-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DlV6gS8EG0kCKXKNXU+ahgrIogLoJzGWG/jVIc1w/jJu88xS5HNeu50k1VJjPnri BHHnTmYU6MBXtJ3T1j6ndw== 0000950109-96-000631.txt : 19960410 0000950109-96-000631.hdr.sgml : 19960410 ACCESSION NUMBER: 0000950109-96-000631 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960209 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERICAN FREIGHTWAYS CORP CENTRAL INDEX KEY: 0000846729 STANDARD INDUSTRIAL CLASSIFICATION: TRUCKING (NO LOCAL) [4213] IRS NUMBER: 742391754 STATE OF INCORPORATION: AR FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-17570 FILM NUMBER: 96513927 BUSINESS ADDRESS: STREET 1: 2200 FORWARD DR CITY: HARRISON STATE: AR ZIP: 72601 BUSINESS PHONE: 5017419000 MAIL ADDRESS: STREET 1: 2200 FORWARD DR CITY: HARRISON STATE: AR ZIP: 72601 10-K405 1 FORM 10-K ================================================================================ SECURITIES AND EXCHANGE COMMISSION FORM 10-K Washington, D.C. 20549 (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the Fiscal Year Ended December 31, 1995 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from ___________________ to ___________________ Commission File No. 34-0-17570 AMERICAN FREIGHTWAYS CORPORATION (Exact name of registrant as specified in its charter) Arkansas 74-2391754 (State or other jurisdiction (I.R.S. Employer Identification Number) of incorporation or organization) 2200 Forward Drive 72601 Harrison, Arkansas (Zip Code) (Address of principal executive offices) Registrant's telephone number, including Area Code: (501) 741-9000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.01 par value (Title of class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Act of 1934 during the preceding 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [_] No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [X] Aggregate market value of voting stock held by nonaffiliates of the registrant at January 30, 1996: $320,961,840.30. Number of shares of common stock outstanding at January 30, 1996: 30,936,081. The Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1995 is incorporated by reference into Parts II and IV. The Proxy Statement for Registrant's March 14, 1996 Annual Meeting is incorporated by reference into Parts III and IV. ================================================================================ TABLE OF CONTENTS
ITEM PAGE - ---- ---- PART I 1. and 2. Business and Properties 1 3. Legal Proceedings 5 4. Submission of Matters to a Vote of Security Holders 5 PART II 5. Market for Registrant's Common Equity and Related Stockholder Matters 6 6. Selected Financial Data 7 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 9 8. Financial Statements and Supplementary Data 9 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 9 PART III 10. Directors and Executive Officers of the Registrant 10 11. Executive Compensation 10 12. Security Ownership of Certain Beneficial Owners and Management 10 13. Certain Relationships and Related Transactions 10 PART IV 14. Exhibits, Financial Statement Schedules and Current Reports on Form 8-K 11 Signatures 14 Financial Statements and Financial Statement Schedules 15
PART I ITEMS 1 AND 2. BUSINESS AND PROPERTIES THE COMPANY American Freightways is a scheduled common and contract carrier transporting primarily less-than-truckload (LTL) shipments of general commodities. As of January 1, 1996, the Company serves all points in Alabama, Arkansas, Colorado, Delaware, Florida, Georgia, Illinois, Indiana, Iowa, Kansas, Kentucky, Louisiana, Maryland, Mississippi, Missouri, Nebraska, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, Virginia, West Virginia, Wisconsin and a portion of Minnesota and provides service to the ten provinces of Canada through an exclusive alliance with Day & Ross, a Canadian less-than-truckload carrier headquartered in Hartland, New Brunswick, Canada. THE LTL INDUSTRY LTL carriers generally handle shipments from multiple shippers to multiple consignees on a scheduled basis. Carriers are classified as regional, interregional or national depending on their average length of haul. Regional carriers typically have an average length of haul of under 500 miles, interregional have an average length of haul of between 500 and 1,000 miles and national carriers, have coverage from coast to coast, with an average length of haul over 1,000 miles. American Freightways, with an average length of haul of 588 miles for 1995, and all points coverage in 25 states effective January 1, 1996, is an interregional carrier targeting shipments within several regions to increase density within its network. American Freightways competes against each class of LTL carrier and to a lesser extent, truckload carriers, railroads and overnight package carriers. In general, the more business an LTL carrier has within a given geographical area, the lower its incremental operating costs. This is particularly true with respect to its pickup and delivery operation where there is less distance between stops and more shipments per stop. Similarly, the more business a carrier experiences in a given traffic lane (or route), resulting in greater linehaul density, the lower its incremental costs. Other areas such as computer operations, sales, collections, purchases of equipment, fuel, tires, parts, insurance, supplies and corporate management also lend themselves to economies of scale. More LTL freight moves short distances than long distances. Typically, national carriers are less effective from an operational, service or cost standpoint in short-haul markets. Thus, due to greater activity in a given region, a regional or interregional carrier may achieve greater economies in such regions or markets than a national carrier. The industry experienced significant overcapacity in 1995 as a result of carriers expanding fleets based on a very strong 1994 coupled with an economic slowdown in the second half of 1995. This overcapacity resulted in aggressive, discounted pricing in the LTL industry during 1995, particularly during the second half of the year. Congress passed legislation in 1994 deregulating intrastate traffic, freight moving within the borders of a given state, effective January 1, 1995. Prior to the deregulation, the Company had intrastate operating authority in Arkansas, Louisiana and Kansas. The Company provides intrastate service to all the states in which it operates. The Interstate Commerce Commission (ICC), the agency exercising regulatory authority over the transportation industry, was closed effective December 31, 1995, and its remaining responsibilities 1 transferred to the Department of Transportation (DOT). The Company does not anticipate any adverse impact as a result of this action. EXPANSION The history of American Freightways has been growth. Thirteen years ago, the Company began serving all points in one state, Arkansas. Today the Company's all-points service coverage extends to 25 states. Perhaps the most distinguishing feature of the Company's operations is this all-points coverage. Management knows of no other LTL carrier that duplicates this coverage. The Company began operations by opening 20 terminals on October 25, 1982. From 1983 through 1985, 11 terminals were added to the system, including Chicago, Illinois; Oklahoma City and Tulsa, Oklahoma; and Houston, Texas. Thirteen terminals were added in 1986, 20 terminals in 1987, 12 terminals in 1988, nine terminals in 1989, 15 terminals in 1990, 11 terminals in 1991 and ten terminals in 1992. During 1993, the opening of seven new terminals in the state of Georgia and nine new terminals in the state of Kentucky brought all-points coverage to these two states as well as the southern portions of the states of Indiana and Ohio. During 1994, the Company opened 14 new terminals in Indiana and Ohio. The Company's most aggressive expansion to date was in 1995. On January 1, 1995, the Company opened 13 terminals and extended its all-points coverage to North Carolina and South Carolina. On April 17, 1995, terminals were opened at Colorado Springs, Denver, Fort Collins and Pueblo, Colorado; Des Moines, Iowa; Madison and Milwaukee, Wisconsin; Minneapolis/St. Paul, Minnesota; and Omaha, Nebraska. On July 10, twelve additional terminals were opened extending the Company's all-points coverage to Colorado, Iowa, Nebraska and Wisconsin. On August 14, 1995, the Company opened seven terminals in Florida to provide all- points coverage to the state. On January 1, 1996, the Company opened 12 terminals to provide all-points coverage to Delaware, Maryland, Virginia and West Virginia. Also, on January 1, 1996, the Company extended its coverage to all 10 Canadian provinces through an exclusive partnership with Day & Ross, one of Canada's leading less-than-truckload carriers. Day & Ross, Inc. is part of the Day & Ross transportation group, Canada's largest truck transportation conglomerate and is a wholly-owned subsidiary of Canadian-based McCain Food Company. The aggressive expansions of service territory initiated by the Company during 1995 contributed to an increase in salaries, wages and benefits as a percentage of operating revenue. Salaries, wages and benefits were disproportionately high in relation to operating revenue as new associates were added to establish an operating base within the expansion territories and to maintain service standards. Plans for expansions of service territory during 1996 are less aggressive than those initiated during 1995. SERVICE FEATURES The principal service features of American Freightways are its all-points coverage, scheduled LTL service, clean and efficient fleet, total information services, its customer satisfaction and cargo care programs, and its total quality and people development processes. All-Points Coverage. To differentiate itself from its competitors, the Company offers all-points coverage to entire states. This feature fulfills shippers' needs by simplifying how freight is routed and assuring that the Company's service standards will apply from pickup through delivery. Scheduled LTL Service. The Company publishes very compressed service standards between the points in its system. It maintains scheduled runs between the terminals each night to ensure that these standards are met. The Company's consistent achievement of these standards results in a high rate of customer retention which, together with the Company's vigorous pursuit of new customers, has resulted in sustained growth. 2 Clean and Efficient Fleet. The Company's policy is to purchase equipment having uniform specifications that are, to the greatest possible extent, compatible with design improvements and resale values. This standardization enables the Company to simplify mechanic and driver training, to control the cost of spare parts and tire inventory, and in general to provide for a more efficient vehicle maintenance program. American Freightways utilizes twin trailers for movement of almost 100% of the freight among its terminals to gain greater flexibility. The use of twin trailers (which can be operated singly or in tandem) provides more options for the achievement of the Company's service standards. At December 31, 1995, the Company utilized 11,173 van trailers, 9,787 of which were twin trailers, and 4,521 tractors. The average ages of the tractors and trailers were 2.7 and 3.3 years, respectively, at December 31, 1995. Total Information Services. An important aspect of customer service is the instantaneous access by shippers to information concerning their shipments and the Company's performance. The Company is committed to providing accurate and timely information to the relevant person as needed. Accordingly, American Freightways provides its customers the ability to customize information they need and how and when they receive it. Customer Satisfaction. The Company recognizes that it is in the customer satisfaction business as well as the transportation business. In recognition of its commitment to customer satisfaction, American Freightways maintains a Customer Satisfaction Department and a Cargo Care Department. Access to each is provided through the use of nationwide toll-free telephone lines. Management believes American Freightways was the first LTL carrier to create a department to deal exclusively with customer satisfaction. The Customer Satisfaction Department is an integral part of an effort to make American Freightways accessible and accountable to its customers, providing special attention to customers' needs such as tracing freight, expediting shipments, and meeting unusual delivery requirements. The Cargo Care Department educates Company personnel on the correct care of shipments, such as proper loading to avoid loss and damage. This department also assists customers with proper packaging of shipments and settles cargo claims with customers. Total Quality Process. The Company has for over six years utilized a "Total Quality Process" to improve the quality and efficiency of its services. The quality process involves management, education and training techniques, some of which are developed by associates. These techniques are designed to, among other things, identify and complete job responsibilities, including identification of customer needs. The process measures improvement in associate performance, enhances communication among management and associates and provides a common Company language. Implementation of this process is accomplished with customer satisfaction surveys, performance benchmarking and educating of personnel. The total quality initiative is ongoing. The Company has committed additional resources in 1996 to the process to further integrate the process into operations and expand associate education. People Development Process. The building blocks for American Freightways have always been its people and its business principles. To continue its growth, the Company must continue to attract, retain and educate quality people who can and will grow with the Company. To facilitate this process, the Company initiated, in 1993, a "People Development Process" in which Company personnel at all levels and in all functions receive training on Company principles, job responsibilities and skills critical to performance of their responsibilities. The Company's people follow six business principles: . Take care of our customers . Take care of our people . Honor our commitments 3 . Work hard, work smart and safely and work together . Make the most of resources . Have fun! At December 31, 1995, the Company employed 8,867 people, including 4,494 drivers, 2,293 dock workers and 227 mechanics and other maintenance personnel. All drivers utilized by American Freightways are selected in accordance with specific Company guidelines relating primarily to safety records and driving experience. Drivers, as well as dockmen and mechanics, are required to pass drug tests upon employment, randomly and for cause. State and federal regulations require drug testing of drivers and require drivers to comply with commercial driver's licensing requirements. Management believes that the Company is substantially in compliance with these regulations. The Company has not experienced a shortage of qualified drivers in the past, and management does not expect a significant shortage in the near future. None of the Company's personnel is currently represented by a collective bargaining unit. From time to time, associates of a particular terminal or facility may vote on representation by a collective bargaining unit. Management of the Company cannot predict the outcome of future elections. However, it believes any outcome will not have a material adverse affect on the Company's competitive position, operations or financial condition. In the opinion of management, the Company's relationship with its drivers, other associates and independent contractors is excellent. The Company's policy is to share its success with its associates through increased wages and benefits. MARKETING The Company's marketing strategy emphasizes to the customer the value of the Company's reliable performance and innovative services. This has resulted in a high level of repeat business from existing customers, which is used as a springboard for business in the areas to which the Company expands. American Freightways also aggressively seeks new customers as it expands its service territory. The Company established a national advertising program in 1984, utilizing full-page, four-color ads in national transportation and distribution magazines. American Freightways also utilizes direct mail advertising and surveys its customers to solicit suggestions for improvements in its services. The Company has designed and implemented its own 48-state class rate tariff and rules tariff with simplified formats. TECHNOLOGY American Freightways is a leader in the use of advanced technology to increase the value of service to its customers and to lower the cost of providing this service. The Company uses computer and electronic technology to compress time in the performance of operating and other processes and to compress the number of levels within the organization necessary to complete tasks. From the customer's call for a pickup through the capture of a signature verifying delivery of the freight, the Company's information technology captures information on the status of each shipment. In most cases the recovery of the data is achieved automatically as the freight is moved. See also "Service Features - Total Information Services." TERMINALS The Company owns its general office located in Harrison, Arkansas and 68 terminal facilities in 16 states. At December 31, 1995, 118 of the Company's terminals were leased. The terms of the leases on the 4 facilities range from month-to-month to ten years. The Company prefers to lease when suitable facilities are available; however, it may be necessary to construct or acquire additional facilities when facilities of sufficient size are not available for lease. One of the principal features distinguishing American Freightways from its competitors is its extensive terminal network, placing terminals nearer to the customer. During 1995, the Company added terminal capacity through the purchase of existing facilities, the construction of new terminals or additions to existing terminals in several strategic locations such as Anniston, Alabama; Des Moines, Iowa; Indianapolis, Indiana; Wichita, Kansas; Louisville, Kentucky; Lake Charles and Shreveport, Louisiana; Columbia, Joplin, Kansas City and Springfield, Missouri; Columbus and Toledo, Ohio; Lewisburg, Tennessee; and Bryan, San Antonio, Victoria and Waco, Texas. In addition, the Company added twelve terminals to provide service to Delaware, Maryland, Virginia and West Virginia on January 1, 1996. The Company presently has under construction a 230 door facility in Atlanta, Georgia, which will be completed during the second half of 1996, and has plans to purchase or construct seven additional terminals in 1996. At December 31, 1995, the Company's terminal network consisted of 186 terminals. Of these terminals, 176 were managed by Company associates and 10 were operated and managed by 7 independent contractors. Company-operated terminals involve relatively fixed costs (such as operating taxes, salaries and wages and depreciation), whereas costs of independent contractor-operated terminals generally are variable as a flat percentage of revenue. It is American Freightways' intent to primarily utilize Company-operated terminals in future expansions. ITEM 3. LEGAL PROCEEDINGS The Company is a party to routine litigation incidental to its business, primarily involving claims for personal injuries and property damage incurred in the transportation of freight. The Company believes adverse results in one or more of these cases would not have a material adverse effect on its competitive position, financial position or its results of operations. The Company maintains insurance in an amount which Management believes is currently sufficient to cover its risks. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 5 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS American Freightways Corporation's Common Stock is traded under the symbol "AFWY" on the National Market System of the National Association of Securities Dealers Automated Quotation System (NASDAQ). The following table sets forth, for the periods indicated, the range of high and low prices for the Company's Common Stock as reported by NASDAQ through January 30, 1996. The latest price for the Company's Common Stock on January 30, 1996, as reported by the NASDAQ was $10.38 per share. At January 30, 1996, there were approximately 2,784 holders of record of the Company's Common Stock.
PERIOD HIGH LOW ---------------------------------------------------------- FISCAL YEAR 1994: First Quarter 20-3/4 15-1/2 Second Quarter 21-3/4 18-1/4 Third Quarter 24-7/8 20-3/4 Fourth Quarter 24-3/8 17-3/4 FISCAL YEAR 1995: First Quarter 24-1/8 18-5/8 Second Quarter 24-1/4 18-3/8 Third Quarter 24 13-3/4 Fourth Quarter 15-1/8 9-7/8 FISCAL YEAR 1996: First Quarter (through January 30, 1996) 12-5/8 10-1/8
The Company has not paid cash dividends in the past and does not intend to pay cash dividends in the foreseeable future. Under certain of the Company's loan agreements, the Company is subject to certain restrictions on its ability to pay dividends. See Note 3 to the Consolidated Financial Statements incorporated by reference herein. 6 ITEM 6. SELECTED FINANCIAL DATA The following selected financial data is derived from consolidated financial statements of the Company. The data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and the Consolidated Financial Statements, related notes and other financial information included elsewhere herein.
