UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
o | Preliminary Proxy Statement | |
o | ||
ý | ||
Definitive Proxy Statement | ||
o | ||
Definitive Additional Materials | ||
o | ||
Soliciting Material Pursuant to | ||
FEDEX CORPORATION | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
| Payment of Filing Fee (Check the appropriate box): | ||||
ý | No fee required. | |||
o | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||||
| (1) | Title of each class of securities to which transaction applies: |
| (2) | Aggregate number of securities to which transaction applies: |
| (3) | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 |
| (4) | Proposed maximum aggregate value of transaction: |
| (5) | Total fee paid: |
o | Fee paid previously with preliminary materials. | ||||
o | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||||
(1) | Amount Previously Paid: |
| (2) | Form, Schedule or Registration Statement No.: |
| (3) | Filing Party: |
| (4) | Date Filed: |
Persons who are to respond to the collection of information contained in this form are not required to respond unless the form displays a currently valid OMB control number. |
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Our Stockholders:
We cordially invite you to attend the 20022004 annual meeting of FedEx’sFedEx's stockholders. The meeting will take place in the AuditoriumTennessee Grand Ballroom at the FedEx Express World Headquarters, 3670 Hacks Cross Road, Building G,Hilton Hotel, 939 Ridge Lake Boulevard, Memphis, Tennessee 38125,38120, on Monday, September 30, 2002,27, 2004, at 10:00 a.m. local time. We look forward to your attendance either in person or by proxy.
The purpose of the meeting is to:
Only stockholders of record at the close of business on August 5, 20022, 2004 may vote at the meeting or any postponements or adjournments of the meeting.
By order of the Board of Directors, | |||
  | |||
| KENNETH R. MASTERSON | |||
| Secretary | |||
August 16, 2004 | |||
HOW TO VOTE: Please complete, date, sign and return the accompanying proxy card or vote electronically via the Internet or by telephone. The enclosed return envelope requires no additional postage if mailed in either the United States or Canada.
REDUCE MAILING COSTS: If you vote on the Internet, you may elect to have next year’syear's proxy statement and annual report to stockholders delivered to you via the Internet. We strongly encourage you to enroll in Internet delivery. It is a cost-effective way for us to send you proxy materials and annual reports.
ANNUAL MEETING ADMISSION: If you attend the annual meeting in person, you will need to present your admission ticket, or an account statement showing your ownership of FedEx common stock as of the record date, and a valid, government-issued photo identification. The indicated portion of your proxy card or voter instruction card will serve as your admission ticket.
Your vote is very important. Please vote whether or not you plan to attend the meeting.
| Page | | |||||
| 2 | ||||||
| What is the purpose of the annual meeting? | 2 | |||||
| Who is entitled to vote? | 2 | |||||
| Am I entitled to vote if my shares are held in | 2 | |||||
| How many shares must be present to hold the meeting? | 2 | |||||
| What if a quorum is not present at the meeting? | ||||||
| 3 | ||||||
| How do I vote? | 3 | |||||
| How do I vote my shares held in a FedEx benefit plan? | 3 | |||||
| Who can attend the meeting? | 4 | |||||
| Can I change my vote after I submit my proxy? | ||||||
| Will my vote be kept confidential? | ||||||
| 4 | ||||||
| Who will count the votes? | 4 | |||||
| How does the Board of Directors recommend I vote on the proposals? | ||||||
| What if I do not specify how my shares are to be voted? | ||||||
| Will any other business be conducted at the meeting? | ||||||
| How many votes are required to elect the director nominees? | ||||||
| What happens if a nominee is unable to stand for election? | ||||||
| How many votes are required to adopt the | ||||||
| How many votes are required to adopt the proposed amendment to FedEx's Incentive Stock Plan to increase the number of shares of common stock reserved for issuance pursuant to stock options? | 6 | |||||
| How many votes are required to ratify the appointment of | ||||||
| How will broker non-votes be treated? | ||||||
| 6 | ||||||
| 7 | ||||||
| Directors and Executive Officers | ||||||
| Section 16(a) Beneficial Ownership Reporting Compliance | ||||||
| 8 | ||||||
| Significant Stockholders | ||||||
| 10 | ||||||
| Corporate Governance Guidelines | 10 | |||||
| Director Independence | 10 | |||||
| Audit Committee Financial Experts | 10 | |||||
| Director Mandatory Retirement | 10 | |||||
| Director Stock Ownership Goal | 10 | |||||
| Code of Business Conduct & Ethics | 11 | |||||
| Executive Sessions of Non-Management Directors | 11 | |||||
| Communications with Directors | 11 | |||||
| Nomination of Director Candidates | 11 | |||||
| MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS | ||||||
| 13 | ||||||
| Meetings | 13 | |||||
i
| Committees | 13 | ||
| Attendance at Annual Meeting of Stockholders | 14 | ||
| 15 | |||
| Loans to Management | 15 | ||
| Compensation Committee Interlocks and Insider Participation; Transactions with Management and Other Relationships | 15 | ||
| PROPOSAL 1 – ELECTION OF DIRECTORS | 17 | ||
| Current Nominees | 17 | ||
| Continuing Directors | 18 | ||
| DIRECTORS' COMPENSATION | 21 | ||
| PROPOSAL 2 – AMENDMENTS TO FEDEX'S BYLAWS TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS | 22 | ||
| SUMMARY COMPENSATION TABLE | 24 | ||
| STOCK OPTION GRANTS IN LAST FISCAL YEAR | |||
| Traditional Pension Benefit | 29 | ||
| Portable Pension Account | 29 | ||
| REPORT ON EXECUTIVE COMPENSATION OF THE COMPENSATION COMMITTEE OF THE BOARD OF DIRECTORS | |||
| Overview of Executive Compensation Philosophy and Program | |||
| Comparison Surveys | 31 | ||
| Base Salary | 31 | ||
| Annual Incentive Cash Bonus Plans | 32 | ||
| Long-Term Incentive Cash Bonus Plan | 33 | ||
| Long-Term Equity Incentives | 33 | ||
| Tax Deductibility of Compensation | 34 | ||
| Conclusion | 35 | ||
| CHANGE-IN-CONTROL ARRANGEMENTS | 36 | ||
| Stock | |||
36 | |||
| Management Retention Agreements | |||
| Administration of the Plan | |||
| Types of Awards | 40 | ||
| Number of Shares That May Be Awarded | |||
| Term of the Plan | 40 | ||
| Eligibility to Receive Awards | |||
| Provisions Applicable to Restricted Stock Awards | |||
| Provisions Applicable to Stock Options | |||
| Stock Option Grants to Non-Employee Directors | |||
| Repricing and | |||
ii
| Loans Prohibited | 43 | ||
| Change of Control | |||
| Termination and Amendment of the Plan | |||
| Benefits to Named Executive Officers and Others | 43 | ||
| New Plan Benefits | |||
| Foreign Jurisdictions | |||
| Federal Income Tax Consequences | 44 | ||
| Vote Required for Approval | |||
| Equity Compensation Plans Approved by Stockholders | |||
| Equity Compensation Plans Not Approved by Stockholders | |||
| Summary Table | |||
PROPOSAL | |||
| Appointment of | 49 | ||
| Policies Regarding Independent Auditor | 49 | ||
| Vote Required for Ratification | |||
| Proxy Solicitation | |||
| Householding | |||
APPENDIX A | A-1 | ||
| APPENDIX B – INCENTIVE STOCK PLAN (AS AMENDED) | B-1 | ||
iii
FedEx's Board of Directors of FedEx is furnishing you this proxy statement in connection with the solicitation of proxies on its behalf for the 20022004 Annual Meeting of Stockholders. The meeting will take place in the AuditoriumTennessee Grand Ballroom at the FedEx Express World Headquarters, 3670 Hacks Cross Road, Building G,Hilton Hotel, 939 Ridge Lake Boulevard, Memphis, Tennessee 38125,38120, on Monday, September 30, 2002,27, 2004, at 10:00 a.m. local time. At the meeting, stockholders will vote on the election of threesix directors, the adoption of FedEx’s 2002amendments to FedEx's Bylaws to provide for the annual election of directors, the adoption of the amendment to FedEx's Incentive Stock Incentive Plan to increase the number of shares of common stock reserved for issuance pursuant to stock options, and the ratification of FedEx’sFedEx's independent auditors and, if properly presented at the meeting, a stockholder proposal.registered public accounting firm. Stockholders also will consider any other matters that may properly come before the meeting, although we know of no other business to be presented.
By submitting your proxy (either by signing and returning the enclosed proxy card or by voting electronically on the Internet or by telephone), you authorize Kenneth R. Masterson, FedEx’sFedEx's Executive Vice President, General Counsel and Secretary, and Alan B. Graf, Jr., FedEx’sFedEx's Executive Vice President and Chief Financial Officer, to represent you and vote your shares at the meeting in accordance with your instructions. They also may vote your shares to adjourn the meeting and will be authorized to vote your shares at any postponements or adjournments of the meeting.
FedEx's Annual Report to Stockholders for the fiscal year ended May 31, 2002,2004, which includes FedEx’sFedEx's audited annual financial statements, accompanies this proxy statement. Although the Annual Report is being distributed with this proxy statement, it does not constitute a part of the proxy solicitation materials and is not incorporated by reference into this proxy statement.
We are first sending thisthe proxy statement, form of proxy and accompanying materials to stockholders on or about August 19, 2002.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE PROMPTLY SUBMIT YOUR PROXY EITHER IN THE ENCLOSED ENVELOPE, VIA THE INTERNET OR BY TELEPHONE.
At the annual meeting, the stockholders will be asked to:
Stockholders also will transact any other business that may properly come before the meeting. Members of FedEx’sFedEx's management team will be present at the meeting to respond to appropriate questions from stockholders.
The record date for the meeting is August 5, 2002.2, 2004. Only stockholders of record at the close of business on that date are entitled to vote at the meeting. The only class of stock entitled to be voted at the meeting is FedEx’sFedEx common stock. Each outstanding share of common stock is entitled to one vote for all matters before the meeting. At the close of business on the record date there were 297,662,861300,401,799 shares of FedEx common stock outstanding.
If your shares are held by a bank or brokerage firm holds your shares, you are considered the “beneficial owner”"beneficial owner" of shares held in “street"street name.”" If your shares are held in street name, these proxy materials are being forwarded to you by your bank or brokerage firm (the “record holder”"record holder"), along with a voting instruction card. As the beneficial owner, you have the right to direct your record holder how to vote your shares, and the record holder is required to vote your shares in accordance with your instructions. If you do not give instructions to your bank or brokerage firm, it will nevertheless be entitled to vote your shares with respectin its discretion on the election of directors (Proposal 1), the adoption of the proposed amendments to “discretionary” items, butFedEx's Bylaws to provide for the annual election of directors (Proposal 2) and the ratification of the appointment of the independent registered public accounting firm (Proposal 4). Absent your instructions, the record holder will not be permitted, however, to vote your shares with respecton the adoption of the proposed amendment to “non-discretionary” items. InFedEx's Incentive Stock Plan to increase the casenumber of a non-discretionary item,shares of common stock reserved for issuance pursuant to stock options (Proposal 3) and your shares will be considered “broker non-votes”"broker non-votes" on thatthis proposal.
As the beneficial owner of shares, you are invited to attend the annual meeting. If you are a beneficial owner, however, you may not vote your shares in person at the meeting unless you obtain a proxy, formexecuted in your favor, from the record holder of your shares.
A quorum must be present at the meeting for any business to be conducted. The presence at the meeting, in person or by proxy, of the holders of a majority of the shares of common stock
outstanding on the record date will constitute a quorum. Proxies received but marked as abstentions or treated as broker non-votes will be included in the calculation of the number of shares considered to be present at the meeting.
If a quorum isshall not be present or represented at the scheduled time of the meeting, the stockholdersholders of a majority of the shares entitled to vote at the meeting who are present in person or represented by proxy or the chairman of the meeting may adjourn the meeting until a quorum is present.present or represented. The time and place of the adjourned meeting will be announced at the time the adjournment is taken, and no other notice will be given.
1.YOU MAY VOTE BY MAILMAIL.. If you properly complete, sign and signdate the accompanying proxy card and return it in the enclosed envelope, it will be voted in accordance with your instructions. The enclosed envelope requires no additional postage if mailed in either the United States or Canada.
2.YOU MAY VOTE BY TELEPHONE OR ON THE INTERNETINTERNET.. If you are a registered stockholder (that is, if you hold your stock directly and not in street name) or if your shares are held in any employee benefit plan of FedEx or its subsidiaries,, you may vote by telephone or on the Internet by following the instructions included on the proxy card. If you vote by telephone or on the Internet, you do not have to mail in your proxy card. If you wish to attend the meeting in person, however, you will need to bring the admission ticket attached to the proxy card with you. Internet and telephone voting are available 24 hours a day. Votes submitted through the Internet or by telephone must be received by 11:59 p.m. Eastern time on September 29, 2002.26, 2004.
If your shares are held in street name, you still may be able to vote your shares electronically by telephone or on the Internet. A large number of banks and brokerage firms participate in a program provided through ADP Investor Communications Services that offers telephone and Internet voting options. If your shares are held in an account at a bank or brokerage firm that participates in the ADP program, you may vote those shares electronically by telephone or on the Internet by following the instructions set forth on the voting form provided to you.
NOTE: If you vote on the Internet, you may elect to have next year’syear's proxy statement and annual report to stockholders delivered to you via the Internet. We strongly encourage you to enroll in Internet delivery. It is a cost-effective way for us to send you proxy materials and annual reports.
3.YOU MAY VOTE IN PERSON AT THE MEETINGMEETING.. If you are a registered stockholder and attend the meeting, you may deliver your completed proxy card in person. Additionally, we will pass out written ballots to registered stockholders who wish to vote in person at the meeting. Beneficial owners of shares held in street name who wish to vote at the meeting will need to obtain a proxy form from their record holder.
How do I vote my shares held in a FedEx benefit plan?
If you own shares of FedEx common stock through a FedEx or subsidiary benefit plan, you can direct the trustee or the record holder to vote the shares held in your account in accordance with your instructions by completing the proxy card and returning it in the enclosed envelope or by registering your instructions via the Internet or telephone as directed on the proxy card. If you
register your voting instructions by telephone or on the Internet, you do not have to mail in the proxy card. If you wish to attend the meeting in person, however, you will need to bring the admission ticket attached to the proxy card with you. In order to instruct a plan trustee on the voting of shares held in your account, your instructions must be received by September 22, 2004. If your voting instructions are not received by that date, each plan trustee will vote your shares in the same proportion as the shares for which voting instructions have been received.
Who can attend the meeting?
Only stockholders eligible to vote or their authorized representatives will be admitted to the meeting. If you plan to attend the meeting, detach and bring with you the stub portion of your proxy card, which is marked "Admission Ticket." You also must bring a valid, government-issued photo identification, such as a driver's license or a passport.
If your shares are held in street name, you must bring the indicated portion of your voter instruction card. Alternatively, you may bring other proof of ownership, such as your most recent brokerage account statement, which clearly shows your ownership of FedEx common stock as of the record date. In addition, you must bring a valid, government-issued photo identification, such as a driver's license or a passport.
Can I change my vote after I submit my proxy?
Yes, you may revoke your proxy and change your vote:
Your attendance at the meeting itself will not revoke your proxy unless you give written notice of revocation to the Secretary before your proxy is voted or you vote in person at the meeting.
Yes, your vote will be kept confidential and not disclosed to FedEx unless:
FedEx's transfer agent, EquiServe Trust Company, N.A., will tabulate and certify the votes. A representative of the transfer agent will serve as the inspector of election.
Your Board recommends that you vote:
If you submit a proxy but do not indicate any voting instructions, your shares will be voted:
We know of no other business that will be presented at the meeting. If any other matter properly comes before the stockholders for a vote at the meeting, however, the proxy holders will vote your shares in accordance with their best judgment.
The affirmative vote of a plurality of the votes cast at the meeting is required to elect the threesix nominees as directors. This means that the threesix nominees will be elected if they receive more affirmative votes than any other person. If you vote “Withheld”"Withheld" with respect to one or more nominees, your shares will not be voted with respect to the person or persons indicated, although they will be counted for purposes of determining whether there is a quorum.
If a nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority.
How many votes are required to adopt the 2002 Stock Incentive Plan?proposed amendments to FedEx's Bylaws to provide for the annual election of directors?
The adoption of FedEx’s 2002the amendments to FedEx's Bylaws to provide for the annual election of directors requires the affirmative vote of at least 80% of the shares of common stock outstanding on the record date.
How many votes are required to adopt the proposed amendment to FedEx's Incentive Stock Plan to increase the number of shares of common stock reserved for issuance pursuant to stock options?
The adoption of the amendment to increase by 2,000,000 the number of shares of common stock reserved for issuance pursuant to stock options under FedEx's Incentive Stock Plan requires the affirmative vote of a majority of the shares present at the meeting in person or by proxy and entitled to vote.
The ratification of the appointment of Ernst & Young LLP as FedEx’sFedEx's independent auditorsregistered public accounting firm requires the affirmative vote of a majority of the shares present at the meeting in person or by proxy and entitled to vote.
Abstentions will be treated as shares present for quorum purposes and entitled to vote, so they will have the same practical effect as votes against a proposal.
Broker non-votes will be treated as shares present for quorum purposes, but not entitled to vote. Absent instructions from you, your broker may not vote so theyyour shares on the adoption of the proposed amendment to FedEx's Incentive Stock Plan to increase the number of shares of common stock reserved for issuance pursuant to stock options (Proposal 3). A broker non-vote with respect to Proposal 3 will not affect the outcome of anythis proposal.
Your broker will be entitled to vote your shares in its discretion on the election of directors (Proposal 1), the adoption of the proposed amendments to FedEx's Bylaws to provide for the annual election of directors (Proposal 2) and the ratification of the appointment of the independent registered public accounting firm (Proposal 4), without your voting instructions on these items.
