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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 14D-9
Solicitation/Recommendation Statement under Section 14(d)(4)
of the Securities Exchange Act of 1934
American Freightways Corporation
(Name of Subject Company)
American Freightways Corporation
(Names of Persons Filing Statement)
Common Stock Par Value $.01
(Title of Class of Securities)
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02629V108
(CUSIP Number of Class of Securities)
Frank Conner
American Freightways Corporation
2200 Forward Drive
Harrison, AR 72601
870-741-9000
(Name, address, and telephone numbers of person authorized to receive
notices and communications on behalf of the persons filing statement)
Copies to:
Jeffrey J. Gearhart
Goodloe M. Partee
Holly L. Larkin
Kutak Rock LLP
425 West Capitol Avenue
Suite 1100
Little Rock, AR 72201
501-975-3000
[_] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Item 1. Subject Company Information.
The name of the subject company to which this Solicitation/Recommendation
Statement on Schedule 14D-9 (this "Statement") relates is American Freightways
Corporation, an Arkansas corporation (the "Company"). The address of the
principal executive offices of the Company is 2200 Forward Drive, Harrison,
Arkansas 72601. The telephone number of the principal executive offices of the
Company is (870) 741-9000.
The title of the class of securities to which this Statement relates is the
common stock of the Company, $.01 par value (the "Shares"). As of November 10,
2000, there were 32,521,705 Shares outstanding, and 2,717,510 Shares issuable
upon exercise of outstanding stock options.
Item 2. Identity and Background of Filing Person.
The name, address and telephone number of the Company, which is the person
filing this Statement, are set forth in Item 1 above.
This Statement relates to the offer by FDX, Inc., a Delaware corporation
("Purchaser") and a wholly-owned subsidiary of FedEx Corporation, a Delaware
corporation ("FedEx"), disclosed in a Tender Offer Statement on Schedule TO
filed by Purchaser and FedEx (the "Schedule TO") with the Securities and
Exchange Commission (the "SEC") on November 20, 2000, to purchase up to 50.1%
(the "Maximum Amount") of the outstanding Shares and associated rights at a
purchase price of $28.13 per Share, net to the seller in cash (the "Offer
Price"), upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated November 20, 2000 and filed as Exhibit (a)(1) to the
Schedule TO (the "Offer to Purchase"). The Offer to Purchase and the related
Letter of Transmittal, as they may be amended and supplemented from time to
time, together constitute the "Offer".
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of November 12, 2000, among FedEx, Purchaser and the Company (the "Merger
Agreement"). The Merger Agreement provides, among other things, that as soon
as practicable after consummation of the Offer and the satisfaction or waiver
of certain conditions set forth in the Merger Agreement, in accordance with
the relevant provisions of the General Corporation Law of the State of
Delaware and the Arkansas Business Corporation Act of 1987 ("ABCA"), the
Company will be merged with and into the Purchaser (the "Merger"). Following
the effective time of the Merger (the "Effective Time"), Purchaser will
continue as the surviving corporation (the "Surviving Corporation").
In the Merger, each of the Shares issued and outstanding immediately prior
to the Effective Time (other than Shares held by Purchaser, FedEx or any other
subsidiary of FedEx, which Shares shall be canceled and retired, and other
than the Shares, if any, held by shareholders who have properly demanded and
perfected their dissenter's rights under Arkansas Code Annotated Section 4-27-
1301 et seq.) will, by virtue of the Merger and without any action on the part
of the holders of the Shares, be converted into the right to receive the
number of shares of FedEx common stock, par value $.10 per share ("FedEx
Common Stock"), determined by dividing $28.13 by the market price per share of
FedEx common stock, defined as the average closing price per FedEx share on
the New York Stock Exchange (the "NYSE") for the 10 trading days selected by
FedEx and the Company by lot out of 20 trading days ending on and including
the fifth trading day prior to the Effective Time of the Merger.
As set forth in the Schedule TO, the address of the principal executive
offices of FedEx and Purchaser is 942 South Shady Grove Road, Memphis,
Tennessee.
Item 3. Past Contacts, Transactions, Negotiations and Agreements.
Certain contracts, agreements, arrangements or understandings between the
Company or its affiliates with certain of its directors and executive officers
are, except as noted below, described in the Information Statement pursuant to
Schedule 14f-1 (the "Information Statement") that is attached as Annex I and
is incorporated herein by reference. Except as described or referred to in
this Schedule 14D-9 and in Annex I, to the knowledge of the Company, as of the
date hereof, there are no material agreements, arrangements or understandings,
or any actual or potential conflicts of interest, between the Company or its
affiliates and (i) the Company's executive officers, directors or affiliates;
or (ii) FedEx or the Purchaser, or their respective officers, directors or
affiliates.
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In considering the recommendation of the Board of Directors of the Company
(the "Company Board") set forth in Item 4 below, the Company's shareholders
should be aware that certain members of the Company's management and certain
members of the Company's Board of Directors have interests in the Offer and
the Merger, which are described herein and in Annex I hereto and which may
present them with certain conflicts of interest. The Board of Directors is
aware of these potential conflicts and considered them along with the other
factors described in Item 4 below.
THE MERGER AGREEMENT
A summary of the material provisions of the Merger Agreement is set forth
below. The summary is qualified in its entirety by reference to the complete
text of the Merger Agreement, which is filed as an exhibit to the Company's
Form 10-Q filed with the SEC on November 14, 2000 and is incorporated herein
by reference. The summary is qualified in its entirety by reference to the
complete text of the Merger Agreement.
The Offer
The Merger Agreement provides for the making of the Offer. The Offer is
subject to the conditions described in "Conditions to the Offer", including,
among other things, (i) there being validly tendered and not withdrawn prior
to the Expiration Date (as defined below) a number of Shares representing
50.1% of the total number of Shares outstanding (the "Minimum Condition") and
(ii) any waiting periods under applicable antitrust laws having expired or
been terminated. The Offer is also subject to other conditions. Subject to the
provisions of the Merger Agreement, Purchaser may waive, in whole or in part
at any time or from time to time, any condition to the Offer; provided that
without the prior written consent of the Company Purchaser cannot make any
change that changes the form of consideration to be paid in the Offer or the
Merger, decreases the price per Share, increases the Minimum Condition or the
Maximum Amount, imposes additional conditions to the Offer or amends any term
or any condition to the Offer in a manner materially adverse to the holders of
the Shares.
Purchaser has the right, without the consent of the Company, to waive the
Minimum Condition and extend the Offer (i) from time to time if, at the
scheduled or extended expiration date of the Offer, any of the conditions to
the Offer have not been satisfied or waived (until such conditions are
satisfied or waived) for a number of days not to exceed 60 in the aggregate
and (ii) for any period required by any rule, regulation, interpretation or
position of the SEC or the staff of the SEC applicable to the Offer or any
period required by applicable law.
"Expiration Date" means 12:00 Midnight, New York City time, on Thursday,
December 21, 2000, unless Purchaser extends the period of time for which the
Offer is open under the terms set forth in the Merger Agreement, in which
event "Expiration Date" means the latest time and date at which the Offer, as
so extended, shall expire.
Recommendation
The Company Board has unanimously (i) determined that each of the Merger
Agreement, the Offer and the Merger is fair to, and in the best interest of,
the holders of Shares, (ii) approved the Merger Agreement and the transactions
contemplated thereby, including each of the Offer and the Merger and
(iii) resolved to recommend that the shareholders of the Company who desire to
receive cash for their Shares accept the Offer and tender their Shares and
that, following consummation of the Offer, the shareholders of the Company
adopt the Merger Agreement and vote in favor of the Merger.
The Company's financial advisor, Credit Suisse First Boston Corporation,
and, as a consequence of a merger of Donaldson, Lufkin and Jenrette Securities
Corporation ("DLJ") with an affiliate of Credit Suisse First Boston
Corporation in November 2000, its affiliate DLJ ("CSFB"), has delivered to the
Company Board its opinion dated November 12, 2000, to the effect that, as of
such date, and based on and subject to the matters stated in the opinion, the
consideration to be received by holders of Shares in the Offer and in the
Merger is fair from a financial point of view to those shareholders. The full
text of the opinion, including the assumptions made, matters considered and
limits on the review undertaken, is attached as Annex II.
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The Merger
The Merger Agreement provides that as soon as practicable after the
purchase of the Shares pursuant to the Offer, the approval of the Merger
Agreement by the Company's shareholders and the satisfaction or waiver of the
other conditions to the Merger, the Company will be merged with and into
Purchaser, and Purchaser will be the Surviving Corporation.
Pursuant to the Merger Agreement, each Share outstanding at the Effective
Time (other than Shares owned by FedEx or any of its subsidiaries or by the
Company as treasury stock, all of which will be cancelled, and other than
Shares that are held by shareholders, if any, who properly exercise their
dissenters' rights under the ABCA) will be converted into the right to receive
that number of shares of FedEx Common Stock (rounded to the nearest ten-
thousandth of a share) determined by dividing $28.13 by the market price per
share of FedEx Common Stock. The "market price" per share of FedEx Common
Stock is the average closing price per share of FedEx Common Stock on the NYSE
at the end of the regular session as reported on the Consolidated Tape,
Network A for the ten trading days selected by FedEx and the Company by lot
out of the 20 trading days ending on and including the fifth trading day prior
to the Effective Time. Shareholders who perfect their dissenters' rights under
the ABCA will be entitled to the amounts determined pursuant to such
proceedings.
Employee Stock Options
At or immediately prior to the Effective Time, (1) each employee stock
option or director stock option to purchase Shares outstanding under any stock
option plan of the Company, whether or not vested or exercisable (each, a
"Company Option") will, by virtue of the Merger and without any further action
on the part of any holder thereof, be assumed by FedEx and deemed to
constitute an option (each, a "FedEx Option") to acquire, on the same terms
and conditions as were applicable under such Company Option, the same number
of shares of FedEx Common Stock as the holder of such Company Option would
have been entitled to receive had such holder exercised such Company Option in
full immediately prior to the Effective Time (rounded to the nearest whole
number), at a price per share (rounded down to the nearest whole cent) equal
to (x) the aggregate exercise price for the Shares otherwise purchasable
pursuant to such Company Option divided by (y) the number of whole shares of
FedEx Common Stock purchasable pursuant to the FedEx Option in accordance with
the foregoing, (2) each share appreciation right issued under any stock option
plan of the Company (each, an "SAR") shall be terminated and payment therefor
shall be made in accordance with the terms of such plan and (3) FedEx shall
assume the obligations of the Company under the stock option plans of the
Company, each of which will continue in effect after the Effective Time, and
all references to the Company in such plans, and any option granted
thereunder, will be deemed to refer to FedEx, where appropriate. The other
terms of each such Company Option, and the plans under which they were issued,
shall continue to apply in accordance with their terms.
Prior to the Effective Time, the Company will (i) obtain any consents from
holders of Company Options and (ii) make any amendments to the terms of such
stock option plans of the Company that, in the case of either clauses (i) or
(ii), are necessary or appropriate to give effect to the above transactions;
provided, however, that lack of consent of any holder of a Company Option will
in no way affect the obligations of the parties to consummate the Merger.
Prior to the Effective Time, the Company will take such actions and make any
amendments to the Company's stock option plans necessary or appropriate to
cause the Company Options outstanding thereunder to (x) not terminate at the
Effective Time, (y) continue to remain outstanding and vest in accordance with
their terms and (z) in the case any holder of such Company Options ceases to
be a director for any reason, expire in accordance with their respective terms
without regard to any provisions in the plans which provide for an earlier
expiration date.
At or prior to the Effective Time, FedEx will take all corporate action
necessary to reserve for issuance a sufficient number of shares of FedEx
Common Stock for delivery upon exercise of the FedEx Options. At or prior to
the Effective Time, FedEx will file a registration statement on Form S-8, with
respect to the shares of FedEx Common Stock subject to such FedEx Options.
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Neither FedEx nor the Surviving Corporation will assume or substitute
equivalent options under the Company's 1999 Employee Stock Purchase Plan (the
"ESPP"). Accordingly, pursuant to Section 19(c) of the ESPP, as of the 15th
day prior to the Effective Time, the Offering Period (as defined in the ESPP)
then in progress under the ESPP will terminate. The Company will notify each
participant in the ESPP in writing of the New Exercise Date (as defined in the
ESPP) for such Offering Period. All Shares purchased under the ESPP and
outstanding as of the Effective Time will be treated in the same manner as
other Shares outstanding as of the Effective Time. The Offering Period ending
as of the 15th day prior to the Effective Time will be the final Offering
Period under the ESPP and the ESPP will be terminated as of the Effective
Time.
Representations and Warranties
Pursuant to the Merger Agreement, the Company has made customary
representations and warranties to us and to FedEx, including representations
relating to its organization and qualification and subsidiaries; its articles
of incorporation and bylaws; capitalization; corporate authorizations; absence
of conflicts; required filings and consents; compliance with laws; SEC
filings; financial statements; absence of certain changes or events (including
any material adverse effect on the financial condition, business, assets or
results of operations of the Company); absence of undisclosed liabilities;
litigation; employee benefit plans; tax matters; intellectual property;
environmental matters; insurance and other matters.
Certain of the Company's representations and warranties are qualified as to
"materiality" or "Material Adverse Effect." When used in connection with the
Company or any of its subsidiaries, the term "Material Adverse Effect" means
any effect that would be materially adverse to the financial condition,
business, assets or results of operations of the Company and its subsidiaries
taken as a whole. In certain instances in the Merger Agreement, "Material
Adverse Effect" excludes any effects, resulting events, occurrences, or
developments (i) relating to, arising from or caused by (x) the economy or
securities markets in general, or (y) the LTL segment of the transportation
industry in general or (ii) arising from or caused by the announcement or
pendency of the Merger Agreement or the transactions contemplated thereby.
Pursuant to the Merger Agreement, FedEx has made customary representations
and warranties to the Company, including representations relating to its
corporate organization; authority relative to the Merger Agreement; absence of
conflicts; financial statements; finders fees and other matters.
Covenants of the Company
Pursuant to the Merger Agreement, the Company has agreed to comply with
various covenants.
Conduct of the Company. Prior to the Effective Time, except as expressly
permitted by the Merger Agreement, the Company and its subsidiaries will
conduct business in the ordinary course consistent with past practices, and
the Company will not and will not permit its subsidiaries to, among other
things:
(a) amend its organizational documents;
(b) make changes in its capital structure;
(c) merge or consolidate, or make material acquisitions or dispositions;
(d) pay dividends;
(e) issue additional shares of capital stock or rights to acquire
capital stock or amend the terms of any existing equity securities;
(f) repurchase or redeem its capital stock;
(g) incur additional indebtedness, except indebtedness in an aggregate
principal amount not in excess of $15 million incurred in the ordinary
course of business on terms consistent with past practices;
(h) enter into any contract, except contracts entered into in the
ordinary course of business on terms consistent with past practice and so
long as the aggregate amount of payments to be made under any single
contract does not exceed $700,000 in any fiscal year or $10 million during
the term of such contract;
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(i) make any capital expenditures, except capital expenditures for the
2000 fiscal year set forth in the Company's capital expenditures budget for
the 2000 fiscal year and capital expenditures for subsequent periods in
amounts and at times consistent with the Company's capital expenditures
budget for the 2000 fiscal year;
(j) create or incur any liens other than in the ordinary course of
business consistent with past practices;
(k) make any loan, advance, capital contributions or investments except
to wholly-owned subsidiaries in the ordinary course of business consistent
with past practices;
(l) grant any severance or termination pay (except for routine severance
payments granted to employees other than officers and directors in the
ordinary course of business consistent with past practice and not exceeding
(x) $75,000 in the aggregate with respect to any single employee and (y)
$300,000 in the aggregate with respect to all employees); increase benefits
payable under any existing severance or termination pay policies or
employment agreements; enter into any employment, deferred compensation or
other similar agreement; establish, adopt or amend (except as required by
applicable law) any collective bargaining, bonus, compensation, option or
other benefit plan; or increase compensation, bonus or other
benefits payable to any officer, director or employee (other than in the
ordinary course of business consistent with past practice);
(m) take any action to consummate the Company's proposed
royalty/financing company restructuring;
(n) grant any option pursuant to any director or employee stock option
plan or accelerate the vesting of any options under such plans; or
(o) take any action that would cause a representation or warranty of the
Company contained in the Merger Agreement to be inaccurate.