YEARS ENDED DECEMBER 31 (Dollars in thousands, except per share data) 1991 1992 1993 1994 1995 ----------------------------------------------------- INCOME STATEMENT DATA: Operating revenue.............................. $198,258 $262,011 $328,464 $465,588 $572,100 Operating expenses and costs: Salaries, wages and benefits.................. 94,312 125,152 168,770 247,049 335,167 Operating supplies and expenses..................................... 12,084 17,169 22,099 30,710 38,667 Operating taxes and licenses.................. 7,218 9,647 12,340 19,251 24,434 Insurance..................................... 7,011 8,705 7,891 15,360 21,595 Communications and utilities.................. 3,484 4,357 6,907 9,117 11,040 Depreciation and amortization................. 14,541 17,059 21,519 27,888 37,560 Rents and purchased transportation............................... 31,877 39,683 42,250 45,633 46,405 Other......................................... 11,848 13,895 15,782 20,880 26,469 ----------------------------------------------------- Total operating expenses..................... 182,375 235,667 297,558 415,888 541,337 ----------------------------------------------------- Operating income............................... 15,883 26,344 30,906 49,700 30,763 Interest expense............................... (3,642) (4,844) (4,246) (6,832) (10,198) Other income, net.............................. 312 453 329 442 415 Gain (loss) on disposal of assets......................................... (3) 9 1 292 329 ----------------------------------------------------- Income before income taxes, extraordinary charge and cumulative effect of accounting change.............................. 12,550 21,962 26,990 43,602 21,309 Income taxes................................... 4,518 8,016 10,238 16,571 8,226 ----------------------------------------------------- Income before extraordinary charge and cumulative effect of accounting change......... 8,032 13,946 16,752 27,031 13,083 Extraordinary charge for early retirement of debt, net of tax benefit of $205............ - - - (335) - Cumulative effect of accounting change......... - (383) - - - ----------------------------------------------------- Net income..................................... $ 8,032 $ 13,563 $ 16,752 $ 26,696 $ 13,083 ===================================================== Per share: Income before extraordinary charge and cumulative effect of accounting change....... $ 0.30 $ 0.50 $ 0.59 $ 0.89 $ 0.42 Extraordinary charge.......................... - - - (0.01) - Cumulative effect of accounting change............................ - (0.02) - - - ----------------------------------------------------- Net income.................................... $ 0.30 $ 0.48 $ 0.59 $ 0.88 $ 0.42 ===================================================== Average shares outstanding (000's)............. 26,644 28,132 28,581 30,357 31,334 Proforma Data (1): Net income..................................... $ 7,807 $ 13,946 $ 16,752 $ 26,696 $ 13,083 Net income per share........................... $ 0.29 $ 0.50 $ 0.59 $ 0.88 $ 0.42
7
YEARS ENDED DECEMBER 31 1991 1992 1993 1994 1995 --------- --------- --------- --------- --------- BALANCE SHEET DATA: (Dollars in thousands) Current assets...................... $ 58,129 $ 34,729 $ 37,660 $ 54,247 $ 77,213 Current liabilities................. 18,218 19,348 35,083 44,378 52,514 Total assets........................ 168,131 175,531 251,130 355,348 477,762 Long-term debt (including current portion).................... 70,896 55,304 97,537 111,181 197,631 Shareholders' equity................ 74,636 89,709 109,460 177,180 195,434 Working capital..................... $ 39,911 $ 15,381 $ 2,577 $ 9,869 $ 24,699 Debt to equity ratio................ 0.95 0.62 0.89 0.63 1.01 Return on shareholders' equity...... 14.5% 16.5% 16.8% 18.6% 7.0% KEY OPERATING STATISTICS: Operating ratio..................... 92.0% 89.9% 90.6% 89.3% 94.6% Total tractors...................... 1,634 1,955 2,453 3,344 4,521 Terminals........................... 111 116 132 144 186 Number of employees................. 3,058 3,655 4,964 6,506 8,867 Gross tonnage hauled (000's)........ 1,238 1,615 2,051 2,759 3,380 Shipments (000's)................... 2,179 2,654 3,237 4,267 5,486 Average length of haul.............. 454 525 550 567 588 Linehaul load factor (tons)......... 9.96 10.79 10.90 10.96 10.91 Revenue per hundred weight.......... $ 8.01 $ 8.11 $ 8.01 $ 8.46 $ 8.48
(1) Assumes the change in accounting method for recognition of revenue as required by EITF 91-9 occurred January 1, 1991. 8 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS This Item is incorporated by this reference to Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1995, pages 20 through 26. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The report of independent auditors and consolidated financial statements included on pages 27 through 35 of the Annual Report to Shareholders for the year ended December 31, 1995, are incorporated herein by reference. Quarterly Results of Operations on page 34 of the Annual Report to Shareholders for the year ended December 31, 1995, is incorporated herein by reference. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 9 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF REGISTRANT The executive officers and directors of American Freightways as of January 30, 1996, are as follows:
NAME AGE POSITION ---- --- -------- F. S. (Sheridan) Garrison 61 Chairman of the Board of Directors, President and Chief Executive Officer Tom Garrison 35 Vice President; Secretary/Treasurer; Director Frank Conner 46 Executive Vice President-Accounting & Finance; Chief Financial Officer; Director Tony R. Balisle 57 Executive Vice President-Operations; Director Ben A. Garrison 64 Director T. J. Jones 59 Director Ken Reeves 48 Director Will Garrison 32 Vice President; Director Daniel Garrison 41 Account Executive Joe Dobbs 49 Vice President-Properties James Hearn 61 Vice President-Maintenance
The remainder of this Item 10, Directors and Executive Officers of the Registrant, is incorporated by this reference to Registrant's Notice and Proxy Statement for its Annual Meeting of Shareholders to be held on Thursday, March 14, 1996. ITEM 11. EXECUTIVE COMPENSATION This Item is incorporated by this reference to applicable portions of the Registrant's Notice and Proxy Statement for its 1996 Annual Meeting of Shareholders to be held on Thursday, March 14, 1996. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT This Item is incorporated by this reference to applicable portions of the Registrant's Notice and Proxy Statement for its 1996 Annual Meeting of Shareholders to be held on Thursday, March 14, 1996. ITEM 13. CERTAIN RELATIONSHIPS AND TRANSACTIONS This Item is incorporated by this reference to applicable portions of the Registrant's Notice and Proxy Statement for its 1996 Annual Meeting of Shareholders to be held on Thursday, March 14, 1996. 10 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) (l) and (2) The response to this portion of Item 14 is submitted as a separate section of this report. (3) The exhibits as listed in the Exhibit Index, are submitted as a separate section of this report. (b) Current Reports on Form 8-K: None. (c) See Item 14(a)(3) above. (d) The response to this portion of Item 14 is submitted as a separate section of this report. 11 INDEX TO EXHIBITS 3(a) Amended and Restated Articles of Incorporation incorporated by reference to Registrant's Form 10-Q for the quarterly period ending March 31, 1995. 3(b) Amended and Restated Bylaws of American Freightways Corporation incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(a) Note Agreement among Prudential Capital Corporation, the Registrant and certain subsidiaries dated December 5, 1991 incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1991. 10(b) Credit Agreement among NationsBank of Texas, N. A., as Agent, the Registrant and certain subsidiaries dated April 14, 1992 incorporated by reference to Registrant's Form 10-Q for the quarterly period ended March 31, 1992. 10(c) Amendment Number 1 to Note Agreement among Prudential Capital Corporation, the Registrant and certain subsidiaries dated December 5, 1991 incorporated by reference to Registrant's Form 10-Q for the quarterly period ended June 30, 1992. 10(d) Promissory Note among NationsBank of Texas, N.A., the Registrant and certain subsidiaries dated August 15, 1992, incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(e) First Amendment to Credit Agreement among NationsBank of Texas, N.A., as Agent, the Registrant and certain subsidiaries dated December 30, 1992, incorporated by reference to Registrant's Annual Report on Form 10-K for the fiscal year ended December 31, 1992. 10(f) Amended and Restated 1993 Chairman Stock Option Plan. 10(g) Amended and Restated 1993 Non-Employee Director Stock Option Plan as amended January 23, 1996. 10(h) Amended and Restated 1993 Stock Option Plan for Key Employees as amended January 23, 1996. 10(i) $50,000,000 Master Shelf Agreement ($10,000,000 note attached) with The Prudential Insurance Company of America dated September 3, 1993, incorporated by reference to Registrant's Form 10-Q for the quarterly period ended September 30, 1993. 10(j) Second Amendment to Credit Agreement among NationsBank of Texas, N.A., as Agent, the Registrant and certain subsidiaries dated February 1, 1994, incorporated by reference to Registrant's Form 10-K for the fiscal year ended December 31, 1993. 10(k) $10,000,000 Note dated February 2, 1994, issued under the $50,000,000 Master Shelf Agreement with The Prudential Insurance Company of America dated September 3, 1993, incorporated by reference to Registrant's Form 10-K for the fiscal year ended December 31, 1993. 10(l) Amended and Restated American Freightways Corporation Excess Benefit Plan as amended January 23, 1996. 12 10(m) Amended and Restated Stock Purchase Plan for Certain employees of Registrant and subsidiaries as amended January 23, 1996. 10(n) $10,000,000 Note dated April 13, 1994, issued under the $50,000,000 Master Shelf Agreement with The Prudential Insurance Company of America dated September 3, 1993, incorporated by reference to Registrant's Form 10-Q for the quarterly period ended June 30, 1994. 10(o) Amended and Restated Credit Agreement among NationsBank of Texas, N.A., as Agent, the Registrant and certain subsidiaries dated October 20, 1994, incorporated by reference to Registrant's Form 10-K for the fiscal year ended December 31, 1994. 10(p) Letter Amendment No. 3 to Note Agreement with The Prudential Insurance Company of America dated October 19, 1994 incorporated by reference to Registrant's Form 10-K for the fiscal year ended December 31, 1994. 10(q) Letter Amendment No. 1 to Master Shelf Agreement with The Prudential Insurance Company of America dated October 19, 1994, incorporated by reference to Registrant's Form 10-K for the fiscal year ended December 31, 1994. 10(r) Letter Amendment No. 2 to Master Shelf Agreement with The Prudential Insurance Company of America dated December 14, 1994, incorporated by reference to Registrant's Form 10-K for the fiscal year ended December 31, 1994. 10(s) $15,000,000 note dated January 30, 1995, issued under the $90,000,000 Master Shelf Agreement with the Prudential Insurance Company of America dated September 3, 1993, incorporated by reference to Registrant's Form 10-Q for the quarterly period ended March 31, 1995. 10(t) First Amendment to Amended and Restated Credit Agreement among NationsBank of Texas, N.A., as agent, the Registrant and its Subsidiary dated May 31, 1995, incorporated by reference to Registrant's Form 10-Q for the quarterly period ended June 30, 1995. 10(u) $20,000,000 noted dated June 15, 1995, issued under the $90,000,000 Master Shelf Agreement with the Prudential Insurance Company of America dated September 3, 1993, incorporated by reference to Registrant's Form 10-Q for the quarterly period ended June 30, 1995. 10(v) Lease Agreement among VT Finance, Inc., the Registrant and its Subsidiary dated January 5, 1996. 13 Annual Report to Stockholders for the fiscal year ended December 31, 1995. 21 Subsidiary of Registrant 23 Consent of Ernst & Young LLP 24 Power of Attorney 27 Financial Data Schedule 13 SIGNATURES Pursuant to the requirements of Section 13 or 15 of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated this 1st day of February, 1996. American Freightways Corporation By: /s/Frank Conner --------------- Frank Conner Chief Financial Officer; Director (Principal Accounting Officer) Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/F. S. Garrison February 1, 1996 - ------------------------------------- ------------------ F. S. Garrison Date Chairman of the Board of Directors, Chief Executive Officer (Principal Executive Officer) /s/Frank Conner February 1, 1996 - ------------------------------------- ------------------ Frank Conner Date Chief Financial Officer; Director (Principal Accounting Officer) /s/Tom Garrison February 1, 1996 - ------------------------------------- ------------------ Tom Garrison Date Director /s/T. J. Jones February 1, 1996 - ------------------------------------- ------------------ T. J. Jones Date Director /s/Ben A. Garrison February 1, 1996 * - ------------------------------------- ------------------ Ben A. Garrison Date Director /s/Ken Reeves February 1, 1996 - ------------------------------------- ------------------ Ken Reeves Date Director /s/Tony Balisle February 1, 1996 - ------------------------------------- ------------------ Tony Balisle Date Director /s/Will Garrison February 1, 1996 - ------------------------------------- ------------------ Will Garrison Date Director
* Signed by Frank Conner under Power of Attorney dated January 18, 1996. 14 ANNUAL REPORT ON FORM 10-K--ITEM 8, ITEM 14(A)(1) AND (2), (C) AND (D) AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY LIST OF FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES The following consolidated financial statements of American Freightways Corporation and subsidiary included in the Registrant's Annual Report to Shareholders for the fiscal year ended December 31, 1995 are incorporated by reference in Item 8: Consolidated Balance Sheets as of December 31, 1995 and 1994. Consolidated Statements of Income for the years ended December 31, 1995, 1994 and 1993. Consolidated Statements of Stockholders' Equity for the years ended December 31, 1995, 1994 and 1993. Consolidated Statements of Cash Flows for the years ended December 31, 1995, 1994 and 1993. Notes to Consolidated Financial Statements--December 31, 1995. The following consolidated financial statement schedule of American Freightways Corporation and subsidiary is included in Item 14(d): AMERICAN FREIGHTWAYS CORPORATION AND SUBSIDIARY Consolidated Financial Statement Schedule: Schedule II Valuation and Qualifying Accounts All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. 15 SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS AMERICAN FREIGHTWAYS CORPORATION
Column A Column B Column C Column D Column E - ------------------------------------------------------------------------------------------------------------- Additions ------------------------- Balance at Charged to Charged to Balance Beginning Costs and Other Account Deductions at End Description of Period Expenses -Describe -Describe of Period - ------------------------------------------------------------------------------------------------------------- Year ended December 31, 1993: Allowance for Doubtful Accounts $800,000 $ 513,464 $430,379 (1) $1,250,804 (2) $493,039 ======== ========== ======== === ========== === ======== Year ended December 31, 1994: Allowance for Doubtful Accounts $493,039 $1,125,840 $423,029 (1) $1,403,102 (2) $638,806 ======== ========== ======== === ========== === ======== Year ended December 31, 1995: Allowance for Doubtful Accounts $638,806 $ 928,974 $264,867 (1) $ 988,116 (2) $844,531 ======== ========== ======== === ========== === ========
Note 1 - Recoveries of amounts previously written off. Note 2 - Uncollectible accounts written off. EX-10.(F) 2 AM. FREIGHTWAYS CORP. CHAIRMAN STOCK OPION PLAN EXHIBIT 10(f) AMERICAN FREIGHTWAYS CORPORATION CHAIRMAN STOCK OPTION PLAN SECTION 1 --------- 1. This Amended and Restated 1993 Chairman Stock Option Plan as amended and restated as of July 20, 1994 (the "Plan") is intended to attract and retain the services of an experienced and knowledgeable chairman ("Chairman") of American Freightways Corporation (the "Company"), for the benefit of the Company and its shareholders and to provide additional incentive for such persons to continue to work for the best interests of the Company and its shareholders. 2. ADMINISTRATION. The Plan shall be administered by the Board of Directors of the Company (the "Board"). The Board shall have the power to construe the Plan, to determine all questions arising thereunder and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable. The interpretation and construction by the Board of any provisions of the Plan or of any option granted under it shall be final. No member of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. 3. ELIGIBILITY. The person who has been duly elected and is then serving as Chairman of the Board of the Company on each February 1 hereafter shall automatically be granted options to purchase such number of shares of the Company's Common Stock (subject to further adjustment as provided in Section 3 hereof) as follows: The Chairman shall be granted options to acquire the number of shares set forth in Column B which correspond to the percentage (set forth in Column A) by which earnings per share ("EPS") for the Company's common stock for the most recently completed fiscal year exceeded EPS for the preceding fiscal year.
A B ------ ------ 15 - 17.5% 10,000 17.6 - 20.0% 20,000 20.1 - 25.0% 30,000 25.1 - 29.0% 40,000 30.0 - and above 50,000
The dates on which options are granted hereunder are referred to herein as the "Grant Date." All options granted to the Chairman under this Section 3 shall vest at the rate of 20% per year beginning on the first anniversary of the Grant Date. 4. SHARES OF STOCK SUBJECT TO THE PLAN. The shares that may be issued under the Plan shall be authorized and unissued or reacquired shares of the Company's common stock (the "Common Stock"). The aggregate number of shares which may be issued under the Plan shall not exceed 950,000 shares of Common Stock, unless an adjustment is required in accordance with Section 3. 5. AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors may, insofar as permitted by law, from time to time, suspend or terminate the Plan or revise or amend it in any respect whatsoever, except that no such amendment shall alter or impair or diminish any rights or obligations under any option theretofore granted under the Plan without the consent of the person to whom such option was granted. In addition no such amendment shall be effective without shareholder approval is such approval is required in order to assure the Plan's continued qualification under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. The Plan's provisions regarding the formula for determining the amount, exercise price, and timing of options to be granted under the Plan shall in no event be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, as amended. 6. APPROVAL OF SHAREHOLDERS. The Plan is effective February 1, 1993, subject to approval by the affirmative votes of the holders of a majority of the securities of the Company present, or represented, and entitled to vote at the next succeeding meeting of shareholders, or any adjournment thereof, duly held in accordance with Arkansas law. Notwithstanding any contrary provision of the Plan, no option granted hereunder may become exercisable unless and until such approval is obtained. Options may be granted under the Plan until February 1, 1998. Notwithstanding the foregoing, each option granted under the Plan shall remain in effect until such option has been satisfied by the issuance of shares or terminated in accordance with its terms and the terms of the Plan. 7. NONASSIGNABILITY. No option shall be assignable or transferable by the grantee except by will or by the laws of descent and distribution. During the lifetime of the optionee, the option shall be exercisable only by him or her, and no other person shall acquire any rights therein. 8. WITHHOLDING TAXES. Whenever shares of Common Stock are to be issued under the Plan, the Company shall require the optionee to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares. 2 9. DEFINITION OF "FAIR MARKET VALUE". For the purposes of this Plan, the term "fair market value," when used in reference to the date of grant of an option shall be the mean: If the Shares of the Company are listed on a national securities exchange (including the New York, American or NASDAQ National Market System) in the United States on the date any Option is granted, the fair market value per Share shall be deemed to be the average of the high and low sale prices per share of such Shares of the Company on such national securities exchange in the United States on such date, as published by the Wall Street Journal or other reliable publication, but if the Shares of the Company are not traded on such date or such national securities exchange is not open for business on such date, the fair market value per Share shall be the average of such high and low sale prices on the last preceding date on which such exchange shall have been open for business and the Shares of the Company were traded. If the Shares of the Company are listed on more than one national securities exchange in the United States on the date any such Option is granted, the Committee shall determine, in its discretion, which national securities exchange shall be used for the purpose of determining the fair market value per Share. If at any date any Option is granted a public market exists for the Shares of the Company but such Shares are not listed on a national securities exchange in the United States, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the- counter market for such Shares of the Company in the United States on the date such Option is granted. If there are no bid and asked quotations for such Shares on such date, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the-counter market in the United States for such Shares of the Company on the closest date preceding the date such Option is granted, for which such quotations are available. SECTION 2 --------- STOCK OPTIONS ------------- 1. AWARD OF STOCK OPTIONS. Awards of stock options shall be made under the Plan under all the terms and conditions contained herein. Each option granted under the Plan shall be evidenced by an option agreement duly executed on behalf of the Company and by the recipient, which option agreements shall comply with and be subject to the terms and conditions of the Plan. Any option agreement may contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Board. 2. TERM OF OPTIONS AND EFFECT OF TERMINATION. Notwith-standing any other provision of the Plan, no option granted under the Plan shall be exercisable after the expiration of ten years from the date of its grant. 3 In the event that any outstanding option under the Plan expires by reason of lapse of time or otherwise is terminated for any reason, the shares of Common Stock subject to any such option which have not been issued pursuant to the exercise of the option shall again become available in the pool of shares of Common Stock for which options may be granted under the Plan. 3. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the Plan shall be evidenced by agreements in such form as the Board shall from time to time determine, which agreements shall comply with the following terms and conditions. A. Number of Shares. Each option agreement shall state the number of shares to which the option pertains. B. Option Price. Each option agreement shall state the option price per share (or the method by which such price shall be computed), which shall be equal to 100% of the Fair Market Value of a share of the Common Stock on the date such option is granted. C. Medium and Time of Payment. The option price shall be payable upon the exercise of an option in the legal tender of the United States. Upon receipt of payment, the Company shall deliver to the optionee (or person entitled to exercise the option) a certificate or certificates for the shares of Common Stock to which the option pertains. D. Exercise of Options. Options granted under the Plan shall vest and become exercisable in 20% increments per year, beginning on the first anniversary of the Grant Date of the Option. To the extent that an option has become exercisable and subject to the restrictions and limitations set forth in this Plan and any option agreement, it may be exercised in whole or such lesser amount as may be authorized by the option agreement. If exercised in part, any vested, unexercised portion of an option shall continue to be held by the optionee and may thereafter be exercised as provided herein. E. Termination of Chairman Employment. In the event that an optionee shall cease to be Chairman of the Company for any reason other than his termination for cause, his option shall cease to continue vesting, but vested and exercisable portions shall continue to be exercisable to the extent it was exercisable at the date he ceased to be Chairman, for the period specified in the Option Agreement. In the event that an optionee ceases to be Chairman due to his termination for cause, his option shall cease to continue vesting but vested and exercisable portions shall continue to be exercisable portions shall be exercisable for 90 days following the date of his termination, and thereafter shall terminate. SECTION 3 --------- RECAPITALIZATIONS AND REORGANIZATIONS ------------------------------------- 4 The number of shares of Common Stock covered by the Plan, the number of shares and price per share of each outstanding option, and the number of shares subject to each grant provided for in Section 1 hereof shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend or any other increase or decrease in the number of issued and outstanding shares of Common Stock effected without receipt of consideration by the Company. If the Company shall be the surviving corporation in any merger or consolidation, each outstanding option shall pertain to and apply to the securities to which a holder of the same number of shares of Common Stock that are subject to that option would have been entitled. A dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the surviving corporation, shall cause each outstanding option to terminate, unless the agreement of merger or consolidation shall otherwise provide; provided that, in the event such dissolution, liquidation, merger or consolidation will cause outstanding options to terminate, optionee shall have the right immediately prior to such dissolution, liquidation, merger or consolidation to exercise his option in whole or in part without regard to any limitations on the exercisability of such option other than the expiration date of the option. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. SECTION 4 --------- MISCELLANEOUS PROVISIONS ------------------------ 1. RIGHTS AS A SHAREHOLDER. An optionee or a transferee of an option as such shall have no rights as a shareholder with respect to any shares covered by an option until the date of the receipt of payment (including any amounts required by the Company pursuant to Subsection 10 of Section 1) by the Company. 2. PURCHASE FOR INVESTMENT. Unless the shares of Common Stock to be issued upon exercise of an option granted under the Plan have been effectively registered under the Securities Act of 1933, as amended (the "Securities Act"), the Company shall be under no obligation to issue any shares of Common Stock covered by any option unless the person who exercises such option, in whole or in part, shall give a written representation and undertaking to the Company which is satisfactory in form and scope to counsel to the Company and upon which, in the opinion of such counsel, the Company may reasonably rely, that he is acquiring the shares of Common Stock issued to him pursuant to such exercise of the option for his own account as an investment and not with a view to, or for sale in connection with, the distribution of any such shares of Common Stock, and that he will make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the Securities Act, or any other 5 applicable law, and that if shares of Common Stock are issued without such registration, a legend to this effect may be endorsed upon the securities so issued. 3. OTHER PROVISIONS. The option agreements authorized under the Plan shall contain such other provisions, including, without limitation, restrictions upon the exercise of the option or restrictions required by any applicable securities laws, as the Board shall deem advisable. 4. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of Common Stock pursuant to the exercise of options will be used for general corporate purposes. 5. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall impose no obligation upon the optionee to exercise such option. IN WITNESS WHEREOF, AMERICAN FREIGHTWAYS CORPORATION, by its duly authorized officer, has executed this Amended and Restated Plan on the date indicated below. Dated January 18, 1996 By:/s/Tom Garrison ---------------- --------------- Officer AMENDED AND RESTATED Date January 18, 1996 ---------------- By:/s/Tom Garrison --------------- Officer 6 EX-10.(G) 3 AMD. AND RESTD. NON-EMPL. DIRECTOR STOCK OP. PLAN EXHIBIT 10(g) AMERICAN FREIGHTWAYS CORPORATION AMENDED AND RESTATED NON-EMPLOYEE DIRECTOR STOCK OPTION PLAN SECTION 1 --------- 1. This 1995 Non-Employee Director Stock Option Plan (the "Plan") as amended and restated in 1995, is intended to attract and retain the services of a non-employee director ("Director") of American Freightways Corporation (the "Company"), for the benefit of the Company and its shareholders and to provide additional incentive for such persons to continue to work for the best interests of the Company and its shareholders. 2. ADMINISTRATION. The Plan shall be administered by the Board of Directors of the Company (the "Board"). The Board shall have the power to construe the Plan, to determine all questions arising thereunder and to adopt and amend such rules and regulations for the administration of the Plan as it may deem desirable. The interpretation and construction by the Board of any provisions of the Plan or of any option granted under it shall be final. No member of the Board shall be liable for any action or determination made in good faith with respect to the Plan or any option granted under it. 3. ELIGIBILITY. Each person who shall have been elected or appointed a director of the Company at our or after its annual meeting of stockholders shall automatically be granted options to purchase 2,000 shares of the Company's common stock (subject to further adjustment as provided herein) on each succeeding first day in February, commencing in 1995, provided, that such automatic option grants shall be made only if the recipient director (i) is not otherwise an employee of the Company or any subsidiary on the date of grant, (ii) was not an employee of the Company or any subsidiary at any time during the period commencing on the date of the immediately preceding annual meeting of stockholders and ending on the date of grant (the "Eligibility Period") and (iii) served on the Board of Directors for the entire Eligibility Period. The dates on which options are granted hereunder are referred to herein as the "Grant Date." All options granted to any Directors under this Section 3 shall vest at the rate of 20% per year beginning on the first anniversary of the Grant Date. 4. SHARES OF STOCK SUBJECT TO THE PLAN. The shares that may be issued under the Plan shall be authorized and unissued or reacquired shares of the Company's common stock (the "Common Stock"). The aggregate number of shares which may be issued under the Plan shall not exceed 50,000 shares of Common Stock, unless an adjustment is required in accordance with Section 3. 