretion, unless
directed as to such vote by the committee administering the Plan. The
administrative committee for each such Plan has determined not to direct the
trustee for such Plan with respect to votes taken at the Special Meeting.
PROXIES
All shares of Company Common Stock represented by properly executed proxies
will, unless such proxies have previously been revoked, be voted at the Special
Meeting in accordance with the directions on the proxies. If no direction is
indicated on a properly executed proxy, the shares will be voted in favor of the
Distribution Proposals. If any other matters are properly presented at the
Special Meeting for action, which is not anticipated, the Proxy holders will
vote the proxies (which confer authority to such holders to vote on such
matters) in accordance with their best judgment. A Company shareholder returning
a proxy may revoke it at any time before it is voted by communicating such
revocation in writing to the Secretary of the Company or by executing and
delivering a later-dated proxy. In addition, any person who has executed a proxy
and is present at the Special Meeting may vote in person instead of by proxy,
thereby cancelling any proxy previously given, whether or not written revocation
of such proxy has been given. Any written notice revoking a proxy should be sent
to Roadway Services, Inc., 1077 Gorge Blvd., Akron, Ohio 44310; P.O. Box 88,
Akron, Ohio 44309-0088, Attention: Secretary.
If a quorum is not present at the time the Special Meeting is convened, or
if the Company believes that additional time should be allowed for the
solicitation of proxies or for any other reason, the Company may adjourn the
Special Meeting from time to time upon a vote of the shareholders. If the
Company proposes any adjournment of the Special Meeting by a vote of the
shareholders, the persons named in the enclosed form of proxy will vote all
shares of Company Common Stock for which they have voting authority in favor of
such adjournment.
11
<PAGE> 19
COSTS OF SOLICITATION
The Company will bear the costs of the solicitation. In addition to
solicitation by mail, the Company will request banks, brokers and other
custodians, nominees and fiduciaries to supply proxy material to the beneficial
owners of Company Common Stock of whom they have knowledge, and will reimburse
them for their expenses in so doing; and certain directors, officers and other
employees of the Company, not specially employed for the purpose, may solicit
proxies, without additional remuneration therefor, by personal interview, mail,
telephone or telefax. In addition, the Company has retained Georgeson & Company,
Inc. to assist in the solicitation for a fee of $10,000, plus reimbursement for
its reasonable out-of-pocket expenses and for payments made to brokers and other
nominees for their expenses in forwarding soliciting material. Georgeson &
Company, Inc. will distribute proxy materials to beneficial owners and solicit
proxies by personal interview, mail, telephone and telefax, and will request
banks, brokers and other custodians, nominees and fiduciaries to forward
soliciting material to the beneficial owners of the Company Common Stock held on
the Special Meeting Record Date by such persons.
RIGHTS OF DISSENTING SHAREHOLDERS
If, under Ohio law, the Distribution constitutes a disposition of
substantially all of the assets of the Company, holders of Company Common Stock
on the Special Meeting Record Date who fulfill the requirements of O.R.C.
Section 1701.85 will be entitled to dissent from Proposal One and receive,
instead of the Distribution, payment for the "fair cash value" of their Company
Common Stock on the terms and conditions described below.
The Company does not believe that the Distribution would be a disposition
of substantially all of the assets of the Company under Ohio law (see "The
Special Meeting -- Vote Required") and, accordingly, does not believe that
dissenters' rights will arise by reason of the Distribution. Therefore, the
Company reserves the right at any time to litigate in any appropriate forum the
questions whether a shareholder vote is in fact required on Proposal One and
whether dissenters' rights must in fact be granted if Proposal One receives
shareholder approval and the Distribution occurs. As to dissenters' rights, the
Company also reserves the right to contest their applicability to Proposal One
in any proceeding brought by shareholders or the Company under Section 1701.85
of the O.R.C. If the holders of more than 1% of the Company Common Stock
outstanding on the Special Meeting Record Date purport to exercise such
dissenters' rights, the Company Board may elect not to proceed with the
Distribution.
If, contrary to the Company's belief, such dissenters' rights are
available, holders of Company Common Stock who so desire will be entitled to
relief as dissenting shareholders under O.R.C. Section 1701.76. HOWEVER, ANY
SUCH HOLDER WILL BE ENTITLED TO SUCH RELIEF ONLY UPON STRICT COMPLIANCE WITH
O.R.C. SECTION 1701.85. The following summary does not purport to be a complete
statement of the method of compliance with O.R.C. Section 1701.85 and is
qualified in its entirety by reference to that Section, the full text of which
is attached hereto as Appendix A. A holder of Company Common Stock who is
considering the possibility of dissenting is urged to read O.R.C. Section
1701.85 in full, and is encouraged to consult his own counsel.
A shareholder who wishes to perfect his rights as a dissenting shareholder
(if, in fact, such rights are available) MUST, if Proposal One is adopted:
(a) have been a record holder of the Company Common Stock as to which
he seeks relief on the Special Meeting Record Date;
(b) not have voted such Company Common Stock in favor of adoption of
Proposal One; and
(c) DELIVER to the Company, not later than 10 days after the Special
Meeting, a written demand for payment of the fair cash value of the shares
as to which he seeks relief. This written demand must state the name of the
shareholder, his address, the number of shares as to which he seeks relief,
and the amount claimed as the "fair cash value" thereof.
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A vote against adoption of Proposal One will not satisfy the requirements
of a written demand for payment as described in clause (c) of the immediately
preceding paragraph. Any written demand for payment must be DELIVERED to Roadway
Services, Inc., 1077 Gorge Blvd., Akron, Ohio 44310; P. O. Box 88, Akron, Ohio
44309-0088, Attention: Secretary. Because the written demand must be delivered
within the 10-day period immediately following the Special Meeting, a
shareholder should use a means of delivery, including hand delivery, that will
assure timely delivery, and should consider use of a means of delivery that
would provide a receipt establishing the timeliness thereof.
If the Company sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificate(s) representing the
shares as to which he seeks relief, the dissenting shareholder must DELIVER such
certificate(s) to the Company for endorsement as to the fact of his demand.
Failure to meet this requirement may, at the option of the Company Board,
terminate any dissenters' rights unless a court for good cause shown otherwise
directs.
Unless the dissenting shareholder and the Company shall agree on the fair
cash value per share of Company Common Stock as to which relief is sought,
either may, within three months after the delivery of the written demand by the
shareholder, file a petition in the Court of Common Pleas of Summit County,
Ohio. If the court finds that the shareholder is entitled to be paid the fair
cash value of any shares, the court may appoint one or more appraisers to
receive evidence and to recommend a decision on the amount of the fair cash
value.
Fair cash value will be determined as of the day prior to the Special
Meeting, will be the amount a willing seller and willing buyer would accept or
pay with neither being under compulsion to sell or buy, will not exceed the
amount specified in the shareholder's written demand, and will exclude any
appreciation or depreciation in market value resulting from the Distribution.
Unless the Company and the dissenting shareholder shall otherwise agree in
writing, or except in the case of any of the eventualities (a) - (e) summarized
below, a court shall make a finding as to the fair cash value of a share of
Company Common Stock and render judgment against the Company for its payment
with interest at such rate and from such date as the court considers equitable.
The costs of these proceedings shall be assessed or apportioned as the court
considers equitable.
The rights, if any, of a dissenting shareholder will terminate if (a) he
has not strictly complied with O.R.C. Section 1701.85 unless the Company Board
waives such failure; (b) the Company abandons or is enjoined or prevented from
carrying out, or the holders of Company Common Stock rescind their adoption of,
the Distribution; (c) the dissenting shareholder withdraws his written demand,
with the consent of the Company Board; (d) the Company and the dissenting
shareholder shall not have agreed upon the fair cash value per share of Company
Common Stock and neither shall have timely filed or joined in a petition in an
appropriate court for a determination of the fair cash value of the shares; or
(e) a court shall have finally determined that no dissenters' rights arise by
reason of the Distribution and all rights of appeal shall have expired or been
irrevocably waived. If the rights, if any, of a dissenting shareholder
terminate, such shareholder shall receive his shares of RSI Common Stock (if
previously delivered to the Company), the shares of REX Common Stock to which he
is entitled in the Distribution and any other distributions on the RSI Common
Stock and REX Common Stock payable in respect of the period in which such
shareholder was asserting his dissenter's rights.
BECAUSE A PROXY WHICH DOES NOT CONTAIN VOTING INSTRUCTIONS WILL, UNLESS
REVOKED, BE VOTED FOR ADOPTION OF THE DISTRIBUTION PROPOSALS, A COMPANY
SHAREHOLDER WHO WISHES TO EXERCISE HIS DISSENTERS' RIGHTS (IF, CONTRARY TO THE
COMPANY'S BELIEF, DISSENTERS' RIGHTS ARE AVAILABLE UNDER OHIO LAW) MUST EITHER
NOT SIGN AND RETURN HIS PROXY OR, IF HE SIGNS AND RETURNS HIS PROXY, VOTE
AGAINST OR ABSTAIN FROM VOTING ON THE ADOPTION OF PROPOSAL ONE.
THE ABOVE SUMMARY DOES NOT REPRESENT AN ACKNOWLEDGMENT BY THE COMPANY (AND
THE COMPANY EXPLICITLY DENIES) THAT SUCH RIGHTS OF DISSENT AND PAYMENT ARE
AVAILABLE TO HOLDERS OF COMPANY COMMON STOCK.
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CERTAIN SPECIAL CONSIDERATIONS
Shareholders should carefully consider the following factors, as well as
the other information set forth herein, before acting on the Distribution
Proposal.
CERTAIN FINANCIAL CONSIDERATIONS RELATED TO REX AND RSI
For the year ended December 31, 1994 and the thirty-six weeks ended
September 9, 1995, REX experienced substantial operating losses. Although such
losses have been reduced, there can be no assurance that REX's operating losses
will be eliminated or as to the level of any future profitability. See "The
Distribution -- Background and Reasons for the Distribution" and "REX
Management's Discussion and Analysis of Financial Condition and Results of
Operations".
One of the principal purposes of the Distribution is to enable REX to
provide employee incentives to improve its operating results. REX management
intends to provide its employees with the opportunity to earn significant
amounts of REX Common Stock through equity incentive compensation arrangements.
In connection therewith, REX will from time to time repurchase REX Common Stock
in the open market to fund such arrangements, which repurchases could be
substantial. Although no assurances can be given, REX management believes that
cash flows from operations and financing sources which it anticipates to be
available will be sufficient to support such repurchases, its working capital
needs and projected capital expenditures. See "REX Management's Discussion and
Analysis of Financial Condition and Results of Operations."
Because of operating losses at REX during 1994 and 1995, RSI has made funds
available to REX during such periods, which will not be the case after the
Distribution. Nonetheless, uncertain profitability at other subsidiaries, as
well as expenses to be incurred in connection with the discontinuance of the
business of RGA, would appear to make it necessary for RSI to incur significant
borrowings in light of its projected capital expenditures. Although no
assurances can be given, RSI anticipates that it will be able to make
arrangements for lines of credit sufficient to meet its needs for the
foreseeable future. See "RSI Management's Discussion and Analysis of Financial
Condition and Results of Operations".
The assets and liabilities attributable to pensions for REX's active
employees will be transferred from one of the Company's pension plans to a new
pension plan to be established by REX. After the Distribution, REX will have
accrued pension costs, based on actuarial estimates, of approximately $36.5
million and RSI will have a corresponding increase in its prepaid pension costs.
The Company pension plan in which REX's employees now participate currently has
assets sufficient to discharge its liabilities. The amortization of such
obligation and future pension expense of REX will depend upon investment
returns, future contributions and discount rate, rate of return and mortality
assumptions to be made by REX following the Distribution.
PENSION BENEFIT GUARANTY CORPORATION
Since the public announcement of the Distribution, the Company has received
an inquiry from the Pension Benefit Guaranty Corporation (the "PBGC") regarding
the funding status of the Company's pension plans and the effect of the
Distribution on the ability of the Company to satisfy its obligations to such
plans. The Company has responded to the inquiry by the PBGC but has not received
a response. Although there can be no assurance as to the ultimate result, the
Company does not believe that any material liabilities will arise as a result of
such inquiry.
REX contributes to various multi-employer pension plans pursuant to a
collective bargaining agreement. If REX were to cease to contribute or to
substantially reduce its contributions to a multi-employer plan, the Employee
Retirement Income Security Act of 1974, as amended ("ERISA") would impose
withdrawal liability for REX's proportionate share of the plan's unfunded
liabilities on REX and each member of its controlled group, and, in certain
circumstances, on former members of REX's controlled group, including RSI. REX
has no intention of ceasing to contribute or substantially reduce its
contributions to such multi-employer plans.
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ADVANTAGES AND DISADVANTAGES OF THE DISTRIBUTION
Certain relationships have existed between RSI's businesses and REX's
business, including the ability to provide working capital from cash flows of
one company's business to the other and the provision of certain administrative
services. Although RSI is entering into various agreements with REX in
connection with the Distribution, such relationships will not exist after the
Distribution. REX will no longer be able to rely on RSI for financial support or
obtain credit on the basis of the Company's credit standing. RSI, which expects
to make substantial capital expenditures in the remainder of 1995 and 1996, will
no longer be able to rely on the cash flows generated by REX to satisfy a
portion of its capital needs. Nevertheless, the Company Board believes that
separation of the two companies will result in certain long-term operating
efficiencies by allowing the companies to focus on their respective businesses.
See "The Distribution -- Background and Reasons for the Distribution." The
Company Board also believes that each of RSI and REX will generate cash flows
and have access to financing that will be sufficient to fund working capital,
planned capital expenditures and other uses. See "RSI Management's Discussion
and Analysis of Pro Forma Financial Condition and Results of Operations" and
"REX Management's Discussion and Analysis of Financial Condition and Results of
Operations".
COMPETITION AND INDUSTRY FACTORS
The businesses in which RSI and REX engage are highly competitive.
The operations and profitability of the industry in which RSI and REX
compete, as well as RSI and REX, could be affected by significant changes in
labor costs, fuel costs and taxes among other factors.
RSI's subsidiaries provide services to various portions of the
transportation market, none of which is dominated by a single carrier or small
number of carriers with one exception. The surface small package shipping
market, in which RPS competes, is dominated by United Parcel Service ("UPS").
REX's primary competitors in the national long haul LTL market are Yellow
Freight System and Consolidated Freightways. REX also competes with other
national and, to a lesser extent, regional LTL carriers, small package delivery
services, railroads, private carriers, freight forwarding companies, and air
freight companies. Approximately 75% of REX's employees are represented by
various labor unions, primarily the International Brotherhood of Teamsters
("IBT"). In 1994, the Company experienced a 24-day work stoppage which had an
adverse impact on the Company's results of operations. REX and the IBT are
currently parties to a National Master Freight Agreement ("NMFA") which expires
on March 31, 1998. There can be no assurance that work stoppages will not occur
in the future. Certain non-union competitors of REX may have advantages over
unionized carriers like REX, including lower wage and benefit costs.
CERTAIN TAX CONSIDERATIONS
It is intended that the Distribution will be a tax-free spin-off under
Section 355 of the Internal Revenue Code of 1986 (the "Code"). If the
Distribution does qualify as a tax-free spin-off, in general, no income, gain or
loss will be recognized by holders of Company Common Stock or by the Company or
REX on the Distribution. It is a condition to the Distribution that the Company
receive either (i) a ruling from the IRS that Section 355 of the Code will apply
to the Distribution or, (ii) at the option of the Company Board, an opinion of
Jones, Day, Reavis & Pogue, the Company's counsel, to the effect that, for
Federal income tax purposes, Section 355 should apply to the Distribution.
On September 15, 1995, counsel for the Company filed a request with the IRS
for a ruling letter that Section 355 will apply to the Distribution. The IRS has
not yet issued a ruling letter and there can be no assurance that the IRS will
issue such letter prior to the Distribution. A ruling, while generally binding
upon the IRS, would be subject to certain factual representations and
assumptions. The tax opinion of counsel would similarly be subject to certain
factual representations, assumptions and qualifications. If the Distribution
were not to qualify under Section 355 of the Code, then, in general, a corporate
tax (which would be very substantial) would be payable by the Company based upon
the difference between (x)
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the fair market value of the distributed REX Common Stock and (y) the adjusted
basis of such REX Common Stock. In addition, under the consolidated return rules
of the Code, each member of the consolidated group (including REX) would be
severally liable for such tax liability. If the Distribution occurred and it
were not to qualify under Section 355 of the Code, the resulting tax liability
would have a material adverse effect on the financial position, results of
operations and cash flows of RSI and possibly REX. The combined Federal and
state income tax liability arising from the Distribution if it were found to be
taxable would be equal to the fair market value of the REX Common Stock at the
time of the Distribution, less the Company's tax basis of approximately $240
million in the REX Common Stock, multiplied by the applicable combined tax rate,
which could be as high as 39%.
Furthermore, if the Distribution were not to qualify as a tax-free
spin-off, each Company shareholder receiving shares of REX Common Stock in the
Distribution would be treated as if such shareholder had received a taxable
distribution in an amount equal to the fair market value of REX Common Stock
received, which would result in (x) a dividend to the extent of such
shareholder's pro rata share of the Company's current and accumulated earnings
and profits, (y) a reduction in such shareholder's basis in Company Common Stock
to the extent that the amount received exceeds such shareholder's share of
earnings and profits and (z) a gain from the deemed sale or exchange of Company
Common Stock to the extent the amount received exceeds both such shareholder's
share of earnings and profits and such shareholder's basis in Company Common
Stock. Finally, any future dispositions by RSI of any REX Common Stock retained
by RSI would likely be taxable to RSI, whether or not the Distribution qualifies
as a tax-free spin-off. See "The Distribution -- Federal Income Tax Consequences
of the Distribution".
SUBSTANTIAL OWNERSHIP BY REX AND RSI EMPLOYEE STOCK PLANS FOLLOWING THE
DISTRIBUTION
Following the Distribution, REX employees participating in the Roadway
Express, Inc. 401(k) Stock Savings Plan ("REX Savings Plan") and the Roadway
Services, Inc. Employee Stock Ownership Plan ("REX Participants") will
beneficially own approximately 14.76% of the outstanding shares of REX Common
Stock and approximately 15.54% of the outstanding shares of RSI Common Stock,
based on the share ownership of Company Common Stock on August 31, 1995.
Following the Distribution, RSI employees and former employees of RSI and REX
participating in the Roadway Services, Inc. Stock Bonus Plan, Roadway Services,
Inc. Stock Savings and Retirement Income Plan, and Roadway Services, Inc.
Employee Stock Ownership Plan ("RSI Plans")("RSI Participants") will
beneficially own approximately 6.85% of the outstanding shares of REX Common
Stock and approximately 7.21% of the outstanding shares of RSI Common Stock.
Pursuant to the terms of the REX Savings Plan and the RSI Plans,
participants are entitled to instruct the trustee as to the voting of any REX
Common Stock and RSI Common Stock allocated to their accounts. However, the
trustee of each RSI Plan has the power, in its discretion, to vote all shares
held in trust by such Plan, other than those for which it has received
participant instructions, subject to the direction of the respective
administrative committee for such Plan. The administrative committee for each
such RSI Plan has determined not to direct the trustee for such Plan with
respect to votes to be taken at the Special Meeting. Voting of shares by
participants or by the respective trustee pursuant to its power or pursuant to
direction of the respective administrative committee could significantly
influence the outcome of matters submitted to RSI or REX shareholders for
approval. Furthermore, participants in the REX Savings Plan who vote their
shares have the separate right to vote shares held in trust pursuant to such
Plan, other than those for which the trustee has received participant
instructions, in proportion to their shares. Voting of the shares by the
participants could, in the aggregate, significantly influence the outcome of
matters submitted to RSI or REX shareholders for approval.
Through their beneficial ownership of REX Common Stock as of the
Distribution Date and resulting from additional future awards, REX Participants
will, in the aggregate, have the power to influence the election of directors of
REX and the outcome of various other REX corporate actions requiring shareholder
approval. In addition, RSI will retain up to 5% of the shares of REX Common
Stock in connection with the Distribution to facilitate the purchase of REX
Common Stock by the trustee of the REX Savings Plan for the benefit of REX
Participants who beneficially own RSI Common Stock and who choose to have such
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stock sold following the Distribution. If all REX Participants were to choose to
purchase all of such retained shares of REX Common Stock, REX Participants would
beneficially own approximately 19.76% of the outstanding shares of REX Common
Stock and could, in the aggregate, exercise even greater influence over the
election of directors and shareholder matters. Moreover, pursuant to employee
compensation plans to be implemented immediately following the Distribution, REX
employees will be eligible to receive or acquire a significant number of
additional shares of REX Common Stock. Although the percentage of REX Common
Stock to be beneficially owned by present and future REX employees is not known
with precision, over time it could constitute up to one-half of the voting stock
of REX.
It is presently contemplated that REX will have in effect other stock plans
after the Distribution which will facilitate the acquisition and ownership of
REX Common Stock by REX employees. These proposed plans include (1) the REX
Management Incentive Stock Plan, which will authorize the award of up to
1,200,000 shares of REX Common Stock to officers and other key employees of REX
(See "REX Management and Executive Compensation -- REX Management Incentive
Stock Plan"); (2) a special stock incentive plan for REX's organized workforce,
pursuant to which 800,000 shares will be reserved for issuance based on terms
and objectives that REX plans to develop in cooperation with representatives of
such workforce; and (3) a stock purchase plan designed to comply with Section
423 of the Code, under which REX employees other than executive officers would
be offered rights to purchase REX Common Stock at a discount of up to 15% from
the market price of REX Common Stock at the time of purchase.
Through their beneficial ownership of RSI Common Stock, REX Participants
and other REX employees, in the aggregate, could influence the election of
directors of RSI and the outcome of various RSI corporate actions requiring
shareholder approval.
Through their beneficial ownership of RSI Common Stock, RSI Participants,
in the aggregate, could influence the election of directors of RSI and the
outcome of various RSI corporate actions requiring shareholder approval.
INTELLECTUAL PROPERTY - TRADEMARKS AND TRADENAMES
The Company will change its name and plans to establish a new market image
utilizing trademarks containing the new name. See "Amendment to the Amended
Articles of Incorporation of the Company". RSI, RPS (Roadway Package System),
ROLS (Roadway Logistics Systems) and RRG (Roadway Regional Group) will migrate
away from using their current tradenames and trademarks incorporating the word
"Roadway", and will adopt new tradenames, trademarks and identities that are not
associated with the familiar "Roadway" name. The process of establishing a new
market identity and new trademarks will involve expense and could result in
unanticipated conflicts with other users of similar names. These changes could
also result in some loss of market recognition and goodwill.
NO CURRENT PUBLIC MARKET FOR REX COMMON STOCK
There is currently no public market for REX Common Stock and there can be
no assurance as to the prices at which trading in REX Common Stock will occur
after the Distribution. Until REX Common Stock is fully distributed and an
orderly market develops, the prices at which trading in such stock occurs may
fluctuate significantly. REX has filed an application to list the REX Common
Stock on Nasdaq-NMS under the symbol "ROAD". See "The Distribution -- Listing
and Trading of REX Common Stock".
CHANGES IN TRADING PRICES OF RSI COMMON STOCK
The Company Common Stock is currently traded on the Nasdaq-NMS. Application
has been made to list the Company Common Stock on the NYSE. It is expected that,
prior to the Distribution, the Company Common Stock will commence trading on the
NYSE and in such event, will no longer trade on the Nasdaq-NMS. As a result of
the Distribution, the trading price range of RSI Common Stock is expected to be
lower than the trading price range of Company Common Stock prior to the
Distribution. The combined trading prices of RSI Common Stock and REX Common
Stock held by shareholders after the Distribution
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may be less than, equal to, or greater than the trading price of Company Common
Stock prior to the Distribution. See "The Distribution -- Listing and Trading of
Company Common Stock".
DIVIDEND POLICIES
It is currently anticipated that following the Distribution REX and RSI
will each initially pay quarterly cash dividends on their shares of common
stock. Other than a dividend of $0.35 per share of Company Common Stock to
Company Shareholders of record on December 29, 1995 payable on February 1, 1996,
no such dividends have been declared. The actual amount of future dividends, if
any, will be determined by the boards of directors of the respective companies
and will depend on operating results, financial requirements, state law
requirements and other factors. See "Dividend Policies".
INTERESTS OF CERTAIN PERSONS IN THE DISTRIBUTION
As a result of the Distribution, individuals who are directors and
executive officers of the Company and certain individuals who will be directors
and executive officers of RSI and REX will receive REX Common Stock in respect
of the Company Common Stock held by such individuals. The beneficial ownership
of Company Common Stock for such individuals is reflected under "Holders of
Company Common Stock".
In connection with the Distribution, certain incentive stock plans and
other compensation plans, in which individuals who are directors and executive
officers of the Company, and who will be directors and executive officers of
RSI, participate, will be amended.
Information describing the management and executive compensation
arrangements of RSI and REX after the Distribution is set forth under "RSI
Management and Executive Compensation" and "REX Management and Executive
Compensation".
COMPARISON OF RIGHTS OF SHAREHOLDERS OF THE COMPANY AND REX
The rights of the Company's shareholders will continue to be governed by
Ohio law and the Company's charter documents after the Distribution. The rights
of REX stockholders, however, will be governed by Delaware law and REX's charter
documents. There are certain differences between Delaware and Ohio corporate
law, as well as differences between the charter documents of the Company and the
charter documents of REX, including, among other things, the calling of special
meetings of shareholders, the number of directors, rights of shareholders to
dissent, limitation of directors' liability and amendment of corporate
governance documents. See "Certain Significant Differences between the Law and
Charter Documents Governing REX and the Law and Charter Documents Governing
RSI".
GOVERNMENTAL REGULATION
Transportation. The businesses of the Company are subject to regulation by
various federal and state agencies, including the Interstate Commerce Commission
("ICC") which retains limited oversight authority over motor carriers. The
transportation services industry is subject to regulatory and legislative
changes (including as to limits on vehicle weights and size) that can affect the
economics of the industry by requiring changes in operating practices or
influencing the demand for, and the costs of providing, services to shippers.
Environmental. The transportation services and trucking industries are
subject to stringent environmental laws and regulations, including laws and
regulations dealing with underground fuel storage tanks and the transportation
of hazardous materials. Neither RSI nor REX is engaged, however, in transporting
"hazardous wastes," as that term is used in Federal environmental protection
statutes. Laws protecting the environment have become more stringent. Management
of the Company believes that both RSI and REX are in material compliance with
all laws applicable to their operations and is not aware of any situation or
condition that it believes is likely to have a material adverse effect on the
financial condition of either.
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THE DISTRIBUTION PROPOSALS
THE DISTRIBUTION
BACKGROUND AND REASONS FOR THE DISTRIBUTION
Management and the Company Board have devoted substantial time to assessing
the competitive positioning of the Company's operating subsidiaries, including
the capabilities of REX, the Company's long-haul LTL carrier, in the competitive
LTL market. This assessment prompted the formation of a special strategy team
comprised of certain REX managers, including Michael Wickham, REX's President,
to consider the separation of REX from the Company. This special team developed
for management and the Company Board recommendations for the separation of REX
and RSI predicated upon REX's operation as a separate publicly held corporation
in which its employees, both salaried and hourly, would be incentivized through
significant equity incentive compensation.
These recommendations were presented to the Company Board during the summer
of 1995 and after consideration, the proposal to spin off REX from the Company
was adopted by the Company Board at its meeting on August 22, 1995, based upon
the considerations discussed below. The Company Board believes shareholders
should approve the Distribution for these reasons.
Management, Employee and Operating Considerations. One important
consideration of the REX strategy team and the Company Board in determining to
proceed with the Distribution is the necessity for REX to gain control over its
cost structure and incentivize its employees, an essential aspect of which is
the ability to design and put in place employee compensation arrangements,
especially equity incentive compensation arrangements, for both its hourly and
salaried employees. Such compensation arrangements need to take into account
what is best for REX rather than, as currently is the case, what is best for the
Company as a whole. So long as REX is part of the Company, this objective cannot
be achieved.
It became increasingly apparent to the strategy team that the rapidly
evolving transportation marketplace is blurring the traditional boundaries
between regional and national LTL and small package carriers. The resulting
overlapping positioning of several Company carriers has created inevitable if
unintended internal conflict and customer confusion. The strategy team came to
the conclusion that freedom to address the market unconstrained by concerns over
the market positioning of affiliated companies would be a critical success
factor for REX. It concluded also that strengthening its partnership with its
organized workforce was critical to REX's future success and could not be
achieved so long as REX was owned by RSI.
It was also apparent to the strategy team that increasingly what is in the
financial interest of the Company as a whole is no longer in the financial
interest of REX. For example, the Company's company-wide incentive compensation
system, which management believes must be retained, disfavors employees of REX.
Furthermore, the creation of a separate compensation plan solely for the benefit
of REX employees would impair pay equity and endanger employee morale
company-wide. The special strategy team concluded that REX's current inability
properly to incentivize both REX's salaried and hourly workforce hinders REX's
ability to retain key employees, will hamper its ability to attract new
employees in the future, and will continue to present difficult obstacles to an
effective relationship with its organized workforce.
The special strategy team finally concluded that conflicts such as the
foregoing between REX and the Company could be resolved most effectively, and
perhaps only, by REX's becoming independent of RSI. The Company Board accepted
this recommendation that separating the Company and REX into two unaffiliated
companies was in the best interests of both. As independent companies, each will
pursue business strategies unconstrained by the mission of the other. REX will
be free to engage in the business activities, including entering into alliances
with non-RSI companies, that it finds worth pursuing without regard to the
effect on the remaining RSI companies. Decisions affecting REX will no longer be
made by RSI but by those who will have only REX's unique interests in mind. And
REX will put into place employee
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equity and cash incentive compensation plans it deems to be in its best
interests to enhance its productivity and profitability. The strategy team
believes that REX management will be able to bring the labor costs of REX more
in line with its non-union competitors by providing the benefits and training
that will enable REX employees to be more productive than any other workforce in
the industry.
Following the Distribution, REX will tie compensation incentives for its
employees to the performance of REX Common Stock. As a result, the value of REX
Common Stock will more closely correspond to the performance of employees of REX
than the value of Company Common Stock does now. REX management intends to
provide both its salaried and hourly employees with the opportunity to earn
significant amounts of REX Common Stock through incentive-based compensation,
discount stock purchase and matching stock purchase plans and permit them, as a
group, to have a major say, as stockholders, in the destiny of their company.
See "REX Management and Executive Compensation -- REX Management Incentive Stock
Plan". Consequently, REX and its stockholders (including its employees), whose
decisions would be based on REX concerns, not RSI concerns, should benefit from
the positive effects of the closer link between REX's employee incentive
compensation arrangements and the value of REX Common Stock.
Cost Savings. The Company also expects that RSI and REX each will achieve
certain cost savings following the Distribution. RSI expects to achieve
administrative cost savings resulting from the separation of REX and RSI. REX
intends to reengineer its terminal network and restructure its operations
consistent with its new focus on particular industries and profitable service
offerings, all with the design of improving efficiencies and achieving cost
reductions.
Investor Understanding. The Company also believes that the Distribution
will allow investors to better evaluate the different merits of each of RSI's
and REX's businesses and their future outlooks, enhancing the likelihood that
each will achieve appropriate market recognition of its performance and its
prospects.
OPINION OF FINANCIAL ADVISOR
In reaching a decision to recommend the Distribution, the Company Board
considered the advice of the Company's financial advisor, Goldman, Sachs & Co.
("Goldman Sachs"). The advice of Goldman Sachs with respect to the Distribution
was one of several sources of information which the Company Board took into
consideration in making its recommendation on the Distribution.
As part of its assignment, Goldman Sachs was asked to render its opinion as
to the fairness to the holders of the Company's stock of the Distribution. In
that opinion, Goldman Sachs concluded that the Distribution was fair to the
Company's shareholders. A summary of the opinion rendered by Goldman Sachs with
respect to the Distribution is set forth below. The full text of such opinion,
dated as of the date hereof, is attached as Annex B hereto and is incorporated
herein by reference. Company shareholders are urged to read such opinion
carefully and in its entirety. It is a condition to the consummation of the
Distribution that Goldman Sachs deliver an opinion to the Company Board, to be
dated on or about the Distribution Date, in substantially the same form as the
opinion set forth in Annex B. See "The Distribution -- Conditions; Termination".
In arriving at its opinion, Goldman Sachs conducted discussions with
management of both the Company and REX, reviewed information as detailed in the
opinion and conducted such other studies, analyses and investigations as it
deemed appropriate. Goldman Sachs believes that its analysis must be considered
as a whole and that selecting portions of such analysis or any of the factors
considered, without considering all of such analysis and factors, could create
an incomplete view of the process underlying its analysis and opinion. Goldman
Sachs relied upon the accuracy and completeness of the historical and forecasted
financial and other information regarding the Company and REX and their
businesses and subsidiaries provided by the Company and REX and did not
undertake any independent verification of any such information. Goldman Sachs
assumed and did not independently verify the reasonableness of the projections
provided by the Company and REX in connection with its analysis of
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the Company and REX. Goldman Sachs did not make any appraisals nor was it
furnished with independent appraisals of any of the assets of the Company and
REX. Goldman Sachs assumed that the projections furnished to it will be realized
in the amounts shown and at the times stated.
No limitations were imposed by the Company upon Goldman Sachs with respect
to the investigations made or the procedures followed by Goldman Sachs, except
that Goldman Sachs was not requested or authorized to solicit, and did not
solicit, any proposals for the acquisition of stock or assets of REX, nor did
Goldman Sachs make any determination as to whether any such proposal could be
obtained if solicited.
Goldman Sachs' opinion addresses only the fairness of the Distribution to
the holders of Company Common Stock and constitutes neither a recommendation to
any current or prospective shareholder of the Company or REX as to any voting or
investment decision or other action such person or party may take, nor an
opinion or estimate as to the value or trading price of the Company Common Stock
or the REX Common Stock prior to or following the Distribution.
Goldman Sachs is an internationally recognized investment banking firm that
specializes in providing financial advisory services in connection with mergers
and acquisitions and corporate restructurings.
TRANSACTIONS PRIOR TO OR CONTEMPORANEOUS WITH THE DISTRIBUTION
REX maintains a $50 million line of credit with RSI of which $29 million
was outstanding at September 9, 1995. These borrowings arose from losses,
capital expenditures and working capital requirements incurred in 1994 and 1995.
It is anticipated that cash flows from operations prior to the Distribution Date
will allow full repayment of such outstanding debt. Should this not occur RSI
has agreed to make a capital contribution to REX sufficient to permit repayment
of such debt prior to the Distribution Date.
Prior to the Distribution ROLS will be merged into the Company. RSI intends
to operate ROLS as a separate business division following the Distribution.
Effective January 1, 1996, REX will withdraw from the Roadway Services,
Inc. Pension Plan ("Company Pension Plan") and establish the Roadway Express,
Inc. Pension Plan ("REX Pension Plan") for its then active employees. All former
employees of REX, including retirees who are receiving benefits, will remain
participants in the Company Pension Plan. Following the Distribution, RSI and
REX will cause the accrued benefits attributable to the active REX employees to
be transferred to the REX Pension Plan, and assets attributable to those accrued
benefits in the amount of approximately $182 million will be transferred from
the trustee of the Company Pension Plan to the trustee of the REX Pension Plan,
at which point all participation, vesting and benefit accrual service of the
active REX employees will be transferred to the REX Pension Plan. Following the
transfer, the REX Pension Plan will have accrued pension costs, based on
actuarial estimates, of approximately $36.5 million. The REX Pension Plan will
initially provide the same benefit accrual formulas as are currently provided in
the Company Pension Plan, and future REX retirees will receive pension benefits
under the REX Pension Plan based upon all of their service with the Company
prior to the Distribution and with REX after the Distribution. REX will retain
the discretion to amend, modify or terminate the REX Pension Plan after the
Distribution.
MANNER OF EFFECTING THE DISTRIBUTION
If the holders of Company Common Stock approve the Distribution Proposals
and all other conditions to the Distribution are satisfied (or waived by the
Company Board), the Company anticipates that the Company Board will declare the
Distribution and establish the Distribution Record Date and Distribution Date
following the Special Meeting. The Distribution Record Date and Distribution
Date are presently expected to be on or about December 31, 1995. On the
Distribution Date, at least ninety-five percent (95%) of the outstanding shares
of REX Common Stock will be delivered by the Company to KeyCorp Shareholder
Services, Inc., as the Distribution Agent. As soon as practicable thereafter,
certificates therefor will be mailed by the Distribution Agent to holders of
record of Company Common Stock as of the Distribution Record Date on the basis
of one share of REX Common Stock for every two shares of
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Company Common Stock held on that date. The actual total number of shares of REX
Common Stock to be distributed will depend on the number of shares of Company
Common Stock outstanding on the Distribution Date and the number of shares of
REX Common Stock (not more than 5% thereof) to be retained by RSI to effect the
exchange of RSI Common Stock (to be sold by the trustee of the REX Savings Plan
on behalf of REX employees) for REX Common Stock following the Distribution
Date. See "Certain Special Considerations -- Substantial Ownership by REX and
RSI Employee Stock Plans Following the Distribution". All such shares of REX
Common Stock will be fully paid and nonassessable and the holders thereof will
not be entitled to preemptive rights. See "Description of REX Capital Stock".
No holder of Company Common Stock will be required to pay any cash or other
consideration for the shares of REX Common Stock received in the Distribution or
to surrender or exchange shares of Company Common Stock in order to receive REX
Common Stock. SHAREHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
Shareholders of the Company having inquiries relating to the Distribution
prior to the Distribution Date should contact, in writing or by telephone,
Douglas A. Wilson - Senior Vice President-Finance and Planning at Roadway
Services, Inc., 1077 Gorge Boulevard, Akron, Ohio 44310, P.O. Box 88, Akron,
Ohio 44309-0088, telephone (216) 384-2378.
FRACTIONAL SHARES
No certificates or scrip representing fractional interests in shares of REX
Common Stock ("Fractional Shares") will be issued to holders of Company Common
Stock in the Distribution. The Distribution Agent, acting as agent for such
holders otherwise entitled to receive in the Distribution certificates
representing Fractional Shares, will aggregate and sell in the open market all
Fractional Shares at then prevailing market prices and distribute the net
proceeds (after deduction of brokerage fees) to the holders of Company Common
Stock entitled thereto.