Company Shareholder Meeting. The Company will cause a meeting of its
shareholders to be duly called and held as soon as reasonably practicable after
consummation of the Offer for the purpose of voting on the approval and
adoption of the Merger Agreement and the Merger.
Recommendations. Except as provided in the next sentence, the Company Board
will recommend that all shareholders of the Company who desire to receive cash
for their Shares tender their Shares in the Offer and that, following
acceptance for payment of the Shares pursuant to the Offer, the shareholders of
the Company approve the Merger. The Company Board is permitted to withdraw, or
modify in a manner adverse to FedEx, its recommendation to its shareholders,
and approve or recommend an Acquisition Proposal (as defined below), if (i) the
Company has complied with the terms of the "No Solicitation" covenant below,
(ii) the Company Board, based on the advice of its outside legal counsel,
determines in good faith by a majority vote that failure to take such action
would be reasonably likely to be inconsistent with fulfilling its fiduciary
duties under applicable law and (iii) the Acquisition Proposal is a Superior
Proposal. "Acquisition Proposal" means, other than the transactions
contemplated by the Merger Agreement, any Third Party offer or any proposal or
inquiry relating to, or any Third Party indication of interest in, (1) any
acquisition or purchase, direct or indirect, of 20% or more of the consolidated
assets of the Company and its subsidiaries or over 20% of any class of equity
or voting securities of the Company or any of its subsidiaries whose assets,
individually or in the aggregate, constitute more than 20% of the consolidated
assets of the Company, (2) any tender offer (including a self-tender offer) or
exchange offer that, if consummated, would result in any Third Party
beneficially owning 20% or more of any class of equity or voting securities of
the Company or any of its subsidiaries whose assets, individually or in the
aggregate, constitute more than 20% of the consolidated assets of the Company,
(3) a merger, consolidation, share exchange, business combination, sale of
substantially all the assets, reorganization, recapitalization, liquidation,
dissolution or other similar transaction involving the Company or any of its
subsidiaries whose assets, individually or in the aggregate, constitute more
than 20% of the consolidated assets of the Company or (4) solely for purposes
of the provisions described in the "No Solicitation" covenant below, any other
transaction the consummation of which would reasonably be likely to impede,
interfere with, prevent or materially delay the Offer or Merger or that would
reasonably be likely to dilute materially the benefits to FedEx of the
transactions
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contemplated by the Merger Agreement. "Third Party" means any person as
defined in Section 13(d) of the Exchange Act, other than FedEx or any of its
affiliates. "Superior Proposal" means any bona fide, unsolicited written
Acquisition Proposal for at least a majority of the outstanding Shares on
terms that the Company Board determines in good faith by a majority vote, on
the basis of the advice of a financial advisor of nationally recognized
reputation and taking into account all the terms and conditions of the
Acquisition Proposal, including any break-up fees, expense reimbursement
provisions and conditions to consummation, are more favorable to the Company
and all the Company's shareholders than as provided under the Merger Agreement
and is reasonably likely to be completed, taking into account all legal,
financial, regulatory and other aspects of the proposal and the third party
making the proposal available to the Company Board.
No Solicitation. The Merger Agreement provides that neither the Company nor
any of its subsidiaries will, or will authorize or permit any of their
officers, directors, employees, investment bankers, attorneys, accountants,
consultants or other agents or advisors to, directly or indirectly, (i)
solicit, initiate or knowingly take any action to facilitate or encourage the
submission of any Acquisition Proposal, (ii) enter into or participate in any
discussions or negotiations with, furnish any information relating to the
Company or any of its subsidiaries or afford access to the business,
properties, assets, books or records of the Company or any of its subsidiaries
to,
otherwise cooperate in any way with, or knowingly assist, participate in,
facilitate or encourage any effort by any Third Party that is seeking to make,
or has made, an Acquisition Proposal, or (iii) grant any waiver or release
under any standstill or similar agreement with respect to any class of equity
securities of the Company or any of its subsidiaries.
Notwithstanding the foregoing, the Company Board may, prior to the approval
and adoption of the Merger Agreement by the shareholders of the Company, (i)
engage in negotiations or discussions with any Third Party that has made a
Superior Proposal, (ii) furnish to such Third Party nonpublic information
relating to the Company or any of its subsidiaries pursuant to a
confidentiality agreement with terms no less favorable to the Company than
those contained in the confidentiality agreement between FedEx and the
Company, (iii) following receipt of such Superior Proposal, take and disclose
to its shareholders a position contemplated by Rule 14e-2(a) under the
Exchange Act or otherwise make disclosure to them, (iv) following receipt of
such Superior Proposal, fail to make, withdraw, or modify in a manner adverse
to FedEx its recommendation to its shareholders and/or (v) take any non-
appealable, final action ordered to be taken by the Company by any court of
competent jurisdiction, but in the cases described in clauses (i) through
(iv), only if the Company Board determines in good faith by a majority vote,
on the basis of advice from Kutak Rock LLP, outside legal counsel to the
Company, that its failure to take such action would be reasonably likely to be
inconsistent with fulfilling its fiduciary duties under applicable law, and
only so long as prior to taking any of these actions the Company has delivered
to FedEx a prior written notice advising FedEx that it intends to take such
action, and the Company continues to advise FedEx after taking such action.
Reorganization Matters. Neither the Company nor any of its subsidiaries
will take any action that would reasonably be likely to prevent the Merger
from qualifying as a reorganization under Section 368 of the Code and, prior
to the Effective Time, the Company and its subsidiaries will use their
reasonable best efforts to cause the Merger to so qualify.
Covenants of FedEx
Pursuant to the Merger Agreement, FedEx has agreed to comply with various
covenants.
Conduct of FedEx. Prior to the Effective Time, except as expressly
permitted by the Merger Agreement, FedEx and its subsidiaries will conduct
business in the ordinary course consistent with past practices, and FedEx will
not:
(i) amend its organizational documents; or
(ii) take any action that would cause a representation or warranty of
FedEx contained in the Merger Agreement to be inaccurate.
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FedEx's Obligations. FedEx will take all action necessary to cause the
Purchaser to perform its obligations under the Merger Agreement and to
consummate the Merger on the terms and conditions set forth in the Merger
Agreement.
Voting of Shares. FedEx has agreed to vote all Shares beneficially owned by
it or any of its subsidiaries in favor of approval and adoption of the Merger
Agreement, the Merger and any related actions at the Company shareholder
meeting, and at any adjournment.
Director and Officer Liability. FedEx will cause the Surviving Corporation
to indemnify the present and former officers and directors of the Company
(each an "Indemnified Person") in respect of acts or omissions occurring at or
prior to the Effective Time to the fullest extent provided under the Company's
articles of incorporation and bylaws in effect on the date of the Merger
Agreement, subject to any limitation imposed from time to time under
applicable law. For six years after the Effective Time, the Surviving
Corporation will provide officers' and directors' liability insurance in
respect of acts or omissions occurring prior to the Effective Time covering
each Indemnified Person currently covered by the Company's officers' and
directors' liability insurance policy on terms with respect to coverage and
amount no less favorable than those of such policy in effect on the date of
the Merger Agreement. In satisfying this obligation, the Surviving Corporation
will not be obligated to pay premiums in any one year in excess of 200% of the
amount per annum the Company paid in its last full fiscal year.
Form S-4. FedEx will promptly prepare and file with the SEC a registration
statement on Form S-4 (the "Form S-4") and will use its reasonable best
efforts to cause the Form S-4 to be declared effective by the SEC as promptly
as practicable.
Stock Exchange Listing. FedEx will use its reasonable best efforts to cause
the shares of FedEx Common Stock to be issued in connection with the Merger to
be listed on the NYSE, subject to official notice of issuance.
Employee Matters. FedEx will cause the Surviving Corporation to provide to
the employees of the Surviving Corporation and its subsidiaries, for a period
of at least two years after the Effective Time, benefits (excluding stock or
other equity-based compensation) that are no less favorable in the aggregate
than the benefits currently being provided by the Company and its
subsidiaries, subject to applicable law.
The Surviving Corporation will also assume, honor and perform the
provisions of the Company's Director Compensation Health Benefit Plan for each
director of the Company. This plan provides that retired members of the
Company's Board of Directors and their dependents will be provided the
opportunity to purchase health insurance, at the director's expense (at COBRA
rates) under the company's health care plan from the beginning of their
retirement until they reach the age of 65 or they are covered by Medicare.
Reorganization Matters. Neither FedEx nor any of its subsidiaries will take
any action that would reasonably be likely to prevent the Merger from
qualifying as a reorganization under Section 368 of the Code and, prior to the
Effective Time, FedEx and its subsidiaries will use their reasonable best
efforts to cause the Merger to so qualify.
Mutual Covenants of FedEx and the Company
Pursuant to the Merger Agreement, FedEx and the Company have agreed to
comply with various mutual covenants.
Reasonable Best Efforts. The Company and FedEx have agreed to use their
reasonable best efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
the Merger Agreement including taking all actions necessary to cause the
expiration or termination of the waiting period under the HSR Act. However,
FedEx is not required, in doing so, to divest or hold separate any business or
assets of the Company or FedEx.
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Certain Filings. The Company and FedEx have agreed to cooperate with one
another in connection with the preparation of the proxy or information
statement of the Company (the "Company Proxy Statement"), the Form S-4, the
Schedule TO, the Schedule 14D-9 and in determining whether any other actions
or filings or consents are necessary in connection with the transactions
contemplated by the Merger Agreement.
Public Announcements. The Company and FedEx have agreed to consult with
each other regarding timing and content before issuing any press release or
making any public statement with respect to the Merger Agreement, except as
may be required by applicable law or any listing agreement with any national
securities exchange.
Confidentiality. The Merger Agreement contains customary provisions
requiring FedEx and the Company to maintain confidential documents and
information received in connection with the transactions contemplated by the
Merger Agreement, and to provide each other with access to properties, books
and records.
Notices. FedEx and the Company have agreed to notify each other promptly of
any notices or communications received from any governmental or regulatory
agency or authority in connection with the transactions contemplated by the
Merger Agreement and of certain other events.
Conditions to the Offer
Notwithstanding any other provision of the Offer, the Purchaser is not
required to accept for payment or pay for any Shares, and the Purchaser may
terminate the Offer, if:
(1) prior to the expiration date of the Offer, the Minimum Condition has
not been satisfied, or the waiting period applicable to the Offer under the
HSR Act or any other laws, rules and regulations in foreign jurisdictions
governing antitrust or merger control matters (if any) shall not have
expired or been terminated; and
(2) at any time on or after November 12, 2000 and prior to the
expiration date of the Offer, any of the following conditions exists:
(a) (x) there shall be instituted or pending any action or
proceeding by any government or governmental authority or agency,
domestic, foreign or supranational, before any court or governmental
authority or agency, domestic, foreign or supranational, (1)
challenging or seeking to make illegal, delay materially or otherwise
directly or indirectly restrain or prohibit the making of the Offer,
the acceptance for payment of or payment for some or all of the Shares
by FedEx or the Purchaser or the consummation of the Merger, (2)
seeking to restrain or prohibit FedEx's ownership or operation (or that
of its affiliates) of all or any material portion of the business or
assets of the Company and its subsidiaries, taken as a whole, or of
FedEx and its subsidiaries, taken as a whole, or to compel FedEx or any
of its affiliates to dispose of or hold separate all or any material
portion of the business or assets of the Company and its subsidiaries,
taken as a whole, or of FedEx and its subsidiaries, taken as a whole,
(3) seeking to impose or confirm material limitations on the ability of
FedEx, the Purchaser or any of FedEx's other affiliates effectively to
exercise full rights of ownership of the Shares, including the right to
vote any Shares acquired or owned by FedEx, the Purchaser or any of
FedEx's other affiliates on all matters properly presented to the
Company's shareholders, (4) seeking to require divestiture by FedEx,
the Purchaser or any of FedEx's other affiliates of any Shares or (5)
that otherwise is reasonably likely to have a Material Adverse Effect
on the Company or FedEx or (y) there shall have been any action taken,
or any statute, rule, regulation, injunction, order or decree proposed,
enacted, enforced, promulgated, issued or deemed applicable to the
Offer or the Merger, by any court, government or governmental authority
or agency, domestic, foreign or supranational, other than the
application of the waiting period provisions of the HSR Act to the
Offer or the Merger that is reasonably likely, directly or indirectly,
to result in any of the consequences referred to in clause (x) above;
or
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(b) any change shall have occurred (or any development shall have
occurred involving a prospective change) in the business, assets,
liabilities, financial condition, capitalization, operations or results
of operations of the Company or any of its subsidiaries that has had or
is reasonably likely to have a Material Adverse Effect on the Company,
except for events, occurrences, or developments (i) relating to,
arising from or caused by (x) the economy or securities markets in
general or (y) the LTL segment of the transportation industry in
general or (ii) arising from or caused by the announcement or pendency
of the Merger Agreement or the transactions contemplated hereby; or
(c) (i) the Company shall have breached or failed to perform in all
material respects any of its obligations under the Merger Agreement, or
(ii) any of the representations and warranties of the Company contained
in the Merger Agreement and qualified by materiality or "Material
Adverse Effect" shall not be true or any of the representations and
warranties not so qualified shall not be true in all material respects,
in each case when made or at any time prior to the consummation of the
Offer as if made at and as of such time (except to the extent that any
such representation or warranty is made as of a specific date, in which
case such representation or warranty (x) if qualified by materiality or
"Material Adverse Effect," shall be true as of such specific date and
(y) if not so qualified, shall be true in all material respects as of
such specific date) and in each case such breach shall not be subject
to cure; or
(d) the Merger Agreement shall have been terminated in accordance
with its terms; or
(e) there shall have occurred any general suspension of trading in,
or limitation on prices for, securities on the NYSE or in the over-the-
counter market in the United States, any declaration of a banking
moratorium by Federal or New York authorities or general suspension of
payments in respect of banks in the United States that regularly
participate in the United States market in loans to large corporations,
any material limitation by any Federal, state or local government in
the United States or any court, administrative or regulatory agency or
commission or other governmental authority or agency in the United
States that materially affects the extension of credit generally by
banks in the United States that regularly participate in the United
States market in loans to large corporations, any commencement of a war
involving the United States or any commencement of armed hostilities or
other national or international calamity involving the United States
that has a material adverse effect on bank syndication or financial
markets in the United States or, in the case of any of the foregoing
occurrences existing on or at the time of the commencement of the
Offer, a material acceleration or worsening thereof;
which, in the reasonable judgment of FedEx in any such case, and regardless of
the circumstances (including any action or omission by FedEx but excluding any
willful action or omission by FedEx not permitted or contemplated by the
Merger Agreement) giving rise to any such condition, makes it inadvisable to
proceed with such acceptance for payment or payment.