5. AMENDMENT OR TERMINATION OF THE PLAN. The Board of Directors may, insofar as permitted by law, from time to time, suspend or terminate the Plan or revise or amend it in any respect whatsoever, except that no such amendment shall alter or impair or diminish any rights or obligations under any option theretofore granted under the Plan without the consent of the person to whom such option was granted. In addition no such amendment shall be effective without shareholder approval is such approval is required in order to assure the Plan's continued qualification under Rule 16b-3 promulgated under the Securities Exchange Act of 1934, as amended. The Plan's provisions regarding the formula for determining the amount, exercise price, and timing of options to be granted under the Plan shall in no event be amended more than once every six months, other than to comport with changes in the Internal Revenue Code of 1986, as amended. 6. EXPIRATION OF PLAN. Options may be granted under the Plan until February 1, 1998. Notwithstanding the foregoing, each option granted under the Plan shall remain in effect until such option has been satisfied by the issuance of shares or terminated in accordance with its terms and the terms of the Plan. 7. NONASSIGNABILITY. No option shall be assignable or transferable by the grantee except by will or by the laws of descent and distribution. During the lifetime of the optionee, the option shall be exercisable only by him or her, and no other person shall acquire any rights therein. 8. WITHHOLDING TAXES. Whenever shares of Common Stock are to be issued under the Plan, the Company shall require the optionee to remit to the Company an amount sufficient to satisfy federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for such shares. 9. DEFINITION OF "FAIR MARKET VALUE". For the purposes of this Plan, the term "fair market value," when used in reference to the date of grant of an option shall be the mean: If the Shares of the Company are listed on a national securities exchange (including the New York, American or NASDAQ National Market System) in the United States on the date any Option is granted, the fair market value per Share shall be deemed to be the average of the high and low sale prices per share of such Shares of the Company on such national securities exchange in the United States on such date, as published by the Wall Street Journal or other reliable publication, but if the Shares of the Company are not traded on such date or such national securities exchange is not open for business on such date, the fair market value per Share shall be the average of such high and low sale prices on the last preceding date on which such exchange shall have been open for business and the Shares of the Company were traded. If the Shares of the Company are listed on more than one national securities exchange in the United States on the date any such Option is -2- granted, the Committee shall determine, in its discretion, which national securities exchange shall be used for the purpose of determining the fair market value per Share. If at any date any Option is granted a public market exists for the Shares of the Company but such Shares are not listed on a national securities exchange in the United States, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the- counter market for such Shares of the Company in the United States on the date such Option is granted. If there are no bid and asked quotations for such Shares on such date, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the-counter market in the United States for such Shares of the Company on the closest date preceding the date such Option is granted, for which such quotations are available. SECTION 2 --------- STOCK OPTIONS ------------- 1. AWARD OF STOCK OPTIONS. Awards of stock options shall be made under the Plan under all the terms and conditions contained herein. Each option granted under the Plan shall be evidenced by an option agreement duly executed on behalf of the Company and by the recipient, which option agreements shall comply with and be subject to the terms and conditions of the Plan. Any option agreement may contain such other terms, provisions and conditions not inconsistent with the Plan as may be determined by the Board. 2. TERM OF OPTIONS AND EFFECT OF TERMINATION. Notwithstanding any other provision of the Plan, no option granted under the Plan shall be exercisable after the expiration of ten years from the date of its grant. In the event that any outstanding option under the Plan expires by reason of lapse of time or otherwise is terminated for any reason, the shares of Common Stock subject to any such option which have not been issued pursuant to the exercise of the option shall again become available in the pool of shares of Common Stock for which options may be granted under the Plan. 3. TERMS AND CONDITIONS OF OPTIONS. Options granted pursuant to the Plan shall be evidenced by agreements in such form as the Board shall from time to time determine, which agreements shall comply with the following terms and conditions. A. Number of Shares. Each option agreement shall state the number of shares to which the option pertains. B. Option Price. Each option agreement shall state the option price per share (or the method by which such price shall be computed), which shall be equal to 100% of the Fair Market Value of a share of the Common Stock on the date such option is granted. -3- C. Medium and Time of Payment. The option price shall be payable upon the exercise of an option in the legal tender of the United States. Upon receipt of payment, the Company shall deliver to the optionee (or person entitled to exercise the option) a certificate or certificates for the shares of Common Stock to which the option pertains. D. Exercise of Options. Options granted under the Plan shall vest and become exercisable in 20% increments per year, beginning on the first anniversary of the Grant Date of the Option. To the extent that an option has become exercisable and subject to the restrictions and limitations set forth in this Plan and any option agreement, it may be exercised in whole or such lesser amount as may be authorized by the option agreement. If exercised in part, any vested, unexercised portion of an option shall continue to be held by the optionee and may thereafter be exercised as provided herein. E. Termination of Director. If an optionee ceases to be a director for any reason, any option held by such person may be exercised at any time within 90 days after the date on which such person ceased to be a director, but only to the extent the option was vested and exercisable at such date. Any such option granted hereunder may be exercised by the executors or administrators of the optionee's estate or by any person or persons who shall have acquired the option directly from the optionee by his will or the applicable law of descent and distribution. SECTION 3 --------- RECAPITALIZATIONS AND REORGANIZATIONS ------------------------------------- The number of shares of Common Stock covered by the Plan, the number of shares and price per share of each outstanding option, and the number of shares subject to each grant provided for in Section 1 hereof shall be proportionately adjusted for any increase or decrease in the number of issued and outstanding shares of Common Stock resulting from a subdivision or consolidation of shares or the payment of a stock dividend or any other increase or decrease in the number of issued and outstanding shares of Common Stock effected without receipt of consideration by the Company. If the Company shall be the surviving corporation in any merger or consolidation, each outstanding option shall pertain to and apply to the securities to which a holder of the same number of shares of Common Stock that are subject to that option would have been entitled. A dissolution or liquidation of the Company, or a merger or consolidation in which the Company is not the surviving corporation, shall cause each outstanding option to terminate, unless the agreement of -4- merger or consolidation shall otherwise provide; provided that, in the event such dissolution, liquidation, merger or consolidation will cause outstanding options to terminate, optionee shall have the right immediately prior to such dissolution, liquidation, merger or consolidation to exercise his option in whole or in part without regard to any limitations on the exercisability of such option other than the expiration date of the option. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. SECTION 4 --------- MISCELLANEOUS PROVISIONS ------------------------ 1. RIGHTS AS A SHAREHOLDER. An optionee or a transferee of an option as such shall have no rights as a shareholder with respect to any shares covered by an option until the date of the receipt of payment (including any amounts required by the Company pursuant to Subsection 10 of Section 1) by the Company. 2. PURCHASE FOR INVESTMENT. Unless the shares of Common Stock to be issued upon exercise of an option granted under the Plan have been effectively registered under the Securities Act of 1933, as amended (the "Securities Act"), the Company shall be under no obligation to issue any shares of Common Stock covered by any option unless the person who exercises such option, in whole or in part, shall give a written representation and undertaking to the Company which is satisfactory in form and scope to counsel to the Company and upon which, in the opinion of such counsel, the Company may reasonably rely, that he is acquiring the shares of Common Stock issued to him pursuant to such exercise of the option for his own account as an investment and not with a view to, or for sale in connection with, the distribution of any such shares of Common Stock, and that he will make no transfer of the same except in compliance with any rules and regulations in force at the time of such transfer under the Securities Act, or any other applicable law, and that if shares of Common Stock are issued without such registration, a legend to this effect may be endorsed upon the securities so issued. 3. OTHER PROVISIONS. The option agreements authorized under the Plan shall contain such other provisions, including, without limitation, restrictions upon the exercise of the option or restrictions required by any applicable securities laws, as the Board shall deem advisable. 4. APPLICATION OF FUNDS. The proceeds received by the Company from the sale of Common Stock pursuant to the exercise of options will be used for general corporate purposes. -5- 5. NO OBLIGATION TO EXERCISE OPTION. The granting of an option shall impose no obligation upon the optionee to exercise such option. (The remainder of this page left blank intentionally) -6- IN WITNESS WHEREOF, AMERICAN FREIGHTWAYS CORPORATION, by its duly authorized officer, has executed this Plan on the date indicated below. Dated January 23, 1996 By:/s/Tom Garrison ---------------- --------------------------- Officer -7- EX-10.(H) 4 AMENDED AND RESTATED 1993 STOCK OPTION PLAN EXHIBIT 10(h) AMERICAN FREIGHTWAYS CORPORATION AMENDED AND RESTATED 1993 STOCK OPTION PLAN Effective Date: January 23, 1996 AMERICAN FREIGHTWAYS AMENDED AND RESTATED 1993 STOCK OPTION PLAN
Article Page - ------- ---- I. Purposes........................................ 1 II. Shares Subject to the Plan...................... 1 III. Administration.................................. 2 IV. Eligibility..................................... 4 V. Maximum Allotment of Incentive Options.......... 5 VI. Option Price and Payment........................ 5 VII. Use of Proceeds................................. 6 VIII. Term of Options and Limitations on the Right of Exercise........................... 7 IX. Exercise of Options............................. 7 X. Stock Appreciation Rights....................... 8 XI. Nontransferability of Options and Stock Appreciation Rights....................... 9 XII. Termination of Employment...................... 10 XIII. Adjustment of Shares; Effect of Certain Transactions........................... 11 XIV. Right to Terminate Employment.................. 12 XV. Purchase for Investment........................ 12 XVI. Issuance of Certificates; Legends; Payment of Expenses................... 13 XVII. Withholding Taxes.............................. 14 XVIII. Listing of Shares and Related Matters.......... 14 XIX. Amendment of the Plan.......................... 14 XX. Termination or Suspension of the Plan.......... 15 XXI. Governing Law.................................. 15 XXII. Effective Date................................. 15
AMERICAN FREIGHTWAYS AMENDED AND RESTATED 1993 STOCK OPTION PLAN I. PURPOSES -------- American Freightways Corporation (the "Company") desires to afford certain of its key employees and key employees of any subsidiary corporation or parent corporation now existing or hereafter formed or acquired who are responsible for the continued growth of the Company an opportunity to acquire a proprietary interest in the Company, and thus to create in such key employees an increased interest in and a greater concern for the welfare of the Company. The stock options ("Options") and stock appreciation rights ("Rights") offered pursuant to this Freightways Stock Option Plan (the "Plan") are a matter of separate inducement and are not in lieu of any salary or other compensation for the services of any key employee. The Company, by means of the Plan, seeks to retain the services of persons now holding key positions and to secure the services of persons capable of filling such positions. The Options granted under the Plan are intended to be either incentive stock options ("Incentive Options") within the meaning of Section 422 of the Internal Revenue Code of 1986, as it may from time to time be amended (the "Code"), or options that do not meet the requirements for Incentive Options ("Nonqualified Options"), but the Company makes no warranty as to the qualification of any Option as an Incentive Option. II. SHARES SUBJECT TO THE PLAN -------------------------- The total number of common shares of the Company which either may be purchased pursuant to the exercise of Options granted under the Plan or acquired pursuant to the exercise of Rights granted under the Plan shall not exceed, in the aggregate, 1,000,000 of the presently authorized common shares, $.01 par value per share, of the Company (the "Shares"). Accordingly, the sum of (a) the number of Shares subject at any one time to Options or Rights granted under the Plan and (b) the number of Shares then outstanding pursuant to exercises of Options or Rights granted under the Plan, shall not exceed 1,000,000 Shares. If and to the extent that Options granted under the Plan expire or terminate without having been exercised, new Options or Rights may be granted with respect to the Shares covered by such expired or terminated Options or Rights, provided that the grant and the terms of such new Options or Rights shall in all respects comply with the provisions of the Plan. The term "Shares" shall include any securities, cash or other property into which Shares may be changed through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split-up, split-off, spin-off, combination of Shares, exchange of Shares, issuance of rights to subscribe or change in capital structure. Shares which are subject to Rights and related Options shall be counted only once in determining whether the maximum number of Shares which may be purchased or acquired under the Plan has been exceeded. Shares which may be acquired under the Plan may be either authorized but unissued Shares, Shares of issued stock held in the Company's treasury, or both, at the discretion of the Company. The Company may, from time to time during the period beginning February 1, 1993 (the "Effective Date") and ending February 1, 2003 (the "Termination Date"), grant to certain key employees of the Company, or of any subsidiary corporation or parent corporation of the Company now existing or hereafter formed or acquired, Options, Rights or both Options and Rights, under the terms hereinafter set forth provided, however, that any such grants shall not be effective until this Plan shall have been approved by stockholder vote at the 1993 Annual Meeting of Stockholders. Provisions of the Plan which pertain to Options or Rights granted to an employee shall apply to Options, Rights or a combination thereof. As used in the Plan, the terms "subsidiary corporation" and "parent corporation" shall mean, respectively, a corporation coming within the definition of such terms contained in Sections 424(f) and 424(e) of the Code. III. ADMINISTRATION -------------- The Board of Directors of the Company (the "Board of Directors") hereby designates the Compensation Committee (the "Committee") as the Committee of the Board of Directors authorized to administer the Plan. The Committee shall consist of no fewer than two members of the Board of Directors, each of whom shall be a "disinterested person" within the meaning of Rule 16b-3 (or any successor rule or regulation, hereafter "Rule 16b-3") promulgated under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). A majority of the members -2- of the Committee shall constitute a quorum, and the act of a majority of the members of the Committee shall be the act of the Committee. Any member of the Committee may be removed at any time either with or without cause by resolution adopted by the Board of Directors, and any vacancy on the Committee may at any time be filled by resolution adopted by the Board of Directors. Subject to the express provisions of the Plan, the Committee shall have authority, in its discretion, to determine the employees to whom Options or Rights shall be granted, the time when such Options or Rights shall be granted to employees, the number of Shares which shall be subject to each Option or Right, the purchase price of each Share which shall be subject to each Option or Right, the period(s) during which such Options or Rights shall be exercisable (whether in whole or in part), and the other terms and provisions thereof. In determining the employees to whom Options or Rights shall be granted, the Committee shall consider the length of service, the amount of earnings, the responsibilities and duties of such employees and such other factors as it reasonably determines to be relevant to any such employees contribution to the Company; provided, however, that no employee shall be granted Incentive Options in any calendar year to purchase shares of stock in the Company or in any subsidiary corporation or parent corporation of the Company which exceeds the maximum allotment prescribed in Article V. Subject to the express provisions of the Plan, the Committee also shall have authority to construe the Plan and Options and Rights granted thereunder, to amend the Plan and Options and Rights granted thereunder, to prescribe, amend and rescind rules and regulations relating to the Plan, to determine the terms and provisions of the respective Options and Rights (which need not be identical) and to make all other determinations necessary or advisable for administering the Plan. Any decision of the Committee reduced to writing and signed by all members of the Committee shall be effective as a meeting of the Committee. The Committee also shall have the authority to require, in its discretion, that the employee agree, promptly after the grant of an Option or Right, (i) not to sell or otherwise dispose of Shares acquired pursuant to the exercise of an Option or Right granted under the Plan for a period of six (6) months following the date of grant or exercise of the Option or Right; and (ii) that in the event of termination of employment of such employee, other than as a result of dismissal without cause, such employee will not, for a period to be fixed at the time of the grant of the Option or Right, enter into any other employment, or participate directly or -3- indirectly in any other business or enterprise, which is competitive with the business of the Company or any subsidiary corporation or parent corporation of the Company, or enter into any employment in which such employee will be called upon to utilize special knowledge and information obtained through employment with the Company or any subsidiary corporation or parent corporation thereof. The determination of the Committee on matters referred to in this Article III shall be conclusive. Whether or not a Committee is separately designated by the Board of Directors, any or all powers and functions of the Committee may at any time and from time to time be exercised by the Board of Directors; provided, however, that, with respect to the participation in the Plan of employees who are members of the Board of Directors, such powers and functions of the Committee may be exercised by the Board of Directors only if, at the time of such exercise, each of the members of the entire Board of Directors are "disinterested persons" within the meaning of Rule 16b-3 (or any successor rule or regulation) promulgated under the Exchange Act. The Committee may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion received from any such counsel or consultant and any computation received from any such consultant or agent. Expenses incurred by the Board of Directors or the Committee in the engagement of such counsel, consultant or agent shall be paid by the Company. No member or former member of the Committee or of the Board of Directors shall be liable for any action or determination made in good faith with respect to the Plan or any Option or Right granted hereunder. IV. ELIGIBILITY ----------- Options and Rights may be granted only to salaried key employees of the Company or of any subsidiary corporation or parent corporation of the Company, except members of the Committee and except as hereinafter provided, and shall not be granted to any officer or director who is not also a salaried key employee. An Incentive Option shall not be granted to any person who, at the time such Option is granted, owns shares of the Company or any subsidiary corporation or parent corporation of the Company who possesses more than ten percent (10%) of the total combined voting power of all classes of shares of the Company or of any subsidiary corporation or parent corporation of the -4- Company, unless (i) the exercise price per share is not less than one hundred and ten percent (110%) of the fair market value per share on the date such Option is granted and (ii) such Option by its terms is not exercisable after the expiration of five (5) years from the date such Option is granted. In determining share ownership of an employee, the rules of Section 424(d) of the Code shall be applied, and the Committee may rely on representations of fact made to it by the employee and believed by it to be true. V. MAXIMUM ALLOTMENT OF INCENTIVE OPTIONS -------------------------------------- To the extent that the aggregate fair market value of shares as to which Incentive Options (determined without regard to this Article V) are exercisable for the first time by an employee during any calendar year exceeds $100,000, such options shall be treated as Nonqualified Options. VI. OPTION PRICE AND PAYMENT ------------------------ The price for each Share purchasable under any Option granted hereunder shall be such amount as the Committee shall, in its best judgment, determine on the basis of facts and circumstances to be not less than (i) one hundred percent (100%) of the fair market value per Share with respect to Incentive Options, and (ii) one hundred percent (100%) of the fair market value per Share with respect to Nonqualified Options, at the date any such Option is granted; provided, however, that, in the case of an Incentive Option granted to a person who, at the time such Option is granted, owns shares of the Company who possesses more than ten percent (10%) of the total combined voting power of all classes of shares of the Company, the purchase price for each share shall be such amount as the Committee, in its best judgment, shall determine to be not less than one hundred and ten percent (110%) of the fair market value per Share at the date the Option is granted. If the Shares of the Company are listed on a national securities exchange (including the New York, American or NASDAQ National Market System) in the United States on the date any Option is granted, the fair market value per Share shall be deemed to be the average of the high and low sale prices per share of such Shares of the Company on such national securities exchange in the United States on such date, as published by the Wall Street Journal or other reliable publication, but if the Shares of the Company are not traded on such date or such national securities exchange is not -5- open for business on such date, the fair market value per Share shall be the average of such high and low sale prices on the last preceding date on which such exchange shall have been open for business and the Shares of the Company were traded. If the Shares of the Company are listed on more than one national securities exchange in the United States on the date any such Option is granted, the Committee shall determine, in its discretion, which national securities exchange shall be used for the purpose of determining the fair market value per Share. If at the date any Option is granted a public market exists for the Shares of the Company but such Shares are not listed on a national securities exchange in the United States, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the- counter market for such Shares of the Company in the United States on the date such Option is granted. If there are no bid and asked quotations for such Shares on such date, the fair market value per Share shall be deemed to be the mean between the closing bid and asked quotations in the over-the-counter market in the United States for such Shares of the Company on the closest date preceding the date such Option is granted, for which such quotations are available. The Company shall cause such Share certificates to be issued only when it shall have received the full purchase price for the Shares in cash; provided, however, that in lieu of cash, the holder of an Option may, if the terms of such Option so provide in the discretion of the Committee and to the extent permitted by applicable law, exercise his Option, in whole or in part, by delivering to the Company common shares of the Company (in proper form for transfer and accompanied by all requisite stock transfer tax stamps or cash in lieu thereof) owned by such holder having a fair market value equal to the cash exercise price applicable to that portion of the Option being exercised by the delivery of such shares. The fair market value of the shares so delivered to be determined on the exercise date in the same manner as provided for the determination of the fair market value on the date of grant, or as may be required in order to comply with or to conform to the requirements of any applicable laws or regulations. For this provision, the exercise date is the date on which shares are received pursuant to the Option and payment is made therefor. VII. USE OF PROCEEDS --------------- Any cash proceeds of the sale of Shares subject to the Options granted hereunder are to be added to the general funds of the Company and used for its general corporate purposes as the Board -6- of Directors shall determine. Shares received by the Company as payment, in whole or in part, for the exercise of any Option may, in the discretion of the Board of Directors, be retained as treasury shares or returned and cancelled. VIII. TERM OF OPTIONS AND LIMITATIONS ON THE RIGHT OF EXERCISE ------------------------ Unless the Committee shall determine otherwise (in which event, the instrument evidencing the Option granted hereunder shall so specify), and subject to the provisions of Article IV, any Option granted hereunder shall be exercisable during a period of not more than ten (10) years from the date of grant of such Option at such times and in such amounts as the Committee shall determine at such date of grant. Any Nonqualified Option granted hereunder shall be exercisable at such times, in such amounts and during such period or periods as the Committee, with the Board of Directors approval, shall determine at the date of the grant of such Option. The Committee shall have the right to accelerate, in whole or in part, from time to time, conditionally or unconditionally, rights to exercise any Option granted hereunder. To the extent that an Option is not exercised within the period of exercisability specified therein, it shall expire as to the then unexercised part. If any Option granted hereunder shall terminate prior to the Termination Date, the Committee shall have the right to use the Shares as to which such Option shall not have been exercised to grant one or more additional Options to any eligible employee, but any such grant of an additional Option shall be made prior to the close of business on the Termination Date. In no event shall an Option granted hereunder be exercised for a fraction of a share. IX. EXERCISE OF OPTIONS ------------------- Options granted under the Plan shall be exercised by the optionee as to all or part of the Shares covered thereby by the giving of written notice of the exercise thereof to the Corporate Secretary of the Company at the principal business office of the Company, specifying the number of Shares to be purchased and accompanied by payment of the purchase price. -7- X. STOCK APPRECIATION RIGHTS ------------------------- In the discretion of the Committee, a Right may be granted (i) alone, (ii) simultaneously with the grant of an Option (either Incentive or Nonqualified) and in conjunction therewith or in the alternative thereto or (iii) subsequent to the grant of a Nonqualified Option and in conjunction therewith or in the alternative thereto. The exercise price of a Right granted alone shall be determined by the Committee, but shall not be less than one hundred percent (100%) of the fair market value of one Share on the date of grant of such Right. A Right granted simultaneously with or subsequent to the grant of an Option and in conjunction therewith or in the alternative thereto shall have the same exercise price as the related Option, shall be transferable only upon the same terms and conditions as the related Option, and shall be exercisable only to the same extent as the related Option; provided, however, that a Right, by its terms, shall be exercisable only when the fair market value of the Shares subject to the Right exceeds the exercise price thereof. Any Right shall be exercisable upon such additional terms and conditions as may from time to time be prescribed by the Committee. A Right shall entitle the holder to receive from the Company, upon a written request filed with the Corporate Secretary of the Company at its principal offices (the "Request"), a number of Shares as specified in the Request (with or without restrictions as to