FEDERAL INCOME TAX CONSEQUENCES OF THE DISTRIBUTION
The Distribution will not occur unless, on or before the Distribution Date,
the Company has received either (i) a letter ruling from the IRS to the effect
that, for Federal income tax purposes, the Distribution will qualify as a
spin-off under Section 355 of the Internal Revenue Code (the "Code") tax-free to
the holders of Company Common Stock and to the Company, or (ii) at the option of
the Company Board, an opinion of Jones, Day, Reavis & Pogue, the Company's
counsel, to the effect that, for Federal income tax purposes, the Distribution
should qualify as such a spin-off under current law. If the Distribution so
qualifies, the principal Federal income tax consequences will be as follows:
1. No income, gain or loss will be recognized by the holders of Company
Common Stock as a result of their receipt of REX Common Stock in the
Distribution (although any cash received in lieu of a fractional share of
Company Common Stock will be treated as if the fractional share had been
received and then sold by the shareholder, resulting in recognition of gain or
loss to the shareholder, which will be capital gain or loss if the shareholder
held such fractional share as a capital asset on the Distribution Date, and
long-term capital gain or loss if the Company Stock has been held for more than
a year on the Distribution Date).
2. The basis of a holder of Company Common Stock in the RSI Common Stock
and the REX Common Stock received on the Distribution Date in respect of Company
Common Stock will be determined by allocating such holder's basis in the Company
Common Stock immediately before the Distribution among the RSI Common Stock and
the REX Common Stock received (including any fractional shares deemed received)
with respect to such Company Common Stock in proportion to their relative fair
market values on the Distribution Date.
3. The holding period of the REX Common Stock received in the Distribution
will include the holding period of the Company Common Stock with respect to
which the REX Common Stock will be distributed, provided the Company Common
Stock is held as a capital asset on the Distribution Date.
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4. No income, gain or loss will be recognized by RSI solely on account of
the Distribution.
A letter ruling by the IRS or an opinion of counsel will be based upon and
subject to certain assumptions, facts, representations and advice provided and
to be provided by the Company, REX, certain of the holders of Company Common
Stock and the Company's financial advisors. The Company is not aware of any
present facts or circumstances which should make such assumptions, facts,
representations and advice unobtainable or untrue. However, certain future
events not within the control of RSI and REX, including, for example, certain
dispositions of RSI Common Stock or REX Common Stock after the Distribution,
could cause the Distribution not to qualify as tax-free.
If a ruling from the IRS is not received on or before the Distribution
Date, and if the Distribution proceeds upon the basis of an opinion of counsel
rather than an IRS ruling, the IRS may take the position that the Distribution
does not qualify as a tax-free spin-off, whether or not the assumptions, facts,
representations and advice referred to above are true, and such position may
ultimately be upheld. The opinion of counsel would give no assurance that the
IRS would not challenge the tax-free nature of the Distribution or, if it does,
that a court would not sustain such a challenge.
If the Distribution were not to qualify for tax-free treatment under
Section 355 of the Code, each holder of Company Common Stock who receives REX
Common Stock would be treated as receiving a distribution, generally taxable as
a dividend, in an amount equal to the fair market value of such REX Common Stock
on the Distribution Date. Furthermore, the tax basis of REX Common Stock
received in the Distribution would equal its fair market value on the
Distribution Date, the holding period of such stock would begin with and include
the day after the Distribution Date and RSI would recognize taxable gain on the
Distribution. Furthermore, whether or not the Distribution qualifies for taxfree
treatment under Section 355 of the Code, any future dispositions by RSI of any
REX Common Stock retained by RSI would likely be taxable to RSI.
THE FOREGOING SUMMARY OF THE ANTICIPATED PRINCIPAL FEDERAL INCOME TAX
CONSEQUENCES OF THE DISTRIBUTION UNDER CURRENT LAW IS FOR GENERAL INFORMATION
ONLY AND DOES NOT PURPORT TO COVER ALL FEDERAL INCOME TAX CONSEQUENCES
(INCLUDING THOSE THAT MAY APPLY TO PARTICULAR CATEGORIES OF SHAREHOLDERS) OR ANY
TAX CONSEQUENCES THAT MAY ARISE UNDER THE TAX LAWS OF OTHER JURISDICTIONS. THE
COMPANY HAS NOT REQUESTED ANY RULINGS OR OPINIONS WITH RESPECT TO THE TAX
CONSEQUENCES OF THE DISTRIBUTION UNDER THE LAWS OF ANY STATE, LOCAL OR FOREIGN
GOVERNMENT. EACH HOLDER (INCLUDING EACH CORPORATE HOLDER) OF COMPANY COMMON
STOCK SHOULD CONSULT HIS OR HER TAX ADVISOR AS TO THE PARTICULAR TAX
CONSEQUENCES OF THE DISTRIBUTION, INCLUDING APPLICATION OF FEDERAL, STATE, LOCAL
AND FOREIGN TAX LAWS, AND THE EFFECT OF POSSIBLE CHANGES IN TAX LAWS THAT MAY
AFFECT THE TAX CONSEQUENCES DESCRIBED ABOVE. THE OPINION OF COUNSEL, IF ANY,
WILL RUN ONLY TO THE COMPANY BOARD AND MAY NOT BE RELIED UPON BY ANY
SHAREHOLDER.
LISTING AND TRADING OF REX COMMON STOCK
REX has made application to the Nasdaq-NMS for the listing of the REX
Common Stock. It is anticipated that RSI will change its trading symbol
effective with the Distribution and that REX shares will trade under the symbol
"ROAD". REX initially will have approximately 7,500 stockholders of record based
upon the number of shareholders of record of the Company as of November 14,
1995. It is presently anticipated that REX Common Stock will be approved for
listing on the Nasdaq-NMS prior to the Distribution Date, and trading may
commence on a "when-issued" basis prior to the Distribution. It is also possible
that RSI Common Stock would be traded on a "when-distributed" basis prior to the
Distribution. On the trading day following the date that certificates for REX
Common Stock are mailed by the Distribution Agent, "when-issued" or
"when-distributed" trading, as applicable, in respect of each of the REX Common
Stock and RSI Common Stock would end and "regular-way" trading would begin. The
Nasdaq-NMS will not approve any trading in respect of the REX Common Stock until
the Securities and Exchange Commission (the "Commission") has declared effective
the Registration Statement of REX on
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Form 10 in respect of the REX Common Stock. REX will file with the Commission a
Registration Statement on Form 10 prior to the Special Meeting and request
effectiveness of such Registration Statement prior to the Distribution Date.
There is now no public market for REX Common Stock. Prices at which REX's
Common Stock may trade prior to the Distribution on a "when-issued" basis or
after the Distribution cannot be predicted. Until the REX Common Stock is fully
distributed and an orderly market develops, the prices at which trading in such
stock occurs may fluctuate significantly. The price at which REX Common Stock
trades after the Distribution will be determined by the marketplace and may be
influenced by many factors, including, among others, the depth and liquidity of
the market for REX Common Stock, investor perception of REX and the industry in
which REX participates, REX's operating results, REX's dividend policy and
general economic and market conditions. Such prices may also be affected by
certain provisions of REX's Certificate of Incorporation and By-Laws as each
will be in effect following the Distribution, which may have an antitakeover
effect. See "Certain Change in Control Effects of Certain Provisions of the
Certificate of Incorporation and By-Laws of REX".
The Company filed a request for no-action letter with the Commission Staff
on October 24, 1995, setting forth, among other things, the Company's view that
the Distribution does not require registration of the REX Common Stock under the
Securities Act of 1933, as amended (the "Securities Act"). It is a condition to
the Distribution that the Company receive a favorable letter from the Commission
Staff in response to this request. Accordingly, the REX Common Stock distributed
to holders of Company Common Stock in the Distribution will be freely
transferable, except for shares received by persons who may be deemed to be
"affiliates" of REX under the Securities Act. Persons who may be deemed to be
affiliates of REX after the Distribution generally include individuals or
entities that control, are controlled by, or are under common control with REX
and include directors and executive officers of REX. Persons who are affiliates
of REX will be permitted to sell their shares of REX Common Stock only pursuant
to an effective registration statement under the Securities Act or an exemption
from the registration requirements of the Securities Act, such as the exemption
afforded by Section 4(2) of the Securities Act or by Rule 144 under such Act.
LISTING AND TRADING OF COMPANY COMMON STOCK
The Company Common Stock is currently traded on the Nasdaq-NMS. Application
has been made to list the Company Common Stock on the NYSE. It is expected that,
prior to the Distribution, the Company Common Stock will commence trading on the
NYSE under the trading symbol "CBB". In such event, the Company Common Stock
will no longer trade on the Nasdaq-NMS. Following the Distribution, REX's
financial results will no longer be consolidated with those of RSI; RSI's
revenues and dividends will be below those of the Company prior to the
Distribution. Accordingly, as a result of the Distribution, the trading price
range of the RSI Common Stock immediately after the Distribution is expected to
be lower than the trading price range of the Company Common Stock prior to the
Distribution. The combined trading prices of the RSI Common Stock and the REX
Common Stock held by shareholders after the Distribution may be less than, equal
to or greater than the trading price of the Company Common Stock prior to the
Distribution. The prices at which RSI Common Stock trades after the Distribution
will be determined by the marketplace and may be influenced by the depth and
liquidity of the market for RSI Common Stock, investor perception of RSI and the
industry in which RSI participates, RSI's operating results, RSI's dividend
policy and general economic and market conditions.
DIFFERENT JURISDICTION OF INCORPORATION
REX is incorporated under Delaware law. Accordingly, shareholders should
note the differences between Delaware law and Ohio law, the law under which the
Company is incorporated. See "Certain Significant Differences between the Law
and Charter Documents Governing REX and the Law and Charter Documents Governing
RSI."
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CONDITIONS; TERMINATION
The Distribution is conditioned on (a) its approval by the holders of a
majority of Company Common Stock outstanding on the Special Meeting Record Date;
(b) the receipt of a ruling from the IRS, in form and substance satisfactory to
the Company Board, to the effect that the Distribution will constitute a tax-
free distribution for Federal income tax purposes for both holders of Company
Common Stock and the Company or, at the option of the Company Board, an opinion
by Jones, Day, Reavis & Pogue, the Company's counsel, in form and substance
satisfactory to the Company Board, to the effect that the Distribution should
constitute such a tax-free distribution; (c) the Registration Statement on Form
10 under the Exchange Act to be filed by REX with the Commission being
effective; and (d) there not being in effect any statute, rule, regulation or
order of any court or governmental or regulatory body which prohibits or makes
illegal the transactions contemplated by the Distribution. These conditions are
not waivable by the Company Board.
Unless waived by the Company Board, the Distribution is also conditioned
upon, among other things: (i) the receipt of all necessary regulatory approvals;
(ii) the receipt of a favorable response from the Staff of the Commission with
respect to the Company's no-action request concerning, among other things,
whether the Distribution may be effected without registration of the REX Common
Stock under the Securities Act; (iii) all necessary consents of any third
parties having been obtained; (iv) the shares of REX Common Stock to be issued
having been approved for listing on the Nasdaq-NMS, subject to official notice
of issuance; (v) Goldman Sachs having delivered an updated opinion to the
Company Board, dated as of the Distribution Date in substantially the same form
as the opinion set forth in Annex B; and (vi) if, contrary to the Company's
belief, dissenters' rights are available under Ohio law, a claim of dissenters'
rights is properly asserted by holders of no more than 1% of the Company Common
Stock. The Company Board has retained discretion, even if shareholder approval
of the Distribution is obtained and the other conditions to the Distribution are
satisfied, to abandon, defer or modify the Distribution or any matter
contemplated by the Distribution. The terms of the Distribution thus may be
modified or conditions thereto may be waived by the Company Board. However, if
the Company Board takes any such action, it will be on the basis that such
action will be in the best interests of the Company and its shareholders.
REGULATORY APPROVALS
The Company does not believe that any material Federal or state regulatory
approvals will be necessary in connection with the Distribution.
INTEREST OF CERTAIN PERSONS IN THE DISTRIBUTION
As a result of the Distribution, individuals who are directors and
executive officers of the Company and certain individuals who will be directors
and executive officers of RSI or REX will receive REX Common Stock in respect of
Company Common Stock held by such individuals. The beneficial ownership of
Company Common Stock for such individuals is reflected below under "Holders of
Company Common Stock".
Stock credits and Restricted Book Value Shares ("RBV Shares") held by
individuals who are executive officers of RSI or REX will be adjusted in
connection with the Distribution.
ACCOUNTING TREATMENT
Upon approval of the Distribution at the Special Meeting, the Company will
present the business of REX and its subsidiaries as a discontinued operation to
the extent financial information for periods prior to the Distribution is
required to be included in the Company's historical financial statements. After
the Distribution, the business of REX and its subsidiaries will be reflected in
REX's own separate consolidated financial statements.
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RELATIONSHIP BETWEEN RSI AND REX AFTER THE DISTRIBUTION
REX is wholly owned by the Company, and its results and the results of
operations of its subsidiaries have been included in the Company's consolidated
financial results. After the Distribution, the results of operations of REX will
no longer be consolidated with RSI and REX will be an independent public
company. Furthermore, except as described below, all contractual relationships
existing prior to the Distribution between RSI and REX will be terminated except
for commercial relationships in the ordinary course of business.
Prior to the Distribution, the Company and REX will enter into certain
agreements, described below, governing their relationship subsequent to the
Distribution and providing for the allocation of tax and certain other
liabilities and obligations arising from periods prior to the Distribution. Each
of the Company and REX believes that the agreements are fair.
Copies of the forms of the material agreements will be included as exhibits
to the Registration Statement on Form 10 to be filed for the purpose of
registering the REX Common Stock under the Exchange Act. The following
description summarizes certain terms of such agreements, but is qualified by
reference to the texts of such agreements, which are incorporated herein by
reference.
AGREEMENTS
Distribution Agreement
The Company and REX will enter into the Distribution Agreement providing
for, among other things, certain corporate transactions required to effect the
Distribution and certain other arrangements between the Company and REX with
respect to or in consequence of the Distribution.
The Distribution Agreement will provide for, with certain exceptions,
assumptions of liabilities and cross-indemnities designed principally to place
financial responsibility for the liabilities of the Company and its subsidiaries
other than REX with RSI and financial responsibilities of REX and its
subsidiaries with REX. The Distribution Agreement also will provide that each of
RSI and REX will indemnify the other in the event of certain liabilities arising
under the Federal securities laws. Each of RSI and REX will have sole
responsibility for claims arising out of its respective activities after the
Distribution.
The Distribution Agreement will also provide that each of the Company and
REX will be granted mutual access to certain historical records and information
in the possession of the other, and requires the retention by each of the
Company and REX for a period of six years following the Distribution of all such
information in its possession, and thereafter requires that each party give the
other prior notice of its intention to dispose of such information.
The Distribution Agreement will also provide that, except as otherwise set
forth therein or in any other agreement, all costs or expenses incurred on or
prior to the Distribution Date in connection with the Distribution will be
charged to and paid by the party incurring such costs or expenses. Except as set
forth in the Distribution Agreement or any related agreement, each party shall
bear its own costs and expenses incurred after the Distribution Date.
Tax Matters Agreement
As part of the Distribution, the Company and REX will enter into a Tax
Matters Agreement that provides, among other things, for the allocation of
Federal, state, local and foreign tax liabilities for periods prior to and
including the Distribution Date. Through the Distribution Date, REX has been and
will be included in the Company's consolidated Federal income tax returns and,
in certain states, the Company's state tax returns. In general, the Tax Matters
Agreement will provide that REX will be liable for taxes and be entitled to
refunds for each period covered by any such return which are attributable to REX
and that the Company will be liable for and be entitled to refunds for each
period covered by such return which are not attributable to REX. The Company
will compensate REX for tax benefits generated by REX that are used by the
Company based on the amount of the benefit realized by the Company. Though valid
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as between the parties thereto, the Tax Matters Agreement is not binding on the
IRS and does not affect the several liability of the Company and REX for all
Federal income taxes of the consolidated group required to be shown on the above
consolidated Federal income tax returns.
Data Processing and Information Technology Services Agreement
The businesses of the Company and of REX both rely heavily on extensive use
of information technology and networked data and transaction processing.
Currently, Roadway Information Technology, Inc. ("RIT") performs the majority of
the information technology services used in the operation of REX's business.
RIT and REX will enter into a Data Processing and Information Technology
Services Agreement (the "Data Processing Agreement"), having a term of two to
three years, pursuant to which RIT will continue to provide those information
technology services currently being provided to REX. These services are
primarily network management, computer operations and technical support of the
processing infrastructure. REX will have the option to terminate certain
services after one year. Each of RIT and REX believes that the service fees to
be charged by RIT pursuant to the Data Processing Agreement reflect arms-length
prices.
Alternative Dispute Resolution Agreement
The Company and REX will enter into an Alternative Dispute Resolution
Agreement establishing procedures for resolving disputes that may arise between
them after the Distribution. The alternative dispute resolution agreement
provides for both mediation and arbitration, which would be the exclusive
methods for resolution of most disputes between the parties that arise prior to
the Distribution or in connection with the Distribution and would reduce the
possibility of litigation between them.
Agreement on Employee Matters
The Company and REX will enter into an Agreement on Employee Matters
providing for the treatment of employee benefit matters and other compensation
arrangements for former and current employees of REX and its subsidiaries.
REX Pension Plan. REX will establish its own pension plan for the benefit
of its active employees effective January 1, 1996, the terms of which will be
substantially identical to the Company Pension Plan. REX employees who
participate in the Company Pension Plan will be eligible for immediate
participation in the REX Pension Plan as of January 1, 1996. REX employees also
will be credited under the REX Pension Plan, for eligibility and vesting
purposes, with service credited to them under the Company Pension Plan. Those
assets and liabilities of the Company Pension Plan which are attributable to
active employees of REX will, subject to certain conditions, be transferred from
the Company Pension Plan to the REX Pension Plan in connection with the
Distribution, following which the REX employees will receive benefit service
with respect to service credited to them under the Company Pension Plan. Such
transfers will result in REX having accrued pension costs, based on actuarial
estimates, of approximately $36.5 million and RSI having a corresponding
increase in its prepaid pension costs.
REX Savings Plan. REX will establish for the benefit of REX employees,
effective as of January 1, 1996, a qualified profit sharing plan with a salary
deferral feature under Section 401(k) of the Code (the "REX Savings Plan"). REX
employees who participate in the Company's Stock Savings and Retirement Income
Plan and Trust (the "SSRIP") will be eligible for immediate participation in the
REX Savings Plan as of January 1, 1996. The account balances attributable to REX
employees under the SSRIP and the Company's Stock Bonus Plan and Trust (the
"SBP") will be transferred to the REX Savings Plan as soon as practicable after
the Distribution Date. Service with the Company prior to January 1, 1996 will be
counted for purposes of participation and vesting under the REX Savings Plan,
subject to the requirements of the Code. The SSRIP and SBP will continue to
provide benefits to former employees of REX who terminated their employment with
REX on or prior to the Distribution Date.
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With respect to other employee pension and welfare benefit plans, policies,
contracts and arrangements of the Company, such as the Company's medical,
reimbursement and vacation, sick leave and jury duty policies, the Agreement on
Employee Matters will generally provide that REX will assume or retain, and be
solely responsible for, all liabilities and obligations of the Company under
such plans, policies, contracts and arrangements, to the extent unpaid as of the
Distribution Date, with respect to individuals who will be employees of REX
after the Distribution Date and their respective beneficiaries. To the extent
required to accomplish the foregoing, REX will establish new plans which (other
than the medical plan to be implemented by REX on January 1, 1996) initially are
substantially identical to the plans sponsored by the Company. The Agreement on
Employee Matters also will provide that service with the Company prior to the
Distribution Date will be counted for purposes of participation, vesting and
benefit accruals under the plans, policies, contracts and arrangements of REX
following the Distribution Date. All of the benefit plans of the Company and REX
that are subject to the Code with respect to qualification matters and to ERISA
will be in material compliance with the Code and ERISA on the Distribution Date.
Intellectual Property Agreement
REX owns the primary "ROADWAY" trademark and uses it heavily in connection
with its business. The Company, ROLS and RPS use composite trademarks and
tradenames which include the term "ROADWAY" in conjunction with other terms,
symbols or acronyms. In some cases, these trademarks are related in color and
design to the REX trademarks. After the Distribution, REX will continue to own
the "ROADWAY" trademark and use it and the related trade dress prominently in
its business. RSI and its affiliated companies will, over a twelve to thirty-six
month period, phase out their use of "ROADWAY" and related trademarks and trade
dress. RSI and REX will enter into an Intellectual Property Agreement which will
provide for a licensing arrangement under which RSI and its affiliated companies
may continue to use "ROADWAY" and the related trademarks and trade dress through
the phase-out period.
Services and Support Agreement
The Company and REX will enter into a Services and Support Agreement which
will provide for RSI to continue to supply to REX, for periods generally not to
exceed one year and subject to certain conditions, certain transitional
administrative services, including, among others, payroll support, benefit plan
administration, and assistance in the preparation of financial statements and
tax returns and to assist in effecting an orderly transition following the
Distribution. RSI will be entitled to reimbursement for all direct and indirect
costs of providing such transitional services on terms believed by RSI and REX
to be commercially reasonable. These costs are not expected to be material.
REAL ESTATE TRANSACTIONS
Five parcels of land acquired by REX in recent Code Section 1031 like-kind
exchanges which currently are ground leased by REX to an affiliate of the
Company, and on which various subsidiaries of the Company other than REX have
constructed or are constructing terminals, will continue to be ground leased by
REX to such affiliate, but the existing leases will be recast as net leases on
arms-length terms, with ground rents at fair rental value and ongoing options
for such affiliate to purchase the land at the then-prevailing fair market
value. A portion of the headquarters building in Akron, Ohio owned by REX which
the Company currently utilizes pursuant to a lease agreement with REX will
continue to be leased by REX to RSI but the existing lease will be recast on
arms-length terms, with rent at fair rental value on a net basis and for a short
term until RSI secures other suitable headquarters space. Another portion of the
headquarters building owned by REX and a portion of an adjoining building leased
by REX from a third party, both of which RIT currently utilizes pursuant to a
management agreement with REX, will be leased and subleased, respectively, by
REX to RIT on arms-length terms on a net basis at fair rental value for a short
term concurrent with the term of the Services and Support Agreement. With
respect to those terminals (or portions of terminals) currently leased by REX to
affiliates of the Company or by affiliates of the Company to REX which the
lessees thereunder will continue to require in their operations following the
Distribution, the existing leases will be recast as net leases on arms-length
terms.
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DIRECTORS
After the Distribution Date, there will be no individuals who will serve on
both (i) the Board of Directors of RSI and (ii) the Board of Directors of REX.
See "RSI Management and Executive Compensation -- RSI Board of Directors" and
"REX Management and Executive Compensation -- REX Board of Directors".
DIVIDEND POLICIES
RSI DIVIDEND POLICY
The Company's quarterly dividend is now $0.35 per share of Company Common
Stock. The payment and level of cash dividends by RSI after the Distribution
will be subject to the discretion of the RSI Board of Directors. Future dividend
decisions will be based on, and affected by, a number of factors, including the
future operating results, financial requirements of RSI on a stand-alone basis,
state law requirements and other factors. Other than a dividend of $0.35 per
share of Company Common Stock to Company shareholders of record on December 29,
1995 payable on February 1, 1996, no such dividends have been declared. Although
there can be no assurance that dividends will be paid other than the dividend
most recently declared, management of RSI believes that its cash flows after the
Distribution should be sufficiently strong, after giving effect to the
Distribution, that, barring unforeseen circumstances, a cash dividend can be
paid for the foreseeable future.
REX DIVIDEND POLICY
The payment and level of cash dividends by REX after the Distribution will
be subject to the discretion of the REX Board of Directors. Future dividend
decisions will be based on, and affected by, a number of factors, including the
future operating results, financial requirements of REX on a stand-alone basis,
state law requirements and other factors. Although there can be no assurance
that dividends will be paid, and no dividends have been declared, management of
REX believes that its cash flows after the Distribution should be sufficiently
strong, after giving effect to the Distribution, that, barring unforeseen
circumstances, a cash dividend can be maintained for the foreseeable future.
29
<PAGE> 37
DIVIDENDS AND PRICE RANGE OF COMPANY COMMON STOCK
As of the date of this Proxy Statement, the Company Common Stock is listed
and traded on the Nasdaq-NMS. It is expected that, prior to the Distribution
Date, the Company Common Stock will commence trading on the NYSE and no longer
trade on the Nasdaq-NMS. The following table reflects the high and low sales
prices per share of Company Common Stock, as reported on Nasdaq-NMS for the
periods indicated. The table also sets forth the cash dividends paid per share
of Company Common Stock.
<TABLE>
<CAPTION>
PRICE RANGE
OF COMPANY
COMMON STOCK CASH DIVIDENDS
-------------------- PAID ON COMPANY
HIGH LOW COMMON STOCK
------- ------- ---------------
<S> <C> <C> <C> <C>
1993
First Quarter................................... $ 72.50 $ 59.75 $.325
Second Quarter.................................. 65.50 51.75 .325
Third Quarter................................... 63.25 55.75 .35
Fourth Quarter.................................. 69.00 57.50 .35
1994
First Quarter................................... 74.25 59.50 .35
Second Quarter.................................. 72.00 62.50 .35
Third Quarter................................... 64.50 53.75 .35
Fourth Quarter.................................. 58.00 46.00 .35
1995
First Quarter................................... 56.75 47.75 .35
Second Quarter.................................. 49.50 42.00 .35
Third Quarter................................... 56.50 45.50 .35
Fourth Quarter (Through November 20, 1995)...... 53.50 42.6875 .35
</TABLE>
On August 22, 1995, the last trading day before the Company Board announced
its plan to spin-off REX, the high and low sales prices for Company Common Stock
on the Nasdaq-NMS were $52.25 and $50.75, respectively. On November 20, 1995,
the last trading day for which quotations were available at the time of the
printing of this Proxy Statement, the closing price for Company Common Stock on
the Nasdaq-NMS was $51.75. SHAREHOLDERS ARE URGED TO OBTAIN CURRENT TRADING
PRICE INFORMATION BEFORE VOTING ON THE DISTRIBUTION PROPOSALS.
For a discussion of the possible impact of the Distribution on the trading
price of Company Common Stock, see "The Distribution -- Listing and Trading of
Company Common Stock". For a discussion of the dividend policies of RSI and REX
after the Distribution, see "Dividend Policies".
There has not been any established public trading market for REX Common
Stock. For a discussion of certain matters in respect thereof, see "The
Distribution -- Listing and Trading of REX Common Stock".
30
<PAGE> 38
ROADWAY SERVICES, INC. SELECTED HISTORICAL FINANCIAL DATA
The following table sets forth selected consolidated historical financial
data of the Company. The summary historical information has been derived from
and should be read in conjunction with the audited consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1994 and unaudited financial data included in the Company's
Quarterly Report on Form 10-Q for the quarterly period ended September 9, 1995,
both of which are incorporated herein by reference.
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS
ENDED
(THREE QUARTERS)
--------------------- YEAR ENDED DECEMBER 31,
SEPT. 9, SEPT. 10, ------------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
-------- --------- --------- --------- --------- --------- ---------
(AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.......................... $3,293 $ 3,045(a) $ 4,572(a) $ 4,156 $ 3,578 $ 3,177 $ 2,971
Operating expenses............... 3,276 3,033(a) 4,520(a)(b) 3,952 3,341 2,971 2,782
Operating income................. 17 12(a) 52(a)(b) 204 237 206 189
Net income....................... 6 6(a) 20(a)(b) 101(c) 147 127 119
Net income per share............. 0.16 0.15(a) 0.50(a)(b) 2.56(c) 3.73 3.27 3.05
BALANCE SHEET DATA:
Current assets................... 675 667 643 619 698 550 442
Carrier operating property....... 1,294 1,138 1,210 1,126 896 852 811
Total assets..................... 2,064 1,904 1,949 1,846 1,681 1,489 1,341
Long-term debt................... -- -- -- -- -- -- --
Shareholders' equity............. 982 1,014 1,015 1,047 1,021 890 778
OTHER DATA:
Book value per common share...... 24.88 25.73 25.76 26.60 25.71 22.72 20.15
Cash dividends declared per
common share................... 1.05 1.05 1.40 1.375 1.275 1.175 1.10
</TABLE>
- ---------------
(a) Includes the effect of a 24-day Teamsters strike against REX in the second
quarter of 1994.
(b) Includes the net after tax effect of $13.7 million ($0.35 per share) related
to an employment tax settlement with the IRS in 1994 as described in the
notes to the consolidated financial statements included in the Company's
Annual Report on Form 10-K for the year ended December 31, 1994 which is
incorporated by reference in this Proxy Statement.
(c) Includes a net charge of $18.1 million ($0.46 per share) for the cumulative
effect of accounting changes for the after tax effect of postretirement
benefits other than pensions and income taxes as described in the notes to
the consolidated financial statements included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1994 which is
incorporated by reference in this Proxy Statement.
31
<PAGE> 39
ROADWAY SERVICES, INC. AND SUBSIDIARIES CAPITALIZATION
The following table sets forth the capitalization of the Company at
September 9, 1995 (the end of the Company's third quarter), the principal
financial adjustments that will result from the Distribution and the
discontinuance of the business of RGA described in note (b) to the table and the
pro forma capitalization of RSI after giving effect to these events. This data
should be read in connection with the historical financial statements of the
Company incorporated herein by reference and the unaudited pro forma financial
statements and the notes thereto included elsewhere herein.
<TABLE>
<CAPTION>
SEPTEMBER 9, 1995
--------------------------------------------------------------------------------
PRO FORMA
REX SPIN-OFF BEFORE EFFECTS OF EFFECTS OF RGA
ACTUAL ADJUSTMENTS RGA DISCONTINUANCE DISCONTINUANCE (B) PRO FORMA
---------- ------------ ------------------- ------------------ ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Serial preferred stock,
without par value:
Authorized --
40,000,000 shares
Issued -- none........ $ -- $ -- $ -- $ -- $ --
Common Stock, without
par value:
Authorized --
200,000,000 shares
Issued -- 40,896,414
shares................ 39,898 -- 39,898 -- 39,898
Additional capital...... 51,310 -- 51,310 -- 51,310
Earnings reinvested in
the business.......... 943,604 (202,306)(a) 741,298 (38,783)(c) 702,515
---------- ------------ ------------------- ------------------ ---------
1,034,812 (202,306) 832,506 (38,783) 793,723
Less cost of common
stock in
treasury--1,433,000
shares................ 52,908 -- 52,908 -- 52,908
---------- ------------ ------------------- ------------------ ---------
Total
Capitalization.. $ 981,904 $ (202,306) $ 779,598 $(38,783) $ 740,815
========= ========== ================== ================= =========
</TABLE>
- ---------------
(a) Reflects the net effects of the following assuming distribution of 95% of
the outstanding REX Common Stock:
<TABLE>
<S> <C> <C>
(1) Adjustment to eliminate 95% of the pro forma net assets of REX as
part of the Distribution............................................. $(224,606)
(2) Represents the transfer of accrued pension costs from RSI to REX
attributable to the defined benefit pension plan obligation and
related assets for active REX employees, net of deferred income
taxes................................................................ 22,300
-----------
$(202,306)
==========
</TABLE>
(b) On November 6, 1995, the Company Board announced plans to exit the air
freight business served by RGA, RSI's worldwide air freight subsidiary. The
Company estimated a pre-tax charge of approximately $65 million for the
operation's discontinuance which is not reflected in the pro forma financial
statements. On November 17, 1995, the Company announced an agreement with an
air freight company to provide continuing services to RGA's former U.S.
customers and to sell certain limited U.S. assets. Although no assurances
can be given, discussions are continuing with respect to the disposition of
other U.S. assets and with an international freight forwarder with respect
to the non-U.S. operations of RGA. The estimate of the pre-tax charge does
not include the effects of any transactions or any sale proceeds which may
be realized. No revised estimate is available as of the date of this Proxy
Statement.
(c) Reflects the elimination of historical RGA amounts, excluding intercompany
borrowings, and a capital contribution of $125.4 million by the Company.
32
<PAGE> 40
ROADWAY SERVICES, INC. PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited Pro Forma Condensed Financial Statements of RSI
have been prepared on a pro forma basis to give effect to the Distribution and
the discontinuance of the business of RGA. The unaudited Pro Forma Condensed
Balance Sheet gives effect to the Distribution and the discontinuance of
the business of RGA as if both events occurred on September 9, 1995. The
unaudited Pro Forma Condensed Statements of Consolidated Income give effect to
the Distribution and the discontinuance of the business of RGA as if both events
occurred at the beginning of each period presented.
The unaudited Pro Forma Condensed Financial Statements and accompanying
notes should be read in conjunction with the audited financial statements and
notes thereto incorporated by reference in this Proxy Statement. The unaudited
Pro Forma Condensed Financial Statements do not purport to represent what the
results of operations or financial position of RSI would actually have been if
the Distribution and the discontinuance of the business of RGA in fact had
occurred on the dates indicated or at any future date.
33
<PAGE> 41
ROADWAY SERVICES, INC. AND SUBSIDIARIES
---------------------------------------
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
SEPTEMBER 9, 1995
<TABLE>
<CAPTION>
LESS PRO
PRO FORMA ADJUSTMENTS FORMA
------------------------ PRO FORMA EFFECTS OF
OTHER BEFORE EFFECTS RGA
LESS EFFECTS OF RGA DISCONTINUANCE
HISTORICAL REX (A) OF SPIN-OFF DISCONTINUANCE (F),(G) PRO FORMA
---------- ---------- ----------- -------------- ------------ ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
ASSETS
Cash................................ $ 35,310 $ 22,006 $ -- $ 13,304 $ 476 $ 12,828
Marketable securities............... 1,906 -- -- 1,906 -- 1,906
Accounts receivable................. 513,051 236,156 -- 276,895 18,547 258,348
Due from affiliates................. -- -- 29,000(b) 29,000 -- 29,000
Prepaid expenses and supplies....... 87,668 14,316 -- 73,352 2,963 70,389
Deferred income taxes............... 37,093 4,670 -- 32,423 2,364 30,059
---------- ---------- ----------- -------------- ------------ ----------
TOTAL CURRENT ASSETS............ 675,028 277,148 29,000 426,880 24,350 402,530
Carrier operating property.......... 2,890,528 1,435,556 -- 1,454,972 53,784 1,401,188
Less allowances for depreciation.... 1,596,465 995,325 -- 601,140 24,380 576,760
---------- ---------- ----------- -------------- ------------ ----------
TOTAL CARRIER OPERATING
PROPERTY...................... 1,294,063 440,231 -- 853,832 29,404 824,428
Deferred income taxes............... -- 2,720 2,720(c) -- -- --
Prepaid pension expense............. -- -- 36,500(d) 36,500 -- 36,500
Cost in excess of net assets of
businesses acquired............... 95,042 -- -- 95,042 -- 95,042
Investment in REX................... -- -- 10,648(e) 10,648 -- 10,648
---------- ---------- ----------- -------------- ------------ ----------
95,042 2,720 49,868 142,190 -- 142,190
---------- ---------- ----------- -------------- ------------ ----------
$2,064,133 $ 720,099 $78,868 $1,422,902 $ 53,754 $1,369,148
========= ========= ========= =========== =========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable.................... $ 326,786 $ 110,667 $ -- $ 216,119 $ 14,750 $ 201,369
Salaries and wages payable.......... 191,408 111,334 -- 80,074 2,742 77,332
Short-term debt..................... 195,000 -- -- 195,000 -- 195,000
Short-term debt affiliates.......... -- 29,000 29,000(b) -- -- --
Other current liabilities........... 128,926 71,087 -- 57,839 (4,725) 62,564
---------- ---------- ----------- -------------- ------------ ----------
TOTAL CURRENT LIABILITIES....... 842,120 322,088 29,000 549,032 12,767 536,265
Casualty claims payable after one
year.............................. 110,025 90,454 -- 19,571 -- 19,571
Future equipment repairs............ 29,971 28,373 -- 1,598 -- 1,598
Retiree medical..................... 63,653 43,930 -- 19,723 74 19,649
Deferred income taxes............... 36,460 -- 2,720(c) 53,380 2,130 51,250
14,200(d)
---------- ---------- ----------- -------------- ------------ ----------
TOTAL LONG-TERM LIABILITIES..... 240,109 162,757 16,920 94,272 2,204 92,068
10,648(e)
TOTAL SHAREHOLDERS' EQUITY...... 981,904 235,254 22,300(d) 779,598 38,783 740,815
---------- ---------- ----------- -------------- ------------ ----------
$2,064,133 $ 720,099 $78,868 $1,422,902 $ 53,754 $1,369,148
========= ========= ========= =========== =========== =========
</TABLE>
34
<PAGE> 42
- ---------------
(a) Reflects the elimination of historical REX amounts as presented in the
historical financial statements of REX included elsewhere in this Proxy
Statement.
(b) At the balance sheet date, REX owed the Company $29 million. Such balance is
not included in the Company's historical balance sheet as it was eliminated
in consolidation. This adjustment reflects the receivable on a pro forma
basis, which will be paid or eliminated on or before the Distribution Date.
The line of credit borrowing between REX and the Company is more fully
described in "REX Management's Discussion and Analysis of Financial
Condition and Results of Operations--Liquidity and Capital Resources" and
"The Distribution--Transactions Prior to or Contemporaneous with the
Distribution".
(c) Reclassification of deferred income taxes from noncurrent assets to
long-term liabilities.
(d) Represents the transfer of accrued pension costs and related deferred income
taxes from RSI to REX attributable to the defined benefit pension plan
obligation and related assets for active REX employees. The projected
benefit obligation was actuarially determined based on the participants in
the Plan that are active REX employees and actuarial assumptions used were
consistent with assumptions previously used by RSI. The assets were split
based on the requirements of Section 414(l) of the Code and other management
considerations.
(e) Assumes 5% of REX Common Stock is retained by RSI.
(f) On November 6, 1995, the Company Board announced plans to exit the air
freight business served by RGA. See note (b) to "Roadway Services, Inc. and
Subsidiaries Capitalization".