Conditions to the Merger
The Merger Agreement provides that the obligations of the Company, FedEx
and Purchaser consummate the Merger are subject to the satisfaction or, to the
extent permitted by law, waiver of the following conditions:
(a) the Merger Agreement has been approved and adopted by the
shareholders of the Company in accordance with Arkansas law;
(b) no provision of any applicable law or regulation and no judgment,
injunction, order or decree prohibits the consummation of the Merger;
(c) Purchaser has purchased Shares pursuant to the Offer;
(d) the Form S-4 has been declared effective, no stop order suspending
the effectiveness of the Form S-4 will be in effect and no proceedings for
such purpose will be pending before or threatened by the SEC;
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(e) the shares of FedEx Common Stock to be issued in the Merger have
been approved for listing on the NYSE, subject to official notice of
issuance; and
(f) FedEx has received an opinion of Davis Polk & Wardwell in an agreed
upon form.
The Merger Agreement provides that any of the conditions described above
that is not satisfied as a result of a breach by a party to the Merger
Agreement of any provision of the Merger Agreement ceases to be a condition to
the obligations of such party to consummate the Merger, from and after the
time of such breach.
The obligation of the Company to consummate the Merger is also subject to
the condition that the Company will have received an opinion of Kutak Rock LLP
in an agreed upon form.
Termination
The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time (notwithstanding any approval of the
Merger Agreement by the shareholders of the Company):
(a) by mutual written agreement of the Company and FedEx;
(b) by either the Company or FedEx, if:
(i) the Offer has not been consummated on or before March 1, 2001;
provided that this right to terminate the Merger Agreement is not
available to any party whose breach of any provision of the Merger
Agreement results in the failure of the Offer to be consummated by
March 1, 2001;
(ii) there is any law or regulation that makes acceptance for
payment of, and payment for, the Shares pursuant to the Offer, or
consummation of the Merger illegal or otherwise prohibited or any
judgment, injunction, order or decree of any court or governmental body
having competent jurisdiction permanently enjoins us from accepting for
payment of, and paying for, the Shares pursuant to the Offer or we, the
Company or FedEx from consummating the Merger and such judgment,
injunction, order or decree has become final and nonappealable; or
(iii) prior to the acceptance for payment of the Shares under the
Offer, the Company Board has failed to make, withdrawn, or modified in
a manner adverse to FedEx, its approval or recommendation of the Merger
Agreement, the Offer or the Merger, as permitted by the Merger
Agreement; provided that the Company has paid all fees and expenses
payable under the Merger Agreement and, in the case of any termination
by the Company, (x) the Company notifies FedEx promptly in writing and
at least 72 hours prior to termination of its intention to terminate
and to enter into a binding written agreement concerning an Acquisition
Proposal that constitutes a Superior Proposal, attaching the most
current version of such agreement (or a description of all material
terms and conditions thereof), and (y) FedEx does not make, within 72
hours of receipt of such written notification, an offer that the
Company Board determines, in good faith after consultation with its
financial advisors, is at least as favorable to the shareholders of the
Company as such Superior Proposal (it being understood that the Company
will not enter into any such binding agreement during such 72-hour
period); or
(c) by FedEx, if prior to the acceptance for payment of the Shares under
the Offer, there has been a breach by the Company of any representation,
warranty, covenant or agreement contained in the Merger Agreement that is
not curable and such breach would give rise to a failure of the condition
described in clause 2(c) of "Conditions to the Offer" above; or
(d) by the Company, if prior to the acceptance for payment of the Shares
under the Offer there has been a breach by FedEx of any representation,
warranty, covenant or agreement contained in the Merger Agreement that is
not curable and such breach would give rise to a failure of the condition
set forth in clause 2(c) of "Conditions to the Offer" above (which shall be
construed to apply to FedEx).
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Fees and Expenses
Except as otherwise specified below, all fees and expenses incurred in
connection with the Merger Agreement and the transactions contemplated thereby
will be paid by the party incurring such expenses.
The Company will pay FedEx $33 million if the Merger Agreement is
terminated as described in (b)(iii) under "Termination" above, or if (1)
within 12 months after the Merger Agreement is terminated as described in
(b)(i) or (c) under "Termination" above the Company (i) merges with or into,
or is acquired, directly or indirectly, by merger or otherwise by, a Third
Party; (ii) a Third Party, directly or indirectly, acquires more than 50% of
the total assets of the Company and its subsidiaries, taken as a whole; (iii)
a Third Party, directly or indirectly, acquires more than 50% of the
outstanding Shares; or (iv) the Company adopts or implements a plan of
liquidation, recapitalization or share repurchase relating to more than 50% of
the outstanding Shares or an extraordinary dividend relating to more than 50%
of the outstanding Shares or 50% of the assets of the Company and its
subsidiaries, taken as a whole and (2) prior to such termination, an
Acquisition Proposal is made to the Company or its shareholders.
If the Merger Agreement is terminated by the Company as described in
(b)(iii) under "Termination" above, or by FedEx as described in (b)(iii) or
(c) above, the Company will reimburse FedEx and its affiliates for all
reasonable out-of-pocket fees and expenses.
Amendments
At any time prior to the Effective Time, the Merger Agreement may be
amended by an instrument signed by the Purchaser, FedEx and the Company.
However, after adoption of the Merger Agreement by the shareholders of the
Company, the Merger Agreement may not be amended by any amendment which by law
requires the further approval of the shareholders of the Company unless the
shareholders of the Company have given their approval.
THE VOTING AGREEMENT
A summary of the material provisions of the Voting Agreement is set forth
below. The summary is qualified in its entirety by reference to the complete
text of the Voting Agreement, which is filed as an exhibit to this Schedule
14D-9 and is incorporated herein by reference. The summary is qualified in its
entirety by reference to the complete text of the Voting Agreement.
In connection with the execution of the Merger Agreement, FedEx entered
into the Irrevocable Proxy and Voting Agreement dated as of November 12, 2000
with F.S. Garrison, Tom Garrison, Will Garrison and certain other members of
the Garrison family (the "Garrison Family") (the "Voting Agreement"). The
Garrison Family has agreed to vote all Shares that each member is entitled to
vote, at the time of any vote to approve and adopt the Merger Agreement, the
Merger and all agreements related to the Merger and any actions related
thereto at any meeting of the shareholders of the Company, and at any
adjournment thereof, at which such Merger Agreement and other related
agreements (or any amended version thereof), or such other actions, are
submitted for the consideration and vote of the shareholders of the Company,
in favor of the approval and adoption of the Merger Agreement, the Merger and
the transactions contemplated by the Merger Agreement.
The Garrison Family also has agreed that it would not vote any Shares that
it is entitled to vote in favor of the approval of any (i) Acquisition
Proposal, (ii) reorganization, recapitalization, liquidation or winding up of
the Company or any other extraordinary transaction involving the Company,
(iii) corporate action the consummation of which would frustrate the purposes,
or prevent or delay the consummation, of the transactions contemplated by the
Merger Agreement or (iv) other matter relating to, or in connection with, any
of the foregoing matters. The Garrison Family has granted FedEx an irrevocable
proxy coupled with an interest to vote any of the Shares it is entitled to
vote or otherwise use such voting power in the manner contemplated by the
foregoing.
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The Voting Agreement prohibits the Garrison Family from granting any
proxies or entering into any voting trust or other agreement or arrangement
with respect to the voting of any Shares beneficially owned by them and from
acquiring, selling, assigning, transferring, encumbering or otherwise
disposing of any Shares during the term of the Voting Agreement, subject to
the exceptions described in this paragraph. The Garrison Family has the right
to tender, at its option, up to 1.0 million Shares into the Offer. In
addition, to satisfy the Minimum Condition FedEx has the right to require
members of the Garrison Family to tender up to an additional 1.0 million
Shares into the Offer, and members of the Garrison Family, at their option,
may tender additional Shares into the Offer, so long as the total number of
Shares tendered by the Garrison Family into the Offer (including any Shares
that FedEx has required members of the Garrison Family to tender into the
Offer) is not more than 3.2 million.
The Voting Agreement terminates four months after the termination of the
Merger Agreement, except that when the Merger Agreement is terminated, the
number of Shares subject to the Irrevocable Proxy and Voting Agreement is
reduced by 1.0 million (net of any Shares tendered by the Garrison Family into
the Offer) and if the Merger Agreement is terminated because the Company Board
has failed to make, withdrawn or modified in a manner adverse to FedEx its
approval or recommendation of the Merger Agreement, the Offer or the Merger,
the obligation of the Garrison Family to tender up to 1.0 million Shares into
the Offer at the request of FedEx automatically terminates.
EMPLOYMENT AGREEMENTS
In connection with the Merger, American Freightways, Inc., a wholly-owned
subsidiary of the Company ("AFI"), will enter into standard forms of
employment agreements with 26 associates of the Company, including Tom
Garrison, Will Garrison, Frank Conner and Ken Reeves, each of whom is an
executive officer and director of the Company. A summary of the material
provisions of the employment agreements is set forth below. The summary is
qualified in its entirety by reference to the complete text of the form of
employment agreement, which is filed as an Exhibit hereto and is incorporated
herein by reference.
The employment agreements run for a term of two or three years, depending
on the associate's job level, and provide compensation and benefits similar to
those currently received by the associates of AFI. All employment agreements
require the associate to devote substantially all of his or her business time
and attention to the affairs of the AFI, except for the employment agreement
with Mr. Reeves, which requires, consistent with his existing employment
arrangement, that he devote one-half of his business time to the affairs of
AFI. The employment agreements with Messrs. T. Garrison, W. Garrison, Conner
and Reeves run for a term of three years, and provide for an annual salary of
$400,000, $370,000, $235,000 and $120,000, respectively.
Under the employment agreements, if an executive's employment is
involuntarily terminated without Cause or the executive resigns for Good
Reason (as those terms are defined in the employment agreements), the
executive will receive an amount equal to the greater of the executive's base
salary through the end of the original term of the employment agreement or one
and one-half times the executive's annual base salary. In the event of such a
termination, the executive will also receive continued medical, dental and
life insurance benefits for the duration of the original term of the
employment agreement, full vesting of all stock options and other equity
awards, if any, and a gross-up payment for any excise taxes that may apply to
the severance benefits provided. As of the Effective Time of the Merger, the
Surviving Corporation will assume the employment agreements.
Item 4. The Solicitation or Recommendation.
Recommendation of the Board of Directors. The Board of Directors of the
Company, by unanimous vote, has approved the Merger Agreement and the
transactions contemplated by it, including the Offer and the Merger, and has
determined that the Offer and the Merger are fair to, and in the best
interests of, the shareholders of the Company and recommends that shareholders
of the Company who desire to receive cash for their Shares accept the Offer
and tender their Shares pursuant to the Offer.
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Background Of the Offer.
As part of the continuous evaluation of its businesses and plans, FedEx
regularly considers a variety of strategic options and transactions. In recent
years, as part of this process, FedEx has evaluated various alternatives for
expanding its LTL (less than truckload) business, including through
acquisitions.
Since mid-1998, senior management at FedEx has periodically engaged in
discussions with F. S. (Sheridan) Garrison, the Chairman of the Board of the
Company, and other members of the Company's senior management, regarding a
possible business combination. In particular, Frederick W. Smith, the Chairman
of the Board, President and Chief Executive Officer of FedEx, met with Mr.
Garrison on a number of occasions, including on June 18, 1998, on June 24,
1999 and again on February 4, 2000. These discussions covered a wide range of
topics, including the potential acquisition of the Company by FedEx, as well
as the potential sale of FedEx's Viking Freight operations to the Company.
During these meetings, Mr. Garrison expressed his and the Company's Board of
Directors' desire to remain independent. Additionally, the parties were unable
to reach an agreement regarding the terms upon which the Company would acquire
Viking Freight. During this time period, management of FedEx also considered
other strategies for expanding into the LTL sector.
In late August 2000, management of FedEx determined again to approach Mr.
Garrison to discuss a purchase of the Company by FedEx. On August 30, 2000,
Alan B. Graf, Jr., the Executive Vice President and Chief Financial Officer of
FedEx, telephoned representatives of CSFB, the Company's financial advisors
who had assisted the Company in considering the potential acquisition of
Viking Freight, to discuss the possibility of a business combination between
FedEx and the Company. Shortly thereafter, Mr. Smith and Mr. Garrison agreed
to meet to resume discussions regarding a possible business combination.
On September 17, 2000, Mr. Smith and Mr. Graf met in Harrison, Arkansas
with Mr. Garrison, Tom Garrison, the Company's President and Chief Executive
Officer, and Will Garrison, the Company's Chief Operating Officer, to further
explore the possibility of a business combination. At this meeting, Mr. Smith
indicated FedEx's desire to pursue an acquisition of all the outstanding
Shares of the Company. Mr. Smith emphasized FedEx's intent, based on its
perception of customer needs and the success of Viking Freight, to expand its
freight capacity by acquiring an LTL carrier. While no specific price or other
terms were discussed, Mr. Smith and Mr. Graf indicated that FedEx would be
willing to pay an attractive premium for the Shares. Mr. Smith also confirmed
FedEx's willingness to make a portion of the consideration available in FedEx
Common Stock in order to provide for a partially tax-free transaction.
Finally, Mr. Smith stated that FedEx's strategic plans for the Company did not
involve making substantial changes in the Company's operations or personnel.
Following the September 17, 2000 meeting, Mr. Garrison informally informed
the other members of the Company Board about FedEx's proposal and the
substance of the September 17th meeting. Mr. Garrison indicated to the Company
Board his intention to continue discussions and exchange information with
FedEx in order to obtain a better understanding of FedEx's proposal. Mr.
Garrison also discussed with the Company Board the need to retain a financial
advisor in order to assist the Company Board in developing a full
understanding of the Company's strategic alternatives in light of FedEx's
proposal.
On September 20, 2000, Mr. Graf telephoned Mr. Garrison and reiterated
FedEx's desire to proceed with the acquisition of the Company. The parties
discussed various practical aspects of the proposed transaction, including the
need to enter into mutual confidentiality agreements and to engage financial
advisors. Shortly thereafter, representatives of FedEx and the Company
exchanged confidentiality agreements and engaged their respective financial
advisors to advise on the proposed transaction.
On September 21, 2000, Mr. Smith and Mr. Graf called Mr. Garrison to convey
the proposed terms upon which FedEx would be willing to acquire the Company.
FedEx's proposal contemplated an acquisition of the Company for a price per
Share of $22.50. The acquisition would be made in two steps: first, a cash
tender offer to acquire approximately 50% of the outstanding Shares of the
Company for $22.50 per Share; and second, a
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merger of the Company into a subsidiary of FedEx, in which the remaining
shareholders of the Company would receive shares of FedEx Common Stock having
a value of $22.50 per Share. FedEx also indicated that it would, as a
condition to its willingness to proceed with the transaction, require an
undertaking from the Garrison Family to vote in favor of and support the
transaction.
After informing the Company Board of the terms of the proposal received
from FedEx, and after discussions with financial and legal advisors, it was
determined that FedEx's proposal to acquire the Company at a price of $22.50
per Share was inadequate. On September 25, 2000, at the direction of the
Company, CSFB advised Merrill Lynch & Co. ("Merrill Lynch"), FedEx's financial
advisors, that the Company was not prepared to accept FedEx's proposal.
Although the Company did not make a counter-proposal, representatives of CSFB
invited representatives of FedEx to conduct a preliminary due diligence
investigation of the business and prospects of the Company in order to allow
FedEx to determine whether it would be willing to make a higher offer.
