Exhibit 20.1
July 6, 2000
To Our Shareholders:
After extensive study, the Board of Directors of Frozen Food
Express Industries, Inc. has adopted a shareholder Rights
Agreement designed to ensure that all of the Company's
shareholders receive fair and equal treatment in the event of any
proposal to acquire the Company. The agreement is intended to
protect the interests of our shareholders in the event of abusive
or unfair takeover tactics. It is not designed to prevent the
acquisition of the Company on terms beneficial to all
shareholders.
Terms of the agreement are contained in the Summary of
Rights enclosed with this letter. This letter is for
informational purposes only, and no action is required of you at
this time.
Effective as of the close of business on June 26, 2000, the
rights were implicitly attached to all shares of the Company's
Common Stock. Because the rights are not currently exercisable
and have no current market value, certificates representing the
rights will not be issued at this time; the rights will trade
with and be represented by your Common Stock certificate. The
rights detach and trade separately from the Common Stock
following the acquisition by a person or group of 15 percent or
more of the Company's Common Stock or, at the Board's option,
following the announcement of a tender or exchange offer to
acquire an interest in the Company of 15 percent or more. The
rights may be exercised once a person or group owns 15 percent or
more of the Company's Common Stock. If the rights become
exercisable, they entitle all holders - except the prospective
acquiror - to purchase stock in the Company or the resulting
entity from a merger involving the Company at a discounted price.
One objective of the plan is to encourage a prospective acquiror
to negotiate a transaction that is fair to all shareholders with
the Board of Directors of the Company.
The Company currently has no shareholder with an interest of
15 percent or more, and the Board is not aware of any current
attempt to take control of the Company. We have a great deal of
optimism about the future of our Company, and the Rights
Agreement helps to ensure that our shareholders will have greater
opportunity to enjoy the benefits of the Company's success.
In addition, on June 14, 2000, the Board of Directors
approved amendments to the Company's Bylaws which fix the maximum
number of directors at nine, provide for a staggered board
commencing at the 2001 annual meeting of shareholders and provide
that directors may only be removed for cause. These amendments
are intended to further protect our shareholders in the event of
an abusive takeover attempt.
Statements contained in this letter which are not historical
facts are forward-looking statements as that term is defined in
the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements are subject to risks and uncertainties
(contained in the company's SEC filings) which could cause actual
results to differ.
Very truly yours,
Xxxxxx X. Xxxxxx, Xx.
President and Chief Executive
Officer
Enclosure
FROZEN FOOD EXPRESS INDUSTRIES, INC.
SUMMARY OF RIGHTS
July 6, 2000
Each holder of shares of FROZEN FOOD EXPRESS INDUSTRIES,
INC. Common Stock as of June 26, 2000 (the "Record Date")
received a distribution on July 6, 2000 (the "Distribution Date")
of a right to purchase one share (a "Right") per share of Common
Stock in accordance with and pursuant to a Rights Agreement
between the Company and Fleet National Bank dated as of June 14,
2000. A Right will also accompany each share of Common Stock
issued following the Record Date. Each Right, if it first
becomes exercisable, entitles the holder to purchase from Frozen
Food Express Industries, Inc. one share of Common Stock at an
initial exercise price of $11.00 per share (the "Exercise
Price"), subject to adjustment.
Exercisability of Rights. Initially, the Rights will not be
exercisable or transferable apart from the shares of Common Stock
with respect to which they were distributed, and will be
evidenced only by the certificates representing such shares. The
Rights will become exercisable and transferable apart from the
Common Stock on a date (the "Separation Date") that is the
earlier of (i) the close of business on the tenth business day
after the Stock Acquisition Date, defined as the first date of a
public announcement by the Company that a person or group of
affiliated or associated persons has become an Acquiring Person
(as described below) or (ii) the close of business on such date
as a majority of the Board of Directors shall determine, which
date shall follow the commencement of a tender or exchange offer
that, if consummated, would result in a person or group becoming
an Acquiring Person. The Rights will be exercisable from the
Separation Date until the Expiration Date, which is the earlier
of (i) the close of business on the ten-year anniversary of the
date of the Rights Agreement (the "Final Expiration Date"), (ii)
the date the Rights are redeemed by the Company, (iii) the date
the Rights are exchanged by the Company, or (iv) immediately
prior to the effective time of a consolidation, merger or share
exchange of the Company (A) into another corporation or (B) with
another corporation in which the Company is the surviving
corporation but Common Stock is converted into cash and/or
securities of another corporation, in each case pursuant to an
agreement entered into by the Company prior to a Stock
Acquisition Date, at which time the Rights will expire.