(g) Reflects the elimination of historical RGA amounts, excluding intercompany
borrowings, and a capital contribution of $125.4 million by the Company.
35
<PAGE> 43
ROADWAY SERVICES, INC. AND SUBSIDIARIES
---------------------------------------
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
THIRTY-SIX WEEKS ENDED SEPTEMBER 9, 1995
<TABLE>
<CAPTION>
LESS PRO
PRO FORMA ADJUSTMENTS FORMA
------------------------ PRO FORMA EFFECTS OF
OTHER BEFORE EFFECTS RGA
LESS EFFECTS OF RGA DISCONTINUANCE
HISTORICAL REX (A) OF SPIN-OFF DISCONTINUANCE (C),(D) PRO FORMA
---------- ---------- ----------- -------------- ----------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
REVENUE............................... $3,292,819 $1,569,991 $ -- $1,722,828 $ 75,839 $1,646,989
OPERATING EXPENSES
Salaries, wages and benefits........ 1,740,501 1,067,515 (3,300)(b) 669,686 30,627 639,059
Purchased transportation............ 639,181 102,965 -- 536,216 75,293 460,923
Operating supplies and expenses..... 584,291 272,095 -- 312,196 23,379 288,817
Operating taxes and licenses........ 88,989 52,565 -- 36,424 2,898 33,526
Insurance and claims................ 76,227 39,978 -- 36,249 834 35,415
Provision for depreciation.......... 148,550 50,470 -- 98,080 9,386 88,694
Net (gain) loss on sale of carrier
operating property.............. (1,530) (550) -- (980) 5 (985)
---------- ---------- ----------- -------------- ----------- ----------
TOTAL OPERATING EXPENSES.......... 3,276,209 1,585,038 (3,300) 1,687,871 142,422 1,545,449
---------- ---------- ----------- -------------- ----------- ----------
OPERATING INCOME (LOSS)........... 16,610 (15,047) 3,300 34,957 (66,583) 101,540
Other (expense) income, net........... (1,636) (2,754) -- 1,118 (5,117)(e) 6,235
---------- ---------- ----------- -------------- ----------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES........................... 14,974 (17,801) 3,300 36,075 (71,700) 107,775
Provision (benefit) for income
taxes............................... 8,797 (4,605) 1,300(b) 14,702 (24,964) 39,666
---------- ---------- ----------- -------------- ----------- ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS...................... $ 6,177 $ (13,196) $ 2,000 $ 21,373 $ (46,736) $ 68,109
========= ========= ========= =========== ========== =========
INCOME PER SHARE FROM CONTINUING
OPERATIONS...................... $ 0.16 $ 0.54 $ 1.73
========= =========== =========
</TABLE>
- ---------------
(a) Reflects the elimination of the historical results of operations of REX as
presented in the historical financial statements of REX included elsewhere
in this Proxy Statement. Included in "Other (expense) income, net" is
interest expense of $1.5 million incurred under intercompany credit
agreements with a subsidiary of the Company.
(b) Represents the decrease in pension expense and related tax effect through
the thirty-six weeks ended September 9, 1995 attributable to the transfer of
the defined benefit pension plan obligation and related assets for active
REX employees from RSI to REX.
(c) On November 6, 1995, the Board of Directors of the Company announced plans
to exit the air freight business served by RGA. See note (b) to "Roadway
Services, Inc. and Subsidiaries Capitalization".
(d) Reflects the elimination of historical RGA amounts.
(e) Includes interest expense of $5.1 million incurred under intercompany credit
agreements with a subsidiary of the Company with outstanding borrowings
aggregating $125.4 million at September 9, 1995.
36
<PAGE> 44
ROADWAY SERVICES, INC. AND SUBSIDIARIES
---------------------------------------
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRO FORMA ADJUSTMENTS
------------------------ PRO FORMA
OTHER BEFORE EFFECTS LESS PRO FORMA
LESS EFFECTS OF RGA EFFECTS OF RGA
HISTORICAL REX (A) OF SPIN-OFF DISCONTINUANCE DISCONTINUANCE(C),(D) PRO FORMA
---------- ---------- ----------- -------------- --------------------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
REVENUE..................... $4,572,004 $2,171,117 $ -- $2,400,887 $ 73,364 $2,327,523
OPERATING EXPENSES
Salaries, wages and
benefits................ 2,420,716 1,512,235 (4,800)(b) 903,681 31,787 871,894
Purchased
transportation.......... 889,476 105,486 -- 783,990 83,974 700,016
Operating supplies and
expenses................ 776,366 388,268 -- 388,098 27,331 360,767
Operating taxes and
licenses................ 120,249 74,031 -- 46,218 2,400 43,818
Insurance and claims...... 107,372 46,913 -- 60,459 815 59,644
Provision for
depreciation............ 207,267 75,750 -- 131,517 11,488 120,029
Net (gain) loss on sale of
carrier operating
property.............. (1,179) (2,628) -- 1,449 (3) 1,452
---------- ---------- ----------- -------------- ----------- ----------
TOTAL OPERATING
EXPENSES.............. 4,520,267 2,200,055 (4,800) 2,315,412 157,792 2,157,620
---------- ---------- ----------- -------------- ----------- ----------
OPERATING INCOME
(LOSS)................ 51,737 (28,938) 4,800 85,475 (84,428) 169,903
Other (expense) income,
net....................... 701 (1,775) -- 2,476 (3,901)(e) 6,377
---------- ---------- ----------- -------------- ----------- ----------
INCOME (LOSS) FROM
CONTINUING OPERATIONS
BEFORE INCOME TAXES... 52,438 (30,713) 4,800 87,951 (88,329) 176,280
Provision (benefit) for
income taxes.............. 32,878 (9,268) 1,900(b) 44,046 (30,797) 74,843
---------- ---------- ----------- -------------- ----------- ----------
INCOME (LOSS) FROM
CONTINUING
OPERATIONS............ $ 19,560 $ (21,445) $ 2,900 $ 43,905 $ (57,532) $ 101,437
========= ========= ========= =========== =================== =========
INCOME PER SHARE FROM
CONTINUING
OPERATIONS............ $ 0.50 $ 1.11 $ 2.58
========= =========== =========
</TABLE>
- ---------------
(a) Reflects the elimination of the historical results of operations of REX as
presented in the historical financial statements of REX included elsewhere
in this Proxy Statement.
(b) Represents the decrease in pension expense and related tax effect for the
year ended December 31, 1994 attributable to the transfer of the defined
benefit pension plan obligation and related assets for active REX employees
from RSI to REX.
(c) On November 6, 1995, the Board of Directors of the Company announced plans
to exit the air freight business served by RGA. See note (b) to "Roadway
Services, Inc. and Subsidiaries Capitalization".
(d) Reflects the elimination of historical RGA amounts.
(e) Includes interest expense of $3.9 million incurred under intercompany credit
agreements with a subsidiary of RSI with outstanding borrowings aggregating
$80.0 million at December 31, 1994.
37
<PAGE> 45
ROADWAY SERVICES, INC. AND SUBSIDIARIES
---------------------------------------
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
THIRTY-SIX WEEKS ENDED SEPTEMBER 10, 1994
<TABLE>
<CAPTION>
LESS PRO
PRO FORMA ADJUSTMENTS FORMA
------------------------ PRO FORMA EFFECTS OF
OTHER BEFORE EFFECTS RGA
LESS EFFECTS OF RGA DISCONTINUANCE
HISTORICAL REX (A) OF SPIN-OFF DISCONTINUANCE (C),(D) PRO FORMA
---------- ---------- ----------- -------------- ------------ ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
REVENUE............................. $3,045,404 $1,443,002 $ -- $1,602,402 $ 43,498 $1,558,904
OPERATING EXPENSES
Salaries, wages and benefits...... 1,638,997 1,024,289 (3,300)(b) 611,408 20,522 590,886
Purchased transportation.......... 559,879 59,443 -- 500,436 51,754 448,682
Operating supplies and expenses... 534,065 272,466 -- 261,599 16,673 244,926
Operating taxes and licenses...... 84,316 52,062 -- 32,254 1,599 30,655
Insurance and claims.............. 72,481 30,888 -- 41,593 490 41,103
Provision for depreciation........ 144,260 53,450 -- 90,810 8,997 81,813
Net (gain) loss on sale of carrier
operating property.............. (661) (1,363) -- 702 (3) 705
---------- ---------- ----------- -------------- ------------ ----------
TOTAL OPERATING EXPENSES.......... 3,033,337 1,491,235 (3,300) 1,538,802 100,032 1,438,770
---------- ---------- ----------- -------------- ------------ ----------
OPERATING INCOME (LOSS)........... 12,067 (48,233) 3,300 63,600 (56,534) 120,134
Other (expense) income, net......... 1,473 (978) -- 2,451 (2,331)(e) 4,782
---------- ---------- ----------- -------------- ------------ ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME
TAXES........................... 13,540 (49,211) 3,300 66,051 (58,865) 124,916
Provision (benefit) for income
taxes............................. 7,705 (22,209) 1,300(b) 31,214 (20,460) 51,674
---------- ---------- ----------- -------------- ------------ ----------
INCOME (LOSS) FROM CONTINUING
OPERATIONS...................... $ 5,835 $ (27,002) $ 2,000 $ 34,837 ($38,405) $ 73,242
========= ========= ========= =========== =========== =========
INCOME PER SHARE FROM CONTINUING
OPERATIONS...................... $ 0.15 $ 0.88 $ 1.86
========= =========== =========
</TABLE>
- ---------------
(a) Reflects the elimination of the historical results of operations of REX as
presented in the historical financial statements of REX included elsewhere
in this Proxy Statement.
(b) Represents the decrease in pension expense and related tax effect through
thirty-six weeks ended September 10, 1994 attributable to the transfer of
the defined benefit pension plan obligation and related assets for active
REX employees from RSI to REX.
(c) On November 6, 1995, the Board of Directors of the Company announced plans
to exit the air freight business served by RGA. See note (b) to "Roadway
Services, Inc. and Subsidiaries Capitalization".
(d) Reflects the elimination of historical RGA amounts.
(e) Includes interest expense of $2.3 million incurred under intercompany credit
agreements with a subsidiary of RSI with outstanding borrowings aggregating
$68.9 million at September 10, 1994.
38
<PAGE> 46
RSI MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
BACKGROUND AND BUSINESS CONDITIONS
The following discussion and analysis of financial condition and results of
operations has been prepared to reflect the Distribution and the announced plans
to exit the air freight business served by RGA, the Company's worldwide air
freight subsidiary, in the fourth quarter of 1995 and refers to RSI as the
continuing business of the Company following these events. This discussion is
based on information derived from the unaudited pro forma statements of
consolidated income for the thirty-six weeks ended September 9, 1995 and
September 10, 1994 and the unaudited pro forma condensed balance sheet at
September 9, 1995. The RSI pro forma results, except for the reduction in
pension expense, represent the historical financial results for all companies
that will be a part of RSI after the Distribution and discontinuance of the RGA
business. The pro forma reduction in pension expense, which is included as a
reduction to salaries, wages and benefits, reflects the effect on pension
expense resulting from the allocation of pension assets to REX on a basis
different than previously used to determine historical pension expense. See
"Roadway Services, Inc. -- Pro Forma Condensed Financial Statements". This
reduction is expected to continue in future years.
39
<PAGE> 47
The following table sets forth the percentage relationship of RSI's revenue
and expense items to operating revenue for the periods indicated.
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS THIRTY-SIX WEEKS
ENDED ENDED
SEPTEMBER 9, 1995 SEPTEMBER 10, 1994
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Revenue................................. $1,646,989 100.0% $1,558,904 100.0%
Operating Expenses
Salaries, wages and benefits.......... 639,059 38.8 590,886 37.9
Purchased transportation.............. 460,923 28.0 448,682 28.8
Operating supplies and expenses....... 288,817 17.5 244,926 15.7
Operating taxes and licenses.......... 33,526 2.0 30,655 2.0
Insurance and claims.................. 35,415 2.2 41,103 2.6
Provision for depreciation............ 88,694 5.4 81,813 5.3
Net (gain) loss on sale of carrier
operating property................. (985) (0.1) 705 0.0
---------- ----- ---------- -----
Total Operating Expenses................ 1,545,449 93.8 $1,438,770 92.3
---------- ----- ---------- -----
Operating Income........................ 101,540 6.2 120,134 7.7
Other income, net....................... 6,235 0.3 4,782 0.3
---------- ----- ---------- -----
Income from Continuing Operations
Before Income Taxes..................... 107,775 6.5 124,916 8.0
Provision for income taxes.............. 39,666 2.4 51,674 3.3
---------- ----- ---------- -----
Income from Continuing Operations....... $ 68,109 4.1% $ 73,242 4.7%
========== ===== ========== =====
Income from Continuing Operations per
Share................................. $ 1.73 $ 1.86
========== ==========
</TABLE>
RESULTS OF OPERATIONS
Thirty-Six Weeks Ended September 9, 1995 Compared With Thirty-Six Weeks Ended
September 10, 1994
Revenue for the thirty-six weeks ended September 9, 1995 increased $88.1
million or 5.7% over the same period in 1994. Revenue growth continues to be
behind plan at all operating companies, except ROLS, because of the sluggish
economy and an intense pricing environment, especially in the regional LTL
market.
Revenue at RPS increased by $61.6 million or 7.6% as a result of package
volume growth and the effects of the rate increase implemented in early 1995. In
addition, ROLS contributed significantly to the revenue increase due to ongoing
expansion of the business. ROLS began operations in 1989 and operates in markets
which have experienced significant overall growth in recent years. RRG revenues
for the period were 2.3% above the prior year's despite Central Freight Lines'
revenue which was down 9.7% due in part to the impact of intrastate deregulation
in Texas. Roberts experienced a revenue decline of 11.3%.
Operating expenses for the thirty-six weeks ended September 9, 1995
increased $106.7 million or 7.4% over the same period in 1994. The increase
resulted primarily from higher business volumes at all business units except
Roberts, with RPS and RRG reporting operating expense increases of 7.8% and
7.3%, respectively. The increase in overall operating expenses occurred despite
higher than normal operating expenses having been incurred in 1994. As a result
of Federal legislation enacted during 1994, the remaining asset values of
intrastate operating rights of $5.8 million were charged to operating supplies
and expenses and were included in the results for the thirty-six weeks ended
September 10, 1994. Operating supplies and expenses in 1995 were impacted by
expenses related to an information technology project undertaken by RRG called
PRISM which is expected to negatively impact earnings for the year by
approximately $0.25 per share. Increases in expenses more than offset a decline
of $5.7
40
<PAGE> 48
million in insurance and claims related expenses which resulted from ongoing
claims management and safety related programs.
Operating income was $101.5 million for the thirty-six weeks ended
September 9, 1995 compared to $120.1 million for the comparable 1994 period.
Lower than planned volumes resulting from the sluggish economy and higher
operating expenses negatively impacted margins in 1995. RRG's margins were
further impacted by intense discounting of rates in certain geographic areas as
well as costs for the PRISM project, as previously discussed. These factors
resulted in an operating loss at RRG for the thirty-six weeks of 1995 which
represented a decline of $27.0 million from its operating income for the
comparable period in 1994. After the Distribution and the discontinuance of the
RGA business, Other income, net will no longer include interest income which
amounted to $6.6 million and $2.3 million for the thirty-six weeks ended
September 9, 1995 and September 10, 1994, respectively, from REX and RGA
intercompany borrowings. The effective tax rate differs from the Federal
statutory rate due to state income taxes and non-deductible operating costs.
Income from continuing operations declined $5.1 million or 7.0% from $1.86
per share for the thirty-six weeks ended September 10, 1994 to $1.73 per share
for the comparable period of 1995. An earnings increase at RPS of 10.6% in 1995
was more than offset by declines at RRG and Roberts.
During the fourth quarter of 1995, RSI expects freight volume to increase
from the third quarter as a result of the normal seasonal nature of its
businesses. Competitive discounting is expected to continue in the regional LTL
markets with limited opportunity to improve rate levels.
LIQUIDITY AND CAPITAL RESOURCES
Early in 1995 the Company entered into two new debt agreements, a $300
million Revolving Credit Agreement with several banks, expiring in March 1999,
and a $25 million unsecured bank line of credit, which have been amended to
permit the Distribution. Interest on outstanding borrowings is based on variable
rates.
Borrowings under the Credit Agreement were $195 million at September 9,
1995. RSI capital expenditures for continuing operations were $209 million for
the thirty-six week period ended September 9, 1995 and are expected to
approximate $285 million for the year ending December 31, 1995. RSI expects that
the investment in the growth of its operating companies, especially RPS, after
the Distribution will be substantial. Investments in technology and systems
development are also expected to continue, including the PRISM project, which
was launched in 1994 at RRG. Capital expenditures are expected to exceed $350
million in 1996. In the past, internally generated cash flow and financing
sources readily available to the Company have been sufficient to finance capital
expenditures, needed working capital, and dividends and interest. RSI's working
capital deficit of $134 million, uncertain profitability at its subsidiaries,
and the expenses to be incurred in connection with the discontinuance of the
business of RGA, as well as the loss of cash flows previously provided by REX,
would appear to make it necessary for RSI to incur significant future borrowings
in light of projected capital expenditures. However, the stress that RGA would
have put on the future liquidity of RSI will have been eliminated. RSI
anticipates that it will be able to arrange financing that together with cash
flows from operations will be sufficient to fund its projected capital
expenditures and provide adequate levels of working capital and funds for
payment of dividends and interest. It is anticipated that RSI will establish its
dividend policy after the Distribution.
The impact of inflation on operating expenses has been moderate in recent
years. Most of RSI's operating expenses reflect current costs. In the normal
course of business, RSI is exposed to various financial risks including interest
and foreign exchange rates. Monitoring of these exposures and the evaluation of
related risks includes strong oversight by senior management. Currently, RSI
believes these risks are not significant and the use of derivatives has not been
considered necessary although they may be considered in the future. RSI's policy
would allow the use of derivatives to hedge against specified risks but would
not allow use for speculative purposes. It is anticipated that although RSI will
continue to
41
<PAGE> 49
expand its presence in the global marketplace, the effects of foreign currency
fluctuations will remain relatively insignificant. Foreign currency transaction
gains or losses have not been significant.
Costs related to the Distribution, primarily legal, accounting and other
professional fees, will be included as part of the cost of the discontinued
operations of REX. In addition, the anticipated pre-tax charge of approximately
$65 million for the discontinuance of the business of RGA will be included as
part of the cost of the RGA discontinued operations.
42
<PAGE> 50
ROADWAY EXPRESS, INC. SELECTED HISTORICAL FINANCIAL DATA
The following data is qualified in its entirety by the financial statements
of REX and other information contained elsewhere in this Proxy Statement. The
financial data as of December 31, 1994 and 1993, and for the years ended
December 31, 1994, 1993 and 1992 has been derived from the audited financial
statements of REX contained elsewhere in this Proxy Statement. The historical
financial data is unaudited except for the years ended December 31, 1994, 1993
and 1992. The historical financial statements of REX contained in this Proxy
Statement are presented as if REX were a separate entity for all periods
presented.
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
(THREE QUARTERS)
----------------------------- YEAR ENDED DECEMBER 31,
SEPTEMBER 9, SEPTEMBER 10, ----------------------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
------------- ------------- --------- --------- -------- --------- ---------
(UNAUDITED) (AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue........................ $ 1,570 $ 1,443(a) $ 2,171(a) $ 2,324 $ 2,186 $ 2,063 $ 1,982
Operating expenses............. 1,585 1,491(a) 2,200(a) 2,251 2,088 1,960 1,885
Operating income (loss)........ (15) (48)(a) (29)(a) 73 98 103 97
Net income (loss).............. (13) (27)(a) (21)(a) 26(b) 61 62 60
BALANCE SHEET DATA:
Current assets................. 277 286 272 235 231 223 225
Carrier operating property..... 440 456 474 505 472 479 488
Total assets................... 720 742 746 740 705 704 716
Long-term debt................. -- -- -- -- -- -- --
Shareholder's equity........... 235 250 256 300 301 298 321
(AMOUNTS IN THOUSANDS)
OTHER DATA:
Tons of freight -- LTL......... 4,108 3,734 5,598 6,221 5,873 5,634 5,528
TL.............. 995 981 1,439 1,639 1,587 1,605 1,587
Total........... 5,103 4,715 7,037 7,860 7,460 7,239 7,115
Intercity miles................ 431,957 387,138 588,499 648,831 601,659 583,839 560,711
Ton miles...................... 6,538,605 5,873,308 8,792,871 9,714,031 9,170,521 8,833,070 8,536,483
Number of employees............ 26 27 27 27 26 26 26
</TABLE>
- ---------------
(a) Includes the effect of a 24-day Teamsters strike against REX in the second
quarter of 1994.
(b) Includes a net charge of $14.7 million for the cumulative effect of
accounting changes for the after-tax effect of postretirement benefits other
than pensions and income taxes as described in the notes to the consolidated
financial statements of REX included elsewhere in this Proxy Statement.
43
<PAGE> 51
ROADWAY EXPRESS, INC. AND SUBSIDIARIES CAPITALIZATION
The following table sets forth the capitalization of REX at September 9,
1995, the principal financial adjustments that will result from the Distribution
and the pro forma capitalization of REX after giving effect to the Distribution.
This data should be read in connection with the historical financial statements
and the unaudited pro forma condensed financial statements of REX and
Subsidiaries included elsewhere in this Proxy Statement.
<TABLE>
<CAPTION>
SEPTEMBER 9, 1995
----------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
Preferred Stock (a)
Authorized -- 20,000,000 shares
Issued -- none............................. $ -- $ -- $ --
Common stock -- $.01 par value:
Authorized -- 100,000,000 shares...........
Issued -- 20,770,218 shares (b)............ 39,898 -- 39,898
Additional capital........................... 3,408 -- 3,408
Earnings reinvested in the business.......... 191,948 (22,300)(c) 169,648
---------- ----------- ---------
TOTAL CAPITALIZATION............... $ 235,254 $ (22,300) $ 212,954
========= =========== =========
</TABLE>
- ---------------
(a) Reflects the proposed authorized preferred stock assuming the Distribution
occurred on September 9, 1995.
(b) Estimate of the number of outstanding shares of REX Common Stock based on
the number of outstanding shares of Company Common Stock on September 9,
1995 (other than in the treasury) and assuming a (i) Distribution ratio of
one share of REX Common Stock for each two shares of Company Common Stock
and (ii) Distribution of ninety-five percent of the outstanding REX Common
Stock to shareholders of RSI.
(c) Represents the transfer of accrued pension costs from RSI to REX
attributable to the defined benefit pension plan obligation and related
assets for active REX employees, net of deferred income taxes.
44
<PAGE> 52
REX MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
The Historical Financial Data of REX contained herein sets forth certain
information with respect to REX's financial condition and results of operations
and should be read in conjunction with the following analysis. The following
table sets forth the percentage relationship of REX's revenue and expense items
to operating revenues for the periods indicated:
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
---------------------------- YEAR ENDED DECEMBER 31
SEPTEMBER 9, SEPTEMBER 10, -------------------------
1995 1994 1994 1993 1992
------------ ------------- ----- ----- -----
(EXPENSES AS A PERCENTAGE OF REVENUE)
<S> <C> <C> <C> <C> <C>
Net Revenue........................... 100.0% 100.0% 100.0% 100.0% 100.0%
Operating Expenses
Salaries, wages and benefits........ 68.0 71.0 69.6 67.1 65.6
Operating supplies and expenses..... 17.3 18.9 17.9 16.5 17.1
Purchased transportation............ 6.6 4.1 4.9 3.6 3.1
Operating taxes and licenses........ 3.4 3.6 3.4 3.4 3.3
Insurance and claims expense........ 2.5 2.1 2.1 2.2 2.0
Provision for depreciation.......... 3.2 3.7 3.5 4.1 4.4
Loss (Gain) on disposal of
property......................... -- (0.1) (0.1) -- --
------------ ------------- ----- ----- -----
Total Operating Expenses.............. 101.0 103.3 101.3 96.9 95.5
------------ ------------- ----- ----- -----
Operating Income (loss)............... (1.0) (3.3) (1.3) 3.1 4.5
Other (expense) income................ (0.1) (0.1) (0.1) (0.0) 0.1
------------ ------------- ----- ----- -----
Income (loss) before income taxes and
cumulative effect of accounting
changes............................. (1.1) (3.4) (1.4) 3.1 4.6
Provision (benefit) for income
taxes............................... (0.3) (1.5) (0.4) 1.4 1.8
------------ ------------- ----- ----- -----
Income (loss) before cumulative effect
of accounting changes............... (0.8) (1.9) (1.0) 1.7 2.8
Cumulative effect of accounting
changes............................. -- -- -- (0.6) --
------------ ------------- ----- ----- -----
Net income (loss)..................... (0.8)% (1.9)% (1.0)% 1.1% 2.8%
============= ============== ===== ===== =====
</TABLE>
45
<PAGE> 53
RESULTS OF OPERATIONS
Thirty-Six Weeks Ended September 9, 1995 Compared With Thirty-Six Weeks Ended
September 10, 1994
Consolidated revenue for the thirty-six weeks ended September 9, 1995 was
$1.57 billion as compared to $1.44 billion for the comparable period of 1994.
This increase of $127.0 million or 8.8% was in comparison to the depressed
business levels during 1994 due to a 24-day strike by REX's IBT workers in April
1994. Total freight tonnage for REX was up 8.2% for the thirty-six week period
in 1995, with LTL tonnage up 10.0% and truckload tonnage up 1.4%. Ton miles (the
sum of the weight of freight times the distance freight is moved) increased
11.3%, reflecting the tonnage increase as well as the increased distance an
average shipment moved in 1995 (2.8%). However, after adjusting for the impact
of the work stoppage in 1994, tons during the thirty-six week period ending
September 9, 1995 were approximately 3% below the comparable period in 1994.
Extreme competitive pressure on freight rates resulting in discounting caused
revenue per ton to be up only 0.5% in 1995 over 1994 levels, despite a general
rate increase of approximately 4% in January, 1995. LTL revenue per ton
decreased 0.6% for the thirty-six week period ended September 9, 1995 from the
comparable period in 1994. Revenue per ton rose, even while LTL revenue per ton
declined, because REX transported proportionately more higher-priced LTL freight
than truckload freight in 1995 as compared to 1994.
Operating expenses for the thirty-six weeks ended September 9, 1995
increased $93.8 million or 6.3% over the same period in 1994. This increase
resulted primarily from higher business volume. Such increase also reflects the
effect of a 3.1% increase in union labor wage and benefit rates and benefits
effective April 1, 1995 under the terms of the National Master Freight Agreement
("NMFA") with the IBT of which REX is a signatory. The NMFA became effective
April 1994, and expires March 31, 1998. REX expects labor wages to increase
under the NMFA, although the precise amount of such increase cannot presently be
determined. REX has frozen non-union salaries and wages since mid-1995. In the
1995 period, REX had certain productivity gains through reengineering efforts
that partially offset the 1995 wage and benefit increase, including the
increased use both of rail lines when appropriate and implementation of
scheduled shipping times. REX believes that relatively low tonnage levels have
limited the full use of cost saving measures and reengineering improvements. As
a result of REX's initiatives, operating expenses per freight ton increased only
2.3% during the thirty-six weeks ended September 9, 1995 over the comparable
period in 1994, and operating costs per ton mile decreased by 0.3% over the same
period. Included in operating expenses for the 1994 period is approximately $6.9
million associated with the closure of certain terminals, realignment of
linehaul operations and the relocation of personnel in connection therewith.
Also included in operating expenses is a 0.6% decline in fuel prices on a per
gallon basis in the 1995 period compared to the same period in 1994.
REX's operating loss was $15.0 million (or 1.0% of revenue) for the
thirty-six weeks ended September 9, 1995, compared to an operating loss of $48.2
million (or 3.3% of revenue) for the comparable 1994 period. 1995 results
reflect intense discounting of rates, overcapacity in the LTL market and the
corresponding adverse effect on operating margins.
The tax benefit attributable to the operating losses in both years differs
from the Federal statutory benefit due to the impact of state taxes,
non-deductible operating expenses, and taxes on profitable foreign operations.
These components have a much greater impact in periods where operating results
are near break even. The deferred tax asset at the end of the third quarter of
1995 is the result of temporary differences consistent with Note D to REX's
Consolidated Financial Statements contained herein.
Year Ended December 31, 1994 Compared With The Year Ended December 31, 1993
Consolidated revenue for year ended December 31, 1994 decreased $152.6
million or 6.6% over the same period in 1993. This decrease was the result of
the adverse impact of the strike by REX's union workers in April 1994 which
reduced revenue by approximately $190.0 million. Total freight tonnage at REX
decreased 10.5% with a similar reduction in LTL tonnage. Although total tonnage
was down,
46
<PAGE> 54
revenue per ton increased 4.5% in 1994 over 1993 due primarily to a rate
increase in January 1994. LTL revenue per ton increased 3.9% during this period.
Operating expenses for the year ended December 31, 1994 decreased $50.8
million, or 2.3%, over the same period in 1993 primarily a result of reduced
volume. Included in operating costs for 1994 was the effect of a 1.2% increase
in union wage rates and benefits resulting from the labor contract which was
effective April 1994, expenses associated with the closing of certain terminals,
realignment of linehaul operations and the relocation of personnel in connection
therewith. Fuel prices in 1994, on a per gallon basis, were 1.6% higher than
1993 levels. Purchased transportation increased 27.6% in 1994, reflecting the
increased use of rail.
REX experienced an operating loss of $28.9 million (or 1.3% of revenue)
compared to operating income of $72.8 million (or 3.1% of revenues in 1993) due
primarily to the previously mentioned strike by unionized workers. The magnitude
of REX's 1994 operating loss was mitigated by operating income from foreign
operations of $9.3 million.
The tax benefit attributable to the operating loss in 1994 differs from the
Federal statutory benefit due to the impact of state taxes, non-deductible
operating expenses, and taxes on profitable foreign operations. The effective
tax rate in 1993 also differed from the statutory rate due to state taxes, non-
deductible operating expenses and foreign operations.
Year Ended December 31, 1993 Compared With The Year Ended December 31, 1992
Consolidated revenue for the year ended December 31, 1993 increased $138.0
million, or 6.3%, over the same period in 1992. Total freight tonnage increased
5.4%, including an increase of 5.9% in LTL tons over the same period in 1993.
Competitive pressures, and related discounting caused freight rates to increase
only slightly in 1993 which resulted in revenue per ton only 0.9% above 1992
levels. LTL revenue per ton increased only 0.5%.
Operating expenses for the year ended December 31, 1993 increased $163.6
million, or 7.8%, over the same period in 1992 primarily due to increased volume
and a 3.4% increase in compensation costs under REX's labor contract. Fuel
prices in 1993, on a per gallon basis, were 2.1% above 1992 levels, primarily
because of federally mandated reductions in diesel fuel sulfur levels and
increased federal fuel taxes. Operating expenses in 1993 also increased as a
result of an increase of $11.8 million in pension plan expenses, a $4.7 million
increase in retiree medical expenses and a 22.8% increase in purchased
transportation reflecting increased use of rail and shipments to foreign
markets. Operating income was $72.8 million (or 3.1% of revenues) for the year
ended December 31, 1993 compared to $98.4 million (or 4.5% of revenues) for the
year ended 1992.
REX's effective income tax rate increased from 39.2% in 1992 to 43.9% in
1993 primarily from the increase, effective January 1, 1993, in the statutory
Federal rate to 35%, and increases in state taxes.
As discussed in Notes D and E to the consolidated financial statements, REX
recorded the cumulative effect of two accounting changes in 1993 which resulted
in a net charge to 1993 earnings of $14.7 million. By adopting the Statement of
Financial Accounting Standards ("SFAS") No. 106, "Employer's Accounting for
Post-retirement Benefits Other Than Pensions," REX recognized the entire
December 31, 1992 accumulated post-retirement benefit obligation of $32.5
million ($20.4 million after taxes) as a charge to earnings and, as discussed
above, also increased the 1993 provision for retiree medical costs. Also adopted
by REX in 1993 was SFAS No. 109, "Accounting for Income Taxes," which resulted
in an increase in 1993 earnings of $5.7 million. Under SFAS 109, REX now
recognizes deferred tax liabilities and assets using the liability method
whereby such amounts are adjusted and earnings are affected in the periods when
changes in tax rates are legislated.
LIQUIDITY AND CAPITAL RESOURCES
REX had cash and cash equivalents of $22.0 million September 9, 1995, which
was consistent with its historical cash position. REX maintains a $50 million
line of credit with RSI of which $29 million was
47
<PAGE> 55
outstanding at September 9, 1995. This line of credit will no longer be
available following the Distribution. REX intends to repay such amount prior to
the Distribution out of cash flows from operations. If cash flows are not
sufficient to repay such amount, the Company has agreed to make a capital
contribution to REX sufficient to permit repayment of the debt prior to the
Distribution. REX intends to replace this financing arrangement with a line of
credit from a commercial lender. REX expects that such credit line will have
comparable terms (including interest rate) to those of its existing line. Cash
flows have been negatively impacted in recent years by an increase in standard
credit terms under contracts with freight customers. Over the last five years,
the average time of payment by customers has increased by two days.
Capital expenditures are financed primarily through internally generated
funds. Future expenditures are expected to be financed in a similar manner,
except for a planned replacement in 1996, 1997 and 1998 of approximately 50% of
REX's trailer fleet through a yet to be established operating lease arrangement.
Capital expenditures are expected to be $35 million in 1996, excluding trailers
to be leased. Future capital expenditures for facilities are expected to be
limited as REX reduces its terminal network to better utilize existing capacity,
improve efficiency and reduce fixed costs. Revenue equipment needs will be
reduced as REX increases utilization of rail services to transport freight in
linehaul operations. REX management believes that cash flows from operations and
financing sources which it anticipates to be available will be sufficient to
support its working capital needs, projected capital expenditures and provide
funds to purchase shares of REX Common Stock for its employee benefit plans. See
"Certain Special Considerations - Certain Financial Considerations Related to
REX and RSI", "The Distribution - Background and Reasons for the Distribution",
and "Approval of the Adoption of the REX Management Incentive Stock Plan".
Accordingly, REX management does not believe its working capital deficit ($44.9
million at September 9, 1995) materially impacts its liquidity. Also, REX
management does not expect that the Distribution will materially affect future
cash flows from operations.
Freight rate levels have been severely depressed throughout 1995 resulting
in generally poor operating results for much of the LTL industry. Although no
assurances can be given, REX believes that rates will improve in 1996 as
consolidation and capacity reduction programs continue to be implemented by REX
and several of its major competitors.
REX plans on reducing its terminal network by 200 facilities by early 1997,
which it expects will result in a reduction in fixed costs while improving
utilization of remaining terminal capacity. This change is also expected to
reduce freight handling labor costs. No significant expenses are expected in
connection with this facility reduction.
Fixed price fuel contracts have been utilized to moderate the impact of
potential fuel price swings. In 1995, approximately 24% of fuel purchases are
subject to such contracts, while an additional 28% of such purchases are for
guaranteed quantities at market rates. These fixed price contracts have had no
material impact on REX's fuel costs.
The impact of inflation on operating expenses has been moderate in recent
years.
48
<PAGE> 56
REX PRO FORMA CONDENSED FINANCIAL STATEMENTS
The following unaudited Pro Forma Condensed Financial Statements of REX
have been prepared on a pro forma basis to give effect to the Distribution. The
unaudited Pro Forma Condensed Balance Sheet gives effect to the Distribution as
if it occurred on September 9, 1995. The unaudited Pro Forma Condensed
Statements of Consolidated Income give effect to the Distribution as if it
occurred at the beginning of each period presented.
The unaudited Pro Forma Condensed Financial Statements of REX and
accompanying notes should be read in conjunction with the audited financial
statements and notes thereto of REX appearing elsewhere in this Proxy Statement.
The unaudited Pro Forma Condensed Financial Statements of REX do not purport to
represent what the results of operations or financial position of REX would
actually have been if the Distribution in fact had occurred on the dates
indicated or at any future date.
49
<PAGE> 57
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
---------------------------------------
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
SEPTEMBER 9, 1995
<TABLE>
<CAPTION>
PRO
FORMA PRO
HISTORICAL ADJUSTMENTS FORMA
---------- -------- --------
(AMOUNTS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents........................ $ 22,006 $ -- $ 22,006
Accounts receivable.............................. 236,156 -- 236,156
Prepaid expenses and supplies.................... 14,316 -- 14,316
Deferred income taxes............................ 4,670 -- 4,670
---------- -------- ---------
TOTAL CURRENT ASSETS...................... 277,148 -- 277,148
Carrier operating property....................... 1,435,556 -- 1,435,556
Less allowances for depreciation................. 995,325 -- 995,325
---------- -------- ---------
TOTAL CARRIER OPERATING PROPERTY.......... 440,231 -- 440,231
Deferred income taxes............................ 2,720 14,200(a) 16,920
---------- -------- ---------
$ 720,099 $ 14,200 $ 734,299
========== ======== =========
LIABILITIES AND SHAREHOLDER'S EQUITY
Accounts payable................................. $ 110,667 $ -- $ 110,667
Salaries and wages payable....................... 111,334 -- 111,334
Short-term debt-affiliates....................... 29,000 -- 29,000(b)
Other current liabilities........................ 71,087 -- 71,087
---------- -------- ---------
TOTAL CURRENT LIABILITIES................. 322,088 -- 322,088
Accrued pension costs............................ -- 36,500(a) 36,500
Future equipment repairs......................... 28,373 -- 28,373
Casualty claims payable after one year........... 90,454 -- 90,454
Retiree medical.................................. 43,930 -- 43,930
---------- -------- ---------
TOTAL LONG-TERM LIABILITIES............... 162,757 36,500 199,257
Common stock..................................... 39,898 -- 39,898
Additional capital............................... 3,408 -- 3,408
Earnings reinvested in the business.............. 191,948 (22,300)(a) 169,648
---------- -------- ---------
TOTAL SHAREHOLDER'S EQUITY................ 235,254 (22,300) 212,954
---------- -------- ---------
$ 720,099 $ 14,200 $ 734,299
========== ======== =========
</TABLE>
(a) Represents the transfer of accrued pension costs and related deferred taxes
from RSI to REX attributable to the defined benefit pension plan obligation
and related assets for active REX employees. The projected benefit
obligation was actuarially determined based on the participants in the Plan
that are active REX employees and actuarial assumptions used were consistent
with assumptions previously used by RSI. The assets were divided based on
the requirements of Section 414(l) of the Code and other management
considerations.