At the invitation of CSFB, representatives of FedEx and Merrill Lynch met
with representatives of the Company and CSFB at the New York offices of CSFB
on October 2, 2000. At the meeting, representatives of the Company provided an
overview of the Company's operations, as well as certain financial
information. The meeting concluded, however, with neither party proposing a
new acquisition price. After the meeting, Mr. Garrison advised the Company
Board as to the status of the discussions with FedEx.
On October 4, 2000, representatives of CSFB contacted Mr. Graf and advised
him that the Company was interested in pursuing discussions with FedEx, but
only in a transaction valued at a price in excess of $30 per Share. Following
the call and at the direction of FedEx, representatives of Merrill Lynch
telephoned CSFB and advised them that FedEx was not interested in pursuing a
transaction priced at that level and that FedEx would pursue other
alternatives. No further discussions between FedEx and the Company took place
until October 13, 2000, when Mr. Smith and Mr. Garrison spoke by telephone to
discuss the status of the transaction. Based upon this discussion, another
meeting was proposed to determine whether the parties could reach an agreement
regarding a price that they both would be willing to propose to their
respective Boards of Directors.
On October 18, 2000 at the regularly scheduled quarterly meeting of the
Company Board, the Company's senior management and its financial and legal
advisors advised the Company Board as to the status of discussions with FedEx.
At this meeting, the Company's legal advisors summarized for the directors
their fiduciary duties and other legal considerations. The Company's senior
management and CSFB representatives provided the Company Board with an
overview of the previous proposal received from FedEx and reviewed the
Company's current and projected financial performance, business strategy and
various valuation models for the Company. At the conclusion of this meeting
the Company Board determined that it would be appropriate for the Company's
senior management and financial and legal advisors to continue to provide
information to and pursue negotiations with FedEx in order to determine
whether an acceptable transaction could be negotiated for subsequent
consideration by the Company Board.
On October 22, 2000, Mr. Smith and Mr. Graf met in Harrison, Arkansas with
Mr. Garrison, Tom Garrison, Will Garrison and Frank Conner, the Company's
Chief Financial Officer. After lengthy discussion, the parties agreed upon a
price of $28.13 per Share, which FedEx indicated was its final offer.
Mr. Garrison agreed that he would be willing to support a transaction with
FedEx at that price, subject to further negotiation of the other terms and
structure of the transaction and the consideration and approval by the Company
Board. At the conclusion of the meeting, FedEx committed to promptly commence
its due diligence review of the Company and its legal counsel began preparing
the appropriate acquisition documents. Mr. Garrison informed the Company's
directors as to the substance of the meeting.
A special meeting of the Company Board was held on October 25, 2000. At
that meeting, the Company's senior management and financial and legal advisors
reviewed the status of discussions with FedEx. CSFB and senior management made
a presentation regarding the strategic and financial rationale supporting a
transaction between the companies. Additionally, CSFB presented for the Board
a detailed financial analysis concerning the Company, as well as a detailed
review of the risks and benefits of pursuing other potential business
alternatives
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and combinations. Although no formal opinion was rendered by CSFB at this
meeting, it did provide a preliminary indication of its views regarding the
fairness of the $28.13 per Share price. While no determination was made by the
Company Board as to whether the price of $28.13 per Share was acceptable, the
Company's directors authorized management and the Company's financial and
legal advisors to negotiate definitive agreements with FedEx, for subsequent
review by the Company Board.
During the week of October 30, 2000, representatives of FedEx conducted a
due diligence review of the Company, which included extensive interviews with
Company management. In addition, counsel for FedEx delivered to counsel for
the Company a draft of the Merger Agreement and the Voting Agreement (as
defined in "The Offer--the Voting Agreement").
On November 6, 2000, senior management of the Company and FedEx, along with
their respective legal and financial advisors, met at FedEx's corporate
headquarters in Memphis to negotiate the terms of the proposed Merger
Agreement, the Voting Agreement and other related agreements, including
customary provisions relating to the exercise of the fiduciary duties of
directors of the Company. Negotiations continued through the remainder of the
week, with senior management of the Company advising members of the Company
Board as to the status of the discussions.
On the afternoon of November 12, 2000, the Board of Directors of FedEx met
and, after reviewing all the aspects of the proposed transaction, unanimously
authorized FedEx to enter into the Merger Agreement and the Voting Agreement.
Following the meeting of the FedEx Board of Directors, the Company Board
met to consider the transaction. Representatives of CSFB were present and
delivered their opinion that the consideration to be received by the
shareholders of the Company in the Offer and the Merger was fair from a
financial point of view. Representatives of CSFB also presented the Company
Board with more detailed information regarding other potential business
combinations. Representatives of the Company's management also made a
presentation and the Company's legal advisors summarized for the directors
their fiduciary duties, the terms of the Merger Agreement and other legal
considerations. After reviewing all the aspects of the proposed transaction
and considerable discussion, the Company Board authorized the Company to enter
into the Merger Agreement and resolved to recommend approval of the
transaction to the Company shareholders.
On the evening of November 12, 2000, representatives of FedEx and the
Company, after finalizing the terms of the transaction, executed the Merger
Agreement. At the same time, FedEx and Mr. Garrison, along with the members of
the Garrison Family, executed the Voting Agreement. The parties announced the
transaction on the morning of November 13, 2000.
Reasons for the Recommendation of the Board of Directors. In making the
determination and recommendation described above, the Board considered a
number of factors, including, without limitation, the following:
. The fact that the $28.13 price per share to be paid to the Company's
shareholders represents (1) a premium of approximately 61% over the
closing price of the Company's Shares on The Nasdaq National Market on
November 10, 2000, the trading day immediately preceding the public
announcement of the transaction, and (2) a premium of approximately 71%
and 60%, respectively, over the 5-day and 20-day average closing prices
of the Company's shares as of November 10, 2000, and the fact that these
premiums compare favorably to premiums paid in other similarly sized
acquisition transactions;
. The Company's business, its current financial condition and results of
operations, and its future prospects, and the Board's belief, on the
basis of their familiarity with these matters, that the consideration to
be received by the Company's shareholders in the transaction fairly
reflects the Company's intrinsic value, including its potential for
future growth;
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. The Company's business, strategic objectives and prospects if it did not
pursue the transaction, and the risks and uncertainties associated
therewith, including risks associated with (1) increased competition as
larger companies, like FedEx, enter the LTL market; (2) the Company's
planned growth and geographic expansion westward and the fact that if
the Company were to maintain operations in its present markets, growth
and shareholder value creation opportunities could be limited, and
(3) increased governmental regulation of the transportation industry;
. The fact that the public equity markets have historically given a low
valuation to the Company's equity, thereby making its cost of capital
high and its growth more difficult;
. A review of FedEx's financial condition and future financial prospects;
. The strategic fit between the Company and FedEx, including the fact that
the combined company will have opportunities for significant revenue
synergies resulting from the creation of a flexible national LTL network
allowing for movement of shipments seamlessly on a multi-regional basis;
. The opinion of CSFB dated as of November 12, 2000, to the effect that as
of such date the $28.13 per share to be received by the holders of
Common Stock in the Offer and the Merger is fair to such holders from a
financial point of view. The full text of the written opinion of CSFB,
which sets forth assumptions made, matters considered and limitations on
the review undertaken in connection with such opinion, is attached
hereto as Annex II. HOLDERS OF SHARES ARE ENCOURAGED TO READ SUCH
OPINION IN ITS ENTIRETY;
. The terms of the Merger Agreement which, subject to certain
restrictions, allow the Company to terminate the Merger Agreement upon
payment of a $33 million termination fee if a superior proposal with
respect to the Company is made;
. The Board's conclusion, based upon the advice of CFSB, that the size of
the termination fee, and the circumstances when such fee is payable,
were reasonable in light of the benefits of the Offer and the Merger;
. The belief, based in part upon the analysis of CSFB and the opinion of
senior management, that it was unlikely that a third party would propose
a transaction superior to the FedEx transaction;
. The course of negotiations between the parties, including the initial
price indication given by FedEx on September 21, 2000 and the discussion
that occurred on October 22, 2000 at which FedEx informed the Company
that $28.13 per share represented FedEx's final offer;
. The fact that the Merger Agreement allows the Company's shareholders the
option of receiving cash for their shares pursuant to the Offer, subject
to certain conditions, or shares of FedEx common stock on a tax-free
basis in the Merger;
. The high likelihood that the transactions contemplated by the Merger
Agreement and the Offer will be consummated, particularly in light of
FedEx's reputation, ability to finance the transaction, lack of any
financing condition in the Merger Agreement and the ability to terminate
the Offer and Merger Agreement only in limited circumstances;
. The support for the transaction by the Garrison Family, the Company's
largest shareholder; and
. The other terms and conditions of the Offer and the Merger.
The Board did not assign relative weights to the above factors or determine
that any factor was of particular importance. Rather the Board viewed its
position and recommendations as being based on the totality of the information
presented to and considered by it.
Intent To Tender.
Pursuant to the Voting Agreement, the Garrison Family has agreed to vote in
favor of the Merger. The Garrison Family has the right to tender, at its
option, up to 1 million Shares into the Offer. The Garrison Family
17
<PAGE>
has indicated its intention to exercise these tender rights. In addition,
under certain circumstances, if the Minimum Condition (as defined in the Offer
to Purchase) would not otherwise be met, FedEx has the right to require
members of the Garrison Family to tender up to an additional 1 million Shares
into the Offer, and members of the Garrison Family, at their option, may
tender additional Shares into the Offer, so long as the total number of Shares
tendered by the Garrison Family into the Offer (including any Shares that
FedEx has required members of the Garrison Family to tender into the Offer)
does not exceed 3.2 million in the aggregate. The members of the Garrison
Family who have signed the voting agreement own approximately 12.2 million
Shares, representing collectively approximately 37% of the currently
outstanding Shares.
Although each of the Company's directors and executive officers will make
his own determination, based on individual and personal financial and other
circumstances, after reasonable inquiry and to the best of the Company's
knowledge, each executive officer and director of the Company currently
intends to either tender his Shares held of record or beneficially owned by
such person to the Purchaser in the Offer or vote his Shares in favor of the
Merger.
Item 5. Person/Assets, Retained, Employed, Compensated or Used.
Pursuant to an engagement letter agreement dated October 4, 2000 (the
"Engagement Letter"), the Company retained DLJ to act as its exclusive
financial advisor to provide strategic advice with respect to the sale,
merger, consolidation or any other business combination in one or a series of
transactions involving the acquisition of a substantial amount of the
business, securities or assets of the Company. As a consequence of the merger
of DLJ with an affiliate of CSFB in early November 2000, the Company and DLJ
agreed that CFSB would deliver the opinion requested by the Company pursuant
to the Engagement Letter that the consideration to be received by the holders
of the Company common stock in the Offer and Merger is fair to such holders
(other than FedEx and its affiliates) from a financial point of view.
As compensation for the services provided by DLJ and CFSB, the Company
agreed to pay DLJ (a) a retainer fee of $100,000, (b) a fee of $900,000, if
after being requested by the Company's Board to deliver an opinion as to the
fairness from a financial point of view of the consideration to be received by
the Company or its shareholders, as the case may be, in any proposed
transaction, DLJ notified the Company's Board that it was prepared to deliver
such opinion, irrespective of the conclusion reached therein, and (c) a fee
equal to .39% of the aggregate value of outstanding common stock of the
Company, plus the amount of any debt assumed, acquired, remaining outstanding,
retired or defeased or preferred stock redeemed or remaining outstanding in
connection with the proposed Merger and the transactions contemplated thereby;
less the amount paid by the Company pursuant to (a) and (b) above. In
addition, the Company also agreed, upon request by DLJ from time to time, to
reimburse DLJ promptly for all out-of-pocket expenses (including the
reasonable fees and expenses of counsel) incurred by DLJ in connection with
its engagement thereunder and to indemnify DLJ and certain related persons
(including its affiliate, CFSB) against certain liabilities in connection with
its engagement. In the past, DLJ and its affiliates have provided certain
financial and investment banking services to the Company and have received
compensation for such services.
The Company selected DLJ as its financial advisor and agreed that CFSB may
provide the fairness opinion on behalf of its affiliate, DLJ, because each of
DLJ and CFSB is an internationally recognized investment banking firm that has
substantial experience providing strategic advice and services in connection
with mergers, acquisitions and similar transactions. As part of their
investment banking and financial advisory business, each of DLJ and CFSB is
continuously engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings,
competitive biddings, secondary distributions of listed and unlisted
securities, private placements and valuations for corporate and other
purposes. In addition, each of DLJ and CFSB is a full service securities firm
engaged in securities trading, brokerage and financing activities. Each of DLJ
and CFSB has informed the Company that, in the ordinary course of their
trading and brokerage activities, they or their affiliates may at any time
hold long or short positions and may trade or otherwise effect transactions,
for their own accounts and the accounts of customers, in debt or equity
securities of the Company or FedEx.
18
<PAGE>
Except as set forth above, neither the Company nor any person acting on its
behalf has or currently intends to employ, retain or compensate any other
person to make solicitations or recommendations to stockholders of the Company
on the Company's behalf with respect to the Offer and the Merger.
Item 6. Interest in Securities of the Subject Company.
Except as described below, no transactions in Shares have been effected
during the past 60 days by the Company or, to the knowledge of the Company, by
any executive officer, director, affiliate or subsidiary of the Company.
On October 31, 2000, Dennie Carey and Pat Reed purchased 54 and 145 Shares,
respectively, pursuant to the Company's ESPP at a purchase price per Share of
$13.7063.
The following table sets forth Shares issued by the Company pursuant to
cash exercises of options during the past 60 days:
<TABLE>
<CAPTION>
Number of Date of Exercise Price
Name Shares Issued Issuance per Share
---- ------------- -------- --------------
<S> <C> <C> <C>
Frank Conner........................ 400 10/30/00 $ 6.3125
Frank Conner........................ 2000 10/30/00 $ 7.6250
Frank Conner........................ 2000 10/30/00 $13.0625
Ken Reeves.......................... 1200 11/09/00 $13.4375
Ken Reeves.......................... 2000 11/09/00 $11.1600
Ken Reeves.......................... 1600 11/09/00 $10.5000
Ken Reeves.......................... 2000 11/09/00 $13.0625
Ken Reeves.......................... 4000 11/09/00 $ 9.6875
</TABLE>
Item 7. Purposes of the Transaction and Plans or Proposals.
The Company is not currently undertaking or engaged in any negotiations in
response to the Offer that relate to (1) a tender offer for or other
acquisition of the Company's securities by the Company, any subsidiary of the
Company or any other person; (2) an extraordinary transaction, such as a
merger, reorganization or liquidation, involving the Company or any subsidiary
of the Company; (3) a purchase, sale or transfer of a material amount of
assets of the Company or any subsidiary of the Company; or (4) any material
change in the present dividend rate or policy, or indebtedness or
capitalization of the Company.
There are no transactions, resolutions of the Board, agreements in
principle, or signed contracts in response to the Offer that relate to one or
more of the events referred to in the preceding paragraph.
Item 8. Additional Information.
Information Statement Provided Pursuant to Section 14(f) of the Exchange
Act. The Information Statement attached hereto as Annex I is being furnished
to the Company's shareholders in connection with the possible designation by
FedEx, pursuant to the Merger Agreement, of certain individuals to be
appointed to the Company's Board other than at a meeting of the Company's
shareholders.