A person or group becomes an Acquiring Person when such
person or group, acquires or obtains the right to acquire
beneficial ownership of 15% or more of the then outstanding
shares of Common Stock, with certain exceptions described in the
Rights Agreement (including exceptions for shares owned by the
Company or a subsidiary or employee benefit plan of the Company,
and for shares owned by any person who the Board of Directors
determines inadvertently reached such 15% beneficial ownership
level and who promptly divests sufficient shares such that 15% or
greater beneficial ownership ceases).
Transferability of Rights. Prior to the Separation Date,
the Rights will not be transferable apart from the shares of
Common Stock to which they are attached. Thus, the surrender or
transfer of any Common Stock certificate prior to that date will
also constitute the transfer of the Rights associated with the
shares represented by such certificate. Until the Separation
Date (or earlier redemption, exchange or expiration of the
Rights), new Common Stock certificates issued after the Record
Date, upon transfer or new issuance of shares of Common Stock,
will contain a notation incorporating the Rights Agreement by
reference. Until the Separation Date (or earlier redemption,
exchange or expiration of the Rights), the surrender for transfer
of any certificates for shares of Common Stock, outstanding as of
the Record Date, even without such notation or a copy of a
Summary of Rights being attached thereto, will also constitute
the transfer of the Rights associated with the shares of Common
Stock represented by such certificate. As soon as practicable
after the Separation Date, separate certificates evidencing the
Rights ("Rights Certificates") will be mailed to each record
holder of shares of Common Stock as of the close of business on
the Separation Date and, in certain circumstances, holders of
certain shares issued after the Separation Date. Until
exercised, the holders will not have any rights of holders of
Common Stock, including any rights to vote or receive dividends
on the Common Stock.
Flip-In Rights. Upon the tender for or the acquisition of
15% of the Common Stock by an Acquiring Person (a "Flip-In
Event"), each holder of a Right will thereafter have the right
(the "Flip-In Right") to receive, upon exercise and payment of
the Exercise Price, the number of having a market value
immediately prior to the Flip-In Event equal to two times the
then current Exercise Price of the Right (the "Adjustment
Shares"); provided, however, that if the quotient obtained when
the Exercise Price is divided by the Adjustment Shares is less
than the par value of the Common Stock, the number of Adjustment
Shares shall be the quotient obtained when the Exercise Price is
divided by the par value of the Common Stock. Any Right that is
(or, in certain circumstances specified in the Rights Agreement,
was) beneficially owned by an Acquiring Person (or any of its
affiliates or associates, as defined) will become null and void
upon the occurrence of the Flip-In Event. Cash will be paid in
lieu of fractional shares.
For example, at the Exercise Price of $11 per Right, if any
person becomes the beneficial owner of 15% or more of the
outstanding Common Stock of the Company, thereafter each Right
(other than Rights owned by such 15% Acquiring person or any of
its affiliates or associates, which will have become void) would
entitle its holder to purchase $22 worth of Common Stock for $11.
Assuming that the Common Stock had a per share value of $5.50 at
such time, each Right would effectively entitle its holder to
purchase four shares of Common Stock for $11.
Flip-Over Rights. If, at any time following a Flip-in
Event, either (A) the Company is acquired in a merger or other
business combination transaction, the Acquiring Person controls
the Board of Directors of the Company and either (i) the
investment of the shares owned by those other than the Acquiring
Person are not identified to the shares owned by the Acquiring
Person or (ii) the transaction is with the Acquiring Person or a
related party; or (B) the Company sells or otherwise transfers
more than 50% of its aggregate assets or earning power to a
related party if approved by Company after Acquiring Person
Controls the Board of Directors of the Company, each holder of a
Right (except Rights previously voided as described above) will
thereafter have the right (the "Flip-Over Right") to receive,
upon exercise, shares of common stock of the Acquiring Person
having a value equal to twice the Exercise Price of the Right.