(b) See Note (b) to Roadway Services, Inc. and Subsidiaries Unaudited Pro Forma
Condensed Balance-Sheet September 9, 1995.
50
<PAGE> 58
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
---------------------------------------
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
THIRTY-SIX WEEKS ENDED SEPTEMBER 9, 1995
<TABLE>
<CAPTION>
PRO
FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- -------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
REVENUE.......................................... $1,569,991 $ -- $1,569,991
OPERATING EXPENSES
Salaries, wages and benefits................... 1,067,515 3,300(a) 1,070,815
Purchased transportation....................... 102,965 -- 102,965
Operating supplies and expenses................ 272,095 -- 272,095
Operating taxes and licenses................... 52,565 -- 52,565
Insurance and claims........................... 39,978 -- 39,978
Provision for depreciation..................... 50,470 -- 50,470
Net (gain) loss on sale of carrier operating
property.................................... (550) -- (550)
---------- -------- ----------
TOTAL OPERATING EXPENSES.................. 1,585,038 3,300 1,588,338
---------- -------- ----------
OPERATING INCOME (LOSS)................... (15,047) (3,300) (18,347)
Other (expense) income, net.................... (2,754) -- (2,754)
---------- -------- ----------
INCOME (LOSS) BEFORE INCOME TAXES......... (17,801) (3,300) (21,101)
Provision (benefit) for income taxes............. (4,605) (1,300)(a) (5,905)
---------- -------- ----------
NET INCOME (LOSS)......................... $ (13,196) $ (2,000) $ (15,196)
========== ========= ==========
PRO FORMA NET INCOME (LOSS) PER SHARE..... $ (0.73)(b)
==========
</TABLE>
(a) Represents the increase in pension expense and related tax effect through
the thirty-six weeks ended September 9, 1995 attributable to the transfer of
the defined benefit pension plan obligation and related assets for active
REX employees from RSI to REX.
(b) Pro Forma net income (loss) per share is based on the equivalent weighted
average shares outstanding -- 20,767,000 shares. The number of shares was
determined based on a Distribution ratio of one share of REX Common Stock
for each two shares of RSI Common Stock and distribution of ninety-five
percent of the outstanding REX Common Stock.
51
<PAGE> 59
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
---------------------------------------
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
YEAR ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
PRO
FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- -------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
REVENUE.......................................... $2,171,117 $ -- $2,171,117
OPERATING EXPENSES
Salaries, wages and benefits................... 1,512,235 4,800(a) 1,517,035
Purchased transportation....................... 105,486 -- 105,486
Operating supplies and expenses................ 388,268 -- 388,268
Operating taxes and licenses................... 74,031 -- 74,031
Insurance and claims........................... 46,913 -- 46,913
Provision for depreciation..................... 75,750 -- 75,750
Net (gain) loss on sale of carrier operating
property.................................... (2,628) -- (2,628)
---------- -------- ----------
TOTAL OPERATING EXPENSES.................. 2,200,055 4,800 2,204,855
---------- -------- ----------
OPERATING INCOME (LOSS)................... (28,938) (4,800) (33,738)
Other (expense) income, net...................... (1,775) -- (1,775)
---------- -------- ----------
INCOME (LOSS) BEFORE INCOME TAXES......... (30,713) (4,800) (35,513)
Provision (benefit) for income taxes........... (9,268) (1,900)(a) (11,168)
---------- -------- ----------
NET INCOME (LOSS)......................... $ (21,445) $ (2,900) $ (24,345)
========== ========= ==========
PRO FORMA NET INCOME (LOSS) PER SHARE..... $ (1.17)(b)
==========
</TABLE>
(a) Represents the increase in pension expense and related tax effect for the
year ended December 31, 1994 attributable to the transfer of the defined
benefit pension plan obligation and related assets for active REX employees
from RSI to REX.
(b) Pro Forma net income (loss) per share is based on the equivalent weighted
average shares outstanding -- 20,733,000 shares. The number of shares was
determined based on a Distribution ratio of one share of REX Common Stock
for each two shares of RSI Common Stock and distribution of ninety-five
percent of the outstanding REX Common Stock.
52
<PAGE> 60
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
---------------------------------------
UNAUDITED PRO FORMA STATEMENT OF CONSOLIDATED INCOME
THIRTY-SIX WEEKS ENDED SEPTEMBER 10, 1994
<TABLE>
<CAPTION>
PRO
FORMA
HISTORICAL ADJUSTMENTS PRO FORMA
---------- -------- ----------
(AMOUNTS IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
REVENUE.......................................... $1,443,002 $ -- $1,443,002
OPERATING EXPENSES
Salaries, wages and benefits................... 1,024,289 3,300(a) 1,027,589
Purchased transportation....................... 59,443 -- 59,443
Operating supplies and expenses................ 272,466 -- 272,466
Operating taxes and licenses................... 52,062 -- 52,062
Insurance and claims........................... 30,888 -- 30,888
Provision for depreciation..................... 53,450 -- 53,450
Net (gain) loss on sale of carrier operating
property.................................... (1,363) -- (1,363)
---------- -------- ----------
TOTAL OPERATING EXPENSES.................. 1,491,235 3,300 1,494,535
---------- -------- ----------
OPERATING INCOME (LOSS)................... (48,233) (3,300) (51,533)
Other (expense) income, net...................... (978) -- (978)
---------- -------- ----------
INCOME (LOSS) BEFORE INCOME TAXES......... (49,211) (3,300) (52,511)
Provision (benefit) for income taxes............. (22,209) (1,300)(a) (23,509)
---------- -------- ----------
NET INCOME (LOSS)......................... $ (27,002) $ (2,000) $ (29,002)
========== ======== ==========
PRO FORMA NET INCOME (LOSS) PER SHARE..... $ (1.40)(b)
==========
</TABLE>
(a) Represents the increase in pension expense and related tax effect through
three quarters attributable to the transfer of the defined benefit pension
plan obligation and related assets for active REX employees from RSI to REX.
(b) Pro Forma net income (loss) per share is based on the equivalent weighted
average shares outstanding -- 20,731,000 shares. The number of shares was
determined based on a Distribution ratio of one share of REX Common Stock
for each two shares of RSI Common Stock and distribution of ninety-five
percent of the outstanding REX Common Stock.
53
<PAGE> 61
BUSINESS OF RSI
INTRODUCTION
RSI, an Ohio corporation organized in 1982, is a holding company that after
the Distribution will be engaged directly in the contract logistic services
business and through its subsidiaries in express small package delivery
services, LTL trucking and related transportation activities. These operations
provide services and solutions to meet customer requirements based upon shipment
size, distance, time in transit, and distribution needs. RSI conducts these
operations through Roadway Package System, Inc., ("RPS"); Roadway Regional
Group, Inc. ("RRG"), the parent company of Viking Freight System, Inc.
("Viking"), Spartan Express, Inc. ("Spartan"), Coles Express, Inc. ("Coles") and
Central Freight Lines, Inc. ("Central"); and Roberts Express, Inc. ("Roberts").
The business of Roadway Logistics Systems, Inc. ("ROLS"), which operates the
contract logistic services business, will be merged into RSI prior to the
Distribution. RSI intends to change its name following the Distribution. See
"Amendment to the Amended Articles of Incorporation of the Company".
STRATEGY
The transportation, intermodal and logistics marketplace continues to
experience rapid change in response to demands for quality and time based
management. RSI's business strategy is to own and coordinate individual
operating units that address specific customer requirements for shipment size,
distance traveled and time in transit. By offering a broad range of
transportation services, RSI is positioned to take advantage of changing
distribution trends as more customers embrace the concept of a single core
carrier. RSI believes that the Distribution will enable it to be a more
flexible, efficient and responsive organization.
This strategy includes the continuing improvement of information services
to customers, an increasingly important component of transportation and
logistics services. Each of RSI's subsidiaries provide shipment tracking and
related information systems to assist customers in achieving the lowest total
delivered cost of their products.
BUSINESSES
Roadway Package System
RPS, founded in 1985, serves customers in the small package market
throughout North America and between North America and Europe, focusing
primarily on the business-to-business delivery of packages weighing up to 150
pounds. RPS also offers service offshore to Puerto Rico, Alaska and Hawaii via a
ground/air network operation. Further, RPS provides other specialized
transportation services to meet specific customer requirements in the small
package market. RPS's headquarters are located in Pittsburgh, Pennsylvania.
The RPS network of 339 facilities in North America enables it to provide
second-day and later delivery service to 98% of the United States population.
Second-day coverage to the entire United States is expected in 1996. RPS intends
to expand its network operations during the remainder of the 1990s to provide
overnight ground service capability in regional markets.
In 1995, RPS began providing service in Europe through an agreement entered
into with General Parcel, GMBH, a European consortium comprised of domestic
small package carriers. RPS provides its expedited air and ground delivery
service between North America and Europe by means of this transportation
consortium.
RPS conducts its operations primarily with owner-operated vehicles and, in
addition, owns 7,618 trailers.
54
<PAGE> 62
Roadway Logistics Systems
ROLS provides customized, single source logistics solutions for
manufacturing, industrial, distribution and retail businesses. These services
include transportation management, dedicated transportation, warehouse
operations and management, just-in-time delivery programs (including light
assembly and manufacturing), customer order processing, returnable container
management, freight bill payment and auditing, and other management services
outsourced by its customers. ROLS is currently managing customer operations at
more than 50 sites.
Roadway Regional Group
RRG is a nationwide network of regional LTL freight carriers. LTL shipments
require less than the full cargo and/or weight capacity of a trailer and are
more efficiently transported by sharing trailer capacity with other LTL
shipments. RRG's subsidiaries operate dedicated regional trucking networks
principally serving their core geographic markets with next-day and second-day
LTL service. RRG carriers cooperatively transport freight throughout the United
States and serve manufacturing, commercial and retail business-to-business
customers. RRG's headquarters are located in San Jose, California.
Viking operates in 12 western states through 51 terminals. Spartan operates
in 17 midwestern and southern states through 77 terminals. Coles serves 11
northeastern and mid-atlantic states, along with eastern Canada, operating 26
terminals. Central operates in 10 states in the central and southwestern United
States through 74 terminals.
RRG's regional carriers provide service to customers nationwide using a
single sales or service contact. RRG's subsidiaries have a combined fleet
exceeding 20,000 trucks, tractors and trailers.
Roberts Express
Roberts is the world's largest surface expedited carrier, providing
critical needs shipping and transportation for emergency shipments. Utilizing
over 2,000 vehicles, Roberts provides these services in North America and
Europe. Roberts' headquarters are located in Akron, Ohio.
Roberts focuses on the delivery of urgent and critical shipments, including
those requiring security, customized handling, temperature control or other
special care and handling. Such shipments generally require speed and guaranteed
reliability. Roberts also provides air charter and related ground service.
Roberts, using satellite communications, has demonstrated its ability to deliver
shipments within 15 minutes of promised times in 95% of all cases. Roberts
transports freight through independent owner-operators.
COMPETITION
RPS competes in the small package market, which is dominated by UPS, the
world's largest package carrier. Competition for high volume, profitable
shipping business focuses largely on providing economical pricing and dependable
service.
ROLS operates in a relatively new business area and further competition is
expected from existing competitors and new entrants. Competition for the
provision of logistics services is vigorous.
RRG operates in the extremely competitive LTL marketplace. High levels of
competition and periodic industry overcapacity continue to result in aggressive
discounting and narrow margins. RRG competes primarily with other regional LTL
carriers and, to a lesser extent, with national LTL carriers, small package
carriers, private carriage, freight forwarders, railroads and airlines.
Competition for freight is based primarily on price and service.
Roberts competes principally with companies that specialize in critical
time or needs shipments. Competition is based primarily on meeting exacting
service requirements. Roberts competes by providing extremely reliable, fast
delivery of shipments at competitive prices.
55
<PAGE> 63
GOVERNMENT REGULATION
RSI's operations in interstate commerce are currently regulated by the ICC,
which retains limited oversight authority over motor carriers. Recently enacted
Federal legislation has preempted regulation by the states of price, routes, and
service in intrastate freight transportation.
RSI, like other interstate motor carriers, is subject to certain Department
of Transportation ("DOT") safety requirements governing interstate operations.
In addition, vehicle weight and dimensions remain subject to both Federal and
state regulations. More restrictive limitations on vehicle weight and size, or
on trailer length or configuration, could adversely affect the profitability of
RSI.
RSI is subject to Federal, state and local environmental laws and
regulations relating to, among other things, contingency planning for spills of
petroleum products and the disposal of waste oil. Additionally, RSI is subject
to significant regulations dealing with underground fuel storage tanks. RSI
stores some of its fuel for its trucks and tractors in approximately 234
underground tanks located in 27 states. RSI has policies and methods to conform
with these regulations. RSI estimates that capital expenditures for upgrading
underground tank systems and costs associated with cleaning activities for 1995
and 1996 will not be material.
CYCLICALITY
The trucking and shipping industries are affected directly by the state of
the overall economy. Seasonal fluctuations affect tonnage, revenues, and
earnings. Normally, the fall of each year is the busiest shipping period for
each of RSI's operating companies; the months of December and January of each
year are the slowest. Shipment levels, operating costs and earnings can also be
adversely affected by inclement weather.
EMPLOYEES
RSI and its subsidiaries (excluding REX and RGA) employ approximately
24,200 persons (on a full time equivalent basis) and utilize the services of
approximately 9,900 independent contractors.
PROPERTIES
RSI
RSI's corporate offices and its information systems subsidiary, Roadway
Information Technology, Inc., are currently located in Akron, Ohio in facilities
leased from REX. Limited additional corporate office space is located in nearby
leased facilities. RSI expects to relocate its corporate offices to another site
within the Akron, Ohio area following the Distribution.
The following information is as of September 9, 1995:
RPS
RPS operates 339 terminals, including 22 hub facilities. Forty-four of its
terminals, 18 of which are hub facilities, are owned and 295 terminals,
including the other four hub facilities, are leased, generally for terms of
three years or less. Twelve of the terminals, including three hub facilities,
are operated by Roadway Package System, Ltd., RPS's Canadian subsidiary. RPS's
22 hub facilities average 78,000 square feet in size and range in size from
22,000 to 143,000 square feet.
RPS's corporate offices and information and data centers are located in an
approximately 350,000 square foot building owned by a subsidiary of RSI in the
Pittsburgh, Pennsylvania area.
ROLS
ROLS' general offices are located in Hudson, Ohio in leased facilities.
56
<PAGE> 64
RRG
Viking operates 51 terminals located in twelve western states.
Approximately thirty of the terminals, with approximately 1,470 loading spaces,
are owned and the remaining terminals, with approximately 500 loading spaces,
are leased. The largest terminal facility, located in Fontana, California, has
136 loading spaces and is leased by Viking. Viking's general offices are located
in leased facilities in San Jose, California.
Central operates 74 terminals located primarily in ten southwestern and
midwestern states. Approximately forty-five of the terminals, with approximately
2,225 loading spaces, are owned and the remaining terminals, with approximately
400 loading spaces, are leased. The largest terminal, located in Dallas, Texas,
has 525 loading spaces and is owned by Central. Central's general offices are
located in Waco, Texas in owned facilities.
Spartan operates 77 terminals located in 17 central and southern states.
Fifteen of the terminals, with 575 loading spaces, are owned and the remaining
62, with 1,418 loading spaces, are leased. The largest terminal, a leased
facility located in the Chicago, Illinois area, has 136 loading spaces. The
general offices of Spartan are located in Greer, South Carolina.
Coles operates 26 terminals located in 11 New England and Middle Atlantic
states. Five of the terminals, with 127 loading spaces, are owned and the
remaining 21, with 455 loading spaces, are leased. The largest terminals have 39
loading spaces each, and are located in leased facilities in Elizabeth, New
Jersey and in facilities owned by Coles in Portland, Maine. Coles' general
offices are located in Bangor, Maine.
Roberts
Roberts' general offices are located in Akron, Ohio. Roberts does not use
any terminal facilities in its business.
LEGAL PROCEEDINGS
RSI is involved in various lawsuits arising in the ordinary course of its
business. In the opinion of the management of RSI, the outcome of these matters
will not have a material adverse effect on RSI's financial condition or results
of operations.
57
<PAGE> 65
BUSINESS OF REX
BUSINESS
REX, a Delaware corporation founded in 1930, provides primarily nationwide,
long-haul, LTL freight services in the United States. It provides similar LTL
service in Canada through its wholly-owned subsidiary, Roadway Express (Canada),
Inc. ("Roadway Canada"). Service in Mexico is provided through TNL-Roadway S.A.
de C.V. ("Roadway Mexico"), a company in which REX owns 70% of the outstanding
capital stock and which functions as a logistics company for customers by
coordinating the handling and flow of their shipments. REX serves over a half
million customers in North America and offers service to 62 countries worldwide.
Based on revenues for the year ended December 31, 1994, REX is one of the top
three LTL motor carriers in the United States. REX is, and after the
Distribution will continue to be, headquartered at 1077 Gorge Boulevard, Akron,
Ohio, 44310.
REX operations consist of an extensive transportation network that
transports primarily LTL shipments of general commodity freight. General
commodity freight includes apparel, appliances, automotive parts, chemicals,
food, furniture, glass, machinery, metal and metal products, non-bulk petroleum
products, rubber, textiles, wood, and miscellaneous manufactured products.
During the 36 weeks ended September 9, 1995, no single customer accounted for
more than 2% of REX's total revenues, and the ten largest customers accounted
for less than 8% of REX's total revenues.
BUSINESS STRATEGY
REX's business strategy emphasizes differentiation of the company's
services from those of its competitors, localized sales and service efforts,
increased use of technology and information systems, and rigorous cost
reduction. REX believes that its services can be differentiated on the basis of
product offerings, transit speed and reliability. REX emphasizes the maintenance
of close, local relationships with customers.
An important component of the REX strategy is to put in place employee
compensation arrangements for both hourly and salaried employees, especially
equity incentive compensation arrangements. In this way, REX anticipates gaining
greater control over its cost structure. REX also intends to reduce fixed costs
by closing or consolidating over 200 of its smaller terminal facilities by early
1997. See "REX Management's Discussion and Analysis of Financial Condition and
Results of Operations". Reducing the number of facilities while maintaining
market coverage will allow for significant improvement in handling frequency as
well as reduce associated labor expense and exposure to cargo damage.
OPERATIONS
LTL carriers differ substantially from truckload carriers by offering
service that is tailored to the efficient transport of a wide variety of small
to medium sized shipments to geographically dispersed locations. Truckload
carriers typically operate point-to-point, from the shipper's dock to the
receiver's dock, requiring less fixed investment than that required of LTL
carriers.
REX moves freight through a distribution network comprised of local or
"satellite" terminals, "hub" facilities, and driver relay stations. Freight is
collected by local trucks and transported to regional hubs or satellite
terminals. Shipments are sorted by destination and transported by intercity
truck to the delivering satellite terminal, or if necessary, to a regional hub
and then to the delivering satellite terminal. Final delivery is accomplished by
local trucks dispatched daily to multiple customers throughout the vicinity of
the delivery satellite terminal.
By concentrating consolidation activities for a given region at major
facilities, virtually all of which are located in major metropolitan areas and
which also serve as local terminals for pickup-and-delivery, REX reduces freight
handling by providing more direct city-to-city service and reduces linehaul
(terminal-to-terminal) trips by consolidating more shipments onto each outgoing
trailer. Shipments destined to small or remote communities are consolidated into
full truckloads to be delivered to the hub facility serving that
58
<PAGE> 66
community. The result of this system is that REX's average LTL shipment is
transferred at a hub only 1.4 times.
Shipments requiring transportation by sea are delivered by REX to ports
where they are transported by ocean carriers to various relevant ports-of-entry
and delivered by overseas agents. REX acts as a neutral Non-Vessel Operating
Common Carrier ("NVOCC"), which facilitates REX's movement of international
cargo. Freight is containerized at REX facilities and is then tendered to
steamship lines for overseas transport. Upon arrival at the destination, the
freight is given to an overseas agent for ultimate delivery. The distribution of
freight shipments to Canada is provided by Roadway Canada, which provides
service between the United States and Alberta, British Columbia, Manitoba,
Ontario, Quebec and Saskatchewan. Canada's Atlantic Maritime Provinces are
served by REX through a shipment interchange with Midland Transport, Ltd. a
Canadian LTL carrier, in Portland, Maine. In Mexico, the movement of freight is
managed by Roadway Mexico. Roadway Mexico functions as a logistics company for
its customers by coordinating the handling and flow of their shipments. Roadway
Mexico contracts with Transportes de Nuevo Laredo ("TNL"), a Mexican
transportation company, to complete linehaul service. Single-system freight
services are offered to and from Mexico City, Monterey, Nuevo Laredo, San Luis
Potosi, Guadalajara, and surrounding metropolitan areas are offered through the
Laredo, Texas gateway. Other points in Mexico are reached through interline
service with Mexican carriers.
INFORMATION AND DATA PROCESSING SYSTEMS
REX operations are supported by data processing and management information
systems that enable management to track equipment, drivers, and freight; review
critical service action times for each dispatch, arrival, unload, and load
activity (at both the trailer and shipment level of detail); and develop
projections for manpower and equipment.
REX offers to customers a wide range of Electronic Data Interchange ("EDI")
and Customer Information Services. REX's customers can access shipment
information, including shipment tracking, status manifests, and on-line freight
bills through PC and mainframe connections. Shipment information and updates,
freight rates, and REX News (an electronic newsletter providing highlights of
industry and REX events) can also be obtained through REX's automated telephone
voice response system. Freight rates are available by using E*Z-Rate, a PC-based
rating system that eliminates the need for paper tariffs. Shipment and logistics
management information (including shipment tracing information and the
preparation of bills) is available through another PC-based program marketed as
E*Z-Bill. REX may provide personal computers and a license of the software in
connection with the provision of these services.
EQUIPMENT
As of September 9, 1995, REX owned or leased a total of 9,871 tractors and
33,203 trailers, described in the following table:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
P&D (LOCAL PICKUP AND
INTERCITY TRAILERS DELIVERY)
INTERCITY ----------------------------- -----------------------------
MODEL YEAR TRACTORS 28' LONG 45' LONG TRACTORS TRAILERS
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
1995................. 260 0 0 0 0
1994................. 52 0 0 4 0
1993................. 887 3,315 0 0 0
1992................. 1 1,831 0 0 0
1991................. 352 997 0 3 0
1990 and earlier..... 2,349 21,112 3,334 5,963 2,614
------------ ------------ ------------ ------------ ------------
Total........... 3,901 27,255 3,334 5,970 2,614
</TABLE>
59
<PAGE> 67
COMPETITION
The LTL business is extremely competitive. High levels of competition and
persistent industry overcapacity continue to result in aggressive discounting
and narrow margins. REX's primary competitors in the national LTL market are
Yellow Freight System and Consolidated Freightways. REX also competes for LTL
freight with other national LTL carriers and, to a lesser extent, with regional
LTL motor carriers, small package carriers, private carriage, freight
forwarders, railroads and airlines. Competition for freight is based primarily
upon price and service (transit time).
Deregulation in the trucking industry has resulted in ease of entry and
increased competition. New entrants (some of which have grown rapidly in
regional markets) include some non-union carriers that have lower labor costs
than REX. To both maintain and improve market share, REX offers and negotiates
various discounts. REX's policy is to limit necessary price increases to once a
year effective January 1. REX works directly with customers on an
account-by-account basis to find ways to improve efficiencies and contain costs
to improve both customer and carrier profitability.
GOVERNMENT REGULATION
REX's operations in interstate commerce are currently regulated by the ICC,
which retains limited oversight authority over motor carriers. Recently enacted
Federal legislation has preempted regulation by the states of price, routes, and
service in intrastate freight transportation.
REX, like other interstate motor carriers, is subject to certain safety
requirements governing interstate operations prescribed by the DOT. REX has
earned a "satisfactory" rating (the highest of three grading categories) from
the DOT. In addition, vehicle weight and dimensions remain subject to both
Federal and state regulation. More restrictive limitations on vehicle weight and
size, or on trailer length or configuration, could adversely affect the
operating results of REX.
REX is subject to Federal, state and local environmental laws and
regulations relating to, among other things, contingency planning for spills of
petroleum products, and its disposal of waste oil. Additionally, REX is subject
to significant regulations dealing with underground fuel storage tanks. REX
stores some of its fuel for its trucks and tractors in approximately 372
underground tanks located in 40 states. REX has in place policies and methods to
conform with these regulations. REX estimates that capital expenditures for
upgrading underground tank systems and costs associated with cleaning activities
for 1995 and 1996 will not be material.
INSURANCE AND SAFETY
REX assumes certain risks under a combined single limit self-insured
retention and has sufficient excess/umbrella liability limits to adequately
cover all exposures. Included in the combined single limit are
Automobile/Truckers Liability, Cargo Legal Liability, General Liability,
Comprehensive/Collision to Owned and Leased Equipment, Workers' Compensation
where a Qualified Self-Insurer, and Employer's Liability.
Employee safety and safe cargo handling are integral parts of Roadway's
work processes. REX is recognized as having one of the best safety records in
the trucking industry. For the past 12 years, REX's P&D (local pickup and
delivery) drivers earned first place honors in the annual American Trucking
Associations' Safety Contest for having the lowest vehicle accident frequency in
its industry class. For the year ended December 31, 1994, REX achieved the
lowest DOT recordable accident frequency in its history.
Of shipments transported during 1994, more than 99% were delivered without
a damage claim. More than 94% of such cargo damage claims were settled within 30
days of the claim filing date.
60
<PAGE> 68
The table below summarizes vehicle accident and claim loss results for each
of the last five years:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
YEAR ENDING DECEMBER 31, 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------
Linehaul miles (in thousands) per DOT
Recordable Accident* 2,856 2,556 2,499 2,501 2,339
Claim losses by category (expense as
a percentage of total revenue)
Cargo Claims 1.59% 1.49% 1.34% 1.41% 1.51%
Public Liability 0.55% 0.67% 0.61% 0.48% 0.80%
Workers' Compensation 3.02% 2.10% 1.89% 2.11% 2.18%
---------- ---------- ---------- ---------- ----------
TOTAL 5.16% 4.26% 3.84% 4.00% 4.49%
========== ========== ========== ========== ==========
</TABLE>
- ---------------
* A DOT Recordable Accident is a vehicle accident that involves personal injury
requiring immediate treatment away from the scene of the accident or damage
that requires one or more vehicles to be towed from the scene of an accident.
CYCLICALITY
The trucking industry, including REX, is affected directly by the state of
the overall economy, but no single segment of the economy (e.g., general retail
merchandise, automotive, chemical) accounts for more than 10% of REX's revenues.
Seasonal fluctuations affect tonnage, revenues and operating results. Normally,
the fall of each year is REX's busiest shipping period; the months of December
and January of each year are the slowest. Shipment levels, operating costs, and
operating results can also be adversely affected by inclement weather.
EMPLOYEES
As of September 9, 1995, REX employed 25,292 persons, of whom 6,686 were
operations, sales, management and administrative personnel; 5,585 were freight
handlers; 5,512 were local drivers; and 5,365 were intercity drivers.
Approximately 75% of REX's employees are represented by various labor
unions, primarily the International Brotherhood of Teamsters ("IBT"). In 1994,
REX experienced a 24-day strike by the IBT following expiration of the National
Master Freight Agreement. The current agreement with IBT expires on March 31,
1998. REX believes that its current relations with the IBT are satisfactory.
PARTICIPATION IN MULTI-EMPLOYER PENSION PLANS
REX, as a signatory to the NMFA, is required to make contributions to
various multi-employer pension plans maintained for the benefit of its
IBT-represented employees. The benefit levels of such plans are established by
the trustees thereof, who are selected by various management organizations and
the IBT. REX has no control over the funding or solvency of such plans. Under
ERISA, as amended by the Multiemployer Pension Plan Amendments Act of 1980, an
employer who makes contributions to a multi-employer pension plan and the
members of such employer's controlled group are jointly and severally liable for
their proportionate share of the plan's unfunded liabilities in the event the
employer ceases to have an obligation to contribute to the plan or substantially
reduces its contributions to the plan (in the event of the plan termination or
withdrawal by the employer from the multi-employer plans). Although REX has no
current information regarding its potential liability under ERISA in the event
it wholly or partially ceases to have an obligation to contribute or
substantially reduces its contributions to the multi-employer plans to which it
currently contributes, management believes that such liability would be
material. REX has no intention of ceasing to contribute or substantially
reducing its contributions to such multi-employer plans.
61
<PAGE> 69
PROPERTIES
REX owns its main headquarters offices of approximately 259,000 square
feet, of which 185,000 square feet are leased to RSI and its subsidiaries. The
building is situated on 39.7 acres, of which 14.7 are owned, and 25 leased under
a long-term contract expiring in 2009, but renewable to 2084. Approximately
128,000 square feet of office space for certain headquarters department
functions, are leased at other locations in and surrounding Akron, Ohio.
REX also owns or leases the facilities of its operating terminals, relays,
and garages. As of September 9, 1995, REX operated 549 terminals, and 3
relay-only, operating facilities in the United States, Mexico, Canada, and
Puerto Rico. District and division offices and certain other operations are
located in various major hub facilities.
In 1992, REX commenced the consolidation of small, neighboring terminals in
many major metropolitan areas and business centers. This trend has continued
through the present, as the following table indicates:
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
NUMBER OF TERMINALS
YEAR ENDED DECEMBER 31, AND LOADING POINTS
<S> <C>
- --------------------------------------------------------------------------------
1991
.. 686
1992
.. 684
1993
.. 632
1994
.. 586
1995 (through September 9).. 558
</TABLE>
As of September 9, 1995, total operating property owned by REX consists of
345 facilities on 2,977 acres, comprising 5.1 million square feet of dock space
and 865,477 square feet of office space. REX leaseholds include 204 facilities
with 228 acres, 869,000 square feet of loading docks and 200,465 square feet of
office space.
LEGAL PROCEEDINGS
REX is involved in various lawsuits arising in the ordinary course of its
business. In the opinion of the management of REX, the outcome of these matters
will not have a material adverse effect on REX's financial condition or results
of operations.
62
<PAGE> 70
HOLDERS OF COMPANY COMMON STOCK
The following table sets forth certain information regarding the beneficial
ownership of the Company Common Stock as of October 2, 1995 by (i) each person
known by the Company to beneficially own more than 5% of the Company Common
Stock; (ii) each of the Company's present Directors; (iii) each of the Executive
Officers listed on the RSI Summary Compensation Table; and (iv) all of the
Company's present Directors and Executive Officers as a group.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SHARES
SHARES IN % OF OUTSIDE % OF TOTAL %
VOTING TRUST VOTING VOTING VOTING TOTAL OF VOTING
NAME AND ADDRESS OF BENEFICIAL OWNER (A) STOCK TRUST STOCK SHARES STOCK
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sarah Roush Werner
P.O. Box 611
Marysville, Washington 98270 2,620,711(b) 6.70 1,052,372(c) 2.69 3,673,083 9.40
The GAR Foundation
Robert W. Briggs and
National City Bank, Akron, Trustees
One Cascade Plaza
Akron, Ohio 44308 1,883,218 4.82 735,588 1.88 2,618,806 6.70
G. James Roush
P.O. Box 3123
Bellevue, Washington 98009 2,000,000 5.12 97,345(g) 0.25 2,097,345 5.37
Other Shareholders 257,037 0.66 731,156 1.87 988,193 2.53
------------ ------ --------- ----- --------- ---------
Total 6,760,966 17.30 2,616,461 6.69 9,377,427 24.00
Roadway Services, Inc. Stock
Bonus Plan
National City Bank, Trustee
P.O. Box 5756
Cleveland, Ohio 44101 6,010,207(d) 15.38
Roadway Services, Inc. Stock Savings and
Retirement Income Plan
National City Bank, Trustee
P.O. Box 5756
Cleveland, Ohio 44101 2,669,783(d) 6.83
Invesco PLC
11 Devonshire Square
London, England EC2M 4YR 4,107,141(f) 10.51
FMR Corp.
82 Devonshire St.
Boston, Massachusetts 02109 4,042,655(e) 10.35
George B. Beitzel
29 King Street
Chappaqua, New York 10514-3432 7,329(g) 0.02
Richard A. Chenoweth
P.O. Box 1500
50 S. Main Street
Akron, Ohio 44309 4,003(g) 0.01
Norman C. Harbert
920 Lake Road
Medina, Ohio 44256 4,336 0.01
Charles R. Longsworth
P.O. Box 8
Williamsburg, Virginia 23187 1,987 0.01
Robert E. Mercer
P.O. Box 3019
Nantucket, Massachusetts 02584 3,619 0.01
</TABLE>
63
<PAGE> 71
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
SHARES
SHARES IN % OF OUTSIDE % OF TOTAL %
VOTING TRUST VOTING VOTING VOTING TOTAL OF VOTING
NAME AND ADDRESS OF BENEFICIAL OWNER (A) STOCK TRUST STOCK SHARES STOCK
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
William Sword
34 Chambers Street
Princeton, New Jersey 08542 1,987 0.01
H. Mitchell Watson, Jr.
191 Post Road W.
Westport, Connecticut 06880 2,897 0.01
Daniel J. Sullivan
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 44,144(h)(i) 0.11
Donald C. Brown
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 822(h)(i) 0.00
John P. Chandler
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 5,900(h)(i) 0.02
Rodger G. Marticke
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 311(i)(j) 0.00
Douglas A. Wilson
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 51,047(h)(i) 0.13
17 Directors and Executive Officers as a
group 5,925,737(c)(g) 15.17
(i)(j)
</TABLE>
- ---------------
(a) Pursuant to the terms of the Voting Trust of June 1, 1966, as amended and
restated effective November 1, 1992, and extended for a term ending October
31, 2002, the voting trustees, R. A. Chenoweth and G. J. Roush, have
authority to attend all meetings of the shareholders, to exercise consents
and to vote the shares relative to the election of directors and any other
matter that may be brought before the shareholders; provided that in the
case of certain proposals involving major decisions concerning the Company
or its assets, the voting trustees are to request instructions from each
Voting Trust beneficiary and, if such instructions are received, must vote
in accordance with such instructions. Except as set forth in the Voting
Trust Agreement, the beneficiaries of the Voting Trust have an annual
noncumulative right to withdraw approximately 5% of the shares deposited on
their behalf. The business address of R. A. Chenoweth is P.O. Box 1500, 50
South Main Street, Akron, Ohio 44309.
(b) Includes 12,827 shares in the Voting Trust as to which Mrs. Werner may be
deemed in law to have investment power but as to which she disclaims
beneficial ownership.
(c) Includes 177,680 shares outside the Voting Trust as to which Mrs. Werner has
investment and voting power although she disclaims any beneficial ownership.
(d) Pursuant to the terms of the Roadway Services, Inc. Stock Bonus Plan and the
Roadway Services, Inc. Stock Savings and Retirement Income Plan,
participants are entitled to instruct the trustee as to the voting of any
shares allocated to their account(s). The trustee must vote the shares as
directed. The trustee, however, possesses the power to vote all other shares
held in trust by the Plans (including shares for which it does not receive
instructions from participants) in accordance with its discretion absent the
express direction of the respective Plan Administrative Committee. The
Administrative Committee of the Stock Bonus Plan consists of D. C. Brown, D.
J. Sullivan and D. A.
64
<PAGE> 72
Wilson, and the Administrative Committee of the Stock Savings and Retirement
Income Plan consists of D. C. Brown, T. R. Warren and D. A. Wilson.
(e) Based on information received from FMR Corp., includes 3,998,990 shares
beneficially owned by Fidelity Management & Research Company ("Fidelity"), a
wholly-owned subsidiary of FMR Corp. and a registered investment adviser,
and 39,665 shares beneficially owned by Fidelity Management Trust Company
("FMTC"), a wholly-owned subsidiary of FMR Corp. and a bank. Beneficial
ownership with respect to 4,000 shares is disclaimed. Sole investment power
with respect to all shares is reported to be held by Edward C. Johnson 3d.,
Chairman of FMR Corp.; Fidelity and its various Funds; and FMTC. FMR Corp.
reports that it has sole voting power over 26,065 shares and that the shares
held in the Fidelity Funds are voted pursuant to guidelines established by
the Funds.
(f) Invesco PLC disclaims beneficial ownership of all shares since they are held
pursuant to investment advisory contracts through which voting and
investment powers may be shared with clients. No single client owns more
than 5% of the outstanding common stock of the Company, and ownership is
solely for investment purposes.
(g) Includes shares owned by family members as to which beneficial ownership is
disclaimed, as follows: Mr. Beitzel, 1,227 shares; Mr. Chenoweth, 416
shares; and Mr. Roush, 47,908 shares.
(h) Includes shares held pursuant to the Stock Bonus Plan, the Stock Savings and
Retirement Income Plan and the Employee Stock Ownership Plan as of December
31, 1994, as follows: Mr. Sullivan, 10,931 shares; Mr. Brown, 658 shares;
Mr. Chandler, 3,498 shares; Mr. Marticke, 311 shares; Mr. Wilson, 9,421
shares; and all executive officers as a group, 43,307 shares.
(i) Includes Restricted Book Value Shares ("RBV Shares") held pursuant to the
Restricted Book Value Shares Plan for Roadway Services, Inc. and Certain
Operating Companies ("RBVS Plan") as of December 31, 1994, as follows: Mr.
Sullivan, 32,169 shares; Mr. Brown, 164 shares; Mr. Chandler, 2,402 shares;
Mr. Wilson, 41,541 shares; and all executive officers as a group, 84,715
shares.
(j) Includes shares owned by family members as to which beneficial ownership is
disclaimed, as follows: Mr. Wilson, 5 shares; and all directors and
executive officers as a group, 1,648 shares.
