-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Rrrb3Zt6ZWrL6M5i5uSRGiCFgAeyt5TLpIVKaNGtQwjO+1ip7BNJpFUwoWBTNYK5 q2yiq7yR4Nm0hHmGmiXAVw== /in/edgar/work/20000802/0000912057-00-034322/0000912057-00-034322.txt : 20000921 0000912057-00-034322.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-034322 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 15 CONFORMED PERIOD OF REPORT: 20000531 FILED AS OF DATE: 20000802 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FEDEX CORP CENTRAL INDEX KEY: 0001048911 STANDARD INDUSTRIAL CLASSIFICATION: [4513 ] IRS NUMBER: 621721435 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 001-15829 FILM NUMBER: 684689 BUSINESS ADDRESS: STREET 1: 942 SOUTH SHADY GROVE ROAD CITY: MEMPHIS STATE: TN ZIP: 38120- BUSINESS PHONE: 9013693600 MAIL ADDRESS: STREET 1: 6075 POPLAR AVENUE CITY: MEMPHIS STATE: TN ZIP: 38119 FORMER COMPANY: FORMER CONFORMED NAME: FDX CORP DATE OF NAME CHANGE: 19971103 10-K405 1 a10-k405.txt 10-K/405 - -------------------------------------------------------------------------------- UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (MARK ONE) /X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED MAY 31, 2000. OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM _________________ TO _________________. COMMISSION FILE NUMBER 1-15829 FEDEX CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 62-1721435 (STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.) 942 SOUTH SHADY GROVE ROAD, MEMPHIS, TENNESSEE 38120 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (901) 818-7200 SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED Common Stock, par value $.10 per share New York Stock Exchange SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. /X/ As of July 26, 2000, 284,886,605 shares of the Registrant's Common Stock were outstanding and the aggregate market value of the voting stock held by non-affiliates of the Registrant (based on the closing sale price of such stock on the New York Stock Exchange) was approximately $10.3 billion. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Registrant's definitive proxy statement to be delivered to shareholders in connection with the 2000 Annual Meeting of Stockholders to be held on September 25, 2000 are incorporated by reference in response to Part III of this Report. - ------------------------------------------------------------------------------ TABLE OF CONTENTS
PAGE PART I ITEM 1. Business 4 ITEM 2. Properties 23 ITEM 3. Legal Proceedings 27 ITEM 4. Submission of Matters to a Vote of Security Holders 28 Executive Officers of the Registrant 28 PART II ITEM 5. Market Price for the Registrant's Common Equity and Related Stockholder Matters 31 ITEM 6. Selected Financial Data 32 ITEM 7. Management's Discussion and Analysis of Results of Operations and Financial Condition 33 ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk 44 ITEM 8. Financial Statements and Supplementary Data 45 ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 46 PART III ITEM 10. Directors and Executive Officers of the Registrant 46 ITEM 11. Executive Compensation 46 ITEM 12. Security Ownership of Certain Beneficial Owners and Management 46 ITEM 13. Certain Relationships and Related Transactions 46 PART IV ITEM 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 47 FINANCIAL STATEMENTS Report of Independent Public Accountants F-1 Consolidated Balance Sheets - May 31, 2000 and 1999 F-2 Consolidated Statements of Income - Years ended May 31, 2000, 1999 and 1998 F-4 Consolidated Statements of Changes in Stockholders' Investment and Comprehensive Income - Years ended May 31, 2000, 1999 and 1998 F-5 Consolidated Statements of Cash Flows - Years ended May 31, 2000, 1999 and 1998 F-6 Notes to Consolidated Financial Statements F-7 FINANCIAL STATEMENT SCHEDULE Report of Independent Public Accountants on Financial Statement Schedule S-1 Schedule II - Valuation and Qualifying Accounts S-2 Exhibit Index E-1
PART I ITEM 1. BUSINESS INTRODUCTION FedEx Corporation ("FedEx") is a leading global provider of transportation, e-commerce and supply chain management services. Services offered by FedEx companies include worldwide express delivery, ground small-parcel delivery, less-than-truckload freight delivery, global logistics, supply chain management and customs brokerage, as well as trade facilitation and electronic commerce solutions. FedEx offers its integrated business solutions through a portfolio of operating companies, including - - FEDERAL EXPRESS CORPORATION ("FedEx Express"). FedEx Express is our largest subsidiary and is the world leader in global express distribution, offering time-certain delivery within 24 to 48 hours among markets that comprise more than 90% of the world's gross domestic product. - - FEDEX GROUND PACKAGE SYSTEM, INC. ("FedEx Ground"). Formerly known as RPS, FedEx Ground is North America's second largest provider of business-to-business money-back guaranteed ground package delivery. FedEx Ground also provides money-back guaranteed, low-cost residential deliveries to many major U.S. markets through its new FedEx Home Delivery service. - - FEDEX GLOBAL LOGISTICS, INC. ("FedEx Logistics"). FedEx Logistics offers complete supply chain solutions by combining worldwide transportation, information and physical logistics services. - - FEDEX CUSTOM CRITICAL, INC. ("FedEx Custom Critical"). Formerly known as Roberts Express, FedEx Custom Critical is the world's leading surface-expedited carrier for time-critical shipments and those requiring special handling. - - FEDEX TRADE NETWORKS, INC. ("FedEx Trade Networks"). FedEx Trade Networks provides customs brokerage and trade facilitation solutions, principally through its Tower Group International, Inc. subsidiary ("Tower"). - - VIKING FREIGHT, INC. ("Viking"). Viking is a less-than-truckload freight carrier operating principally in the western United States. FedEx was incorporated in Delaware on October 2, 1997 to serve as the holding company parent of FedEx Express and each of our other operating companies. Through our holding company, along with our FedEx Corporate Services, Inc. subsidiary ("FedEx Services"), we are able to provide strategic direction to, and coordination of, the FedEx portfolio of companies. We recently formed FedEx Services, principally to combine the sales, marketing and technology groups of FedEx, FedEx Express and FedEx Ground, allowing us to provide our customers with a single point of contact in these areas for easy access to our broad portfolio of services. We believe that sales and marketing activities, as well as the information systems that support the extensive automation of our services, are functions that are best coordinated across subsidiary lines. Through the use of our advanced information systems which connect the FedEx companies, we make it easy and convenient for our customers to use the full range of FedEx services. We believe that seamless information integration is critical in order to obtain business synergies from multiple operating units. For example, we have redesigned our Web site, www.fedex.com, as a single point of contact for our customers to access FedEx Express and FedEx Ground package tracking, customer service and invoicing information. In addition, we have combined FedEx Express and FedEx Ground domestic shipping functionality on our FedEx PowerShipMC proprietary computer system. This permits customers to use the dedicateD computer installed in their offices and, with a few keystrokes, switch between FedEx Express and FedEx Ground domestic shipping services. Our commitment to provide customers with fully integrated shipping solutions is reflected in the new strategic initiatives we announced in January 2000. As described below, these initiatives are intended to, among other things, provide a convenient single point of access to our customers for their shipping needs. We manage our business as a portfolio. As a result, decisions on capital investment, expansion of delivery and information technology networks, and service additions or enhancements are based on achieving the highest overall long-term return on capital. For each one of the FedEx companies, we focus on making appropriate investments in the technology and transportation assets necessary to optimize our earnings performance and cash flow. For financial information concerning FedEx's business segments, refer to Note 12 of Notes to Consolidated Financial Statements included elsewhere herein. Except as otherwise indicated, references to years means the fiscal year of FedEx ended May 31 of the year referenced. STRATEGIC INITIATIVES On January 19, 2000, we announced three important strategic initiatives designed to strengthen our competitive position and to offer new and more robust solutions for customers worldwide: - - A new branding strategy to extend the FedEx brand name to most of our subsidiaries and to the holding company. - - Organizational changes planned to take effect over the first half of calendar 2000, designed to provide a convenient single point of access to customers for sales, customer service, billing and automation systems. - - An innovative expansion of FedEx Ground service to the low-cost residential delivery market, FedEx Home Delivery, began rolling out to many major U.S. markets in March 2000. Our strategy is to leverage and extend one of our greatest assets, the FedEx brand, and to provide our customers with an integrated set of business solutions. Our customers increasingly want a single solution that can meet all of their global transportation needs. Our goal is to provide them convenient access to our powerful collection of express, ground, logistics, supply chain and trade facilitation solutions. THE FEDEX BRAND Immediately following our January 19th announcement, the parent company, formerly FDX Corporation, was renamed FedEx Corporation. Substantially all of our global subsidiaries now operate under the highly-recognized and trusted FedEx brand name. - - Federal Express, the worldwide leader in express transportation, retained its name but modified its logo to FedEx Express. - - RPS, which specializes in small-package, business-to-business ground delivery, was renamed FedEx Ground. FedEx Home Delivery, the new residential delivery service, is provided through FedEx Ground. - - Roberts Express, the leader in the expedited, time-critical delivery sector, was renamed FedEx Custom Critical. - - FDX Logistics was renamed FedEx Logistics. We will continue to meet the needs of customers requiring distinct regional services through Viking, the leading less-than-truckload carrier in the western U.S., Tower, an international logistics and trade information technology company, and Caribbean Transportation Services, an airfreight forwarder. These companies remain part of FedEx but retain their individual brand names, as they are well known and respected in the regional markets where they operate. FedEx is one of the most trusted and respected brands in the world, and the FedEx brand name is a powerful sales and marketing tool. While FedEx Ground and FedEx Custom Critical have established excellent reputations in their market segments, we believe that bringing them under the FedEx brand umbrella will accelerate their prospects for growth. For example, research indicates that many customers are not as familiar with the service reliability levels at RPS as they are with the FedEx reputation for reliability. We believe that branding those RPS services with the FedEx name will increase customer awareness for FedEx Ground and generate additional business. ORGANIZATIONAL CHANGES While each of our subsidiaries will continue to operate independently, completely focused on the distinct needs of various market segments, we now provide a single point of access for many customer support functions, such as customer service, sales and automation. Our sales and marketing organizations have been combined under FedEx Services to more effectively sell the entire portfolio of express, ground and e-commerce services. FedEx Services sells and markets the full portfolio of services offered by our principal subsidiaries and provides customer-facing solutions that meet customer needs. FedEx Services also includes substantially all of the information technology groups from FedEx, FedEx Express and FedEx Ground. The majority of our e-commerce groups are also part of FedEx Services. By forming a new subsidiary responsible for sales, marketing, electronic commerce and customer automation systems, we can fully integrate those vital activities to make our services more convenient and consistent. We now speak to the customer with one voice, and provide them with a single access point to our services while allowing the operating companies to execute the delivery of their services at the lowest cost with the highest level of service. These strategic actions are designed to fulfill our two-fold business philosophy - to operate independently yet compete collectively. We strongly believe that the optimal way to serve very distinct market segments, such as express and ground, is to operate highly efficient, independent networks with different facilities, different cut-off times and different delivery commitments. Our collective approach also allows customers to select the right network, for the right place, at the right price through a single point of access. Each subsidiary generally serves a separate and distinct sector of the market. Everything about the companies - the operations, the cost structure, the policies and the culture - has been designed to serve the unique customer needs of a particular market segment successfully. Each of the companies is a service leader for its market segment. We believe combining the operations would lower the superior service levels we are now able to provide. At the same time, while we operate separately, we compete collectively by combining the functions that are related to customer communication and information. That is where our customers want a single, consistent, convenient point of access. In the United States, one of the primary tactics used by our competitors is to bundle their ground and express services at one packaged price. An estimated 1.7 million businesses ship both express and ground packages, accounting for nearly 14 million shipments every day. These "multi-mode" shippers need one convenient bundled solution, which is why our integrated sales force has been trained to cross-sell both FedEx Express and FedEx Ground services. These changes are simply a response to customer preferences and should strengthen our competitive position in the marketplace. FEDEX HOME DELIVERY In March 2000, FedEx Ground began providing FedEx Home Delivery to approximately 50% of the U.S. population. This delivery-only service is dedicated to the needs of businesses specializing in the business-to-consumer marketplace by providing unique and compelling low-cost service offerings. This new neighborhood-friendly service is designed to fit the way we live, work and shop today. With this new service, we provide a money-back guaranteed, low-cost solution to the rapidly increasing number of businesses who ship large volumes to residential customers. These customers, in general, want more economical and convenient home delivery options. Features of this service include: - - CONVENIENT AND CUSTOMIZED -- FedEx Home Delivery provides customized delivery options, including delivery by appointment day or evening, with a money-back guarantee. - - UNIQUE AND EFFICIENT -- FedEx Home Delivery takes advantage of the FedEx Ground operational network for pickup and package sorting to maintain a low cost structure. - - DEDICATED TO DELIVERIES -- FedEx Home Delivery is different from the competition because it is dedicated to the delivery side of the equation. Hence, it is able to focus on meeting the distinct customer interface requirements of residential customers. - - A SUPERIOR E-COMMERCE SOLUTION -- This service complements FedEx Ground's leadership position in the business-to-business e-commerce market - by far the largest and fastest growing segment of e-commerce. FedEx Home Delivery gives "e-tailers" an option that combines reliability with cost-effective ground transportation. For more information regarding FedEx Home Delivery see "FedEx Ground -- FedEx Home Delivery" elsewhere herein. FEDEX STRATEGY Our strategy is to have focused operating companies that excel in each segment of the transportation and logistics marketplace, from price-sensitive to service-sensitive, and to create synergies across companies through coordinated sales and marketing programs enhanced by state-of-the-art information technology. We believe that operating independent transportation networks, each focused on its own respective markets, results in optimal service quality, reliability and profitability from each of our businesses. All of the FedEx subsidiaries are free to focus exclusively on the market sectors in which they have the most expertise. We believe that our strategy is proving successful at producing higher levels of service quality. In June 2000, two FedEx subsidiaries, FedEx Express and FedEx Ground were named "Carriers of the Year" by Wal-Mart Stores, Inc., the nation's leading discount retailer. FedEx Express and FedEx Ground were honored by Wal-Mart for the second year in a row for exceptional performance in transportation services in their respective categories, express and ground small package delivery. Wal-Mart's "Carrier of the Year" is determined by a transportation services provider's ability to meet the following rigorous criteria: technology, percentage of accepted and rejected deliveries, on-time pick-up and delivery, customer service, capacity, quality assurance, ease-of-doing business and long-term commitment. Our strategy is also producing improved financial results. For the second year in a row, we experienced record revenues and earnings per share. During 2000, revenue rose 9% to $18.3 billion, net income increased 9% to $688 million and earnings per share rose 10% to $2.32. While our subsidiaries operate independently, they compete collectively. Because they compete collectively, FedEx has the flexibility to rapidly tailor customized delivery and logistics solutions for its customers. As an example, in June 2000 Amazon.com and FedEx teamed up to deliver the highly anticipated fourth Harry Potter book on the first day that the book became available to the public. The arrangement, which we believe is the largest distribution event to date of any single item in e-commerce, used both FedEx Home Delivery and FedEx Express services to provide special Saturday door-to-door delivery for a quarter-million orders placed at the Amazon.com website. To deliver the books, we mobilized more than 9,000 delivery personnel and vehicles from more than 700 stations covering the continental U.S. and about 100 regularly scheduled FedEx Express flights. Our strategy allows us to capitalize on four trends shaping the emerging "Network Economy": GLOBAL SOURCING AND SELLING As the world's economy becomes more fully integrated, and as barriers and borders to trade continue to decrease, companies are sourcing and selling globally. For example, businesses can obtain components from Southeast Asia, assemble them in Europe and sell them in the United States. This, in turn, has opened multiple legs of transportation on both the in-bound "sourcing" side as well as the out-bound "selling" side. With customers in 210 countries, we are a major facilitator in this supply chain because of our global reach, delivery services and information capabilities. During 2000, our global express network delivered very strong growth, particularly in Asia and Europe. Revenue from our FedEx Express international business grew 18% during 2000, including over 20% in the fourth quarter. RAPID GROWTH OF HIGH-TECH AND HIGH-VALUE-ADDED BUSINESSES We believe that the high-tech and high-value-added goods sector will continue to experience strong growth as a percentage of total economic activity. Information technology alone contributes significantly to real economic growth in the United States and overseas. The high-value-added sector, however, is broader, including pharmaceuticals, automotive, electronics, aviation and other goods with high value per pound. ACCELERATION OF THE SUPPLY CHAIN The third major trend affecting the "Network Economy" is the increase of fast-cycle logistics. Companies of varying sizes, particularly in industries experiencing rapid obsolescence, are increasing productivity, efficiency and profitability through sharply increased supply chain velocity. A supply chain is the series of transportation and information exchanges required to convert raw materials into finished, delivered goods. Managing inventory at rest is unprofitable. Warehouses, for example, are expensive ways to ensure the availability of goods. We believe in substituting real-time information to manage inventory in motion, thereby enabling customers to reduce overhead and obsolescence, while speeding time-to-market. FedEx Logistics allows us to take advantage of the move toward faster, more efficient supply chains. We believe that the future of logistics will not be in brick-and-mortar warehouses, but in providing information-intensive services that increase the value, visibility and velocity of the goods in customers' supply chains. RAPID GROWTH OF E-COMMERCE While there has been significant press recently about the expected growth of consumer purchases over the Internet, the business-to-business e-commerce marketplace is substantially larger than the business-to-consumer e-commerce marketplace. Business-to-business e-commerce is estimated to exceed the $2.7 trillion sales mark in 2004. Computers and electronics, already two of FedEx's largest customer segments, currently account for almost half of this category, and supply chains are increasingly moving online. While FedEx expects business-to-business e-commerce to remain the largest e-commerce segment, FedEx is also leveraging the strength of the FedEx portfolio in the business-to-consumer market. In March 2000, we began our new FedEx Home Delivery service through FedEx Ground. This new service provides a money-back guaranteed, low-cost solution to the rapidly increasing number of businesses, including e-tailers, who ship large volumes to residential customers. The following describes in more detail the business of each of our six principal operating companies: FEDEX EXPRESS INTRODUCTION FedEx Express invented express distribution in 1973 and remains the industry leader, providing rapid, reliable, time-definite delivery of documents, packages and freight to 210 countries. FedEx Express offers time-certain delivery in 24 to 48 hours to markets that generate 90% of the world's gross domestic product through door-to-door, customs-cleared service, with a money-back guarantee. FedEx Express's extensive air route authorities and transportation infrastructure, combined with its use of leading-edge information technologies, make FedEx Express the world's largest express-distribution company, providing fast, reliable service for over 3.3 million shipments each business day. FedEx Express employs more than 149,000 employees and has more than 46,000 drop-off locations, 663 aircraft and 49,000 vehicles in its integrated global network. DELIVERY SERVICES DOMESTIC FedEx Express offers three U.S. overnight delivery services: FedEx First Overnight, FedEx Priority Overnight and FedEx Standard Overnight. Overnight document and package service extends to virtually the entire United States population. FedEx SameDay service is for urgent shipments up to 70 pounds to virtually any U.S. destination. Packages and documents are either picked up from shippers by FedEx Express couriers or are dropped off by shippers at FedEx Express sorting facilities, FedEx World Service Centers, FedEx Drop Boxes, FedEx ShipSites or FedEx Authorized ShipCenters strategically located throughout the country. Two U.S. deferred services are available for less urgent shipments: FedEx 2Day and FedEx Express Saver. U.S. overnight and second-day services are backed by money-back guarantees and are primarily used by customers for shipment of time-sensitive documents and goods, including high-value machines and machine parts, computer parts, software and consumer items. FedEx Express handles virtually every shipment from origin to destination. FedEx Express also offers express freight services to handle the needs of the time-definite freight market, which is growing at almost twice the rate of the non-time-definite market. FedEx Express offers customers the option of one, two or three business day service backed by two money-back guarantees. Shipments must be 151 lbs. - 2,200 lbs., and be forkliftable, stackable, banded and shrinkwrapped. FedEx 1Day-SM- Freight offers 10:30 a.m. delivery, next-business-day in many areas of the continental United States, including Alaska. FedEx 2Day Freight offers noon delivery in 2 business days in all 50 states. No advance booking is required. FedEx 3Day-SM- Freight offers 3:00 p.m. delivery within 3 business days in every state except Alaska and Hawaii. No advance booking is required. INTERNATIONAL FedEx Express offers various international package and document delivery services and international freight services to 210 countries. These services include: FedEx-Registered Tradmark- International Next Flight, FedEx International First-Registered Tradmark-, FedEx International Priority ("IP"), FedEx International Economy, FedEx International Priority DirectDistribution-SM-, FedEx International Priority Plus, FedEx International MailService, FedEx International Priority Freight, FedEx International Economy Freight, FedEx InternationaL Express Freight, FedEx International Airport-to-Airport-SM-, and the FedEx Expressclear-SM- Electronic Customs Clearance and FedEx International Broker Select service feature options. FedEx Express offers next business day 10:30 a.m. express cargo service from Asia to the United States. FedEx has a direct flight from Osaka, Japan to Memphis, Tennessee. The nonstop daily flight cuts transit times across the Pacific in half for FedEx Express customers -- from 48 to 24 hours -- who ship from Asia to North America. The FedEx Express IP service is backed by FedEx Express's money-back guarantee. The flight schedule also enables FedEx Express to offer its Asian customers later pickup times for connections through FedEx Express's AsiaOne hub in Subic Bay, the Philippines, to 13 major Asian markets. International freight and express delivery markets, particularly outbound from Asia, are growing rapidly. FedEx Express offers the most comprehensive international freight service in the industry, backed by a money-back guarantee, real-time tracking and advanced customs clearance. In June 2000, FedEx Express announced the expansion of its international freight service to provide more delivery options to more countries. Three new FedEx International Priority Freight delivery options were made available for U.S. outbound and inbound shipments beginning July 1: Door to Airport (DTA), Airport to Airport (ATA) and Airport to Door (ATD). These options were in addition to the existing Door to Door (DTD) service. FedEx International Priority Freight and FedEx International Economy Freight now provide service to five and ten more countries, respectively. FedEx Express's enhanced international freight services may now be used by customers to combine pick-up, linehaul and four delivery options to meet their daily business needs. In order to capitalize on the rapid traffic growth in Europe and Asia, FedEx Express announced in June 2000 a significant strengthening of its global network, with new connections in Europe, Asia, the Middle East and India. As a result of the network reconfiguration, FedEx Express offers reduced transit times, later customer pick-ups and earlier deliveries in key global markets. FedEx Express customers in India are able to get their products to the East Coast of the U.S. a full business day faster as a result of the new flights. Companies in southeast Asia doing business in Europe are now able to take orders from their customers two to three hours later in the evening, thanks to later cut off times for FedEx Express pick-ups. In June 1999, the U.S. Department of Transportation ("DOT") announced a new protocol with the Chinese government permitting FedEx Express to expand its existing service to China. FedEx Express is currently the only U.S. all-cargo airline with route authority to serve China, with 10 weekly flights. FedEx Express is ISO 9001 certified for its global operations. ISO 9001 is currently the most rigorous international standard for Quality Management and Assurance. These quality standards were developed by the International Organization for Standardization in Geneva, Switzerland to promote and facilitate international trade. More than 90 countries, including European Union members, the United States and Japan, recognize ISO standards. Detailed information about all of FedEx Express's delivery services can be found on the FedEx Web site at www.fedex.com. The information on our Web site, however, does not form part of this Report. E-COMMERCE SERVICES We have played a significant role in three business revolutions that have influenced the emergence of what is now known as e-commerce. First came the express revolution. We anticipated the "just-in-time future," which led to the creation of FedEx and the first integrated air/ground express transportation network in 1973. Second came the automation revolution. We have been the leader in customer automation since 1985, when FedEx Express launched the first PC-based automated shipping system, named FedEx PowerShip-Registered Tradmark-. In 1993, FedEx Ground launched MultiShip-Registered Tradmark-, the first carrier-supplied customer automation system to process packages shipped by other transportation providers. In 1994, the FedEx Web site, fedex.com, became the first Web site to offer online package tracking. Two years later, in 1996, FedEx Express launched FedEx interNetShip-Registered Tradmark-, the first shipping application for express packages on the Internet. Customers could now prepare paperwork using formatted screens, print the label on any laser printer, and electronically request a courier to pick up the package. The third revolution, the integration revolution, is now underway. We are empowering businesses with integrated eBusiness and complete supply chain solutions. Many of our newest eBusiness solutions are directed toward the rapidly growing small and medium-sized business ("SMB") market. In June 2000, we announced an alliance with Orbit Commerce, Inc., a leading eBusiness services platform provider, resulting in the introduction of FedEx eCommerce Builder on our Web site. This solution provides SMB's with the ability to build and manage an online store. FedEx eCommerce Builder integrates the core business processes necessary for SMB's to sell online, including FedEx shipping and tracking. We have a comprehensive Internet strategy, driven by our desire for customer convenience. The focal point of our Internet strategy is our fedex.com Web site, through which our customers accomplish all of the tasks they could otherwise accomplish with us by phone or in person. In addition, we design our e-commerce tools and solutions so that they are easily integrated into our customers' applications, as well as into third-party software being developed by the leading e-procurement, systems integration and enterprise resource planning companies. This is increasingly important given the growing customer trend toward multi-carrier shipping platforms. Reflecting our emphasis on e-commerce and information technology, we have had a lineage of distinguished Chief Information Officers, including James L. Barksdale, who went on to serve as the President and Chief Executive Officer of Netscape Communications Corporation, Dennis H. Jones, named by NETWORK WORLD as "One of the 25 Most Powerful People in Networking" and by PC WEEK as "One of the Top 10 Toughest CIOs," and current CIO Robert B. Carter, named as INFOWORLD'S first-ever "Chief Technology Officer of the Year." E-SHIPPING TOOLS AND SOLUTIONS We offer e-shipping tools and solutions which give our customers the power to ship, track and report from their desktops, allowing them to reduce the time spent preparing shipments and increase efficiency and customer service levels. These e-shipping tools can also allow customers to centralize their shipping with back-office solutions. The following e-shipping tools and solutions are offered by FedEx Express and FedEx Ground: - - FedEx interNetship-Registered Tradmark- - through this Web-based shipping application, customers can prepare FedEx Express shipping labels and arrange for pickup or drop-off. Customers can also cancel shipments, track packages and perform certain other applications for FedEx Express and FedEx Ground. - - FedEx Ship-Registered Tradmark- - this software, available to customers who have a computer, modem and laser printer, delivers point-and-click addressing, label printing, package tracking and easy preparation of shipping labels. - - FedEx Tracking-Registered Tradmark- - allows customers to track both FedEx Express and FedEx Ground packages at one time through the FedEx Web site. - - Drop-off Locator - allows customers to easily find and view maps of FedEx drop-off locations through the FedEx Web site. Searches can be conducted by address, city, state or zip code to find one of over 45,000 full-service and self-service locations worldwide. - - Rate Finder - allows customers to determine the cost of shipping packages from the U. S. to virtually anywhere in the world through the FedEx Web site. FedEx also offers the following hardware-based e-shipping tools, designed to provide customers with centralized control over their shipping process and to help them better manage shipping, billing and reporting: - - FedEx PowerShipMC-Registered Tradmark- - this stand-alone hardware system provides customers with the ability to utilize a single system for use with FedEx Express, FedEx Ground and other carriers. Customers can use this system to ship with the carrier of their choice and benefit from increased operational efficiency, decreased employee training time, enhanced access to information and better utilization of space. - - FedEx PowerShip-Registered Tradmark- - this stand-alone hardware system provides customers with a full range of shipping functions, enabling customers to handle large volumes and to automate their entire shipping process. FedEx PowerShip-Registered Tradmark- provides package tracking, produces shipping labels, calculates shipping charges, invoices the customer daily and produces customized reports. - - FedEx ShipAPI-TM- - allows customers to seamlessly integrate FedEx Express services by downloading software from the Internet, which will allow them to connect directly with FedEx Express when placing shipping orders and scheduling pickup requests. - - FedEx DirectLink-TM- - this software allows customers to electronically receive, manage and remit FedEx Express invoicing data. - - FedEx NetReturn-Registered Tradmark- - uses a comprehensive Internet-based returns management system to allow customers to gain better control over the return inventory process, resulting in lower costs, improved cycle times and increased customer service levels. - - FedEx EDI Electronic Invoice and Remittance - integrates with customers' accounts payable systems to allow them to receive FedEx invoice data electronically, including data regarding domestic and international shipments, duties and taxes. PRICING FedEx Express periodically publishes list prices in its Service Guides for the majority of its services. In general, during 2000, U.S. shipping rates were based on the service selected, destination zone, weight, size, any ancillary service charge and whether or not the shipment was picked up by a FedEx Express courier or dropped off by the customer at a FedEx Express location. International rates are based on the type of service provided and vary with size, weight and destination. FedEx Express offers its customers volume discounts generally based on actual or potential average daily revenue produced. Discounts are generally determined by reference to several local and national revenue bands developed by FedEx Express. In response to higher fuel costs, FedEx Express implemented a fuel surcharge of 3% on most U.S. domestic and international services, effective February 1, 2000. The fuel surcharge was further increased to 4%, effective April 1, 2000. The surcharge applies to all shipments tendered within the United States and all U.S. export shipments, where legally and contractually possible. SERVICE REVENUES The following table shows the amount of revenues generated for each class of service offered for the fiscal years ended May 31 (amounts in thousands):
2000 1999 1998 ---- ---- ---- Package: U.S. overnight $ 7,537,844 $ 7,185,462 $ 6,810,211 U.S. deferred 2,428,002 2,271,151 2,179,188 International Priority 3,551,593 3,018,828 2,731,140 Freight: U.S. 566,259 439,855 337,098 International 492,280 530,759 597,861 Other* 492,360 533,222 599,343 ----------- ----------- ----------- Total $15,068,338 $13,979,277 $13,254,841 =========== =========== ===========
- ------------------------- *Includes revenues from sales of aircraft engine noise reduction kits, revenues generated by the specialized services summarized above under "E-Commerce Services," Canadian domestic revenue and charter services. OPERATIONS FedEx Express's global transportation and distribution services are provided through an extensive worldwide network consisting of numerous aviation and ground transportation operating rights and authorities, 663 aircraft, approximately 49,000 vehicles, sorting facilities, FedEx World Service Centers, FedEx Drop Boxes, FedEx ShipSites and ShipCenters and sophisticated package tracking, billing and communications systems. FedEx Express's primary sorting facility, the SuperHub located in Memphis, serves as the center of FedEx Express's multiple hub-and-spoke system. A second national hub is located in Indianapolis. In addition to these national hubs, FedEx Express operates regional hubs in Newark, Oakland and Fort Worth and major metropolitan sorting facilities in Los Angeles and Chicago. Facilities in Anchorage, Paris and Subic Bay, the Philippines, serve as sorting facilities for express package and freight traffic moving to and from Asia, Europe and North America. Additional major sorting and freight handling facilities are located at Narita Airport in Tokyo, Stansted Airport outside London and Pearson Airport in Toronto. Facilities in Subic Bay and Paris are also designed to serve as regional hubs for their respective market areas. Throughout its worldwide network, FedEx Express operates city stations and employs a staff of customer service agents, cargo handlers and couriers who pick up and deliver shipments in the station's service area. In some cities, FedEx Express operates FedEx World Service Centers which are staffed, store-front facilities located in high-traffic, high-density areas. Unmanned FedEx Drop Boxes provide customers the opportunity to drop off packages at locations in office buildings, shopping centers and corporate or industrial parks. FedEx Express has also formed alliances with certain retailers to extend this customer convenience network to drop-off sites in retail stores. In international regions where low package traffic makes FedEx Express's direct presence less economical, Global Service Participants ("GSPs") have been selected to complete deliveries and to pick up packages. FedEx Express has an advanced package tracking and billing system, FedEx COSMOS-Registered Tradmark-, that utilizes hand-held electronic scanning equipment and computer terminals. This system provides proof of delivery information, an electronically reproduced airbill for the customer and information regarding the location of a package within FedEx Express's system. For international shipments, FedEx Express has developed FedEx Expressclear-SM-, a worldwide electronic customs clearance system, which speeds up customs clearance by allowing customs agents in destination countries to review information about shipments before they arrive. FUEL SUPPLIES AND COSTS During 2000, FedEx Express purchased aviation fuel from various suppliers under contracts which vary in length and which provide for specific amounts of fuel to be delivered. The fuel represented by these contracts is purchased at market prices that may fluctuate daily. As a result of rising fuel prices during 2000, we entered into jet fuel hedging contracts during the second half of 2000 that are designed to limit our exposure to fluctuations in jet fuel prices. Under these contracts, we make (or receive) payments based on the difference between a specified lower (or upper) limit and the market price of jet fuel, as determined by an index of spot market prices representing various geographic regions. The difference is recorded as an increase or decrease in fuel expense. Under jet fuel hedging contracts, we received approximately $18 million in 2000. As of May 31, 2000, we had entered into jet fuel hedging contracts for approximately one-third of FedEx Express's estimated requirements for jet fuel in 2001. The timing and magnitude of any additional contracts may vary due to availability and pricing. Notwithstanding our hedging activities, during 2000, fuel costs increased by $273 million due to higher fuel prices. The following table sets forth FedEx Express's costs for aviation fuel and its percentage of total operating expense for the previous five fiscal years:
TOTAL COST PERCENTAGE OF TOTAL FISCAL YEAR (IN THOUSANDS) OPERATING EXPENSE ----------- -------------- ------------------- 2000 $723,584 5.1% 1999 467,598 3.6 1998 570,959 4.6 1997 557,533 5.2 1996 461,401 4.8
In response to higher fuel costs, FedEx Express implemented a fuel surcharge of 3% on most U.S. domestic and international services, effective February 1, 2000. The fuel surcharge was increased to 4%, effective April 1, 2000. The surcharge applies to all shipments tendered within the United States and all U.S. export shipments, where legally and contractually possible. These fuel surcharges offset the increase in fuel expense during the fourth quarter of 2000. Approximately 15% of FedEx Express's requirement for vehicle fuel is purchased in bulk. The remainder of FedEx Express's requirement is satisfied by retail purchases with various discounts. Management believes that, barring a substantial disruption in supplies of crude oil, these agreements will ensure the availability of an adequate supply of fuel for FedEx Express's needs for the immediate future. However, a substantial reduction of oil supplies from oil producing regions or refining capacity, or other events causing a substantial reduction in the supply of aviation fuel, could have a significant adverse effect on FedEx Express. COMPETITION The express package and freight markets are both highly competitive and sensitive to price and service. The ability to compete effectively depends upon price, frequency and capacity of scheduled service, ability to track packages, extent of geographic coverage and reliability. Competitors in these markets include other package delivery concerns, principally United Parcel Service, Inc. ("UPS"), Airborne Express, DHL Worldwide Express, passenger airlines offering express package services, regional express delivery concerns, airfreight forwarders and the United States Postal Service. FedEx Express's principal competitors in the international market are DHL Worldwide Express, UPS, foreign postal authorities such as Deutsche Poste and TNT Post Group, passenger airlines and all-cargo airlines. FedEx Express currently holds certificates of authority to serve more foreign countries than any other United States all-cargo air carrier and its extensive, scheduled international route system allows it to offer single-carrier service to many points not offered by its principal all-cargo competitors. This international route system, combined with an integrated air and ground network, enables FedEx Express to offer international customers more extensive single-carrier service to a greater number of U.S. domestic points than can be provided currently by competitors. Many of FedEx Express's competitors in the international market, however, are government owned, controlled, or subsidized carriers which may have greater resources, lower costs, less profit sensitivity and more favorable operating conditions than FedEx Express. EMPLOYEES FedEx Express is headquartered in Memphis, Tennessee. David J. Bronczek is the President and Chief Executive Officer of FedEx Express. As of May 31, 2000, FedEx Express employed approximately 96,000 permanent full-time and 53,000 permanent part-time employees, of which approximately 20% are employed in Memphis. Employees of FedEx Express's international branches and subsidiaries in the aggregate represent approximately 13% of all employees. FedEx Express believes its relationship with its employees is excellent. Since May 31, 1999, FedEx Express and the Fedex Pilots Association ("FPA") have been operating under a five-year collective bargaining agreement which provides, in part, for a 17% pay increase over the term of the contract (3.4% average annual increase), enhanced retirement benefits, direct pilot input on scheduling issues, and limits on types of trips scheduled during certain times of the day. Attempts by other labor organizations to organize certain other groups of employees occur from time to time. Although FedEx Express responds to these organization attempts, we cannot predict the outcome of these labor activities or their effect, if any, on FedEx Express or its employees. FEDEX GROUND INTRODUCTION By focusing on business-to-business customers, maintaining a low cost structure and efficiently using information technology, FedEx Ground has become the second-largest ground small-package carrier in the United States. FedEx Ground serves customers in the small-package market in North America, focusing primarily on the business-to-business delivery of packages weighing up to 150 pounds. FedEx Ground provides ground service to 100% of the United States population and overnight service to approximately 80% of the United States population. Through its subsidiary, FedEx Ground Package System, Ltd., service is provided to 100% of the Canadian population. Additionally, FedEx Ground provides service to Mexico through an alliance with Estefeda Mexicana, S.A. de C.V. FedEx Ground also offers service offshore to Puerto Rico, Alaska and Hawaii via a ground/air network operation in cooperation with other transportation providers. In March 2000, FedEx Ground began providing FedEx Home Delivery to approximately 50% of the U.S. population. FedEx Home Delivery takes advantage of the FedEx Ground operational network for pickup and package sorting to maintain a low cost structure. FedEx Home Delivery is dedicated exclusively to the delivery side of the business. Hence, it focuses and excels on meeting the distinct customer interface requirements of residential customers. FedEx Ground provides other specialized transportation services to meet specific customer requirements in the small-package market. FedEx Ground conducts its operations primarily with 9,800 owner-operated vehicles and, in addition, owns over 10,800 trailers. Competition for high-volume, profitable business focuses largely on providing competitive pricing and dependable service. FedEx Ground provides a money-back guarantee on all business-to-business ground deliveries within the continental United States. FEDEX HOME DELIVERY FedEx Home Delivery was created to respond to business-to-consumer demand for a better ground delivery solution for the residential market. Recognizing the unique needs of this growing sector, which Forrester Research, Inc. projects will escalate from $39 billion in 2000 to $184 billion by 2004, FedEx Home Delivery introduced new ideas to business-to-consumer delivery to help retailers address mounting fulfillment challenges. This service expansion offers an economical and customized residential solution to fit the individual needs of customers. FedEx Home Delivery offers a suite of service options not offered by competitors, including extended evening delivery, Saturday delivery, and premium services, such as day-specific, signature and appointment delivery. FedEx Home Delivery brings an unmatched level of service to residential shippers and their customers and also offers the only money-back guarantee in the residential ground delivery market. In June 2000, due to the response of business-to-consumer shippers and their customers to the innovative service options FedEx Home Delivery brings to the residential market, FedEx Ground announced the accelerated expansion of the FedEx Home Delivery network. Through a two-phase expansion plan, which began in July 2000, FedEx Ground will open approximately 150 new FedEx Home Delivery terminals to increase the network's service coverage. FedEx Home Delivery expects to increase its reach from 50% to 70% of the U.S. population by March 31, 2001 and to approximately 80% of the U.S. population by September 2001. Full coverage of the U.S. population is expected to be achieved by September 2002, more than one year earlier than originally scheduled. OPERATIONS FedEx Ground utilizes advanced automatic sortation technology to streamline the handling of over 1.4 million daily packages. FedEx Ground also utilizes software systems and Internet-based applications to offer its customers new ways to connect internal package information with external delivery information. FedEx Ground provides multiple-carrier shipment tracing and proof-of-delivery signature functionality on the FedEx Web site (www.fedex.com). For additional information regarding FedEx Ground's e-shipping tools and solutions, see "FedEx Express - E-Commerce Services." Like FedEx Express, FedEx Ground utilizes a hub-and-spoke sorting and distribution system. Its 27 hubs are equipped with sophisticated package-sortation technology, with average processing speeds of 15,000 to 20,000 packages per hour. In January 1999, FedEx Ground announced its intention to boost its package-processing capacity by 50% through a three-year expansion program. Plans included the opening of three new state-of-the-art distribution hubs that will support key metropolitan markets in New York, Chicago and Los Angeles, as well as the relocation and expansion of more than 50 local terminals. The Chicago and Los Angeles area hubs opened in 2000, while the New York area hub is scheduled to open in August 2000. The New York area facility will be the largest in the FedEx Ground network. It will be 326,000 square feet in size and capable of processing 30,000 packages per hour - approximately double the processing capacity of the average FedEx Ground hub. FedEx Ground also expanded existing hubs in Toledo and Denver during 2000 and expects to complete expansion of its Sacramento hub in 2001. As of May 31, 2000, FedEx Ground operated 369 facilities in the U.S. and Canada. Using overhead laser scanners, hub conveyors electronically guide packages to their appropriate destination chute, where they are loaded for transport to their destination terminals for local delivery. FedEx Ground is still the only ground carrier to operate a fully automated hub network for greater efficiency and package integrity. In order to provide the new FedEx Home Delivery service, FedEx Ground is leveraging its existing pickup operation and hub and linehaul network while initiating a separate delivery network comprised of distinct terminals and a separate team of independent contractors. As of May 31, 2000, FedEx Ground had opened 64 dedicated delivery terminals to support the FedEx Home Delivery service in 45 metropolitan areas. FedEx Ground plans to add more dedicated FedEx Home Delivery facilities over the next two years as part of an aggressive plan to rapidly expand its residential service area. FedEx Ground is headquartered in Pittsburgh, Pennsylvania. Daniel J. Sullivan is the President and Chief Executive Officer of FedEx Ground. FedEx Ground has approximately 35,000 employees and contractors in North America. FedEx Ground's primary competitors are UPS and the United States Postal Service. FEDEX LOGISTICS FedEx Logistics serves as the holding company for FedEx Supply Chain Services, Inc. and Caribbean Transportation Services, Inc. FedEx Logistics specializes in transportation management, logistics and consulting services that, in keeping with the FedEx brand, are global, time-definite and information intensive. Joseph C. McCarty is the President and Chief Executive Officer of FedEx Logistics, which is based in Memphis, Tennessee. FEDEX SUPPLY CHAIN SERVICES FedEx Supply Chain Services is a contract logistics provider to targeted industries, with expertise across the entire supply chain, from inbound materials management through distribution to the final consumer. Services provided include global transportation management, dedicated transportation, warehouse operations and management, finished goods distribution, just-in-time logistics programs, customer order processing, returnable container management, freight bill payment and auditing and other management services outsourced by its customers. In May 2000, FedEx Supply Chain Services created a new division, FedEx eLogistics, to focus on providing businesses with end-to-end electronic commerce logistics solutions. FedEx eLogistics enables customers to lower fulfillment costs, decrease cycle time and improve returns management. An important element in FedEx Supply Chain Services' overall value to customers is improved information exchange. FedEx Supply Chain Services, transportation management programs use advanced electronic data interchanges to speed communications between customers and their suppliers. Faster communication translates into more cost-effective logistics and competitive advantages. FedEx Supply Chain Services manages over 100 major logistics contracts, 3 million shipments per year and over 6 million square feet of warehouse space. Gary D. Gilbert is the President and Chief Executive Officer of FedEx Supply Chain Services, which is based in Hudson, Ohio. FedEx Supply Chain Services' European headquarters is located in Leiden, the Netherlands and its Asian headquarters is located in Singapore. FedEx Supply Chain Services has approximately 2,900 employees. FedEx Supply Chain Services' primary competitors are contract logistics providers, including the logistics divisions of UPS, Ryder System, Inc. and CNF, Inc. CARIBBEAN TRANSPORTATION SERVICES Caribbean Transportation Services was acquired by FedEx Logistics in September 1999 and is a provider of airfreight forwarder services between the United States, Canada, Puerto Rico and the Dominican Republic, specializing in arranging the shipment of heavyweight and oversized cargo. Caribbean Transportation Services provides several delivery options for door-to-door or airport-to-airport airfreight forwarder services, principally to the medical, pharmaceutical and technology sectors. Richard A. Faieta is the President and Chief Executive Officer of Caribbean Transportation Services, which is headquartered in Greensboro, North Carolina. Caribbean Transportation Services has approximately 300 employees. FEDEX CUSTOM CRITICAL FedEx Custom Critical is the world's largest surface-expedited carrier. FedEx Custom Critical offers one service: time-specific, non-stop, door-to-door delivery for critical shipments anytime, anywhere. Each shipper has exclusive vehicle usage, eliminating freight handling since operations are free from freight consolidation. A network of over 2,300 vehicles assures the customer of time-specific service anywhere within the United States and Canada, as well as within much of Europe, with pickup in less than 90 minutes within 25 miles of any of FedEx Custom Critical's 242 ExpressCenters. Customer Link, FedEx Custom Critical's integrated two-way satellite communications system, enables the customer to immediately trace his shipment to determine its status and to-the-minute delivery time. Service is available 24 hours a day, 365 days a year, including weekends and holidays, at no extra cost. If at any time during transport FedEx Custom Critical is more than 15 minutes late, both the shipper and the consignee are notified. If FedEx Custom Critical is more than two hours late on delivery, it will refund the customer 25% of the freight charges. If FedEx Custom Critical is more than four hours late on delivery, it will refund the customer 50% of the freight charges. In many cases, FedEx Custom Critical offers (with guaranteed delivery times) a faster and less expensive alternative to heavyweight airfreight. More than 96% of shipments are delivered to the customer within 15 minutes of FedEx Custom Critical's time-specific promise. FedEx Custom Critical's White Glove Services division specializes in the transport of high value products, medical and electronic equipment, tradeshow exhibits, temperature-sensitive commodities and high-security shipments. FedEx Custom Critical's CharterAir division provides expedited air solutions to meet customers' critical delivery times. Express, CharterAir and White Glove services are also available through FedEx Custom Critical Europe, which is based in Maastricht, the Netherlands. With continuous monitoring of shipments, two-way satellite communications and multilingual agents and drivers, FedEx Custom Critical Europe provides expedited services almost anywhere in Europe. FedEx Custom Critical is headquartered in Akron, Ohio. R. Bruce Simpson is the President of FedEx Custom Critical. FedEx Custom Critical has approximately 700 employees and 2,100 owner-operators. FedEx Custom Critical's primary competitors are ConWay NOW, Inc., CTX, Emery Expedite, Inc., Landstar Express America, Inc., TNT Expedite and Tri-State Expediting Service, Inc. FEDEX TRADE NETWORKS FedEx Trade Networks, created to serve the needs of customers doing business globally, serves as the holding company for Tower Group International, Inc. ("Tower") and World Tariff, Limited ("Worldtariff"). Tower was acquired in February 2000 and is a significant part of our strategy to provide a full range of international trade services, including customs brokerage, trade consulting, e-clearance solutions and transportation and logistics services. Tower is an international logistics and trade information technology company with approximately 1,600 employees and 63 offices throughout North America. Tower also provides customs brokerage, warehousing, freight forwarding and national distribution, duty drawback, trade consulting, cargo insurance and trade-related seminars. Gerald P. Leary is the President and Chief Operating Officer of Tower, which is based in Buffalo, New York. Worldtariff was acquired in March 2000 and is a publisher of customs duty and tax information for customs areas worldwide. Worldtariff continuously collects data from the world's customs authorities, then simplifies, standardizes and translates it into English. Timely information from Worldtariff provides for logistics optimization and calculating the landed cost of international shipments. Scott D. Morse is the President and Publisher of Worldtariff, which is based in San Francisco, California. G. Edmond Clark is the President and Chief Executive Officer of FedEx Trade Networks, which is based in Memphis, Tennessee. FedEx Trade Network's primary competitors are U.S. based customs brokers and freight forwarders. VIKING Viking specializes in one and two-day less-than-truckload ("LTL") service throughout the western United States. Service is also available to Alaska and Hawaii via purchased transportation with ocean freight companies. Viking's management focuses on achieving high levels of on-time delivery, easy-to-use information technology and responsive customer service. In addition to reliability and e-commerce services, Viking offers shippers value-added services such as cross-border service to Canada and Mexico. With next and second-business day regional freight service, plus direct ocean service to Alaska and Hawaii, Viking's 5,400 employees handle shipments through 50 service centers, achieving an award-winning on-time delivery performance exceeding that of most other LTL carriers. Consistent with its EZTDBW ("Easy To Do Business With") service philosophy, Viking has created two customer advisory boards -- one for corporate accounts, the other for smaller, regional shippers -- to better anticipate and meet customers' needs. Viking has enhanced its customer service and today responds to most inquiries within seconds. Viking's Web site (www.vikingfreight.com) lets customers conduct business electronically with convenience and confidence. In 2000, for the fifth time in the twelve-year history of the award, NASSTRAC named Viking its regional LTL carrier of the year. In addition, readers of LOGISTICS MANAGEMENT AND DISTRIBUTION magazine voted to award Viking the "QUEST FOR QUALITY AWARD FOR 1999," the eighth year Viking has received this award. Douglas G. Duncan is the President and Chief Executive Officer of Viking, which is headquartered in San Jose, California. Viking's primary regional competitors are ConWay Western Express, Inc., USF Bestway, Inc. and USF Reddaway Truck Line, Inc. SEASONALITY OF BUSINESS FedEx Express's express package business and freight business are both seasonal in nature. Historically, the U.S. package business experiences an increase in late November and December. International business, particularly in the Asia to U.S. market, peaks in October and November due to U.S. holiday sales. The latter part of FedEx Express's third fiscal quarter and late summer, being post winter-holiday and summer vacation seasons, have historically exhibited lower volumes relative to other periods. The transportation and logistics industry is affected directly by the state of the overall domestic and international economies. Seasonal fluctuations affect tonnage, revenues and earnings. Normally, the fall of each year is the busiest shipping period for FedEx Ground and FedEx Custom Critical, while the latter part of December, January, June and July of each year are the slowest periods. For Viking, the fall of each year is the busiest shipping period and the latter part of December, January and February of each year are the slowest periods. Shipment levels, operating costs and earnings can also be adversely affected by inclement weather. REGULATION AIR. Under the Federal Aviation Act of 1958, as amended, both the DOT and the Federal Aviation Administration ("FAA") exercise regulatory authority over FedEx Express. The DOT's authority relates primarily to economic aspects of air transportation. The DOT's jurisdiction extends to aviation route authority and to other regulatory matters, including the transfer of route authority between carriers. FedEx Express holds various certificates issued by the DOT, authorizing FedEx Express to engage in U.S. and international air transportation of property and mail on a worldwide basis. FedEx Express's international authority permits it to carry cargo and mail from several points in its U.S. route system to numerous points throughout the world. The DOT regulates international routes and practices and is authorized to investigate and take action against discriminatory treatment of United States air carriers abroad. The right of a United States carrier to serve foreign points is subject to the DOT's approval and generally requires a bilateral agreement between the United States and the foreign government. The carrier must then be granted the permission of such foreign government to provide specific flights and services. The regulatory environment for global aviation rights may from time to time impair the ability of FedEx Express to operate its air network in the most efficient manner. The FAA's regulatory authority relates primarily to safety and operational aspects of air transportation, including aircraft standards and maintenance, personnel and ground facilities, which may from time to time affect the ability of FedEx Express to operate its aircraft in the most efficient manner. FedEx Express holds an operating certificate granted by the FAA pursuant to Part 121 of the Federal Aviation Regulations. This certificate is of unlimited duration and remains in effect so long as FedEx Express maintains its standards of safety and meets the operational requirements of the regulations. FedEx Express participates in the Civil Reserve Air Fleet ("CRAF") program. Under this program, the Department of Defense may requisition for military use certain of FedEx Express's wide-bodied aircraft in the event of a declared need, including a national emergency. FedEx Express is compensated for the operation of any aircraft requisitioned under the CRAF program at standard contract rates established each year in the normal course of awarding contracts. Through its participation in the CRAF program, FedEx Express is entitled to bid on peacetime military cargo charter business. FedEx Express, together with a consortium of other carriers, currently contracts with the United States Government for charter flights. GROUND. The ground transportation performed by FedEx Express is integral to its air transportation services. Prior to January 1996, FedEx Express conducted its interstate motor carrier operations pursuant to common and contract carrier authorities issued by the Interstate Commerce Commission ("ICC"). The ICC Termination Act of 1995 abolished the ICC and transferred responsibility for interstate motor carrier registration to the DOT. The enactment of the Federal Aviation Administration Authorization Act of 1994 abrogated the authority of states to regulate the rates, routes or services of intermodal all-cargo air carriers and most motor carriers. States may now only exercise jurisdiction over safety and insurance. FedEx Express is registered in those states that require registration. The operations of FedEx Ground, Viking and FedEx Custom Critical in interstate commerce are currently regulated by the DOT and the Federal Highway Administration, which retain limited oversight authority over motor carriers. Federal legislation has been enacted that preempted regulation by the states of rates and service in intrastate freight transportation. Like other interstate motor carriers, FedEx Express, FedEx Ground, Viking and FedEx Custom Critical are subject to certain DOT safety requirements governing interstate operations. In addition, vehicle weight and dimensions remain subject to both federal and state regulations. COMMUNICATION. Because of the extensive use of radio and other communication facilities in its aircraft and ground transportation operations, FedEx Express is subject to the Federal Communications Commission Act of 1934, as amended. Additionally, the Federal Communications Commission regulates and licenses FedEx Express's activities pertaining to satellite communications. ENVIRONMENTAL. Pursuant to the Federal Aviation Act, the FAA, with the assistance of the Environmental Protection Agency, is authorized to establish standards governing aircraft noise. FedEx Express's present aircraft fleet is in compliance with current noise standards of the Federal Aviation Regulations. FedEx Express's aircraft are also subject to, and are in compliance with, the regulations governing engine emissions. In addition to federal regulation of aircraft noise, certain airport operators have local noise regulations which limit aircraft operations by type of aircraft and time of day. These regulations have had a restrictive effect on FedEx Express's aircraft operations in some of the localities where they apply but do not have a material effect on any of FedEx Express's significant markets. Congress' passage of the Airport Noise and Capacity Act of 1990 established a National Noise Policy which enabled FedEx Express to plan for noise reduction and better respond to local noise constraints. FedEx Express's international operations are also subject to noise regulations in certain of the countries in which it operates. FedEx Express, FedEx Ground, Viking and FedEx Custom Critical are subject to federal, state and local environmental laws and regulations relating to, among other things, contingency planning for spills of petroleum products and the disposal of waste oil. Additionally, these companies are subject to numerous regulations dealing with underground fuel storage tanks, hazardous waste handling, vehicle and equipment emissions and the discharge of effluents from properties and equipment owned or operated by them. Each company has environmental management programs to ensure compliance with these regulations. WORKPLACE. In November 1999, the U.S. Occupational Safety and Health Administration, or OSHA, proposed regulations to mandate an ergonomics standard that could require many businesses, including FedEx's operating companies, to make significant changes in the workplace in order to reduce the incidence of musculoskeletal disorders such as lower back pain. The proposal does not specify which workplace changes would be required in order to comply with the proposed new regulations. We, our competitors and other affected parties have submitted comments to OSHA challenging the economic and technical feasibility of the proposed regulations. In July 2000, OSHA completed public hearings on the proposed regulations and is expected to release final rules later this year. If OSHA adopts the proposed regulations and applies them in the same way as it attempted unsuccessfully in the past to impose ergonomic measures under its general authority, we would be required to make extensive changes to the layout of our sorting facilities and hire a significant number of additional employees. We believe that the cost of compliance would be substantial and have a material adverse effect on our business. We expect that our competitors, along with the rest of American industry, would also incur substantial compliance costs. CUSTOMS. Through its FedEx Trade Networks subsidiary, FedEx provides customs brokerage and freight forwarding services. These activities are subject to regulation by the U.S. Customs Service (customs brokerage), the U.S. Federal Maritime Commission (ocean freight forwarding) and the U.S. Department of Transportation (airfreight forwarding). FedEx's offshore operations are subject to similar regulation by the regulatory authorities of the respective foreign jurisdictions. FORWARD-LOOKING STATEMENTS Certain statements contained in this Report or in documents that we incorporate by reference are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, such as statements relating to management's views with respect to future events and financial performance. Such forward-looking statements are subject to risks, uncertainties and other factors which could cause actual results to differ materially from historical experience or from future results expressed or implied by such forward-looking statements. Accordingly, a forward-looking statement is not a prediction of future events or circumstances and those future events or circumstances may not occur. A forward-looking statement is usually identified by our use of certain terminology, including "believes," "expects," "may," "will," "should," "seeks," "pro forma," "anticipates," "intends" or "plans" or by discussions of strategies, intentions or outlook. Potential risks and uncertainties include, but are not limited to - - Economic conditions in the markets in which we operate, which can affect demand for our services. - - The costs and complexities associated with the integration of certain of our sales, marketing, customer service and information technology functions (see "Strategic Initiatives - Organizational Changes"). - - Market acceptance of our new sales, marketing and branding strategies, as well as our new residential home delivery service (see "Strategic Initiatives - Organizational Changes"). - - Competition from other providers of transportation and logistics services, including competitive responses to our new initiatives. - - Our ability to adapt to technological change and to compete with new or improved services offered by our competitors. - - Changes in customer demand patterns, including the impact of technology developments on demand for our services. - - Increases in aviation and motor fuel prices. - - Our ability to match aircraft, vehicle and sort capacity with customer volume levels. - - Work stoppages, strikes or slowdowns by our employees. - - Our ability, and that of our principal competitors, to obtain and maintain aviation rights in important international markets. - - Changes in government regulation, including the adoption by OSHA of its proposed ergonomics standard (see "Regulation"). - - Changes in weather. - - Availability of financing on terms acceptable to us. - - Other uncertainties detailed herein and from time to time in our Securities and Exchange Commission filings. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. ITEM 2. PROPERTIES FEDEX FedEx does not own any material real properties. FedEx leases two facilities in the Memphis area for its corporate headquarters and administrative offices. FEDEX EXPRESS FedEx Express's principal owned or leased properties include its aircraft, vehicles, national, regional and metropolitan sorting facilities, administration buildings, FedEx World Service Centers, FedEx Drop Boxes and data processing and telecommunications equipment. AIRCRAFT AND VEHICLES FedEx Express's aircraft fleet at May 31, 2000 consisted of the following:
MAXIMUM GROSS STRUCTURAL PAYLOAD DESCRIPTION NUMBER (1) (POUNDS PER AIRCRAFT)(2) - ----------- ---------- ------------------------ McDonnell Douglas MD11 30 195,000 McDonnell Douglas DC10-30 22 176,000 McDonnell Douglas DC10-10 69 139,000 Airbus A300-600 36 116,000 Airbus A310-200 41 82,000 Boeing B727-200 95 60,000 Boeing B727-100 66 45,000 Fokker F27-500 24 13,500 Fokker F27-600 8 12,500 Shorts 3-60 11 8,300 Cessna 208B 251 3,400 Cessna 208 10 3,000 -- Total 663
- ------------------------- (1) Except as described in the following sentence, all of our aircraft are owned. The following aircraft are subject to operating leases: MD11 (29); DC10-30 (17); DC10-10 (4); A300 (36); A310 (16); B727-200 (13); B727-100 (5); and Shorts 3-60 (11). (2) Maximum gross structural payload includes revenue payload and container weight. - - The MD11s are three-engine, wide-bodied aircraft that have a longer range and larger capacity than DC10s. - - The DC10s are three-engine, wide-bodied aircraft that have been specially modified to meet FedEx Express's cargo requirements. - - The A300s and A310s are two-engine, wide-bodied aircraft that have a longer range and more capacity than B727s. - - The B727s are three-engine aircraft configured for cargo service. - - The Shorts 3-60 are turbo-prop aircraft leased by FedEx Express and then subleased to independent operators, who are contractually obligated to service selected FedEx Express routes in Europe. - - The Fokker F27 and Cessna 208 turbo-prop aircraft are owned by FedEx Express and leased to unaffiliated operators to support FedEx Express operations in areas where demand does not justify use of a larger aircraft. An inventory of spare engines and parts is maintained for each aircraft type. In addition, FedEx Express "wet leases" 45 smaller piston-engine and turbo-prop aircraft which feed packages to and from airports served by FedEx Express's larger jet aircraft. The wet lease agreements call for the owner-lessor to provide flight crews, insurance and maintenance, as well as fuel and other supplies required to operate the aircraft. FedEx Express's wet lease agreements are for terms not exceeding one year and are generally cancelable upon 30 days' notice. At May 31, 2000, FedEx Express operated worldwide approximately 49,000 ground transport vehicles, including pick-up and delivery vans, larger trucks called container transport vehicles and over-the-road tractors and trailers. AIRCRAFT PURCHASE COMMITMENTS At May 31, 2000, FedEx Express was committed under various contracts to purchase 28 MD11s, 13 DC10s (in addition to those discussed below) and 75 Ayres ALM 200 aircraft to be delivered through 2007. FedEx Express has entered into agreements with two airlines to acquire 53 DC10 aircraft (49 of which have been received as of May 31, 2000), spare parts, aircraft engines and other equipment, and maintenance services in exchange for a combination of aircraft engine noise reduction kits and cash. Delivery of these aircraft began in 1997 and will continue through 2001. Additionally, these airlines may exercise put options through December 31, 2003, requiring FedEx Express to purchase up to 11 additional DC10s, along with additional aircraft engines and equipment. In April 2000, put options were exercised by an airline requiring FedEx Express to purchase six DC10s (in addition to those discussed in the preceding paragraph) for a total purchase price of $26.4 million. Delivery of the aircraft is expected to be completed by April 2001. SORTING AND HANDLING FACILITIES At May 31, 2000, FedEx Express operated the following sorting and handling facilities:
SORTING LEASE SQUARE CAPACITY EXPIRATION LOCATION ACRES FEET (PER HOUR)(1) LESSOR YEAR -------- ----- --------- ------------- ------ ---------- NATIONAL - -------- Memphis, Tennessee 479 3,074,440 465,000 Memphis-Shelby County 2012 Airport Authority Indianapolis, Indiana 120 645,000 175,000 Indianapolis Airport 2016 Authority REGIONAL - -------- Fort Worth, Texas 168 641,000 74,000 Fort Worth Alliance 2014 Airport Authority Newark, New Jersey 56 554,000 142,000 Port Authority of New 2010 York and New Jersey Oakland, California 66 320,000 47,500 City of Oakland 2011 METROPOLITAN - ------------ Los Angeles, California 25 305,000 54,000 City of Los Angeles 2009 Chicago, Illinois 55 419,000 47,000 City of Chicago 2018 Anchorage, Alaska(2) 42 258,000 14,200 Alaska Department of 2013 Transportation and Public Facilities INTERNATIONAL - ------------- Subic Bay, Philippines(3) 18 316,000 16,000 Subic Bay Metropolitan 2007 Authority Paris, France(4) 87 861,000 48,000 Aeroports de Paris 2029
- ------------------------ (1) Documents and packages (2) Handles international express package and freight shipments to and from Asia, Europe and North America. (3) Handles intra-Asia express package and freight shipments. (4) Handles intra-Europe express package and freight shipments, as well as international express package and freight shipments to and from Europe. FedEx Express's facilities at the Memphis International Airport also include aircraft hangars, flight training and fuel facilities, administrative offices and warehouse space. FedEx Express leases these facilities from the Memphis-Shelby County Airport Authority (the "Authority") under several leases. The leases cover land, the administrative and sorting buildings, other facilities, ramps and certain related equipment. FedEx Express has the option to purchase certain equipment (but not buildings or improvements to real estate) leased under such leases at the end of the lease term for a nominal sum. The leases obligate FedEx Express to maintain and insure the leased property and to pay all related taxes, assessments and other charges. The leases are subordinate to, and FedEx Express's rights thereunder could be affected by, any future lease or agreement between the Authority and the United States Government. In addition to the facilities noted above, FedEx Express has major international sorting and freight handling facilities located at Narita Airport in Tokyo, Japan, Stansted Airport outside London, England and Pearson Airport in Toronto, Canada. New, larger facilities were opened in 1998 at the new Chek Lap Kok Airport in Hong Kong, CKS International Airport in Taiwan and Dubai, United Arab Emirates. Construction on a 204,000 square foot facility to be located at Miami International Airport is expected to begin during 2001. ADMINISTRATIVE AND OTHER PROPERTIES AND FACILITIES FedEx Express has facilities housing administrative and technical operations on approximately 200 acres adjacent to the Memphis International Airport. Of the seven buildings located on this site, four are subject to long-term leases, and the other three are owned by FedEx Express. FedEx Express also leases approximately 90 facilities in the Memphis area for its corporate headquarters, warehouse facilities and administrative offices. FedEx Express is building a headquarters office campus in East Shelby County, Tennessee. The headquarters campus, which will comprise nine separate buildings with more than 1.1 million square feet of space, is designed to consolidate many administrative and training functions currently spread throughout the Memphis metropolitan area. Beginning in July 2000, the office campus will bring together approximately 3,700 employees from more than 100 work groups. FedEx Express owns or leases 725 facilities for city station operations in the United States. In addition, 153 city stations are owned or leased throughout FedEx Express's international network. The majority of these leases are for terms of five to ten years. City stations serve as the sorting and distribution center for a particular city or region. FedEx Express believes that suitable alternative facilities are available in each locale on satisfactory terms, if necessary. As of May 31, 2000, FedEx Express owned or leased space for 387 FedEx World Service Centers in the United States and had placed approximately 34,500 Drop Boxes. FedEx Express also operates stand-alone mini-centers located on leaseholds in parking lots adjacent to office buildings, shopping centers and office parks, of which 93 were in service at May 31, 2000. As of May 31, 2000, FedEx Express also had approximately 10,000 ShipSites and ShipCenters, which are drop-off locations situated within certain retailers, such as Staples or Kinkos. Internationally, FedEx Express operates 91 FedEx World Service Centers and has over 650 FedEx Drop Boxes. FedEx Services has an office campus in Collierville, Tennessee for its information technology and telecommunications division. FEDEX GROUND As of May 31, 2000, FedEx Ground operated 369 facilities, including 27 hubs. FedEx Ground owns 52 facilities (23 of which are hubs) and leases 317, generally for terms of three years or less. The 27 hub facilities are strategically located to cover the geographic area served by FedEx Ground. These facilities average 131,000 square feet and range in size from 31,000 to 262,000 square feet. FedEx Ground Package System, Ltd., FedEx Ground's subsidiary operating in Canada, operates 13 facilities, three of which are hubs. FedEx Ground's corporate offices and information and data centers are located in the Pittsburgh, Pennsylvania area in an approximately 350,000 square foot building owned by FedEx Ground. FedEx Ground is expanding its corporate offices with a 156,000 square foot addition, which is expected to be completed in 2002. FEDEX LOGISTICS FedEx Logistics' corporate headquarters is located in Memphis, Tennessee in leased facilities. FedEx Supply Chain Services' headquarters is located in Hudson, Ohio in leased facilities. Caribbean Transportation Services' headquarters is located in Greensboro, North Carolina in leased facilities. FEDEX CUSTOM CRITICAL FedEx Custom Critical's corporate headquarters is located in Akron, Ohio in owned and leased facilities. FedEx Custom Critical does not use terminal facilities in its business. FEDEX TRADE NETWORKS FedEx Trade Networks' corporate headquarters is located in Memphis, Tennessee in leased facilities. Tower's corporate headquarters is located in Buffalo, New York in owned facilities. Tower also has 63 owned and leased offices throughout North America. Worldtariff's corporate headquarters is located in San Francisco, California in leased facilities. VIKING As of May 31, 2000, Viking operated 50 service centers, 32 of which are owned. The service centers are strategically located to cover the geographic area served by Viking. These facilities range in size from 1,800 to 72,000 square feet of office and dock space, and are located on sites ranging from 1.8 to 38.3 acres. Viking's corporate headquarters is located in leased facilities in San Jose, California. ITEM 3. LEGAL PROCEEDINGS In November 1987, The Flying Tiger Line Inc. ("Flying Tigers"), a company acquired by FedEx Express in 1989, received a notice from the United States Environmental Protection Agency ("EPA") identifying Flying Tigers as a potentially responsible party ("PRP") in connection with a "Superfund" site located in Monterey Park, California. The site is a 190-acre landfill that operated from 1948 through 1984. In June 1985, the EPA began a remedial investigation of the site to identify the extent of contamination. The EPA estimates that approximately 0.1% of the waste disposed at the site is attributable to Flying Tigers. Flying Tigers participated in a partial settlement relating to remedial actions for management of contamination and site control. Partial consent decrees were entered in the United States District Court for the Central District of California in 1989 and 1992 which provided, in part, for payments of $109,000 and $230,000, respectively, by Flying Tigers and FedEx Express to the partial-settlement escrow account. All outstanding issues are not expected to be resolved for several years. Due to several variables which are beyond FedEx Express's control, it is impossible to accurately estimate FedEx Express's potential share of the remaining costs, but based on Flying Tigers' relatively insignificant contribution of waste to the site, FedEx Express believes that its remaining liability will not be material. FedEx and its subsidiaries are subject to other legal proceedings and claims that arise in the ordinary course of their business. In the opinion of management, the aggregate liability, if any, with respect to these other actions will not materially adversely affect FedEx's financial position or results of operations. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS There were no matters submitted to a vote of security holders during the fourth quarter of the fiscal year ended May 31, 2000. EXECUTIVE OFFICERS OF THE REGISTRANT EXECUTIVE OFFICERS Information regarding executive officers of FedEx is as follows (included herein pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) of Form 10-K):
OFFICER, YEAR FIRST ELECTED AS OFFICER AGE POSITIONS HELD - ------------------- --- -------------- FREDERICK W. SMITH 55 Chairman, President and Chief Executive Officer of FedEx since January 1971 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. ROBERT B. CARTER 41 Executive Vice President and Chief Information Officer of FedEx since June 1993 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 44 Executive Vice President - Market Development and Corporate Communications 1985 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. 46 Executive Vice President and Chief Financial Officer of FedEx since January 1987 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 51 Corporate Vice President - Strategic Financial Planning and Control and 1992 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 56 Executive Vice President, General Counsel and Secretary of FedEx since 1980 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.
Officers are elected by, and serve at the discretion of, the Board of Directors. There is no arrangement or understanding between any officer and any person, other than a director or executive officer of FedEx or of any of its subsidiaries acting in his or her official capacity, pursuant to which any officer was selected. There are no family relationships between any executive officer and any other executive officer or director of FedEx or of any of its subsidiaries. KEY EMPLOYEES The following key employees serve as the Chief Executive Officer of FedEx Express, FedEx Ground and FedEx Logistics, respectively.
NAME AGE POSITIONS HELD ---- --- -------------- DAVID J. BRONCZEK 46 President and Chief Executive Officer of FedEx Express since January 2000; Executive Vice President and Chief Operating Officer of FedEx Express from January 1998 to January 2000; Senior Vice President - Europe, Middle East and Africa of FedEx Express from June 1995 to January 1998; Senior Vice President - Europe, Africa and Mediterranean of FedEx Express from June 1993 to June 1995; Vice President - Canadian Operations of FedEx Express from February 1987 to March 1993; and several sales and operations managerial positions at FedEx Express from 1976 to 1987. DANIEL J. SULLIVAN 54 President and Chief Executive Officer of FedEx Ground since January 1998; Chairman, President and Chief Executive Officer of Caliber System, Inc. ("Caliber") from January 1996 to January 1998; Chairman, President and Chief Executive Officer of Roadway Services, Inc. from October 1995 to January 1996; President and Chief Executive Officer of Roadway Services, Inc. from August 1995 to October 1995; President and Chief Operating Officer of Roadway Services, Inc. from January 1994 to August 1995; Senior Vice President and President of National Carrier Group of Roadway Services, Inc. during 1993; Vice President and President - National Carrier Group of Roadway Services, Inc. during 1992; Vice President and Group Executive of Roadway Services, Inc. from July 1990 through 1991; and President of RPS through June 1990. JOSEPH C. MCCARTY 55 President and Chief Executive Officer of FedEx Logistics since October 1998; Corporate Vice President and Chief Administrative Officer of FedEx from February 1998 to October 1998; Senior Vice President - Latin America and Caribbean from October 1995 to February 1998; Senior Vice President - Asia Pacific from June 1995 to October 1995; Senior Vice President - Asia, Pacific and Middle East from November 1991 to June 1995; Vice President - International Legal from March 1987 to November 1991; Vice President - Properties & Facilities from November 1984 to March 1987; and Vice President - Legal from February 1983 to November 1984.
PART II ITEM 5. MARKET PRICE FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS STOCK PRICE INFORMATION FedEx's common stock is listed on the New York Stock Exchange under the symbol "FDX." The following table sets forth, for the periods indicated, the high and low sale prices per share for the common stock as reported on the NYSE. The stock prices set forth below give effect to a two-for-one stock split effected in the form of a stock dividend on May 6, 1999.
HIGH LOW ---- --- Fiscal Year Ended May 31, 1999 First Quarter $33-29/32 $24-11/32 Second Quarter 33-23/32 21-13/16 Third Quarter 49 32-9/32 Fourth Quarter 61-7/8 44-9/16 Fiscal Year Ended May 31, 2000 First Quarter 57-1/8 38-1/2 Second Quarter 47-5/16 34-7/8 Third Quarter 47-15/16 33-3/16 Fourth Quarter 42-7/16 30-9/16
SHAREHOLDERS As of July 15, 2000, there were 16,293 holders of record of our common stock. DIVIDENDS No cash dividends have been declared. We have never declared a dividend on our shares because our policy has been to reinvest earnings in our businesses. There are no material restrictions on our ability to declare dividends, nor are there any material restrictions on the ability of our subsidiaries to transfer funds to us in the form of cash dividends, loans or advances. See Note 5 to Notes to Consolidated Financial Statements. RECENT SALES OF UNREGISTERED SECURITIES In connection with the acquisition of Worldtariff on March 31, 2000, we issued 175,644 shares of common stock to the sole shareholder of Worldtariff. This issuance of securities was made in reliance on the exemption from registration provided by Section 3(b) of the Securities Act of 1933, as a transaction by an issuer not involving a public offering. The securities were acquired by the Worldtariff shareholder for investment and not with a view toward the resale or distribution of these shares. The offer and sale was made without any public solicitation and the stock certificate bears a restrictive legend. No underwriter was involved in the transaction and no commissions were paid. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth certain selected consolidated financial and operating data for FedEx as of and for the five years ended May 31, 2000. This information should be read in conjunction with the Consolidated Financial Statements, Management's Discussion and Analysis of Results of Operations and Financial Condition and other financial data appearing elsewhere herein.
In thousands, except per share amounts and YEARS ENDED MAY 31, ------------------------------------------------------------------------------ other operating data 2000 1999 1998 1997 1996 - -------------------------------------------------- -------------- --------------- --------------- -------------- ---------------- OPERATING RESULTS Revenues $18,256,945 $16,773,470 $15,872,810 $14,237,892 $12,721,791 Operating income (1) 1,221,074 1,163,086 1,010,660 507,002 779,552 Income from continuing operations before income taxes 1,137,740 1,061,064 899,518 425,865 702,094 Income from continuing operations 688,336 631,333 498,155 196,104 400,186 Income (loss) from discontinued operations (2) - - 4,875 - (119,614) Net income (1) 688,336 631,333 503,030 196,104 280,572 PER SHARE DATA Earnings (loss) per share: Basic: Continuing operations $2.36 $2.13 $1.70 $.67 $1.38 Discontinued operations (2) - - .02 - (.41) --------- --------- ------- ------- ------- $2.36 $2.13 $1.72 $.67 $.97 ===== ===== ===== ==== ==== Assuming dilution: Continuing operations $2.32 $2.10 $1.67 $.67 $1.37 Discontinued operations (2) - - .02 - (.41) --------- --------- ------- ------- ------- $2.32 $2.10 $1.69 $.67 $.96 ===== ===== ===== ==== ==== Average shares of common stock 291,727 295,983 293,401 291,426 289,390 Average common and common equivalent shares 296,326 300,643 298,408 294,456 291,686 Cash dividends (3) - - - - - FINANCIAL POSITION Property and equipment, net $7,083,527 $6,559,217 $5,935,050 $5,470,399 $4,973,948 Total assets 11,527,111 10,648,211 9,686,060 9,044,316 8,088,241 Long-term debt, less current portion 1,776,253 1,359,668 1,385,180 1,597,954 1,325,277 Common stockholders' investment 4,785,243 4,663,692 3,961,230 3,501,161 3,312,440 OTHER OPERATING DATA FedEx Express: Operating weekdays 257 256 254 254 256 Aircraft fleet 663 634 613 584 557 FedEx Ground: Operating weekdays 254 253 256 254 252 Average full-time equivalent employees 163,324 156,386 150,823 145,995
- ------------------------ (1) In connection with its restructuring, Viking recorded a pretax asset impairment charge of $225,000,000 ($175,000,000, net of tax) in 1997. (2) Discontinued operations include the operations of Roadway Express, Inc., a wholly-owned subsidiary of Caliber, whose shares were distributed to Caliber stockholders on January 2, 1996, and Roadway Global Air, Inc., a wholly-owned subsidiary of Caliber, which exited the airfreight business in calendar 1995. (3) Caliber declared dividends of $3,899,000, $28,184,000 and $54,706,000, for 1998, 1997 and 1996, respectively. Caliber declared additional dividends of $10,833,000 from January 1, 1997 to May 25, 1997 that are not included in the preceding amounts. FedEx has never paid cash dividends on its common stock. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS CONSOLIDATED RESULTS FedEx Corporation (also referred to herein as "FedEx" or the "Company") results for 2000 reflect strong international package volume growth, particularly in Asia and Europe, and improved revenue per package (yield), which lessened the effect of higher fuel prices. U.S. domestic package volume growth during 2000 was below that experienced over the past two years. However, the Company's execution of cost containment and productivity enhancement programs helped mitigate the impact of the decrease in U.S. domestic volume growth in 2000. Increased prices caused fuel expense to increase by $273 million in 2000. In response to higher fuel costs, several of our subsidiaries implemented fuel surcharges during 2000. At Federal Express Corporation ("FedEx Express"), the Company's largest business segment, a 3% fuel surcharge on most U.S. domestic and international services was implemented effective February 1, 2000. Effective April 1, 2000, this surcharge was increased to 4%. The surcharge applies to all shipments tendered within the United States and all U.S. export shipments, where legally and contractually possible. We have also entered into jet fuel hedging contracts designed to limit our exposure to fluctuations in fuel prices. In 2000, we received approximately $18 million under these contracts, principally in the fourth quarter. FedEx Ground Package System, Inc. ("FedEx Ground") also implemented a 1.25% fuel surcharge on all of its services, effective August 7, 2000, in response to continued high fuel costs. During 2000, we began a major rebranding and reorganization initiative that management believes will enable our operating subsidiaries to compete collectively while retaining the independent operating structure of their business units. The new branding strategy extended the FedEx brand name to three subsidiaries and the Company, formerly FDX Corporation. The reorganization is designed to enhance revenue growth and improve financial returns by centralizing the sales, marketing, customer service and most of the information technology functions of our two largest subsidiaries. Most of these functions were moved into a new corporate services company called FedEx Corporate Services, Inc. ("FedEx Services") effective June 1, 2000. We also launched our FedEx Home Delivery service in March 2000. This service was initially offered to approximately 50% of the U.S. population. The rebranding and reorganization actions and FedEx Home Delivery negatively affected 2000 operating income by approximately $40 million. As expected, operating profit from the sale of engine noise reduction kits ("hushkits") declined by $50 million in 2000, following a $30 million decline in 1999. Operating results for 1999 included $81 million in operating expenses associated with strike contingency planning during contract negotiations between FedEx Express and the Fedex Pilots Association ("FPA"). To avoid service interruptions related to a threatened strike, FedEx began strike contingency planning, including entering into agreements for additional third-party air and ground transportation and establishing special financing arrangements. Negotiations with the FPA ultimately resulted in a five-year collective bargaining agreement that took effect on May 31, 1999. Operating results in 1998 included $88 million of expenses related to the acquisition of Caliber System, Inc. ("Caliber") and the formation of FedEx. These expenses were primarily investment banking fees and payments to members of Caliber's management in accordance with pre-existing management retention agreements. Excluding these expenses, consolidated net income for 1998 was $583 million. Another significant item impacting 1998's results of operations was the Teamsters strike against United Parcel Service ("UPS") in August 1997. FedEx analytically calculated that the volume not retained at the end of the first quarter of 1998 contributed approximately $170 million in revenues and approximately $.12 additional earnings per share. OTHER INCOME AND EXPENSE AND INCOME TAXES Net interest expense increased 8% for 2000, due to higher average debt levels, primarily incurred as a result of FedEx's stock repurchase program, business acquisitions and bond redemptions. For 1999, net interest expense decreased 21% primarily due to lower debt levels. Other, net in 2000 included gains of approximately $12 million from an insurance settlement for a destroyed MD11 aircraft and approximately $11 million from the sale of securities held. In 1999 this category included approximately $10 million of expenses related to the Company's strike contingency plans described above, primarily costs associated with a business interruption credit facility. FedEx's effective tax rate was 39.5% in 2000, 40.5% in 1999 and 44.6% in 1998. Excluding nonrecurring items from the Caliber acquisition in 1998, the effective rate would have been 41.5% in 1998. The 39.5% effective tax rate in 2000 was lower than the 1999 effective rate primarily due to stronger results from international operations. Generally, the effective tax rate exceeds the statutory U.S. federal tax rate because of state income taxes and other factors as identified in Note 10 of Notes to Consolidated Financial Statements. For 2001, we expect the effective tax rate will not exceed, and could possibly be lower than, the 2000 rate. The actual rate, however, will depend on a number of factors, including the amount and source of operating income. OUTLOOK In 2001, we expect FedEx will realize increased volumes and yields as a result of the rebranding and reorganization initiative begun in 2000. Training of the combined sales force was completed in the fourth quarter of 2000 and sales and marketing efforts to cross-sell express and ground services have begun. While there will be continued front-end costs associated with increasing the sales force and emphasizing marketing efforts on small and medium-sized customers, we expect the Company may begin to realize benefits from this initiative starting as early as the second quarter of 2001. Full integration of the customer service function, expected to be completed in the second half of 2001, will provide customers with one FedEx account number and a single point of contact for all express and ground services. However, there are certain risks and uncertainties associated with this initiative that could affect its success and FedEx's future financial performance. Those risks and uncertainties include, but are not limited to, the complexities and costs associated with integrating the sales and marketing functions, including the technologies supporting those functions; market acceptance of the new branding strategy and the combined sales force; competitive responses to our actions, including those affecting pricing, and general U.S. and international economic conditions. We will continue to invest in the expansion of FedEx Home Delivery and have announced plans to accelerate the rollout of this service to achieve service coverage of approximately 80% of the U.S. population by September 2001. We believe this service will allow the Company to capture an increased share of the business-to-consumer shipping market, particularly in retail sales generated through the Internet. FedEx Home Delivery operating losses are expected to approximate $50 million in 2001. Actual results for 2001 will depend upon a number of factors such as consumer demand for and satisfaction with the FedEx Home Delivery product, competitive responses to the product, the extent of our ability to penetrate the business-to-consumer electronic commerce market, and the ability to attract and retain qualified contractors for the delivery network. For 2001, fuel costs are expected to remain at levels approaching those experienced in the second half of 2000. FedEx currently has jet fuel hedges in place to fix the price of approximately one-third of the anticipated jet fuel usage for 2001 at FedEx Express who anticipates retaining its fuel surcharge until such time as fuel costs have declined for a sustained period. The actual effect of the cost of fuel and our ability to mitigate price fluctuations through fuel surcharges and the use of jet fuel hedging contracts is subject to a number of uncertainties, including variability in the spot price of jet fuel, actions taken by foreign producers of crude oil, the actions of competitors and others within the transportation industry regarding fuel surcharges, and general U.S. and international economic conditions. FEDEX EXPRESS The following table compares revenues and operating income (in millions) and selected statistics (in thousands, except dollar amounts) for the years ended May 31:
PERCENT CHANGE ---------------- 2000/ 1999/ 2000 1999 1998 1999 1998 ---- ---- ---- ---- ---- Revenues: Package: U.S. overnight ................. $ 7,538 $ 7,185 $ 6,810 + 5 + 6 U.S. deferred .................. 2,428 2,271 2,179 + 7 + 4 International Priority (IP) .... 3,552 3,019 2,731 +18 +11 ------- ------- ------- Total package revenue ........ 13,518 12,475 11,720 + 8 + 6 Freight: U.S ............................ 566 440 337 +29 +30 International .................. 492 531 598 -7 -11 ------- ------- ------- Total freight revenue ........ 1,058 971 935 + 9 + 4 Other .............................. 492 533 600 -8 -11 ------- ------- ------- Total revenues ............... $15,068 $13,979 $13,255 + 8 + 5 ======= ======= ======= Operating income ...................... $ 900 $ 871 $ 837 + 3 + 4 ======= ======= ======= Package: Average daily packages: U.S. overnight ................. 2,020 1,957 1,886 + 3 + 4 U.S. deferred .................. 916 894 872 + 3 + 3 IP ............................. 319 282 259 +13 + 9 ------- ------- ------- Total packages ............... 3,255 3,133 3,017 + 4 + 4 Revenue per package (yield): U.S. overnight ................. $ 14.52 $ 14.34 $ 14.22 + 1 + 1 U.S. deferred .................. 10.31 9.93 9.84 + 4 + 1 IP ............................. 43.36 41.87 41.45 + 4 + 1 Composite .................... 16.16 15.56 15.30 + 4 + 2 Freight: Average daily pounds: U.S ............................ 4,693 4,332 3,356 + 8 +29 International .................. 2,420 2,633 2,770 -8 -5 ------- ------- ------- Total freight ................ 7,113 6,965 6,126 + 2 +14 Revenue per pound (yield): U.S ............................ $ .47 $ .40 $ .40 +18 -- International .................. .79 .79 .85 -- -7 Composite .................... .58 .54 .60 + 7 -10
REVENUES In 2000, total package revenue for FedEx Express increased 8%, principally due to increases in international package volume and yield. List price increases, including an average 2.8% domestic rate increase in March 1999, the fuel surcharges implemented in the second half of the year, an ongoing yield management program and a slight increase in average weight per package, all contributed to the increases in yields in 2000. While growth in U.S. domestic package volume was lower than anticipated, the higher-yielding IP services experienced strong growth, particularly in Asia and Europe. Total freight revenue increased in 2000 due to higher average daily pounds and improved yields in U.S. freight, offset by declines in international freight pounds. In 1999, FedEx Express experienced increased volume and slightly improved yields in its U.S. overnight, U.S. deferred and IP services. Growth in higher-priced U.S. overnight and IP services and higher average weight per package were the primary factors in revenue growth. List price increases and other yield-management actions contributed to the yield improvement in 1999. The U.S. deferred package growth rate declined in 1999 in large part due to specific management actions to restrict growth of these lower-yielding services. IP package volume and international freight pounds and yield were negatively affected by weakness in Asian markets, especially in U.S. outbound traffic destined for that region. Other revenue included Canadian domestic revenue, charter services, logistics services, sales of hushkits and other. Revenue from hushkit sales has continued to decline over the past three years and is expected to be negligible hereafter. OPERATING INCOME Operating income increased 3% in 2000 despite higher fuel costs and costs associated with the corporate realignment and reorganization of the sales, marketing and information technology functions. A 48% increase in average fuel price per gallon had a negative impact of approximately $260 million on 2000 fuel costs, including the results of jet fuel hedging contracts entered into to mitigate some of the increased jet fuel costs. Fuel surcharges implemented during 2000 offset the increase in fuel costs in the fourth quarter. As anticipated, maintenance and repairs increased in 2000 due to the timing of scheduled maintenance and a greater number of routine cycle checks resulting from fleet usage and certain Federal Aviation Administration directives. Operating income increased in 1999 compared to 1998 in spite of $81 million in strike contingency costs in 1999 and continued weakness in Asian markets. Lower fuel prices and cost controls, including adjustments in network expansion and aircraft deployment plans, contributed to improved results. A decline in average jet fuel price per gallon of 23% was partially offset by an increase in gallons consumed of 6%. Although international freight pounds and revenue per pound continued to decline in 1999, higher yielding IP volume continued to grow, utilizing capacity otherwise occupied by freight. In 1998, operating income improved as package yield increased at a higher rate than costs. An increase in average daily packages also contributed to the improvement in operating income. In 1998, fuel expense included amounts paid by FedEx Express under jet fuel hedging contracts that were designed to mitigate some of the increased jet fuel costs. Lower international freight yield, rising expenses associated with international expansion and foreign currency fluctuations along with expenses of $14 million related to the acquisition of Caliber negatively affected 1998 results. Operating income for 1998 increased approximately $50 million related to the UPS strike. Proceeds from a 2% temporary fuel surcharge on U.S. domestic shipments through August 1, 1997 also had a favorable impact. Year-over-year comparisons were also affected by fluctuations in the contribution from sales of hushkits. Operating profit from these sales declined $50 million in 2000 and $30 million in 1999. OUTLOOK We believe U.S. overnight package volumes for FedEx Express will grow in 2001 at rates higher than those experienced in 2000, with second half growth rates exceeding those in the first half of 2001. We believe U.S. deferred package volume growth rates at FedEx Express will be lower in 2001 as we implement the strategy of shifting a portion of these shipments to FedEx Ground. Improved domestic yields associated with the new sales initiatives are also expected in 2001. We expect IP package volume growth rates to remain strong in 2001. Freight pounds are expected to continue to increase in 2001, with increases in the U.S. partially offset by continued declines in international freight, as it is replaced by higher-yielding priority packages. FedEx Express also plans to continue cost containment and productivity enhancement programs in 2001. By lowering discretionary spending and limiting staffing additions, we expect to align controllable costs with business growth; however, these actions will not affect plans for strategic spending in support of long-term growth goals. FedEx Express will continue to use the flexibility of its global network infrastructure by reconfiguring its system and flights to meet market demands. While long-term profitability is expected to improve, incremental costs incurred during periods of strategic expansion and varying economic conditions can affect short-term operating results. Actual results may vary depending on the successful implementation of our reorganization and rebranding initiative, the impact of competitive pricing changes, customer responses to yield management initiatives, the timing and extent of network refinement, actions by our competitors, including capacity fluctuations, jet fuel prices, regulatory conditions for aviation rights and the rate of domestic and international economic growth. In the past three years, the FedEx Express worldwide aircraft fleet has increased, resulting in a corresponding rise in maintenance expense. While we expect a predictable pattern of aircraft maintenance and repairs expense, unanticipated maintenance events will occasionally disrupt this pattern, resulting in periodic fluctuations in maintenance and repairs expense. FedEx Express's operating income from the sales of hushkits, which peaked in 1998 and declined in 1999 and 2000, is expected to become insignificant in 2001. FEDEX GROUND The following table compares revenues and operating income (in millions) and selected package statistics (in thousands, except dollar amounts) for the years ended May 31:
PERCENT CHANGE -------------- 2000/ 1999/ 2000 1999 1998 1999 1998 ---- ---- ---- ----- ---- Revenues $2,033 $1,878 $1,711 + 8 +10 Operating income $ 226 $ 231 $ 171 - 2 +35 Average daily packages 1,442 1,385 1,326 + 4 + 4 Revenue per package (yield) $ 5.55 $ 5.36 $ 5.04 + 4 + 6
REVENUES Revenues for FedEx Ground increased 8% in 2000, while average daily packages increased 4% and yields increased 4%. The increase in yields is due to a 2.3% price increase, which was effective in February 1999 and a slight increase in the mix of higher yielding packages. In 1999, FedEx Ground's revenue increased due to improving yields and steady volume growth. Yields were positively impacted by rate increases of 2.3% and 3.7% in February 1999 and 1998, respectively. During 1999, FedEx Ground recognized a year-to-date, one-time benefit of approximately $6 million to align its estimation methodology for in-transit revenue with that of our other operating subsidiaries. Year-to-date package yield was increased by $.02 because of this one-time adjustment. Results for 1998 included incremental volume associated with the UPS strike. Excluding this incremental volume, average daily packages increased 6% for 1999. OPERATING INCOME Operating income for 2000 reflects higher operating costs, due primarily to increases in capacity and technology, as well as the effects of FedEx Home Delivery and the rebranding and reorganization initiatives. Depreciation expense increased 20% in 2000 as new terminal facilities were opened late in 1999 and throughout the first half of 2000. In March 2000, FedEx Ground launched its new service, FedEx Home Delivery. This new service is dedicated to meeting the needs of business-to-consumer shippers. Currently, this service is available for approximately 50% of the U.S. population. An operating loss of $19 million was incurred by the home delivery service in 2000. Operating income increased in 1999 due to increased volume and yield-management actions. Results for 1998 contained approximately $6 million of incremental operating income associated with the UPS strike. OUTLOOK FedEx Ground continues to expand capacity in order to accommodate volume growth, while maintaining or improving yields. FedEx Ground opened two additional hub facilities in 2000 and will continue to expand package processing capacity to meet its growth plans. Package volume and yields are expected to increase in 2001 as the results of the new rebranding and reorganization effort are realized. FedEx Ground plans to accelerate its expansion of the home delivery service to reach approximately 80% of the U.S. population by September 2001 and full U.S. coverage by September 2002. We expect to incur operating losses on the FedEx Ground home delivery service of approximately $50 million in 2001, including costs associated with the acceleration of the expansion of the service. Actual results may vary depending on a number of factors, such as consumer demand for and satisfaction with the FedEx Ground product, the service coverage and brand awareness of the FedEx Ground product, competitive responses including pricing and capacity fluctuations, the rate of U.S. domestic economic growth, the extent of FedEx Ground's ability to penetrate the business-to-consumer electronic commerce market, and the ability to attract and retain qualified contractors for the delivery network. OTHER OPERATIONS Other operations include FedEx Global Logistics, Inc. ("FedEx Logistics"), a contract logistics provider; FedEx Custom Critical, Inc. ("FedEx Custom Critical"), a critical-shipment carrier; FedEx Trade Networks, Inc. ("FedEx Trade Networks"), a trade services provider; Viking Freight, Inc. ("Viking"), a regional less-than-truckload freight carrier operating in the western United States, and certain unallocated corporate items. REVENUES Revenues from other operations increased 26% in 2000. Excluding the effects of businesses acquired in 2000, the increase was 15% compared with 1% in 1999, due to substantially higher revenues at FedEx Custom Critical combined with double-digit revenue growth at Viking. Revenue growth for 1999 reflects an increase at FedEx Custom Critical, offset by modest decreases at Viking and FedEx Logistics. OPERATING INCOME Increased operating income for 2000 is due to strong earnings at Viking and continued earnings growth at FedEx Custom Critical. Results for 2000 also include a $10 million favorable adjustment related to estimated future lease costs from the Viking restructuring. Operating income for 1999 reflected improved performances at FedEx Custom Critical, offset by a decline at FedEx Logistics. Operating income in 1998 includes $74 million in expenses, which were not allocated to operating segments, for merger costs associated with the acquisition of Caliber. These expenses were primarily investment banking fees and payments to members of Caliber's management in accordance with pre-existing management retention agreements. FINANCIAL CONDITION LIQUIDITY Cash and cash equivalents totaled $68 million at May 31, 2000, compared to $325 million at May 31, 1999. Cash flows from operating activities during 2000 totaled $1.6 billion, compared to $1.8 billion for 1999 and $1.6 billion for 1998. FedEx's operations have generated increased cash earnings over the past three years. The following table compares cash earnings (in billions, except per share amounts) for the years ended May 31:
2000 1999 1998 ---- ---- ---- EBITDA (earnings before interest, taxes, depreciation and amortization) $ 2.4 $2.2 $ 2.0 Cash earnings per share (net income plus depreciation and amortization divided by average common and common equivalent shares) $6.22 $5.54 $4.92
The Company currently has a $1.0 billion revolving credit facility that is generally used to finance temporary operating cash requirements and to provide support for the issuance of commercial paper. As of May 31, 2000, approximately $478 million of the credit facility remains available. For more information regarding the credit facility, see Note 5 of Notes to Consolidated Financial Statements. During 2000, FedEx acquired three businesses for approximately $264 million, primarily in cash. These purchases were funded from operations and borrowings under our commercial paper program. On September 27, 1999, the Company's Board of Directors approved a plan that authorized the purchase of up to 15 million, or approximately 5%, of FedEx's outstanding shares of common stock. We completed the purchase of 15 million shares at an average cost of $39.75 per share. The purchase of these shares was funded principally through the issuance of commercial paper. Shares held in treasury will be used for general corporate purposes. FedEx Express redeemed $100 million of 9.625% unsecured sinking fund debentures on March 1, 2000. The bond redemption was financed with commercial paper borrowings. In 1999, FedEx filed a $1 billion shelf registration statement with the Securities and Exchange Commission ("SEC"), indicating that we may issue up to that amount in one or more offerings of either unsecured debt securities, preferred stock or common stock, or a combination of such instruments. The Company may, at its option, direct FedEx Express to issue guarantees of the debt securities. We believe that cash flow from operations, our commercial paper program and revolving bank credit facility will adequately meet the Company's working capital needs for the foreseeable future. CAPITAL RESOURCES FedEx's operations are capital intensive, characterized by significant investments in aircraft, vehicles, computer and telecommunications equipment, package handling facilities and sort equipment. The amount and timing of capital additions depend on various factors including volume growth, domestic and international economic conditions, new or enhanced services, geographical expansion of services, competition, availability of satisfactory financing and actions of regulatory authorities. The following table compares capital expenditures (including equivalent capital, which is defined below) for the years ended May 31 (in millions):
2000 1999 ---- ---- Aircraft and related equipment $ 469 $ 606 Facilities and sort equipment 437 466 Information and technology equipment 378 366 Other equipment 343 332 ------ ------ Total capital expenditures 1,627 1,770 Equivalent capital, principally aircraft-related 365 561 ------ ------ Total $1,992 $2,331 ====== ======
FedEx finances a significant amount of its aircraft and certain other equipment needs using long-term operating leases. We believe the determination to lease versus buy equipment is a financing decision, and both forms of financing are considered when evaluating the resources committed for capital. The amount that the Company would have expended to purchase these assets had it not chosen to obtain their use through operating leases is considered equivalent capital in the table above. While capital expenditures over the past two years have been reduced based on lower than expected U.S. domestic volume growth at FedEx Express, we plan to continue to make strategic capital investments in support of our long-term growth goals. For 2001, we expect capital spending, including equivalent capital, to approximate $2.3 billion. For information on the Company's purchase commitments, see Note 14 of Notes to Consolidated Financial Statements. We have historically financed our capital investments through the use of lease, debt and equity financing in addition to the use of internally generated cash from operations. Generally, our practice in recent years with respect to funding new wide-bodied aircraft acquisitions has been to finance such aircraft through long-term lease transactions that qualify as off-balance sheet operating leases under applicable accounting rules. We have determined that these operating leases have provided economic benefits favorable to ownership with respect to market values, liquidity and after-tax cash flows. In the future, other forms of secured financing may be pursued to finance FedEx Express's aircraft acquisitions when we determine that it best meets FedEx Express's needs. FedEx Express has been successful in obtaining investment capital, both domestic and international, for long-term leases on terms acceptable to it although the marketplace for such capital can become restricted depending on a variety of economic factors beyond its control. See Note 5 of Notes to Consolidated Financial Statements for additional information concerning the Company's debt facilities. In July 1999, approximately $231 million of pass-through certificates were issued to finance or refinance the debt portion of leveraged operating leases related to four A300 aircraft, which were delivered in 2000. In June 1998, approximately $833 million of pass-through certificates were issued to finance or refinance the debt portion of FedEx Express's leveraged operating leases related to eight A300 and five MD11 aircraft, which were delivered in 2000. The pass-through certificates are not direct obligations of, or guaranteed by, the Company or FedEx Express, but amounts payable by FedEx Express under the leveraged operating leases are sufficient to pay the principal of and interest on the certificates. In June 2000, FedEx Express filed a shelf registration with the SEC, indicating that it may issue up to $450 million in pass- through certificates in one or more offerings to finance or refinance leveraged operating aircraft leases. We believe that the capital resources available to us provide flexibility to access the most efficient markets for financing its capital acquisitions, including aircraft, and are adequate for FedEx's future capital needs. DEFERRED TAX ASSETS At May 31, 2000, the Company had a net cumulative deferred tax liability of $27 million, consisting of $884 million of deferred tax assets and $911 million of deferred tax liabilities. The reversals of deferred tax assets in future periods will be offset by similar amounts of deferred tax liabilities. EURO CURRENCY CONVERSION Since the beginning of the European Union's transition to the euro on January 1, 1999, our subsidiaries have been prepared to quote rates to customers, generate billings and accept payments, in both euro and legacy currencies. The legacy currencies will remain legal tender through December 31, 2001. FedEx believes that the introduction of the euro, any price transparency brought about by its introduction and the phasing out of the legacy currencies will not have a material impact on our consolidated financial position, results of operations or cash flows. Costs associated with the euro project are being expensed as incurred and are being funded entirely by internal cash flows. YEAR 2000 COMPLIANCE FedEx's operating subsidiaries rely heavily on sophisticated information technology for their business operations. Our Year 2000 ("Y2K") computer compliance issues were, therefore, broad and complex. Nothing has come to the Company's attention that would cause it to believe that its Y2K compliance effort was not successful. Since 1996, FedEx has incurred approximately $115 million on Y2K compliance ($22 million in 2000), which was funded by internal cash flows. We do not expect to incur any material additional Y2K-related costs. We classified costs as Y2K for reporting purposes if they remedied only Y2K risks or resulted in the formulation of contingency plans and would otherwise have been unnecessary in the normal course of business. For 2000, Y2K expenditures were less than 10% of the Company's total information technology expense budget. We believe that no significant information technology projects were deferred due to our Y2K compliance effort. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK FedEx currently has market risk sensitive instruments related to interest rates; however, there is no significant exposure to changing interest rates on our long-term debt because the interest rates are fixed. As disclosed in Note 5 of Notes to Consolidated Financial Statements, FedEx has outstanding unsecured long-term debt exclusive of capital leases of $1.1 billion and $1.2 billion at May 31, 2000 and 1999, respectively. Market risk for fixed-rate long-term debt is estimated as the potential decrease in fair value resulting from a hypothetical 10% increase in interest rates and amounts to approximately $54 million as of May 31, 2000 ($45 million as of May 31, 1999). The underlying fair values of our long-term debt were estimated based on quoted market prices or on the current rates offered for debt with similar terms and maturities. FedEx does not use derivative financial instruments to manage interest rate risk. FedEx's earnings are affected by fluctuations in the value of the U.S. dollar, as compared with foreign currencies, as a result of transactions in foreign markets. At May 31, 2000, the result of a uniform 10% strengthening in the value of the dollar relative to the currencies in which the Company's transactions are denominated would result in a decrease in operating income of approximately $52 million for the year ending May 31, 2001 (the comparable amount in the prior year was $25 million). This calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar. In addition to the direct effects of changes in exchange rates, which are a changed dollar value of the resulting reported operating results, changes in exchange rates also affect the volume of sales or the foreign currency sales price as competitors' services become more or less attractive. FedEx's sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. FedEx has entered into jet fuel hedging contracts on behalf of its subsidiary FedEx Express, which are designed to limit its exposure to fluctuations in jet fuel prices. Under these contracts, FedEx makes (or receives) payments based on the difference between a fixed price and the market price of jet fuel, as determined by an index of spot market prices representing various geographic regions. The difference is recorded as an increase or decrease in fuel expense. Market risk for jet fuel is estimated as the potential decrease in earnings resulting from a hypothetical 10% increase in jet fuel prices applied to projected 2001 usage and amounts to approximately $49 million, net of hedging settlements, as of May 31, 2000. There were no such jet fuel hedging contracts at May 31, 1999. As of May 31, 2000, jet fuel hedging contracts cover approximately one-third of the estimated usage in 2001. See Notes 2 and 14 of Notes to Consolidated Financial Statements for accounting policy and additional information regarding jet fuel hedging contracts. FedEx does not purchase or hold any derivative financial instruments for trading purposes. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The following financial statements are filed with this Report:
PAGE NUMBER ----------- Report of Independent Public Accountants ............................................................... F-1 Consolidated Balance Sheets - May 31, 2000 and 1999..................................................... F-2 Consolidated Statements of Income - Years ended May 31, 2000, 1999 and 1998............................. F-4 Consolidated Statements of Changes in Stockholders' Investment and Comprehensive Income - Years ended May 31, 2000, 1999 and 1998................................... F-5 Consolidated Statements of Cash Flows - Years ended May 31, 2000, 1999 and 1998......................... F-6 Notes to Consolidated Financial Statements.............................................................. F-7
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information regarding members of the Board of Directors will be presented in FedEx's Definitive Proxy Statement for its 2000 Annual Meeting of Stockholders which will be held on September 25, 2000 and is incorporated herein by reference. Information regarding executive officers of FedEx is included above in Part I of this Form 10-K under the caption "Executive Officers of the Registrant" pursuant to Instruction 3 to Item 401(b) of Regulation S-K and General Instruction G(3) of Form 10-K. ITEM 11. EXECUTIVE COMPENSATION Information regarding executive compensation will be presented in FedEx's Definitive Proxy Statement for its 2000 Annual Meeting of Stockholders which will be held on September 25, 2000 and is incorporated herein by reference. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information regarding security ownership of certain beneficial owners and management will be presented in FedEx's Definitive Proxy Statement for its 2000 Annual Meeting of Stockholders which will be held on September 25, 2000 and is incorporated herein by reference. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information regarding related party transactions will be presented in FedEx's Definitive Proxy Statement for its 2000 Annual Meeting of Stockholders which will be held on September 25, 2000 and is incorporated herein by reference. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) 1. FINANCIAL STATEMENTS The consolidated financial statements required by this item are listed in Item 8, "Financial Statements and Supplementary Data" herein and are included on pages F-1 to F-25 herein. 2. FINANCIAL STATEMENT SCHEDULES The following financial statement schedule is filed with this Report:
PAGE NUMBER ----------- Report of Independent Public Accountants on Financial Statement Schedule S-1 Schedule II - Valuation and Qualifying Accounts S-2
All other financial statement schedules have been omitted because they are not applicable or the required information is included in the consolidated financial statements, or the notes thereto, contained herein. 3. EXHIBITS Exhibits 3.1, 3.2, 10.1 through 10.61, 12, 21, 23, 24 and 27 are being filed in connection with this Report or incorporated herein by reference. The Exhibit Index on pages E-1 through E-7 is incorporated herein by reference. (b) REPORTS ON FORM 8-K No reports were filed on Form 8-K for the fourth quarter of the fiscal year ended May 31, 2000. SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. FEDEX CORPORATION BY: /s/ James S. Hudson ----------------------------------- James S. Hudson Corporate Vice President - Strategic Financial Planning and Control (PRINCIPAL ACCOUNTING OFFICER) Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.