The following table sets forth the amount of FedEx’sFedEx's common stock beneficially owned by each director or nominee, each executive officer named in the Summary Compensation Table on page 1524 and all directors, nominees and executive officers as a group, as of August 5, 2002.2, 2004. Unless otherwise indicated, beneficial ownership is direct and the person indicated has sole voting and investment power.
| | Common Stock Beneficially Owned | ||||||
|---|---|---|---|---|---|---|---|
| Name of Beneficial Owner | Number of Shares | Number of Option Shares(1) | Percent of Class(2) | ||||
| Frederick W. Smith | 19,747,144 | (3) | 2,178,125 | 7.25 | % | ||
| James L. Barksdale | 32,800 | (4) | 21,000 | * | |||
| August A. Busch IV | — | 15,000 | * | ||||
| John A. Edwardson | 2,000 | 15,000 | * | ||||
| Judith L. Estrin | 20,000 | 63,000 | * | ||||
| J. Kenneth Glass | 5,000 | 7,000 | * | ||||
| Philip Greer | 79,812 | (5) | 63,000 | * | |||
| J.R. Hyde, III | 95,600 | (6) | 63,000 | * | |||
| Shirley A. Jackson | 3,000 | 35,000 | * | ||||
| Charles T. Manatt | — | — | — | ||||
| George J. Mitchell | 8,000 | 59,000 | * | ||||
| Joshua I. Smith | 2,573 | 24,800 | * | ||||
| Paul S. Walsh | 6,000 | 39,000 | * | ||||
| Peter S. Willmott | 155,690 | 35,000 | * | ||||
| David J. Bronczek | 106,394 | (7) | 392,424 | * | |||
| T. Michael Glenn | 201,483 | (7) | 200,937 | * | |||
| Alan B. Graf, Jr. | 184,009 | (7) | 336,937 | * | |||
| Kenneth R. Masterson | 98,628 | (7) | 228,937 | * | |||
| All directors and executive officers as a group (21 persons) | 20,967,186 | (8) | 4,123,401 | 8.24 | % | ||
Common Stock Beneficially Owned | ||||||||
Name of Beneficial Owner | Number of Shares | Number of Option Shares(1) | Percent of Class(2) | |||||
| Smith, Frederick W. | 19,931,574 | (3) | 2,084,375 | 7.34 | % | |||
| Barksdale, James L. | 14,800 | (4) | 24,000 | * | ||||
| DeNunzio, Ralph D. | 16,000 | 56,000 | * | |||||
| Estrin, Judith L. | 16,000 | 52,000 | * | |||||
| Garrison, F.S. | 3,513,165 | (5) | 16,000 | 1.19 | % | |||
| Greer, Philip | 74,462 | (6) | 56,000 | * | ||||
| Hyde, J.R., III | 92,000 | (7) | 56,000 | * | ||||
| Jackson, Shirley A. | 1,000 | 24,000 | * | |||||
| Mitchell, George J. | 8,000 | 44,000 | * | |||||
| Smith, Joshua I. | 1,200 | 20,000 | * | |||||
| Walsh, Paul S. | 7,000 | 36,000 | * | |||||
| Willmott, Peter S. | 172,690 | 20,000 | * | |||||
| Masterson, Kenneth R. | 76,034 | (8) | 393,062 | * | ||||
| Graf, Alan B., Jr. | 161,418 | (8) | 292,562 | * | ||||
| Glenn, T. Michael | 196,912 | (8) | 159,062 | * | ||||
| Carter, Robert B. | 42,796 | 88,266 | * | |||||
All directors and executive officers as a group (16 persons) | 24,325,051 | 3,421,327 | 9.22 | % | ||||
Section 16(a) of the Securities Exchange Act of 1934 as amended, requires directors and certain officers of FedEx and persons who own more than ten percent of FedEx’sFedEx's common stock to file with the Securities and Exchange Commission initial reports of beneficial ownership (Form 3) and reports of subsequent changes in their beneficial ownership (Form 4 or Form 5) of FedEx’sFedEx's common stock. Such directors, officers and greater-than-ten-percent stockholders are required to furnish FedEx with copies of the Section 16(a) reports they file. The Securities and Exchange Commission has established specific due dates for these reports, and FedEx is required to disclose in this proxy statement any late filings or failures to file.
Based solely upon a review of the copies of the Section 16(a) reports (and any amendments thereto) furnished to FedEx and written representations from certain reporting persons that no additional reports were required, FedEx believes that its directors, reporting officers and greater-than-ten-percent stockholders complied with all these filing requirements for the fiscal year ended May 31, 2002, except Philip Greer, who inadvertently filed a late Form 4 reporting the sale by a foundation during the 2002 fiscal year of 4,000 shares of FedEx common stock donated to the foundation by Mr. Greer and a one-day late Form 5 reporting a stock option grant.
The following table lists certain persons known by FedEx to own beneficially as of March 31, 2002, more than five percent of FedEx’sFedEx's outstanding shares of common stock.stock as of March 31, 2004.
| | Amount and Nature of Beneficial Ownership | Percent of Class | |||
|---|---|---|---|---|---|
| Vanguard Chester Funds – Vanguard PRIMECAP Fund 100 Vanguard Boulevard Malvern, Pennsylvania 19355 | 21,191,877 | (1) | 7.09 | % | |
Barclays Global Investors, N.A. 45 Fremont Street San Francisco, California 94105 | 20,647,315 | (2) | 6.90 | % | |
Capital Research and Management Company 333 South Hope Street Los Angeles, California 90071 | 19,286,300 | (3) | 6.46 | % |
as to 16,087,147 shares; Barclays Global Fund Advisors, sole voting power as to 1,055,656 shares and sole dispositive power as to 1,063,316 shares; Barclays Global Investors, Ltd., sole voting power as to 3,224,267 shares and sole dispositive power as to 3,239,867 shares; Barclays Global Investors Japan Trust and Banking Company Limited, 227,009 shares; Barclays Life Assurance Company Limited, 14,512 shares; Barclays Capital Securities Limited, 9,487 shares; Barclays Private Bank and Trust (Jersey) Limited, 350 shares; and Barclays Bank (Suisse) SA, 5,627 shares.
Corporate Governance Guidelines
In furtherance of its longstanding goal of providing effective governance of FedEx's business and affairs for the long-term benefit of stockholders, the Board of Directors approved and adopted Corporate Governance Guidelines during fiscal 2003. The Guidelines were updated in 2004 and are available on FedEx's Web site athttp://fdx.client.shareholder.com/governance.cfm. The information on FedEx's Web site, however, does not form part of this proxy statement.
Director Independence
The Board of Directors has determined that all of its members continuing as directors after the annual meeting, as well as Charles T. Manatt, are independent and meet the independence requirements of the New York Stock Exchange and the Board's standards for determining director independence, except for Frederick W. Smith and J.R. Hyde, III. Mr. Smith is FedEx's Chairman of the Board, President and Chief Executive Officer. Mr. Hyde has an ownership interest in HOOPS, L.P., with which FedEx has a relationship. For more information, please see page 15, "Certain Relationships and Related Transactions." The Board's standards for determining director independence are included in FedEx's Corporate Governance Guidelines.
James L. Barksdale and Peter S. Willmott are former employees of FedEx's predecessor, Federal Express Corporation. Mr. Barksdale's employment with FedEx Express ended in 1992, and Mr. Willmott's employment ended in 1983. The Board determined that neither of these past relationships is material or otherwise impairs, or appears to impair, the judgment of Mr. Barksdale or Mr. Willmott, and therefore does not prevent either from being independent. In making this determination, the Board considered, among other factors, the length of time that had elapsed since the last date of employment.
Each member of the Audit, Compensation and Nominating & Governance Committees meet the applicable independence requirements of the New York Stock Exchange.
Audit Committee Financial Experts
The Board of Directors has determined that at least one member of the Audit Committee, John A. Edwardson, is an audit committee financial expert.
Director Mandatory Retirement
A director must retire immediately before the annual meeting of FedEx's stockholders during the calendar year in which he or she attains age 72. There are no directors retiring under this provision at the annual meeting. Although he has not reached the mandatory retirement age, George J. Mitchell is retiring as a director at the annual meeting.
Director Stock Ownership Goal
In order to further align the directors' interests with those of FedEx's stockholders, the Board of Directors has established a stock ownership goal that, within three years after joining the Board, each director should own FedEx shares valued at three times his or her annual retainer fee. Stock options are not counted toward this goal. As of August 2, 2004, each of the ten directors who have been on the Board for more than three years owned sufficient shares to comply with this goal.
Code of Business Conduct & Ethics
The Board of Directors has approved and adopted a Code of Business Conduct & Ethics for officers, directors and employees of FedEx.
Executive Sessions of Non-Management Directors
Non-management Board members meet without management present at least twice annually at regularly scheduled executive sessions. At least once a year, such meetings will include only the independent members of the Board. The Chairman of the Nominating & Governance Committee presides over meetings of the non-employee and independent directors.
Communications with Directors
You may communicate directly with any member or committee of the Board of Directors by writing to: FedEx Corporation Board of Directors, c/o Corporate Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120. Please specify to whom your letter should be directed. The Corporate Secretary of FedEx will review all such correspondence and regularly forward to the Board a summary of all such correspondence and copies of all correspondence that, in his opinion, deals with the functions of the Board or its committees or that he otherwise determines requires the attention of any member, group or committee of the Board of Directors. Board members may at any time review a log of all correspondence received by FedEx that is addressed to Board members and request copies of any such correspondence.
Nomination of Director Candidates
The Nominating & Governance Committee will consider director nominees proposed by stockholders. To recommend a prospective director candidate for the Nominating & Governance Committee's consideration, stockholders may submit the candidate's name, qualifications, including whether the candidate satisfies the requirements set forth below, and other relevant biographical information in writing to: FedEx Corporation Nominating & Governance Committee, c/o Corporate Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120.
The Board is responsible for recommending director candidates for election by the stockholders and for electing directors to fill vacancies or newly created directorships. The Board has delegated the screening and evaluation process for director candidates to the Nominating & Governance Committee, which identifies, evaluates and recruits highly qualified director candidates and recommends them to the Board. The Nominating & Governance Committee considers potential candidates for director, which may come to the attention of the Nominating & Governance Committee through current directors, management, professional search firms, stockholders or other persons. The Nominating & Governance Committee considers and evaluates a director candidate recommended by a stockholder in the same manner as a nominee recommended by a Board member, management or other sources.
If the Nominating & Governance Committee has either identified a prospective nominee or determines that an additional or replacement director is required, the Nominating & Governance Committee may take such measures that it considers appropriate in connection with its evaluation of a director candidate, including candidate interviews, engagement of an outside firm to gather additional information and inquiry of persons with knowledge of the candidate's qualifications and character. In its evaluation of director candidates, including the members of the Board of Directors eligible for reelection, the Nominating & Governance Committee considers the current size and
composition of the Board of Directors and the needs of the Board of Directors and the respective committees of the Board.
Candidates nominated for election or reelection to the Board of Directors must possess the following minimum qualifications:
In addition, it is expected that the following qualities or skills be possessed by one or more of FedEx's Board members: transportation industry experience; financial expertise; marketing expertise; technological expertise; international experience; and government experience.
Charles T. Manatt is the only nominee who is not an executive officer of FedEx or a current director standing for re-election. Frederick W. Smith, FedEx's Chairman of the Board, President and Chief Executive Officer, recommended Mr. Manatt, who is a former director of FedEx, as a nominee for election at the annual meeting.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
Meetings
During fiscal 2004, the Board of Directors held eight meetings. With the exceptions of Mr. Barksdale and Ms. Jackson, each director attended at least 75% of the meetings of the Board and any committees on which he or she served.
Committees
The Board of Directors has a standing Audit Committee, Compensation Committee, Information Technology Oversight Committee and Nominating & Governance Committee. Each committee's written charter, as adopted by the Board of Directors, is available on the FedEx Web site athttp://fdx.client.shareholder.com/governance.cfm. Committee memberships are as follows:
| Audit Committee | Information Technology Oversight Committee | |||
|---|---|---|---|---|
John A. Edwardson (Chairman) | Judith L. Estrin (Chairwoman) | |||
| J. Kenneth Glass | James L. Barksdale | |||
| Compensation Committee | Nominating & Governance Committee | |||||
|---|---|---|---|---|---|---|
| Peter S. Willmott (Chairman) | ||||||
| James L. Barksdale | Shirley A. Jackson | |||||
| August A. Busch IV | George J. Mitchell | |||||
| George J. Mitchell | ||||||
| Paul S. Walsh |
If elected at the annual meeting, Mr. Manatt will serve on the Compensation Committee. Upon the retirement of Senator Mitchell, Mr. Glass will serve on the Nominating & Governance Committee in addition to the Audit Committee.
The Audit Committee, which held ten meetings during fiscal 2004, performs the following functions:
The members of the Audit Committee meet all independence and qualification requirements of the New York Stock Exchange. The Board of Directors has determined that at least one member of the Audit Committee, John A. Edwardson, is an audit committee financial expert.
The Compensation Committee, which held seven meetings during fiscal 2004, performs the following functions:
The members of the Compensation Committee meet all independence requirements of the New York Stock Exchange.
The Information Technology Oversight Committee, which held seven meetings during fiscal 2004, performs the following functions:
The Nominating & Governance Committee, which held seven meetings during fiscal 2004, performs the following functions:
The members of the Nominating & Governance Committee meet all independence requirements of the New York Stock Exchange.
Attendance at Annual Meeting of Stockholders
FedEx expects all board members to attend annual meetings of stockholders. Twelve of the fourteen members of the Board of Directors attended the 2003 annual meeting of stockholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Loans to Management
Prior to enactment of the Sarbanes-Oxley Act in July 2002, FedEx made an interest-free demand loan to T. Michael Glenn, FedEx's Executive Vice President — Market Development and Corporate Communications, to assist him in exercising non-qualified stock options and paying any tax liability associated with such exercises. The highest outstanding balance of FedEx's loan to Mr. Glenn during fiscal 2004 was $1,872,004; the loan balance as of May 31, 2004 was $538,732. In July 2004, Mr. Glenn paid in full the outstanding balance of the loan.
FedEx has ceased providing any loans in connection with the exercise of stock options and no longer extends or maintains credit, arranges for the extension of credit, or renews an extension of credit, in the form of a personal loan, to or for any of its directors or executive officers.
Compensation Committee Interlocks and Insider Participation; Transactions with Management and Other Relationships
Messrs. Greer, Barksdale, Busch, Mitchell, Walsh and F. S. Garrison served on FedEx's Compensation Committee during fiscal 2004. James L. Barksdale is a former officer of FedEx Express and his employment with FedEx Express ended in 1992.
On February 9, 2001, FedEx completed its acquisition of American Freightways, Inc. (now known as FedEx Freight East, Inc.). F. S. Garrison, who retired as a director at the 2003 annual meeting of stockholders, was the founder of American Freightways. Mr. Garrison was not an officer of FedEx or any of its subsidiaries after the completion of the acquisition. Mr. Garrison's son, Tom Garrison, resigned as an officer of FedEx Freight East on November 30, 2002, and was an unclassified employee of FedEx from December 1, 2002 through February 15, 2004. During 2004, Mr. Garrison and FedEx Freight entered into a consulting agreement under which he provided consulting services to FedEx Freight until his death in May 2004. In consideration for his services, Mr. Garrison was able to exercise his stock options as they became exercisable. Mr. Garrison's estate has the right to exercise the balance of his stock options when they vest in January 2005. In addition, certain health insurance benefits were provided to Mr. Garrison.
George J. Mitchell, who served on FedEx's Compensation Committee and Nominating & Governance Committee during fiscal 2004, provided consulting services to FedEx during fiscal 2004 pursuant to a retainer arrangement for a fee of $100,000. This retainer arrangement has been in effect, at this level, throughout Senator Mitchell's Board service. Senator Mitchell is retiring as a director at the annual meeting.
J.R. Hyde, III and his wife together own approximately 13% of HOOPS, L.P., the owner of the NBA Memphis Grizzlies professional basketball team. Mr. Hyde, through one of his companies, also is the general partner of the minority limited partner of HOOPS. During fiscal 2002, FedEx entered into a multi-year, $90 million naming rights agreement with HOOPS. Under this agreement, FedEx has certain marketing rights, including the right to name the new arena where the Grizzlies will play. Pursuant to a separate agreement with HOOPS, the City of Memphis and Shelby County, FedEx has agreed to pay $2.5 million a year for the balance of the twenty-five year term of the agreement if HOOPS terminates its lease for the new arena after 17 years.
On March 26, 2004, FedEx purchased an aggregate of 94 acres of real estate in Olive Branch, Mississippi for $4.7 million. FedEx proposes to construct a FedEx Ground hub on this site, which is just south of Memphis. The 94-acre site is divided into three parcels, two of which were owned by
entities in which Mr. Hyde has a 50% ownership interest. These two parcels total approximately 3.4 acres. An independent appraisal of the property determined its fair market value to be not less than the negotiated purchase price.
In November 1999, FedEx entered into a multi-year, $205 million naming rights agreement with the NFL Washington Redskins professional football team. Under this agreement, FedEx has certain marketing rights, including the right to name the Redskins' stadium "FedExField." In August 2003, Frederick W. Smith acquired an approximate 10% ownership interest in the Washington Redskins and joined its Leadership Council, or board of directors.
Mr. Smith's son-in-law is a 50% owner of a company that provides insurance brokerage and consulting services in connection with certain insurance and legal services plan benefits offered by FedEx to certain of its employees. Mr. Smith's son-in-law's company is paid commissions and fees directly by the benefit providers and not FedEx. During fiscal 2004, such commissions and fees totaled approximately $497,000.
The Board of Directors currently consists of twelvethirteen directors divided into three classes (Class I, Class II and Class III). Directors in each class are elected to serve for three-year terms that expire in successive years. The terms of the Class IIII directors will expire at the upcoming annual meeting. The Board of Directors has nominated JamesJudith L. Barksdale, Paul S. WalshEstrin, Philip Greer, J.R. Hyde, III, Shirley A. Jackson and Peter S. WillmottFrederick W. Smith for election as Class IIII directors for three-year terms expiring at the annual meeting of stockholders to be held in 20052007 and until their successors are elected and qualified. In addition, the Board of Directors has nominated Charles T. Manatt for election as a Class I director for a one-year term expiring at the annual meeting of stockholders to be held in 2005 and until his successor is elected and qualified. Each nominee, except for Mr. Manatt who is not currently a director, currently serves as a Class IIII director.
If stockholders approve the Board of Directors' proposal to amend FedEx's Bylaws to provide for the annual election of directors, as more fully described under "Proposal 2 – Amendments to FedEx's Bylaws to Provide for the Annual Election of All Directors," then the term of all directors, including those elected at this annual meeting, will end at the 2005 annual meeting, and all directors will thereafter be elected for one-year terms.
Each nominee has consented to being named in this proxy statement and has agreed to serve if elected. If a nominee is unable to stand for election, the Board of Directors may either reduce the number of directors to be elected or select a substitute nominee. If a substitute nominee is selected, the proxy holders will vote your shares for the substitute nominee, unless you have withheld authority.
The affirmative vote of a plurality of the votes cast at the meeting is required to elect the threesix nominees as directors. This means that the threesix nominees will be elected if they receive more affirmative votes than any other person.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR”"FOR" THE ELECTION OF EACH OF THE THREESIX NOMINEES.