65
<PAGE> 73
HOLDERS OF REX STOCK
REX is presently a wholly-owned subsidiary of the Company. The following
table sets forth certain information regarding the beneficial ownership of REX
Common Stock as of the Distribution Date (and following the Distribution) as if
the Distribution took place on October 2, 1995 by (i) each person known by the
Company who would beneficially own more than 5% of the outstanding REX Common
Stock; (ii) each of the persons who are expected to serve as a Director of REX;
(iii) each of the Executive Officers listed on the REX Compensation Table; and
(iv) all REX Directors and Executive Officers as a group who are expected to
serve as such after the Distribution.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
%
TOTAL OF VOTING
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES STOCK
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Sarah Roush Werner
P.O. Box 611
Marysville, Washington 98270 1,836,541(a) 8.93
The GAR Foundation
Robert W. Briggs and
National City Bank, Akron, Trustees
One Cascade Plaza
Akron, Ohio 44308 1,309,403(a) 6.37
G. James Roush
P.O. Box 3123
Bellevue, Washington 98009 1,048,672(a) 5.10
Roadway Express, Inc. 401(k) Stock
Savings Plan (b)
Key Trust Company of Ohio, National
Association, Trustee 2,954,873(b) 14.37
Invesco PLC
11 Devonshire Square
London, England EC2M 4YR 2,053,570(d) 9.99
FMR Corp.
82 Devonshire St.
Boston, Massachusetts 02109 2,021,327(c) 9.83
Roadway Services, Inc.
1077 Gorge Blvd.
Akron, Ohio 44310 1,028,140 5.00
J. Dawson Cunningham
P.O. Box 471
1077 Gorge Boulevard
Akron, Ohio 44309 6,958(e)(f) 0.03
Frank P. Doyle
260 Long Ridge Road
Stamford, Connecticut 06927 0 0.00
L.J. Esposito
P.O. Box 471
1077 Gorge Boulevard
Akron, Ohio 44309 7,643(e)(f) 0.04
J.M. Glenn
P.O. Box 471
1077 Gorge Boulevard
Akron, Ohio 44309 8,269(e)(f)(g) 0.04
</TABLE>
66
<PAGE> 74
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
%
TOTAL OF VOTING
NAME AND ADDRESS OF BENEFICIAL OWNER SHARES STOCK
- ----------------------------------------------------------------------------------------------
<S> <C> <C>
Phillip J. Meek
77 W. 66th Street
New York, New York 10023 0 0.00
Robert E. Mercer
P.O. Box 3019
Nantucket, Massachusetts 02584 1,809 0.01
Carl Schafer
16 Farber Road
Princeton, New Jersey 08540 0 0.00
James D. Staley
P.O. Box 471
1077 Gorge Boulevard
Akron, Ohio 44309 7,457(e)(f) 0.04
William Sword
34 Chambers Street
Princeton, New Jersey 08542 993 0.00
Michael W. Wickham
P.O. Box 471
1077 Gorge Boulevard
Akron, Ohio 44309 20,463(e)(g) 0.10
11 Directors and Executive Officers as a group 1,890,113(e)(f)(g) 9.19
</TABLE>
- ---------------
(a) The shares of REX Common Stock distributed to such holder in the
Distribution will not be subject to the Voting Trust described in note (a)
to the table under "Holders of Company Common Stock."
(b) Assumes the accounts of REX active employees in the RSI SSRIP and Stock
Bonus Plan have been transferred to the REX 401(k) Stock Savings Plan, and
the REX Common Stock received in the Distribution is retained. Pursuant to
the terms of the Roadway Express, Inc. 401(k) Stock Savings Plan,
participants are entitled to instruct the trustee as to the voting of any
shares allocated to their account(s), and shares for which no direction is
received by the trustee. The trustee must vote the shares as directed.
(c) See Note (e) to "Holders of Company Common Stock".
(d) See Note (f) to "Holders of Company Common Stock".
(e) Includes shares held pursuant to the Roadway Services, Inc. Stock Savings
and Retirement Income Plan, Stock Bonus Plan and Employee Stock Ownership
Plan as of December 31, 1994, as follows: Mr. Cunningham, 2,476 shares; Mr.
Esposito, 5,181 shares; Mr. Glenn, 1,778 shares; Mr. Staley, 4,690 shares;
Mr. Wickham, 10,112 shares; and all executive officers as a group, 24,558
shares.
(f) Includes REX Common Stock to be issued in the Distribution with respect to
RBV Shares held pursuant to the RBVS Plan as of December 31, 1994, as
follows: Mr. Cunningham, 4,482 shares; Mr. Esposito, 2,462 shares; Mr.
Glenn, 5,440 shares; Mr. Staley, 2,767 shares; and all executive officers as
a group, 15,310 shares.
(g) Includes shares owned by family members as to which beneficial ownership is
disclaimed, as follows: Mr. Glenn, 500 shares; Mr. Wickham, 10,350 shares;
and all directors and executive officers as a group, 10,850 shares.
67
<PAGE> 75
HOLDERS OF RSI STOCK
The following table sets forth certain information regarding the beneficial
ownership of RSI Common Stock as of the date of Distribution (and following the
Distribution) as if the Distribution took place on October 2, 1995 by (i) each
person known to the Company who would beneficially own more than 5% of the
outstanding RSI Common Stock; (ii) each of the persons who are expected to serve
as a Director of RSI immediately after the Distribution; (iii) each of the
Executive Officers listed on the RSI Summary Compensation Table; and (iv) all
RSI Directors and Executive Officers as a group who are expected to serve as
such after the Distribution.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SHARES
SHARES IN % OF OUTSIDE % OF TOTAL %
VOTING TRUST VOTING VOTING VOTING TOTAL OF VOTING
NAME AND ADDRESS OF BENEFICIAL OWNER (A) STOCK TRUST STOCK SHARES STOCK
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Sarah Roush Werner
P.O. Box 611
Marysville, Washington 98270 2,620,711(b) 6.70 1,052,372(c) 2.69 3,673,083 9.40
The GAR Foundation
Robert W. Briggs and
National City Bank, Akron, Trustees
One Cascade Plaza
Akron, Ohio 44308 1,883,218 4.82 735,588 1.88 2,618,806 6.70
G. James Roush
P.O. Box 3123
Bellevue, Washington 98009 2,000,000 5.12 97,345(f) 0.25 2,097,345 5.37
Other Shareholders 257,037 0.66 731,156 1.87 988,193 2.53
------------ ------ --------- ----- --------- ---------
Total 6,760,966 17.30 2,616,461 6.69 9,377,427 24.00
Roadway Express, Inc.
401(k) Stock Savings Plan (k)
Key Trust Company of Ohio, National
Association, Trustee 5,912,403 15.13
Invesco PLC
11 Devonshire Square
London, England EC2M 4YR 4,107,141(e) 10.51
FMR Corp.
82 Devonshire St.
Boston, Massachusetts 02109 4,042,655(d) 10.35
George B. Beitzel
29 King Street
Chappaqua, New York 10514-3432 7,329(f) 0.02
Richard A. Chenoweth
P.O. Box 1500
50 S. Main Street
Akron, Ohio 44309 4,003(f) 0.01
Norman C. Harbert
920 Lake Road
Medina, Ohio 44256 4,336 0.01
Charles R. Longsworth
P.O. Box 8
Williamsburg, Virginia 23187 1,987 0.01
H. Mitchell Watson, Jr.
191 Post Road W.
Westport, Connecticut 06880 2,897 0.01
Daniel J. Sullivan
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 44,144(h)(i) 0.11
</TABLE>
68
<PAGE> 76
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SHARES
SHARES IN % OF OUTSIDE % OF TOTAL %
VOTING TRUST VOTING VOTING VOTING TOTAL OF VOTING
NAME AND ADDRESS OF BENEFICIAL OWNER (A) STOCK TRUST STOCK SHARES STOCK
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Donald C. Brown
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 822(g)(h) 0.00
John P. Chandler
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 5,900(g)(h) 0.02
Rodger G. Marticke
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 311(g) 0.00
Douglas A. Wilson
P.O. Box 88
1077 Gorge Boulevard
Akron, Ohio 44309 51,047(h)(i) 0.13
17 Directors and Executive Officers as
a group 5,925,737(c)(f) 15.17
(h)(i)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Pursuant to the terms of the Voting Trust of June 1, 1966, as amended and
restated effective November 1, 1992, and extended for a term ending October
31, 2002, the voting trustees, R. A. Chenoweth and G. J. Roush, have
authority to attend all meetings of the shareholders, to exercise consents
and to vote the shares relative to the election of directors and any other
matter that may be brought before the shareholders; provided that in the
case of certain proposals involving major decisions concerning the Company
or its assets, the voting trustees are to request instructions from each
Voting Trust beneficiary and, if such instructions are received, must vote
in accordance with such instructions. Except as set forth in the Voting
Trust Agreement, the beneficiaries of the Voting Trust have an annual
noncumulative right to withdraw approximately 5% of the shares deposited on
their behalf. The business address of R. A. Chenoweth is P.O. Box 1500, 50
South Main Street, Akron, Ohio 44309.
(b) Includes 12,827 shares in the Voting Trust as to which Mrs. Werner may be
deemed in law to have investment power but as to which she disclaims
beneficial ownership.
(c) Includes 177,680 shares outside the Voting Trust as to which Mrs. Werner has
investment and voting power although she disclaims any beneficial ownership.
(d) See Note (e) to "Holders of Company Common Stock".
(e) See Note (f) to "Holders of Company Common Stock".
(f) Includes shares owned by family members as to which beneficial ownership is
disclaimed, as follows: Mr. Beitzel, 1,227 shares; Mr. Chenoweth, 416
shares; and Mr. Roush, 47,908 shares.
(g) Includes shares held pursuant to the Stock Bonus Plan, the Stock Savings and
Retirement Income Plan and the Employee Stock Ownership Plan as of December
31, 1994, as follows: Mr. Sullivan, 10,931 shares; Mr. Brown, 658 shares;
Mr. Chandler, 3,498 shares; Mr. Marticke, 311 shares; Mr. Wilson, 9,421
shares; and all executive officers as a group, 43,307 shares.
(h) Includes RBV Shares held pursuant to the RBVS Plan as of December 31, 1994,
as follows: Mr. Brown, 164 shares; Mr. Chandler, 2,402 shares; Mr. Sullivan,
32,169 shares; Mr. Wilson, 41,541 shares; and all executive officers as a
group, 84,715 shares.
(i) Includes shares owned by family members as to which beneficial ownership is
disclaimed, as follows: Mr. Wilson, 5 shares; and all directors and
executive officers as a group, 1,648 shares.
(j) See Note (b) to "Holders of REX Stock".
69
<PAGE> 77
RSI MANAGEMENT AND EXECUTIVE COMPENSATION
RSI BOARD OF DIRECTORS
The following table sets forth the names, in alphabetical order, and
information as to the persons who are expected to serve as directors of RSI
immediately after The Distribution. There will be four vacancies on the RSI
Board of Directors after the Distribution and the resignation of the three
current Company Directors who will serve as Directors of REX after the
Distribution. The Board of Directors of RSI may fill one or more of such
vacancies and such persons will serve until next annual meeting of RSI
shareholders.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
PRINCIPAL OCCUPATION
NAME OTHER DIRECTORSHIPS AND AGE
- ---------------------------------------------------------------------------------------------
<S> <C>
George B. Beitzel Retired. Senior Vice President and Director of
Director since 1986 International Business Machines Corporation, a
manufacturer of computers and office equipment, from
1972 to 1987. Director, Bankers Trust New York
Corporation, Computer Task Group, FlightSafety
International, Inc., Phillips Petroleum Company, Rohm
and Haas Company, TIG Holdings, Chairman, The Colonial
Williamsburg Foundation, and Chairman Emeritus,
Amherst College. Age 67.
Richard A. Chenoweth Principal of Buckingham, Doolittle & Burroughs, a
Director since 1980 Legal Professional Association, Akron, Ohio. Director:
First Merit Corporation and First National Bank of
Ohio. Age 70.
Norman C. Harbert Chairman and Chief Executive Officer of The Hawk
Director since 1981 Group, a venture capital company investing in
industrial firms, since 1988. Director: Second
Bancorp, New West Eyeworks. Age 61.
Charles R. Longsworth Chairman Emeritus of The Colonial Williamsburg
Director since 1989 Foundation, a colonial restoration museum and hotel
complex, since 1994, Chairman in 1992 and 1993 and
President and Chief Executive Officer from 1979 to
1992. Director: Crestar Financial Corporation,
FlightSafety International, Inc., Houghton Mifflin
Co., Saul Centers, Inc., Virginia Eastern Shore
Corporation. Chairman of the Board of Trustees,
Amherst College. Age 66.
G. James Roush Private investor. Bellevue, Washington. Age 67.
Director since 1969
Daniel J. Sullivan Chairman since October 1995; and Director since August
Director since 1990 1990, President and Chief Executive Officer since
August 1995; previously he served as President and
Chief Operating Officer from January 1994 to August
1995; Senior Vice President and President-National
Carrier Group during 1993; Vice President and
President-National Carrier Group during 1992; Vice
President and Group Executive from July 1990 through
1991 and President of Roadway Package System, Inc.
through June 1990. Age 49.
H. Mitchell Watson, Jr. President, Sigma Group of America, a consulting
Director since 1995 company, Westport, Connecticut, since December 1992;
President and Chief Executive Officer, ROLM Company, a
communications and electronics company, Norwalk,
Connecticut, from 1989 to 1992. Director: Praxair,
Inc. and PlastiLine, Inc.; Director and President of
Helen Keller International. Member of the Board of
Trustees of the Interdenominational Theology Center at
Atlanta University. Age 58.
</TABLE>
70
<PAGE> 78
DIRECTOR COMPENSATION
After the Distribution, compensation for nonemployee directors of RSI will
consist of an annual retainer of $18,000 plus 100 shares of RSI Common Stock
plus (a) an annual retainer of $4,000 for each committee membership and (b) an
additional sum of $1,500 for each meeting of the Company Board or a committee,
except when held the same day as a meeting of the Company Board or another
committee, in which case an additional sum is $850. Additionally, the chairmen
of the Audit Committee and the Compensation Committee will each be paid an
annual retainer of $4,000 and all other committee chairmen (except officers of
RSI) will each be paid an annual retainer of $3,000.
The directors of RSI who are currently non-employee directors of the
Company have been participants in the Roadway Services, Inc. 1989 Nonemployee
Directors' Stock Plan (the "1989 Stock Plan"); its successor, the Roadway
Services, Inc. 1994 Nonemployee Directors' Stock Plan (the "1994 Stock Plan");
the Roadway Services, Inc. Directors' Deferred Compensation Plan (the "Deferred
Compensation Plan"); and the Roadway Services, Inc. Retirement Plan for
Nonemployee Directors (the "Retirement Plan"). These Plans will be continued
following the Distribution. Their characteristics are described below.
THE 1989 STOCK PLAN: During 1995, the restrictions on 222 shares of Company
Common Stock awarded under the 1989 Stock Plan to Mr. Mercer were removed, and
options to purchase 888 shares at $36 per share were cancelled. The 1989 Stock
Plan was approved by the shareholders at the Annual Meeting held in May, 1989.
THE 1994 STOCK PLAN: The 1994 Stock Plan was approved by the shareholders
of the Company at the Annual Meeting held May 11, 1994, and was effective that
date. In 1994, Mrs. Werner, and Messrs. Beitzel, Chenoweth, Harbert, Longsworth,
Roush and Sword were each awarded 1,887 shares of the Company Common Stock
having an aggregate fair market value at the time of $125,014, with vesting to
be phased in over a five-year period, in tandem with a grant of options to
purchase 7,548 shares of Company Common Stock at a price of $66.25 per share. In
1995 Mr. Mercer and Mr. Watson were each awarded 2,797 shares of Company Common
Stock having a fair market value of $124,991, with vesting to be phased in over
a five-year period, in tandem with a grant of options to purchase 11,188 shares
of Company Common Stock at a price of $44.6875 per share.
The shares and option rights are subject to forfeiture and cancellation
according to a formula. Two years after the grant, depending on the fair market
value of a share, either 40% of the shares awarded will vest free of
restrictions and the related option rights will be cancelled, or such option
rights will become exercisable and the related shares will be forfeited.
Thereafter, 20% of such shares or related option rights will become
nonforfeitable or exercisable annually, on the same basis.
The 1994 Stock Plan is administered by a committee consisting of the
Chairman of RSI's Board of Directors, (provided he is not a nonemployee
director) and two RSI officers who are not nonemployee directors. The committee
currently consists of Messrs. Sullivan, Wilson and Brown. The committee has
before it a proposal to adjust the number of RSI shares and option rights
following the Distribution to prevent dilution or enlargement of nonemployee
directors' rights under the Plan.
THE DEFERRED COMPENSATION PLAN: Under the Deferred Compensation Plan, any
nonemployee director of RSI may elect to defer receipt of all or a portion of
the compensation payable to him or her for services as a member of the RSI Board
or any committee thereof. Amounts deferred may earn interest at a formula rate
or be credited in units equal in value to the average price of shares of the RSI
Common Stock acquired by the Roadway Services, Inc. Stock Bonus Plan during the
year in which such amounts are payable. Each credited unit is payable in cash
based on the fair market value of the RSI Common Stock at the time of payment.
Deferred amounts will be payable upon termination of service as a director, or
on certain earlier dates, as requested by the director. The Deferred
Compensation Plan was amended in 1995 to accommodate the deferral of the dollar
equivalent of the shares of RSI Common Stock that is part of the director's
annual retainer. This portion of deferred compensation will be credited as units
while
71
<PAGE> 79
in the Plan and will be paid in shares of RSI Common Stock at the time of
payment. The units on December 31, 1995 will be adjusted to reflect the
Distribution, and units will be expressed in RSI Common Stock.
THE RETIREMENT PLAN: Under the Retirement Plan, a nonemployee director is
entitled to receive a retirement benefit in annual amounts equal to the annual
retainer in effect during the year of his retirement. Payment of such benefits
will commence upon termination of service as a director. Payments will be made
in quarterly installments for the joint lives of the retired director and his
surviving spouse until the number of such payments equals the total number of
quarters of his service as a director. The Retirement Plan also provides an
additional annual retirement benefit payable in cash equal to the market value
of 200 shares of RSI Common Stock as of December 31 of the year prior to the
year in which the additional benefit is paid. The number of shares of RSI Common
Stock used to measure the value of future additional payments will be adjusted
to reflect the Distribution. A director must have served a minimum of five years
on the RSI Board in order to receive the additional benefit. If a director has
served at least five years but less than eight years at the time of his
retirement, the additional benefit will be paid annually thereafter for a period
of eight years, limited to the joint lives of the retired director and his
spouse. If a director has served for at least eight years at the time of his
retirement, the additional benefit will be paid annually thereafter until the
number of such payments equals the total number of years of his service as a
director, limited by the joint lives of the retired director and his spouse.
Retirement distributions will not commence prior to the date any Director who
becomes a director of REX retires from the REX board.
NONEMPLOYEE DIRECTOR CHARITABLE AWARD PROGRAM: As part of its overall
program to promote the mutual interest of RSI and its nonemployee directors in
charitable giving, RSI established a Nonemployee Director Charitable Award
Program (the "Charitable Award Program") which is funded by life insurance
policies on the lives of nonemployee directors. Upon the death of a nonemployee
director (or certain other qualifying events), RSI will donate up to $1 million
(or its actuarial equivalent) to one or more qualifying charitable organizations
recommended by the individual director funded entirely by insurance proceeds.
Individual directors derive no financial benefit from this program since all
available deductions for tax purposes accrue solely to RSI. The Charitable Award
Program may be continued, as determined by the Board of Directors of REX after
the Distribution, for nonemployee directors of the Company who may become
directors of REX following the Distribution.
72
<PAGE> 80
RSI EXECUTIVE OFFICERS
Listed below is certain information as to the persons who are expected to
be the executive officers of RSI immediately after the Distribution and the
capacity in which they are expected to serve.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
NAME POSITIONS AND RECENT BUSINESS EXPERIENCE
- ---------------------------------------------------------------------------------------------
<S> <C>
Donald C. Brown Vice President-Human Resources effective January 1,
1996; he has served as Vice President-Corporate
Support Services since January 1995; previously he
served as Assistant Controller from January 1992
through 1994; Assistant to Vice President and
Controller from December 1990 through 1991; previous
to employment with the Company, he was an audit senior
manager with Ernst & Young LLP since 1984. Age 40.
John P. Chandler Vice President and Treasurer effective January 1,
1996; he has served as Vice President-Administration
and Treasurer since January 1994; previously he had
served as Vice President-Administration during 1993;
President of Roadway Package System, Inc. from July
1990 to December 1992 and Vice President-Finance and
Administration of Roadway Package System, Inc. through
June 1990. Age 52.
Kathryn W. Dindo Vice President and Controller effective January 1,
1996; she has served as Assistant Controller since
August 1994; previous to employment with the Company,
she was a partner with Ernst & Young LLP since 1985.
Age 46.
Douglas G. Duncan Vice President-Corporate Marketing effective January
1, 1996; he has served as Vice President-Special
Assignment since September 1995; previously he served
as Vice President-Sales for Roadway Express, Inc. from
January 1991 through September 1995. Age 44.
Rodger G. Marticke President-Roadway Logistics Group since September
1995; previously he served as Vice President and Group
Executive from August 1994 through September 1995;
Assistant to the President from January 1993 to August
1994; previous to employment with the Company, he was
a principal with Temple, Barker and Sloan/Mercer
Management, a management consulting firm since 1988.
Age 47.
Jonathan T. Pavloff Vice President-Corporate Planning since February 1991;
previously he served as President of Roadway
Information Technology, Inc. (formerly Summit
Information Systems, Inc.) a Company owned management
information subsidiary, from 1989 to February 1991.
Age 46.
Daniel J. Sullivan Director since August 1990, President and Chief
Executive Officer since August 1995; and Chairman
since October 1995; previously he served as President
and Chief Operating Officer from January 1994 to
August 1995; Senior Vice President and
President-National Carrier Group during 1993; Vice
President and President-National Carrier Group during
1992; Vice President and Group Executive from July
1990 through 1991 and President of Roadway Package
System, Inc. through June 1990. Age 49.
</TABLE>
73
<PAGE> 81
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
NAME POSITIONS AND RECENT BUSINESS EXPERIENCE
- ---------------------------------------------------------------------------------------------
<S> <C>
D. A. Wilson Senior Vice President-Finance and Planning, Secretary
and Chief Financial Officer since January 1994;
previously he served as Senior Vice President-Finance
and Planning and Secretary during 1993 and as Vice
President-Finance and Secretary from 1989 through
1992. Age 50.
- ---------------------------------------------------------------------------------------------
</TABLE>
Officers are elected to serve on a calendar year basis except for the
Chairman, President, Treasurer and Secretary, who are elected for an annual term
following the annual meeting of shareholders. No family relationships exist
between any of the executive officers named above or between any executive
officer and any director of RSI.
EXECUTIVE COMPENSATION AND SHAREHOLDINGS BY EXECUTIVE OFFICERS
RSI Summary Compensation Table: The following table sets forth with respect
to RSI information concerning annual and long-term compensation for services
rendered to the Company for 1994, 1993 and 1992 by those persons who are
expected to be the Chief Executive Officer and the other four most
highly-compensated Executive Officers of RSI immediately following the
Distribution (collectively, the "Named RSI Officers").
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
LONG-TERM
COMPENSATION
---------------
RESTRICTED
STOCK
AWARDS
NAME AND PRINCIPAL POSITION ANNUAL COMPENSATION (BOOK VALUE ALL OTHER
HELD YEAR SALARY BONUS(A) SHARES)(B) COMPENSATION(C)
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Daniel J. Sullivan 1994 $322,500 $254,866 $ 132,196 $ 37,317
Director, Chairman, 1993 300,000 323,276 177,087 40,436
President and CEO 1992 270,000 443,587 305,182 37,715
Donald C. Brown 1994 107,000 47,714 0 7,939
Vice President- 1993 100,000 30,485 3,387 9,770
Human Resources 1992 90,000 38,984 4,332 8,959
John P. Chandler (d) 1994 215,000 187,387 31,265 17,654
Vice President 1993 210,000 159,157 17,689 23,010
and Treasurer 1992
R. G. Marticke (e) 1994 151,923 80,422 0 5,929
President-Roadway 1993
Logistics Group 1992
D. A. Wilson 1994 233,192 134,291 94,933 19,093
Senior Vice President- 1993 225,000 137,368 100,830 24,222
Finance and Planning, 1992 205,000 192,693 133,797 24,004
Secretary and CFO
</TABLE>
- ---------------
(a) Reflects incentive compensation earned, less amounts used to purchase RBV
Shares under the RBVS Plan. Amounts used to purchase RBV Shares are included
in the Long-Term Compensation column.
(b) The amounts set forth in this column do not reflect conventional awards of
restricted stock, but rather reflect amounts of compensation otherwise
provided to the executive officer that he elected to use for the purchase of
RBV Shares under the RBVS Plan. The amounts include (i) the portion of cash
incentive compensation referred to in footnote (a) above and (ii) the value
of certain stock credits awarded under the Roadway Services, Inc. Long-Term
Stock Award Incentive Plan ("LTS Plan"). RBV Shares are purchased from RSI
at book value. Owners of RBV Shares have the same rights as other holders of
Company Common Stock or RSI Common Stock, as the case may be,
74
<PAGE> 82
including voting and dividend rights. However, RBV Shares cannot be resold
except to RSI and then only at a price equal to book value as of the
year-end preceding. Repurchase book value was $25.76 as of December 31,
1994, $26.60 as of December 31, 1993, and $25.71 as of December 31, 1992.
RBV Shares owned by the Named RSI Officers, including purchases with 1994
compensation, and the aggregate value based upon the book value as of
December 31, 1994, are as follows: Mr. Sullivan, 32,169 ($828,673); Mr.
Brown, 164 ($4,225); Mr. Chandler, 2,402 ($61,876); and Mr. Wilson, 41,541
($1,070,096).
(c) Reflects (i) dividend equivalents earned on stock credits awarded under the
LTS Plan and predecessor plans (Mr. Sullivan, $28,961; Mr. Brown, $742; Mr.
Chandler, $9,298; and Mr. Wilson $10,737); (ii) Company matching
contributions under the Roadway Services, Inc. Stock Savings and Retirement
Income Plan, a voluntary contributory defined contribution employee benefit
plan ($5,250 for Mr. Sullivan, Mr. Chandler and Mr. Wilson; $4,091 for Mr.
Brown and $2,823 for Mr. Marticke) and (iii) allocations under the Roadway
Services, Inc. Stock Bonus Plan, a noncontributory defined contribution
employee benefit plan ($3,106 for each of the Named RSI Officers).
(d) During 1992 Mr. Chandler was the president of RPS and was not an executive
officer of the Company.
(e) Mr. Marticke joined the Company in 1993 as Assistant to the Senior Vice
President.
LONG-TERM INCENTIVE PLANS TABLE: The following table sets forth information
concerning long-term incentive plans pursuant to which the Named RSI Officers
received awards for 1994. It reflects stock credits awarded under the LTS Plan,
less supplemental stock credits used to purchase RBV Shares. Supplemental stock
credits are designed to make up for contributions to participants' accounts in
the Company's qualified defined contribution plans that are not allocated to a
participant because of limitations imposed by the Code. The value of
supplemental stock credits that were used to purchase RBV Shares is included in
the Long-Term Compensation column of the Summary Compensation Table.
Until distribution, dividend equivalents will be accumulated in additional
supplemental stock credit. Stock credits are distributed as shares in five
annual installments after retirement. Stock credits are fully vested at age 55.
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------
NUMBER OF
SHARES, UNITS
OR OTHER RIGHTS MINIMUM PERIOD
(STOCK CREDIT UNTIL
NAME AND PRINCIPAL POSITION YEAR AWARDS) MATURATION(A)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Daniel J. Sullivan
Director, Chairman, President and CEO 1994 2,668 1
Donald C. Brown
Vice President-
Human Resources 1994 284 1
John P. Chandler
Vice President-Administration
and Treasurer 1994 1,231 1
R. G. Marticke
Vice President and
Group Executive 1994 239 1
D. A. Wilson
Senior Vice President-Finance
and Planning, Secretary and CFO 1994 1,590 1
</TABLE>
- ---------------
(a) After December 31, 1995, 50% of an executive officer's basic stock credits
awarded under the LTS Plan may be used to purchase RBV Shares in a number
equivalent to the number which could be purchased at book value.
75
<PAGE> 83
Roadway Services, Inc. Pension Plan: The Company Pension Plan is a
non-contributory qualified employee defined benefit plan. The Company Pension
Plan provides retirement benefits after normal retirement at age 65 equal to the
greater of (a) 1 1/3% of final five year average compensation or (b) 1 3/4% of
final 20 year average compensation up to $45,000 and 1 1/2% of final 20 year
average compensation in excess of $45,000, times total years of service not to
exceed 30. Benefits under the Company Pension Plan are not subject to reductions
for Social Security benefits or other offset amounts. The following table shows
estimated annual pension benefits payable as a straight life annuity under
various assumptions based on final 20 year average compensation and years of
service. Annual compensation for computing annual pension benefits includes base
salary and incentive compensation. For the Named Officers, annual compensation
represents the sum of the amounts shown for 1994 in the Salary and Bonus columns
of the Summary Compensation Table, plus that portion of the amount shown in the
Long-term Compensation column that represents incentive compensation used to
purchase RBV Shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE
ANNUAL
COMPENSATION ESTIMATED ANNUAL PENSION BENEFIT UPON RETIREMENT FOR YEARS OF
FOR LAST 20 SERVICE INDICATED
YEARS OF ---------------------------------------------------------------
SERVICE 15 YEARS 20 YEARS 25 YEARS 30 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 $ 46,688 $ 62,250 $ 77,813 $ 93,375
400,000 91,688 122,250 152,813 183,375
600,000 136,688 182,250 227,813 273,375
800,000 181,688 242,250 302,813 363,375
1,000,000 226,688 302,250 377,813 453,375
</TABLE>
At normal retirement, the credited years of service and the estimated final
20 year average compensation under the Pension Plan for the Named Officers are:
Mr. Brown, 29 7/12 years and $116,872; Mr. Chandler, 24 1/3 years and $304,408;
Mr. Marticke, 20 2/3 years and $210,769; Mr. Sullivan, 30 years and $507,461;
and Mr. Wilson, 30 years and $331,225. The current estimated annual compensation
for the Named Officers if incentive compensation goals are met would be: Mr.
Brown, $116,872, Mr. Chandler, $267,886; Mr. Marticke, $211,619; Mr. Sullivan,
$451,649; and Mr. Wilson, $299,241.
76
<PAGE> 84
REX MANAGEMENT AND EXECUTIVE COMPENSATION
REX BOARD OF DIRECTORS
The following table sets forth the names, in alphabetical order, and
information of the persons who are expected to serve as Directors of REX
immediately after the Distribution. Robert E. Mercer is expected to serve as
Chairman of the Board of Directors of REX immediately after the Distribution.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
NAME PRESENT POSITIONS AND RECENT BUSINESS EXPERIENCE
- ---------------------------------------------------------------------------------------------
<S> <C>
Frank P. Doyle Executive Vice President of General Electric Company,
a manufacturing, services and technology company,
since 1992, and Senior Vice President from 1981
through 1992. Age 64.
Phillip J. Meek Senior Vice President, Capital Cities/ABC Inc. and
President of its publishing group since 1986. Age 58.
Robert E. Mercer Retired. Director of the Company from 1989 to the
Distribution Date. Chairman and Chief Executive
Officer of The Goodyear Tire & Rubber Company, a
manufacturer of tires and related products, from 1983
through 1988 and Chairman to March 1989. Director:
General Electric Company. Age 71.
Carl Schafer President of the Atlantic Foundation, supporting
oceanographic research, since 1990. Director: Wainco
Oil Corporation, Evans Systems, Inc., Electronic
Clearing House, Inc., Nutracentix, Inc., and The Paine
Webber Group of Mutual Funds. Financial Vice President
and Treasurer of Princeton University from 1976
through 1987. Age 59.
William Sword Director of the Company from 1977 to the Distribution
Date. Chairman of the Board of Wm. Sword & Co.
Incorporated, investment bankers, since 1976. General
Partner, Morgan Stanley and Co. from 1962 through
1975. Trustee, The Center of Theological Inquiry,
Princeton, N.J. Age 71.
Sarah Roush Werner Director of the Company from 1970 to the Distribution
Date. Private investor, Marysville, Washington. Age
65.
Michael W. Wickham President since July 1990; Executive Vice President-
Administration and Finance from January 1990 through
June 1990. Age 49.
</TABLE>
DIRECTOR COMPENSATION
The Board of Directors of REX will determine the compensation to be paid to
nonemployee directors at its organizational meeting following the Distribution.
No decisions have been made with respect to any cash or equity components of
such compensation, however, it is not anticipated that such compensation will
exceed compensation presently paid to RSI directors. The Board will consider the
nature and scope of REX's operation and design the components of compensation to
be offered to nonemployee directors with a view towards encouraging ownership of
REX Common Stock by such directors so that the interests of shareholders and
directors in the success of REX are aligned.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the Delaware General Corporation Law ("DGCL") permits
indemnification of directors, officers, agents and controlling persons of a
corporation under certain conditions and subject to
77
<PAGE> 85
certain limitations. Section 145 empowers a corporation to indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that such person is or
was a director, officer or agent of the corporation or another enterprise if
serving at the request of the corporation. Depending on the character of the
proceeding, a corporation may indemnify against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred in connection with such action, suit or proceeding if the person
indemnified acted in good faith and in a manner such person reasonably believed
to be in or not opposed to, the best interests of the corporation, and, with
respect to any criminal action or proceeding, had no reasonable cause to believe
such person's conduct was unlawful. In the case of an action by or in the right
of the corporation, no indemnification may be made with respect to any claim,
issue or matter as to which such person shall have been adjudged to be liable to
the corporation unless and only to the extent that the Delaware Court of
Chancery or the court in which such action or suit was brought shall determine
that despite the adjudication of liability such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
The REX Certificate of Incorporation provides that no directors of REX
shall be personally liable to REX or its stockholders for or with respect to any
acts or omissions in the performance of his duties as a director to the full
extent permitted by the DGCL.
REX's Certificate of Incorporation contains provisions for indemnification
of directors, officers, employees and agents which are substantially the same as
Section 145 and also permit REX to enter into agreements with any person which
provide for indemnification greater or different than that provided in the
Certificate of Incorporation. After the Distribution it is anticipated that REX
will enter into indemnity agreements with its directors and officers
substantially similar to those currently in effect between the Company and its
directors.
COMMITTEES OF THE REX BOARD OF DIRECTORS
REX will have four standing committees: Audit, Compensation, Executive and
Finance and Nominating.
Audit Committee
The Audit Committee will recommend the selection of independent auditors
for REX, confirm the scope of audits to be performed by such auditors, review
audit results and internal accounting and control procedures and policies and
review the fees paid to the independent auditors. The Audit Committee also will
review and recommend approval of the audited financial statements of REX and the
annual reports to shareholders. Members will be selected by the Board of
Directors of REX once constituted.
Compensation Committee
The Compensation Committee will consist of directors who are not employees
of REX or any of its subsidiaries and will oversee the compensation and benefits
of the executive officers of REX. Members will be selected by the Board of
Directors of REX once constituted.
Executive and Finance Committee
The Executive and Finance Committee will make recommendations for capital
expenditures and other financial matters. Members will be selected by the Board
of Directors of REX once constituted.
78
<PAGE> 86
Nominating Committee
The Nominating Committee will comprise certain directors who are not
employees of REX or any of its subsidiaries. The Nominating Committee will
consider candidates for election as directors and will be responsible for
keeping abreast of and making recommendations with regard to corporate
governance in general. The Nominating Committee will make recommendations with
respect to qualifications of director candidates, compensation of directors, the
selection of committee chairmen, committee assignments and related matters
affecting the function of the board. Members will be selected by the Board of
Directors of REX once constituted.
REX EXECUTIVE OFFICERS
Listed below is certain information as to the persons who have been
selected to serve as Executive Officers of REX after the Distribution and the
capacity in which they are expected to serve.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
NAME PRESENT POSITIONS AND RECENT BUSINESS EXPERIENCE
- ---------------------------------------------------------------------------------------------
<S> <C>
J. Dawson Cunningham Vice President-Finance and Administration and
Treasurer since August 1990; previously he served as
Vice President and Controller of the Company from
January 1987 through August 1990. Age 48.
Louis J. Esposito Vice President-Sales since September 1995; previously
he served as Vice President-Midwest Division from
December 1990 through September 1995. Age 53.
John M. Glenn Vice President-General Counsel and Secretary.
Currently Vice President and General Counsel of the
Company since 1987. Age 64.
Kenneth B. Olsen Vice President-Marketing since January 1994;
previously he served as Assistant to the Vice
President-Marketing during 1993 and Assistant to the
Vice President-Marketing from February 1991 through
1992; previous to employment with the company he was
Senior Vice President-Marketing with R. Biederman &
Associates. Age 48.
James D. Staley Vice President-Operations since 1993; previously he
served as Vice President-Northeast Division from May
1989 through 1992. Age 46.
Michael W. Wickham President and Chief Executive Officer. Currently
President since July 1990; previously he served as
Executive Vice President-Administration and Finance
from January 1990 through June 1990. Age 49.
</TABLE>
No family relationships exist between any of the executive officers named
above or between any executive officer and any director of REX.
79
<PAGE> 87
EXECUTIVE COMPENSATION AND SHAREHOLDINGS BY EXECUTIVE OFFICERS
REX Summary Compensation Table: The following table sets forth with
respect to REX information concerning annual and long-term compensation for
services rendered to REX or RSI, as the case may be, for 1994, 1993 and 1992 by
those persons who are expected to be the Chief Executive Officer and the other
four most highly-compensated Executive Officers of REX following the
Distribution (collectively, the "Named REX Officers").