SIGNATURE CAPACITY DATE - --------- -------- ---- /s/ FREDERICK W. SMITH* Chairman, President and - ------------------------- Chairman, President and Frederick W. Smith and Director (PRINCIPAL EXECUTIVE OFFICER) /s/ ALAN B. GRAF, JR.* Executive Vice President and - ------------------------ Chief Financial Officer Alan B. Graf, Jr. (PRINCIPAL FINANCIAL OFFICER) /s/ JAMES S. HUDSON Corporate Vice President - August 2, 2000 - --------------------------- Strategic Financial Planning James S. Hudson and Control (PRINCIPAL ACCOUNTING OFFICER) /s/ ROBERT H. ALLEN * - --------------------------- Director Robert H. Allen /s/ JAMES L. BARKSDALE * - --------------------------- Director James L. Barksdale /s/ ROBERT L. COX * - --------------------------- Director Robert L. Cox /s/ RALPH D. DENUNZIO * - --------------------------- Director Ralph D. DeNunzio
SIGNATURE CAPACITY DATE - --------- -------- ---- /s/ JUDITH L. ESTRIN * - ---------------------------- Director Judith L. Estrin /s/ PHILIP GREER * - ---------------------------- Director Philip Greer /s/ J. R. HYDE, III * - ---------------------------- Director J. R. Hyde, III /s/ SHIRLEY ANN JACKSON * - ---------------------------- Director Shirley Ann Jackson /s/ GEORGE J. MITCHELL * - ---------------------------- Director George J. Mitchell /s/ JOSHUA I. SMITH * - ---------------------------- Director Joshua I. Smith /s/ PAUL S. WALSH* - ---------------------------- Director Paul S. Walsh /s/ PETER S. WILLMOTT * - ---------------------------- Director Peter S. Willmott *By: /s/ JAMES S. HUDSON August 2, 2000 ---------------------- James S. Hudson Attorney-in-Fact
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Stockholders of FedEx Corporation: We have audited the accompanying consolidated balance sheets of FedEx Corporation (a Delaware corporation) and subsidiaries as of May 31, 2000 and 1999, and the related consolidated statements of income, changes in stockholders' investment and comprehensive income and cash flows for each of the three years in the period ended May 31, 2000. These financial statements are the responsibility of FedEx's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of FedEx Corporation as of May 31, 2000 and 1999, and the results of its operations and its cash flows for each of the three years in the period ended May 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ARTHUR ANDERSEN LLP ---------------------- Arthur Andersen LLP Memphis, Tennessee June 27, 2000 F-1 FEDEX CORPORATION CONSOLIDATED BALANCE SHEETS
ASSETS May 31, ------------------------------------ 2000 1999 -------------- -------------- (In thousands) CURRENT ASSETS Cash and cash equivalents $ 67,959 $ 325,323 Receivables, less allowances of $85,972,000 and $68,305,000 2,547,043 2,153,166 Spare parts, supplies and fuel 255,291 291,922 Deferred income taxes 317,784 290,721 Prepaid expenses and other 96,667 79,896 -------------- ------------- Total current assets 3,284,744 3,141,028 PROPERTY AND EQUIPMENT, AT COST Flight equipment 4,960,204 4,556,747 Package handling and ground support equipment and vehicles 4,270,596 3,858,788 Computer and electronic equipment 2,416,666 2,363,637 Other 3,095,077 2,940,735 -------------- ------------- 14,742,543 13,719,907 Less accumulated depreciation and amortization 7,659,016 7,160,690 -------------- ------------- Net property and equipment 7,083,527 6,559,217 OTHER ASSETS Goodwill 500,547 344,002 Equipment deposits and other assets 658,293 603,964 -------------- ------------- Total other assets 1,158,840 947,966 -------------- ------------- $ 11,527,111 $ 10,648,211 ============== =============
The accompanying notes are an integral part of these consolidated financial statements. F-2 FEDEX CORPORATION CONSOLIDATED BALANCE SHEETS LIABILITIES AND STOCKHOLDERS' INVESTMENT
May 31, ---------------------------------- 2000 1999 --------------- --------------- (In thousands) Current Liabilities Current portion of long-term debt $ 6,537 $ 14,938 Accrued salaries and employee benefits 755,747 740,492 Accounts payable 1,120,855 1,133,952 Accrued expenses 1,007,887 895,375 ---------- ---------- Total current liabilities 2,891,026 2,784,757 Long-Term Debt, Less Current Portion 1,776,253 1,359,668 Deferred Income Taxes 344,613 293,462 Other Liabilities 1,729,976 1,546,632 Commitments and Contingencies (Notes 6, 14 and 15) COMMON STOCKHOLDERS' INVESTMENT Common stock, $.10 par value; 800,000,000 shares authorized; 298,573,387 and 297,987,200 shares issued 29,857 29,799 Additional paid-in capital 1,079,462 1,061,312 Retained earnings 4,295,041 3,615,797 Accumulated other comprehensive income (36,074) (24,688) ---------- ---------- 5,368,286 4,682,220 Less treasury stock, at cost and deferred compensation 583,043 18,528 ---------- ---------- Total common stockholders' investment 4,785,243 4,663,692 ---------- ---------- $11,527,111 $10,648,211 ========== ==========
The accompanying notes are an integral part of these consolidated financial statements. F-3 FEDEX CORPORATION CONSOLIDATED STATEMENTS OF INCOME
Years ended May 31, -------------------------------------------------- 2000 1999 1998 ------------ ------------ ------------ (In thousands, except per share amounts) REVENUES $18,256,945 $16,773,470 $15,872,810 OPERATING EXPENSES Salaries and employee benefits 7,597,964 7,087,728 6,647,140 Purchased transportation 1,674,854 1,537,785 1,481,590 Rentals and landing fees 1,538,713 1,396,694 1,304,296 Depreciation and amortization 1,154,863 1,035,118 963,732 Maintenance and repairs 1,101,424 958,873 874,400 Fuel 918,513 604,929 726,776 Other 3,049,540 2,989,257 2,864,216 ----------- ----------- ----------- 17,035,871 15,610,384 14,862,150 ----------- ----------- ----------- OPERATING INCOME 1,221,074 1,163,086 1,010,660 OTHER INCOME (EXPENSE) Interest, net (106,060) (98,191) (124,413) Other, net 22,726 (3,831) 13,271 ----------- ----------- ----------- (83,334) (102,022) (111,142) ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES 1,137,740 1,061,064 899,518 PROVISION FOR INCOME TAXES 449,404 429,731 401,363 ----------- ----------- ----------- INCOME FROM CONTINUING OPERATIONS 688,336 631,333 498,155 ----------- ----------- ----------- INCOME FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES -- -- 4,875 ----------- ----------- ----------- NET INCOME $ 688,336 $ 631,333 $ 503,030 =========== =========== =========== EARNINGS PER COMMON SHARE Continuing operations $ 2.36 $ 2.13 $ 1.70 Discontinued operations -- -- .02 ------------ ------------ ------------ $ 2.36 $ 2.13 $ 1.72 ============ ============ ============ EARNINGS PER COMMON SHARE - ASSUMING DILUTION Continuing operations $ 2.32 $ 2.10 $ 1.67 Discontinued operations -- -- .02 ------------ ------------ ------------ $ 2.32 $ 2.10 $ 1.69 ============ ============ ============
The accompanying notes are an integral part of these consolidated financial statements. F-4 FEDEX CORPORATION CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' INVESTMENT AND COMPREHENSIVE INCOME
Accumulated Additional Other Common Paid-in Retained Comprehensive Treasury Deferred Stock Capital Earnings Income Stock Compensation Total ------ ---------- -------- ------------- -------- ------------ ----- (In thousands, except shares) BALANCE AT MAY 31, 1997 $ 14,762 $ 937,978 $ 2,618,492 $ 3,019 $(55,482) $ (17,608) $ 3,501,161 Net income -- -- 503,030 -- -- -- 503,030 Foreign currency translation adjustment, net of deferred tax benefit of $2,793 -- -- -- (30,296) -- -- (30,296) ----------- TOTAL COMPREHENSIVE INCOME 472,734 Adjustment to conform Caliber System, Inc.'s fiscal year -- 492 (51,795) -- (1,765) -- (53,068) Cash dividends declared by Caliber System, Inc. -- -- (3,899) -- -- -- (3,899) Purchase of treasury stock -- -- -- -- (7,049) -- (7,049) Forfeiture of restricted stock -- -- -- -- (979) 586 (393) Issuance of stock under employee incentive plans (1,466,895 shares) 135 54,195 -- -- 7,918 (7,204) 55,044 Cancellation of Caliber System, Inc. treasury stock (156) 156 (66,474) -- 57,357 -- (9,117) Amortization of deferred compensation -- -- -- -- -- 5,817 5,817 ----------- --------- ----------- --------- -------- --------- ----------- BALANCE AT MAY 31, 1998 14,741 992,821 2,999,354 (27,277) -- (18,409) 3,961,230 Net income -- -- 631,333 -- -- -- 631,333 Foreign currency translation adjustment, net of deferred tax benefit of $959 -- -- -- (611) -- -- (611) Unrealized gain on available-for-sale securities, net of deferred taxes of $2,100 -- -- -- 3,200 -- -- 3,200 ----------- TOTAL COMPREHENSIVE INCOME 633,922 Purchase of treasury stock -- -- -- -- (8,168) -- (8,168) Forfeiture of restricted stock -- -- -- -- (1,196) 507 (689) Two-for-one stock split by FedEx Corporation in the form of a 100% stock dividend (148,931,996 shares) 14,890 -- (14,890) -- -- -- -- Issuance of stock under employee incentive plans (1,770,626 shares) 168 68,491 -- -- 8,083 (8,273) 68,469 Amortization of deferred compensation -- -- -- -- -- 8,928 8,928 ----------- --------- ----------- --------- -------- --------- ----------- BALANCE AT MAY 31, 1999 29,799 1,061,312 3,615,797 (24,688) (1,281) (17,247) 4,663,692 Net income -- -- 688,336 -- -- -- 688,336 Foreign currency translation adjustment, net of deferred tax benefit of $1,881 -- -- -- (9,021) -- -- (9,021) Unrealized loss on available-for-sale securities, net of deferred tax benefit of $1,513 -- -- -- (2,365) -- -- (2,365) ----------- TOTAL COMPREHENSIVE INCOME 676,950 Purchase of treasury stock -- -- -- -- (606,506) -- (606,506) Forfeiture of restricted stock -- -- -- -- (790) 845 55 Issuance of stock under employee incentive plans and other (1,715,585 shares) 58 18,150 (9,092) -- 44,483 (14,725) 38,874 Amortization of deferred compensation -- -- -- -- -- 12,178 12,178 ----------- --------- ----------- --------- --------- --------- ----------- BALANCE AT MAY 31, 2000 $ 29,857 $1,079,462 $ 4,295,041 $ (36,074) $(564,094) $ (18,949) $ 4,785,243 =========== ========== =========== ========= ========= ========= ===========
The accompanying notes are an integral part of these consolidated financial statements. F-5 FEDEX CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended May 31, ----------------------------------------------------- 2000 1999 1998 -------------- --------------- --------------- (In thousands) OPERATING ACTIVITIES Income from continuing operations $ 688,336 $ 631,333 $ 498,155 Adjustments to reconcile income from continuing operations to cash provided by operating activities: Depreciation and amortization 1,154,863 1,035,118 963,732 Provision for uncollectible accounts 71,107 55,649 72,700 Deferred income taxes and other noncash items (7,363) (34,037) 29,570 Gain from disposals of property and equipment (17,068) (2,330) (7,188) Changes in operating assets and liabilities, net of businesses acquired: Increase in receivables (404,511) (294,121) (267,367) Decrease (increase) in other current assets 70,720 (155,720) (102,203) Increase in accounts payable and other operating liabilities 107,543 555,565 450,836 Other, net (38,385) (19,337) (32,963) ----------- ----------- ----------- Cash provided by operating activities 1,625,242 1,772,120 1,605,272 INVESTING ACTIVITIES Purchases of property and equipment, including deposits on aircraft of $1,500,000, $1,200,000 and $70,359,000 (1,627,418) (1,769,946) (1,880,173) Proceeds from dispositions of property and equipment: Sale-leaseback transactions -- 80,995 322,852 Reimbursements of A300 and MD11 deposits 24,377 67,269 106,991 Other dispositions 165,397 195,641 162,672 Acquisitions of businesses (257,095) -- -- Other, net (13,378) (22,716) (471) ----------- ----------- ----------- Cash used in investing activities (1,708,117) (1,448,757) (1,288,129) FINANCING ACTIVITIES Principal payments on debt (115,090) (269,367) (533,502) Proceeds from debt issuances 517,664 -- 267,105 Proceeds from stock issuances 15,523 49,932 33,925 Dividends paid -- -- (7,793) Purchase of treasury stock (606,506) (8,168) (7,049) Other, net 13,920 (2) 110 ----------- ----------- ----------- Cash used in financing activities (174,489) (227,605) (247,204) ----------- ----------- ----------- CASH AND CASH EQUIVALENTS Cash (used in) provided by continuing operations (257,364) 95,758 69,939 Cash used in discontinued operations -- -- (1,735) Balance at beginning of year 325,323 229,565 161,361 ----------- ----------- ----------- Balance at end of year $ 67,959 $ 325,323 $ 229,565 =========== =========== ===========
The accompanying notes are an integral part of these consolidated financial statements. F-6 FEDEX CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE 1: BASIS OF PRESENTATION On January 19, 2000, new branding strategy was announced that resulted in name changes of the holding company and certain operating companies to include the FedEx brand name. The name of the holding company was changed from FDX Corporation to FedEx Corporation ("FedEx") and the following operating subsidiaries' names were changed:
Former Name New Name Brand Name ------------------------------------ ------------------------------------------- --------------------------- RPS, Inc. FedEx Ground Package System, Inc. FedEx Ground FDX Logistics FedEx Global Logistics, Inc. FedEx Logistics Roberts Express FedEx Custom Critical, Inc. FedEx Custom Critical
The names of Federal Express Corporation ("FedEx Express") and Viking Freight, Inc. ("Viking") did not change. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include the accounts of FedEx Corporation and its subsidiaries. All significant intercompany accounts and transactions have been eliminated. PROPERTY AND EQUIPMENT. Expenditures for major additions, improvements, flight equipment modifications and certain equipment overhaul costs are capitalized. Maintenance and repairs are charged to expense as incurred. The cost and accumulated depreciation of property and equipment disposed of are removed from the related accounts, and any gain or loss is reflected in the results of operations. For financial reporting purposes, depreciation and amortization of property and equipment is provided on a straight-line basis over the asset's service life or related lease term as follows: Flight equipment 5 to 20 years Package handling and ground support equipment and vehicles 3 to 30 years Computer and electronic equipment 3 to 10 years Other 2 to 30 years Aircraft airframes and engines are assigned residual values ranging from 10% to 20% of asset cost. All other property and equipment have no material residual values. Vehicles are depreciated on a straight-line basis over five to 10 years. For income tax purposes, depreciation is generally computed using accelerated methods. DEFERRED GAINS. Gains on the sale and leaseback of aircraft and other property and equipment are deferred and amortized over the life of the lease as a reduction of rent expense. Included in other liabilities at May 31, 2000 and 1999, were deferred gains of $533,371,000 and $429,488,000, respectively. F-7 DEFERRED LEASE OBLIGATIONS. While certain of FedEx's aircraft and facility leases contain fluctuating or escalating payments, the related rent expense is recorded on a straight-line basis over the lease term. Included in other liabilities at May 31, 2000 and 1999, were $354,566,000 and $321,248,000, respectively, representing the cumulative difference between rent expense and rent payments. SELF-INSURANCE ACCRUALS. FedEx is self-insured up to certain levels for workers' compensation, employee health care and vehicle liabilities. Accruals are based on the actuarially estimated undiscounted cost of claims. Included in other liabilities at May 31, 2000 and 1999, were $324,869,000 and $282,889,000, respectively, representing the long-term portion of self-insurance accruals for FedEx's workers' compensation and vehicle liabilities. CAPITALIZED INTEREST. Interest on funds used to finance the acquisition and modification of aircraft, construction of certain facilities, and development of certain software up to the date the asset is placed in service is capitalized and included in the cost of the asset. Capitalized interest was $34,823,000, $38,880,000 and $33,009,000 for 2000, 1999 and 1998, respectively. ADVERTISING. Advertising costs are generally expensed as incurred and are included in other operating expenses. Advertising expenses were $221,511,000, $202,104,000 and $183,253,000 in 2000, 1999 and 1998, respectively. CASH EQUIVALENTS. Cash equivalents in excess of current operating requirements are invested in short-term, interest-bearing instruments with maturities of three months or less at the date of purchase and are stated at cost, which approximates market value. Interest income was $15,116,000, $12,399,000 and $11,283,000 in 2000, 1999 and 1998, respectively. MARKETABLE SECURITIES. FedEx's marketable securities are available-for-sale securities and are reported at fair value. Unrealized gains and losses are reported, net of related deferred income taxes, as a component of accumulated other comprehensive income within common stockholders' investment. SPARE PARTS, SUPPLIES AND FUEL. Spare parts are stated principally at weighted-average cost; supplies and fuel are stated principally at standard cost, which approximates actual cost on a first-in, first-out basis. Neither method values inventory in excess of current replacement cost. GOODWILL. Goodwill is the excess of the purchase price over the fair value of net assets of businesses acquired. It is amortized on a straight-line basis over periods generally ranging from 15 to 40 years. Accumulated amortization was $165,624,000 and $157,106,000 at May 31, 2000 and 1999, respectively. IMPAIRMENT OF LONG-LIVED ASSETS. FedEx reviews long-lived assets for impairment when circumstances indicate the carrying value of an asset may not be recoverable. If an impairment exists, an adjustment is made to write the asset down to its fair value, and a loss is recorded as the difference between the carrying value and fair value. FOREIGN CURRENCY TRANSLATION. Translation gains and losses of FedEx's foreign operations that use local currencies as the functional currency are accumulated and reported, net of related deferred income taxes, as a component of accumulated other comprehensive income within common stockholders' investment. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the local functional currency are included in the results of operations. INCOME TAXES. Deferred income taxes are provided for the tax effect of temporary differences between the tax basis of assets and liabilities and their reported amounts in the financial statements. FedEx uses the liability method to account for income taxes, which requires deferred taxes to be recorded F-8 at the statutory rate expected to be in effect when the taxes are paid. FedEx has not provided for U.S. federal income taxes on its foreign subsidiaries' earnings deemed to be permanently reinvested. Quantification of the deferred tax liability, if any, associated with permanently reinvested earnings is not practicable. REVENUE RECOGNITION. Revenue is recorded based on the percentage of service completed at the balance sheet date. RECENT PRONOUNCEMENTS. Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities," was issued in June 1998, was subsequently amended by SFAS No. 137, and is now effective for fiscal years beginning after June 15, 2000 (2002 for FedEx). The Statement requires an entity to recognize all derivatives as either assets or liabilities in the balance sheet and to measure those instruments at fair value. The impact of the adoption of SFAS No. 133, if any, on earnings, comprehensive income and financial position will depend on the amount, timing and nature of any agreements entered into by FedEx. As of May 31, 2000, FedEx has not adopted the provisions of SFAS No. 133. SFAS No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities," was issued in June 2000, and amends SFAS No. 133. SFAS No. 138 must be adopted concurrently with FedEx's adoption of SFAS No. 133. FedEx does not believe the amendment will affect its implementation of SFAS No. 133. RECLASSIFICATIONS. Certain prior year amounts have been reclassified to conform to the 2000 presentation. USE OF ESTIMATES. The preparation of the consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. F-9 NOTE 3: BUSINESS COMBINATION AND ACQUISITIONS On January 27, 1998, FedEx Express became a wholly-owned subsidiary of FedEx Corporation in connection with the acquisition of Caliber System, Inc. ("Caliber"). The acquisition was accounted for as a pooling of interests. FedEx Corporation exchanged 0.8 shares of its common stock for each share of Caliber common stock. Each share of FedEx Express's common stock was automatically converted into one share of FedEx Corporation common stock. On September 10, 1999, FedEx Logistics acquired the assets of GeoLogistics Air Services, Inc., an airfreight forwarder servicing freight shipments between the United States and Puerto Rico, for approximately $116,000,000 in cash. This business operates under the name Caribbean Transportation Services, Inc. The excess of purchase price over the estimated fair value of the net assets acquired ($103,000,000) has been recorded as goodwill and is being amortized ratably over 15 years. On February 29, 2000, FedEx acquired the common stock of Tower Group International, a leader in the business of providing international customs clearance services, for approximately $140,000,000 in cash. This business is operating as a subsidiary of FedEx Trade Networks, Inc. ("FedEx Trade Networks"). The excess of purchase price over the estimated fair value of the net assets acquired ($30,000,000) has been recorded as goodwill and is being amortized ratably over 25 years. On March 31, 2000, FedEx acquired the common stock of World Tariff, Limited, a premier source of customs duty and tax information around the globe, for approximately $8,400,000 in cash and stock. This business is operating as a subsidiary of FedEx Trade Networks. The excess of purchase price over the estimated fair value of the net assets acquired ($8,300,000) has been recorded as goodwill and is being amortized ratably over 25 years. The operating results of these acquired companies are included in the operations of FedEx from the date of acquisition. Pro forma results including these acquisitions would not differ materially from reported results in any of the periods presented. NOTE 4: ACCRUED SALARIES AND EMPLOYEE BENEFITS AND ACCRUED EXPENSES The components of accrued salaries and employee benefits and accrued expenses were as follows:
May 31, ----------------------------- 2000 1999 ------------ ---------- (In thousands) Salaries $ 216,705 $ 216,647 Employee benefits 225,192 236,741 Compensated absences 313,850 287,104 ----------- --------- Total accrued salaries and employee benefits $ 755,747 $ 740,492 =========== ========= Insurance $ 363,899 $ 345,804 Taxes other than income taxes 237,342 225,378 Other 406,646 324,193 ----------- --------- Total accrued expenses $ 1,007,887 $ 895,375 =========== =========
F-10 NOTE 5: LONG-TERM DEBT AND OTHER FINANCING ARRANGEMENTS
May 31, --------------------------- 2000 1999 ------- ----------- (In thousands) Unsecured debt, interest rates of 7.60% to 10.57%, due through 2098 $ 975,862 $ 988,120 Unsecured sinking fund debentures, interest rate of 9.63%, originally due through 2020, called during 2000 -- 98,598 Commercial paper, effective interest rate of 6.73% 521,031 -- Capital lease obligations and tax exempt bonds, interest rates of 5.35% to 7.88%, due through 2017 253,569 253,425 Less bond reserves 9,024 9,024 ---------- ---------- 244,545 244,401 Other debt, interest rates of 9.68% to 11.12% 41,352 43,487 ---------- ---------- 1,782,790 $1,374,606 Less current portion 6,537 14,938 ---------- ---------- $1,776,253 $1,359,668 ========== ==========
FedEx has a $1,000,000,000 revolving credit agreement with domestic and foreign banks. The revolving credit agreement comprises two parts. The first part provides for a commitment of $800,000,000 through January 27, 2003. The second part provides for a 364-day commitment for $200,000,000 through October 13, 2000. Interest rates on borrowings under this agreement are generally determined by maturities selected and prevailing market conditions. The agreement contains certain covenants and restrictions, none of which are expected to significantly affect FedEx's operations or its ability to pay dividends. As of May 31, 2000, approximately $2,093,000,000 was available for the payment of dividends under the restrictive covenant of the agreement. Commercial paper borrowings are backed by unused commitments under this revolving credit agreement and reduce the amount available under the agreement. Borrowings under this credit agreement and commercial paper borrowings are classified as long-term based on FedEx's ability and intent to refinance such borrowings. At May 31, 2000, $478,000,000 of the $1,000,000,000 commitment amount was available. Unsecured sinking fund debentures in the amount of $100,000,000, originally due through 2020, were redeemed by FedEx Express on March 1, 2000. Other income (expense) includes a charge of approximately $6,000,000, which represents premiums paid to the holders of the bonds retired and the write-off of the related unamortized deferred finance charges and discount. The components of unsecured debt were as follows:
May 31, --------------------------- 2000 1999 ---------- --------- (In thousands) Senior debt, interest rates of 7.80% to 9.88%, due through 2013 $ 673,970 $ 673,779 Bonds, interest rate of 7.60%, due in 2098 239,382 239,376 Medium term notes, interest rates of 9.95% to 10.57%, due through 2007 62,510 74,965 ---------- --------- $ 975,862 $ 988,120 ========== =========
Of the senior debt outstanding at May 31, 2000 and 1999, $200,000,000 was issued by Caliber. On April 28, 2000, FedEx assumed all obligations relating to the notes, including restrictive covenants limiting the F-11 ability of FedEx and its subsidiaries to incur liens on assets and enter into leasing transactions. These notes mature on August 1, 2006 and bear interest at 7.80%. Tax exempt bonds were issued by the Memphis-Shelby County Airport Authority ("MSCAA") and the City of Indianapolis. Lease agreements with the MSCAA and a loan agreement with the City of Indianapolis covering the facilities and equipment financed with the bond proceeds obligate FedEx Express to pay rentals and loan payments, respectively, equal to the principal and interest due on the bonds. Scheduled annual principal maturities of long-term debt for the five years subsequent to May 31, 2000, are as follows: $6,500,000 in 2001; $202,600,000 in 2002; $6,100,000 in 2003; $25,100,000 in 2004; and $5,500,000 in 2005. FedEx's long-term debt, exclusive of capital leases, had carrying values of $1,063,000,000 and $1,178,000,000 at May 31, 2000 and 1999, respectively, compared with fair values of approximately $1,055,000,000 and $1,250,000,000 at those dates. The estimated fair values were determined based on quoted market prices or on the current rates offered for debt with similar terms and maturities. NOTE 6: LEASE COMMITMENTS FedEx utilizes certain aircraft, land, facilities and equipment under capital and operating leases that expire at various dates through 2027. In addition, supplemental aircraft are leased under agreements that generally provide for cancellation upon 30 days' notice. The components of property and equipment recorded under capital leases were as follows:
May 31, ---------------------------- 2000 1999 ---------- ---------- (In thousands) Package handling and ground support equipment and vehicles $ 226,580 $ 245,041 Facilities 134,442 134,442 Computer and electronic equipment and other 6,852 6,496 ---------- ---------- 367,874 385,979 Less accumulated amortization 260,526 268,696 ---------- ---------- $ 107,348 $ 117,283 ========== ==========
Rent expense under operating leases for the years ended May 31 was as follows:
2000 1999 1998 ------------ ------------- ----------- (In thousands) Minimum rentals $ 1,298,821 $ 1,246,259 $ 1,135,567 Contingent rentals 98,755 59,839 60,925 ----------- ----------- ----------- $ 1,397,576 $ 1,306,098 $ 1,196,492 =========== =========== ===========
Contingent rentals are based on hours flown under supplemental aircraft leases. A summary of future minimum lease payments under capital leases and noncancellable operating leases (principally aircraft and facilities) with an initial or remaining term in excess of one year at May 31, 2000 is as follows: F-12
Capital Operating Leases Leases ------- --------- (In thousands) 2001 $ 15,195 $ 1,258,109 2002 15,174 1,087,035 2003 15,024 990,125 2004 14,894 926,290 2005 14,828 877,701 Thereafter 287,673 9,263,996 -------- ------------ $362,788 $ 14,403,256 ======== ============
At May 31, 2000, the present value of future minimum lease payments for capital lease obligations, including certain tax exempt bonds, was $200,259,000. FedEx Express makes payments under certain leveraged operating leases that are sufficient to pay principal and interest on certain pass-through certificates. The pass-through certificates are not direct obligations of, or guaranteed by, FedEx or FedEx Express. NOTE 7: PREFERRED STOCK The Certificate of Incorporation authorizes the Board of Directors, at its discretion, to issue up to 4,000,000 shares of Series Preferred Stock. The stock is issuable in series, which may vary as to certain rights and preferences, and has no par value. As of May 31, 2000, none of these shares had been issued. NOTE 8: COMMON STOCKHOLDERS' INVESTMENT STOCK COMPENSATION PLANS At May 31, 2000, FedEx had options and awards outstanding under stock-based compensation plans described below. As of May 31, 2000, there were 25,210,811 shares of common stock reserved for issuance under these plans. The Board of Directors has authorized repurchase of FedEx's common stock necessary for grants under its restricted stock plans. As of May 31, 2000, 13,418,185 of the 27,688,302 total shares repurchased by FedEx at an average cost of $27.42 (including the 15,000,000 shares repurchased under the current year stock repurchase program, see Note 9) had been reissued under the above-mentioned plans. FedEx applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," and related interpretations to measure compensation expense for its plans. Compensation cost for the restricted stock plans was $12,178,000, $8,928,000 and $5,817,000 for 2000, 1999 and 1998, respectively. If compensation cost for FedEx's stock-based compensation plans had been determined under SFAS No. 123, "Accounting for Stock-Based Compensation," FedEx's net income and earnings per share would have been the pro forma amounts indicated below:
2000 1999 1998 -------- -------- -------- (In thousands, except per share data) Net income: As reported $688,336 $631,333 $503,030 Pro forma 659,601 609,960 489,556 Earnings per share, assuming dilution: As reported $ 2.32 $ 2.10 $ 1.69 Pro forma 2.23 2.03 1.64
The pro forma disclosures, applying SFAS No. 123, are not likely to be representative of pro forma disclosures for future years. The pro forma effect is not expected to be fully reflected until 2002, since SFAS No. 123 is applicable to options granted by FedEx after May 31, 1995, and because options vest over several years and additional grants could be made. FIXED STOCK OPTION PLANS Under the provisions of FedEx's stock incentive plans, options may be granted to certain key employees (and, under the 1997 plan, to directors who are not employees of FedEx) to purchase shares of common stock of FedEx at a price not less than its fair market value at the date of grant. Options granted have a F-13 maximum term of 10 years. Vesting requirements are determined at the discretion of the Compensation Committee of the Board of Directors. Presently, option vesting periods range from one to eight years. At May 31, 2000, there were 9,714,810 shares available for future grants under these plans. Beginning with the grants made on or after June 1, 1995, the fair value of each option grant was estimated on the grant date using the Black-Scholes option-pricing model with the following assumptions for each option grant:
2000 1999 1998 ------------------ ------------------ ------------------ Dividend yield 0% 0% 0% Expected volatility 30% 25% 25% Risk-free interest rate 5.6% - 6.8% 4.2% - 5.6% 5.4% - 6.5% Expected lives 2.5 - 9.5 years 2.5 - 5.5 years 2.5 - 6.5 years
The following table summarizes information about FedEx's fixed stock option plans for the years ended May 31:
2000 1999 1998 -------------------------- ------------------------ ----------------------- Weighted- Weighted- Weighted- Average Average Average Exercise Exercise Exercise Shares Price Shares Price Shares Price ------------ --------- ------ --------- ---------- --------- Outstanding at beginning of year 13,399,532 $23.11 13,388,452 $19.74 13,523,460 $17.09 Granted 3,218,450 50.79 3,377,500 31.80 2,485,544 28.20 Exercised (1,232,699) 18.81 (3,135,640) 17.86 (2,336,984) 13.45 Forfeited (374,632) 33.81 (230,780) 26.59 (283,568) 19.51 ------------ ---------- ---------- Outstanding at end of year 15,010,651 29.12 13,399,532 23.11 13,388,452 19.74 ============ ========== ========== Exercisable at end of year 5,781,855 21.44 4,404,146 18.57 5,349,626 16.92
The weighted-average fair value of options granted during the year was $16.63, $9.12 and $8.25 for the years ended May 31, 2000, 1999 and 1998, respectively. F-14 The following table summarizes information about fixed stock options outstanding at May 31, 2000:
Options Outstanding Options Exercisable ---------------------------------------------------- --------------------------- Weighted- Weighted- Weighted- Average Average Average Range of Number Remaining Exercise Number Exercise Exercise Prices Outstanding Contractual Life Price Exercisable Price - ---------------- ----------- ------------------ -------- ----------- --------- $ 8.63 - $10.91 281,246 1.2 years $ 9.73 281,246 $ 9.73 12.00 - 16.50 2,095,522 3.9 years 15.48 1,649,622 15.51 17.50 - 25.19 4,523,806 5.7 years 20.16 2,139,188 20.65 26.44 - 37.25 5,068,127 7.7 years 30.61 1,655,299 29.73 38.69 - 55.94 3,041,950 9.2 years 51.15 56,500 40.07 ---------- ---------- 8.63 - 55.94 15,010,651 6.7 years 29.12 5,781,855 21.44 ========== =========
RESTRICTED STOCK PLANS Under the terms of FedEx's Restricted Stock Plans, shares of FedEx's common stock are awarded to key employees. All restrictions on the shares expire over periods varying from two to five years from their date of award. Shares are valued at the market price of FedEx's common stock at the date of award. Compensation related to these plans is recorded as a reduction of common stockholders' investment and is being amortized to expense as restrictions on such shares expire. The following table summarizes information about restricted stock awards for the years ended May 31:
2000 1999 1998 ------------------------- --------------------------- ------------------------- Weighted- Weighted- Weighted- Average Average Average Shares Fair Value Shares Fair Value Shares Fair Value ---------- ------------ ---------- -------------- -------- ------------- Awarded 283,750 $51.90 252,000 $32.71 240,000 $32.99 Forfeited 20,000 37.71 16,900 44.38 28,000 34.94
At May 31, 2000, there were 485,350 shares available for future awards under these plans. F-15 NOTE 9: COMPUTATION OF EARNINGS PER SHARE The calculation of basic earnings per share and earnings per share, assuming dilution, for the years ended May 31 was as follows:
2000 1999 1998 ---------- ---------- ----------- (In thousands, except per share amounts) Income from continuing operations $ 688,336 $ 631,333 $ 498,155 Income from discontinued operations - - 4,875 ---------- ---------- ---------- Net income applicable to common stockholders $ 688,336 $ 631,333 $ 503,030 ========== ========== ========== Average shares of common stock outstanding 291,727 295,983 293,401 Basic earnings per share: Continuing operations $ 2.36 $ 2.13 $ 1.70 Discontinued operations - - .02 ---------- ---------- ---------- $ 2.36 $ 2.13 $ 1.72 ========== ========== ========== Average shares of common stock outstanding 291,727 295,983 293,401 Common equivalent shares: Assumed exercise of outstanding dilutive options 12,735 13,090 13,849 Less shares repurchased from proceeds of assumed exercise of options (8,136) (8,430) (8,842) ---------- ---------- ---------- Average common and common equivalent shares 296,326 300,643 298,408 ========== ========== ========== Earnings per share, assuming dilution: Continuing operations $ 2.32 $ 2.10 $ 1.67 Discontinued operations - - .02 ---------- ---------- ---------- $ 2.32 $ 2.10 $ 1.69 ========== ========== ==========
In September 1999, FedEx's Board of Directors approved a plan that authorized the purchase of up to 15,000,000, or approximately 5%, of FedEx's outstanding shares of common stock. FedEx completed its purchases under the plan in 2000 at an average cost of $39.75 per share. As of May 31, 2000, FedEx had 14,128,998 shares in treasury for general corporate purposes. NOTE 10: INCOME TAXES The components of the provision for income taxes for the years ended May 31 were as follows:
2000 1999 1998 ---------- ---------- ---------- (In thousands) Current provision: Domestic Federal $ 365,137 $ 385,164 $ 267,471 State and local 48,837 49,918 32,839 Foreign 39,844 22,730 36,543 ---------- ---------- ---------- 453,818 457,812 336,853 ---------- ---------- ---------- Deferred provision (credit): Domestic Federal (3,444) (21,773) 56,408 State and local 469 (4,437) 7,860 Foreign (1,439) (1,871) 242 ---------- ---------- ---------- (4,414) (28,081) 64,510 ---------- ---------- ---------- $ 449,404 $ 429,731 $ 401,363 ========== ========== ==========
F-16 Income taxes have been provided for foreign operations based upon the various tax laws and rates of the countries in which FedEx's operations are conducted. There is no direct relationship between FedEx's overall foreign income tax provision and foreign pretax book income due to the different methods of taxation used by countries throughout the world. In 1998, FedEx entities in foreign locations reported a net foreign pretax loss of $98,000,000, comprising foreign pretax income of $208,000,000 and foreign pretax losses of $306,000,000. A reconciliation of the statutory federal income tax rate to FedEx's effective income tax rate for the years ended May 31 is as follows:
2000 1999 1998 --------- --------- --------- Statutory U.S. income tax rate 35.0% 35.0% 35.0% Increase resulting from: State and local income taxes, net of federal benefit 2.8 2.8 2.7 Nonrecurring item (1998 Caliber acquisition) -- -- 3.1 Other, net 1.7 2.7 3.8 -------- -------- -------- Effective tax rate 39.5% 40.5% 44.6% ======= ======= ======= Effective tax rate (excluding nonrecurring item) 39.5% 40.5% 41.5% ======= ======= =======
The significant components of deferred tax assets and liabilities as of May 31 were as follows:
2000 1999 ------------------------------ --------------------------------- (In thousands) Deferred Deferred Deferred Deferred Tax Assets Tax Liabilities Tax Assets Tax Liabilities ---------- --------------- ---------- --------------- Property, equipment and leases $206,239 $686,547 $122,515 $608,719 Employee benefits 207,297 127,784 198,750 79,374 Self-insurance accruals 245,923 -- 228,020 -- Other 224,615 96,572 233,331 97,264 --------- ---------- --------- ---------- $884,074 $910,903 $782,616 $785,357 ======== ======== ======== ========
NOTE 11: EMPLOYEE BENEFIT PLANS PENSION PLANS. FedEx sponsors defined benefit pension plans covering a majority of employees. The largest plans cover certain U.S. employees age 21 and over, with at least one year of service, and provide benefits based on average earnings and years of service. Plan funding is actuarially determined, and is F-17 also subject to certain tax law limitations. International defined benefit pension plans provide benefits primarily based on final earnings and years of service and are funded in accordance with local laws and income tax regulations. Plan assets consist primarily of marketable equity securities and fixed income instruments. During 1999, benefits provided under certain of FedEx's pension plans were enhanced, principally in connection with the ratification on February 4, 1999, of a collective bargaining agreement between FedEx Express and the Fedex Pilots Association ("FPA"). These benefit enhancements are reflected in the funded status of the plans at May 31, 2000 and 1999, but did not materially affect pension cost in either year. POSTRETIREMENT HEALTH CARE PLANS. FedEx Express offers medical and dental coverage to eligible U.S. retirees and their eligible dependents. Vision coverage is provided for retirees, but not their dependents. Substantially all FedEx Express U.S. employees become eligible for these benefits at age 55 and older, if they have permanent, continuous service with FedEx Express of at least 10 years after attainment of age 45 if hired prior to January 1, 1988, or at least 20 years after attainment of age 35 if hired on or after January 1, 1988. Life insurance benefits are provided only to retirees of the former Tiger International, Inc. who retired prior to acquisition. FedEx Ground offers similar benefits to its eligible retirees. F-18 The following table provides a reconciliation of the changes in the pension and postretirement health care plans' benefit obligations and fair value of assets over the two-year period ended May 31, 2000 and a statement of the funded status as of May 31, 2000 and 1999:
Postretirement Pension Plans Health Care Plans --------------------- ------------------------ 2000 1999 2000 1999 ---- ---- ---- ---- (In thousands) CHANGE IN BENEFIT OBLIGATION - ---------------------------- Benefit obligation at beginning of year $4,385,519 $4,121,795 $ 246,186 $ 217,027 Service cost 337,780 331,005 26,450 23,676 Interest cost 336,143 288,221 19,579 16,962 Amendments, benefit enhancements and acquisitions 12,853 125,145 1,420 1,681 Actuarial gain (510,132) (427,179) (28,607) (7,402) Plan participant contributions -- -- 1,112 679 Foreign currency exchange rate changes (618) 3,112 -- -- Benefits paid (67,800) (56,580) (9,133) (6,437) ---------- ---------- ---------- ---------- Benefit obligation at end of year $4,493,745 $4,385,519 $ 257,007 $ 246,186 ========== ========== ========== ========== CHANGE IN PLAN ASSETS - --------------------- Fair value of plan assets at beginning of year $4,952,431 $4,434,870 $ -- $ -- Actual return on plan assets 630,706 451,738 -- -- Foreign currency exchange rate changes (5,192) (1,283) -- -- Company contributions 217,271 123,686 8,021 5,758 Plan participant contributions -- -- 1,112 679 Benefits paid (67,800) (56,580) (9,133) (6,437) ---------- ---------- ---------- ---------- Fair value of plan assets at end of year $5,727,416 $4,952,431 $ -- $ -- ========== ========== ========== ========== FUNDED STATUS OF THE PLANS $1,233,671 $ 566,912 $ (257,007) $ (246,186) - -------------------------- Unrecognized actuarial gain (1,173,903) (595,238) (49,286) (20,809) Unrecognized prior service cost 121,697 132,116 254 291 Unrecognized transition amount (10,529) (11,852) -- -- ---------- ---------- ---------- ---------- Prepaid (accrued) benefit cost $ 170,936 $ 91,938 $(306,039) $(266,704) =========== ========== ========= ========= Amounts Recognized in the Balance Sheet at May 31: - ------------------------ Prepaid benefit cost $ 302,935 $ 188,423 $ -- $ -- Accrued benefit liability (131,999) (96,485) (306,039) (266,704) Minimum pension liability (12,662) (86,000) -- -- Intangible asset 12,662 86,000 -- -- ---------- ---------- ---------- --------- Prepaid (accrued) benefit cost $ 170,936 $ 91,938 $ (306,039) $(266,704) =========== =========== ========== =========
F-19 Net periodic benefit cost for the years ended May 31 was as follows:
Postretirement Pension Plans Health Care Plans ------------------------------------ ----------------------------------- 2000 1999 1998 2000 1999 1998 ---------- ---------- ---------- --------- -------- -------- (In thousands) Service cost $337,780 $331,005 $250,753 $26,450 $23,676 $18,385 Interest cost 336,143 288,221 245,697 19,579 16,962 14,767 Expected return on plan assets (546,169) (483,709) (377,421) -- -- -- Net amortization and deferral 5,977 (1,948) (2,304) (93) (211) (709) -------- -------- -------- ------- ------- ------- $133,731 $133,569 $116,725 $45,936 $40,427 $32,443 ======== ======== ======== ======= ======= =======
WEIGHTED-AVERAGE ACTUARIAL ASSUMPTIONS
2000 1999 1998 2000 1999 1998 ------ ------ ------ ------ ------ ------ Discount rate 8.5% 7.5% 7.0% 8.3% 7.3% 7.2% Rate of increase in future compensation levels 5.0 4.6 4.6 - - - Expected long-term rate of return on assets 10.9 10.9 10.3 - - -
The projected benefit obligation, accumulated benefit obligation, and fair value of plan assets for the pension plans with accumulated benefit obligations in excess of plan assets were $177,900,000, $126,300,000 and $2,700,000, respectively, as of May 31, 2000, and $201,700,000, $172,800,000 and $2,600,000, respectively, as of May 31, 1999. The minimum pension liability and corresponding intangible asset recognized in the balance sheet at May 31, 1999, relate principally to the collective bargaining agreement between FedEx Express and the FPA. During 2000, FedEx obtained the necessary approvals to fund a substantial portion of these benefits in the qualified pension plan, and the minimum liability and related intangible asset have been reduced accordingly. FedEx Express's future medical benefit costs were estimated to increase at an annual rate of 8.5% during 2001, decreasing to an annual growth rate of 6.3% in 2006 and thereafter. Future dental benefit costs were estimated to increase at an annual rate of 7.5% during 2001, decreasing to an annual growth rate of 6.3% in 2006 and thereafter. FedEx Express's cost is capped at 150% of the 1993 employer cost and, therefore, will not be subject to medical and dental trends after the capped cost is attained, projected to be in 2001. A 1% change in these annual trend rates would not have a significant impact on the accumulated postretirement benefit obligation at May 31, 2000, or 2000 benefit expense. Claims are paid as incurred. PROFIT SHARING PLANS. The profit sharing plans cover a majority of U.S. employees age 21 and over, with at least one year of service with FedEx as of the contribution date. The plans provide for discretionary employer contributions, which are determined annually by the Board of Directors. Profit sharing expense was $125,300,000 in 2000, $137,500,000 in 1999 and $124,700,000 in 1998. Included in these expense amounts are cash distributions made directly to employees of $39,100,000, $46,800,000 and $43,100,000 in 2000, 1999 and 1998, respectively. NOTE 12: BUSINESS SEGMENT INFORMATION FedEx Corporation is a global transportation and logistics provider primarily composed of FedEx F-20 Express, the world's largest express transportation company, and FedEx Ground, a ground small-package carrier. Other operating companies included in the FedEx Corporation portfolio are FedEx Logistics, a contract logistics provider; FedEx Custom Critical, a critical-shipment carrier; FedEx Trade Networks, a global trade services company; and Viking, a regional less-than-truckload freight carrier operating principally in the western United States. Other also includes certain unallocated corporate items. FedEx has determined its reportable operating segments to be FedEx Express and FedEx Ground, both of which operate in single lines of business. FedEx evaluates financial performance based on operating income. The following table provides a reconciliation of reportable segment revenues, depreciation and amortization, operating income and segment assets to FedEx's consolidated financial statement totals:
FedEx FedEx Consolidated Express Ground Other Total ------------- ----------- ----------- ------------ (In thousands) REVENUES - -------- 2000 $15,068,338 $2,032,570 $1,156,037 $18,256,945 1999 13,979,277 1,878,107 916,086 16,773,470 1998 13,254,841 1,710,882 907,087 15,872,810 DEPRECIATION AND AMORTIZATION - ----------------------------- 2000 $ 997,735 $ 99,140 $ 57,988 $ 1,154,863 1999 912,002 82,640 40,476 1,035,118 1998 844,606 79,835 39,291 963,732 OPERATING INCOME - ---------------- 2000 $ 899,610 $ 225,812 $ 95,652 $ 1,221,074 1999 871,476(1) 231,010 60,600 1,163,086 1998 836,733 171,203 2,724(2) 1,010,660 SEGMENT ASSETS - -------------- 2000 $ 9,740,539 $1,057,519 $ 729,053 $ 11,527,111 1999 9,115,975 896,723 635,513 10,648,211
(1) Includes $81,000,000 of strike contingency costs. See Note 16. (2) Includes $74,000,000 of merger expenses. The following table provides a reconciliation of reportable segment capital expenditures to FedEx's consolidated totals for the years ended May 31:
FedEx FedEx Consolidated Express Ground Other Total ----------- ------------ ------- ------------- (In thousands) 2000 $1,330,904 $244,073 $52,441 $1,627,418 1999 1,550,161 179,969 39,816 1,769,946 1998 1,761,963 78,041 40,169 1,880,173
F-21 The following table presents FedEx's revenue by service type and geographic information for the years ended or as of May 31: REVENUE BY SERVICE TYPE - -----------------------
2000 1999 1998 --------------- ---------------- ---------------- (In thousands) FedEx Express: Package: U.S. overnight $ 7,537,844 $ 7,185,462 $ 6,810,211 U.S. deferred 2,428,002 2,271,151 2,179,188 International priority 3,551,593 3,018,828 2,731,140 Freight: U.S. 566,259 439,855 337,098 International 492,280 530,759 597,861 Other 492,360 533,222 599,343 -------------- -------------- -------------- Total FedEx Express 15,068,338 13,979,277 13,254,841 FedEx Ground 2,032,570 1,878,107 1,710,882 Other 1,156,037 916,086 907,087 ------------- -------------- -------------- $ 18,256,945 $ 16,773,470 $ 15,872,810 ============= ============== ============== GEOGRAPHIC INFORMATION (1) - -------------------------- Revenues: U.S. $ 13,804,849 $ 12,910,107 $ 12,231,537 International 4,452,096 3,863,363 3,641,273 ------------- ------------- ------------- $18,256,945 $ 16,773,470 $ 15,872,810 ============= ============= ============= Long-lived assets: U.S. $ 7,224,219 $ 6,506,424 International 1,018,148 1,000,759 ------------- ------------- $ 8,242,367 $ 7,507,183 ============ ============
(1) Generally, international revenue includes shipments that either originate in or are destined to locations outside the United States. Long-lived assets include property and equipment, goodwill and other long-term assets. Flight equipment is allocated between geographic areas based on usage. NOTE 13: SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest expense and income taxes for the years ended May 31 was as follows:
2000 1999 1998 ---------- ---------- ---------- (In thousands) Interest (net of capitalized interest) $ 124,964 $114,326 $130,250 Income taxes 354,614 437,340 355,563
Noncash investing and financing activities for the years ended May 31 were as follows:
2000 1999 1998 -------- ---------- ---------- (In thousands) Fair value of assets surrendered under exchange agreements (with two airlines) $19,450 $48,248 $90,428 Fair value of assets acquired under exchange agreements 28,018 34,580 78,148 -------- -------- -------- Fair value of assets surrendered (under) over
F-22 fair value of assets acquired $ (8,568) $ 13,668 $ 12,280 ========= ======== ======== Fair value of treasury stock issued in business acquisition $ 6,817 $ -- $ -- ======== ========= ========
NOTE 14: COMMITMENTS AND CONTINGENCIES FedEx's annual purchase commitments under various contracts as of May 31, 2000, were as follows (in thousands):
Aircraft- Aircraft Related (1) Other (2) Total -------- ----------- ---------- -------------- 2001 $222,500 $427,600 $376,300 $1,026,400 2002 252,000 381,300 18,300 651,600 2003 441,700 456,900 7,600 906,200 2004 235,000 446,500 7,600 689,100 2005 165,400 452,200 7,600 625,200
(1) Primarily aircraft modifications, rotables, spare parts and spare engines. (2) Primarily facilities, vehicles, computer and other equipment. At May 31, 2000, FedEx Express was committed to purchase 28 MD11s, 13 DC10s (in addition to those discussed in the following paragraph) and 75 Ayres ALM 200s to be delivered through 2007. Deposits and progress payments of $7,100,000 have been made toward these purchases. FedEx Express has agreements with two airlines to acquire 53 DC10 aircraft (49 of which had been received as of May 31, 2000), spare parts, aircraft engines and other equipment, and maintenance services in exchange for a combination of aircraft engine noise reduction kits and cash. Delivery of these aircraft began in 1997 and will continue through 2001. Additionally, these airlines may exercise put options through December 31, 2003, requiring FedEx Express to purchase up to 11 additional DC10s along with additional aircraft engines and equipment. In April 2000, put options were exercised by an airline requiring FedEx Express to purchase six DC10s (in addition to those discussed in the preceding paragraph) for a total purchase price of $26,400,000. Delivery of the aircraft is expected to be completed by April 2001. In January 1999, put options were exercised by an airline requiring FedEx Express to purchase six DC10s (in addition to those discussed above) for a total purchase price of $21,150,000. Delivery of five of the aircraft was completed by August 1999, and the commitment to purchase the sixth aircraft has been cancelled. FedEx has entered into jet fuel hedging contracts on behalf of its subsidiary FedEx Express, which are designed to limit its exposure to fluctuations in jet fuel prices. Under these jet fuel hedging contracts, FedEx makes (or receives) payments based on the difference between a fixed price and the market price of jet fuel, as determined by an index of spot market prices representing various geographic regions. The difference is recorded as an increase or decrease in fuel expense. Under jet fuel hedging contracts, FedEx received $18,512,000 in 2000 and made payments of $28,764,000 in 1998. There was no jet fuel hedging activity in 1999. As of May 31, 2000, contracts in place to fix the price of jet fuel cover a total notional volume of 352,822,000 gallons or approximately one-third of the estimated usage in 2001. Based on current market prices, the fair value of these jet fuel hedging contracts, which have no carrying value, was an asset of approximately $51,060,000 at May 31, 2000. There were no such jet fuel hedging contracts in place at May 31, 1999. F-23 NOTE 15: LEGAL PROCEEDINGS FedEx and its subsidiaries are subject to legal proceedings and claims that arise in the ordinary course of their business. In the opinion of management, the aggregate liability, if any, with respect to these actions will not materially adversely affect FedEx's financial position or results of operations. NOTE 16: OTHER EVENTS In 2000, FedEx Express recorded nonoperating gains of approximately $11,000,000 from the sale of securities and approximately $12,000,000 from the insurance settlement for a leased MD11 destroyed in October 1999. To avoid service interruptions related to a threatened strike by the FPA in November 1998, FedEx and FedEx Express implemented strike contingency plans including entering into agreements for additional third-party air and ground transportation and establishing special financing arrangements. Subsequently, a five-year collective bargaining agreement was ratified by the FPA membership in February 1999 and became effective May 31, 1999. Costs associated with these contingency plans were approximately $91,000,000. Of these costs, approximately $81,000,000, primarily the cost of contracts for supplemental airlift and ground transportation, was included in operating expenses. The remaining $10,000,000 was included in nonoperating expenses and represents the costs associated with obtaining additional short-term financing capabilities. In 1998, FedEx Express realized a net gain of $17,000,000 from the insurance settlement and the release from certain related liabilities on a leased MD11 aircraft destroyed in an accident in July 1997. The gain was recorded in operating and nonoperating income in substantially equal amounts. FedEx incurred $88,000,000 of merger expenses related to the acquisition of Caliber and the formation of FedEx in 1998, primarily investment banking fees and payments to members of Caliber's management in accordance with pre-existing management retention agreements. There are no remaining accrued costs at May 31, 2000 related to the merger. On March 27, 1997, Caliber announced a major restructuring of its Viking subsidiary. In connection with the restructuring, Viking recorded a pretax restructuring charge of $85,000,000 ($56,400,000 net of tax) in the period from January 1, 1997 to May 24, 1997. This restructuring charge is included in the adjustment to conform Caliber's fiscal year in the accompanying Consolidated Statements of Changes in Stockholders' Investment and Comprehensive Income and, therefore, is excluded from the Consolidated Statements of Income. Components of the $85,000,000 restructuring charge included asset impairment charges, future lease costs and other contractual obligations, employee severance and other benefits and other exit costs. Gains on assets sold in the restructuring of $16,000,000 were recognized in the third quarter of 1998 and estimates, primarily for future lease costs, were revised in 2000 resulting in a favorable adjustment of approximately $10,000,000. There are no remaining accrued restructuring costs at May 31, 2000. On November 6, 1995, Caliber announced plans to exit the airfreight business served by its wholly-owned subsidiary, Roadway Global Air, Inc. Income from discontinuance of $4,875,000, net of tax, in 1998 included the favorable settlement of leases and other contractual obligations. F-24 NOTE 17: SUMMARY OF QUARTERLY OPERATING RESULTS (Unaudited)
First Second Third Fourth Quarter Quarter Quarter Quarter ----------- ---------- -------- --------- (In thousands, except earnings per share) 2000 - ---- Revenues $4,319,977 $4,570,104 $4,518,057 $4,848,807 Operating income 283,807 304,535 206,472 426,260 Income before income taxes 262,880 282,928 186,998 404,934 Net income 159,034 171,183 113,128 244,991 Earnings per common share .53 .58 .39 .86 Earnings per common share - assuming dilution .52 .57 .39 .85 1999 (1) - ---- Revenues $4,082,302 $4,209,237 $4,098,418 $4,383,513 Operating income 283,843 336,987 152,038 390,218 Income before income taxes 255,348 312,404 121,269 372,043 Net income 149,379 182,756 77,833 221,365 Earnings per common share .51 .62 .26 .74 Earnings per common share - assuming dilution .50 .61 .26 .73
(1) Third quarter 1999 results included approximately $91,000,000 of expenses ($54,100,000 net of tax or $.18 per share, assuming dilution) for contingency plans made by FedEx related to the threatened strike by the FPA. F-25 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE To FedEx Corporation: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements of FedEx Corporation included in this Form 10-K, and have issued our report thereon dated June 27, 2000. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. The financial statement schedule on page S-2 is the responsibility of FedEx Corporation's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. The financial statement schedule has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. /s / Arthur Andersen LLP --------------------------- ARTHUR ANDERSEN LLP Memphis, Tennessee June 27, 2000 S-1 SCHEDULE II FEDEX CORPORATION AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED MAY 31, 2000, 1999 AND 1998 (In thousands)
ADDITIONS ---------------------- Balance Charged Charged Balance At To To At Beginning Costs and Other End Of Description of Year Expenses Accounts Deductions Year ----------- --------- ---------- ------------ ------------ --------- Accounts Receivable Allowances - --------------------- 2000............................. $68,305 $84,165 $19,553 (A) $ 86,051 (B) $85,972 ======= ======= ======= ======== ======= 1999............................. $61,409 $71,704 $ 2,769 (A) $ 67,577 (B) $68,305 ======= ======= ======= ======== ======= 1998............................ $86,154 $95,634 $ -- $120,379 (B) $61,409 ======= ======= ======= ======== ======= Viking Restructuring Reserve - --------------------- 2000 $16,039 $(9,528) (C) $(5,536) (A) $ 975 (D) $ -- ======= ======= ======= ======== ======= 1999 $18,857 $ -- $ -- $ 2,818 (D) $16,039 ======= ======= ======= ======== ======= 1998......................... $64,342 $ -- $ -- $ 45,485 (D) $18,857 ======= ======= ======= ======== ======= Reserve Related to Merger of FedEx Express and Caliber - -------------------- 2000 $15,646 $(4,568) (C) $(3,554) (A) $ 7,524 (D) $ -- ======= ======= ======= ======== ======= 1999 $27,274 $ -- $ -- $ 11,628 (D) $15,646 ======= ======= ======= ======== ======= 1998......................... $ -- $88,000 $ -- $ 60,726 (D) $27,274 ======= ======= ======= ======== =======
(A) Reclassifications and reserves assumed in connection with acquisitions. (B) Uncollectible accounts written off, net of recoveries. (C) Change in estimate, credited to operations. (D) Amounts paid and charged to reserve. S-2 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT - -------- ------------------------ *3.1 Amended and Restated Certificate of Incorporation of FedEx, as amended. 3.2 Amended and Restated By-laws of FedEx (Filed as Exhibit 3.2 to Amendment No. 1 to FedEx's Registration Statement on Form S-4, Commission File No. 333-39483, and incorporated herein by reference.) 10.1 Consolidated and Restated Lease Agreement dated as of August 1, 1979 between the Memphis-Shelby County Airport Authority (the "Authority") and FedEx Express. (Refiled as Exhibit 10.12 to FedEx Express's FY90 Annual Report on Form 10-K, and incorporated herein by reference.) 10.2 First Supplemental Lease Agreement dated as of April 1, 1981 between the Authority and FedEx Express. (Filed as Exhibit 10.13 to FedEx Express's FY92 Annual Report on Form 10-K, and incorporated herein by reference.) 10.3 Second Supplemental Lease Agreement dated as of May 1, 1982 between the Authority and FedEx Express. (Refiled as Exhibit 10.14 to FedEx Express's FY93 Annual Report on Form 10-K, and incorporated herein by reference.) 10.4 Third Supplemental Lease Agreement dated November 1, 1982 between the Authority and FedEx Express. (Filed as Exhibit 28.22 to FedEx Express's FY93 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.5 Fourth Supplemental Lease Agreement dated July 1, 1983 between the Authority and FedEx Express. (Filed as Exhibit 28.23 to FedEx Express's FY93 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.6 Fifth Supplemental Lease Agreement dated February 1, 1984 between the Authority and FedEx Express. (Filed as Exhibit 28.24 to FedEx Express's FY93 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.7 Sixth Supplemental Lease Agreement dated April 1, 1984 between the Authority and FedEx Express. (Filed as Exhibit 28.25 to FedEx Express's FY93 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.8 Seventh Supplemental Lease Agreement dated June 1, 1984 between the Authority and FedEx Express. (Filed as Exhibit 28.26 to FedEx Express's FY93 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.9 Eighth Supplemental Lease Agreement dated July 1, 1988 between the Authority and FedEx Express. (Filed as Exhibit 28.27 to FedEx Express's FY93 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.10 Ninth Supplemental Lease Agreement dated July 12, 1989 between the Authority and FedEx Express. (Filed as Exhibit 28.28 to FedEx Express's FY93 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.11 Tenth Supplemental Lease Agreement dated October 1, 1991 between the Authority and FedEx Express. (Filed as Exhibit 28.29 to FedEx Express's FY93 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.12 Eleventh Supplemental Lease Agreement dated as of July 1, 1994 between the Authority and FedEx Express. (Filed as Exhibit 10.21 to FedEx Express's FY96 Annual Report on Form 10-K, and incorporated herein by reference.) 10.13 Twelfth Supplemental Lease Agreement dated July 1, 1993 between the Authority and FedEx Express. (Filed as Exhibit 10.23 to FedEx Express's FY93 Annual Report on Form 10-K, and incorporated herein by reference.) 10.14 Thirteenth Supplemental Lease Agreement dated as of June 1, 1995 between the Authority and FedEx Express. (Filed as Exhibit 10.23 to FedEx Express's FY96 Annual Report on Form 10-K, and incorporated herein by reference.) 10.15 Fourteenth Supplemental Lease Agreement dated as of January 1, 1996 between the Authority and FedEx Express. (Filed as Exhibit 10.24 to FedEx Express's FY96 Annual Report on Form 10-K, and incorporated herein by reference.) 10.16 Fifteenth Supplemental Lease Agreement dated as of January 1, 1997 between the Authority and FedEx Express. (Filed as Exhibit 10.1 to FedEx Express's FY97 Third Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.17 Sixteenth Supplemental Lease Agreement dated as of April 1, 1997 between the Authority and FedEx Express. (Filed as Exhibit 10.28 to FedEx Express's FY97 Annual Report on Form 10-K, and incorporated herein by reference.) 10.18 Seventeenth Supplemental Lease Agreement dated as of May 1, 1997 between the Authority and FedEx Express. (Filed as Exhibit 10.29 to FedEx Express's FY97 Annual Report on Form 10-K, and incorporated herein by reference.) 10.19 Eighteenth Supplemental Lease Agreement dated as of July 1, 1997 between the Authority and FedEx Express. (Filed as Exhibit 10.2 to FedEx Express's FY98 First Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.20 Nineteenth Supplemental Lease Agreement dated as of September 1, 1998 between the Authority and FedEx Express. (Filed as Exhibit 10.1 to FedEx Express's FY99 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) *10.21 Twentieth Supplemental Lease Agreement dated as of April 1, 2000 between the Authority and FedEx Express. *10.22 Twenty-First Supplemental Lease Agreement dated as of May 15, 2000 between the Authority and FedEx Express. 10.23 Second Special Facility Supplemental Lease Agreement dated as of November 1, 1982 between the Authority and FedEx Express. (Filed as Exhibit 10.26 to FedEx Express's FY93 Annual Report on Form 10-K, and incorporated herein by reference.) 10.24 Third Special Facility Supplemental Lease Agreement dated as of December 1, 1984 between the Authority and FedEx Express. (Refiled as Exhibit 10.25 to FedEx Express's FY95 Annual Report on Form 10-K, and incorporated herein by reference.) 10.25 Fourth Special Facility Supplemental Lease Agreement dated as of July 1, 1992 between the Authority and FedEx Express. (Filed as Exhibit 10.20 to FedEx Express's FY92 Annual Report on Form 10-K, and incorporated herein by reference.) 10.26 Fifth Special Facility Supplemental Lease Agreement dated as of July 1, 1997 between the Authority and FedEx Express. (Filed as Exhibit 10.35 to FedEx Express's FY97 Annual Report on Form 10-K, and incorporated herein by reference.) 10.27 Special Facility Lease Agreement dated as of July 1, 1993 between the Authority and FedEx Express. (Filed as Exhibit 10.29 to FedEx Express's FY93 Annual Report on Form 10-K, and incorporated herein by reference.) 10.28 Special Facility Ground Lease Agreement dated as of July 1, 1993 between the Authority and FedEx Express. (Filed as Exhibit 10.30 to FedEx Express's FY93 Annual Report on Form 10-K, and incorporated herein by reference.)
10.29 Sales Agreement dated April 7, 1995 between FedEx Express and American Airlines, Inc. for the purchase of MD11 aircraft. Confidential treatment has been granted for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. (Filed as Exhibit 10.79 to FedEx Express's FY95 Annual Report on Form 10-K, and incorporated herein by reference.) 10.30 Amendment No. 1, dated September 19, 1996, to Sales Agreement dated April 7, 1995 between FedEx Express and American Airlines, Inc. (Filed as Exhibit 10.93 to FedEx Express's FY97 Annual Report on Form 10-K, and incorporated herein by reference.) 10.31 Amendments dated March 19, 1998 and January 1999, amending the Sales Agreement dated April 7, 1995, between American Airlines, Inc. and FedEx Express. Confidential treatment has been granted for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibits 10.1 and 10.2, to FedEx Express's FY99 Third Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.32 Modification Services Agreement dated September 16, 1996 between McDonnell Douglas Corporation and FedEx Express. Confidential treatment has been granted for confidential commercial and financial information contained in this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.6 to FedEx Express's FY97 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.33 Letter Agreement No. 3 dated July 15, 1997, amending the Modification Services Agreement dated September 16, 1996, between McDonnell Douglas and FedEx Express. Confidential treatment has been granted for confidential commercial and financial information contained in this exhibit pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.1 to FedEx Express's FY98 First Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.34 Letter Agreement Nos. 5-7 dated January 12, 1998, March 16, 1998 and February 26, 1998, respectively, amending the Modification Services Agreement dated September 16, 1996, between McDonnell Douglas Corporation and FedEx Express. Confidential treatment has been granted for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibits 10.1 through 10.3 to FedEx Express's FY98 Second Quarter Report on Form 10-Q, and incorporated herein by reference.)
10.35 Letter Agreement No. 9 dated January 27, 1999, amending the Modification Services Agreement dated September 16, 1996, between McDonnell Douglas Corporation and FedEx Express. Confidential treatment has been granted for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.3 to FedEx Express's FY99 Third Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.36 Amendment No. 1 dated January 22, 1999, amending the Modification Services Agreement dated September 16, 1996, between McDonnell Douglas Corporation and FedEx Express. Confidential treatment has been granted for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. (Filed as Exhibit 10.4 to FedEx Express's FY99 Third Quarter Report on Form 10-Q, and incorporated herein by reference.) *10.37 Letter Agreement Nos. 8, 11, 13, 14 and 15 dated January 14, 2000, January 14, 2000, December 1, 1999, November 18, 1999 and October 30, 1999, respectively, amending the Modification Services Agreement dated September 16, 1996, between McDonnell Douglas Corporation and FedEx Express. Confidential treatment has been requested for confidential commercial and financial information, pursuant to Rule 24b-2 under the Securities Exchange Act of 1934, as amended. 10.38 Credit Agreement dated January 15, 1998 among FedEx and The First National Bank of Chicago, individually and as agent, and certain lenders. (Filed as Exhibit 10.1 to FedEx's FY98 Third Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.39 Amendment No. 1 dated as of December 10, 1998 to Credit Agreement dated as of January 15, 1998 among FedEx, The First National Bank of Chicago, as Agent, and certain Lenders. (Filed as Exhibit 10.2 to FedEx's FY99 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) 10.40 Extension Agreement dated as of October 15, 1999 to Credit Agreement dated as of January 15, 1998 among FedEx, The First National Bank of Chicago, as Agent, and certain Lenders. (Filed as Exhibit 10.1 to FedEx's FY00 Second Quarter Report on Form 10-Q, and incorporated herein by reference.) FedEx is not filing any other instruments evidencing any indebtedness because the total amount of securities authorized under any single such instrument does not exceed 10%of the total assets of FedEx and its subsidiaries on a consolidated basis. Copies of such instruments will be furnished to the Securities and Exchange Commission upon request. 10.41 1987 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1987 Stock Incentive Plan, as amended. (Filed as an exhibit to FedEx Express's Registration Statement No. 33-20138 on Form S-8 and incorporated herein by reference.)
10.42 1989 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1989 Stock Incentive Plan, as amended. (Filed as Exhibit 10.26 to FedEx Express's FY90 Annual Report on Form 10-K, and incorporated herein by reference.) 10.43 1993 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1993 Stock Incentive Plan, as amended. (1993 Stock Incentive Plan was filed as Exhibit A to FedEx Express's FY93 Definitive Proxy Statement, Commission File No. 1-7806, and incorporated herein by reference, and the form of stock option agreement was filed as Exhibit 10.61 to FedEx Express's FY94 Annual Report on Form 10-K, and incorporated herein by reference.) 10.44 Amendment to FedEx Express's 1980, 1983, 1984, 1987 and 1989 Stock Incentive Plans. (Filed as Exhibit 10.27 to FedEx Express's FY90 Annual Report on Form 10-K, and incorporated herein by reference.) 10.45 Amendment to FedEx Express's 1983, 1984, 1987, 1989 and 1993 Stock Incentive Plans. (Filed as Exhibit 10.63 to FedEx Express's FY94 Annual Report on Form 10-K, and incorporated herein by reference.) 10.46 1995 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1995 Stock Incentive Plan. (1995 Stock Incentive Plan was filed as Exhibit A to FedEx Express's FY95 Definitive Proxy Statement, and incorporated herein by reference, and the form of stock option agreement was filed as Exhibit 99.2 to FedEx Express's Registration Statement No. 333-03443 on Form S-8, and incorporated herein by reference.) 10.47 Amendment to FedEx Express's 1980, 1983, 1984, 1987, 1989, 1993 and 1995 Stock Incentive Plans. (Filed as Exhibit 10.79 to FedEx Express's FY97 Annual Report on Form 10-K, and incorporated herein by reference.) 10.48 1997 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1997 Stock Incentive Plan. (1997 Stock Incentive Plan was filed as Annex E to Joint Proxy Statement/Prospectus contained in Amendment No. 1 to FedEx's Registration Statement on Form S-4, Commission File No. 333-39483, and incorporated herein by reference, and the form of stock option agreement was filed as Exhibit 99.2 to FedEx Express's Registration Statement No. 333-03443 on Form S-8, and incorporated herein by reference.) 10.49 Amendment to 1997 Stock Incentive Plan. (Filed as Exhibit A to FedEx's FY98 Definitive Proxy Statement, and incorporated herein by reference.)
10.50 1999 Stock Incentive Plan and Form of Stock Option Agreement pursuant to 1999 Stock Incentive Plan. (1999 Stock Incentive Plan was filed as Exhibit 4.3 to FedEx's Registration Statement No. 333-34934 on Form S-8, and incorporated herein by reference, and the form of stock option agreement was filed as Exhibit 4.4 to FedEx's Registration Statement No. 333-34934 on Form S-8, and incorporated herein by reference.) 10.51 1986 Restricted Stock Plan and Form of Restricted Stock Agreement pursuant to 1986 Restricted Stock Plan. (Filed as Exhibit 10.28 to FedEx Express's FY90 Annual Report on Form 10-K, and incorporated herein by reference.) 10.52 1995 Restricted Stock Plan and Form of Restricted Stock Agreement pursuant to 1995 Restricted Stock Plan. (1995 Restricted Stock Plan filed as Exhibit B to FedEx Express's FY95 Definitive Proxy Statement, and incorporated herein by reference, and the Form of Restricted Stock Agreement was filed as Exhibit 10.80 to FedEx Express's FY96 Annual Report on Form 10-K, Commission File No. 1-7806, and incorporated herein by reference.) 10.53 1997 Restricted Stock Plan and Form of Restricted Stock Agreement pursuant to 1997 Restricted Stock Plan. (Filed as Exhibit 10.82 to FedEx Express's FY97 Annual Report on Form 10-K, and incorporated herein by reference.) *10.54 FedEx Express's Retirement Parity Pension Plan, as amended and restated effective June 1, 1999. *10.55 Description of Management Performance Bonus Plan. *10.56 Description of Long-Term Performance Bonus Plan. 10.57 FedEx's Retirement Plan for Outside Directors. (Filed as Exhibit 10.85 to FedEx Express's FY97 Annual Report on Form 10-K, and incorporated herein by reference.) 10.58 First Amendment to FedEx's Retirement Plan for Outside Directors. (Filed as Exhibit 10.86 to FedEx Express's FY97 Annual Report on Form 10-K, and incorporated herein by reference.) 10.59 FedEx's Amended and Restated Retirement Plan for Outside Directors. (Filed as Exhibit 10.87 to FedEx Express's FY97 Annual Report on Form 10-K, and incorporated herein by reference.)
*10.60 Form of Management Retention Agreement, dated May 2000, entered into between FedEx and each of Frederick W. Smith, Robert B. Carter, T. Michael Glenn, Alan B. Graf, Jr. and Kenneth R. Masterson. *10.61 Consulting Agreement, dated as of July 14, 2000, by and between FedEx and Dennis H. Jones.