The Flip-Over Right will be exercisable apart from, and
regardless of the exercise or surrender of, the Flip-In Right.
Redemption of the Rights. At any time prior to the close of
business on the tenth business day following a public
announcement that a party is an Acquiring Person, the Board of
Directors may redeem the Rights in whole but not in part at a
Redemption Price of $.001 per Right. Immediately upon any
redemption of the Rights, the right to exercise the Rights will
terminate and the only right of the holders of Rights will be to
receive the Redemption Price.
Exchange of the Rights. At any time after a Flip-in Event,
the Board of Directors of the Company may exchange the Rights
(other than Rights owned by such Acquiring Person or any of its
affiliates or associates which have become void), in whole or in
part, for Common Stock at an exchange ratio of one share of
Common Stock per Right.
Adjustments. The Exercise Price payable, and the number of
shares of Common Stock or other securities or property issuable,
upon exercise of the Rights are subject to adjustment from time
to time to prevent dilution (i) in the event of a stock dividend
on, or a subdivision, combination or reclassification of the
Common Stock, (ii) upon the grant to holders of the Common Stock
of certain rights, options or warrants to subscribe for or
purchase Common Stock at a price, or securities convertible into
Common Stock with a conversion price, less than the then current
market price of the Common Stock or (iii) upon the distribution
to holders of the Common Stock of evidences of indebtedness or
assets (excluding regular periodic cash dividends paid out of
earnings or retained earnings or dividends payable in shares of
Common Stock) or of subscription rights or warrants (other than
those referred to above).
Reserved Shares/Substitution of Assets. The Rights
Agreement contemplates that the Company will reserve a sufficient
number of authorized but unissued shares of Common Stock to
permit the exercise of the right to exchange the Rights should
the Rights become exercisable. The Board of Directors may (and
under certain circumstances is obligated to) issue other equity
securities or assets upon the exercise of the Rights if
sufficient shares of Common Stock are not available for issuance
should the Rights become exercisable. The Board of Directors may
make adequate provision to substitute for the shares of Common
Stock which are not available for issuance upon exercise of such
Rights either cash, other equity securities of the Company
(including, without limitation, shares of Preferred Stock of the
Company), debt securities of the Company, other assets, or a
combination of the foregoing, having an aggregate value (as
determined by a majority of the Board of Directors after
receiving advice from a nationally recognized investment banking
firm) equal to the value of the shares of Common Stock
unavailable for issuance upon exercise of the Rights. In
addition, the Board of Directors, subject to certain limitations,
may amend the Rights to change the Exercise Price and therefore
the number of shares of Common Stock issuable upon exercise of
the Rights. If the Company does not take such action within 30
days following the later of a Flip-In Event or the date on which
the Company's right of redemption with respect to the Rights
expires, then the Company will be required to deliver cash as the
substitute for the unavailable authorized shares of Common Stock.
Amendment of the Rights Agreement. At any time prior to the
Separation Date, the Board of Directors may amend any provision
of the Rights Agreement in any manner, including to change the
Exercise Price, without the approval of the holders of the Common
Stock. Thereafter, subject to certain limitations, the Board of
Directors may amend the Rights Agreement without the approval of
the holders of the Common Stock so long as the interests of the
holders of the Rights are not adversely affected, including
generally (i) to shorten or lengthen any time period under the
Rights Agreement or (ii) in any manner that the Board deems
necessary or desirable, so long as such amendment is consistent
with and for the purpose of fulfilling the objectives of the
Board of Directors in originally adopting the Rights Agreement.
Independent Director Review. The Rights Agreement final
expiration date is ten years from the Record Date. However, a
committee of the Company's Directors who are neither officers,
employees or affiliates of the Company will review the Rights
Plan at least every three years and, if a majority of these
Directors deems it appropriate, may recommend a modification or
termination of the Rights Agreement.