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
LONG-TERM COMPENSATION
----------------------
RESTRICTED STOCK
NAME AND PRINCIPAL POSITION AS ANNUAL COMPENSATION AWARDS ALL OTHER
OF THE DISTRIBUTION YEAR SALARY BONUS(A) (BOOK VALUE SHARES)(B) COMPENSATION(C)
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------
M. W. Wickham 1994 $253,038 $328,031 $ 53,490 $29,928
Director, President and CEO 1993 245,000 161,055 32,293 33,302
1992 230,000 221,484 49,093 32,459
J. Dawson Cunningham 1994 178,615 145,791 43,695 20,073
Vice President-Finance 1993 174,000 69,080 25,679 26,070
and Administration,
Treasurer 1992 165,000 78,442 59,846 26,522
L. J. Esposito 1994 156,785 117,645 50,420 12,465
Vice President-Sales 1993 153,000 58,415 25,035 18,992
1992 135,000 79,400 34,028 20,241
J. M. Glenn (d) 1994 170,000 77,850 62,076 15,910
Vice President- 1993 165,000 64,382 52,160 22,333
General Counsel and 1992 157,500 100,837 72,748 23,286
Secretary
J. D. Staley 1994 178,615 186,795 28,688 15,520
Vice President-Operations 1993 170,000 90,002 10,000 21,601
1992 145,000 83,856 35,938 22,492
</TABLE>
- ---------------
(a) Reflects incentive compensation earned, less amounts used to purchase RBV
Shares under the RBVS Plan. Amounts used to purchase RBV Shares are included
in the Long-Term Compensation column.
(b) The amounts set forth in this column do not reflect conventional awards of
restricted stock, but rather reflect amounts of compensation otherwise
provided to the executive officer that he elected to use for the purchase of
RBV Shares under the RBVS Plan. The amounts include (i) the portion of cash
incentive compensation referred to in footnote (a) above and (ii) the value
of certain stock credits awarded under the LTS Plan. RBV Shares are
purchased from RSI at book value. Owners of RBV Shares have the same rights
as other holders of RSI Common Stock, including voting and dividend rights.
However, RBV Shares cannot be resold except to RSI and then only at a price
equal to book value as of the year-end preceding. Repurchase book value was
$25.76 as of December 31, 1994, $26.60 as of December 31, 1993, and $25.71
as of December 31, 1992. RBV Shares owned by the Named REX Officers,
including purchases with 1994 compensation, and the aggregate value based
upon the book value as of December 31, 1994, are as follows: Mr. Cunningham,
8,964 ($230,913); Mr. Esposito, 4,924 ($126,842); Mr. Glenn, 10,881
($280,295); and Mr. Staley, 5,534 ($142,556).
(c) Reflects (i) dividend equivalents earned on stock credits awarded under the
LTS Plan and predecessor plans (Mr. Cunningham, $11,717; Mr. Esposito,
$4,109; Mr. Glenn, $7,554; Mr. Staley, $7,164; and Mr. Wickham, $21,572);
(ii) Employer matching contributions under the Roadway Services, Inc. Stock
Savings and Retirement Income Plan, a voluntary contributory defined
contribution employee benefit plan ($5,250 for each of the Named REX
Officers); and (iii) allocations under the Roadway Services, Inc. Stock
Bonus Plan, a noncontributory defined contribution employee benefit plan
($3,106 for each of the Named REX Officers).
(d) Mr. Glenn served as Vice President and General Counsel of the Company during
the years listed.
80
<PAGE> 88
Long-Term Incentive Plans Table: The following table sets forth
information concerning long-term incentive plans pursuant to which the Named REX
Officers received awards for 1994. It reflects stock credits awarded under the
LTS Plan, less supplemental stock credits used to purchase RBV Shares.
Supplemental stock credits are designed to make up for contributions to
participants' accounts in the company's qualified defined contribution plans
that are not allocated to a participant because of limitations imposed by the
Code. The value of supplemental stock credits that were used to purchase RBV
Shares is included in the Long-Term Compensation column of the REX Summary
Compensation Table.
REX will assume RSI's obligations with respect to stock credits earned by
REX employees. Until distribution, stock and dividend equivalents will be
accumulated as book entries of share equivalents of RSI Common Stock and REX
Common Stock. Stock credits are distributed as REX shares in five annual
installments after retirement. Stock credits are fully vested at age 55.
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
NUMBER OF SHARES, MINIMUM PERIOD
NAME AND PRINCIPAL POSITION AS OF THE UNITS OR OTHER RIGHTS UNTIL
DISTRIBUTION YEAR (STOCK CREDIT AWARDS) MATURATION(A)
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
J. Dawson Cunningham
Vice President-Finance
and Administration, Treasurer.................. 1994 923 1 Year
L. J. Esposito
Vice President-Sales........................... 1994 938 1 Year
John M. Glenn
Vice President-General Counsel
and Secretary.................................. 1994 795 1 Year
J. D. Staley
Vice President-Operations...................... 1994 1,052 1 Year
M. W. Wickham
Director, President and CEO.................... 1994 1,847 1 Year
- ---------------------------------------------------------------------------------------------------------
</TABLE>
(a) After December 31, 1995, 50% of an executive officer's basic stock credits
awarded under the LTS Plan may be used to purchase RBV Shares in a number
equivalent to the number which could be purchased at book value.
After the Distribution, it is contemplated that all RBV Shares held by the
Named Officers will be repurchased by RSI pursuant to the provisions of the RBVS
Plan.
ROADWAY EXPRESS, INC. PENSION PLAN: The REX Pension Plan to become
effective as of January 1, 1996 is a non-contributory qualified employee defined
benefit plan. The Plan provides retirement benefits after normal retirement at
age 65 equal to the greater of (a) 1 1/3% of final five year average
compensation or (b) 1 3/4% of final 20 year average compensation up to $45,000
and 1 1/2% of final 20 year average compensation in excess of $45,000, times
total years of service not to exceed 30. Benefits under the REX Pension Plan are
not subject to reductions for Social Security benefits or other offset amounts.
Effective January 1, 1996, RSI and REX contemplate that the trustee of the
Company Pension Plan will transfer to the trustee of the REX Pension Plan Trust
the assets of the Company Pension Plan attributable to the service of the active
employees of REX with the RSI controlled group through December 31, 1995, and
that the REX Pension Plan will assume the liabilities attributable to such
service. The transfer of assets will be effected by the trustees of such Plans
pursuant to the Agreement on Employee Matters.
The following table shows estimated annual pension benefits payable as a
straight life annuity under various assumptions based on final 20 year average
compensation and years of service. Annual compensation for computing annual
pension benefits includes base salary and incentive compensation. For the REX
Named Officers, annual compensation represents the sum of the amounts shown for
1994 in the Salary and Bonus columns of the Summary Compensation Table, plus
that portion of the amount
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shown in the Long-Term Compensation column that represents incentive
compensation used to purchase RBV Shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
AVERAGE
ANNUAL
COMPENSATION ESTIMATED ANNUAL PENSION BENEFIT UPON RETIREMENT FOR YEARS OF
FOR LAST 20 SERVICE INDICATED
YEARS OF ---------------------------------------------------------------
SERVICE 15 YEARS 20 YEARS 25 YEARS 30 YEARS
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ 200,000 $ 46,688 $ 62,250 $ 77,813 $ 93,375
400,000 91,688 122,250 152,813 183,375
600,000 136,688 182,250 227,813 273,375
800,000 181,688 242,250 302,813 363,375
1,000,000 226,688 302,250 377,813 453,375
</TABLE>
- --------------------------------------------------------------------------------
At normal retirement, the credited years of service and the estimated final
20 year average compensation under the REX Pension Plan for the Named REX
Officers are: Mr. Cunningham, 26 1/6 years and $227,579; Mr. Esposito, 30 years
and $182,974; Mr. Glenn, 8 7/12 years and $237,341; Mr. Staley, 30 years and
$220,617; and Mr. Wickham, 30 years and $346,117. The current estimated annual
compensation for the Named REX Officers if incentive compensation goals are met
would be: Mr. Cunningham, $217,722; Mr. Esposito, $192,235; Mr. Glenn, $203,906;
Mr. Staley, $220,617; and Mr. Wickham, $327,988.
REX MANAGEMENT INCENTIVE STOCK PLAN
The REX Management Incentive Stock Plan authorizes grants to officers and
other key employees of REX and its subsidiaries of shares of REX Common Stock
which remain subject to a risk of forfeiture and restrictions on transfer for a
predetermined period of time (the "REX Incentive Stock"). The REX Management
Incentive Stock Plan authorizes the granting of stock awards to participants
(the "Grantees") for up to an aggregate of 1,200,000 shares of REX Incentive
Stock.
The restrictions placed upon the REX Common Stock granted under the REX
Management Incentive Stock Plan will lapse after the occurrence of all of the
following: (i) the attainment of such management objectives as the Compensation
Committee of the REX Board of Directors (the "Compensation Committee")
determines; (ii) the Grantee's attainment of the age of 55 provided the Grantee
has remained in the continuous employ of REX or one of its subsidiaries; and
(iii) such other terms and conditions as the Compensation Committee may
determine. The number of shares of REX Incentive Stock granted under the REX
Management Incentive Stock Plan is subject to adjustment upon the occurrence of
a stock dividend, stock split or other changes in the capital structure of REX,
or upon the occurrence of any other transaction or event having a similar effect
to prevent any dilution or expansion of the rights of Grantees that would
otherwise result from the occurrence thereof.
The REX Board of Directors adopted the REX Management Incentive Stock Plan
on October 20, 1995, subject to the approval of the holders of the Company's
Common Stock as described in "Approval of the Adoption of the REX Management
Incentive Stock Plan" below. The purpose of the REX Management Incentive Stock
Plan is to enable REX to attract, compensate and retain officers and other key
employees and provide them with appropriate incentives and rewards for superior
performance.
The REX Management Incentive Stock Plan authorizes the granting of shares
of REX Incentive Stock and provides the Compensation Committee, which has been
authorized by the REX Board of Directors to administer the REX Management
Incentive Stock Plan, with the flexibility to respond to changes in the
competitive and legal environments, thereby protecting and enhancing REX's
current and future ability to attract and retain officers and other key
employees.
In furtherance of the purpose of the REX Management Incentive Stock Plan,
the Compensation Committee of the Company has approved grants of an aggregate of
320,000 shares of REX Incentive
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Stock to a group of six executive officers and 57 other key employees (the
"Grantees") of REX (the "Initial Awards"). In addition to the recipients of the
Initial Awards, REX estimates that a number of additional employees may be
considered key employees and therefore eligible to receive awards under the REX
Management Incentive Stock Plan in the future.
All actions taken to date by the REX Board of Directors and the
Compensation Committee under and with respect to the REX Management Incentive
Stock Plan, including the Initial Awards, were conditioned upon approval by the
holders of the Company's Common Stock, of the REX Management Incentive Stock
Plan. If such approval is not obtained, the REX Management Incentive Stock Plan
will not become effective and any grants previously approved will be void. The
full text of the REX Management Incentive Stock Plan is attached hereto as Annex
C. Set forth below is a general description of the REX Management Incentive
Stock Plan and the Initial Awards. The following description of the REX
Management Incentive Stock Plan is qualified in its entirety by reference to
Annex C.
Description of the REX Management Incentive Stock Plan and the Initial Awards
SHARES AVAILABLE. Subject to adjustment as described below under
"Adjustments," the aggregate number of shares of REX Common Stock that may be
issued or transferred and covered by outstanding awards granted under the REX
Management Incentive Stock Plan (and released from a substantial risk of
forfeiture) shall not exceed 1,200,000 shares, which may be shares of original
issuance or treasury shares or a combination thereof. The maximum number of
shares of REX Common Stock covered by the REX Management Incentive Stock Plan
which may be granted to any Grantee for any year shall not exceed 75,000 shares.
ELIGIBILITY. Officers including officers who are members of the REX Board
of Directors, and other key employees of REX and its subsidiaries may be
selected by the Compensation Committee to receive benefits under the REX
Management Incentive Stock Plan. Members of the REX Board of Directors who are
not employees of REX or any of its subsidiaries will not receive REX Incentive
Stock under the REX Management Incentive Stock Plan.
INITIAL AWARDS. The restrictions on the Initial Awards will lapse after
all of the following conditions have been satisfied: (i) the attainment of
certain performance objectives specified by the Compensation Committee and based
on the appreciation of REX Common Stock (the "Management Objectives"); (ii)
Grantee's attainment of the age of 55 provided the Grantee has remained in the
continuous employ of REX or one of its subsidiaries; and (iii) such other terms
and conditions as the Compensation Committee may determine, including in the
event certain change in control events occur.
The Initial Awards will be forfeited: (i) if the Grantee ceases to be
employed by REX or one of its subsidiaries for any reason other than death or
permanent disability, before attaining the age of 55; or (ii) if any shares of
REX Management Incentive Stock eligible to become vested at the end of a vesting
period as defined in the Initial Award agreement (the "Vesting Period") that
fail to become vested (because the Management Objectives have not been fully
achieved).
ADDITIONAL AWARDS. Though a Grantee may forfeit shares of REX Incentive
Stock when the Management Objectives are not achieved, the Grantee may re-earn
an equal number of shares of REX Incentive Stock by attaining certain Management
Objectives at a later time. Specifically, if in a prior Vesting Period the
Grantee has forfeited REX Incentive Stock previously granted by REX and in a
later Vesting Period certain Management Objectives are attained, REX will issue
to the Grantee shares of REX Common Stock equal in number (taking into account
any adjustments deemed by the Compensation Committee to be equitable) to the
number of shares of REX Incentive Stock the Grantee has previously forfeited in
a prior Vesting Period. Such shares will remain forfeitable if the Grantee
ceases to be employed by REX or any one of its subsidiaries for any reason
before attaining the age of 55.
INCENTIVE STOCK. An award of REX Incentive Stock involves the immediate
transfer by REX to a participant of ownership of a specific number of shares of
REX Common Stock in consideration of the performance of services. The
participant is immediately entitled to voting, dividend and other ownership
rights in the shares. The transfer may be made without additional consideration
or for consideration in an
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amount that is less than the market value of the shares on the date of grant, as
the Compensation Committee may determine.
The Compensation Committee may condition an award of REX Incentive Stock on
the achievement of the Management Objectives. To the extent that any award so
specifies one or more Management Objectives, it (i) will also specify a minimum
level of acceptable achievement, below which all of the shares of REX Incentive
Stock covered by the award will be forfeited, and (ii) will set forth a formula
for determining the number of shares of REX Incentive Stock to be retained by
the participant if performance is at or above the minimum level of acceptable
achievement but falls short of full achievement of the specified Management
Objectives. The Compensation Committee may adjust the specified Management
Objectives and the related minimum level of acceptable achievement if the
Compensation Committee determines that a change in the business, operations,
corporate structure or capital structure of the Company, or the manner in which
it conducts it business, or other events or circumstances render the Management
Objectives unsuitable, the Compensation Committee may in its discretion modify
such Management Objectives or the related minimum acceptable level of
achievement, in whole or in part, as the Compensation Committee deems
appropriate and equitable.
REX Incentive Stock will be subject to a "substantial risk of forfeiture"
within the meaning of Section 83 of the Code for a period to be determined by
the Compensation Committee. An example would be a provision that the REX
Incentive Stock would be forfeited if the participant ceased to serve REX as an
officer or other key employee before attaining the age of 55. In order to
enforce these forfeiture provisions, the transferability of REX Incentive Stock
will be prohibited or restricted in a manner and to the extent prescribed by the
Compensation Committee for the period during which the forfeiture provisions are
to continue. The Compensation Committee may provide for a shorter period during
which the forfeiture provisions are to apply in the event of a change in control
of REX or other similar transaction or event.
REX MANAGEMENT INCENTIVE STOCK PLAN BENEFITS. It is not possible to
determine the specific amounts that may be awarded to various individuals
following the Distribution under the REX Management Incentive Stock Plan. The
following table sets forth the Initial Awards allocated under such Plan to (i)
each of the REX Named Executive Officers, (ii) all the REX executive officers as
a group, (iii) all directors who are not executive officers as a group, and (iv)
all other employees, including all the REX officers who are not executive
officers, as a group. All of the Initial Awards are subject to adoption of
Proposal Three, and are subject to forfeiture if specified management objectives
based on the appreciation of the REX Common Stock are not met after the
Distribution. See "-- Initial Awards".
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PLAN BENEFITS TABLE
REX MANAGEMENT INCENTIVE STOCK PLAN
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
NUMBER
OF
NAME AND PRINCIPAL POSITION AS OF THE DISTRIBUTION SHARES(A)
<S> <C>
- -------------------------------------------------------------------------------------------
J. Dawson Cunningham
Vice President-Finance and Administration, Treasurer................... 16,800
L. J. Esposito
Vice President-Sales................................................... 12,000
John M. Glenn
Vice President-General Counsel and Secretary........................... 9,200
J. D. Staley
Vice President-Operations.............................................. 16,800
M. W. Wickham
Director, President and CEO............................................ 23,600
Executive Group.......................................................... 87,600
Non-Executive Director Group............................................. --
Non-Executive Officer Employee Group..................................... 232,400
</TABLE>
- ---------------
(a) The dollar value of the Initial Awards is not determinable due to the lack
of a public trading market for the REX Common Stock.
ADJUSTMENTS. The number of shares covered by outstanding grants of REX
Management Incentive Stock are subject to adjustment in the event of stock
dividends, stock splits, combinations of shares, recapitalizations, mergers,
consolidations, spin-offs, reorganizations, liquidations, issuances of rights or
warrants, and similar transactions or events. The Compensation Committee may
also make or provide for such adjustments in the aggregate number of shares that
may be issued or transferred and covered by outstanding awards granted under the
REX Management Incentive Stock Plan, as it may in good faith determine to be
appropriate in order to reflect any transaction or event described in the first
sentence of this paragraph.
ADMINISTRATION AND AMENDMENTS. The REX Management Incentive Stock Plan is
to be administered by a committee consisting of not fewer than three
non-employee Directors of REX who are "disinterested persons" within the meaning
of Rule 16b-3 under the Exchange Act. It is expected that the Compensation
Committee of REX will serve as such committee. In connection with its
administration of the REX Management Incentive Stock Plan, the Compensation
Committee is authorized to interpret the REX Management Incentive Stock Plan and
related agreements and other documents. The Compensation Committee may make
grants to participants under any or a combination of all of the various
categories of awards that are authorized under the REX Management Incentive
Stock Plan and may provide for special terms for awards to participants who
either are foreign nationals or are employed by or provide consulting services
to REX or any of its subsidiaries outside of the United States of America, as
the Compensation Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom.
The Compensation Committee may amend the REX Management Incentive Stock
Plan from time to time but no such amendment may increase the aggregate number
of shares that may be issued or transferred and covered by outstanding awards
under the REX Management Incentive Stock Plan, or otherwise cause Rule 16b-3
under the Exchange Act to cease to be applicable to the REX Management Incentive
Stock Plan, without further approval by the stockholders of the Company.
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<PAGE> 93
FEDERAL INCOME TAX CONSEQUENCES
The following is a brief summary of certain of the Federal income tax
consequences of certain transactions under the REX Management Incentive Stock
Plan based on Federal income tax laws in effect on October 1, 1995. This summary
is not intended to be exhaustive and does not describe state or local tax
consequences.
Incentive Stock
A recipient of shares of REX Incentive Stock generally will be subject to
tax at ordinary income rates on the fair market value of the shares, reduced by
any amount paid by the recipient, at such time as the shares are no longer
subject to a risk of forfeiture or restrictions on transfer for purposes of
Section 83 of the Code. However, a recipient who so elects under Section 83(b)
of the Code within 30 days of the date of transfer of the shares will have
taxable ordinary income on the date of transfer of the shares equal to the
excess of the fair market value of the shares (determined without regard to the
risk of forfeiture or restrictions on transfer) over any purchase price paid for
the shares. If a Section 83(b) election has not been made, any dividends
received with respect to shares of REX Incentive Stock that are subject at that
time to a risk of forfeiture and restrictions on transfer generally will be
treated as compensation that is taxable as ordinary income to the recipient.
Special Rules Applicable to Directors and Officers
In limited circumstances where the sale of stock that is received as the
result of a grant could subject a Director or an officer to suit under Section
16b of the Exchange Act, the tax consequences to the Director or officer may
differ from the tax consequences described above. In these circumstances, unless
a special election has been made, the principal difference usually will be to
postpone valuation and taxation of the stock received so long as the sale of the
stock received could subject the Director or officer to suit under Section 16b
of the Exchange Act, but not longer than six months.
Tax Consequences to REX or Subsidiary
To the extent that a participant recognizes ordinary income in the
circumstances described above, REX or subsidiary for which the participant
performs services will be entitled to a corresponding deduction provided that,
among other things, the income meets the test of reasonableness, is an ordinary
and necessary business expense, is not an "excess parachute payment" within the
meaning of Section 280G of the Code and is not disallowed under Section 162(m)
of the Code.
Section 162(m) of the Code generally disallows a tax deduction to a
publicly-held company for compensation in excess of $1 million paid to its chief
executive officer or any of its other four most highly-compensated executive
officers in any fiscal year. All cash and non-cash compensation paid to an
executive must be taken into account, unless the compensation qualifies for a
specific exemption, including an exemption for performance based compensation
meeting certain tests under the Code and approved by the Company's shareholders
or by REX's shareholders after the Distribution. The Initial Awards are subject
to the approval of the Company's shareholders at the Special Meeting. Upon
receipt of such approval, the Company will not be subject to disallowance of the
tax deduction under Section 162(m) of the Code. Accordingly, at the time the
fair market value of the REX Incentive Stock is included in a Grantee's income,
the Company will be entitled to a deduction equal to the fair market value of
the shares of REX Incentive Stock.
OTHER STOCK PLANS
Following the Distribution, REX will implement other stock plans (in
addition to the REX Management Incentive Stock Plan) intended to facilitate the
acquisition and ownership of REX Common Stock by REX employees. REX will propose
a special stock incentive plan for REX's organized work force, and has reserved
800,000 shares of REX Common Stock for issuance based on terms and objectives
that REX plans to develop in coordination with representatives of such work
force.
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<PAGE> 94
The Company (as sole shareholder of REX) and the Board of Directors of REX
have each approved the REX Stock Purchase Plan, which is intended to comply with
Section 423 of the Code. Under such Plan, REX employees (other than executive
officers who are subject to reporting and liability under Section 16 of the
Exchange Act) will be offered rights to purchase REX Common Stock at a discount
of up to fifteen percent from the market price of REX Common Stock at the time
of purchase. REX will reserve 400,000 shares of REX Common Stock for issuance
under such Plan.
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<PAGE> 95
DESCRIPTION OF RSI CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
After the Distribution, RSI's authorized capital stock will be the same as
the Company's authorized capital stock prior to the Distribution. Accordingly,
RSI's authorized capital stock will consist of 200,000,000 shares of Common
Stock, without par value, and 40,000,000 shares of Preferred Stock, without par
value. As of November 14, 1995, there were outstanding 39,069,312 shares of
Company Common Stock. There are currently no shares of the Preferred Stock
outstanding.
RSI COMMON STOCK
Each outstanding share of RSI Common Stock will be entitled to such
dividends as may be declared from time to time by the Board of Directors of RSI.
See "Dividend Policies -- RSI Dividend Policy". Each outstanding share is
entitled to one vote on all matters submitted to a vote of shareholders.
Pursuant to the RSI Amended Articles of Incorporation, holders of RSI Common
Stock do not have the right to cumulative voting; therefore, the holders of a
majority of the shares voting for the election of the Board of Directors of RSI
can elect all the directors up for election, if they so choose. In the event of
liquidation, dissolution or winding up of RSI, holders of RSI Common Stock are
entitled to receive on a pro rata basis any assets remaining after provision for
payment of creditors.
NO PREEMPTIVE RIGHTS
Under the RSI Articles, no holder of RSI Common Stock will have any
preemptive right to subscribe to any additional stock of RSI.
DESCRIPTION OF REX CAPITAL STOCK
AUTHORIZED CAPITAL STOCK
After the Distribution, REX's authorized capital stock will consist of
100,000,000 shares of Common Stock, $.01 par value per share, and 20,000,000
shares of Preferred Stock, $.01 par value per share.
REX COMMON STOCK
Each outstanding share of REX Common Stock will be entitled to such
dividends as may be declared from time to time by the Board of Directors of REX.
See "Dividend Policies -- REX Dividend Policy". Each outstanding share is
entitled to one vote on all matters submitted to a vote of shareholders. The REX
Certificate of Incorporation (the "REX Certificate") does not provide for
cumulative voting rights; therefore, the holders of a majority of the shares
voting for the election of the Board of Directors of REX can elect all the
directors up for election, if they so choose. In the event of liquidation,
dissolution or winding up of REX, holders of REX Common Stock are entitled to
receive on a pro rata basis any assets remaining after provision for payment of
creditors and any holders of REX Preferred Stock.
NO PREEMPTIVE RIGHTS
No holder of any class of stock of REX authorized at the time of the
Distribution will have any preemptive right to subscribe to any securities of
REX of any kind.
CERTAIN CHANGE IN CONTROL EFFECTS OF CERTAIN PROVISIONS OF THE CERTIFICATE OF
INCORPORATION AND BY-LAWS OF REX
The REX Certificate and the REX By-Laws (collectively, the "REX charter
documents") contain certain provisions that could make more difficult the
acquisition of REX by means of a tender offer, a proxy contest or otherwise.
Some of them replicate or are comparable to existing provisions of the RSI
Amended Articles of Incorporation (the "RSI Articles") and the RSI Regulations
(collectively, the "RSI charter documents"), but others take advantage of
Delaware law and go beyond what is provided in the
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<PAGE> 96
RSI charter documents in terms of possibly impacting such a control transaction.
See "Certain Significant Differences between the Law and Charter Documents
Governing REX and the Law and Charter Documents Governing RSI." The description
of such provisions set forth below is intended as a summary only.
NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES
The REX Certificate provides that, subject to any rights of holders of
Preferred Stock of REX to elect additional directors under specified
circumstances (the "Preferred Rights"), the number of directors will be fixed as
provided in the REX By-Laws. The REX By-Laws provide that, subject to the
Preferred Rights, the number of directors will be fixed by the REX directors,
but must consist of not less than three directors. The REX charter documents
provide that, subject to the Preferred Rights, vacancies will be filled only by
the affirmative vote of a majority of the remaining directors, though less than
a quorum, or by the sole remaining director. Thus, the REX Board could prevent
any stockholder from enlarging the REX Board and filling the new directorships
with such stockholder's own nominees. The REX charter documents provide that
directors may be removed only upon the affirmative vote of holders of at least
80% of the voting power of all then outstanding shares entitled to vote
generally in the election of directors ("Voting Stock").
NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS
The REX charter documents provide that, subject to the Preferred Rights,
stockholder action can be taken only at an annual or special meeting. They
prohibit stockholder action by written consent in lieu of a meeting. The REX
charter documents provide that, subject to the Preferred Rights, special
meetings of stockholders can be called only by the Chairman of the Board or by
the REX Board pursuant to a resolution adopted by a majority of the total number
of directors that REX would have if there were no vacancies (the "Whole Board").
Stockholders are not permitted to call a special meeting or to require that the
REX Board call a special meeting. The business permitted to be conducted at any
special meeting is limited to the business brought before the meeting pursuant
to the notice of meeting given by REX.
By prohibiting stockholder action by written consent, the REX charter
documents may have the effect of delaying consideration of a stockholder
proposal until the next annual meeting. They would also prevent the holders of a
majority of the voting power of the Voting Stock from unilaterally using the
written consent procedure to take stockholder action. Moreover, a stockholder
could not force stockholder consideration of a proposal over the opposition of
the REX Board by calling a special meeting.
ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER PROPOSALS
The REX By-Laws establish an advance notice procedure for stockholders to
nominate candidates for election as directors or to bring other business before
an annual meeting (the "Stockholder Notice Procedure").
Under the Stockholder Notice Procedure, only persons who are nominated by
the REX Board, or by a stockholder who has given timely written notice to the
Secretary of REX, will be eligible for election as directors. At an annual
meeting only such business may be conducted as has been specified in the written
notice for such meeting or has been brought before the meeting by the REX
Chairman or the REX Board or by a stockholder who has given timely written
notice to the Secretary of REX of such stockholder's intention to bring such
business before such meeting.
Under the Stockholder Notice Procedure, for notice of stockholder
nominations to be made at an annual meeting to be timely, such notice must be
received by REX at least 70 days prior to the annual meeting or, if REX does not
make a public announcement of the date of the annual meeting at least 80 days
prior to such meeting, then such notice of stockholder nomination must be
received by REX not later than the tenth day after the actual public
announcement of the annual meeting.
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Under the Stockholder Notice Procedure, a stockholder's notice to REX
proposing to nominate a person for election as a director must contain certain
information, including the name and address of the nominating stockholder, a
representation that the stockholder is a holder of record entitled to vote for
the election of directors, a description of all arrangements or understandings
between the stockholder and the nominee, such other information regarding the
proposed nominee that would be required to be included in a proxy statement
soliciting proxies for the proposed nominee and the consent of the nominee to
serve. A stockholder's notice relating to the conduct of business other than the
nomination of directors must contain certain information, including a full
description of the business the stockholder proposes to bring before the
meeting, the name and address of such stockholder, the class and number of
shares of stock of REX beneficially owned by such stockholder, and any material
interest of such stockholder in the business so proposed. If the chairman of the
meeting determines that a person was not nominated, or other business was not
brought before the meeting, in accordance with the Stockholder Notice Procedure,
such person will not be eligible for election as a director, or such business
will not be conducted at such meeting.
By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the REX Board an opportunity to consider the
qualifications of the proposed nominees and to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, the
Stockholder Notice Procedure will provide an orderly means for conducting annual
meetings of stockholders and will provide the REX Board with an opportunity to
inform stockholders of any business proposed to be conducted at such meetings,
together with any recommendations as to the REX Board's position.
The Stockholder Notice Procedure may have the effect of precluding a
contest for the election of directors or the consideration of stockholder
proposals if the proper procedures are not followed, and of deterring a third
party from conducting a solicitation of proxies to elect its own slate of
directors or to approve its own proposal.
PREFERRED STOCK
The REX Certificate authorizes the REX Board to establish one or more
series of REX Preferred Stock and to determine, with respect to any series, the
terms and rights of such series, including voting, dividend and liquidation
rights.
The provisions authorizing the REX Board to issue REX Preferred Stock in
series with such terms as it may designate will provide REX with flexibility in
structuring possible future financings and acquisitions, and in meeting other
corporate needs which might arise. The authorized shares of REX Preferred Stock,
as well as shares of REX Common Stock, will be available for issuance without
further action by stockholders, unless such action is required by applicable law
or the rules of the Nasdaq-NMS. Those rules require stockholder approval as a
prerequisite to listing shares in several instances, including where the present
or potential issuance of shares could result in an increase in the number of
shares of common stock, or in the amount of voting securities, outstanding of at
least 20%.
Although the REX Board has no present intention of doing so, it could issue
a series of REX Preferred Stock that could, depending on its terms, impede the
completion of a takeover attempt, including one in which stockholders might
receive a premium for their stock over the then current market price.
AMENDMENT OF CERTAIN PROVISIONS OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS
Under Delaware law, the stockholders may adopt, amend or repeal the by-laws
and, with the approval of the board of directors, the certificate. If the
certificate so provides, the by-laws may be adopted, amended or repealed by the
board of directors. The REX Certificate does provide for such actions to be
taken by the REX Board, except as provided below. The REX Certificate provides
that the affirmative vote of the holders of at least 80% of the voting power of
the outstanding shares of Voting Stock is required to amend provisions of the
REX Certificate relating to the prohibition of stockholder action without a
meeting; the calling of special meetings and the business to be conducted
thereat; the
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number, election and term of directors; the removal of directors; and amendment
of the REX By-Laws. The vote of the holders of a majority of the voting power of
the outstanding shares entitled to vote on the amendment is required to amend
all other provisions of the REX Certificate. The REX Certificate further
provides that certain provisions of the REX By-Laws (including those relating to
the calling of special meetings and the business to be conducted at such special
meetings; the business to be conducted at an annual meeting; the nomination of
director candidates; the number, term and election of directors; the removal of
directors; and the provision regarding amendment of the REX By-Laws) may be
amended only by the affirmative vote of the holders of at least 80% of the
voting power of the outstanding shares of Voting Stock. These 80% voting
requirements will have the effect of making more difficult any amendment by
stockholders of the REX By-Laws or any of the provisions of the REX Certificate
described above.
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND OFFICERS
Generally, a director of an Ohio corporation will not be found to have
violated his fiduciary duties unless there is proof by clear and convincing
evidence that the director has not acted in good faith, in a manner he
reasonably believes to be in or not opposed to the best interests of the
corporation, or with the care that an ordinarily prudent person in a like
position would use under similar circumstances. In general, a director is liable
for monetary damages for any action or omission as a director only if it is
proved by clear and convincing evidence that such act or omission was undertaken
either with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation.
Under Ohio law, a corporation must indemnify its directors, as well as its
officers, employees and agents, against expenses where any such person is
successful on the merits or otherwise in defense of an action, suit or
proceeding. A corporation may indemnify such persons in actions, suits and
proceedings (including derivative suits) if the individual has acted in good
faith and in a manner that he believes to be in or not opposed to the best
interests of the corporation. In the case of a criminal proceeding, the
individual must also have no reasonable cause to believe that his conduct was
unlawful. Indemnification may be made only if ordered by a court or if
authorized in a specific case upon a determination that the applicable standard
of conduct has been met. Such a determination may be made by a majority of the
disinterested directors, by independent legal counsel or by the shareholders. In
order to obtain reimbursement for expenses in advance of the final disposition
of any action, the individual must provide an undertaking to repay the amount if
it is ultimately determined that he is not entitled to be indemnified.
In general, Ohio law requires that all expenses, including attorney's fees,
incurred by a director in defending any action, suit or proceeding be paid by
the corporation as they are incurred in advance of final disposition if the
director agrees to repay such amounts if it is proved by clear and convincing
evidence that his action or omission was undertaken with deliberate intent to
cause injury to the corporation or with reckless disregard for the best
interests of the corporation and if the director reasonably cooperates with the
corporation concerning the action, suit or proceeding.
RSI's Regulations provide for indemnification which is coextensive with
that permitted under Ohio law. The RSI Regulations authorize RSI to enter into
indemnification agreements with each present and future director and such
officers as may be designated from time to time by the RSI Board. RSI has
entered into agreements that indemnify such persons to the maximum extent
permitted by applicable law. The indemnification so granted is not limited to
the indemnification specifically authorized by the Ohio General Corporation Law.
Each agreement represents a contractual obligation of RSI which cannot be
altered unilaterally.
Under Delaware law, a corporation may include in its certificate a
provision which eliminates or limits the personal liability of a director to the
corporation or its shareholders for monetary damages for breach of fiduciary
duties as a director, but no such provision may eliminate or limit the liability
of a director (i) for any breach of his duty of loyalty, (ii) for acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) under Section 174 of the DGCL (dealing with illegal
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redemptions and stock repurchases) or (iv) for any transaction from which the
director derived an improper personal benefit. The REX Certificate limits
personal liability of directors to the fullest extent permitted by Delaware law.
The REX Certificate authorizes REX to enter into indemnification agreements
with directors, officers and other persons entitled to indemnification
thereunder. It is anticipated that prior to or after the Distribution, REX will
enter into indemnification agreements with its directors and certain officers
that indemnify such persons to the maximum extent permitted by applicable law.
Delaware law provides that a corporation (a) must indemnify its directors,
officers, employees and agents for all expenses of litigation when they are
successful on the merits or otherwise; (b) may indemnify such persons for the
expenses, judgments, fines and amounts paid in settlement of litigation (other
than a derivative suit) even if they are not successful on the merits, if they
acted in good faith and in a manner they reasonably believed to be in or not
opposed to the best interests of the corporation (and, in the case of criminal
proceedings, have no reason to believe that their conduct was unlawful); and (c)
may indemnify such persons for the expenses of a derivative suit even if they
are not successful on the merits if they acted in good faith and in a manner
they reasonably believed to be in or not opposed to the best interests of the
corporation, provided that no such indemnification may be made on behalf of a
person adjudged to be liable in a derivative suit, unless the Delaware Chancery
Court determines that, despite such adjudication but in view of all of the
circumstances, such person is entitled to indemnification. In any such case,
indemnification may be made only upon determination by (i) a majority of the
disinterested directors, (ii) independent legal counsel or (iii) the
shareholders that indemnification is proper because the applicable standard of
conduct was met. The advancement of litigation expenses to a director or officer
is also authorized upon receipt by the board of directors of an undertaking to
repay such amounts if it is ultimately determined that such person is not
entitled to be indemnified for them. The REX Certificate authorizes mandatory
indemnification to the full extent permitted by Delaware law and it authorizes
REX to provide by agreement for indemnification greater or different than that
set forth in the REX Certificate.
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CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE LAW AND CHARTER DOCUMENTS GOVERNING
REX AND THE LAW AND CHARTER DOCUMENTS GOVERNING RSI
RSI is incorporated in Ohio. REX is incorporated in Delaware. Consequently,
RSI is subject to Ohio law, while REX is subject to Delaware law. Ohio law and
Delaware law, and the RSI charter documents and the REX charter documents,
differ in a number of respects. The following discussion is intended to
highlight the principal significant differences.
CERTAIN VOTING RIGHTS
Delaware law generally requires approval of any merger, consolidation or
sale of substantially all the assets of a corporation by vote of the holders of
a majority of all outstanding shares entitled to vote thereon, although the
certificate may provide for a greater vote.
Under Ohio law, unless otherwise provided in the articles, such matters
require the approval of the holders of shares entitling them to exercise at
least two-thirds of the voting power. The articles may provide for a greater or
lesser vote, so long as the vote required is not less than a majority of the
voting power. The RSI Articles require the affirmative vote of the holders of at
least two-thirds of the voting power to approve certain mergers, consolidations
and other extraordinary transactions, unless approved by the RSI Board by an
87.5% vote at a meeting or by unanimous written consent, in which case the
affirmative vote of not less than a majority of the voting power is required.
Both Ohio law and Delaware law permit mergers without approval by
shareholders of the surviving corporation if, among other things, no charter
amendment is involved and no more than a specified maximum increase in
outstanding voting stock will result. Under Delaware law, the maximum permitted
increase is 20% of the corporation's common stock outstanding immediately prior
to the merger. Under Ohio law, the maximum permitted increase is any amount less
than one-sixth of a corporation's resulting shares possessing voting power in
the election of directors.