*12 Statement re Computation of Ratio of Earnings to Fixed Charges. *21 Subsidiaries of Registrant. *23 Consent of Independent Public Accountants. *24 Powers of Attorney. *27 Financial Data Schedule (electronic filing only). - ------------------------- *Filed herewith. EX-3.1 2 ex-3_1.txt EXHIBIT 3.1 Exhibit 3.1 AMENDED AND RESTATED CERTIFICATE OF INCORPORATION of FDX CORPORATION FDX Corporation, a corporation organized and existing under the laws of the State of Delaware (the "Corporation"), hereby certifies that the Corporation was originally incorporated under the name "Fast Holding Inc." on October 2, 1997, and that its original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on the same date. The Corporation further certifies that this Amended and Restated Certificate of Incorporation amends, integrates and restates the provisions previously filed with the Secretary of State of the State of Delaware. ARTICLE FIRST: The name of the corporation is FDX CORPORATION. ARTICLE SECOND: The address of its registered office in the State of Delaware is Corporation Service Company, 1013 Centre Road, City of Wilmington, County of New Castle, Delaware 19805. The name of its registered agent at such address is Corporation Service Company. ARTICLE THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. ARTICLE FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 404,000,000 shares consisting of 4,000,000 shares of Series Preferred Stock, no par value (herein called the "Series Preferred Stock"), and 400,000,000 shares of Common Stock, par value $0.10 per share (herein called the "Common Stock"). The following is a statement of the powers, preferences and rights, and the qualifications, limitations or restrictions thereof, in respect of each class of stock of the Corporation: I. SERIES PREFERRED STOCK 1. CONDITIONS OF ISSUANCE. Series Preferred Stock may be issued from time to time and in such amounts and for such consideration as may be determined by the Board of Directors of the Corporation. The designation and relative rights and preferences of each series, except to the extent such designations and relative rights and preferences may be required by Delaware law or this Amended and Restated Certificate of Incorporation, shall be such as are fixed by the Board of Directors and stated in a resolution or resolutions adopted by the Board of Directors authorizing such series (herein called the "Series Resolution"). A Series Resolution authorizing any series shall fix: A. The designation of the series, which may be by distinguishing number, letter or title; B. The number of shares of such series; C. The divided rate or rates of such shares, the date at which dividends, if declared, shall be payable, and whether or not such dividends are to be cumulative, in which case such Series Resolution shall state the date or dates from which dividends shall be cumulative; D. The amounts payable on shares of such series in the event of voluntary or involuntary liquidation, dissolution or winding up; E. The redemption rights and price or prices, if any, for the shares of such series; F. The terms and amount of any sinking fund or analogous fund providing for the purchase or redemption of the shares of such series, if any; G. The voting rights, if any, granted to the holders of the shares of such series in addition to those required by Delaware law or this Amended and Restated Certificate of Incorporation; H. Whether the shares of such series shall be convertible into shares of the Corporation's Common Stock or any other class of the Corporation's capital stock, and if convertible, the conversion price or prices, any adjustment thereof and any other terms and conditions upon which such conversion shall be made; I. Any other rights, preferences, restrictions or conditions relative to the shares of such series astray be permitted by Delaware law or this Amended and Restated Certificate of Incorporation. 2. RESTRICTIONS. In no event, so long as any Series Preferred Stock shall remain outstanding, shall any dividend whatsoever be declared or paid upon, nor shall any distribution be made upon, Common Stock, other than a dividend or distribution payable in shares of such Common Stock, nor (without the written consent of such number of the holders of the outstanding Series Preferred Stock as shall have been specified in the Series Resolution authorizing the issuance of such outstanding Series Preferred Stock) shall any shares of Common Stock be purchased or redeemed by the Corporation, nor shall any moneys be paid to or made available for a sinking fund for the purchase or redemption of any Common Stock, unless in each instance full dividends on all outstanding shares of the Series Preferred Stock for all past dividend periods shall have been paid and the full dividend on all outstanding shares of the Series Preferred Stock for the current dividend period shall have been paid or declared and sufficient funds for the payment thereof set apart and any arrears in the mandatory redemption of the Series Preferred Stock shall have been made good. 3. PRIORITY. Series Preferred Stock, with respect to both dividends and distribution of assets on liquidation, dissolution or winding up, shall rank prior to the Common Stock. 4. VOTING RIGHTS. Holders of Series Preferred Stock shall have no right to vote for the election of Directors of the Corporation or on any other matter unless a vote of such class is required by Delaware law, this Amended and Restated Certificate of Incorporation or a Series Resolution. 5. FILING OF AMENDMENTS. The Board of Directors shall adopt amendments to this Amended and Restated Certificate of Incorporation fixing, with respect to each series of Series Preferred Stock, the matters described in paragraph 1 of this Subdivision I. II. COMMON STOCK All shares of Common Stock shall be identical and shall entitle the holders thereof to the same rights and privileges. 1. DIVIDENDS. When and as dividends are declared upon the Common Stock, whether payable in cash, in property or in shares of stock of the Corporation, the holders of Common Stock shall be entitled to share equally, share for share, in such dividends. 2 2. VOTING RIGHTS. The holders of Common Stock shall have the sole right to vote for the election of Directors of the Corporation or on any other matter unless required by Delaware law, this Amended and Restated Certificate of Incorporation or a Series Resolution. The holders of Common Stock shall be entitled to one vote for each share held. III. OTHER PROVISIONS 1. No holder of any of the shares of any class or series of stock or of options, warrants or other rights to purchase shares of any class or series of stock or of other securities of the Corporation shall have any pre-emptive right to purchase or subscribe for any unissued stock of any class or series or any additional shares of any class or series to be issued by reason of any increase of the authorized capital stock of the Corporation of any class or series, or bonds, certificates of indebtedness, debentures or other securities convertible into or exchangeable for stock of the Corporation of any class or series, or carrying any right to purchase stock of any class or series, but any such unissued stock, additional authorized issue of shares of any class or series of stock or securities convertible into or exchangeable for stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations, whether such holders or others, and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its sole discretion. 2. Shares of Common Stock may be issued from time to time as the Board of Directors of the Corporation shall determine and on such terms and for such consideration as shall be fixed by the Board of Directors. ARTICLE FIFTH: Certain Business Combinations 1. HIGHER VOTE FOR CERTAIN BUSINESS COMBINATIONS. In addition to any affirmative vote of holders of a class or series of capital stock of the Corporation required by law or this Amended and Restated Certificate of Incorporation, and except as otherwise expressly provided in paragraph 2 of this ARTICLE FIFTH, a Business Combination (as hereinafter defined) with or upon a proposal by a Related Person (as hereinafter defined) shall require the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of capital stock of the Corporation entitled to vote generally in the election of Directors (the "Voting Stock"). Such affirmative vote shall be required notwithstanding the fact that no vote may be required or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. 2. WHEN HIGHER VOTE IS NOT REQUIRED. The provisions of paragraph 1 of this ARTICLE FIFTH shall not be applicable to a particular Business Combination and such Business Combination shall require only such affirmative vote as is required by law and other provisions of this Amended and Restated Certificate of Incorporation, if all of the conditions specified in either of the following paragraphs (A) or (B) are met: (A) Approval by Directors. The Business Combination has been approved by a majority of the Continuing Directors (as hereinafter defined). (B) Price and Procedure Conditions. All of the following conditions shall have been met: (1) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Common Stock in such Business Combination shall be at least equal to the higher of the following: (i) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealer's fees) paid by the Related Person for any shares of Common Stock acquired by it (a) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the "Announcement Date") or (b) in the transaction in which it became a Related Person, whichever is higher; or 3 (ii) the Fair Market Value per share of Common Stock on the Announcement Date or on the date on which the Related Person became a Related Person (such latter date is referred to in this ARTICLE FIFTH as the "Determination Date"), whichever is higher; or (2) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of Shares of any other class or series of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this-paragraph 2(B)(2) shall be required to be met with respect to every class of outstanding Voting Stock whether or not the Related Person has previously acquired any shares of a particular class of Voting Stock): (i) (if applicable) the highest per share price (including any broker commissions, transfer taxes and soliciting dealers' fees), paid by the Related Person for any shares of such class or series of Voting Stock acquired by it (a) within the two-year period immediately prior to the Announcement Date or (b) in the transaction in which it became a Related Person, whichever is higher; (ii) (if applicable) the highest preferential amount per share to which the holders of shares of such class or series of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation; and (iii) the Fair Market Value per share of such class or series of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. (3) The consideration to be received by holders of a particular class or series of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Related Person has previously paid for shares of such class of Voting Stock. If the Related Person has paid for shares of any class or series of Voting Stock with varying forms of consideration, the form of consideration given for such class or series of Voting Stock in the Business Combination shall be either cash or the form used to acquire the largest number of shares of such class or series of Voting Stock previously acquired by it. (4) No Extraordinary Event (as hereinafter defined) shall have occurred after the Related Person became a Related Person and prior to the consummation of the Business Combination. (5) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) is mailed to public stockholders of the Corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required pursuant to such Act or subsequent provisions). 3. CERTAIN DEFINITIONS. For purposes of this ARTICLE FIFTH: (A) A "person" shall mean any individual, firm, corporation or other entity. (B) The term "Business Combination" shall mean any of the following transactions, when entered into by the Corporation or a subsidiary of the Corporation with, or upon a proposal by, a Related Person or any other corporation (whether or not itself a Related Person which is, or after such transaction would be, an Affiliate (as hereinafter defined) of a Related Person: 4 (1) the merger or consolidation of the Corporation or any subsidiary of the Corporation; or (2) the sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one or a series of transactions) of any assets of the Corporation or any subsidiary of the Corporation having an aggregate Fair Market Value of $5,000,000 or more; (3) the issuance or transfer by the Corporation or any subsidiary of the Corporation (in one or a series of transactions) of securities of the Corporation or that subsidiary having an aggregate Fair Market Value of $5,000,000 or more; or (4) the adoption of a plan or proposal for the liquidation or dissolution of the Corporation; or (5) the reclassification of securities (including a reverse stock split), recapitalization, consolidation or any other transaction (whether or not involving a Related Person) which has the direct or indirect effect of increasing the voting power, whether or not then exercisable, of a Related Person in any class or series of capital stock of the Corporation or any subsidiary of the Corporation; or (6) any agreement, contract or other arrangement providing directly or indirectly for the foregoing. (C) The term "Related Person" shall mean any person (other than the Corporation, a subsidiary of the Corporation or any profit sharing, employee stock ownership or other employee benefit plan of the Corporation or a subsidiary of the Corporation or any trustee of or fiduciary with respect to any such plan acting in such capacity) which: (1) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the outstanding Voting Stock, or (2) is an Affiliate of the Corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding Voting Stock; or (3) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Related Person, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. (D) A person shall be a "beneficial owner" of any Voting Stock: (1) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (2) which such person or any of its Affiliates or Associates has (i) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (ii) the right to vote pursuant to any agreement, arrangement or understanding; or (3) which are beneficially owned, directly or indirectly by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. 5 For the purposes of determining whether a person is a Related Person pursuant to subparagraph (C) of this paragraph 3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of subparagraph (D) of this paragraph 3 but shall not include any other shares of Voting Stock which may be issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. (E) The term "Continuing Director" shall mean any member of the Board of Directors who is not affiliated with a Related Person and who was a member of the Board of Directors immediately prior to the time that the Related Person became a Related Person, and any successor to a Continuing Director who is not affiliated with the Related Person and is recommended to succeed a Continuing Director by a majority of Continuing Directors who are then members of the Board of Directors. (F) "Affiliate" and "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934, as in effect on August 1, 1984. (G) The term "Extraordinary Event" shall mean, as to any Business Combination and Related Person, any of the following events that is not approved by a majority of the Continuing Directors: (1) any failure to declare and pay at the regular date therefor any full quarterly dividend (whether or not cumulative) on outstanding Preferred or Preference Stock; or (2) any reduction in the annual rate of dividends paid on the Common Stock (except as necessary to reflect any subdivision of the Common Stock); or (3) any failure to increase the annual rate of dividends paid on the Common Stock as necessary to reflect any reclassification, (including any reverse stock split), recapitalization, reorganization or any similar transaction that has the effect of reducing the number of outstanding shares of the Common Stock; or (4) any Related Person shall become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which resulted in such Related Person becoming a Related Person; or (5) the receipt by the Related Person, after such Person has become a Related Person, of a direct or indirect benefit (except proportionately as a shareholder) from any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the Corporation or any subsidiary of the Corporation, whether in anticipation of or in connection with the Business Combination or otherwise. (H) "Fair Market Value" means: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in good faith. 6 (I) In the event of any Business Combination in which the Corporation survives, the phrase "consideration other than cash to be received" as used in subparagraphs B(1) and (2) of paragraph 2 of this ARTICLE FIFTH shall include the shares of Common Stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. 4. POWERS OF THE BOARD OF DIRECTORS. A majority of all Continuing Directors shall have the power to make all determinations with respect to this ARTICLE FIFTH, on the basis of information known to them after reasonable inquiry, including, without limitation, the transactions that are Business Combinations, the persons who are Related Persons, the number of shares of Voting Stock owned by any person, the time at which a Related Person becomes a Related Person and the Fair Market Value of any assets, securities or other property, and any such determinations of such Directors shall be conclusive and binding. 5. NO EFFECT ON FIDUCIARY OBLIGATIONS OF RELATED PERSONS. Nothing contained in this ARTICLE FIFTH shall be construed to relieve any Related Person from any fiduciary obligation imposed by law. 6. AMENDMENT OR REPEAL. The affirmative vote of the holders of not less than 80% of the total voting power of the Voting Stock of the Corporation, voting together as a single class, shall be required in order to amend, repeal or adopt any provision inconsistent with this ARTICLE FIFTH. ARTICLE SIXTH: In addition to any affirmative vote of holders of a class or series of capital stock of the Corporation required by law or this Amended and Restated Certificate of Incorporation, unless the Business Combination (as defined in ARTICLE FIFTH of this Amended and Restated Certificate of Incorporation) has been approved by a majority of the Continuing Directors (as defined in ARTICLE FIFTH of this Amended and Restated Certificate of Incorporation), a Business Combination with or upon a proposal by a Related Person (as defined in ARTICLE FIFTH of this Amended and Restated Certificate of Incorporation) shall require the affirmative vote of the holders of not less than a majority of the Voting Stock (as defined in ARTICLE FIFTH of this Amended and Restated Certificate of Incorporation) beneficially owned by stockholders other than such Related Person. Such affirmative vote shall be required notwithstanding the fact that no vote may be required or that a lesser percentage may be specified by law or in any agreement with any national securities exchange or otherwise. The affirmative vote of the holders, other than the Related Person proposing the amendment, repeal or adoption of any provision inconsistent with this ARTICLE SIXTH, of not less than a majority of the Voting Stock of the Corporation, voting together as a single class, shall be required in order to amend, repeal or adopt any provision inconsistent with this ARTICLE SIXTH. ARTICLE SEVENTH: The corporation is to have perpetual existence. ARTICLE EIGHTH: In furtherance and not in limitation of the powers conferred by statute, the Board of Directors is expressly authorized: The Board of Directors shall have power to make, alter, amend and repeal the By-laws (except so far as the By-laws adopted by the stockholders shall otherwise provide). Any By-laws made by the Directors under the powers conferred hereby may be altered, amended or repealed by the Directors or by the stockholders. Notwithstanding the foregoing and anything contained in this Amended and Restated Certificate of Incorporation to the contrary, Sections 5 and 11 of Article II of the By-laws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted without the affirmative vote of the holders of at least 80% of the voting power of all the shares of the Corporation entitled to vote generally in the election of Directors, voting together as a single class. Notwithstanding anything contained in this Amended and Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all shares of the Corporation entitled to vote generally in the election of Directors, voting together as a single class, shall be required to alter, amend, adopt any provision inconsistent with or repeal this ARTICLE EIGHTH. 7 To authorize and cause to be executed mortgages and liens upon the real and personal property of the Corporation. To set apart out of any of the funds of the Corporation available for dividends a reserve or reserves for any proper purpose and to abolish any such reserve in the manner in which it was created. By a majority of the whole Board, to designate one or more committees, each committee to consist of one or more of the Directors of the Corporation. The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. The By-laws may provide that in the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. Any such committee, to the extent provided in the resolution of the Board of Directors, or in the By-laws of the Corporation, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation, and may authorize the seal of the Corporation to be affixed to all papers which may require it; but no such committee shall have the power or authority in reference to amending the Amended and Restated Certificate of Incorporation, adopting an agreement of merger or consolidation, recommending to the stockholders the sale, lease or exchange of all or substantially all of the Corporation's property and assets, recommending to the stockholders a dissolution of the Corporation or a revocation of a dissolution, or amending the By-laws of the Corporation; and, unless the resolution or By-laws expressly so provide, no such committee shall have the power or authority to declare a dividend or to authorize the issuance of stock. When and as authorized by the stockholders in accordance with statute, to sell, lease or exchange all or substantially all of the property and assets of the Corporation, including its good will and its corporate franchises, upon such terms and conditions and for such consideration, which may consist in whole or in part of money or property including shares of stock in, and/or other securities of, any other corporation or corporations, as its Board of Directors shall deem expedient and for the best interests of the Corporation. ARTICLE NINTH: Whenever a compromise or arrangement is proposed between this Corporation and its creditors or any class of them and/or between this Corporation and its stockholders or any class of them, any court of equitable jurisdiction within the State of Delaware may, on the application in a summary way of this Corporation or of any creditor or stockholder thereof, or on the application of any receiver or receivers appointed for this Corporation under the provisions of Section 291 of Title 8 of the Delaware Code or on the application of trustees in dissolution or of any receiver or receivers appointed for this Corporation under the provisions of Section 279 of Title 8 of the Delaware Code order a meeting of the creditors or class of creditors and/or of the stockholders/or class stockholders of this Corporation, as the case may be, to be summoned in such manner as the said court directs. If a majority in number representing three-fourths in value of the creditors or class of creditors and/or of the stockholders or class of stockholders of this Corporation, as the case may be, agree to any compromise or arrangement and to any reorganization of this Corporation as consequence of such compromise or arrangement, the said compromise or arrangement and the said reorganization shall, if sanctioned by the court to which the said application has been made, be binding on all the creditors or class of creditors and/or on all the stockholders or class of stockholders of this Corporation, as the case may be, and also on this Corporation. ARTICLE TENTH: Meetings of stockholders may be held within or without the State of Delaware, as the By-laws may provide. The books of the Corporation may be kept (subject to any provision contained in the statutes) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-laws of the Corporation. Elections of Directors need not be by written ballot unless the By-laws of the Corporation shall so provide. ARTICLE ELEVENTH: The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Amended and Restated Certificate of Incorporation, in the manner now or hereafter prescribed by statute, and all rights conferred upon stockholders herein are granted subject to this reservation. 8 ARTICLE TWELFTH: Any action required or permitted to be taken by the stockholders of the Corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Except as otherwise required by law and subject to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, special meetings of stockholders of the Corporation may be called only by the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. Notwithstanding anything contained in this Amended and Restated Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 80% of the voting power of all shares of the Corporation entitled to vote generally in the election of Directors, voting together as a single class, shall be required to alter, amend, adopt any provision inconsistent with or repeal this ARTICLE TWELFTH. ARTICLE THIRTEENTH: No Director shall be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a Director, provided that this ARTICLE THIRTEENTH shall not eliminate or limit the liability of a Director (i) for any breach of the Director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of Title 8 of the Delaware Code or any amendment or successor provision thereto, or (iv) for any transaction from which the Director derived an improper personal benefit. This ARTICLE THIRTEENTH shall not eliminate or limit the liability of a Director for any act or omission occurring prior to the date when this ARTICLE THIRTEENTH becomes effective. Neither the amendment nor repeal of this ARTICLE THIRTEENTH, nor the adoption of any provision of the Amended and Restated Certificate of Incorporation inconsistent with this ARTICLE THIRTEENTH shall eliminate or reduce the effect of this ARTICLE THIRTEENTH with respect to any matter occurring, or any cause of action, suit or claim that, but for this ARTICLE THIRTEENTH, would accrue or arise prior to such amendment, repeal or adoption of an inconsistent provision. * * * * This Amended and Restated Certificate of Incorporation was duly adopted in accordance with the provisions of Section 242 and 245 of the General Corporation Law of the State of Delaware. The Board of Directors of the Corporation approved the Corporation's Amended and Restated Certificate of Incorporation as set forth herein pursuant to a Consent in Lieu of Meeting of the Board of Directors effective as of December 2, 1997. Federal Express Corporation, the holder of all of the outstanding stock of the Corporation, acting by written consent pursuant to Section 228(a) of the General Corporation Law of the State of Delaware, approved the Amended and Restated Certificate of Incorporation as set forth herein as of December 2, 1997. FDX CORPORATION By: /s/ GEORGE W. HEARN ------------------------- George Hearn President ATTEST: /s/ SCOTT E. HANSEN - ------------------------------- Scott E. Hansen Vice President and Secretary 9 CERTIFICATE OF AMENDMENT OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF FDX CORPORATION FDX Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware (the "Corporation"), DOES HEREBY CERTIFY: FIRST: That at a meeting of the Board of Directors of the Corporation, resolutions were duly adopted setting forth a proposed amendment to the Amended and Restated Certificate of Incorporation of the Corporation and declaring said amendment to be advisable. The resolutions setting forth the proposed amendment are as follows: RESOLVED, that an amendment to the Corporation's Amended and Restated Certificate of Incorporation doubling the number of authorized shares of common stock is hereby declared to be advisable and that the officers of the Corporation are hereby directed to submit such amendment to the stockholders of the Corporation for approval at their next annual meeting. FURTHER RESOLVED, that the Amended and Restated Certificate of Incorporation of the Corporation be amended by changing the first sentence of Article Fourth thereof so that, as amended, said first sentence of Article Fourth shall be and read in its entirety as follows: ARTICLE FOURTH: The total number of shares of all classes of stock which the Corporation shall have authority to issue is 804,000,000 shares consisting of 4,000,000 shares of Series Preferred Stock, no par value (herein called the "Series Preferred Stock"), and 800,000,000 shares of Common Stock, par value $0.10 per share (herein called the "Common Stock"). SECOND: That thereafter, at the annual meeting of stockholders of the Corporation, duly called and held upon notice in accordance with Section 222 of the General Corporation Law of the State of Delaware, the necessary number of shares as required by statute were voted in favor of the amendment. THIRD: That the aforesaid amendment was duly adopted in accordance with the applicable provisions of Section 242 of the General Corporation Law of the State of Delaware. IN WITNESS WHEREOF, FDX Corporation has caused this Certificate of Amendment to be signed by George W. Hearn, its Corporate Vice President and Corporate Counsel, this 6th day of October, 1999. FDX CORPORATION By: /s/ GEORGE W. HEARN -------------------------------- George W. Hearn Corporate Vice President and Corporate Counsel 2 CERTIFICATE OF OWNERSHIP AND MERGER MERGING CEK COMPANY, INC. INTO FDX CORPORATION (PURSUANT TO SECTION 253 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE) FDX Corporation, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of CEK Company, Inc., a Delaware corporation. THIRD: That the Corporation, by the resolutions of its Board of Directors attached as EXHIBIT A hereto, duly adopted on the 17th day of January, 2000, determined to merge with and into itself CEK Company, Inc. on the conditions set forth in such resolutions. IN WITNESS WHEREOF, said FDX Corporation has caused this certificate to be signed by Alan B. Graf, Jr., its authorized officer, this 17th day of January, 2000. FDX CORPORATION By: /s/ ALAN B. GRAF, JR. --------------------- Alan B. Graf, Jr. EXECUTIVE VICE PRESIDENT AND CHIEF FINANCIAL OFFICER EXHIBIT A RESOLVED, that the Corporation merge with and into itself its wholly-owned subsidiary, CEK Company, Inc., and assume all of said subsidiary's liabilities and obligations. FURTHER RESOLVED, that the Corporation change its corporate name by changing Article First of the Amended and Restated Certificate of Incorporation of the Corporation, as amended to date, to read as follows: ARTICLE FIRST: The name of the corporation is: FedEx Corporation. FURTHER RESOLVED, that any Vice President of the Corporation be and he or she hereby is, jointly and severally, authorized and directed to make, execute and acknowledge a Certificate of Ownership and Merger setting forth a copy of the resolutions to merge said CEK Company, Inc. with and into the Corporation and to change the name of the Corporation and to assume said subsidiary's liabilities and obligations and the date of adoption thereof and to file the same in the office of the Secretary of State of Delaware and a certified copy thereof in the Office of the Recorder of Deeds of New Castle County. FURTHER RESOLVED, that any officer of the Corporation, acting singly and without necessity of joinder of any other person, is hereby authorized, empowered and directed for, in the name and on behalf of the Corporation to execute any and all documents, instruments and agreements, including any amendments and modifications thereto, and do and perform any and all acts and deeds (including, without limitation, the payment of any fees) that are required to be done, observed, performed or discharged by the Corporation in accordance with the respective terms and provisions of the foregoing resolutions, or that any officer, in his or her sole discretion with the advice and consent of counsel, deems necessary, appropriate or advisable to effect the merger of CEK Company, Inc. with and into the Corporation and to change the name of the Corporation to FedEx Corporation, his or her taking any action being conclusive evidence that he or she did so deem the same to be necessary, appropriate or advisable. FURTHER RESOLVED, that any and all actions taken in good faith by any officer, director, employee or agent of the Corporation prior to the date hereof on behalf of the Corporation and in furtherance of the transactions contemplated by the foregoing resolutions are in all respects ratified, confirmed and approved by the Corporation as its own acts and deeds, and shall be conclusively deemed to be such corporate acts and deeds for all purposes. CERTIFICATE OF CORRECTION FILED TO CORRECT A CERTAIN ERROR IN THE AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF FEDEX CORPORATION (formerly known as FDX CORPORATION) FILED IN THE OFFICE OF THE SECRETARY OF STATE OF DELAWARE ON DECEMBER 3, 1997 FedEx Corporation, a corporation organized and existing under and by virtue of the General Corporation Law of the State of Delaware, DOES HEREBY CERTIFY: 1. The name of the corporation is FedEx Corporation (formerly FDX Corporation). 2. That an Amended and Restated Certificate of Incorporation of FDX Corporation was filed by the Secretary of State of Delaware on December 3, 1997, and that said Certificate requires correction as permitted by Section 103 of the General Corporation Law of the State of Delaware. 3. The inaccuracy or defect of said Certificate to be corrected is as follows: A misspelled word is included in Subsection I, under Paragraph 1 of Section I of Article FOURTH. In its correct form, said Subsection I of the Amended and Restated Certificate of Incorporation should read in its entirety as follows: "I. Any other rights, preferences, restrictions or conditions relative to the shares of such series as may be permitted by Delaware law or this Amended and Restated Certificate of Incorporation." IN WITNESS WHEREOF, said FedEx Corporation has caused this Certificate to be signed by George W. Hearn its Corporate Vice President and Corporate Counsel, this 13th day of April, 2000. FEDEX CORPORATION By: /s/ GEORGE W. HEARN ------------------------------ George W. Hearn Corporate Vice President and Corporate Counsel CERTIFICATE OF OWNERSHIP AND MERGER MERGING CALIBER SYSTEM, INC. INTO FEDEX CORPORATION (PURSUANT TO SECTION 253 OF THE GENERAL CORPORATION LAW OF THE STATE OF DELAWARE) FedEx Corporation, a Delaware corporation (the "Corporation"), does hereby certify: FIRST: That the Corporation is incorporated pursuant to the General Corporation Law of the State of Delaware. SECOND: That the Corporation owns all of the outstanding shares of each class of the capital stock of Caliber System, Inc., an Ohio corporation. THIRD: That the Corporation, by the resolutions of its Board of Directors attached as EXHIBIT A hereto, duly adopted on March 20, 2000, determined to merge with and into itself Caliber System, Inc. on the conditions set forth in such resolutions. IN WITNESS WHEREOF, said FedEx Corporation has caused this certificate to be signed by George W. Hearn, its authorized officer, this 27th day of April, 2000. FEDEX CORPORATION By: /s/ GEORGE W. HEARN -------------------- George W. Hearn CORPORATE VICE PRESIDENT AND CORPORATE COUNSEL EXHIBIT A RESOLVED, that the Corporation merge with and into itself its wholly-owned subsidiary, Caliber System, Inc. ("Caliber"), and assume all of Caliber's liabilities and obligations (including, without limitation, the 7.80% Notes due August 1, 2006 (the "Notes")). FURTHER RESOLVED, that the Vice Presidents of the Corporation be, and each of them hereby is, authorized, empowered and directed for and in the name and on behalf of the Corporation to make, execute and acknowledge a Certificate of Ownership and Merger setting forth a copy of the resolutions to merge Caliber with and into the Corporation and to assume Caliber's liabilities and obligations and the date of adoption thereof and to file the same in the office of the Secretary of State of Delaware and a certified copy thereof in the Office of the Recorder of Deeds of New Castle County. FURTHER RESOLVED, that the Vice Presidents of the Corporation be, and each of them hereby is, authorized, empowered and directed for and in the name and on behalf of the Corporation to negotiate, execute and deliver an Agreement of Merger providing for the merger of Caliber with and into the Corporation, with such terms, conditions and provisions as may be acceptable to such officer with the advice and consent of counsel as conclusively evidenced by his or her execution thereof, and any amendments, modifications and supplements thereto, and to also execute and file a Certificate of Merger with the Ohio Secretary of State. FURTHER RESOLVED, that the Vice Presidents of the Corporation be, and each of them hereby is, authorized, empowered and directed for and in the name and on behalf of the Corporation to execute any and all documents, certificates and agreements (including, without limitation, a First Supplemental Indenture evidencing the Corporation's assumption of the Notes), including any amendments, modifications and supplements thereto, and do and perform any and all acts and deeds that are required to be done, observed, performed or discharged by the Corporation in connection with the merger of Caliber with and into the Corporation (including, without limitation, the payment of any fees), or that such officer, in his or her sole discretion with the advice and consent of counsel, deems necessary, appropriate or advisable in connection therewith, his or her taking any action being conclusive evidence that he or she did so deem the same to be necessary, appropriate or advisable. FURTHER RESOLVED, that any and all actions taken in good faith by any officer, director, employee or agent of the Corporation prior to the date hereof on behalf of the Corporation and in furtherance of the transactions contemplated by the foregoing resolutions are in all respects ratified, confirmed and approved by the Corporation as its own acts and deeds, and shall be conclusively deemed to be such corporate acts and deeds for all purposes. EX-10.21 3 ex-10_21.txt EXHIBIT 10.21 Exhibit 10.21 EXECUTION COPY - ------------------------------------------------------------------------------ TWENTIETH SUPPLEMENTAL LEASE AGREEMENT BY AND BETWEEN MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION DATED AS OF APRIL 1, 2000 AMENDING THE CONSOLIDATED AND RESTATED LEASE AGREEMENT DATED AS OF AUGUST 1, 1979 BETWEEN THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION. - ------------------------------------------------------------------------------ TABLE OF CONTENTS
SECTION PAGE - ------- ---- 1 Definitions............................................ 7 2 Granting Leasehold..................................... 7 3 Term, Delivery and Acceptance of Possession............ 8 4 Rental ............................................... 8 5 Hazardous Substances/Waste............................. 8 6 Lease Agreement Still in Effect; Provisions Thereof Applicable to this Nineteenth Supplemental Lease Agreement........................................ 10 7 Descriptive Headings................................... 10 8 Effectiveness of this Twentieth Supplemental Lease Agreement........................................ 10 9 Execution of Counterparts.............................. 10 10 Summaries ............................................. 10 Notary ............................................... 12 Leased Parcel Summary.................................. 13 Rental Summary......................................... 15
TWENTIETH SUPPLEMENTAL LEASE AGREEMENT THIS TWENTIETH SUPPLEMENTAL LEASE AGREEMENT, made and entered into as of the 1st of April 2000, by and between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY (herein sometimes referred to as "Authority"), a public and governmental body politic and corporate of the State of Tennessee, and FEDERAL EXPRESS CORPORATION (herein sometimes referred to as "Tenant"), a corporation duly organized and existing under the laws of the State of Delaware and qualified to do business in the State of Tennessee. W I T N E S S E T H: WHEREAS, Authority and Tenant on October 3, 1979 entered into a Consolidated and Restated Lease Agreement dated as of August 1, 1979; and WHEREAS, Authority and Tenant, between April 1, 1981 and September 1, 1998, have entered into nineteen Supplemental Lease Agreements amending the 1979 Consolidated and Restated Lease Agreement ; and WHEREAS, the said Consolidated and Restated Lease Agreement dated as of August 1, 1979, together with the First through the Nineteenth Supplemental Lease Agreements is herein referred to as the "Lease Agreement"; and WHEREAS, Authority and Tenant have agreed to further supplement the Lease Agreement so as to lease to Tenant certain additional land under this Twentieth Supplemental Lease Agreement. NOW THEREFORE, for and in consideration of the mutual promises, covenants and agreements hereinafter contained to be kept and performed by the parties hereto and upon the 3 provisions and conditions hereinafter set forth, Authority and Tenant do hereby covenant and agree, and each for itself does hereby covenant and agree, as follows: SECTION 1. DEFINITIONS. Except as otherwise provided herein, and unless the context shall clearly require otherwise, all words and terms used in this Twentieth Supplemental Lease Agreement which are defined in the Lease Agreement, shall, for all purposes of this Twentieth Supplemental Lease Agreement, have the respective meanings given to them in the Lease Agreement. SECTION 2. GRANTING OF LEASEHOLD. In addition to the lease and demise to Tenant of the land in the Lease Agreement, the Authority hereby leases and demises to Tenant, and Tenant hereby takes and hires from Authority, subject to the provisions and conditions set forth in the Lease Agreement and this Twentieth Supplemental Lease Agreement, the additional land containing approximately 13.206 acres located east of the centerline intersection of Taxiway November and Taxilane 800 which is located on Memphis-Shelby County Airport Authority property situated in Memphis, Shelby County, Tennessee and being more particularly described in Exhibit A: SECTION 3. TERM; DELIVERY AND ACCEPTANCE OF POSSESSION. The term of this Twentieth Supplemental Lease Agreement shall commence at 12:01 A.M. on the earlier to occur of December 1, 2000, or the date of beneficial occupancy for the land described as the centerline intersection of Taxiway November and Taxilane 800 and shall expire at such time as the Lease Agreement shall expire, to-wit: August 31, 2012 or upon such earlier termination, extension or otherwise as provided therein. Authority shall, however, deliver to Tenant sole and exclusive possession of the land leased hereby as of the effective date of this Twentieth Supplemental Lease 4 Agreement for the purpose of constructing improvements required for Tenant's intended use of the land leased hereby, subject however, to Authority's right-of-entry set forth in Section 21 of the Lease Agreement. SECTION 4. RENTAL. In addition and supplemental to the rentals required to be paid to the Authority pursuant to Section 5 of the Lease Agreement (including all prior supplemental lease agreements), during the term of this Twentieth Supplemental Lease Agreement, Tenant shall pay the Authority in advance on the first business day of each month $5,848.41 in equal installments beginning December 1, 2000 or date of beneficial occupancy whichever occurs first, a total rental payment of $70,180.91 per year, which the parties hereto agree is based upon an aggregate of 575,253.36 square feet of area at an annual rental rate of ($0.1220) per square foot. SECTION 5. HAZARDOUS SUBSTANCES/WASTE. Tenant, at its own expense, may arrange for a Phase 1 Environmental Survey on the land described herein by a reputable environmental consultant to determine the existence of "Hazardous Substances", as such term is defined in this Agreement. In the event that "Hazardous Substances" are discovered during excavation for construction of the centerline intersection of Taxiway November and Taxilane 800, and such "Hazardous Substances" require special handling, removal or disposal ("Remediation"), then Tenant shall immediately notify Authority. The Tenant and Authority will confer and jointly determine the method for handling, removing or disposing of the "Hazardous Substances" within 14 days after Tenant provides the Authority, in writing, its plan for Remediation. The form of Remediation agreed to by the parties must comply with "Environmental Laws", as such term is defined below. In the event that Tenant and Authority are unable to agree on a method for handling, removing or disposing of the "Hazardous Substances" "due to differing interpretations 5 of the requirements for Remediation as set forth in the applicable "Environmental Laws", then the form of Remediation will be determined by the appropriate federal, state or local agency with relevant regulatory and enforcement jurisdiction over the subject site. Authority will grant to Tenant a rent credit equal to the reasonable documented costs paid by Tenant for the Remediation of such "Hazardous Substances" associated with the centerline intersection of Taxiway November and Taxilane 800. The term "HAZARDOUS SUBSTANCES", as used in this Twentieth Supplemental Lease Agreement, shall mean any hazardous or toxic substances, materials or wastes, including but not limited to, those substances, materials, and wastes (i) listed in the United States Department of Transportation Hazardous Materials Table (49 CFR Section 172.101) or by the Environmental Protection Agency as Hazardous substances (40 CFR Part 302) and amendments thereto, (ii) designated as a "Hazardous Substance" pursuant to Section 311 of the Clean Water Act, 33 U.S.C. Section 1251 et seq. (33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317, (iii) defined as a "Hazardous Waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C Section . 6903), or (iv) defined as "Hazardous Substance" pursuant to Section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. 42 U.S.C. Section 9601) or any other substances, (including, without limitation, asbestos and raw materials which include hazardous constituents), the general, discharge or removal of which or the use of which is restricted, prohibited or penalized by any "Environmental Law", which term shall mean any Federal, State or local law, regulation, or ordinance relating to pollution or protection of the environment. 6 SECTION 6. LEASE AGREEMENT STILL IN EFFECT; PROVISIONS THEREFORE APPLICABLE TO THIS SUPPLEMENTAL LEASE AGREEMENT. All of the terms, provisions, conditions, covenants and agreements of the Lease Agreement, as supplemented, shall continue in full force and effect as supplemented hereby, and shall be applicable to each of the provisions of this Twentieth Supplemental Lease Agreement during the term hereof with the same force and effect as though the provisions hereof were set forth in the Lease Agreement. SECTION 7. DESCRIPTIVE HEADINGS. The descriptive headings of the sections of this Twentieth Supplemental Lease agreement are inserted for convenience of reference only and do not constitute a part of this Twentieth Supplemental Lease Agreement and shall not affect the meaning, construction, interpretation or effect of this Twentieth Supplemental Lease Agreement. SECTION 8. EFFECTIVENESS OF THIS SUPPLEMENTAL LEASE AGREEMENT. This Twentieth Supplemental Lease Agreement shall become effective at 12:01 a.m. on April 1, 2000. SECTION 9. EXECUTION OF COUNTERPARTS. This Twentieth Supplemental Lease Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 10. SUMMARIES. For the convenience of both parties a Leased Parcel Summary and a Rental Summary are attached to this Lease Agreement. 7 IN WITNESS WHEREOF, THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION have caused this Twentieth Supplemental Lease Agreement to be duly executed in their respective behalfs, as of the day and year first above written. WITNESS: MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY /s/ RICHARD V. WHITE BY: /s/ LARRY D. COX - ------------------------------ ---------------------------- TITLE: DIRECTOR OF PROPERTIES TITLE: PRESIDENT ----------------------- ---------------------------- Approved as to Form and Legality: /s/ R. GRATTAN BROWN, JR. - ----------------------------- R. Grattan Brown, Jr., Attorney for Authority WITNESS: FEDERAL EXPRESS CORPORATION /s/ GLORIA OWENS BY: /s/ GRAHAM R. SMITH - ------------------------------ ---------------------------- TITLE: PROJECT COORDINATOR TITLE: VP ----------------------- ---------------------------- Approved Legal Department /s/ R.J. KWOKA 000331 --------------------- 8 (STATE OF TENNESSEE) (COUNTY OF SHELBY ) On this 31st day of March, 2000, before me appeared Larry D. Cox to me personally known, who, being by me duly sworn (or affirmed), did say that he is the President of the Memphis-Shelby County Airport Authority, the within named Lessor, and that he as such President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Authority by himself as such President. MY COMMISSION EXPIRES 8/29/01 /s/ CAROL D. WOLFE - ----------------------- ------------------------- Notary Public (seal) (STATE OF TENNESSEE) (COUNTY OF SHELBY ) On this 31st day of March, 2000, before me appeared Graham R. Smith to me personally known, who, being by me duly sworn (or affirmed), did say that he is a Vice President of Federal Express Corporation, the within named Lessee, and that he as such Vice President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Authority by himself as such Vice President. MY COMMISSION EXPIRES - ------------------------ /s/ MARILYN JONES -------------------- Notary Public (seal) 9 FEDERAL EXPRESS LEASED PARCELS SUMMARY
PARCEL EFFECTIVE LEASE ACRES SQUARE FEET AGREEMENT DATE - -------- ----- ----------- --------- --------- BASE-LEASE ---------- Revised 9 128.469 Consolidated & 08/01/79 Restated 10 1.612 70,200 Consolidated & 08/01/79 Restated 11 1.044 45,359 Consolidated & 08/01/79 Restated PREVIOUS SUPPLEMENTS -------------------- 12 2.707 117,915 First 04/01/81 Supplemental 13 6.860 298,830 Second 01/01/82 Supplemental 14 14.586 635,377 Fourth 07/01/83 Supplemental 15 12.689 552,723 Fourth 07/01/83 Supplemental Rev 16 18.281 (19.685) 796,312 Fifth 02/01/84 Supplemental Rev 17 119.616 (124.992) 5,210,477 Sixth 04/01/84 Supplemental 18 2.717 118,353 Sixth 04/01/84 Supplemental 19 41.606 1,812,352 Seventh 06/01/84 Supplemental 25 0.435 18,933 Eighth 07/01/88 Supplemental 20 11.275 491,127 Ninth 06/01/89 Supplemental 27 11.192 487,512 Tenth 10/01/91 Supplemental 27 A(West) 4.058 176,777 Eleventh 07/01/94 Supplemental 27 B(West) 5.706 248,533 Eleventh 07/01/94 Supplemental Southwest Ramp 2.350 102,366 Eleventh 07/01/94 Supplemental
10
PARCEL EFFECTIVE LEASE ACRES SQUARE FEET AGREEMENT DATE - -------- ----- ----------- --------- --------- 32 (removed) 22.972 1,000,681 Twelfth 07/01/93 Supplemental 33 8.998 391,942 Thirteenth 06/01/95 Supplemental 36 3.050 132,837 Thirteenth 06/01/95 Supplemental Hangar 8 (removed) 36,946,33 Thirteenth 06/01/95 Supplemental 34 9.951 433,461 Fourteenth 01/01/96 Supplemental 21 19.134 833,476 Fifteenth 01/01/97 Supplemental 22A (North) 3.214 140,000 Sixteenth 04/01/97 Supplemental 37 2.692 117,283 Seventeenth 05/01/97 Supplemental 38 2.523 109,921 Eighteenth 07/01/97 Supplemental 39 8.366 364,430 Eighteenth 07/01/97 Supplemental West Ramp 19.917 867,583 Nineteenth 09/01/98 Expansion Supplemental THIS SUPPLEMENT --------------- CENTERLINE 13.206 575,253.36 TWENTIETH 11/01/2000 NOVEMBER SUPPLEMENTAL OPTIONS ------- 22B (South) 3.310 144,200 Option, Expires 5/31/99 29 3.85 167,706 Option, Expires 9/30/2001 ASSIGNMENTS ----------- 23 5.923 258,008 Graber Assignment, Expires 12/31/2000 Invoice FEC Final Increase 1/l/96 24 9.964 434,030 Southwide Assignment Expires 5/14/2013 Invoice FEC Next Increase 5/15/03 26 9.532 415,213 BICO Assignment, Expires 7/31/2021 Invoice FEC Next Increase 8/01/2011 28 10.68 465,221 Equitable Life Assignment Expires 5/14/2013 Invoice FEC Next Increase 5/15/03
11 RENTAL - FEDERAL EXPRESS Effective November 1, 2000
Annual Category Number of Rental Rate of Space Square Feet Per Sq. Ft. Annual Rental - -------- ----------- ----------- ------------- Bldg. T-376 1,240 1.5258 $ 1,891.99 Unimproved Ground 7,486,757.36 0.1220 913,384.39 Improved Apron 2,395,802 0.1525 365,359.80 Hangar Property 72,092.67 1.1291 81,399.83 Hangar Office 28,000 1.8311 51,270.80 International Park 9,694,700 0.2138 2,072,726.80 Former IRS Facility 2,255,137.24 ------ 1,200,000.00 ------------ 4.97 ------------ 21,933,729.27 $4,686,033.61
BREAKDOWN OF SPACE
Sq. Ft. Sq. Ft. ------- ------- Bldg. T-376 Parcel 4 1,240 - ----------- ----- 1,240 Unimproved Ground Parcel 1 130,900 - ----------------- Parcel 2 50,000 Parcel 3 192,400 Parcel 4 32,540 Parcel 6 89,700 Parcel 9 1,167,337 Parcel 19 1,812,362 Parcel 20 491,127 Parcel 27A 176,777 Parcel 27B 248,533 Southwest Ramp 102,366 Parcel 33 391,942 Parcel 36 132,837 Parcel 34 433,461 Parcel 37 117,283 Parcel 38 109,921 Parcel 39 364,430 West Ramp Expansion 867,588 Centerline November 575,253.36 ---------- 7,486,757.36 Improved Apron Parcel 1 850,250 - -------------- Parcel 2 226,900 Parcel 7 577,540 Parcel 9 253,600 Parcel 27 487,512 ------- 2,395,802.00
12
Sq. Ft. Sq. Ft. ------- ------- Hangar Property Parcel 1 44,336 - --------------- Parcel 2 27,756.67 --------- 72,092.67 Hangar Office Parcel 1 22,400 - ------------- Parcel 2 5,600 ----- 28,000.00 International Park Parcel 5 24,000 - ------------------ Parcel 8 247,254 Parcel 9 1,586,172 Parcel 10 70,200 Parcel 11 45,359 Parcel 12 117,915 Parcel 13 298,830 Parcel 14 556,334 Parcel 15 552,723 Parcel 16 796,312 Parcel 17 4,288,839 Parcel 18 118,353 Parcel 25 18,9338 Parcel 21 833,476 Parcel 22A 140,000 --------- 9,694,700.00 Former IRS Facility 2,255,137.24 2,255,137.24 - ------------------- ------------ TOTAL: 21,933,729.27
