Item 1.01. Entry into a Material Definitive Agreement.
On March 15, 2021, Forward Air Corporation (“Forward Air” or the “Company”) entered into a Cooperation Agreement (the “Agreement”) with Ancora Merlin, LP, Ancora Merlin Institutional, LP, Ancora Catalyst, LP, Ancora Catalyst Institutional, LP, Ancora Catalyst SPV I LP – Series I, Ancora Catalyst SPV I LP – Series J, Ancora Catalyst SPV I LP – Series K, Ancora Catalyst SPV I LP – Series L, Ancora Catalyst SPV I SPC LTD. – Segregated Portfolio E, Ancora Alternatives LLC, Ancora Advisors, LLC, Ancora Family Wealth Advisors, LLC, The Ancora Group Inc., Inverness Holdings LLC, Ancora Holdings Inc. and Frederick DiSanto (collectively, the “Ancora Parties”), pursuant to which Forward Air (i) increased the size of the board of directors of Forward Air (the “Board”) to fifteen directors and (ii) appointed Scott M. Niswonger, Richard H. Roberts (together with Mr. Niswonger, the “Ancora Appointees”), George S. Mayes, Chitra Nayak and Javier Polit (Ms. Nayak and Messrs. Polit and Mayes, collectively with the Ancora Appointees, the “New Independent Directors”) to the Board, with such appointments effective immediately. Existing directors C. John Langley, Jr. and W. Gilbert West will not stand for re-election at the 2021 annual meeting of shareholders of Forward Air (the “2021 Annual Meeting”) and accordingly will retire from the Board at the 2021 Annual Meeting. In addition, provided that the Ancora Parties continue to beneficially own in the aggregate at least the lesser of (i) 3.5% of Forward Air’s then-outstanding common stock, par value $0.01 (“Common Stock”), and (ii) 963,518 shares of Common Stock (subject to adjustment) (the “Ownership Level Minimum”), Forward Air has agreed to include each of the Ancora Appointees as part of Forward Air’s slate of nominees for election to the Board at the 2021 Annual Meeting, which will consist of the New Independent Directors and the following existing Forward Air directors: Ronald W. Allen, Ana B. Amicarella, Valerie A. Bonebrake, C. Robert Campbell, R. Craig Carlock, G. Michael Lynch, Thomas Schmitt and Laurie A. Tucker.
Subsequent to the date of the 2021 Annual Meeting and prior to the expiration of the Standstill Period (as defined below), the Board and all applicable committees of the Board will not increase the size of the Board above 13 directors without the prior written consent of the Ancora Parties. In addition, if, during the Standstill Period, any Ancora Appointee resigns from the Board or is unable (due to death or disability) or refuses to serve on the Board, so long as the Ancora Parties at that time and at all times since the date of the Agreement beneficially own in the aggregate at least the Ownership Level Minimum, then the Ancora Parties and Forward Air will work together to identify a mutually acceptable replacement for appointment to the Board on the terms set forth in the Agreement.
Forward Air has agreed to consider each Ancora Appointee for membership on one or more committees of the Board in the same manner as other independent members of the Board.
The Ancora Parties have withdrawn their slate of director nominees and any related materials or notices, including the letter dated January 6, 2021 demanding, pursuant to Section 48-26-102 of the Tennessee Code, to inspect books, records and documents of the Company, submitted in connection with the 2021 Annual Meeting.
During the Standstill Period, the Ancora Parties have agreed to vote all of their shares of Common Stock in favor of recommendations of the Board with respect to (i) the election, removal and/or replacement of directors (a “Director Proposal”), (ii) the ratification of the appointment of the Company’s independent registered public accounting firm and (iii) any other proposal submitted to the Company’s shareholders at a meeting of the Company’s shareholders, in each case as such recommendation of the Board is set forth in the applicable definitive proxy statement filed in respect thereof. Notwithstanding the foregoing, in the event both Institutional Shareholder Services Inc. (“ISS”) and Glass Lewis & Co., LLC (“Glass Lewis”) make a recommendation that differs from the recommendation of the Board with respect to any proposal submitted to the shareholders at any meeting of the Company’s shareholders (other than Director Proposals), the Ancora Parties are permitted to vote in accordance with the ISS and Glass Lewis recommendation. The Ancora Parties are also entitled to vote in their sole discretion with respect to any publicly announced proposal relating to a merger, acquisition, disposition of all or substantially all of the assets of the Company and its subsidiaries or other business combination involving the Company, in each case, that requires a vote of the Company’s shareholders.
Forward Air is not required to include any Ancora Appointee (or any replacement thereof) or any of the other New Independent Directors on its slate of director nominees at any annual meeting following the 2021 Annual Meeting.
The Agreement also includes customary standstill, non-disparagement and expense reimbursement provisions. The standstill restrictions on the Ancora Parties began on the date of the Agreement and remain in effect until the earlier of (i) the date that is 20 days prior to the deadline for the submission of shareholder nominations for the 2022 annual meeting of shareholders of Forward Air and (ii) the date that is 110 days prior to the first anniversary of the 2021 Annual Meeting (such period, the “Standstill Period”).
The Agreement will terminate upon the expiration of the last day of the Standstill Period, unless earlier terminated by mutual written agreement of Forward Air and the Ancora Parties.
While any Ancora Appointee serves on the Board, such Ancora Appointee will receive compensation on the same basis as all other non-employee directors of the Company.
The foregoing description of the Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Agreement filed as Exhibit 10.1 hereto, which is incorporated herein by reference.
In addition, in connection with the Agreement, Forward Air has entered into a Consulting Agreement with Andrew C. Clarke, pursuant to which Mr. Clarke, as a consultant, will assist the Chief Executive Officer of Forward Air with identifying opportunities for operational improvements to the Company’s business and designing and implementing strategies to achieve such improvements.