The following table sets forth, with respect to each nominee, his or her name, age, principal occupation and employment during the past five years, the year in which he or she first became a director of FedEx (or its predecessor, Federal Express Corporation)FedEx Express) and directorships held in other public companies.
NOMINEE FOR ELECTION AS CLASS I DIRECTOR
| Director, Year First Elected as Director | Age | Principal Occupation, Business and Directorships | ||
|---|---|---|---|---|
| Charles T. Manatt | 68 | Partner and co-founder of Manatt, Phelps & Phillips, LLP, a diversified law firm, since 1965; Co-Chair of ManattJones Global Strategies LLC, a global consulting firm providing international business, government and public affairs strategies and solutions, since October 2001; U.S. Ambassador to the Dominican Republic from 1999 to 2001. Former director of FedEx from 1989 to 1999. |
| Director, Year First | Elected as Director Age | Principal Occupation, | Business and Directorships | ||
| Judith L. Estrin 1989 | |||||
| President and Chief Executive Officer of Packet Design, LLC, an Internet technology company, since May 2000; Senior Vice President and Chief Technology Officer of Cisco Systems, Inc., a networking systems company, from April 1998 to April 2000; President and Chief Executive Officer of Precept Software, Inc., a computer software company, from March 1995 to April 1998. Director, The Walt Disney Company. | |||||
Philip Greer 1974 | 68 | Managing Director, Greer Family Consulting and Investments, LLC, an investment management firm, since April 2002; Senior Managing Director of Weiss, Peck & Greer, L.L.C., an investment management firm, from 1995 to April 2002; General Partner of Weiss, Peck & Greer from 1970 to 1995. Director, The Robert Mondavi Corporation. | |||
J.R. Hyde, III 1977 | 61 | Chairman of GTx, Inc., a biopharmaceutical company specializing in serious men's health issues, since March 2001; Chairman of Pittco Management, LLC, an investment management company, since January 1998; President of Pittco, Inc., an investment company, since April 1989; Chairman of AutoZone, Inc., an auto parts retail chain, from May 1986 to March 1997; Chief Executive Officer of AutoZone, Inc. from May 1986 to December 1996. Director, Autozone, Inc. and GTx, Inc. | |||
Shirley A. Jackson 1999 | 58 | President of Rensselaer Polytechnic Institute, a technological university, since July 1999; Chairwoman and Commissioner of the United States Nuclear Regulatory Commission from July 1995 to June 1999; Commissioner of the United States Nuclear Regulatory Commission from May 1995 to July 1995. Director, AT&T Corp., Marathon Oil Corporation, Medtronic, Inc., Public Service Enterprise Group Incorporated, and United States Steel Corporation. Dr. Jackson also serves as a director of the New York Stock Exchange. | |||
Frederick W. Smith 1971 | 59 | Chairman, President and Chief Executive Officer of FedEx since January 1998; Chairman of FedEx Express since 1975; Chairman, President and Chief Executive Officer of FedEx Express from 1983 to January 1998; Chief Executive Officer of FedEx Express from 1977 to January 1998; President of FedEx Express from 1971 to 1975. |
Continuing Directors
The terms of FedEx's four Class I directors expire at the annual meeting of stockholders to be held in 2005. The terms of FedEx's three Class II directors who will continue in office following the annual meeting expire at the annual meeting of stockholders to be held in 2006. If stockholders approve the Board of Directors' proposal to amend FedEx's Bylaws to provide for the annual election of directors, then the term of all directors will expire at the 2005 annual meeting. The following tables set forth, with respect to each current Class I and Class II director who will continue in office following the annual meeting, his or her name, age, principal occupation and employment during the past five years, the year in which he or she first became a director of FedEx (or its predecessor, FedEx Express) and directorships held in other public companies. One current Class II director, George J. Mitchell, is retiring as a director at the annual meeting.
CLASS I DIRECTORS CONTINUING IN OFFICE
| Director, Year First Elected as Director | Age | Principal Occupation, Business and Directorships | ||
|---|---|---|---|---|
| James L. Barksdale 1999 | 61 | Chairman and President, Barksdale Management Corporation, | ||
J. Kenneth Glass 2003 | 58 | Chairman of the Board, President and | ||
Paul S. Walsh 1996 | 49 | Chief Executive Officer of Diageo plc, a consumer food and beverage company, since September 2000; Group Chief Operating Officer of Diageo plc from January 2000 to September 2000; Chairman, President and Chief Executive Officer of The Pillsbury Company, a wholly owned subsidiary of Diageo plc, from April 1996 to January 2000; Chief Executive Officer of The Pillsbury Company from January 1992 to April 1996. Director, |
Diageo plc. | ||||
Peter S. Willmott 1974 | 67 | Chairman and Chief Executive Officer of Willmott Services, Inc., a retail and consulting firm, since June 1989; Interim President and Chief Executive Officer of Fleming Companies, Inc., a wholesale distributor of consumable goods, from March 2003 to August 2003 (Fleming Companies, Inc. filed for reorganization in federal bankruptcy court in April 2003); Chief Executive Officer and President of Zenith Electronics Corporation, an electronics manufacturing company, from July 1996 to January 1998 (Zenith Electronics Corporation filed for reorganization in federal bankruptcy court in August 1999); various senior management positions at FedEx Express from 1974 to 1983, including President and Chief Operating |
CLASS II DIRECTORS CONTINUING IN OFFICE
| Director, Year First | Elected as Director Age | Principal Occupation, | Business and Directorships | ||
| August A. Busch IV 2003 | |||||
| President of | |||||
John A. Edwardson 2003 | 55 | Chairman | |||
Joshua I. Smith 1989 | 63 | Chairman and Managing Partner, Coaching Group, LLC, a consulting firm, since June 1998; Vice Chairman and President of iGate, Inc., a broadband networking company, from June 2000 to June | |||
Committee chairpersons, other than for the Audit Committee, will be paid an additional annual fee of $8,000. Outside directors$10,000. The Audit Committee chairperson will be paid an additional annual fee of $15,000. Each outside director who is elected at or who is remaining in office after the annual meeting also will receive ana stock option under FedEx’s 1997 Stock Incentive Plan, as amended, for 8,0006,000 shares of common stock on the date of the 20022004 annual meeting. Mr.Frederick W. Smith, the only director who is also a FedEx employee, receives no additional compensation for serving as a director.
The Compensation Committee annually reviews director compensation, including, among other things, comparing FedEx's director compensation practices with those of other public companies of comparable size. Before making a recommendation regarding director compensation to the Board, the Compensation Committee considers that the directors' independence may be compromised if compensation exceeds appropriate levels or if FedEx enters into other arrangements beneficial to the directors.
At its July 1997 meeting, the Board of Directors of FederalFedEx Express Corporation (FedEx’s(FedEx's predecessor) voted to freeze the Retirement Plan for Outside Directors (that is, no further benefits would be earned under this plan). This plan is unfunded and any benefits under the plan are payable out of the assets of FedEx as a general, unsecured obligation of FedEx.
Concurrent with the freeze, the Board amended the plan to accelerate the vesting of the benefits for each outside director who was not yet vested under the plan. In general, each outside director is entitled to a retirement benefit beginning as of the first day of the fiscal quarter of FedEx next following the date of termination of his or her directorship or the date such director attains age 60, whichever is
PROPOSAL 2 – AMENDMENTS TO FEDEX'S BYLAWS
TO PROVIDE FOR THE ANNUAL ELECTION OF ALL DIRECTORS
The Board has establishedof Directors recommends that FedEx's Second Amended and Restated Bylaws be amended to eliminate the classified structure of the Board and allow for the annual election of all directors.
Article III, Section 1 of FedEx's Bylaws currently provides that:
The Board of Directors has adopteddetermined that FedEx's Bylaws should be amended to repeal these provisions of Article III and to make certain other conforming changes to the Bylaws (the "Annual Election Amendments"). The proposed amendments to FedEx's Bylaws are attached to this proxy statement asAppendix A.
Proponents of a guidelineclassified board structure believe that classification assures the continuity and stability of management and policies, as a majority of the directors at any given time would have prior experience. This fosters long-term planning and helps create long-term value. In the event of a hostile takeover attempt, the classification of directors would be beneficial to stockholders. While it would not prevent a takeover, it would give the Board time to consider alternative proposals. It also encourages the person seeking to gain control of a company to initiate arm's length discussions with the board of directors. Proponents also argue that longer terms under the classified board structure promote the independence of non-management directors by insulating them from outside short-term influences and reducing the threat that a director who refuses to conform will not be re-nominated.
A classified board of directors has the effect of making it more difficult for stock ownershipa substantial stockholder to gain control of a board of directors without the approval or cooperation of incumbent directors and, therefore, may deter unfriendly and unsolicited takeover proposals and proxy contests. A classified board of directors also makes it more difficult for stockholders to change a majority of directors even if a majority of stockholders are dissatisfied with the performance of incumbent directors. Many investors believe that the election of directors is the primary means for stockholders to influence corporate governance policies and to hold management accountable for implementing these policies, that all directors should be equally accountable at all times for the company's performance and that the will of the majority of stockholders should not be impeded by establishing a goalclassified board.
The Board of Directors listened to the stockholders, reexamined the arguments for and against continuation of the classified Board, and determined that the classified Board should be eliminated.
If stockholders approve the Annual Election Amendments, then each outside director own shares in FedEx valuedelected at five timesthis annual meeting will hold office for a one-year term until the 2005 annual retainer fee. Basedmeeting, subject to his or her earlier resignation, removal or death. In addition, each of the remaining directors also will stand for election at the 2005 annual meeting. In that regard, each of FedEx's directors not otherwise up for reelection at the 2005 annual meeting has agreed to shorten his existing term so that it concludes at the 2005 annual meeting if the Annual Election Amendments are approved by
stockholders. In addition, any director appointed by the Board of Directors to fill any newly created directorship or vacancy on the closing priceBoard will hold office for a term ending at the next annual meeting.
If stockholders do not approve the Annual Election Amendments, the Board of FedEx’sDirectors will remain classified. The five Class III directors, if elected at the 2004 annual meeting, will serve a three-year term expiring in 2007. All other directors will continue in office for their full three-year term, subject to their earlier resignation, removal or death.
The affirmative vote of at least 80% of the outstanding shares of FedEx common stock on August 5, 2002, this goal represents approximately 4,455 shares. Vested stock options are not countedwill be required for approval of the Annual Election Amendments. Abstentions will have the same effect as stock ownership undervotes against the guideline. Nine of FedEx’s outside directors own sufficient shares to comply with the guideline. The Board believes significant stock ownership by outside directors further aligns their interests with the interests of FedEx’s stockholders.
The following table sets forth the compensation awarded to, earned by or paid to FedEx’sFedEx's chief executive officer and its four other most highly compensated executive officers for services rendered in all capacities during the fiscal yearsyear ended May 31, 2002, 20012004 and 2000.
| Long-Term Compensation | | ||||||||||||||||||||||||||||||||||
| Awards | Payouts | | |||||||||||||||||||||||||||||||||
| Annual Compensation | |||||||||||||||||||||||||||||||||||
| Restricted | Stock Award(s) ($)(1) Shares | Underlying Options (#) | |||||||||||||||||||||||||||||||||
| Name and Principal Position | | Year | | | Salary | ($) | | Bonus | ($) | | Other Annual | Compensation ($) | | LTIP | Payouts ($) | All Other Compensation ($) | ||||||||||||||||||||||||
Frederick W. Smith Chairman, President and Chief Executive Officer | 2004 2003 2002 | 1,238,567 1,195,295 1,150,008 | 2,647,756 1,031,194 1,317,985 | 357,919 438,883 312,143 | (2) (2) (2) | – – – | 250,000 375,000 437,500 | 1,192,500 – – | 9,603 5,927 5,947 | (3) (3) (3) | |||||||||||||||||||||||||
David J. Bronczek(4) President and Chief Executive Officer – FedEx Express | 2004 2003 | 819,144 768,814 | 1,309,306 220,582 | (5) | 477,371 543,687 | (6) (6) | 664,908 580,680 | 85,000 60,000 | 715,500 – | 6,041 3,118 | (7) (7) | ||||||||||||||||||||||||
Kenneth R. Masterson Executive Vice President, General Counsel and Secretary | 2004 2003 2002 | 739,510 713,949 685,668 | 1,081,920 291,754 375,527 | (5) | 391,287 299,289 259,509 | (8) (8) (8) | 498,681 435,510 361,800 | 65,000 45,000 56,250 | 596,250 – – | 9,870 6,221 6,226 | (9) (9) (9) | ||||||||||||||||||||||||
Alan B. Graf, Jr. Executive Vice President and Chief Financial Officer | 2004 2003 2002 | 729,925 704,694 644,544 | 1,073,826 286,145 349,327 | (5) | 300,779 358,619 259,509 | (10) (10) (10) | 498,681 435,510 361,800 | 65,000 45,000 56,250 | 596,250 – – | 6,602 3,518 3,047 | (11) (11) (11) | ||||||||||||||||||||||||
T. Michael Glenn | |||||||||||||||||||||||||||||||||||
Executive Vice President, Market Development and Communications | 2004 2003 2002 | 680,062 638,363 600,516 | 1,000,471 270,013 301,483 | (5) | 379,254 500,529 491,360 | (12) (12) (12) | 498,681 435,510 361,800 | 65,000 45,000 56,250 | 596,250 – – | 5,646 3,086 2,994 | (13) (13) (13) | ||||||||||||||||||||||||
| Name | Number of Shares Held | Value ($) | ||
|---|---|---|---|---|
| F.W. Smith | – | – | ||
| D.J. Bronczek | 27,924 | 2,054,648 | ||
| K.R. Masterson | 20,693 | 1,522,591 | ||
| A.B. Graf, Jr. | 20,693 | 1,522,591 | ||
| T.M. Glenn | 20,693 | 1,522,591 |
Name | Number of Shares Held | Value ($) | ||
| F.W. Smith | — | — | ||
| K.R. Masterson | 21,500 | 1,159,925 | ||
| A.B. Graf, Jr. | 21,500 | 1,159,925 | ||
| T.M. Glenn | 21,500 | 1,159,925 | ||
| R.B. Carter | 19,000 | 1,025,050 |
Holders of restricted shares are entitled to receive any dividends paid on such shares.
| (2) |
| Of the amounts shown for 2004, 2003 and 2002, |
(3) | The amounts shown | |
(4) | Mr. Bronczek became an executive officer of FedEx in | |
(5) | The amounts shown include special recognition bonuses. |
(6) | Of the amounts shown for |
(7) | Of the amounts shown for 2004 and 2003, $5,541 and $2,618, respectively, represent excess life and umbrella insurance premiums paid on Mr. | |
(8) | Of the amounts shown for 2004, $300,779 represents tax reimbursements related to restricted stock awards, $41,306 is for financial counseling and $24,681 represents personal use of corporate aircraft treated as taxable income to Mr. Masterson. The amounts shown for 2003 and 2002 represent tax reimbursements related to restricted stock awards. Amounts related to personal use of aircraft and financial counseling are based on Mr. Masterson's Form W-2 for the immediately preceding calendar year. | |
(9) | Of the amounts shown for 2004, 2003 and 2002, $9,370, $5,721 and $5,726, respectively, represent excess life and umbrella insurance premiums paid on Mr. Masterson's behalf. The amounts shown also include a $500 matching contribution under the FedEx 401(k) plan. | |
(10) | The amounts shown for 2004 and 2002 represent tax reimbursements related to restricted stock awards. Of the amount shown for 2003, $299,289 represents tax reimbursements related to restricted stock awards and $41,934 represents personal use of corporate aircraft treated as taxable income to Mr. Graf. Amounts related to personal use of corporate aircraft are based on | |
(11) | Of the amounts shown for 2004, 2003 and 2002, $6,102, $3,018 and $2,547, respectively, represent excess life and umbrella insurance premiums paid on Mr. Graf's behalf. The amounts shown also include a $500 matching contribution under the FedEx 401(k) plan. | |
(12) | Of the amounts shown for 2004, 2003 and 2002, $300,779, $299,289 and $259,509, respectively, represent tax reimbursements related to restricted stock awards and $47,203, $119,519 and $193,702, respectively, represent imputed interest in connection with Mr. Glenn's interest-free demand loan. Of the amounts shown for 2004 and 2003, $19,851 and $70,753, respectively, represent personal use of corporate aircraft treated as taxable income to Mr. Glenn. Amounts related to the interest free demand loan and personal use of corporate aircraft are based on Mr. Glenn's Form W-2 for the immediately preceding calendar year. | |
(13) | Of the amounts shown for 2004, 2003 and 2002, $5,146, $2,586 and $2,494, respectively, represent excess life and umbrella insurance premiums paid on Mr. Glenn's behalf. The amounts shown also include a $500 matching contribution under the FedEx 401(k) plan. |
The following table sets forth information regarding stock option grants under FedEx’s Stock Incentive PlansFedEx's stock option plans made during the fiscal year ended May 31, 20022004 to the named executive officers. The amounts shown for each named executive officer as potential realizable values are based entirely on assumed annualized rates of stock price appreciation of five percent and ten percent over the full ten-year term of the options. These assumed rates of growth were selected by the Securities and Exchange Commission for illustration purposes only and are not intended to predict future stock prices, which will depend upon overall stock market conditions and FedEx’sFedEx's future performance and prospects. Consequently, there can be no assurance that the potential realizable values shown in this table will be achieved.