Rights Agreement. The Company and EquiServe Trust Company, N.A. are parties
to a First Amended and Restated Rights Agreement (the "Rights Agreement")
pursuant to which the Company authorized and declared a dividend distribution
of one common stock purchase right for each outstanding share of common stock
to shareholders of record at the close of business on August 17, 1998
("Right"), and authorized the issuance of one Right with each future share of
common stock issued by the Company before the Distribution Date (as defined in
the Rights Agreement). The Rights attach to all certificates representing
shares of outstanding common stock of the Company and are not exercisable or
transferable apart from the common stock until ten days after, among other
things, another person or group of persons acquires 15 percent or more of the
Company's outstanding common stock or commences a tender or exchange offer for
at least 15 percent of the Company's common stock.
19
<PAGE>
On November 12, 2000, the Rights Agreement was amended (the "Amendment to
Rights Agreement") in order to, among other things, (i) ensure that neither
FedEx nor Purchaser would be an Acquiring Person (as defined in the Rights
Agreement); and (ii) revise the definition of the "Expiration Date" (as
defined in the Rights Agreement) to include the time immediately prior to the
Effective Time. A copy of the Amendment to Rights Agreement is filed herewith
as Exhibit (e)(4) and is incorporated herein by reference.
Dissenters' Rights. No dissenters' rights are available to holders of
Shares in connection with the Offer. However, if the Merger is consummated,
holders of Shares who have not voted in favor of the Merger may have certain
rights under the ABCA to dissent and demand payment of the fair value of their
Shares. Such rights, if the statutory procedure is followed and dissenting
holders and the Company do not otherwise agree on the value of the holder's
shares, could lead to a judicial determination of the fair value required to
be paid to such dissenting holders for their Shares. The ABCA defines "fair
value" as the value of the Shares immediately before consummation of the
Merger, excluding any appreciation or depreciation in anticipation of the
Merger unless exclusion would be unequitable, but does not prescribe a method
for determining fair value. Consequently, any judicial determination of the
fair value of Shares could be based upon any valuation method or combination
of methods the court deems appropriate, and the value so determined could be
more or less than the consideration paid in the Merger. If any holder of
Shares who demands payment under the ABCA fails to perfect, or effectively
waives, his or her right to payment, as provided in the ABCA, each of the
Shares of such holder will be converted into the consideration paid in the
Merger in accordance with the Merger Agreement. Shareholders who wish to
exercise dissenters' rights in connection with the Merger do not need to take
any action at this time. If the Offer is consummated, the Company will
distribute to the remaining shareholders additional information on the
procedures to be followed to perfect their dissenters' rights.
Regulatory Approvals. The Company is not aware of any licenses or
regulatory permits that appear to be material to the business of the Company
that might be adversely affected by the acquisition of the Shares in the
Offer. In addition, except as set forth below, the Company is not aware of any
filings, approvals or other actions by or with any governmental authority or
administrative or regulatory agency that would be required for the acquisition
or ownership of the Shares by Purchaser. Should any such approval or other
action be required, the Company, FedEx and Purchaser expect to seek that
approval or action, except as described below in "Arkansas Investor Protection
Takeover Act and Other State Takeover Statutes." However, the Company cannot
be certain that it, FedEx and Purchaser would be able to obtain such approval
or action required, with or without substantial conditions, or that adverse
consequence might not result to the Company's business or that certain parts
of the Company's business might not have to be disposed of or held separate in
order to obtain the required approval or action. In that event, FedEx and
Purchaser may not be required to purchase any Shares under the Offer.
Arkansas Investor Protection Takeover Act and Other State Takeover
Statutes. The Arkansas Investor Protection Takeover Act, codified at Arkansas
Code Annotated Section 23-43-101 et seq. (the "Act"), prohibits a third party
from making a takeover offer for shares of a corporation organized under the
laws of the State of Arkansas unless (i) the offer is registered with the
Arkansas Securities Department (the "Department"), or (ii) an order of
exemption is granted by the commissioner of the Department (the
"Commissioner"). The Offer qualifies as a "takeover offer." However, FedEx
requested that the Commissioner issue an order exempting the Offer from the
provisions of the Act. The Commissioner granted an order of exemption on
November 16, 2000.
A number of states have adopted laws which purport, to varying degrees, to
apply to attempts to acquire corporations that have substantial assets,
principal executive offices or principal places of business or whose business
operations otherwise have substantial economic effects in, such states. The
Company, directly or through subsidiaries, conducts business in a number of
states throughout the Untied States, some of which have enacted such laws.
Except for the Act, the Company does not know whether any of these laws will,
by their terms, apply to the Offer or any merger or other business combination
between the Company and Purchaser or
FedEx and the Company has not complied with any such laws. To the extent that
certain provisions of these laws purport to apply to the Offer or any such
merger or other business combination, the Company, based on legal precedent,
believes that there are reasonable bases for contesting such laws.
20
<PAGE>
If any government official or third party should seek to apply any state
takeover law to the Offer or any merger or other business combination between
the Company and Purchaser or FedEx, FedEx has stated that it will take such
action as then appears desirable, which action may include challenging the
applicability or validity of such statute in appropriate proceedings. In the
event it is asserted that one or more state takeover statutes is applicable to
the Offer or any such merger or other business combination and an appropriate
court does not determine that it is inapplicable or invalid as applied to the
Offer or any such merger or other business combination, Purchaser might be
required to file certain information with, or to receive approvals from, the
relevant state authorities or holders of Shares, and Purchaser might be unable
to accept for payment or pay for Shares tendered pursuant to the Offer, or be
delayed in continuing or consummating the Offer or any such merger or other
business combination. In such case, FedEx and Purchaser may not be obligated
to accept for payment or pay for any tendered Shares.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), and the rules that have been promulgated
thereunder by the Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless certain information has been
furnished to the Antitrust Division of the Department of Justice (the
"Antitrust Division") and the FTC and certain waiting period requirements have
been satisfied. The purchase of Shares pursuant to the Offer is subject to
such requirements.
Pursuant to the requirements of the HSR Act, the Company and FedEx each
filed a Notification and Report Form with respect to the Offer and Merger with
the Antitrust Division and the FTC on November 14, 2000. The initial waiting
period applicable to the purchase of Shares pursuant to the Offer will expire
at 11:59 p.m., Eastern Standard Time, on November 29, 2000, which is the
fifteenth calendar day following filing of the Notification and Report Form by
FedEx. However, prior to such time, the Antitrust Division or the FTC may
extend the waiting period by requesting additional information or documentary
material relevant to the Offer from FedEx or the Company. If such a request is
made, the waiting period will be extended until 11:59 p.m., Eastern Standard
Time, on the tenth day after FedEx's or the Company's, as applicable,
substantial compliance with such request. Thereafter, such waiting period can
be extended only by court order. A request has been made pursuant to the HSR
Act for early termination of the waiting period applicable to the Offer. There
can be no assurance, however, that the 15-day HSR Act waiting period will be
terminated early.
Shares will not be accepted for payment or paid for pursuant to the Offer
until the expiration or earlier termination of the applicable waiting period
under the HSR Act. Any extension of the waiting period will not give rise to
any withdrawal rights not otherwise provided for by applicable law. If
Purchaser's acquisition of Shares is delayed pursuant to a request by the
Antitrust Division or the FTC for additional information or documentary
material pursuant to the HSR Act, the Offer may be extended.
The Antitrust Division and the FTC frequently scrutinize the legality under
the antitrust laws of transactions such as the acquisition of Shares by
Purchaser pursuant to the Offer. At any time before or after the consummation
of any such transactions, the Antitrust Division or the FTC could take such
action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant
to the Offer or seeking divestiture of the Shares so acquired or divestiture
of substantial assets of FedEx or the Company. Under certain circumstances,
Purchaser may not be required to proceed with the Offer if divestiture of
substantial assets of FedEx or the Company would materially harm the business
of such entities.
Private parties (including individual states) may also bring legal actions
under the antitrust laws. The Company does not believe that the consummation
of the Offer will result in a violation of any applicable antitrust laws.
However, there can be no assurance that a challenge to the Offer on antitrust
grounds will not be made, or if a challenge on antitrust grounds is made, what
the result will be.
21
<PAGE>
Item 9. Exhibits.
The following Exhibits are filed herewith:
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<C> <S>
(a)(1) Offer to Purchase, dated November 20, 2000 (incorporated by reference
to Exhibit (a)(1) to the Schedule TO filed by Purchaser on November
20, 2000).
(a)(2) Form of Letter of Transmittal (incorporated by reference to Exhibit
(a)(2) to the Schedule TO filed by Purchaser on November 20, 2000).
(a)(3) Letter to holders of American Freightways Corporation common stock,
dated November 20, 2000 (included with Schedule 14D-9 mailed to
shareholders).*
(a)(4) Fairness Opinion of Credit Suisse First Boston Corporation, dated
November 12, 2000 (included as Annex II hereto).*
(a)(5) Joint Press Release of American Freightways Corporation and FedEx
Corporation, dated November 13, 2000 (incorporated by reference to
Exhibit (a)(99) to the Company's Form 10-Q for the period ended
September 30, 2000, filed by the Company on November 14, 2000).
(e)(1) Agreement and Plan of Merger, dated as of November 12, 2000, among FDX
Inc., FedEx Corporation (incorporated by reference to Exhibit (a)(2)
to the Company's Form 10-Q for the period ended September 30, 2000,
filed by the Company on November 14, 2000).
(e)(2) Irrevocable Proxy and Voting Agreement, dated as of November 12, 2000,
among FDX Inc., FedEx Corporation and certain shareholders of American
Freightways Corporation.
(e)(3) Form of Employment Agreement.
(e)(4) First Amendment to the First Amended and Restated Rights Agreement,
dated November 12, 2000, among American Freightways Corporation and
EquiServe Trust Company, N.A.
(e)(5) Information Statement of the Company (included as Annex I to this
Statement).*
</TABLE>
--------
*Included in copy mailed to shareholders.
22
<PAGE>
SIGNATURE
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
American Freightways Corporation
By: /s/ F. S. (Sheridan) Garrison
---------------------------------
F. S. (Sheridan) Garrison
Chairman
Dated: November 20, 2000
23
<PAGE>
ANNEX I
INFORMATION STATEMENT PURSUANT TO
SECTION 14(f) OF THE SECURITIES EXCHANGE
ACT OF 1934 AND RULE 14f-1 THEREUNDER
NO VOTE OR OTHER ACTION OF AMERICAN FREIGHTWAYS CORPORATION'S SHAREHOLDERS IS
REQUIRED IN CONNECTION WITH THIS INFORMATION
STATEMENT. NO PROXIES ARE BEING SOLICITED AND YOU ARE REQUESTED
NOT TO SEND A PROXY TO AMERICAN FREIGHTWAYS CORPORATION
GENERAL
This Information Statement is being mailed on or about November 20, 2000 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of American Freightways Corporation, an Arkansas corporation
(the "Company"), to the holders of record of shares of common stock, par value
$0.01 per share, of the Company (the "Shares"). Capitalized terms used and not
otherwise defined herein shall have the meanings set forth in the Schedule
14D-9. You are receiving this Information Statement in connection with the
possible election of persons designated by FedEx (as defined below) to the
Board of Directors of the Company. Such designation is to be made pursuant to
an Agreement and Plan of Merger, dated November 12, 2000 (the "Merger
Agreement"), among FedEx Corporation, a Delaware corporation ("FedEx"), FDX,
Inc., a Delaware corporation (the "Purchaser"), and the Company.
The Merger Agreement provides that, after the purchase by the Purchaser
pursuant to the Offer, FedEx will be entitled to designate the number of
directors, rounded up to the next whole number, on the Company's Board (the
"FedEx Designees") as will give FedEx representation on the Company's Board
equal to the product of (i) the total number of directors on the Company's
Board and (ii) the percentage that the aggregate number of Shares beneficially
owned by FedEx bears to the total number of Shares then outstanding. The
Company has agreed in the Merger Agreement to take all action necessary to
cause the FedEx Designees to be elected to the Company's Board, including, in
connection therewith, increasing the size of the Company's Board or securing
the resignations of incumbent directors.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with this Information
Statement. The information contained in this Information Statement concerning
FedEx and the Purchaser has been furnished to the Company by FedEx. The
Company assumes no responsibility for the accuracy or completeness of such
information.
VOTING SECURITIES OF THE COMPANY
The Shares belong to the only class of equity securities of the Company
outstanding which is entitled to vote at a meeting of shareholders of the
Company. Each Share is entitled to one vote. As of the close of business on
November 10, 2000, there were 32,521,705 Shares outstanding.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
The Board of Directors of the Company currently consists of nine members.
FedEx has informed the Company that FedEx will choose the FedEx Designees from
the directors and executive officers of FedEx and Purchaser listed in the
Schedule I attached hereto. FedEx has also informed the Company that each of
the individuals listed in the Schedule I has consented to act as a director of
the Company if appointed or elected. The business address of each person
listed on the Schedule is 942 South Shady Grove Road, Memphis, Tennessee
<PAGE>
38120. FedEx and the Purchaser have advised the Company that none of the
individuals referenced in Schedule I (i) is currently a director of, or holds
any position with, the Company, (ii) has any familial relationship with any
directors or executive officers of the Company or any other FedEX Designee or
(iii) to the knowledge of FedEx and the Purchaser, beneficially owns any
equity securities (or rights to acquire any such securities) of the Company.
The Company has been advised by FedEx and the Purchaser that, to FedEx's and
the Purchaser's knowledge, none of the individuals referenced above has been
involved in any (y) transaction with the Company or any of its directors,
executive officers or affiliates that are required to be disclosed pursuant to
the rules and regulations of the Securities and Exchange Commission (the
"SEC"), except as may be disclosed herein, in the Schedule 14D-9, Schedule TO,
or this Information Statement, or (z) legal proceeding required to be
disclosed pursuant to the rules and regulations of the SEC in this Information
Statement. It is expected that FedEx Designees may assume office at any time
following the purchase by Purchaser of a specified minimum number of Shares
pursuant to the Offer, and that, upon assuming office, the FedEx Designees
will thereafter constitute at least a majority of the Board. This step will be
accomplished at a meeting or by written consent of the Board providing that
the size of the Board will be increased and/or sufficient numbers of current
directors will resign such that, immediately following such action, the number
of vacancies to be filled by the FedEx Designees will constitute at least a
majority of the available positions on the Board. It is currently not known
which of the current directors of the Company will resign.
CURRENT DIRECTORS OF THE COMPANY
The Board of Directors presently consists of nine members divided into
three classes, with three directors in each class serving three-year terms
(and, in each case, until their respective successors are duly elected and
qualified). The terms of the directors in Class I will expire at the 2002
Annual Meeting, the terms of the directors in Class II will expire at the 2003
Annual Meeting and the terms of the directors in Class III will expire at the
2001 Annual Meeting.
Class II Directors--Terms Ending in 2003
Tom Garrison has been with American Freightways since 1982 and serves as
President, Chief Executive Officer and as a Director. He assumed the
responsibility of President on July 1, 1998 and the additional responsibility
of Chief Executive Officer on July 1, 1999.
Frank Conner has been the Executive Vice President--Accounting & Finance
and Chief Financial Officer since November 1995, and a Director since March
1989. He joined American Freightways in 1994 as Vice President--Special
Projects. He previously was the Executive Vice President/General Manager of
McKesson Service Merchandising, Harrison, Arkansas. He had been with McKesson
Service Merchandising for over fifteen years, including serving as its Chief
Financial Officer. Mr. Conner, a CPA, was with the firm of Peat Marwick
Mitchel & Co. for seven years prior to his joining McKesson.
T.J. Jones has served on the Board of Directors since March 1989. Mr. Jones
helped organize the Company in 1982 and previously served as the Company's
Executive Vice President-Operations until retirement in 1994.