substantial risk of forfeiture and transferability, as determined by the Committee in its sole discretion), an amount of cash, or any combination of Shares and cash, as set forth in the Request (but subject to the approval of the Committee, in its sole discretion, at any time up to and including the time of payment, as to the making of any cash payment), having an aggregate value equal to the product of (i) the excess of the fair market value on the day of such Request of one Share over the exercise price per Share specified in such Right or its related Option, multiplied by (ii) the number of Shares for which such Right shall be exercised; provided, however, that the Committee, in its discretion, may impose a maximum limitation on the amount of cash, the fair market value of Shares, or a combination thereof, which may be received by a holder upon exercise of a Right. Any election by a holder of a Right to receive cash in full or partial settlement of such Right, and any exercise of such Right for cash, may be made only by a Request filed with the Corporate Secretary of the Company either (i) six months prior to the proposed settlement date for -8- such Right, or (ii) during the period beginning on the third business day following the date of release for publication by the Company of quarterly or annual summary statements of sales and earnings and ending on the twelfth business day following such date. Within sixty (60) days of the receipt by the Company of a Request to receive cash in full or partial settlement of a Right or to exercise such Right for cash, the Committee shall, in its sole discretion, either consent to or disapprove, in whole or in part, such Request. If the Committee disapproves in whole or in part any election by a holder to receive cash in full or partial settlement of a Right or to exercise such Right for cash, such disapproval shall not affect such holder's right to exercise such Right at a later date, to the extent that such Right shall be otherwise exercisable, or to elect the form of payment at a later date, provided that an election to receive cash upon such later exercise shall be subject to the approval of the Committee. Additionally, such disapproval shall not affect such holder's right to exercise any related Option or Options granted to such holder under the Plan. A holder of a Right shall not receive cash or Shares of the Company stock in full or partial settlement of such Right, or upon the full or partial exercise of such Right, if such Right or the related Option shall have been exercised during the first six (6) months of its respective term; provided, however, that such prohibition shall not apply if the holder of such Right dies or becomes disabled (within the meaning of Section 105(d)(4) of the Code) prior to the expiration of such six-month period, or if such holder is not a director, officer or a beneficial owner of more than ten percent (10%) of any class of equity security of the Company as described in Section 16(a) of the Exchange Act. A Right shall be deemed exercised on the last day of its term, if not otherwise exercised by the holder thereof, provided that the fair market value of the Shares subject to the Right exceeds the exercise price thereof on such date. XI. NONTRANSFERABILITY OF OPTIONS AND STOCK APPRECIATION RIGHTS ----------------------------- Neither an Option nor a Right granted hereunder shall be transferable otherwise than by will or the laws of descent and distribution, and any Option or Right granted hereunder shall be exercisable, during the lifetime of the holder, only by such holder. -9- XII. TERMINATION OF EMPLOYMENT ------------------------- If an employee's employment with the Company shall be terminated by reason of retirement, the Employee shall have the right to exercise the vested portions of such Option in no event later than (i) in respect of Incentive Stock Options, 90 days after the retirement date, and (ii) with respect to other Options the date the Option would have expired had it not been for such retirement. If an employee's employment shall be terminated by reason of death or disability, the employee shall have the right to exercise vested portions of such Options for one year following the termination of the employee's employment. During such one year period following death or disability, Options held by employee shall continue to vest. Such vesting shall not continue after such one year period and Options not vested shall expire and terminate. If an employee's employment shall terminate for reasons other than death, disability or retirement, any Option or Right previously granted to the employee, unless otherwise specified by the committee in the Option or Right, shall, to the extent not theretofore vested, terminate and become null and void. Employee shall be entitled to exercise any vested portion of an Option or Right for 90 days following termination. If applicable to an Option or Right granted hereunder, whenever such Option or Right shall be exercised by the legal representative of a deceased employee or former employee, or by a person who acquired an Option or Right granted hereunder by bequest or inheritance or by reason of the death of any employee or former employee, written notice of such exercise shall be accompanied by a certified copy of letters testamentary or equivalent proof of the right of such legal representative or other person to exercise such Option or Right. For the purposes of the Plan, an employment relationship shall be deemed to exist between an individual and a corporation if, at the time of the termination, the individual was an "employee" of such corporation for purposes of Section 422(a) of the Code. If an individual is on leave of absence taken with the consent of the corporation by which such individual was employed, or is on active military service, and is determined to be an "employee" for purposes of the exercise of an Option or Right, such individual shall not be entitled to exercise such Option or Right during such period and while the employment relationship is treated as continuing intact unless such individual shall have obtained the prior written consent of such corporation, which consent shall be signed by -10- the Chairman of the Board, the President, a Vice-President or other duly authorized officer of such corporation. A termination of employment shall not be deemed to occur by reason of (i) the transfer of an employee from employment by the Company to employment by a subsidiary corporation or a parent corporation of the Company or (ii) the transfer of an employee from employment by a subsidiary corporation or a parent corporation of the Company to employment by the Company or by another subsidiary corporation or parent corporation of the Company. XIII. ADJUSTMENT OF SHARES; EFFECT OF CERTAIN TRANSACTIONS ----------------------- Notwithstanding any other provision contained herein, in the event of any change in the Shares subject to the Plan or to any Option or Right granted under the Plan (through merger, consolidation, reorganization, recapitalization, stock dividend, stock split, split-up, split-off, spin-off, combination of shares, exchange of shares, issuance of rights to subscribe, or change in capital structure) appropriate adjustments shall be made by the Committee as to the maximum number of Shares subject to the Plan, the maximum number of Shares for which Options or Rights may be granted to any one employee and the number of Shares and price per Share subject to outstanding Options or Rights which may be granted to any one employee, and the number of Shares and price per Share subject to outstanding Options or Rights as shall be equitable to prevent dilution or enlargement of rights under Options or Rights, and the determination of the Committee as to these matters shall be conclusive; provided, however, that (i) any such adjustment with respect to an Incentive Option and any related Right shall comply with the rules of Section 424(a) of the Code, and (ii) in no event shall any adjustment be made which would render any Incentive Option granted hereunder other than an Incentive Option for purposes of Section 422 of the Code. The Committee may determine, in its discretion, that Options and Rights may become immediately exercisable upon the occurrence of a transaction involving a "change in control" of the Company, which transactions shall be as defined in the Option Agreement or other document pursuant to which Options or Rights are granted. A "change in control" transaction may include a merger or consolidation of the Company, a sale of all or substantially all of its assets, or the -11- acquisition of a significant percentage of the voting power of the Company, or such other form of transaction as the Committee determines to constitute a change in control. The Committee, in its discretion, may also determine that, upon the occurrence of such a "change in control" transaction, each Option or Right outstanding hereunder shall terminate within a specified number of days after notice to the holder, and such holder shall receive, with respect to each Share subject to such Option or Right, an amount equal to the excess of the fair market value of the Shares immediately prior to the occurrence of such transaction over the exercise price of such Option or Right; such amount shall be payable in cash, in one or more of the kinds of property payable in such transaction, or in a combination thereof, as the Committee in its discretion shall determine. XIV. RIGHT TO TERMINATE EMPLOYMENT ----------------------------- The Plan shall not impose any obligation on the Company or on any subsidiary corporation or parent corporation thereof to continue the employment of any holder of an Option or Right; it shall not impose any obligation on the part of any holder of an Option or Right to remain in the employ of the Company or of any subsidiary corporation or parent corporation thereof. XV. PURCHASE FOR INVESTMENT ----------------------- Except as hereafter provided, the holder of an Option or Right granted hereunder shall, upon any exercise hereof, execute and deliver to the Company a written statement, in form satisfactory to the Company, in which such holder represents and warrants that such holder is purchasing or acquiring the Shares acquired thereunder for such holder's own account, for investment only and not with a view to the resale or distribution of any of such Shares. Any resale or distribution of such Shares shall be made only pursuant to either (a) a Registration Statement on an appropriate form under the Securities Act of 1933, as amended (the "Securities Act"), which Registration Statement shall have become effective and is then current with regard to the Shares being sold, or (b) a specific exemption from the registration requirements of the Securities Act, but in claiming such exemption the holder shall, prior to any offer of sale or sale of such Shares, obtain a prior favorable written opinion, in form and substance satisfactory to the Company, from counsel for or approved by the Company, as to the application of such exemption thereto. The foregoing -12- restriction shall not apply to (i) issuances by the Company so long as the Shares being issued are registered under the Securities Act and a prospectus in respect thereof is current or (ii) reofferings of Shares by affiliates of the Company (as defined in Rule 405 or any successor rule or regulation promulgated under the Securities Act) if the Shares being reoffered are registered under the Securities Act and a prospectus in respect thereof is current. XVI. ISSUANCE OF CERTIFICATES; LEGENDS; PAYMENT OF EXPENSES ---------------------------- Upon any exercise of an Option or Right which may be granted hereunder and, in the case of an Option, payment of the purchase price, a certificate or certificates for the Shares as to which the Option or Right has been exercised shall be issued by the Company in the name of the person exercising the Option or Right and shall be delivered to or upon the order of such person or persons, as permitted by state or federal securities law. The Company may place such legend or legends upon the certificates for Shares issued upon exercise of an Option or Right granted hereunder, and the Committee may issue such "stop transfer" instructions to its transfer agent in respect of such Shares, as the Committee, in its discretion, determines to be necessary or appropriate to (i) prevent a violation of, or to perfect an exemption from, the registration requirements of the Securities Act, (ii) implement the provisions of any agreement between the Company and the optionee or grantee with respect to such Shares, or (iii) permit the Company to determine the occurrence of a disqualifying disposition, as described in Section 421(b) of the Code, of Shares transferred upon exercise of an Incentive Option granted under the Plan. The Company shall pay all issue or transfer taxes with respect to the issuance or transfer of shares, as well as all fees and expenses necessarily incurred by the Company in connection with such issuance or transfer, except fees and expenses which may be necessitated by the filing or amending of a Registration Statement under the Securities Act, which fees and expenses shall be borne by the recipient of the Shares unless such Registration Statement has been filed by the Company for its own corporate purposes (and the Company so states) in which event the recipient of the Shares shall bear only such fees and expenses as are attributable solely to the inclusion of such Shares in the Registration Statement. -13- All Shares issued as provided herein shall be fully paid and non-assessable to the extent permitted by law. XVII. WITHHOLDING TAXES ----------------- Upon exercise of a Right or an Option and the issuance of Shares hereunder, the Optionee shall remit to the Company an amount of cash (in the form of a cashiers' check) sufficient to satisfy any taxes required by any government to be withheld or otherwise deducted and paid by the Company in respect of such issuance of Shares. XVIII. LISTING OF SHARES AND RELATED MATTERS ------------------------------------- If at any time the Board of Directors shall determine in its discretion that the listing, registration or qualification of the Shares covered by the Plan upon any national securities exchange or under any state or federal law, or the consent or approval of any governmental regulatory body, is necessary or desirable as a condition of, or in connection with, the sale or purchase of Shares under the Plan, no Shares shall be delivered unless and until such listing, registration, qualification, consent or approval shall have been effected or obtained, or otherwise provided for, free of any conditions not acceptable to the Board of Directors. XIX. AMENDMENT OF THE PLAN --------------------- The Board of Directors may, from time to time, amend the Plan, provided that no amendment shall be effective, without the approval of the holders of a majority of the voting stock of the Company present in person or by proxy at a meeting thereof (or pursuant to a written consent in lieu of such a meeting), if such approval is necessary to maintain compliance with the provisions of Rule 16b-3. The Committee shall be authorized to amend the Plan and the Options granted thereunder to permit the Options granted thereunder to qualify as incentive stock options under Section 422 of the Code and the Treasury regulations promulgated thereunder and, to the extent permitted under applicable laws, rules, and regulations, to include a cashless exercise provision of Article VI. The rights and obligations under any Option or Right granted before amendment of the -14- Plan or any unexercised portion of such Option or Right shall not be adversely affected by amendment of the Plan or the Option or Right without the consent of the holder of the Option or Right. XX. TERMINATION OR SUSPENSION OF THE PLAN ------------------------------------- The Board of Directors may at any time suspend or terminate the Plan. The Plan, unless sooner terminated under Article XXII or by action of the Board of Directors, shall terminate at the close of business on the Termination Date. An Option or Right may not be granted while the Plan is suspended or after it is terminated; provided, however, that options or rights previously issued and unexpired shall continue to exist and may be validly exercised, pursuant to the provisions of the Plan, until each option and/or right individually expires. Rights and obligations under any Option or Right granted while the Plan is in effect shall not be altered or impaired by suspension or termination of the Plan, except upon the consent of the person to whom the Option or Right was granted. The power of the Committee to construe and administer any Options or Rights granted prior to the termination or suspension of the Plan under Article III shall nevertheless continue after such termination or during such suspension. XXI. GOVERNING LAW ------------- The Plan, such Options and Rights as may be granted thereunder and all related matters shall be governed by, and construed and enforced in accordance with, the laws of the State of Arkansas from time to time obtaining. XXII. EFFECTIVE DATE -------------- The Plan shall become effective at 3:00 P.M., Central Standard time, on the Effective Date, the date on which the Plan was adopted by the Board or Directors. Grants of Option or Rights made prior to shareholder approval as required under Section II hereof shall be effective upon the date of such shareholder approval. -15- CERTIFICATE ----------- I, Tom Garrison, Secretary of American Freightways Corporation, certify that the foregoing is a true and correct copy of the American Freightways Corporation Amended and Substituted Stock Option Plan as adopted by the board of directors of the corporation January 23, 1996, and authorized by its shareholders April 22, 1993. /s/Tom Garrison --------------- -16- EX-10.(L) 5 AMENDED AND RESTATED EXCESS BENEFITS PLAN EXHIBIT 10(l) AMERICAN FREIGHTWAYS CORPORATION AMENDED AND RESTATED EXCESS BENEFITS PLAN ARTICLE I ESTABLISHMENT OF PLAN --------------------- Section 1.01. Establishment. American Freightways Corporation Excess Benefits Plan was established effective as of 1993. This amended and restated Plan is effective March 1, 1994. Section 1.02. Purpose. The purpose of this Plan is solely to provide benefits in excess of the limitations of Section 415(c), 415(e), 401(k) and Section 401(a)(17) of the Internal Revenue Code of 1986, or corresponding provisions of subsequent federal tax laws ("Code") to a select group of management or highly compensated employees upon whose efforts the continued successful operation of the Company is largely dependent, and to ensure the continued availability of their services to the Company. Section 1.03. Funding. The Plan is unfunded and the rights, if any, of any person to any benefits hereunder shall be the same as any unsecured general creditor of the Company. The benefits payable under this Plan shall be paid by the Company each year out of the Trust under the American Freightways Corporation Amended and Restated Executive Saving Plan dated as of March, 1993 (the "Trust"), to the full extent of the assets contained in the Trust, otherwise out of the Company's general assets. ARTICLE II DEFINITIONS AND INTERPRETATION ------------------------------ Section 2.01. Definitions. When the initial letter of a word or phrase is capitalized herein, such word or phrase shall have the meaning hereinafter set forth; (a) "Board" means the Board of Directors of the Company which shall interpret the Plan in its sole discretion. (b) "Company" means American Freightways Corporation. (c) "Excess Benefit Plan Account" means the book reserve established for each Participant to which shall be credited his benefit under this Plan. (d) "Participant" means a participant under the Profit-Sharing Plan (i) who is designated by the Board as being eligible to participate in this Plan, (ii) who agrees to be bound by the provisions of this Plan on a form provided by the Company and (iii) who is, or whose beneficiaries are entitled to benefits under the Plan. (e) "Plan" means the "American Freightways Corporation Amended and Restated Excess Benefits Plan" as set forth herein and as it may be amended from time to time hereafter. (f) "Profit-Sharing Plan" means the "American Freightways Corporation 401(k) Profit-Sharing Plan" as amended from time to time. (g) "Trust" means the Trust under the American Freightways Corporation Amended and Restated Excess Benefits Plan, as may be amended from time to time. Section 2.02. Construction and Governing Law. (a) This Plan shall be construed, enforced, and administered and the validity thereof determined in accordance with the laws of the State of Arkansas. (b) Words used herein in the masculine gender shall be construed to include the feminine gender where appropriate and the words used herein in the singular or plural shall be construed as being in the plural or singular where appropriate (c) When the initial letter of a word or phrase is Capitalized herein and such word or phrase is not defined in Section 2.01, such word or phrase shall have such meaning as provided in the Profit-Sharing Plan. -2- ARTICLE III AMOUNT OF BENEFIT ----------------- Section 3.01. Allocations. If, with respect to any Plan Year, the allocation made to the Account of a Participant under the Profit-Sharing Plan is less than the allocation that would have been for the benefit of such Participant but for the application of the limitations on benefits under Code Sections 415(c), 415(e), 401(k) or 401(a)(17), the Participant shall be entitled to have his Plan Account credited with an amount equal to the difference between the actual allocation made for the benefit of such Participant for the Plan Year and the allocation that would have been made for such Participant but for the application of such Code limitations. Such allocation shall be made at such time as these benefits would have been contributed to the Profit Sharing Plan, if determinable, otherwise as of the last day of the corresponding year. Section 3.02. Credited Interest. The balance of a Participant's Excess Benefit Plan Account as of any Valuation Date shall be credited with a gain (or debited with a loss), equal to the gain (or loss) such balance would have experienced had it been invested in the Trust for the period from the date the funds were credited to such Excess Benefit Plan Account until such Valuation Date. Section 3.03. Vesting. A Participant under this Plan shall vest in his Excess Benefit Plan Account in accordance with the vesting schedule set forth in the Profit-Sharing Plan. ARTICLE IV PAYMENT OF BENEFITS ------------------- Section 4.01. Retirement. Upon retirement, benefits under this Plan shall be payable to a Participant on the same date in annual installments over a five year period. The amount of each installment shall be determined by multiplying the value of the amount of the Excess Benefit Plan Account to be distributed by a fraction, the numerator of which is one and the denominator of which is the total number of installments remaining to be paid. Such benefits shall be payable commencing with payments under the Profit-Sharing Plan. Such benefits shall be paid first out of the assets of the Trust, to the extent thereof, and, otherwise out of the general assets of the Company. Section 4.02. Termination. Upon the death, disability or other termination of Participant's employment with the Company other than by retirement, all vested amounts in such Participant's Excess Benefits Plan Account shall be distributed in a single cash lump sum payment to Participant (or his designated beneficiary) on a date that is the later of (i) ninety (90) days after the date of death, disability or termination, or (ii) January 1 or the year beginning after the date of such death, disability or termination. -3- ARTICLE V ADMINISTRATION -------------- Section 5.01. Plan Administrator. The person or persons designated by the Plan Administrator of the Profit-Sharing Plan to perform the administrative functions for the Profit-Sharing Plan shall perform the administrative functions necessary for the operation of this Plan, except that no person shall vote or take action with respect to his own Plan benefit. ARTICLE VI MISCELLANEOUS ------------- Section 6.01. Amendments. The Board from time to time may amend, suspend, or terminate, in whole or In part, any or all of the provisions of this Plan, effective as of the beginning of any calendar year commencing on or after the date of adoption of such action by the Board; provided, however, that no such action shall affect the rights of any Participant, or the operation of this Plan with respect to any benefits of a Participant which have accrued prior to such action. Section 6.02. No Employment Rights. Neither the establishment of this Plan nor the status of an employee as a Participant shall give any Participant any right to be retained in the employ of an Employer; and no Participant and no person claiming under or through such Participant shall have any right or interest in any benefit under this Plan unless and until the terms, conditions and provisions of this Plan affecting such Participant shall have been satisfied, Section 6.03. Nonalienation. The right of any Participant or any person claiming under or through such Participant to any benefit or any payment hereunder shall not be subject in any manner to attachment or other legal process for the debts of such Participant or person; and the same shall not be subject to anticipation, alienation, sale, transfer, assignment or encumbrance. Section 6.04. Limitation of Liability. No member of the Board and no officer or employee of an Employer shall be liable to any person for any action taken or omitted in connection with the administration of this Plan, nor shall an Employer be liable to any person for any such action or omission. No person shall, because of the Plan, acquire any right to an accounting or to examine the books or the affairs of an Employer. Nothing in this Plan shall be construed to create any trust or fiduciary relatIonship between an Employer and any Participant or any other person. Suction 6.05. Acceleration of Payment. The Board in its sole discretion may accelerate the time of payment of any benefit to any Participant or Beneficiary to the extent that it deems It equitable or desirable under the circumstances. Section 6.06. Representative of Board. The Board may from time to time designate an individual or committee to carry out any duties or responsibilities of the Board hereunder. -4- Section 6.07. Designation of Beneficiary. Each Participant may designate a beneficiary in writing to receive any and all payments to which he may be entitled under this Plan upon his death. If a Participant fails to designate a beneficiary in writing, benefits remaining unpaid at his death shall be paid to his surviving spouse and if there is no surviving spouse to the executor or other personal representative of the Participant to be distributed in accordance with the Participant's will or applicable law. -5- IN WITNESS WHEREOF, the undersigned has caused this Amended and Restated Plan to be executed as of this 7th day of February, 1996. AMERICAN FREIGHTWAYS CORPORATION By: /s/Tom Garrison -------------------------- Its: Vice President ------------------------- -6- EX-10.(M) 6 AMD. AND RESTATED EMPLOYEE STOCK PURCHASE PLAN EXHIBIT 10(m) AMERICAN FREIGHTWAYS CORPORATION AMENDED AND RESTATED EMPLOYEE STOCK PURCHASE PLAN WHEREAS, American Freightways Corporation (the "Company"), desires to adopt an Employee Stock Purchase Plan (the "Plan") providing for the grant of options to purchase common stock of the Company to eligible employees who are employed by the Company or its subsidiaries; Now, therefore, the Company hereby establishes the Plan, the terms of which shall be as follows: 1. Purpose ------- The purpose of this Employee Stock Purchase Plan is to give only eligible employees of American Freightways Corporation, an Arkansas corporation, and its Subsidiaries, an opportunity to acquire shares of its Common Stock, $.01 par value, and to continue to promote its best interests and enhance the long- term performance of such Employees. 2. Definitions Wherever used herein, the following words and phrases shall have the meanings stated below unless a different meaning is plainly required by the context: (a) "Act" means the Securities Act of 1933, as amended. (b) "Board" means the Board of Directors of the Company. (c) "Code" means the Internal Revenue Code of 1986, as amended. (d) "Committee" means a committee appointed by the Board and composed of not less than three members of the Board to which the Board may delegate its powers with respect to administration of the Plan pursuant to Section 3 hereof. (e) "Common Stock" means shares of the common stock of the Company, $.01 par value. (f) "Company" means American Freightways Corporation, an Arkansas corporation, and, unless the context hereof requires otherwise, the Subsidiaries. (g) "Eligible Employee" for the purposes of Section 5 hereof shall mean each person who, on the applicable Grant Date, is employed by the Company or a Subsidiary as follows: 1) An Employee who has been employed for more than one year; 2) An Employee whose customary employment is for more than five months in any calendar year; and 3) An Employee who is not a Highly Compensated Employee. Determination of the Committee as to eligible employees shall be conclusive and binding in all parties. (h) "Grant Period" means a period of 12 months commencing on the first day of grant of an Option hereunder. (i) "Fair Market Value" of Common Stock as of the applicable Grant Date shall mean: (1) If the Common stock is listed on a national securities exchange or market or is traded in the over-the-counter market and sales prices are regularly reported for the Common Stock, the average of the mean bid and mean ask prices of the Common Stock as of the Grant Date or, if applicable, the closing sales price of the Common Stock as reported by such national exchange or market, or if not quoted on such because it is a Saturday, Sunday or holiday, or because no trades occurred on the Grant Date, then on the business day for which such quotations are available that immediately precedes such Grant Date, and (2) If the Common Stock is neither listed on a national securities exchange nor traded on the over-the-counter market, such value as the Board, in good faith, shall determine. Notwithstanding any provision of the Plan to the contrary, no determination made with respect to the Fair Market Value of Common Stock subject to an Option shall be inconsistent with Section 423 of the Code (or successor provision) or regulations thereunder. (j) "Fair Market Value of Common Stock" as of any Purchase Date shall mean: (1) If the Common Stock is listed on a national securities exchange or market system, or is traded in the over-the-counter market and sales prices are regularly reported for the Common Stock, the average of the mean bid and mean ask price of the Common Stock on the date immediately preceding the Purchase Date, or if applicable, the closing sales price of the Common Stock as reported by such national securities exchange or market; or if not quoted on such because no trades occurred on such date, then on the business day for which such quotations are available immediately preceding such date; and -2- (2) If the Common Stock is neither listed on a national securities exchange nor traded on the over-the-counter market, such value as the Board, in good faith, shall determine. Notwithstanding any provision of the Plan to the contrary, no determination made with respect to the Fair Market Value of Common Stock subject to an Option shall be inconsistent with Section 423 of the Code or regulations thereunder. (k) "Grant Date" means any date on which the Committee elects to grant options hereunder, it being within the scope of this Plan that any number of Grant Dates may occur within any one year. (l) "Highly Compensated Employee" means an employee who meets Section 414(q) of the Code. (m) "Option" means an option granted hereunder that will entitle an Eligible Employee to purchase shares of Common Stock on the applicable Purchase Date. (n) "Option Price" means the lower of: (1) 85% of the Fair Market Value per share of Common Stock as set forth in Section 2(i) hereof; or (2) 85% of the Fair Market Value per share of Common Stock as set forth in Section 2(j) hereof. (o) "Plan" means the American Freightways Corporation Employee Stock Purchase Plan as set forth herein. (p) "Purchase Date" means the date which is one calendar year, less one day, from the applicable Grant Date. If the Purchase Date falls upon a date which the Company is not open for business, then the Purchase Date shall be the next preceding date in which the Company is open for business. (q) "Subsidiary" or "Subsidiaries" means a corporation or corporations of which stock possessing at least 51% of the total combined voting power of all classes of stock entitled to vote is owned by the Company or by any other Subsidiary or Subsidiaries. -3- 3. Administration of the Plan The Plan shall be administered by the Compensation Committee (the "Committee") of the Board of Directors of the Company (the "Board") consisting of not less than three (3) members appointed by the Board and serving at the Board's pleasure. Each member of the Committee shall be both a member of the Board who is a "disinterested person" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (Exchange Act) or any successor rule or regulation. Any vacancy occurring in the membership of the Committee shall be filled by appointment by the Board. The Committee may appoint a Plan Administrator who may or may not be an employee or affiliate of the Company to assist in the day-to-day administration of the Plan. -4- The Committee may interpret the Plan, prescribe, amend, and rescind any rules and regulations necessary or appropriate for the administration of the Plan, and take such other action as it deems necessary or advisable, except as otherwise expressly reserved to the Board in the Plan. All decisions and actions made by the Committee pursuant to the provisions of the Plan shall be made by a majority of its members. Any decision reduced to writing and signed by a majority of the members shall be fully effective as if it had been made by a majority at a meeting duly held. Any interpretation, determination or other action made or taken by the Committee shall be final, binding and conclusive. 