| | Individual Grants | | | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | % of Total Options Granted to Employees in Fiscal Year | | | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term | |||||||
| | Number of Shares Underlying Options Granted (#) | | | |||||||||
| Name | Exercise or Base Price ($/Sh)* | Expiration Date | ||||||||||
| 5% ($) | 10% ($) | |||||||||||
| F.W. Smith | 250,000 | 6.51 | 64.53 | 6/2/2013 | 10,145,643 | 25,711,050 | ||||||
| D.J. Bronczek | 85,000 | 2.21 | 64.53 | 6/2/2013 | 3,449,518 | 8,741,757 | ||||||
| K.R. Masterson | 65,000 | 1.69 | 64.53 | 6/2/2013 | 2,637,867 | 6,684,873 | ||||||
| A.B. Graf, Jr. | 65,000 | 1.69 | 64.53 | 6/2/2013 | 2,637,867 | 6,684,873 | ||||||
| T.M. Glenn | 65,000 | 1.69 | 64.53 | 6/2/2013 | 2,637,867 | 6,684,873 | ||||||
Individual Grants | Potential Realizable Value at Assumed Annual Rates of Stock Price Appreciation for Option Term | |||||||||||
Name | Number of Shares Underlying Options Granted (#) | % of Total Options Granted to Employees in Fiscal Year | Exercise or Base Price ($/Sh)* | Expiration Date | 5% ($) | 10% ($) | ||||||
| F.W. Smith | 437,500 | 11.12 | 40.49 | 06/01/11 | 11,140,475 | 28,232,152 | ||||||
| K.R. Masterson | 56,250 | 1.43 | 40.49 | 06/01/11 | 1,432,347 | 3,629,848 | ||||||
| A.B. Graf, Jr. | 56,250 | 1.43 | 40.49 | 06/01/11 | 1,432,347 | 3,629,848 | ||||||
| T.M. Glenn | 56,250 | 1.43 | 40.49 | 06/01/11 | 1,432,347 | 3,629,848 | ||||||
| R.B. Carter | 56,250 | 1.43 | 40.49 | 06/01/11 | 1,432,347 | 3,629,848 | ||||||
The following table sets forth for each named executive officer certain information about stock options exercised during the fiscal year ended May 31, 20022004 and unexercised stock options held at the end of the fiscal year. The value realized upon exercise of an option is the difference between the exercise price of the option and the fair market value of FedEx’sFedEx's common stock (the mean betweenaverage of the high and low prices of the stock on the New York Stock Exchange) on the exercise date. The value of an unexercised in-the-money option at fiscal year-end is the difference between its exercise price and the fair market value of FedEx’sFedEx's common stock on May 31, 2002.28, 2004. The value of unexercised in-the-money options, unlike the amounts set forth in the column “Value"Value Realized,”" has not been, and may never be, realized. Such options have not been, and may never be, exercised. The actual gain, if any, on exercise will depend on the value of FedEx’sFedEx's common stock on the date of exercise. An option is “in-the-money”"in-the-money" if the fair market value of FedEx’sFedEx's common stock exceeds the exercise price of the option. An option is “unexercisable”"unexercisable" if it has not yet vested.
| | | | Number of Shares Underlying Unexercised Options at FY-End (#) | Value of Unexercised In-the-Money Options at FY-End ($) | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Name | Shares Acquired on Exercise (#) | Value Realized ($) | ||||||||||
| Exercisable | Unexercisable | Exercisable | Unexercisable | |||||||||
| F.W. Smith | 600,000 | 30,963,480 | 1,837,500 | 825,000 | 65,818,086 | 17,789,281 | ||||||
| D.J. Bronczek | 61,756 | 3,394,300 | 322,424 | 182,500 | 12,501,083 | 3,442,688 | ||||||
| K.R. Masterson | 186,000 | 9,824,905 | 177,374 | 136,876 | 5,715,877 | 2,546,386 | ||||||
| A.B. Graf, Jr. | 40,000 | 2,075,262 | 285,374 | 136,876 | 11,609,295 | 2,546,386 | ||||||
| T.M. Glenn | 40,000 | 1,907,836 | 149,374 | 136,876 | 4,535,075 | 2,546,386 | ||||||
Shares Acquired on | Value | Number of Shares Underlying Unexercised Options at FY-End (#) | Value of Unexercised In-the-Money Options at FY-End ($) | |||||||||
Name | Exercise (#) | Realized ($) | Exercisable | Unexercisable | Exercisable | Unexercisable | ||||||
| F.W. Smith | — | — | 1,690,000 | 947,500 | 44,196,590 | 13,377,195 | ||||||
| K.R. Masterson | 7,200 | 274,816 | 346,500 | 123,750 | 11,006,787 | 1,651,376 | ||||||
| A.B. Graf, Jr. | 40,000 | 1,432,748 | 223,500 | 168,750 | 6,401,477 | 3,217,205 | ||||||
| T.M. Glenn | 22,108 | 789,239 | 92,500 | 163,750 | 1,770,578 | 3,043,224 | ||||||
| R.B. Carter | 6,500 | 187,760 | 56,204 | 112,250 | 1,330,393 | 1,944,734 | ||||||
In 2000,2001, 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 20022004 if FedEx achieved certain earnings-per-share targetsgoals established by the Compensation Committee with respect to the three-fiscal-year period 20002002 through 2002. No bonuses2004. Bonuses were awarded infor fiscal 20022004 to upper management, including executive officers, under the long-term plan because of below-planFedEx's performance exceeded the threshold for the three-fiscal-year period.
The Compensation Committee has established long-term performance bonus plans for the three-fiscal-year periods 2001 through 2003, 2002 through 2004 and 2003 through 2005, 2004 through 2006 and 2005 through 2007, providing bonus opportunities for 2003, 2004fiscal 2005, 2006 and 2005,2007, respectively, if certain earnings-per-share targetsgoals are achieved with respect to those periods. No amounts can be earned for the 2001 through 2003, 2002 through 2004 and 2003 through 2005, 2004 through 2006 and 2005 through 2007 plans until 2003, 20042005, 2006 and 2005,2007, respectively, because achievement of the earnings-per-share objectivesgoals can only be determined following the conclusion of the applicable three-fiscal-year period. The following table sets forth estimates of the possible future payouts to each of the named executive officers under FedEx’sFedEx's long-term performance bonus plans.
Performance or Other Period Until Maturation or Payout | Estimated Future Payouts Under Non-Stock Price-Based Plans | |||||||
Name | Threshold ($) | Target ($) | Maximum ($) | |||||
| F.W. Smith | 5/31/03 | 750,000 | 1,500,000 | 2,250,000 | ||||
| 5/31/04 | 375,000 | 1,500,000 | 2,250,000 | |||||
| 5/31/05 | 500,000 | 2,000,000 | 3,000,000 | |||||
| K.R. Masterson | 5/31/03 | 375,000 | 750,000 | 1,125,000 | ||||
| 5/31/04 | 187,500 | 750,000 | 1,125,000 | |||||
| 5/31/05 | 187,500 | 750,000 | 1,125,000 | |||||
| A.B. Graf, Jr. | 5/31/03 | 375,000 | 750,000 | 1,125,000 | ||||
| 5/31/04 | 187,500 | 750,000 | 1,125,000 | |||||
| 5/31/05 | 187,500 | 750,000 | 1,125,000 | |||||
| T.M. Glenn | 5/31/03 | 375,000 | 750,000 | 1,125,000 | ||||
| 5/31/04 | 187,500 | 750,000 | 1,125,000 | |||||
| 5/31/05 | 187,500 | 750,000 | 1,125,000 | |||||
| R.B. Carter | 5/31/03 | 375,000 | 750,000 | 1,125,000 | ||||
| 5/31/04 | 187,500 | 750,000 | 1,125,000 | |||||
| 5/31/05 | 187,500 | 750,000 | 1,125,000 | |||||
| Estimated Future Payouts Under Non-Stock Price-Based Plans | ||||||||
|---|---|---|---|---|---|---|---|---|
| Performance or Other Period Until Maturation or Payout | ||||||||
| Name | Threshold ($) | Target ($) | Maximum ($) | |||||
| F.W. Smith | 5/31/05 5/31/06 5/31/07 | 500,000 562,500 562,500 | 2,000,000 2,250,000 2,250,000 | 3,000,000 3,375,000 3,375,000 | ||||
D.J. Bronczek | 5/31/05 5/31/06 5/31/07 | 250,000 250,000 250,000 | 1,000,000 1,000,000 1,000,000 | 1,500,000 1,500,000 1,500,000 | ||||
K.R. Masterson | 5/31/05 5/31/06 5/31/07 | 187,500 187,500 187,500 | 750,000 750,000 750,000 | 1,125,000 1,125,000 1,125,000 | ||||
A.B. Graf, Jr. | 5/31/05 5/31/06 5/31/07 | 187,500 187,500 187,500 | 750,000 750,000 750,000 | 1,125,000 1,125,000 1,125,000 | ||||
T.M. Glenn | 5/31/05 5/31/06 5/31/07 | 187,500 187,500 187,500 | 750,000 750,000 750,000 | 1,125,000 1,125,000 1,125,000 | ||||
The estimated individual future payouts set forth in the table above are set dollar amounts ranging from threshold amounts, if the objectivesearnings-per-share goals achieved are minimally achieved,less than target, up to maximum amounts, if the plan targetsgoals are substantially exceeded. With respect to the 2001 through 2003 plan, individual bonuses may be adjusted downward if the individual’s average individual achievement percentage is less than 100% for the three-fiscal-year period of the plan. There can be no assurance that the estimated future payouts shown in this table will be achieved.
FedEx maintains the FedEx Corporation Employees' Pension Plan. Effective May 31, 2003, FedEx amended the Pension Plan to add a cash balance feature, which is called the Portable Pension Account. Eligible employees as of May 31, 2003 had the option to make a one-time election to accrue future pension benefits under either the new cash balance formula or the traditional pension benefit formula. In either case, employees retained all benefits previously accrued under the traditional pension benefit formula and will continue to receive the benefit of future salary increases on benefits accrued as of May 31, 2003. All eligible employees hired after May 31, 2003 will only be eligible to participate in the Portable Pension Account feature.
Traditional Pension Benefit
The following table shows the estimated annual pension benefits, based on the traditional pension benefit formula, payable to participants upon normal retirement (age 60) on a single life annuity basis in specified remuneration classes and years of credited service under the FedEx Corporation Employees’Employees' Pension Plan and the Federal ExpressFedEx Corporation Retirement Parity Pension Plan, which provides 100% of the benefit that would otherwise be denied certain participants by reason of Internal Revenue Code limitations on qualified plan benefits. These plans (under the traditional pension benefit formula) generally provide for a maximum2% of 25the average of the three calendar years of highest earnings during employment multiplied by years of credited service for purposes of benefit accrual. Additional benefits are not paid for in excess ofaccrual up to 25 years of credited service.years. The benefits listed in the table are not subject to any reduction for Social Security or other offset amounts.
Years of Service | |||||||||||||||
Remuneration | 10 | 15 | 20 | 25 | 30 | ||||||||||
| $ 700,000 | $ | 140,000 | $ | 210,000 | $ | 280,000 | $ | 350,000 | $ | 350,000 | |||||
| 800,000 | 160,000 | 240,000 | 320,000 | 400,000 | 400,000 | ||||||||||
| 900,000 | 180,000 | 270,000 | 360,000 | 450,000 | 450,000 | ||||||||||
| 1,000,000 | 200,000 | 300,000 | 400,000 | 500,000 | 500,000 | ||||||||||
| 1,100,000 | 220,000 | 330,000 | 440,000 | 550,000 | 550,000 | ||||||||||
| 1,200,000 | 240,000 | 360,000 | 480,000 | 600,000 | 600,000 | ||||||||||
| 2,100,000 | 420,000 | 630,000 | 840,000 | 1,050,000 | 1,050,000 | ||||||||||
| 2,200,000 | 440,000 | 660,000 | 880,000 | 1,100,000 | 1,100,000 | ||||||||||
| 2,500,000 | 500,000 | 750,000 | 1,000,000 | 1,250,000 | 1,250,000 | ||||||||||
| 2,600,000 | 520,000 | 780,000 | 1,040,000 | 1,300,000 | 1,300,000 | ||||||||||
| 3,000,000 | 600,000 | 900,000 | 1,200,000 | 1,500,000 | 1,500,000 | ||||||||||
| | Years of Service | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Remuneration | |||||||||||||||
| 10 | 15 | 20 | 25 | 30 | |||||||||||
| $ 900,000 | $ | 180,000 | $ | 270,000 | $ | 360,000 | $ | 450,000 | $ | 450,000 | |||||
| 1,000,000 | 200,000 | 300,000 | 400,000 | 500,000 | 500,000 | ||||||||||
| 1,200,000 | 240,000 | 360,000 | 480,000 | 600,000 | 600,000 | ||||||||||
| 1,900,000 | 380,000 | 570,000 | 760,000 | 950,000 | 950,000 | ||||||||||
| 2,000,000 | 400,000 | 600,000 | 800,000 | 1,000,000 | 1,000,000 | ||||||||||
| 2,100,000 | 420,000 | 630,000 | 840,000 | 1,050,000 | 1,050,000 | ||||||||||
| 2,200,000 | 440,000 | 660,000 | 880,000 | 1,100,000 | 1,100,000 | ||||||||||
| 2,500,000 | 500,000 | 750,000 | 1,000,000 | 1,250,000 | 1,250,000 | ||||||||||
| 2,600,000 | 520,000 | 780,000 | 1,040,000 | 1,300,000 | 1,300,000 | ||||||||||
| 3,000,000 | 600,000 | 900,000 | 1,200,000 | 1,500,000 | 1,500,000 | ||||||||||
The remuneration specified in the Pension Plan Tableabove table includes “Salary”"Salary" and “Bonus”"Bonus" as reported in the Summary Compensation Table on page 15. Because24.
Portable Pension Account
For employees accruing benefits under the Portable Pension Account, the pension benefit earned after May 31, 2003 is expressed as a notional cash balance account. For each plan year in which a participant is credited with a year of service compensation credits are added based on the
participant's age, service and eligible compensation for the prior calendar year based on the following table:
| Age + Service on May 31 | Compensation Credit | ||
|---|---|---|---|
| Less than 55 | 5 | % | |
| 55-64 | 6 | % | |
| 65-74 | 7 | % | |
| 75 or over | 8 | % |
On June 1, 2003, the sum of age plus years of service for the three named executive officers who elected the Portable Pension Account feature was as follows: Mr. Smith – 89; Mr. Graf – 72; and Mr. Bronczek – 73.
Interest credits are added to a participant's Portable Pension Account benefit at the end of each fiscal quarter (August 31, November 30, February 28 and May 31). Interest credits are based on the Portable Pension Account balance and an annual interest credit rate equal to the greater of (a) the one-year Treasury constant maturities rate for April of the preceding plan year plus 1% or (b) 4%. The annual rate for each plan year, however, will not be more than the average 30-year Treasury rate for April of the preceding plan year. Interest credits will continue to be added until the last day of the month before plan benefits are distributed. The interest crediting rate for the plan year ended May 31, 2004 was 4%.
At retirement or other termination of employment an amount equal to the vested Portable Pension Account balance is payable to the participant in the form of an immediate or deferred, lump sum payment or annuity.
Under the traditional pension plan benefit, because the covered compensation for the named executive officers is the average of the three calendar years of highest earnings during employment, the amount differs from that set forth in the Summary Compensation Table and is stated below, together with the years of credited service achieved to date. Also shown below is the estimated annual pension benefits payable upon normal retirement (age 60) under the Portable Pension Account feature to the three named executive officers that elected this feature.
| | Traditional Pension Benefit | Portable Pension Account | ||||||
|---|---|---|---|---|---|---|---|---|
| Name | Covered Compensation | Years of Service | Estimated Annual Benefits(1) | |||||
| F.W. Smith(2) | $ | 2,315,736 | 31 | $ | 13,900 | |||
| D.J. Bronczek(2) | 1,059,294 | 25 | 83,400 | |||||
| K.R. Masterson | 1,145,759 | 24 | – | |||||
| A.B. Graf, Jr.(2) | 1,066,505 | 23 | 72,800 | |||||
| T.M. Glenn | 952,735 | 23 | – | |||||
Name | Covered Compensation | Years of Service | |||
| F.W. Smith | $ | 2,156,032 | 30 | ||
| K.R. Masterson | 1,137,188 | 22 | |||
| A.B. Graf, Jr. | 1,046,653 | 22 | |||
| T.M. Glenn | 925,297 | 21 | |||
| R.B. Carter | 606,999 | 9 | |||
Overview of FedEx’s executives comprises three basic components: base salary; annualExecutive Compensation Philosophy and long-term performance bonus plans;Program
FedEx's mission is to produce superior financial returns for stockholders by providing high value-added supply chain, transportation and long-term equity incentives.business services through focused independent operating companies that compete collectively and are managed collaboratively. The Compensation Committee of the Board of Directors determines theis committed to establishing and overseeing a compensation of theprogram for executive officers that furthers FedEx's mission.
FedEx's compensation program for executive officers consists of FedEx, approves the objectives for thefour key elements: (1) a base salary, (2) an annual incentive cash bonus plan, (3) a long-term incentive cash bonus plan, and long-term performance bonus plans, establishes the funding of the plans, determines the awards of(4) long-term equity incentives in the form of stock options and the individuals to whom such awards are made,restricted stock. The executive officer compensation program is designed to:
The Compensation Committee believes that general industry is an appropriate comparison categoryFedEx's compensation structure for executive officers promotes the best interests of FedEx and its stockholders. The program enables FedEx to attract and retain highly talented and productive executive officers, while ensuring that they are compensated in determining competitive compensation because FedEx’s executives can be recruited from,such a manner as to advance both the short- and by, businesses outside FedEx’s industry peer group.long-term interests of stockholders.
Comparison Surveys
In its fiscal 20022004 executive compensation review, the Compensation Committee considered compensation survey information published by two major consulting firms of other companies available from a group of companies in general industry companies with annual sales in excess of $10 billion. The Compensation Committee believes that general industry is the appropriate comparison category in determining competitive compensation because FedEx's executives can be recruited from, and by, businesses outside FedEx's industry peer group.
Base Salary
Base salaries are reviewed annually for all executive officers, including the Chief Executive Officer. The primary objective in setting salaries is to establish a competitive base compensation for FedEx executive officers.
Base salaries for FedEx executives,executive officers, including Mr. Smith,the Chief Executive Officer, are generally targeted at the 7550th percentile of base salaries for comparable positions in the two comparison surveys mentioned above.
recognize individual competencies, skills and contributions, varying levels of experience and responsibilities, individual performance, internal equity issues or the relative extent of an individual’s experience or a desire to retain a valuable executive. None of these factors is given any particular weight and the specific factors used may vary among individual executives. Base salaries for executive officers other than the Chief Executive Officer are based upon the recommendation of Mr. Smith’sSmith.
Mr. Smith's base salary was not increased in fiscal 20022004 by 3.5% and was slightly below the market median of base salaries of chief executive officers in the comparison surveys.
PerformanceAnnual Incentive Cash Bonus Plans. AnnualPlans
The annual incentive cash bonus targets are established as a percentage of pay based on pay level. If bothprogram and the individual and plan objectives are achieved, the annuallong-term incentive cash bonus plan is designed to producedescribed below reflect the Compensation Committee's philosophy that there should be a bonus ranging, onstrong relationship between pay and corporate performance and that 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.high proportion of executive officer compensation should be "at risk." Total annual salary and bonus for executive officers (assuming achievement of all individual and corporate objectives)objectives as described below) is designed to range from less thantargeted at the 5075th up to the 75th percentile of total annual salary and bonus for comparable positions in the comparison surveys.
FedEx Corporation executive vice presidents participate in the annual incentive cash bonus plan established for headquarters employees. Under this plan, an annual bonus target is established as a percentage of salary based on pay level. A threshold payout of up to 30% of the target bonus is based on the achievement of individual objectives established at the beginning of the fiscal year for each executive officer. The balance of the bonus payout is based on FedEx's consolidated pre-tax income for the fiscal year and ranges, on a sliding scale, from a threshold amount if the plan's pre-established consolidated pre-tax income objectives are minimally achieved up to a maximum amount if such financial performance goals are substantially exceeded.