Class III Directors--Terms Ending in 2001
F.S. (Sheridan) Garrison founded American Freightways in 1982, serving as
its President as well as Chief Executive Officer and Chairman, the latter
being the position he currently holds. Mr. Garrison serves his industry as a
member of the board of directors of both American Trucking Association and
Arkansas Trucking Association.
Ken Reeves, a Director since March 1989, has been an attorney-at-law in
private practice since 1973 in Harrison, Arkansas. Mr. Reeves has served on
the Arkansas Supreme Court Committee on Professional Conduct since 1990 and is
currently Chairman of the Committee. He is a Director of Regions Bank of
Harrison, Arkansas.
I-2
<PAGE>
Doyle Z. Williams, a Director since November 1997, is the Dean of the Sam
M. Walton College of Business Administration and the holder of the Sam M.
Walton Leadership Chair at the University of Arkansas. The College houses the
Supply Chain Management Research Center, which is involved with transportation
and logistics issues. Dr. Williams was the founding Dean of the School of
Accounting at the University of Southern California. Prior to that he served
as coordinator for the area of accounting at Texas Tech University. He is also
a Director of McIlroy Bank & Trust.
Class I Directors--Terms Ending in 2002
Will Garrison has been with American Freightways since 1986 and serves as
Secretary/Treasurer, Corporate Vice President, and Chief Operating Officer. He
assumed the responsibility of Secretary/Treasurer and Corporate Vice President
on July 1, 1998 and the additional responsibility of Chief Operating Officer
on July 1, 1999.
John Paul Hammerschmidt has served on the Board of Directors since May
1997. Mr. Hammerschmidt served twenty-six years as the U. S. Representative
for the Third District of Arkansas until his retirement in 1993. He was the
ranking minority member of the House Transportation Infrastructure Committee
and the House Veterans Affairs Committee. He served on various sub-committees
and co-authored the Intermodal Surface Transportation Efficiency Act (ISTEA).
Mr. Hammerschmidt also serves as a member of the Board of Directors of the
following companies: Dillard's Department Stores, Inc., Southwestern Energy
Co., First Federal Bancshares of Arkansas, the Metropolitan Washington Airport
Authority and Ozark Aircraft Systems.
William P. Stiritz has served on the Board of Directors since April 1999.
Mr. Stiritz served Ralston Purina Company for the past thirty-five years, as
its Chief Executive Officer from 1981 until 1997 and its Chairman from 1981
until present. Mr. Stiritz also serves as Chairman of the Board of Directors,
Chief Executive Officer and President of Agribrands International and Chairman
of the Board of Directors of Ralcorp Holdings, Inc. In addition, he serves on
the Board of Directors of the following public companies: Angelica
Corporation, Ball Corporation, May Department Stores Company, Reinsurance
Group of America and Vail Resorts, Inc.
Messrs. Tom and Will Garrison are sons of Mr. F.S. (Sheridan) Garrison.
Except for the foregoing, no family relationships exist among any of the
persons named above.
BOARD COMMITTEES AND MEETINGS
The Company presently does not have a standing nominating committee. The
Board of Directors nominates persons for director. The Board will consider
suggestions by shareholders for names of nominees as Class III Directors of
the Board of Directors for the 2001 Annual Meeting, provided that such
suggestions are made in writing and delivered to Mr. Will Garrison,
Secretary/Treasurer of the Company, on or before December 20, 2000.
The Company has a standing Compensation Committee, which is currently
composed of Mr. T.J. Jones, Mr. John Paul Hammerschmidt, Dr. Doyle Z. Williams
and Mr. William P. Stiritz. The Compensation Committee is charged with, among
other things, the supervision and administration of the Company's employee
benefit plans and the review and approval of the Company's executive officers'
salaries, as well as review of the general wage policy of the Company.
The Company has an Audit Committee which is currently composed Mr. T.J.
Jones, Mr. John Paul Hammerschmidt, Dr. Doyle Z. Williams and Mr. William P.
Stiritz. The Audit Committee recommends candidates to serve as the Company's
auditors, reviews the reports of the Company's auditors and has the authority
to investigate the financial and business affairs of the Company.
During the past fiscal year, the Board of Directors met on five occasions,
the Compensation Committee met on two occasions and the Audit Committee met on
three occasions. Each Director attended at least 75% of the total of such
meetings of the Board and committees of the Board on which such Director
served.
I-3
<PAGE>
PRINCIPAL SHAREHOLDERS
As of November 10, 2000, the only shareholders known by the Company to own,
directly or indirectly, more than 5% of the Company's common stock, the only
class of the Company's capital stock presently outstanding, are reflected in
the following table:
<TABLE>
<CAPTION>
Number of
Shares Percent of
Beneficially Total Shares
Name and Address Owned (c) (d)
---------------- ------------ ------------
<S> <C> <C>
F.S. (Sheridan) Garrison (a).................... 10,919,708 32.0%
Dimensional Fund Advisors (b)................... 1,956,050 5.8%
Tom Garrison (a)................................ 291,204 0.9%
Will Garrison (a)............................... 133,068 0.4%
</TABLE>
--------
(a) The address of this shareholder is 2200 Forward Drive, Harrison, Arkansas
72601. Amounts shown include shares held under trust or otherwise by or
for the benefit of certain immediate family members.
(b) The address of this shareholder is 1299 Ocean Avenue, 11th Floor, Santa
Monica, California 90401.
(c) Includes shares issuable upon exercise of options which are currently
exercisable or which will become exercisable within 60 days from the
record date.
(d) Percentage based upon 34,115,685 shares of the Company's common stock as
of November 10, 2000. Includes 32,521,705 shares outstanding and 1,593,980
shares issuable upon exercise of options which are currently exercisable
or which will become exercisable within 60 days from the record date.
On November 12, 2000, FedEx Corporation, a Delaware corporation, entered
into an Irrevocable Proxy and Voting Agreement with certain shareholders who
in the aggregate own approximately 37% of the outstanding shares of the
Company's common stock. For a description of the voting agreement, see "The
Voting Agreement" under Item 3 of the Schedule 14D-9 to which this Information
Statement is attached.
I-4
<PAGE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the name, age, term of office as director of
the Company, and ownership of the Company's common stock with respect to each
member of the Board of Directors, the executive officers of the Company named
under the caption "Executive Compensation" and the directors and officers of
the Company as a group as of November 10, 2000.
<TABLE>
<CAPTION>
Year First
Serving As Shares
Name Age Director Owned (a) Percentage (b)
---- --- ---------- ---------- --------------
<S> <C> <C> <C> <C>
F.S. (Sheridan) Garrison............. 66 1982 10,919,708 32.0%
Tom Garrison......................... 40 1982 291,204 0.9%
Will Garrison........................ 37 1995 133,068 0.4%
Frank Conner......................... 50 1989 * *
John Paul Hammerschmidt.............. 78 1997 * *
T.J. Jones........................... 63 1989 * *
Ken Reeves........................... 52 1989 * *
William P. Stiritz................... 66 1999 420,000 1.2%
Doyle Z. Williams.................... 60 1997 * *
Pat Reed............................. 42 * *
All directors and executive officers
(including 14 persons).............. 11,978,433 35.1%
</TABLE>
--------
(a) Includes shares issuable upon exercise of options which are currently
exercisable or which will become exercisable within 60 days from the
record date.
(b) Percentage based upon 34,115,685 shares of the Company's common stock as
of November 10, 2000. Includes 32,521,705 shares outstanding and
1,593,980 shares issuable upon exercise of options which are currently
exercisable or which will become exercisable within 60 days from November
10, 2000.
* Denotes ownership of less than 1% of the total shares of common stock.
CERTAIN TRANSACTIONS
Any transactions between the Company and its officers, directors, principal
shareholders or other affiliates will be approved by a majority vote of the
Company's disinterested directors and will continue to be on terms no less
favorable to the Company than could be obtained from unaffiliated third
parties.
Certain members of the Company's management and certain members of the
Company's Board of Directors have interests in the transactions contemplated
by the Merger Agreement. These interests, which are described in the Schedule
14D-9 to which this Information Statement is attached, may present those
individuals with certain conflicts of interest.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under the Securities Exchange Act of 1934, the Company's executive
officers, directors and those persons who own more than ten percent of the
Company's common stock are required to file reports of ownership and
subsequent changes of ownership with the Securities and Exchange Commission.
Specific due dates have been established for these reports, and the Company is
required to disclose in this Information Statement any failure to file by
these dates. Based upon a review of the copies of such reports filed with the
Commission and written representations from the Company's directors and
executive officers, the Company believes that during the preceding year all
filing requirements applicable to executive officers and directors have been
met.
I-5
<PAGE>
EXECUTIVE COMPENSATION AND OTHER INFORMATION
The following table shows all of the cash compensation paid or to be paid
by the Company, as well as certain other compensation paid, to the Chief
Executive Officer and the four highest paid executive officers of the Company
for such period in all capacities in which they served:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Long-Term All Other
Compensation (a) Compensation Compensation
---------------- ---------------- ------------
Awards
Name and Position Year Salary ($)(b) Options/SARs (#) ($)(c)
----------------- ---- ---------------- ---------------- ------------
<S> <C> <C> <C> <C>
F.S. (Sheridan) Garrison 1999 325,000 50,000/0 6,400
Chairman 1998 295,000 50,000/0 6,400
1997 270,000 0/0 9,125
Tom Garrison 1999 282,500 30,000/0 4,000
President and CEO 1998 210,000 20,000/0 6,400
1997 185,000 20,000/0 4,625
Will Garrison
COO, Corporate Vice 1999 260,000 30,000/0 6,400
President 1998 210,000 20,000/0 6,400
and Secretary/Treasurer 1997 185,000 20,000/0 7,000
Pat Reed 1999 210,000 12,000/0 6,400
Executive Vice President 1998 150,000 5,000/0 5,438
Operations 1997 121,667 5,000/0 844
Frank Conner
Executive Vice President 1999 200,000 15,000/0 6,400
Accounting & Finance and 1998 190,000 15,000/0 6,400
CFO 1997 180,000 15,000/0 6,875
</TABLE>
--------
(a) Does not include the value of perquisites and other benefits where the
aggregate value of such compensation, if any, does not exceed the lesser
of $50,000 or 10% of the total amount of annual salary and bonus for any
named executive.
(b) Amounts shown include cash and non-cash compensation earned and received
by executive officers as well as amounts earned but deferred at the
election of those officers.
(c) Amounts consist solely of Company contributions to executives' accounts
under the Company's defined contribution plan.
Director Compensation
Non-employee directors are paid an annual retainer of $24,000 plus $1,000
per board meeting attended and $500 per committee meeting attended or $1,000
per committee meeting if serving as chairman. The Company reimburses all
directors for their travel expenses. The Company has adopted a non-employee
elected director stock option plan and a non-employee appointed director stock
option plan. The plans provide for the automatic granting of 6,000 options to
purchase shares of the Company's common stock at the fair market value of such
common stock on January 2 of each year or at the date such director was
appointed to the Board. The options vest and become exercisable at 33 1/3% per
year for three years and may not be exercised later than ten years after the
date of grant. During 1999, the Company granted to Mr. John Paul
Hammerschmidt, Mr. T. J. Jones, Mr. Ken Reeves and Dr. Doyle Z. Williams
options to acquire 6,000 shares of the Company's common stock each at a
purchase price of $11.16 per share. Mr. William P. Stiritz was granted options
to acquire 6,000 shares of the Company's common stock each at a purchase price
of $14.97 per share. Except as indicated above, the Company's officers are not
compensated for their services as directors.
I-6
<PAGE>
Employment Agreements
The Company has entered, or intends to enter, into employment agreements
with certain employees. For a discussion of these employment agreements, see
"Employment Agreements" under Item 3 of the Schedule 14D-9 to which this
Information Statement is attached.
Options/Stock Appreciation Right ("SAR") Grants
The following table sets forth information with respect to the named
executives concerning options granted in the last fiscal year and their
potential realizable value:
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential
Realizable Value
Individual Grants at Assumed Annual
---------------------------------------------- Rates of Stock
% of Total Price
Number of Option/SARs Appreciation for
Securities Granted to Exercise Option Term (c)
Underlying Employees or Base -----------------
Options/SARs in Fiscal Price Expiration 5% 10%
Name (a) Granted (#) Yr (%) ($/Sh) (b) Date ($) ($)
-------- ------------ ----------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
F.S. (Sheridan)
Garrison............... 50,000 7.4 12.69 1/20/09 399,034 1,011,230
Tom Garrison............ 30,000 4.5 11.16 1/04/09 210,554 533,585
Will Garrison........... 30,000 4.5 11.16 1/04/09 210,554 533,585
Pat Reed................ 12,000 1.8 11.16 1/04/09 84,222 213,434
Frank Conner............ 15,000 2.2 11.16 1/04/09 105,277 266,792
</TABLE>
--------
(a) Options granted in 1999 are exercisable starting 12 months after the
grant date with 20% of the shares covered thereby becoming exercisable at
that time and with an additional 20% of the option shares vesting and
becoming exercisable on each successive anniversary date with full
vesting occurring on the fifth anniversary date. Unvested portions of
options are forfeited upon termination of employment. Under the terms of
the Stock Option Plans, the Board of Directors retains discretion subject
to plan limits to modify terms of outstanding options. The options were
granted for a term of 10 years subject to earlier termination in certain
events related to termination of employment. The options qualify as
"incentive stock options" under the Internal Revenue Code, with the
exception of the options granted to Mr. F.S. (Sheridan) Garrison.
(b) The exercise price reflects the fair market value of the underlying
shares on the grant date. The exercise price may be paid by delivery of
shares, subject to certain conditions and limitations.
(c) As required by rules of the Securities and Exchange Commission, potential
values stated are based on the prescribed assumption that the Company's
common stock will appreciate in value from the date of grant to the end
of the option term (ten years from the date of grant) at annualized rates
of 5% and 10% (total appreciation of 63% and 159%), respectively, and
therefore are not intended to forecast possible future appreciation, if
any, in the price of the Company's common stock.
I-7
<PAGE>
The following table sets forth information with respect to the named
executives concerning options granted through November 10 of fiscal 2000 and
their potential realizable value:
OPTIONS/SAR GRANTS THROUGH NOVEMBER 10 OF FISCAL 2000
<TABLE>
<CAPTION>
Potential
Realizable Value
Individual Grants at Assumed Annual
---------------------------------------------- Rates of Stock
% of Total Price
Number of Option/SARs Appreciation for
Securities Granted to Exercise Option Term (c)
Underlying Employees or Base -----------------
Options/SARs in Fiscal Price Expiration 5% 10%
Name (a) Granted (#) Yr (%) ($/Sh) (b) Date ($) ($)
-------- ------------ ----------- ---------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
F.S. (Sheridan)
Garrison............... 50,000 7.4 16.34 1/01/10 513,807 1,302,088
Tom Garrison............ 30,000 4.4 15.81 1/03/10 298,285 755,912
Will Garrison........... 30,000 4.4 15.81 1/03/10 298,285 755,912
Pat Reed................ 15,000 2.2 15.81 1/03/10 149,142 377,956
Frank Conner............ 15,000 2.2 15.81 1/03/10 149,142 377,956
</TABLE>
--------
(a) Options granted in 2000 are exercisable starting 12 months after the
grant date with 20% of the shares covered thereby becoming exercisable at
that time and with an additional 20% of the option shares vesting and
becoming exercisable on each successive anniversary date with full
vesting occurring on the fifth anniversary date. Unvested portions of
options are forfeited upon termination of employment. Under the terms of
the Stock Option Plans, the Board of Directors retains discretion subject
to plan limits to modify terms of outstanding options. The options were
granted for a term of 10 years subject to earlier termination in certain
events related to termination of employment. The options qualify as
"incentive stock options" under the Internal Revenue Code, with the
exception of the options granted to Mr. F.S. (Sheridan) Garrison.