4. Maximum Limitations The total number of shares of Common Stock available for grant as Options pursuant to Section 5 shall not exceed 600,000, subject to adjustment pursuant to Section 9 hereof. Shares of Common Stock granted pursuant to the Plan may be authorized but unissued shares of Common Stock or shares now or hereafter held by or on behalf of the Company. In the event that any Option granted pursuant hereto expires or is terminated, surrendered or cancelled without being exercised, in whole or in part, for any reason, the number of shares of Common Stock theretofore subject to such Option shall again be available for grant as an Option hereunder and shall not reduce the total number of shares of Common Stock available for grant. 5. Basis of Participation and Granting of Options (a) Each person who is an Eligible Employee on a Grant Date, subject to earlier termination of the Plan pursuant to Section 13(c) hereof, ending with the last Grant Date on which shares of Common Stock are available for grant within the limitation set forth in Section 4, will be granted an Option hereunder which will entitle such Eligible Employee at the discretion of such Eligible Employee to purchase on the Purchase Date, at the Option Price per share, a whole number of shares of Common Stock having a Fair Market Value at the Grant Date of no less than $100 and no more than the greater of (i) the Fair Market Value at the Grant Date of 200 shares of Common Stock, or (ii) $1,200. The Grant Date applicable to an Option granted pursuant to this Section 5 shall be the date of the grant of such Option. (b) If the number of shares of Common Stock for which Options are granted pursuant to this Section 5 exceeds the number of shares set forth and calculated pursuant to Section 4 hereof, then outstanding, unexercised Options shall, in a nondiscriminatory manner, be reduced. -5- 6. Terms of Options. (a) Each Option granted under Section 5 and exercised by delivering written notice and payment thereof as provided in Section 7 shall, unless sooner expired pursuant to Section 6, become exercisable on the Purchase Date. Each Option not exercised on the Purchase Date next succeeding the Grant Date shall terminate and expire. (b) Each Option granted under Section 5 and exercised by electing to authorize a payroll deduction as provided in Section 7 shall, unless sooner expired pursuant to Section 6, become exercisable on the Purchase Date. Each Option not exercised on the Purchase Date next succeeding the Grant Date shall terminate and expire. (c) Notwithstanding the foregoing, an Option shall expire on the date that the employment of the Eligible Employee with the Company and its Subsidiaries terminates (as such date is determined by the Board or the Committee in its discretion) for any reason other than death or disability of such Eligible Employee. (d) Notwithstanding the foregoing, if the employment of the Eligible Employee with the Company and its Subsidiaries terminates by reason of the death of such Eligible Employee, outstanding Option(s) held by such Employee shall expire on the Purchase Date as set forth in the subject Option. (e) Notwithstanding the foregoing, if the employment of the Eligible Employee with the Company and its subsidiaries terminates by reason of the full or permanent disability of such Eligible Employee (as defined in the Code), outstanding Option(s) held by such Employee shall become exercisable on the 90th calendar day following the date on which such disability occurs (as such dates are determined by the Board or the Committee); thereafter, such Options shall terminate and expire. 7. Manner of Exercise of Options and Parents for Common StocK (a) An Option may be exercised by an optionee by: (i) delivering written notice to the Secretary of the Company stating the number of shares of Common Stock with respect to which the Option is being exercised (within the maximum and minimum number of such shares set forth in the Option or in Section 5 hereto) and tendering payment therefor in full in cash or by certified check on the Purchase Date. Written notice hereunder will be effective if it is delivered pursuant to Section 13(i) at or before 5:00 P.M. at the principal executive offices of the Company either on the date immediately preceding the Purchase Date or on the Purchase Date. A written notice hereunder delivered prior to the date immediately preceding the Purchase Date will not become effective until the date immediately preceding the Purchase Date and, until effective, may be revoked by the optionee by delivery of a written revocation to the Secretary of the Company; or -6- (ii) electing to authorize a payroll deduction made by the Company of the Option Price times the number of shares of Common Stock which the Optionee anticipates purchasing upon the exercise of the Option by the optionee. Such amount is to be equally divided by the number of payroll periods in a twelve month period. Such payroll deductions will be credited, without interest, to an account under the Plan. As of the Purchase Date, the amount of each participating employee's account is totaled. If a participating employee has sufficient funds in his account to purchase any whole number of full shares of the Common Stock at the Option Price, such employee shall be deemed to have exercised his option to purchase shares (to the full extent of funds in his account as of the Purchase Date) at the Option Price and his account shall be charged for the amount of the purchase. Any unused balance in a participating employee's account at the Purchase Date due to insufficient funds for the purchase of any whole share or due any limitation on the grant or exercise of options expressed herein will be refunded without interest. If on or as of the Purchase Date the optionee elects in writing to acquire a number of shares of Common Stock having an aggregate Option Price in excess of amounts reserved in his or her payroll deduction account, then, at the option of such optionee, such optionee may, on the Purchase Date remit to the Company the total amount of such excess in cash or cashier's check. (b) An Eligible Employee may decrease his payroll deduction amount up to four times (once per quarter) during the Grant Period. Such decrease will become effective on the next pay period following the receipt by the Company of written notice of the decrease from the employee. Decreases in payroll deductions shall proportionally reduce the number of shares of Common Stock into which the subject Option shall be exercisable. An Eligible Employee may not increase his payroll deduction once an authorization for payroll deduction becomes effective. (c) Prior to an applicable Purchase Date, an Eligible Employee may make total withdrawals of unused payroll deductions credited to his account under the Plan by providing proper notice to the Company. Unused balances shall be paid to such employee, without interest, after the timely receipt of the notice, and no further payroll deductions may be made for the remainder of the Grant Period. The number of shares of Common Stock into which the Option is exercisable shall be reduced to the extent of an Eligible Employee's withdrawal from his or her payroll deduction account. As soon as possible following such exercise, a certificate representing the shares of Common Stock purchased, in the name of the optionee, shall be issued in the name of the optionee and delivered to the optionee or his designee. 8. Transferability. No Option may be transferred, assigned, pledged, or hypothecated (whether by operation of law or otherwise), except as provided by will or the applicable laws of descent or distribution, and no Option shall be subject to execution, attachment or similar process. Any attempted assignment, -7- transfer, pledge, hypothecation or other disposition of any Option, or levy of attachment or similar process upon the Option not specifically permitted herein shall be null and void and without effect. An Option may be exercised only by the Eligible Employee during his or her lifetime, or pursuant to Section 6, by his or her estate or the person who acquires the right to exercise such Option upon his or her death by bequest or inheritance. Any shares issued upon exercise of an Option shall, unless subject to a registration statement that is effective under the Act, bear a legend restricting transfer thereof, containing substantially the following language: The securities represented by this certificate have not been registered under federal or state securities laws. These securities may not be sold, transferred or assigned in the absence of an effective registration statement for the securities under applicable federal or state securities laws or an opinion of counsel satisfactory to the issuer to the effect that such sale, transfer or assignment is exempt from registration thereunder. 9. Adjustment Provisions The aggregate number of shares of Common Stock with respect to which all Options may be granted hereunder (as set forth in Section 4 hereof), the aggregate number of shares of Common Stock subject to each outstanding Option, and the Option Price per share of each Option may all be appropriately adjusted as the Board may determine for any increase or decrease in the number of shares of issued Common Stock resulting from a subdivision or consolidation of shares, whether through reorganization, recapitalization, stock split-up, stock distribution or combination of shares, or the payment of a share dividend or other increase or decrease in the number of shares outstanding effected without receipt of consideration by the Company. Adjustments under this Section 9 shall be made according to the sole discretion of the Board, and its decision shall be binding and conclusive. 10. Dissolution, Merger, Consolidation Upon the dissolution or liquidation of the Company, or upon a merger or consolidation of the Company pursuant to which the Company is not the surviving corporation, each Option granted hereunder shall expire as of the effective date of such transaction; provided, however, that the Board shall give at least 30 days' prior written notice of the intended date in which such event is to be consummated to each optionee during which time he or she shall have a right to exercise his or her wholly or partially unexercised Option and, subject to prior expiration pursuant to Section 6, each Option shall be exercisable after receipt of such written notice and prior to the effective date of such transaction. -8- 11. Effectiveness and Termination of the Plan The effective date of the Plan is March 1, 1994. Unless terminated sooner pursuant to the provisions contained herein, the Plan shall terminate on March 1, 1999. 12. Limitation on Options Notwithstanding any other provisions of the Plan: (a) The Company intends that Options granted and Common Stock issued under the Plan shall be treated for all purposes as granted and issued under an employee stock purchase plan within the meaning of Section 423 of the Code and regulations issued thereunder. Any provisions required to be included in the Plan under said Section and regulations issued thereunder are hereby included as fully as though set forth in the Plan at length. (b) No Eligible Employee shall be granted an Option under the Plan if, immediately after the Option was granted, the Eligible Employee would own stock constituting 5% or more of the total combined voting power or total value of all classes of stock of the Company or of any parent or Subsidiary of the Company. For purposes of this Section 12(b), stock ownership of an individual shall be as determined under the rules of Section 425(d) of the Code and stock which the Eligible Employee may purchase under outstanding Options shall be treated as stock owned by the Eligible Employee. (c) No Eligible Employee shall be granted an Option under the Plan which permits his or her rights to purchase stock under all employee stock purchase plans (as defined in Section 423 of the Code) of the Company and any parent or Subsidiary of the Company to accrue at a rate which exceeds $25,000 of Fair Market Value of such stock (determined at the time of the grant of such Option) for each calendar year in which such Option is outstanding at any time. Any Option granted under the Plan shall be deemed to be reduced or otherwise modified to the extent necessary to satisfy this paragraph (c). 13. General (a) Legal and Other Requirements. The obligations of the Company to sell and deliver Common Stock under the Plan shall be subject to all applicable laws, regulations, rules and approvals, including, but not by way of limitation, the effectiveness of a registration statement under the Securities Act of 1933 if deemed necessary or appropriate by the Company. Certificates for shares of Common Stock issued hereunder may bear any legend as the Board or the Committee shall in its discretion deem appropriate. (b) No Obligation To Exercise. The granting of an Option shall impose no obligation upon an optionee to exercise such Option. -9- (c) Termination and Amendment of Plan. The Board may from time to time alter, amend or suspend the Plan or any Option granted hereunder or may at any time terminate the Plan, except that it may not effect a change inconsistent with Section 423 of the Code or regulations issued thereunder. No action taken by the Board under this Section may materially and adversely affect any outstanding Option without the consent of the holder thereof. (d) Withholding Taxes. Upon the exercise of any Option under the Plan, the Company shall have the right to require the optionee to remit to the Company an amount sufficient to satisfy all federal, state and local withholding tax requirements prior to the delivery of any certificate or certificates for shares of Common Stock. (e) Right to Terminate Employment. Nothing in the Plan or any agreement entered into pursuant to the Plan shall confer upon any Eligible Employee or other optionee the right to continue in the employment of the Company or any Subsidiary or affect any right which the Company or any Subsidiary may have to terminate the employment of such Eligible Employee or other optionee. (f) Rights as a Shareholder. No holder of options shall, as such, have any right as a shareholder unless and until certificates for shares of Common Stock are issued to him. (g) Leaves of Absence and Disability. The Board or the Committee shall be entitled to make such rules, regulations and determinations as it deems appropriate under the Plan in respect of any leave of absence taken by or disability of any Eligible Employee. Without limiting the generality of the foregoing, the Board or the Committee shall be entitled to determine (i) whether or not any such leave of absence shall constitute a termination of employment within the meaning of the Plan, and (ii) the impact, if any, of any such leave of absence on Options under the Plan theretofore granted to any Eligible Employee who takes such leave of absence. (h) Notices. Every direction, revocation or notice authorized or required by the Plan shall be deemed delivered to the Company (1) on the date it is personally delivered to the Secretary of the Company at its principal executive offices or (2) three business days after it is sent by registered or certified mail, postage prepaid, addressed to the Secretary at such offices; and shall be deemed delivered to an optionee (1) on the date it is personally delivered to him or her or (2) three business days after it is sent by registered or certified mail, postage prepaid, addressed to him or her at the last address shown for him on the records of the Company or of any Subsidiary. (i) Waiver of Notice. Any person entitled to notice hereunder may waive such notice. (j) Company Records. Records of the Company regarding the participant's period of employment, termination of employment and the reason therefor, leaves of absence, reemployment and other matters shall be conclusive for all purposes hereunder, unless determined by the Committee to be incorrect. -10- (k) Information. The Company shall, upon request or as may be specifically required hereunder, furnish or cause to be furnished, all of the information or documentation which is necessary or required by the Committee to perform its duties and functions under this Plan. (l) No Liability of Company. The Company assumes no obligation or responsibility to the participant (or such participant's successors and assigns by operation of law) for any act of, or failure to act on the part of, the Committee. (m) Elimination of Fractional Shares. If under any provision of the Plan which requires a computation of the number of shares of Common Stock subject to an Option and the number so computed is not a whole number of shares of Common Stock, such number of shares of Common Stock shall be rounded down to the next whole number. (n) Corporation Action. Any action required of the Company shall be by resolution of the Board or the Committee or by any other person authorized to so act by resolution of the Board. (o) Successors. This Plan shall be binding upon the Eligible Employee, the Company, the Committee and each of their permitted successors and assigns. (p) Headings. The titles and headings of Sections are included for convenience of reference only and are not to be considered in construction of the provisions hereof. (q) Governing Law. All questions arising with respect to the provisions of this Plan shall be determined by application of the laws of the State of Arkansas to the extent not inconsistent with Section 423 of the Code and regulations hereunder and except to the extent Arkansas law is preempted by federal law. The decision by the Company to deliver Stock hereunder is subject to applicable laws and to the approval of any governmental authority required in connection with the authorization, issuance, sale or delivery of such Stock. -11- IN WITNESS WHEREOF, the undersigned has caused this Amended and Restated Plan to be executed as of this 23rd day of January, 1996. AMERICAN FREIGHTWAYS CORPORATION By: /s/Tom Garrison ------------------------- Its: Vice President ----------------------- -12- EX-10.(V) 7 VOLVO TRUCK LEASE PLAN EXHIBIT 10(v) VOLVO TRUCK LEASE PLAN TRUCK LEASE AGREEMENT (TRAC/Non-Maintenance) THIS LEASE AGREEMENT is made as of December 20, 1995 by and between VT Finance, Inc. (hereinafter called "Lessor"), a Delaware corporation with a place of business located at P.O. Box 35129, Tulsa, OK 74153-0129 and American Freightways, Inc. (hereinafter called "Lessee"), an Arkansas corporation with its principal place of business located at 2200 Forward Drive, Harrison, AR 72602. IN CONSIDERATION of the mutual covenants hereinafter contained, Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, one or more vehicles as shall from time to time be described in Schedules, Vehicle Purchase Orders or Delivery Receipts executed by authorized employees and agents of Lessee and accepted by Lessor, at its sole discretion, for the rental and lease term and upon the terms and conditions set forth below: 1. THIS AGREEMENT is a contract of leasing only and shall consist of the general terms and conditions stated herein which shall be applicable to every Vehicle leased hereunder, any Schedule which may hereafter be attached hereto describing certain Vehicles either individually or as a class and the specific terms for each, and Delivery Receipts or other evidences of ordering or delivery for each Vehicle delivered to Lessee by Lessor. Without limiting the generality of the above, it is agreed that the terms hereof may be changed for specific Vehicles by the Schedules relating thereto. All of said Schedules, Delivery Receipts and evidences of ordering or delivery are hereby incorporated by reference and made a part hereof. Wherever used herein, the term "Vehicle" or "Vehicles" shall mean such passenger automobiles, trucks and other motor vehicles and trailers as are leased hereunder from time to time, together with all additional equipment and accessories thereon. Vehicles shall at all times remain the property of, and shall be registered in the name of Lessor, but shall be under the full and complete control of Lessee. During the term of this lease renewal of registration in the name of Lessor shall be the responsibility and expense of Lessee, and Lessor will, upon Lessee's request, furnish to Lessee a power of attorney to this end. Lessee recognizes that it has acquired no right, title, option or interest in or to any of the Vehicles and agrees that it shall not assert any claim in or to an interest in any Vehicle other than that of a lessee. Lessee agrees to accept delivery of all vehicles ordered by Lessor pursuant to the request of Lessee. Lessee shall at all times, and at its sole expense and cost, keep the Vehicle(s) free from all levies, attachments, liens and encumbrances and other judicial process other than those arising solely from acts of Lessor. Lessee shall give Lessor immediate written notice of any action taken by a third party which may jeopardize Lessor's rights in any Vehicle and shall indemnify and hold Lessor harmless from any loss or damages caused thereby. 2. LESSEE AGREES to pay Monthly Rental for each Vehicle in the amounts stated in the Schedule "A" applicable to such Vehicle. Such amounts shall be equal to the product of the Monthly Rental Factors stated in such Schedule for such Vehicle multiplied by the Schedule "A" Value of such Vehicle stated in such Schedule. The Monthly Rentals are subject to final depreciation adjustment as provided in Section 9 of this Lease, using a Final Adjustment Percentage which is stated in the Schedule "B" applicable to such Vehicle. "Schedule "A" Value" as used herein shall mean the amount designated as such in the Schedule "A" for such Vehicle, representing the value of such Vehicle as determined by Lessor. Lessee acknowledges that Schedule "A" Values set forth in the Schedules are based upon the manufacturer's price and the amount of required equipment in effect on the date the Schedule is executed. If the manufacturer's price increases or decreases or if additional items of equipment are required on the Vehicle prior to or at the time of delivery of the Vehicle to Lessee, the Schedule "A" Value of such Vehicle will be adjusted by the amount of such increase or decrease and by the cost to Lessor of the additional equipment. The "Residual Value" assigned to each Vehicle represents the product of (a) the Schedule "A" Value multiplied by (b) the Final Adjustment Percentage corresponding to expiration of the Maximum Term for such Vehicle, and is provided for informational purposes only. In addition to the Monthly Rental, Lessee shall pay to Lessor upon demand and as Additional Rental all other charges payable by Lessee which have been paid by Lessor. Lessee also agrees to pay to Lessor, at the time each Vehicle is delivered, the amount of any Advance Rentals noted in the Schedule applicable to such Vehicle. All Advance Rentals shall be held by Lessor and, provided Lessee is not in default, applied to the payment of the last Monthly Rentals which are due for the Vehicle to which they relate. If Lessee is in default Lessor may apply the Advance Rentals to any of Lessee's obligations hereunder as Lessor in its sole discretion may determine. No interest shall accrue to Advance Rentals. 3. THE TERM of this Lease in relation to each Vehicle shall extend for a period not in excess of the Maximum Term noted in the Schedule "A" relating to such Vehicle. The Lease Term shall commence on the earlier of (i) the date when such Vehicle is delivered to Lessee or (ii) forty- eight hours after Lessee has been notified, orally or in writing, that the Vehicle is ready for delivery (hereinafter called the "Delivery Date"). If the Delivery Date for such Vehicle is on or before the fifteenth day of a month, the Monthly Rental for such Vehicle shall commence as of the first day of such calendar month and if the Delivery Date for such Vehicle is on or after the sixteenth day of a month, the Monthly Rental for such Vehicle shall commence on the first day of the next succeeding calendar month. Lessee may terminate this Lease as to any Vehicle on any anniversary of the Delivery Date for such Vehicle by (i) giving notice to Lessor; (ii) returning such Vehicle to Lessor on such anniversary date in accordance with Section 8 hereof; and (iii) paying to Lessor any amount owing pursuant to Section 9 hereof relating to such Vehicle. For each Vehicle so terminated, the term of this Lease shall end on the earlier of (i) the date such Vehicle is sold in accordance with Section 8 hereof or (ii) forty-five days after the later of (a) such anniversary date or (b) the date the Vehicle is actually returned to Lessor and for each Vehicle as to which the Maximum term has expired, the term of this Lease shall end on the earlier of (i) the date such Vehicle is sold in accordance with Section 8 hereof or (ii) forty- five days after the later of (a) the last day of the Maximum Term or (b) the date the Vehicle is actually returned to Lessor. If such date is before the fifteenth day of a month, no Monthly Rental for such Vehicle shall be payable for such month; if such date is on or after the fifteenth day of a month, a full Monthly Rental shall be payable for such month without proration. Lessee may terminate this Lease as to any Vehicle effective at any other time only upon terms hereafter agreed to by Lessor. Lessor's failure to deliver vehicles at the time and places specified, by reason of labor disorders or other circumstances or events beyond the control of Lessor, shall not impute liability of any kind to Lessor. 4. THIS LEASE MAY BE TERMINATED by either party regarding vehicles not then ordered or under lease by giving written notice thereof to the other party at least five days in advance of the proposed termination date. After the giving of such notice no additional or replacement vehicles will be delivered for lease hereunder. Notwithstanding expiration or termination, all of the provisions of this Lease shall continue in full force and effect with respect to each Vehicle then ordered pursuant to request of Lessee or then under lease until the end of the lease term for such Vehicle as provided in Section 3 hereof. 5. USE OF VEHICLES under this Lease is permitted only in the conduct of Lessee's business in the United States and occasionally in Canada and only for lawful purposes. No Vehicle shall be used off an improved road or for transportation of passengers or of material designated as extra hazardous, radioactive, flammable or explosive. Lessee will permit the Vehicles to be operated only by safe and careful drivers who are qualified and properly licensed in accordance with the laws of the jurisdictions where such Vehicles are used. All operators of the Vehicles will be conclusively presumed to be the agents, employees or servants of Lessee and not of Lessor. Upon any complaint from Lessor specifying illegal, negligent, reckless, careless or abusive handling of the Vehicles, Lessee shall promptly take such steps as may be necessary to stop and prevent the recurrence of any such practice. Lessee shall in all respects comply, and cause all persons operating the Vehicles to comply, with all applicable requirements of law (including but not limited to rules, regulations, statutes and ordinances) relating to the licensing, maintenance and operation of the Vehicles (including weight limitations, tire requirements, load, axle and spring limits) and with all terms and conditions of policies of insurance relating to the Vehicle. Lessee shall immediately notify Lessor of any change of place of permanent garaging of any Vehicle. Lessee agrees that it will not load any Vehicle in excess of the lesser of (i) the payload capacity noted in the manufacturer's specifications for such Vehicle or (ii) the maximum amount permitted by applicable law. 6. MONTHLY RENTAL and all other amounts owing by Lessee shall be paid to Lessor at its address stated on page one hereof or at such other place as Lessor shall hereafter notify Lessee in writing. Monthly Rentals shall be due and payable in advance on the first day of each and every month during the term hereof; provided, however, that the first Monthly Rental for a Vehicle with a Delivery Date on or before the fifteenth day of a month shall be due and payable on the Delivery Date, whether or not Lessee shall have received a statement for such amount. Lessor will render to Lessee monthly statements of the amounts payable on all Vehicles under this Lease and Lessee shall, within ten (10) days after receipt of such statements, make payment by one check for each such statement to the order of Lessor for the Monthly Rental, Additional Rent and other sums, if any, covered by such statements without abatement, off-set or counter-claim arising out of any circumstance whatsoever. Lessee hereby waives any and all existing or future claims of off-set against the Monthly Rentals, Additional Rents and Adjusted Rents due hereunder, and agrees to make such payments regardless of any off-set or claim which may be asserted by Lessee or on its behalf. For each Monthly Rental or other sum due hereunder which is not paid when due, Lessee agrees to pay Lessor a delinquency charge calculated thereon at the rate of 1 1/2% per month for the period of delinquency or, at Lessor's option, 5% of such Monthly Rental or other sum due hereunder, provided that such a delinquency charge is not prohibited by law, otherwise at the highest rate Lessee can legally obligate itself to pay and/or Lessor can legally collect. 