13 EXHIBIT "A" 1 of 3 [ Survey of leased premises ] EXHIBIT "A" 2 of 3 Lease Parcel Being a parcel of land contained entirely within the Memphis/Shelby County Airport Authority property located in the City of Memphis, Shelby County, State of Tennessee being more particularly described by metes and bounds as follows: Commencing, at the centerline intersection of Taxiway November and Taxilane 800; thence along said centerline of Taxilane 800, South 85 degrees 42 minutes 38 seconds East a distance of 400.00' to a point, said point being the TRUE POINT OF BEGINNING; thence departing from and perpendicular to said centerline, North 04 degrees 17 minutes 22 seconds East a distance of 50.00' to a point on the north edge of pavement of said Taxilane 800; thence along said north edge of pavement of Taxilane 800, South 85 degrees 42 minutes 38 seconds East a distance of 527.30' to a point being 200.00' west of the existing west edge of pavement of the "FedEx Ramp 1999 Project" lease; thence along a line being parallel with and 200.00' west of said existing west edge of pavement of the "FedEx Ramp 1999 Project" lease, North 04 degrees 17 minutes 22 seconds East a distance of 399.00' to a point; thence along a line being parrallwl with and 449.00' north of said centerline of Taxilane 800, South 85 degrees 42 minutes 38 seconds East a distance of 506.06' to a point on the existing west edge of pavement, said point being common with a west line of the Part 1.34 project, Part II lease; thence along said west edge of pavement and common with said west line of the Part 1.34 project, Part II lease, South 01 degrees 56 minutes 39 seconds West a distance of 46.11' to a point of curvature; thence continuing along said west line of the Part 1.34 project, Part II lease in a southwesterly direction along the arc of a curve to the right having a radius of 22.50' (Long Chord = South 48 degrees 07 minutes 01 seconds West, 32.46') an arc distance of 36.26' to a point on the existing north edge of pavement of the "FedEx Ramp 1999 Project" being a north line of the FedEx Ramp 1999 lease parcel; thence along said north edge of pavement and said north line of the FedEx Ramp 1999 lease parcel, North 85 degrees 42 minutes 38 seconds West a distance of 285.47" to a point on the existing west edge of pavement; thence along said west edge of pavement, crossing said Taxilane 800 and continuing along said west edge of pavement being a west line of said FedEx Ramp 1999 project lease, South 04 degrees 17 minutes 22 seconds West a distance of 782.16' to a point on a north edge of pavement being a north line of said FedEx Ramp 1999 project lease; thence along said north edge of pavement being a north line of said FedEx Ramp 1999 project lease, North 85 degrees 42 minutes 38 seconds West a distance of 47.32' to a point on the west edge of pavement being a west line of said FedEx 1999 Ramp project lease; thence along said west edge of pavement being a west line of said FedEx 1999 Ramp project lease, South 04 degrees 17 minutes 22 seconds West a distance of 53.33' to a point on the south edge of pavement being a south line of said FedeEx Ramp 1999 project lease; thence along said south edge of pavement being said south line of the FedEx Ramp 1999 project lease, South 85 degrees 42 minutes 38 seconds East a distance of 352.33' to a point on the west edge of pavement being a west line of said Fed Ex Ramp 1999 project lease; thence along said west edge of pavement being said west line of the FedEx Ramp 1999 project, South 04 degrees 17 minutes 22 seconds West a distance of 210.00' to a point; thence departing from said west line of the FedEx Ramp 1999 project along a line being 666.00' south of and parallel with said center line of Taxilane 800, North 85 degrees 42 minutes 38 seconds West a distance of 223.80' to a point; thence North 04 degrees 17 minutes 22 seconds East a distance of 136.00' to a point; thence along a line being 530.00' south of and parallel with said centerline of Taxilane 800, North 85 degrees 42 minutes 38 seconds West a distance of 283.51' to a point; thence North 04 degrees 17 minutes 22 seconds East a distance of 125.49' to a point; thence along a line being 405.00' south of and parallel with said centerline of Taxilane 800, North 85 degrees 42 minutes 38 seconds West a distance of 500.00' to a point; thence South 04 degrees 17 minutes 22 seconds West a distance of 25.00' to a point; thence along a line being 430.00' south of and parallel with said centerline of Taxilane 800, North 85 degrees 42 minutes 38 seconds West a distance of 50.00' to a point; thence North 04 degrees 17 minutes 22 seconds East a distance of 25.00' to a point; thence along a line being 405.00' south of and parallel with said centerline of Taxilane 800, North 85 degrees 42 minutes 38 seconds West a distance of 175.00' to a point being 200.00' east of said centerline of Taxiway November; thence along a line being 200.00' east of and parallel with said centerline of Taxiway November, North 04 degrees 17 minutes 22 seconds East a distance of 329.50' to a point on the existing south edge of pavement of said Taxilane 800; thence along said edge of pavement of Taxilane 800, South 85 degrees 42 minutes 38 seconds East a distance of 175.00' to a point on an existing east edge of pavement of said Taxilane 800; thence along said east edge of pavement of Taxilane 800, North 04 degrees 17 minutes 22 seconds East a distance of 25.00' to a point on the south edge of pavement of said Taxilane EXHIBIT "A" 3 of 3 800; thence along said edge of pavement of Taxilane 800, South 85 degrees 42 minutes 38 seconds East a distance of 25.00' to a point; thence departing from said south edge of pavement of Taxilane 800 perpendicular to said centerline of Taxilane 800, North 04 degrees 17 minutes 22 seconds East a distance of 50.00' to the TRUE POINT OF BEGINNING. Said parcel of land containing 575,255 square feet, or 13.206 Acres, more or less. EX-10.22 4 ex-10_22.txt EXHIBIT 10.22 Exhibit 10.22 EXECUTION COPY - ----------------------------------------------------------------------------- TWENTY-FIRST SUPPLEMENTAL LEASE AGREEMENT BY AND BETWEEN MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION DATED AS OF MAY 15, 2000 AMENDING THE CONSOLIDATED AND RESTATED LEASE AGREEMENT DATED AS OF AUGUST 1, 1979 BETWEEN THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION. - ----------------------------------------------------------------------------- TABLE OF CONTENTS
SECTION PAGE - ------- ---- 1 Definitions............................................ 3 2 Granting Leasehold..................................... 3 3 Term; Delivery and Acceptance of Possession............ 4 4 Rental................................................. 4 5 Hazardous Substances/Waste............................. 4 6 Lease Agreement Still in Effect; Provisions Thereof Applicable to this Supplemental Lease Agreement........ 5 7 Descriptive Headings................................... 6 8 Effectiveness of this Twenty-First Supplemental Lease Agreement........................................ 6 9 Execution of Counterparts.............................. 6 10 Summaries ............................................. 6 Signatures............................................. 7 Lease Parcel Summary................................... 9 Rental Summary......................................... 11
TWENTY-FIRST SUPPLEMENTAL LEASE AGREEMENT THIS TWENTY-FIRST SUPPLEMENTAL LEASE AGREEMENT, made and entered into as of the 15th of May 2000, by and between MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY (herein sometimes referred to as "Authority"), a public and governmental body politic and corporate of the State of Tennessee, and FEDERAL EXPRESS CORPORATION (herein sometimes referred to as "Tenant"), a corporation duly organized and existing under the laws of the State of Delaware and qualified to do business in the State of Tennessee. WITNESSETH: WHEREAS, Authority and Tenant on October 3, 1979 entered into a Consolidated and Restated Lease Agreement dated as of August 1, 1979; and WHEREAS, Authority and Tenant, between April 1, 1981 and March 31, 2000, have entered into Twenty Supplemental Lease Agreements amending the 1979 Consolidated and Restated Lease Agreement; and WHEREAS, the said Consolidated and Restated Lease Agreement dated as of August 1, 1979, together with the First through the Twentieth Supplemental Lease Agreements is herein referred to as the "Lease Agreement"; and WHEREAS, Authority and Tenant have agreed to further supplement the Lease Agreement so as to lease to Tenant certain additional land under this Twenty-First Supplemental Lease Agreement. NOW THEREFORE, for and in consideration of the mutual promises, covenants and agreements hereinafter contained to be kept and performed by the parties hereto and upon the provisions and conditions hereinafter set forth, Authority and Tenant do hereby covenant and agree, and each for itself does hereby covenant and agree, as follows: SECTION 1. DEFINITIONS. Except as otherwise provided herein, and unless the context shall clearly require otherwise, all words and terms used in this Twenty-First Supplemental Lease Agreement which are defined in the Lease Agreement, shall, for all purposes of this Twenty-First Supplemental Lease Agreement, have the respective meanings given to them in the Lease Agreement. SECTION 2. GRANTING OF LEASEHOLD. In addition to the lease and demise to Tenant of the land in the Lease Agreement, the Authority hereby leases and demises to Tenant, and Tenant 3 hereby takes and hires from Authority, subject to the provisions and conditions set forth in the Lease Agreement and this Twenty-First Supplemental Lease Agreement, the additional land containing approximately 4.706 acres located approximately 650 feet east and 404.5 feet south of the intersection of the physical centerline of Taxiway November and the physical centerline of Taxilane 800 which is located on Memphis-Shelby County Airport Authority property situated in Memphis, Shelby County, Tennessee and being more particularly described in Exhibit A: SECTION 3. TERM; DELIVERY AND ACCEPTANCE OF POSSESSION. The term of this Twenty-First Supplemental Lease Agreement shall commence at 12:01 A.M. on the earlier to occur of April 1, 2001, or the date of beneficial occupancy for the land described in Exhibit "A" and shall expire at such time as the Lease Agreement shall expire, to-wit: August 31, 2012 or upon such earlier termination, extension or otherwise as provided therein. Authority shall, however, deliver to Tenant sole and exclusive possession of the land leased hereby as of the effective date of this Twenty-First Supplemental Lease Agreement for the purpose of constructing improvements required for Tenant's intended use of the land leased hereby, subject however, to Authority's right-of-entry set forth in Section 21 of the Lease Agreement. SECTION 4. RENTAL. In addition and supplemental to the rentals required to be paid to the Authority pursuant to Section 5 of the Lease Agreement (including all prior supplemental lease agreements), during the term of this Twenty-First Supplemental Lease Agreement, Tenant shall pay the Authority in advance on the first business day of each month $2,083.91 in equal installments beginning April 1, 2001 or date of beneficial occupancy whichever occurs first, a total rental payment of $25,066.95 per year, which the parties hereto agree is based upon an aggregate of 204,975 square feet of area at an annual rental rate of ($0.1220) per square foot. SECTION 5. HAZARDOUS SUBSTANCES/WASTE. Tenant, at its own expense, may arrange for a Phase 1 Environmental Survey on the land described herein by a reputable environmental consultant to determine the existence of "Hazardous Substances", as such term is defined in this Agreement. In the event that "Hazardous Substances" are discovered during excavation for construction on the property described in Exhibit "A", and such "Hazardous Substances" require special handling, removal or disposal ("Remediation"), then Tenant shall immediately notify Authority. The Tenant and Authority will confer and jointly determine the method for handling, removing or disposing of the "Hazardous Substances" within 14 days after Tenant provides the Authority, in writing, its plan for Remediation. The form of Remediation agreed to by the parties 4 must comply with "Environmental Laws", as such term is defined below. In the event that Tenant and Authority are unable to agree on a method for handling, removing or disposing of the "Hazardous Substances" due to differing interpretations of the requirements of Remediation as set forth in the applicable "Environmental Laws", then the form of Remediation will be determined by the appropriate federal, state or local agency with relevant regulatory and enforcement jurisdiction over the subject site. Authority will grant to Tenant a rent credit equal to the reasonable documented costs paid by Tenant for the Remediation of such "Hazardous Substances" associated with the property described in Exhibit "A". The term "HAZARDOUS SUBSTANCES", as used in this Twenty-First Supplemental Lease Agreement, shall mean any hazardous or toxic substances, materials or wastes, including but not limited to, those substances, materials, and wastes (i) listed in the United States Department of Transportation Hazardous Materials Table (49 CFR Section 172.101) or by the Environmental Protection Agency as hazardous substances (40 CFR Part 302) and amendments thereto, (ii) designated as a "Hazardous Substance" pursuant to Section 311 of the clean Water Act, 33 U.S.C. Section 1251 est seq. (33 U.S.C. Section 1321) or listed pursuant to Section 307 of the Clean Water Act (33 U.S.C. Section 1317, (iii) defined as a "Hazardous Waste" pursuant to Section 1004 of the Resource Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq. (42 U.S.C Section . 6903), or (iv) defined as "Hazardous Substances" pursuant to section 101 of the Comprehensive Environmental Response, Compensation and Liability Act, 42 U.S.C. Section 9601, et seq. 42 U.S.C. Section 9601) or any other substances, (including, without limitation, asbestos and raw materials which include hazardous constituents), the general, discharge or removal of which or the use of which is restricted, prohibited or penalized by any "Environmental Law", which term shall mean any Federal, State or local law, regulation, or ordinance relating to pollution or protection of the environment. SECTION 6. LEASE AGREEMENT STILL IN EFFECT; PROVISIONS THEREFORE APPLICABLE TO THIS SUPPLEMENTAL LEASE AGREEMENT. All of the terms, provisions, conditions, covenants and agreements of the Lease Agreement, as supplemented, shall continue in full force and effect as supplemental hereby, and shall be applicable to each of the provisions of this Twenty-First Supplemental Lease Agreement during the term hereof with the same force and effect as though the provisions hereof were set forth in the Lease Agreement. 5 SECTION 7. DESCRIPTIVE HEADINGS. The descriptive headings of the sections of this Twenty-First Supplemental Lease Agreement are inserted for convenience of reference only and do not constitute a part of this Twenty-First Supplemental Lease Agreement and shall not effect the meaning, construction, interpretation or effect of this Twenty-First Supplemental Lease Agreement. SECTION 8. EFFECTIVENESS OF THIS SUPPLEMENTAL LEASE AGREEMENT. This Twenty-First Supplemental Lease Agreement shall become effective at 12:01 a.m. on May 15, 2000. SECTION 9. EXECUTION OF COUNTERPARTS. This Twenty-First Supplemental Lease Agreement may be simultaneously executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. SECTION 10. SUMMARIES. For the convenience of both parties a Leased Parcel Summary and a Rental Summary are attached to this leased Agreement. 6 IN WITNESS WHEREOF, THE MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY AND FEDERAL EXPRESS CORPORATION have caused this Twenty-First Supplemental Lease Agreement to be duly executed in their respective behalfs, as of the day and year first above written. WITNESS: MEMPHIS-SHELBY COUNTY AIRPORT AUTHORITY /s/ RICHARD V. WHITE BY: /s/ LARRY D. COX - ------------------------- ----------------------- TITLE: TITLE: PRESIDENT ------------------- ----------------------- Approved as to Form and Legality: /s/ R. GRATTAN BROWN, JR. - ------------------------------ R. Grattan Brown, Jr., Attorney for Authority WITNESS: FEDERAL EXPRESS CORPORATION A Delaware Corporation /s/ BONNIE L. BARLOW BY: /s/ WILEY JOHNSON, JR. - ----------------------------- ------------------------- Managing Director, Real Estate and TITLE: Project Coordinator TITLE: Airport Development --------------------- ------------------------- /s/ MM /s/RJG /s/TD Approved Legal Department /s/ PLM 6/13/00 7 (STATE OF TENNESSEE) (COUNTY OF SHELBY) On this 12th day of June, 2000, before me appeared Larry D. Cox to me personally known, who, being by me duly sworn (or affirmed), did say that he is the President of the Memphis-Shelby County Airport Authority, the within named Lessor, and that he as such President, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Authority by himself as such President. MY COMMISSION EXPIRES JAN. 20, 2004 /s/ PAT STANFILL - --------------------- ----------------- Notary Public (seal) (STATE OF TENNESSEE) (COUNTY OF SHELBY) On this 13th day of June, 2000, before me appeared Wiley Johnson, Jr. to me personally known, who, being by me duly sworn (or affirmed), did say that he is a Managing Director Real Estate And Airport Development of Federal Express Corporation, the within named Lessee, and that he as such Director, being authorized so to do, executed the foregoing instrument for the purposes therein contained, by signing the name of the Authority by himself as such Director. MY COMMISSION EXPIRES 8-13-2003 /s/ GLORIA E. OWENS - ------------------------ ----------------------- Notary Public (seal) 8 FEDERAL EXPRESS LEASED PARCELS SUMMARY
PARCEL EFFECTIVE LEASE ACRES SQUARE FEET AGREEMENT DATE - -------- ----- ----------- --------- --------- BASE-LEASE ---------- Revised 9 128.469 Consolidated & 08/01/79 Restated 10 1.612 70,200 Consolidated & 08/01/79 Restated 11 1.044 45,359 Consolidated & 08/01/79 Restated PREVIOUS SUPPLEMENTS -------------------- 12 2.707 117,915 First 04/01/81 Supplemental 13 6.860 298,830 Second 01/01/82 Supplemental 14 14.586 635,377 Fourth 07/01/83 Supplemental 15 12.689 552,723 Fourth 07/01/83 Supplemental Rev 16 18.281 (19.685) 796,312 Fifth 02/01/84 Supplemental Rev 17 119.616 (124.992) 5,210,477 Sixth 04/01/84 Supplemental 18 2.717 118,353 Sixth 04/01/84 Supplemental 19 41.606 1,812,352 Seventh 06/01/84 Supplemental 25 0.435 18,933 Eighth 07/01/88 Supplemental 20 11.275 491,127 Ninth 06/01/89 Supplemental 27 11.192 487,512 Tenth 10/01/91 Supplemental 27 A(West) 4.058 176,777 Eleventh 07/01/94 Supplemental 27 B(West) 5.706 248,533 Eleventh 07/01/94 Supplemental Southwest Ramp 2.350 102,366 Eleventh 07/01/94 Supplemental
9
PARCEL EFFECTIVE LEASE ACRES SQUARE FEET AGREEMENT DATE - -------- ----- ----------- --------- --------- 32 (removed) 22.972 1,000,681 Twelfth 07/01/93 Supplemental 33 8.998 391,942 Thirteenth 06/01/95 Supplemental 36 3.050 132,837 Thirteenth 06/01/95 Supplemental Hangar 8 (removed) 36,946,33 Thirteenth 06/01/95 Supplemental 34 9.951 433,461 Fourteenth 01/01/96 Supplemental 21 19.134 833,476 Fifteenth 01/01/97 Supplemental 22A (North) 3.214 140,000 Sixteenth 04/01/97 Supplemental 37 2.692 117,283 Seventeenth 05/01/97 Supplemental 38 2.523 109,921 Eighteenth 07/01/97 Supplemental 39 8.366 364,430 Eighteenth 07/01/97 Supplemental West Ramp 19.917 867,583 Nineteenth 09/01/98 Expansion Supplemental Centerline 13.206 575,253.36 Twentieth 12/01/00 November Supplemental THIS SUPPLEMENT TAXILANE 700 4.706 204,975 TWENTY-FIRST 05/15/00 SUPPLEMENTAL OPTIONS 22B (South) 3.310 144,200 Option, Expires 5/31/04 29 3.85 167,706 Option, Expires 9/30/2001 ASSIGNMENTS 23 5.923 258,008 Graber Assignment, Expires 12/31/2000 Invoice FEC Final Increase 1/l/96 24 9.964 434,030 Southwide Assignment Expires 5/14/2013 Invoice FEC Next Increase 5/15/03 26 9.532 415,213 BICO Assignment, Expires 7/31/2021 Invoice FEC Next Increase 8/01/2011
10
28 10.68 465,221 Equitable Life Assignment Expires 5/14/2013 Invoice FEC Next Increase 5/15/03
RENTAL - FEDERAL EXPRESS Effective April 1, 2001
Annual Category Number of Rental Rate of Space Square Feet Per Sq. Ft. Annual Rental - -------- ----------- ----------- ------------- Bldg. T-376 1,240 1.5258 $1,891.99 Unimproved Ground 7,691,736.36 0.1220 938,391.34 Improved Apron 2,395,802 0.1525 365,359.80 Hangar Property 72,092.67 1.1291 81,399.83 Hangar Office 28,000 1.8311 51,270.80 International Park 9,694,700 0.2138 2,072,726.80 Former IRS Facility 2,255,137.24 ------ 1,200,000.00 ------------ 4.97 ------------ 22,138,704.27 $4,711,040.56
BREAKDOWN OF SPACE
Sq. Ft. Sq. Ft. ------- ------- Bldg. T-376 Parcel 4 1,240 - ----------- ----- 1,240 Unimproved Ground Parcel 1 130,900 - ----------------- Parcel 2 50,000 Parcel 3 192,400 Parcel 4 32,540 Parcel 6 89,700 Parcel 9 1,167,337 Parcel 19 1,812,362 Parcel 20 491,127 Parcel 27A 176,777 Parcel 27B 248,533 Southwest Ramp 102,366 Parcel 33 391,942 Parcel 36 132,837 Parcel 34 433,461 Parcel 37 117,283 Parcel 38 109,921 Parcel 39 364,430 West Ramp Expansion 867,588 Centerline November 575,253.36 Taxilane 700 204,975 ---------- 7,691,732.36
11
Improved Apron Parcel 1 850,250 - -------------- Parcel 2 226,900 Parcel 7 577,540 Parcel 9 253,600 Parcel 27 487,512 ------- 2,395,802.00 13 Sq. Ft. Sq. Ft. ------- ------- Hangar Property Parcel 1 44,336 - --------------- Parcel 2 27,756.67 --------- 72,092.67 Hangar Office Parcel 1 22,400 - ------------- Parcel 2 5,600 ----- 28,000.00 International Park Parcel 5 24,000 - ------------------ Parcel 8 247,254 Parcel 9 1,586,172 Parcel 10 70,200 Parcel 11 45,359 Parcel 12 117,915 Parcel 13 298,830 Parcel 14 556,334 Parcel 15 552,723 Parcel 16 796,312 Parcel 17 4,288,839 Parcel 18 118,353 Parcel 25 18,9338 Parcel 21 833,476 Parcel 22A 140,000 ---------- 9,694,700.00 Former IRS Facility 2,255,137.24 2,255,137.24 - ------------------- ------------ TOTAL: 22,138,704.27
[ Survey of leased premises ] EXHIBIT "A" 1 of 2 [ letterhead ] MARCH 31, 2000 LEGAL DESCRIPTION - PROPOSED FEDEX LEASE AREA BEING A LEGAL DESCRIPTION OF A PROPOSED FEDES CORPORATION LEASE AREA, BEING A PARCEL OF LAND CONTAINED ENTIRELY WITHIN THE LIMITS OF THE MEMPHIS AND SHELBY COUNTY AIRPORT AUTHORITY PROPERTY, ALL SITUATED IN MEMPHIS, SHELBY COUNTY, TENNESSEE AND SAID PROPOSED LEASE AREA BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: COMMENCING AT THE INTERSECTION OF THE PHYSICAL CENTERLINE OF TAXIWAY NOVEMBER AND THE PHYSICAL CENTERLINE OF TAXILANE 800; THENCE SOUTH 85 DEGREES 42 MINUTES 38 SECONDS EAST ALONG THE SAID CENTERLINE OF TAXILANE 800 A DISTANCE OF 650.00 FEET; THENCE SOUTH 04 DEGREES 17 MINUTES 22 SECONDS WEST (LEAVING AND PERPENDICULAR TO SAID CENTERLINE) - 404.50 FEET TO THE POINT OF BEGINNING OF SAID PROPOSED LEASE AREA; THENCE SOUTH 85 DEGREES 42 MINUTES 38 SECONDS EAST (PARALLEL TO SAID CENTERLINE) - 275.00 FEET; THENCE SOUTH 04 DEGREES 17 MINUTES 22 SECONDS WEST (PERPENDICULAR TO SAID CENTERLINE) - 125.49 FEET; THENCE SOUTH 85 DEGREES 42 MINUTES 38 SECONDS EAST (PARALLEL TO SAID CENTERLINE) - 50.00 FEET; THENCE SOUTH 04 DEGREES 17 MINUTES 22 SECONDS WEST (PERPENDICULAR TO SAID CENTERLINE) - 524.51 FEET; THENCE NORTH 85 DEGREES 42 MINUTES 38 SECONDS WEST (PARALLEL TO SAID CENTERLINE) - 325 FEET; THENCE NORTH 04 DEGREES 17 MINUTES 22 SECONDS EAST (PERPENDICULAR TO SAID CENTERLINE) TO THE POINT OF BEGINNING. CONTAINING 204.975 SQUAE FEET, OR 4.706 ACRES MORE OR LESS. BEARINGS ARE RELATIVE TO THE MEMPHIS AND SHELBY COUNTY AIRPORT AUTHORITY GRID SYSTEM. /s/ WILLIAM H. WOODS :\17165\65LEGAL_1 jra EXHIBIT "A" 2 of 2 EX-10.37 5 ex-10_37.txt EXHIBIT 10.37 EXHIBIT 10.37 01-07-00 Letter Agreement No. 8 DAC 96-29-M Federal Express Corporation 2005 Corporate Avenue Memphis, Tennessee 38132 Federal Express Corporation (Federal Express) and McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company (MDC), have entered into Modification Services Agreement Document No. DAC 96-29-M (the "Agreement") dated September 16, 1996, which Agreement covers Federal Express' desire to incorporate certain modifications in its DC-10 aircraft (the "Aircraft", as defined in the Agreement) and MDC desires to perform such modifications. As a further consideration of the parties hereto, this Letter Agreement No. 8 shall constitute a part of said Agreement. In anticipation of potential FAA future requirements, MDC agrees to install certified smoke detection systems in the Aircraft subject to the following terms and conditions: 1. UPPER CARGO COMPARTMENT a) MDC shall install a certified one-minute smoke detection system in the upper main cargo compartment of MD-10 (ACF configured) Aircraft. The certification basis and detailed design shall include use of the Whittaker model 602 one-minute smoke detector (the "One-Minute Detectors"). b) For all Aircraft that are to receive the ACF Modification and that are Delivered in a passenger configuration, the One-Minute Detectors for the upper cargo compartment shall be provided by MDC as Seller Furnished Equipment (SFE) c) For all Aircraft that are to receive the ACF Modification and that are Delivered in a freighter configuration, the One-Minute Detectors for the upper cargo compartment shall be provided by FedEx as Buyer Furnished Equipment (BFE) 2. LOWER CARGO COMPARTMENTS a) MDC shall continue to install a certified five-minute smoke detection system in the lower forward cargo compartment in accordance with Exhibit B. - Passenger to Freighter Modification (ER 95-051). b) For all Aircraft that are to receive the ACF Modification and the Passenger to Freighter Modification as noted in Exhibit O - Schedule, MDC shall install a certified five-minute smoke detection and fire suppression system in the lower center and aft cargo compartments concurrently with the accomplishment of the P to F and ACF Modifications at an additional charge to FedEx of [ * ]. c) For all Aircraft that are to receive the ACF Modification only as noted in Exhibit O - Schedule, FedEx shall be responsible for installing the smoke Page 2 detection and fire suppression systems in the center and aft cargo compartments either by contracting directly with a FedEx subcontractor prior to Delivery or directly with MDC, or its subcontractor, via the ASR process during the Aircraft Visit. d) MDC shall be responsible to provide the One-Minute Detectors for the lower forward cargo compartment for those Aircraft in which the lower galley is removed during the Passenger to Freighter modification. FedEx shall be responsible to provide the One-Minute Detectors for the lower forward, center and aft cargo compartments as BFE for all other Aircraft. 3. Aircraft that are configured for CRAF and/or animal charter operation ("Charter Aircraft") shall be certified with a five-minute smoke detection system for the upper and lower cargo compartments. 4. In all cases where the five-minute smoke detector system is installed, MDC shall (i) obtain FAA approval for the One-Minute Detector to be an equivalent part to the existing five minute detectors without change to the five-minute system certification, which approval will preclude the intermix of one-minute and five-minute detectors, and (ii) install the BFE or SFE, as applicable, One Minute Detectors in the lower forward, center and aft cargo compartments during the ACF Modification at no additional charge to FedEx. 5. MDC shall install the one-minute smoke detection system on all flight test Aircraft prior to Redelivery to Federal Express. Federal Express shall be responsible for providing a complete shipset (all upper and lower compartments) of One-Minute Detectors as BFE for fuselage 444. 6. All of the terms of the Agreement shall remain in full force and effect, except as herein expressly changed, modified or supplemented, or except insofar as the terms thereof have been completed, performed or complied with prior to the date hereof. If the foregoing correctly sets forth our understanding, please execute this Letter Agreement in the space provided below. FEDERAL EXPRESS CORPORATION MCDONNELL DOUGLAS CORPORATION /s/ JAMES R. PARKER /s/ CHARLES STREITZ - --------------------------- ----------------------------- Signature Signature JAMES R. PARKER CHARLES STREITZ - --------------------------- ----------------------------- Printed Name Printed Name VICE PRESIDENT CONTRACTS MANAGER - --------------------------- ----------------------------- Title Title 1-14-00 ----------------------------- Date * Blank space contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. 01-07-00 Letter Agreement No. 11 DAC 96-29-M Federal Express Corporation 2005 Corporate Avenue Memphis, Tennessee 38132 Federal Express Corporation (FedEx) and McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company (MDC), have entered into Modification Services Agreement Document No. DAC 96-29-M (the "Agreement") dated September 16, 1996, which Agreement covers Federal Express' desire to incorporate certain modifications in its DC-10 aircraft (the "Aircraft", as defined in the Agreement) and MDC desires to perform such modifications. As a further consideration of the parties hereto, this Letter Agreement No. 11 shall constitute a part of said Agreement. FedEx and MDC have previously come to an agreement on certain wiring changes which are to be accomplished on all Aircraft during completion of the Services. These wiring changes consist of the Sundstrand enhanced electrical system (the "EPC Wiring") and replacement of a substantial portion of the wiring in the non-pressurized sections of the airframe (the "External Wiring), and have been documented in Amendment No. 1 to the Agreement dated January 27, 1999. In addition to the EPC Wiring and External Wiring changes noted above, FedEx and MDC agree to substantially replace the wiring in the pressurized sections of the airframe as defined by the list included herein as Attachment A (the "Internal Wiring"). As a result of accomplishing the replacement of the Internal Wiring, effectively the only wiring remaining on the Aircraft that will not have been replaced, by virtue of one or all of the EPC Wiring, External Wiring or Internal Wiring changes, will be the power feeder cables connecting from the Electrical Power Center (EPC) to the engines, Auxiliary Power Unit (APU) and Air Driven Generator (ADG). Any wiring not listed in Attachment A which is part and parcel to Line Replaceable Units (LRUs) will also remain unchanged. MDC hereby agrees to replace the Internal Wiring on the Aircraft during the accomplishment of the Services on each Aircraft, excluding Flight Test Aircraft fuselages 138 and 444, subject to the following terms and conditions: 1. In consideration of MDC accomplishing the replacement of the Internal Wiring on the Aircraft, the Price to be paid to MDC by FedEx upon Redelivery of the Aircraft shall be increased by an amount equal to [ * ], subject to escalation in accordance with Exhibit N to the Agreement. 2. MDC shall develop a standardized wire harness by incorporating the changes associated with the replacement of the EPC Wiring, External Wiring and Internal Wiring such that substantially the same wire harness assemblies are installed on each Aircraft (the "Standard Wire Harness"). FedEx and MDC have jointly developed a mutually agreed to list of FedEx EOs, included herein as Attachment B, that are to be included for potential interface on any given Aircraft as part of the Standard Wire Harness design configuration (the "Standard ACF Configuration"). [ * ] FedEx shall be responsible for the adaptive engineering to revise the FedEx EOs in Attachment B to coincide with the MDC design at a Page 2 mutually agreed interface point. If an Aircraft is Delivered with a given EO in Attachment B incorporated, then MDC shall retain and re-connect such installations at no additional charge to FedEx. If an Aircraft is Delivered without a given EO in Attachment B incorporated, and FedEx elects to install such EO on that Aircraft, then MDC shall accomplish such EO and charge FedEx via the ASR process. 3. FedEx acknowledges that as a result of the changes associated the EPC Wiring, External Wiring, Internal Wiring, Standard ACF Configuration and the Standard Wire Harness, MDC will essentially remove indiscriminately all wiring from the Aircraft, except for the wiring noted above, prior to installing new wiring in the Aircraft during the accomplishment of the Services. As a result, it is possible for wiring to be removed from any given Aircraft that is associated with installations that were installed by MDC, FedEx or the prior owner(s) of the Aircraft after such Aircraft was delivered by MDC to the original owner and that are not part of the Standard ACF Configuration or the Standard Wire Harness ("Unique Installation"). If a Unique Installation is encountered in the process of accomplishing the Services, FedEx can request for MDC to include such Unique Installation into that Aircraft's configuration at additional charge to FedEx via the ASR process. Notwithstanding the terms of this Paragraph, at no additional charge to FedEx MDC shall install all wiring that is in excess of that listed in Attachment A which is otherwise required for MDC's accomplishment of the Services in accordance with the Agreement. 4. All of the terms of the Agreement shall remain in full force and effect, except as herein expressly changed, modified or supplemented, or except insofar as the terms thereof have been completed, performed or complied with prior to the date hereof. If the foregoing correctly sets forth our understanding, please execute this Letter Agreement in the space provided below. FEDERAL EXPRESS CORPORATION MCDONNELL DOUGLAS CORPORATION /s/ JAMES R. PARKER /s/ CHARLES STREITZ - ---------------------------- ----------------------------- Signature Signature JAMES R. PARKER CHARLES STREITZ - ---------------------------- ----------------------------- Printed Name Printed Name VICE PRESIDENT CONTRACTS MANAGER - ---------------------------- ----------------------------- Title Title 1-14-00 ----------------------------- Date * Blank spaces contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. 11-18-99 Letter Agreement No. 13 DAC 96-29-M Federal Express Corporation 2005 Corporate Avenue Memphis, Tennessee 38132 Federal Express Corporation (FedEx) and McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company (MDC), have entered into Modification Services Agreement Document No. DAC 96-29-M (the "Agreement") dated September 16, 1996, which Agreement covers Federal Express' desire to incorporate certain modifications in its DC-10 aircraft (the "Aircraft", as defined in the Agreement) and MDC desires to perform such modifications. As a further consideration of the parties hereto, this Letter Agreement No. 13 shall constitute a part of said Agreement. This Letter Agreement No. 13 provides notice to FedEx that fuselage 4, Factory Serial Number 46600 (the "MAE Aircraft"), shall receive the ACF Modification at ST Mobile Aerospace, Inc. (MAE) located in Mobile, AL. MDC acknowledges that FedEx desires to contract directly with MAE to accomplish any non-routines that arise during the accomplishment of the ACF Modification, or for maintenance actions that were deferred during the accomplishment of the P to F modification while the Aircraft was at Aeronavali in Venice, Italy (collectively the "Specified Services"). MDC also acknowledges that FedEx intends to contract directly with MAE to accomplish the Specified Services concurrently with the accomplishment of the ACF Modification by MAE under separate contract with MDC. MDC hereby agrees to the reduction in work scope resulting from FedEx or its subcontractor accomplishing the Specified Services subject to the following terms and conditions: 1. MDC agrees to waive the requirement that FedEx contract through MDC for the accomplishment of the Specified Services [ * ]. 2. The induction of the MAE Aircraft into Mobile, AL at the MAE facility for commencement of the ACF Modification shall be August 25, 1999. The Redelivery Date of the MAE Aircraft shall be May 21, 2000. FedEx shall be responsible for ensuring that the Federal Express Supplied Parts required to support the accomplishment of the Specified Services are delivered to MAE in accordance with the requirements stipulated in the Agreement. 3. FedEx hereby irrevocably and unconditionally waives any of MDC's warranties which are exclusively related to workmanship and only for the portion of the Specified Services on the MAE Aircraft exclusively performed by FedEx or its subcontractor, provided, however, nothing in this Section 3. shall extend to or otherwise affect warranties which may be applicable to Parts. 4. The performance of the Specified Services by FedEx or its subcontractor shall in no manner change, modify, terminate or otherwise affect MDC's warranties regarding the MAE Aircraft or in any manner whatsoever modify the terms and conditions of the Agreement except as expressly set forth herein. Page 2 5. FedEx and MDC mutually acknowledge that a potential resource conflict exists as a result of MAE entering into two separate contracts to accomplish work concurrently on one aircraft. FedEx and MDC agree to mutually develop a priority of tasks, and mutually resolve any resource conflicts that arise to prevent any materially adverse impact to the MAE Aircraft Redelivery Date. If a resource conflict arises, then the party identifying the conflict shall immediately notify the other party. If the resource conflict cannot be resolved within two days of notification of the conflict by MDC or FedEx, and such conflict results in a delay of MDC's or FedEx's ability to accomplish the services in accordance with the scheduled planning in MDC's or FedEx's respective contract with MAE, then any resultant delay in the Redelivery Date will constitute an Excusable Delay as defined in the Agreement. 6. Should there be a delay to the flight test activity on the MAE Aircraft that is directly attributable to a delay caused by the accomplishment of the Specified Services by FedEx or its subcontractor, and (i) FedEx has not initiated appropriate action, and (ii) the parties agree that such delay can be cured more expeditiously by MDC providing resources or parts on behalf of FedEx or its subcontractor; then MDC shall have the right to provide such resources or parts provided that the costs associated therewith are mutually agreed upon by the parties via the ASR process prior to such services being performed by MDC. MDC shall provide FedEx with timely notice of such potential delay in order for FedEx or its subcontractor to initiate any appropriate action. 7. All of the terms of the Agreement shall remain in full force and effect, except as herein expressly changed, modified or supplemented, or except insofar as the terms thereof have been completed, performed or complied with prior to the date hereof. If the foregoing correctly sets forth our understanding, please execute this Letter Agreement in the space provided below. FEDERAL EXPRESS CORPORATION MCDONNELL DOUGLAS CORPORATION /s/ JAMES R. PARKER /s/ CHARLES STREITZ - ---------------------------- ----------------------------- Signature Signature JAMES R. PARKER CHARLES STREITZ - ---------------------------- ----------------------------- Printed Name Printed Name VICE PRESIDENT CONTRACTS MANAGER - ---------------------------- ----------------------------- Title Title 12-1-99 ----------------------------- Date 11-03-99 Letter Agreement No. 14 DAC 96-29-M Federal Express Corporation 2005 Corporate Avenue Memphis, Tennessee 38132 Federal Express Corporation (FedEx) and McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company (MDC), have entered into Modification Services Agreement Document No. DAC 96-29-M (the "Agreement") dated September 16, 1996, which Agreement covers Federal Express' desire to incorporate certain modifications in its DC-10 aircraft (the "Aircraft", as defined in the Agreement) and MDC desires to perform such modifications. As a further consideration of the parties hereto, this Letter Agreement No. 14 shall constitute a part of said Agreement. This Letter Agreement No. 14 incorporates a revised Exhibit O - Schedule dated 11-08-99 to the Agreement, enclosed herein as Attachment A, which reflects mutually agreed revisions to the Delivery and Redelivery Dates, fuselage number sequencing and modification site allocations. MDC and FedEx agree to the accomplishment of the Services in accordance with the above noted revised Exhibit O subject to the following terms and conditions: 1. MDC assumes that one Module 5 and one Module 1 kit will both be utilized on an Aircraft of Option Block 3 which is to be Delivered to Mobile Aerospace in Mobile, AL (MAE) by no later than May 2003 for commencement of the Services. [ * ] 2. If FedEx elects not to exercise another block of Option Aircraft, or does not include an Aircraft that needs the above noted parts in their next option block [ * ]. 3. The price to FedEx for the Passenger to Freighter Modification for each of fuselage numbers 207, 271, 353 and 321 (the "Advanced Aircraft") shall be [ * ]. When FedEx exercises the block of Option Aircraft that includes Aircraft fuselage numbers 3, 5, 12 and 13 (the "Required Option Block"), then [ * ] of the Premium Amount per Aircraft shall be refundable (the "Refundable Amount"). Within 30 days of FedEx's exercise of the Required Option Block, MDC shall issue a refund check to FedEx for the Refundable Amount for each of the four Advanced Aircraft. If FedEx does not exercise the Required Option Block prior to the termination of the Agreement, the entire Premium Amount shall be non-refundable. 4. The Delivery Dates and corresponding Redelivery Dates for Aircraft fuselage number 298 and fuselage number 351 have been extended to the new dates shown in Attachment A. FedEx shall be charged the price for the Passenger to Page 2 Freighter and ACF Modifications for the two noted Aircraft in accordance with Exhibit K to the Agreement, subject to escalation in accordance with Exhibit N of the Agreement. 5. For Aircraft Delivered to OAN subsequent to the two Aircraft noted in Paragraph 4 above, which are specified by Exhibit O to receive the P to F as well as the ACF Modifications (the "Subsequent Aircraft"), FedEx shall provide [ * ] written notice to MDC prior to the Delivery of any given Subsequent Aircraft that (i) FedEx intends to accept Redelivery of the Aircraft, ferry that Aircraft to a FedEx designated location, have the ACF line replaceable units itemized in the list included herein as Attachment B ( the "ACF LRUs") removed by MDC, and place that Aircraft into storage (the "Storage Aircraft"), or (ii) FedEx intends to accept Redelivery of the Aircraft with a new shipset of ACF LRUs for entry of that Aircraft into the FedEx revenue fleet (the "Revenue Aircraft"). 6. The first Subsequent Aircraft designated by FedEx as a Storage Aircraft shall be the First Rotable Aircraft, and the next Aircraft after the First Rotable Aircraft Delivered to OAN shall be automatically designated the Second Rotable Aircraft. These two noted Aircraft shall be Redelivered to FedEx with the full shipset of ACF LRUs installed. After FedEx ferry of each of these noted Aircraft to a FedEx designated storage location, MDC shall remove, inventory, and ship the ACF LRUs to OAN for use as a rotable Redelivery shipset (the "Rotable ACF LRU Set") for use on subsequent Storage Aircraft. FedEx shall be charged [ * ] associated with the return of the ACF LRUs to Aeronavali in Venice, Italy (OAN) via the ASR process. [ * ]. The price for the First Rotable Aircraft and Second Rotable Aircraft shall be as noted in Exhibit K, [ * ] (the "ACF LRU Price") for the price of the ACF LRUs, with the remaining balance subject to escalation in accordance with Exhibit N of the Agreement. With respect to the two Rotable ACF LRU Sets referred to herein, at the Redelivery of a Storage Aircraft, the applicable Rotable ACF LRU Set shall be considered not Redelivered until it is Redelivered to FedEx installed in either the Next-to-Last Subsequent Aircraft or the Last Subsequent Aircraft in accordance with Paragraph 9. of this Letter Agreement. As such, issues regarding risk of loss, risk of damage or warranty associated with component(s) of the Rotable ACF LRU Sets: a) Prior to Redelivery to FedEx, shall be resolved in accordance with Article 8 - Warranty and Article 22-Insurance as if the component(s) in question from the applicable Rotable ACF LRU Set was not yet Redelivered to FedEx. b) After Redelivery to FedEx installed in either the Next-to-Last Subsequent Aircraft or the Last Subsequent Aircraft, shall be resolved in accordance with Article 8 - Warranty and Article 22 - Insurance as if the component(s) in question from the applicable Rotable ACF LRU Set was Redelivered to FedEx. Page 3 7. Subsequent Aircraft to the First Rotable Aircraft and Second Rotable Aircraft, which have been designated by FedEx as Storage Aircraft in accordance with Paragraph 5. above, shall be Redelivered to FedEx utilizing one of the two Rotable ACF LRU Sets noted above, subject to the following: a) The price for Storage Aircraft shall be as noted in Exhibit K, less the amount of the ACF LRU Price, with the remaining balance subject to escalation in accordance with Exhibit N of the Agreement. b) If MDC can successfully defer, [ * ]. FedEx agrees to purchase the ACF LRUs for each applicable Storage Aircraft from MDC at the ACF LRU Price by no later than [ * ] after Redelivery of each such Storage Aircraft to FedEx. The ACF LRU Price shall be subject to escalation in accordance with Exhibit N of the Agreement. i) FedEx shall provide MDC written notice by [ * ] of its intent to designate the first or more Subsequent Aircraft as Storage Aircraft. MDC shall negotiate in good faith with its ACF LRU suppliers to defer the ACF LRUs for those designated Storage Aircraft in such a manner to mitigate FedEx's liability as noted in Paragraph 7.c) below. c) If MDC is unable to defer shipment of a given set of ACF LRUs for any Subsequent Aircraft, then MDC shall retain in storage each such set of ACF LRUs, and FedEx shall be charged MDC's inventory holding costs at a rate not to exceed [ * ] per month (which shall be verified by MDC outside auditors upon request) for the storage of each such set of ACF LRUs, which amount shall not be subject to escalation. If requested by FedEx, MDC shall provide documentation to the satisfaction of FedEx to verify MDC's receipt of each set of ACF LRUs for which FedEx is being charged. The noted charges shall accrue from the time the applicable Storage Aircraft is Redelivered to FedEx until FedEx purchases the applicable ACF LRUs from MDC. [ * ] d) After ferry of the Aircraft by FedEx to a FedEx designated storage location, MDC shall remove, inventory, and ship the Rotable ACF LRU Set to OAN for use on a subsequent Storage Aircraft. FedEx shall be charged the direct pass through removal labor hours, packaging and freight costs associated with the return of the Rotable ACF LRU Set to OAN via the ASR process. [ * ] e) FedEx shall provide to MDC either (i) [ * ] written notice if MDC has no ACF LRUs sets in storage, or (ii) [ * ] written notice if MDC has ACF LRUs sets in storage, of its intent to purchase a set of ACF Page 4 LRUs for use on a Storage Aircraft, including the First Rotable Aircraft and the Second Rotable Aircraft, for FedEx's return of the Storage Aircraft to revenue service. 8. Subsequent Aircraft which have been designated as Revenue Aircraft by FedEx in accordance with Paragraph 5. above shall be Redelivered to FedEx with a new set of ACF LRUs installed. [ * ] 9. The Next-to-last Subsequent Aircraft , as designated by FedEx at the Delivery of any given Subsequent Aircraft, shall be Redelivered to FedEx utilizing one of the two Rotable ACF LRU Sets, which shall remain installed on the Aircraft and be retained by FedEx. Once the Next-to-last Subsequent Aircraft has been designated, the following Subsequent Aircraft shall be the Last Subsequent Aircraft, and shall be Redelivered to FedEx utilizing the remaining Rotable ACF LRU Set, which shall remain installed on the Aircraft and be retained by FedEx. FedEx shall be charged the price for the Passenger to Freighter and ACF Modifications for these two noted Aircraft in accordance with Exhibit K to the Agreement, subject to escalation in accordance with Exhibit N to the Agreement. 10. Notwithstanding the terms of Letter Agreement No. 9, for all Subsequent Aircraft designated by FedEx as Storage Aircraft, including the First Rotable Aircraft and the Second Rotable Aircraft: a) The Services specified on the initial issue of the MJCS for each applicable Aircraft are to be performed concurrently with the P to F and ACF Modifications and, except as may be mutually agreed to as noted in Paragraph b) below, shall be limited to those items specified in the MJCS Standard Tasks List, included herein as Attachment C. FedEx may elect to contract the MJCS work tasks either directly with MDC or directly with OAN. If FedEx elects to contract the noted MJCS items directly with MDC, then the prices noted in Attachments A and C to Exhibit K of the Agreement, or the ASR process as applicable, shall be used to determine the pricing for each such MJCS item. b) Any MJCS Addendums issued after the initial issue of the MJCS for each applicable Aircraft shall be subject to mutual agreement between FedEx and MDC and MDC shall not unreasonably withhold concurrence of such additional work items. FedEx shall limit such MJCS Addendums to AD/FAR driven tasks which cannot be deferred or other tasks in which deferral would add significantly to FedEx's total Aircraft costs to return the Aircraft to revenue service. c) It is acknowledged by MDC and FedEx that any ASRs requested by FedEx, or any non-routines written by OAN in the course of accomplishing the Services on the Aircraft, shall be deferred if possible to future maintenance action, unless such ASR or non-routine is (i) considered by FedEx to be a safety of flight item, (ii) is the result of an AD/FAR action or other such mandatory item, (iii) or such non-routine interferes with the accomplishment of the Services by MDC or its subcontractor, or (iv) FedEx and MDC Page 5 mutually determine that it is economically more efficient to accomplish the item during the Services rather than during maintenance action at a future date. 11. It is the intent of this Letter Agreement that only Aircraft that are to receive the P to F and ACF Modifications at OAN are affected by the terms described in Paragraphs 4 through 10 above inclusively. None of the Aircraft that are to be modified at other facilities or are to receive only the ACF Modification during their respective Aircraft Visit are affected by the terms described in Paragraphs 4 through 10 above inclusively, other than their respective Aircraft Positions and Aircraft Visit time periods as noted in Attachment A herein. 12. [ * ]. Written notice to MDC for an Aircraft substitution as noted in this Paragraph, executed by an officer of FedEx and submitted to MDC in accordance with Article 11 - Notice of the Agreement, shall be deemed to amend the Agreement accordingly with regard to the substitution of such Aircraft. a) Where specific fuselage numbers are cited in this Letter Agreement, except Paragraph 3, it is the intent of this Letter Agreement that the cited fuselage numbers are for reference to that Aircraft Position's Aircraft Visit time period at OAN. If FedEx substitutes one of the cited Aircraft by exercising its rights under the terms of the Agreement, it is understood that the new Aircraft fuselage number shall replace the old fuselage number in all instances as cited in this Letter Agreement. 13. Notwithstanding the terms of Paragraph 12 above, FedEx acknowledges that for fuselage numbers 298 and 351, FedEx has exercised its right to modify the schedule as noted in Paragraph 2.C. of the Agreement. Any further modifications to the schedule with respect to these two noted Aircraft shall require approval from MDC. 14. If MDC or its subcontractors are able to demonstrate improvement to the Aircraft Visit time period and Redelivery Dates for various Aircraft, such that a given conversion facility could accept Delivery of an Aircraft on an earlier date than the scheduled Delivery Date, then FedEx agrees to Deliver the affected Aircraft at the earlier date. a) Notwithstanding the foregoing, FedEx shall not be obligated to accept early Redelivery of an Aircraft in cases where such early Redelivery would cause the Redelivery Date to occur in an earlier FedEx fiscal year (fiscal year ends May 31) than was budgeted by FedEx. FedEx shall remain obligated to Page 6 accept Redelivery of the Aircraft on the scheduled Redelivery Date in accordance with Exhibit "O". attached hereto. b) Notwithstanding any other provision, any payments required for early Delivery and/or Redelivery which occur in a FedEx fiscal year in which it was not originally scheduled per Exhibit "O" shall be made in accordance with Exhibit "O" attached hereto. 15. MDC agrees to pay to FedEx a lump sum payment of [ * ] within five days of execution of this Letter Agreement, which amount FedEx agrees shall be payment in full for all FedEx's incremental costs at additional facilities through December 31, 1999 and satisfies all of MDC's responsibilities in accordance with item (ii) of the first sentence of Paragraph 5.A.3. and Paragraph 5.A.3)b) of the Agreement, excluding MDC's responsibilities as stipulated in Letter Agreement No. 9. Without affecting the terms and conditions of Letter Agreement No. 9, which shall remain in full force and effect, item (ii) of the first sentence of Paragraph 5.A.3. and Paragraph 5.A.3)b) shall no longer be applicable effective January 1, 2000 for the conversion facilities located in Venice, Italy; Mobile, Alabama; Zurich, Switzerland and Goodyear, Arizona. If MDC is contemplating the use of a new facility other than those noted herein for accomplishment of the Services, MDC shall coordinate such intent in a timely manner with FedEx and FedEx shall identify and submit to MDC in a timely manner FedEx's incremental costs (or cost basis) for support of such a new facility. MDC shall not enter into an agreement for the accomplishment of the Services with the operators of a new facility without the prior consent of FedEx as stipulated in Paragraph 5.A.3) of the Agreement. Subject to FedEx's consent as stipulated herein, MDC shall be obligated to provide to FedEx the reimbursement of FedEx's incremental costs associated with the new facility in accordance with Paragraph 5.A.3) of the Agreement, however such reimbursement shall be limited to only those costs (or cost basis) identified and submitted by FedEx to MDC prior to FedEx issuing such consent as described herein. 16. This Letter Agreement is subject to MDC and OAN coming to an agreement with respect to extending the Delivery Dates for fuselage numbers 298 and 351 as contemplated in Paragraph 4. above. 17. FedEx agrees to pay in full by wire transfer of funds the balance due amounts noted in invoice numbers 506427-00 and 506428-00 within five days of execution of this Letter Agreement. 18. MDC shall provide invoices for all charges for each Redelivered Aircraft by no later than thirty (30) business days after the Redelivery of an Aircraft commencing with all Aircraft Redelivered after the execution of this Letter Agreement. FedEx shall not be responsible for charges against the above noted Redelivered Aircraft discovered by MDC after the thirty day deadline, except at FedEx's sole discretion. 19. MDC agrees that if FedEx needs to store an Aircraft prior to Delivery at the applicable modification site noted in Exhibit O - Schedule, and the applicable Page 7 modification site cannot accommodate the storage of such Aircraft, then FedEx shall store such Aircraft at the AMS, Inc. facility located in Goodyear, AZ. MDC's and FedEx's responsibilities associated with the subsequent ferry of such a stored Aircraft from Goodyear, AZ to the specified modification site shall be in accordance with Letter Agreement No. 9 as then currently stored Aircraft. The terms in this Paragraph 19. assumes that storage of an incremental Aircraft at Goodyear, AZ by FedEx does not exceed the maximum allowed number of stored Aircraft as stipulated in the Agreement. 20. All of the terms of the Agreement, including any prior Letter Agreements entered into by and between the parties, shall remain in full force and effect, except as herein expressly changed, modified or supplemented, or except insofar as the terms thereof have been completed, performed or complied with prior to the date hereof. If the foregoing correctly sets forth our understanding, please execute this Letter Agreement in the space provided below. FEDERAL EXPRESS CORPORATION MCDONNELL DOUGLAS CORPORATION /s/ JAMES R. PARKER /s/ CHARLES STREITZ - --------------------------- ----------------------------- Signature Signature JAMES R. PARKER CHARLES STREITZ - --------------------------- ----------------------------- Printed Name Printed Name VICE PRESIDENT CONTRACTS MANAGER - --------------------------- ----------------------------- Title Title 11-8-99 ----------------------------- Date * Blank spaces contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. 10-29-99 Letter Agreement No. 15 DAC 96-29-M Federal Express Corporation 2005 Corporate Avenue Memphis, Tennessee 38132 Federal Express Corporation (FedEx) and McDonnell Douglas Corporation, a wholly-owned subsidiary of The Boeing Company (MDC), have entered into Modification Services Agreement Document No. DAC 96-29-M (the "Agreement") dated September 16, 1996, which Agreement covers Federal Express' desire to incorporate certain modifications in its DC-10 aircraft (the "Aircraft", as defined in the Agreement) and MDC desires to perform such modifications. As a further consideration of the parties hereto, this Letter Agreement No. 15 shall constitute a part of said Agreement. FedEx desires to utilize Flight Test Aircraft Fuselage 138 ("T1") for flight testing of the Local Area Augmentation System (LAAS) as developed by the Federal Aviation Administration (FAA). The flight tests for the LAAS shall be accomplished on a non-interference basis concurrently with the flight test program accomplished by MDC in support of the certification of the ACF Modification. MDC hereby agrees to allow the use of T1 for the noted FAA/FedEx flight test of the LAAS subject to the following terms and conditions: 1. MDC acknowledges that the LAAS flight test procedure "Wide-Band Airport Pseudolite (APL) Test Plan" dated October 1999, included herein for reference only as Attachment A (the "LAAS Procedure"), shall be accomplished by FedEx in conjunction with the FAA. 2. The LAAS Procedure shall be accomplished at Memphis International Airport and shall consist of static tests as well as in-flight tests as noted in the LAAS Procedure. 3. This Letter Agreement shall remain in effect until the completion of the LAAS Procedure. The LAAS Procedure shall commence on 10-29-99 and proceed in accordance with the LAAS Procedure, for approximately seven consecutive days. 4. FedEx shall be responsible for the following: a) Providing the LAAS Test Prototype (LTP) in the form of an FAA owned LAAS testbed (the "LAAS Testbed"), as well as any other equipment or instrumentation required for accomplishment of the LAAS Procedure. b) Installation of the LAAS Testbed and other required equipment noted in Paragraph 4.a) above shall utilize FedEx provided technical personnel. Page 2 c) Providing the ground maintenance crew for all required servicing and routine maintenance of T1 during the LAAS Procedure. d) Providing the necessary flight crew, other than pilot-in-command, for the accomplishment of the LAAS Procedure, including the required technical personnel for the operation of the LAAS Testbed equipment. e) Providing all required aircraft fuel in support of the LAAS Procedure. f) All landing and parking fees incurred during the accomplishment of the LAAS Procedure. g) At the conclusion of the LAAS Procedure, removal of the LAAS Testbed and all associated equipment from T1 utilizing FedEx provided personnel. 