Each of the presidents of FedEx Express, FedEx Ground, FedEx Freight and FedEx Kinko's participates in the annual incentive cash bonus plan sponsored by his respective company. Under each of these plans, an annual bonus target is established as a percentage of salary based on pay level. Under the FedEx Express, FedEx Ground and FedEx Freight plans, a threshold payout of up to 30% of the target bonus is based on the achievement of pre-established individual objectives. Under the FedEx Kinko's prorated plan, a threshold payout of up to 25% of the target bonus is based on the achievement of pre-established individual objectives. The balance of the bonus payout under the FedEx Express, FedEx Ground and FedEx Freight plans is based on each respective subsidiary's operating income and FedEx's consolidated pre-tax income for the fiscal year and ranges, on a sliding scale, from a threshold amount if the plan's pre-established subsidiary operating income and FedEx's consolidated pre-tax income objectives are minimally achieved up to a maximum amount if such financial performance goals are substantially exceeded. The balance of the bonus payout under the FedEx Kinko's prorated plan is based on its earnings before interest and taxes ("EBIT") and sales revenue for the prorated fiscal year. The bonus payout portion based on EBIT ranges, on a sliding scale, from a threshold amount if the plan's pre-established EBIT objectives are minimally achieved up to an indefinite amount if such EBIT goals are substantially exceeded. The bonus payout portion based on sales revenue ranges, on a sliding scale, from a threshold amount if the plan's pre-established revenue objectives are minimally achieved up to a maximum amount if the sales revenue goals are substantially exceeded.
Mr. Smith’sSmith's annual bonus is determined by whetherthe achievement of corporate business plan objectives are metfor consolidated pre-tax income for the fiscal year. The Compensation Committee may adjust this amount upward or exceeded. If such objectives are met,downward based on its consideration of several factors, including: FedEx's stock
price performance relative to the Standard & Poor's 500 Composite Index, the Dow Jones Transportation Average and the Dow Jones Industrial Average; FedEx's revenue and operating income growth relative to competitors; FedEx's cash flow; FedEx's U.S. revenue market share; FedEx's reputation rankings by various publications and surveys; and the Compensation Committee's assessment of the quality and effectiveness of Mr. Smith's leadership during the fiscal year. None of these factors is given any particular weight by the Compensation Committee determinesin determining whether to adjust Mr. Smith's bonus amount.
Taking into account these objectives and factors, the Compensation Committee recommends to the Boardindependent members of Directorsthe Board a bonus that, when combined with base salary, may be up tohas a 75th percentile target for total annual salary and bonus for chief executive officers in the comparison surveys. Mr. Smith received an annual bonus of $2,647,756 for fiscal 2004, which, together with his base salary, was above the 75th percentile of total annual salary and bonus for chief executive officers in the comparison surveys discussed above underBase Salary. Mr. Smith received an annual bonussurveys.
Long-Term Incentive Cash Bonus Plan
In keeping with the Compensation Committee's philosophy of $1,317,985providing a total compensation package for fiscal 2002, which, together with his base salary, was below the 75
In 2000,2001, the Compensation Committee established a long-term performanceincentive cash bonus plan to provide a long-term cash bonus opportunity tofor members of upper management, including executive officers,officers. This plan provided a bonus opportunity at the conclusion of fiscal 20022004 if FedEx achieved certain earnings-per-share targetsgoals established by the Compensation Committee with respect to the three-fiscal-year period 20002002 through 2002. No bonuses2004. Bonuses were awarded infor fiscal 20022004 to upper management, including executive officers,all eligible participants under the long-termthis plan because of below-planFedEx's performance exceeded the threshold for the three-fiscal-year period.
The Compensation Committee has established long-term performance bonus plans for the three-fiscal-year periods 2001 through 2003, 2002 through 2004 and 2003 through 2005, 2004 through 2006 and 2005 through 2007 providing bonus
Long-Term Equity Incentives.Incentives
The Compensation Committee believes that stock-based compensation aligns the interests of executive officers with stockholder interests by creating a direct link between compensation and stockholder return and gives the executive officers a significant, long-term interest in FedEx's success. In addition, equity awards encourage and facilitate significant ownership of FedEx common stock by executive officers.
Under the terms of FedEx’s Stock Incentive Plans,FedEx's stock option plans, FedEx may grant options to key employees (as determined by the Compensation Committee) to purchase such number of shares of FedEx common stock as is determined by the Compensation Committee. All decisions to grant stock
options are in the sole discretion of the Compensation Committee. In fiscal 2002,2004, options for 3,837,628 shares of common stock options were granted as long-term incentives to certainvarious key employees of FedEx, including executive officers.
Stock options granted to executive officers under certaingenerally vest ratably over four years beginning on the first anniversary of the plans.
Under the terms of FedEx’s Restricted Stock Plans,FedEx's restricted stock plans, FedEx may award shares of restricted stock to key employees, including executive officers, as determined by the Compensation Committee. Shares of restricted stock awarded to executive officers generally vest ratably over four years beginning on the first anniversary of the date of grant. FedEx pays the taxes resulting from a restricted stock award on behalf of the recipient and the Committee considers the amount paid in its determination of the recipient's total compensation. In fiscal 2002, 329,5002004, 282,423 shares of restricted stock were awarded.
Stock option and restricted stock awards are generally made on an annual basis to executive officers. In appropriate cases, however, special grants may be authorized outside of the annual-grant framework. No such special grants were made in fiscal 2004 to executive officers. Mr. Smith did not receive any restricted stock awards in fiscal 2004.
A primary factor that the Compensation Committee generally considers in determining the number of option shares and shares of restricted stock to award to executive officers theis an individual's position and level of responsibility. The Compensation Committee generally considersdoes not consider the respective officer’s senior officer status. Other factors that influence the Compensation Committee’s determination with respect to the number ofstock option shares and shares of restrictedor common stock awarded are the promotion of an individual to a higher position, a desire to retain a valued executive, a desire to recognize a particular officer’s contribution to FedEx and the number of shares then available for award. The stock option holdings of an individual at the time of an option grant are generally not consideredexecutive officer in determining the size of aan option or restricted stock grant to that individual.
Other factors that the Compensation Committee may consider with respect to the number of option shares and shares of restricted stock to award to an executive officer include: the promotion of an individual to a more senior position; a desire to retain a valued executive; a desire to recognize a particular officer's contributions; the number of shares then available to be granted; and stockholder dilution. None of these factors is given any particular weight and the specific factors used may vary among individual executives.
Tax Deductibility.Deductibility of Compensation
Section 162(m) of the Internal Revenue Code limits the deductibility of certainincome tax deduction by FedEx for compensation forpaid to the chief executive officerChief Executive Officer and the four other highest-paid executive officers to $1,000,000 per year, unless the compensation is "performance based compensation" or qualifies under certain requirements are met. FedExother exceptions. The Compensation Committee designs certain components of executive compensation plans and programs to ensure full deductibility. The Compensation Committee believes, however, that thestockholder interests of the stockholders are best served by not restricting the Compensation Committee’s
Committee's discretion and flexibility in crafting compensation programs, even though such programs may result in certain non-deductible compensation expenses.
FedEx's stock option plans satisfy the requirements of Section 162(m),. Accordingly, compensation recognized by the five highest-paid executive officers in connection with stock options granted under these plans will qualify for appropriate tax deductions. FedEx’sis fully deductible. FedEx's annual and long-term performanceincentive cash bonus plans and its Restricted Stock Plansrestricted stock plans do not meet all of the conditions for qualification under Section 162(m). Therefore, compensationCompensation received by the five highest paid executive officers under these plans will beis subject, therefore, to the $1,000,000 deductibility limit.
Conclusion
The Compensation Committee believes FedEx's executive officer compensation policies and programs effectively serve the best interests of FedEx and its stockholders. The various components of executive officer compensation have been deliberately crafted to attract and retain highly qualified and effective executive officers and to motivate them to substantially contribute to FedEx's future success for the benefit of stockholders.
Compensation Committee Members
FedEx's stock option plans provide that, in the event of a change in control (as defined in the plans), each holder of an unexpired option under any of the plans has the right to exercise such option without regard to the date such option would first be exercisable, except that, under certain of the plans, no option may be exercised less than six months from the date of grant.exercisable. This right continues, with respect to holders whose employment with FedEx terminates following a change in control, for a period of twelve months after such termination or until the option’soption's expiration date, whichever is sooner.
FedEx's restricted stock plans provide that, in the event of a change in control (as defined in the plans), depending on the change of control event, the restricted shares will either be canceled and FedEx shall make a cash payment to each holder in an amount equal to the product of the highest price per share received by the holders of FedEx’sFedEx's common stock in connection with the change in control multiplied by the number of restricted shares held.
FedEx has entered into Management Retention Agreements (“MRAs”("MRAs") with certain senior officers of FedEx and its subsidiaries, including the named executive officers. The purpose of the MRAs is to secure the executives’executives' continued services in the event of any threat or occurrence of a change of control (as defined in the MRAs). The terms and conditions of the MRAs with the named executive officers are summarized below.
Term. The MRAs renew annually for consecutive two-year terms, unless FedEx gives six months’months' prior notice that the agreements will not be extended. The non-extension notices may not be given at any time when the Board of Directors has knowledge that any person has taken steps reasonably calculated to effect a change of control of FedEx.
Employment Period. Upon a change of control, the MRA immediately establishes a three-year employment agreement with the executive officer. During the employment period, the officer’sofficer's position (including status, title, authority, duties and responsibilities) may not be diminished. The officer’sofficer's position is considered diminished if FedEx becomes a subsidiary of another company or if another company acquires all or substantially all of FedEx’sFedEx's assets, unless the parent or successor assumes all of FedEx’sFedEx's obligations under the MRA and the officer assumes a position with the parent or successor commensurate with his former position.
Compensation. During the three-year employment period, the executive officer receives base salary (no less than his highest base salary over the twelve-month period prior to the change of control), annual bonus (no less than his average bonus over the three-year period prior to the change of control), incentive, savings and retirement plan benefits, expense reimbursement, fringe benefits, office and staff support, welfare plan benefits and vacation benefits. These benefits must be no less than the benefits the officer had during the 90-day period immediately prior to the change of control.
Termination. The MRA terminates immediately upon the executive officer’sofficer's death. FedEx may terminate the MRA for disability if the disability is determined to be total after 26 weeks. Once disability is established, the officer receives 180 days’days' prior notice of termination. FedEx also may terminate the officer’sofficer's MRA for “cause.”"cause."
Benefits for Qualifying Terminations. A “Qualifying Termination”"Qualifying Termination" is a termination by FedEx other than for cause, disability or death, by the officer “for"for good reason”reason" (principally relating to assignment of
In the event of a Qualifying Termination, the executive officer will receive: (1) a lump sum cash payment equal to three times his annual compensation, which includes his base salary, target annual bonus, target long-term incentive compensation, and company matching contributions to various benefit plans; and (2) a lump sum cash payment equal to the actuarial present value at termination of the amount required to be contributed by FedEx to fund the benefits to the officer under FedEx’sFedEx's pension and parity plans based on an additional 36 months of base salary and target annual bonus and an additional 36 months of age and service, or, if greater, the number of additional months of age and service necessary to provide the officer with 25 years of service and an attained age of 60 under the plans.
For a period ending on the earliest of:of (i) 36 months following the termination date, (ii) the commencement of equivalent benefits from a new employer, or (iii) the date on which the executive officer reaches age 60, FedEx agrees to keep in force each plan and policy providing medical, accidental death, disability and life coverage to the officer and his dependents with the same level of coverage and the same terms as each policy and plan in effect immediately prior to the termination date.
FedEx agrees to pay any taxes incurred by the officer for any payment, distribution or other benefit (including any acceleration of vesting of any benefit) received or deemed received by the officer from FedEx that triggers certain excise taxes.
In exchange for these benefits, the executive officer has agreed that, for the one-year period following his termination, he will not own, manage, operate, control or be employed by any enterprise that competes with FedEx or any of its affiliates.
The following graph compares the cumulative total return on FedEx’sFedEx's common stock during the last five fiscal years with the Standard & Poor’sPoor's 500 Composite Index and the Dow Jones Transportation Average and the peer group index forduring the same period. The graph shows the value, at the end of each of the last five fiscal years, of $100 invested in FedEx’sFedEx's common stock and in each of the foregoing indices on May 31, 1997,1999, and assumes the reinvestment of all dividends. No dividends were paid on FedEx’s common stock during this five-year period. The graph depicts the change in the value of FedEx’sFedEx's common stock relative to the indices as of the end of each fiscal year and not for any interim period. Historical stock performance is not necessarily indicative of future stock price performance.
Fiscal Year Ended May 31, | ||||||||||||
1997 | 1998 | 1999 | 2000 | 2001 | 2002 | |||||||
| FedEx Corporation | $100 | $122 | $209 | $136 | $153 | $206 | ||||||
| S&P 500 Composite Index | 100 | 131 | 158 | 175 | 156 | 135 | ||||||
| Dow Jones Transportation Average | 100 | 129 | 133 | 107 | 118 | 111 | ||||||
| Peer Group Index | 100 | 113 | 125 | 91 | 118 | 113 | ||||||
FedEx's Board of Directors adopted the amendment described above on May 28, 2004, subject to stockholder approval at the annual meeting.
FedEx's Board believes that increasing the number of shares of FedEx common stock reserved for issuance pursuant to stock options under the Plan is necessary to allow FedEx to continue to utilize stock options to attract and retain the services of key individuals essential to increase stockholder value by:
In furtherance of these objectives, the Board of Directors, upon the recommendation of the Compensation Committee, has adopted the amendment to the Plan to provide for additional shares of FedEx common stock reserved for issuance pursuant to stock options, subject to approval by the stockholders at thisthe annual meeting. The Plan will become effective when approved by the stockholders. A summary of the Plan is set forth below. This summary is, however, qualified by and subject to the more complete information set forth in the Plan, as proposed to be amended, a copy of which is attached asAppendix A.B.
The purpose of the Plan is to promote the long-term success of FedEx and its subsidiaries and to increase stockholder value by:
Administration of the Plan
The Plan will beis administered by those members (the "Committee"), not less than two, of the Compensation Committee of the Board of Directors, (the “Committee”), which must be comprised of at least two members each of whom is both an “outside director”"outside director" within the meaning of
Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”"Code"), and a “non-employee director”"non-employee director" as defined in Rule 16b-3 of the rules and regulations under the Securities Exchange Act of 1934, as amended. The Committee, will:
The Committee has the powerauthority to interpret the Plan and all agreements and other instruments relating to awards, to adopt, amend and rescind rules for the administration of the Plan and to
make allsuch other determinations and take such other actions that it deems necessary or advisable for its administration.
The Committee may award restricted shares of FedEx common stock and options to purchase shares of FedEx common stock under the Plan.
Number of Shares That May Be Awarded
Prior to the proposed amendment, under the Plan, FedEx may grant, from time to time, grant:
Both amounts are subject to adjustment in the event of a stock split, stock dividend, recapitalization or other corporate reorganization). This amountreorganization. The total number of shares currently covered by the Plan represents 1.5%1.17% of the shares of common stock outstanding as of August 5, 2002.2, 2004. The Plan also provides that no person may be granted options for more than 800,000600,000 shares during any fiscal year.
The proposed amendment would increase the aggregate number of shares of FedEx common stock purchasable for cash pursuant to stock options to 5,000,000 shares. The additional 2,000,000 shares proposed to be added pursuant to the amendment represents 0.67% of the shares of common stock outstanding as of August 2, 2004.
The Plan provides for the use of authorized but unissued shares or treasury shares. To the extent that treasury shares are not available for issuance upon option exercise, authorized but unissuedany shares of common stock will be issued upon exercise of options granted under the Plan.
Term of the Plan
The Plan became effective on September 29, 2003. The Plan amendment will then become available for additional option grants.
Unless otherwise determined by the Committee, awards of restricted stock and stock options may be grantedmade to key employees, including approximately 250260 officers, of FedEx and its subsidiaries, as may be designated by the Committee. The Committee shall select persons to receive options among the eligible employees and determine the number of shares underlying the options to be granted. In addition, non-employee directors (11 persons) may receive an annual option grant understock options as set forth in the Plan, for such numberbut are not eligible to receive restricted stock awards.
Provisions Applicable to Restricted Stock Awards
Terms, Conditions and Restrictions. The Committee has authority to establish the terms, conditions, restrictions and other provisions of each restricted stock award. Unless otherwise specified by the Committee, restricted shares as shall be restricted for a period of at least one year
and not more than ten years. Except as otherwise provided in the Plan or determined by the Committee.
Agreements and Stock Legends. A restricted stock award will be evidenced by a written agreement, in such form as may be specified by the Committee, issued by FedEx and setting forth the terms, conditions, restrictions and other provisions of the award. Stock certificates for restricted shares may, if the Committee so determines, bear a legend referring to the restrictions and the instruments to which the shares are subject.
Rights with Respect to Shares. The recipient of a restricted stock award has all rights of ownership with respect to such underlying shares, including the right to vote such shares and to receive any dividends paid thereon, subject, however, to the provisions of the Plan, the agreement relating to the award and any legend on the stock certificate for such shares. Any additional shares of FedEx common stock received incident to the ownership of restricted shares, as a result of a stock dividend, stock split, merger or otherwise, will also be restricted and be subject to the same restrictions and bear the same legend as the original restricted shares.
Transferability Restrictions. During the applicable restriction period, restricted shares may not be sold, pledged, assigned, exchanged, encumbered, hypothecated, transferred or disposed of in any manner.
Lapse of Restrictions. Unless otherwise determined by the Committee, the restrictions applicable to restricted shares terminate with respect to such shares on the earliest to occur of:
provided that, in the event of the recipient's retirement at or after the age of 60 or permanent disability, the restrictions will not terminate prior to six months after the date of award, unless otherwise specified by the Committee. If a recipient retires at or after the age of 55, but before the age of 60, the restrictions will continue until the earlier of the specified expiration of the restriction period, the recipient's permanent disability or the recipient's death.
Tax Reimbursement. At the Committee's discretion, FedEx may make a tax reimbursement cash payment in favor of an award recipient in connection with the tax consequences resulting from the restricted stock award, the lapse of restrictions on the restricted shares or the payment by the recipient of any taxes related thereto, subject to any conditions the Committee may specify.