(b) The exercise price reflects the fair market value of the underlying shares
on the grant date. The exercise price may be paid by delivery of shares,
subject to certain conditions and limitations.
(c) As required by rules of the Securities and Exchange Commission, potential
values stated are based on the prescribed assumption that the Company's
common stock will appreciate in value from the date of grant to the end of
the option term (ten years from the date of grant) at annualized rates of
5% and 10% (total appreciation of 63% and 159%), respectively, and
therefore are not intended to forecast possible future appreciation, if
any, in the price of the Company's common stock.
Option/SAR Exercises and Holdings
The following table sets forth information with respect to the named
executives concerning exercise of options during the last fiscal year and
unexercised options and SARs held as of the end of the fiscal year:
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised In-
Unexercised the-Money Options
Shares Options and SARs at and SARs at FY-
Acquired on Value FY-End Exercisable/ End Exercisable/
Exercise Realized Unexercisable (#) Unexercisable ($)
Name (#) ($) (a) (b) (c)
---- ----------- -------- -------------------- -----------------
<S> <C> <C> <C> <C>
F.S. (Sheridan)
Garrison............... 0 0 580,000/100,000 1,627,755/434,920
Tom Garrison............ 29,000 336,938 3,600/62,800 2,350/332,606
Will Garrison........... 18,600 214,038 25,200/62,800 100,759/332,606
Pat Reed................ 2,400 26,213 1,000/19,400 5,188/101,977
Frank Conner............ 0 0 23,400/40,500 111,710/217,620
</TABLE>
I-8
<PAGE>
--------
(a) Market price of underlying securities at exercise date, minus exercise or
base price of "in the money" options.
(b) Unexercised options include certain options granted under the Company's
1989 Stock Option Plan which are due to expire May 2001 and February 2002.
(c) Market value of the Company's common stock at December 31, 1999 was $16.19
per share and was used to calculate the value.
The following table sets forth information with respect to the named
executives concerning exercise of options through November 10 of fiscal 2000
and unexercised options and SARs held as of November 10, 2000:
AGGREGATED OPTIONS/SAR EXERCISES THROUGH NOVEMBER 10 OF FISCAL 2000
AND OPTION/SAR VALUES AS OF NOVEMBER 10, 2000
<TABLE>
<CAPTION>
Number of Securities Value of
Underlying Unexercised In-
Unexercised the-Money Options
Shares Options and SARs at and SARs at FY-
Acquired on Value FY-End Exercisable/ End Exercisable/
Exercise Realized Unexercisable (#) Unexercisable ($)
Name (#) ($) (a) (b) (c)
---- ----------- -------- -------------------- -----------------
<S> <C> <C> <C> <C>
F.S. (Sheridan)
Garrison............... 0 0 610,000/120,000 2,423,100/484,775
Tom Garrison............ 0 0 20,400/76,000 110,540/356,985
Will Garrison........... 0 0 40,000/76,000 232,040/356,985
Pat Reed................ 0 0 5,600/29,800 36,829/122,452
Frank Conner............ 4,400 25,125 30,500/44,000 178,895/220,618
</TABLE>
--------
(a) Market price of underlying securities at exercise date, minus exercise or
base price of "in the money" options.
(b) Unexercised options include certain options granted under the Company's
1989 Stock Option Plan which are due to expire May 2001 and February 2002.
(c) Market value of the Company's common stock at November 10, 2000 was $17.50
per share and was used to calculate the value.
REPORT OF THE COMPENSATION COMMITTEE
(for last fiscal year)
The Compensation Committee of the Company's Board of Directors consisted of
Messrs. T. J. Jones (Chairman), Ken Reeves and John Paul Hammerschmidt. The
Compensation Committee is responsible for recommending to the Board of
Directors compensation levels for the Company's Executive Officers and the
policies that govern the Company's compensation and benefit plans. The
Company's compensation programs consist of base compensation, stock options
and contributions to its 401(k) retirement plan. The programs are intended to
enable the Company to attract, retain, reward and motivate management required
to achieve the Company's corporate objectives.
In reviewing the total compensation of the Company's Executive Officers,
the Compensation Committee compares American Freightways' corporate
performance with its industry peer group included in the performance graph
(see page I-11) and a broader more generalized group of similarly sized and
geographically located companies. The Compensation Committee then evaluates
the current Company performance (in particular revenue growth, operating ratio
and net margin), its financial position (in particular debt to equity, current
ratio and asset utilization) and its long range goals against contributions
made by key employees in current performance and contribution toward achieving
future objectives. In dealing with the above factors the Compensation
Committee must use some subjectivity in assigning weights to each factor.
I-9
<PAGE>
In evaluating compensation levels for 2000 the Compensation Committee
considered a number of factors relating to the Company's results for 1999.
During 1999 the Company realized strong revenue growth and successfully
introduced the new "American Flyer" service along with the "American Flyer
Guaranteed" and "American Expediter" guaranteed services. These products have
better positioned the Company to compete in its markets. As a result of
management's efforts, the Company exceeded its 1999 revenue growth goals while
achieving improved revenue yield. The Company made substantial progress in
achieving its long standing operating margin and net income margin goals of
10% and 5% respectively while maintaining high levels of customer service. The
Committee also believes that management's efforts have positioned the Company
for continuing growth.
The Committee felt that the 1999 improvements in Company performance along
with the positioning of the Company to meet long term goals reflected
favorably on the performance of the Company's management.
The annual compensation programs of the Company are weighted heavily
towards a base salary. In setting executive base salaries, subject to approval
of the Board of Directors, the Committee considers many factors including
corporate performance in meeting both long and short term objectives, current
market conditions and relative size of the Company. The Compensation Committee
places the most weight (over 60%) on corporate performance with other
considerations given between 15-20% of the weight. Among other things, the
Compensation Committee evaluates the individual's experience,
responsibilities, management and leadership abilities and job performance and
the necessity of qualifying compensation under Section 162(m) of the Code
(which is not currently relevant).
The Company currently has no long term incentive program other than stock
option grants. The Compensation Committee is of the view that options more
closely align the interests of the Company's executive officers with the
interests of its shareholders. The Compensation Committee believes in the
longer term the value of the stock will be most directly related to revenue
growth and earnings per share. The base salaries for Mr. F. S. (Sheridan)
Garrison, Chairman who also served as CEO through June 30, 1999, and Mr. Tom
Garrison, President and also CEO as of July 1, 1999, were determined by
evaluating the same factors generally considered for the Company's other
executives. The Committee was of the view that in consideration of their
contribution to the Company, as well as a comparison of the overall
compensation package for the CEO of similar sized companies, their overall
compensation is at the low end of the range for their peer group.
The stock option plan for the Chairman is a non-discretionary plan with the
number of options granted tied to the annual growth rate in earnings per
share. The formula is set in the plan that was approved by the shareholders in
the 1999 annual shareholders' meeting. It cannot be materially modified by the
Committee or the Board without amending the plan and obtaining shareholder
approval. The Committee believes the compensation package of base salary and
stock options has fairly compensated the Company's executives in the past. The
overall compensation package is in the mid to low range in comparison to both
its industry peers represented in the performance graph (see page I-11) and
the generalized group of companies. The Committee will continue to review the
programs to ensure that the combination of base salary and incentives are fair
to the Company and the employees and that the compensation package is related
to overall performance of both the employees and the Company in relation to
long term objectives of the Company.
The Compensation Committee
T.J. Jones
Ken Reeves
John Paul Hammerschmidt
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the last completed fiscal year, executive compensation was
administered by the Compensation Committee comprised of the individuals listed
above. Mr. Jones previously served as the Company's Executive Vice President-
Operations until his retirement in 1994.
I-10
<PAGE>
COMPANY PERFORMANCE
The following graph shows a five year comparison of cumulative total returns
for American Freightways, the S&P 500 index and an index of peer companies
selected by the Company:
[PERFORMANCE GRAPH APPEARS HERE]
EDGAR PRESENTATION OF
DATA POINTS USED IN
PRINTED GRAPH:
5 YEAR CUMULATIVE TOTAL RETURN SUMMARY
<TABLE>
<CAPTION>
Starting
Basis
Description 1994 1995 1996 1997 1998 1999
----------- -------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
AMERICAN FREIGHTWAYS (%)...... -47.80 7.23 -11.24 16.77 40.39
AMERICAN FREIGHTWAYS ($)...... $100.00 $ 52.20 $ 55.97 $ 49.69 $ 58.02 $ 81.45
S & P 500 (%)................. 37.58 22.96 33.36 28.58 21.05
S & P 500 ($)................. $100.00 $137.58 $169.17 $225.60 $290.08 $351.12
PEER GROUP ONLY (%)........... -15.38 5.24 48.60 -10.41 8.15
PEER GROUP ONLY ($)........... $100.00 $ 84.62 $ 89.05 $132.33 $118.56 $128.22
</TABLE>
--------
(a) Total return based on $100 initial investment and reinvestment of
dividends, if applicable
(b) Peer group total return based on market capitalization.
I-11
<PAGE>
Peer group comprised of nine publicly-traded, less-than-truckload carriers.
The total cumulative return on investments (change in the year-end stock
price plus applicable reinvested dividends) for each of the periods for the
Company, the peer group and the S&P 500 is based on the stock price or market
index at the end of fiscal year 1994.
The above graph compares the Company with that of the S&P 500 and a group
of peer companies with the investment weighted on market capitalization.
Companies in the peer group are as follows: Arkansas Best Corporation, Arnold
Industries, Inc., CNF Transportation, Inc., Consolidated Freightways, Old
Dominion Freight Line, Inc., Roadway Express, US Freightways Corporation,
Vitran Corporation, Inc. and Yellow Corporation.
For fiscal year 1999 the following changes were made to the peer group:
Vitran Corporation was added to replace Jevic Transportation. Jevic
Transportation was deleted from the peer group as a result of its acquisition
by Yellow Corporation.
The stock price performance depicted in the above graph is not necessarily
indicative of future price performance.
I-12
<PAGE>
SCHEDULE I
TO INFORMATION STATEMENT
DIRECTORS AND EXECUTIVE OFFICERS OF FEDEX AND PURCHASER
DIRECTORS AND EXECUTIVE OFFICERS OF FEDEX
The name, current principal occupation or employment and material
occupations, positions, offices or employment for the past five years, of each
director and executive officer of FedEx are set forth below. References herein
to "FedEx" mean FedEx Corporation and references to "FedEx Express" mean its
subsidiary, Federal Express Corporation. Unless otherwise indicated below, the
business address of each director and officer is c/o FedEx Corporation, 942
South Shady Grove Road, Memphis, TN. Where no date is shown, the individual has
occupied the position indicated for the past five years. Unless otherwise
indicated, each occupation set forth opposite an individual's name refers to
employment with FedEx. None of the directors and officers of FedEx listed below
has, during the past five years, (i) been convicted in a criminal proceeding or
(ii) been a party to any judicial or administrative proceeding that resulted in
a judgment, decree or final order enjoining the person from future violations
of, or prohibiting activities subject to, federal or state securities laws, or
a finding of any violation of federal or state securities laws. All directors
and officers listed below are citizens of the United States, except for Paul S.
Walsh, who is a British citizen.
1. Directors of FedEx
<TABLE>
<CAPTION>
Current Principal Occupation or Employment
Name and Five-Year Employment History
---- -------------------------------------------
<C> <S>
James L. Barksdale............... Managing Partner, The Barksdale Group, a
venture capital firm, from April 1999 to
present; President and Chief Executive
Officer of Netscape Communications
Corporation, a provider of software,
services and Web site resources to Internet
users, from January 1995 to March 1999;
President, Chief Executive Officer and
Chief Operating Officer of AT&T Wireless
Services (formerly McCaw Cellular
Communications, Inc. (collectively,
"McCaw")), a cellular telecommunications
company, from September 1994 to January
1995; President and Chief Operating Officer
of McCaw from January 1992 to September
1994; Executive Vice President and Chief
Operating Officer of FedEx Express from
April 1983 to January 1992; Director of
FedEx Express from April 1983 to October
1991; Senior Vice President-Data Systems of
FedEx Express from February 1979 to April
1983. Director, America Online, Inc.,
HomeGrocer.com, Inc., Liberate
Technologies, The Robert Mondavi
Corporation, Sun Microsystems, Inc. and
3Com Corporation.
Robert L. Cox.................... Partner, Waring Cox, a law firm, for more
than the past five years; Secretary of
FedEx Express from June 1971 to September
1993.
Ralph D. DeNunzio................ President of Harbor Point Associates, Inc.,
a private investment and consulting firm,
since October 1987. Director, Harris
Corporation and NIKE, Inc.
Judith L. Estrin................. President and Chief Executive Officer of
Packet Design, Inc., an Internet technology
company, since May 2000; Senior Vice
President and Chief Technology Officer of
Cisco Systems, Inc., a networking systems
company, from April 1998 to April 2000;
President and Chief Executive Officer of
Precept Software, Inc., a computer software
company, from March 1995 to April 1998;
Consultant from September 1994 to March
1995. Director, Sun Microsystems, Inc. and
The Walt Disney Company.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Current Principal Occupation or Employment
Name and Five-Year Employment History
---- -------------------------------------------
<C> <S>
Philip Greer..................... Senior Managing Director of Weiss, Peck &
Greer, L.L.C., an investment management
firm, since 1995; General Partner of Weiss,
Peck & Greer from 1970 to 1995. Director,
Network Computing Devices, Inc. and The
Robert Mondavi Corporation.
J. R. Hyde, III.................. Chairman of Pittco Management, LLC, an
investment management company, since
January 1998; President of Pittco, Inc., an
investment company, since April 1989;
Chairman of AutoZone, Inc., an auto parts
retail chain, from May 1986 to March 1997;
Chief Executive Officer of AutoZone, Inc.
from May 1986 to December 1996. Director,
AutoZone, Inc.
Shirley A. Jackson............... President of Rensselaer Polytechnic
Institute, a technological university,
since July 1999; Chairman and Commissioner
of the United States Nuclear Regulatory
Commission from July 1995 to June 1999;
Commissioner of the United States Nuclear
Regulatory Commission from May 1995 to July
1995; Professor of Physics at Rutgers
University from July 1991 to May 1995.
Director, Newport News Shipbuilding Inc.,
Sealed Air Corporation, USX Corporation and
UtiliCorp United Inc.
George J. Mitchell............... Special Counsel to Verner, Liipfert,
Bernhard, McPherson and Hand, a law firm,
since January 1995; Member of the United
States Senate from May 1980 to January
1995. Director, Casella Waste Systems,
Inc., Staples, Inc., Starwood Hotels &
Resorts Worldwide, Inc., Unilever PLC,
UnumProvident Corporation, The Walt Disney
Company and Xerox Corporation.
Joshua I. Smith.................. Vice Chairman and President of iGate, Inc.,
a broadband networking company, since June
2000; Chairman, President and Chief
Executive Officer of The MAXIMA
Corporation, an information and data
processing firm, from 1978 to June 2000.
The MAXIMA Corporation filed for
reorganization in federal bankruptcy court
in June 1998. Director, The Allstate
Corporation, CardioComm Solutions Inc. and
Caterpillar Inc.