5. MDC shall be responsible for the following: a) Providing the pilot in command during the LAAS Procedure. b) Providing flight test technical personnel for on board data management during the LAAS Procedure. c) Installation of necessary wiring and other accommodations as required for the installation of the LAAS Testbed. (i.e. wiring for power source and source for general aircraft data needed for the LAAS Testbed and LAAS Procedure) d) Providing project safety oversight for the LAAS Procedure. e) All costs associated with the ferry of T1 in its flight from Mesa, AZ to Memphis, TN for the LAAS Procedure, and the ferry of T1 in its return flight from Memphis, TN to Mesa, AZ. 6. FedEx shall pay to MDC the amount of [ * ] in the aggregate for the total per diem cost of MDC's personnel in Memphis in support of the LAAS Procedure for a seven day period, which amount shall not be subject to escalation. If the LAAS Procedure requires more than seven days, then FedEx agrees to pay an additional [ * ] per day in per diem charges for each day beyond the seventh day. In addition to the per diem charges noted, FedEx shall be charged the actual touch labor hours required for MDC to accomplish its responsibilities as outlined in Paragraph 5 above, not to exceed [ * ]. The indicated amounts shall represent payment in full for MDC's efforts in support of the LAAS Procedure. MDC shall submit an invoice to FedEx itemizing the final charges, based on the calculations stated in this Paragraph, after the conclusion of the LAAS Procedure. 7. All of the terms of the Agreement shall remain in full force and effect, except as herein expressly changed, modified or supplemented, or except insofar as the terms thereof have been completed, performed or complied with prior to the date hereof. Page 3 If the foregoing correctly sets forth our understanding, please execute this Letter Agreement in the space provided below. FEDERAL EXPRESS CORPORATION MCDONNELL DOUGLAS CORPORATION /s/ RONALD D. WICKENS /s/ CHARLES STREITZ - --------------------------- ----------------------------- Signature Signature RONALD D. WICKENS CHARLES STREITZ - --------------------------- ----------------------------- Printed Name Printed Name VP, ADD STRATEGIC PROJECTS CONTRACTS MANAGER - --------------------------- ----------------------------- Title Title 10-30-99 ----------------------------- Date * Blank spaces contained confidential information which has been filed separately with the Securities and Exchange Commission pursuant to Rule 24b-2 under the Securities Exchange Act of 1934. EX-10.54 6 ex-10_54.txt EXHIBIT 10.54 Exhibit 10.54 FEDERAL EXPRESS CORPORATION RETIREMENT PARITY PENSION PLAN EFFECTIVE DATE JUNE 1, 1993 AS AMENDED AND RESTATED EFFECTIVE JUNE 1, 1999 SECTION 1. PURPOSE AND DESCRIPTION. Federal Express Corporation, a Delaware corporation (the "Company"), established, effective June 1, 1993 (the "Effective Date"), the Federal Express Corporation Retirement Parity Pension Plan (the "Plan"). The Plan was amended, effective June 1, 1994, to increase the benefit provided from 80% to 100% of the difference of the "Unreduced Benefit" less the "Maximum Benefit," as both terms are defined below. The Plan was amended and restated, effective June 1, 1996 to provide for the inclusion of Managing Directors, in addition to Officers, under the terms of the Plan. The Plan was restated, effective February 1, 1998 to provide for the inclusion of Managing Directors and Officers of FedEx Corporation (formerly FDX Corporation) and, effective December 1, 1998, Managing Directors and Officers of FedEx Global Logistics, Inc. (formerly FDX Global Logistics, Inc.), under the terms of the Plan. The Plan is hereby restated, effective June 1, 1999, to conform the Plan to previous amendments and to provide that, upon retirement, an eligible Officer or Managing Director may elect certain lump-sum and installment distributions in lieu of receiving benefits in the same manner as such benefits would be paid from the Qualified Pension Plan. The Plan provisions, as in effect immediately prior to June 1, 1999, shall remain in effect for anyone who was not actively employed by the Company, FedEx Corporation, or FedEx Global Logistics, Inc. as an Officer or Managing Director on or after that date, unless the Plan specifically provides otherwise. The Plan is intended to be an "employee benefit pension plan," as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), and a plan that is "unfunded and is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees," as provided in Sections 201, 301 and 401 of ERISA and the Department of Labor regulations promulgated under ERISA. The benefits provided by the Plan are not funded, but shall be payable when due out of the assets of the Company as general, unsecured obligations of the Company. SECTION 2. ELIGIBILITY. Any employee of the Company, or, on or after February 1, 1998, any employee of FedEx Corporation, or, on or after December 1, 1998, any employee of FedEx Global Logistics, Inc., other than an Officer or Managing Director the terms of whose employment are governed by the collective bargaining agreement between the Company and the Fedex Pilots Association effective May 31, 1999 (or any successor agreement thereto), who (i) serves as an Officer after the Effective Date or, after June 1, 1996, as a Managing Director, (ii) has served as an Officer and/or Managing Director for a combined period of five consecutive years, including service prior to the Effective Date, and (iii) is an active participant in the Federal Express Corporation Employees' Pension Plan, as it currently exists and as it may be amended from time to time (the "Qualified Pension Plan"), shall be eligible for the benefit described in subsection (a) 2 of Section 3 below. In addition, an Officer described above shall be eligible for the benefit described in subsection (b) of Section 3 below. For the purpose of this Plan, the term "Officer" shall mean an officer of the Company, FedEx Corporation or FedEx Global Logistics, Inc. elected to the position of vice-president or above, as evidenced in the minutes of the Company's Board of Directors, the Board of Directors of FedEx Corporation, or the Board of Directors of FedEx Global Logistics, Inc. The term "Managing Director" shall, for the purpose of this Plan, mean a managing director of the Company appointed to the position of managing director, as evidenced in the Company's personnel information system, PRISM, and shall also mean an employee having the title of "Staff Director" or "Director" of FedEx Corporation or FedEx Global Logistics, Inc. In determining whether an Officer or Managing Director has served in such capacity for a combined period of five consecutive years, such Officer's or Managing Director's service with any of the following entities shall be taken into account: Federal Express Corporation, FedEx Corporation, FedEx Global Logistics, Inc., Caliber System, Inc., Caliber Technology, Inc., FedEx Supply Chain Services, Inc. (formerly, Caliber Logistics, Inc.), FedEx Ground Package System, Inc. (formerly, RPS, Inc.), FedEx Custom Critical, Inc. (formerly, Roberts Express, Inc.) or Viking Freight System, Inc. SECTION 3. BENEFIT AMOUNT AND LIMITATIONS. (a) An Officer or Managing Director who meets the eligibility 3 requirements of Section 2 above shall be paid from the Plan a benefit equal to 100% of the difference between the Unreduced Benefit and the Maximum Benefit. For the purpose of this Plan, "Unreduced Benefit" shall mean the benefit that would be provided to the Officer by the Qualified Pension Plan without regard to the limits imposed by Internal Revenue Code (the "Code") Section 415 (limitations on benefits for defined benefit plans and limitation in case of defined benefit and defined contribution plan for same employee) and Section 401(a)(17) (annual compensation limit). "Average Compensation" taken into account with respect to a participating Officer or Managing Director shall have the same meaning as set forth under the Qualified Pension Plan (without regard to the limits imposed under Code Section 401(a)(17)), except that, with respect to Officers or Managing Directors who retire on or after June 1, 1999, the number of whole calendar years over which the arithmetic average is determined shall be three (3) years instead of five (5) years. For the purpose of this Plan, "Maximum Benefit" shall mean the benefit actually provided to the Officer or Managing Director by the Qualified Pension Plan. (b) An Officer who meets the eligibility requirements of Section 2 above shall be paid from this Plan, in addition to the benefit described in subsection (a) above, the difference between such Officer's Maximum Benefit under the Qualified Pension Plan and what such Officer's Maximum Benefit would have been had such Officer received credit for a Year of 4 Service under the Qualified Pension Plan for each year that such Officer is eligible to receive, and does in fact receive, a benefit under the Federal Express Corporation Nonqualified Disability Plan for Officers, as it currently exists or as it may be amended from time to time (the "Officers Nonqualified Disability Plan"). For purposes of determining eligibility for an increased benefit as contemplated by this subsection, such increased benefit shall be provided for each Plan Year during which an Officer's Hours of Service under the Qualified Pension Plan plus such Officer's "Phantom Hours of Service" while receiving benefits under the Officers Nonqualified Disability Plan are equal to a Year of Service under the Qualified Pension Plan. Phantom Hours of Service shall be credited at the same rate under this subsection as if the Officer receiving benefits under the Officers Nonqualified Disability Plan had been actively at work and receiving credit for Hours of Service under the Qualified Pension Plan. Notwithstanding the above, an Officer shall not receive credit under this subsection for the same Plan Year for which such Officer receives credit for a Year of Service under the Qualified Pension Plan. (c) Unless otherwise provided herein, defined terms used in this Plan shall have the same meaning attributed to such terms in the Qualified Pension Plan and the Officers Nonqualified Disability Plan, as applicable. SECTION 4. PAYMENT OF BENEFITS. (a) Unless an eligible Officer or Managing Director makes an 5 election in the manner and within the time period specified in subsection (b) below, benefits under this Plan shall be paid in the same manner and at the same time as benefit payments under the Qualified Pension Plan and shall be subject to the same restrictions and limitations as provided therein, without regard to Code Sections 415 and 401(a)(17). (b) An eligible Officer or Managing Director shall, no later than twelve (12) months prior to the date on which benefits commence under the Qualified Pension Plan, elect one of the following options under which benefits shall be payable under this Plan. An eligible Officer or Managing Director may elect to receive his or her benefit: (i) in a single lump-sum, payable on the date on which benefit payments commence under the Qualified Pension Plan; (ii) in a single lump-sum, payable twelve (12) months following the date on which benefit payments commence under the Qualified Pension Plan; (iii) in a single lump-sum payable twenty-four (24) months following the date on which benefit payments commence under the Qualified Pension Plan; (iv) in two equal installments (each being equal to one-half of the lump-sum amount described in clause (i) above), the first installment payable 6 on the date on which benefit payments commence under the Qualified Pension Plan, and the second installment payable twelve (12) months following the date on which benefit payments commence under the Qualified Pension Plan; or (v) in two equal installments (each being equal to one-half of the lump-sum amount described in clause (ii) above), the first installment payable twelve (12) months following the date on which benefit payments commence under the Qualified Pension Plan, and the second installment payable twenty-four (24) months following the date on which benefit payments commence under the Qualified Pension Plan. (c) In the event that any eligible Officer or Managing Director elects to receive a lump-sum or installment benefit under subsection (b) above, the amount of each such distribution shall be determined in the same manner as the present value of lump-sum distributions is determined under the Qualified Pension Plan. (d) An eligible Officer or Managing Director may revoke the election made in this section and elect another manner in which his or her benefit from this Plan shall be payable, but only if such revocation and subsequent election occur no later than twelve (12) months prior to the date on which benefits commence under the Qualified Pension Plan with respect to such Officer or Managing Director. 7 SECTION 5. PLAN ADMINISTRATION. The Plan shall be administered by the Company, acting through its Retirement Administration Department or its successor (the "Administrator"). The Administrator shall have the responsibility to receive, evaluate and process all claims for benefits and shall cause payment of benefits to be made under the Plan in accordance with its terms. In connection with its duties, the Administrator shall have the authority to interpret the Plan's provisions and to determine eligibility for Plan benefits. The Administrator shall have the authority to adopt such rules and procedures which it deems necessary for the administration of the Plan and recommend any modifications, changes or amendments to the Plan. SECTION 6. THE COMMITTEE. The Committee, as defined in the Qualified Pension Plan, shall have the authority to perform the administrative duties under the Plan, other than the duties of the Administrator. In connection with its duties, the Committee shall have the authority to interpret the Plan's provisions and to determine eligibility for Plan benefits. The Committee is the named fiduciary of the Plan and shall adopt such rules and procedures that in its opinion are either necessary or desirable to implement and administer the Plan. SECTION 7. CLAIMS PROCEDURES. The claims procedures for the Plan shall be the same as such procedures in the Qualified Pension Plan. SECTION 8. LEGAL EXPENSES. An Officer or Managing 8 Director shall be entitled to reimbursement from the Company for reasonable legal expenses incurred in successfully enforcing his or her right to benefits under the Plan. This right to reimbursement shall only be available if such Officer or Managing Director has applied for benefits in substantial compliance with the Administrator's procedures, been denied benefits by the Administrator, timely requested a review of that denial as provided in Section 7 above and had the Administrator's denial upheld. SECTION 9. NON-ASSIGNABILITY OF BENEFITS. Benefits under this Plan shall not be assignable or transferable in any manner, nor shall they be subject to garnishment, attachment or other legal process, except as provided by ERISA and other applicable federal law. SECTION 10. EFFECT. Neither the establishment of the Plan nor any modification thereto, nor the creation of any account on the books of any participating employer hereunder, nor the payment of any benefit from the Plan shall be construed as giving an Officer, Managing Director or any other person any legal or equitable right against a participating employer, its directors, officers, employees or agents, except that the provisions of this Section 10 shall neither impair nor extinguish any rights of any participating Officer or Managing Director with respect to any claim for benefits payable under this Plan. SECTION 11. NO GUARANTEE OF EMPLOYMENT. Nothing contained in this Plan shall be construed as a contract of 9 employment between a participating employer and any Officer or Managing Director or as a promise that any Officer or Managing Director shall continue in his or her present or comparable position or as a limit on the participating employer's right to discharge such Officer or Managing Director. SECTION 12. AMENDMENT OR TERMINATION. The Company may amend or terminate the Plan at any time. An amendment shall become effective: (i) upon its execution in writing by duly authorized Officers of the participating employers, (ii) upon action of the Company's Board of Directors or the Board of Directors of FedEx Corporation, or any committee thereof, or (iii) upon action of the Committee, as reflected in the Committee's minutes or in the minutes of the Board of Directors of the Company or of FedEx Corporation or any committee thereof. The Plan's termination shall become effective: (i) upon action of the Company's Board of Directors or the Board of Directors of FedEx Corporation, or any committee thereof, or (ii) upon action of the Committee, as reflected in the Committee's minutes or in the minutes of the Board of Directors of the Company or of FedEx Corporation or any committee thereof. However, no amendment or termination shall eliminate or reduce any benefits accrued under the Plan at the time of such amendment or termination. SECTION 13. AGENT FOR SERVICE OF PROCESS. The Company is hereby designated as agent for service of process for all purposes provided herein. SECTION 14. GOVERNING LAW. Except to the extent 10 preempted by federal law, the provisions of this Plan shall be administered, construed and enforced in accordance with the laws of the State of Tennessee. SECTION 15. EXECUTION. This document may be executed in any number of counterparts and each fully executed counterpart shall be deemed an original. IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted effective as of June 1, 1999, by affixing their signatures hereto. FEDERAL EXPRESS CORPORATION BY: /s/ Steven E. Priddy ----------------------------- Steven E. Priddy Vice President, Personnel Administration Date: 2/22/00 --------------------------- FEDEX CORPORATION BY: /s/ William J. Cahill ----------------------------- William J. Cahill Staff Vice President, Personnel Date: 2/25/00 --------------------------- FEDEX GLOBAL LOGISTICS, Inc. BY: /s/ Ami P. Kelley ----------------------------- Ami P. Kelley Vice President and General Counsel Date: 2/28/00 --------------------------- ATTEST: /s/ George W. Hearn - ---------------------------- George W. Hearn, Corporate Vice President and Assistant Secretary, FedEx Corporation 11 FIRST AMENDMENT TO FEDERAL EXPRESS CORPORATION RETIREMENT PARITY PENSION PLAN (EFFECTIVE DATE JUNE 1, 1993, AS AMENDED AND RESTATED EFFECTIVE JUNE 1, 1999) WHEREAS, Federal Express Corporation (the "Company") has established the Federal Express Corporation Retirement Parity Pension Plan (the "Plan") as an "employee benefit pension plan," as defined in Section 3(2) of the Employee Retirement Income Security Act of 1974 ("ERISA"), and a plan that is "unfunded and is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees," as provided in Sections 201, 301 and 401 of ERISA and the Department of Labor regulations promulgated under ERISA, with benefits payable when due out of the assets of the Company as its general, unsecured obligations; and WHEREAS, the Company has reserved the right, pursuant to Section 12 of the Plan, to amend the Plan at any time; NOW, THEREFORE, the Company amends the Plan, effective as of the dates provided herein, to (i) clarify the eligibility provisions, as set forth in Section 2 of the Plan and (ii) clarify the benefit amount payable with respect to an eligible Officer or Managing Director the terms of whose employment are governed by the collective bargaining agreement between the Company and the Fedex Pilots Association effective May 31, 1999 (or any successor agreement thereto). I. Effective March 1, 2000, Section 2 of the Plan is amended to read as follows: SECTION 2. ELIGIBILITY. Any employee of a participating employer (which shall mean the Company; on or after February 1, 1998, FedEx Corporation; on or after December 1, 1998, FedEx Global Logistics, Inc.; on or after March 1, 2000, FedEx Trade Networks, Inc., and Tower Group International, Inc.; on or after May 1, 2000, World Tariff, Limited; and on or after June 1, 2000, FedEx Corporate Services, Inc.) other than an Officer or Managing Director the terms of whose employment are governed by the collective bargaining agreement between the Company and the Fedex Pilots Association effective May 31, 1999 ("Agreement") or any successor agreement thereto, who (i) serves as an Officer after the Effective Date or, after June 1, 1996, as a Managing Director, (ii) has served as an Officer and/or Managing Director for a combined period of five consecutive years, including service prior to the Effective Date, and (iii) is an active participant in the Federal Express Corporation Employees' Pension Plan, as it currently exists and as it may be amended from time to time (the "Qualified Pension Plan"), 2 shall be eligible for the benefit described in subsection (a) of Section 3 below. In addition, an Officer described above shall be eligible for the benefit described in subsection (b) of Section 3 below. For the purpose of this Plan, the term "Officer" shall mean an officer of a participating employer elected to the position of vice-president or above, as evidenced in the minutes of each respective participating employer's board of directors. The term "Managing Director" shall, for the purpose of this Plan, mean an employee of the Company or another participating employer who has been appointed to the position of managing director, as evidenced in the affected participating employer's personnel information system, and shall also mean an employee having the title of "Staff Director" or "Director". In determining whether an Officer or Managing Director has served in such capacity for a combined period of five consecutive years, such Officer's or Managing Director's service with any of the following entities shall be taken into account: Federal Express Corporation, FedEx Corporation, FedEx Global Logistics, Inc., Caliber System, Inc., Caliber Technology, Inc., FedEx Supply Chain Services, Inc. (formerly, Caliber Logistics, Inc.), FedEx Ground Package System, Inc. (formerly, RPS, Inc.), FedEx Custom Critical, Inc. (formerly, Roberts Express, Inc.), Viking Freight System, Inc., FedEx Trade Networks, Inc., Tower Group International, Inc., World Tariff, Limited, or FedEx Corporate Services, Inc. 3 II. Effective June 1, 1999, Section 3 of the Plan is amended to read as follows: SECTION 3. BENEFIT AMOUNT AND LIMITATIONS. (a) An Officer or Managing Director who meets the eligibility requirements of Section 2 above shall be paid from the Plan a benefit equal to 100% of the difference between the Unreduced Benefit and the Maximum Benefit. For the purpose of this Plan, "Unreduced Benefit" shall mean the benefit that would be provided to the Officer by the Qualified Pension Plan without regard to the limits imposed by Internal Revenue Code (the "Code") Section 415 (limitations on benefits for defined benefit plans and limitation in case of defined benefit and defined contribution plan for same employee) and Section 401(a)(17) (annual compensation limit). "Average Compensation" taken into account with respect to a participating Officer or Managing Director shall have the same meaning as set forth under the Qualified Pension Plan (without regard to the limits imposed under Code Section 401(a)(17)), except that, with respect to Officers or Managing Directors who (i) are actively employed by a participating employer as Officers or Managing Directors on or after June 1, 1999, (ii) are not Officers or Managing Directors the terms of whose employment are governed by the collective bargaining agreement between the Company and the Fedex Pilots Association effective May 31, 1999 (or any successor agreement thereto), and (iii) retire on or after June 1, 1999, the number of whole calendar years over which the arithmetic average is determined shall be three (3) 4 years instead of five (5) years. For the purpose of this Plan, "Maximum Benefit" shall mean the benefit actually provided to the Officer or Managing Director by the Qualified Pension Plan. (b) An Officer who meets the eligibility requirements of Section 2 above shall be paid from this Plan, in addition to the benefit described in subsection (a) above, the difference between such Officer's Maximum Benefit under the Qualified Pension Plan and what such Officer's Maximum Benefit would have been had such Officer received credit for a Year of Service under the Qualified Pension Plan for each year that such Officer is eligible to receive, and does in fact receive, a benefit under the Federal Express Corporation Nonqualified Disability Plan for Officers, as it currently exists or as it may be amended from time to time (the "Officers Nonqualified Disability Plan"). For purposes of determining eligibility for an increased benefit as contemplated by this subsection, such increased benefit shall be provided for each Plan Year during which an Officer's Hours of Service under the Qualified Pension Plan plus such Officer's "Phantom Hours of Service" while receiving benefits under the Officers Nonqualified Disability Plan are equal to a Year of Service under the Qualified Pension Plan. Phantom Hours of Service shall be credited at the same rate under this subsection as if the Officer receiving benefits under the Officers Nonqualified Disability Plan had been actively at work and receiving credit for Hours of Service 5 under the Qualified Pension Plan. Notwithstanding the above, an Officer shall not receive credit under this subsection for the same Plan Year for which such Officer receives credit for a Year of Service under the Qualified Pension Plan. (c) The foregoing to the contrary notwithstanding, the benefit payable to an Officer or Managing Director the terms of whose employment are governed by the Agreement (or any successor agreement thereto) and who, as of May 31, 1999, had an accrued benefit under this Plan, shall be reduced by the total amount of pension benefits payable to such Officer or Managing Director under the Qualified Pension Plan, the Federal Express Corporation Non-Qualified Section 415 Excess Pension Plan for Pilots and the Federal Express Corporation Non-Qualified Pension Plan for Pilots, pursuant to the terms of the Agreement (or any successor agreement thereto). (d) Unless otherwise provided herein, defined terms used in this Plan shall have the same meaning attributed to such terms in the Qualified Pension Plan and the Officers Nonqualified Disability Plan, as applicable. 6 IN WITNESS WHEREOF, the undersigned duly authorized Officers of the participating employers have caused this Plan amendment and restatement to be adopted effective as of the dates provided herein, by affixing their signatures hereto. FEDERAL EXPRESS CORPORATION BY: /s/ Steven E. Priddy ------------------------------- Steven E. Priddy Vice President, Personnel Administration Date: 5/11/00 ----------------------------- FEDEX CORPORATION BY: /s/ William J. Cahill ------------------------------- William J. Cahill Staff Vice President, Personnel Date: 5/15/00 ----------------------------- FEDEX GLOBAL LOGISTICS, Inc. BY: /s/ Ami P. Kelley ------------------------------- Ami P. Kelley Vice President and General Counsel Date: 5/24/00 ----------------------------- FEDEX TRADE NETWORKS, Inc. BY: /s/ Penelope W. Register ------------------------------- Penelope W. Register Vice President and General Counsel Date: 5/19/00 ----------------------------- TOWER GROUP INTERNATIONAL, Inc. BY: /s/ Gerald P. Leary ------------------------------- Gerald P. Leary President Date: 5/30/00 ----------------------------- 7 WORLD TARIFF, LIMITED BY: /s/ Penelope W. Register ------------------------------- Penelope W. Register Vice President and Secretary Date: 5/19/00 ----------------------------- FEDEX CORPORATE SERVICES, Inc. BY: /s/ William J. Cahill ------------------------------ William J. Cahill Vice President, Personnel Date: 5/15/00 ----------------------------- ATTEST: /s/ George W. Hearn - ----------------------------- George W. Hearn, Corporate Vice President and Assistant Secretary, FedEx Corporation 8 EX-10.55 7 ex-10_55.txt EXHIBIT 10.55 Exhibit 10.55 DESCRIPTION OF MANAGEMENT PERFORMANCE BONUS PLAN Bonus targets were established as a percent of pay based on pay level. If both the individual and plan objectives are achieved, the plan is designed to produce a bonus ranging, on a sliding scale, from a threshold amount if the plan objectives are minimally achieved up to a maximum amount if such objectives are substantially exceeded. For fiscal 2000, the threshold bonus level was established at an amount which, when added to base salary, could be less than the 50th percentile of total salary and bonus for comparable positions in comparison surveys utilized by the Compensation Committee. Thus, total salary and bonus for executive officers (assuming achievement of all individual objectives) is designed to range from less than the 50th up to the 75th percentile of total salary and bonus for comparable positions in the comparison surveys according to the degree to which plan objectives are met or exceeded. Frederick W. Smith's bonus is determined by whether corporate business plan objectives are met or exceeded. If such objectives are met, the Compensation Committee determines and recommends to the Board of Directors a bonus which, when combined with base salary, may be up to the 75th percentile of total salary and bonus for chief executive officers in the comparison surveys discussed above. Mr. Smith received an annual bonus of $1,048,000 for fiscal 2000, which, together with his base salary, is below the 75th percentile of total salary and bonus for chief executive officers in the comparison surveys discussed above. EX-10.56 8 ex-10_56.txt EXHIBIT 10.56 Exhibit 10.56 DESCRIPTION OF LONG-TERM PERFORMANCE BONUS PLAN In 1998, the Compensation Committee established a long-term performance bonus plan to provide a long-term cash bonus opportunity to members of upper management, including executive officers, at the conclusion of fiscal year 2000 if the Company achieves certain earnings per share targets established by the Compensation Committee with respect to the three-fiscal year period 1998 through 2000. The Compensation Committee has established similar plans for the three-fiscal year periods 1999 through 2001, 2000 through 2002 and 2001 through 2003, providing bonus opportunities for 2001, 2002 and 2003, respectively, if certain earnings per share targets are achieved with respect to those periods. No amounts can be earned for the 1999 through 2001, 2000 through 2002 and 2001 through 2003 plans until 2001, 2002 and 2003, respectively, because achievement of the earnings per share objectives can only be determined following the conclusion of the applicable three-fiscal year period. Each successive plan has earnings per share targets that are higher than those in the previous plans. Under each plan, the average percentage of an individual's achievement of individual objectives under the Company's annual performance bonus plan for the three-fiscal year period of each of the long-term performance bonus plans will be used as an individual performance measure when calculating individual bonuses, except for Frederick W. Smith, whose individual performance measure will be determined by the Compensation Committee. EX-10.60 9 ex-10_60.txt EXHIBIT 10.60 Exhibit 10.60 MANAGEMENT RETENTION AGREEMENT THIS MANAGEMENT RETENTION AGREEMENT (the "Agreement") is entered into this ___ day of May, 2000, between FedEx Corporation, a Delaware corporation (the "Corporation"), and [Name of Executive Officer] ("Executive"). WHEREAS, the Executive currently serves as [Title of Executive Officer] of the Corporation; and WHEREAS, the Corporation considers the establishment and maintenance of a sound and vital management to be essential to protecting and enhancing the best interests of the Corporation and its stockholders; and WHEREAS, the Board (as defined in Section 2) has determined that it is in the best interests of the Corporation and its stockholders to secure the Executive's continued services and to ensure the Executive's continued dedication and objectivity in the event of any threat or occurrence of, or negotiation or other action that could lead to, or create the possibility of, a Change in Control (as defined in Section 2) of the Corporation, without concern as to whether the Executive might be hindered or distracted by personal uncertainties and risks created by any such possible Change in Control, and to encourage the Executive's full attention and dedication to the Corporation, the Board has authorized the Corporation to enter into this Agreement. NOW, THEREFORE, for and in consideration of the premises and the mutual covenants and agreements herein contained, the Corporation and the Executive agree as follows: 1. OPERATION OF AGREEMENT. (a) The "Effective Date" shall be the date during the "Change of Control Period" (as defined in Section 1(b)) on which a Change of Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive's employment with the Corporation terminates prior to the date on which a Change of Control occurs, and Executive can reasonably demonstrate that the termination: (1) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control, or (2) was directly related to, arose in connection with or occurred in anticipation of, such Change of Control, then for all purposes of this Agreement the "Effective Date" shall mean the date immediately prior to the date of such termination. (b) The "Change of Control Period" is the period commencing on the date of this Agreement and ending on the second anniversary of such date; PROVIDED, HOWEVER, that commencing on the date one year after the date of this Agreement, and on each annual anniversary of that date (such date and each annual anniversary thereof is referred to as the "Renewal Date"), the Change of Control Period will be automatically extended so as to terminate two years from such Renewal Date, unless at least 180 days prior to the Renewal Date the Corporation gives the Executive notice that the Change of Control Period will not be extended. The Corporation may not, however, give the Executive any non-extension notice during any period of time when the Board has knowledge that any person has taken steps reasonably calculated to effect a Change in Control of the Corporation until, in the Board's opinion, such person has abandoned or terminated its efforts to effect a Change in Control. 2. CHANGE OF CONTROL. For purposes of this Agreement, a "Change of Control" means a change of control during the Change of Control Period of a nature that is required to be reported in response to Item 1(a) of the Current Report on Form 8-K, as in effect on the date of this Agreement, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided, that, without limitation, such a "Change of Control" shall be deemed to have occurred if: (a) any "person," as this term is used in Sections 3(a)(9) and 13(d) of the Exchange Act, becomes, directly or indirectly, a "beneficial owner," as such term is used in Rule 13d-3 promulgated under the Exchange Act, of 20% or more of the combined voting power of the Corporation's outstanding Voting Securities (as defined below); or (b) individuals who, as of the date of this Agreement, constitute the Board of Directors of the Corporation (the "Board" generally, and as of the date of this Agreement, the "Incumbent Board") cease for any reason to constitute at least a majority of the Board, PROVIDED that any person becoming a director after the date of this Agreement whose election, or nomination for election by the Corporation's stockholders, was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board (other than an election or nomination of an individual whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of the directors of the Corporation, as such terms are used in Rule 14a-11 of Regulation 14A promulgated under the Exchange Act) will be, for purposes of this Agreement, considered as though such person was a member of the Incumbent Board; or (c) the Corporation adopts any plan of liquidation providing for the distribution of all or substantially all of its assets; or 2 (d) the Corporation disposes of all or substantially all of its assets pursuant to a merger, consolidation or other transaction (unless the holders of the Corporation's Voting Securities immediately prior to the merger, consolidation or other transaction beneficially own, directly or indirectly, in substantially the same proportion as they owned the Corporation's Voting Securities, all of the voting securities or other ownership interests of the entity or entities, if any, that succeed to the Corporation's business); or (e) the Corporation is merged, consolidated or reorganized into or with, or sells all or substantially all of its assets to, another corporation or other entity, and immediately after the transaction less than 80% of the voting power of the then-outstanding securities of the corporation or other entity immediately after the transaction is held in the aggregate by holders of the Corporation's Voting Securities immediately before the transaction. For purposes of this Agreement, the term "Voting Securities" means any shares of the Corporation's capital stock or other securities that are generally entitled to vote in elections of directors. 3. EMPLOYMENT PERIOD. The Corporation agrees to continue the Executive in its employ, and the Executive agrees to remain in the Corporation's employ, for the period commencing on the Effective Date and ending on the third anniversary of such date (the "Employment Period"). 4. POSITION AND DUTIES. (a) During the Employment Period: (1) the Executive's position (including status, offices, titles and reporting relationships), authority, duties and responsibilities shall be at least commensurate in all material respects with the most significant of those held, exercised and assigned at any time during the 90-day period immediately preceding the Effective Date; and (2) the Executive's services will be performed at the location where the Executive was employed immediately preceding the Effective Date or any office or location less than thirty-five (35) miles from such location. (b) The Executive's position, authority, duties and responsibilities shall be regarded as NOT commensurate if, as a result of a Change of Control: (1) the Corporation becomes a direct or indirect subsidiary of another corporation or corporations or becomes controlled, directly or indirectly, by one or more unincorporated entities (such other corporation or unincorporated entity owning or controlling, directly or indirectly, the greatest amount of equity (by vote) of the Corporation is referred to in this Agreement as a "parent company"); 3 (2) all or substantially all of the Corporation's assets are acquired by another corporation or unincorporated entity or group of corporations or unincorporated entities owned or controlled, directly or indirectly, by another corporation or unincorporated entity (the other acquiring or controlling corporation or unincorporated entity is referred to in this Agreement as a "successor"), UNLESS, in each case: (i) Section 14 of this Agreement is complied with; and (ii) the Executive has assumed a position with the parent company or successor, as the case may be, and the Executive's position, authority, duties and responsibilities with the parent company or successor, as the case may be, are at least commensurate in all material respects with the most significant of those held, exercised and assigned with the Corporation at any time during the 90-day period immediately preceding the Effective Date; or (3) more than one unrelated corporation or unincorporated entity acquires a significant portion of the Corporation's assets. (c) Excluding periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote reasonable attention and time during normal business hours to the Corporation's business and affairs and, to the extent necessary to discharge the responsibilities assigned to the Executive under this Agreement, to use the Executive's reasonable best efforts to perform faithfully and efficiently these responsibilities. The Executive may: (1) serve on corporate, civic or charitable boards or committees; (2) deliver lectures, fulfill speaking engagements or teach at educational institutions; and (3) manage personal investments, so long as, such activities do not significantly interfere with the performance of the Executive's responsibilities. It is expressly understood and agreed that, to the extent that any such activities have been conducted by the Executive prior to the Effective Date, the continued conduct of these activities (or the conduct of activities similar in nature and scope) subsequent to the Effective Date will not thereafter be deemed to interfere with the performance of the Executive's responsibilities to the Corporation. 5. COMPENSATION. (a) BASE SALARY. During the Employment Period, the Executive will receive a base salary ("Base Salary") at a monthly rate at least equal to the highest monthly base salary paid 4 to the Executive by the Corporation, together with any of its affiliate companies, during the twelve-month period immediately preceding the month in which the Effective Date occurs. During the Employment Period, the Base Salary will be reviewed at least annually and will be increased at any time and from time to time as will be consistent with increases in base salary awarded in the ordinary course of business to other key executives. Any increase in the Base Salary will not serve to limit or reduce any other obligation to the Executive under this Agreement. The Base Salary will not be reduced after any such increase. As used in this Agreement, the term "affiliates" includes any company controlling, controlled by or under common control with the Corporation. (b) ANNUAL BONUS. In addition to the Base Salary, the Executive will be awarded, for each of the Company's fiscal years ("Fiscal Year") during the Employment Period, an annual bonus (an "Annual Bonus")(either pursuant a bonus, profit sharing or incentive plan or program of the Corporation or otherwise) in cash at least equal to the average bonus paid or payable to the Executive during the three Fiscal Years immediately prior to the Fiscal Year in which the Effective Date occurs (annualized with respect to any such Fiscal Year for which the Executive has been employed only during a portion thereof). Each such annual bonus will be payable within the first 60 days of the Fiscal Year next following the Fiscal Year for which the Annual Bonus is awarded, unless the Executive otherwise elects to defer the receipt of such Annual Bonus. (c) INCENTIVE, SAVINGS AND RETIREMENT PLANS. In addition to the Base Salary and Annual Bonus payable as provided above, the Executive will be entitled to participate, during the Employment Period, in all incentive, savings and retirement plans and programs applicable to other key executives (including, without limitation, the Corporation's pension, profit sharing, restricted stock and stock option plans, in each case comparable to those in effect or as subsequently amended), but in no event will these plans and programs, in the aggregate, provide the Executive with compensation, benefits and reward opportunities less favorable than the most favorable of those provided by the Corporation and its affiliates for the Executive under such plans and programs as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as provided at any time thereafter with respect to other key executives. (d) WELFARE BENEFIT PLANS. During the Employment Period, the Executive and/or the Executive's family, as the case may be, will be eligible for participation in and shall receive all benefits under each of the Corporation's welfare benefit plans, including, without limitation, all medical, prescription, dental, disability, salary continuance, group life, accidental death and travel accident insurance plans and programs of the Corporation and its affiliates, in each case comparable to those in effect at any time during the 90-day period immediately preceding the Effective Date which would be most favorable to the Executive or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. 5 (e) EXPENSES. During the Employment Period, the Executive will be entitled to receive prompt reimbursement for all reasonable expenses incurred by the Executive in accordance with the most favorable policies and procedures of the Corporation in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (f) FRINGE BENEFITS. During the Employment Period, the Executive will be entitled to fringe benefits in accordance with the most favorable policies of the Corporation in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. (g) OFFICE AND STAFF SUPPORT. During the Employment Period, the Executive will be entitled to an office or offices of a size and with furnishings and other appointments, and to secretarial and other assistance, at least equal to those provided to the Executive at any time during the 90-day period immediately preceding the Effective Date which would be most favorable to the Executive or, if more favorable to the Executive, as provided at any time thereafter with respect to other key executives. (h) VACATION. During the Employment Period, the Executive will be entitled to paid vacation in accordance with the most favorable policies of the Corporation as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive, as in effect at any time thereafter with respect to other key executives. 6. TERMINATION. (a) DEATH OR DISABILITY. This Agreement will terminate automatically upon the Executive's death. The Corporation may terminate this Agreement, after having established the Executive's Disability (as defined below), by giving to the Executive written notice of its intention to terminate the Executive's employment. In such a case, the Executive's employment with the Corporation will terminate effective on the 180th day after receipt of such notice (the "Disability Effective Date"), provided that, within 180 days after such receipt, the Executive shall not have returned to full-time performance of the Executive's duties. For purposes of this Agreement, "Disability" means disability which, after the expiration of more than 26 weeks after its commencement, is determined to be total and permanent by a physician selected by the Corporation or its insurers and acceptable to the Executive or the Executive's legal representative (such agreement to acceptability not to be withheld unreasonably). 6 (b) CAUSE. The Corporation may terminate the Executive's employment for "Cause." For purposes of this Agreement, "Cause" means: (1) any act or acts of dishonesty taken by the Executive and intended to result in substantial personal enrichment of the Executive; (2) repeated material violations by the Executive of the Executive's obligations under Section 4 of this Agreement: (i) which are demonstrably willful and deliberate on the Executive's part (which violations occur other than as a result of incapacity due to the Executive's physical or mental illness), and (ii) which result in demonstrably material economic injury to the Corporation and which are not remedied in a reasonable period of time after receipt of written notice from the Corporation specifying such breach; or (3) the conviction of the Executive of a felony. Notwithstanding anything to the contrary set forth in this Agreement, however, "Cause" will not exist, unless and until the Corporation has delivered to the Executive a copy of a resolution duly adopted by three-quarters (3/4) of the Board and to the extent applicable, three-quarters (3/4) of the Incumbent Board, if any, at a meeting of the Board called and held for such purpose (after reasonable notice to the Executive and an opportunity for the Executive, together with his counsel, to be heard before the Board), finding that in the good faith opinion of the Board, the Executive was guilty of the conduct set forth in this Section 6(b) and specifying the particulars in detail. (c) GOOD REASON. The Executive's employment may be terminated by the Executive for Good Reason. For purposes of this Agreement, "Good Reason" means: (1) the assignment to the Executive of any duties inconsistent in any respect with the Executive's position (including status, offices, titles and reporting relationships), authority, duties or responsibilities as contemplated by Section 4 of this Agreement, or any other action by the Corporation which results in a diminution in such position, authority, duties or responsibilities, other than an insubstantial and inadvertent action which is remedied by the Corporation promptly after receipt of notice thereof given by the Executive; (2) any failure by the Corporation to comply with any of the provisions of Section 5 of this Agreement, other than an insubstantial and inadvertent failure which is remedied by the Corporation promptly after receipt of notice thereof given by the Executive; (3) any reduction in the Executive's Base Salary or target award opportunity as in effect within 90 days prior to the Effective Date (including any change in performance 7 criteria which impacts negatively on Executive's ability to achieve the target) under the Corporation's annual or long-term performance incentive plans or programs; (4) the failure to continue the Executive's participation in any incentive compensation plan in which he was a participant within 90 days prior to the Effective Date unless a plan providing a substantially similar opportunity is substituted, or the termination or material reduction of any employee benefit or perquisite enjoyed by him within 90 days prior to the Effective Date, unless comparable benefits or perquisites (determined in the aggregate) are substituted; (5) the Corporation's requiring the Executive to be based at any office or location other than as described in Section 4(a)(2), except for travel reasonably required in the performance of the Executive's responsibilities; (6) any purported termination by the Corporation of the Executive's employment otherwise than as permitted by this Agreement, it being understood that any such purported termination will not be effective for any purpose of this Agreement; or (7) any failure by the Corporation to comply with and satisfy Section 14 of this Agreement. For purposes of this Section 6(c), any good faith determination of "Good Reason" made by the Executive will be conclusive. (d) NOTICE OF TERMINATION. Any termination by the Corporation for Cause or by the Executive for Good Reason will be communicated by Notice of Termination to the other party, given in accordance with Section 16. For purposes of this Agreement, a "Notice of Termination" means a written notice which: (1) indicates the specific termination provision in this Agreement relied upon; (2) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated; and (3) if the Date of Termination is other than the date of receipt of such notice, specifies the Date of Termination (which shall be not more than 15 days after the giving of such notice (except as provided in Section 6(e) of this Agreement)). (e) DATE OF TERMINATION. "Date of Termination" means (1) the effective date on which the Executive's employment by the Corporation terminates as specified in a Notice of Termination by the Corporation or the Executive, as the case may be, or (2) if the Executive's employment by the Corporation terminates by reason of death, the date of death of the Executive. Notwithstanding the previous sentence, if the Executive's employment is 8 terminated for Disability (as defined in Section 6(a)), or the Executive's employment is terminated by the Corporation other than for Cause, then such Date of Termination will be no earlier than thirty (30) days following the date on which a Notice of Termination is received. 7. OBLIGATIONS OF THE CORPORATION UPON TERMINATION. (a) DEATH. If the Executive's employment terminates by reason of the Executive's death, the Corporation will not have any further obligations to the Executive's legal representatives under this Agreement, other than those obligations accrued hereunder at the date of the Executive's death. Anything to the contrary notwithstanding, the Executive's family shall be entitled to receive benefits at least equal to the most favorable benefits provided by the Corporation to surviving families of key executives of the Corporation under such plans, programs and policies relating to family death benefits, if any, as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive and/or the Executive's family, as in effect on the date of the Executive's death with respect to other key executives and their families. (b) DISABILITY. If the Executive's employment is terminated by reason of the Executive's Disability, the Executive will be entitled after the Disability Effective Date to receive disability and other benefits at least equal to the most favorable of those provided by the Corporation to disabled employees and/or their families in accordance with such plans, programs and policies relating to disability, if any, as in effect at any time during the 90-day period immediately preceding the Effective Date or, if more favorable to the Executive or the Executive's family, as in effect at any time thereafter with respect to other key executives and their families. (c) CAUSE. If the Executive's employment is terminated for Cause, the Corporation will pay the Executive his full Base Salary through the Date of Termination at the rate in effect at the time Notice of Termination is given and shall have no further obligations to the Executive under this Agreement. (d) QUALIFYING TERMINATION. If during the Employment Period the Executive's employment is terminated either by the Corporation other than for Cause or Disability or by reason of the Executive's death, or by the Executive for Good Reason, or by the Executive for any reason during the thirty-day period commencing with the first anniversary date of the Effective Date (a "Qualifying Termination"), then the Corporation will pay to the Executive within thirty (30) days following the Date of Termination (except as provided below), as compensation for services rendered to the Corporation: 9 (1) a lump-sum cash amount equal to the sum of: (i) the Executive's unpaid Base Salary through the Date of Termination (at the rate in effect on the Date of Termination or, if higher, at the highest rate in effect at any time within the 90-day period preceding the Effective Date); (ii) that portion of the target annual bonus under the Corporation's incentive compensation plans determined by multiplying the target annual bonus by the fraction arrived at by dividing the number of full weeks worked by the Executive during the fiscal year in which his Date of Termination occurred by fifty-two (52); (iii) a pro rata portion of the target payments under the FedEx Corporation Long Term Incentive ("LTI") Plans adopted with respect to the current Fiscal Year and with respect to each of the immediately two preceding Fiscal Years. In each case, the pro rata portion of the LTI payment shall be determined by dividing the number of full weeks worked by the Executive since the beginning of the Fiscal Year with respect to which the relevant LTI Plan was adopted to his Date of Termination by one hundred and fifty-six (156); PLUS (iv) any unpaid vacation under the Corporation's vacation policy in effect at the Date of Termination (or, if more favorable to the Executive, under any vacation policy of the Corporation in effect at any time within the 90-day period preceding the Effective Date). (2) a lump-sum cash amount equal to the sum of: (i) three (3) times the Executive's highest annual rate of Base Salary in effect during the 12-month period prior to the Date of Termination; (ii) three (3) times the target annual bonus in effect for the Fiscal Year in which the Change of Control occurs; plus (iii) three (3) times the target LTI payment for the Fiscal Year in which the Change of Control occurs. Any amount paid to the Executive pursuant to this Section 7(d)(2) shall be offset by any other amount of severance relating to salary or bonus continuation to be received by the Executive upon termination of the Executive's employment under any other severance plan, policy, employment agreement or arrangement of the Corporation. 10 (3) a lump-sum cash amount equal to: (i) three (3) times the employer matching contributions that would be made to the Federal Express Corporation Profit Sharing Plan (the "PSP Plan") on behalf of Executive for the current fiscal year assuming Executive made the maximum contribution to the PSP Plan; (ii) three (3) times the most recent profit sharing contribution that was made by the Corporation to the PSP Plan on behalf of Executive; and (iii) three (3) times the sum of (i) the most recent payment made to Executive in lieu of a profit sharing contribution to the PSP Plan and (ii) the most recent payment made to the Executive that represented that portion of the profit sharing contribution that could not be made to the PSP Plan due to the limitations of Section 401(a)(17) of the Internal Revenue Code. (4) a lump-sum cash amount equal to the actuarial present value as of the Date of Termination of the amount required to be contributed by the Corporation to fully fund the benefits to the Executive under the Federal Express Corporation Employees' Pension Plan and the Federal Express Corporation Retirement Parity Pension Plan based upon: (i) an additional 36 months of base salary and target annual bonus under Sections 7(d)(2)(i) and 7(d)(2)(ii) above; (ii) an additional 36 months of age and service, or, if greater, the number of additional months of age and service necessary to provide the Executive with 25 years of service and an attained age of 60 under the specific plans referenced in this paragraph or any applicable amended, successor or substitute plan or plans of the Corporation put into effect prior to a Change in Control; and (iii) the assumption that the Corporation's liability under the Federal Express Retirement Parity Pension Plan was fully funded to the Date of Termination. For purposes of determining actuarial present value under this Section 7(d)(4), the most current Mortality Table (assuming a blend of 50 percent of male mortality rates and 50 percent of female mortality rates) shall be utilized. For purposes of determining actuarial present value under this Section 7(d)(4), the interest rate on 30-year U.S. Treasury securities for the month of May preceding the Fiscal Year in which the Date of Termination occurs shall be used (such rate is the "applicable interest rate" under Section 417(e)(3)(A)(ii)(II) of the Internal Revenue Code). (e) If during the Employment Period, the employment of the Executive shall terminate, by reason of a Qualifying Termination, then for a period ending on the earliest of: 11 thirty-six (36) months following the Date of Termination; the commencement date of equivalent benefits from a new employer; or the date on which the Executive reaches age 60: (1) the Corporation will continue to keep in full force and effect (or otherwise provide) each plan and policy providing medical, accident, disability and life coverage with respect to the Executive and his dependents with the same level of coverage, upon the same terms and otherwise to the same extent as, each such plan and policy in effect immediately prior to the Date of Termination (or, if more favorable to the Executive, each such plan and policy in effect within the 90-day period prior to the Effective Date), and the Corporation and the Executive will share the costs of continuing each such coverage in the same proportion as such costs were shared immediately prior to the Date of Termination (or, if more favorable to the Executive, within the 90-day period prior to the Effective Date); and (2) if, on or after the end of thirty-six (36) months following the Date of Termination, the Executive is not then receiving equivalent medical coverage from a new employer, the Corporation will provide the Executive with coverage equivalent to the Corporation's retiree medical benefits program then in effect. Upon termination of any of the other coverages discussed in this sub-section, the Executive may convert Executive's coverage and his dependents' coverage under any such plan or policy to individual policies or programs upon the same terms as employees of the Corporation may apply for such conversions. (f) If during the Employment Period, the employment of the Executive terminates, by reason of a Qualifying Termination, then for a period of twelve months following the Date of Termination, the Corporation will provide, at its expense, executive level outplacement assistance to the Executive by a nationally recognized outplacement firm acceptable to the Executive. 