Provisions Applicable to Stock Options
Exercise Price. The Committee may grant options to purchase FedEx common stock of FedEx for cash at a price that may not be less than the fair market value of the shares, as determined bywhich is equal to the mean betweenaverage of the high and low prices of the common stock on the New York Stock Exchange on the date the option is granted.grant date. The closing price of FedEx’sFedEx's common stock on August 5, 20022, 2004 was $44.90.$82.45.
Repricing Term of Options; Incentive Stock Options. Unless otherwise determined by the Committee, options may not be exercised later than ten years after the grant date. Subject to the limitations imposed by the provisions of the Code, certain of the options granted under the Plan may be designated "incentive stock options."
Written Agreement. Each stock option granted under the Plan will be evidenced by a written agreement, in such form as may be specified by the Committee, issued by FedEx and Discounting Prohibitedsetting forth the terms, conditions and other provisions of the stock option, including the number of shares covered by the stock option, the exercise price per share, the term of the stock option and the vesting schedule. A recipient of a stock option award may not exercise the stock option until he or she executes and delivers such agreement to FedEx.
Transferability Restrictions. A stock option issued under the Plan by its terms will be personal, and may not be sold, pledged, assigned, exchanged, encumbered, hypothecated, transferred or disposed of in any manner other than by will or by the laws of descent and distribution.
Rights After Termination of Employment. Unless otherwise determined by the Committee:
Payment of Exercise Price. Because the options are to be granted as incentives, FedEx will not receive any cash consideration for granting options. Payment in full of the option price in cash must be made upon exercise of any option.
Cancellation of Outstanding Options.The Plan prohibits the repricing ofCommittee may revoke and cancel any outstanding options (including, without limitation, by canceling an outstanding option and replacingwhich, in the aggregate, would create a significant adverse effect on FedEx's financial statements if the Financial Accounting Standards Board subjects such option with aoptions to new option with a lower exercise price) and the granting of discounted options.
The Plan provides thatCommittee may grant to each non-employee director who is elected at or who remains in office immediately following or is elected at, an annual meeting, beginning with the 2003 annual meeting, will be granted, immediately after the conclusion of eachfollowing such meeting, an option to purchase such number of shares of FedEx common stock as shall be determined by the Committee. Each
non-employee director who is first elected or appointed a director after the 2002 annual meeting, other than at an annual meeting willmay be granted upon such election or appointment an option to purchase such number of shares of FedEx common stock as shall be determined by the Committee. Options granted to non-employee directors cannot be exercised earlier than one year from the grant date.
ExercisingRepricing and Discounting Prohibited
The Plan prohibits the repricing of Optionsoutstanding options (including, without limitation, by canceling an outstanding option and Other Termsreplacing such option with a new option with a lower exercise price) and Conditions
Loans Prohibited
FedEx will not be exercised later than ten years afterloan funds to an optionee for the grant date. Subject topurpose of paying the limitations imposed by the provisions of the Code, certain of the options grantedexercise price associated with a stock option issued under the Plan may be designated “incentive stock options.”
Upon the occurrence of a “change in control”"change of control" (as defined in the Plan), each holder: (i) depending on the change of an unexpired option undercontrol event, the Planstock certificates evidencing any restricted shares will have the right to exercise the option in whole or in part without regardeither be canceled and FedEx shall make a cash payment to the date that such option wouldholders in an amount equal to the highest price per share received by the holders of FedEx's common stock in connection with the change of control multiplied by the number of restricted shares held, with any non-cash consideration to be first exercisable. Such right will continue, with respectvalued in good faith by the Committee, or the restrictions applicable to any such shares will immediately lapse; and (ii) all outstanding stock options will become fully vested and immediately exercisable. Any option holder whose employment or directorship terminates following a change inof control may exercise his or her option for a period ending on the earlier of the date of expiration of such option’s expirationoption or the date orthat is twelve months after such termination.
The Board of Directors or the Committee may altersuspend or amendterminate the Plan at any time. No amendment bytime and the Committee however, may (i) increaseamend or modify the total number of shares reservedPlan and amend, cancel or suspend any award made under the Plan (ii) reduceat any time; provided, however, that without the option price to an amount less thanconsent of the fair market value on the grant date or (iii) increase the maximum number of shares underlying options that may be granted to an optionee under the Plan, unless the stockholders approverecipients affected, no such amendment. Nosuspension, termination, cancellation, amendment or alterationmodification may materially impair optionees’the rights of such recipients with respect to optionsawards previously granted, except the Committee may revoke and cancel any outstanding options which,as provided in the aggregate, would create a significant adverse effect on FedEx’s financial statements ifPlan. Certain amendments and modifications as specified in the Financial Accounting Standards Board subjects such optionsPlan, including an amendment to new accounting rules.
Benefits to Named Executive Officers and Others
During fiscal 2004, options to purchase 6,035 shares were granted under the Plan to 26 persons at an exercise price of $67.635 per share. None of the recipients was an executive officer or director of FedEx. There were no restricted stock awards under the Plan during fiscal 2004.
During fiscal 2005 (through August 2, 2004), options to purchase 1,544,900 shares have been granted under the Plan to 314 persons at an exercise price of $72.845 per share. None of the recipients was an executive officer or director of FedEx. Through August 2, 2004, restricted stock awards for 211,979 shares have been granted under the Plan to 122 persons. These grants included 6,145 shares of restricted stock to each of Messrs. Glenn, Graf and Masterson and
7,901 shares of restricted stock to Mr. Bronczek, for a total of 26,336 shares of restricted stock to the named executive officers. A total of 44,332 shares of restricted stock were granted to all executive officers as a group and a total of 167,647 shares of restricted stock were granted to all employees as a group who are not executive officers. There were no grants to non-employee directors,directors. The closing price on the date of grant was $79.93. During the remainder of fiscal 2005, the Committee, in its discretion, may grant additional awards to eligible participants under the Plan.
New Plan Benefits
Any future awards granted to eligible participants under the Plan are subject to the discretion of the Committee and, therefore, are not determinable at this time.
In order to foster and promote achievement of the material purposes of the Plan in foreign jurisdictions and to fairly accommodate for differences in local law, tax policy or custom, the Committee may modify the terms of the Plan or provide additional terms. These modifications or additional terms may be reflected in sub-plans, supplements or alternative versions of the Plan.
Federal Income Tax Consequences
The following is a brief description of the material United States federal income tax law, neitherconsequences associated with awards under the Plan. It is based on existing United Sates laws and regulations, and there can be no assurance that those laws and regulations will not change in the future. Tax consequences in other countries may vary.
Restricted Stock. Restricted stock is not taxable to a recipient at the time of grant, but instead is included in ordinary income (at its then fair market value) when the restrictions lapse. A recipient may elect, however, to recognize income at the time of grant, in which case the fair market value of the restricted shares at the time of grant is included in ordinary income and there is no further income recognition when the restrictions lapse. FedEx is entitled to a tax deduction in an amount equal to the ordinary income recognized by the recipient.
A recipient's tax basis for restricted shares will be equal to the amount of ordinary income recognized by the recipient. The recipient will recognize capital gain (or loss) on a sale of the restricted stock if the sale price exceeds (or is lower than) such basis. The holding period for restricted shares for purposes of characterizing gain or loss on the sale of any shares as long- or short-term commences at the time the recipient recognizes ordinary income pursuant to an award.
Stock Options. Neither incentive stock option grants nor non-qualified stock option grants cause any tax consequences to the optionee or FedEx. Upon the exercise of a non-qualified stock option, the excess of the market value of the shares acquired over their costexercise price is compensationordinary income to the optionee and is generally deductible by FedEx. The optionee’soptionee's tax basis for the shares is the market value thereof at the time of exercise. Any gain or loss realized upon a subsequent disposition of the stock will generally constitute capital gain.
Upon the exercise of an incentive stock option, the optionee will not realize taxable income, but the excess of the fair market value of the stock over the exercise price may give rise to alternative minimum tax. When the stock acquired upon exercise of an incentive stock option is subsequently sold, the optionee will recognize income equal to the difference between the sales price and the exercise price of the option. If the sale occurs after the expiration of two years from the grant date and
occurs prior to that time, the optionee will recognize ordinary income to the extent of the lesser of the gain realized upon the sale or the difference between the fair market value of the acquired stock at the time of exercise and the exercise price; any additional gain will constitute capital gain. FedEx will be entitled to a deduction in an amount equal to the ordinary income recognized by the optionee. If the optionee exercises an incentive stock option more than three months after his or her termination of employment due to retirement or more than twelve months after his or her termination of employment due to permanent disability, he or she is deemed to have exercised a non-qualified stock option.
Compensation realized by optionees on the exercise of non-qualified stock options or the disposition of shares acquired upon exercise of any incentive stock options will be considered performance-based compensation under the Code and not subject to the $1,000,000 deductibility limit of Section 162(m) of the Code.
The affirmative vote of a majority of the shares present at the meeting in person or by proxy and entitled to vote is required to approve the proposed amendment to the Plan.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR”"FOR" THIS PROPOSAL.
Stockholders approved FedEx’s 1983, 1984,FedEx's 1987, 1989, 1993, 1995, 1997, 1999 and 19972002 Stock Incentive Plans, as amended, and the 1999Incentive Stock Incentive Plan. Although options are still outstanding under the 1983, 1984, 1987, 1989 and 19891993 plans, as amended, no shares are available under these plans for future grants. Stockholders also approved FedEx’sFedEx's 1995 Restricted Stock Plan.
FedEx's 1997 and 2001 Restricted Stock Plans, as amended, were approved by the Board of Directors, but were not approved by the stockholders. Under the terms of these plans, key employees may receive restricted shares of common stock as determined by the Compensation Committee. Only treasury shares may be issued under these plans. Restrictions on the shares typically expire over four years from the award date. Holders of restricted shares are entitled to vote the shares and to receive any dividends declaredpaid on the shares.
In connection with its acquisition of Caliber System, Inc. in January 1998, FedEx assumed Caliber's deferred compensation plan. This plan was approved by Caliber's board of directors, but not by Caliber's or FedEx's stockholders. Following FedEx's acquisition of Caliber, Caliber stock units under the plan were converted to FedEx common stock equivalent units. In addition, the employer's 50% matching contribution on compensation deferred under the plan was made in FedEx common stock equivalent units. Subject to the provisions of the plan, distributions to participants with respect to their stock units are payable in shares of FedEx common stock on a one-for-one basis. Effective January 1, 2003, no further deferrals or employer matching contributions will be made under the plan. Participants may continue to acquire FedEx common stock equivalent units under the plan, however, pursuant to dividend equivalent rights.
The following table sets forth certain information as of May 31, 20022004 with respect to compensation plans under which shares of FedEx common stock may be issued. The table does not include anythe additional shares of common stock that may be issued under the 2002FedEx's Incentive Stock Incentive Plan if the proposed Plan amendment is approved by the stockholders at the annual meeting.
Equity Compensation Plan Information
| Plan Category | Number of Shares to be Issued Upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights | Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in the First Column) | | ||||||
|---|---|---|---|---|---|---|---|---|---|---|
Equity compensation plans approved by stockholders | 16,985,692 | (1) | $ | 46.92 | 4,643,540 | (2) | ||||
Equity compensation plans not approved by stockholders | 15,382 | (3) | N/A | 244,453 | (4) | |||||
| Total: | 17,001,074 | $ | 46.92 | 4,887,993 | ||||||
FedEx cannot make any additional awards under these assumed plans, but additional FedEx common stock equivalent units may be issued to current participants under the assumed stock credit plans pursuant to dividend equivalent rights.
Plan Category | Number of Shares to be Issued Upon Exercise of Outstanding Options | Weighted-Average Exercise Price of Outstanding Options | Number of Shares Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Shares Reflected in the First Column) | ||||||
| Equity compensation plans approved by stockholders | 16,426,807 | (1) | $ | 35.04 | 3,499,033 | (2) | |||
| Equity compensation plans not approved by stockholders | N/A | N/A | 843,438 | (3) | |||||
| Total | 16,426,807 | $ | 35.04 | 4,342,471 | |||||
The Audit Committee operates pursuant to a written charter, which has been approved and adopted byassists the Board of Directors and is reviewed and reassessed annually by the Audit Committee. During the fiscal year ended May 31, 2002 and asin its oversight of the date of the adoption of this report, the Audit Committee was comprised of four directors who met the independence and experience requirements of the New York Stock Exchange.
Management has the primary responsibility for the financial statements and the financial reporting process, including the systems of internal controls. In fulfilling its oversight responsibilities, the Audit Committee reviewed and discussed with management the audited financial statements for the fiscal year ended May 31, 2002,2004, including a discussion of the acceptability and quality of the accounting principles, the reasonableness of significant accounting judgments and critical accounting policies and estimates, and the clarity of disclosures in the financial statements. The Audit Committee also discussed with the Chief Executive Officer and Chief Financial Officer of FedEx their respective certifications with respect to FedEx’sFedEx's Annual Report on Form 10-K for the fiscal year ended May 31, 2002.
The Audit Committee reviewed and discussed with the independent auditors, who areregistered public accounting firm, which is responsible for expressing an opinion on the conformity of those audited financial statements with generally accepted accounting principles, their judgments as to the acceptability and quality of FedEx’sFedEx's accounting principles and such other matters as are required to be discussed with the Audit Committee under generally accepted auditing standards, including those matters required to be discussed by Statement on Auditing Standards No. 61 Communication(Communication with Audit Committees.Committees). In addition, the Audit Committee has received the written disclosures and the letter from the independent auditorsregistered public accounting firm required by Independence Standards Board Standard No. 1 Independence(Independence Discussions with Audit Committees,Committees), and has discussed those disclosures and other matters relating to independence with the auditors.
The Audit Committee discussed with FedEx’sFedEx's internal auditor and independent auditorsregistered public accounting firm the overall scope and plans for their respective audits. The Audit Committee meets with the internal auditor and the independent auditors,registered public accounting firm, with and without management present, to discuss the results of their examinations, their evaluations of FedEx’sFedEx's internal controls and the overall quality of FedEx’sFedEx's financial reporting.
In reliance on the reviews and discussions with management and with the independent auditors referred to above, and the receipt of an unqualified opinion from Ernst & Young LLP dated June 24, 200222, 2004 regarding the audited financial statements of FedEx for the fiscal year ended May 31, 2002,2004, the Audit Committee recommended to the Board of Directors, (andand the Board approved)approved, that the audited financial statements be included in the Annual Report on Form 10-K for the fiscal year ended May 31, 20022004, for filing with the Securities and Exchange Commission.
Audit Committee Members
The foregoing Report on Executive Compensation of the Compensation Committee of the Board of Directors, Stock Performance Graph and Report of the Audit Committee of the Board of Directors shall not be deemed to be soliciting material or to be incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933 or under the Securities Exchange Act of 1934, except to the extent FedEx specifically incorporates this information by reference, and shall not otherwise be deemed to be filed with the Securities and Exchange Commission under such Acts.
The following table sets forth fees for services Ernst & Young LLP billedprovided to FedEx the followingduring fiscal 2004 and 2003:
| | 2004 | 2003 | |||||
|---|---|---|---|---|---|---|---|
| Audit fees | $ | 7,330,000 | $ | 5,917,000 | |||
| Audit-related fees | 369,000 | 398,000 | |||||
| Tax fees | 1,965,000 | 1,967,000 | |||||
| All other fees | 20,000 | 20,000 | |||||
| Total | $ | 9,684,000 | $ | 8,302,000 | |||
| Audit Fees | $ | 3,600,000 | |
| Financial Information Systems Design and Implementation Fees | 0 | ||
| All Other Fees | 1,600,000 | ||
| Total Fees | $ | 5,200,000 | |
FedEx's Audit Committee has determined that the provision of non-audit services by Ernst & Young is compatible with maintaining Ernst & Young’sYoung's independence.
PROPOSAL 3 —4 – RATIFICATION OF THE APPOINTMENT OF
THE INDEPENDENT AUDITORSREGISTERED PUBLIC ACCOUNTING FIRM
Appointment of AuditorsIndependent Registered Public Accounting Firm
Ernst & Young LLP audited FedEx’sFedEx's annual financial statements for the fiscal year ended May 31, 2002. Upon the recommendation of the2004. The Audit Committee the Board of Directors has appointed Ernst & Young to be FedEx’sFedEx's independent auditorsregistered public accounting firm for the fiscal year ending May 31, 2003.2005. The stockholders are asked to ratify this appointment at the annual meeting. Representatives of Ernst & Young will be present at the meeting to respond to appropriate questions and to make a statement if they so desire.
ChangePolicies Regarding Independent Auditor
The Audit Committee is directly responsible for the appointment, compensation and oversight of Auditors During Fiscal Yearthe independent registered public accounting firm. To help ensure the independence of the independent registered public accounting firm, the Audit Committee has adopted two policies: the Policy on Engagement of Independent Auditor and the Policy on Hiring Certain Employees and Partners of the Independent Auditor. The Policy on Engagement of Independent Auditor is available on FedEx's Web site at
Pursuant to the Policy on Engagement of Independent Auditor, the Audit Committee preapproves all audit services and non-audit services to be provided to FedEx determined, for itselfby its independent registered public accounting firm. The Audit Committee may delegate to one or more of its members the authority to grant the required approvals, provided that any exercise of such authority is presented at the next Audit Committee meeting.
Each audit or non-audit service that is approved by the Audit Committee (excluding tax services performed in the ordinary course of FedEx's business) will be reflected in a written engagement letter or writing specifying the services to be performed and the cost of such services, which will be signed by either a member of the Audit Committee or by an officer of FedEx authorized by the Audit Committee to sign on behalf of its subsidiary Federal Express Corporation (“FedEx.
The Audit Committee will not approve any prohibited non-audit service or any non-audit service that individually or in the aggregate may impair, in the Audit Committee's opinion, the independence of the independent registered public accounting firm.
In addition, FedEx's independent registered public accounting firm may not provide any services to FedEx Express”),officers or Audit Committee members, including financial counseling and tax services.
Pursuant to dismiss itsthe Policy on Hiring Certain Employees and Partners of the Independent Auditor, FedEx will not hire a person who is concurrently a partner or other professional employee of the independent auditors, Arthur Andersen LLP,registered public accounting firm or, in certain cases, an immediate family member of such a person. Additionally, FedEx will not hire a former partner or professional employee of the independent registered public accounting firm in an accounting role or a financial reporting oversight role if he or she remains in a position to influence the independent registered public accounting firm's operations or policies, has capital balances in the independent registered public accounting firm or maintains certain other financial arrangements with the independent registered public accounting firm. FedEx will not hire a former member of the independent registered public accounting firm's audit engagement team (with certain exceptions) in a financial reporting oversight role without waiting for a required "cooling-off" period to elapse.