7. FEES, TAXES, GOVERNMENTAL ASSESSMENTS AND CHARGES (INCLUDING INTEREST AND PENALTIES THEREON) of whatsoever nature, by whomsoever payable, (other than federal, state or local taxes levied on the net income of Lessor) levied, assessed or incurred during the entire term of this Lease in connection with the Vehicles including, but not limited to, the titling and registration of the Vehicles in all jurisdictions required by the nature of Lessee's business and the purchase, sale, ownership, rental, use, inspection and operation thereof, shall be paid by Lessee. In the event any of said fees, taxes, governmental assessments and charges shall have been paid by Lessor, of if Lessor is required to collect or pay any thereof, Lessee shall reimburse Lessor therefor, upon demand, as Additional Rent, to the end that Lessor shall receive the rental as provided in Sections 2 and 9 hereof as a net return on the Vehicles. If requested by Lessor, Lessee agrees to file, or to refrain from filing, on behalf of Lessor in form satisfactory to Lessor and before the due date thereof, all required tax returns and reports concerning the Vehicles with all appropriate governmental agencies and to mail a copy thereof to Lessor concurrently with the filing thereof. Lessee further agrees to keep or cause to be kept and made available to Lessor any and all necessary records relative to the use of the Vehicles and/or pertaining to the aforesaid fees, taxes, governmental assessments and charges. Lessee's obligations under this Section shall survive the expiration or termination of this Lease. 8. LESSEE SHALL RETURN each Vehicle to Lessor, at Lessee's expense, at the expiration or termination of this Lease in relation to such Vehicle at the location where delivery was made or at such other location as is designated by Lessor in the same working order, condition and repair as when received by Lessee, excepting only reasonable wear and tear caused by normal usage of such Vehicle, together with all license plates, registration certificates, or other documents relating to such Vehicle. Upon request of Lessee, Lessor may at its sole discretion allow Lessee to retain some or all of such license plates or other documents. Unless otherwise agreed by Lessor, Lessee shall give Lessor at least sixty, and not more than ninety, days notice of the return of any Vehicle. After said return, Lessor shall cause such Vehicle to be sold at public or private sale, at wholesale, for the highest cash offer received and still open at the time of sale. The "net sale proceeds" for said Vehicle shall be the net amount received by and paid to Lessor after deducting the cost of sale, the cost of cleaning, repairing, equipping or transporting said Vehicle and any other expenses of Lessor in connection therewith. 9. FINAL ADJUSTMENT for each Vehicle will be made upon receipt of the net sale proceeds therefor and, unless any default shall have occurred and except as provided below; Lessor shall pay to Lessee the amount, if any, by which the sum of (a) the net sale proceeds, and (b) surplus insurance recoveries, if any, on such Vehicle, exceeds (c) a Final Adjustment Amount, as defined herein, for such Vehicle calculated as of the rental payment date next preceding the date such Vehicle was returned to Lessor (referred to hereafter as the "Calculation Date"). The Final Adjustment Amount for any Vehicle as of a Calculation Date shall be computed by multiplying the Schedule "A" Value for such Vehicle by that percentage ("Final Adjustment Percentage") opposite the respective Calculation Date as set forth in the Final Adjustment Table attached hereto as Schedule B. If the sum of items (a) and (b) is less than item (c), Lessee shall, within ten days after notice thereof, pay the deficiency to Lessor as Adjusted Rental without abatement, off-set or counterclaim arising out of any circumstance whatsoever. Lessor shall promptly determine the aforesaid amounts and shall render statements therefor to Lessee. Lessor may apply any sums received as proceeds from any Vehicle which would otherwise be due to Lessee hereunder against any other obligation of Lessee and Lessor may off-set the amount of any such rental adjustment against any claim it may have against Lessee. 10. LOSS OF OR DAMAGE TO EACH VEHICLE and loss of use thereof, from whatsoever cause, are risks hereby assumed by Lessee from the date hereof until such Vehicle is returned to and sold by Lessor. If any Vehicle is lost, stolen, damaged or destroyed, Lessee shall promptly notify Lessor thereof. Lessor shall have no obligation to repair or replace any such Vehicle. There shall be no abatement of rental otherwise due hereunder during the period a Vehicle is stolen or missing or during the time required for any repair, adjustment, servicing or replacement of a Vehicle and Monthly Rentals will continue to accrue until Final Adjustment is made. Final Adjustment in relation to lost, stolen or destroyed Vehicles shall be made as provided in Section 9, promptly after sale of the salvage and/or receipt of insurance proceeds, as applicable or within forty-five days after such loss, theft or destruction; whichever is earlier. For purposes of Final Adjustment, lost or stolen Vehicles shall be deemed to have been sold as of the date of such loss or theft, and the amount of net sale proceeds therefor shall be deemed to be zero. In no event shall Lessor be liable to Lessee, its employees or agents for business or other losses by reason of loss, theft, destruction, repair, servicing or replacement of any Vehicle. 11. A. LIABILITY AND PHYSICAL DAMAGE INSURANCE, for bodily injury and property damage to others, and damage to or loss of Vehicles by collision, fire, theft, or otherwise, from the time each Vehicle is delivered to Lessee until the Vehicle is sold after return to Lessor and legal title passes to the purchaser thereof, shall be purchased and maintained by Lessee. Lessor shall not be required to order vehicles for Lessee's use until binders disclosing insurance coverage as herein provided have been delivered to Lessor. All insurance policies shall provide primary coverage, shall name Lessor as additional insured, shall be in such amounts and with such insurers as shall be approved by Lessor, shall provide for a minimum of 15 days prior written notice to Lessor before cancellation or material change for any reason, and shall provide that no act or default of any person other than Lessor shall affect Lessor's right to recovery under such policies. Minimum requirements shall be $250,000.00 for bodily injury or death to any one person; $750,000.00 for any one accident; $100,000.00 for property damage; or a combined single limit of $750,000.00; and actual cash value for fire, theft, comprehensive and collision. Deductible amounts shall not be in excess of $2,500.00. Lessor may from time to time by notice to Lessee specify higher minimum requirements or additional risks to be insured against. Lessee shall deliver the policies or other satisfactory evidence of insurance required hereunder to Lessor, but Lessor shall be under no duty to examine such evidence of insurance now to advise Lessee in the event said insurance is not in compliance with this Lease. Evidence of renewal of all expiring policies will be delivered to Lessor at least 60 days prior to their respective expiration dates. Lessor does not assume any liability for loss of or damage to the contents or personal property contained in any Vehicles, and Lessee hereby releases and saves Lessor free from any and all liability for loss of or damage to any contents or personal property contained in said Vehicles regardless of the circumstances under which such loss or damage may occur. 11. B. INDEMNITIES: The term "Liabilities" as used herein shall include any and all liabilities, obligations, losses, damages, penalties, claims, actions, suits, costs, expenses and disbursements of whatsoever kind and nature, including legal fees and expenses, (whether or not any of the transactions contemplated hereby are consummated), imposed on, incurred by or asserted against Lessor (which term as used herein shall include Lessor's successors, assigns, agents, employees and servants) or the Vehicles (whether by way of strict or absolute liability or otherwise), and in any way relating to or arising out of this lease or the selection, manufacture, purchase, acceptance, ownership, delivery, non-delivery, lease, possession, use, operation, condition, servicing, maintenance, repair, improvement, alteration, replacement, storage, return or other disposition of the Vehicles including, but not limited to, (i) claims as a result of latent, patent or other defects, whether or not discoverable by Lessor or Lessee; (ii) claims for patent, trademark or copyright infringement; (iii) tort claims of any kind, (whether based on strict liability, on Lessor's alleged negligence or otherwise), including claims for injury or damage to property or injury or death to any person, (including Lessee's employees); and (iv) claims for any interruption of service or loss of business or anticipatory profits, or consequential damages. Lessor shall have no responsibility or liability or Lessee, its successors or assigns, or any other person with respect to any and all Liabilities and, irrespective of any insurance coverage and commencing on the date each Vehicle is ready for delivery to Lessee, Lessee hereby assumes liability for, and hereby agrees, at its sole cost and expense, to indemnify, defend, protect, save and keep harmless Lessor from and against any and all Liabilities. Where a Vehicle is operated by Lessee with a trailer or other equipment not covered by this Lease, then in such event, Lessee warrants that such trailer or other equipment will be in good operating condition, compatible in all respects with the vehicles with which such trailer or other equipment is to be used, and in all respects in full compliance with all federal, state and local statutes, ordinances, rules or regulations covering said trailer or other equipment, including but not limited to all licensing and operating requirements. Lessee hereby assumes liability for, and hereby agrees, at its sole cost and expense, to indemnify, defend, protect, save and keep harmless Lessor from and against any and all costs, expenses, damages, (including damages for loss of any Vehicles leased hereunder) and Liabilities resulting from Lessee's failure to properly connect, operate or maintain such trailer or other equipment or to comply with any of the foregoing requirements or from any other cause. Lessee agrees to give Lessor prompt written notice of any claim or liability hereby indemnified against. 11. C. LESSEE'S TAX RELATED INDEMNITIES to Lessor are as follows: (1) General Indemnity. Lessee agrees to pay and to indemnify and hold Lessor harmless, on an after-tax basis, from and against all sales, use, personal property, leasing, leasing use, stamp or other taxes, levies, imposts, duties, charges, or withholdings of any nature (together with any penalties, fines or interest thereon) now or hereafter imposed against Lessor, Lessee or the Vehicles or any part thereof or upon the purchase, ownership, delivery, leasing, possession, use, operation, return or other disposition thereof, or upon the rentals, receipts or earnings arising therefrom, or upon or with respect to this Lease (excluding, however, Federal and State taxes on, or measured by, the net income of Lessor). Lessee agrees to file, on behalf of Lessor, all required tax returns concerning the Vehicles with all appropriate governmental agencies and to furnish to Lessor a copy of each such return, including evidence of payment, promptly after the due date of each such filing; provided, that, in the event Lessee is not permitted to file any such return on behalf of Lessor, then Lessee agrees to prepare and forward each such return to Lessor in a timely manner with instructions to Lessor with respect to the filing thereof. (2) Income Tax Indemnity. Lessee and Lessor agree that Lessor shall be entitled to accelerated cost recovery (or depreciation) deductions with respect to the Vehicles, and should, under any circumstances whatsoever, except as specifically below set forth, either the United States government or any state tax authority disallow, eliminate, reduce, recapture, or disqualify, in whole or in part, any benefits consisting of accelerated cost recovery (or depreciation) deductions with respect to any Vehicle, Lessee shall then indemnify Lessor by payment to Lessor, upon demand, of a sum which shall be equal to the amount necessary to permit Lessor to receive (on an after-tax basis over the full term of this Lease) the same after-tax cash flow and after-tax yield assumed by Lessor in evaluating the transactions contemplated by this Lease (referred to hereafter as "Economic Return") that Lessor would have realized had there not been a loss or disallowance of such benefits, together with, on an after-tax basis, any interest or penalties which may be assessed by the governmental authority with respect to such loss or disallowance. In addition, if Lessee shall make any addition or improvement to any Vehicle, and as a result thereof, Lessor is required to include an additional amount in its taxable income, Lessee shall also pay to Lessor, upon demand, an amount which shall be equal to the amount necessary to permit Lessor to receive (on an after-tax basis over the full term of this Lease) the same Economic Return that Lessor would have realized had such addition or improvement not been made. Notwithstanding the foregoing, Lessee's tax indemnification of Lessor shall not extend to any change in Lessor's accelerated cost recovery (or depreciation) caused by a change in tax law or policy. Lessee shall not be obligated to pay any sums required in this subsection 11.C.(2) with respect to any Vehicle in the event the cause of the loss of the deductions results solely from one or more of the following events: (1) a failure of Lessor to timely claim accelerated cost recovery (or depreciation) deductions for the Vehicle in Lessor's tax return, other than a failure resulting from the Lessor's determination, based upon opinion of counsel or otherwise, that no reasonable basis exists for claiming accelerated cost recovery (or depreciation) deductions, or (2) a failure of Lessor to have sufficient gross income to benefit from accelerated cost recovery (or depreciation) deductions. Lessor agrees to promptly notify Lessee of any claim made by any federal or state tax authority against the Lessor with respect to the disallowance of such accelerated cost recovery (or depreciation) deductions. (3) Payment and Enforceability. All amounts payable by Lessee pursuant to subsection 11.C.(1) or 11.C.(2) shall be payable directly to Lessor except to the extent paid to a governmental agency or taxing authority. All the indemnities contained in subsection 11.C.(1) or 11.C.(2) shall continue in full force and effect notwithstanding the expiration or other termination of this Lease in whole or in part and are expressly made for the benefit of, and shall be enforceable by, Lessor. Lessee's obligations under subsection 11.C.(1) and 11.C.(2) shall be that of primary obligor irrespective of whether Lessor shall also be indemnified with respect to the same matter under some other agreement by another party. (4) Duration. The obligations of Lessee under subsection 11.C. are expressly made for the benefit of, and shall be enforceable by, Lessor without necessity of declaring this Lease in default and Lessor may initially proceed directly against Lessee under this subsection 11.C. without first resorting to any other rights of indemnification it may have. In the event that, during the continuance of this Lease, an event occurs which gives rise to a liability pursuant to this subsection 11.C., such liability shall continue, notwithstanding the expiration or termination of this Lease, until all payments or reimbursements with respect to such liability are made. 11. D. ALL OF LESSEE'S obligations, indemnities and liabilities under this Section 11 shall survive the expiration or termination of this Lease. Notwithstanding anything else herein to the contrary, in the event that Lessee fails to procure or maintain insurance as above provided or fails to perform any other of Lessee's duties or obligations as set forth in this Lease, Lessor may, but shall have no obligation to, obtain such insurance at Lessee's expense and perform such other duties and obligations of Lessee and any amounts expended therefor shall be due and payable immediately as Additional Rent. Lessee shall not use or permit the use of any Vehicle at any time when the insurance described above is not in effect. 12. A. EXPENSE OF OPERATION AND MAINTENANCE of Vehicles in accordance with manufacturer's recommendations and in condition satisfactory to Lessor, including but not limited to, cost of fuel, oil, grease, repairs, maintenance, tires, tubes, storage, parking, tolls, fines and penalties shall be the responsibility and obligation of Lessee. Lessee shall reimburse Lessor if Lessor shall pay any of such operating or maintenance expenses. If tires or parts are removed from a Vehicle, Lessee shall provide comparable replacements therefor and such replacements shall become part of the Vehicles by accession. Lessor may inspect the Vehicles and Lessee's books and records relating thereto at any time during Lessor's usual business hours. Lessee shall not alter any Vehicle without the prior written consent of Lessor unless such alteration is required by law. Lessee agrees to remove all markings from the Vehicles, at Lessee's expense, prior to the return of the Vehicles to Lessor. 12. B. ADDITIONAL EQUIPMENT REQUIRED BY LAW. In the event that subsequent to the Delivery Date of a Vehicle any federal, state or local law, ordinance, rule or regulation shall require the installation of any additional equipment or accessories, including but not limited to anti- pollution and/or safety devices, or in the event that any other modifications of the Vehicles shall be required by virtue of such law, ordinance, rule or regulation, then and in any of such events, Lessee shall pay the full cost thereof, including installation expenses. Lessor may, at its option, arrange for the installation of such equipment or the performance of such modifications, and Lessee agrees to pay the full cost thereof as Additional Rent, immediately upon receipt of an invoice for same. 13. NO WARRANTIES; LIMITATION ON LIABILITY: Lessee acknowledges and agrees (i) that the Vehicles are of a size, design, capacity and manufacture selected by Lessee, (ii) that the Lessor is not the manufacturer or seller of the Vehicles or the manufacturer's or seller's agent and (iii) that LESSEE LEASES THE VEHICLES "AS-IS" AND THAT LESSOR HAS NOT MADE, AND DOES NOT HEREBY MAKE, ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, AS TO THE VALUE, CONDITION, QUALITY, MATERIAL, WORKMANSHIP, DESIGN, CAPACITY, MERCHANTABILITY, DURABILITY, FITNESS OR SUITABILITY OF THE VEHICLES FOR ANY USE OR PURPOSE OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED WITH RESPECT TO THE VEHICLES. IN NO EVENT SHALL LESSOR BE LIABLE FOR LOSS OF OR DAMAGE TO CARGO, LOSS OF PROFITS OR BUSINESS OR FOR INCIDENTAL, SPECIAL OR CONSEQUENTIAL DAMAGES OF ANY NATURE, HOWSOEVER CAUSED. Provided Lessee is not in default hereunder, during the term of this Lease as to any Vehicle, Lessor hereby assigns to Lessee any rights Lessor may have under any manufacturer's or seller's warranty, to the extent that such assignment may be made without impairing Lessor's ability to assert such rights in its own name under such warranty. No suit, claim or settlement shall be brought or made by Lessee against or with the manufacturer or seller without the prior written consent of Lessor. 14. A. DEFAULT under this Lease shall occur in the event (i) Lessee shall fail to pay when due any part of the Monthly Rentals, Additional Rents or Adjusted Rents payable hereunder or to provide or maintain the insurance required hereby; (ii) any of Lessee's warranties or representations shall be or become untrue or breached; (iii) Lessee shall fail, after fifteen days notice thereof, to correct any failure in the due performance and observance of any other of the covenants and obligations of Lessee hereunder; (iv) Lessee shall default under any other agreement with Lessor or its affiliates; (v) Lessee transfers a substantial portion of its assets other than in the ordinary course of business; (vi) a voluntary or involuntary petition under any statute relating to bankruptcy, reorganization or receivership or under any other statute relating to the relief of debtors shall be filed by or against Lessee or any guarantor of Lessee's obligations hereunder; or (vii) Lessee or any guarantor of Lessee's obligations hereunder shall make an assignment for the benefit of creditors, admit in writing to being insolvent or, if Lessee or such guarantor is a natural person, if such person shall die. 14. B. LESSOR'S REMEDIES: (1) In the event of such default described above, Lessor shall have no further obligation to lease vehicles to Lessee and, at the option of Lessor, all rights of Lessee hereunder and in and to the Vehicles shall forthwith terminate. Upon such termination Lessee agrees that Lessor may, without notice to Lessee, either take possession of any or all Vehicles (with or without legal process) or require Lessee to return all Vehicles forthwith to Lessor at such location as Lessor shall designate. Lessee authorizes Lessor and Lessor's agents to enter any premises where the Vehicles may be found for the purpose of repossessing the same. If Lessor retakes possession of any of the Vehicles and at the time of such retaking there shall be in, upon, or attached to the Vehicles any property, goods, or things of value belonging to Lessee or in the custody or control of Lessee, Lessor is hereby authorized to take possession of such property, goods, and things of value and hold the same for Lessee or to place such property, goods, or things of value in public storage for the account of, and the expense of, Lessee. Lessor may at its option (i) sell any or all of the Vehicles which are returned or repossessed pursuant to this Section and hold Lessee liable for Adjusted Rental as provided in Section 9, or (ii) lease any or all of the Vehicles to a person other than Lessee for such term and such rental as Lessor may elect in its sole discretion, and apply the proceeds of such lease, after first deducting all costs and expenses relating to the termination of this Lease and the retaking of the Vehicles, to Lessee's obligations hereunder; provided, however, that Lessee shall pay to Lessor immediately upon demand, as liquidated damages for loss of bargain and not as a penalty, a sum with respect to each such Vehicle which represents the excess of the present value at the time of termination of all Monthly Rentals which would otherwise have accrued hereunder to the end of the Maximum Term for such Vehicle over the present value of the aggregate of the rentals to be paid for such Vehicle by such third party for such period (such present values to be computed in each case on the basis of a discount factor equal to the per annum lending rate publicly announced from time to time by Continental Illinois National Bank and Trust Company of Chicago as its prime rate, base rate or reference rate for unsecured loans of the shortest maturity to corporate borrowers in effect on the date this Lease is terminated by Lessor, from the respective dates upon which such Monthly Rentals would have been payable hereunder had this Lease not been terminated). In addition to the other remedies set forth herein, if any Vehicle is not returned to Lessor, or if Lessor is prevented from taking possession thereof, Lessee shall pay to Lessor immediately upon demand Adjusted Rental as provided in Section 9, as if such Vehicle had been sold on the date this Lease was terminated, and the amount of net sale proceeds therefor were zero. (2) Whether or not the Vehicles are returned to, sold or leased by Lessor, Lessor shall also recover from Lessee all unpaid Monthly Rentals, Additional Rents and Adjusted Rents then due or owing together with all costs and expenses, including attorneys' fees, incurred by Lessor in the enforcement of its rights and remedies under this Lease. In addition, Lessor may retain as liquidated damages all Monthly Rentals and Additional Rents and sale proceeds received, including any refunds and other sums which otherwise would be payable to Lessee, and a sum equal to the aggregate of all Monthly Rentals and other amounts, including but not limited to any early termination fee customarily charged by Lessor, (the due dates of which Rentals and other amounts Lessor may accelerate at its option) which would have been due during the period ending, for each Vehicle, on the earliest date on which Lessee could have effectively terminated this Lease as to such Vehicle pursuant to Section 3 if Lessee had not defaulted. (3) The remedies in this Lease provided in favor of Lessor shall not be deemed exclusive or alternative, but shall be cumulative and shall be in addition to all other remedies in its favor existing at law or in equity. Lessee hereby waives any right to trial by jury in any action relating to this Lease, as well as any requirements of law, now or hereafter in effect, which might limit or modify any of the remedies herein provided, to the extent that such waiver is permitted by law. The failure of Lessor to exercise any of the rights granted it hereunder shall not constitute a waiver of any such right or establish a custom or course of dealing. 15. NEITHER THIS LEASE, any rights or obligations hereunder, nor any rights in or to the Vehicles may be assigned or subleased by Lessee without the prior written consent of Lessor and no such assignment or sublease shall be valid or binding on Lessor. Lessor may assign this Lease or an interest hereunder or in the Vehicles for any purpose without consent of or notice to Lessee. 16. LESSEE AGREES that at any time and from time to time, after the execution and delivery of this Lease, it shall, upon request of Lessor, execute and deliver such further documents and do such further acts and things as Lessor may reasonably request in order fully to effect the purposes of this Lease and to protect Lessor's interest in the Vehicles, including, but not limited to, furnishing any and all information necessary to enable Lessor or its insurer to defend itself in any litigation arising in connection herewith. Lessee hereby authorizes Lessor to insert serial numbers, delivery and Monthly Rental due dates, and other data on the Schedules, Delivery Receipts and other documents relating hereto when such numbers, dates and data become known to Lessor. 17. NOTICES required or permitted to be given hereunder shall be given in writing either personally or by registered or certified mail addressed to the respective party at its address listed on page one hereof or, if such party has previously given notice of a change of address, to the address specified in the last such notice of change of address. Notices shall be deemed received when delivered if personally delivered or, if mailed, two business days after deposit postage prepaid in the United States mails. 