SPECIAL MEETINGS OF STOCKHOLDERS; STOCKHOLDER ACTION BY WRITTEN CONSENT
Under Delaware law, special stockholder meetings may be called by the board
of directors and by any person(s) authorized by the certificate or the by-laws.
The REX charter documents provide that, in general, special meetings of
stockholders can be called only by the Chairman of the Board or at the request
of a majority of the Whole Board.
Under Ohio law, a special meeting of shareholders may be called by the
chairman, the president, the directors by action at a meeting, a majority of the
directors acting without a meeting, persons owning 25% of the outstanding shares
entitled to vote at such meeting (or a lesser or greater proportion as specified
in the articles or regulations but not greater than 50%) or the person(s)
authorized to do so by the articles of incorporation or the regulations. The RSI
Regulations authorize shareholders to call a special meeting only if such
holders have at least 50% of the voting power.
The REX By-Laws provide that the business transacted at an annual meeting
of stockholders shall be confined to matters which have been (a) specified in
the written notice of the meeting given to stockholders by REX, (b) brought
before the meeting at the direction of the REX Board or the chairman of the
meeting, or (c) specified in a written notice given by or on behalf of a
stockholder sufficiently in advance of the meeting to enable the REX Board to
consider such a matter and, if necessary, to inform all stockholders of its
position thereon. The REX By-Laws provide that business transacted at a special
meeting of stockholders shall be limited to the purposes stated in the notice of
such meeting. The RSI Regulations provide that business transacted at either an
annual meeting or a special meeting of shareholders shall be confined to the
matters (i) specified in the written notice of the meeting given to shareholders
of RSI, (ii) brought before the meeting at the direction of the RSI Board or the
chairman of the meeting, or (iii) specified in a written notice given by or on
behalf of the shareholders sufficiently in advance of the meeting to enable the
RSI Board to consider such matter and, if necessary, to inform all shareholders
of its position thereon.
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Under Delaware law, unless the certificate provides otherwise, any action
by stockholders must be taken at a meeting of stockholders, unless a consent in
writing setting forth the action so taken is signed by stockholders having not
less than the minimum number of votes necessary to take such action at a meeting
at which all shares entitled to vote were present and voted. The REX Certificate
prohibits stockholder action by written consent in lieu of a meeting.
Under Ohio law, unless prohibited by the articles or the regulations, any
action by shareholders generally must be taken at a meeting, unless a consent in
writing setting forth the action so taken is signed by all the shareholders who
would be entitled to notice of the meeting held to consider the subject matter
thereof. The RSI Regulations permit written actions by shareholders which are
signed by all of the shareholders.
AMENDMENT OF CERTIFICATE OF INCORPORATION AND BY-LAWS
Delaware law allows amendments of the certificate if the board of directors
adopts a resolution setting forth the amendment proposed, declaring its
advisability, and the stockholders thereafter approve such proposed amendment
either at a special meeting called by the board for that purpose, if so directed
by the board, at the next annual stockholders' meeting. At any such meeting, the
proposed amendment generally must be approved by a majority of the outstanding
shares entitled to vote. The REX Certificate provides that certain provisions
may only be amended by an affirmative vote of the holders of at least 80% of the
voting power of the outstanding shares of Voting Stock, including provisions
relating to the prohibition of stockholder action without a meeting; the calling
of special meetings and the business to be conducted thereat; the number,
election and term of directors; the removal of directors; and amendment of the
REX By-Laws.
Ohio law permits the adoption of amendments to the articles if such
amendments are approved at a meeting held for such purpose by the holders of
shares entitling them to exercise two-thirds of the voting power of the
corporation, or such lesser, but not less than a majority, or greater vote as
specified in the articles. The RSI Articles provide that, except in the case of
Article XI, they may be amended by the holders of shares entitling them to
exercise a majority of the voting power. Article XI, which requires the approval
of two-thirds of the voting power for certain mergers, consolidations and other
extraordinary transactions (unless the directors approve the transaction by an
87.5% majority, in which case the majority of the voting power is required), may
be amended only by holders of shares entitling them to exercise two-thirds of
the voting power.
Under Delaware law, the power to adopt, amend or repeal the by-laws resides
with the stockholders entitled to vote thereon. Such power may be conferred upon
the board of directors by the certificate, but this grant does not divest the
stockholders of their power to adopt, amend or appeal the by-laws. The REX
Certificate provides that the directors may adopt, amend or repeal the By-Laws,
but also requires that certain provisions of the By-Laws may only be amended by
an affirmative vote of the holders of at least 80 percent of the voting power of
the outstanding shares of Voting Stock. These provisions relate to the calling
of special meetings and the business conducted thereat; the business to be
conducted at an annual meeting; the nomination of director candidates; the
number, term and election of directors; the removal of directors; and amendment
of the REX By-Laws.
Under Ohio law, regulations may be adopted, amended or repealed only by
approval of the shareholders either at a meeting of shareholders by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power on such proposal or by written consent signed by holders of
shares entitling them to exercise two-thirds of the voting power on such
proposal. The articles or regulations may provide for amendment by a greater or
lesser proportion of the voting power, but not less than a majority. The RSI
Regulations state that provisions contained therein regarding the calling of
special meetings of shareholders, indemnification, nomination of directors and
introduction of business at shareholders' meetings, as well as the provision
regarding the amendment of the RSI Regulations, may be amended only by the
affirmative vote of holders of shares entitling them to exercise two-thirds of
the
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voting power. All other provisions may be amended by the affirmative vote of
holders of shares entitling them to exercise a majority of the voting power.
BOARD-APPROVED PREFERRED STOCK
Both Delaware law and Ohio law permit a corporation's certificate or
articles, respectively, to allow the board of directors to issue, without
shareholder approval, a series of preferred or preference stock and to designate
their rights, preferences, privileges and restrictions. Ohio law, however, does
not permit the board of directors to fix the voting rights of any such series of
preferred or preference stock. The REX Certificate grants such power, including
the power to fix the voting rights, to the REX Board. The RSI Articles grant
such power (other than the power to fix voting rights) to the RSI Board.
CUMULATIVE VOTING OF SHARES
Under Delaware law, stockholders of a corporation cannot elect directors by
cumulative voting unless its certificate so provides. The REX Certificate does
not provide for cumulative voting. As a result, the holders of shares having a
majority of the voting power in the election of directors are able to elect all
of the directors then being elected.
Under Ohio law, cumulative voting (unless eliminated by an amendment of the
articles) is required to be available for the election of directors if notice to
such effect is given by a shareholder prior to a shareholders' meeting and an
announcement to such effect is made at the meeting. The RSI Articles provide for
the elimination of cumulative voting rights. Hence, the holders of a majority of
the voting power of RSI in the election of directors can elect all of the
directors then being elected.
NUMBER OF DIRECTORS
Under Delaware law, unless the certificate specifies the number of
directors, a board of directors may change the authorized number of directors by
an amendment to the by-laws if fixed therein, or in such manner as may be
provided therein. If the certificate specifies the number of directors, then
that number can be changed only by amending the certificate. The REX Certificate
states that the number of directors shall be fixed by the REX By-Laws and may be
increased or decreased as prescribed by the REX By-Laws, but in no case shall
the number of directors be less than three. The REX By-Laws provide that,
subject to the Preferred Rights, the number of directors shall be not less than
three, with the exact number to be determined by a vote of the majority of
directors then in office.
Under Ohio law, the number of directors may be fixed or changed by the
shareholders or by the board of directors if so authorized by the articles or
regulations. The RSI Regulations provide that the number of directors which
shall constitute the whole board shall be limited to a maximum of ten, unless
changed by the directors or by a vote of the holders of a majority of shares
entitled to vote thereon.
REMOVAL OF DIRECTORS
In general, under both Delaware law and Ohio law, any or all of the
directors may be removed, with or without cause, by vote of the holders of a
majority of the shares then entitled to vote at an election of directors.
Delaware law permits a certificate to specify a greater majority. Ohio law
permits a greater majority to be specified in either the articles or the
regulations. The REX charter documents authorize removal only by the affirmative
vote of the holders of 80 percent of the voting power of the Voting Stock. The
RSI charter documents do not contain such a provision.
DISSENTERS' RIGHTS
Under Ohio law, shareholders are entitled to dissenters' appraisal rights
in the following situations: (a) to shareholders of an Ohio corporation which is
merged into or consolidated with another corporation; (b) to shareholders of an
Ohio corporation surviving a merger in cases where such shareholders were
entitled to vote on the merger; (c) to shareholders of an Ohio subsidiary
corporation being merged into
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its parent in a short-form merger; (d) to shareholders of the acquiring
corporation in a combination or majority share acquisition where such
shareholders are entitled to vote on the transaction; (e) to affected
shareholders in the case of certain amendments to the articles; and (f) to
shareholders of an Ohio corporation that sells or otherwise disposes of all or
substantially all of its assets. However, in mergers and consolidations in
which, after giving effect to the transaction, the original shareholders of the
acquiring corporation retain more than five-sixths of the voting power in the
election of directors, such shareholders are denied dissenters' appraisal rights
if they have no right to vote on the transaction.
Delaware law provides for dissenters' rights only in merger and
consolidation transactions. Even then, unless the corporation's certificate
provides otherwise, Delaware law denies dissenters' rights to (i) stockholders
of a corporation whose shares are either listed on a national securities
exchange, designated as a national market system security on an interdealer
quotation system by the National Association of Securities Dealers, Inc.
("NASD") or held by more than two thousand stockholders, if the stockholders of
such corporation receive only shares of the surviving corporation or of such a
listed or widely held corporation in the transaction or (ii) those stockholders
who are stockholders of a corporation surviving a merger if no vote by such
stockholders is required. The REX Certificate contains no provisions granting
dissenters' rights.
PAYMENT OF DIVIDENDS
Both Delaware law and Ohio law permit the payment of dividends and the
redemption of shares out of paid-in, earned or other surplus. However, under
Ohio law, if a dividend is paid out of capital surplus, shareholders must be so
notified. Under Delaware law, no such notice is required and dividends may also
be paid out of net profits for the fiscal year in which declared or out of net
profits for the preceding fiscal year, even if the corporation has no surplus.
REPURCHASE OF SHARES
Under Ohio law, a corporation may repurchase shares only in certain
specified instances or when the articles provide that the corporation shall have
the right to repurchase. The RSI Articles authorize RSI to redeem or repurchase
any of its shares to such extent, at such time, in such manner and on such terms
as the Board determines, but no such action shall cause RSI's assets to be less
than its liabilities plus stated capital nor may such action be effected if RSI
is insolvent or would be rendered insolvent thereby.
Delaware law permits the board of directors to authorize the repurchase of
a corporation's shares, so long as capital is not impaired and, in the case of
redeemable shares, so long as the purchase price is not greater than the
redemption price.
CONTROL SHARE ACQUISITION STATUTE
The Ohio control share acquisition statute requires any person making a
tender offer for an Ohio corporation to comply with certain filing, disclosure
and procedural requirements. Delaware has no similar statute.
Under the Ohio control share acquisition statute, any person who proposes
to make a control share acquisition must obtain prior shareholder approval. A
control share acquisition is the acquisition of shares of an issuing public
corporation resulting in the person being able to exercise voting power in the
election of directors of the issuing public corporation within three ranges: (a)
one-fifth to one-third, (b) one-third to one-half and (c) more than one-half of
such voting power. RSI is an issuing public corporation.
In order to obtain shareholder approval, the person seeking to make a
control share acquisition must deliver a statement to the issuing public
corporation containing (a) the identity of the acquiring person, (b) the number
of shares of the issuing public corporation owned by the acquiring person, (c)
the range of voting power under which the proposed control share acquisition
would fall, (d) a description of the terms of the proposed acquisition and (e)
representations that the acquisition is legal and that the acquiring person has
the financial capability to make the acquisition.
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The issuing public corporation must call a special shareholders' meeting to
vote on the proposed acquisition within 10 days of receiving the statement, and
the meeting must take place within 50 days of receipt of the statement. The
issuing public corporation must send to all shareholders a copy of the statement
and a summary of the issuing public corporation's position or recommendation on
the transaction.
The quorum requirement for the special meeting is a majority of the voting
power of the issuing public corporation in the election of directors and a
majority of the portion of such voting power which excludes shares owned by the
acquiring person and other interested shares. The acquiring person may proceed
with the control share acquisition if (a) it is approved by both the affirmative
vote of shares representing a majority of the quorum and by a majority of such
quorum (after excluding the voting power of any interested shares); and (b) the
acquisition is consummated within 360 days following the shareholders'
authorization. Dissenters' rights are not available to shareholders who vote
against authorization of a control share acquisition. Once an acquiring person
obtains more than 50% of the corporation's voting power, no further shareholder
approval is required under the control share acquisition act for his acquisition
of additional shares.
An issuing public corporation may elect to be excluded from the Ohio
control share acquisition statute by so providing in its articles or
regulations. The RSI charter documents do not provide for any such exclusion.
MERGER MORATORIUM STATUTES
Both Ohio and Delaware have "merger moratorium" statutes which are designed
to encourage potential acquirors of publicly traded corporations to obtain the
approval of the proposed target's board of directors prior to commencing a
tender offer.
The Ohio statute does so by focusing on the second step in a two-step
acquisition of an issuing public corporation and regulating the circumstances
under which a person may accomplish a second step once he has become an
interested shareholder in the first step of an acquisition. An interested
shareholder is defined generally as a person that is entitled to exercise 10% of
the voting power of an issuing public corporation. The basic restriction that
the statute imposes is an absolute moratorium on an issuing public corporation
engaging in any of a number of specified transactions for three years after the
date upon which an interested shareholder becomes such, unless prior to that
share acquisition date, the directors of the issuing public corporation have
approved either the transaction which the issuing public corporation proposes to
engage in or the interested shareholder's purchase of shares on the share
acquisition date. The transactions covered include, among other things, certain
mergers, consolidations and other extraordinary transactions, as well as certain
transactions in which the interested shareholder receives a particular benefit.
After the three-year period, the 10% shareholder can complete the transaction
only if, among other things, (a) approval is received from the holders of at
least two-thirds of the voting power of the issuing public corporation and by
holders of a majority of the voting power of the corporation, excluding shares
held by the interested shareholder; or (b) the transaction meets certain
criteria to ensure fairness to all shareholders. RSI is an issuing public
corporation under this statute.
The Delaware statute is also directed at the second step of a two-step
acquisition and provides that a corporation shall not engage in any business
combination with any interested stockholder for a three-year period following
the time that such stockholder becomes an interested stockholder, unless (a)
prior to such time the board of directors of the corporation approves either the
business combination or the transaction which results in the stockholder
becoming an interested stockholder; (b) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owns at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares); or
(c) at or subsequent to such time, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of at least
two-thirds of the outstanding voting stock which is not owned by the interested
stockholder. An interested stockholder includes any person who is the owner of
15% or more of the outstanding voting
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stock of the corporation, or is an affiliate or associate of the corporation and
was the owner of 15% or more of the outstanding voting stock of the corporation,
at any time within three years prior to the relevant date. A business
combination is a merger or consolidation, a sale or other disposition of more
than 10% of the corporation's assets, a security issuance that increases the
interested stockholder's proportionate share of the corporation's stock or any
other transaction that confers a potential benefit on the interested
stockholder.
Both the Ohio and the Delaware statutes permit a corporation to opt out of
the operation of the merger moratorium provisions. Neither RSI nor REX have done
so.
PROFIT DISGORGEMENT STATUTE
Ohio has enacted a profit disgorgement statute which permits a publicly
held corporation, subject to certain exceptions, to recover profits realized
from the disposition of its shares by a person who proposed to acquire the
corporation within 18 months of the disposition. This right of recovery does not
apply to a person who proves in court that his sole purpose in making the
proposal was to succeed in acquiring control of the corporation and that there
were reasonable grounds to believe that such person would acquire control.
Further, the aggregate amount of profit realized must exceed $250,000 before the
corporation may recover. If the corporation refuses to bring an action to
recover these profits, any shareholder may sue on behalf of the corporation. If
a judgment is rendered ordering recovery of any profits, the party bringing the
action is entitled to recovery of its attorney fees. Ohio law permits a
corporation to opt out of the statute, but RSI has not done so. Delaware has no
comparable statute.
AMENDMENT TO THE AMENDED ARTICLES OF INCORPORATION OF THE COMPANY
Approval of Proposal Two will constitute approval of the amendment to the
Amended Articles of Incorporation of the Company discussed under this heading.
Approval of Proposal Two is being sought because the Ohio General Corporation
Law requires such approval. Accordingly, if Proposal Two is not approved by the
shareholders, the proposed amendment could not occur.
NAME CHANGE
Shareholders will be asked to vote to amend the Company's Amended Articles
of Incorporation to change the name of Roadway Services, Inc. to "Caliber
System, Inc.", effective only if the Distribution occurs. Shareholders are being
asked to vote so to amend the Company's Amended Articles of Incorporation so
that RSI will be able to conduct its business under that name.
Additionally, the Chairman of the Company Board may determine to withdraw
the Name Change Proposal from consideration at the Special Meeting, or if
adopted by the shareholders, may determine not to file with the Ohio Secretary
of State, if further investigation reveals that "Caliber System, Inc." may not
be reasonably available for use by the Company. In such case, the Company
intends to propose an alternative name change for a vote by the shareholders of
the Company at the next annual meeting of shareholders.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF
THE AMENDMENT TO THE COMPANY'S RESTATED AMENDED ARTICLES OF INCORPORATION.
APPROVAL OF THE ADOPTION OF THE REX MANAGEMENT INCENTIVE STOCK PLAN
Approval of Proposal Three will constitute approval by shareholders of the
adoption by REX of the REX Management Incentive Stock Plan discussed in the
section entitled "REX Management and Executive Compensation -- REX Management
Incentive Stock Plan." Approval of such plan is sought to comply with Section
162(m) of the Code, and to preserve the deductibility to the Company under the
Code of compensation paid under such plan. See "Rex Management and Executive
Compensation --
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Federal Income Tax Consequences". No further approval by REX stockholders will
be required. If such approval is not obtained, the REX Management Incentive
Stock Plan will not become effective and any grants previously approved will be
void. For a complete description of the REX Management Incentive Stock Plan and
the Initial Awards, see "REX Management and Executive Compensation -- REX
Management Incentive Stock Plan."
The Company's Board of Directors believes that the approval of the REX
Management Incentive Stock Plan is in the best interests of the Company and the
stockholders of REX because the REX Management Incentive Stock Plan and the
Initial Awards will enable REX to provide competitive equity incentives to
officers and other key employees to enhance the profitability of REX and
increase the value of the REX Common Stock received in the Distribution and is
consistent with the purposes of the Distribution.
RECOMMENDATION
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE "FOR" APPROVAL OF
THE REX MANAGEMENT INCENTIVE STOCK PLAN.
OTHER MATTERS
EXPERTS
The consolidated financial statements of the Company appearing in the
Company's Annual Report on Form 10-K for the year ended December 31, 1994, have
been audited by Ernst & Young LLP, independent auditors, as set forth in their
report included therein and incorporated by reference herein. Such consolidated
financial statements are incorporated herein by reference in reliance upon such
report given upon the authority of such firm as experts in accounting and
auditing.
The consolidated financial statements of REX at December 31, 1994 and 1993
and for each of the three years in the period ended December 31, 1994, appearing
in this Proxy Statement have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon appearing elsewhere herein, and
are included in reliance upon such report given upon the authority of such firm
as experts in accounting and auditing.
It is anticipated that representatives of Ernst & Young LLP will attend the
Special Meeting, will have the opportunity to make a statement and will be
available to respond to appropriate questions from shareholders.
SHAREHOLDER PROPOSALS
As described in the Company's proxy statement for the 1995 annual meeting
of shareholders, proposals which shareholders intend to present at the 1996
annual meeting of shareholders must be received by the Company at its principal
offices no later than December 11, 1995 in order to be included in the proxy
material for the 1996 annual meeting.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated herein by reference:
1. Annual Report on Form 10-K for the fiscal year ended December 31,
1994.
2. Quarterly Report on Form 10-Q for the quarterly period ended March
25, 1995.
3. Quarterly Report on Form 10-Q for the quarterly period ended June
17, 1995.
4. Quarterly Report on Form 10-Q for the quarterly period ended
September 9, 1995.
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The Company will provide without charge to each person to whom a copy of
this Proxy Statement is delivered, on the telephonic or written request of any
such person, by first class mail or other equally prompt means within one
business day of receipt of such request, a copy of any or all of the foregoing
documents incorporated herein by reference (other than any exhibits to such
documents which are not specifically incorporated herein by reference). Requests
should be directed to:
Roadway Services, Inc.
1077 Gorge Boulevard
Akron, Ohio 44310
P.O. Box 88
Akron, Ohio 44309-0088
Telephone No.: (216) 384-8184
Attention: Corporate Secretary.
All documents filed by the Company with the Commission pursuant to Section
13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof and prior to
the date of the Special Meeting or any adjournment thereof shall be deemed to be
incorporated by reference herein.
Any statements contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes hereof to the extent
that a statement contained herein (or in any other subsequently filed document
that also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall be deemed to constitute
a part hereof except as so modified or superseded.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and the rules and regulations promulgated thereunder and in accordance
therewith files, reports, proxy statements and other information with the
Commission. Reports, proxy statements and other information filed by the Company
may be inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 and at
the Regional Offices of the Commission at Seven World Trade Center, Suite 1300,
New York, New York 10048 and in the Citicorp Center, Suite 1400, 500 West
Madison Street, Chicago, Illinois 60661. Copies of such information may be
obtained by mail from the Public Reference Section of the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
REX will file with the Commission a Registration Statement on Form 10 with
respect to the shares of REX Common Stock to be received by the shareholders of
the Company in the Distribution and will request effectiveness of such
Registration Statement prior to the Distribution Date. After its filing, the
Registration Statement on Form 10 and the exhibits thereto may be inspected and
copied at the public reference facilities of the Commission listed above.
REPORTS OF REX
After the Distribution, REX will be required to comply with the reporting
requirements of the Exchange Act and, in accordance therewith, to file reports,
proxy statements and other information with the Commission.
After the Distribution, such reports, proxy statements and other
information may be inspected and copied at the public reference facilities of
the Commission listed above under "Available Information" and obtained by mail
from the Commission as described above under "Available Information".
Additionally, REX intends to provide annual reports, containing audited
financial statements, to its shareholders in connection with its annual meetings
of shareholders.
100
<PAGE> 108
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
<TABLE>
<S> <C>
Financial Statements
Report of Independent Auditors......................................................... F-2
Consolidated Balance Sheets............................................................ F-3
Statements of Consolidated Income...................................................... F-4
Statements of Consolidated Earnings Reinvested in the Business......................... F-4
Statements of Consolidated Cash Flows.................................................. F-5
Notes to Consolidated Financial Statements............................................. F-6
Financial Statement Schedule
Valuation and Qualifying Accounts...................................................... F-12
</TABLE>
F-1
<PAGE> 109
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors
Roadway Services, Inc.
We have audited the accompanying consolidated balance sheets of Roadway
Express, Inc. ("REX") and subsidiaries as of December 31, 1994 and 1993, and the
related statements of consolidated income, earnings reinvested in the business,
and cash flows for each of the three years in the period ended December 31,
1994. Our audits also included the financial statement schedule listed in the
accompanying index to financial statements and schedule. These financial
statements and schedule are the responsibility of REX's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Roadway
Express, Inc. and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
As discussed in Notes D and E to the consolidated financial statements, in
1993 REX changed its methods of accounting for income taxes and postretirement
benefits other than pensions.
Ernst & Young LLP
Akron, Ohio
September 29, 1995
F-2
<PAGE> 110
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
SEPTEMBER 9, DECEMBER 31,
1995 -------------------------
(UNAUDITED) 1994 1993
------------ ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents....................... $ 22,006 $ 24,028 $ 17,086
Accounts receivable, net of allowance for
uncollectible accounts (1994--$4,400,000,
1993--$5,230,000)............................ 236,156 229,488 201,374
Prepaid expenses and supplies................... 14,316 12,702 15,563
Deferred income taxes--Note D................... 4,670 5,456 1,061
------------ ---------- ----------
Total current assets.............................. 277,148 271,674 235,084
Carrier operating property--at cost:
Land............................................ 81,542 78,895 77,780
Structures...................................... 356,824 354,960 340,199
Revenue equipment............................... 823,930 832,184 821,515
Other operating equipment....................... 173,260 173,997 222,231
------------ ---------- ----------
1,435,556 1,440,036 1,461,725
Less allowances for depreciation................ 995,325 965,870 956,407
------------ ---------- ----------
Total carrier operating property.................. 440,231 474,166 505,318
Deferred income taxes--Note D..................... 2,720 -- --
------------ ---------- ----------
Total assets...................................... $ 720,099 $ 745,840 $ 740,402
============= ========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current liabilities:
Accounts payable--Note C........................ $ 110,667 $ 118,525 $ 112,196
Salaries and wages.............................. 111,334 133,976 114,248
Short-term borrowings from affiliate--Note B.... 29,000 10,000 --
Freight and casualty claims payable within one
year......................................... 71,087 67,113 62,576
Due to affiliates--Note B....................... -- -- 9,612
------------ ---------- ----------
Total current liabilities......................... 322,088 329,614 298,632
Long-term liabilities:
Casualty claims payable after one year.......... 90,454 87,028 74,215
Future equipment repairs........................ 28,373 25,546 22,433
Retiree medical--Note E......................... 43,930 40,780 37,732
Deferred income taxes--Note D................... -- 6,922 6,969
------------ ---------- ----------
Total long-term liabilities....................... 162,757 160,276 141,349
Shareholder's equity:
Common stock-without par value:
Authorized and issued 1,000 shares........... 39,898 39,898 39,898
Additional capital.............................. 3,408 3,408 3,408
Earnings reinvested in the business............. 191,948 212,644 257,115
------------ ---------- ----------
Total shareholder's equity........................ 235,254 255,950 300,421
------------ ---------- ----------
Total liabilities and shareholder's equity........ $ 720,099 $ 745,840 $ 740,402
============= ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 111
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
----------------------------
SEPTEMBER 9, SEPTEMBER 10, YEAR ENDED DECEMBER 31,
1995 1994 --------------------------------------
(UNAUDITED) (UNAUDITED) 1994 1993 1992
------------ ------------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Revenue..................... $1,569,991 $ 1,443,002 $2,171,117 $2,323,696 $2,185,703
Operating expenses:
Salaries, wages and
benefits............... 1,067,515 1,024,289 1,512,235 1,559,462 1,434,714
Operating supplies and
expenses............... 272,095 272,466 388,268 384,079 373,549
Purchased
transportation......... 102,965 59,443 105,486 82,693 67,367
Operating taxes and
licenses............... 52,565 52,062 74,031 78,769 72,936
Insurance and claims...... 39,978 30,888 46,913 50,306 42,713
Provision for
depreciation........... 50,470 53,450 75,750 96,126 95,688
Net (gain) loss on sale of
carrier operating
property............... (550) (1,363) (2,628) (552) 286
------------ ------------- ---------- ---------- ----------
Total operating expenses.... 1,585,038 1,491,235 2,200,055 2,250,883 2,087,253
------------ ------------- ---------- ---------- ----------
Operating income (loss)..... (15,047) (48,233) (28,938) 72,813 98,450
Other (expense) income:
Interest expense.......... (2,615) (2,306) (3,218) (1,137) (585)
Other, net................ (139) 1,328 1,443 1,033 2,384
------------ ------------- ---------- ---------- ----------
(2,754) (978) (1,775) (104) 1,799
------------ ------------- ---------- ---------- ----------
Income (loss) before income
taxes and cumulative
effect of accounting
changes................... (17,801) (49,211) (30,713) 72,709 100,249
Provision (benefit) for
income taxes.............. (4,605) (22,209) (9,268) 31,890 39,337
------------ ------------- ---------- ---------- ----------
Income (loss) before
cumulative effect of
accounting changes........ (13,196) (27,002) (21,445) 40,819 60,912
Cumulative effect of
accounting changes--Notes
D and E................... -- -- -- (14,691) --
============= ============== ========== ========== ==========
Net income (loss)........... $ (13,196) $ (27,002) $ (21,445) $ 26,128 $ 60,912
============= ============== ========== ========== ==========
</TABLE>
STATEMENTS OF CONSOLIDATED EARNINGS
REINVESTED IN THE BUSINESS
<TABLE>
<CAPTION>
THIRTY-SIX
WEEKS ENDED
SEPTEMBER 9, YEAR ENDED DECEMBER 31
1995 --------------------------------------
(UNAUDITED) 1994 1993 1992
------------ ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C>
Balance at beginning of year............. $ 212,644 $ 257,115 $ 257,987 $ 255,075
Net (loss) income for the period......... (13,196) (21,445) 26,128 60,912
------------ ---------- ---------- ----------
199,448 235,670 284,115 315,987
Less dividends declared.................. (7,500) (23,026) (27,000) (58,000)
------------ ---------- ---------- ----------
Balance at end of period................. $ 191,948 $ 212,644 $ 257,115 $ 257,987
============= ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 112
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
<TABLE>
<CAPTION>
THIRTY-SIX WEEKS ENDED
----------------------------
SEPTEMBER 9, SEPTEMBER 10, YEAR ENDED DECEMBER 31,
1995 1994 --------------------------------------
(UNAUDITED) (UNAUDITED) 1994 1993 1992
------------ ------------- ---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES
Net income (loss)........... $ (13,196) $ (27,002) $ (21,445) $ 26,128 $ 60,912
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities:
Cumulative effect of
accounting changes....... -- -- -- 14,691 --
Depreciation.............. 50,440 53,616 76,893 96,220 95,723
(Gain) loss on sale of
carrier operating
property................. (550) (1,363) (2,628) (552) 286
Changes in assets and
liabilities:
Accounts receivable.... (13,879) (30,730) (28,114) (36,067) (19,503)
Other current assets... (798) (1,382) (2,945) 5,919 2,450
Accounts payable and
accrued items......... (19,316) 30,091 22,872 14,975 (470)
Long-term
liabilities........... (238) 9,998 17,060 16,778 577
------------ ------------- ---------- ---------- ----------
Net cash provided by
operating activities....... 2,463 33,228 61,693 138,092 139,975
CASH FLOWS FROM INVESTING
ACTIVITIES
Purchases of carrier
operating property......... (19,303) (17,815) (60,556) (131,957) (93,482)
Sales of carrier operating
property................... 3,318 4,088 7,805 3,148 4,020
------------ ------------- ---------- ---------- ----------
Net cash used in investing
activities................. (15,985) (13,727) (52,751) (128,809) (89,462)
CASH FLOWS FROM FINANCING
ACTIVITIES
Dividends paid.............. (7,500) -- (12,000) (27,000) (58,000)
Net borrowings from
affiliate.................. 19,000 -- 10,000 -- --
------------ ------------- ---------- ---------- ----------
Net cash provided by (used)
in financing activities.... 11,500 -- (2,000) (27,000) (58,000)
------------ ------------- ---------- ---------- ----------
Net (decrease) increase in
cash and cash
equivalents................ (2,022) 19,501 6,942 (17,717) (7,487)
Cash and cash equivalents at
beginning of period........ 24,028 17,086 17,086 34,803 42,290
------------ ------------- ---------- ---------- ----------
Cash and cash equivalents at
end of period.............. $ 22,006 $ 36,587 $ 24,028 $ 17,086 $ 34,803
============= ============== ========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE> 113
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1994
INFORMATION AS OF AND FOR THE PERIODS ENDED
SEPTEMBER 9, 1995 AND SEPTEMBER 10, 1994 IS UNAUDITED
NOTE A -- BASIS OF PRESENTATION AND ACCOUNTING POLICIES
Basis of Presentation -- Roadway Express, Inc. ("REX") is a wholly-owned
subsidiary of Roadway Services, Inc. ("RSI"). The consolidated financial
statements of REX and its subsidiaries included herein are presented in
connection with a proposed distribution of at least 95% of the common shares of
Roadway Express, Inc. to the common shareholders of RSI (the "Distribution").
The assets, liabilities, revenues and expenses included in the accompanying
financial statements are based on historical amounts included in the
consolidated financial statements of RSI.
Principles of Consolidation -- The consolidated financial statements
include the accounts and operations of REX and its subsidiaries. All significant
intercompany accounts and transactions have been eliminated. Operations are
exclusively within the transportation industry, primarily serving the national,
less-than-truck load ("LTL") market.
Depreciation -- Depreciation of carrier operating property is computed by
the straight-line method based on the useful lives of the assets: structures 15
to 33 years, equipment 3 to 10 years.
Casualty Claims Payable -- These accruals represent claims for property
damage and public liability, and workers' compensation, including estimated
amounts for incurred but not reported claims. Expenses resulting from workers'
compensation claims are included in salaries, wages and benefits in the
accompanying statement of consolidated income.
Future Equipment Repairs -- This accrual represents the estimated costs of
anticipated major future repairs on intercity tractors.
Revenue -- REX recognizes revenue as earned on the date of freight delivery
to consignee. Related expenses are recognized as incurred.
Cash Equivalents -- REX considers all highly liquid investments with a
maturity of three months or less when purchased to be cash equivalents.
NOTE B -- ALLOCATIONS AND RELATED PARTY TRANSACTIONS
REX receives various corporate support services from RSI and other
affiliated companies including cash management and short-term financing, legal,
risk management and data processing. Charges for such services generally are
based on actual costs incurred. Management believes amounts charged by RSI and
other affiliated companies are reasonable and approximate amounts which would
have been incurred had REX operated on a stand-alone basis. Charges from
affiliated companies, (principally corporate support services) amounted to
$13,395,000 in 1994, $14,744,000 in 1993 and $16,036,000 in 1992. Such
allocations amounted to $7,332,000 and $9,428,000 for the thirty-six weeks ended
September 9, 1995 and September 10, 1994, respectively.
During 1994, REX entered into a short-term borrowing arrangement through a
line-of-credit agreement with RSI. The agreement allows borrowings up to
$50,000,000. To date, the maximum amount outstanding under this agreement has
been $44,000,000. Interest is payable each accounting period and is determined
based on the prime lending rate of a commercial lending institution less 1%.
Interest expense under the agreement was $22,000 in 1994 and $1,465,000 for the
thirty-six weeks ended September 9, 1995. Interest payments to RSI were
$7,309,000 for the thirty six-weeks ended September
F-6
<PAGE> 114
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE B -- ALLOCATIONS AND RELATED PARTY TRANSACTIONS -- CONTINUED
9, 1995, $420,000 in 1994, $737,000 in 1993 and $585,000 in 1992. Interest paid
included amounts to settle tax examinations.
Effective January 1, 1994, REX transferred most of the assets and certain
employees of its data processing subsidiary to RSI in the form of a dividend.
The net book value of the assets transferred was $11,026,000. REX incurred
charges of approximately $28,000,000 in 1994, $19,790,000 for the thirty-six
weeks ended September 9, 1995 and $19,063,000 for the thirty-six weeks ended
September 10, 1994 for the data processing services provided by this affiliated
company. These charges, which are included in operating supplies and expenses,
approximated the costs incurred when REX owned the data processing affiliate.
NOTE C -- ACCOUNTS PAYABLE
Items classified as accounts payable consist of the following:
<TABLE>
<CAPTION>
1995
(UNAUDITED) 1994 1993
----------- ----------- -----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Trade and other payables.................... $ 36,639 $ 46,833 $ 47,463
Drafts outstanding.......................... 22,052 25,437 21,478
Taxes, other than income.................... 25,761 25,255 23,108
Union health, welfare and pension........... 26,215 21,000 20,147
----------- ----------- -----------
Total accounts payable...................... $ 110,667 $ 118,525 $ 112,196
============ ========= =========
</TABLE>
NOTE D -- INCOME TAXES
The domestic operations of REX are included in the consolidated Federal
income tax return of RSI. The provision for income taxes reflects an allocation
of Federal income taxes computed on a separate return basis.
Effective January 1, 1993, REX adopted the provisions of Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." The cumulative effect of adopting SFAS 109 resulted in an increase in
1993 earnings of $5,732,000.
In accordance with SFAS 109, REX uses the liability method of accounting
for income taxes. Deferred income taxes are provided for temporary differences
between financial statement and income tax reporting, using tax rates scheduled
to be in effect at the time the items giving rise to the deferred taxes reverse.
F-7
<PAGE> 115
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D -- INCOME TAXES -- CONTINUED
Significant components of REX's deferred tax liabilities and assets are as
follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Depreciation.................................................... $ 66,729 $ 59,378
Pensions........................................................ 17,745 19,371
-------- --------
Total deferred tax liabilities.................................... 84,474 78,749
Deferred tax assets:
Freight and casualty claims..................................... 51,981 44,472
Retiree medical................................................. 15,904 14,716
Other........................................................... 15,123 13,653
-------- --------
Total deferred tax assets......................................... 83,008 72,841
-------- --------
Net deferred tax liabilities...................................... $ 1,466 $ 5,908
======== ========
</TABLE>
Income (loss) before income taxes and the cumulative effect of accounting
changes consists of the following:
<TABLE>
<CAPTION>
1995
(UNAUDITED) 1994 1993 1992
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Domestic......................... $ (24,793) $ (40,968) $ 63,278 $ 95,339
Foreign.......................... 6,992 10,255 9,431 4,910
----------- ----------- ----------- -----------
$ (17,801) $ (30,713) $ 72,709 $ 100,249
============ ========= ========= =========
</TABLE>
The provision (benefit) for income taxes consists of the following:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Taxes currently payable:
Federal.......................................... $ (4,974) $ 26,904 $ 35,382
State and local.................................. (1,745) 6,082 7,212
Foreign.......................................... 4,705 4,181 2,706
-------- -------- --------
(2,014) 37,167 45,300
Deferred taxes (credits):
Federal.......................................... (6,312) (4,737) (5,257)
State and local.................................. (721) (541) (618)
Foreign.......................................... (221) 1 (88)
-------- -------- --------
(7,254) (5,277) (5,963)
-------- -------- --------
Provision (benefit) for income taxes............... $ (9,268) $ 31,890 $ 39,337
======== ======== ========
</TABLE>
Income tax payments amounted to $1,268,000 in 1994, $36,052,000 in 1993 and
$32,026,000 in 1992 including payments of $27,552,000 and $27,171,000 during
1993 and 1992, respectively, made to RSI for REX's allocated share of federal
and certain state income taxes.