The FedEx Executive Vice President and Chief Financial Officer will approve any hire who was employed during the preceding three years by the independent registered public accounting firm, and will annually report all such hires to engage the services of Ernst & Young as its new independent auditors. The change in auditors became effective on April 12, 2002 following the completion by Arthur Andersen of its review report on the financial statements of FedEx and FedEx Express for the fiscal quarter ended February 28, 2002. This determination followed FedEx’s decision to seek proposals from independent accountants to audit the financial statements of FedEx and FedEx Express, and was approved by FedEx’s Board of Directors upon the recommendation of its Audit Committee.
The Audit Committee was responsible for recommending to the Board of Directors, and the Board of Directors wasis responsible for selecting FedEx’sFedEx's independent auditors for fiscal year 2003.registered public accounting firm. Accordingly, stockholder approval is not required to appoint Ernst & Young as FedEx’sFedEx's independent auditorsregistered public accounting firm for fiscal year 2003.2005. The Board of Directors believes, however, that submitting the appointment of Ernst & Young to the stockholders for ratification is a matter of good corporate governance. As a result of recent legislation, the Audit Committee now will be solely responsible for selecting FedEx’s independent auditors. If the stockholders do not ratify the appointment, the Audit Committee will review its future selection of the independent auditors.
The ratification of the appointment of Ernst & Young as FedEx’sFedEx's independent auditorsregistered public accounting firm requires the affirmative vote of a majority of the shares present at the meeting in person or by proxy and entitled to vote.
YOUR BOARD OF DIRECTORS RECOMMENDS THAT YOU VOTE “FOR”"FOR" THIS PROPOSAL.
We know of no other business that will be presented at the meeting. If any other matter properly comes before the stockholders for a vote at the meeting, however, the proxy holders will vote your shares in accordance with their best judgment.
FedEx will bear the entire costall costs of this proxy solicitation. In addition to soliciting proxies by this mailing, we expect that our directors, officers and regularly engaged employees may solicit proxies personally or by mail, telephone, facsimile or other electronic means, for which solicitation they will not receive any additional compensation. FedEx will reimburse brokerage firms, custodians, fiduciaries and other nominees for their out-of-pocket expenses in forwarding solicitation materials to beneficial owners upon our request. FedEx has retained Morrow & Co., Inc. to assist in the solicitation of proxies for a fee of up to $25,000, which includes reimbursement of expenses.
Householding
We have adopted a procedure approved by the Securities and Exchange Commission called "householding." Under this procedure, stockholders of record who have the same address and last name and do not participate in electronic delivery will receive only one copy of this proxy statement and the 2004 Annual Report to Stockholders, unless contrary instructions have been received from one or more of these stockholders. This procedure will reduce our printing costs and postage fees.
Stockholders who participate in householding will continue to receive separate proxy cards. Also, householding will not in any way affect dividend check mailings.
If you are eligible for householding, but you and other stockholders of record with whom you share an address currently receive multiple copies of our annual report or proxy statement, or if you hold stock in more than one account, and in either case you wish to receive only a single copy of
our annual report or proxy statement for your household, please contact our transfer agent, EquiServe Trust Company, N.A. (in writing: P.O. Box 43069, Providence, Rhode Island 02940-3069; by telephone: in the U.S. or Canada, 1-800-446-2617; outside the U.S. or Canada, 1-781-575-2723).
If you participate in householding and wish to receive a separate copy of this proxy statement or the 2004 Annual Report, or if you do not wish to participate in householding and prefer to receive separate copies of future annual reports or proxy statements, please contact EquiServe as indicated above. A separate copy of this proxy statement and the 2004 Annual Report will be delivered promptly upon request.
Beneficial stockholders who are not record holders can request information about householding from their banks, brokers or other holders of record.
Stockholder proposals intended to be presented at FedEx’s 2003FedEx's 2005 annual meeting must be received by FedEx no later than April 21, 200318, 2005 to be eligible for inclusion in FedEx’sFedEx's proxy statement and form of proxy for next year’syear's meeting. Proposals should be addressed to FedEx Corporation, Attention: Corporate Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120.
For any proposal that is not submitted for inclusion in next year’syear's proxy statement (as described in the preceding paragraph), but is instead sought to be presented directly at the 20032005 annual meeting, Securities and Exchange Commission rules will permit managementincluding nominations of director candidates, FedEx's Bylaws require stockholders to vote proxies in its discretion if FedEx does not receivegive advance notice of such proposals. The required notice must be given no more than 120 days and no less than 90 days in advance of the proposal by July 7, 2003. Noticesanniversary date of intentionthe immediately preceding annual meeting. Accordingly, with respect to present proposals at the 2003our 2005 annual meeting shouldof stockholders, our Bylaws require notice to be addressedprovided to FedEx Corporation, Attention: Corporate Secretary, 942 South Shady Grove Road, Memphis, Tennessee 38120.
| By order of the Board of Directors, | ||||
| ||||
| KENNETH R. MASTERSON | ||||
| Secretary | ||||
PROPOSED AMENDMENTS TO FEDEX CORPORATIONCORPORATION'S
SECOND AMENDED AND RESTATED BYLAWS
Article III, Sections 1 and 2 of FedEx's Second Amended and Restated Bylaws are amended to read as follows:
Section 1. Number, Election and Term of Directors. The number of directors which shall constitute the whole board shall be not more than fifteen, with the exact number to be determined from time to time by the board of directors. At each annual meeting of stockholders, all directors shall be elected for a term expiring at the next succeeding annual meeting of stockholders. Each director shall hold office until his or her successor has been duly elected and qualified or until his or her earlier disqualification, death, resignation or removal. No decrease in the number of directors constituting the board of directors shall shorten the term of any incumbent director.
Section 2. Newly Created Directorships and Vacancies. Vacancies and newly created directorships resulting from an increase in the authorized number of directors shall be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual meeting of stockholders and until their successors are duly elected and qualified, unless sooner displaced. If there are no directors in office, then an election of directors may be held in the manner provided by statute. If, at the time of filling any vacancy or any newly created directorship, the directors then in office shall constitute less than a majority of the whole board (as constituted immediately prior to any such increase), the Court of Chancery may, upon application of any stockholder or stockholders holding at least ten percent of the total number of shares at the time outstanding having the right to vote for such directors, summarily order an election to be held to fill any such vacancies or newly created directorships, or to replace the directors chosen by the directors then in office.
Article VIII of FedEx's Second Amended and Restated Bylaws is amended to read as follows:
Subject to the provisions of the certificate of incorporation of the corporation, these bylaws may be altered, amended or repealed, or new bylaws may be adopted, by the stockholders or by the board of directors. Notwithstanding the foregoing and anything contained in these bylaws to the contrary, Sections 1 and 2 of Article III herein shall not be altered, amended or repealed for the purpose of dividing the board of directors into classes with staggered terms and no provision inconsistent therewith shall be adopted for such purpose 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 these bylaws 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 the preceding sentence of this Article VIII.
1. Purpose of Plan
The purpose of the FedEx Corporation 2002Incentive Stock Incentive Plan (the “Plan”"Plan") is to aid FedEx Corporation (the “Corporation”)the Company and its subsidiaries in securing and retaining key employees and directors of outstanding ability and to provide additional motivation to such employees and directorsmotivate them to exert their best efforts on behalfto achieve the long-term goals of the CorporationCompany and its subsidiaries. The Corporation expectsCompany believes that it will benefit from the added interest which such employees and directors will have in the welfare of the Corporation as a result of their ownership or increased ownership of the Corporation’sCompany's Common Stock.
2. Stock Subject toDefinitions
Unless the context clearly indicates otherwise, for purposes of the Plan, the following terms shall have the respective meanings indicated below:
"Award" means an award granted under the Plan, which may be in the form of Restricted Shares or a Stock Option.
"Board of Directors" means the Board of Directors of the Company.
"Code" means the Internal Revenue Code of 1986, as amended. A reference to any provision of the Code shall include reference to any successor provision of the Code.
"Common Stock" means the common stock, par value $0.10 per share, of the Company.
"Company" means FedEx Corporation, a Delaware corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended. A reference to any provision of the Exchange Act or rule promulgated under the Exchange Act shall include reference to any successor provision or rule.
"Incentive Stock Option" means a Stock Option or portion thereof that is intended to be an "incentive stock option" within the meaning of Section 422 of the Code and the regulations promulgated thereunder.
"Non-Management Director" means a member of the Board of Directors who is not an employee of the Company or any of its subsidiaries.
"Non-Qualified Option" means a Stock Option or portion thereof that is not an Incentive Stock Option.
"Participant" means any individual who receives an Award.
"Restricted Shares" means shares of Common Stock granted under the Plan that are subject to certain restrictions as provided inSection 8.
"Restricted Stock Award" means a grant of Restricted Shares under the Plan.
"Stock Option" is a right granted under the Plan to purchase a specified number of shares of Common Stock at a specified price. A Stock Option may be an Incentive Stock Option or a Non-Qualified Option.
3. Term of the Corporation that mayPlan
The Plan shall be optionedeffective as of the date on which it is approved by the Company's stockholders. Unless the Plan is earlier terminated in accordance with the provisions hereof, no Award shall be granted under the Plan is 4,400,000 shares, whichafter May 31, 2013, but outstanding Stock Options and restrictions on Restricted Shares may consist, in whole or in part,extend beyond such date.
4. Administration of unissued shares or treasury shares. Any shares optioned hereunder that are canceled or cease to be subject to the option may again be optioned under the Plan.
3. Administration
(b) Authority of the Committee.
(1) Subject to the provisions of the Plan, the Committee shall be eligible for participation in any granthave sole and complete authority and discretion to: (i) select Participants and make Awards; (ii) determine the types of options to directors hereunder.
(2) The Committee shall have the sole and complete authority to grant options under the Plan and consistent with the Plan, to determine the provisions of the options to be granted,discretion to interpret the Plan and the options granted under the Plan,all agreements and other documents and instruments relating to Awards, to adopt, amend and rescind rules and regulations for the administration of the Plan and generally to administer the Plan and to make allsuch other determinations in connection therewith which may beand take such other actions that it deems necessary or advisable and all such actionsfor the effective administration of the Plan.
(3) All decisions of the Committee relating to the Plan or any Award shall be final, conclusive and binding uponon all participants.persons. Committee decisions and selections shall be made by a majority of its members present at theany meeting at which a quorum is present, and shall be final.present. Any decision or selection reduced to writing and signed by all of the members of the Committee shall be as fully effective as if it had been made at a meeting duly held.
(c) Limitation of Liability. Neither the Board of Directors nor the Committee, nor any member of either, shall be liable for any act, omission, interpretation, construction or determination made in good faith in connection with the Plan or any Award.
5. Types of Awards
The Committee may grant Stock Options and Restricted Shares under and subject to the provisions of the Plan.
6. Stock Subject to the Plan
(a) Restricted Shares. The maximum number of shares of Common Stock available to be issued under the Plan pursuant to Restricted Stock Awards is 500,000 shares (subject to adjustment as provided inSection 14).
(b) Stock Options. The maximum number of shares of Common Stock that may be optioned and sold under the Plan pursuant to Stock Options is 5,000,000 shares (subject to adjustment as provided inSection 14).
4. (c) Restoration of Shares. To the extent any shares of Common Stock covered by an Award are forfeited, not issued or cease to be issuable for any reason, including, without limitation, because the Award is terminated, canceled or expires unexercised, then the shares of Common Stock subject to such Award may again be used for further Awards under the Plan.
(d) Source of Stock. Shares of Common Stock issued under the Plan may consist, in whole or in part, of authorized but unissued shares or treasury shares. No fractional shares of Common Stock shall be issued under the Plan.
7. Eligibility and Participation in the Plan
(a) Eligible Recipients. Unless otherwise determined by the Committee, (a)
(1) key employees, including officers, of the CorporationCompany and its subsidiaries who are from time to time responsible for the management, growth and protection of the business of the CorporationCompany and its subsidiaries and (b) non-employee directors are eligible to be granted options underreceive Restricted Shares and Stock Options; and
(2) Non-Management Directors are eligible to receive Stock Options, but not Restricted Shares.
(b) Grant of Awards. The Committee shall, in its sole and complete discretion and subject to the Plan. The employees who shall receive options underprovisions of the Plan, shall be selected(1) select from time to time by the Committee in its sole discretion,employees, from among those eligible, who shall receive Awards, (2) determine the type of Award to be granted and (3) determine and establish the Committee shall determine, in its sole discretion,terms, provisions, conditions and restrictions of each Award, including the number of shares to be covered by the option or options granted to each such employee selected,of Common Stock subject to the maximum numberAward. Subject to the provisions of stock options whichthe Plan, Awards may be granted singly or in combination with other Awards or in combination with, in replacement of, as alternatives to an optioneeor as the payment form for grants or rights under any other compensation plan, contract or agreement of the Plan. Non-employee directors shall receive options under the PlanCompany or any subsidiary. Non-Management Directors may be granted Stock Options as provided in paragraph 7.
5. Limit (c) No Right to Receive Award. No employee or Non-Management Director shall have any right to receive an Award or, having received an Award, to receive a future Award.
(d) Rights of Employees and Others.
(1) Neither the Plan nor any Award shall (i) confer upon any employee or Non-Management Director any right to remain employed by, or to continue to provide services to, the Company or any subsidiary, (ii) limit in any way the right of the Company or any subsidiary to terminate any individual's employment by or service on behalf of the Company or any subsidiary, whether or not such individual is a Participant, or (iii) require the Board of Directors to nominate any director for reelection by the Company's stockholders.
(2) No person shall have any rights or claims under or pursuant to the Plan except in accordance with the provisions of the Plan.
8. Provisions Applicable to Restricted Stock Awards
(a) Terms, Conditions and Restrictions. The Committee shall establish the terms, conditions, restrictions and other provisions of each Restricted Stock Award. Unless otherwise specified by the Committee, shares subject to a Restricted Stock Award shall be restricted for a period of at least one year and not more than ten years (the "Restriction Period"). Except as provided inSection 8(g) below, the Participant must remain employed by the Company or a subsidiary during the Restriction Period or otherwise forfeit all right, title and interest in and to the Restricted Shares. Notwithstanding the foregoing, if a Participant retires at or after the age of 55, but before the age of 60, the Restriction Period shall continue after the Participant's retirement in accordance with the terms of
the Restricted Stock Award or until the earlier to occur of the events described inSections 8(g)(3) and(4) below.
(b) Agreements; Stock Legend. Each Restricted Stock Award will be evidenced by a written agreement, in such form as may be specified by the Committee, issued by the Company and setting forth the terms, conditions, restrictions and other provisions of such Award. As a condition to receiving a Restricted Stock Award, each proposed recipient must execute and deliver such agreement to the Company. Certificates for Restricted Shares may, if the Committee so determines, bear a legend referring to the restrictions and the instruments to which such shares are subject.
(c) Rights with Respect to Shares. A Participant who receives a Restricted Stock Award shall have all rights of ownership with respect to such underlying shares of Common Stock, including the right to vote such shares and to receive any dividends paid thereon, subject, however, to the provisions of the Plan, the agreement relating to the Restricted Stock Award and any legend on the certificate for such shares. Until such time as any restrictions imposed pursuant toSection 8(a) on any Restricted Shares shall terminate, the Company or its designee will hold the certificate(s) for such Restricted Shares in escrow on such Participant's behalf.
(d) Transferability Restriction. Shares of Common Stock subject to a Restricted Stock Award may not be sold, pledged, assigned, exchanged, encumbered, hypothecated, transferred or disposed of in any manner during the Restriction Period applicable thereto.
(e) Additional Shares Received With Respect to Restricted Shares. Any shares of Common Stock or other securities of the Company received by a Participant as a stock dividend on, or in connection with a stock split or combination, share exchange, reorganization, recapitalization, merger, consolidation or otherwise with respect to, shares of Common Stock received as a Restricted Stock Award shall have the same status, be subject to the same restrictions and bear the same legend, if any, as the shares received pursuant to the Restricted Stock Award.
(f) Tax Reimbursement. In the sole discretion of the Committee, any agreement relating to a Restricted Stock Award may provide for a tax reimbursement cash payment to be made by the Company in favor of any Participant in connection with the tax consequences resulting from a Restricted Stock Award, the lapse of restrictions on any Restricted Shares or the payment by a Participant of any taxes related thereto, subject to such conditions as the Committee may specify.
(g) Lapse of Restrictions. Unless otherwise determined by the Committee, any restrictions imposed pursuant toSection 8(a) on Restricted Shares shall terminate with respect to such shares on the earliest to occur of the following,provided, that no option mayrestrictions shall lapse less than six months from the date of award in the event of (2) and (3) below, unless otherwise specified by the Committee:
(1) the expiration of the Restriction Period (including pursuant toSection 15(b)(1) below);
(2) the Participant's retirement at or after the age of 60;
(3) the Participant's permanent disability; or
(4) the Participant's death.
Upon the termination of such restrictions, the certificates for such shares of Common Stock shall be granted underreleased from escrow and delivered to the Plan after May 31, 2012, but options theretofore granted may extend beyond that date.Participant or, in the event of the Participant's death, the Participant's personal representative and any legend on such certificates shall be removed.
9. Provisions Applicable to Stock Options
6. (b) Agreements. Each Stock Option will be evidenced by a written agreement, in such form as may be specified by the Committee, issued by the Company and setting forth the terms, conditions and other provisions of the Stock Option, including the number of shares of Common Stock covered by the Stock Option, the exercise price per share, the term of the Stock Option and the vesting schedule. A Participant may not exercise a Stock Option until he or she executes and delivers such agreement to the Company.
(c) Terms and Conditions of. All Stock Options
(a) (1) Option Price. The optionexercise price per share shall be determined by the Committee, but shall not be less than 100% of the fair market value atFair Market Value of the timeCommon Stock on the option is granted.date of grant. The fair market value"Fair Market Value" of the Common Stock on a particular date shall mean, for all purposes ofunder the Plan, be the mean betweenaverage of the high and low sales prices at which shares of such stock are tradedthe Common Stock as reported on the New York Stock Exchange composite tape on the day on which the option is granted.that date. In the event that thesuch method for determining the fair market value of the shares provided for in this paragraph (a) shallFair Market Value is not be practicable, then the fair market value per share shall be determined by such other reasonable method as the Committee shall in its discretion, select and apply atdetermine the time of grantFair Market Value of the option concerned.Common Stock in such manner as it deems appropriate.
(b) (2) Time of Exercise of Option. Unless otherwise determined by the Committee, each optionStock Option shall be exercisable during and over such period ending not later than ten years from the date it was granted, as may be determined by the Committee and stated in the option.
(3) Method of the Plan.
(d) (4) Rights After Termination of Employment.