18. THIS LEASE will become effective only upon acceptance by Lessor. This form is intended for general use throughout the United States. Any provision of this Lease which is prohibited or unenforceable in any jurisdiction shall be ineffective in such jurisdiction to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. It is the intention of the parties hereto that this contract constitute a lease for tax and other purposes; however, if for purposes of perfection, this contract is interpreted by any court as a lease intended as security, Lessee hereby grants to Lessor a security interest in the vehicles. THIS AGREEMENT REPRESENTS THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. This Lease and any Schedules and other documents relating hereto may be modified only in a writing signed by the party against whom enforcement is sought. No vehicle dealer nor any employee or agent of any dealer or of any other person has authority to make any representations to Lessee on Lessor's behalf as to the performance of the Vehicles, or as to any provision of this Lease or as to any other matter whatsoever. Lessee has no authority to, and shall not, make any warranty or representation concerning the Vehicles to any person on Lessor's behalf. American Freightways, Inc. , Lessee Witness (or Attest) By/s/Frank Conner --------------------------------------------------- /s/David T. Shepherd Title Executive Vice President T.I.N. 71-0562003 - -------------------- --------------------------------------------------- VT FINANCE, INC., LESSOR Accepted on By/s/D. Collins Hicks --------------------------------------------------- January 5, 1996 Title Authorizing Representative - ---------------------- --------------------------------------------------- (Date) SCHEDULE A ---------- This Schedule A is attached to and made part of that certain Used Vehicle Acquisition Agreement dated 12/20/95 between American Freightways, Inc. and VT Finance, Inc. DESCRIPTION OF VEHICLES ----------------------- Serial Number Make Model Year (body type) Price ------------- ---- ----- ---- --------- ----- 4V4VBAPF 6TN723685 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723686 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723687 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723688 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723689 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723690 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723691 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723692 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723693 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723694 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723695 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723696 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723697 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723698 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723699 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723700 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723701 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723702 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723703 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723704 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723705 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723706 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723707 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723708 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723709 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723710 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723711 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723712 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723713 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723714 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723715 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723716 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723717 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723718 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723719 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723720 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723721 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723722 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723723 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723724 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723725 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723726 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723727 Volvo WCA42T 1996 Tractor 56,253.00 Page 1 4V4VBAPF 9TN723728 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723729 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723730 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723731 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723732 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723733 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723734 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723735 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723736 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723737 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723738 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723739 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723740 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723741 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723742 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723743 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723744 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723745 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723746 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723747 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723748 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723749 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723750 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723751 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723752 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723753 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723754 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723755 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723756 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723757 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723758 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723759 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723760 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723761 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723762 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723763 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723764 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723765 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723766 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723767 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723768 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723769 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723770 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723771 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723772 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723773 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723774 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723775 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723776 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723777 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723778 Volvo WCA42T 1996 Tractor 56,253.00 Page 2 4V4VBAPF 4TN723779 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723780 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723781 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723782 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723783 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723784 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723786 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723787 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723788 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723789 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723790 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723791 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723792 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723793 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723794 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723795 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723796 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723797 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723798 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723799 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723800 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723801 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723802 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723803 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723804 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723805 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723806 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723807 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723808 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723809 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723810 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723811 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723812 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723813 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723814 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723815 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723816 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723817 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723818 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723819 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723820 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723821 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723822 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723823 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723824 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723825 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723826 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723827 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723828 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723829 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723830 Volvo WCA42T 1996 Tractor 56,253.00 Page 3 4V4VBAPF 2TN723831 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723832 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723833 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723834 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723835 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723836 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723837 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723838 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723839 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723840 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723841 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723842 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723843 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723844 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723845 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723846 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723847 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723848 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723849 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723850 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723851 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723852 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723853 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723854 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723855 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723856 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723857 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723858 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723859 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723860 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723861 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723862 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723863 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723864 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723865 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723866 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723867 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723868 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723869 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 1TN723870 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 3TN723871 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 5TN723872 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 7TN723873 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN723874 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 0TN723875 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 2TN723876 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723877 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723878 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 8TN723879 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 4TN723880 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 6TN723881 Volvo WCA42T 1996 Tractor 56,253.00 Page 4 4V4VBAPF 8TN723882 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF XTN723883 Volvo WCA42T 1996 Tractor 56,253.00 4V4VBAPF 9TN724295 Volvo WCA42T 1996 Tractor 56,253.00 ------------- Grand Totals 199 Units 11,194,347.00 ============= American Freightways, Inc. VT Finance, Inc. By:/s/Frank Conner By:/s/D. Collins Hicks - -------------------------------- ---------------------------------- Title: Executive Vice President Title: Authorizing Representative - -------------------------------- ---------------------------------- Page 5 EX-13 8 ANNUAL REPORT TO STOCKHOLDERS (YEAR END 12/31/95) EXHIBIT 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following table sets forth, for the years indicated, the percentages of operating expenses and other items to operating revenue:
1995 1994 1993 - ----------------------------------------------------------------- Operating revenue 100.0% 100.0% 100.0% Operating expenses and costs: Salaries, wages and benefits 58.6 53.1 51.4 Operating supplies and expenses 6.8 6.6 6.7 Operating taxes and licenses 4.3 4.1 3.8 Insurance 3.8 3.3 2.4 Communications and utilities 1.9 1.9 2.1 Depreciation and amortization 6.5 6.0 6.5 Rents and purchased transportation 8.1 9.8 12.9 Other 4.6 4.5 4.8 - ----------------------------------------------------------------- Total operating expenses 94.6 89.3 90.6 - ----------------------------------------------------------------- Operating income 5.4 10.7 9.4 Interest expense 1.8 1.5 1.3 Other income, net 0.1 0.2 0.1 - ----------------------------------------------------------------- Income before taxes 3.7 9.4 8.2 Income taxes 1.4 3.6 3.1 - ----------------------------------------------------------------- Income before extraordinary item 2.3 5.8 5.1 - -----------------------------------------------------------------
[graph appears here] Average Shares Outstanding (in millions) Year Amount 1984 10.60 1985 12.56 1986 14.79 1987 15.25 1988 16.63 1989 20.91 1990 22.40 1991 26.64 1992 28.13 1993 28.58 1994 30.36 1995 31.33 1 RESULTS OF OPERATIONS 1995 COMPARED TO 1994 Revenue - ------- Operating revenue for 1995 was $572,100,000, up 22.9%, compared to $465,588,000 for 1994. This increase in operating revenue was due almost entirely to a 22.5% increase in tonnage handled by the Company. Revenue per hundred weight was basically unchanged in 1995 from 1994 despite the Company effecting a rate increase of approximately 3.5% on January 1, 1995. This was primarily due to aggressive, discounted pricing as a result of excess capacity within the less- than-truckload industry. This excess capacity existed largely as a result of overall economic conditions during 1995. In order to utilize its excess capacity and better position the Company for the long-term, the Company elected to accelerate the pace of expansion of its service territory. The following expansions of service territory were initiated by the Company during 1995: . On January 1, 1995, the Company expanded its all-points coverage to the states of North Carolina and South Carolina with the opening of thirteen new terminals. . On April 17, 1995, the Company expanded its service territory with the addition of terminal locations in: Colorado Springs, Denver, Fort Collins and Pueblo, CO; Des Moines, IA; Minneapolis/St. Paul, MN; Omaha, NE; Madison and Milwaukee, WI. . On July 10, 1995, the Company expanded its all-points coverage to the states of Colorado, Iowa, Nebraska and Wisconsin with the opening of twelve new terminal locations. . On August 14, 1995, the Company provided all-points coverage to the state of Florida with the opening of seven new terminal locations and opened one additional terminal in the the state of Georgia. These expansions of service territory from 14 to 21 states during 1995 were the primary reasons for the increase in tonnage handled by the Company. In addition, tonnage was increased by the deregulation of intrastate commerce, effective January 1, 1995, by the Federal Aviation Administration Authorization Act of 1994, and by continued market penetration into existing service territories. [graph appears here] Book Value per Share (in dollars) Year Amount 1984 $0.08 1985 $0.14 1986 $0.17 1987 $0.28 1988 $0.47 1989 $1.36 1990 $1.61 1991 $2.80 1992 $3.19 1993 $3.83 1994 $5.84 1995 $6.24 2 Management expects that growth in operating revenue is sustainable in the near term. However, the Company's planned expansions of service territory during 1996 are less aggressive than those initiated during 1995. Any near-term growth in operating revenue will primarily be due to increased tonnage handled by the Company. OPERATING EXPENSES Operating expenses as a percentage of operating revenue increased to 94.6% in 1995 from 89.3% in 1994. This overall increase was primarily attributable to: . Salaries, wages and benefits as a percentage of operating revenue increased to 58.6% in 1995 from 53.1% in 1994. The increase in salaries, wages and benefits as a percentage of operating revenue was primarily a result of three factors. First, the utilization of Company-operated terminals, rather than contractor-operated terminals, in expansions of service territory contributed to this increase. Second, the continuation of the Company's philosophy of sharing its success with its associates through increased wages and enhanced benefit packages contributed to this increase. On March 6, 1995, the Company increased the wages of its drivers, dockmen and clerical associates by approximately 5.5%. The third factor was the accelerated expansion of service territory during 1995. Within the expansion territories, wages and benefits were disproportionately high in relation to operating revenues as new associates were added to establish an operating base. Management does not expect salaries, wages and benefits as a percentage of operating revenue to continue in an upward trend, but expects these expenses as they relate to operating revenue to stabilize or gradually improve. . Insurance as a percentage of operating revenue increased to 3.8% in 1995 from 3.3% in 1994. This increase was primarily a result of the Company's increased experience of accidents and cargo claims, particularly in the areas of cargo care and liability insurance. Management does not expect a continuation of the upward trend in insurance expenses as they relate to operating revenue but expects a stabilization of these expenses near historical levels. [graph appears here] Operating Revenue (in millions) Year Amount 1984 $17.83 1985 $25.04 1986 $34.45 1987 $47.07 1988 $73.08 1989 $97.59 1990 $142.78 1991 $198.26 1992 $262.01 1993 $328.46 1994 $465.59 1995 $572.10 3 . Depreciation and amortization as a percentage of operating revenue increased to 6.5% in 1995 from 6.0% in 1994. This increase was primarily due to two factors. The first factor was the decreased usage of rented equipment in favor of Company-owned equipment. The second factor was the rapid expansion of service territory. During the initial stages of expansion of service territory, depreciation expense is disproportionately high in comparison to operating revenue. Management expects depreciation expense as a percentage of operating revenue to stabilize or gradually improve. [graph appears here] Total Terminals Year Amount 1984 31 1985 31 1986 44 1987 64 1988 76 1989 85 1990 100 1991 111 1992 116 1993 132 1994 144 1995 186 These increases in operating expenses as a percentage of operating revenue were partially offset by improvements in the following area: . Rents and purchased transportation as a percentage of operating revenue improved to 8.1% in 1995 from 9.8% in 1994. This improvement was primarily due to the Company's philosophy of utilizing Company-operated terminals rather than contractor-operated terminals in expansions of service territory. In addition, this improvement was partially due to the decreased usage of rented equipment in favor of Company-owned equipment. Management expects rents and purchased transportation as a percentage of operating revenue to stabilize near current levels. OTHER Interest expense as a percentage of operating revenue increased to 1.8% in 1995 from 1.5% in 1994. This increase was primarily attributable to increased borrowings incurred by the Company to finance the expansion of service territory and support growth in operating revenue. The effective tax rate of the Company was 38.6% for 1995, up from 38.0% in 1994. This increase was primarily due to increased state income taxes. Net income for 1995 was $13,083,000, down 51.0%, from $26,696,000 for 1994. 4 1994 COMPARED TO 1993 Operating revenue for 1994 was $465,588,000, up 41.7%, compared to $328,464,000 for 1993. The growth in operating revenue was primarily attributable to a 34.5% increase in tonnage handled by the Company from new and existing customers. The major causes of this increase in tonnage were: . On April 5, 1993, the Company opened nine new terminals to extend all-points coverage to the state of Kentucky and the southern regions of Indiana and Ohio. The year 1994 included a full year of operation of these terminals. . On January 1, 1994, the Company expanded its all-points coverage to the states of Indiana and Ohio with the opening of fourteen new terminals. . The Company continued to increase its market penetration into service territory that existed on January 1, 1994. . The one-time increase in tonnage as a result of a strike in April 1994, by the International Brotherhood of Teamsters against several companies in the less- than-truckload industry. This one-time, strike-related increase in tonnage resulted in extra operating revenue of approximately $12,000,000. In addition to the increase in tonnage, operating revenue was increased by a 5.5% increase in revenue per hundred weight. The major factors contributing to this increase in revenue per hundred weight were: . A general rate increase of 2.8% effective January 1, 1994. General rate increases initially affect approximately 50% of the Company's customers. The remaining customers' rates are determined by contracts and guarantees and are negotiated throughout the year. . The Company's average length of haul increased 3.1% in 1994 as a result of the Company's expanded service territory. . The percentage of the Company's total revenue that was truckload (shipments greater than 10,000 pounds) declined to 8.1% in 1994 compared to 8.8% in 1993. [graph appears here] Shareholder's Equity (in millions) Year Amount 1984 $0.80 1985 $1.71 1986 $2.50 1987 $4.28 1988 $7.75 1989 $28.30 1990 $35.94 1991 $74.64 1992 $89.71 1993 $109.46 1994 $177.18 1995 $195.43 5 Operating expenses as a percentage of operating revenue improved to 89.3% in 1994 from 90.6% in 1993. This overall improvement was primarily attributable to: . Rents and purchased transportation as a percentage of operating revenue decreased to 9.8% in 1994 from 12.9% in 1993. This decrease was due to the Company's philosophy of utilizing Company-operated terminals in expansions of service territory, along with the conversion of four contractor-operated terminals to Company-operated terminals during 1994. At December 31, 1994, of the Company's 144 terminals, 10 were contractor-operated. The increased utilization of Company-operated terminals was one of two primary reasons salaries, wages and benefits as a percentage of operating revenue increased to 53.1% in 1994 from 51.4% in 1993. The other reason for the increase in salaries, wages and benefits as a percentage of operating revenue was the Company's ongoing philosophy of sharing its success with associates through increased wages and enhanced benefit packages. On March 6, 1994, the Company increased the wages of its drivers, dockmen and clerical associates by approximately 5.5%. . Depreciation and amortization as a percentage of operating revenue decreased to 6.0% in 1994 from 6.5% in 1993. This improvement was primarily due to three factors. The first factor was the increased tonnage handled by the existing fixed cost structure of the Company. The second factor was the one- time surge in tonnage related to the Teamster strike in April 1994 (where there was not a comparable surge in equipment in use). The third factor was the extension of the useful lives of a portion of the Company's revenue equipment by two years, effective July 1, 1994. Based on the historical experience of the Company, management expects the extended lives to better match the economic benefits received from the equipment. [graph appears here] Gross Tonnage Hauled (in thousands) Year Amount 1984 218 1985 289 1986 334 1987 432 1988 586 1989 711 1990 937 1991 1,238 1992 1,615 1993 2,051 1994 2,759 1995 3,380 These improvements in operating expenses as a percentage of operating revenue were partially offset by increases in the following areas: . Insurance as a percentage of operating revenue increased to 3.3% in 1994 from 2.4% in 1993. This increase was primarily a result of the Company's increased experience of accidents and cargo claims, particularly in the areas of cargo care and liability 6 insurance. Accidents and cargo claims returned to historical levels during 1994, after being somewhat lower in the prior two years. . Operating taxes and licenses as a percentage of operating revenue increased to 4.1% in 1994 from 3.8% in 1993. The primary cause for this increase was an increase in federal fuel taxes in October 1993. [graph appears here] Total Number of Tractors Year Amount 1984 233 1985 270 1986 382 1987 516 1988 714 1989 968 1990 1,195 1991 1,634 1992 1,955 1993 2,453 1994 3,344 1995 4,521 LIQUIDITY AND CAPITAL RESOURCES Significant capital resources were required by the Company during 1995, primarily due to the expansion of service territory during 1995 and the startup costs associated with the expansion of service territory initiated on January 1, 1996. Capital resources were also required to support the continued growth in tonnage handled by the Company in service territory that existed prior to January 1, 1995. Capital requirements during 1995 consisted primarily of $136,923,000 of investing activities. The Company invested $137,952,000 in capital expenditures during 1995 comprised of $81,062,000 in additional revenue equipment, $30,072,000 in new terminal facilities or the expansion of existing terminal facilities and $26,818,000 in other equipment. Planned expansions of service territory during 1996 are less aggressive than those expansions initiated during 1995. Therefore, management does not expect a similar amount of capital expenditures will be required in 1996. However, the amount of capital expenditures required in 1996 will be dependent on the growth rate of the Company and the timing and size of any future geographical expansions. At December 31, 1995, the Company had commitments for land, terminals, revenue and other equipment of approximately $33,462,000. These commitments were for the completion of projects in process at December 31, 1995, and for the purchase of additional revenue equipment in anticipation of increased revenue levels during 1996. The Company provided for its capital resource requirements in 1995 with cash from operations and financing activities. Cash from operations totaled $45,676,000 in 1995 7 compared to $65,501,000 in 1994. This decrease was primarily attributable to the increase in operating expenses, as they relate to operating revenue in 1995 compared to 1994. Financing activities augmented cash flow by $89,890,000 in 1995, utilizing two primary sources of financing: the revolving line of credit and the Master Shelf facility. . The Company experiences periodic cash flow fluctuations common to the industry. Cash outflows are heaviest during the first part of any given year while cash inflows are normally weighted towards the last two quarters of the year. To smooth these fluctuations and to provide flexibility to fund future growth, the Company utilizes a variable-rate, unsecured revolving line of credit provided by NationsBank of Texas, N.A., Texas Commerce Bank, N.A. and Wachovia Bank of Georgia, N.A. Effective May 31, 1995, the limit of this line of credit facility was increased to $125,000,000 from $75,000,000. During 1995, the Company utilized this facility to provide $57,000,000 of net financing, bringing outstanding borrowings under the facility to $94,000,000 and leaving $31,000,000 available for borrowing. The Company also maintains a short-term, unsecured revolving line of credit with NationsBank of Texas, N.A. Effective May 9, 1995, the limit of this short-term facility was increased to $7,500,000 from $5,000,000. At December 31, 1995, $7,500,000 was available for borrowing. In addition, the Company maintains a $10,000,000 line of credit with NationsBank, N.A. to obtain letters of credit required for its self-insurance program. At December 31, 1995, the Company had obtained letters of credit totaling $5,870,000 for this purpose. [graph appears here] Total Assets (in millions) Year Amount 1984 $ 7.47 1985 $ 11.66 1986 $ 15.37 1987 $ 23.20 1988 $ 43.47 1989 $ 68.90 1990 $ 97.95 1991 $168.13 1992 $175.53 1993 $251.13 1994 $355.35 1995 $477.76 . To assist in financing longer-lived assets, the Company has an uncommitted Master Shelf Agreement with the Prudential Insurance Company of America which provides for the issuance of up to $90,000,000 in medium to long-term unsecured notes at an interest rate calculated at issuance. During 1995, the Company utilized this agreement to issue a $15,000,000 note at 8.85% with a ten year maturity and a $20,000,000 note at 6.92% with a ten year maturity. The proceeds of these notes were used primarily to repay borrowings from the revolving line of credit or to fund capital expenditures. At December 31, 1995, $25,000,000 was available under this facility for borrowing. 8 Working capital at December 31, 1995, increased $14,830,000, compared to December 31, 1994. This increase was primarily the result of a $14,301,000 increase in trade receivables, less allowance for doubtful accounts, at December 31, 1995, compared to December 31, 1994. Management expects that the Company's existing working capital and its available lines of credit are sufficient to meet the Company's commitments as of December 31, 1995, and to fund current operating and capital needs. However, if additional financing is required, management believes it will be available. The Company utilizes off-balance sheet financing in the form of operating leases, when appropriate and suitable, to finance computer equipment, terminal facilities and revenue equipment. At December 31, 1995, future rental commitments on operating leases were $54,805,000. ENVIRONMENTAL At December 31, 1995, the Company had no outstanding inquiries with any state or federal environmental agency. INFLATION During 1995, the effect of inflation on the operating results of the Company was minimal. However, most of the Company's expenses are sensitive to inflation as increases in inflation generally result in increased costs. [graph appears here] Average Length of Haul (miles) Year Amount 1984 264 1985 290 1986 289 1987 274 1988 300 1989 360 1990 395 1991 454 1992 525 1993 550 1994 567 1995 588 SEASONALITY In the trucking industry, results of operations generally show a seasonal pattern because customers reduce shipments during winter months. In addition, the Company's operating expenses as a percentage of operating revenues have historically been higher during the winter. 9 [graph appears here] Total Number of Shipments (in thousands) Year Amount 1984 227 1985 313 1986 437 1987 613 1988 949 1989 1,252 1990 1,693 1991 2,179 1992 2,654 1993 3,237 1994 4,267 1995 5,486 OTHER MATTERS In October 1995, the Financial Accounting Standards Board issued Statement No. 123, Accounting for Stock-Based Compensation, which will be effective for 1996. The Company has elected to continue following the existing accounting rules (the intrinsic value method) and has disclosed such in the 1995 financial statements. In March 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. Although this Statement will also be applicable for 1996, the Company does not expect it to have a significant impact on the Company's financial position or results of operations. RECENT EVENTS On January 1, 1996, the Company opened twelve new terminals and extended its all-points coverage to the states of Delaware, Maryland, Virginia and West Virginia. On January 1, 1996, the Company effected a general rate increase of approximately 5.75%. This rate increase initially affected approximately 44% of its customers. Rates for other customers are covered by contracts and guarantees and are negotiated throughout the year. Effective January 1, 1996, the Company expanded its coverage to include 92% of Canada's population through an exclusive partnership with Day & Ross, Inc., one of Canada's leading less-than-truckload carriers. Day & Ross, Inc. is part of the Day & Ross Transportation Group, Canada's largest truck transportation conglomerate and is a wholly-owned subsidiary of the Canadian-based McCain Food Company. Day & Ross, Inc. corporate offices are located in Hartland, New Brunswick, Canada. 10 [graph appears here] Total Number of People Year Amount 1984 288 1985 340 1986 385 1987 745 1988 1,156 1989 1,516 1990 2,209 1991 3,058 1992 3,655 1993 4,964 1994 6,506 1995 8,867 11 American Freightways Corporation and Subsidiary Consolidated Balance Sheets (thousands, except per share data)