F-8
<PAGE> 116
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE D -- INCOME TAXES -- CONTINUED
Deferred income taxes (benefits) include the following:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Depreciation....................................... $ 5,115 $ (13) $ (3,549)
Freight and casualty claims........................ (7,509) (6,294) (721)
Pensions........................................... (1,627) 2,100 --
Retiree medical.................................... (1,755) (2,199) --
Other, net......................................... (1,478) 1,129 (1,693)
-------- -------- --------
$ (7,254) $ (5,277) $ (5,963)
======== ======== ========
</TABLE>
The effective tax rate (benefit) differs from the federal statutory rate as
set forth in the following reconciliation:
<TABLE>
<CAPTION>
1994 1993 1992
------- ------- -------
<S> <C> <C> <C>
Federal statutory tax rate.......................... (35.0%) 35.0% 34.0%
State income taxes, net of Federal tax benefit...... (5.2) 5.0 4.3
Non-deductible operating costs...................... 7.6 1.7 1.2
Impact of foreign operations........................ 2.3 1.2 .8
Other, net.......................................... .1 1.0 (1.1)
------- ------- -------
(30.2%) 43.9% 39.2%
====== ====== ======
</TABLE>
NOTE E -- EMPLOYEE BENEFIT PLANS
REX charged to operations $94,245,000 in 1994, $97,682,000 in 1993 and
$90,229,000 in 1992 for contributions to multi-employer pension plans for
employees subject to labor contracts. REX also charged to operations
$112,947,000 in 1994, $114,167,000 in 1993 and $102,127,000 in 1992 for
contributions to multi-employer plans that provide health and welfare benefits
to employees and retirees who are or were subject to labor contracts. These
amounts were determined in accordance with provisions of industry labor
contracts.
REX participates in RSI sponsored defined benefit pension plans covering
employees not subject to labor contracts. The benefits are based on, among other
things, years of service and average compensation during employment with REX.
Pension expense for these plans was allocated to REX based on amounts that would
approximate net pension cost on a stand-alone basis. Allocated pension expense
was $13,000,000 in 1994 and 1993 and $1,200,000 in 1992. The increase in pension
cost subsequent to 1992 reflects a plan amendment that significantly increased
benefits to participants effective January 1, 1993.
F-9
<PAGE> 117
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE E -- EMPLOYEE BENEFIT PLANS -- CONTINUED
The following table sets forth the RSI plans' (including REX) funded status
and related accrued pension cost.
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Actuarial present value of benefit obligations:
Accumulated benefit obligation, including vested benefits
of $275,611 in 1994 and $264,908 in 1993............... $ 313,130 $ 302,638
========= =========
Projected benefit obligation for service rendered to
date................................................... $ 384,016 $ 380,034
Plan assets at fair value, primarily listed stocks, bonds
and U. S. government securities........................... 391,319 364,792
--------- ---------
Plan assets greater (less) than projected benefit
obligation................................................ 7,303 (15,242)
Unrecognized net gain....................................... (35,010) (25,812)
Unrecognized prior service cost............................. 75,959 81,216
Unrecognized net asset at transition........................ (39,209) (42,009)
--------- ---------
Prepaid (accrued) pension cost.............................. $ 9,043 $ (1,847)
========= =========
</TABLE>
The weighted-average discount rate and rate of increase in future
compensation levels used in determining the actuarial present value of the
projected benefit obligation were 7% and 4% in 1994, and 6.5% and 4% in 1993.
The expected long-term rate of return on assets was 7.75%. If the assumed
discount rate had remained unchanged during 1994, RSI's projected benefit
obligation would have been $36 million higher.
REX also participates in an RSI sponsored plan that provides health care
benefits to certain retirees who were not subject to labor contracts. RSI's
policy is to allocate all costs associated with this plan on a stand-alone
basis. During 1993, eligible new retirees began contributing to the cost of
these benefits. Prior to 1993, the cost of these benefits was recognized when
incurred. Effective January 1, 1993, REX adopted the provisions of SFAS 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." Under
SFAS 106, the costs of these benefits is recognized during eligible employment.
REX recorded the entire transition obligation of $32,491,000 ($20,423,000 after
tax) as a cumulative effect of an accounting change against 1993 earnings.
The following table sets forth the amounts recognized in the balance sheet
for REX's allocated portion of the plan's obligation:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees................................................. $ (4,746) $ (4,843)
Fully eligible active plan participants.................. (3,796) (4,392)
Other active plan participants........................... (30,089) (35,148)
--------- ---------
(38,631) (44,383)
Unrecognized net (gain) loss............................... (2,149) 6,651
--------- ---------
Accrued postretirement benefit cost........................ $ (40,780) $ (37,732)
========= =========
</TABLE>
F-10
<PAGE> 118
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE E -- EMPLOYEE BENEFIT PLANS -- CONTINUED
Net periodic postretirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Service cost of benefits earned during the year............ $ 2,496 $ 2,674
Interest cost on accumulated postretirement benefit
obligation............................................... 2,574 2,785
Net amortization and deferral.............................. -- 75
--------- ---------
Net postretirement benefit cost............................ $ 5,070 $ 5,534
========= =========
</TABLE>
Postretirement benefit payments amounted to $1,086,000 in 1994, $940,000 in
1993 and $797,000 in 1992.
At December 31, 1994, the assumed health care cost trend rate is 12% for
1995 and is assumed to decrease gradually to 6.25% by 2006 and remain at that
level thereafter. At December 31, 1993, the assumed rate was 12.75% for 1994,
decreasing gradually to 6.25% by 2006. The health care cost trend rate
assumption has a significant effect on the amounts reported. For example,
increasing the assumed health care cost trend rates by one percentage point in
each year would increase the accumulated postretirement benefit obligation as of
December 31, 1994 and 1993 by $6.5 million and $7.5 million, respectively, and
the aggregate of the service and interest cost components of net periodic
postretirement benefit cost for 1994 by $1 million.
The weighted-average discount rate used in determining the actuarial
present value of the accumulated postretirement benefit obligation was 7% and
6.5% at December 31, 1994 and 1993, respectively.
REX contributed $10,472,000 in 1994, $14,779,000 in 1993 and $18,207,000 in
1992 to various employee defined contribution plans sponsored by RSI which
invest primarily in RSI common stock. These plans generally cover employees not
subject to labor contracts. Annual contributions are related to profitability
and employees' salaries and wages.
NOTE F -- OPERATING LEASES
REX leases certain terminals under noncancellable operating leases
requiring minimum future rentals aggregating $32,500,000 payable as follows:
1995-$6,500,000, 1996-$6,300,000, 1997-$4,300,000, 1998-$2,800,000,
1999-$2,400,000 and thereafter $10,200,000. Rental expense for operating leases
was $5,500,000, $6,200,000 and $5,400,000 for 1994, 1993 and 1992, respectively.
NOTE G -- CONTINGENCIES AND COMMITMENTS
Various legal proceedings arising from the normal conduct of business are
pending but, in the opinion of management, the ultimate disposition of these
matters is not expected to have a material effect on the results of operations
or financial condition of REX.
F-11
<PAGE> 119
VALUATION AND QUALIFYING ACCOUNTS
ROADWAY EXPRESS, INC. AND SUBSIDIARIES
YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------
COL. A COL. B COL. C COL. D COL. E
- ------------------------------------------------------------------------------------------------
ADDITIONS
-------------------------
(2)
(1) CHARGED TO
BALANCE CHARGED TO OTHER BALANCE
AT BEGINNING COST ACCOUNTS- DEDUCTIONS- AT END
DESCRIPTION OF PERIOD AND EXPENSES DESCRIBE DESCRIBE OF PERIOD
- ------------------------------------------------------------------------------------------------
(A)
<S> <C> <C> <C> <C> <C>
1994
Allowance for uncollectible
accounts $5,230 $5,845 $6,675 $4,400
1993
Allowance for uncollectible
accounts $5,740 $5,992 $6,502 $5,230
1992
Allowance for uncollectible
accounts $4,300 $7,225 $5,785 $5,740
</TABLE>
(A) Uncollectible accounts written off, net of recoveries.
F-12
<PAGE> 120
ANNEX A
DISSENTER'S RIGHTS
OHIO GENERAL CORPORATION LAW
SECTION 1701.85 DISSENTING SHAREHOLDER'S DEMAND FOR FAIR CASH VALUE OF
SHARES.
(A)(1) A shareholder of a domestic corporation is entitled to relief as a
dissenting shareholder in respect of the proposals described in sections
1701.74, 1701.76, and 1701.84 of the Revised Code, only in compliance with this
section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record holder of the
shares of the corporation as to which he seeks relief as of the date fixed for
the determination of shareholders entitled to notice of a meeting of the
shareholders at which the proposal is to be submitted, and such shares shall not
have been voted in favor of the proposal. Not later than ten days after the date
on which the vote on the proposal was taken at the meeting of the shareholders,
the dissenting shareholder shall deliver to the corporation a written demand for
payment to him of the fair cash value of the shares as to which he seeks relief,
which demand shall state his address, the number and class of such shares, and
the amount claimed by him as the fair cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C) of
section 1701.84 of the Revised Code in the case of a merger pursuant to section
1701.80 of the Revised Code and a dissenting shareholder entitled to relief
under division (E) of section 1701.84 of the Revised Code in the case of a
merger pursuant to section 1701.801 of the Revised Code shall be a record holder
of the shares of the corporation as to which he seeks relief as of the date on
which the agreement of merger was adopted by the directors of that corporation.
Within twenty days after he has been sent the notice provided in section 1701.80
or 1701.801 of the Revised Code, the dissenting shareholder shall deliver to the
corporation a written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the surviving or the new
entity, whether the demand is served before, on, or after the effective date of
the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the address
specified in his demand, a request for the certificates representing the shares
as to which he seeks relief, the dissenting shareholder, within fifteen days
from the date of the sending of such request, shall deliver to the corporation
the certificates requested so that the corporation may forthwith endorse on them
a legend to the effect that demand for the fair cash value of such shares has
been made. The corporation promptly shall return such endorsed certificates to
the dissenting shareholder. A dissenting shareholder's failure to deliver such
certificates terminates his rights as a dissenting shareholder, at the option of
the corporation, exercised by written notice sent to the dissenting shareholder
within twenty days after the lapse of the fifteen-day period, unless a court for
good cause shown otherwise directs. If shares represented by a certificate on
which such a legend has been endorsed are transferred, each new certificate
issued for them shall bear a similar legend, together with the name of the
original dissenting holder of such shares. Upon receiving a demand for payment
from a dissenting shareholder who is the record holder of uncertificated
securities, the corporation shall make an appropriate notation of the demand for
payment in its shareholder records. If uncertificated shares for which payment
has been demanded are to be transferred, any new certificate issued for the
shares shall bear the legend required for certificated securities as provided in
this paragraph. A transferee of the shares so endorsed, or of uncertificated
securities where such notation has been made, acquires only such rights in the
corporation as the original dissenting holder of such shares had immediately
after the service of a demand for payment of the fair cash value of the shares.
A request under this paragraph by the corporation is not an admission by the
corporation that the shareholder is entitled to relief under this section.
A-1
<PAGE> 121
(B) Unless the corporation and the dissenting shareholder have come to an
agreement on the fair cash value per share of the shares as to which the
dissenting shareholder seeks relief, the dissenting shareholder or the
corporation, which in case of a merger or consolidation may be the surviving or
new entity, within three months after the service of the demand by the
dissenting shareholder, may file a complaint in the court of common pleas of the
county in which the principal office of the corporation that issued the shares
is located or was located when the proposal was adopted by the shareholders of
the corporation, or, if the proposal was not required to be submitted to the
shareholders, was approved by the directors. Other dissenting shareholders,
within that three-month period, may join as plaintiffs or may be joined as
defendants in any such proceeding, and any two or more such proceedings may be
consolidated. The complaint shall contain a brief statement of the facts,
including the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such a complaint is required. Upon the filing of
such a complaint, the court, on motion of the petitioner, shall enter an order
fixing a date for a hearing on the complaint and requiring that a copy of the
complaint and a notice of the filing and of the date for hearing be given to the
respondent or defendant in the manner in which summons is required to be served
or substituted service is required to be made in other cases. On the day fixed
for the hearing on the complaint or any adjournment of it, the court shall
determine from the complaint and from such evidence as is submitted by either
party whether the dissenting shareholder is entitled to be paid the fair cash
value of any shares and, if so, the number and class of such shares. If the
court finds that the dissenting shareholder is so entitled, the court may
appoint one or more persons as appraisers to receive evidence and to recommend a
decision on the amount of the fair cash value. The appraisers have such power
and authority as is specified in the order of their appointment. The court
thereupon shall make a finding as to the fair cash value of a share and shall
render judgment against the corporation for the payment of it, with interest at
such rate and from such date as the court considers equitable. The costs of the
proceeding, including reasonable compensation to the appraisers to be fixed by
the court, shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding and final orders in it may be vacated,
modified, or reversed on appeal pursuant to the Rules of Appellate Procedure
and, to the extent not in conflict with those rules, Chapter 2505. of the
Revised Code. If, during the pendency of any proceeding instituted under this
section, a suit or proceeding is or has been instituted to enjoin or otherwise
to prevent the carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be stayed until
the final determination of the other suit or proceeding. Unless any provision in
division (D) of this section is applicable, the fair cash value of the shares
that is agreed upon by the parties or fixed under this section shall be paid
within thirty days after the date of final determination of such value under
this division, the effective date of the amendment to the articles, or the
consummation of the other action involved, whichever occurs last. Upon the
occurrence of the last such event, payment shall be made immediately to a holder
of uncertificated securities entitled to such payment. In the case of holders of
shares represented by certificates, payment shall be made only upon and
simultaneously with the surrender to the corporation of the certificates
representing the shares for which the payment is made.
(C) If the proposal was required to be submitted to the shareholders of the
corporation, fair cash value as to those shareholders shall be determined as of
the day prior to the day on which the vote by the shareholders was taken and, in
the case of a merger pursuant to section 1701.80 or 1701.801 of the Revised
Code, fair cash value as to shareholders of a constituent subsidiary corporation
shall be determined as of the day before the adoption of the agreement of merger
by the directors of the particular subsidiary corporation. The fair cash value
of a share for the purposes of this section is the amount that a willing seller
who is under no compulsion to sell would be willing to accept and that a willing
buyer who is under no compulsion to purchase would be willing to pay, but in no
event shall the fair cash value of a share exceed the amount specified in the
demand of the particular shareholder. In computing such fair cash value, any
appreciation or depreciation in market value resulting from the proposal
submitted to the directors or to the shareholders shall be excluded.
(D)(1) The right and obligation of a dissenting shareholder to receive such
fair cash value and to sell such shares as to which he seeks relief, and the
right and obligation of the corporation to purchase such shares and to pay the
fair cash value of them terminates if any of the following applies:
A-2
<PAGE> 122
(a) The dissenting shareholder has not complied with this section,
unless the corporation by its directors waives such failure;
(b) The corporation abandons the action involved or is finally
enjoined or prevented from carrying it out, or the shareholders rescind
their adoption of the action involved;
(c) The dissenting shareholder withdraws his demand, with the consent
of the corporation by its directors;
(d) The corporation and the dissenting shareholder have not come to an
agreement as to the fair cash value per share, and neither the shareholder
nor the corporation has filed or joined in a complaint under division (B)
of this section within the period provided in that division.
(2) For purposes of division (D)(1) of this section, if the merger or
consolidation has become effective and the surviving or new entity is not a
corporation, action required to be taken by the directors of the corporation
shall be taken by the general partners of a surviving or new partnership or the
comparable representatives of any other surviving or new entity.
(E) From the time of the dissenting shareholder's giving of the demand
until either the termination of the rights and obligations arising from it or
the purchase of the shares by the corporation, all other rights accruing from
such shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution is paid in
money upon shares of such class or any dividend, distribution, or interest is
paid in money upon any securities issued in extinguishment of or in substitution
for such shares, an amount equal to the dividend, distribution, or interest
which, except for the suspension, would have been payable upon such shares or
securities, shall be paid to the holder of record as a credit upon the fair cash
value of the shares. If the right to receive fair cash value is terminated other
than by the purchase of the shares by the corporation, all rights of the holder
shall be restored and all distributions which, except for the suspension, would
have been made shall be made to the holder of record of the shares at the time
of termination.
A-3
<PAGE> 123
ANNEX B
November 24, 1995
Roadway Services, Inc.
1077 Gorge Boulevard
Akron, Ohio 44309-0088
Attention: Board of Directors
Ladies and Gentlemen:
You have requested our opinion as to the fairness to the holders of the
common stock of Roadway Services, Inc. ("Services" or the "Company") of the
proposed distribution of at least 95% of the Roadway Express, Inc. ("Express")
common stock currently held by Services ("Express Common Stock") to the holders
of Services common stock ("Services Common Stock"), on a pro rata basis, as more
fully described in the Services Proxy Statement dated November 24, 1995 (the
"Distribution").
Goldman Sachs, as part of its investment banking business, is continually
engaged in the evaluation of businesses and their financial structures in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. Goldman
Sachs is familiar with the Company and the market for its securities having
acted as financial advisor to the Company in connection with the Distribution.
In arriving at our opinion, we have, among other things: (i) conducted
discussions with members of the current senior managements of Services and
Express with regard to the operations and prospects of each business; (ii)
analyzed certain historical business and financial information related to
Services and Express and business line information related thereto provided to
us by Services management; (iii) reviewed certain projections for Services and
Express and business line information related thereto provided to us by Services
and Express management; (iv) reviewed public information relating to Services
and its subsidiaries, including the Services Annual Reports on Form 10-K for the
five years ended December 31, 1994 and Quarterly Report on Form 10-Q for the
three and six month periods ended June 30, 1995; (v) reviewed public information
with respect to certain other companies in lines of business we believe to be
generally comparable to certain of the businesses conducted by Services and
Express and (vi) conducted such other studies, analyses and investigations as we
deemed appropriate.
We have relied upon the accuracy and completeness of the historical and
forecasted financial and other information regarding Services and Express and
their business lines and subsidiaries provided to us, and have not undertaken
any independent verification of any such information. We have assumed and have
not independently verified the reasonableness of the projections provided by
management in connection with our analysis of Services and Express. We have not
made any appraisals nor have we been furnished with independent appraisals of
any of the assets of Services or Express. At your instruction we have assumed
projections will be realized in amounts shown and at times stated. Further, our
opinion is based on economic, monetary and market conditions existing on the
date of this opinion, and we have not undertaken to reaffirm or revise or
supplement this opinion based upon any events occurring after the date hereof.
B-1
<PAGE> 124
Roadway Services, Inc.
November 24, 1995
Page Two
After the completion of the Distribution, Services will own no more than 5%
of Express Common Stock. We have assumed with your consent that receipt of the
Express Common Stock will be tax-free for Federal income tax purposes to the
stockholders of Services and that Services will not recognize income, gain or
loss as a result of the Distribution.
Based upon and subject to the foregoing and in light of the fact that the
Distribution will be on a pro rata basis to each of the holders of Services
Common Stock, it is our opinion that the Distribution is fair to such holders.
Very truly yours,
Goldman, Sachs & Co.
B-2
<PAGE> 125
ANNEX C
ROADWAY EXPRESS, INC. MANAGEMENT INCENTIVE STOCK PLAN
(EFFECTIVE AS OF JANUARY 1, 1996)
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C>
1. Purpose........................................................................ C-2
2. Definitions.................................................................... C-2
3. Shares Available under the Plan................................................ C-3
4. Incentive Shares............................................................... C-3
5. Transferability................................................................ C-4
6. Adjustments.................................................................... C-4
7. Fractional Shares.............................................................. C-5
8. Withholding Taxes.............................................................. C-5
9. Participation by Employees of a Less-Than-80-Percent Subsidiary................ C-5
10. Certain Terminations of Employment, Hardship and Approved Leaves of Absence.... C-5
11. Foreign Employees.............................................................. C-5
12. Administration of the Plan..................................................... C-6
13. Amendments and Other Matters................................................... C-6
</TABLE>
<PAGE> 126
1. PURPOSE. The purpose of this Plan is to attract and retain officers and
key employees for Roadway Express, Inc., a Delaware corporation (the "Company"),
and its Subsidiaries and to provide such persons with incentives and rewards for
superior performance. The Company will be spun off from Roadway Services, Inc.,
an Ohio corporation ("RSI"), on or about January 1, 1996 (the "Spin-off"). Prior
to the Spin-off RSI is the sole shareholder of the Company.
2. DEFINITIONS. As used in this Plan,
"BOARD" means the Board of Directors of the Company.
"CODE" means the Internal Revenue Code of 1986, as amended from time
to time.
"COMMITTEE" means the committee described in Section 12(a) of this
Plan.
"COMMON SHARES" or "COMMON STOCK" means (i) shares of the common stock
of the Company without par value and (ii) any security into which Common
Shares may be converted by reason of any transaction or event of the type
referred to in Section 6 of this Plan.
"COVERED EMPLOYEE" means a Participant who is, or is determined by the
Committee to be likely to become, a "covered employee" within the meaning
of Section 162(m) of the Code (or any successor provision).
"DATE OF GRANT" means the date specified by the Committee on which a
grant or sale of Incentive Shares shall become effective, which shall not
be earlier than the date on which the Committee takes action with respect
thereto.
"EFFECTIVE DATE" means January 1, 1996; provided, however, that the
effectiveness of the Plan is conditioned on its approval (i) by an
affirmative vote of the holders of the Common Stock of RSI prior to the
Spin-off, at a meeting duly held in accordance with Ohio law, or (ii) by an
affirmative vote of the holders of Common Stock of the Company after the
Spin-off, at a meeting duly held in accordance with Delaware law, in each
case in compliance with the provisions of Section 162(m) of the Code and
the regulations, if any, thereunder. All grants under the Plan to Covered
Employees shall be null and void if the Plan is not approved by such RSI or
Company holders in accordance with Section 162(m) of the Code.
"INCENTIVE SHARES" or "INCENTIVE STOCK" means Common Shares granted or
sold pursuant to Section 4 of this Plan as to which neither the substantial
risk of forfeiture nor the restrictions on transfer referred to in Section
4 hereof has expired.
"LESS-THAN-80-PERCENT SUBSIDIARY" means a Subsidiary with respect to
which the Company directly or indirectly owns or controls less than 80
percent of the total combined voting or other decision-making power.
"MANAGEMENT OBJECTIVES" means the achievement of a performance
objective or objectives established pursuant to this Plan for Participants
who have received grants of Incentive Shares when so determined. Management
Objectives may be described in terms of Company-wide objectives or
objectives that are related to the performance of the individual
Participant or of the Subsidiary, division, department or function within
the Company or Subsidiary in which the Participant is employed. The
Management Objectives applicable to any award to a Covered Employee shall
be limited to specified levels of or growth in:
<TABLE>
<C> <S>
(i) return on invested capital;
(ii) earnings per share;
(iii) return on assets;
(iv) return on equity;
(v) shareholder return (including price increases);
(vi) sales growth; and/or
(vii) productivity improvement.
</TABLE>
C-2
<PAGE> 127
Except in the case of such a covered employee, if the Committee
determines that a change in the business, operations, corporate structure
or capital structure of the Company, or the manner in which it conducts its
business, or other events or circumstances render the Management Objectives
unsuitable, the Committee may in its discretion modify such Management
Objectives or the related minimum acceptable level of achievement, in whole
or in part, as the Committee deems appropriate and equitable.
"MARKET VALUE PER SHARE" means the fair market value of the Common
Shares as determined by the Committee from time to time.
"PARTICIPANT" means a person who is selected by the Committee to
receive benefits under this Plan and who is at that time an officer,
including without limitation an officer who may also be a member of the
Board, or other key employee of the Company or any Subsidiary or who has
agreed to commence serving in any such capacity.
"PLAN" means the Roadway Express, Inc. Management Incentive Stock Plan
effective January 1, 1996.
"RULE 16B-3" means Rule 16b-3 of the Securities and Exchange
Commission (or any successor rule to the same effect), as in effect from
time to time.
"SUBSIDIARY" means a corporation, partnership, limited liability
company, joint venture, unincorporated association or other entity in which
the Company has a direct or indirect ownership or other equity interest.
3. SHARES AVAILABLE UNDER THE PLAN. Subject to adjustment as provided in
Section 6 of this Plan, the number of Common Shares issued or transferred as
Incentive Shares and released from all substantial risks of forfeiture shall not
in the aggregate exceed 1,200,000 Common Shares, which may be Common Shares of
original issuance or Common Shares held in treasury or a combination thereof.
The maximum number of Common Shares covered by the Plan which may be granted to
any Participant for any year shall not exceed seventy-five thousand (75,000).
4. INCENTIVE SHARES. The Committee may authorize grants or sales to
Participants of Incentive Shares upon such terms and conditions as the Committee
may determine in accordance with the following provisions:
(a) Each grant or sale shall constitute an immediate transfer of the
ownership of Common Shares to the Participant in consideration of the
performance of services, entitling such Participant to dividend, voting
and other ownership rights, subject to the substantial risk of
forfeiture and restrictions on transfer hereinafter referred to.
(b) Each grant or sale may be made without additional consideration from
the Participant or in consideration of a payment by the Participant
that is less than the Market Value per Share on the Date of Grant.
(c) Each grant or sale shall provide that the Incentive Shares covered
thereby shall be subject to a "substantial risk of forfeiture" within
the meaning of Section 83 of the Code for a period to be determined by
the Committee on the Date of Grant, and any grant or sale may provide
for the earlier termination of such period in the event of a change in
control of the Company or other similar transaction or event.
(d) Each grant or sale shall provide that, during the period for which such
substantial risk of forfeiture is to continue, the transferability of
the Incentive Shares shall be prohibited or restricted in the manner
and to the extent prescribed by the Committee on the Date of Grant.
Such restrictions may include without limitation rights of repurchase
or first refusal in the Company or provisions subjecting the Incentive
Shares to a continuing substantial risk of forfeiture in the hands of
any transferee.
C-3
<PAGE> 128
(e) Any grant of Incentive Shares may specify Management Objectives which,
if achieved, will result in termination or early termination of the
restrictions applicable to such shares and each grant may specify in
respect of such specified Management Objectives, a minimum acceptable
level of achievement and shall set forth a formula for determining the
number of Incentive Shares on which restrictions will terminate if
performance is at or above a specified minimum level, but falls short
of full achievement of the specified Management Objectives. The grant
of Incentive Shares will specify that the Committee must certify that
the Management Objectives have been satisfied before the restrictions
on the Incentive Shares shall terminate.
(f) Any grant of Incentive Shares may provide that upon the attainment of
certain Management Objectives, the Company can issue that number of
Common Shares equal to the number of Incentive Shares previously
forfeited by the Participant pursuant to the Plan.
(g) Any grant or sale may require that any or all dividends or other
distributions paid on the Incentive Shares during the period of such
restrictions be automatically sequestered. Such distribution may be
reinvested on an immediate or deferred basis in additional Common
Shares, which may be subject to the same restrictions as the underlying
award or such other restrictions as the Committee may determine.
(h) Each grant or sale shall be evidenced by an agreement, which shall be
executed on behalf of the Company by any officer thereof and delivered
to and accepted by the Participant and shall contain such terms and
provisions as the Committee may determine consistent with this Plan.
Unless otherwise directed by the Committee, all certificates
representing Incentive Shares, together with a stock power that shall
be endorsed in blank by the Participant with respect to such shares,
shall be held in custody by the Company until all restrictions thereon
lapse.
5. TRANSFERABILITY. (a) No Incentive Shares awarded under this Plan shall
be transferable by a Participant other than by will or the laws of descent and
distribution. Notwithstanding the foregoing, the Committee, in its sole
discretion, may provide for transferability of particular awards under this Plan
so long as such provisions will not disqualify the exemption for other awards
under Rule 16b-3.
(b) Any award made under this Plan may provide that all or any part of the
Common Shares that are no longer subject to the substantial risk of forfeiture
and restrictions on transfer referred to in Section 4 of this Plan, shall be
subject to further restrictions upon transfer.
6. ADJUSTMENTS. The Committee may make or provide for such adjustments in
the (a) number of Incentive Shares granted hereunder, (b) the vesting formula
applicable to such Incentive Shares, and (c) kind of shares (including shares of
another issuer) covered thereby, as the Committee in its sole discretion may in
good faith determine to be equitably required in order to prevent dilution or
enlargement of the rights of Participants that otherwise would result from (x)
any stock dividend, stock split, combination of shares, recapitalization or
other change in the capital structure of the Company, (y) any merger,
consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial
or complete liquidation or other distribution of assets, issuance of rights or
warrants to purchase securities or (z) any other corporate transaction or event
having an effect similar to any of the foregoing. In the event of any such
transaction or event, the Committee may provide in substitution for any or all
outstanding awards under this Plan such alternative consideration as it may in
good faith determine to be equitable under the circumstances and may require in
connection therewith the surrender of all awards so replaced. Moreover, the
Committee may on or after the Date of Grant provide in the agreement evidencing
any award under this Plan that the holder of the award may elect to receive an
equivalent award in respect of securities of the surviving entity of any merger,
consolidation or other transaction or event having a similar effect, or the
Committee may provide that the holder will automatically be entitled to receive
such an equivalent award. The Committee may also make or provide for such
adjustments in the number of shares specified in Section 3 of this Plan as the
Committee in its sole discretion may in good faith determine to be appropriate
in order to reflect any transaction or event described in this Section 6.
Notwithstanding any provision set forth in this Section 6, the Committee shall
not make any adjustment or substitution with
C-4
<PAGE> 129
respect to the number of Incentive Shares or kind of shares issued to a Covered
Employee if such adjustment or substitution would constitute a "discretionary"
grant of compensation within the meaning of section 162(m) of the Code or
regulations promulgated thereunder.
7. FRACTIONAL SHARES. The Company shall not be required to issue any
fractional Common Shares pursuant to this Plan. The Committee may provide for
the elimination of fractions or for the settlement thereof in cash.
8. WITHHOLDING TAXES. To the extent that the Company is required to
withhold federal, state, local or foreign taxes in connection with any payment
made or benefit realized by a Participant or other person under this Plan, and
the amounts available to the Company for such withholding are insufficient, it
shall be a condition to the receipt of such payment or the realization of such
benefit that the Participant or such other person make arrangements satisfactory
to the Company for payment of the balance of such taxes required to be withheld.
At the discretion of the Committee, such arrangements may include mandatory or
voluntary relinquishment of a portion of such benefit. The Company and any
Participant or such other person may also make similar arrangements with respect
to the payment of any taxes with respect to which withholding is not required.
9. PARTICIPATION BY EMPLOYEES OF A LESS-THAN-80-PERCENT SUBSIDIARY. As a
condition to the effectiveness of any grant or award to be made hereunder to a
Participant who is an employee of a Less-Than-80-Percent Subsidiary, regardless
whether such Participant is also employed by the Company or another Subsidiary,
the Committee may require the Less-Than-80-Percent Subsidiary to agree to
transfer to the Participant (as, if and when provided for under this Plan and
any applicable agreement entered into between the Participant and the
Less-Than-80-Percent Subsidiary pursuant to this Plan) the Common Shares that
would otherwise be delivered by the Company upon receipt by the Less-Than-80-
Percent Subsidiary of any consideration then otherwise payable by the
Participant to the Company. Any such award may be evidenced by an agreement
between the Participant and the Less-Than-80-Percent Subsidiary, in lieu of the
Company, on terms consistent with this Plan and approved by the Committee and
the Less-Than-80-Percent Subsidiary. All Common Shares so delivered by or to a
Less-Than-80-Percent Subsidiary will be treated as if they had been delivered by
or to the Company for purposes of Section 3 of this Plan, and all references to
the Company in this Plan shall be deemed to refer to the Less-Than-80-Percent
Subsidiary except with respect to the definitions of the Board and the Committee
and in other cases where the context otherwise requires.
10. CERTAIN TERMINATIONS OF EMPLOYMENT, HARDSHIP AND APPROVED LEAVES OF
ABSENCE. Notwithstanding any other provision in any other Section of this Plan
to the contrary, in the event of termination of employment by reason of death,
disability, normal retirement, early retirement with the consent of the Company,
termination of employment to enter public service with the consent of the
Company or leave of absence approved by the Company, or in the event of hardship
or other special circumstances, of a Participant who holds any Incentive Shares
as to which the substantial risk of forfeiture or the prohibition or restriction
on transfer has not lapsed, the Committee may in its sole discretion take any
action that it deems to be equitable under the circumstances or in the best
interests of the Company, including without limitation waiving or modifying any
limitation or requirement with respect to any award under this Plan.
Notwithstanding the foregoing, the Committee may not take any action with
respect to a Covered Employee's award if such action would constitute a
"discretionary" grant of compensation within the meaning of section 162(m) of
the Code or regulations promulgated thereunder.
11. FOREIGN EMPLOYEES. In order to facilitate the making of any grant or
combination of grants under this Plan, the Committee may provide for such
special terms for awards to Participants who are foreign nationals, or who are
employed by the Company or any Subsidiary outside of the United States of
America, as the Committee may consider necessary or appropriate to accommodate
differences in local law, tax policy or custom. Moreover, the Committee may
approve such supplements to, or amendments, restatements or alternative versions
of, this Plan as it may consider necessary or appropriate for such
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purposes without thereby affecting the terms of this Plan as in effect for any
other purpose, and the Secretary or other appropriate officer of the Company may
certify any such document as having been approved and adopted in the same manner
as this Plan. No such special terms, supplements, amendments or restatements
shall include any provisions that are inconsistent with the terms of this Plan
as then in effect unless this Plan could have been amended to eliminate such
inconsistency without further approval by the shareholders of the Company.
12. ADMINISTRATION OF THE PLAN. (a) This Plan shall be administered by the
Compensation Committee of the Board, as it shall be constituted from time to
time. The Committee shall be composed of not less than three members of the
Board, each of whom shall be a "disinterested person" within the meaning of Rule
16b-3 and an "outside director" within the meaning of Section 162(m) of the
Code. A majority of the Committee shall constitute a quorum, and the acts of the
members of the Committee who are present at any meeting thereof at which a
quorum is present, or acts unanimously approved by the members of the Committee
in writing, shall be the acts of the Committee.
(b) The interpretation and construction by the Committee of any provision
of this Plan or of any agreement, notification or document evidencing the grant
of Incentive Shares and any determination or any exercise of discretion by the
Committee pursuant to any provision of this Plan or any such agreement,
notification or document, shall be final and conclusive. No member of the
Committee shall be liable for any such action taken or determination made in
good faith.
13. AMENDMENTS AND OTHER MATTERS. (a) This Plan may be amended from time to
time by the Committee, but except as expressly authorized by this Plan no such
amendment shall increase the maximum number of shares specified in Section 3 of
this Plan or cause Rule 16b-3 to become inapplicable to this Plan, without the
further approval of the shareholders of the Company. The Committee may amend
this Plan to eliminate provisions which are no longer necessary as a result of
changes in tax or securities laws or regulations, or in the interpretation
thereof.
(b) This Plan shall not confer upon any Participant any right with respect
to continuance of employment or other service with the Company or any Subsidiary
and shall not interfere in any way with any right that the Company or any
Subsidiary would otherwise have to terminate any Participant's employment or
other service at any time.
(c) Any award that may be made pursuant to an amendment to this Plan that
shall have been adopted without the approval of the shareholders of the Company
shall be null and void if it is subsequently determined that such approval was
required in order for Rule 16b-3 to remain applicable to this Plan.
(d) This Plan is intended to comply with and be subject to Rule 16b-3 as in
effect prior to May 1, 1991. The Committee may at any time elect that this Plan
shall be subject to Rule 16b-3 as in effect after May 1, 1991.
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<PAGE> 131
ROADWAY SERVICES, INC.
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR
P THE SPECIAL MEETING OF SHAREHOLDERS, DECEMBER 14, 1995
R The undersigned hereby appoints R.A. Chenoweth, D.J. Sullivan
and D.A. Wilson, or any of them or their substitutes, as Proxies, each
O with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all the shares of common
X stock of Roadway Services, Inc. held of record by the undersigned at
the close of business on November 14, 1995, at the Special Meeting of
Y Shareholders to be held Thursday, December 14, 1995, or any adjournment
therof. In their discretion, the proxies are authorized to vote upon
such other business as may properly come before the meeting.
This proxy, when properly executed, will be voted in the manner
directed herein by the undersigned shareholder. If no direction is
made, this proxy will be voted FOR all three of the proposals.
YOU ARE ENCOURAGED TO SPECIFY YOUR CHOICES BY MARKING THE APPROPRIATE
BOXES, SEE REVERSE SIDE, BUT YOU NEED NOT MARK ANY BOXES IF YOU WISH TO VOTE IN
ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS. THE PROXIES CANNOT
VOTE YOUR SHARES UNLESS YOU SIGN AND RETURN THIS CARD.
/ SEE REVERSE /
/ SIDE /
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DETACH CARD
<PAGE> 132
<TABLE>
<S> <C> <C>
/ X / PLEASE MARK YOUR SHARES IN YOUR NAME REINVESTMENT SHARES |
VOTES AS IN THIS |
EXAMPLE. |______
</TABLE>
<TABLE>
<CAPTION>
FOR AGAINST ABSTAIN
<S> <C> <C> <C>
1. Approval of the distribution of at least ninety-five / / / / / /
percent (95%) of the outstanding REX Common Stock on
the basis of one share of REX Common Stock for each
two shares of Company Common Stock.
2. Approval of an amendment to the Amended Articles of / / / / / /
Incorporation with respect to the Company's name
change.
3. Approval of the adoption by REX of the REX Management / / / / / /
Incentive Stock Plan.
</TABLE>
Confidential
Vote
Requested
/ /
<TABLE>
<S> <C>
SIGNATURE(S) _______________________________________________ DATE _______________________
SIGNATURE(S) _______________________________________________ DATE _______________________
NOTE: Please sign exactly as name appears hereon. Joint
owners should each sign. When signing as attorney,
executor, administrator, trustee or guardian, please
give full title as such. Please mark, sign, date and
return the proxy promptly in the enclosed postage
paid envelope.
</TABLE>
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DETACH CARD