Frederick W. Smith............... Chairman, President and Chief Executive
Officer of FedEx since January 1998;
Chairman of FedEx Express since 1975;
Chairman, President and Chief Executive
Officer of FedEx Express from 1983 to
January 1998; Chief Executive Officer of
FedEx Express from 1977 to January 1998;
President of FedEx Express from 1971 to
1975. Director, Value America, Inc.
Paul S. Walsh.................... Group Chief Operating Officer of Diageo
plc, a consumer food and beverage company,
since January 2000; Chairman, President and
Chief Executive Officer of The Pillsbury
Company, a wholly-owned subsidiary of
Diageo plc, from April 1996 to January
2000; Chief Executive Officer of The
Pillsbury Company from January 1992 to
April 1996. Director, Ceridian Corporation
and Diageo plc.
Peter S. Willmott................ Chairman and Chief Executive Officer of
Willmott Services, Inc., a retail and
consulting firm, since June 1989; Chief
Executive Officer and President of Zenith
Electronics Corporation, an electronics
manufacturing company, from July 1996 to
January 1998 (Zenith Electronics
Corporation filed for reorganization in
federal bankruptcy court in August 1999);
President and Chief Operating Officer of
FedEx Express from September 1980 to May
1983; Executive Vice President of FedEx
Express from 1977 to 1980; Senior Vice
President-Finance and Administration of
FedEx Express from 1974 to 1977. Director,
Security Capital Group Incorporated.
</TABLE>
2
<PAGE>
2. Executive Officers of FedEx
<TABLE>
<CAPTION>
Current Principal Occupation or Employment
Name and Five-Year Employment History
---- -------------------------------------------
<C> <S>
Robert B. Carter................. Executive Vice President and Chief
Information Officer of FedEx since June
2000; Corporate Vice President and Chief
Technology Officer of FedEx from February
1998 to June 2000; Vice President--
Corporate Systems Development of FedEx
Express from September 1993 to February
1998; Managing Director--Systems
Development of FedEx Express from April
1993 to September 1993.
T. Michael Glenn................. Executive Vice President--Market
Development and Corporate Communications of
FedEx since January 1998; Senior Vice
President--Marketing, Customer Service and
Corporate Communications of FedEx Express
from June 1994 to January 1998; Senior Vice
President--Marketing and Corporate
Communications of FedEx Express from
December 1993 to June 1994; Senior Vice
President--Worldwide Marketing Catalog
Services and Corporate Communications of
FedEx Express from June 1993 to December
1993; Senior Vice President--Catalog and
Remail Services of FedEx Express from
September 1992 to June 1993; Vice
President--Marketing of FedEx Express from
August 1985 to September 1992; and various
management positions in sales and marketing
and senior sales specialist of FedEx
Express from 1981 to 1985.
Alan B. Graf, Jr................. Executive Vice President and Chief
Financial Officer of FedEx since January
1998; Executive Vice President and Chief
Financial Officer of FedEx Express from
February 1996 to January 1998; Senior Vice
President and Chief Financial Officer of
FedEx Express from December 1991 to
February 1996; Vice President and Treasurer
of FedEx Express from August 1987 to
December 1991; and various management
positions in finance and a senior financial
analyst of FedEx Express from 1980 to 1987.
James S. Hudson.................. Corporate Vice President--Strategic
Financial Planning and Control and
Principal Accounting Officer of FedEx since
January 1998; Vice President--Corporate and
Strategic Financial Planning of FedEx
Express from January 1997 to January 1998;
Vice President, Controller and Chief
Accounting Officer of FedEx Express from
December 1994 to January 1997; Vice
President-Finance--Europe, Africa and
Mediterranean of FedEx Express from July
1992 to December 1994; and various
management positions in finance at FedEx
Express from 1974 to 1992.
Kenneth R. Masterson............. Executive Vice President, General Counsel
and Secretary of FedEx since January 1998;
Executive Vice President, General Counsel
and Secretary of FedEx Express from
February 1996 to January 1998; Senior Vice
President, General Counsel and Secretary of
FedEx Express from September 1993 to
February 1996; Senior Vice President and
General Counsel of FedEx Express from
February 1981 to September 1993; and Vice
President--Legal of FedEx Express from
January 1980 to February 1981.
Frederick W. Smith............... Chairman, President and Chief Executive
Officer of FedEx since January 1998;
Chairman of FedEx Express since 1975;
Chairman, President and Chief Executive
Officer of FedEx Express from April 1993 to
January 1998; Chief Executive Officer of
FedEx Express from 1977 to January 1998;
and President of FedEx Express from June
1971 to February 1975.
</TABLE>
3
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
The name, current principal occupation or employment and material
occupations, positions, offices or employment for the past five years of each
director and executive officer of Purchaser are set forth below. Unless
otherwise indicated below, the business address of each director and officer
is c/o FedEx Corporation, 942 South Shady Grove Road, Memphis, TN. Unless
otherwise indicated, each occupation set forth opposite an individual's name
refers to employment with Purchaser. None of the directors and officers of
Purchaser listed below has, during the past five years, (i) been convicted in
a criminal proceeding or (ii) been a party to any judicial or administrative
proceeding that resulted in a judgement, decree or final order enjoining the
person from future violations of, or prohibiting activities subject to,
federal or state securities laws, or a finding of any violation of federal or
state securities laws. All directors and officers listed below are citizens of
the United States.
1. Directors of Purchaser
<TABLE>
<CAPTION>
Current Principal Occupation or Employment
Name and Five-Year Employment History
---- -------------------------------------------
<C> <S>
Robert B. Carter................. Executive Vice President and Chief
Information Officer of FedEx since June
2000; Corporate Vice President and Chief
Technology Officer of FedEx from February
1998 to June 2000; Vice President--
Corporate Systems Development of FedEx
Express from September 1993 to February
1998; Managing Director--Systems
Development of FedEx Express from April
1993 to September 1993.
T. Michael Glenn................. Executive Vice President--Market
Development and Corporate Communications of
FedEx since January 1998; Senior Vice
President--Marketing, Customer Service and
Corporate Communications of FedEx Express
from June 1994 to January 1998; Senior Vice
President--Marketing and Corporate
Communications of FedEx Express from
December 1993 to June 1994; Senior Vice
President--Worldwide Marketing Catalog
Services and Corporate Communications of
FedEx Express from June 1993 to December
1993; Senior Vice President--Catalog and
Remail Services of FedEx Express from
September 1992 to June 1993; Vice
President--Marketing of FedEx Express from
August 1985 to September 1992; and various
management positions in sales and marketing
and senior sales specialist of FedEx
Express from 1981 to 1985.
Alan B. Graf, Jr................. Executive Vice President and Chief
Financial Officer of FedEx since January
1998; Executive Vice President and Chief
Financial Officer of FedEx Express from
February 1996 to January 1998; Senior Vice
President and Chief Financial Officer of
FedEx Express from December 1991 to
February 1996; Vice President and Treasurer
of FedEx Express from August 1987 to
December 1991; and various management
positions in finance and a senior financial
analyst of FedEx Express from 1980 to 1987.
Kenneth R. Masterson............. Executive Vice President, General Counsel
and Secretary of FedEx since January 1998;
Executive Vice President, General Counsel
and Secretary of FedEx Express from
February 1996 to January 1998; Senior Vice
President, General Counsel and Secretary of
FedEx Express from September 1993 to
February 1996; Senior Vice President and
General Counsel of FedEx Express from
February 1981 to September 1993; and Vice
President--Legal of FedEx Express from
January 1980 to February 1981.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
Current Principal Occupation or
Employment
Name and Five-Year Employment History
---- ----------------------------------------
<C> <S>
Frederick W. Smith............... Chairman, President and Chief Executive
Officer of FedEx since January 1998;
Chairman of FedEx Express since 1975;
Chairman, President and Chief Executive
Officer of FedEx Express from 1983 to
January 1998; Chief Executive Officer of
FedEx Express from 1977 to January 1998;
President of FedEx Express from 1971 to
1975. Director, Value America, Inc.
</TABLE>
2. Executive Officers of Purchaser
<TABLE>
<CAPTION>
Current Principal Occupation or Employment
Name and Five-Year Employment History
---- -------------------------------------------
<C> <S>
Kenneth R. Masterson............. President and Secretary of Purchaser since
November 2000. Executive Vice President,
General Counsel and Secretary of FedEx
since January 1998; Executive Vice
President, General Counsel and Secretary of
FedEx Express from February 1996 to January
1998; Senior Vice President, General
Counsel and Secretary of FedEx Express from
September 1993 to February 1996; Senior
Vice President and General Counsel of FedEx
Express from February 1981 to September
1993; and Vice President--Legal of FedEx
Express from January 1980 to February 1981.
</TABLE>
5
<PAGE>
ANNEX II
November 12, 2000
Board of Directors
American Freightways Corporation
2200 Forward Drive
Harrison, Arkansas 72601
Members of the Board:
You have asked us to advise you with respect to the fairness to the holders
of common stock, par value $0.01 per share ("Company Common Stock"), of
American Freightways Corporation (the "Company") from a financial point of view
of the Consideration (as defined below) to be received by such holders pursuant
to the terms of the Agreement and Plan of Merger, dated as of November 12, 2000
(the "Merger Agreement"), by and among the Company, FedEx Corporation (the
"Acquiror") and FDX, Inc., a wholly owned subsidiary of the Acquiror ("Merger
Sub"). Pursuant to the Merger Agreement (i) Merger Sub will commence a tender
offer (the "Tender Offer") for 50.1% of the outstanding shares of Company
Common Stock at a price of $28.13 per share, in cash (the "Cash Consideration")
and (ii) following consummation of the Tender Offer, Merger Sub will be merged
with the Company (the "Merger" and, together with the Tender Offer, the
"Transaction"), the Company will become a wholly owned subsidiary of the
Acquiror and each outstanding share of Company Common Stock (other than shares
owned by the Acquiror, the Company and their subsidiaries) will be converted
into the right to receive a number of shares of common stock, par value $0.10
per share of the Acquiror ("Acquiror Common Stock"), equal to the ratio
determined by dividing $28.13 by the average closing price per share of
Acquiror Common Stock for the ten (10) trading days selected by the Acquiror
and the Company by lot out of the 20 trading days ending on and including the
fifth trading day prior to the date the Merger becomes effective (such number
of shares of Acquiror Common Stock, the "Stock Consideration" and, together
with the Cash Consideration, the "Consideration").
In arriving at our opinion, we have reviewed certain publicly available
business and financial information relating to the Company and the Acquiror, as
well as the Merger Agreement and certain related documents. We have also
reviewed certain other information, including financial forecasts, provided to
or discussed with us by the Company and the Acquiror and have discussed the
business and prospects of the Company and the Acquiror with the Company's and
the Acquiror's management. We have also considered certain financial and stock
market data of the Company and the Acquiror, and we have compared those data
with similar data for other publicly held companies in businesses similar to
the Company and the Acquiror and we have considered the financial terms of
certain other business combinations and other transactions which have recently
been effected. We also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which
we deemed relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. We have assumed that
the financial forecasts provided to us by the Company have been reasonably
prepared on bases reflecting the best currently available estimates and
judgements of the Company's management as to the future financial performance
of the Company, and we have been advised by management of the Acquiror and have
assumed that the publicly available forecasts with respect to the Acquiror
discussed with us represent reasonable estimates as to the future financial
performance of the Acquiror. You also have informed us, and we have
<PAGE>
assumed, that the Merger will be treated as a tax-free reorganization for
federal income tax purposes. In addition, we have not been requested to make,
and have not made, an independent evaluation or appraisal of the assets or
liabilities (contingent or otherwise) of the Company or the Acquiror, nor have
we been furnished with any such evaluations or appraisals. Our opinion is
necessarily based upon financial, economic, market and other conditions as
they exist and can be evaluated on the date hereof. We are not expressing any
opinion as to the actual value of Acquiror Common Stock when issued to holders
of Company Common Stock pursuant to the Merger or the prices at which such
shares will trade at any time. We were not requested to, and did not, solicit
third party indications of interest in acquiring all or any part of the
Company.
We and our affiliate, Donaldson, Lufkin & Jenrette Securities Corporation,
have acted as financial advisor to the Company in connection with the
Transaction and will receive a fee for such services, a portion of which will
be paid in connection with the delivery of this opinion and a significant
portion of which is contingent upon the consummation of the Tender Offer. In
the past, we or our affiliates have provided certain financial and investment
banking services to the Company and have received compensation for such
services. In the ordinary course of business, we and our affiliates may
actively trade the debt and equity securities of both the Company and the
Acquiror for our and such affiliates' own accounts and for the accounts of
customers and, accordingly, may at any time hold a long or short position in
such securities.
It is understood that this letter is for the information of the Board of
Directors of the Company in connection with its consideration of the
Transaction and does not constitute a recommendation to any holder of Company
Common Stock whether or not such holder should tender shares pursuant to the
Tender Offer or how such holder should vote or act on any matter relating to
the Merger.
Based upon and subject to the foregoing, it is our opinion that, as of the
date hereof, the Consideration to be received by the holders of Company Common
Stock in the Transaction is fair to such holders (other than the Acquiror and
its affiliates) from a financial point of view.
Very truly yours,
Credit Suisse First Boston
Corporation
/s/ L. Price Blackford
By: _________________________________
L. Price Blackford
Managing Director
II-2
<PAGE>
EXHIBIT (a)(3)
November 20, 2000
Dear Shareholder:
As you know, American Freightways Corporation has entered into a merger
agreement providing for the acquisition of American Freightways by FedEx
Corporation ("FedEx"). In accordance with the merger agreement, FedEx, through
its wholly-owned subsidiary, FDX, Inc., has today commenced a tender offer to
purchase up to 50.1% of the outstanding shares of American Freightways common
stock for $28.13 per share in cash.
The tender offer is conditioned upon, among other things, (i) a number of
shares which represents 50.1% of American Freightways' outstanding shares
being validly tendered and not withdrawn prior to the expiration of the offer
and (ii) the waiting periods under applicable antitrust laws having expired or
been terminated. The tender offer will be followed by a merger in which each
share of American Freightways common stock not purchased in the tender offer
will be converted into the right to receive that number of shares of FedEx
common stock determined by dividing $28.13 by the average closing price per
share of FedEx common stock for a defined period of trading days prior to the
closing of the merger.
Your Board of Directors, by unanimous vote, has approved the merger
agreement and the transactions contemplated by it, including the offer and the
merger, and has determined that the offer and the merger are fair to, and in
the best interests of, the shareholders of American Freightways and recommends
that shareholders of American Freightways who desire to receive cash for their
shares accept the offer and tender their shares pursuant to the offer.
In arriving at its recommendation, the Board of Directors considered a
number of factors, which are described in the attached Schedule 14D-9,
including, among other things, the written opinion of American Freightways'
financial advisor, Credit Suisse First Boston Corporation ("CSFB"), that, as
of the date of the opinion, the consideration to be received pursuant to the
offer and the merger is fair to American Freightways shareholders from a
financial point of view. A copy of CSFB's written opinion, which describes the
assumptions made, procedures followed, matters considered and qualifications
and limitations of the review undertaken, can be found in Annex II to the
Schedule 14D-9. You should read the opinion carefully and in its entirety.
In addition to the attached Schedule 14D-9 relating to the offer, also
enclosed are FedEx's Offer to Purchase, dated November 20, 2000, and related
materials to be used for tendering your shares. These documents set forth the
terms and conditions of the offer and provide instructions as to how to tender
your shares. I urge you to read all the enclosed materials carefully.
Very truly yours,
/s/ F.S. (Sheridan) Garrison
F.S. (Sheridan) Garrison
Chairman