DECEMBER 31 1995 1994 -------------------------- ASSETS Current assets: Cash and cash equivalents (Note 9) $ 2,642 $ 3,999 Trade receivables, less allowance for doubtful accounts (1995--$845; 1994--$639) 54,119 39,818 Operating supplies and inventories 2,136 1,519 Prepaid expenses 5,504 4,247 Deferred income taxes (Note 4) 8,444 4,664 Income taxes receivable 4,368 - -------------------------- Total current assets 77,213 54,247 Property and equipment (Notes 3 and 6): Land and structures 97,303 83,244 Revenue equipment 322,748 230,732 Service, office and other equipment 66,012 49,324 Leasehold improvements 1,650 1,439 Construction in progress 42,876 31,855 Allowances for depreciation and amortization (deduction) (132,887) (98,701) -------------------------- 397,702 297,893 Other assets: Bond funds (Notes 3 and 9) 901 888 Other 1,946 2,320 -------------------------- 2,847 3,208 -------------------------- $ 477,762 $ 355,348 ==========================
12
DECEMBER 31 1995 1994 -------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Trade accounts payable $ 10,532 $ 13,358 Accrued expenses (Note 2) 33,590 24,449 Federal and state income taxes - 233 Current portion of long-term debt 8,392 6,338 -------------------------- Total current liabilities 52,514 44,378 Long-term debt, less current portion (Notes 3 and 9) 189,239 104,843 Deferred income taxes (Note 4) 40,575 28,947 Shareholders' equity (Notes 3, 5 and 7): Common stock, par value $.01 per share; authorized 250,000 shares; issued and outstanding 30,931 shares in 1995 and 30,496 in 1994 309 305 Additional paid-in capital 98,514 93,347 Retained earnings 96,611 83,528 -------------------------- 195,434 177,180 Commitments (Note 6) -------------------------- $ 477,762 $ 355,348 ==========================
See accompanying notes. 13 American Freightways Corporation and Subsidiary Consolidated Statements of Income (thousands, except per share data)
YEAR ENDED DECEMBER 31 1995 1994 1993 ---------------------------------- Operating revenue $572,100 $465,588 $328,464 Operating expenses and costs: Salaries, wages and benefits 335,167 247,049 168,770 Operating supplies and expenses 38,667 30,710 22,099 Operating taxes and licenses 24,434 19,251 12,340 Insurance 21,595 15,360 7,891 Communications and utilities 11,040 9,117 6,907 Depreciation and amortization 37,560 27,888 21,519 Rents and purchased transportation 46,405 45,633 42,250 Other 26,469 20,880 15,782 ---------------------------------- 541,337 415,888 297,558 ---------------------------------- Operating income 30,763 49,700 30,906 Other income (expense): Interest expense (10,198) (6,832) (4,246) Interest income 146 195 132 Gain on disposal of assets 329 292 1 Other, net 269 247 197 ---------------------------------- (9,454) (6,098) (3,916) ---------------------------------- Income before income taxes and extraordinary charge 21,309 43,602 26,990 Federal and state income taxes (Note 4): Current (credit) (422) 7,071 4,189 Deferred 8,648 9,500 6,049 ---------------------------------- 8,226 16,571 10,238 ---------------------------------- Income before extraordinary charge 13,083 27,031 16,752 Extraordinary charge for early retirement of debt, net of tax benefit of $205 (Note 3) - (335) - ---------------------------------- Net income $ 13,083 $ 26,696 $ 16,752 ================================== Per share (Note 1): Income before extraordinary charge $ 0.42 $ 0.89 $0.59 Extraordinary charge - (0.01) - ---------------------------------- Net income $ 0.42 $ 0.88 $0.59 ================================== Average shares outstanding (Note 1) 31,334 30,357 28,581 ==================================
See accompanying notes. 14 American Freightways Corporation and Subsidiary Consolidated Statements of Shareholders' Equity
COMMON STOCK ----------------- ADDITIONAL PAR PAID-IN RETAINED SHARES VALUE CAPITAL EARNINGS TOTAL --------------------------------------------------------- (thousands) Balances at January 1, 1993 27,694 $ 277 $ 49,352 $ 40,080 $ 89,709 Stock option and purchase plans 329 3 2,996 - 2,999 Net income - - - 16,752 16,752 --------------------------------------------------------- Balances at December 31, 1993 28,023 280 52,348 56,832 109,460 Sale of stock (Note 7) 2,125 21 36,630 - 36,651 Stock option and purchase plans 348 4 4,369 - 4,373 Net income - - - 26,696 26,696 --------------------------------------------------------- Balances at December 31, 1994 30,496 305 93,347 83,528 177,180 Stock option and purchase plans 435 4 5,167 - 5,171 Net income - - - 13,083 13,083 --------------------------------------------------------- Balances at December 31, 1995 30,931 $ 309 $ 98,514 $ 96,611 $ 195,434 =========================================================
See accompanying notes. 15 American Freightways Corporation and Subsidiary Consolidated Statements of Cash Flows
YEAR ENDED DECEMBER 31 1995 1994 1993 ------------------------------------- (thousands) OPERATING ACTIVITIES Cash received from customers $ 557,139 $ 454,308 $ 323,298 Cash paid to suppliers and employees (498,454) (377,424) (266,724) Interest received 146 195 132 Interest paid (9,907) (7,152) (4,157) Income taxes paid (3,248) (4,426) (5,729) ------------------------------------- Net cash provided by operating activities 45,676 65,501 46,820 INVESTING ACTIVITIES Proceeds from sales of equipment 1,029 945 1,162 Capital expenditures (137,952) (116,272) (95,085) ------------------------------------- Net cash used by investing activities (136,923) (115,327) (93,923) FINANCING ACTIVITIES Proceeds from notes payable and long-term borrowings 117,640 74,500 44,000 Principal payments on long-term debt (31,190) (60,856) (1,767) Proceeds from issuance of common stock 3,440 39,938 2,172 ------------------------------------- Net cash provided by financing activities 89,890 53,582 44,405 ------------------------------------- Net increase (decrease) in cash and cash equivalents (1,357) 3,756 (2,698) Cash and cash equivalents at beginning of year 3,999 243 2,941 ------------------------------------- Cash and cash equivalents at end of year $ 2,642 $ 3,999 $ 243 =====================================
16 American Freightways Corporation and Subsidiary Consolidated Statements of Cash Flows (continued)
YEAR ENDED DECEMBER 31 1995 1994 1993 ----------------------------------- (thousands) RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: Net income $ 13,083 $ 26,696 $ 16,752 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 37,560 27,888 21,519 Provision for losses on accounts receivable 929 1,126 513 Current tax effect of exercise of stock options 931 1,086 826 Gain on sale of equipment (329) (292) (1) Deferred income taxes 8,648 9,500 6,049 Changes in operating assets and liabilities: Trade accounts receivable (15,230) (11,521) (5,403) Operating supplies and inventories (617) (664) (284) Prepaid expenses (1,257) (986) (781) Other assets 244 100 (262) Trade accounts payable (2,826) 3,534 7,779 Accrued expenses 9,141 7,681 1,653 Federal and state income taxes (4,601) 1,353 (1,540) ----------------------------------- Total adjustments 32,593 38,805 30,068 ----------------------------------- Net cash provided by operating activities $ 45,676 $ 65,501 $ 46,820 ===================================
See accompanying notes. 17 American Freightways Corporation and Subsidiary Notes to Consolidated Financial Statements December 31, 1995 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION The consolidated financial statements include the accounts of American Freightways Corporation and its subsidiary (collectively, the "Company"). All significant intercompany accounts and transactions have been eliminated. BUSINESS The Company primarily operates as an interregional, scheduled, for hire, less- than-truckload motor carrier, serving all points in 21 contiguous states from a network of 186 terminals. The Company performs ongoing credit evaluations of its customers and generally does not require collateral. Historically, credit losses have not been significant. REVENUE RECOGNITION The Company recognizes revenue and direct shipment costs upon the delivery of the related freight. PROPERTY AND EQUIPMENT Property and equipment is recorded at cost. For financial reporting purposes, the cost of such property is depreciated principally by the straight-line method over the estimated useful lives of 3 to 12 years for revenue and service equipment, 15 to 40 years for structures and improvements and 3 to 10 years for furniture and office equipment. For tax reporting purposes, accelerated depreciation or applicable cost recovery methods are used. Gains and losses are recognized in the year of disposal. Effective for periods beginning July 1, 1994, the Company changed the service lives and salvage values for certain revenue equipment. These changes in estimates were made to more accurately reflect the Company's experience as to service lives of the equipment. These changes increased 1994 net income by approximately $565,000, or $.02 per common share. Effective for periods beginning October 1, 1995, the Company changed the service lives for certain structures and improvements, ancillary and computer equipment and furniture and fixtures. These changes in estimates were made to more accurately reflect future service lives of the assets. These changes increased 1995 net income by approximately $453,000, or $.01 per common share. 18 American Freightways Corporation and Subsidiary Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INSURANCE As of December 31, 1995, the Company was self-insured up to specified limits for the following types of claims: Workers' compensation: All states of operation (with the exception of Colorado, Florida, Indiana, Iowa, Minnesota, Nebraska, Ohio, Texas and Wisconsin) $ 500,000 State of Wisconsin FULLY INSURED In the states of Colorado, Florida, Indiana, Iowa, Minnesota, Nebraska and Texas, workers' compensation claims are insured under a $500,000 deductible plan. In the state of Ohio, workers' compensation claims are insured under the mandatory State Plan as private plans are not permitted. Wisconsin law does not allow deductible plans and those claims are fully insured. All other types of claims are self-insured with a retention limit of $500,000 per occurrence. INCOME TAXES Deferred income taxes are accounted for under the liability method. Deferred income tax assets and liabilities reflect the effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and the amounts used for income tax purposes. EARNINGS PER SHARE Earnings per share is computed based on the weighted average number of shares outstanding during each year, adjusted to include common stock equivalents attributable to dilutive stock options and retroactively adjusted for the effect of a 2-for-1 stock split declared April 22, 1993. CASH EQUIVALENTS The Company considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. 19 American Freightways Corporation and Subsidiary Notes to Consolidated Financial Statements (continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) COMPENSATION TO EMPLOYEES Stock based compensation to employees is accounted for based on the intrinsic value method under Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. RECENT ACCOUNTING PRONOUNCEMENTS In 1995, the Financial Accounting Standards Board issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of. This statement will be adopted in the first quarter of 1996. The Company does not expect Statement No. 121 to have a significant impact on the Company's financial position or results of operations. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. 2. ACCRUED EXPENSES
1995 1994 --------------------------- (thousands) Accrued salaries, wages and benefits $ 13,796 $ 10,518 Taxes other than income 2,363 2,575 Loss, injury, damage, health and workers' compensation claims reserves 16,320 10,536 Other 1,111 820 --------------------------- $ 33,590 $ 24,449 ===========================
20 American Freightways Corpration and Subsidiary Notes to Consolidated Financial Statements (continued) 3. LONG-TERM DEBT
1995 1994 ------------------------- (thousands) Bonds payable /(1)/ $ 7,310 $ 7,580 Revolving credit agreements /(2)/ 94,000 37,000 Mortgage notes /(3)/ 1,107 419 Capitalized lease obligations /(4)/ 214 1,182 Unsecured senior notes /(5)/ 95,000 65,000 ------------------------- 197,631 111,181 Less current portion (8,392) (6,338) ------------------------- $ 189,239 $ 104,843 =========================
(1) Represents the Company's liability under a loan agreement with Arkansas Development Finance Authority, issuer of economic development revenue bonds to construct terminals and a general office facility. The loan agreement provides that the Company will make payments sufficient to pay the principal and interest on the bonds. The bonds include a $1,320,000 term bond due in 1999 and a $5,990,000 term bond due in 2009. The bonds bear interest at fixed rates of 8.25% and 8.50%, respectively, and are collateralized by land and structures with a net book value of $8,268,000 at December 31, 1995. The loan agreement requires that certain bond service funds be maintained. As of December 31, 1995, there was $901,000 in a debt service reserve fund. Mandatory annual sinking fund redemption payments began in 1995. (2) The revolving credit agreements at December 31, 1995, include an unsecured revolving credit agreement which provides for available borrowings of $125,000,000. Borrowings under this revolving credit agreement at December 31, 1995 totaled $94,000,000. The term of this agreement extends to April 1, 2000 (unless terminated or renewed). Interest is applied to outstanding borrowings at variable interest rates based on the London Interbank rate or the prime rate. The weighted average rate on outstanding borrowings at December 31, 1995 was 6.5%. The agreement contains covenants which limit, among other things, indebtedness, loans, investments and dividend payments, as well as require the Company to meet certain financial tests. The Company pays an annual commitment fee of .20% of the unused commitment. As of December 31, 1995, the amount available for additional borrowing under this line of credit was $31,000,000. 21 American Freightways Corpration and Subsidiary Notes to Consolidated Financial Statements (continued) 3. LONG-TERM DEBT (CONTINUED) The Company also has $7,500,000 of available borrowings at December 31, 1995, under a separate unsecured revolving credit agreement. The terms of this agreement provide for borrowings up to $7,500,000 at the prime rate of interest or at a rate of interest agreed upon at the time of any borrowings. No borrowings were outstanding at December 31, 1995 under this agreement. This agreement matures May 31, 1996, unless terminated or renewed. In addition, the Company maintains a $10,000,000 line of credit to fund letters of credit. At December 31, 1995, the Company had utilized this line of credit to obtain letters of credit totaling $5,870,000. (3) Mortgage notes are due monthly or quarterly to November 2003 at an average interest rate of 8.44%. The notes are collateralized by land and structures with a net book value of $1,618,000 at December 31, 1995. (4) Capitalized lease obligations consist primarily of installment obligations for revenue equipment purchases; payable in various monthly installments through April 1996, at a weighted average interest rate of 9.33% and collateralized by revenue equipment with a net book value of approximately $2,417,000 at December 31, 1995. (5) Includes an unsecured senior note for $30,000,000 payable in equal annual installments of $5,000,000 through November 2001. The note bears interest at a fixed rate of 8.91% payable semi-annually. Also includes five notes totaling $65,000,000; all issued under an unsecured and uncommitted $90,000,000 Master Shelf Agreement with the following characteristics:
OUTSTANDING INTEREST PRINCIPAL MATURITY DATE RATE ------------------------------------------------------------- $ 10,000,000 August 2000 6.25% 10,000,000 October 2000 6.00 10,000,000 April 2001 7.55 15,000,000 January 2005 8.85 20,000,000 June 2005 6.92
22 American Freightways Corporation and Subsidiary Notes to Consoliated Financial Statements (continued) 3. LONG-TERM DEBT (CONTINUED) All notes have fixed interest rates, payable quarterly. These note agreements contain covenants which limit, among other things, loans, indebtedness, investments and dividend payments, and require the Company to meet certain financial tests. Annual maturities on long-term debt, excluding capitalized lease obligations, are $8,178,000 in 1996, $11,463,000 in 1997, $11,495,000 in 1998, $11,539,000 in 1999, $106,835,000 in 2000 and $47,907,000 thereafter. Interest costs of $1,478,000, $1,002,000 and $1,568,000 in 1995, 1994, and 1993, respectively, were capitalized as part of the acquisition cost of certain property and equipment. In 1994, the Company paid a note prior to its maturity date and incurred a prepayment charge of $540,000 which has been classified as an extraordinary charge in the 1994 statement of income, net of the related income tax benefit of $205,000. 4. FEDERAL AND STATE INCOME TAXES Significant components of the Company's deferred tax liabilities and assets as of December 31, 1995 and 1994, respectively, are as follows:
1995 1994 --------------------- (thousands) Noncurrent deferred tax liabilities: Tax over book depreciation $49,490 $31,361 Alternative minimum tax credit carryover (8,915) (2,414) --------------------- Net noncurrent deferred tax liabilities $40,575 $28,947 ===================== Current deferred tax assets: Accrued expenses not deductible until paid $ 8,802 $ 5,346 Allowance for doubtful accounts 224 154 Revenue recognition differences 88 241 --------------------- Total current deferred tax assets 9,114 5,741 Current deferred tax liabilities: Prepaid expenses (670) (1,077) --------------------- Net current deferred tax assets $ 8,444 $ 4,664 =====================
23 American Freightways Corporation and Subsidiary Notes to Consoliated Financial Statements (continued) 4. FEDERAL AND STATE INCOME TAXES (CONTINUED) The reconciliation between the effective income tax rate and the statutory federal income tax rate is presented in the following table:
1995 1994 1993 --------------------------------- (thousands) Income tax at the statutory federal rate of 35% $ 7,458 $ 15,261 $ 9,446 Federal income tax effects of: Retroactive tax rate change effect on deferred taxes - - 270 State income taxes (336) (613) (334) Nondeductible expenses 295 214 90 Lower rates on taxable income below $15,000,000 (150) (100) (80) Other - 58 (108) --------------------------------- Federal income taxes 7,267 14,820 9,284 State income taxes 959 1,751 954 --------------------------------- $ 8,226 $ 16,571 $ 10,238 ================================= Effective income tax rate 38.6% 38.0% 37.9% =================================
The Company has alternative minimum tax credit carryovers of approximately $8,915,000 which have reduced the deferred tax liability. These credits carry over indefinitely. Tax benefits of stock option and purchase plans recorded as paid-in capital and which did not reduce income tax expense amounted to $1,731,000, $1,086,000 and $826,000 in 1995, 1994 and 1993, respectively. 5. EMPLOYEE BENEFIT AND COMPENSATION PLANS STOCK PURCHASE PLAN The Company maintains a stock purchase plan covering substantially all employees of the Company. A total of 320,699 shares of common stock remain reserved for issuance under this plan at December 31, 1995. An eligible employee can purchase shares having a fair market value on the date of grant of up to a maximum of the greater of $1,200 or the fair market value of 200 shares. The price per share is 85% of the lower of the fair market value at the date of grant or the date of exercise, which is one year from the date of grant. 24 American Freightways Corporation and Subsidiary Notes to Consoliated Financial Statements (continued) 5. EMPLOYEE BENEFIT AND COMPENSATION PLANS (CONTINUED) Shares have been issued during 1993, 1994 and 1995 as follows:
NUMBER OF PER SHARE ISSUE DATE SHARES ISSUED EXERCISE PRICE - ------------------------------------------------------------------------------ May 1, 1993 53,734 $ 9.56 November 1, 1993 63,328 9.46 April 30, 1994 91,199 12.75 October 31, 1994 55,795 16.58 April 30, 1995 59,093 16.15 October 31, 1995 74,014 10.84
STOCK OPTIONS AND STOCK APPRECIATION RIGHTS During 1993, the Company adopted the 1993 Stock Option Plan (the "Employee Plan"), the Chairman Stock Option Plan, and the Nonemployee Director Stock Option Plan. The Employee Plan is a successor to a nonstatutory stock option plan adopted in February 1989. The Employee Plan provides for the issuance of qualified or nonqualified options to purchase common stock of the Company, and the awarding of stock appreciation rights payable in shares or cash. The stock appreciation rights issued in 1993 are payable only in cash. No option or right may be issued for less than the fair market value of the stock on the date of grant. The options and rights vest over a five year period from the date of grant and will expire if not exercised after ten years from the date of grant. Collective activity within the plans is summarized as follows:
STOCK SHARES APPRECIATION UNDER RIGHTS OPTION PRICE RANGE ---------------------------------------------- Outstanding at January 1, 1993 - 1,273,350 $3.00 -$10.75 Granted 198,900 705,300 12.81 - 19.88 Exercised - (218,320) 3.00 - 10.75 Canceled (3,600) (50,470) 3.00 - 13.06 ---------------------------------------------- Outstanding at December 31, 1993 195,300 1,709,860 3.00 - 19.88 Granted - 154,500 17.88 - 22.13 Exercised (10,690) (201,600) 3.00 - 13.06 Canceled (9,490) (29,020) 3.00 - 17.88 ---------------------------------------------- Outstanding at December 31, 1994 175,120 1,633,740 3.00 - 22.13 Granted - 231,950 14.81 - 21.38 Exercised (21,800) (290,990) 3.00 - 17.88 Canceled (15,030) (76,920) 3.00 - 21.38 ---------------------------------------------- Outstanding at December 31, 1995 138,290 1,497,780 $3.00 -$22.13 ==============================================
25 American Freightways Corporation and Subsidiary Notes to Consoliated Financial Statements (continued) 5. EMPLOYEE BENEFIT AND COMPENSATION PLANS (CONTINUED) The number of shares of common stock reserved for granting future options under these plans was 2,017,790, 2,172,820 and 2,644,090, at December 31, 1995, 1994, and 1993, respectively. At December 31, 1995, options were exercisable to purchase 551,590 shares. The Company recorded a benefit related to the change in value of stock appreciation rights of $243,000 in 1995 and expense of $256,000 in 1994 and $244,000 in 1993. RETIREMENT PLAN The Company maintains a profit sharing plan for the benefit of all eligible employees. The plan qualifies under Section 401(k) of the Internal Revenue Code thereby allowing eligible employees to make tax deferred contributions to the plan. The plan permits, at the discretion of the Board of Directors, annual employer contributions to a maximum (generally) of 6% of the participants' compensation. The Company's contributions to the plan totaled $6,436,000, $4,254,000 and $2,979,000 for 1995, 1994 and 1993, respectively. 6. LEASES AND COMMITMENTS Rent expense, exclusive of amounts related to purchased transportation, totaled approximately $22,119,000 for 1995, $18,576,000 for 1994 and $11,296,000 for 1993. The future minimum rental commitments under noncancelable operating leases having initial or remaining terms in excess of one year as of December 31, 1995 are as follows:
REVENUE OTHER TOTAL STRUCTURES EQUIPMENT EQUIPMENT ------------------------------------------------- (thousands) 1996 $22,319 $3,890 $ 2,380 $16,049 1997 16,010 1,957 2,597 11,456 1998 5,723 1,159 2,597 1,967 1999 3,638 820 2,596 222 2000 3,005 409 2,596 - Thereafter 4,110 1,075 3,035 - ------------------------------------------------- $54,805 $9,310 $15,801 $29,694 =================================================
26 American Freightways Corporation and Subsidiary Notes to Consoliated Financial Statements (continued) 6. LEASES AND COMMITMENTS (CONTINUED) Certain leases have renewal options for periods from one to five years at the fair rental value of the related property at renewal. The future minimum lease payments under capitalized leases consist of the following at December 31, 1995 (thousands): 1996 $ 217 Amount representing interest 3 --------- Present value of minimum lease payments included in long-term debt (Note 3) $ 214 =========
Capitalized leases are included in property and equipment as follows:
1995 1994 -------------------- (thousands) Revenue equipment $ 4,136 $ 4,136 Service, office and other equipment 23 23 Less accumulated amortization (1,742) (1,456) -------------------- $ 2,417 $ 2,703 ====================
Lease amortization is included in depreciation expense. Certain of the lease agreements contain fixed price purchase options. The lease agreements require the lessee to pay property taxes, maintenance and operating expenses. Commitments for land, terminals and revenue equipment (including the cost to complete construction in progress) aggregated approximately $33,462,000 at December 31, 1995. 7. COMMON STOCK In 1994, the Company completed a public offering of 2,125,000 shares (including over-allotment option) of common stock at $18.25 per share. The net proceeds to the Company were $36,651,000. 27 American Freightways Corporation and Subsidiary Notes to Consoliated Financial Statements (continued) 8. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) The following is a summary of the quarterly results of operations for the years ended December 31, 1995 and 1994:
THREE MONTHS ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 -------------------------------------------------- (thousands, except per share data) 1995 Operating revenue $ 132,533 $ 141,969 $ 149,392 $ 148,206 Operating expenses and costs 120,277 126,445 142,946 151,669 Net income (loss) 6,278 8,148 2,444 (3,787) Net income (loss) per share $.20 $.26 $.08 $(.12) Average shares outstanding 31,376 31,426 31,398 30,895 1994 Operating revenue $ 99,272 $ 123,656 $ 124,134 $ 118,525 Operating expenses and costs 91,677 106,576 110,256 107,378 Income before extraordinary charge 3,933 9,486 7,774 5,838 Net income 3,933 9,486 7,439 5,838 Income per share before extraordinary charge $.14 $.32 $.25 $.19 Net income per share $.14 $.32 $.24 $.19 Average shares outstanding 28,881 29,906 31,342 31,302
9. FAIR VALUES OF FINANCIAL INSTRUMENTS The following methods and assumptions were used by the Company in estimating fair value disclosures for financial instruments: Cash and cash equivalents - the carrying amount reported in the balance sheet for cash and cash equivalents approximates fair value. Bond funds - the Company's debt service reserve fund is invested in money market funds and the carrying amount reported in the balance sheet for bond funds approximates fair value. 28 American Freightways Corporation and Subsidiary Notes to Consoliated Financial Statements (continued) 9. FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) Long-term debt - the fair values of the Company's long-term debt are estimated using discounted cash flow analyses, based on the Company's current incremental borrowing rates for similar types of borrowing arrangements. The carrying amounts and fair values of the Company's financial instruments at December 31 are as follows (in thousands):
CARRYING AMOUNT FAIR VALUE ------------------------------- 1995 Cash and cash equivalents $ 2,642 $ 2,642 Bond funds 901 901 Long-term debt 197,631 201,763 1994 Cash and cash equivalents $ 3,999 $ 3,999 Bond funds 888 888 Long-term debt 111,181 112,995
29 Report of Ernst & Young LLP, Independent Auditors The Board of Directors and Shareholders American Freightways Corporation We have audited the accompanying consolidated balance sheets of American Freightways Corporation and subsidiary as of December 31, 1995 and 1994, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of American Freightways Corporation and subsidiary at December 31, 1995 and 1994, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 1995 in conformity with generally accepted accounting principles. Ernst and Young LLP Little Rock, Arkansas January 18, 1996 30 EX-21 9 SUBSIDIARIES OF REGISTRANT EXHIBIT 21 Subsidiary of Registrant 1. American Freightways, Inc., an Arkansas Corporation EX-23 10 CONSENT OF ERNST & YOUNG EXHIBIT 23 Consent of Independent Auditors We consent to the incorporation by reference in this Annual Report (Form 10-K) of American Freightways Corporation and Subsidiary of our report dated January 18, 1996, included in the 1995 Annual Report to Shareholders of American Freightways Corporation. Our audits also included the financial statement schedule of American Freightways Corporation and Subsidiary listed in Item 14(a). This schedule is the responsibility of the Company's management. Our responsibility is to express an opinion based on our audits. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. We also consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-63674) pertaining to the American Freightways Corporation Stock Option Plan and in the Registration Statement (Form S-8 No. 33-76788) pertaining to the American Freightways Stock Purchase Plan of our report dated January 18, 1996, with respect to the consolidated financial statements incorporated herein by reference, and our report included in the preceding paragraph with respect to the financial statement schedule included in this Annual Report (Form 10-K) of American Freightways Corporation and Subsidiary. ERNST & YOUNG LLP Little Rock, Arkansas February 9, 1996 EX-24 11 POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Frank L. Conner, his true and lawful attorney in fact and agent with full powers of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities to sign the Annual Report on Form 10-K, and any or all amendments thereto (including post-effective amendments), to be filed by American Freightways Corporation in accordance with the rules and regulations governed by the Securities and Exchange Commission. IN WITNESS WHEREOF, the undersigned hereby sets his hand this 18th day of January, 1996. /s/Ben A. Garrison - ------------------------------------ Ben A. Garrison, Director State of Arkansas ) ) County of Boone ) This 18th day of January, 1996, personally came before me Ben A. Garrison, who, being by me duly sworn says that he is a Director for American Freightways Corporation, an Arkansas corporation, and that said writing was signed and sealed by him, on behalf of said corporation, by its authority given. /s/Robbie Schriner ------------------------------------ Notary Public My commission expires: February 1, 2002 -------------------- (SEAL) EX-27 12 ARTICLE 5 FINANCIAL DATA SCHEDULE
5 This schedule contains summary financial information extracted from 1995 consolidated financial statements and is qualified in its entirety by reference to such financial statements. 1,000 Year DEC-31-1995 JAN-01-1995 DEC-31-1995 2,642 0 54,964 845 2,136 77,213 530,589 132,887 477,762 52,514 189,239 309 0 0 195,125 477,762 0 572,100 0 541,337 0 0 10,198 21,309 8,226 13,083 0 0 0 13,083 .42 .42 Provision for doubtful accounts included in costs and expenses applicable to revenues.
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