8. CONSEQUENCE OF A CHANGE IN CONTROL UPON CERTAIN ENTITLEMENTS. (a) Except as provided herein, the consequences of a Change in Control on the Executive's stock options, restricted stock awards, or any other award or grant of stock or rights to purchase the stock of the Corporation (by option, warrant or otherwise) and pension, retirement, long-term incentive or any other similar benefits, will be determined in accordance with the provisions of the applicable plans in effect on the Effective Date (or, if more favorable to the Executive, in effect during the 90-day period preceding the Effective Date). (b)(1) No later than the occurrence of a Change of Control, the Corporation will fund in full that portion, if any, of its obligations to the Executive under the Federal Express Corporation Retirement Parity Pension Plan that are then unfunded. Such funding will be provided through an irrevocable trust for the benefit of the Executive which will be established as promptly as possible following the Effective Date of this Agreement for the purpose of receiving contributions from the Corporation to fund such obligations. 12 (2) No later than the occurrence of a Change in Control, the Corporation will fund its obligations to provide payments and benefits under this Agreement (other than the obligations which are provided for in Section 8(b)(1)) by the establishment of a trust to which it contributes an amount sufficient to meet its obligations. The trust described in this Section 8(b)(2) may be part of the trust described in Section 8(b)(1). (3) Any trust created pursuant to this Section 8 will provide for distribution of amounts to the Executive in order to pay taxes, if any, that become due prior to payment of amounts pursuant to the trust. Following the occurrence of a Change in Control, the Corporation will make periodic additional contributions (no less frequently than annually) to keep the trust fully funded. The intent is that no later than the Change in Control and annually thereafter (the "Applicable Dates") the amount of such fund will equal at least the then present value (determined as of each Applicable Date) of any amounts subject to the funding requirement of Section 8(b)(1) as determined by a nationally recognized firm qualified to provide actuarial services and to fully fund the payments and benefits described in Section 8(b)(2). The establishment and funding of any such trust will not affect the Corporation's obligation to provide the benefits being funded. (4) The trust may be terminated in accordance with the trust agreement between the Corporation and the trustee and, if so terminated, the Corporation will not be required to establish a successor trust under this Section 8(b). The trust described in this Section 8(b) may be part of a trust funding similar obligations for the Corporation's other employees. 9. NO DUTY TO MITIGATE. In no event will the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement, nor will the amount of any payment under this Agreement be reduced, except as otherwise specifically provided herein, by any compensation earned by the Executive as a result of employment by another employer. 10. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement will prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Corporation or any of its affiliates and for which the Executive may qualify, nor will anything in this Agreement limit or otherwise affect such rights as the Executive may have under any stock option, stock warrant, restricted stock, pension, long-term incentive award or other agreements, plans or programs with the Corporation or any of its affiliates. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Corporation or any of its affiliates at or subsequent to the Effective Date will be payable in accordance with such plan or program. 13 11. NO SET-OFF; NO MITIGATION. The Corporation's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations will not be affected by any circumstances, including, without limitation, any set-off, counterclaim, recoupment, defense or other claim, right or action which the Corporation may have against the Executive or others. In no event will the Executive be obligated to seek other employment or take other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and these amounts will not be reduced whether or not the Executive obtains any other employment. 12. TAX PAYMENT. (a) WITHHOLDINGS AND DEDUCTIONS. Any payment made pursuant to Section 7(d) will be paid, less standard withholdings and other deductions authorized by the Executive or required by law. (b) GROSS-UP FOR CERTAIN TAXES. (1) Subject to the provisions of Section 12(f) of this Agreement, all determinations required to be made under this Section 12, including whether and when a Gross-up Payment (as defined below) is required and the amount of such Gross-up Payment and the assumptions to be utilized in arriving at such determination, will be made by the public accounting firm that is retained by the Corporation as of the date immediately prior to the Effective Date (the "Accounting Firm") which will provide detailed supporting calculations both to the Corporation and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment (as defined below), or such earlier time as is requested by the Corporation (collectively, a "Determination"). (2) In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change in Control, the Executive will appoint another nationally recognized public accounting firm to make the determinations required under this Agreement (which accounting firm shall then be referred to as the Accounting Firm ). All fees and expenses of the Accounting Firm will be borne solely by the Company. (3) If it is determined by the Accounting Firm that any payment, distribution or other benefit (including any acceleration of vesting of any benefit) received or deemed received by the Executive from the Corporation and its affiliates pursuant to this Agreement or otherwise ( a "Payment")(whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise, but determined without regard to any Gross-up Payment required by this Section 12) is or will become subject to any excise tax imposed by Section 4999 of the Internal Revenue Code or any similar tax payable under any United States federal, state, local or other law (such excise tax and all such similar taxes, together 14 with any interest and penalties imposed in respect thereto, are referred to in this Agreement as the "Excise Taxes"), then the Corporation will pay the Executive within five (5) days of receipt of the Determination, an amount (the "Gross-up Payment") such that the net amount retained by the Executive, after the deduction of any Excise Taxes on the Payments, and any federal, state and local income tax, Medicare and any Excise Tax (including any applicable interest and penalties on all such taxes), upon such Gross-up Payment, will be equal to the amount of the Payments in the absence of the imposition of such Excise Taxes and the Gross-up Payment. (4) For purposes of determining the amount of the Gross-up Payment, the Executive will be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-up Payment is to be made and local income taxes at the highest marginal rates of taxation in the state and locality of his residence in such calendar year. (5) If the Accounting Firm determines that no Excise Tax is payable by the Executive, it will furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return will not result in the imposition of a negligence or similar penalty. (c) DETERMINATION BY THE EXECUTIVE. (1) If at any time following determination of the Gross-up Payment by the Accounting Firm, the Executive disputes the amount of the Gross-up Payment, the Executive may elect to demand payment of the amount which the Executive, in accordance with an opinion of counsel to the Executive ("Executive Counsel Opinion"), determines to be the Gross-up Payment. Any such demand by the Executive shall be made by delivery to the Corporation of a written notice which specifies the Gross-up Payment determined by the Executive and an Executive Counsel Opinion regarding such Gross-up Payment (such written notice and opinion collectively, the "Executive's Determination"). (2) Within 14 days after delivery of the Executive's Determination to the Corporation, the Corporation shall either (i) pay the Executive the Gross-up Payment set forth in the Executive's Determination (less the portion of such amount, if any, previously paid to the Executive by the Corporation) or (ii) deliver to the Executive a certificate specifying the Gross-up Payment determined by the Accounting Firm, together with an opinion of the Corporation's counsel ("Corporation Counsel Opinion"), and pay the Executive the Gross-up Payment specified in such certificate. If for any reason the Corporation fails to comply with clause (ii) of the preceding sentence, the Gross-up Payment specified in the Executive's Determination shall be controlling for all purposes. (d) OPINION OF COUNSEL. "Executive Counsel Opinion" means a legal opinion of nationally recognized executive compensation counsel that there is a reasonable basis to support a conclusion that the Gross-up Payment determined by the Executive has been 15 calculated in accordance with this Section and applicable law. "Corporation Counsel Opinion" means a legal opinion of a nationally recognized executive compensation counsel that (1) there is a reasonable basis to support a conclusion that the Gross-up Payment set forth by the Accounting Firm has been calculated in accordance with this Section and applicable law, and (2) there is no reasonable basis for the calculation of the Gross-up Payment determined by the Executive. (e) ADDITIONAL GROSS-UP AMOUNTS. If, despite the initial conclusion of the Corporation and/or the Executive that certain Payments are neither subject to Excise Taxes nor to be counted in determining whether other Payments are subject to Excise Taxes (any such item, a "Non-Parachute Item"), it is later determined (pursuant to the subsequently-enacted provisions of the Code, final regulations or published rulings of the Internal Revenue Service, final judgment of a court of competent jurisdiction or the Accounting Firm) that any of the Non-Parachute Items are subject to Excise Taxes, or are to be counted in determining whether any Payments are subject to Excise Taxes, with the result that the amount of Excise Taxes payable by the Executive is greater than the amount determined by the Corporation or the Executive pursuant to this Section, as applicable, then the Corporation shall pay the Executive an additional Gross-up Payment in order to compensate the Executive for such additional Excise Taxes, any interest, fines, penalties, expenses or other costs incurred by the Executive as a result of having taken a position in accordance with a determination made pursuant to Section 12(b), and any federal, state and local income tax, Medicare and any Excise Tax upon such additional Gross-up Payments, calculated in the manner described in Section 12(b). (f) AMOUNT INCREASED OR CONTESTED. (1) The Executive shall notify the Corporation in writing of any claim by the Internal Revenue Service or other taxing authority that, if successful, would require the payment by the Corporation of a Gross-up Payment. Such notice shall include the nature of such claim and the date on which such claim is due to be paid. (2) The Executive shall give such notice as soon as practicable, but no later than 10 business days, after the Executive first obtains actual knowledge of such claim; provided, however, that any failure by the Executive to give or delay in giving such notice shall affect the Corporation's obligations under this Section only if and to the extent that such failure results in actual prejudice to the Corporation. (3) The Executive shall not pay such claim less than 30 days after the Executive gives such notice to the Corporation (or, if sooner, the date on which payment of such claim is due). If the Corporation notifies the Executive in writing before the expiration of such period that it desires to contest such claim, the Executive shall: (i) give the Corporation any information that it reasonably requests relating to such claim; 16 (ii) take such action in connection with contesting such claim as the Corporation reasonably requests in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Corporation; (iii) cooperate with the Corporation in good faith to contest such claim; and (iv) permit the Corporation to participate in any proceedings relating to such claim; PROVIDED, HOWEVER, that the Corporation shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax, income tax or employment tax, including related interest and penalties, imposed as a result of such representation and payment of costs and expenses. (4) Without limiting the foregoing, the Corporation shall control all proceedings in connection with such contest and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner. (5) The Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Corporation shall determine; PROVIDED, HOWEVER, that if: (i) the Corporation directs the Executive to pay such claim and sue for a refund, the Corporation shall advance the amount of such payment to the Executive, on an interest-free basis and shall indemnify the Executive, on an after-tax basis, for any Excise Tax , income tax or employment tax, including related interest or penalties, imposed with respect to such advance; and, FURTHER PROVIDED; (ii) that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to be due is limited solely to such contested amount. The Corporation's control of the contest shall be limited to issues with respect to which a Gross-up Payment would be payable. The Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or other taxing authority. 17 (g) REFUNDS. (1) If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to Section 12(f), the Executive becomes entitled to receive any refund with respect to such claim, the Executive shall (subject to the Corporation's complying with the requirements of Section 12(f)) promptly pay the Corporation the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). (2) If, after the receipt by the Executive of an amount advanced by the Corporation pursuant to Section 12(f), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Corporation does not notify the Executive in writing of its intent to contest such determination before the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-up Payment required to be paid. (3) Any contest of a denial of refund shall be controlled by Section 12(f). 13. CONFIDENTIAL INFORMATION; NON-COMPETITION. (a) CONFIDENTIALITY. (1) The Executive shall hold in a fiduciary capacity for the benefit of the Corporation all Confidential Information (as hereinafter defined) relating to the Corporation or any of its affiliates and their respective businesses, which shall have been obtained by the Executive during the Executive's employment by the Corporation or any of its affiliates. (2) "Confidential Information" means any non-public, proprietary information that may provide the Corporation with a competitive advantage, including, without limitation, any trade secrets, formulas, flow charts, computer programs and codes (including, without limitation, any source codes), or other systems information, business, product or marketing plans, sales and other forecasts, financial information, customer lists and information relating to compensation and benefits, provided that such proprietary information does not include any information which is available to the general public or is generally available within the relevant business or industry other than as a result of the Executive's breach of this Section 13(a). (3) Confidential Information may be in any medium or form, including, without limitation, physical documents, computer files, drives or discs, videotapes, audiotapes and oral communications. (4) Anything herein to the contrary notwithstanding, it shall not be a violation of this Section 13(a) for the Executive to disclose information in the ordinary course of properly carrying out his duties and responsibilities on behalf of the Corporation or to 18 respond to an order of a court or other body having jurisdiction provided that he gives the Corporation prior notice of any such order. In no event shall an asserted violation of the provisions of this Section 13(a) constitute a basis for deferring or withholding any amounts otherwise payable to the Executive under this Agreement. (b) NON-COMPETITION. (1) The Executive agrees that he shall not for a period of one (1) year following the Date of Termination, directly or indirectly own, manage, operate, join, control, be employed by, or participate in the ownership, management, operation or control of or be connected in any manner, including but not limited to, holding the positions of officer, director, shareholder, consultant, independent contractor, employee, partner or investor, with any Competing Enterprise (as hereinafter defined); PROVIDED, HOWEVER, that the Executive may invest without being deemed in violation of this Section 13(b), in stocks, bonds or other securities of any corporation or other entity (but without participating in the business thereof) if such stocks, bonds or other securities are listed for trading on a national securities exchange or NASDAQ and the Executive's investment does not exceed 1% of the issued and outstanding shares of capital stock, or in the case of bonds or other securities, 1% of the aggregate principal amount thereof issued and outstanding. (2) For purposes of this Agreement, the term "Competing Enterprise" shall mean an enterprise that engages in any business that, on the Date of Termination, is engaged in by the Corporation or by any of its affiliates if such enterprise engages in such business in any geographic areas in which the Corporation or any of its affiliates conducts such business. (c) RETURN OF PROPERTY. Except as expressly provided herein, promptly following the Executive's termination of employment, the Executive shall return to the Corporation all property of the Corporation then in the Executive's possession or under his control, except that the Executive may retain his personal notes, diaries, Rolodexes (whether in electronic form or otherwise), calendars and correspondence. (d) IRREPARABLE INJURY. The Executive agrees that any material breach of the terms of this Section 13 would result in irreparable injury and damage to the Corporation for which the Corporation would have no adequate remedy at law. The Executive further agrees that in the event of said material breach or any reasonable threat of material breach, the Corporation shall be entitled to an immediate injunction and restraining order to prevent such material breach or threatened material breach. The terms of this Section 13(d) shall not prevent the Corporation from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to, the recovery of damages. Should a court or arbitrator determine that any provision of this Section 13 is unreasonable, the parties agree that such provision shall be interpreted and enforced to the maximum extent such court or arbitrator deems reasonable. 19 (e) SURVIVAL. (1) The provisions of this Section shall survive any termination of this Agreement and of the Employment Period, and the existence of any claim or cause of action by the Executive against the Corporation, whether predicated on this Agreement or otherwise, shall not constitute a defense to the enforcement by the Corporation of the covenants and agreements of this Section. (2) Anything in this Section 13(e) to the contrary notwithstanding, the provisions of Section 13(b) shall only apply in the event of: (i) a termination of the Executive's employment described in Section 1(a) hereof prior to the occurrence of a Change in Control; (ii) a termination of the Executive's employment during the Employment Period that constitutes a Qualifying Termination; or (iii) a termination for Cause at any time during the Employment Period. 14. SUCCESSORS; BINDING AGREEMENT. (a) This Agreement shall not be terminated by any merger or consolidation of the Corporation whereby the Corporation is or is not the surviving or resulting corporation or as a result of any transfer of all or substantially all of the assets of the Corporation. In the event of any such merger, consolidation or transfer of assets, the provisions of this Agreement shall be binding upon the surviving or resulting corporation or the person or entity to which such assets are transferred. (b) The Corporation agrees that concurrently with any merger, consolidation or transfer of assets referred to in Section 14(a) hereof, it will cause any successor or transferee unconditionally to assume, by written instrument delivered to the Executive (or his beneficiary or estate), all of the obligations of the Corporation hereunder. (c)(1) No rights or obligations of the Corporation under this Agreement may be assigned or transferred by the Corporation except that such rights or obligations may be assigned or transferred pursuant to a merger or consolidation in which the Corporation is not the continuing entity, or in connection with the sale or liquidation of all or substantially all of the assets of the Corporation, or in connection with the disposition of all or substantially all of the assets of the Corporation, or in connection with the disposition of the business of the Corporation substantially as an entirety, provided that the assignee or transferee is the successor to all or substantially all of the assets of the Corporation and such assignee or transferee assumes all of the liabilities, obligations and duties of the Corporation under this Agreement, either contractually or as a matter of law. 20 (2) This Agreement is personal to the Executive and, without the prior written consent of the Corporation, shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This agreement shall inure to the benefit of and be enforceable by the Executive's personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If the Executive shall die while any amounts would be payable to the Executive hereunder had the Executive continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to such person or persons appointed in writing by the Executive to receive such amounts or, if no person is so appointed, to the Executive's estate. 15. INDEMNIFICATION. (a) The Corporation agrees that if the Executive is made a party to any action, suit or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), by reason of the fact that he is or was a director, officer or employee of the Corporation or of any of its affiliates, the Executive shall be indemnified and held harmless by the Corporation to the fullest extent legally permitted or authorized by the Corporation's Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, any Indemnification Agreement between the Corporation (or any of the Corporation's affiliates) and the Executive or, if greater, by the laws of the State of Delaware, against all cost, expense, liability and loss (including, without limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by the Executive in connection therewith. (b) The Corporation agrees to continue and maintain a directors' and officers' liability insurance policy covering the Executive to the extent the Corporation provides such coverage for its other executive officers. 16. MISCELLANEOUS. (a) This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. (b) All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows: 21 IF TO THE EXECUTIVE: [ Name of Executive Officer ] [ Home address of Executive Officer ] IF TO THE CORPORATION: FedEx Corporation 942 South Shady Grove Road Memphis, Tennessee 38120 Attn: Kenneth R. Masterson Executive Vice President, General Counsel and Secretary
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee. (c) The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. (d) If any contest or dispute shall arise under this Agreement involving termination of the Executive's employment with the Corporation or involving the failure or refusal of the Corporation to perform fully in accordance with the terms hereof, the Corporation shall reimburse the Executive, on a current basis, for all legal fees and expenses, if any, incurred by the Executive in connection with such contest or dispute regardless of the result thereof. (e) This Agreement contains the entire understanding between the Corporation and the Executive with respect to the subject hereof and supersedes and nullifies any previous change of control employment agreement between the parties. (f) The Executive and the Corporation acknowledge that the employment of the Executive by the Corporation is "at will" and, prior to the Effective Date, may be terminated by either the Executive or the Corporation at any time. Except as specified in Section 1(a) hereof, upon a termination of the Executive's employment or upon the Executive's ceasing to be an officer of the Corporation, in each case, prior to the Effective Date, there shall be no further rights under this Agreement. (g) Any reference in this Agreement to any compensation, bonus, profit sharing, stock option, restricted stock, pension, savings, retirement, welfare, vacation or other similar benefit plan or program means and includes, for purposes of this Agreement, any substitute or successor plan or program. 22 IN WITNESS WHEREOF, the Executive has hereunto set his hand and, pursuant to the authorization from its Board of Directors, the Corporation has caused these presents to be executed in its name on its behalf, all as of the day and year first above written. -------------------------------- [Name of Executive Officer] FEDEX CORPORATION By: --------------------------- Name: Title: 23 EX-10.61 10 ex-10_61.txt EXHIBIT 10.61 Exhibit 10.61 CONSULTING AGREEMENT THIS AGREEMENT is made this 14 day of July, 2000 by and between FEDEX CORPORATION, a Delaware corporation (the "Company"), and DENNIS H. JONES ("Jones"). WHEREAS, Jones has submitted his resignation from the Company effective August 31, 2000 and the parties have agreed to a consulting arrangement and wish to reduce such arrangement to writing. NOW, THEREFORE, in consideration of the foregoing and the mutual undertakings contained in this Agreement, the parties agree as follows: SECTION 1. TERM. The term of this Agreement ("Term") shall begin on the earlier of September 1, 2000 or the date Jones begins other full-time, permanent employment with a successor employer and shall end on December 31, 2002, unless earlier terminated under the provisions of Section 13 of this Agreement. SECTION 2. CONSULTING COMPENSATION. Jones shall remain an executive officer of the Company until the beginning date of the Term of this Agreement and shall become an unclassified employee of the Company on such date and shall remain so for the Term of this Agreement. For and in consideration of the consulting services to be performed by Jones and the further covenants and agreements made by him under this Agreement, the Company shall, for the Term hereof, provided Jones is not in default under this Agreement: (a) pay to Jones from the beginning date of the Term of this Agreement through December 31, 2002 basic monthly compensation of $48,528 in semi-monthly installments; (b) provide Jones and his dependents coverage under the Company's employee benefit plans to the same extent that coverage existed immediately before the date as of which this Agreement is made; (c) reimburse Jones for not otherwise reimbursed reasonable and necessary travel and lodging expenses incurred in seeking other employment; (d) provide, at its expense, tax and financial counseling services up to, but not beyond, April 15, 2002 in accordance with the program applicable to executive officers of the Company; (e) continue to provide Jones the high-speed telephone line currently provided by the Company; however, Jones will reimburse to the Company the cost of providing such telephone line after the beginning date of the Term of this Agreement; and (f) use its best efforts to provide executive access for Jones and members of his immediate family, to the extent within the Company's control, to Disney World and Disneyland. Notwithstanding subsection (b) above, neither Jones nor his dependents shall be entitled to travel on Company aircraft, but may obtain interline travel tickets through the Federal Express Corporation Corporate Travel department. However, Jones shall be entitled to discount shipping privileges on the same basis as provided to other employees until he attains age 55. SECTION 3. HEALTH INSURANCE, CERTAIN PERSONAL PROPERTY AND BOARD SEAT RESIGNATIONS. The Company agrees to provide Jones and his dependents health benefit coverage after the Term of this Agreement until Jones attains age 55, on substantially the same basis as provided by the Company to participants in its Retiree Group Health Plan as it then exists. The Company may provide such coverage through the purchase of an insurance policy or otherwise, as it shall determine in its sole and exclusive discretion. In addition, the Company agrees that Jones may keep Company computer equipment currently in his possession but Jones agrees to return to the Company his identification badge at the end of the Term of this Agreement. Upon execution of this Agreement, Jones hereby resigns, without 2 further notice, his seats on the boards of directors of all Company subsidiaries and affiliates of the Company (as defined in Section 13 of this Agreement). SECTION 4. LTI AND MIC SETTLEMENT. Jones understands and agrees that any claims he may have with respect to the Company's Long Term Incentive ("LTI") Plans are settled by (i) any LTI payment due to him in his current position in calendar year 2000 under the Company's FY1998-2000 LTI Plan, and (ii) any amount payable under the FY1999-2001 LTI Plan to Executive Vice Presidents of the Company, multiplied by a fraction, the numerator of which is 27 and the denominator of which is 36, with the result multiplied by the average percentage of Jones' achievement of his Management by Objectives ("MBO") goals for fiscal years 1998 through 2000. In addition, Jones shall be entitled to (i) Management Incentive Compensation ("MIC") for fiscal year 2000 calculated by multiplying the number of points allocated to his position by the percentage achievement of his MBO goals for such year, and (ii) the MBO dollar point value, if any, for FY2001 established for Executive Vice Presidents (assuming Jones achieved 100% of his MBO objectives for such year), multiplied by a fraction, the numerator of which is three and the denominator of which is 12. Such FY2000 and FY2001 MIC and LTI settlements shall be paid at the same time as MIC and LTI payments are made to other participants in such programs. It is understood and agreed that Jones shall receive no other LTI or MIC payments other than as specified in this Section 3. SECTION 5. JONES'S SERVICES; ACKNOWLEDGEMENT OF DUTY OF LOYALTY. Jones agrees to perform such reasonable services as may be requested from time to time during the Term of this Agreement by the Company's Chief Executive Officer. Jones agrees to make himself available at all reasonable times to perform such services during such period. Jones acknowledges his duty of loyalty to the Company and covenants to conduct himself in accordance with such duty during the Term of this Agreement. 3 SECTION 6. OTHER EMPLOYMENT. If Jones obtains other employment providing comparable or better benefits, including life and other insurance, medical, dental, disability, vision care and similar coverage as under the Company's plans during the Term of this Agreement, or medical benefits thereafter pursuant to Section 3 of this Agreement, Jones, on behalf of his dependents, heirs and beneficiaries, hereby waives any claims he or they may have with respect to Company benefits to the extent covered by a successor employer's benefit plan or plans. SECTION 7. WITHHOLDING. Any payments made pursuant to this Agreement shall be net of (i) all amounts required to be withheld from such payments pursuant to applicable income tax, Social Security and unemployment insurance laws and regulations, and (ii) such other amounts as are withheld from such payments pursuant to Jones's authorization. SECTION 8. STOCK OPTION AND RESTRICTED STOCK MATTERS. Jones shall remain an employee of the Company during the Term of this Agreement. Accordingly, Jones may exercise any options granted under the Company's stock incentive plans which vest before the end of such Term and are exercisable in accordance with the provisions of such stock incentive plans; provided, however, that no loans shall be made pursuant to the Company's Stock Option Loan Policy for purposes of exercising such options or paying any taxes in connection therewith. In addition, Jones shall remain an unclassified employee of the Company until December 31, 2002 for purposes of satisfying the employment condition for becoming entitled to receive all shares of restricted stock then vested. However, Jones shall not be entitled to any stock option or restricted stock grants after the date of this agreement. Jones agrees to repay in full the balance of all currently outstanding stock option loans on or before December 31, 2002. 4 SECTION 9. REFERENCES. The Company shall cause its executive officers, and each of them, to, upon request of a prospective employer for a reference with respect to Jones, favorably recommend Jones in a manner commensurate with his record. SECTION 10. RESTRICTIVE COVENANT. Jones covenants and agrees that he will not, during the Term of this Agreement and for a period of two years thereafter, engage as a principal, employee, agent, consultant, independent contractor or in any capacity whatsoever with a Competitor of the Company, except with the prior written consent of the Company, which consent will not be unreasonably withheld. For this purpose, "Competitor" shall mean and be limited to either of United Parcel Service, Airborne Freight Corporation, DHL, Emery Worldwide, TNT Express Worldwide, or any of their principal affiliates and any entity succeeding to their business by reason of a change in identity, merger or consolidation. In addition to any other rights or remedies available to the Company on breach of this covenant, the Company shall be entitled to enforcement hereof by court injunction. In addition, Jones acknowledges his duty of loyalty as an employee of the Company and covenants and agrees that he will not, during the Term of this Agreement, knowingly engage in any activity which would be detrimental or adverse to the interests of the Company. SECTION 11. NON-DISCLOSURE OF PROPRIETARY INFORMATION. Jones acknowledges that he possesses substantial proprietary information which is or may become valuable assets of the Company, and that he may obtain knowledge of additional such proprietary information during the term of this Agreement. Jones hereby covenants and agrees that he will not on any occasion, during or after the Term of this Agreement, disclose any such non-public proprietary information to any person except upon the express written authorization of the Company. 5 SECTION 12. RELEASE AND INDEMNIFICATION. (a) Jones hereby releases the Company from any and all liabilities, claims and causes of action arising, or which may arise in the future, from or in connection with his employment or its termination with or by the Company or the furnishing of services hereunder, other than the obligations of the Company under this Agreement. (b) Jones agrees to indemnify and hold harmless the Company and its directors, officers, agents and employees from and against any and all liabilities, damages, claims, demands, suits, judgments and expenses, in any manner arising out of or in connection with any act or omission of Jones outside the scope and course of his employment with the Company or the performance of services hereunder. (c) The Company hereby releases Jones from any and all liabilities, claims and causes of action arising, or which may arise in the future, from or in connection with his employment with or by the Company, other than the undertakings and obligations of Jones under this Agreement. (d) The Company agrees to indemnify and hold harmless Jones from and against any and all liabilities, claims, costs and expenses, including reasonable attorneys' fees, in any matter arising out of or in connection with his employment with the Company provided that Jones was acting within the scope and course of his employment with respect to such matter. (e) The release and indemnities provided hereunder shall continue in full force and effect after the termination or expiration of this Agreement. SECTION 13. DEFAULT AND TERMINATION. A failure by Jones to perform such services as may be reasonably requested of him pursuant to this Agreement or a breach by Jones of any covenant or agreement contained herein shall constitute a default by Jones. In the event of such default, the Company shall, in addition to any 6 right or remedy available to it at law or in equity, have the right to immediately terminate this Agreement by written notice to Jones. In addition, this Agreement shall immediately terminate in the event that Jones becomes employed by an affiliate of the Company in another position, whether or not such employment commences before or during the Term of this Agreement. For this purpose, "affiliate of the Company" shall mean any entity in which the Company or one or more of its subsidiaries has an ownership interest or which is commercially identified with the Company's or any of its subsidiaries' trade names, service marks or trademarks through a licensing arrangement or otherwise. Upon any such termination, the Company shall not be obligated to make any further payments pursuant to this Agreement. SECTION 14. ENTIRE CONTRACT. This Agreement, the Release and Waiver of Rights and Claims executed by the parties and dated the same date as this Agreement and the outstanding promissory notes evidencing Jones' stock option loans from the Company together constitute the entire contract between the parties with respect to the subject matters to which they pertain. Any and all other agreements, representations and understandings of the parties shall be deemed merged into such instruments. SECTION 15. GOVERNING LAW. This Agreement is made in and shall be governed, construed and enforced in accordance with the laws of the State of Tennessee. 7 IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed this 14 day of July, 2000. FEDEX CORPORATION /s/ Frederick W. Smith APPROVED BY By: ------------------------------- LEGAL DEPARTMENT: Title: Chairman and CEO ------------------------------- By: /s/ GWH --------------------------- /s/DENNIS H. JONES --------------------------- DENNIS H. JONES 8 EX-12 11 ex-12.txt EXHIBIT 12 Exhibit 12 FEDEX CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES (Unaudited)
Year Ended May 31, --------------------------------------------------------------------- 1996 1997 1998 1999 2000 ----------- -------- ----------- ----------- ---------- (In thousands, except ratios) Earnings: Income before income taxes $ 702,094 $425,865 $ 899,518 $1,061,064 $1,137,740 Add back: Interest expense, net of capitalized interest 109,249 110,080 135,696 110,590 121,173 Amortization of debt issuance costs 1,628 1,328 1,481 9,249 1,264 Portion of rent expense representative of interest factor 393,775 439,729 508,325 570,789 624,588 ---------- -------- ---------- ---------- ---------- Earnings as adjusted $1,206,746 $977,002 $1,545,020 $1,751,692 $1,884,765 ========== ======== ========== ========== ========== Fixed Charges: Interest expense, net of capitalized interest $ 109,249 $110,080 $ 135,696 $ 110,590 $ 121,173 Capitalized interest 44,654 45,717 33,009 38,880 34,823 Amortization of debt issuance costs 1,628 1,328 1,481 9,249 1,264 Portion of rent expense representative of interest factor 393,775 439,729 508,325 570,789 624,588 ---------- -------- ---------- ---------- ---------- $ 549,306 $596,854 $ 678,511 $ 729,508 $ 781,848 ========== ======== ========== ========== ========== Ratio of Earnings to Fixed Charges 2.2 1.6 2.3 2.4 2.4 ========== ======== ========== ========== ==========
EX-21 12 ex-21.txt EXHIBIT 21 Exhibit 21 FEDEX CORPORATION
JURISDICTION OF ORGANIZATION OR REGISTRATION --------------- 1. FEDERAL EXPRESS CORPORATION Delaware I. FEDERAL EXPRESS AVIATION SERVICES, INCORPORATED Delaware A. Federal Express Aviation Services International, Ltd. Delaware II. FEDERAL EXPRESS CANADA LTD. Canada III. FEDERAL EXPRESS INTERNATIONAL, INC. Delaware A. Dencom Investments Limited Northern Ireland 1. Dencom Freight Holdings Limited Northern Ireland a. F.E.D.S. (Ireland) Limited Ireland b. Federal Express (N.I.) Limited Northern Ireland c. Fedex (Ireland) Limited Ireland B. Federal Express (Australia) PTY Ltd. Australia C. Federal Express Europe, Inc. Delaware 1. Federal Express Europe, Inc. & Co., V.O.F./S.N.C. Belgium 2. Federal Express European Services, Inc. Delaware D. Federal Express Europlex, Inc. Delaware E. Federal Express Finance P.L.C. United Kingdom F. Federal Express Holdings, S.A. Delaware 1. Federal Express (Antigua) Limited Antigua 2. Federal Express (Antilles Francaises) S.A.R.L. French West Indies 3. Federal Express (Barbados) Limited Barbados 4. Federal Express (Bermuda) Limited Bermuda 5. Federal Express Cayman Limited Cayman Islands 6. Federal Express (Dominicana) S.A. Dominican Republic a. Inversiones Geminis, S.A. Dominican Republic
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JURISDICTION OF ORGANIZATION OR REGISTRATION --------------- b. Inversiones Sagitario, S.A. Dominican Republic 7. Federal Express Entregas Rapidas, Ltd. Brazil 8. Federal Express (Grenada) Limited Grenada 9. Federal Express (Haiti) S.A. Haiti 10. Federal Express Holdings (Mexico) y Compania S.N.C. de Mexico C.V. 11. Federal Express (Jamaica) Limited Jamaica 12. Federal Express (St. Kitts) Limited St. Kitts 13. Federal Express (St. Lucia) Limited St. Lucia 14. Federal Express (St. Maarten) N.V. Netherland Antilles a. Federal Express (Aruba) N.V. Netherland Antilles 15. Federal Express (Turks & Caicos) Limited Turks & Caicos Islands 16. Federal Express Virgin Islands, Inc. U.S. Virgin Islands 17. FedEx (Bahamas) Limited Bahamas G. Federal Express International (France) SNC France H. Federal Express International Limited United Kingdom I. Federal Express International Y Compania S.N.C. de C.V. Mexico J. Federal Express Italy Inc. Delaware K. Federal Express Japan K.K. Japan L. Federal Express Limited United Kingdom M. Federal Express Luxembourg, Inc. Delaware N. Federal Express Pacific, Inc. Delaware 1. Federal Express Services (M) Sdn. Bhd. Malaysia
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JURISDICTION OF ORGANIZATION OR REGISTRATION --------------- 2. The Flying Tiger Line, Limited Hong Kong 3. Udara Express Courier Services Sdn. Bhd. Malaysia O. Federal Express Parcel Services Limited United Kingdom P. Federal Express (Singapore) PTE, LTD. Singapore Q. Federal Express (Thailand) Limited Thailand R. Federal Express (U.K.) Limited United Kingdom a. Federal Express (U.K.) Pension Trustees Ltd. United Kingdom S. FedEx (Mauritius) Ltd. Mauritius T. Fedex (N. I.) Limited Northern Ireland U. Winchmore Developments Ltd. England a. Concorde Advertising Limited England IV. FEDERAL EXPRESS LEASING CORPORATION Delaware V. FEDEX CUSTOMS BROKERAGE CORPORATION Delaware VI. FEDEX FSC CORPORATION Barbados VII. FEDEX PARTNERS, INC. Delaware VIII. FEDEX SPAIN, S.L. Spain IX. FLYING TIGERS LIMITED New Zealand X. THE FLYING TIGER LINE (NZ) LIMITED New Zealand XI. TIGER INTERNATIONAL INSURANCE LTD. Cayman Islands
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JURISDICTION OF ORGANIZATION OR REGISTRATION --------------- 2. CALIBER SYSTEM (CANADA), INC. Canada 3. ROADWAY GLOBAL AIR, INC. Delaware I. ROADWAY GLOBAL AIR INTERNATIONAL, INC. Delaware A. Roadway Global Air, S.r.L. Italy 4. FEDEX CUSTOM CRITICAL, INC. Ohio I. AUTOQUIK, INC. Delaware II. NORTH COAST EXPRESS, INC. Ohio III. ROBERTS AIR FREIGHT, INC. Ohio IV. FEDEX CUSTOM CRITICAL N.V. Belgium V. FEDEX CUSTOM CRITICAL B.V. Netherlands A. FedEx Custom Critical, S.r.L. Italy VI. FEDEX CUSTOM CRITICAL GMBH Germany VII. FEDEX CUSTOM CRITICAL SARL France VIII. FEDEX CUSTOM CRITICAL, S.L. Spain IX. FEDEX CUSTOM CRITICAL UK, INC. Delaware X. PASSPORT TRANSPORT, LTD. Delaware XI. THIRD PARTY SERVICES, INC. Delaware XII. TRANSPORTATION TECHNOLOGIES, INC. Ohio XIII. URGENTFREIGHT, INC. Delaware 5. FEDEX GROUND PACKAGE SYSTEM, INC. Delaware I. FEDEX GROUND PACKAGE SYSTEM, LTD. Wyoming II. RPS DE MEXICO, S.A. DE C.V. Mexico III. RPS URBAN RENEWAL CORPORATION New Jersey IV. FDX TECHNOLOGY, INC. Ohio
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JURISDICTION OF ORGANIZATION OR REGISTRATION --------------- 6. FEDEX GLOBAL LOGISTICS, INC. Delaware I. FEDEX SUPPLY CHAIN SERVICES, INC. Ohio A. FedEx Supply Chain Services International, Inc. Delaware 1. FedEx Supply Chain Services Korea, Inc. Korea 2. FedEx Supply Chain Services International Pte, Ltd. Singapore B. FedEx Supply Chain Services (Canada), Ltd. Ontario C. Caliber Logistics de Mexico, S.A. de C.V. Mexico D. FedEx Supply Chain Services Europe B.V. Netherlands 1. FedEx Supply Chain Services Germany GmbH Germany 2. FedEx Supply Chain Services Netherlands B.V. Netherlands 3. FedEx Supply Chain Services UK Limited United Kingdom 4. FedEx Supply Chain Services Belgium N.V. Belgium 5. FedEx Supply Chain Services France SARL France 6. FedEx Supply Chain Services Ireland Limited Ireland 7. FedEx Supply Chain Services Italy S.r.l. Italy E. Caliber Logistics Healthcare, Inc. Ohio II. CARIBBEAN TRANSPORTATION SERVICES, INC. Delaware 7. VIKING FREIGHT, INC. California I. BAY CITIES DIESEL ENGINE REBUILDERS, INC. California II. LORENA LAND COMPANY Texas III. VFS FORWARDING, INC. California IV. VIKING DE MEXICO, S.A. DE C.V. Mexico
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JURISDICTION OF ORGANIZATION OR REGISTRATION --------------- 8. FEDEX TRADE NETWORKS, INC. Delaware I. TOWER GROUP INTERNATIONAL, INC. New York A. Tower Group International Canada, Inc. Canada II. WORLD TARIFF, LIMITED California 9. FEDEX CORPORATE SERVICES, INC. Delaware I. FEDEX INTERNATIONAL TRANSMISSION CORPORATION Delaware
-6- EX-23 13 ex-23.txt EXHIBIT 23 Exhibit 23 Consent of Independent Public Accountants As independent public accountants, we hereby consent to the incorporation by reference in FedEx Corporation's previously filed Form S-3 Registration Statement No. 333-74701 and Form S-8 Registration Statement Nos. 333-45037, 333-71065 and 333-34934 of our reports dated June 27, 2000, included in FedEx Corporation's Form 10-K for the year ended May 31, 2000. /s/ ARTHUR ANDERSEN LLP ------------------------- ARTHUR ANDERSEN LLP Memphis, Tennessee July 31, 2000 EX-24 14 ex-24.txt EXHIBIT 24 Exhibit 24 POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 8th day of June, 2000. /s/ROBERT H. ALLEN ----------------------------- Robert H. Allen STATE OF TEXAS COUNTY OF HARRIS I, Earlene L. Barbeau, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Robert H. Allen, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/EARLENE L. BARBEAU ----------------------------- Notary Public My Commission Expires: April 15, 2001 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 9 day of June, 2000. /s/JAMES L. BARKSDALE ----------------------------- James L. Barksdale STATE OF TENNESSEE COUNTY OF SHELBY I, Joyce J. Jones, a Notary Public in and for said County, in the aforesaid State, do hereby certify that James L. Barksdale, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/JOYCE J. JONES ----------------------------- Notary Public My Commission Expires: July 9, 2002 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of June, 2000. /s/ROBERT L. COX ----------------------------- Robert L. Cox STATE OF TENNESSEE COUNTY OF SHELBY I, Vicci L. Anderson, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Robert L. Cox, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/VICCI L. ANDERSON ----------------------------- Notary Public My Commission Expires: 5-1-01 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 19th day of June, 2000. /s/RALPH D. DENUNZIO ----------------------------- Ralph D. DeNunzio STATE OF NEW YORK COUNTY OF NEW YORK I, Pauline E. Kalahele, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Ralph D. DeNunzio, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/PAULINE E. KALAHELE ----------------------------- Notary Public My Commission Expires: February 28, 2002 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, her true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 23 day of June, 2000. /s/JUDITH L. ESTRIN ----------------------------- Judith L. Estrin STATE OF CALIFORNIA COUNTY OF SAN MATEO I, Patricia R. MacDonald, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Judith L. Estrin, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that she signed and delivered the said instrument as her free and voluntary act, for the uses and purposes therein set forth. /s/PATRICIA R. MCDONALD ----------------------------- Notary Public My Commission Expires: 4/16/2001 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 10th day of June, 2000. /s/PHILIP GREER ----------------------------- Philip Greer STATE OF NY COUNTY OF NY I, Michael Singer, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Philip Greer, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/MICHAEL E. SINGER ----------------------------- Notary Public My Commission Expires: May 8, 2000 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 2 day of June, 2000. /s/J.R. HYDE, III ----------------------------- J. R. Hyde, III STATE OF TENNESSEE COUNTY OF SHELBY I, Nancy C. Phillips, a Notary Public in and for said County, in the aforesaid State, do hereby certify that J. R. Hyde, III, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/NANCY C. PHILLIPS ----------------------------- Notary Public My Commission Expires: Jan. 20, 2004 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, her true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 30 day of June, 2000. /s/SHIRLEY ANN JACKSON ----------------------------- Shirley Ann Jackson STATE OF NEW YORK COUNTY OF RENSSELAER I, Charles F. Carletta, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Shirley Ann Jackson, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that she signed and delivered the said instrument as her free and voluntary act, for the uses and purposes therein set forth. /s/CHARLES F. CARLETTA ----------------------------- Notary Public My Commission Expires: July 31, 2001 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of June, 2000. /s/GEORGE J. MITCHELL ----------------------------- George J. Mitchell WASHINGTON DISTRICT OF COLUMBIA I, June L. Todd, a Notary Public in and for said County, in the aforesaid State, do hereby certify that George J. Mitchell, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/JUNE L. TODD ----------------------------- Notary Public My Commission Expires: August 31, 2001 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 7th day of July, 2000. /s/JOSHUA I. SMITH ----------------------------- Joshua I. Smith STATE OF VIRGINIA COUNTY OF FAIRFAX I, Leslie McRae Reed, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Joshua I. Smith, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/LESLIE MCRAE REED ----------------------------- Notary Public My Commission Expires: 10/31/00 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 29 day of June, 2000. /s/PAUL S. WALSH ----------------------------- Paul S. Walsh LONDON ENGLAND I, David Noel Lloyd Fawcett, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Paul S. Walsh, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/DAVID NOEL LLOYD FAWCETT ----------------------------- Notary Public My Commission Expires: WITH LIFE - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, a Director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith, Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such Director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 6th day of July, 2000. /s/PETER S. WILLMOTT ----------------------------- Peter S. Willmott STATE OF ILLINOIS COUNTY OF COOK I, Rose Marie Erwin, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Peter S. Willmott, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/ROSE MARIE ERWIN ----------------------------- Notary Public My Commission Expires: May 17, 2002 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the principal financial officer of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 2nd day of June, 2000. /s/ALAN B. GRAF, JR. ----------------------------- Alan B. Graf, Jr. STATE OF TENNESSEE COUNTY OF SHELBY I, Mary T. Britt, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Alan B. Graf, Jr., personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/MARY T. BRITT ----------------------------- Notary Public My Commission Expires: April 14, 2001 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the principal executive officer and a director of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Alan B. Graf, Jr. and James S. Hudson, and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer and director, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 12 day of June, 2000. /s/FREDERICK W. SMITH ----------------------------- Frederick W. Smith STATE OF TENNESSEE COUNTY OF SHELBY I, June Y. Fitzgerald, a Notary Public in and for said County, in the aforesaid State, do hereby certify that Frederick W. Smith, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/JUNE Y. FITZGERALD ----------------------------- Notary Public My Commission Expires: Dec. 1, 2002 - ---------------------- POWER OF ATTORNEY KNOW ALL PERSONS BY THESE PRESENTS: That the undersigned, the principal accounting officer of FedEx Corporation (the "Corporation"), a Delaware corporation, does hereby constitute and appoint Frederick W. Smith and Alan B. Graf, Jr., and each of them, with full power of substitution and resubstitution, his true and lawful attorneys-in-fact and agents, with full power and authority to execute in the name and on behalf of the undersigned as such officer, the Corporation's Annual Report on Form 10-K with respect to the Corporation's fiscal year ended May 31, 2000, and any and all amendments thereto; and hereby ratifies and confirms all that said attorneys-in-fact and agents, or any of them, or their or his substitute or substitutes may lawfully do or cause to be done by virtue of these presents. IN WITNESS WHEREOF, I have hereunto set my hand this 5th day June, 2000. /s/JAMES S. HUDSON ----------------------------- James S. Hudson STATE OF TENNESSEE COUNTY OF SHELBY I, Joyce J. Jones, a Notary Public in and for said County, in the aforesaid State, do hereby certify that James S. Hudson, personally known to me to be the same person whose name is subscribed to the foregoing instrument, appeared before me this day in person, and acknowledged that he signed and delivered the said instrument as his free and voluntary act, for the uses and purposes therein set forth. /s/JOYCE J. JONES ----------------------------- Notary Public My Commission Expires: July 9, 2002 - ---------------------- EX-27 15 ex-27.txt EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED STATEMENTS OF INCOME AND CONSOLIDATED BALANCE SHEETS ON PAGES 45-47 OF THE COMPANY'S 10-K FOR THE YEAR ENDED MAY 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR MAY-31-2000 JUN-01-1999 MAY-31-2000 67,959 0 2,633,015 85,972 255,291 3,284,744 14,742,543 7,659,016 11,527,111 2,891,026 1,776,253 0 0 29,857 4,755,386 11,527,111 0 18,256,945 0 17,035,871 0 0 106,060 1,137,740 449,404 688,336 0 0 0 688,336 2.360 2.320
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