(i) Retirement. Unless otherwise determined by the Committee, if an optionee’sa Participant's employment by the Corporation or a subsidiary or directorship terminates by reason of such person’shis or her retirement, at or after the age of 55, the optionee’s optionParticipant's Stock Option will continue to vest in accordance with its terms and may be exercised until the expiration of the stated period of the option;Stock Option;provided,however, that if the optioneeParticipant dies after such termination of employment or directorship, any unexercised option,Stock Option, to the extent to which it was exercisable at the time of the optionee’sParticipant's death, may thereafter be exercised by the legal representative of the estate or by the legatee of the optionStock Option under the last will for a period of twelve months from the date of the optionee’sParticipant's death or the expiration of the stated period of the option,Stock Option, whichever period is the shorter.
(ii) Disability. Unless otherwise determined by the Committee, if an optionee’sa Participant's employment by the Corporation or a subsidiary or directorship terminates by reason of permanent disability, the optionee’s optionParticipant's Stock Option may thereafter be exercised in full (except that no optionStock Option may be exercised less than six months from the date of grant) but may not be exercised after the expiration of thegrant date) for a period of twenty-four months from the date of such
termination of employment or directorship or of the stated period of the option,Stock Option, whichever period is the shorter;provided,however, that if the optioneeParticipant dies within a period of twenty-four months after such termination of employment or directorship, any unexercised optionoutstanding Stock Option may thereafter be exercised by the legal representative of the estate or by the legatee of the optionStock Option under the last will for a period of twelve months from the date of the optionee’sParticipant's death or the expiration of the stated period of the option,Stock Option, whichever period is the shorter.
(iv) Other. Unless otherwise determined by the Committee, if an optionee’sa Participant's employment or if a director’s directorship terminates for any reason other than death, retirement at or after the age of 55 or permanent disability, the optionee’s optionParticipant's Stock Option shall thereupon terminate.
7. (d) Grant of Stock Options to Non-Management Directors. Non-Management Directors shall not be eligible to receive any Awards other than Stock Options as specified in thisSection 9(d).
(1) Discretionary Awards.The Committee may grant of options hereundera Non-Qualified Option to directors who are not also employees of the Corporation or one of its subsidiaries shall be subject to the following terms and conditions:
(2) Terms and Conditions of Stock Options. The Committee shall thereupon be granted a non-incentive stock option to purchase such numberestablish the terms and conditions of shares of the Common Stock of the Corporation as shall be determined by the Committee.
(e) Designation of Certain Options as Incentive Stock Options. Stock Options, or portions thereof, granted to employees may in the discretion of the Committee be designated as Incentive Stock Options. In addition to the other applicable terms and conditions contained in this paragraph 7 shall constituteSection 9, the only grants underaggregate Fair Market Value of the shares of Common Stock covered by an Incentive Stock Option (determined at the time the Stock Option is granted) with respect to which an Incentive Stock Option is exercisable for the first time by any individual Participant during any calendar year (under the Plan permitted to be made to directors who are not also employeesand all other similar plans of the Corporation or oneCompany and its subsidiaries) shall not exceed $100,000 (or such other amount as may be specified by Section 422(d) of its subsidiaries.
8. (f) Transferability Restriction
9. Designation of Certain (g) Repricing Prohibited. Neither the Committee nor the Company shall "reprice" outstanding Stock Options as Incentive Stock Options
(h) Use of Proceeds. Proceeds received by the Company pursuant to the exercise of Stock Options shall constitute general funds of the Corporation and its subsidiaries) shall not exceed $100,000.
Notwithstanding any distributionother provision of the Plan or any agreement relating to a particular Award, the Company shall have no obligation to issue any shares of Common Stock under the Plan unless such issuance would comply with all applicable laws and the applicable requirements of any securities exchange or similar entity. Prior to the Corporation pursuant toissuance of any provisionshares of thisCommon Stock under the Plan, the distributeeCompany may be required to represent in writingrequire a written statement that he or shethe Participant is acquiring such shares for his or her own account for investment and not with a view to,for the purpose or for sale in connection with the distributionintention of distributing the shares or any part thereof. The certificates forrepresenting shares of Common Stock issued under the Plan may bear such shares may include any legend whichor legends as the CorporationCommittee deems appropriate in order to assure compliance with applicable securities laws and regulations and to reflect any restrictions on transfers.
11. Transfer, Leave of Absence, Etc.
For the purposepurposes of the Plan:Plan, (a) a transfer of an employee from the CorporationCompany to a subsidiary, or vice versa, or from one subsidiary to another, and (b) a leave of absence, duly authorized in writing by the Corporation,Company or a subsidiary, shall not be deemed a termination of employment.
12. Rights of Employees and OthersTax Withholding
All distributions under the Plan except(including, without limitation, the grant of Awards and the issuance of Common Stock pursuant to an Award) are subject to withholding of all applicable taxes, and the Committee may condition the delivery of any Award or the issuance of any Common Stock pursuant to an Award on the satisfaction of applicable withholding obligations (including, without limitation, by requiring a Participant to relinquish a portion of any proceeds received by the Participant in accordanceconnection with the provisionssale of shares acquired upon exercise of a Stock Option).
13. Prohibition on Loans
The Company shall not loan funds to any Participant for the Plan.
13.14. Changes in Capital or ControlCapitalization
If the outstanding Common Stock of the Corporation subject to the Plan shall at any time be changed or exchanged by declarationas a result of a stock dividend, stock split, share combination, of shares,exchange or reclassification, recapitalization, merger, consolidation or other corporate reorganization affecting the Common Stock, (a) the number and kind of shares that have been issued and that may thereafter be issued under the Plan, (b) the number and kind of shares underlying Restricted Stock Awards still subject to a Restriction Period, (c) the exercise prices and the number and kind of shares subject to this Plan outstanding Stock Options
and (d) such other terms of Awards as the option pricesCommittee deems appropriate, shall be approximately and equitably adjusted soby the Committee in its sole and complete discretion.
15. Change of Control
(a) Definition. For purposes of the Plan, the term "Change of Control" means the occurrence of any of the following events following the effective date of the Plan:
(1) Any "person" (as such term is used in Sections 13(d) and 14 of the Exchange Act), other than (i) the Company, (ii) any subsidiary of the Company, (iii) any employee benefit plan (or a trust forming a part thereof) maintained by the Company or any subsidiary of the Company, (iv) any underwriter temporarily holding securities of the Company pursuant to an offering of such securities or (v) any person in connection with a transaction described in clauses (i), (ii) and (iii) ofSection 15(a)(2) below, becomes the "beneficial owner" (within the meaning of Rule 13d-3 under the Exchange Act) of securities of the Company representing 30% or more of the total voting power of the Company's then outstanding voting securities, unless such securities (or, if applicable, securities that are being converted into voting securities) are acquired directly from the Company in a transaction approved by a majority of the Incumbent Board (as defined below).
(2) The consummation of a merger, consolidation or reorganization with or into the Company or in which securities of the Company are issued, or the sale or other disposition, in one transaction or a series of transactions, of all or substantially all of the assets of the Company (a "Corporate Transaction"), unless:
(i) the stockholders of the Company immediately before such Corporate Transaction will own, directly or indirectly, immediately following such Corporate Transaction, at least 60% of the total voting power of the outstanding voting securities of the corporation or other entity resulting from such Corporate Transaction (including a corporation or other entity that acquires all or substantially all of the Company's assets, the "Surviving Company") or the ultimate parent company thereof in substantially the same proportion as their ownership of the voting securities of the Company immediately before such Corporate Transaction;
(ii) the individuals who were members of the Board of Directors immediately prior to the execution of the agreement providing for such Corporate Transaction constitute a majority of the members of the board of directors or equivalent governing body of the Surviving Company or the ultimate parent company thereof; and
(iii) no person, other than (A) the Company, (B) any subsidiary of the Company, (C) any employee benefit plan (or a trust forming a part thereof) maintained by the Company or any subsidiary of the Company, (D) the Surviving Company, (E) any subsidiary or parent company of the Surviving Company, or (F) any person who, immediately prior to such Corporate Transaction, was the beneficial owner of securities of the Company representing 30% or more of the total voting power of the Company's then outstanding voting securities, is the beneficial owner of 30% or more of the total voting power of the then outstanding voting securities of the Surviving Company or the ultimate parent company thereof.
(3) The stockholders of the Company approve a complete liquidation or dissolution of the Company.
(4) Directors who, as of the effective date of the Plan, constitute the Board of Directors (the "Incumbent Board"), cease to constitute at least a majority of the Board of Directors (or, in the event of any merger, consolidation or reorganization the principal purpose of which is to change the Company's state of incorporation, form a holding company or effect a similar reorganization as to maintainform, the option price thereof.board of directors of such surviving company or its ultimate parent company);provided,however, that any individual becoming a member of the Board of Directors subsequent to the
effective date of the Plan whose election, or nomination for election by the Company's stockholders, was approved by a vote of a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of either an actual or threatened proxy contest relating to the election of directors.
Notwithstanding the foregoing, a Change of Control will not be deemed to occur solely because any person (a "Subject Person") becomes the beneficial owner of more than the permitted amount of the outstanding voting securities of the Company as a result of the acquisition of voting securities by the Company which, by reducing the number of voting securities outstanding, increases the proportional number of voting securities beneficially owned by the Subject Person,provided, that if a Change of Control would occur (but for the operation of this sentence) as a result of the acquisition of voting securities by the Company, and after such acquisition by the Company, the Subject Person becomes the beneficial owner of any additional voting securities that increases the percentage of the then outstanding voting securities beneficially owned by the Subject Person to 30% or more of the total voting power, then a Change of Control will have occurred.
(b) Effect of Change of Control. Notwithstanding any other provision of the Plan, upon a Change of Control:
(1) Restricted Shares. In the occurrenceevent of a Change inof Control as hereinafter defined, each holder ofdescribed inSection 15(a)(2), as shall be determined by the Committee: (i) the stock certificates evidencing any Restricted Shares shall be canceled and the Company shall make a cash payment to those Participants in an unexpired option under the Plan shall have the right to exercise such option in whole or in part without regardamount equal to the date thathighest price per share received by the holders of Common Stock in connection with such option wouldChange of Control multiplied by the number of Restricted Shares then held by such Participant, with any non-cash consideration to be first exercisable, and such right shall continue,valued in good faith by the Committee; or (ii) the Restriction Periods with respect to all outstanding Restricted Shares shall immediately lapse. In the event of a Change of Control as described inSection 15(a)(1),(3) or(4), the Restriction Periods with respect to all outstanding Restricted Shares shall immediately lapse.
(2) Stock Options. In the event of a Change of Control, all outstanding Stock Options shall become fully vested and immediately exercisable. Notwithstanding any such holderother provision of the Plan, any Participant whose employment with the Corporation or subsidiary or whose directorship on the Board of Directors terminates following a Change of Control may exercise his or her Stock Option in Control,full for a period ending on the earlier of the date of expiration of such optionStock Option or the date which is twelve months after such termination of employment or directorship.
(c) Deemed Change of Control. If the Plan, a “Change in Control” of the Corporation shall be deemed to have occurred if:
14. Use of Proceeds
The Board of Directors or the Committee may discontinuesuspend or terminate the Plan at any time and the Committee may amend or modify the Plan and amend, modify, cancel or suspend any Award at any time and from time to time, but no amendment, alteration or discontinuation shall be made which,time;provided,however, that without the approvalconsent of the stockholders, would:
Section 17 below. Notwithstanding the foregoing, without the requisite vote of the Plan,Company's stockholders, no such amendment or modification may:
(a) increase the total number of shares reserved forof Common Stock issuable under the purposesPlan pursuant toSection 6;
(b) expand the type of Awards available under the Plan;
(c) materially expand the class of persons eligible to receive Awards;
(d) extend the term of the Plan;
(e) materially change the optionmethod of determining the exercise price per share of Stock Options;
(f) "reprice" an option to less than 100% of the fair market value on the date of the granting of the option; or
(g) increase the maximum number of options whichshares subject to Stock Options that may be granted to an optionee undera Participant; or
(h) delete or limit the Plan.
NeitherIn addition, any "material revision" of the Plan (within the meaning of the rules of the New York Stock Exchange) not listed inSections 16(a) through(h) above also shall any amendment, alteration or discontinuation impairrequire the rightsrequisite vote of any holderthe Company's stockholders.
17. Cancellation of an option theretofore granted without the optionee’s consent;provided, however, that ifOutstanding Options
If the Committee, after consulting with management of the CorporationCompany, determines that application of an accounting standard in compliance with any statement issued by the Financial Accounting Standards Board concerning the treatment of employee stock optionsStock Options would have a significant adverse effect on the Corporation’sCompany's financial statements because of the fact that optionsStock Options granted before the issuance of such statement are subject to new accounting rules, then the Committee in its absolute discretion may cancel and revoke all outstanding optionsStock Options to which such adverse effect is attributed and the holders of such optionsStock Options shall have no further rights in respect thereof. Such cancellation and revocation shall be effective upon written notice by the Committee to the holders of such options.Stock Options.
18. Foreign Jurisdictions
Awards granted under thisto Participants who are foreign nationals or who are employed by the Company or any of its subsidiaries outside of the United States may have such terms and conditions different from those specified in the Plan and such additional terms and conditions as the Committee, in its judgment, determines to be necessary, appropriate or desirable to foster and promote achievement of the material purposes of the Plan and to fairly accommodate for differences in local law, tax policy or custom or to facilitate administration of the Plan. The Committee may approve such sub-plans, appendices or supplements to, or amendments, restatements or alternative versions of, the Plan as it may consider necessary, appropriate or desirable, without thereby affecting the terms of the Plan as in effect for any other purpose. The special terms and any appendices, supplements, amendments, restatements or alternative versions, however, shall not be repriced byinclude any provisions that are inconsistent with the Corporation (including,terms of the Plan as then in effect, unless the Plan could have been amended to eliminate such inconsistency without limitation, by canceling an outstanding option and replacing such option with a new option with a lower exercise price) for any reason.
With respect to Participants who are subject to Section 16 of the Exchange Act ("Reporting Persons"), transactions under the Plan isare intended to comply with all applicable conditions of Rule 16b-3 of the General Rules and Regulations under the Securities Exchange Act of 1934, as amended.Act. All transactions under the Plan involving the Corporation’s directors, executive officers and other persons subject to Section 16 of said ActReporting Persons are subject to such conditions, regardless of whether the conditions are expressly set forth in the Plan. Any provision of the Plan that is contrary to a condition of Rule 16b-3 shall not apply to directors, executive officerssuch Reporting Persons.
ADMISSION TICKET
FedEx Corporation
Annual Meeting of Stockholders
Monday, September 27, 2004
10:00 a.m. local time
Hilton Hotel
Tennessee Grand Ballroom
939 Ridge Lake Boulevard
Memphis, Tennessee 38120
Please present this Admission Ticket and other Section 16 personsa valid, government-issued photo identification (such as a driver's license or a passport) for admission to the meeting.
Security measures will be in place at the meeting to help ensure the safety of attendees. Metal detectors similar to those used in airports will be located at the entrance to the meeting room and briefcases, handbags and packages will be inspected. No cameras or recording devices of any kind, or signs, placards, banners or similar materials, may be brought into the meeting. Anyone who refuses to comply with these requirements will not be admitted.
This Admission Ticket is not transferable.
FOLD AND DETACH HERE |
| PROXY |
FEDEX CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF FEDEX
FOR THE ANNUAL MEETING OF STOCKHOLDERS, SEPTEMBER 27, 2004
The undersigned hereby constitutes and appoints Kenneth R. Masterson and Alan B. Graf, Jr., and each of them, his or her true and lawful agents and proxies, each with full power of substitution, to represent the undersigned and to vote all of the Corporation.
| Election of Directors. | ||
Class I Nominee: | COMMENTS | |
01) Charles T. Manatt Class III Nominees: 02) Judith L. Estrin 03) Philip Greer 04) J. R. Hyde, III 05) Shirley A. Jackson 06) Frederick W. Smith | (If you have written in the above space, please mark the corresponding box on the reverse side of this card.) |
You are encouraged to specify your choices by marking the appropriate boxes on the reverse side, but you need not mark any boxes if you wish to vote in accordance with the Board of Directors' recommendations. Mr. Masterson and Mr. Graf cannot vote your shares unless you sign, date and return this card or vote on the Internet or by telephone. | ||
| SEE REVERSE SIDE | ||
Dear Stockholder:
Internet and telephone voting are convenient ways to vote your shares on matters to be covered at the 2004 Annual Meeting of Stockholders.
If you choose to vote on the Internet or by telephone, you do not need to mail back your proxy card. If you wish to attend the annual meeting in person, however, you will need to bring the Admission Ticket attached to this proxy card with you. Votes submitted through the Internet or by telephone must be received by 11:59 p.m. Eastern time on September 26, 2004.
Your vote is important. Thank you for voting.
| Vote-by-Internet | Vote-by-Telephone | |||||
 | OR |  | ||||
| Log on to the Internet and go to http://www.eproxyvote.com/fdx | Call toll-free 1-877-PRX-VOTE (1-877-779-8683) |
NOTE: If you vote on the Internet, you may elect to have next year's proxy statement and annual report to stockholders delivered to you via the Internet. We strongly encourage you to enroll in Internet delivery. It is a cost-effective way for us to send you proxy materials and annual reports.
DETACH HERE IF YOU ARE RETURNING YOUR
PROXY CARD BY MAIL
| ý | Please mark your votes as in this example. | 2743 |
The Board of Directors recommends that you vote FOR Items 1, 2, 3 and 4.
FEDEX CORPORATION | 2. | Approval of Amendments to FedEx's Bylaws to provide for the annual election of directors. | FOR o | AGAINST o | ABSTAIN o | |||||||||||
1. | Election of Class I Director and Class III Directors. | |||||||||||||||
| FOR | WITHHELD | |||||||||||||||
| FOR ALL NOMINEES | o | o | WITHHELD FROM ALL NOMINEES | 3. | Approval of Amendment to FedEx's Incentive Stock Plan to increase the number of shares reserved for issuance under the plan. | FOR o | AGAINST o | ABSTAIN o | ||||||||
o For all nominees except as written above | 4. | Ratification of Independent Registered Public Accounting Firm. | o | o | o | |||||||||||
Comments on reverse side. | o | |||||||||||||||
I request my name be disclosed with my vote and comments, if any. | o | |||||||||||||||
In their discretion, the proxy holders are authorized to vote on such other matters as may properly come before the meeting or any postponements or adjournments thereof. | ||||
The signer hereby revokes all proxies previously given by the signer to vote at said meeting or at any postponements or adjournments thereof. NOTE: Please sign exactly as the name appears on this card. Joint owners should each sign. When signing as attorney, officer, executor, administrator, trustee or guardian, please give full title as such. | ||||
Signature: | Date: | Signature: | Date: |